There's no shortage of mixed signal in the market right now. We ended the week with the indices pretty much in the middle of their August ranges. The Russell 2000 continues to look stronger than the Nasdaq and S&P 500. It's the only of those three that's above its 200-day moving average. The other two indices are stuck between their 50 and 200-day moving averages. That the place I like to call "no-man's land" because of the conflicting signals from the bearish long(er) term posture (below the 200 DMA) and bullish intermediate term posture (above the 50 DMA).
When I saw how closely the Russell's 50 and 200 DMAs were tracking each other I wanted to check the Guppy Multiple Moving Averages (MMAs) to see that they were indicating. The picture looks bullish with price being supported by bullish long and short-term groups.
Here's the more traditional view showing the recent support from the 200-day moving average.
The MMAs on the S&P 500 tell a very different story. The bearish long-term group (investors) are still in control here.
This chart shows how price has marked time for the past two months against the headwind from the bearish 200-day moving average.
The Nasdaq is trying to figure out which camp it wants to be in, bull or bear. The MMAs show an agreement on price which should lead to a disagreement on price. Here's a refresher on the Guppy's MMA rules:
- Degree and nature of separation in the long term group define trend strength and weakness
- Degree and nature of separation in the short term group define the nature of trading activity.
- Degree and nature of separation between the two groups of moving averages define the character of the trend.
- Compression shows agreement on price and value.
- Compression of both groups at the same time indicate major re-evaluation of stock and potential for a trend change
- Trade in the direction of the long term group of averages
- The relationships between the groups provide the necessary information about the nature and character of the trend.
What stood out to me on the next chart is how the Nasdaq gapped down twice last week from the 200-day moving average. That left two "holes in the wall" right at 200-day moving average. Coincidence? There are no coincidences. :-)
One last thing to throw in the mix is oil. It closed at a new 5 or 6 month low today post-hurricane Gustav. It's now threatening to break its 200-day moving average which could trigger even more bearish action in oil.
No changes
| Trend | Nasdaq | S&P 500 | Russell 2000 |
|---|---|---|---|
| Long-Term | Down(-) | Down | Up |
| Intermediate | Up | Up | Up |
| Short-term | Down(-) | Lat(-) | Up |
(+) Indicates an upward reclassification today
(-) Indicates a downward reclassification today
Lat Indicates a Lateral trend
*** I'm simply using the indices' relations to their 200, 50 and 10-day moving averages to tell me the long, intermediate and short-term trends, respectively.
Good points! It seems for my long positions I should take profit (some 400%) and buy again after they go down.