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A Significant Decline is Coming to the Stock Market

July 13, 2014

Last week we wrote that a trend turn is coming to stocks. Stocks immediately declined sharply. However, we believe there is a much larger decline coming and that it could start soon. Didn’t it already start this past week? Maybe, maybe not. This past week’s decline has several “corrective” characteristics that suggest it is not the big decline we expect to start. There could be more upside before that large sell-off begins. What we can ascertain this weekend is that a significant decline is not far away. If it started last week, a much deeper decline is on its way. If it did not start last week, it could start very soon. Here is some of the evidence why we believe a significant decline should be underway within a few weeks:

Above we see that there is a Bearish Divergence between the NASDAQ 100 and its Demand Power Measure. The Divergence s maturing, suggesting a top is close at hand and a significant decline should begin soon.

Above, we see similar Bearish Divergences with their 10 Day Average Advance/Decline Line Indicators and prices for the small cap Russell 2000 and also the NASDAQ 100. These divergences are maturing, suggesting a top in stocks should arrive over the next two weeks, with the start of a strong decline.

Above we see that there is a Bearish Divergence between the S&P 500 and the NYSE 10 Day Average Advance/Decline Line Indicator. The Divergence is maturing, suggesting a top is close at hand and a significant decline should begin soon.

Above, we see similar Bearish Divergences with their 10 Day Average Advance/Decline Line Indicators and prices for the small cap Russell 2000 and also the NASDAQ 100. These divergences are maturing, suggesting a top in stocks should arrive over the next two weeks, with the start of a strong decline.

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Robert McHugh Ph.D. is President and CEO of Main Line Investors, Inc., a registered investment advisor in the Commonwealth of Pennsylvania, and can be reached at ww.technicalindicatorindex.com. The statements, opinions, buy and sell signals, and analyses presented in this newsletter are provided as a general information and education service only. Opinions, estimates, buy and sell signals, and probabilities expressed herein constitute the judgment of the author as of the date indicated and are subject to change without notice. Nothing contained in this newsletter is intended to be, nor shall it be construed as, investment advice, nor is it to be relied upon in making any investment or other decision. Prior to making any investment decision, you are advised to consult with your broker, investment advisor or other appropriate tax or financial professional to determine the suitability of any investment. Neither Main Line Investors, Inc. nor Robert D. McHugh, Jr., Ph.D. Editor shall be responsible or have any liability for investment decisions based upon, or the results obtained from, the information provided. Copyright 2014, Main Line Investors, Inc. All Rights Reserved.