US Equities Trend Update Mid-August 2019

Updated: Aug 30, 2019

Our last post provided a brief update on sentiment, which has begun to swing from optimism to pessimism. Sentiment hasn't quite reached the levels of extreme pessimism - a contrarian buy signal. This update (current 15/8/2019) focuses on trend. The Asset Allocation Framework's trend score was +2 at the end of July. It's since been downgraded to +1.

Trend Dashboard

Here's what the charts are saying (from top to bottom):

  • The S&P 500 has broken its 50-day moving average. Short-term downtrend. Medium-term trend (200-day moving average) is holding (so far).

  • The slope of the 50-day moving average is negative (i.e. the average is falling). Short-term downtrend.

  • The slope of the 200-day moving average is flattening out. A falling slope indicates a medium-term downtrend.

  • The number of S&P 500 stocks above their 50-day moving average is only 27%. Market breadth is poor. This confirms the short-term downtrend.

  • The number of S&P 500 stocks above their 200-day moving average is 53.17%. Its bad news once more than 50% of the stocks in the S&P 500 are in a medium-term down trend.

  • The NYSE (i.e. all of stocks on the New York Stock exchange) Cumulative Advance/Decline index is also falling. This confirms the downward move of the S&P 500 (i.e. the 500 largest stocks).

  • The High Low Logic Index. This index is calculated using the number of stocks making new highs and lows. I won't bore you with the calculations but the idea is simple. A high index value (above 4) = lots of stocks making new highs and lows at the same time. In other words, there's a lot of churn and no clear direction up or down. This usually happens at an inflection point in a trend. The index is now above the its October 2018 level.