An Echo of the 1973-74 Bear Market Beginning

Tuesday Oct 28 2014

 NYSE

It was originally given a value of 50 points, based on the market closing on December 31, 1965, and is weighted by the number of shares listed for each issue.

If the index is weighted by the number of shares out, the weighting does not change a lot. However, see SPX below, it is weighted by the market capitalization or value of the total shares out. This changes over time, and can change a great deal if fund managers herd into a few stocks with big cap values. 

NYSE

The NYSE is testing the underside of its longest MA. 

 

 

 

 

 

SPX

The S&P 500, or the Standard & Poor's 500, is an American stock market index based on the market capitalizationsof 500 large companies having common stock listed on the NYSE or NASDAQ. The S&P 500 index components and their weightings are determined by S&P Dow Jones Indices. It differs from other U.S. stock market indices, such as the Dow Jones Industrial Average or the Nasdaq Composite index, because of its diverse constituency and weighting methodology. It is one of the most commonly followed equity indices, and many consider it one of the best representations of the U.S. stock market, and a bellwether for the U.S. economy.^[6] The National Bureau of Economic Research has classified common stocks, as a leading indicator of business cycles.^[7]

The S&P 500 was developed and continues to be maintained by S&P Dow Jones Indices, a joint venture majority-owned by McGraw Hill Financial. S&P Dow Jones Indices publishes many stock market indices, such as the Dow Jones Industrial Average, S&P MidCap 400, the S&P SmallCap 600, and the S&P Composite 1500. It is a free-float capitalization-weighted index,^[5] and has many ticker symbols, such as: ^GSPC,^[8] INX,^[9] and $SPX.^[10]

SPX

Meanwhile the SPX is above its shortest MA. This suggests that the fund managers are buying big cap stocks pushing this index relativelyhigher than the NYSE.

Even here the SPX is making a lower high unless it really breaks out.

Russell 2000

The beginning of the bear that Hussman described in out link in yesterday's post is more evident here. 

The small caps topped first. Now they are tracing out a parallel channel to the downsie. Note how the tops coincide with a top in the CCI in the bottom panel. 

I srongly suspect the echo of the 1973-74 Bear Market is getting underway.