Best of the Week
Most Popular
1.Spain Ignores Scotland Lesson as Catalan Independence Referendum Could Spark Civil War - Nadeem_Walayat
2.Used Car Buying From UK Dealer Top Tips, CarMotion.co.uk Real Customer Experience - N_Walayat
3.Spanish New Civil War Begins as Madrid Regime Storm Troopers Quell Catalan Independence Rebellion - Nadeem_Walayat
4.Virgin Media Broadband Down, Catastrophic UK Wide Failure! - Nadeem_Walayat
5.Are the US Markets setting up for an Early October Surprise? - Chris_Vermeulen
6.The Pension Storm Is Coming To Europe—It May Be The End Of Europe As We Know It -John_Mauldin
7.Stock Market Crash 2018; Will it Prove to be Another Buying Opportunity - Sol_Palha
8.The Profoundly Personal Impact Of The National Debt On Our Retirements - Dan_Amerman
9.Stock Market as Good as it Gets; Like 2000 With a Twist -Gary_Tanashian
10.1987 Stock Market Crash 30th Anniversary Greatest Investing Lesson Learned - Nadeem_Walayat
Last 7 days
Bitcoin Hits $6,000, $100 Billion Market Cap As Helicopter Ben and Jamie Demon Warn The End Is Near! - 22nd Oct 17
Time for Caution in Gold Miners - 22nd Oct 17
“Great Rotation” Ahead; Will it Be Inflationary or Deflationary? - 21st Oct 17
The Trigger for Volatility, Rates and the Next Crisis - 21st Oct 17
Perks to Consider an Agent for Auto Insurance - 21st Oct 17
Emerging Megatrends Hurting Consumers - 21st Oct 17
A Catalyst of the Stock Market Bubble Bust - 21st Oct 17
Silver Stocks Comatose - 21st Oct 17
Stock Investors Ignore What May Be The Biggest Policy Error In History - 20th Oct 17
Gold Up 74% Since Last Stock Market Peak 10 Years Ago - 20th Oct 17
Labour Sheffield City Council Employs Army of Spy's to Track Down Tree Campaigners / Felling's Watchers - 20th Oct 17
Stock Market Calm Before The Storm - 20th Oct 17
GOLD Price Creates Bullish Higher Low - 20th Oct 17
Here’s the US’s Biggest Vulnerability in NAFTA Negotiations - 20th Oct 17
The Greatest Investing Lesson Learned from the 1987 Stock Market Crash - 20th Oct 17
Stock Market Time to Go All-in. Short, That Is - 19th Oct 17
How Gold Bullion Protects From Conflict And War - 19th Oct 17
Stock Market Super Cycle Wave C May Have Started - 19th Oct 17
Negative Expectations, Will the Stock Market Correct? - 19th Oct 17
Knowing the Factors Affect your Car Insurance Premium - 19th Oct 17
Getting Your Feet Wet In Crypto Currencies - 19th Oct 17
10 Years Ago Today a Stocks Bear Market Started - 19th Oct 17
1987 Stock Market Crash 30th Anniversary Greatest Investing Lesson Learned - 19th Oct 17
Virgin Media Broadband Down, Catastrophic UK Wide Failure! - 19th Oct 17
The Passive Investing Bubble May Trigger A Massive Exodus from Stocks - 18th Oct 17
Gold Is In A Dangerous Spot - 18th Oct 17
History Says Global Debt Levels Will Lead to Another Crisis - 18th Oct 17
Deflation Basics Series: The Quantity Theory of Money - 18th Oct 17
Attractive European Countries for Foreign Investors - 18th Oct 17
Financial Transcription Services – What investors should know about them - 18th Oct 17
Brexit UK Vulnerable As Gold Bar Exports Distort UK Trade Figures - 18th Oct 17
Surge in UK Race Hate Crimes, Micro-Racism, Sheffield, Millhouses Park, Black on Asian - 18th Oct 17
Comfortably Numb: Surviving the Assault on Silver - 17th Oct 17
Are Amey Street Tree Felling's Devaluing Sheffield House Prices? - 17th Oct 17
12 Real-Life Techniques That Will Make You a Better Trader Now - 17th Oct 17
Warren Buffett Predicting Dow One Million - Being Bold Or Overly Cautious? - 17th Oct 17
Globalization is Poverty - 17th Oct 17
Boomers Are Not Saving Enough for Retirement, Neither Is the Government - 16th Oct 17
Stock Market Trading Dow Theory - 16th Oct 17
Stocks Slightly Higher as They Set New Record Highs - 16th Oct 17
Why is Big Data is so Important for Casino Player Acquisition and Retention - 16th Oct 17
How Investors Can Play The Bitcoin Boom - 16th Oct 17
Who Will Be the Next Fed Chief - And Why It Matters  - 16th Oct 17
Stock Market Only Minor Top Ahead - 16th Oct 17
Precious Metals Sector is on Major Buy Signal - 16th Oct 17
Really Bad Ideas - The Fed Should Have And Defend An Inflation Target - 16th Oct 17
The Bullish Chartology for Gold - 15th Oct 17
Wikileaks Mocking US Government Over Bitcoin Shows Why There Is No Stopping Bitcoin - 15th Oct 17
How to Wipe Out Puerto Rico's Debt Without Hurting Bondholders - 15th Oct 17
Gold And Silver – Think Prices Are Manipulated? Look In The Mirror! - 15th Oct 17

