Should investors be worried?

Stocks actually closed with losses this week. This is something we haven't seen much of lately so every time it happens, I begin to think maybe this is finally the long awaited pullback.

Certainly, price action in the stock market was not particularly reassuring. Despite a sequence of better than expected earnings from most companies and some spectacular earnings from the likes of Apple (AAPL) and Amazon.com (AMZN), stocks were unable to shake off the blahs. The three major averages lost a fraction of a percent, most of it on Friday. Small-caps got spanked as the Russell 2000 lost a big 2.5%

Economic reports presented a so-so picture of the U.S. struggling to rebound. Initial jobless claims were the big disappointment, rising again after economists predicted a decrease. Coupled with an upward revision of the previous week's numbers, it confirmed that the job market could be much worse than merely a lagging indicator. Real estate also showed that it didn't know which way was up as Existing Home Sales came in higher than expected while Housing Starts and Building Permits were lower.

Let's review some charts and see if the worry is justified.

The view from Alert HQ --

Charts of some of the statistics we track at Alert HQ are presented below:


This first chart tracks our moving average analysis. The count of stocks above their 50-DMA (the yellow line) is decreasing. The line has also again failed to cross above the magenta line which tracks the number of stocks whose 20-DMA is above their 50-DMA. This is a bearish setup that is developing. The only hopeful indication is that the number of stocks tracked by both of these lines are still at reasonably high levels.

The next chart provides our trending analysis.