Will stock market bear accompany arrival of Fall Equinox?

Markets closed higher last week, but on noticeably lower volume

Stock index, chart, technical analysis Stock index, chart, technical analysis

Market Snapshot:

 

Last

Week Chg

Week %Chg

S&P 500 Index

1405.87

+14.88

+1.06%

Dow Jones Industrials

13207.95

+111.75

+.85%

NASDAQ Composite

3020.86

+52.96

+1.78%

Value Line Arithmetic Index

2957.00

+68.10

+2.35%

Minor Cycle (Short-term trend lasting days to a few weeks) Positive

Intermediate Cycle (Medium trend lasting weeks to several months) Positive

Major Cycle (Long-term trend lasting several months to years) Neutral / Positive

The time frame toward the Fall Equinox can be a period of the year when the opportunity for historical occurrences increases because of the impetus, natural or otherwise, of circumstance moving inexorably toward eruption. The Fall Equinox that will occur this year on Sept. 22 and the pagan inspired All Hallows Eve, or Halloween, appearing on Oct. 31, have periodically coincided with major historical happenings, some on the darker side of the human spectrum.

Two, seminal, stock market events that occurred toward fall were the 1929 Crash that followed a bull peak on Sept. 3, 1929 and the Oct. 11, 2007 market high that was followed by an economic downdraft that nearly brought the world banking system to its knees. The 1929-1932 bear market erased nearly 90% of equity values and was followed by the Great Depression, the rise of fascism, and World War II. While the 2007-2009 bear resulted in a 54% decline in the Dow Jones Industrial Average, that second event has yet to be fully resolved even though the equity markets have recovered a large portion of its losses. What is still evident in the wake of 2007 is relatively high unemployment, a lackluster economic recovery accompanied by federal, state, municipal, individual debt woes, and a broad sense of investor unease.

Other major events occurring toward the Fall Equinox include the beginning of World War I on July 28, 1914 and the onset of World War II on Sept. 1, 1939 when Nazi Germany attacked Poland. Prior to the 1987 market crash, equity prices peaked on Aug. 25, 1987. And there was the attack on the World Trade Center on Sept. 11, 2001, an event that profoundly affected the stock market, international relations, and the course of history.

Market Overview – What We Know:

  • Major indexes closed marginally positive last week, but trading volume was noticeably diminished by nearly 25%. Average Price per Share was down 6 cents to $59.21.
  • Short-term trend remains positive until lower edge of 10-Day Price Channel (1368.71 through Monday) while similarly positive Intermediate Cycle would require weakness below lower edge of 10-Week Price Channel (1313.24 through August 17) to turn negative.
  • Short-term Momentum and our proprietary Trading Oscillator were last positive, but also “Overbought.”
  • Intermediate Cycle Momentum and our Trading Oscillators were moderately “Overbought.”
  • MAAD has refused to confirm little of market rally after peaking back on July 3 on Daily Cycle. But indicator was positive last week by 18 to 2 while MAAD Weekly Ratio was “Overbought” at 1.96.
  • CPFL was positive last week by 2.50 to 1. While indicator has shown some improvement over past month, it is nowhere near overcoming major resistance at February 2011 resistance high.

Why do we mention these events now? Because we find the current stock market environment and its negative divergences, after nearly 3 ½ years of upward movement within the context of market action since 2000, telling and perhaps prescient.

There is no denying equities have staged a powerful rally since the March 2009 lows. Since then the S&P 500, into its April 2 high at 1422.38, recovered all but 17% of the decline from October 2007 to March 2009. The Dow Jones Industrial Average came back only a little less than 13%. But the fact is that after 3 ½ years, neither index has bettered its October 2007 high. Nor has the NASDAQ, or the Value Line index, or the Russell 2000, or the OEX 100. Of all the indexes we follow, only one, the Dow Jones Transportation Average has been able to marginally better its May 19, 2008 high (5536.57) by rallying to 5627.85 on July 7, 2011. While that latter move might have given Dow theorists a boost over a year ago, the Dow was last nearly 9% below its 2011 peak.

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