Market DashboardLast updated on 5/19/2017
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
There will not be a Market Dashboard update next weekend as we take a break for the Memorial Day weekend. From everyone at CI and AAII, we wish you a safe and enjoyable holiday.
Weekly Market Summary
Political drama, corporate earnings and oil prices were the drivers of the U.S. stock market this week.
Most of the attention was on Washington, D.C. and the Trump administration. After revelations that the President shared sensitive intelligence information with Russian diplomats and rumors of an alleged memo written by former FBI director James Comey in which the President had asked him to end his investigation into former national security adviser Michael Flynn’s ties to Russia, U.S. stocks turned in their worst day of the year on Wednesday.
U.S. stocks started the week on a high note. The Dow Jones Industrial Average ended its losing streak on Monday and flirted with the 21,000 mark. A sharp rise in oil prices fueled the rise in stocks after Saudi Arabia and Russia announced support for extended oil supply cuts. The S&P 500 Index and Nasdaq Composite both closed at record highs.
The Dow Jones Industrial Average started Tuesday strongly following strong earnings from Home Depot (HD). However, uncertainty surrounding President Donald Trump's release of allegedly classified information to Russia sapped the momentum from the market. Still, the S&P 500 Index and Nasdaq Composite hit record highs once again, and the Nasdaq ended the day in the black.
On Wednesday, the snowballing intrigue surrounding the Trump administration sent stocks tumbling. The S&P 500 fell 1.8% that day, its biggest one-day drop since September of last year. In addition, the Dow Jones industrial average shed 1.8% and the NASDAQ Composite fell 2.6% after posting a new all-time high close the day before. In addition, the VIX spiked 46% on Wednesday. In turn, investors flocked to safe-haven assets such as Treasuries and gold. Bank stocks were hit hardest, as financials in the S&P 500 were down 3% on Wednesday as hopes for bank deregulation and tax reform faded.
After suffering its worst session in months, the Dow Jones Industrial Average was able to bounce back Thursday, overcoming a sell-off in Cisco Systems (CSCO) following its earnings announcement and lingering concerns about the President’s ability to pass his legislative agenda. Wal-Mart (WMT) shares saw a strong post-earning bump which, along with a strong day for tech stocks pushed the Dow, S&P 500 Index and Nasdaq Composite higher.
On Friday, the Dow Jones Industrial Average enjoyed a triple-digit gain on the heels of strong quarterly results from Deere (DE), which in turn gave a boost to Dow component Caterpillar (CAT). Oil prices also rose ahead of next week’s Organization of the Petroleum Exporting Countries (OPEC) meeting. As such, energy stocks led the S&P 500 Index higher, and the tech-heavy Nasdaq Composite posted a gain for the day. However, the major U.S. indexes closed the week in the red, as Friday’s gains weren't enough to wipe away Wednesday’s sell-off.
The Dow Jones Industrial Average (DJIA) closed the down 0.4% to 20,804.84. After hitting the 21,00 mark earlier in the week, the blue-chip index once again failed to hold onto it. This strengthens our opinion that it is becoming a psychological barrier. Wednesday’s sell-off sent the index below its 50-day moving average, but the index was able to rally back above it by week’s end. We view the 50-day moving average (20,775.71) as offering minimal support to the downside. Instead, we look to the 20,400 to 20,500 range for initial support, as this marks the intermediate lows of mid-April.
The S&P 500 Index (SPX) dropped 0.4% this week to close at 2,381.73. The large-cap index mimicked last week’s activity by hitting a new all-time close on Monday and then fading the rest of the week. The 2,400 level continues as a near-term resistance point. We question the strength of the 50-day moving average (2,369.53) after the index fell below it on Wednesday, even though the index rallied back above it by the end of the week. Instead, we are looking to support created by April’s intermediate lows around 2,330.
This week, only four of the 10 S&P Sector SPDRs posted gains. Real estate (XLRE) finally posted a strong week, adding 1.34% to lead all sectors. Consumer staples (XLP) also posted a weekly reversal by rising 0.71%. Energy (XLE) posted its second weekly win in a row by climbing 0.5%. Financials (XLF) were the weakest this week, losing 0.9% on fading hopes of tax reform and deregulation.
