We have two economies, Jim Cramer told his Mad Money viewers Thursday night. The consumer economy is booming, but the manufacturing economy has taken a sudden turn for the worse and is now getting worrisome. In particular Cramer said we received confirmation of that from American Electric Power Co. Inc. (AEP) which is seeing a slowdown in power consumption.
Let's check and see if we are seeing a slowdown in the price action on the charts.
In this daily bar chart of AEP, below, we can see a rally from late September to July. Prices are now testing the rising 50-day moving average line. The slower-to-react 200-day line is bullish and well below the price action.
The daily On-Balance-Volume (OBV) line has been flat from end of March to now which is a bearish divergence when compared to the rising price action.
In the lower panel is the 12-day price momentum indicator, which shows a lower high from June to July which is a bearish divergence compared to the equal price highs in June and July. This is not a big or long lasting divergence but it is a heads up that one should not ignore.
In the weekly bar chart of AEP, below, we can see that prices are above the rising 40-week moving average line. The weekly OBV line is pointed up and confirms the bullish price action.
In the bottom of the chart is the 12-week price momentum study. Momentum has been weakening since March and is another "heads up" clue.
In this Point and Figure chart of AEP, below, we can see a downside price target of $82.
Bottom-line strategy: The charts are not screaming sell but we have enough clues to look for a correction to the $82 or the intersection of the 200-day line.
