Written by Lance Roberts, Clarity Financial
On a intermediate-term basis, both of our weekly “sell signals” remain, and as shown below, the market once again failed at its overhead trend line last week as well as the downtrend resistance from the previous peaks. These failures keep downward pressure on the market as prices continue to follow the “path of least resistance.”
Please share this article – Go to very top of page, right hand side, for social media buttons.
The weekly chart below also shows the rare “buy” and “sell” signals issued on a longer-term basis. Currently, as the market struggles with its current correction process, it is also very close to triggering a more important “sell signal” which could indicate a further correctionary process over the next several months.
How rare are these “sell signals” exactly?
The chart below the same chart as above except over a 25-year period.
Over the last 25-years, these sell signals have only been triggered 5-other times.
- At the peak of the market prior to the “Asian Contagion”
- Just prior to the peak of the market in 2000
- At the peak of the market in 2007
- At the peak of the market 2011 as QE-2 ended and the U.S.was facing the “debt ceiling debate.”
- Near the peak of the market from the collision of the end QE-3, the “taper tantrum” and “Brexit.”
Think about this for a minute.
How did a simple technical indicator catch what every mainstream and media analysts missed?
Market prices are a reflection of the overall psychology of the market. While in the very short-term the media and most investors opt to “hope” for a “never-ending bull market.”
Why not? Making money is fun.
However, prices, and more importantly “price momentum,” is the collective wisdom of all market participants. These indicators are simply a reflection of the “forecasts” of the “collective mind.”
There are many who continue to espouse the idea this market will right itself and regain its bullish footing, which is certainly a possibility I laid out in our pathways above. But, with these indicators warning of a different outcome, it is certainly worth considering the alternatives.
As I have often written in the past:
“Making up a lost opportunity in a rising bull market is substantially easier than making up lost capital from a bear market.”
Time is not your friend.
We remain cautious as the “best 6-months” of the year has now come to an end.