Friday, August 18, 2017 11:03:06 AM
8/18 bull market will end until the S&P 500 cries uncle
Those Noisy Small and Mid Caps
One of the biggest challenges in technical analysis is to distinguish between a mere correction and the start of a bigger downtrend. This is also true with broad market analysis. The selling pressure over the last four weeks was certainly intense, but is it enough to end the bull market? The chart below shows the S&P 500 SPDR (SPY), S&P MidCap SPDR (MDY) and S&P SmallCap iShares (IJR) as line charts with the 5% Zigzag. This indicator changes direction when there is a move greater than 5% (except for the most recent move).
Notice that MDY declined more than 5% on three different occasions since April 2016 (red areas) and IJR did the same on five different occasions. SPY, on the other hand, only experienced one pullback that exceeded 5% (closing basis). Deeper pullbacks and choppier price action in small-caps and mid-caps have defined the current bull run, pre and post election. As concerning as it is to see relative weakness in small-caps, I don't not think the bull market will end until the S&P 500 cries uncle.
Those Noisy Small and Mid Caps
One of the biggest challenges in technical analysis is to distinguish between a mere correction and the start of a bigger downtrend. This is also true with broad market analysis. The selling pressure over the last four weeks was certainly intense, but is it enough to end the bull market? The chart below shows the S&P 500 SPDR (SPY), S&P MidCap SPDR (MDY) and S&P SmallCap iShares (IJR) as line charts with the 5% Zigzag. This indicator changes direction when there is a move greater than 5% (except for the most recent move).
Notice that MDY declined more than 5% on three different occasions since April 2016 (red areas) and IJR did the same on five different occasions. SPY, on the other hand, only experienced one pullback that exceeded 5% (closing basis). Deeper pullbacks and choppier price action in small-caps and mid-caps have defined the current bull run, pre and post election. As concerning as it is to see relative weakness in small-caps, I don't not think the bull market will end until the S&P 500 cries uncle.
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