The broad market Wilshire 5000 (W5000) lost 0.38% this week to close at 24,762.35. The index hit a new all-time high close on Monday but still wasn’t able to crack the 25,000 mark. This may prove a difficult obstacle in the near-term. The index also fell through its 50-day moving average on Wednesday, lessening its reliability as support moving forward. We now look to the 24,250 level for initial support, which marks the April lows.
The tech-heavy Nasdaq Composite (COMP) wasn’t able to continue its weekly winning streak, falling 0.6% this week to 6,083.70. However, the index did notch a new all-time high close on Tuesday. The index found round-number support around 6,000 on Wednesday, so we see it as near-term support moving forward. Below that is the 50-day moving average at 5,954.49.
The Russell 2000 (RUT) index of smaller stocks fell 1.1% this week to 1,367.33. The index tested the 1,400 mark earlier in the week but this resistance level held. Wednesday’s sell-off sent the index below its 50-day moving average but, unlike other indexes, it was not able to reclaim it before week’s end. To the downside, we look for near-term support just above the 1,340 level.
The CBOE Volatility Index (VIX) added 15.8% this week following a wild ride. Wall Street’s “fear gauge” jumped 46% on Wednesday to its highest levels in over a month but eased off as the week progressed, moving back below its 50- and 200-day moving averages. Eventually, it closed at 12.04.
Computerized Investing Market Dashboard Indicators
This week, two of the CI Market Dashboard Indicators triggered new bearish signals, both switching from neutral. Another indicator saw its bullish signal go stale and revert to neutral. However, none of the Dashboard indicators triggered confirming bearish or bullish signals this week.
Here is a recap of the Market Dashboard indicators for this week:
- The iShares Dow Jones U.S. Index Fund (IYY) fell 0.25% this to $119.34. However, for the 28th 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 116.96, up from 116.64 last week. The spread between the IYY closing price and the moving average narrowed to +2.0% from +2.6%. 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 clearly below its signal line. As a result, this indicator has triggered a new bearish signal, switching from neutral. The MACD of IYY stands at +0.222 while the signal line is at +0.398. As long as the MACD ends the week clearly below its signal line, this indicator will remain bearish. If the MACD was to end the week with clear separation with its signal line to the upside, this indicator would trigger a new bullish signal. If the MACD was to end the week basically in line 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 53.35, down from last week’s reading of 54.41. The signal for this indicator will remain bearish until August 25, 2017. If there is not a 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 62.36, a tick upward from 62.21 a week ago. 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 a confirming bearish signal was generated before that date. This would happen if the indicator rises above the 70% bearish threshold and then starts 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 component indicators of the NASDAQ Summation Index Moving Average Crossover with MACD Confirmation composite indicator ended this week both flashing bearish signals. Therefore, this composite indicator has triggered a new bearish signal, switching from neutral. 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. $NASI ended the week below its moving average, which is bearish for this component indicator. $NASI ended the week at +40.98 versus the moving average at +70.07. 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 crossed below its signal line and remained there at week’s end. This bearish crossover triggered a new bearish signal for this component indicator. The MACD of $NASI is +12.969 while the signal line is +24.65. This composite indicator will remain bearish as long as its component indicators both have bearish signals. This indicator would trigger a new bullish signal if the two component indicators were both flashing bullish signals. This composite indicator would trigger a new neutral signal if the two component indicators were not in agreement.
- AAII Investor Bullish Sentiment fell 8.9 percentage points this week to 23.9%. This is the largest one-week decline since the end of July 2015 and bullish sentiment is now at its lowest level since the November election. It has also been six months since this indicator generated a confirming bullish signal. As a result, the bullish signal went “stale” and reverted to neutral from bullish. However, this week bullish sentiment fell below the 25% bullish threshold, so when its rises above 25%, a new bullish signal will be generated. Alternatively, a new bearish signal would be triggered if the reading rises above the 50% bearish threshold and then falls back below it.
For the week ended May 19, 2017, one CI Market Dashboard indicator is bullish, four indicators are neutral and four are bearish.