Bearish outcomes are more likely in a bear market and this is playing out as even the defensive groups were hit with selling pressure on Wednesday. We are also seeing this play out in certain commodities, such as industrial metals. Industrial metals
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The weight of the evidence remains bearish for stocks and participation to the downside expanded significantly over the last six trading days. Even the low volatility leaders were hit hard and there were few places to hide as correlations rose among stocks. Bonds managed to firm, but do not offer an alternative to stocks
Today we are going to dive into the subjective world of chart analysis. The weight of the evidence is bearish for stocks, but it is not overwhelmingly bearish because the S&P 500 breadth models are still net bullish. The market is quite divided and this is why SPY has been flat since September. The January-March decline
The weight of the evidence for the stock market remains more bearish that bullish. More stocks are below their 200-day SMAs than above, volatility is above average for SPY and the Composite Breadth Model is net bearish. Nevertheless, the S&P 500 SPDR and the S&P 500 EW ETF are trying to forge short-term reversals with big moves on Tuesday.
The broad market environment for stocks is more bearish than bullish. The Composite Breadth Model is negative, more stocks are below their 200-day SMAs than above and the S&P 500 is below its 200-day. Also note that yield spreads are rising again, offensive groups are lagging and defensive groups are leading.