Tuesday, March 07, 2017 2:49:00 PM
Why ominous ‘Ohama Titanic Syndrome’ has stock-market investors fretting a selloff
By Mark DeCambre
Published: Mar 7, 2017 2:28 p.m. ET
The number of NYSE-listed stocks that hit 52-week lows exceeded those that hit 52-week highs for the first time since Nov. 4
Rough waters ahead for stock investors says the Ohama Titanic Syndrome?
A warning sign is flashing on Wall Street and highlighting growing uneasiness among investors that the stock market-rally inspired by President Donald Trump’s pro-business policies may be starting to unwind.
On Monday, the number of New York Stock Exchange-traded stocks hitting 52-week lows exceeded those that hit 52-week highs for the first time since Nov. 4, indicating a pause in the run-up in equities that has resulted in a parade of all-time highs for the Dow Jones Industrial DJIA, -0.09% the S&P 500 index SPX, -0.18% and the Nasdaq Composite Index COMP, -0.09% since the November election.
Read: Read MarketWatch’s stock-market column
Prominent chart specialist Tom McClellan on Tuesday said that when lows surpass highs, within seven trading days of a 1-year high for the S&P 500, it flashes an Ohama Titanic Syndrome signal. The spooky sounding chart moniker was coined by Bill Ohama in 1965, and is viewed as a “preliminary sell signal,” according to McClellan. The S&P 500 put in its most recent closing high of 2,395.96 on March 1, along with the Dow industrials which registered a high of 21,115.55 on the same day.
Peter Boockvar, chief market analyst at the Lindsey Group, noticed the low/high pattern too. He described the development as a “chink in the armor of the stock market.”
Some believe the Ohama Titanic Syndrome could point to equity benchmarks turning decisively lower, with a downdraft of 5% or more. That’s especially since stocks have raced to a series of records that has raised questions about stock-market valuations.
In combination with the perception that shares are pricey, Wall Street has been on edge amid shifting expectations for a March rate increase, with investors betting on a roughly 90% chance that the Fed will lift rates as early as next week, odds increasing from less than 20% a week ago.
Don’t miss: Yellen says a March interest-rate hike is ‘likely appropriate.’
“Whether it’s the Fed rate increase next week or growing questions about what form of tax changes we’ll eventually see or just a bullish sentiment extreme that needs some cooling off or something else, we may actually be on the cusp of some sort of consolidation of the incredible gains we’ve seen post election,” Boockvar wrote in a Tuesday note.
To be sure, the Titanic Syndrome hasn’t always resulted in a downturn in the market. On its own it has had a number of false alarms, with markets continuing to maintain an uptrend. Ohama has refined the syndrome to note that new lows must exceed new highs for four out of five sessions and new highs must decline to about 1.5% of new issuance.
http://www.marketwatch.com/story/why-ominous-ohama-titanic-syndrome-may-signal-a-downturn-for-stock-market-investors-2017-03-07?siteid=rss&rss=1
By Mark DeCambre
Published: Mar 7, 2017 2:28 p.m. ET
The number of NYSE-listed stocks that hit 52-week lows exceeded those that hit 52-week highs for the first time since Nov. 4
Rough waters ahead for stock investors says the Ohama Titanic Syndrome?
A warning sign is flashing on Wall Street and highlighting growing uneasiness among investors that the stock market-rally inspired by President Donald Trump’s pro-business policies may be starting to unwind.
On Monday, the number of New York Stock Exchange-traded stocks hitting 52-week lows exceeded those that hit 52-week highs for the first time since Nov. 4, indicating a pause in the run-up in equities that has resulted in a parade of all-time highs for the Dow Jones Industrial DJIA, -0.09% the S&P 500 index SPX, -0.18% and the Nasdaq Composite Index COMP, -0.09% since the November election.
Read: Read MarketWatch’s stock-market column
Prominent chart specialist Tom McClellan on Tuesday said that when lows surpass highs, within seven trading days of a 1-year high for the S&P 500, it flashes an Ohama Titanic Syndrome signal. The spooky sounding chart moniker was coined by Bill Ohama in 1965, and is viewed as a “preliminary sell signal,” according to McClellan. The S&P 500 put in its most recent closing high of 2,395.96 on March 1, along with the Dow industrials which registered a high of 21,115.55 on the same day.
Peter Boockvar, chief market analyst at the Lindsey Group, noticed the low/high pattern too. He described the development as a “chink in the armor of the stock market.”
Some believe the Ohama Titanic Syndrome could point to equity benchmarks turning decisively lower, with a downdraft of 5% or more. That’s especially since stocks have raced to a series of records that has raised questions about stock-market valuations.
In combination with the perception that shares are pricey, Wall Street has been on edge amid shifting expectations for a March rate increase, with investors betting on a roughly 90% chance that the Fed will lift rates as early as next week, odds increasing from less than 20% a week ago.
Don’t miss: Yellen says a March interest-rate hike is ‘likely appropriate.’
“Whether it’s the Fed rate increase next week or growing questions about what form of tax changes we’ll eventually see or just a bullish sentiment extreme that needs some cooling off or something else, we may actually be on the cusp of some sort of consolidation of the incredible gains we’ve seen post election,” Boockvar wrote in a Tuesday note.
To be sure, the Titanic Syndrome hasn’t always resulted in a downturn in the market. On its own it has had a number of false alarms, with markets continuing to maintain an uptrend. Ohama has refined the syndrome to note that new lows must exceed new highs for four out of five sessions and new highs must decline to about 1.5% of new issuance.
http://www.marketwatch.com/story/why-ominous-ohama-titanic-syndrome-may-signal-a-downturn-for-stock-market-investors-2017-03-07?siteid=rss&rss=1
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