Market Oracle FREE Newsletter

3 Videos + 8 Charts = Opportunities You Need to See - Free

Stock Market - Is Now the Time to Go To Cash?

Stock-Markets / Stock Markets 2014 Jun 05, 2014 - 03:23 PM GMT

By: Christopher_Quigley

Stock-Markets

Many commentators are asking whether this market is showing real signs of exhaustion, suggesting that it is time to get out, go to cash, and wait for a serious correction or collapse to jump back in.

To try to answer this question let us look at the situation from a more distant perspective than the standard one. Accordingly, I am going to adopt a 6 year view using the following charts set out below: 1. The Dow Transports, 2. The Dow Industrials, 3. The S & P 500, 4. The NASDAQ 100, 5. The Russell 2000 (small cap. stocks: weekly), The Russell 2000 (small cap. stocks: daily), 7. The NYSE A/D Line and 8. The index of the percentage of stocks above their 200 DMA.


Observations:
The bull market which commenced in March 2009 shows no sign of abating. On the Dow Transports and the Dow Industrials we see higher highs and higher lows and both indices are congruent.

This strength is confirmed by the S & P 500 and the NASDAQ 100 as both are reaching ever higher highs from ever higher lows.

The NYSE A/D Line shows no sign whatsoever of technical stress. If market breath was seriously weakening we would begin to see compression of the 20, 50, 100 or 200 Daily Moving Average lines. There is no evidence of that happening at the moment. Therefore the 2009 bull trend is in place and firm.

However, there is some indication that the underlying economy may be weakening. The canary in the coal mine is the Russell 2000. Small cap stocks are far more sensitive to economic deterioration that large caps.  Looking to the Russell 2000 daily chart we can see that the 50 DMA has crossed the 100 DMA and prices are struggling around the 200 DMA. Over the last two months the 50 DMA line and the 100 DMA line became points of price resistance instead of points of price support.  Should near future price action experience the same resistance at the 200 DMA, this index will have entered a bear trend and that would be a cause for concern.

When we look at Chart 8; “The % of stocks above the 200 DMA”, we see more signs of deterioration. This market breath indicator is showing us that fewer stocks are breaking above this significant DMA. Thus the market is not getting stronger, it is in fact getting weaker, another cause for pause, but not undue worry.

On balance, filtering all the information from the charts below, I believe the bull market is still intact. Sure there are early signals indicating exhaustion but there has been no serious technical damage in evidence to indicate near term price capitulation. On the contrary, should the European weakness discussed in the news items below become more pronounced it is possible that American GDP numbers going forward will weaken.  However this news is a double edged sword.  Should Janet Yellen react to negative European growth data by slowing QE tapering the market could explode into the latter stages of a hyperbolic bull. This means to me that there is as much risk being out of the market as being in. Thus, I see no easy choices for investors and money managers. The existing “wall of worry” will continue for some time longer.

Chart 1. Dow Transports: Weekly


Chart 2.Dow Industrials: Weekly.

Chart 3. S & P 500: Weekly.


Chart 4. NASDAQ: Weekly.



Chart 5. Russell 2000 Small Cap Stocks: Weekly.


Chart 6. Russell 2000 Small Cap: Daily


Chart 7. NYSE A/D Line: Weekly


Chart 8. % Stocks Above 200 DMA: Weekly.

