In short, none of the other markets are giving us any hope for an upside break-out. I would treat the equity markets as currently consolidating we they wait to see what the overall economic direction is.This week I've grown far more cautious and concerned about the market. First, defensive sectors are now outperforming more aggressive areas of the market. For the last week, health care (XLV), consumer staples (XLP) and utilities (XLU) advanced over other, more aggressive ETFs. The same is true over the last 30 days (I'll be touching on this issue later today in more detail). In addition, consider these longer charts of the averages:
The IWMs -- the riskiest of the largest averages -- have broken a long-term trend line. Remember, this average led the market higher over the last year or so.
There are two possible long-term trend lines with the SPYs. The lowest connects the lowest shadows of the two candles while the second, slightly higher line connects the low point of the bodies. Either way, the chart indicates the SPYs are in very touchy technical ground and need to be monitored closely.
The QQQs -- much like the SPYs -- are also at very touchy technical levels.
Let's take a closer look at some of the averages:
The SPYs have broken a shorter-term trend line. In addition, the 10 and 20 day EMAs are now moving sideways as opposed to higher, indicating slower upward momentum. The A/D and CMF lines show a lack of volume moving into the average and the MACD has given a sell signal and has continued to decline. Right now, the primary line of support is the 50 day EMA.
The IWMs have many features similar to the SPYs. However, take special note of the EMA picture, as the 10 day EMA has moved below the 20 day EMA. Also note that both the shorter EMAs are now moving lower rather than sideways.
In short, the technicals of the market are now signaling more caution signs. Important, long-term trend lines have either been broached or are currently very close to being broken. Underlying technicals (A/D, CMF, MACD) are weakening. This mirrors the issues with the fundamental economy right now, which is also showing signs of weakness. In short, I would not be looking for any long opportunities right now. If you've made money over the last few months, I'd take some profits off the table. And I'd also be looking for a shorting opportunity if it presented itself.
