Market DashboardLast updated on 2/24/2017
How do I use the Computerized Investing Market Dashboard?
- Read the Overview
- Click on any of the charts below for deeper analysis on the timing indicators.
Overview: iShares Dow Jones U.S. Index Fund (IYY) 100-day Moving Average Crossover
The IYY is an ETF tracking the performance of the Dow ones U.S. Index and holds roughly 1,300 stocks. The Dow Jones U.S. Index is designed to represent approximately 95% of the investable U.S. stock market and is a market-cap-weighted index. Since it is a market-cap-weighted index, its performance is dominated by the largest stocks traded on U.S. exchanges. However, it offers broader market exposure than the S&P 500 Large Cap Index or the Dow Jones Industrial Average. In addition, our analysis indicates that the Dow Jones U.S. Index is slightly more responsive to changes in market direction relative to other indexes.
Moving averages are the simplest trend indicators. When deciding on the number of periods to use when calculating a moving average, there is a balancing act between timeliness and usefulness. The fewer number of periods you use, the more responsive the moving average is to changing trends. This, in turn, produces better profits in both bull and bear markets. All else equal, IYY closing prices above the moving average line indicate a bullish, upward trend, while IYY closing prices below the moving average line indicate a downward, bearish trend.
However, the downside of using a more responsive moving average, with fewer periods in the calculation, is the greater potential for "whipsaws." A whipsaw occurs when a security's price heads in one direction, but then is followed quickly by a movement in the opposite direction. If your moving average is too responsive, it may generate back-to-back buy/sell signals based in this short-term price movement. Whipsaws are especially common when the market is moving within a trading range (moving sideways). When this happens, moving averages tend to flatten out, increasing the likelihood that the price can close above or below the moving average line in short succession. Acting on these buy and sell signals can result in a string of unprofitable trades and higher trading costs. It is for this reason that we don't rely on only a moving average as in indicator of the market's direction.
A bullish signal is generated when the closing price of IYY rises above the 100-day moving average. A bearish signal is generated when the IYY closing price crosses below the moving average.CLOSE
Overview: MACD on iShares Dow Jones U.S. Index Fund (IYY)
The moving average convergence/ divergence (MACD) is a trend-following indicator developed by Gerald Appel. It is calculated by subtracting the 26-period exponential moving average (EMA) from the 12-period EMA (periods can be days, weeks, months, etc.). Exponential moving averages place greater weighting on more recent prices, making them more reactive to recent price moves than simple moving averages, which place equal weighting on each periodic price.
This indicator also consists of a "signal line," which is a nine-period moving average of the MACD. The indicator generates buy and sell signals when the MACD line crosses the signal lineâ€”a crossover from below is a buy and a crossover from above is a sell.
Since the MACD makes use of moving averages, like the IYY moving average crossover indicator, it is sometimes prone to generating false short-term signals. This again highlights the importance of using multiple indicators when determining when to buy and sell.
Beyond using crossovers between the signal line and MACD to identify possible buy and sell points, traders also look for divergences between the direction of the MACD and the underlying security or index. When you see the MACD making new highs while the underlying security or index is falling, this points to a possible reversal in the index or security.
A bullish signal is generated when the MACD line crosses above the signal line; a bearish signal is generated when the MACD line crosses below the signal line. On those rare occasions where the MACD line and signal line are basically equal, the indicator is neutral.CLOSE
Overview: NYSE New Highs/New Lows
The NYSE High Highs/New Lows indicator ($NYHL) is the difference between the number of daily new highs and the number of new daily lows for the stocks traded on the New York Stock Exchange (NYSE). An increase from extremely negative readings is a possible indication of a market reversal to the upside.
A bullish signal is generated when the $NYHL falls to -750 or lower and then begins to increase. Alternatively, if the $NYHL declines by 750 points or more from a reading above zero and then begins to increase, this too is a bullish signal. Otherwise, the indicator is neutral. The last time $NYHL registered a value of -750 or lower was October 4, 2011, when it fell to -1,192. Dating back to the start of 1990, we have not observed a week in which $NYHL fell by at least 750 without also registering a value of -750 or lower. Therefore, we have extended this out so that if, at the end of trading for a week, $NYHL has fallen by 750 points or more from a positive reading in the preceding 10 trading days, the indicator triggers a bullish signal. The last time this happened was the week ended May 7, 2010. Over the 10 trading days ended May 7, the $NYHL had fallen from +665 on April 26 to -166 on May 6, for a decline of 831 points.
