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Growth Investor
Helping Investors Build Wealth Since 1970

Cabot Market Timing Indicators - Issue 1338

The market continues to act well as selling pressures remain light. We’re optimistic and leaning bullish, but still need to see the longer-term trend turn up (and some better action among growth stocks) before flooring the accelerator.

Cabot Trend Lines: Bearish Close but no cigar. Our Cabot Trend Lines have improved, with the S&P 500 closing the past three weeks above its 35-week moving average. But it takes two to tango with this indicator; the Nasdaq has yet to close any week above its own 35-week line (currently near 4,815) Thus, the longer-term trend of the market remains down, which is something we’ll need to see change if we’re going to recommend a heavily invested position.

Cabot Tides: Bullish Our Cabot Tides, on the other hand, continue to look fine—all five of the indexes we track (including the S&P 400 MidCap, shown here) remain well above their lower (50-day) moving averages. In fact, the spread is large enough that there’s plenty of room for the major indexes to pull back and consolidate during the next couple of weeks, without interrupting the uptrend. So there’s little evidence the recent rally is under duress.

Two-Second Indicator: Robust Our Two-Second Indicator has now recorded 20 days of 20 or fewer new lows, the longest streak since February 2013, near the start of that powerful bull market year. Of course, such a string of tame readings is no guarantee of success, but combined with the blastoff measure last week (see page 1), it paints a bullish picture and clearly tells you the broad market has returned to health.