Another Warning Sign
Updated
As always, do what you will with this information. For me, the most reliable indicator over the years when determining interim/long term market direction is the Advanced/Decline line. When the A/D makes new highs, yet the market is double topping or in a minor correction, it is a bullish sign. Much like we seen this past August:
On the contrary, every time that the A/D line does NOT make new highs, while the market is making new highs, it has been followed by a substantive sell-off. We have hit yet this warning sign once again in the markets over the past few days.
A couple things to note:
1. I have no clue what the tradingview built-in A/D uses for it's metrics. It does matter a lot. And I bring it up because I noticed the tradingview indicator has a slightly different reading than the platform I use. It printed a 1131.06 yesterday (Up from Friday) vs the 1131.04 reading from November 4th, which resulted in a fractional new high. When the NYSE A/D line actually went down yesterday on the platform I use, and it remains November 4th remains the last day it made new highs. (And yes I will trust the indicator data from TD Ameritrade over this site lol)
2. It does not necessarily mean today or tomorrow is the beginning of the end.
In 2007-08 the indicator once again did not fail us in indicating a big sell-off coming, but that was also a process that took a month or two.
The 2018 October sell-off came days after the market made new highs and the A/D did not.
Case in point, I'm more confident than ever that a bigger sell-off is coming shortly as long as the A/D continues to tread below new high territory.
On the contrary, every time that the A/D line does NOT make new highs, while the market is making new highs, it has been followed by a substantive sell-off. We have hit yet this warning sign once again in the markets over the past few days.
A couple things to note:
1. I have no clue what the tradingview built-in A/D uses for it's metrics. It does matter a lot. And I bring it up because I noticed the tradingview indicator has a slightly different reading than the platform I use. It printed a 1131.06 yesterday (Up from Friday) vs the 1131.04 reading from November 4th, which resulted in a fractional new high. When the NYSE A/D line actually went down yesterday on the platform I use, and it remains November 4th remains the last day it made new highs. (And yes I will trust the indicator data from TD Ameritrade over this site lol)
2. It does not necessarily mean today or tomorrow is the beginning of the end.
In 2007-08 the indicator once again did not fail us in indicating a big sell-off coming, but that was also a process that took a month or two.
The 2018 October sell-off came days after the market made new highs and the A/D did not.
Case in point, I'm more confident than ever that a bigger sell-off is coming shortly as long as the A/D continues to tread below new high territory.
Note
Probably a good time to remind everyone that more often than not markets will attempt to regain it's previous highs before a substantial sell-off occurs.So if you are one that feels a bear market can be here any second. Don't let fear dictate decisions (such as this lovely 2 dollar drop that took minutes today) . Be rational, re-assess at the end of the day and if you have come to the conclusion a sell-off is beginning, get out in the next bounce. For example:
For example, what I am looking at now is a close below the 9 DMA, and then a potential sell-off down to the red megaphone trendline around 305-306. From there we see some form of bounce. Likely driven by the major support line and the fact that there is the FOMO crowd that sees this as there chance to buy the dip.
A bounce back up to highs or close, but a lack of advancement in the A/D would be a major red flag that says, get out now and ask questions later for me personally.
There are of course the rare cases like January 2018 where it was just a straight drop down. There was two days of an attempted bounce that failed both times before the major sell down occurred. Still a chance to get out, before it got ugly none the less.
Note
Just an update....the A/D has made new highs with the market now. For now, putting the red flag at bay. Still quite the oddity to see new highs for weeks without new highs from the A/D....Definitely going to be following what appears to be a parabolic move higher that ends when? Today....maybe tomorrow...maybe a month from now.
Note
MACD looks eerily similar to the 2018 pop. We'd be around Jan 2nd- 3rd area right now today.
That's not to say the markets will do the exact same thing this time....but just a point of reference of how these blow-off tops can look..
Note
If it is a blow-off top that you are looking for, are we there now? I'd say no. The 2018 blowoff seen pretty well every sector make a parabolic move higher....Energy, Financials, Tech, Materials, etc. There wasn't a "bad investment", minus utilities.Consumer disc. , energy, retail, utilities are all currently lagging the market at he moment.. Hard to call it a blow off top when so many areas of the market remain weak.
I'll remain long as long as SPY can hold it's 9 day MA. (Which it has). Ride out the greed of others, but nothing suggests this move higher is sustainable. Q4 estimates keeping declining and the market keeps trucking higher.
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