Author: Greg Schnell, CMT, MFTA

Chopped Summer Salad – July 10, 2021

The indexes bounced up and down this week alternating days. Ultimately, we finished on the highs. In the breadth work on the video, I mentioned there was an initiation thrust suggesting renewed enthusiasm on Friday.

The dollar is at a key inflection point. It would appear to me to be trying to roll over lower. That would be my bias, but it has not broken down yet. It is trying to break trend line resistance to the upside. If that stalls and reverses lower, I expect a big resurgence into the commodity related trades. Stay tuned on oil, industrial metals, gold, silver, rare earths, and lithium as examples.

The dollar seems to be a light switch here, with lots of trades pivoting around it currently. It traded in the same range as last week for the most part. A declining dollar seems to help the $SPX stock market rally easily, whereas a rising dollar gives us a slower, more laboring rise.

The big banks start the heavy reporting season this week. The financial charts look ready to turn back higher, so that could be the interesting sector for the week.

Summary: The indexes are continuing to hit new highs. The wobble this week was a small problem, but we bounced back down on the Put/Call ratio as it was hitting a level where most market turns higher start from. Interestingly, we hit the put/call ratio very close to new highs.

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More Weakness, More Highs – Weekly Market Review January 22nd, 2021

The tone of the market changed this week when all of the attention that was on cyclicals rotated into technology. Financials wobbled lower 2%, and energy drifted lower (-1.75% ). However, the big 6 tech names rallied higher, carrying the indexes up big. The front line for the bulls pushed down field! MSFT and AMZN rallied 6%. GOOGL, AAPL and FB rallied 9% this week. NFLX showed up moving up 13.5% on the week! Wham! Tesla was only up 2.5%. They make up 50% of the Nasdaq 100 and 23% of the $SPX. Big cap tech pretty much
straight-armed the bear in the teeth and sent him rocking on his back. The XLK had the lowest SCTR ranking in almost two years, only to show up as a bull stampede this week! The list on the right shows the weeks’ top performers on the Nasdaq 100.

Last week I highlighted that analyzing the market here is tricky, because my strength indicators are plummeting, but the advance/decline lines are holding up. According to Bob Pisani, 8% of the options traded are single contract (tiny) option entries, suggesting high retail investor involvement. I listed off 11 different euphoria’s last week, and they are still there. The massive push into the top 6 names this week, shows more bullish action. Large cap tech earnings
come out over the next two weeks. Can they continue to drive higher?

Summary: I will continue to protect capital. As the SSIH drops even lower, it validates my bias, but the large-cap anchor tenants are driving higher. More importantly, if the SSIH is waffling here, there is no tailwind. That is the information we are ultimately seeking. Careful out there! Keep watching the top Nasdaq names. The indexes might not drop until they start to weaken. Tech might be the place to look as I mentioned last week, but a thin market gets more dangerous. See September 3 high.

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Looks Like Exhaustion – January 15th, 2021

The markets made their high Monday morning and traded lower all week. This is a difficult week to analyze where the markets want to go. Why? Because my strength indicators, which I trust and invest based on, are breaking down hard. Meanwhile, the Advance/Decline, net new highs, and other metrics are strong. So strong, they look like no impending danger.

Last week, we had great price action across the globe. I expected that to continue. When the market doesn’t do what we expect, we need to watch for winds of change. This week, that is particularly true. The newsletter doesn’t suggest new positions this week. Even areas I want to see perform well, I will probably avoid, because the market has some very precarious signals underneath. I don’t need to be jumping every week, when the potential
for a rip lower is increasing. More outside bars and inside bars – mean indecision.

What I do know, is in the background, a large number of my charts went from positive to negative this week while the $SPX only dropped 1.5%. I trust my strength indexes a lot because I created them to protect my capital. I want out before or near the top of the market. I invest when I have tailwinds and right now, we have swirling winds at best with numerous charts extremely stretched.

A phrase from Dan Fitzpatrick – “Expect the expected.” I expected the markets to continue to push higher on Biden’s agenda. If it doesn’t play out, I’ll check my work and be careful. That is where I am at this week.

The newsletter below is focused on showing the significant extremes of the market, complete with negative divergence and a sell signal on the Nasdaq 100. It also shows the euphoria that hit the Nasdaq Composite to start the year. This isn’t a subtle ‘one-off’ clue. This is an absolute bomb, suggesting extreme caution. All of a sudden, from out of nowhere, the Nasdaq volume is crazy, whereas the Nasdaq 100 is fine.

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2021 Starts Huge- January 8th, 2021

The US markets were up this week but underneath the surface, there were clues of a bigger market push. Breadth swelled, bullish percent indexes climbed, transports popped, and all my strength indicators swelled. Globally, it was a launch fest with the Shanghai breaking out to 5-year highs, while Canada, Brazil and Germany confirmed the move. Asia, North and South America, as well as Europe all popping to new highs to start the year. I can’t ignore that! Say it with swagger – “When you are hitting new highs, you are
not in a bear market!”.

The US political world had a newsworthy week. The attack on the capitol building had the world watching. It did slow down the US markets compared to the rest of the world, as the global surge was remarkably big.

