More Downside Pain: A Swan Dive Into The Close; TTI’s Still Hang On To The Bullish Side Of The Trend Line—So Far

[Chart courtesy of]

The equity markets picked up where they left off yesterday and continued with their best imitation of a black diamond ski slope as the major averages got crushed for the second day in a row. Many traders had expected some kind of a rebound after Wednesday’s thrashing but, other than a quick peek higher after the open, it was all downhill.

To add insult to injury, not only did the S&P 500 imitate a perfect swan dive into the close, it also took out its psychologically important 200-day moving average of 1,380. It pierced through that level for the first time in 5 months even though by only a couple of points; however, closing at the low for the day is usually a sign of more weakness to come.

The Dow Industrials and the Nasdaq had already crossed their respective 200-day averages and are now stuck on the bearish side of their trend lines.

It’s no secret what was behind the sell off.

While all eyes had been focused on the election for most of this year, I have pointed out from time to time certain realities have simply been ignored, and they are now coming back to haunt the markets.

The big worry is that if no deal is reached in Congress the fiscal cliff will strike the economy with all of its might as some $600 billion in spending cuts and tax increases are sure to push us ‘officially’ into a recession.

Then there is the upcoming debt ceiling debacle and the never ending European crisis, which can at anytime blow sky high and accelerate any market downturns. It is therefore imperative that you follow my recommended sell stop discipline and head for the sidelines when prompted to do so.

Our Trend Tracking Indexes (TTIs) moved closer to their trend lines, but a break did not yet occur. Here’s how we ended the day:

Domestic TTI: +0.71%

International TTI: +1.39%

Any more downward momentum will either trigger our trailing sell stops for our equity holdings or push our Domestic TTI into bear market territory. Either way, that action will prompt us to liquidate any equity ETFs/mutual funds for the time being. Stay tuned for the latest updates.

For quick access to the most recent StatSheet including TTI charts and all momentum figures, click here. You can read the latest ETF Model Portfolio update here.

About Ulli Niemann

Ulli Niemann is the publisher of "The ETF Bully" and is a Registered Investment Advisor. Learn more
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