• Investing
  • Stock
Round Table Thoughts
  • Economy
  • Editor’s Pick
Home Stock Three Concerning Signs for Stocks
Stock

Three Concerning Signs for Stocks

by February 10, 2023
by February 10, 2023 0 comment
Share
0
FacebookTwitterPinterestWhatsapp

I’ve recognized the strength displayed by the S&P 500 and Nasdaq Composite off the October lows. I’ve written about the New Dow Theory buy signal and the improvement in breadth indicators like the percent of stocks above moving averages. So, while I am not as all-in uber-bullish as my friend Tom Bowley, I certainly will admit that the strength we have seen thus far in 2023 usually leads to further strength down the road.

Three charts I’m watching suggest that we may be in short-term pullback mode, with a non-zero probability that it leads to a retest of the December lows. Will this represent a better entry point for investors that have missed all the bullishness of the last six weeks?

Bullish Percent Index Becomes Less Bullish

First, let’s review a breadth indicator driven entirely by point & figure charts.

The Bullish Percent Index was one of the most helpful indicators to navigate 2022. Most of the major tops last year saw this indicator move above 70 toward the end of the upswing, then right back below 70 to indicate a downside reversal. We also had three buy signals, where the indicator dipped below 30 and then back higher. Two of those times beautifully indicated the June and October lows.

At the end of January, the Bullish Percent Index pushed above the key 70 level, suggesting the latter stages of a bull move. This week, we have noted this indicator has moved back below the 70 level, which suggests a new leg down for the S&P 500.

McClellan Oscillator No Longer Bullish

I shared a video last week about the McClellan Oscillator, a well-designed adaptation of advance-decline data.

Simply put, the market is bullish when the McClellan Oscillator is above zero, and bearish when it is below zero. There’s certainly more to the indicator, including the bearish divergences indicated with red lines on my chart.

But if you look at what the S&P 500 has done when the indicator is above zero vs. below zero, you can see why this breakdown is an important gauge of market breadth and should give bulls some pause about next couple weeks.

An Foreboding Increase in Volatility

Finally, we can look at volatility, which has remained fairly low since December of last year.

I had a great conversation with Katie Stockton recently about the prospects for the market to rally on lower volatility, which is something we really hadn’t seen since the October low. Well, this week, the VIX pushed back above the 20 level, which may be the beginning of a return to a higher volatility regime.

Why is high volatility a concern? Well, the market doesn’t tend to rally on high volatility. The reason is that, when investors get nervous and panic, they tend to sell quickly and anxiously. This pushes the VIX, or the “fear gauge”, higher to reflect investor uncertainty.

Markets tend to have sustained advances on lower volatility because investors tend to accumulate shares over time during a bull market phase. We don’t anxiously accumulate shares (although that can happen in the “irrational exuberance” phase at the end of bull markets!), so a market uptrend with a relatively low VIX would be pretty bullish. As the VIX has moved back above 20, we’re faced with weakening price characteristics as the SPX dips below 4100, declining breadth indicators with similar signals to previous corrective moves, and stocks like GOOG in a freefall.

Bullish on stocks here? The indicators we shared today could mean an even better entry point to ride the next bull move higher. But these indicators will need to improve, as, otherwise, they suggest a more painful downdraft than some may expect.

Want to learn more about how we use RSI to analyze price momentum? Hit my YouTube channel.

RR#6,

Dave

P.S. Ready to upgrade your investment process? Check out my free behavioral investing course!

David Keller, CMT

Chief Market Strategist

StockCharts.com

Disclaimer: This blog is for educational purposes only and should not be construed as financial advice. The ideas and strategies should never be used without first assessing your own personal and financial situation, or without consulting a financial professional.

The author does not have a position in mentioned securities at the time of publication. Any opinions expressed herein are solely those of the author and do not in any way represent the views or opinions of any other person or entity.

You Might Also Like
  • Despite Stable Markets, Breadth Says Danger
  • Real Problems in Real Estate
  • Can QQQ Prove the Bears Wrong?
  • Have We Bottomed? Here Are 3 Charts To Watch
Share
0
FacebookTwitterPinterestWhatsapp

previous post
Biden’s energy secretary met with China-connected group fueling gas stove bans in US
next post
Golden Cross Carries Some Little-Known Magic

You may also like

KRE’s Impending Plunge: What This Emerging Crisis Means

March 27, 2024

Here Are Two Great Earnings Reports This Past Quarter

February 16, 2025

Citi Predicts $3,000 Gold by 2025 — What You Need...

