Stock Market Breadth Summation Index Breaks Down

| June 8, 2011

The S&P 500 index closed moderately lower today, moving down to a new low for the violent downtrend from early May.

Stock market breadth continues to weaken and the breadth summation index has moved well below the lower boundary of the symmetrical triangle formation that has been developing since late 2010.

This breakdown is a bearish signal that forecasts additional deterioration during the next several weeks. Volume summation continues to plunge and the downtrend from the beginning of the year is approaching the August 2010 low.

As a result of the breadth summation breakdown, the Cyclical Trend Score (CTS) downtrend has gained additional momentum and the score is now moving sharply lower in negative territory.

As shown on the following long-term chart, the CTS has declined to the lowest level since the invalid sell signal that was generated in June 2010 and it could potentially enter sell territory below the -65 level sometime during the next few weeks.

It is important to remember that a move into sell territory alone would not guarantee the generation of a cyclical trend sell signal. There are additional criteria that must be satisfied in order to generate a confirmed signal as dictated by our cyclical trend trading system rules. We will continue to monitor the CTS downtrend and notify you of any meaningful developments as they occur.

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Category: Commentary, Market Update


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