Earnings Analysis: GOOGL, AMZN, AAPL

Three big bellwether stocks announced earnings on the same day, after the close, and they all missed estimates. Does this mean the Technology sector or the broader market will head lower?

Not necessarily. From a technical perspective, ahead of earnings, the charts of Alphabet (GOOGL), Amazon (AMZN), and Apple (AAPL) were leaning towards being bullish. Here’s a technical perspective.

Alphabet (GOOGL): What to Watch Out For

GOOGL’s breakaway gap on February 2 indicates some significance for the following reasons. It betrays strong bullish sentiment on the day it’s slated to report earnings after hours. It also places share prices above three critical levels of resistance:

  • The 200-day moving average
  • The December 2 (2022) high leading to the most recent rounding bottom, and
  • The October 25 high preceding the bearish swing, which brought GOOGL stock to its lowest 12-month level.

CHART 1: WILL GOOGLE STAY ABOVE ITS 200-DAY MOVING AVERAGE? We’ll see how the stock reacts after its earnings report. If it goes above it, the 200-day MA could become a support level. Chart source: StockChartsACP. For illustrative purposes only.

  • Depending on the scenario, gaps often get filled, and the outcome following the fill depends on whether the initial bullishness was driven by real anticipated value or overextended exuberance.
  • For the current swing to develop into a stronger trend, GOOGL should remain above its 100-day moving average.
  • A move below the January 6 swing low (at 84.86) would likely invalidate any uptrend thesis.

Amazon (AMZN): What to Watch Out For

Adding the Ichimoku cloud overlay to the price chart takes care of some of the critical points a trader should be looking for. The cloud helps identify trend direction, support, and resistance levels.

While Amazon’s stock price may be tempting to buy given it gapped up to its 200-day moving average, it’s best to take a step back and look at the bigger picture (see chart below).

CHART 2: AMAZON IN THE CLOUD. The Ichimoku cloud overlay identifies support and resistance levels and trend direction. Chart source: StockChartsACP. For illustrative purposes only.

Consider the following:

  • Price is trading above the shaded band, which means the top line of the band (green line) would be your first support level. The bottom band line (red line) would be the second support level.
  • The base line (cyan) can be used to confirm a trend. Since AMZN’s stock price is above the base line, it’s an indication that price could go higher.
  • The conversion line (pink) is another trend confirmation indicator. The direction of this line coincides with trend direction. In the chart of AMZN stock, the pink line is trending higher, which is another positive for the stock price.

There are many other ways to use the Ichimoku cloud indicator but its main purpose is to act as a measure of future price movement which is why you see the cloud extending beyond the prevailing price bar. You can see a bullish cloud forming with the red line above the green line. There’s also a lagging span line (white). While it’s lagging, it still is useful in identifying price direction. It’s trending up and is above the price charts from 26 bars ago. That’s another positive indication.

Any reversal in any of these lines or a reversal in the crossover should alert you to a potential reversal in price direction.

Apple (AAPL): What to Watch Out For

Out of the three, Apple’s stock price has held up pretty well. Since reaching a high in January 2023, the stock price has seen slightly lower highs and lows but the stock has held above its 50% Fib Retracement levels (see chart below).

CHART 3: A BULLISH BIAS IN APPLE? The stock price is approaching its 23.6% Fib retracement level and there’s a chance that price could move higher. Chart source: StockChartsACP. For illustrative purposes only.

  • If you look at the Fib retracement levels from the 2020 low to the January 23, 2022 high, price is approaching its 23.6% level (upwards), having bounced slightly above the 50%  retracement level. If Apple’s stock price crosses above it, then it would likely become a support level, considering it’s been tested as a resistance level about five times since 2021.
  • Note that from December 13 to the present day outlines a V Bottom. If Apple stock pulls back in the next few days to test its V bottom neckline (white trendline), you at least have some idea as to the prevailing market sentiment, which currently leans bullish.
  • The relative strength index (RSI) and stochastic oscillator indicate that AAPL may be approaching “overbought” levels. That might make you think that prices may pull back but remember, these oscillators can sustain oversold readings for a lengthy period of time (so exercise caution).

Another thing to consider: Apple’s earnings, along with those of Amazon, Alphabet, and other stocks within or correlated to big tech may play a significant role along with or despite the prevailing technical readings. This is a case where fundamentals may or may not play along with trader sentiment as revealed by the pre-earnings technical setup.

Trade With Caution

Earnings are tricky to trade, particularly for those attempting to enter early on to catch the upside. Based on the Nasdaq’s performance compared to the S&P and Dow, the overall market bullishness seems to be favoring tech-heavy names. Today’s triple earnings, following Meta’s positive surprise, may boost all three stocks. But they could also pull back to their support levels. So, just set your stops before you enter any trades.


Disclaimer: This blog is for educational purposes only and should not be construed as financial advice. The ideas and strategies should never be used without first assessing your own personal and financial situation, or without consulting a financial professional.

Jayanthi Gopalakrishnan

About the author:
Jayanthi Gopalakrishnan is Director of Site Content at StockCharts.com. She spends her time coming up with content strategies, delivering content to educate traders and investors, and finding ways to make technical analysis fun. Jayanthi was Managing Editor at T3 Custom, a content marketing agency for financial brands. Prior to that, she was Managing Editor of Technical Analysis of Stocks & Commodities magazine for 15+ years.
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Karl Montevirgen

About the author:
Karl Montevirgen is a professional freelance writer who specializes in finance, crypto markets, content strategy, and the arts. Karl works with several organizations in the equities, futures, physical metals, and blockchain industries. He holds FINRA Series 3 and Series 34 licenses in addition to a dual MFA in critical studies/writing and music composition from the California Institute of the Arts.
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#Earnings #Analysis #GOOGL #AMZN #AAPL

The S&P 500 Leaves the 200-Day Behind

How much weight should we put on the fact that the S&P 500 index powered above its 200-day moving average this week? If history is any indication, then this is actually a fairly momentous occasion. Unless it’s a repeat of March 2022, in which case we’re obviously poised for a push to new lows any minute now.

To be clear, any signal considered bullish or bearish is based on the average reaction back through the history of the financial markets. So, instead of a signal always being 100% bullish or 100% bearish, I tend to think in terms of tendencies. In short, we should ask ourselves, “What tends to happen after this signal has occurred?”

Today, we’ll dig into a brief history of the S&P 500 and its 200-day moving average.

The 200-Day as a Market Barometer

One of my mentors used to say, “Nothing good happens below the 200-day moving average.” To rephrase, it pays to be patient for a move above the 200-day moving average, because, until then, it’s at best a bear market rally.

Way back in 2021 (actually not that long ago!), the SPX stayed well above its 200-day moving average. In fact, it often tested the 50-day moving average, and pretty much every one of those tests ended up being a decent buying opportunity.

In January 2022, when the S&P 500 broke below its 50-day and 200-day moving averages, it certainly suggested that something was different. This is the sort of “change of character” that I hope to identify in my daily and weekly market analysis routines. Attempts to break out above the 200-day in August and November 2022 failed to see any upside follow through. So, when I see the price break above this moving average earlier this month, then the subsequent followthrough with higher swing highs over the last five trading days, I have to consider that a bullish tell.

Going into next week, I’d love to see a confirmed break above the 4100 level, which, I believe, would open the way to a retest of the August 2022 high around 4300. But let’s continue our analysis of market history and consider some alternative approaches to the 200-day moving average.

The Moving Average Crossover Technique

While there is often plenty of noise produced when we achieve a “golden cross” or “death cross” on the major averages, I have found them to not be the most effective ways to determine uptrends and downtrends. However, while the timing may not be perfect on these signals, I would admit that the occurrence of a golden cross next week (which seems highly likely if we rally further around the Fed meeting) would confirm even more strength in equities off the October low.

