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Point & Go Figure: Dow Jones Wilshire 5000 Composite, German DAX, S&P 500



Market Overview:

The short-term Percent Above 50-Day Moving Average Indicators for most of the major averages are now back above levels not seen since last March and April.

According to data from Investors Intelligence:

  • The S&P 500 50-day indicator is above 70% for the first time since March.
  • The Nasdaq-100 50-day indicator is above 70% for the first time since April.
  • The Russell 2000 50-day indicator is above 70% for the first time since March.
  • The Dow Jones Industrial Average 50-day indicator is above 86% at its highest level since March.

Among other short-term indicators, the High-Low Index for the Nasdaq is in Xs at 64% after a spread triple top breakout at 44%. The NYSE High-Low Index is also in Xs and now back above the 70% "overbought" level and at its highest reading since March.

Meanwhile, the long-term index bullish percent readings are mixed. The Dow Jones Industrial Average bullish percent remains sluggish and in a column of Os having completed a bearish catapult pattern. The S&P 500 bullish percent reversed back to Xs with Tuesday's action, but remains on a sell signal less than 1% away from a new buy signal and double top break. That kind of break would need to be taken seriously and suggest the recent rally remains incomplete. The Russell 2000 is now in Xs but remains on a sell signal which suggests the primary bearish trend of diminished participation for all the index bullish percents of lower highs dating back to January 2004 is still in place.

The bottom line is that fewer and fewer stocks are able to participate on upmoves in the major averages, which is bearish for the market as a whole in the long-term. The short-term is now overbought as well, aligning with potential DeMark sell signals on the daily charts for several of the major averages, and setting up for a significant potential reversal lower.

Charts of Interest:
Dow Jones Wilshire 5000 Composite Index ($WLSH)
The chart of the Wilshire 5000 is on a PnF buy signal but the overall context of the chart is negative. The primary trendline was violated in May and a significant amount of buying power has been used to regain the ground lost since that peak.

Dow Jones Wilshire 5000 Composite Index (.DIWC)
(Chart Thomson Financial)
Meanwhile, looking at the same chart on Thomson with DeMark TD-Sequential and TD-Combo (version 2) overlaid, both indicators registered sell signals with yesterday's and today's actions. This suggests the corrective move back toward the May highs is now complete.

German DAX ($DAX)
The German DAX reversed down on the chart with Wednesday's action, and like the Wilshire 5000 remains below the May peak.

German DAX (DAX-XE)
(Chart Thomson Financial)
Meanwhile, looking at the same chart on Thomson we see that a TD-Combo 12 was put in on Monday and a TD-Sequential 11.

German DAX and S&P 500
What do the DAX and the S&P 500 have to do with one another? Take a look at the chart below with the DAX in red and the SPX in green. The correlation was actually very tight... until August 15. Since then the DAX has failed to keep pace with the SPX.

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No positions in stocks mentioned.

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