Despite my belief that the fundamental environment is generally favorable towards equities, the technical indicators of breadth, sentiment and price are all showing signs of rolling over. While I love analyzing the fundamentals, it’s more important to pay attention to price and breadth in the short term when making entry and exit decisions. Therefore, I’m going to become a bit more defensive.
Breadth on the NASDAQ, as measured by the number of stocks above the 50 day moving average and by the Summation Index, has rolled over.
In addition, price has turned negative.
The NYSE has even been weaker with breadth and price rolling over several days ago.
Finally, sentiment as measured by the CBOE equity only put/call ratio looks to be turning higher. That indicates that traders are unwinding their bullish bets and starting to become bearish which puts downward pressure on prices. It’s always unclear when a sell signal is given because I use a combination of moving averages to measure the trend. However, its closer to giving a sell than a buy signal.