You’ll notice on this chart that, when the 50-day moving average (blue) crosses above the 200-day (red), it’s often way after the bottom. And that makes sense for a trend-following indicator! The most recent buy signals were in July 2020 (well after the March low) and April 2019 (after a big rally off the December 2018 low).

So while waiting for the golden cross may not feel like the best timing signal ever created, the fact remains that, in a secular bull market phase (which we are arguably still in), these signals often lead to much stronger gains.

We could also strip out the 50-day moving average and just look at the slope of the 200-day moving average. On The Final Bar this week, my guest Willie Delwiche did a great job explaining why the slope of the 200-day can be an important data point.

You can easily see the relationship between the slope of the 200-day moving average (in purple on this chart) and the trend of highs and lows in the raw price data (in light gray). So when the 200-day has been sloping lower and then turns higher, this could be a better indication of an upside follow-through than some of the other techniques we’ve discussed.

Putting It All Together With Other Indicators

You have to remember, however, that moving averages don’t just happen in a vacuum. There are other indicators we can use to confirm or deny the signals we’re finding in a simple analysis of the moving average patterns.

Let’s add the PPO and RSI on the weekly S&P 500 chart and see how the current configuration relates to other market declines. Now that we’re using a weekly chart, I’m showing the 40-week moving average (similar to the 200-day moving average and shown in red) as well as the 150-week moving average in green.

If you look at 2022-2023 and compare it to 2015-2016 and 2007-2008, you’ll notice that these factors are all the same for the S&P 500 index:

  • A new all-time high, followed by a lower high and a failure to hold the 40-week moving average, which then turns lower
  • A retest of the 40-week moving average from below, then a break below the 150-week moving average
  • The PPO gives a buy signal, followed soon after by another sell signal
  • The RSI shows a bullish momentum divergence

But then the patterns start to diverge a bit. In 2008, the S&P failed to get back above the 40-week moving average. There was no additional buy signal from the PPO, and the RSI plunged into the oversold territory as the SPX accelerated lower for the next six months.

In 2016, however, the S&P briefly dipped below the 150-week moving average before powering back above this long-term barometer. The index then moved above its 40-week moving average, the RSI pushed above 50, and the PPO generated a new buy signal.

Now look at the current configuration, and you’ll notice that it matches much more closely to 2016 than 2008. The conclusion? This may be just the beginning of a bullish recovery as positive momentum builds for stocks.

Want to digest this article in video format? You can find it over at my YouTube channel.

RR#6,

Dave

P.S. Ready to upgrade your investment process? Check out my YouTube channel!


David Keller, CMT

Chief Market Strategist

StockCharts.com


Disclaimer: This blog is for educational purposes only and should not be construed as financial advice. The ideas and strategies should never be used without first assessing your own personal and financial situation, or without consulting a financial professional. 

The author does not have a position in mentioned securities at the time of publication.   Any opinions expressed herein are solely those of the author and do not in any way represent the views or opinions of any other person or entity.

David Keller

About the author:
David Keller, CMT is Chief Market Strategist at StockCharts.com, where he helps investors minimize behavioral biases through technical analysis. He is a frequent host on StockCharts TV, and he relates mindfulness techniques to investor decision making in his blog, The Mindful Investor.

David is also President and Chief Strategist at Sierra Alpha Research LLC, a boutique investment research firm focused on managing risk through market awareness. He combines the strengths of technical analysis, behavioral finance, and data visualization to identify investment opportunities and enrich relationships between advisors and clients.
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The S&P 500 Showing More Bullish Signals, Watch This Key Level

Say what you want, but January has proven to be a very reliable predictor of U.S. stock market action from February through December since 1950 and, with just a little more than a week left to go in January 2023, market action is suggesting that we’re going to have a very strong year. It’s just one more historical fact that suggests higher prices are ahead of us. I’ve also mentioned recently that of the previous 13 bear markets since 1950, excluding the 2022 cyclical bear market, 6 ended during the calendar month of October. If October 2022 proves to be the ultimate low, that’ll make 7 out of 14, 50% of all bear markets. That’s another piece of compelling evidence that the bear market low is IN.

If I step away from historical tendencies, however, and simply look at the S&P 500 chart, the downtrend line since the beginning of 2022 is what nearly every technician is watching:

The downtrend line currently intersects at approximately 4000, depending on how you draw your trend line. In my view, that’s the first critical level to clear in order to confirm the end of the bear market decline. Check out the subtle difference that we’re seeing in January 2023, though. After the last 3 death crosses and bearish PPO centerline crosses, we saw selling accelerate and new lows quickly reached. We’re seeing something entirely different this time. The PPO has turned back above centerline resistance in bullish fashion and we’ve also seen a bullish “golden cross” just a few weeks after the death cross suggested we’d head lower. What’s happening? Well, I can tell you what I think is happening. We’re chopping in preparation for a solid year ahead. Many are waiting for price action to confirm what’s been taking place beneath the surface for months. I told our members and the entire investing public that June 2022 had the characteristics of a major market bottom and that it was time to concentrate on long positions, letting go of the bear mentality that was appropriate during the first six months of 2022. I don’t think I could have been much clearer:

Did we eventually move slightly lower in October? Yes we did. I’m still pretty happy, though, with my signals that suggested shorting the S&P 500 at the beginning of the year and moving to a long position in mid-June 2022. The S&P 500 closed lower than 3636 on 5 separate trading days from September 30th through October 14th. Since my bottom call, the S&P 500 has closed higher on 143 different trading days. I think I’ve been on the right side of the market since June and 2023 will prove that the October 2022 low was THE ultimate bear market low. Waiting for further signals, in my humble opinion, will result in lower returns, but I suppose time will tell. I remain very bullish and said throughout 2022 that the bear market was of a cyclical (short-term) nature.

Another critical technical component that tells me the worst is behind us is that we’re seeing buying with bad news. The October low saw a massive reversing candle after a much-worse-than-expected September CPI inflation report. After a gap lower, buying was intense ALL DAY LONG. Check it out:

Another very positive development is that after a brutal 4th quarter for many growth stocks, the sun is suddenly shining in 2023. The 10-year treasury yield ($TNX) set a new recent low and this time, growth is performing much better than value. That’s a very important change in market character, because many of these growth stocks have large market cap valuations and can much more easily move our benchmark indices like the S&P 500. Check out the sudden improvement in growth stocks in 2023:

The drop in the TNX in November/December didn’t have quite the same bullish effect on large cap growth stocks (IWF) that the June/July drop had. Growth vs. value (IWF:IWD), however, is moving solidly higher in 2023, clearly benefiting from the lower TNX. I have highlighted in red the months of negative relative momentum that growth stocks have experienced. While things have certainly improved, we haven’t seen any significant confirmation of long-term renewed strength. The bulls still have work to do.

An encouraging part, however, has been key individual stocks’ resilience to bad fundamental news. Take Salesforce.com (CRM) as an example. It downtrended throughout 2022 and was the Dow Jones worst-performing component stock for the year. But then, after announcing 8,000 layoffs, or 10% of its work force, CRM rallied strongly:

The green arrow highlights the successful 20-day EMA test the day that the layoffs were announced and you can see the subsequent rally. CRM has now broken above its recent downtrend channel and is on the verge of clearing important relative strength resistance vs. its software peers ($DJUSSW).

Last week, at our quarterly “Sneak Preview: Q3 Earnings” event, I highlighted Netflix (NFLX) as one of my favorite companies heading into earnings season. NFLX absolutely loves the month of January and January 2023 has been no exception. Check out this seasonality chart:

Over the last 20 years, NFLX has averaged gaining 15.7 during the month of January. That’s incredible and is the reason why NFLX was our favorite seasonal stock for January 2023 and passed along to our EB.com members to open the month. Those bullish thoughts proved to be correct as NFLX is currently higher by approximately 17% this month. Quarterly results were reported on Thursday and were solid, as expected.

