Broad Market Analysis – August 24, 2018

Hi. This is A.J. Brown with Trading Trainer on the afternoon of Sunday, August 26, with your Trading Trainer Weekend Edition of your Daily Insights. What we are going to do here is take a look at the broad market by taking a look at representative indexes of our watch list namely the Dow Jones Industrial Average, the NASDAQ Composite Index, and the S&P 500 Index. We are also going to take a look at the New York Stock Exchange Composite Index and the VIX Volatility Index. And because it is the weekend, we’re going to take a look at both daily and weekly charts.

But before looking at any charts, we are actually going to log into the Trading Trainer ‘Learning Community’ web portal by going to login.trainingtrainer.com. And of course, once we have logged into the ‘Learning Community’ web portal, I am going to direct you right to today’s Daily Insights tab and further to the Recommendations sub-tab. Take a look at the recommendations we have for tomorrow, which is Monday, August 27’s trading session. Slight changes in these recommendations could have a major impact on your trading.

You are also going to find here a link to our audio commentary. This is the audio where I take you by the hand through today’s Daily Insights and its sub-tabs. Go ahead and click on that link. An audio is going to start playing automagically in the background in another browser tab or another browser window, depending on how you have your browser configured. Go ahead and listen to that audio, the first time you do click through today’s Daily Insights tab and its sub-tabs. It will make sure you hit all the high points. You can always drill down deeper on your own after the audio is over. When you listen to the audio commentary, please pay special close attention to the opening and closing comments.

In the meantime for this particular Broad Market Analysis of this Charts of Interest video series, let us go to the Daily Insights tab and the Index Stats sub-tab. Our trading bias is neutral bullish. Our industrial’s, shown by the Dow Jones Industrial Average, gained 0.52% this past Friday on light, below average New York Stock Exchange volume, and gained 0.47% this past week on light, below average New York Stock Exchange weekly volume. Our technology stocks, shown by the NASDAQ Composite Index gained 0.86% this past Friday on flat, below average NASDAQ Exchange volume, and gained 1.66% this past week on flat, below average NASDAQ Exchange weekly volume. Our large caps shown by the S&P 500 Index gained 0.62% this past Friday and gained 0.86% this past week.

Moving on to our secondary indexes, our 100 best stocks out there shown by the S&P 100 Index, gained 0.58% this past Friday and 0.8% this past week. Our mid-caps, shown by the S&P 400 Index, gained 0.4% this past Friday and 1.24% this past week. Our small-caps, shown by the S&P 600 Index and the Russell 2000 Index, two different perspectives on our small caps, gaining 0.35% and 0.50% respectively for this past Friday, and gaining 1.77% and 1.93% respectively for this past week. Our New York Stock Exchange Composite Index gained 0.51% this past Friday and gained 0.71% for this past week. Our VIX Volatility Index fell 3.38% this past Friday and 5.14% for this past week. Our Gold ETF gained 1.75% this past Friday and 1.81% for this past week. And our Oil ETF gained 1.12% this past Friday and 5.41% for this past week.

Let’s take a look at our Economic Calendar. We’ll go to our Daily Insights tab and our Economic Calendar sub-tab. The first thing I would like you to do is go to this past Friday, August 24th, and read the Market Reflections Summary. Then, I would like you to go to tomorrow, Monday, August 27, and read the Market Focus Pointers. This should be something we do at the end of every trading day. At the end of every trading week, including this weekend, I would like you to go to Monday, August 27, and read the International Perspective Report followed by the Simply Economics Report. These two reports are must-reads as they summarize what happened internationally and domestically for the past week and forecast what is to come for the week ahead. I would like you to read these two reports and thoroughly understand, be prepared and grounded for what is about to come compared to what has happened.

Let us go back to Friday, August 24th. The Durable Goods Orders was released. In June, New Orders were up 1%. We revised that number down to be up 0.7% this go around. For July, we are reporting that New Orders dropped by 1.7%. When you factor out the more volatile transportation sector, in June New Orders were reported up 0.4%, and we revised that number this time around, to being only up 0.1%. For July, we are reporting New Orders ex-transportation, up 0.2%. Core capital goods in June came in at 0.6% and for July were are reporting, 1.4%.

