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Earlier this month I wrote that the stock market’s short-term outlook was weak, showing signs of wanting to fall or even suffer a correction.
Since then, the S&P 500 Index has traversed sideways as shown in the daily chart below.
Note that with the S&P 500 flat and the stochastic trending down, a negative divergence is developing. Also, the MACD has registered a sell signal (red circles).
In the recent past, the market has retrenched under those conditions.
Support resides at 1,720 and 1,700.
The following chart also depicts some foreboding indications.
The percentage of NYSE stocks above their 50-day moving average is now at 61 percent, steadily declining from a peak of 85 percent last month.
A rising S&P 500 coupled with a declining percentage of issues above their 50-day moving average is typically a bearish harbinger with price weakness often the outcome.
So investors should remain cautious by holding cash and await a more opportune time to buy.
Best wishes,
Douglas
