• Investing
  • Stock
Round Table Thoughts
  • Economy
  • Editor’s Pick
Home Stock Three Charts Screaming Market Top
Stock

Three Charts Screaming Market Top

by September 7, 2024
by September 7, 2024 0 comment
Share
0
FacebookTwitterPinterestWhatsapp

This week, the market appeared to shift dramatically from “stalling out at all-time highs” to more of a “big time risk-off selloff move” kind of situation. The warning signs were building in August, but, so far, September is ringing all kinds of market topping alarm bells. Let’s review three key charts that tell the story of this shift in investor sentiment.

Weaker Momentum Indicates Bulls are Exhausted

When the S&P 500 first tested the 5650 level in July, the daily RSI pushed above 80 to reinforce the strong positive momentum. Then, when that level was retested in late August, the RSI was down around 60.

What appeared to be a potential pause before an upside breakout now seems to be a confirmed double top pattern with weakening momentum characteristics. This suggests an exhaustion of bullish sentiment and looks awfully similar to previous market tops.

Looking for help navigating what will most likely be a turbulent September and beyond? Our Market Misbehavior premium membership could be the answer. From our Weekly Flight Plan report to virtual courses on technical analysis and an interactive members-only community, we’re ready to help you upgrade your market awareness! Sign up today and use code DK2024 for 30% off your first 12 months on any plan!

To be clear, the S&P 500 still remains within 5% of an all-time high.  But with the SPX down over 4% this week, and the Nasdaq 100 down almost 6%, bears appears to be back in control of the major market averages.

Elevated Volatility Implies Elevated Risks

I was super surprised to see the VIX come back down to the mid-teens in mid-August after spiking to one of its highest levels in history. Through late August, the VIX remained below the 20 level, suggesting a low-volatility environment.

This week, the VIX pushed back above that crucial 20 level, signaling elevated uncertainty and therefore elevated risk for stocks. Every day the VIX remains above 20 should give less comfort to bulls cautiously looking for a dramatic upside reversal.

Newer Dow Theory Flashes Bearish Non-Confirmation

Finally, we can look what I call the “Newer Dow Theory,” an adaptation of Charles Dow’s foundational work relating the movements of two major equity indexes. While Dow used the Dow Transports and Dow Railroads to gauge economic strength, I like to consider an equal-weighted S&P 500 and equal-weighted Nasdaq 100 to compare the performance of “old economy” versus “new economy” names.

Over the last six weeks, while the S&P 500 itself has stalled out around the 5650 level, the Invesco S&P 500 Equal Weight ETF (RSP) has actually achieved a new all-time high. At the same time, the Direxion Nasdaq 100 Equal Weighted ETF (QQQE) has actually displayed a lower peak. Dow called this configuration a “bearish non-confirmation,” where a new high from one index was not confirmed by the price action of another. And this bearish non-confirmation is a common feature of major market peaks.

As a trend-follower, I would argue that the primary trend in the S&P 500 remains bullish as long as the index remains above the August swing low around 5200. But given the growing signs of deterioration in these key macro charts, the likelihood of further downside in September feels very real.

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
  • Options Trade Ideas YOU NEED to SEE!
  • Here’s A Fresh Look At The Markets Using A Longer Term Lens
  • Navigate Market Shifts Like a Pro: Utilize This Key Indicator Effectively
  • Is This BUD Still For You?
Share
0
FacebookTwitterPinterestWhatsapp

previous post
Markets Nosedive Amid Recession Fears
next post
Alan Dershowitz leaves Democratic Party, cites DNC: ‘I was disgusted’

You may also like

Why the NAAIM Exposure Index Matters to Your Investments

February 8, 2024

Stocks Are Going UP “With or Without You”

March 23, 2024

Powerful Entry Strategy Using One Moving Average

May 15, 2024

Elevate Your Options Trading!

March 6, 2025

Investors Await CPI and Bank Earnings: Will They Spark Investor...

January 15, 2025

The Secret Behind My Moving Average “Buddy” System

January 11, 2024

Are the Magnificent 7 Still the Kings of Wall Street?

November 15, 2024

Heads Up! 10-Year Treasury Yield Could Go All the Way...

August 18, 2023

Equity and Inflation Outlook — Watch These Videos!

November 21, 2023

M2 Continues to Fall, Making Stocks Overvalued

August 23, 2023

    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

    • Breakouts, Momentum & Moving Averages: 10 Must-See Stock Charts Right Now

      May 31, 2025
    • Leadership Rotation Could Confirm Corrective Phase

      May 30, 2025
    • Run Your Stock Portfolio Like a Pro Sports Team

      May 30, 2025
    • U.S. foreign tax bill sends jitters across Wall Street

      May 30, 2025
    • Amazon taps Xbox co-founder to lead new team developing ‘breakthrough’ consumer products

      May 30, 2025

    Popular Posts

    • 1

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

      June 27, 2024 2,765 views
    • 2

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

      August 9, 2024 2,472 views
    • 3

      Biden appointee played key role in recruiting Chinese...

      June 25, 2024 2,451 views
    • 4

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

      July 10, 2024 2,432 views
    • 5

      Harris VP pick spent years promoting research facility...

      August 29, 2024 2,308 views

    Categories

    • Economy (7,009)
    • Editor's Pick (2,106)
    • Investing (538)
    • Stock (2,581)

    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

    • Breakouts, Momentum & Moving Averages: 10 Must-See Stock Charts Right...

      May 31, 2025
    • Leadership Rotation Could Confirm Corrective Phase

      May 30, 2025
    • Run Your Stock Portfolio Like a Pro Sports Team

      May 30, 2025

    Categories

    • Economy (7,009)
    • Editor's Pick (2,106)
    • Investing (538)
    • Stock (2,581)

    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

    SELL The News! NVDA Trades Lower...

    August 24, 2023

    EQUITIES STRUGGLE AS MORE SECTORS TRY...

    July 29, 2024

    Apple (AAPL) and Google (GOOGL) Flashing...

    February 29, 2024
    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