Markets took another downturn last week following higher-than-expected CPI data; the S&P 500 (SPX) posted a loss for the ninth time in the past 10 weeks, and today, equities extended their losses. The high degree of selling pressure pushed several of our key indicators in low field position. This reversal down simply tells us that fewer stocks are trading on “technical” buy signals and now moving to sell signals, implying breakages of support. It is common to see this indicator chop around in a low field position during market environments like these. So, once again, we will set alerts for a reversal back up and interpret such as a sign that demand is (again) trying to reenter the picture.
2021 and 2020 were each volatile years, but if looking beyond those years, this is the most “directional” changes we have seen in the first half of any year since data beginning in 1997. In past times when we saw an extreme number of column changes to start the year, the major equity benchmarks finished with a modest gain, but note those years were quite messy beneath the surface
For those interested, an explanation for, “why have we seen so many reversals lately?” The answer is with increased volatility, stocks have changed columns lots of times on their trend charts, creating periods of consolidation. In these consolidated postures, levels of support and resistance are closer together which means stocks can more easily, and quickly, give a sell or buy signal, respectively. More to come tomorrow… Pina F.
Pina Formicola, AWMA, AIF
Director of Research Analysis/Wealth Manager
Tax & Investment Group
1343 Long Pond Rd, Suite C
Rochester, NY 14626
Phone: 585-720-0730
Fax: 585-720-1301
Email: pina@taxandinvest.com
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