Tomorrow, I’ll be hosting our “Q4 Earnings” event at 4:30pm ET and I’ll be providing my favorite 10 companies that will report earnings over the next 2-3 weeks as earnings season really heats up. I’ll also disclose the 10 companies that I’d completely avoid heading into earnings. I’ll discuss dozens of other companies reporting quarterly results as well. I use a key technical indicator to evaluate companies prior to their quarterly earnings report and it’s proven to be extremely effective in predicting reported results. If you’d like to join me tomorrow, simply CLICK HERE and sign up for a FREE 30-day trial. You can check out our entire service at no cost for an entire month! I hope to see you tomorrow!

Happy trading!

Tom

Tom Bowley

About the author:
Tom Bowley is the Chief Market Strategist of EarningsBeats.com, a company providing a research and educational platform for both investment professionals and individual investors. Tom writes a comprehensive Daily Market Report (DMR), providing guidance to EB.com members every day that the stock market is open. Tom has contributed technical expertise here at StockCharts.com since 2006 and has a fundamental background in public accounting as well, blending a unique skill set to approach the U.S. stock market.

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At the Edge of Chaos: Has the Game Changed? Possible Buy Signal for Stocks Emerges

Bearish stock traders are suddenly in a tough spot as major technical indicators flash potential buy signals. In addition, liquidity has stabilized, and money flows have suddenly turned positive for stocks. This combination of factors suggests that this rally has the potential to be a game-changer. Get the full details below.

The December consumer price index (CPI) was good enough to make stocks jump and bond yields fall precipitously, as the new consensus is that the Federal Reserve will raise interest rates by 25 basis points on February 1 and that it may be its last rate hike. We’ll see what happens when the Fed actually makes its next move.

The 10-Year U.S. Treasury Yield index ($TNX) broke below the crucial 3.5% support level, temporarily, and the S&P 500 index ($SPX) and the New York Stock Exchange Advance-Decline line ($NYAD) both moved above their respective 200-day simple moving averages (SMA). Get more details on both below.

When taken together, unless there is a meaningful reversal in the not-too-distant future, these indicators are close to flashing an all-out buy signal, which, if it materializes, could mean that this bear market may be over. Of course, that remains to be seen. We’ve been here before twice already in this bear market (the summer rally and the failed Santa Rally), but maybe the third time will be a charm.

Last week, I noted, “bond yields are well off of their recent highs. That’s because there is a growing body of private macro data, especially recent PMI and ISM numbers, that suggest the U.S. economy has been slowing for months and that perhaps that slowing is accelerating.” Specifically, data inside those surveys pointed to a slowing in inflation as well as a slowing in the job market. On the other hand, the December jobs report was not overtly bearish, unless you consider that the ratio of full-time-to-part-time workers continues to suggest that many Americans are either solely working part-time or supplementing their main employment via a second job.

That said, perhaps the silver lining is the slowing in wages, which may be the indicator that gives the Fed wiggle room to slow the pace of its interest rate increases or stop altogether. And that may be good enough for now to push stocks higher.

Bullish Developments: Yes. Total Bullishness: Not Yet.

For the past several months, in my weekly portfolio update to subscribers, I’ve noted that, when the following conditions are met, I would turn bullish. They are as follows:

  • The $NYAD needs to move well above its 200-day moving average;
  • There needs to be a rally in the Eurodollar index ($XED), which would mean liquidity has improved;
  • The Cboe Volatility Index ($VIX) must trade near its lows for a long time, which would mean that put buyers have mostly gone away, leaving the market makers no choice but to buy calls and index futures in order to hedge their bets;
  • There must be clear signs from the Fed that the interest rate hike cycle isn’t just slowing but coming to an end.

So here is where we stand at the moment. $NYAD and $VIX have made positive moves. XED is moving sideways, which is better than falling. And the Fed is hinting that it’s going to slow its rate hikes but hasn’t signaled the end yet.

Putting it all together, the environment for stocks has improved but is not totally calling for an all-out bullish stance. What that means is that sticking with what’s working is the way to make money in this market.


Check out what’s working with a Free trial to my service. Click here for more.


Expect Buyer Frenzy as Mortgage Rates Resume Down Trend

It’s time to watch the housing market, including both existing homes and homebuilder data over the next couple of weeks. That’s because a good enough consumer price index (CPI), plus the precipitous drop in bond yields, has reshaped the entire forward-looking interest rate structure.

That means that any potential buyer who has been waiting for a drop in rates might decide that their opportunity has arrived. And if I’m right, the rush to close will be fairly aggressive, as buyers will put plans to work in fear of a rate reversal, which could certainly materialize.

The market is certainly betting on this, as shares of online realtor Redfin (RDFN), whose stock was recently trading under $5 (making it a penny stock), moved decidedly higher on the CPI news. Moreover, bottom fishers had been moving in over the past few weeks, correctly anticipating some type of good news.

On the other hand, the resurgent D.R. Horton (DHI), which has been featured in our Rainy Day Portfolio for several months continues its steady climb.

For the record, I own shares in DHI.

The Fed’s Got a Fine Line to Walk

Familiar readers know that I’ve focused on the population shift to the sunbelt over the last year as a dominant macro trend. This is likely the most important economic issue of the moment. And it’s directly related to the employment and CPI data in the future.

That’s because, even though the rate of rise in CPI has flattened out, service inflation and shelter costs remain stubbornly high. This is important because there’s low housing supply and a potentially tight job market in the sunbelt, which sets up the potential for those two categories of CPI to remain higher than others, which in turn could skew the data in a way that pushes the Fed to indeed “keep rates higher for longer.”

Now, since the housing sector accounts for some 16% of GDP, as the migration picks up speed—which, based on the suddenly rising numbers of out-of-state license plates I’m seeing in the Dallas Fort Worth Metroplex (DFW), and hard data, is already well underway—there could be a resurgence in the housing market in the DFW before too long. And that means a pickup in not just construction jobs, but also in other areas of employment. 

More corporations are moving to DFW and other areas of Texas. Apple (AAPL) is expanding its Austin, TX headquarters, while Goldman Sachs (GS) has already quietly moved a large chunk of its operations to Richardson, a suburb of Dallas. Goldman is also planning to move 5000 employees to a new headquarters north of Downtown Dallas, while leasing even more space prior to the construction of its new headquarters. News just broke yesterday that Tesla (TSLA) is expanding its operations in Houston.

This activity could work its way beyond just housing data and into GDP. In other words, some areas of the country may face significant economic slowing, but the data may not truly reflect this as the sunbelt’s activity more than makes up for the lack thereof elsewhere.

NYAD Breaks Above 200-Day Moving Average

$NYAD broke above its 50-day SMA on January 6, 2023 and followed through, breaking above its 200-day SMA a week later. A sustained move above the 200-day SMA would be a very bullish development.

Note that all counter-trend rallies in this bear market have failed at the 200-day SMA. That means that, if this break above this key line holds, the odds of a new bull market will increase.

For its part, the $VIX recently made new lows. This is also bullish. When $VIX rises, stocks tend to fall, as rising put volume is a sign that market makers are selling stock index futures in order to hedge their put sales to the public. A fall in $VIX is bullish, as it means less put option buying.

Liquidity has remained surprisingly stable, despite the Fed’s QT maneuvers, as $XED has been trending sideways to slightly higher for the past few weeks.

$SPX found support at 3800 and is now testing its 20-, 50-, and 200-day moving averages, as well as the 4000 area.

But here’s the great news. Accumulation Distribution line and on balance volume (OBV) have turned up. That means that there’s now net buying in stocks.

The Nasdaq 100 index ($NDX) continues to lag $SPX badly. It’s still possible that it may have made a triple bottom, with the 10,500–10,700 price area bringing in some short-covering. The problem is that the 12,000 area and the 200-day SMA, together, form a sizeable resistance band.


To get the latest up-to-date information on options trading, check out Options Trading for Dummies, now in its 4th Edition—Get Your Copy Now! Now also available in Audible audiobook format!

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Good news! I’ve made my NYAD-Complexity – Chaos chart (featured on my YD5 videos) and a few other favorites public. You can find them here.

