Stock Market S&P 500 Index Structurally Positive, But Weak
Stock-Markets / Stock Markets 2011 May 22, 2011 - 02:53 PM GMTBy: Piazzi
I can sum up S&P’s current internals using four words:
Structurally positive, but weak!
This is a weekly chart with cyclical momentum overlaid
It’s 9 week since the low of March and we still see no sign of a turn in cyclical momentum. I have talked about structural weakness using OEW (which measures aggregate trends) and MAI (Market Alignment Index measuring aggregate structure) indicators. We can also see momentum weakness
If we zoom out
We see that, in most occasions, momentum lows (or peaks) precede price lows (or peaks). In fact, going back many years, a 9-week momentum lag is not an ordinary occurrence.
This is the chart we have been using for OEW and MAI indicators
I have said a number of times that these indicators have to uptrend and get to the top of their panels. This is not what we have been seeing. In fact, the peak of early May was accompanied with a lower peak for mid-term OEW as well weekly and daily MAIs.
It’s not a disastrous situation. All three indicators are still above zero denoting a positive tilt to aggregate trend (as measured by OEW) and aggregate structure (as measured by MAI). The weekly momentum cycle we just saw is also above zero (dropping but above zero). So the situation is not terribly negative, but it reeks of internal weakness, like a patient with a serious yet curable disease. The cure of the market’s disease at this time is money deployed on the bid side so that we start seeing uptrending OEW and MAI indicators, and, eventually, a turn in weekly momentum cycle.
Weak structure is a sign that buyers are lacking. We need buyers to hold support, strengthen the internals and then lift the index. We need them while mid-term trend is up and index is above support
By Piazzi
Piazzi offers a premium service at http://www.markettimepremium.com
And blogs freely at http://markettime.blogspot.com
I am a self taught market participant with more than 12 years of managing my own money. My main approach is to study macro level conditions affecting the markets, and then use technical analysis to either find opportunities or stay out of trouble. Staying out of trouble (a.k.a Loss) is more important to me than making profits. In addition to my self studies of the markets, I have studied Objective Elliott Wave (OEW) under tutorship of Tony Caldaro.
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