“In the short term, the stock market is overbought, momentum is waning, and volume indicators are falling. This is a warning that the market is ripe for a short-term pullback.”
The stock market is now experiencing a short-term pullback and our job is to analyze the data to determine when the market recovers. Below is a chart of the S&P 500 in the top panel and On Balance Volume , a volume indicator, in the lower panel. Here are my takeaways: For comparison purposes, look at last year’s correction. The signal that the correction had concluded was when the index and OBV moved decisively above their respective downtrend lines.
The chart below displays the S&P 500 Index in the top panel and relative strength charts underneath, comparing Utilities and Staples to the S&P 500. An increase in the lines indicates these risk-off sectors are outperforming the S&P 500. Here are my takeaways: Conclusion: Continued outperformance in Utilities and Staples would suggest a more risk-off stance among investors, which could signal caution in the broader stock market.The S&P 500 is positioned below a key resistance level and slightly above its short-term downtrend line. A decisive move higher would be bullish for the broader stock market, especially if it is accompanied by falling yields and an upturn in risk-on asset performance.
Source: News Formal (newsformal.com)
S&P 500 Consumer Staples Select Sector SPDR® Fund Ishares Semiconductor ETF
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