Opposing Indicators

A lack of concrete action from Draghi yesterday and pro-risk sold off accordingly, making for an appropriate full moon low. However, there was a little recovery into the close and this has been continued this morning (Europe time), suggesting the markets were holding up on more than Draghi’s promise. Gold is back into its large triangle meaning the breakout, for now, was premature. By lunar phase and geomagnetism the pressure is upward for pro-risk as of next week, so for me it is back to watching and waiting. My focus remains on leading indicators which I see as crucial to market fortunes now. ECRI for the US today and then the next 2 weeks give us the latest Conference Board and OECD leading indicators for key countries around the globe.

There is an interesting opposition of indicators for equities. First AAII sentiment says the stock market should go up from here.

Source: Sentimentrader / AAII

But second, Rydex involvement in the market says the market should go down from here.

Source: Sentimentrader / Tiho

Yet, third, Wall Street strategists equity allocation recommendation says the market should go up from here.

Source: Business Insider / BofA (Hat tip Gary)

And fourth and last, open interest shows that large specs and commercials are short and small specs long, which can be read as smart v dumb money, suggesting the market should decline from here.

Source: Cotpricecharts / Bill L

It’s rare to find normally reliable indicators at such odds with each other. What does it mean? I noted that this current rally isn’t a run-of-the-mill rally. Small caps are underperforming – although Quant Edges and Sentimentrader have now both run studies which suggest this is historically actually bullish for the market ahead rather than bearish. I suggest the market action will morph into something more typical – either a full involvement rally or a regular decline. But which is it to be? Putting my wider views aside (secular and solar supporting a bullish resolution) I would suggest the opposition of the indicators above suggests the market may struggle to move decisively one way or the other – at least until one of these indicators starts to shift the other way. So I will be watching for what shifts and which way.

I am on hols next week so there will be no posts and no model updates until w/c 13 August.

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8 thoughts on “Opposing Indicators

  1. Hi

    You say as of next week we are seeing pressure of Geo and lunar as upward, however, the short and medium model suggest that they overall trend for the S&P is still down. Am I correct or am I missing something?

  2. My 2nd top for the Industrials was provided for mid. jul12, in this mini-bullish market from march09 about 13.166 +-, and if this up mov. continues probabably next top around 12-17 ago12.

    After a decline about 30%, or more.

    Regards, Jonh, nice Holidays

  3. John,
    What does the sunspot and geomagnetic cycle look like at this time…I am seeing that the end of August (around 25th) to possibly sometime in October we will see a lot of volatility. Just wondering what your charts look like if you have them?
    Thanks.

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