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