First, the good news…

.

Let’s get right to the point on today’s market analysis.

The good news regarding stock market indices is:

  • The SPX, DJIA and NAZDAQ are all ahead of their 200 days SMA’s
  • All three of the indices are approaching their old highs – they are close enough to expect that test point to occur shortly
  • Cumulative moneyflow is (bottom pane of SPX chart below) bullish across the board.
  • Dow Theory breadth positive development via the recent move by the Dow Transports over its 200 day SMA (not shown)
  • Market breadth is bullish as seen on the Advance/ Decline line (chart below, courtesy www.freestockcharts.com)
  • April is one of the better seasonal periods for stocks
Note the divergence by MACD over the past year…a long termed negative
Note how the A/D line (black) is making new highs – ahead of the SPX (red line).

The bad news regarding US stock market indices include:

  • Diverging MACD on the SPX per the chart above
  • Smart/Dumb money confidence spread is bearish. Recall that “smart” money is tracked via movement of institutional traders and commercial hedgers, while “dumb” money is tracked by moneyflow into mutual funds and through individual retail investor surveys. When the indicator stays at this level for extended periods (as it seems to be doing) there can often be a correction (see chart below, courtesy www.sentimentrader.com)
  • The SPX is getting into overbought territory, albeit not too deep at this point. RSI, stochastics, etc should be watched.
When the “smarties” are significantly less bullish than the “dummies”, it can be a mid termed negative signal

I’ll post a Bear-o-meter update soon. So far, the positives are outweighing the negatives for this market. The big hurdle will be the October 2018 highs. That may be a correction point – although not necessarily a serious one. We continue to selectively buy stocks in undervalued areas – we have been avoiding chasing the overbought sectors. For now, this value – orientated approach appears more prudent than chasing overbought growth stocks.

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