Joe Duarte

In The Money Options


Joe Duarte is a former money manager, an active trader, and a widely recognized independent stock market analyst since 1987. He is author of eight investment books, including the best-selling Trading Options for Dummies, rated a TOP Options Book for 2018 by Benzinga.com and now in its third edition, plus The Everything Investing in Your 20s and 30s Book and six other trading books.

The Everything Investing in Your 20s and 30s Book is available at Amazon and Barnes and Noble. It has also been recommended as a Washington Post Color of Money Book of the Month.

To receive Joe’s exclusive stock, option and ETF recommendations, in your mailbox every week visit https://joeduarteinthemoneyoptions.com/secure/order_email.asp.

Joe Duarte

About the author:
Joe Duarte is a former money manager, an active trader and a widely recognized independent stock market analyst going back to 1987. His books include the best selling Trading Options for Dummies, a TOP Options Book for 2018, 2019, and 2020 by Benzinga.com, Trading Review.Net 2020 and Market Timing for Dummies. His latest best-selling book, The Everything Investing Guide in your 20’s & 30’s, is a Washington Post Color of Money Book of the Month. To receive Joe’s exclusive stock, option and ETF recommendations in your mailbox every week, visit the Joe Duarte In The Money Options website.
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#Edge #Chaos #Game #Changed #Buy #Signal #Stocks #Emerges

At the Edge of Chaos: Contrarian Investors with a Regional Bias Will Outperform Traditional Macro Strategies in 2023

Just as many investors were getting ready to throw in the towel, the Federal Reserve was signaling that it’s getting close to stopping its rate hikes. Meanwhile, the latest jobs report suggested that wage gains are slowing. The combination of rising pessimism and a potential change in behavior from the Fed ignited a nice Friday rally in stocks, as well as a nifty reversal in the U.S. 10-Year Treasury yield ($TNX).

However, if inflation shows signs of picking up steam once again as the latest batch of CPI numbers are released, we can expect more hawkish talk from the Fed, a potential reversal in $TNX, and a new down leg in stocks.

Data Points to Slowing Economy

Bond yields are well off of their recent highs. That’s because there’s a growing body of private macro data, especially recent PMI and ISM numbers, that suggest that the U.S. economy has been slowing for months and, perhaps, that slowing is accelerating.

There is also a regional variation in the economy (see below) which the central bank and most private analysts aren’t commenting on—the regional variation could muddle the waters for the Fed while providing a potential area of profits for investors who know what to look for.

From a trading standpoint, the external macro background, such as the Fed’s actions and economic data, is important. But what happens in the stock market is most important. Therefore, as a contrarian investor, I suggest the following two caveats for the year:

  • Look to invest in down-and-out sectors where those who are panicking are bailing out; and
  • Consider a regional orientation to where you put your money.

First, let’s look at some key economic data from a contrarian point of view.

ADP Data

While the PMI and ISM data don’t break the data down by region, the most recent ADP Private Employment Report does. Certainly, the headline which notes that the private sector created 235,000 was a market mover, as investors saw this as bad news that would make the Federal Reserve continue on its “higher for longer” trek for interest rates. Still, the number was close to the government’s data released a few days later.

A closer look at the data (see page 2 of the ADP report) illustrates my point, as the private job growth was in the Northeast (54,000 jobs added), the Midwest (70,000 jobs), and the South (253,000 jobs). Meanwhile, the West lost 142,000 jobs.

U-Haul Data

Comparing the ADP data to U-Haul’s 2022 One-Way destination data shows a remarkable correlation, as Texas, Florida, and the Carolinas were the leading regions. Moreover, California, Illinois, and New York led the way for one-way departures.

Further parsing of the ADP data shows that the New England area (roughly including New York) only had 2,000 jobs added, while the West North Central area (including Illinois) added 9,000 jobs.

Even more interesting was that the highest job numbers in the ADP under goods-producing sectors were 41,000 construction jobs. ADP didn’t list where the construction jobs were added, but it wouldn’t be surprising if most of them were in the south.

Split Decision

The Fed looks at data for the whole U.S. and factors in global data as well. The problem with that approach is that there’s a wide-ranging regional difference in the economic activity in the U.S. This data is no longer anecdotal. Recent private sector reports, as well as U.S. Census data, confirm what the U-Haul and ADP data are saying, which is that people are leaving certain regions of the U.S. and moving permanently to others.

In other words, the current data that the Fed relies on—GDP, and other national statistics—may not show an actual recession, because the economic activity in the sunbelt may be growing at a decent clip while the New York, Illinois, and the West Coast may be struggling. This creates a potentially messy situation for the Fed as it ponders what to do about the future of rate increases. When the recession hits, it will likely hit the areas where people are leaving harder than the areas where people are migrating.

Thinking Regionally

Since the Fed is thinking one-size fits all, and the reality on the ground may be significantly different based on regional realities, investors who think regionally are more likely to fare well in 2023 than those who follow the national macro, which is widely followed on Wall Street and at the Fed. In other words, those sectors that benefit from the migration and the subsequent outcomes are the most likely to deliver the best results, as long as the Fed remains in its “higher and longer” mode.

Here’s an example. If people are moving to new areas of the country, there will be a need for infrastructure, as roads will need repairs and expansion, utilities will need to grow their grid, and demand for energy in those areas will increase. Most of all, jobs will need to be created to support the population surge.

An overlooked area of the stock market for decades has been that of building materials. Yes, cement, concrete, lumber, insulation, glass, and the machinery to deploy them will be central to the way forward for areas of the U.S. that will face the accommodation of growing populations. And a one-stop shop to consider might be the Materials Select Sector SPDR exchange-traded fund (XLB).

As you can see in the chart above, XLB has been a fountain of relative strength, as seen by the relative strength index (RSI) of late. It delivered a nice rally since its most recent bottom in October 2022. Accumulation/Distribution (ADI) has been very steady, which means short-sellers are finding other places to ply their wares. Meanwhile, on balance volume (OBV) has bottomed out, which means that sellers are just about finished as well. This creates a potentially bullish scenario for this sector ETF, especially if it can clear the 200-day moving average (MA) and the large Volume-by-Price bar (VBP) around $82.

The bottom line is that in this market, even as the Fed continues to raise interest rates, there are areas of opportunity. Investors just have to dig deeper and consider the macro effects of what’s happening on the ground.

Welcome to the Edge of Chaos:

The edge of chaos is a transition space between order and disorder that is hypothesized to exist within a wide variety of systems. This transition zone is a region of bounded instability that engenders a constant dynamic interplay between order and disorder.” – Complexity Labs

NYAD Challenges 200-Day Moving Average

The New York Stock Exchange Advance Decline line (NYAD) broke above its 50-day MA on January 6, 2023, and is on the verge of challenging its 200-day MA. A sustained move above the 200-day MA would be a very bullish development. Note that all counter-trend rallies in this bear market have failed at the 200-day MA.

For its part, the Cboe Volatility Index ($VIX) continues to roll over. This is also bullish. When $VIX rises, stocks tend to fall, as rising put volume is a sign that market makers are selling stock index futures in order to hedge their put sales to the public. A fall in $VIX is bullish, as it means less put option buying.

Liquidity remained surprisingly stable, as the Eurodollar Index ($XED) has been trending sideways to slightly higher for the past few weeks.

But the current situation is slightly different. You can see that shares of D.R. Horton (DHI) and Lennar (LEN) fell for several months in 2022 as $TNX rose. However, the stocks responded well when the yields reversed. You can see that the stock price of real estate company Redfin (RDFN) has yet to recover.

The S&P 500 index ($SPX) found support at 3800, and is now testing its 20-, 50-, and 200-day MAs. Accumulation/Distribution (ADI) has stabilized, but OBV remains near its recent lows. ADI suggests short sellers are making quick profits and getting out, while OBV suggests that sellers are not quite done yet.

