Well, here we go again. Just when you thought that the bulls were back in charge and the favorable seasonality was going to cause Christmas to come early this year to the corner of Broad and Wall, the worry returns. And with that worry comes the usual selling and what could easily become yet another in a long string of treks through the trading range.

While the S&P 500 remains well above its 50-day moving average at the present time (the venerable MA currently resides at 2006) it is worth noting that the blue chip index has crossed its 50-day a whopping 38 times so far this year. And for those keeping score at home, this represents the most back-and-forth, schizophrenic, A.D.D. market (in terms of the number of 50-day crossings, that is) since 1930. Oh, and for the record, the DJIA has crossed its 50-day 36 times so far in 2015, which is the most since 1900.

So, it will suffice to say that this market has issues. And perhaps the biggest issue is the worry about global growth.

While stocks surged in October on the idea that Super Mario and his merry band of European central bankers were going to keep printing money and the Chinese were talking about pushing a bit harder on the stimulus gas pedal, the bloom is definitely off that rose as traders are back to fretting about the outlook for growth. Well, in places outside the U.S., anyway.

And what do traders do when they begin to get uncomfortable? That's right, they sell. And don't look now fans, but the selling in some of the market's biggest and brightest proxies for global growth is getting serious.

First there are the industrial metals. More specifically, take a look at the weekly chart of "Doctor Copper" over the last 4 years, shown just below.

IPath Copper ETF (NYSE: JJC) - Weekly

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Remember, copper is supposed to be the commodity that has a PhD in economics - due to the metal being a proxy for construction around the globe.

The message from Dr. Copper is quite clear: The patient (global growth) is one sick puppy.

Next up is oil.

US Oil Fund (NYSE: USO) - Weekly

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Everybody knows that oil has had a rough go lately. Everybody knows that the Saudis would love to put many of their competitors out of business and that keeping prices low is likely to do the trick. And everybody knows that a rising dollar is tough on "Texas tea."

But, it is worth remembering that the price of oil is also seen as a prime proxy for the state of the global economy. So, with oil pushing lower lately and now threatening to break to fresh lows, one can easily conclude that global growth isn't exactly hitting on all cylinders at the present time.

The IMF Agrees

Heck, even the IMF agrees that the outlook for growth isn't heading in the right direction. Yesterday the fund suggested that Yellen & Co. ought to hold off on their plans to raise interest rates on December 16. While I'm paraphrasing here, the report basically said the global economy can't handle it.

High Yields Are Also in Trouble

Although the index that junk bond ETFs employ is heavily influenced by the action in the oil patch, many analysts (including yours truly) like to look at high yield bonds as a "canary in the coal mine" so to speak. And right now, things are definitely not looking good here.

SPDR High Yield ETF (NYSE: JNK) - Weekly

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Yes, it is true that high yield bonds are impacted by interest rates. However, junk really trades on credit risk (i.e. the risk of default) and in turn, the overall outlook for the economy. And as someone who has been managing this market since 1990, I can say that most folks think of junk bonds as "stocks in drag." As such, the action in the high yield space is viewed as a good gauge of the stock market's internal health.

And like the charts of "Dr. Copper" and oil, this is not a pretty picture at the present time.

The Retail Wreck

Finally, there has been a lot of chatter lately about the difficulty that has been developing in the retail space. Here are a couple more weekly charts that don't exactly bring a smile to one's face.

Wal-Mart Stores (NYSE: WMT) - Weekly

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Macy's (NYSE: M) - Weekly

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This just in... Nordstrom (NYSE: JWN) joined the retail wreck crowd this morning with a big miss on earnings.

The Takeaway

The bottom line would appear to be that some worry is back in the game and traders have decided it is time to "go the other way" yet again this year. Thus, we should keep an eye on the important support zones to see if the bulls will be able to make a stand. Currently, key near-term support is in the 2020 area.

S&P 500 - Daily

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However, keep in mind that stocks typically sell off prior to the holidays - and that usually (a key word here) the bulls wind up putting on a good show as the year draws to a close. Therefore, anyone feeling like they were a little light on equity exposure as the S&P was nearing that all-time high a couple weeks back may want to think about buying the dip.

Today's Pre-Game Indicators

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

Major Foreign Markets:
Japan: -0.51%
Hong Kong: -2.15%
Shanghai: -1.43%
London: -0.85%
Germany: -0.76%
France: -1.00%
Italy: -0.59%
Spain: -0.67%

Crude Oil Futures: +$0.16 to $41.91

Gold: +$5.30 at $1085.70

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

10-Year Bond Yield: Currently trading at 2.303%

Stock Indices in U.S. (relative to fair value):
S&P 500: -3.85
Dow Jones Industrial Average: -31
NASDAQ Composite: -14.20

Thought For The Day:

A man is tested by his reaction to man's praise. --Proverbs 27:2

Here's wishing you green screens and all the best for a great day,

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

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 China/Global Growth
2. The State of Global Central Bank Policy
3. 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 6 months, and long-term as 6 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: Moderately Positive
(Chart below is S&P 500 daily over past 6 months)

Long-Term Trend: Moderately 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: 2020
• 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: Moderately Positive
• Volume Thrust Indicator(NASDAQ): Negative
• Breadth Thrust Indicator (NASDAQ): Neutral
• Short-Term Volume Relationship: Positive
• 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 Overbought
  
• Market Sentiment: Our primary sentiment model is Negative

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: Moderately Positive

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 is the owner of Heritage Capital Management (HCM) a registered investment adviser. Advisory services are offered through Heritage Capital Management, Inc. For a complete description of investment risks, fees and services review the HCM firm brochure (ADV Part 2) which is available from your Investment Representative or by contacting HeritageHCM also serves as a sub-advisor to other investment advisory firms. Neither HCM or Heritage 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.