For those of you keeping score at home, the S&P 500 has changed direction no fewer than 14 times in 2015 alone. This means traders are "going the other way" on average, about twice a month. And if this stat doesn't drive home the choppiness on display at the corner of Broad and Wall these days, perhaps this next little tidbit will. I saw a report on Friday that the S&P 500 has crossed is 50-day moving average - the generally accepted "state of the trend" in the stock market - a total of 27 times in the last 6 months. Can you say, A.D.D.?

Lest we forget, it was only 12 days ago that the latest Greek drama held the market's attention. While the decline didn't turn out to be meaningful this time around, the fear that Greece's new left-wing, anti-austerity party would do something really stupid and blow up the Eurozone in the process was the talk of the town and wound up holding stocks hostage.

But then the stupidity ended as Alexis Tsipras and friends figured out they held no chips, and the latest in a long line of Greek worries ended. As one might have expected, stocks then breathed a sigh of relief and moved back up toward the all-time highs.

However, as has been the trend for quite some time now, whenever the S&P approaches its high-water mark, traders tend to find a reason to go the other way. So as the S&P flirted with a fresh new high on July 20th, I wrote that it was likely time to Cue the Negative News.

Sure enough, traders wasted little time in moving on to the next worry.

S&P 500 Index - Daily

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Four days after it looked as if the bulls might be attempting a comeback, fear is back in the game and the venerable blue-chip index appears to be slashing its way back through the trading range.

So what gives? Why are traders once again freaking out and sending stocks down in earnest?

And We're Back To Worrying...

Take a moment to peruse the following charts. These are weekly charts of various indices over the past four and one-half years. See if you can't spot the problem here...

S&P 500 Index - Weekly

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Well, to be honest, there really doesn't seem to be much of a problem on the chart above. While it is clear that the momentum of the uptrend continues to wane, the chart of the S&P 500 is still moving from the lower left to the upper right.

However, this is most certainly NOT the case for Oil.

United States Oil Fund (USO) - Weekly

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Don't look now fans, but the price of oil just broke down to fresh weekly lows. However, it is important to realize that the current worry in the market may go beyond oil. Take a look at the chart of the PowerShares DB Commodity Index ETF (NYSE: DBC).

PowerShares DB Commodity Index (DBC) - Weekly

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Note that commodities in general are actually in worse shape than oil as the weekly chart of the DBC looks to be launching into a new leg lower.

What Does "Doctor Copper" Have to Say?

It is said that copper has a PhD in economics and is a key "tell" in terms of the state of the global economy. So what does the "doctor" have to say?

iPath Bloomberg Copper ETF (JJC) - Weekly

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Ouch! It would appear that Dr. Copper is telling us the patient has serious health issues - and has for quite some time as this is a textbook example of a long-term downtrend.

And just in case you think the problem is copper-specific, check out the chart of steel.

Market Vectors Steel ETF (SLX) - Weekly

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Should we then conclude that the current worry in the market is the state of the global economy?

Blame It On The Dollar?

Before we jump to conclusions, let's remember that traders can play an important roll in the "story" that may emanate from the charts. For example, everybody knows that commodities of all shapes and sizes tend to move inversely to the dollar. So, some argue that the worries about the global economy are overblown and that it's really just traders playing their games with the buck.

PowerShares DB US Dollar ETF (UUP) - Weekly

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To which, I'd like to respond, "Uh, not so much."

After comparing the chart of the dollar to the rest of the commodities, it becomes quite clear that commodities were a problem long before the big spike in the dollar.

Oh, and the fact that the dollar is not breaking to new highs as commodities are breaking to new lows suggests that the greenback is not the sole culprit here.

The Bottom Line

Instead of blaming traders or computer algorithms for a change, I think we have to admit that there is a bigger problem at hand here. The bottom line appears to be that the combination of slowing global growth (look no further than China here) and the end of the secular bull market in commodities is the real problem.

So, is this the big one? Will an ongoing decline in commodities soon infect the stock market? Is THIS the real problem that will lead to the crunch in stocks that everyone on the planet seems to be waiting on?

To review, we are not seers of all things global macro. We do NOT invest based on an opinion or point of view. No, we prefer to let the weight of the indicator evidence guide us. And on that score, with commodities breaking down, high yields struggling, and three of our four long-term risk management models all waving warning flags, we will continue to say that risk remains elevated at this time.

This Morning's Pre-Game Indicators

Here are the Pre-Market indicators we review each morning before the opening bell...