The Nasdaq 100 index ($NDX) continues to lag $SPX badly. It’s still possible that it may have made a triple bottom, with the 10,500–10,700 price area bringing in some short covering. The problem is that the 12,000 area and the 200-day MA, together, form a sizeable resistance band.


To get the latest up-to-date information on options trading, check out Options Trading for Dummies, now in its 4th Edition—Get Your Copy Now! Now also available in Audible audiobook format!

#1 New Release on Options Trading!

Good news! I’ve made my NYAD-Complexity – Chaos chart (featured on my YD5 videos) and a few other favorites public. You can find them here.

Joe Duarte

In The Money Options


Joe Duarte is a former money manager, an active trader, and a widely recognized independent stock market analyst since 1987. He is author of eight investment books, including the best-selling Trading Options for Dummies, rated a TOP Options Book for 2018 by Benzinga.com and now in its third edition, plus The Everything Investing in Your 20s and 30s Book and six other trading books.

The Everything Investing in Your 20s and 30s Book is available at Amazon and Barnes and Noble. It has also been recommended as a Washington Post Color of Money Book of the Month.

To receive Joe’s exclusive stock, option and ETF recommendations, in your mailbox every week visit https://joeduarteinthemoneyoptions.com/secure/order_email.asp.

Joe Duarte

About the author:
Joe Duarte is a former money manager, an active trader and a widely recognized independent stock market analyst going back to 1987. His books include the best selling Trading Options for Dummies, a TOP Options Book for 2018, 2019, and 2020 by Benzinga.com, Trading Review.Net 2020 and Market Timing for Dummies. His latest best-selling book, The Everything Investing Guide in your 20’s & 30’s, is a Washington Post Color of Money Book of the Month. To receive Joe’s exclusive stock, option and ETF recommendations in your mailbox every week, visit the Joe Duarte In The Money Options website.
Learn More

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At the Edge of Chaos: Why Homebuilders Have a Long-Term Advantage but Face a Short-Term Bumpy Ride

The working premise for 2023 is that, as long as the Federal Reserve continues to raise rates, stocks will struggle. In fact, there is a high level of speculation about the so-called “terminal rate,” the interest rate to which the Fed is willing to go in order to whip inflation. As of the most recent Fed “dot plot”, the central bank has communicated that it may raise rates above 5%.

It doesn’t take a whole lot of imagination to pencil in a whole lot of damage to the stock market and the economy if they go much beyond that. That said, there are still some sectors of the stock market that will, more likely than not, outperform others due to the state of the supply and demand balance in their business. One of them is housing.

Housing Will Likely Surprise to the Upside

I’ve been bullish on the homebuilder stocks for quite a while. I was even bullish when the sector crashed and burned in the middle of 2022 as the summer blowoff in prices for existing homes imploded. And I remain long-term bullish.

Of course, as the Fed continues to raise interest rates, mortgage rates will likely retain their recent upward bias. This will have a negative effect on home sales and create short-term difficulties for homebuilders. The recent rebound in mortgage rates will not be helpful.

At the same time, it’s important to delineate the important differences between the homebuilders (new housing), the existing home markets, and the rental markets. That’s because even though they are all related, each has its own set of internal dynamics which influence how they operate.

The Brave New World of Housing

To understand the U.S. housing markets, it’s important to review the two seismic events in recent history which have shaped the current supply and demand balance: the 2008 subprime mortgage crisis and the COVID-19 pandemic. Although they were 12 years apart, they are irreversibly intertwined and, together, created the environment which favors homebuilders the most for the present and likely for the future.

After the 2008 crash, many homebuilders faced near-death experiences as their overbuilt inventory sat idle for years. As a result, they stopped building homes. This created a long-term supply crunch for new homes. Moreover, when the overall situation improved, they still didn’t overbuild. This perpetuated the undersupply of new homes, even as populations grew and shifted.

The pandemic caused a population shift from cities to suburbs and, in many cases, to other states, especially the sunbelt, where COVID-19 restrictions were fewer and jobs and economies recovered faster compared to states which kept pandemic restrictions in place longer.

Meanwhile, the Federal Reserve’s massive QE and zero interest rates added to the demand for housing, as buyers fleeing cities looked to own their homes instead of renting apartments. This demand was very pronounced in the sunbelt and states with lower restrictions, due to the large numbers of people who moved there. Initially, this also favored landlords in those areas, as the short supply of homes drove many to rent.

When the Fed began its interest rate increases, all segments of the housing market stumbled. But as time has passed, both realtors who deal in existing homes and landlords have struggled more than homebuilders. In fact, homebuilders have remained in the driver’s seat, as a low supply of existing homes in preferred locations, persistently high rents from landlords, and a continuation of the migration to the sunbelt, combined with a limited supply of new homes, have perpetuated the most favorable conditions for homebuilders in a generation.

Perhaps the take-home message is that, even after a huge increase in interest rates in 2022, homebuilders are still in a profitable position.

REITs and Rentals: Online Brokers and Existing Homes

For stock investors, the rental market is best traded via real estate investment trusts (REITs). These are fairly easy to trade because they will usually rally when interest rates fall, and fall in price when interest rates rise. They’re particularly sensitive to the Federal Reserve’s interest rates and to the trend in yields in government bonds, especially the U.S. 10-Year U.S. Treasury Yield ($TNX).

In the current market, corporate entities own a disproportionate amount of rental units. This dominance of the market, combined with low supply in attractive locations, has kept rents at high levels for an extended period of time. But as the economy has slowed, landlords in high tax, high-regulation states have seen their vacancy rates rise, while those in low tax, low regulation states have seen high occupancy rates.

Existing homes are equally interest rate-sensitive, but are a bit harder to trade via the stock market. One way to trade the trend in existing homes is via the shares of companies, which own real estate brokerages such as online broker Redfin (RDFN).

Generally speaking, these types of stocks do well when existing home sales are rising and interest rates are falling.

Homebuilders Beat to a Different Drum

Homebuilder stocks are also interest rate-sensitive, as mortgage rates are tied to bond yields. As a result, the price of stocks such as D.R. Horton (DHI) and Lennar (LEN) often follow the same price trend as REITs and online brokers.

But the current situation is slightly different. You can see that shares of DHI and LEN fell for several months in 2022 as $TNX rose. However, the stocks responded well when the yields reversed. You can see that RDFN shares have yet to recover.

The reason that homebuilder stocks responded more favorably to the yield reversal is multifold:

  • There are fewer new homes available than there is demand. That’s because homebuilders stopped building after the 2008 housing crash and never quite picked up the rate of building to the levels prior to the crash.
  • Demand for new homes remains high because there is a migration from high-tax states to low-tax states with higher availability of jobs—especially sunbelt states such as Texas, Florida, and Georgia.
  • Older homes are often less attractive than new homes due to their outdated amenities, location limitations, and, in many cases, poor upkeep. Moreover, in some states, rents are so high that it makes more sense to own a home.

These factors make new homes more attractive than existing homes. As a result, homebuilders remain in a more favorable position than real estate brokers and landlords.

Of course, that doesn’t guarantee uninterrupted up trends in these stocks. And, if interest rates rise significantly, they will have an adverse effect on homebuilder stocks. Yet, when they eventually fall, the homebuilders will be in a better position than many sectors in the stock market because supply is on their side.

Higher interest rates are never good for most stocks. But it’s still possible to make money in stocks during periods of rising interest rates if you know where to look. You can see when and how to fight the Fed and win in my latest video here.

I own shares in DHI and LEN.

Welcome to the Edge of Chaos:

The edge of chaos is a transition space between order and disorder that is hypothesized to exist within a wide variety of systems. This transition zone is a region of bounded instability that engenders a constant dynamic interplay between order and disorder.” – Complexity Labs

NYAD Remains 200-Day Moving Average

The New York Stock Exchange Advance Decline line (NYAD) remained below its 50- and 200-day moving averages, but really went nowhere in the final week of the year.

