{"id":54111,"date":"2020-08-22T18:11:13","date_gmt":"2020-08-23T01:11:13","guid":{"rendered":"https:\/\/drduru.com\/onetwentytwo\/?p=54111"},"modified":"2020-08-23T18:24:20","modified_gmt":"2020-08-24T01:24:20","slug":"t2108-update-new-bearish-divergence-shreds-stock-trading-script","status":"publish","type":"post","link":"https:\/\/drduru.com\/onetwentytwo\/2020\/08\/22\/t2108-update-new-bearish-divergence-shreds-stock-trading-script\/","title":{"rendered":"New Bearish Divergence Shreds the Stock Trading Script – Above the 40 (August 21, 2020)"},"content":{"rendered":"\n

Stock Market Statistics<\/strong><\/h2>\n\n\n\n

AT40<\/strong> = 60.6% of stocks are trading above their respective 40-day moving averages (DMAs) (ended 7 overbought trading days)
AT200<\/strong> = 42.7% of stocks are trading above their respective 200DMAs
VIX<\/strong> = 22.5
Short-term Trading Call<\/strong>: cautiously bearish<\/p>\n\n\n\n

Stock Market Commentary<\/strong><\/h2>\n\n\n\n

AT40 (T2108)<\/a>, the percentage of stocks trading above their respective 40-day moving averages (DMAs), closed last Monday at 75.7%, comfortably sitting in overbought territory. On Tuesday, AT40 fell right under the overbought threshold of 70% with a close at 69.7%. My favorite technical indicator methodically declined for the rest of the week from 67.5% to 64.5% and finally to 60.6%. <\/p>\n\n\n\n

This rapid decline in AT40 while the S&P 500 (SPY) and NASDAQ (COMPQX) managed to scratch and claw to new all-time highs creates the very essence of a bearish divergence. This is the most glaring signal I have seen since I last went bearish: first cautiously bearish in late January<\/a> and then full out bearish in early February<\/a>. This bearish divergence is much more convincing than the one which appeared briefly last month; at that time I left the trading call at neutral<\/a>.<\/p>\n\n\n\n

The advancers versus decliners numbers forced me to drop my yellow flag in exchange for a red flag. Decliners outpaced advancers by a 2:1 ratio on Friday despite the all-time highs in the major indices. According to swingtradebot<\/a>, bearish stock signals outnumbered bullish signals by about a third. Yet, somehow, new highs towered over new lows. Taken together, these data further confirm a narrowing market rally: a few high-performing stocks are racing ahead<\/a> of a stock market full of wilting and weakening stocks.<\/p>\n\n\n\n

\"Decliners<\/a>
Decliners outpaced advancers 2-to-1 (3790-to-1691)! Source: SwingTradeBot.com<\/a><\/strong><\/figcaption><\/figure><\/div>\n\n\n\n

The Stock Market Indices<\/strong><\/h3>\n\n\n\n

The slow-motion rally in the S&P 500 (SPY) came to a very brief end with Thursday’s small gap down. Buyers stepped in and never looked back. The index closed the week with a new all-time high.<\/p>\n\n\n\n

\"The<\/a>
The S&P 500 (SPY) gained 0.3% for a new marginal all-time high.<\/figcaption><\/figure><\/div>\n\n\n\n