Several near-term troubling signs remain, including some bellwether stocks

As promised in yesterday's blog post, I've returned from an extended silence with plenty of charts. Also mentioned in yesterday's post, since my short-term stance has become cautious over the last few weeks, the S&P 500 has climbed to just above 1800, translating into a move of about 2.5%. The Index has retraced some this week, reducing the rally's percentage to just 1.5% since the start of November. The longer-term outlook for the market remains bullish, but in the near-term I continue to see some troubling signs.

The daily chart of the S&P 500 depicts an overall bullish picture, including a breakout in October from an ascending wedge.

However, as I've noted in prior posts, the MACD has been trending down as the S&P 500 has risen higher setting up a negative divergence. The MACD histogram (red rectangle) is another way to view this divergence as it shows nary a positive bar, further illustrating the weak underpinnings of this recent move.

Another non-confirming chart is the relative performance of the Russell 2000 vs. the S&P 500.

The return of the IWM vs. SPY (black line) peaked at the start of October and has been trending downward ever since then -- with the S&P 500 (red line) climbing higher for most of that time.

Another non-confirming chart: the percentage of NYSE stocks above their 50-day moving average.

This indicator peaked in mid-October and has been steadily eroding, currently approaching the very anemic figure of 50%. Having just about half the stocks on the NYSE above their 50-day MA while the S&P 500 has reached new highs is not what I would call healthy internals. In fact, prior peaks in this indicator (blue circles) have more often coincided with peaks in the S&P 500, yet in this recent instance a bearish divergence is clearly developing. 

The chart showing the percentage of NYSE stocks above their 200-day MA further makes evident this divergence.

And mind you with just 63% of NYSE stocks currently above their 200-day MA, this number is well below the 80+% peak of earlier this year. I realize this indicator can frequently lag and does not always "nail" corrections, but for it to attain lower levels over a matter of months in the face of a market advance is less than ideal and suggests a weakening foundation. Focusing more on the near-term, fewer stocks able to stay above their 50- and 200-day MAs as the market moves higher by definition exhibits an increasingly narrow and less robust rally.

Last chart, the Morgan Stanley Cyclical Index vs. the Staples SPDR.

The relative return of risk-on cyclical stocks versus generally risk-off staples often gives a reliable estimation of investor sentiment. When the CYC:XLP relative return (black line) is trending higher it infers that investors remain in a more aggressive, risk-seeking mode and is bullish for the market. Cyclicals had been outperforming staples until October, when the uptrend in relative performance flat-lined and has been traversing sideways for the last several weeks. Yes, I'm sounding like a broken record at this point, but this is another non-confirmation of the market's recent advance.

Actually, I thought I'd show one more chart.

I'm always keeping an eye out for bellwether stocks of the moment, those equities that are flying high and quickly becoming the darlings of CNBC. One can argue TSLA is one and we know what's happened to that stock of late (I wrote about TSLA on November 6, in quite bearish terms to say the least). But the chart above is of Facebook (FB), which has been on a tear since July. However, I would point out what appears to be a bearish head-and-shoulders formation in the chart, complete with a break in the neckline (important, a H-&-S formation is not necessarily bearish until the neckline is breached). Earlier in November, FB rallied back to the neckline and 50-day MA only to fail, and more recently price has again climbed back to the neckline and 50-day MA -- we'll see if it rolls over and fails again. 

I think it's safe to say that the charts of TSLA and FB are at minimum a bit concerning and to the extent that these bellwethers serve as canaries in the coal mine for the overall market, it's just another worrisome near-term observation.

(Source for all charts above: Stockcharts.com)