Pop the Clutch- October 16th, 2020

What a weak week. After a nice roaring rally last week, this was a really poor follow-thru. Not much to cheer about. The US dollar was barely up, but most commodities took it on the chin. While there were pockets of success (broker dealers), the big names are still hovering around the 50-day moving average. It was literally a great Monday followed by a lack of enthusiasm all week.

My frustration looking through the charts got more pessimistic as I went
along. The real problem is having the market stall at a level where the
momentum indicators are barely above zero for the sectors and indexes.
One week is a pause, but I certainly don’t want to see more weakness next
week.

It was an options expiration Friday this week, but the volume was v-e-r-y
muted. Lack of interest, or everybody is just riding what we already hold.
We need more institutional buyers to start throwing their weight around. It
makes me nervous to see everything get stuck so soon after the rally
started. Regarding breadth, everything is up. My strength indicators continued to climb, signalling the rally is ok. Fresh new highs on the cumulative advance/decine line on Monday. That is usually a harbinger of more bullish
behavior. The percentage of stocks above the 200 DMA stayed strong. The S&P 1500 advance/decline percentage followed the indexes which is ok. The real problem is price action was chilling on a nice bull rally like snow on blooming flowers.

Summary: All three of my strength indicators are moving up, which is the easiest backdrop for investing. The weak price action
makes that harder to believe! Broad participation still suggests higher highs. It feels like we need to pop the clutch this week, to jump out of the funk. The Nasdaq needs to rally early in the week.

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