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Point & Go Figure: PHLX Housing Sector Index (HGX)

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It's all a matter of context.

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Market Overview:

The 50-day indicators for the NYSE , the S&P 500 and the Nasdaq are all back in Os (short-term negative) after relieving some of their oversold conditions. The short-term High-Low Indexes for the NYSE and Nasdaq are in Xs (positive) and have relieved some of their recent oversold conditions as well. Barring a sharp turnaround this afternoon, the 50-day indicators could give new sell signals.

Meanwhile, the overall context for the market remains negative. The long-term bullish percent indexes for the S&P 500, Nasdaq-100, NYSE and Nasdaq Composite all remain negative so any positive action among the broad indices is the equivalent of rowing upstream.

Charts of Interest:

Yesterday afternoon on the Buzz & Banter we noted the DeMark price completion "buy" signals for the PHLX Housing Sector Index. However, note that today those signals have been extended lower with the moves below the "risk level" shown by the green line.

PHLX Housing Sector Index (HGX)
(Chart courtesy Thomson Financial)

This most often happens in impulsive moves lower, where the trends in place are strong and structural in nature. That is why we use the "risk levels" for trade management and capital protection. It is also why we combine the PnF context for risk management as well. The PnF chart of the HGX shows the violation yesterday of the long-term secular uptrend for the HGX.

Want to guess how long this trendline has been intact? Since October 2002. Given the context of the HGX PnF chart and the negative broad market indicators, we would expect any resolution of the DeMark daily price completions to be shallow in nature until the context changes.

PHLX Housing Sector Index (HGX)
(Chart courtesy
StockCharts.com)

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