Major Equity Averages Reach Risky Levels

The major equity averages ended January with several chart warnings. This includes weekly key reversals, weekly closes below five-week modified moving averages, and stochastic readings declining below overbought territory.

The Dow Jones Industrial Average set its all-time intraday high of 31,272.22 on January 21, between its semiannual and annual risky levels at 31,459 and 33,425.

The S&P 500 set its all-time intraday high of 3,870.90 on January 26. This index ended January with a weekly key reversal. It’s high was between quarterly and annual risky levels at 3,836.19 and 3,932.35.

The Nasdaq Composite set its all-time intraday highs of 13,728.98 on January 25. This index ended January with a weekly key reversal. It’s high was below its monthly risky level for January at 13,804.

The Dow Jones Transportation Average set its all-time intraday high of 13,208.63 on January 14. The average ended January with a negative weekly chart. Its high was between its monthly pivot at 12,650 and its annual risky level at 14,424.

The Russell 2000 Index (.RUT) set its all-time intraday high of 2,194.86 on January 25. This index ended January with a weekly key reversal. Its high was above its annual risky level at 2,120.34.

The Federal Reserve Balance Sheet slipped to $7.405 trillion on January 25, down from $7.415 trillion on January 18. This was a factor to consider when the stock market declines.

The weekly chart for the Dow Jones Industrial Average is neutral. The Dow is below its five-week modified moving average at 30,276. Its 200-week simple moving average lags at 25,461. The 12-week slow stochastic reading is overbought at 89.13. My proprietary analytics shows quarterly and semiannual pivots at 31,052 and 31,459, with an annual risky level at 33,425.

The weekly chart for the S&P 500 is neutral. The S&P is below its five-week modified moving average at 3,723.50. Its 200-week simple moving average lags at 2,887.31. The 12-week slow stochastic reading is extremely overbought at 90.48. The reading above 90.00 puts the S&P 500 in an inflating parabolic bubble. My proprietary analytics shows a semiannual value level at 3,511.43 with a quarterly pivot at 3,836.19, and an annual risky level at 3,932.35.

The weekly chart for the Nasdaq Composite is positive but extremely overbought with the index above its five-week modified moving average at 12,861.93. Its 200-week simple moving average lags at 8,213.54. The 12-week slow stochastic reading is extremely overbought at 92.74. The reading above 90.00 puts the Nasdaq in an inflating parabolic bubble. My proprietary analytics shows quarterly, annual and semiannual value levels at 12,789.26, 12,000.71 and 10,972.72, respectively.  

The weekly chart for the Dow Jones Transportation Average is negative with the average below its five-week modified moving average at 12,504.83. Its 200-week simple moving average lags at 10,325.54. The 12-week slow stochastic reading is declining below the overbought threshold at 79.24. My proprietary analytics shows semiannual and quarterly pivots at 12,314.56 and 12,003.69, with an annual risky level at 14,424.55.   

The weekly chart for the Russell 2000 Index is positive but extremely overbought with the index above its five-week modified moving average at 2,014.65. Its 200-week simple moving average lags at 1,543.87. The 12-week slow stochastic reading is extremely overbought at 93.37. The reading above 90.00 puts the Russell 2000 in an inflating parabolic bubble. My proprietary analytics shows quarterly and semiannual value levels at 1,840.34 and 1,711.55, with an annual pivot at 2,120.34.