New York Composite Index - Weekly Chart Sell Signal Has Been Triggered!

A weekly chart sell signal has been officially triggered by my computer trading system in the New York Composite Index at Friday's close, May 25th. This follows a daily chart sell signal that was triggered on Tuesday, May 22nd.

NY Composite Index Weekly Chart

New York Composite Index Daily Chart

Weekly chart sell signals were also triggered in almost every energy-related sector index and energy-related ETF at Friday's close.

AMEX Oil Index Weekly Chart

Daily Chart Sell Signals - Key Downside Reversal Day!

Just a quick note this evening...

It is my strong view that today represented a key downside reversal day in the U.S. stock market. Daily Chart Sell Signals were triggered by my computer trading system in the following major U.S. stock indices:

NY Composite Index

S&P 500 Index

S&P 100 Index

Russell 2000 Index

Dow Jones Transportation Index

And Daily Chart Sell Signals were triggered in the following sector ETF's:

IWM, IWN, IYT, DVY, OIH, RTH, XLE, XTN

And a Daily Chart Sell Signal was triggered in my own FAANG Composite Index.

Bottom line: A major decline in the U.S. stock market probably began today! Traders and Investors can probably expect the closely watched 200-day moving average line in most major benchmark indexes to be convincingly broken on the downside over the very near term as a correction of at least 20% unfolds over the next several months!

NY Composite Index with 200-day Moving Average Line

Russell 2000 Index with 200-Day Moving Average Line

S&P 500 Index with 200-Day Moving Average Line

Dow Jones Transportation Average with 200-Day Moving Average Line

Nasdaq Composite - Head & Shoulders Top Formation?

Old-school technical analysts might view the current Nasdaq Composite chart as a possible head & shoulders top formation. I am leaning in that direction.

Nasdaq Composite Index with 200-day Moving Average Line

I actually read a quote from one notable Wall Street analyst this past week who said that a major stock correction is unlikely to unfold with the Russell 2000 Small-cap Index posting record all-time highs as it is now.

However, what if the record high in the Russell 2000 Index is a red herring? What if the weaker current patterns in the New York Composite Index and the S&P 500 Index are really warning signs of meaningful weakness ahead? And what if the Nasdaq Composite Index is now actually completing the right shoulder in a perfect head & shoulders bearish formation?

The widely publicized gradual tightening in U.S. monetary policy from the Federal Reserve has been generally ignored by stock investors who appear to be more focused on solid corporate earnings and record corporate share buybacks. The obvious question is when (if ever) will the Fed's tighter monetary actions have an impact on stock prices? If the S&P 500 year-over-year earnings growth in 2018 is +21.5% and in 2019 the growth is +10.0%, as is now the consensus on Wall Street, then a major correction in U.S. stock market averages is unlikely. However, are these bullish estimates realistic? Not likely !!

I couldn't help but notice this interesting chart from an article on the ZeroHedge.com website. The Credit-card charge-off rate at smaller U.S. banks, of which there are about 4,800 in this category, was 8.0% in the 1st quarter of 2018 !! Looks to me like the U.S. Consumer is tapped out!

Mortgage origination and refinancing are down sharply given the steady rise of mortgage interest rates over the last several quarters. Sub-prime auto loans are a disaster now! And sharply higher gasoline prices are seriously cutting into discretionary income and more than offsetting the trivial Trump tax cuts for anyone making less than $75,000 per year.

Bottom Line: Another 10% slide in the average U.S. stock price, just like one experienced earlier this year, looks imminent to me! And if the average investor begins to realize that the "Powell Put" won't kick in until at least -20%, then downside price action could easily accelerate into a mini-crash!