(This is an excerpt from the subscriber-only DecisionPoint Alert on DecisionPoint.com)
This week, the markets experienced a dramatic bias shift. We measure the Intermediate-Term Bias using our Silver Cross Index (SCI). The SCI measures how many stocks within an index, sector, or industry group hold “silver crosses”, as in a 20-day EMA above the 50-day EMA.
When the SCI moves below its signal line, it shifts the Bias to BEARISH. This week, we saw every major market index we follow, with the exception of the Dow Industrials, move to Bearish Biases. We’ve also seen similar activity among the sectors and industry groups we follow.
To reiterate, the bias shift is due to a Silver Cross Index crossing down through its 10-day EMA, which means that some stocks within the given market index are experiencing 20/50-day EMA downside crossovers. When the 20-day EMA is below its 50-day EMA, the stock is, at the very least, in correction mode. The chart below is one that we use daily to track bias shifts. Clearly, most indexes still have a high percentage of stocks that still have a Silver Cross, but their bias is now bearish because of the shift below the moving average.
Conclusion: Based on the Silver Cross Indexes moving below their EMAs, we have new Bearish Biases on nearly every market index we follow. These Bear Shifts often precede longer declines. The weakness within these indexes implies a more concerted decline to follow.
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Technical Analysis is a windsock, not a crystal ball. –Carl Swenlin
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