The market has finally run out of steam in the near-term. Two charts of interest, the NYSE Bullish Percent Index and the NASDAQ Bullish Percent Index today undercut their respective 20 period daily moving averages. When the bullish percent index undercuts the 20 dma in the indices, especially after a prolonged up trend like weâve seen, the market can correct violently. In 2007, when the market topped in this manner in October, it saw a modest decline, then a weak rally to âretestâ the highs, and then the onset of its substantial decline. I would not be surprised that we are seeing a major retest and failure of the May 2011 top and action similar to 2007. http://jstradingnotes.wordpress.com
Predicting a major top is not a slam dunk exercise, even with time-tested indicators. That said, Robert McCurtain has developed a range of indicators with a reliable track record. And McCurtainâs indicators say proceed in the U.S. stock market with extreme caution. His latest article (http://www.futuresmag.com/2012/03/04/sp-dow-30-build-key-reversal-day-near-price-target?) lays out the analysis. Without going into tremendous detail on the indicators, the relevant takeaway is that four indicators with independent data sources (cumulative volume from the stock market, cumulative volume from the futures market, a running total of the advancing minus declining issues taken from the most actives list from the stock market, and call and put price-volume data from the options market) do not confirm the move in the stock market from the March 2009 lows nor from the recent October 2011 lows. The indicators all suggest that major declines still lie ahead. http://jstradingnotes.wordpress.com