Looking forward to what is coming up for the week to come, this coming Monday looks like it will be a calm economic news day. Tuesday through Friday it looks like we will have a little bit more economic news for investors and traders alike to react to. For Monday, it looks like the main reaction might be a carryover to what the Federal Reserve announced as they were leaving their annual Jackson Hole, Wyoming trip, contradicting our fiscal policy, saying that they are going to continue watching and carefully applying the brakes via monetary policy.

Let us go ahead and take a look at our Trading Tools tab and our Watch List sub-tab. We had quite a few tickers identified by our Options Trading Candidate filters. The ones not highlighted in yellow are already on our watch list, they are simply reaffirming their position there. The ones highlighted in yellow are new to us. We will evaluate those for liquidity and patterns before adding them permanently to our list.

Going to our Trading Tools tab and our Daily Picks sub-tab, here is where you will find the Trading Trainer Daily Picks report generation tool. We will do a deeper dive on our indexes by looking at volume and trends. Our indexes look to have a similar volume on Friday as they had on Thursday, slightly lower, and slightly lower than their 50-day volume simple moving average. The oscillator is about the same. Short duration trends are clearly bullish. Long duration trends are neutral to bullish.

Backing this up, we are going to take a look at our template algorithm filters. These mathematically go through whatever raw data they are presented with, looking for patterns in the numbers. We are going to present them with the raw data of the index tickers. That is going to give us an idea of what the broad market personality is doing, as well as what to look for in our Watch Lists.

Our trend continuation templates are logging long-term bull trends. However, the signals for a trend continuation are not quite there yet. Looking at our short-term trend template and our trend reversal template, clearly, we have been bullish for about a week’s worth of trading. Taking a look at our pattern alterations, our Bollinger Band Width Index is getting tighter but still in the mid-range with fours, fives, and in some cases nines and eights. Our bar counter looks to be in single digits in some cases, but for the technology stocks, the S&P 500 and the S&P 100, we are still in double digits, hinting at some channeling. The question is, have we entered a bull trend?

Let us take a look at some charts. We will go to the Trading Tools tab and the Charting sub-tab. We will start with our Quick Review template, which is a six-month, daily chart with a linear scale, and open-high-low-close bars. To that, I like to add my 30, 50, and 200-day simple moving averages. These lagging indicators help me determine the trend. I have these simple moving averages added to the Quick Review template here in a user-defined template in my personal profile. I am going to apply that user-defined template to the indexes, specifically starting out with the Dow Jones Industrial Average.

First thing I am going to do is take a look at the weekly, two-year chart. Here we can see that indeed, the Dow Jones Industrial Average seems to be trending up. This past week was a little bit of a doji week, which means that we opened and closed, just about at the same price level, and, in fact, it looked to be a low activity week, because the highs and lows were not too extreme either. In fact, weekly volume was very low. It is as if investors are making the most of the last week of summer on vacation away from the markets. Still, it looks like we have the beginnings of a bull trend. We have some overhead resistance to breakthrough, but if we continue slow but sure, that could happen as we pass Labor Day and get into the fall season.

Switching to a six-month, daily chart, our 200-day simple moving average, 50-day simple moving average, and 30-day simple moving average are all trending up. Our volume this past week was low, including this past Friday. It looks like on Wednesday and Thursday we were coming down off of a high. Friday, it looks like we are on our way back up. Our seven-day simple moving average is trending up as well.

Let’s move to a five-minute chart. Our five-minute chart shows decline on Thursday. Our five-minute chart shows decline on Wednesday and Thursday. Thursday, it looks like we see some bottoming of our intraday price action. Friday we see a popup at open and through the whole morning session, only to stagnate in the afternoon session into the professional hour.

