U.S. Stock Market: A Broken Clock Is Right Twice A Day

The following headline was posted on Reuters yesterday afternoon: "Despite sharp selloff, too early to worry about correction". After the worst week in more than two years (since June 2012), this headline and the related storyline are nothing short of astounding to me. If last week's decline is not a worry, then when should we worry?

I've been negative on the U.S. stock market for quite some time now, and I recently stepped up my bearish rhetoric in this column with the backing of key sell signals triggered this past month by my computer trading system. A quick review of my recent columns might be worthy of your attention. A monthly chart sell signal was triggered in mid-July in the Russell 2000 Index for the first time since July 2007 (the exact top of the 2002 - 2007 bull market). Monthly chart signals are rarely triggered in my computer trading system, but they are the most reliable as compared to daily and weekly chart signals.

While I don't consider myself a "perma-bear" by any measure, I clearly underestimated the staying power of the 2009 - 2014 bull market. Credibility is a fragile commodity in the investment advisory business, and I sincerely hope that my correct call on last week's steep decline is not viewed by readers in the same vane as the proverbial "broken clock that is right twice a day".

With last week's 467-point decline in the Dow Jones Industrial Average (-2.75%), this venerable index is now actually down on the year (0.50%). And the Russell 2000 Index is down 4.19% on the year so far!

The S&P 500 Index fell 2.69% last week, but it's still up 4.15% on the year. And the NY Composite Index fell 2.67% last week, but it's still up 2.81% this year so far.

However, monthly chart sell signals were triggered by my computer system last week in both the S&P 500 Index and the NY Composite Index (see charts below). Monthly chart sell signals were also triggered the following indexes: DJIA, DJTA, OEX, OSX, and SOX. And among major stocks, monthly chart sell signals were triggered in AXP, CAT, CLX, KO, CL, CMCSA, XOM, F, FWLT, GT, HON, IP, JNJ, KMB, LLY, MMM, NFLX, NVX, PCAR, PEP MO, QCOM, UPS, VIA, and WY, among others.

Bottom Line: Not only should stock investors be worried, they should probably start selling before it's too late! A major stock market correction is now underway.

NY Composite Index Monthly Chart with Computer-generated Buy & Sell Signals

S&P 500 Index Monthly Chart with Computer-generated Buy & Sell Signals

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Dow Jones Transportation Average Monthly Chart with Computer-generated Buy & Sell Signals

Minnesota Mining (MMM) Monthly Chart with Computer-generated Buy & Sell Signals

Pepsico (PEP) Monthly Chart with Computer-generated Buy & Sell Signals

U.S. Stock Market: YES! The Long Awaited Correction Has Begun!

With today's 1.38% decline, the Dow Jones Transportation Average is now down 3.49% from its all-time record high as posted just 5 trading days ago on July 23rd. And as incredible as it sounds, another drop of just 15.33 points (or -0.19% to negative on the month) will trigger a monthly chart sell signal in my computer trading system. As can be seen below, monthly chart signals in the DJTA have been fairly reliable over the last 18 years.

A monthly chart sell signal was triggered in UPS today! Please see chart below. This monthly chart sell signal in UPS is the first sell signal ever recorded by my computer system in UPS since it went public in November 1999. While index chart signals are generally more reliable than individual stock signals within my computer trading system, this monthly chart sell signal in UPS looks very strong to me, especially if a matching monthly chart sell signal is soon triggered in the Dow Jones Transportation Average (which looks like a near certainty to me).

Of course, the most powerful card in the bearish camp's hand right now is the chart of the Russell 2000 Index (please see chart below). This closely watched barometer of small cap stocks is now down 5.92% from its all-time record high of 1213.55 as set on July 1, 2014. And an exceptionally strong preliminary monthly chart sell signal has already been triggered by my computer trading system here, the first monthly chart sell signal in the Russell 2000 Index since July 2007, the exact high of the great 5-year bull market from 2002 through 2007. After the July 2007 monthly chart sell signal, the Russell 2000 Index plunged 60% over the next 20 months!

Bottom Line: The southbound train has left the station!

Dow Jones Transportation Average Monthly Chart with Computer-generated Buy & Sell Signals

UPS Monthly Chart with Computer-generated Buy & Sell Signals

Russell 2000 Index Monthly Chart with Computer-generated Buy & Sell Signals