The indicator will also move from a bullish signal to a neutral signal if no new bullish signals are generated in the six months following an initial bullish signal.CLOSE
Overview: Percentage of NYSE stocks reaching new highs
One drawback of the NYSE New Highs/New Lows indicator is that a reversal from an extremely positive number is not a reliable indicator of possible market reversal to the downside. An alternative is to look at the percentage of NYSE stocks hitting a new high each week. When this percentage reaches extreme high levels and then begins to fall, this is an indication that a market top has been reached.
This indicator is bearish when the percentage of NYSE stocks reaching new highs is 25% or greater but is declining. When the indicator is below 25% or above 25% and still rising, it is neutral. Once a bearish signal is generated, that signal will remain in effect for six months, unless a confirming signal in the same direction is generated, at which point the date will be reset (or if a signal in the opposite direction is generated). If no confirming bearish signal is generated over the following six months after an initial bearish signal is generated, the indicator will revert back to neutral.CLOSE
Overview: Percentage of NYSE Stocks Above 50-day Moving Average
Extreme overbought or oversold conditions in the market often are precursors to a reversal. When a large percentage of stocks are trading above their 50-day moving average, this can indicate an overbought condition, with an increased chance of a market reversal to the downside. Alternatively, when a small percentage of stocks are trading above their 50-day moving average, this potentially oversold condition may signal an upcoming reversal to the upside.
The indicator is bullish when the when the percentage drops to 25% or lower and then begins to rise. Likewise, a bearish signal occurs when the percentage reaches 75% or above and then begins to decline. The indicator is neutral when neither of these conditions is being metâ€”the percentage is below 25% and falling; the percentage is above 75% and rising; or the indicator is between 25% and 75% without a recent reversal from extreme levels. Once a bullish or bearish signal is generated, that signal will remain in effect for six months, unless a confirming signal in the same direction is generated, at which point the date will be reset (or if a signal in the opposite direction is generated). If no new signal is generated over the following six months after a signal is generated, the indicator will revert back to neutral.CLOSE
Overview: NYSE Bullish Percentage Point & Figure
The NYSE bullish percentage (NYSBP) indicator tallies the number of NYSE stocks whose point & figure charts are currently indicating a buy signal and expresses the number as a percentage of all NYSE stocks. When this percentage reaches extremely high levels and begins to decline, the market may be headed for a reversal to the downside. Likewise, when this percentage begins to rise from extremely low levels, the market may be forming a bottom and preparing to reverse to the upside.
A bullish signal is generated when the bullish percentage falls to 30% or below and starts to turn upward. A bearish signal is generated when the percentage peaks above 70% and begins to turn downward. The indicator is neutral if neither of these conditions is metâ€”the indicator is below 30% and falling; above 70% and is rising; or the indicator is between 30% and 70% without a recent reversal from extreme levels. Once a bullish or bearish signal is generated, that signal will remain in effect for six months, unless a confirming signal in the same direction is generated, at which point the date will be reset (or if a signal in the opposite direction is generated). If no new signal is generated over the following six months after a signal is generated, the indicator will revert back to neutral.CLOSE
Overview: NASDAQ Summation Index Moving Average Crossover with MACD Confirmation
The NASDAQ summation index (NASI) consists of two parts. The first is the difference between the number of advancing stocks and the number of declining stocks in the Nasdaq composite index. The second is the five-day exponential moving average (EMA) of the summation (NASI) line. When the NASI line crosses above the EMA, this is considered a buy signal, while a crossover to the downside is a sell signal. Adding a MACD of IYY can serve as a confirmation of the crossover buy and sell signals on the NASI. A NASI buy signal is confirmed when the MACD line crosses above its signal line; likewise a NASI sell signal is confirmed when the MACD crosses below its signal line.
Furthermore, when both the NASI and MACD are showing positive divergence with the NASDAQ composite—reaching new highs while the index is declining—this can be viewed as a strong buy signal. Likewise, negative divergence with both indicators is considered a strong sell signal.
A bullish signal is generated when the NASI rises above its five-day EMA and is confirmed by the MACD crossing above its signal line on or near the same day. A bearish signal is generated when the index falls below the five-day EMA and the MACD has a confirming sell signal on or near the same day. If neither of these conditions is being met, the indicator is neutral.CLOSE
Overview: AAII Investor Sentiment Survey Bullish Percentage
Investor sentiment is often used as a contrarian indicator—individual investors tend to be most bearish at market bottoms and most bullish at market tops.
One sentiment indicator that is widely followed by professional traders and the financial press is AAII's Investor Sentiment Survey. Each week, AAII members can vote online as to where they think the market is going over the next six months—up (bullish), down (bearish), or sideways (neutral). The results are published each Thursday at the AAII website (www.aaii.com/sentimentsurvey).
