August 2015 Stock Market Technical Analysis

The U.S. Stock market has been losing steam as of late with leading stocks like Apple steadily declining and once hyped recent IPOs like Alibaba continuing to descend.  I was the only economists/trader to disagree with Dr. Seigel that the Dow would hit 20,000 this year (that I know of), now that call seems more reasonable here in early August 2015.   Here’s an excerpt from that article,

“Will the Dow hit 20,000 this year as Dr. Siegel suggests?  It seems unlikely to me that this could occur in the next 6 months if current trends continue.  I expect to see the 2nd largest wealth transfer shift in history if oil prices continue to nosedive.  The recent rally of 8 percent shows the transparency of heightened volatility in the mature stages of a decline.”   read more here.

Oil continues to be a source of wealth deterioration and my call in 2013 that major commodities would fall steadily seems to be holding up quite well. Gold bulls have been hurting for the last few years without a serious bottom developing at this point.  And while the S&P 500 has breached critical technical analysis levels I follow closely,  I did not see the irrational exuberance that typifies a true market top. On Twitter a few days ago, I mentioned not participating in the stock market until I saw the movement of at least 2.5% in one direction or another for more assurance that we were not in a rangebound-accumulation or distribution phase.

Since then, a pattern has been confirmed with a highly negative bias.   It might be time to put cash on the sidelines and save capital to look for better equity price entry points that may be coming in the next few weeks.   Technology stocks and small-cap stocks or showing no leadership such as Tesla, yet I didn’t see the retail participation that would have called for being more defensive. The most hated rally never became the most beloved rally, but if current levels can’t hold for the major averages, it may signal further declines to come as patterns of lower lows and lower highs are developing on largely negative breadth.

sp500

The longer-term trend for the S&P 500 is still relatively bullish but market internals are weakening.  The Dow Jones Industrial average is down over 2% for the year while the S&P 500 barely up 1% for the year.   Small caps are relatively unchanged after eight months and the market is top-heavy now which might be a good time to stay on the sidelines or look for a short-term bounce.


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