Assessing The Market's Technical Trend

The Technical Trend Indicator (TTI) registered -6 on Wednesday. Industrials, transports, utilities and technology stocks closed lower on the day. There were fewer advancing stocks than declining stocks (A/D) on the NYSE. The largest market cap stocks (BMBI) closed lower on the day while the majority of stocks with the highest daily volume (MASI) on the NYSE also closed lower on the day. Bond yields closed lower on the day, positively impacting the TTI. The TTI registered 2,898 versus its long-term moving average of 2,852, +46 above trend.

There were no real changes in the technical indicators. Relative strength indicators (RSI) for US and EU markets have moved into positive territory above 50%. MACD momentum readings are still negative for all markets. The S&P 500 has edged above the long-term MA (50WMA) for the first time in months but the S&P 100 closed back below the 50WMA yesterday. The tech sector, S&P 500 and 100 indices in the US are showing readings with the majority of stocks trading above their 200DMA, but no confirmation yet from the broader NYSE index. The NYSE A/D Line is approaching the highs set in December while the TTI has broken out to new all-time highs.

The technicals are starting to confirm the bullish readings of the TTI. However, the stock market has reached strong resistance levels overhead now and will likely pause here for a time. If equities can consolidate without giving up too much ground over the next few weeks, allowing the overbought readings to work off, new highs will likely follow. However, if stocks roll over and head back down to re-test the December lows, more time will be required before determining the longer-term trend. The S&P is coming to the end of its first daily cycle (DC1) of this new medium-term investor cycle (IC), so we should see a decline in the stock market in the short-term. I still favour a deeper correction back to the December lows before a resumption of the recent bullish move.

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