Evidence of a Bear Market Mounting

Stocks fell Monday as the financial and health care sectors were under pressure, down 1.1% and 1.6%, respectively.

The Dow Jones Industrial Average lost 0.7%, but ended the month up 0.3%. This was a big improvement over January’s 5.5% loss, as The Wall Street Journal reported fears of slowing global growth derailing the U.S. economy abated.

However, concerns over China still abound. Its central bank cut its reserve requirements over the weekend so banks will have more funds to make loans. But this is expected to cause more volatility in the yuan.

WTI crude oil rose 3% to $33.75 a barrel, the highest close since early January, but oversupply issues are expected to remain for the rest of the year.

The only sector of the S&P 500 to post a gain on Monday was utilities, up 0.3%, as buyers seemed to be attracted to their high dividend yields.

The day’s worst performer was the biotech sector. The iShares NASDAQ Biotechnology Index (ETF) (IBB) fell 2.8%, and the group ended 4.9% lower in February.

Gold was up 1.2% on Monday, at $1,233.90 an ounce, and up 11% for the month.

The yield on the 10-year Treasury note fell to 1.74% from 1.76% on Friday as buyers moved more cash into safe haven investments. The euro fell 0.5% versus the U.S. dollar to $1.0874.

At Monday’s close, the Dow Jones Industrial Average fell 123 points to 16,517, the S&P 500 lost 16 points at 1,932, the Nasdaq fell 33 points to 4,558 and the Russell 2000 was down 3 points at 1,034.

The NYSE Composite’s primary exchange traded 1.3 billion shares with total volume of 4.4 billion. The Nasdaq crossed 2 billion shares. On the Big Board, advancers outpaced decliners by 1.1-to-1, and on the Nasdaq, decliners led by 1.2-to-1.

S&P 500 Chart
Click to Enlarge

Last month, I noted, “For the first time ever, the price line has crossed the 17-month moving average line three successive times, each rendering a different signal. Is this merely the result of extremely high volatility or a long-term head-and-shoulders top?”

The evidence is growing that this indicator is telling us that, despite recent strength, a bear market is developing.

February’s close on the S&P 500 is 8 points lower than the January close, and the price line at 1,932.23 is more than 5% below the 17-month moving average at 2,037.65. A recovery attempt in September/October failed, and all that remains to confirm a downtrend is a penetration of the February low at 1,810.10.

Conclusion

Looking at 20 past S&P 500 17-month moving average charts, no chart has recovered to a new high after a 5%-plus decline below the moving average. Therefore, I will continue under the assumption that a downtrend has begun.

I will pick up our discussion of the buying in defensive investments as the broader market rallied from the January lows on Wednesday.

Today’s Trading Landscape

To see a list of the companies reporting earnings today, click here.

For a list of this week’s economic reports due out, click here.


Article printed from InvestorPlace Media, https://investorplace.com/2016/03/daily-market-outlook-evidence-of-bear-market-mounting/.

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