Major Bearish Signal for U.S. Stocks – 05/22/24.

Today, 05/22/24 the Nasdaq Composite (IXIC) made a new all-time high unaccompanied by the other two main U.S. stock indices.   This combined with the S&P 500 (SPX) inability to break above major Fibonacci resistance, could signal a bear move lasting into at least early 2025.

When one of the main U.S. stock indices; Dow Jones Industrial Average (DJI), S&P 500 (SPX), and Nasdaq Composite (IXIC)  makes a new high/low unconfirmed by the other two indices it’s a significant momentum divergence. 

This phenomenon which I call a “Rule of the Majority Signal”  usually occurs at major U.S. stock market  turning points.

The daily SPX, DJI, and IXIC chart courtesy of Trading View shows what’s happened. 

The 05/17/24 blog illustrated S&P 500 external momentum.

The 05/18/24 blog illustrated S&P 500 internal momentum.

Those blogs examined significant SPX bearish divergences.   The bearish divergence among the three main U.S. stock indices adds significant weight to the theory that U.S. stocks could be entering a bear market.

The SPX has also failed to move above a major Fibonacci resistance level.

The 05/16/24 blog “Updated Long-Term S&P 500 – Ellott Wave Count – 05/16/24 illustrated major Fibonacci resistance at 5,325.55. 

The SPX high on 05/16/24 was 5,325.49.

The SPX high on 05/20/24 was 5,325.32.

The SPX high on 05/21/24 was 5,324.32.

The SPX high on 05/22/24 was 5,323.18.

This series of lower highs just below a bullseye hit of major Fibonacci resistance, is another sign the stock bulls are losing strength.

The one- hour Russell 2000 (RUT) chart updates the small cap stock index.

For more than two – years RUT has been underperforming the main U.S. indices. On  05/17/24 RUT made a bottom.  Today 05/22/24 RUT tested that bottom, rallied then punched through the double bottom.

If a major down move in U.S. stocks has begun, there’s a high probability RUT could lead the way down.

Traders initiate a 100% short position on non-leveraged Russell 2000 funds at the open of the RUT session on 05/23/24.  Use a move above RUT 2,115.00 as  a stop loss on half the position.  Use a move above RUT 2,140. 00 as a stop loss on the second half of the position.