NFTRH Update; US Indexes vs. Bounce Parameters

It is and has been pretty simple.  Using SPX as an example, the first bounce target was 2050 to 2060, which includes all the moving averages.  That has been registered and exceeded.  Now, the top channel lines of the 3 major indexes await as bear/bull deciders.

us indexes

If the market breaks above the channel lines on the daily charts and holds said break, it is a bull signal and it could be ‘manic up’.  The market is always right, no matter what it is doing.  However, a parameter is a measurable condition to something and the second parameter is a condition that a would-be bullish market has not met.  That would be breaking those channel tops.

For another visual representation, here is the weekly chart showing a still-intact rounding topping pattern.

spx weekly chart

Here is the ‘2011 Comp’, which I think is getting too much attention in the media, just as the failed ‘1929 Crash Analog’ did a couple years ago.  If it breaks the dome (which would also break the daily channel lines) then so be it, it’s a bull signal.  Short of that, the bear case remains favored.

spx weekly chart

As for the other suspects, small and mid caps are bouncing but bearish below the moving averages and SOX is ambling sideways.

rut, mid, sox

Take a look at the weekly RUT for a picture that is potentially very ugly.  The pattern looks remarkably similar to the one it carved out in 2006-2008.  The dotted lines plot the equivalent time since the moving averages triggered down and the shape of the pattern, respectively.  Also, there is Mr. 2011 Comp for good (bullish) measure.  The MA’s triggered down then as well but were soon reversed.

rut weekly

The upshot is that RUT is bearish, but it could be some months before it actually breaks down, which is the favored scenario.  The un-favored scenario is the 2011 ‘Comp’ and bull continuation.  Small Cap companies are more challenged in a rising interest rate environment because as noted in a previous update, they carry more leverage on average.

So it probably makes sense to watch the Small Caps closely as a guide.