July 12, 2024

SPY Dips But Tech Is Now Back On Track

March 10, 2023

Analyzing Risks for Mega-Cap Growth Stocks Before Key FED Meeting

September 19, 2023

NVIDIA’s Stock Split and Potential Correction

June 7, 2024

Nasdaq’s Leadership Is Clear – Here’s What Needs to Happen...

November 11, 2023

MEM TV: NVIDA is Setting Up To SURGE

May 4, 2024

Crude Oil Collapses – Will It Move Even Lower?

March 16, 2023

What’s the BEST Market Visualization Tool?

October 21, 2024

    Stay updated with the latest news, exclusive offers, and special promotions. Sign up now and be the first to know! As a member, you'll receive curated content, insider tips, and invitations to exclusive events. Don't miss out on being part of something special.


    By opting in you agree to receive emails from us and our affiliates. Your information is secure and your privacy is protected.

    Recent Posts

    • Krispy Kreme stock plunges after doughnut chain pauses McDonald’s rollout, pulls outlook

      May 8, 2025
    • Don’t Buy Robinhood Stock… Until You See This Chart Setup

      May 8, 2025
    • UnitedHealthcare sued by shareholders over reaction to CEO’s killing

      May 8, 2025
    • The Unpredictable Stock Market: How to Make Sense of It

      May 8, 2025
    • AMD CEO calls China a ‘large opportunity’ and warns against strict U.S. chip controls

      May 7, 2025

    Popular Posts

    • 1

      Trump-era China sanctions ended by Biden may be...

      June 27, 2024 2,630 views
    • 2

      Walz’s honeymoon with China gets fresh scrutiny as...

      August 9, 2024 2,339 views
    • 3

      Biden appointee played key role in recruiting Chinese...

      June 25, 2024 2,320 views
    • 4

      Shein’s global ambitions leaves some cybersecurity experts fearful...

      July 10, 2024 2,302 views
    • 5

      Harris VP pick spent years promoting research facility...

      August 29, 2024 2,186 views

    Categories

    • Economy (7,009)
    • Editor's Pick (2,066)
    • Investing (538)
    • Stock (2,530)

    Popular Posts

    • 1

      Trump-era China sanctions ended by Biden may be revived under new House GOP bill

      June 27, 2024
    • 2

      Walz’s honeymoon with China gets fresh scrutiny as Harris camp blasts ‘lying’ critics

      August 9, 2024
    • 3

      Biden appointee played key role in recruiting Chinese businesses to Delaware: ‘Longtime friends’

      June 25, 2024
    • 4

      Shein’s global ambitions leaves some cybersecurity experts fearful of Chinese spy threats

      July 10, 2024
    • 5

      Harris VP pick spent years promoting research facility that collaborated with ‘Chinese military company’

      August 29, 2024

    Latest News

    • Krispy Kreme stock plunges after doughnut chain pauses McDonald’s rollout,...

      May 8, 2025
    • Don’t Buy Robinhood Stock… Until You See This Chart Setup

      May 8, 2025
    • UnitedHealthcare sued by shareholders over reaction to CEO’s killing

      May 8, 2025

    Categories

    • Economy (7,009)
    • Editor's Pick (2,066)
    • Investing (538)
    • Stock (2,530)

    Disclaimer: RoundTableThoughts.com, its managers, its employees, and assigns (collectively “The Company”) do not make any guarantee or warranty about what is advertised above. Information provided by this website is for research purposes only and should not be considered as personalized financial advice. The Company is not affiliated with, nor does it receive compensation from, any specific security. The Company is not registered or licensed by any governing body in any jurisdiction to give investing advice or provide investment recommendation. Any investments recommended here should be taken into consideration only after consulting with your investment advisor and after reviewing the prospectus or financial statements of the company.

    Copyright © 2024 RoundTableThoughts.com. All Rights Reserved.

    Round Table Thoughts
    • Investing
    • Stock
    Round Table Thoughts
    • Economy
    • Editor’s Pick

    Read alsox

    Economic Modern Family–Granny Retail Takes a...

    July 8, 2023

    Head and Shoulders Top for Semiconductors?

    August 14, 2024

    Hidden Gems: Bullish Patterns Emerging in...

    April 23, 2025
    Sign In

    Keep me signed in until I sign out

    Forgot your password?

    Password Recovery

    A new password will be emailed to you.

    Have received a new password? Login here