A similar picture can be seen in VIX, which means no major bets from put buyers materialized. When VIX rises, stocks tend to fall, as rising put volume is a sign that market makers are selling stock index futures in order to hedge their put sales to the public. A fall in VIX is bullish, as it means less put option buying. The lack of rise in VIX has been the reason for the lack of a complete meltdown in stocks.

Liquidity remained surprisingly stable as the Eurodollar Index (XED) has been trending sideways to slightly higher for the past few weeks.

The S&P 500 (SPX) seems to have found temporary support at 3800, but remains below its 20-, 50-, and 200-day moving averages. Accumulation/Distribution (ADI) has stabilized, but On Balance Volume (OBV) remains near its recent lows. ADI suggests short sellers are making quick profits and getting out, while OBV suggests that sellers are not quite done yet.

The Nasdaq 100 index (NDX) may have made a triple bottom, with the 10,500-10,700 price area bringing in some short covering.


To get the latest up-to-date information on options trading, check out Options Trading for Dummies, now in its 4th Edition—Get Your Copy Now! Now also available in Audible audiobook format!

#1 New Release on Options Trading!

Good news! I’ve made my NYAD-Complexity – Chaos chart (featured on my YD5 videos) and a few other favorites public. You can find them here.

Joe Duarte

In The Money Options


Joe Duarte is a former money manager, an active trader, and a widely recognized independent stock market analyst since 1987. He is author of eight investment books, including the best-selling Trading Options for Dummies, rated a TOP Options Book for 2018 by Benzinga.com and now in its third edition, plus The Everything Investing in Your 20s and 30s Book and six other trading books.

The Everything Investing in Your 20s and 30s Book is available at Amazon and Barnes and Noble. It has also been recommended as a Washington Post Color of Money Book of the Month.

To receive Joe’s exclusive stock, option and ETF recommendations, in your mailbox every week visit https://joeduarteinthemoneyoptions.com/secure/order_email.asp.

Joe Duarte

About the author:
Joe Duarte is a former money manager, an active trader and a widely recognized independent stock market analyst going back to 1987. His books include the best selling Trading Options for Dummies, a TOP Options Book for 2018, 2019, and 2020 by Benzinga.com, Trading Review.Net 2020 and Market Timing for Dummies. His latest best-selling book, The Everything Investing Guide in your 20’s & 30’s, is a Washington Post Color of Money Book of the Month. To receive Joe’s exclusive stock, option and ETF recommendations in your mailbox every week, visit the Joe Duarte In The Money Options website.
Learn More

Subscribe to Top Advisors Corner to be notified whenever a new post is added to this blog!

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#Edge #Chaos #Homebuilders #LongTerm #Advantage #Face #ShortTerm #Bumpy #Ride

Weekend Daily: Tips for Trading Profitably in a Bear Market

Many investors have had a rough year.

2022 has been characterized by turbulence in financial markets. The Nasdaq, S&P 500, and Russell 2000 are all in bear market territory, while the Dow Jones is the only U.S. index down less than 10% YTD. The performance of U.S. indices year to date paints a grim picture: Nasdaq (QQQ) -33%, IWM (-23%), SPY (-20%), and DIA (−9%).

Returns for investors range from smaller profits to substantial losses, depending most likely on whether passive or active strategies are deployed and whether any funds are allocated towards alternative assets — like commodities. Rigorous analysis and a trading plan are crucial to trading successfully in bear markets. Commodities are volatile, and it is essential to have stops and profit targets for commodity trades.

The chart displays the performance of Silver (SLV) at 26%, Sugar (CANE) at 12%, the Vanguard Value ETF (VTV) at 11%, Gold (GLD) at 9%, and the Vanguard Growth ETF at -3% over the last 90 days.

The S&P 500 began declining in early January and officially entered a bear market on June 13, 2022. Inflation, higher interest rates, and increased geopolitical tensions all contribute to persistent concerns in the present bear market and will continue in 2023.

At a glance

  • The early 2000s dot-com bubble led to the second-longest bear market in history, which lasted 929 days and a 49.1% decline.
  • The March COVID bear market in 2020 was the shortest in history, lasting 33 days and declining 33%.
  • Excluding the longest and shortest bear markets, the average length of a bear market is around 330 days — or just under one year — and more extended bear markets are closer to two years.
  • The average bear market drawdown is approximately 33%.

If today’s stock market follows a similar time and price trajectory, the current bear market will last much longer than many people anticipate.

  • Market conditions and price action will ultimately decide whether the S&P 500 sees lows of 3300, 3250, 3000, 2900, or even lower.
  • The S&P 500 faces overhead resistance at 4,000, 4,100, 4,150, and, on overhead resistance, 5,000, which will be a number that will be hard to cross for a long length of time.

At MarketGauge, we take advantage of down trends and bear market rallies if we can profitably participate. Despite volatile financial markets this year, we are proud that many of our investments have held firm and have even grown. This provides confidence in our proprietary investment strategies and our ability to manage strategies for maximum returns while limiting drawdowns. And, fortunately, we have seen success with several strategies delivering positive returns despite these trying times. The chart below shows a recent sample of a few profitable trades.

  • On August 21, 2022, MarketGauge’s Big View members were notified that value had surpassed growth as the outperforming strategy, and continues to lead the price spread (or ratio) of value over growth.
  • On August 30, 2022, Mish published “Smart investors know the importance of inflation protection“.
  • Mish wrote a previous column, “Is Silver About to Outshine Gold?”, on September 20, 2022.
  • As 2022 draws to a close, it’s worth taking stock of several of her recent insights, Mid-September column highlights.
  • Mish has written extensively on sugar over the last several years. She recently penned an additional article on sugar, “This Commodity Will Sweeten Your Returns“, in early December.

Rigorous analysis and a well-crafted trading plan are crucial to trading success in bear markets. It also helps to have multiple decades of trading experience at your fingertips and proven trading indicators to guide you.

As 2023 approaches, it is helpful to keep in mind the lessons of the past while focusing on executing risk-managed trades that are profitable today, like silver, as an example highlighted below.

If you’re interested in learning more about how MarketGauge can help you trade with an edge, contact Rob Quinn, our Chief Strategy Consultant, who can provide more information about Mish’s Premium trading service and other trading strategies we offer with a complimentary one-on-one consultation.

“I grew my money tree and so can you!” – Mish Schneider

Get your copy of Plant Your Money Tree: A Guide to Growing Your Wealth and a special bonus here.


Follow Mish on Twitter @marketminute for stock picks and more. Follow Mish on Instagram (mishschneider) for daily morning videos. To see updated media clips, click here.

In this appearance on Business First AM, Mish discusses why she’s picking Nintendo (NTDOY).

Mish sits down with Gav Blaxberg for a W.O.L.F podcast on what she has learned as a trader and teacher.

In this appearance on Business First AM, Mish explains how even the worst trade should not be too bad with proper risk management.

In this appearance on Real Vision, Mish joins Maggie Lake to share her view of the most important macro drivers in the new year, where she’s targeting tradeable opportunities, and why investors will need to keep their heads on a swivel. Recorded on December 7, 2022.

Mish sits down with CNBC Asia to discuss why all Tesla (TSLA), sugar, and gold are all on the radar.

Read Mish’s latest article for CMC Markets, titled “Two Closely-Watched ETFs Could Be Set to Fall Further“.

Mish talks the current confusion in the market in this appearance on Business First AM.

Mish discusses trading the Vaneck Vietname ETF ($VNM) in this earlier appearance on Business First AM.


  • S&P 500 (SPY): 380 support, 390 resistance.
  • Russell 2000 (IWM): 170 pivotal support, 180 resistance
  • Dow (DIA): 330 support, 337 resistance.
  • Nasdaq (QQQ): 269 support, 278 resistance.
  • Regional Banks (KRE): 53 support, 61 resistance.
  • Semiconductors (SMH): Support is 205, resistance 217.
  • Transportation (IYT): 211 pivotal support, 222 now resistance.
  • Biotechnology (IBB): 130 is pivotal support, 139 overhead resistance.
  • Retail (XRT): 57 pivotal support, 63 now resistance. Regained 60.