A bullish signal is generated when the percentage bullish reading drops to 25% and then rises the next week; a bearish signal is generated when the percentage bullish reading rises to 50% and then drops the following week. If neither of these conditions is being met, the indicator is neutral. In addition, if no new confirming signal is generated within six months after a bullish or bearish signal is generated, or if a signal is the opposite direction is not generated within six months of a bullish or bearish signal is generated, the indicator will revert back to neutral.CLOSE
Overview: Shiller CAPE
The Shiller CAPE comes from Nobel Laureate Robert Shiller, the Sterling Professor of Economics at Yale University. CAPE is short for cyclically adjusted price-earnings ratio. It is cyclically adjusted in the sense that the earnings used in the calculation are averaged over a longer interval of time; Shiller uses 10 years. Shiller's research shows that real price divided by the 10-year average of earnings does actually help predict the stock market. The numerator of the CAPE is the real "inflation-adjusted" price level of the S&P 500 index.
Shiller believes that the stock market is somewhat predictable, but he admits that the CAPE ratio does not predict what is going to happen next year very well. Unlike the other indicators used in the CI Market Dashboard, which are short-term in nature, the CAPE is a long-term indicator. The CAPE predicts what will happen over the next five or 10 years. In other words, when prices are high relative to 10-year average earnings, then that suggests that prices will come down, but you don't know exactly when. You might have to wait five years or 10 years for them to come down. For patient, long-term investors, the CAPE is an indicator of value.
For the purpose of our market dashboard, a bearish signal is generated when the CAPE rises to 100% or more than its historical median or midpoint value. A bullish signal is generated when the CAPE falls 50% or more below the historical median. The indicator is neutral when neither of these conditions is being met. In addition, if no new confirming signal is generated within six months after a bullish or bearish signal is generated, or if a signal is the opposite direction is not generated within six months of a bullish or bearish signal is generated, the indicator will revert back to neutral.CLOSE
Weekly Market Summary
U.S. indexes continued their upward march this week, although there may be some indications that the momentum generated by rhetoric from President Trump may need actual policy statements for it to continue. Traders will be watching the President’s address to Congress on Tuesday for more details about his agenda. The Dow Jones Industrial Average ended the week on an 11-day winning streak, the first time this has happened since 1987, according to Schaeffer’s Investment Research. However, the Nasdaq Composite notched its first back-to-back losses of 2017. It also is becoming more likely that the Fed will hike interest rates in March after the Federal Open Market Committee (FOMC) minutes from its latest meeting indicated that “many” members support a rate increase “fairly soon.” However, as of Friday’s close, the CME Group’s FedWatch Tool placed at the probability of a March rate increase at only 26.6%, up from 22.1% the previous day.
The Dow Jones Industrial Average (DJIA) ended the week on an 11-day winning streak, thanks to a late-session rally on Friday after spending most of the day in negative territory. The blue-chip index ended the week at 20,821.76, yet another record close, after adding 1%. Initial support may develop around 20,500, followed by the possibility of round-number support at 20,000. The 50-day moving average is also around that area, currently at 20,059.70.
The S&P 500 Index (SPX) also registered a new all-time high close on Friday after adding 0.7% for the week to 2,367.34. This was also the fifth consecutive weekly win for the large-cap index. We wonder is the 2,370 level may offer some near-term resistance for the index. To the downside, we are waiting to see if support develops around 2,300 – 2,325, which served as the upper bounds of the former trading range for the index. There is also the 50-day moving average, which now stands at 2,288.25.
This week, two of the 10 S&P Sector SPDRs posted losses, as Financials (XLF) and Energy (XLE) fell 0.2% and 1.4%, respectively. Utilities (XLU) were the big winners, jumping 4.1%. Real estate (XLRE) also gained 2.2%. The Technology (XLK) sector added 0.8% for the week.
The broad market Wilshire 5000 (W5000) index climbed 0.5% this week to close at 24,689.93, 0.24% off the record close it set on Tuesday. The performance of the index indicates that the rally in U.S. stocks this week was mainly confined to larger stocks. We are also wondering if the 24,750 level may offer near-term resistance. Initial downside support may come around 24,500, followed by round-number support at 24,000 and the 50-day moving average at 23,930.73.
The tech-heavy Nasdaq Composite (COMP) finished the week at 5,845.31 for its fifth straight weekly advance after ticking upward 0.2%. As we mentioned earlier, the index recorded its first consecutive losing days of the year this week and is 0.52% below the record close it set on Tuesday. We look for round-number support at 5,800, although the 5,600 level is more compelling as it is also near the 50-day moving average at 5,598.58.
The Russell 2000 (RUT) index of smaller stocks fell 0.4% this week, again indicating that the rally may be starting to lose steam among rank-and-file stocks. The index now stands at 1,394.52. We continue to wonder if the 1,400 mark is becoming a resistance point. To the downside, the 50-day moving average (1,372.52) has been a reliable floor over the last several weeks.
