Blashing for Profits

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The Dow-Jones-Transports fell below 50- and 200-day SMAs on 8/27/12, thereby turning systematically bearish again.

Industrial stock sector ETF Relative Strength Ratio (XLI/SPY) whipsawed back below its 50-day SMA on 8/27/12, thereby turning systematically bearish again.

Consumer Discretionary stock sector ETF Relative Strength Ratio (XLY/SPY) whipsawed back below its 50-day SMA on 8/27/12, thereby turning systematically neutral again.

The S&P 500 (SPX: 1,410.44) fell 0.69 points or 0.05% on Monday.

Price momentum oscillators have turned downward, after many of them demonstrated bearish divergences.

NYSE volume fell 6% on Monday and was 36% below its 200-day SMA. Volume has been running near the lowest levels of the year since 8/8/12, possibly reflecting diminishing enthusiasm for stocks, as well as summer vacations.

On-Balance Volume for the SPX remains in a downtrend with bearish divergence.

NYSE Cumulative Volume of Advancing Stocks minus Volume of Declining Stocks remains weak relative to price: it recovered only a little more than 61.8% of its March-June loss while the S&P 500 recovered 100%. Clearly, volume has not been confirming the price up move.

It takes volume to push prices up. After the shorts have been forced to cover and the longs have had their fill of buying, in the absence of a fresh source of demand, stocks fall of their own weight.

While the S&P 500 Composite Price Index recovered nearly all of its April-June loss, both the percentage of these same 500 stocks that are above their 200-day SMAs and the percentage in bullish Point-and-Figure Chart uptrends have recovered much less of their losses. Moreover, both are systematically neutral relative to their own 50- and 200-day SMAs. Both indicators turned down last week after failing to confirm the strength in the S&P 500. Both are diverging bearishly.

With the stock price indexes far above their 4-year lows and still very close to the top end of their 4-year price range, downside risk may exceed upside potential for the stock market. Choosing safety over risk appears to be the most reasonable approach for conservative traders and investors.

by Robert W. Colby of traderplanet.com

These are longer-term indicators all followed by Blashing.com and given to our Members before they happen.

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