In the latest Global Markets Report from Robert Colby Asset Management, they highlight that the recently inverted US yield curve not only historically signals a forthcoming recession, but also a falling stock market in anticipation of a recession.
Other warning signs for US stocks include a 37% minority of the S&P 500 stocks now above their 50-day Simple Moving Averages (SMAs), down further from 43.29% the previous week. This, says Colby, indicates broadbased stock price weakness. Also, the cumulative daily advance-decline line (for NYSE stocks only) peaked on 7/5/2019 and ended last week further below its 50-day SMA.
Finally, the report draws attention to ETF performance as a guide to overall market sentiment. While the LargeCap, S&P 500 stock price index ETF (SPY) is only 4.43% below its 52-week high, the following index ETFs are underperforming and bearishly diverging:
- SmallCap (IWM) is 14.29% below its high
- Dow-Jones Transportation (IYT) is 14.25% below its high
- Emerging Markets ETF (EEM) 11.82% below its high
- BRIC (BKF) 10.85% below its high
- Foreign Developed Markets (EFA) 9.95% below its high
- MidCap (MDY) 8.67% below its high