Wednesday, October 16, 2013

Stock market outlook remains bullish near-term, but bearish divergence developing longer-term

The stock market (S&P 500) continues to look bullish in the near- to intermediate-term.


The daily chart above shows the S&P 500 successfully held at the lower threshold of an ascending channel and currently resides at about the midpoint within the channel. It's good to see the Index has now spent three days above the round number 1700, the approximate previous high at the start of August. The stochastic is currently overbought at a reading of 90, but a newly-extended stochastic is common at the start of a move higher within an uptrend. Note also the MACD recently registered a buy signal, which have been timely in the recent past.

To give a better sense of which way the risk-on/risk-off pendulum has been swinging of late, I submit the following three charts.

The chart above shows what has been working since the market low of late August. Clearly, risk-on has been outperforming as 1) smaller-cap stocks have outperformed larger-caps, 2) high-yield "junk" bonds have outperformed T-bonds, and 3) cyclical stocks have outperformed staples.

But what does this exhibit look like since the market peak in September?

Interestingly, despite the S&P 500 decline, which typically translates into risk-off assets doing better than their risk-on counterparts, the chart above shows the opposite. The S&P 400 and 600 have actually appreciated in that time with junk bonds outperforming T-bonds and cyclical stocks holding up better than the more conservative staples.

Finally, the following chart shows results for this most recent rally.

Once again, and not surprisingly, risk-on has outperformed risk-off. In sum, the three charts collectively depict a bullish backdrop for the market.

I would mention that longer-term there is a negative divergence developing that is concerning.

The weekly chart above shows the S&P 500 and its MACD. Note that as the Index has climbed this year, the MACD has been trending down -- a bearish divergence. In the past, such a negative divergence has often resulted in equities suffering a correction, in some cases quite a drastic one at that (2008!). It's still too early to make any sort of definitive call on this looming development, and late last year a similar bearish divergence appeared only to result in a fairly mild correction before the Index resumed its ascent. Price has yet to confirm this divergence, but it's definitely something worth keeping in mind.


  1. Exactly ! It is a very important and informational website about financial market. So, I like it very surely. Thank you very much for this website. If you want more informastion about stock quotes to visit stock quotes Mainly because also told before real-time stock quotes are payed off services. These facilities in addition provide well-timed dire warnings not to mention sets off to make sure you automatic systems not to mention more suitable make professionals, and are generally involved using ultra powerful numerical not to mention ocular software to make sure you give voice most suitable stock trading strategies.

  2. Thanks to the blogger for share the chart. The daily chart above shows the S&P 500 successfully. The chart above shows what has been working since the market low of late August. The following chart shows results for this most recent rally.
    It is most effected for all.

  3. Wow ! this can be an exquisite and informative web site.It is a awfully helpful for U.S.. So, i prefer it greatly. several several thanks for build this web site. If you wish additional data regarding stock charts to go to stock charts shopping for the suitable Monitor Time frames is a vital half from inexperienced persons stock choices shopping for and merchandising along side location encouragejob chart. In accordance with simply however long the positions characteristically stick with it, you may wish to shop for a time schedule that is compatible.

  4. Currently, It is a perfect and effective website about financial markets. It is very useful for us. So, I loved it. Many, many thanks to you for creating such an informative website. If you would like more information about this please visit market watch The advantage of these market watch is they allow for a vast amount of customization by the user. That same advantage can create a disadvantage for some users. Those users may not really know what they are looking for or what data criteria might produce a market watch of stocks that present the highest possible probability of a successful stock trade.


  5. This post is very useful for us. Because we have a lot of
    tips and tricks from this post. Thank you for this amazing post share. I many
    tips about job circular as well. If you want to know more about a career sites, please visit our website.