Bitcoin had a massive range week of 13500 points. Marijuana names had a massive week. Energy had a massive week. Financials had a massive week. I can’t find the correlation between them, but each one launched their own party. Bitcoin investors continue to believe in the limited supply approach.
Digital printing of money. Marijuana names surged as the Senate got to a 50/50 political split suggesting a possibility of passing a law for recreational consumption. The Saudi’s trimmed oil production sending energy stocks up 10%! Bond prices plummeted, kicking financials much higher.

The Schnell Strength Indexes all improved this week. We saw the median stock up 5 % on the week which is obviously huge. This broad participation suggests more to come. Whenever I see everything so bullish, I am inclined to worry. But rising markets suggest being invested. Don’t be overly aggressive, but if you find some nice setups, the majority of stocks are trending higher. There were
over 1900 up more than 5% and only 250 down 5% as an example.

Summary: I am buying a little more as the SSIH suggests. As I mentioned last week → “My larger time frames suggest this pullback is a blip, but other big caution signs loom like the lower PPO right now on the Nasdaq” . If the market wants to push higher, I want to ride it. As the sign on the cross country ski trail says “Giddy Up!”

Let’s hit the charts. Click below to view the full PDF article.


2020 is Behind Us- January 2nd, 2021

The markets pushed up early Monday, traded sideways until Thursday afternoon. With 2 hours to go, someone put in a 2-hour buy order, pushing the markets to close in the top right corner of the charts for the day, the week and the year. The US markets closed the year at the highest levels after incurring a 35% drop in the first quarter of 2020. It has been a remarkable year as names like Peleton and Zoom soared, while main street America struggled to get past the 2019 highs.

Santa Claus Rally Needs a Sleigh- December 25th, 2020

The markets had a soft, flat week coming off options expiration. The Nasdaq closed down slightly, the $SPX down a ½%. Globally, most markets pulled back. Most commodities pulled back this week as well. Currencies were flat even though a UK-Eurozone trade deal got done. All in all, a week that consolidated all the moves up.

Two Get Approved- December 18th, 2020

The Pfizer vaccine rollout continues. The Moderna vaccine got approved. More vaccines are in the approval pipeline but look to be later in January. JNJ. Astrazeneca. With my strength indicators weakening and the majority of good news out about the vaccines, it seems like the market wants to pause here. Until you look at Tesla stock. The roaring 2000’s 2020’s.

Extremes are Worrying- December 11th, 2020

The trucks are now rolling out Pfizers vaccine this weekend after the FDA approved it late on Friday. That’s huge! So vaccine injections start Monday. We also have the Fed meeting Tuesday and Wednesday. Moderna’s vaccine is up for approval on Thursday December 17. But that’s not all for this week. To round out the week, we have options expiration (OE) Friday. The last 4 years, this OE has been a positive swing and the market runs into the new year. It all adds up to lots of reasons for volatility. We still have the possibility of a stimulus package.

Currencies Start to Move- December 4th, 2020

The pandemic continues to be front page news with the potential for vaccinations to start this week. The FDA is to meet to decide the emergency use application for Pfizer’s vaccine on Dec. 10. The Operation Warp Speed group said they will be ready to have the vaccine for front line workers within 1-2 days after, potentially meaning December 12-15 to start vaccinations if the FDA decides quickly. A giant risk is if the FDA does not approve the vaccine. All the pre-selling by the FDA, both government parties, the Pfizer and BioNTech companies, suggest smooth sailing. This could be a sniper bullet that comes out of nowhere but it would be one hell of a turn, considering the UK has approved it. There is immense pressure to approve. Let’s hope this goes well, because a lot of lives depend on an early vaccine.

Commodities Take the Stage- November 27th, 2020

The pandemic continues to be front page news with the potential for vaccinations to start within two weeks! The FDA is to meet to decide the emergency use application for Pfizer’s vaccine on Dec. 10. The Operation Warp Speed group said they will be ready to have the vaccine for front line workers within 1-2 days after, potentially meaning December 12-15 to start vaccinations if the FDA decides quickly.

The Nasdaq was one of the stronger markets in the world which broke a 3-week stretch of underperformance. A lot of new leadership names started to move higher. The US Dollar broke below support and closed below 92. As I mentioned last week, if the dollar breaks down it should be extremely bullish commodities. Copper and Oil soared on the week. Copper roared, absolutely roared ahead. It didn’t bother to pause at resistance, it just put it in the rear-view mirror. Pictured left is Caterpillar equipment at a huge copper mine. I want to get moving on Copper trades even more.

An almost confirming fact of the optimism coming through from the vaccines is the selling off of gold, gold miners, silver and silver miners while the dollar dropped. I mentioned last week that Gold had not been performing well with the dropping dollar. To top it off, the $VIX dropped to new post-COVID lows. The macro chart package sets up this beautiful backdrop for foreign investment ideas and commodities to be intertwined with tech exposure for the first time in a long time. This comes after a new thrust in the 4th quarter of 2019 stalled with COVID. That push started as the trade tennis between the US and China eased.

Summary: I am bullish and am invested as the SSIH suggests being invested. Financials, industrial metals, energy and electric vehicle trades all look promising. Foreign market exposure can help with a dropping dollar. We are still testing prior highs, so breakouts need to hold. The $SPX and small caps closed at highs. The $NDX posted the highest weekly close, but not above Sept intraday highs.

Let’s jump into the charts. Click below to view the full PDF article.