• Chartist Corner: Four Charts That Should Scare The Bulls

    by  • April 17, 2013 2:59 pm • Chartist Corner • 3 Comments

    Could we be looking at yet another April peak and summer sell-off?  Well, it happened the past two years and very well could be occurring once again.   Chris Prybal showed a killer chart that notes margin debt is back up to 2007 levels.  What I want to do now is show some charts that have me concerned.

    Back in March, I noted that seeing the Investors Intelligence poll bears move beneath 20 was a concern.  If no one left is bearish, that can mean the only thing left to do is sell.

    We’ve seen continued surges in buying climaxes.  A buying climax occurs when a stock makes a new 52-week high and then closes lower on the week.  Clusters of them can be a warning sign something is wrong under the surface.  I’ve had success with them over the past few years, so I tend to follow them closely.  Even wrote about the cluster of buying climaxes back in early October before some weakness.

    Another sign something is happening under the surface is last week we saw a big spike in new 52 week lows.  Think about that, we are pretty close (at least we were at the time) to new all-time highs, yet more and more stocks are making new lows.  Again, there is something happening under the surface that should be watched.

    Lastly, the Average True Range (ATR) of the SPX is moving higher.  Simply put, the wider this gets then the more volatile the days are becoming.  Historically, more volatility isn’t bullish.

    Now don’t go out and short the market and expect another 50% haircut like we’ve seen twice the past 13 years.  But as traders it is our job to know both sides to the bull and bear case.  I can find you some good reasons to be bullish here as well, but wanted to share some real concerns of mine.  Good luck and be open to anything, and remember the market doesn’t care what you think.

    About

    Ryan Detrick is the Senior Technical Strategist at Schaeffer's Investment Research in Cincinnati, Ohio. He joined Schaeffer’s in 2003 and is a frequent speaker and writer on stock market and economic issues and is widely sought after by financial media for his expertise and commentary. Mr. Detrick is a common guest on CNBC, Fox Business, and Bloomberg Television and has been quoted in outlets such as The Wall Street Journal, BusinessWeek, USA Today, Reuters, the Associated Press, and others. With a decade of financial industry experience in the investment and financial services area, strengths include short-term trading with an eye toward timely technical- and sentiment-based trading opportunities, and advanced option trading strategies. Mr. Detrick received a BA in finance from Xavier University, an MBA in finance from Miami University, and has earned his Chartered Market Technician (CMT).

    http://schaefferstradingfloor.com/

    3 Responses to Chartist Corner: Four Charts That Should Scare The Bulls

    1. April 17, 2013 11:04 pm at 11:04 pm

      The AAII bears just topped 54% last week, the spread is the lowest since the flash crash at -35 this is very odd as their sentiment survey is showing a major bottom? Care to comment?

      • April 18, 2013 10:28 am at 10:28 am

        Great point. AAII is definitely very volatile and I guess last week they forgot to send a reminder email, so they had low participation. Flip side to AAII is Investors Intelligence is rather bullish.

        • April 24, 2013 10:23 pm at 10:23 pm

          I would also note that the AAII survey has a very spotty record as a contrary indicator. E.g. they turned very bearish in mid 2007. That was not exactly a buy signal.

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