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.