Thoughts from our recent Technician podcast with Tracy Knudsen, Senior Market Analyst at Lowry Research, which you can listen to in full at Financial Sense Newshour here or on iTunes here.
Last year, several months after the S&P 500 made its final all-time high, Richard Dickson at Lowry Research, the oldest technical advisory firm in the country, told Financial Sense Newshour listeners that the six-year plus bull market in stocks was likely coming to an end.
Weeks later global markets fell by double digits only to be followed by a much weaker than expected year-end rally, raising concern by many investors that stocks had indeed topped out in 2015 with a bear market ahead.
Given the swift selloff into the new year, and with most global indexes now in bear market territory, we decided to get an update from Lowry's on their current market outlook.
Here's what their Senior Market Analyst, Tracy Knudsen, told listeners in Saturday's podcast:
"Our indicators of buying power and selling pressure, which are Lowry's intermediate-term measures of the trends of supply and demand, indicate we are in a bear market. Selling pressure was recently at a new rally high; buying power is near a multi-year low and we're seeing weak trends in demand, strong trends in supply and as long as this continues we think we are going lower...
[Even though we are oversold] that doesn't necessarily mean we're going to get a significant bounce in the near-term. In a bear market you can remain oversold for extended periods of time, which we saw back into that January low. So we think we are going lower. We're seeing all the signs of a weak market, a bear market, that's got more to go on the downside...
We are seeing selling start to migrate into big cap names. What we saw as this major market top was forming was deterioration first in small caps. That was clear and we started warning our clients back in 2014 to watch out for small caps... then that selling started to migrate more into mid caps and now we're seeing it broaden out into large caps...
Another proprietary indicator that we have here at Lowry's called our Power Rating...is a leading indicator and suggests those stocks that had been holding up well are now starting to weaken...
We cover 22 international markets at Lowry Global..and we are seeing bear markets across the board. Selling has been particularly heavy in Europe. We obviously have the banks in Europe imploding. We also calculate buying power and selling pressure for each of those 22 international markets and we're seeing increasing supply, in some cases surging supply, and diminishing demand—no area right now seems safe.
There were some markets that looked like they could display positive relative performance where internals were not weakening as much as other countries that we cover but there's selling in those areas of the market, which has started to take hold as well. In fact, they're playing some catch up to the weakness that we've seen.
Even Japan, which had a nice rally when they moved to the negative interest rate policy—there was nothing behind that rally as far as our indicators showed and we noted that in our comments to subscribers, saying 'be careful on this rally', we aren't seeing strength behind it and indeed the market has since turned sharply lower...
Facebook...that's starting to deteriorate... Google has started break down... Amazon has dropped sharply lower from its highs... Netflix has formed classicly what you call in technical analysis a double top... so we are seeing all of those [FANG] stocks turn lower and it appears as though their ability to hold up in what we see as a bear market is just not going to play out...
As it stands right now, we are not seeing anything to indicate that a major bottom is on the horizon...we think we are in a bear market and we certainly think the S&P is going to go down in excess of 20%...
[Y]ou don't need a recession to be in a bear market but what the stock market is telling us, given that it's a leading indicator, is that our economy is slowing down and it just appears to be getting started."
Listen to this full interview with Tracy Knudsen, Senior Market Analyst at Lowry Research, by clicking here. For a complete archive of our broadcasts and podcast interviews on finance, economics, and the market, visit our Newshour page here or iTunes page here. Subscribe to our weekly premium podcast by clicking here.
