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Point & Go Figure: Long-term Indicators Turn Negative


Risk is in effect.


The broad bullish percent indicators for the NYSE and the Nasdaq Composite reversed to negative with Wednesday's action for the first time since last October. They now join the narrower S&P 500, Nasdaq-100 and Dow Jones Industrial Average bullish percent indices, which were already negative.

Meanwhile, both the NYSE Percent Above 50-day Moving Average Indicator and the Nasdaq Percent Above 50-day Moving Average Indicator have moved nearer the 30% level. These indicators should form a low by early next week after which a relief of the oversold conditions should occur. With the overall context now negative, however, any move higher should be short-lived and in my opinion provide an opportunity for sales or hedges.

The High-Low Indices for the NYSE and Nasdaq are both in Os but above 50% and nowhere near levels from which very meaningful relief bounces occur.

Even on a DeMark basis, although we are seeing an increase overall in the number of stocks showing DeMark buy signals on their daily charts each day, the weekly and monthly conditions remain very negative, skewed far to the sell side. The reversal down in the bullish percent indicators, as long-term indicators, suggests the longer-term monthly and weekly DeMark sell signals are now likely to assert control over the shorter-term buy signals.

This is how I combine the DeMark indicators with the PnF indicators, to derive an overall context from the PnF and then make a decision about which indicators are exerting the most influence over the market. When the short-term is in control, as it has been until recently, weekly and monthly sell signals will often appear to "defer" to the short-term, allowing moves against the prevailing long-term bias. When the long-term is in control, however, I look for the short-term to have a higher failure rate when it is going against the long-term bias.

Charts of Interest:
3M (MMM)
(Chart courtesy
On a PnF basis MMM is nearing a potential triple bottom break with a move to 83.50.

3M (MMM) Monthly
(Chart courtesy Thomson Financial)
MMM on a monthly chart shows a pattern I like; a sell signal that is occurring below the risk levels established by prior sell signals.

No positions in stocks mentioned.

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