Getting Ugly

It’s getting ugly for my core market health indicators. My measures of market quality, trend, and strength are all in oversold territory. During bull markets, oversold conditions generally result in a resumption of an uptrend. Unfortunately, I suspect we’re at the beginning of a long term bear market so oversold conditions should now result in more price destruction before a rally can ensue.

Here are a few charts that suggest we’re likely resuming the down trend. First is a point and figure chart of the S&P 500 Index (SPX). It now has a bearish reversal during an intermediate term down trend.

Next is a weekly chart of SPX Elder Impulse. It has turned red after a short term rally that couldn’t produce a green bar.

Conclusion

It’s ugly out there. We’re likely in a bear market. Dow Theory hasn’t signaled yet, but many other indicators are toppling one by one. As a result, bear market rules apply as I interpret charts and indicators… which are currently suggesting a resumption of the long term down trend.