It has often been said that the current bull market has been one of the unhappiest in history. It is
true that there has been a continuous litany of caveats, complaints and criticisms. With QE 3,
most of the querulousness was swept aside as the market made a tightly drawn beeline nearly
relentlessly higher. With termination of all QE by the Fed in latter 2014, the path of the market
has been more tortured. Without the big tailwind of a huge period of liquidity growth, the worries
and insecurities of investors and traders have resurfaced. The economy has returned to sluggish
growth, the Phillips Curve (falling unemployment leads to increasing inflation pressure) has been
absent, and the Fed has been talking about returning monetary policy toward normalcy with boosts
to short term rates while the economy continues not to behave normally. With the substantial drop
in the market going into Sep., and a subsequent struggle to recover, market consensus has
dissolved and insecurities reign. SPX Daily
The SPX is no longer oversold short term on a momentum basis. I am partial to momentum
measures on an intermediate term basis and the extended time measures of RSI and MACD are
still deteriorating on a trend basis. So, I have the market on a technical sell signal, and since these
are trend following measures, there is precious little chance I will catch the bottom if a more
sustainable rise occurs.
Other favorite indicators such as the TRIN and equities only put to call ratio contine to signal
that the market is at a substantial oversold position with an elevated p/c ratio and strong selling
pressure captured by a rising by a rising TRIN
Note also the progressive decline in the % of SPX stocks selling above their 200 day m/a's
(bottom panel) to an oversold position.
These oversolds are tempting and suggest a stronger market is out there in the not so distant
future. The problem is that when players have a welter of insecurities, churning volatility can
continue on for several weeks. (As noted above, I will probably miss the low).
- Peter Richardson
- Retired chief investment officer and former NYSE firm partner with 50 plus years experience in field as analyst / economist, portfolio manager / trader, and CIO who has superb track record with multi $billion equities and fixed income portfolios. Advanced degrees, CFA. Having done much professional writing as a young guy, I now have a cryptic style. 40 years down on and around The Street confirms: CAVEAT EMPTOR IN SPADES !!!