Stock Market Broad-based Downturn Not Yet Confirmed

By: Donald_W_Dony

Stock markets normally trend together. So before a broad-based down turn can be identified, most equity indexes need to have rolled over. At present, that event has not occurred. But it is getting close

The NYSE represents a broad collection of North American and global securities. A decline below 7600 for a week (to August 12) would clearly indicate a new down trend has begun (Chart 1). Currently the index has just broken through the 7600 level. More time is needed to confirm a reversal of the bull market has developed.

The S&P 500 has not confirmed a new down trend. The index would need to drop below 1200 for a week (to August 12) before a new bear trend would start (Chart 2).

As of Friday, August 5, there are many global indexes that have already fallen below key support levels. Most of the European markets (Chart 3), Australia's All Ordinaries and Canada's TSX (Chart 4) have all declined below important long term support levels.

Asian markets are still trading above key support lines, though sell-side pressure is building.

At this time, the duration and depth of the roll over is unknown. The decline maybe just until the late September low or the start of a longer descent. More research about the possible reversal will be in the August newsletter.

By Donald W. Dony, FCSI, MFTA
www.technicalspeculator.com

COPYRIGHT © 2011 Donald W. Dony
Donald W. Dony, FCSI, MFTA has been in the investment profession for over 20 years, first as a stock broker in the mid 1980's and then as the principal of D. W. Dony and Associates Inc., a financial consulting firm to present.  He is the editor and publisher of the Technical Speculator, a monthly international investment newsletter, which specializes in major world equity markets, currencies, bonds and interest rates as well as the precious metals markets.   

Donald is also an instructor for the Canadian Securities Institute (CSI). He is often called upon to design technical analysis training programs and to provide teaching to industry professionals on technical analysis at many of Canada's leading brokerage firms.  He is a respected specialist in the area of intermarket and cycle analysis and a frequent speaker at investment conferences.

Mr. Dony is a member of the Canadian Society of Technical Analysts (CSTA) and the International Federation of Technical Analysts (IFTA).

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