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By HaleStewart December 13, 2015 7:54 am
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US Equity and Economic Review: 2016 Technical Outlook Is Not Encouraging

            This week’s column focuses exclusively on the technical side of the US market.  I’ll be using three weekly charts to illustrate my concerns about the structure of the US equity markets.

Let’s start with a weekly SPY chart:

  • The SPY’s rose solidly until the 3Q15.
  • The SPY’s are having a difficult time getting over the 212-214 area
  • MACD has been declining since 1Q14
  • Relative Strength has been declining since 2Q14
  • The number of stocks above the 200 day EMA started to decline in 1Q13, and really started moving lower this year
  • The advance/decline line has been moving lower since 3Q15

Let’s turn to the QQQs
 

  • The QQQs’s are still in an uptrend.  BUT
  • With the other two major averages in weaker technical shape, the odds are far more likely that the QQQs will follow them lower rather than pull them higher
  • MACD has been declining since 3Q14
  • Relative Strength has been declining since 3Q14
  • The number of stocks above the 200 day EMA started to decline in 1Q13, and really started moving lower this fall
  • The advance/decline line has been moving lower since 3Q15

And finally we have the IWMs:

 

  • The IWMs’s rose solidly until the 3Q15.
  • The IWM’s broke trend in 3Q15
  • MACD has been declining since 1Q14
  • Relative Strength has been declining since 2Q14
  • The number of stocks above the 200 day EMA started to decline in 1Q13, and really started moving lower over the last few quarters
  • The advance/decline line has been moving lower since 3Q15

Here are the common patterns:

  • Two major averages have broken long-term trend
  • Declining momentum
  • Declining relative strength
  • Declining number of stocks above their respective 200 day EMAs
  • Declining A/D lines

On top of this, the markets are expensive and top line revenue is declining.

I’m not a full-blown bear, but I am extremely concerned that there is little to no reason for any market to rally in the current environment.

 

 

 

 

 

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