Many of our followers know that we explain our process very simply. We see ourselves as general managers, and we see our trading systems as players. Our systems are loosely divided into two groups: base systems and trigger systems.
Base systems are the star players, like Michael Jordan. Trigger systems are key role players, such as Scottie Pippen and Dennis Rodman.
As of today, Michael Jordan has taken a seat on the bench.
S&P 500 and NASDAQ 100
There is no change here. Both the S&P 500 and the NASDAQ 100 notched new all-time highs last week above steadily rising 60-week moving averages.
Source: Optuma
NYSE Advance/Decline Line
Despite new highs for the major averages, the NYSE Advance/Decline Line sits near one-year lows.
The trend may still be up, but it is no longer healthy.
Source: Optuma
Dow Jones Transportation Average
The Dow Jones Transportation Average peaked in July and has been moving lower ever since. That weakness has pushed the average below its 27-week moving average, which is beginning to shift from rising to flat.
This intermarket theme is not confirming the index price trend.
Source: Optuma
Investment Grade Corporate Bonds
When price is below a declining moving average, the asset is in a downtrend. That is exactly the situation with investment-grade corporate bonds.
Yes, there was a small rally last week, but the bears remain firmly in control of this key intermarket indicator.
Source: Optuma
Final Thoughts
Base systems are designed to give us an answer to three questions in the market:
What is the trend? Bullish
Is the trend healthy as measured by breadth? No
Is the trend confirmed by intermarket themes? No
Right now, MJ is off the floor, the question is how long.