The CBOE Volatility Index (VIX) ticked downward 0.2% this week to 11.47.
Computerized Investing Market Dashboard Indicators
This week, none of the Market Dashboard indicators triggered a change in signal. However, two of the Dashboard indicators triggered confirming bearish signals this week.
Here is a recap of the Market Dashboard indicators for this week:
- The iShares Dow Jones U.S. Index Fund (IYY) gained 0.6% this week to close at $118.82. For the sixteenth week in a row, the ETF closed above its 100-day moving average. Therefore, this indicator remains bullish. The 100-day moving average of IYY's closing price ended the week at 111.34, up from $110.90 a week ago. The spread between the IYY closing price and the moving average now stands at +6.72%, up from +6.55% at the close of last week. As long as the weekly closing price of IYY ends the week above its 100-day moving average in a “meaningful” way, this indicator will remain bullish. If IYY was to close the week with meaningful separation below its 100-day moving average, the indicator would trigger a new bearish signal. If the weekly closing price of IYY and its 100-day moving average are basically the same, the indicator would trigger a new neutral signal.
- The MACD of IYY ended the week with clear separation with this signal line to the upside. Therefore, this indicator remains bullish for the third consecutive week. The MACD of IYY stands at +1.303 while the signal line is at +1.12. As long as the MACD ends the week with clear upside separation with the signal line, this indicator will remain bullish. If the MACD were to end the week below its signal line with meaningful separation, this would trigger a new bearish signal. If the MACD ends the week with no “meaningful” separation with its signal line, this indicator would trigger a new neutral signal.
- The percentage of NYSE Stocks Above 50-day Moving Average ended the week at 71.56, a tick upward from last week’s reading of 71.351. On Tuesday of this week, the indicator closed above the 75% bearish threshold at 75.219. The following day, it closed below it, thereby triggering yet another confirming bearish signal. The signal for this indicator will remain bearish for six months until August 25, 2017. If there is not another confirming bearish signal before then, the signal will go “stale” on that date and revert to neutral. A confirming bearish signal would occur if the indicator were to rise above the 75% level and fall back below it. This would push the “stale date” back six months from the date of the confirming bearish signal. Alternatively, if the indicator reading falls below the 25% bullish threshold and rises above it, this would trigger a new bullish signal.
- The NYSE Bullish Percentage Index ($BPNYA) ended the week at 71.36, a tick downward from last week’s reading of 72.0. This week the reading saw its first daily decline since crossing over the 70% bearish threshold on Wednesday, February 8. As a result, this indicator triggered a confirming bearish signal. This indicator will remain bearish until August 25, 2017, on which date the signal with go “stale” and revert to neutral. The “stale date” would be pushed back if another confirming bearish signal was generated before that date. This would happen if the indicator fell below the 70% bearish threshold, crossed above it and then started to decline. Alternatively, the indicator would trigger a new bullish signal if the reading was to fall below the 30% bullish threshold and then rebound.
- The two component indicators of the NASDAQ Summation Index Moving Average Crossover with MACD Confirmation composite indicator are both flashing bullish signals this week. Therefore, this composite indicator remains bullish for the second consecutive week. The first indicator used by the NASDAQ Summation Index Moving Average Crossover with MACD Confirmation indicator is the Nasdaq Summation Index ($NASI) and its five-day exponential moving average. This week, $NASI closed above its moving average with meaningful separation between the two. This is bullish for this component indicator. $NASI ended the week at +354.19 versus the moving average at +341.8. The second indicator used for the NASDAQ Summation Index Moving Average Crossover with MACD Confirmation indicator is the MACD of $NASI. This week, the MACD line remained above the signal line with meaningful separation between the two. This is also bullish for this component indicator. The MACD of $NASI is +22.751 while the signal line is +2.867. The NASDAQ Summation Index Moving Average Crossover with MACD Confirmation composite indicator will remain bullish as long as the two component indicators are both flashing bullish signals. The indicator would trigger a new bearish signal if the two component indicators are both flashing bearish signals. A new neutral signal would be triggered if the two component indicators are not in agreement.
- The AAII Investor Bullish Sentiment climbed 5.4-percentage points this week to 38.5%. This indicator will remain bullish until May 17, 2017. If there is not another confirming bullish signal before then, the current bullish signal will go “stale” and revert to neutral. A confirming bullish signal would occur if the reading falls below 25% and then climbs above it. If there is a confirming bullish signal before May 17, 2017, the “stale date” would be pushed back six months. Alternatively, a new bearish signal would be triggered if the reading rises above the 50% bearish threshold and then falls below it.
For the week ended February 24, 2017, four CI Market Dashboard indicators are bullish, three are neutral and two are bearish.