Longer-Term Outlook

The charts will be updated by every Saturday. When no change to text, [NC] will be used. Click for favorite investment websites or to go to the Investors' Forum.

The indicators below show a UP MARKET, within an intermediate-term BULL CYCLE, within a longer-term BEAR TREND. John Murphy stated on Friday 12/21/18, "This week's drop by all major stock indexes below their early 2018 lows confirms that U.S. stocks have entered a BEAR MARKET. Some parts of the market have already crossed the -20% threshold which also defines a bear market."  The market is now close to reaffirming the bull market. More comments on whether we are in a bull or bear market are way below along with a chart from 1871. A weekly chart should be used to determine what the market is doing. Then a daily chart can be used to time entries or exits. 

[NC]  A 20-year monthly chart gives a perspective on the current action. A bear trend was signaled at the end of November when the MACD cross occurred. Included in the chart are the 12-month and 36-month simple moving averages. The MACD is based on the difference between the 12 and 36-month exponential moving averages with a red 9-month EMA of the MACD, the signal line. Crossovers indicate a change in the primary trend and seem to be a good indication of where the market is going. The window at the right gives a magnified view of the recent monthly action.

[NC]  A four-year weekly chart of the S&P 500 index shows a record high on Friday 9/21/18. The 9-week RSI is moving up and shows positive momentum. Over 70 indicates an overbought market, and the red down-arrows indicate when the 9-week RSI drops below 70 -- perhaps a time to take a short-term profit thus reducing risk. The MACD shows when the bull and bear cycles occur -- a rise above or below zero. The bear cycle started on 10/22/18 and ended on 2/15/2019. The market is now in a bull cycle. The cycle determination is explained in more detail on the Observations page

The technical indicators listed below give a feeling for the strength of the overall market and whether there are signs of a turn. A good confirmation of a turn from bullish to bearish is the 52-week new lows exceeding the thresholds below.

  • Price Trend of S&P 500 - UP
    • Above/below 50-day SMA - UP
    • Weekly RSI(9)  (above/below 50) - UP
    • Weekly MACD(12,26,6) Histogram + or - confirmation - UP
  • Daily S&P 500 Moving Averages -  UP in a BULL Cycle
    • Bull: price above 200-day SMA - BULL
    • Bear: price below 200-day SMA
    • UP: Both 50-day & 200-day EMAs moving up - UP
    • DOWN: Both EMAs moving down
    • MIXED: averages not moving together
  • Weekly MACD(5,26,0) Histogram + or - (see chart above) - BULL Cycle 
    • Market Leadership (relative strength) - UP  
      • Small caps generally lead large caps - UP
      • Growth stocks lead value stocks (small-cap) - UP
      • Technicals (QQEW, equal-weight Nasdaq 100) tend to lead the general market (RSP, equal-weight S&P 500) - UP
    • McClellan Summation of Advances & Declines of Nasdaq (slope) - UP
    • 52-Week Highs and Lows (excluding ETFs) - UP 
      • NYSE New Lows - UP if less than 45 for three days - UP
      • Nasdaq New Lows - Up if less than 70 for three days - UP
      • 3-day MA of Nasdaq NH-NL positive or negative - UP
    • Consensus of the above - UP in a BULL Cycle

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    Bull or Bear Market?

    [NC]  Alexander Elder gives the long-term view that it has been a bull market since the March 2009 lows. Now a bear market has started as John Murphy indicated on Friday 12/21/18 when he said "This week's drop by all major stock indexes below their early 2018 lows confirms that U.S. stocks have entered a bear market. Some parts of the market have already crossed the -20% threshold which also defines a bear market."

    Now the question is: Have we moved back to a bull market. IMHO, the indexes would need to break through the resistance of the early November highs, as shown on the home page. All the indexes are at the resistance of these highs. The S&P 500 and Nasdaq Index have crossed above their 200-day moving averages, which is a good sign, but the Russell 2000 small-cap index has not. The bull/bear trend is a long-term indicator and would eventually confirm the market direction.

    [NC]  This chart gives a perspective on past market drops during the last 11 years. A bear market is generally considered to be a 20% drop from the last major high in the major indexes. In addition, a confirmation of this would occur when the price drops below the previous major low, which it did.

    [NC]  The chart below gives a really long term perspective. The secular market percent moves up and down are shown. These are true bull and bear markets. The recent "dip" does not look very significant on this chart.

    The source of these charts is given at the uppper right of the chart. This page is for amusement only, and should not be taken as advice to buy or sell anything.