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This death cross predicts a market decline of at least 10%

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This death cross predicts a market decline of at least 10%

por acintra » 11/5/2016 18:46

This death cross predicts a market decline of at least 10%: NYSE trader

All yesterday’s rally did for me was to serve as a reminder that volatility will be here for the foreseeable future.
Yahoo Finance By Keith Bliss


Investors and traders who have a long bias were cheering yesterday as the markets had their best day in some time. But what is there to get so excited about? While the session did provide a momentary respite from the negative sentiment of the last two weeks, I think it’s worthwhile to bring us back to reality on the position of the market.

From a longer term perspective, yesterday’s move did nothing to change the picture, which for me still shows weaker equity markets going forward. The consolidation across the four major indexes (^DJI, ^GSPC, ^IXIC, ^RUT) that commenced in April is still in place, and I see nothing on the horizon suggesting that a breakout is close to occurring. All yesterday’s rally did for me was to serve as a reminder that volatility will be here for the foreseeable future.

Three reasons why the markets will probably head down again

While no breakout looks to be in the offing, by contrast, I still see some issues that make a drawdown more likely. Three technical observations that continue to concern me are the following:

(1) The continued inability for the Nasdaq composite to engineer a sustainable move back to 5000 (and back in April the 50-day moving average crossed below the 200).

(2) The Russell 2000’s lack of conviction over the last month and its inability to move back to 1163.

(3) The 50- and 200-day moving average on the S&P 500 hourly chart continue to diverge with the 50 crossing below the 200 last week. In the last year, this hourly “death cross” happened in a meaningful way twice, which preceded pullbacks of 10% and 12%.

While there are more negative possibilities in the market than positive ones, right now the broad indexes are neither overbought nor oversold. Back and forth action, coupled with momentary spasms of volatility will probably be with us for some time to come.
Um abraço e bons negócios.

Artur Cintra
 
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