There has been more selling than buying in the stock market for weeks and now it is starting to hurt the S&P 500. Now the selling has hurt the Russell 2000 and things such as the ARKK ETF for months and the type of stocks inside of it, but now that damage is spreading. First take a look at this chart, which is the volume advance/decline line. It shows us that the buy volume inside the S&P 500 actually peaked in November.
On the bottom of the chart you can see the S&P 500.
Notice how the buying volume peaked in November, but the S&P 500 managed to make a new high last week.
What that was is a negative divergence in the markets.
This indicator is still above its November and September lows, but if it goes below those lows then you should take this as a SECOND flashing red warning sign on the markets.
We already got the FIRST red warning sign when the internals collapsed in November, meaning the number of stocks above their 200-day moving average took a sharp decline, comparable to what it did in August of 2007.
Let’s see what happens, but it is really hard for the market to go up for more than a day or two when these two indicators are in downtrends like this.
BTW – these indicators ARE NOT shown in Robinhood apps, so Robinhood traders have no idea what is going on.
And there are other things I’m watching too – like will bonds go up or down the rest of this year if the market continue to act like this?
What about gold and other commodities?
Hopefully the market can bounce for people today, but the overall picture is darkening for the stock market in 2022, in fact it looks like it is completing a stage three topping process, as I talked about in this video.
-Mike