Back to our daily chart. Let’s take a look at our notes. We closed at $25,790.35. Our low was $25,688.58. We’ll take a note that says closed above resistance. We have a higher high and a higher low. That means our daily polarity moves to full on bullish. Our weekly polarity has a higher high and a lower low, and now a higher high. We will keep our daily polarity marked as full-on bullish. We will keep our weekly polarity marked as testing bull. Our overall trading bias is neutral bullish until we break through our overhead levels of resistance. But we are knocking on the door at full on bullish.

Let us switch to our NASDAQ Composite Index. We will go with a weekly, two-year chart. We can see here that the NASDAQ this past week did gain after about five weeks of a stall. Some bullish momentum. It did so on light weekly volume. Again, it seems like investors and traders alike took the week off to make the most of the last week of summer.

Switching to our six-month, daily chart, you can see the 7-day, 30-day, and 50-day simple moving averages are all trending up. The 200-day simple moving average is trending up as well. We are testing levels of resistance here. We do have a higher high, following a higher low. Our trading bias on the daily polarity is bullish.

Let us take a look at the five-minute chart. We can see the stall on Thursday. We can even see the stall on Wednesday. Friday we saw gains in the morning session and then sideways stagnation for the rest of the day. We closed at $7,945.98. Our low was $7,907.10. We are going to go ahead and take a note that we closed above resistance. We are going to keep our neutral trading bias for now until we break through overhead ceilings.

Going to the S&P 500 Index, the Index I feel like most represent our watch list, starting with a weekly, two-year chart. We are wrestling with all-time highs, but we are doing so on low volume. Again, we will see what happens when investors and traders alike return to their trading session.

Still, we have got higher highs and higher lows, so our polarities remain bullish. Our simple moving averages are all trending up.

Looking at our five-minute chart, we can see the stagnation and price action on the S&P 500 from Wednesday and Thursday, and then on Friday we see the gains in the morning session, pretty aggressive gains at that, and then the sideways price action for the end of the day. We closed at $2,874.69. Our low was $2,862.35. It looks like we need to adjust our levels of support and resistance.

We will look again at the weekly, two-year chart for some guidance. It looks like resistance will be at $2,875 and support at $2,800. Remember that using our Fibonacci Price Retracement Lines, and our rule that a good trend is at 1.236 of a retracement, $2,875 is a significant number for the S&P 500 being a 100% retracement. And $2,950 is a significant number for the S&P 500, being that key 123.6% retracement. So, let us watch those numbers carefully as we approach both $2,875 and $2,950. For now, as we are trying to wrestle with $2,875, the 100% retracement. We’ll keep our trading bias at neutral bullish until we are clearly above.

Switching to the New York Stock Exchange Composite Index, looking at a weekly, two-year chart. This is the one Index that has been stagnating all this time. It looks like we are wrestling with resistance at $13,000. Let us look at a six-month, daily chart. Clearly, the New York Stock Exchange is stuck with heavy overhead resistance. Let us look at the 200-day simple moving average. Still, everything is trending to the topside. We’re wrestling between neutral and neutral bullish. I’m going to leave this particular secondary indexes bias at neutral for now.

Switching to the VIX Volatility Index, going to a weekly, two-year chart, with a 40-week simple moving average. We can see that the implied volatility over the past week is clearly lower than the mean, but has not broken through support that looks to be around $11.85. We actually closed this past Friday at $11.99. Let us switch to a six-month, daily chart. Here you can see that the implied volatility fell for most of the week, and actually pulled down, ever so slightly, the 200-day simple moving average. The 200-day simple moving average is analogous to the 40-week simple moving average, as there are five trading days in every trading week. Our VIX Volatility Index ended down 3.38% to close at $11.99 per VIX share.

Our overall trading bias still remains neutral bullish as we are actually knocking on the door of full-on bull.

The broad market personality, I am going to stick with testing overhead resistance.

Our market is responding to the following, including but not limited to: Transient External Stochastic Shocks, US Fiscal Policy, US Federal Reserve Monetary Policy, Monetary Policies of China, Europe, and Japan, the price of oil, US economic news, including employment, housing, manufacturing and retail, and market news, including mergers and acquisitions (M&A), initial public offerings (IPOs), public companies going private, and earnings.

That is all I’ve got. Please, take care.