Month: July 2020

A Confluence Of Trend Lines- July 24th, 2020

The US markets drifted lower, with the leading large-cap tech names selling off and moving below their trend lines. Materials and retail now have the highest SCTR rankings for sectors. Both the Nasdaq and SPX made higher closing highs early in the week. Continue Reading

Chilling Charts- June 27th, 2020

The markets closed lower on all the indexes this week. After seeing some all time record volumes, we started to see changes in the index performance. While the herd is still huddled in the US large caps, selling was more pronounced as you look down the size scale of market capitalization. (How large the company is based on multiplying the number of shares by the price per share). There were notable differences this week. Canada, a smaller market, broke the advance/decline line for the uptrend and this is a caution flag for the US. Weaker, smaller markets typically break before the US does. Sweden is a good clue for Europe, and it held up better than I expected. I covered world indexes in the commodity video. So many cyclical (they cycle up and down with the economy) charts have started to decline after touching their 200 DMA. Just scrolling through the Dow 30, JPM, PG,MCD, MRK, IBM, VZ, KO,DIS,TRV, AXP,GS,MMM, DD,UTX, CVX, RTX, CAT, XOM have all failed at the 200 DMA. You can big banks like C and BAC to the list. The Nasdaq Composite recorded the highest volume ever on Friday. The SPX also recorded a high volume day. We have had extreme volume days in each of the last three weeks. One after the Fed meeting, Quad options, and now the final Friday before quarter end. This is a twitchy market, slowly showing that times are changing from the controlled uptrend.

From last week’s newsletter : “From a high level, the SSIH indicator moved lower by another 5%. That level of movement can happen within an uptrend. The big thing for me is the 5% down day on the $SPX the prior week after the Fed. Those days don’t usually show up in uptrends. So caution is creeping in. Now that we have pushed through options expiration on really high volume, I’m watching to see are people starting to price in the weak earnings for the second quarter? Or is the market starting to focus on the COVID 19 resurgence in some of the more populated states like Texas, Florida, and Arizona? We are about to find out.”

Summary: The COVID surge is changing the market as is the move towards earnings season in July. Caution is warranted. Tighten stops. Serious storm clouds on the horizon.

Let’s jump into the charts.

Chilling Charts

Quarterly Newsletter: Feeling fearful when markets turn? Time for a risk reality check

Feeling fearful when markets turn? Time for a risk reality check

Depending on your age and investing experience, the market downturn in March caused by the COVID-19 crisis may have been a real shock or just the latest in a series of unfortunate events in your investing life. Either way, these types of market gyrations bring to the fore our personal relationship with risk. While we may understand risk as a concept,
especially easy to do when the markets are up, it takes a serious downturn to face our emotional reactions to risk. If you’ve been feeling anxious, it may be time to reevaluate your tolerance for risk. Continue Reading

Staring Into The Second Half July 2nd

For the NASDAQ 100, its been a rally! Never underestimate the power of the Fed probably has to be the best lesson. The second best lesson is portfolio managers worldwide have tightened the diversity in their portfolios to focus on Nasdaq 50 stocks. The hedge funds that trade more frequently have made money both short and long this market.

With employment turning up from the deep lows, this is a late indicator but supportive of higher markets. Having the Nasdaq higher than February is apparently normal as it must have been undervalued then! The conversations around news flow are really difficult to absorb. There is an entire financial analyst community using earnings to value markets, yet the earnings for 80% of the publicly traded market are going to come in dramatically lower. So the discussion has evolved to only looking at 2021 earnings, because we have already had a re-rating for 2020. That conversation does not fly with me at all. Who can guess what 2021 is going to look like? Continue Reading

Crossing The Line In The Sand Weekly Market Review May 30th, 2020


A strong week globally for equity markets really added fuel to the ongoing bull market. As COVID fears moved into the rear-view mirror for now, the markets continued to rally. While the NASDAQ tested the same highs three days in a row, it continues to hold near the old highs of February. As I mentioned on the video, volume was almost miraculous, soaring to big levels. While I continue to be amazed that debt doesn’t matter, I must be looking for trouble at a party, instead of just enjoying the party.

This week the Schnell Strength Indicator moved up significantly to 96%. 20% of my data set improved from negative to positive! When momentum is this bullish, it is a strong backdrop. In January 2019, it took 3 weeks to reach this level of momentum off the lows and it lasted 4 months. During this rally it took 10 weeks to get here with a big surge this week. I can’t predict what will happen but it is very positive. Historically, momentum this strong usually has to wane before the market can drop meaningfully, so this is a very bullish development. As bizarre as the world is, investors are bullish globally. The big news this week, was the S&P 500 moving back above the 200-day moving average, which is considered a simple long-term method of defining a positive market or a negative market. Smoother markets above the 200 DMA would be nice. While it was a positive development, lets make sure it holds above it this week. The Nasdaq has work to do too. Japan moved up 1500 points or 7% this week, on more borrowing and central banking activities. Europe moved up on rumours of creating more debt as Europe needs time to implement everything with the EU approvals process. Last week I mentioned: “If the globe is going to stall out here, it’s technical analysis 101. What was support, becomes resistance.” So far, no stalling, but the Nasdaq does need to take out the prior high. China rallied just enough this week to stop a sell signal on the monthly charts. Metals have a nice rally starting or going in the case of lithium.

Summary: The commodities rally looks ready to run, look there. A rotation away from the big tech names appears to be underway as the rally broadens out. That doesn’t mean they won’t rise. It just means investors are looking at other areas too.

Let’s jump into the charts. Continue Reading

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