Stocks are in a bearish trend

The position of stocks is still bearish

The Primary wave 2 (bear rally) in stocks ended on April 29. Since then, the weekly trend in price and volume has been bearish. Even with Friday’s “the worst is over” move in stocks, the below numbers confirm a change in trend from a price, volume, and sentiment is not imminent.

Price Trend(s)

For the week ending May 8, despite the weekly price trends turning positive 0.69% (S&P 500), 0.51% (DJIA), and 1.09% (Russell 2k), the overall weekly price trends are down 0.33% (S&P 500), 1.23% (DJIA), and 2.29% (Russell 2k) from the April 29 peak.

Volume Trend(s)

As far as follow-through, the average and weighted average weekly volume trend for all three indices was -1.17% and 0.12%, respectively.

Since the April 29 price peak(s), the overall weekly volume trend is down 36% across all stocks.

NYSE Advance Decline Ratio

The NYSE advance/decline ratio has been trending down with lower highs well before the end of the Primary wave 2 bear market rally. If we see a bullish reversal in trend, expect an increase in volume accompanied by greater advance-decline ratios.

Sentiment

Both the put/call ratio and volatility measures are essentially neutral with the put/call ratio at 1 and volatility at approximately 30. These current readings reflect a reprieve from the extreme bearishness in both measures around the end of March before the stock market bottomed on April 1.

Elliott Wave Oscillator

The Elliott Wave Oscillator is on a very basic level a pattern following marker. We can see it in one of two different ways. We can either see its value – positive or negative – or we can see its pace of progress.

On the off chance that the EWO is both positive and expanding, this is a bullish sign on two fronts. The near term pattern is bullish and the upswing is getting stronger.

On the off chance that the EWO is both negative and expanding, this is doubly bearish. The near term pattern is bearish and the downtrend is getting stronger.

With the Primary wave 2 pattern in stocks ending on April 30, it coincides with an increasing decline in the EWO since then. Through last Friday, May 8, the EWO is clearly bearish, down 31% from its peak.

Conclusion

There are no definitive signs that the overall character of stocks is changing and a change in the Primary direction of stocks is occurring.

To see Primary wave 3 down begin in earnest we will need to see a material pick-up in volume. What catalyst will kick this off remains to be seen. Maybe some instability in inflation?

For more on inflation and stocks, read:

Will an inflation narrative soon have an impact on the direction of stocks?

For related posts, read:

Global Asset Class Bear Market Gauge

Change Is Noticeable All-Around

When Will This Bear Market End?

Is Your Asset Allocation Strategy Prepared For The Bear Market?

The Increased Fragility of the Economy and the Stock Market

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