Month: September 2020

The US markets were split with a rising Nasdaq 100 and a small move down in the $SPX. Tech stabilized this week and closed up. Lots of the tech charts are consolidating sideways and closed Friday near the top of the consolidation range. Names like NVDA, AAPL, SHOP, WDAY are good examples. After Options Expiration on the previous Friday, this week had three of 5 days up for the Nasdaq. It wasn’t a huge move up, but some big down days were quickly repaired. With the strength of tech, this week could see the rally try to run higher. That would be my bias based on the charts.

It has been 4 weeks since we topped out from the spire to end August.
From the 2nd of Sept, we have been working our way lower. However, the
consolidation is finding support at the start level of the year for the
$SPX. I mentioned it a couple of weeks ago as an area for support. It
seems like its holding.

While the markets were flat to up, we had huge down momentum in the
individual names. Over 500 stocks in my scan were down > 10%. Fiftysome were up 10%. So a lot of heavy lifting was being done by the stability of tech in the indexes.

Commodities got smoked this week on a huge move in the US Dollar. It was a train wreck on that asset class. The commodity related stocks fell HARD. Most commodity related names in gold, copper, silver, oil, rare earth, lithium, timber, steel and coal all dropped. The one positive change was the front month on Natural Gas, up bigly over 30%.

In currencies, it was a-one-way-train! The US dollar soared, which I called the raging teenager trade. It was just sitting in a consolidation range and then exploded higher almost every day for the week. Where did that come from?

Summary: The tech names are consolidating and look ready to run. When the US dollar broke, it crushed all hopes for the commodity buyers. The last three days of the five, the commodity indexes tried to hold their lows. Can they make the turn higher this week?  

Let’s jump into the charts. Click on the image below to view the full newsletter in PDF format.

• By Greg Schnell, CMT, MFTA
• September 28, 2020

The US markets closed lower with a small drop in the technology names. Energy was broadly up 3% but exploration and production was up 6%. Crude moved up almost 10%. More moves in the ag space occurred with the solid moves in Corn and Soybeans. Materials including industrial metals held up fairly well. Semiconductors held up on the back of a big acquisition bid by Nvidia.

The trend line on the $SPX broke and the Nasdaq 100 continued lower. Small caps were up on the week and to round it all out, the S&P 1500 held its trend line. This mixed picture is weakening. While market drops are rarely easy to trade as volatility picks up, the mixed results this week make it more difficult.

An explanation of how tricky the market is, the indexes were down 1-2%. Stocks up 10% or more outpaced stocks down 10% or more by 8x. For stocks up more than 5%, it was 2.5x more up than down.

Commodities were up on the week, with oil rising 10%. Oil moved up more than $3 and closed at $41.32. Copper moved up along with lithium and the rare earth metals. Steel stocks rose, coal stocks rose, agriculture names had a big week.

In currencies the Yen had a strong week. On the video, I cover off a relationship of Gold and the Yen. Essentially, when the Yen goes higher, I might expect Gold to go higher. We’ll watch for that this week. The relationship has broken down over the past year so I am watching to see if it reasserts itself.

As the market steps lower, the first part of the index waterfall was rather quick. It appears we are starting another drop down with Friday’s move below support. Because Friday was Quadruple Options Expiration, my caution level is high. But the selling did not intensify as we broke lower. I would be very cautious taking aggressive index positions either way. Watch for an upside reversal.

Summary: Ahead of the election, some patience is needed here. But it is a good time to stalk the names you want to own. Watch the charts for bottoming patterns. Some of the big names are off 20%. I did buy some commodity related names. It definitely seems to be a rotation going on from high fliers to cyclical economy stocks so far.

Let’s jump into the charts. Click on the image below to view the full newsletter in PDF format.

• By Greg Schnell, CMT, MFTA
• September 21, 2020