Mish Schneider

MarketGauge.com

Director of Trading Research and Education

Wade Dawson

MarketGauge.com

Portfolio Manager

Mish Schneider

About the author:
Mish Schneider serves as Director of Trading Education at MarketGauge.com. For nearly 20 years, MarketGauge.com has provided financial information and education to thousands of individuals, as well as to large financial institutions and publications such as Barron’s, Fidelity, ILX Systems, Thomson Reuters and Bank of America. In 2017, MarketWatch, owned by Dow Jones, named Mish one of the top 50 financial people to follow on Twitter. In 2018, Mish was the winner of the Top Stock Pick of the year for RealVision.

Learn More

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#Weekend #Daily #Tips #Trading #Profitably #Bear #Market

Mish’s Daily: How to Trade a Golden Cross in a Bear Market

Investors will watch closely tomorrow, as the Consumer Price Index (CPI) print is released, and Wednesday, when the Fed announces its latest rate hike. The expectation is for CPI to be lower and for the Fed to raise interest rates a half-percentage point.

The Dow Jones Industrial Average (represented above by DIA) formed a technical “golden cross” today. This formation occurs when the 50-day moving average (represented by the blue line) shoots above its 200-day moving average (represented by the green line). The golden cross technical formation often precedes a rally in stock or, in this case, an index. It is only one indicator of improving potential market prices. It is not foolproof or guaranteed to yield immediate results, but, when used in conjunction with other indicators and analysis, can be helpful, especially during a bear market.

The DIA’s recently formed golden cross marks a powerful signal of potential improvement in equity markets amid recessionary headwinds.

Our proprietary Real Motion Indicator above shows that DIA’s upward momentum is in line with the positive price action. In other words, we could see further price increases. DIA is showing positive market dominance in our Triple Play Leadership Indicator. That is to say, DIA is showing real strength in a good breakout and still trending higher than the S&P 500 (represented by SPY).

Looking at the weekly chart of DIA, this is the strongest U.S. index and trading above its 50-week moving average and 200-week moving average.

In our Triple Play Leadership Indicator, DIA is displaying clear market dominance. It is trending higher than the S&P 500 Index and showing significant pricing power in a strong breakout compared to the SPY. However, our proprietary Real Motion Indicator above shows that DIA’s upward momentum is slightly weaker than the weekly closing price, so watching the weekly trend will be necessary to interpret the golden cross.

Despite appearances, the “golden cross” is not a sure thing. While the indicator could be a trading opportunity, caution is advised, as no guarantee can be given with the deluge of financial data in the days ahead.

On balance, investors should use multiple indicators to confirm trends and never act based solely on one chart-based signal, like a golden cross. Not all golden crosses proceed to a big rally. So, what does this all mean for investors? The takeaway is that investors should watch the DIA closely in the coming days, especially the weekly closing price. While the index has a lot of upward momentum, some signs suggest caution may still be warranted.

Keep an eye on the Triple Play Leadership Indicator and Real Motion Indicator to better understand where DIA is headed. And as always, follow these indicators to stay ahead of the curve in today’s market.

If you want to take advantage of our proprietary trading indicators, contact Rob Quinn, our Chief Strategy Consultant, who can provide more information about Mish’s Premium Trading Service. 

Click here to learn more about Mish’s Premium trading service with a complimentary one-on-one consultation.

“I grew my money tree and so can you!” – Mish Schneider

Get your copy of Plant Your Money Tree: A Guide to Growing Your Wealth and a special bonus here.


Follow Mish on Twitter @marketminute for stock picks and more. Follow Mish on Instagram (mishschneider) for daily morning videos. To see updated media clips, click here.

Mish discusses trading the Vaneck Vietname ETF ($VNM) in this appearance on Business First AM.

Mish discusses the importance of not adding trading risk into the rest of the year in this appearance on Business First AM.

Read Mish’s latest article for CMC Markets, titled “Commodities to Watch in December“.

Mish talks stagflation in her interview by Dale Pinkert during the F.A.C.E. webinar.

Watch Mish’s appearance on Business First AM here.

Mish hosted the Monday, November 28 edition of StockCharts TV’s Your Daily Five, where she covered some of the Modern Family. She also discusses the long bonds and gold with levels to clear or, fail.

Mish discusses “Macro & Market Analysis – Winning Trades in All Markets” in this appearance on the podcast The RO Show with Rosanna Prestia.


  • S&P 500 (SPY): 390 first level of support and 398 resistance. The 50-week MA looms above as overhead resistance 410. Until that clears, this could return to support at the 50-DMA or 380.
  • Russell 2000 (IWM): 177 key support and 182 first level of resistance.  Similarly, 190 is resistance and now looking at 177 as support; must hold.
  • Dow (DIA): 334 first level of support and 341 resistance. As the only index above the 50-WMA, support at 329 is key.
  • Nasdaq (QQQ): 280 first key level of support and 286 resistance. Still the weakest index. Hovering on major support at 278 or else trouble ahead.
  • KRE (Regional Banks): 57 key support and 63 resistance. After weeks of sideways action, last major support is at 57.00.
  • SMH (Semiconductors): 218 support and 226 resistance. If SMH can lead, then 230 is the place to clear and take notice.
  • IYT (Transportation): 222-223 key support and 231 resistance. Another one to fail the 50-WMA.
  • IBB (Biotechnology): 127 key support and 137 resistance. This has been the year of “do not chase breakouts.” Like DIA, is above the 50-WMA; will see if can hold 127 key support or break out to 137 (significant overhead resistance).
  • XRT (Retail): 63 first level of support and 67 resistance. Never got the clearance over 67.00, so now we watch 63 and 60 as strong support.

Mish Schneider

MarketGauge.com

Director of Trading Research and Education

Wade Dawson

MarketGauge.com

Portfolio Manager

Mish Schneider

About the author:
Mish Schneider serves as Director of Trading Education at MarketGauge.com. For nearly 20 years, MarketGauge.com has provided financial information and education to thousands of individuals, as well as to large financial institutions and publications such as Barron’s, Fidelity, ILX Systems, Thomson Reuters and Bank of America. In 2017, MarketWatch, owned by Dow Jones, named Mish one of the top 50 financial people to follow on Twitter. In 2018, Mish was the winner of the Top Stock Pick of the year for RealVision.

Learn More

Subscribe to Mish’s Market Minute to be notified whenever a new post is added to this blog!

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#Mishs #Daily #Trade #Golden #Cross #Bear #Market

SPY Remains Under Pressure But These Sectors Are Improving.

Relative Strength Is Losing Its Concentration

Recent sector rotation shows a relative strength loss for two of the three defensive sectors. This is a move away from the trend we have seen for many months, where the defensive sectors were leading the market, sometimes even when the S&P 500 was moving up. So the first takeaway from this observation is that the dominance of defensive sectors seems to be fading away, at least for now.

The most eye-catching deviation is the almost straight line on the tail for XLU pushing the sector deeper into the lagging quadrant.

On the opposite side, the cyclical sectors also show a diverse image. Materials and Financials are at strong rotations and inside the leading quadrant, while Real Estate and, more importantly, Consumer Discretionary are inside the lagging quadrant.

And also, in the group of sensitive sectors, we find 2-2 opposing rotations. Energy and Industrials are inside, leading and pushing further into it as they advance on both scales. Communication Services remains weak and continues to lose on both scales. Technology has curled upward and is picking up some relative momentum but no relative strength yet.

All in all, it looks as if the dominance of the defensive group is fading, but on the other hand, none of the other groups is picking up that role. This means that relative strength in the market is currently scattered across all sectors, making it hard to use any concentration of leadership as a guide for the direction of the S&P 500.

S&P 500 Remains Under Pressure

With that in mind, I still see an overhead supply for SPY.

