Today I got the sixth sell signal of my long term indicators. This marks six out of six indicators all pointing down, a rare occasion. These include long term as well as short term indicators. Both the Nasdaq and S&P have broken thru support, including a major up trendline on the Nas. On a monthly (long term) basis the Nas indicates way overbought and past due for a correction. The Nas could easily drop 400 points before stopping. If the S&P breaks below 1800ish it could drop another 300 points. Strap on your seat belts for a wild ride.
UPDATE 10/23 ... the 6/6 sell signal has aborted today. the short term indicators have turned bullish, so until they turn down again, there is no 6/6 sell signal. I am thinking of adding longer term indicators ie; weekly and monthly charts (which at this point are still holding bullish).
The S&P is 25 points away from its all time high at 1576, so it has yet to confirm the Dow record. However it put in a strong week and other than the ADX which is giving a cautionary signal, all seems well. The markets are up, not because the economy is so great but simply because the Fed keeps giving money the favored banks and they in turn inject it into the market since the rates are so low, bonds are not the place to be.
The Nasdaq definitely has not confirmed the dow record high but is way behind its 2000 record high. In fact it has yet to take out its Sept. 2012 high of 2878, which until it does, I consider that to be the head of the possible head and shoulders bearish formation. It is basically chopping around sideways with little momentum. Apple of course is a big drag on it, breaking below 400 this week for the first time in over a year.
The small caps measured by the Russell 2000 has confirmed the Dow and is making new highs. For a while I thought this was going to lead the pack down, however, it took off and has been leading on the upside. The only caveat here is the ADX roll over above the 50 mark. It has yet to cross over its moving average, but often this will precede a trend change by 1-3 weeks.
Well two up days in a row seem to have voided the big drop on Monday (2/25) however this all seems to be a normal pull back to the 50/10 LRC lines and the volatility stops. On the Nasdaq 100 the 50/10 have crossed under bearish and the 25/5 is already below the 50/10. Unless the price gets over 2780 or the purple 50/10 LRC, this looks to be still headed south. With these wild whipsaws though, it could poke above then sell off. Who knows.
The small caps, the Russell 2000, have not yet had a complete 50/10 bearish cross but did stop their bounce at the 25 LRC and the volatility stop. A normal bounce unless it continues up and exceeds the previous high of 932, then all bets on the bear are off.