Author: Greg Schnell, CMT, MFTA

Mining the Madness- September 13th, 2020

The US markets closed lower with another drop in the technology names. This week saw a decline in almost every sector. The materials were marginally positive, avoiding the downward suction. Materials includes fertilizers, chemicals, mining names to list a few. With the solid moves in Corn and Soybeans, the fertilizer names held up. Energy was the worst sector once again. Technology, Communications and Semiconductors were demonstrative of the technology weakness.


The former leaders were hit again. Most of the big names (FANMAG) are
hovering around the 50-day moving average. That’s significantly lower in 7
trading days, but the upside euphoria was also significant leading into the
drop. Tesla was down another 10% trying to bounce off the 50-day. The week
was a little chilling, much like snow showing up on the mountain peaks this
week. As the season changes from summer to fall, it seems the market chill is
upon us.


Commodities were down on the week, with oil falling hard. Oil moved down
toward a support level around $35 to finish at $37.33. The weekly low was
$36.13. If the support at $35-$36 doesn’t hold, $29 would be a next stop
target. Yecch! In currencies the British Pound got smoked for 7 cents in a couple of weeks. The US dollar moved up, and most of the commodity currencies were weaker. That’s not great! The Euro and the Yen traded sideways. Both the European and Japanese stock markets were up this week, in a big contrast to the US drop.


Summary: Tech continues to be sold. My courage to be long is suspended. 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%.


Let’s jump into the charts

Mining-The-Madness

Welcome To The Underground- August 22nd, 2020

The US markets closed higher on the week with the $SPX breaking out and closing at new all-time highs a smidgeon under 3400. Breadth indicators weakened considerably in the face of the new highs on the index as Apple soared to a $2 Trillion market cap.

My bullish optimism is now being tempered with the changes I am seeing in behind the glamour of the lofty index. The Schnell Strength Index is still in the 90’s but it weakened 3% intraday on Friday, an Options Expiration day with a new high for the market. 3% is no big deal, but the last 4 days of this week saw more decliners than
advancers on both exchanges as the market pushed higher. This week, we saw a drop below the trend line for the advance/decline line measured on many different markets. The Nasdaq Composite, the NYSE Composite, the Canadian market, the mid caps, small caps and the S&P 1500. Continue Reading

SPY On The New High- August 15th, 2020

The US markets closed higher on the week with the SPY ETF breaking out to all time highs. With all of my breadth data, almost everything is positive here. My SSIH indicator drifted lower with the weakness in gold and a few other areas to 95.8 %. I hear all the noise around me about divergences but the price and momentum action continue to say higher.

Last week I mentioned “Bonds made a very important hammer candle this week giving some reasons to be be bullish the banks. The Bank ETF was up on the week nicely. This bond hammer follows last week’s Fed meeting,
so this is a bullish time to look for changes.” Well, this week, bond yields soared. It was a massive change that bodes well for financials. Continue Reading

Bouncing Banks? August 8th, 2020

The US markets closed higher on the week with the IWM small caps ETF joining the party and moving above the June highs. With all of my breadth data, absolutely everything is positive here. My SSIH indicator moderated marginally, still at a blazingly solid 97.6 %. I here all the noise around me about topping but the price and momentum action continue to say higher.

Breadth is currently rock solid. Bonds made a very important hammer candle this week giving some reasons to
be be bullish the banks. The Bank ETF was up on the week nicely. This bond hammer follows last week’s Fed meeting, so this is a bullish time to look for changes.

Continue Reading

US Markets Close On The Highs- July 31st, 2020

The US markets closed higher, with a big lift on Friday afternoon. This closed out the day, the week and the month almost at the top of the $SPX bar. Thursday, four of the big cap tech names reported and three of four beat the numbers. The Nasdaq 100 had its highest weekly close, but slightly below the July highs. Let’s not split hairs here. It was a big bullish finish to the month. Continue Reading

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

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

MARKET COMMENTARY

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

Threading a Needle Weekly Market Review April 04, 2020

Market indexes dropped in volatility and price this week which should tilt me to be bullish. With the $VIX still above 45, it is still very volatile out there. I am not a big $VIX follower, but being aware of the VIX trend in this elevated environment can be informative. The difficulty is the market was down 7.5% off its recent highs and the $VIX was still falling.

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