Major Foreign Markets:
Japan: -0.95%
Hong Kong: -3.09%
Shanghai: -8.47%
London: -0.61%
Germany: -2.10%
France: -2.10%
Italy: -2.12%
Spain: -1.21%

Crude Oil Futures: -$0.52 to $47.62

Gold: +$4.80 at $1090.30

Dollar: higher against the yen, lower vs. euro and pound

10-Year Bond Yield: Currently trading at 2.239%

Stock Indices in U.S. (relative to fair value):
S&P 500: -6.70
Dow Jones Industrial Average: -77
NASDAQ Composite: -19.57

Thought For The Day:

"The secret of life is honesty and fair dealing. If you can fake that, you've got it made." - Groucho Marx

Current Market Drivers

We strive to identify the driving forces behind the market action on a daily basis. The thinking is that if we can both identify and understand why stocks are doing what they are doing on a short-term basis; we are not likely to be surprised/blind-sided by a big move. Listed below are what we believe to be the driving forces of the current market (Listed in order of importance).

1. The State of Global Economic Growth
2. The State of the Earnings Season
3. The State of Fed/ECB/PBoC Policy
4. The State of the U.S. Economy

The State of the Trend

We believe it is important to analyze the market using multiple time-frames. We define short-term as 3 days to 3 weeks, intermediate-term as 3 weeks to 3 months, and long-term as 3 months or more. Below are our current ratings of the three primary trends:

Short-Term Trend: Moderately Negative
(Chart below is S&P 500 daily over past 1 month)

Intermediate-Term Trend: Neutral
(Chart below is S&P 500 daily over past 6 months)

Long-Term Trend: Positive
(Chart below is S&P 500 daily over past 2 years)

Key Technical Areas:

Traders as well as computerized algorithms are generally keenly aware of the important technical levels on the charts from a short-term basis. Below are the levels we deem important to watch today:

• Key Near-Term Support Zone(s) for S&P 500: 2040
• Key Near-Term Resistance Zone(s): 2135

The State of the Tape

Momentum indicators are designed to tell us about the technical health of a trend - I.E. if there is any "oomph" behind the move. Below are a handful of our favorite indicators relating to the market's "mo"...

• Trend and Breadth Confirmation Indicator (Short-Term): Negative
• Price Thrust Indicator: Negative
• Volume Thrust Indicator: Negative
• Breadth Thrust Indicator: Negative
• Intermediate-Term Bull/Bear Volume Relationship: Moderately Negative
• Technical Health of 100+ Industry Groups: Moderately Positive

The Early Warning Indicators

Markets travel in cycles. Thus we must constantly be on the lookout for changes in the direction of the trend. Looking at market sentiment and the overbought/sold conditions can provide "early warning signs" that a trend change may be near.

• S&P 500 Overbought/Oversold Conditions:
  - Short-Term: Moderately Oversold
  - Intermediate-Term: Moderately Oversold
  
• Market Sentiment: Our primary sentiment model is Neutral .

The State of the Market Environment

One of the keys to long-term success in the stock market is stay in tune with the market's "big picture" environment in terms of risk versus reward.

• Weekly Market Environment Model Reading: Neutral

Wishing you green screens and all the best for a great day,

David D. Moenning
Founder and Chief Investment Strategist
Heritage Capital Research

Indicator Explanations

Trend and Breadth Confirmation Indicator (Short-Term) Explained: History shows the most reliable market moves tend to occur when the breadth indices are in gear with the major market averages. When the breadth measures diverge, investors should take note that a trend reversal may be at hand. This indicator incorporates an All-Cap Dollar Weighted Equity Series and A/D Line. From 1998, when the A/D line is above its 5-day smoothing and the All-Cap Equal Weighted Equity Series is above its 25-day smoothing, the equity index has gained at a rate of +32.5% per year. When one of the indicators is above its smoothing, the equity index has gained at a rate of +13.3% per year. And when both are below, the equity index has lost +23.6% per year.

Price Thrust Indicator Explained: This indicator measures the 3-day rate of change of the Value Line Composite relative to the standard deviation of the 30-day average. When the Value Line's 3-day rate of change have moved above 0.5 standard deviation of the 30-day average ROC, a "thrust" occurs and since 2000, the Value Line Composite has gained ground at a rate of +20.6% per year. When the indicator is below 0.5 standard deviation of the 30-day, the Value Line has lost ground at a rate of -10.0% per year. And when neutral, the Value Line has gained at a rate of +5.9% per year.

Volume Thrust Indicator Explained: This indicator uses NASDAQ volume data to indicate bullish and bearish conditions for the NASDAQ Composite Index. The indicator plots the ratio of the 10-day total of NASDAQ daily advancing volume (i.e., the total volume traded in stocks which rose in price each day) to the 10-day total of daily declining volume (volume traded in stocks which fell each day). This ratio indicates when advancing stocks are attracting the majority of the volume (readings above 1.0) and when declining stocks are seeing the heaviest trading (readings below 1.0). This indicator thus supports the case that a rising market supported by heavier volume in the advancing issues tends to be the most bullish condition, while a declining market with downside volume dominating confirms bearish conditions. When in a positive mode, the NASDAQ Composite has gained at a rate of +38.3% per year, When neutral, the NASDAQ has gained at a rate of +13.3% per year. And when negative, the NASDAQ has lost at a rate of -8.5% per year.

