Categories: world

S & P 500's lower lid warns that the worst is coming

The S & P 500 Index did just something that a broad-based century-old theory of market analysis would say is a sign that warns the worst that may come. S & P 500 SPX, -2.08% fell 2.1% on Monday to close at the lowest level since October 9, 2017. After a later pattern with lower recovery levels, Dow Theory would suggest that the primary trend is now down. "Unmatched breakthroughs have been missing, which adversely affects the driver's seat," says Frank Cappelleri, Managing Director and Technical Analyst at Instinet. "And if this does not change, the same scenario will persist." Dow Theory has been relevant to investors for over 1 00 years, as it is about how investors behave when fear and greed take over, which has not changed, than on surveillance numbers on a chart. The theory seems to identify major trends, with the idea that the best way to make money is to follow market developments, not to try to beat the market by choosing turning points. Do not Miss : Do not be Dow Theory just because it's over 100 years old. One of Dow Theory's six basic principles states that the definition of a downtrend is when a charted instrument gradually makes lower peaks and troughs, according to the CMT Association. It's like the tide – when it's ebbing, every wave ends a bit before the last. The S & P 500's fast bounce to its 7th closing high at 2 813.89, which was well below…

The S & P 500 Index did just something that a broad-based century-old theory of market analysis would say is a sign that warns the worst that may come.

S & P 500

SPX, -2.08%

fell 2.1% on Monday to close at the lowest level since October 9, 2017. After a later pattern with lower recovery levels, Dow Theory would suggest that the primary trend is now down.

“Unmatched breakthroughs have been missing, which adversely affects the driver’s seat,” says Frank Cappelleri, Managing Director and Technical Analyst at Instinet. “And if this does not change, the same scenario will persist.”

Dow Theory has been relevant to investors for over 1

00 years, as it is about how investors behave when fear and greed take over, which has not changed, than on surveillance numbers on a chart. The theory seems to identify major trends, with the idea that the best way to make money is to follow market developments, not to try to beat the market by choosing turning points.

Do not Miss : Do not be Dow Theory just because it’s over 100 years old.

One of Dow Theory’s six basic principles states that the definition of a downtrend is when a charted instrument gradually makes lower peaks and troughs, according to the CMT Association. It’s like the tide – when it’s ebbing, every wave ends a bit before the last.

The S & P 500’s fast bounce to its 7th closing high at 2 813.89, which was well below that of September. 20 record close to 2,930.75, marked the first lower peak and November 23 near 2,632.56, which was below 29th October near 2 641.25, was the first lower thread. After the index’s next studs peaked at 2,790.37 on December 3 – another lower high-Monday’s drop on November 23, close, as well as February 8, the low of 2581.00, confirmed the bearish pattern.

FactSet, MarketWatch [19659010] Technical analyst Mark Arbeter, CEO of Arbeter Investments LLC, said the S & P 500 had broken “key support” at the 2,600 level, while recent positive technical developments have been ignored. He said that it is the type of activity seen under major corrections or bear markets.

“The diagram shows that the next leg lower had begun (if not 2 533), then tighten up seat belts and push up your tiles,” wrote Arbeter in a note to customers.

The S & P 500 was down as much as 2.7% on an intraday day of 2,530.54 on Monday before measuring any losses.

Another Dow Theory principle is that volume should increase as the market moves in the direction of the primary trend. When the S & P 500 rose to a record in September, the volume in SPDR S & P 500 traded fund

SPY, -1.96%

was calculated on average about 64.6 million shares per day, according to FactSet data. When the ETF tripled by 6.9% in October, the volume increased to a daily average of 131.5 million shares.

So far in December, which is the worst start of the month since 1980, the average daily volume has increased to approximately 138.4 million shares.

FactSet, MarketWatch

Dow Theory also says that Dow Jones Industrial Average

DJIA, -2.11%

and Dow Jones Transport Value

DJT, -1.16%

must confirm each other by sending signals as they follow the same primary trend. The idea is the economy can not be too strong if the transport does not take what the industry does.

Dow transports fell by 1.2% on Monday to a 15 month low, after a lower level earlier this month, while the Dow industry dropped 507.53 points, or 2.1% hit its second lower low to join two lower heights since the record closed in early October.

FactSet, MarketWatch

The bearish market behavior comes at a time when other negative technical events have occurred, including the unfortunate sound “Death Cross” of the S & P 500 on December 7th. A death shift should be shown in the Dow Industrial Hall this week, which would confirm the death shift that occurred in Dow Transport on Nov. 26.

Also read : The last key death cuts are ready to weaken the stock market.

A dead cross is when the 50-day moving average crosses the 200-day moving average. Many believe the selection is a short-term decline that goes to a long-term downturn.

In addition, S & P 500 and both Dow indexes are in “correction” territory, many of which define as a 10% upward to 19.9% ​​from a new peak.

For the index to reach a bear market, defined as a decline of 20% or more, the S & P 500 would have to reduce further 7.9% from current levels to 2 344.60 and Dow industrials would have to lower 9.0% to 21,462.71, while Dow transports would only have to lower 1.6% to 9.256.67.

Provides critical information for the United States trading day. Subscribe to MarketWatch’s free need to know newsletters. Sign up here.


Source link

Share
Published by
Faela