The first is that the referendum, which David Cameron has promised to hold by the end of 2017, will split his Conservative party – one of the world’s most successful election-winning machines. The latest report from John Butters of Factset indicates that forward EPS estimates are still falling and the first half of 2015 is looking ugly. The latest news is that the cannabis grower has allowed its base shelf prospectus to lapse this month. Frantic money-printing by the Bank of Japan last year weakened the yen and so pushed up the price of imported goods, particularly energy, while signs of consumer spending allowed shops to push through price increases. Lower liquidity: There are generally fewer buyers and sellers participating in the extended-hours trading sessions, and therefore it may be tougher to buy and sell shares for a competitive price. It raises the issue highlighted by Mark Hulbert of the Dow Theory sell signal, which has been flashed by two of the three Dow Theory strategists that he follows. If you’re looking to sell boutiques , one individual might be willing to buy from you at a certain price, and if you’re looking to buy from them, it’s a different price.
On one hand, the series of lower lows and lower highs are indicative that, even though the market has gone to all-time highs, this indicator is still relatively low and not overbought and therefore stocks could go higher. On the other hand, it is telling a story of a loss of momentum and negative breadth divergence, which is bearish. I also have some technical concerns, mainly due to a number of negative divergences exhibited by some breadth indicators. The chart below of the average 14 day RSI in the SPX also tells the story of lower lows and lower highs – another negative divergence. The middle panel of the chart below shows the SP 1500 advance-decline percentage, which is smoothed by a 20 day exponential moving average. The bottom panel shows the percentage of stocks in the SPX showing a buy signal on the point and figure chart. The signal from this very short-term indicator could be interpreted in one of two ways. My reservations about the Trend Model buys signal is the result of that “sanity check”. Which is correct, the discipline of the Trend Model, or the “sanity checks” of the bearish influences that the model doesn’t capture?