Breadth Thrust Indicator Explained: This indicator uses the number of NASDAQ-listed stocks advancing and declining to indicate bullish or bearish breadth conditions for the NASDAQ Composite. The indicator plots the ratio of the 10-day total of the number of stocks rising on the NASDAQ each day to the 10-day total of the number of stocks declining each day. Using 10-day totals smooths the random daily fluctuations and gives indications on an intermediate-term basis. As expected, the NASDAQ Composite performs much better when the 10-day A/D ratio is high (strong breadth) and worse when the indicator is in its lower mode (weak breadth). The most bullish conditions for the NASDAQ when the 10-day A/D indicator is not only high, but has recently posted an extreme high reading and thus indicated a thrust of upside momentum. Bearish conditions are confirmed when the indicator is low and has recently signaled a downside breadth thrust. In positive mode, the NASDAQ has gained at a rate of +22.1% per year since 1981. In a neutral mode, the NASDAQ has gained at a rate of +14.5% per year. And when in a negative mode, the NASDAQ has lost at a rate of -6.4% per year.

Bull/Bear Volume Relationship Explained: This indicator plots both "supply" and "demand" volume lines. When the Demand Volume line is above the Supply Volume line, the indicator is bullish. From 1981, the stock market has gained at an average annual rate of +11.7% per year when in a bullish mode. When the Demand Volume line is below the Supply Volume line, the indicator is bearish. When the indicator has been bearish, the market has lost ground at a rate of -6.1% per year.

Technical Health of 100 Industry Groups Explained: Designed to provide a reading on the technical health of the overall market, this indicator takes the technical temperature of more than 100 industry sectors each week. Looking back to early 1980, when the model is rated as "positive," the S&P has averaged returns in excess of 23% per year. When the model carries a "neutral" reading, the S&P has returned over 11% per year. But when the model is rated "negative," stocks fall by more than -13% a year on average.

Weekly State of the Market Model Reading Explained:Different market environments require different investing strategies. To help us identify the current environment, we look to our longer-term State of the Market Model. This model is designed to tell us when risk factors are high, low, or uncertain. In short, this longer-term oriented, weekly model tells us whether the odds favor the bulls, bears, or neither team.

Disclosures

The opinions and forecasts expressed herein are those of Mr. David Moenning and may not actually come to pass. Mr. Moenning's opinions and viewpoints regarding the future of the markets should not be construed as recommendations. The analysis and information in this report is for informational purposes only. No part of the material presented in this report is intended as an investment recommendation or investment advice. Neither the information nor any opinion expressed nor any Portfolio constitutes a solicitation to purchase or sell securities or any investment program.

Any investment decisions must in all cases be made by the reader or by his or her investment adviser. Do NOT ever purchase any security without doing sufficient research. There is no guarantee that the investment objectives outlined will actually come to pass. All opinions expressed herein are subject to change without notice. Neither the editor, employees, nor any of their affiliates shall have any liability for any loss sustained by anyone who has relied on the information provided.

The analysis provided is based on both technical and fundamental research and is provided “as is” without warranty of any kind, either expressed or implied. Although the information contained is derived from sources which are believed to be reliable, they cannot be guaranteed.

David D. Moenning, an advisor representative of CONCERT Wealth Management Inc. (CONCERT), is founder of Heritage Capital Advisors LLC, a legal business entity doing business as Heritage Capital Research (Heritage). Advisory services are offered through CONCERT Wealth Management, Inc., a registered investment advisor. For a complete description of investment risks, fees and services review the CONCERT firm brochure (ADV Part 2) which is available from your Investment Representative or by contacting Heritage or CONCERT.

Mr. Moenning is also the owner of Heritage Capital Management (HCM) a state-registered investment adviser. HCM also serves as a sub-advisor to other investment advisory firms. Neither HCM, Heritage, or CONCERT is registered as a broker-dealer.

Employees and affiliates of Heritage and HCM may at times have positions in the securities referred to and may make purchases or sales of these securities while publications are in circulation. Editors will indicate whether they or Heritage/HCM has a position in stocks or other securities mentioned in any publication. The disclosures will be accurate as of the time of publication and may change thereafter without notice.

Investments in equities carry an inherent element of risk including the potential for significant loss of principal. Past performance is not an indication of future results.