First, the major falling resistance has been running over the highs since the start of the year. Secondly, the resistance zone between 410-415 came into play a few times as support and resistance. And then there seems to be a small double-top building around 403 where the two most recent peaks were formed.

All of that is happening while the bigger trend is still down, with a clear series of lower highs and lower lows visible on the weekly chart.

Some Individual Sectors Are Improving

Now, with that bigger framework in place, we can check out a few sectors that are in the process of setting up for a positive turnaround. The sectors that I am particularly watching are Materials (XLB), Financials (XLF), Industrials (XLI), and Consumer Staples (XLP).

Above are these four sectors plotted on a weekly Relative Rotation Graph. Except for XLF, they are all at a strong RRG-Heading between 0-90 degrees. XLF is moving due East and continues to gain in terms of relative strength at a steady pace (relative momentum).

Switching to the daily version of this chart shows a strong rotation for XLP moving back into the leading quadrant after a corrective rotation through weakening and briefly lagging.

XLB, XLI, and XLF are all inside the weakening quadrant well above the 100-level on the RS-Ratio scale. XLF and XLI have already started turning back up, while XLB seems to need a bit more corrective relative rotation.

Materials

XLB is pushing against that slightly up-sloping resistance for a few weeks already but has not been able to create a decisive breakthrough. In terms of relative strength, this sector already broke horizontal resistance a few weeks ago, while the next (relative) resistance is still a bit higher. This creates room for a corrective relative move in XLB when the price fails to break higher. This is likely the sector facing the most resistance of these four.

Industrials

Industrials have already broken the down-sloping resistance and is now pushing against resistance in the area around the previous peak at 100.50. Yesterday’s high was at 101.30, but no real follow-through yet.

Relative strength continues to pick up momentum, resulting in one of the stronger rotations on the RRG. I am looking for a decisive break above 101.50 on this week’s close. That will very likely attract more buying interest to push the sector further up toward the 105 area, where it will face the real test.

Consumer Staples

XLP found support near 66 and rallied strongly towards the 76 area, which is now running into resistance coming off the previous peak (mid-August). Relative Strength has also followed the price rally up to its resistance level.

We need a break above 76 by the end of the week to trigger new upside potential toward the peak that was set near 80 earlier this year. A decent tradable opportunity, when triggered with good downside protection once old resistance can start to act as support and a real good entry for an expected rally if and when XLP can take out its all-time high.

Financials

The setup for XLF is quite similar to the other three sectors I discussed above. However;

The upside potential from the breakout to the previous high seems to be the biggest which makes it, IMHO, the most interesting opportunity to watch once it triggers.

Last week’s high was at 36.16, while the peaks of May and August came in at 35.74 and 35.97. I’d say a close at or above 36.50 this week will be the trigger for a further rally toward the levels we saw at the start of the year, ie, ~41. That equals a solid 10% upside potential while the downside is well protected around 36.

#StaySafe, –Julius


Julius de Kempenaer
Senior Technical Analyst, StockCharts.com
CreatorRelative Rotation Graphs
FounderRRG Research
Host ofSector Spotlight

Please find my handles for social media channels under the Bio below.

Feedback, comments or questions are welcome at [email protected]. I cannot promise to respond to each and every message, but I will certainly read them and, where reasonably possible, use the feedback and comments or answer questions.

To discuss RRG with me on S.C.A.N., tag me using the handle Julius_RRG.

RRG, Relative Rotation Graphs, JdK RS-Ratio, and JdK RS-Momentum are registered trademarks of RRG Research.

Julius de Kempenaer

About the author:
Julius de Kempenaer is the creator of Relative Rotation Graphs™. This unique method to visualize relative strength within a universe of securities was first launched on Bloomberg professional services terminals in January of 2011 and was released on StockCharts.com in July of 2014.

After graduating from the Dutch Royal Military Academy, Julius served in the Dutch Air Force in multiple officer ranks. He retired from the military as a captain in 1990 to enter the financial industry as a portfolio manager for Equity & Law (now part of AXA Investment Managers).
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#SPY #Remains #Pressure #Sectors #Improving

This Semiconductor ETF Might Signal a Chip Recovery


The VanEck Semiconductor ETF (SMH), or AKA Sister Semiconductor of Mish’s Modern Economic Family, displays Leadership with our Triple Play indicator and strong momentum according to our Real Motion indicator.

Semiconductors are an essential part of our daily lives, a geopolitical football of national security interests, and chips are increasingly in demand.

Meet Sister Semiconductor (SMH), also known in trading circles as the VanEck Semiconductor ETF (SMH). SMH potentially indicates new leadership in the beaten-down tech industry.

Today, institutional investment managers released their 13 F filings and sometimes disclosures provide insights. Warren Buffett’s Berkshire Hathaway (BRKB) disclosed today that it bought a $4 billion stake in Taiwanese chip giant TSMC (TSM). Why is this significant?

Stock market returns from October 04 to November 14.

Many semiconductor companies outsource the manufacturing of their components to TSMC. TSMC is also the No. 1 holding in the VanEck Semiconductor ETF (SMH) and a Taiwanese firm which brings additional geopolitical risk. SMH is breaking out of a consolidation pattern; it is about to regain the 200-day moving average and closed just below it.

SMH crossed the 50-day moving average at the beginning of the month, and we might see a significant shift in the chip market if SMH can cross the 200-day moving average and hold this higher price level.

Semis are in increasing demand, and in the past, Sister Semiconductor (SMH) was one indicator of technology rebounding.

The Real Motion Indicator and Triple Play Indicator on SMH show that the momentum, price, and volume trends indicate potential bullishness. The Triple Play indicator is a strong signal of market leadership, but SMH is also running rich on the Real Motion Indicator. This could lead to a breakout above the 200-day moving average, but this could also be a risky trade as SMH is subject to potential mean reversion.

So far, the bear market in semis has lasted longer than expected, so traders need to keep an eye on these indicators to position trades correctly. Keep an eye on SMH to have a better understanding of where technology and the semiconductor business are headed next.

Our MarketGauge Leadership Line, Real Motion Indicator, and Volume Trend Line Indicator can help identify stocks and ETFs with strong leadership trends. Our team is here to assist if you have any questions or need help implementing these tools in your trading strategy.

Rob Quinn, our Chief Strategy Consultant, can provide pricing and software compatibility for our trading indicators and offer a complimentary one-on-one trading consult. Click here to learn more about Mish’s Premium trading service.

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Read Mish’s latest article for CMC Markets, titled “What’s Next For Key Sectors After the Midterms“.

Mish explains why MarketGauge loves metals and is still patiently loading up equities on Business First AM.

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See Mish join Neil Cavuto and Eddie Ghabour on Cavuto Coast to Coast to talk about the Fed’s recent rate hike decision.


  • S&P 500 (SPY): 396 support and 402 resistance.
  • Russell 2000 (IWM): 185 support and 188 resistance.
  • Dow (DIA): 333 support and 339 resistance.
  • Nasdaq (QQQ): 286 support and 293 resistance.
  • KRE (Regional Banks): 62 support and 67 resistance.
  • SMH (Semiconductors): 221 support and 229 resistance.
  • IYT (Transportation): 227 support and 233 resistance.
  • IBB (Biotechnology): 133 support and 137 resistance.
  • XRT (Retail): 64 support and 69 resistance.

Keith Schneider

MarketGauge.com

Chief Executive Officer

Wade Dawson

MarketGauge.com

Portfolio Manager

Mish Schneider

About the author:
serves as Director of Trading Education at MarketGauge.com. For nearly 20 years, MarketGauge.com has provided financial information and education to thousands of individuals, as well as to large financial institutions and publications such as Barron’s, Fidelity, ILX Systems, Thomson Reuters and Bank of America. In 2017, MarketWatch, owned by Dow Jones, named Mish one of the top 50 financial people to follow on Twitter. In 2018, Mish was the winner of the Top Stock Pick of the year for RealVision.

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