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The five major equity averages set all-time intraday highs between February 10 and February 24. Each has a positive but overbought weekly chart. This means that each is trading above its five-week modified moving average with their 12-week slow stochastic reading above 80.00, on a scale of 00.00 to 100.00.
The Dow Jones Industrial Average (.DJI) set its all-time intraday high at 32,009.64 on February 24. This is between its semiannual pivot at 31,459 and its annual risky level at 33,425. The S&P 500 (.SPX) set its all-time intraday high of 3,950.43 on February 16. This put the index just above its annual risky level at 3,932.35. The Nasdaq Composite (.IXIC) set its all-time intraday high of 14,175.12 on February 16. Its monthly risky level for March is 14,195.
The Dow Jones Transportation Average (.DJT) set its all-time intraday high of 13,698.78 on February 24. The high was shy of its annual risky level at 14,424. The Russell 2000 Index (.RUT) set its all-time intraday high of 2,318.09 on February 10. The high was well above its annual risky level at 2,120.34 which is now a pivot.
A reason for concern is the size of margin debt, which reached a record high at the end of January. If the market starts to decline significantly, there will be margin call selling. This was a major factor in the stock market decline in the first quarter in 2020.
Margin Debt vs S&P 500
The technical warning comes from the Nasdaq Composite. During the week of February 26 this index ended the week below its five-week modified moving average, which is now at 13,370. A close this week below 13,370 will downgrade this weekly chart to negative as its 12-week slow stochastic reading will be declining below 80.00.
Let’s look at the weekly charts.
Year-to-date performance
The weekly chart for the Dow Jones Industrial Average is positive but overbought. The Dow is above its five-week modified moving average at 30,972. Its 200-week simple moving average lags at 25,726. The 12-week slow stochastic reading is overbought at 81.17. My proprietary analytics shows quarterly and semiannual pivots at 31,052 and 31,459, respectively with an annual risky level at 33,425. A weekly close below 30,972 will downgrade the weekly chart to negative.
The weekly chart for the S&P 500 is positive but overbought. The S&P is above its five-week modified moving average at 3,829.29. Its 200-week simple moving average lags at 2,925.26. The 12-week slow stochastic reading is overbought at 82.79. My proprietary analytics show 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. During the week of February 16, SPX traded as low as 3,789.54. A weekly close below 3836.19 will be a warning.
The weekly chart for the Nasdaq Composite is positive but overbought but was neutral at the February 26 close below the five-week modified moving average. The index is above its five-week modified moving average at 13,370.44. Its 200-week simple moving average is 8,407.18. The 12-week slow stochastic reading is overbought at 80.01. A weekly close below 13,370.44 would be negative. My proprietary analytics show 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 positive but overbought with the average above its five-week modified moving average at 13,051.05. Its 200-week simple moving average lags at 10,429.92. The 12-week slow stochastic reading is rising at 82.81. My proprietary analytics show semiannual and quarterly pivots at 12,314.56 and 12,003.69, respectively with an annual risky level at 14,424.55.
The weekly chart for the Russell 2000 Index is positive but overbought with the index above its five-week modified moving average at 2,168.19. Its 200-week simple moving average lags at 1,565.60. The 12-week slow stochastic reading is overbought at 87.60. This reading was above 90.00 two weeks ago, which put the Russell 2000 in an inflating parabolic bubble. My proprietary analytics show quarterly and semiannual value levels at 1,840.34 and 1,711.55, respectively with an annual pivot at 2,120.34.
