Stock Market Trends Still ‘Up’ But Risk Increasing

Market Trending Indicators

US Stock Market    Trending Up

Canadian Stock Market   Trending Down

US Bond Yields      Yields Trending Down

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sp 500 intraday stock market trend chart with volumeThere is an old saying that a picture is worth a thousand words. Since I am an inherently lazy writer I’ll make use of today’s stock chart of the S&P 500 (SPX – Quote) index:

Over the last weeks and months I have talked about the issue of volume. I explained that while the major market indexes (except for the Russell 2000) have been setting new all-time highs seemingly week after week, that the engine powering that momentum was pretty weak.

The biggest tell-tale sign of that weakness is that the number of shares traded during the up moves are considerably less than the number of shares traded on the down moves.

Our picture perfectly illustrates this situation. Prior to around 12:15 the volume bars were averaging around the 250k area or lower.  Look at the two waterfall events when the S&P 500 index dropped roughly three quarters of one percent over a two hour time span. The bulk of the drops occurred in in a matter of minutes. And look at the number of shares traded! The volume on the waterfall events was around 3 times higher than the normal up moves.

You may have heard the phrase ‘using the escalator going up and the window coming down’. This is what that describes.

tlt bonds intraday market trend chart higherThat’s why I believe that there is significant risk in these markets right now and why I have little equity exposure.

By the way, those boring bonds I’ve been recommending for weeks and months now have continued to do well. Here is the picture of the iShares Barclays 20+ Year Treasury Bond (TLT) over the same time frame.

On a broader note, deflationary forces continue to impact our economy.

So the thesis I am operating under remains the same. I continue to recommend that retired investor’s position themselves conservatively, reducing the amount they have invested in stocks (if they haven’t already) and increasing the amount in US Treasury Bonds and cash. In short, avoid stocks and high-yield bonds. Thanks for reading and have a good week.


Follow Jeff on Twitter:  @JeffVoudrie

Any opinions expressed herein are solely those of the author, and do not in any way represent the views or opinions of any other person or entity.