Is the Stock Market Close to Deciding Whether to Give Us Another Leg Down?
Today's chart looks at "the change of balance fight" between how many stocks are shifting between being Very Strong in Strength, or Very Weak in Strength.
Today's Question: Can this "change of balance fight" chart analysis signal new down turns in the stock market?
For the answer, let's go to today's Lead/Lag Indicator chart of the "Very Strong stocks minus the number of Very Weak Stocks".
The chart below goes back to the beginning of 2008. For a down turn signal, a support trend line must be broken like the instances at the end of February, mid May, and mid August ... see the vertical red dotted lines (A, B, and C) for when this occurred. As you can see below, in all 3 cases, the market retreated afterwards.
Note also, that this Lead/Lag Indicator shows a series of lower/highs that continued to generate lower/lows with more damage occurring in the stock market. Also note how the lower/highs all failed at points 1, 2, 3, and 4 when they reached the red resistance line.
Notice that after the peak failure move at label 4, the Lead/Lag Indicator dropped like all the previous occasions. But, also notice that the Lead/lag Indicator has continued making higher/lows and higher/highs since bottoming out ... so it has been trending up.
Do we now get another drop with a lower/low that takes the market down another leg?
The answer will come soon because the indicator ended yesterday being very close to retesting the support line. If the support gets tested and breaks to the downside in the next few days, then that would be a condition favoring more downside action. (The Lead/Lag Indicator is posted on the paid website every day and will be reposted here in early December.)