The six-day losing streak finally came to an finish on Thursday, but I sense that the purchasing was likely more to do with oversold purchasing than a change in market sentiment.
The charts continue to show fragility and exhaustion, with the near-term view being bearish on weak Relative Strength (RS). My investment advice is that stocks could move lower in the near term.
Key chart developments include the S&P 500 holding below its April low of one,294. Failure to hold could drive the index to its 200-day MA of one,252. The Russell 2000 is also below 800. The Russell 2000 is down over four percent from its 2011 high, while the NASDAQ is down over four percent.
All of the key indices stay below their respective key 50-day moving average (MA)-a bearish sign. Watch for purchasing support due to an oversold technical condition.
As I said last week, the charts look ominous.
Investor sentiment is flattening. The trend of the NYSE new-high/new-low (NHNL) ratio had been edging higher, with 211 of the last 234 sessions positive. The near-term trend is flat, with ten of the last 13 sessions being neutral.
In the expertise area, 157 of the last 191 sessions have been positive. The trend is flat, with 15 of the last 18 sessions flashing a neutral sign. The trend is down.
My more in-depth view is as follows:
NASDAQ:- The near-term technical picture is moderately bearish on weak RS, so there could be mixed or downward trading in the near term. The index is below four,800 and its 50-day MA of four,794. Market breadth is trending lower. There is near-term topping on the chart, as the index appears set to retrench back to its earlier sideways channel.
DOW:- The near-term technical picture for the DOW is moderately bearish on weak RS, so there could be mixed or downward trading. The index is below its 50-day MA of 12,451, but above its 200-day MA of 11,677.There may be near-term topping on the chart on a downward-sloping flag formation.
S&P 500:- In the broader market, the near-term technical signals for the S&P 500 are moderately bearish on weak RS. The index is hovering around its April low of one,294, but below its key one,340 level and 50-day MA of one,329.
RUSSELL 2000:- The index is back below 800. The near-term picture for the Russell 2000 is moderately bearish on weak RS. The index is below its 50-day MA of 833, but well above its 200-day MA of 767.
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