Spiraling Euroland Crisis:
I have not written with regard the EU for a long time. This is not because her problems have abated but because they have become so pervasive that it is difficult to cover them all. To give readers a feel of what is unfolding I have quoted below 4 short excerpts from blogs and the Irish Times to give a sense of what is actually developing.

The recent lackluster growth figures for the Euro-wide area will have serious political ramifications given that the new European Parliament is so divided. It is my opinion that as the crisis deepens it could seriously affect the American recovery and could possibly convince Janet Yellen to consider putting on hold her plans to phase out Quantitative Easing. Such action would have a major effect on all markets.

1. Economic data puts ECB into unknown:

The Irish Times, Dublin, Ireland, 5th. June 2014.
“Eurostat confirmed that growth was an anemic 0.2 per cent in the first quarter.
Mario Draghi, president of the European Central Bank (ECB), will have been given pause by recent data.
Eurostat yesterday confirmed that growth across the block was an anemic 0.2 per cent in the first quarter – just half the relatively unchallenging 0.4 per cent analysts had expected. Year on year, the growth came to just 0.9 per cent.

2. A divided parliament following May 23rd elections:
Euro News:  “It has been a night of seismic shocks for Europe as the election counts came in from all over the EU. One minor tremor that surprised many was that voter turnout was up by 0.1% defying projections of continued voter apathy.
But, the exit polls indicated that Eurosceptics were scooping up the majority of the votes in some of the biggest member states, yet the head of the largest pro-European party in parliament (EPP), still saw it as a reason for celebration.
“I would like to tell you. We’ve stopped the trend of lowering turnout. This was one of our main goals, in terms of democracy. Obviously, it’s not perfect, sure, we’re not satisfied, but at least it’s the first time we’ve stopped the tide of absenteeism,” said Joseph Daul speaking at the parliament in Brussels.

3. The Ukrainian crisis, an EU one:
STRATFOR, From Hungary, 21st. May 2014.
“The Ukrainian crisis can only be understood in terms of the failure of the European Union. Germany is doing well, but it isn't particularly willing to take risks. The rest of northern Europe has experienced significant unemployment, but it is Mediterranean Europe that has been devastated by unemployment. The European financial crisis has morphed into the European social crisis, and that social crisis has political consequences.
The middle class, and those who thought they would rise to the middle class, have been most affected. The contrast between the euphoric promises of the European Union and the more meager realities has created movements that are challenging not only membership in the European Union but also the principle of the bloc: a shared fate in which a European identity transcends other loyalties and carries with it the benefits of peace and prosperity. If that prosperity is a myth, and if it is every nation for itself, then parties emerge extolling nationalism. Nationalism in a continent of vast disparities carries with it deep mistrust. Thus the principle of open borders, the idea that everyone can work anywhere, and above all, the idea that the nation is not meaningful is challenged.

4.  ‘They are stealing everything, even our homes’:
By Afrodity Giannakis, from Thessaloniki, Greece. 21st. May 2014
 “I wish I could leave Greece. I can’t go on living here. I work very long hours and live more frugally than ever, but I still can’t pay the bills, the income tax or the other taxes like the property poll tax. My tax debt keeps building up. I’ll end up losing my home. They are stealing our homes and they are not communists. And people are getting sadder and madder every day. I can’t go on like this.”
This was the response I got when I greeted a stall holder at an open-air market in my area. Due to my own extremely difficult working and commuting conditions, I hadn’t seen him in months. His anger and despair were much stronger than before, as is the case with most ordinary people in Greece.

By Christopher M. Quigley

B.Sc., M.M.I.I. Grad., M.A.
http://www.wealthbuilder.ie

Mr. Quigley was born in 1958 in Dublin, Ireland. He holds a Bachelor Degree in Accounting and Management from Trinity College Dublin and is a graduate of the Marketing Institute of Ireland. He commenced investing in the stock market in 1989 in Belmont, California where he lived for 6 years. He has developed the Wealthbuilder investment and trading course over the last two decades as a result of research, study and experience. This system marries fundamental analysis with technical analysis and focuses on momentum, value and pension strategies.

Since 2007 Mr. Quigley has written over 80 articles which have been published on popular web   sites based in California, New York, London and Dublin.

Mr. Quigley is now lives in Dublin, Ireland and Tampa Bay, Florida.

© 2014 Copyright Christopher M. Quigley - All Rights Reserved

Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any trading losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors before engaging in any trading activities.

Christopher M. Quigley Archive

© 2005-2017 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

Catching a Falling Financial Knife