Good Monday morning and welcome back. To be sure, this week’s meeting of Janet Yellen and her merry band of central bankers will be the focal point for the markets. In case you’ve been sleeping under a rock for the past month, note that the markets are expecting the Fed to raise rates on Wednesday. However, the key will be the statement that accompanies the announcement as well as the updated “dot plot,” which details what each FOMC member thinks about the future of interest rates. So while we wait, let’s review my key market models and indicators – to make sure we recognize what “is” happening in the market.

The State of the Trend

We start each week with a look at the “state of the trend” from our objective indicator panel. These indicators are designed to give us a feel for the overall health of the current short- and intermediate-term trend models.

Executive Summary:

  • Short-term trend has turned “sloppy” with S&P sitting on 10-day ma, which itself is flat
  • There hasn’t been enough selling pressure to cause even the S.T. Channel Breakout System to move to sell signal. Although the breakdown point is close at this time.
  • The weekly trend and trend model remains strong
  • The Intermediate-term Channel Breakout system is in good shape.
  • The L.T. Trend Model still solidly positive
  • The Cycle Composite now points to stair-step decline into mid-April
  • The market remains in a “trending” mode
  • Takeaway: We are seeing a pullback within a strong uptrend

    • The State of Internal Momentum

    Now we turn to the momentum indicators…

    Executive Summary:

  • The sell signal from the short-term Trend & Breadth Confirm model is a sign of underlying weakness
  • However, the intermediate-term model reading is still strong
  • The reading of the Industry Health model is still decent, but the direction of the indicator is now down slightly.
  • Demand volume and supply volume are equal at this time. It is worth noting that demand volume has been much weaker on most recent rally than it was during the November-December move.
  • The reading of the intermediate-term Volume Relationship model is still in good shape, but demand and supply volume lines are both heading in wrong direction for bulls.
  • The Price Thrust indicators (which uses the NASDAQ composite) turned negative this week
  • Both the Volume and Breadth Thrust indicators are also negative here
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