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Technical Market Indicators
Dow Theory, W.D. Gann, MetaStock, system tester, indicator builder, custom formulas, momentum, overbought, oversold, buy, sell, signals, top, bottom, Bull, Bear, consolidation, sentiment, contrary opinion
March 20, 2017
The U.S. stock market: the short-term price trend remains uncertain, but the long-term main trend remains bullish.
Preview from my weekly report*
On Balance Volume (OBV) is in a short-term downside correction.
Short-term price momentum remains in the neutral zone, as quantified by RSI(14). Slowing short-term price momentum from time to time is normal in an ongoing bull market.
Longer term, the majority of the U.S. stock market price indexes remain systematically bullish: above their 50-day SMAs (simple moving averages), above their 200-day SMAs, and with the 50-day SMAs above the 200-day SMAs.
Contrary Thinking: investors appear to be increasingly cautious. The stock market tends to swing from one extreme to the opposite extreme as human emotions swing from greed to fear and back again. The current data shows that the $VIX Volatility Index still indicates bullish complacency, but the Equity Put/Call ratio appears more neutral. The latest AAII survey indicates more bearish sentiment than bullish sentiment, with 31.17% Bullish, 30.13% Neutral, and 38.70% Bearish. The CNN Money Fear & Greed Index indicates Index indicates neutral sentiment at 45 on Friday, its lowest level since November before the election.
Widely-diverging investor opinions about the probable direction of the stock market going forward may be bullish. When nearly everyone is extremely bullish, we have to worry about a significant market top. Currently, we are not there yet, and there still may be under-invested skeptics available to be converted into fully-invested bulls. Many investors don't like or trust President Trump, and many doubt that he can actualize his plans. Others are worried about already high stock price valuations, which do show that the market is richly priced, although valuation measures lack usefulness as market timing indicators, as overvalued stocks can become more overvalued when the trend is pointing upward. The trend skeptics may be allowing their biases to overwhelm objective and obvious evidence of the stock market's major uptrend.
Uncertainty rules the short-term, but the long-term trend is our friend. Although markets never offer any guarantees, the trends in multiple time frames put the probabilities in our favor. Long-term economic growth prospects appear to be picking up, and investors are looking forward to President Trump's promised "phenomenal" comprehensive tax plan, including tax cuts for individuals as well as businesses. There appear to be obstacles on that path, and only time will tell whether reality can live up to hope. For the short term, the technical evidence reflects investor uncertainty, which seems understandable if we read the news headlines. For the long term, however, objective technical indicators tell us that the Path of Least Resistance is up.
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Analysis of market forces may offer a sense of probabilities. But the many variables that can impact market prices are notoriously difficult to predict. And, market analysis is something less than an exact science. So, sound trading tactics are always recommended. See my Money Management Rules.
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