Broad Market Analysis – June 1, 2018

Hi there. This is A.J. Brown with Trading Trainer on the evening of Friday, June 1, 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 lists, 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 are going to take a look at both daily and weekly charts. Before looking at any charts, we’re actually going to log into the Trading Trainer “Learning Community” web portal by going to login.tradingtrainer.com. Of course, once we’ve logged into the “Learning Community” web portal, I’m 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 Monday, June 4’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” tab and it’s 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’s click on the “Daily Insights” tab and the “Index Stats” sub-tab. Team, our trading bias remains neutral. Our industrials shown by the Dow Jones Industrial Average gained 0.9% today on light, above average New York Stock Exchange volume, and fell 0.48% for this past week on heavy, above average New York Stock Exchange weekly volume. Our technology stocks shown by the NASDAQ Composite Index gained 1.51% today on light, above average NASDAQ exchange volume and for this past week, gained 1.62% on heavy, above average NASDAQ exchange weekly volume. Our large caps shown by the S&P 500 Index gained 1.08% today and gained 0.49% for this past week.

Moving on to our secondary indexes. Our 100 best stocks out there, shown by the S&P 100, gained 1.1% today and gained 0.63% for this past week. Our mid-caps, shown by the S&P 400, gained 0.61% today and 0.59% for this past week. Our small caps, shown by the S&P 600 and the Russell 2000, two different perspectives on small caps, gained 0.8% and 0.88% respectively for today and gained 1.09% and 1.29% respectively for this past week. Our New York Stock Exchange Composite Index gained 0.75% today and fell 0.11% for this past week. Our VIX Volatility Index fell 12.77% today and gained 1.82% for this past week to close at 13.46. Our Gold ETF fell 0.5% today and 0.58% for this past week. Our Oil ETF fell 2.21% today and 3.14% for this past week.

Team, let’s take a look at our economic calendar by clicking on our “Daily Insights” tab and our “Economic Calendar” sub-tab. The first thing I’d like you to do is read today’s “Market Reflection” summary. After reading today’s “Market Reflection” summary, fast forward to Monday, June 4 and read the “Market Focus” pointers. Also, on Monday, June 4, you will find two reports, namely the “International Perspective” report and the “Simply Economics” reports. Please read through these reports. These reports summarize what happened the previous week in the economic news front, as well as what to expect for the week to come. These are must-reads over the weekend.

Returning back to Friday, June 1, Motor Vehicle Sales were released. For April, total vehicle sales were 17.2 million. Domestic vehicle sales were 13.2 million. For May, that number dropped a little bit with total vehicle sales coming in at 16.9 million and domestic vehicle sales coming in at 13 million. Although a little drop, still robust.

Our Employment Situation was released. In April, our non-farm payrolls month over month change were 164,000. We revise that April number this time around to be 159,000. Our May number, 223,000. The unemployment rate in April was 3.9%. In May, we’re reporting 3.8%. Our participation rate in April was 62.8%. In May, it actually seems to have gone down to 62.7%. Average hourly earnings month over month, in April we reported an increase by a tenth of a percent. In May, we’re seeing a three-tenths percent increase. When you look at the average hourly earnings year over year change, in April, we were reporting 2.6%. In May, 2.7%. This is enough impetus for the Federal Open Market Committee (FOMC) to want to raise interest rates to control this wage inflation. The average workweek for employees in April was 34.5 hours. That’s what we report in May, 34.5 hours.

The PMI Manufacturing Index in April was 56.5. In May, we’re reporting 56.4.

The Institute of Supply Management’s Manufacturing Index in April came in at 57.3, and in May, 58.7.

Construction Spending, in March, the month over month change was down 1.7%. In April, it was up 1.8%. Year over year, in March, construction spending was up 3.6%. In April, we’re reporting 7.6% increase.

Looking to next week, Monday we have Factory Orders; Tuesday, we have our services indexes, as well as our Job Opening and Labor Turnover Survey (JOLTS) report; Wednesday, Thursday, we have some more economic news that people will be looking at; Friday, it kind of calms down. Let’s move on.

Let’s take a look at our “Trading Tools” tab and our “Watch Lists” sub-tab. We have quite a few tickers identified by our Options Trading Candidate filter. The ones that are not highlighted in yellow are already on our list, they are simply reaffirming their position there. The ones highlighted in yellow are new to us and we will evaluate these additionally for liquidity and patterns before adding them permanently to our list.

Let’s go to our “Trading Tools” tab and our “Daily Picks” sub-tab. Here you will find our Trading Trainer “Daily Picks” report generation tool. I’m going to do a deeper dive on our indexes by looking at volume and trends. It seems our volume dropped considerably today compared to yesterday but is just about right at the 50-day simple moving average, the NASDAQ a little bit higher, also right at the 200-day simple moving average, again the NASDAQ is a little bit higher. The oscillator shows we’ve had some healthy volume. Our short duration trends are mixed. Some are up, some are down, some are neutral. The long duration trends are all coming in marked as neutral.

Taking a look at our template algorithm filters, these mathematically go through whatever raw data we present them with looking for patterns in the numbers. We’re going to present these templates with the raw data of our index tickers. That’s going to give us an idea what the broad market personality is doing, as well as what to look for in our watch lists. Our trend continuation trio of templates, the Reactive, Buffered, and Chaiken, are all coming in neutral. Our Short-Term Trend template is for the most part showing neutral. Same with our Trend Reversal template. Our Pattern Alteration template is showing the Bollinger Band Width indexes still on the wider side with threes, fours, and fives. Our bar counter, this is the Candlestick Bar Count, is getting up there in size into the double digits, in some cases even bigger. This is telling me that we are sideways channeling in a neutral channel, and perhaps even seeing some consolidation and converging.

Let’s go to our “Trading Tools” tab and our “Charting” sub-tab. I’m going to start with my Quick Review template. This is a six month, daily chart with a linear scale and open-high-low-close (OHLC) bars. We have a separate pane for volume and volume average. To this, we like to add our 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’m going to apply that user-defined template to the indexes, specifically starting out with the Dow Jones Industrial Average.

We’ll begin by going to a weekly, two-year chart. We had a Doji week that was actually an upside-down Lincoln’s hat, meaning the Bears put on some pressure, but the Bulls rebounded bringing price to where we started. Volume was moderate. Our weekly polarity shows a higher high and so far a higher low; a bullish weekly polarity. Switching to a six-month, daily chart, our 200-day simple moving average trends up. Our 50-day simple moving average is flat, and so is our 30-day simple moving average. Our seven-day simple moving average is trending down and has caught up with price. Our volume was moderate. Taking a look at today’s five-minute chart, price hardly moved after gapping up, just went sideways. Back to our daily chart. Let’s take a look at our notes. We closed at $24,635.21. We have a lower low, but a higher high, so we’re testing Bear. Doesn’t look like any of our note parameters change.

Let’s move onto the NASDAQ. Let’s go to a weekly chart with two years of data. We have a bullish weekly polarity, and we had a bullish week in the technology stocks. Our volume for the week, however, was low. Let’s switch to a six-month, daily bar chart. Today was an up day on moderate volume. The 50-day simple moving average is flat. The 30-day simple moving average is bullish. The seven-day simple moving average is bullish. The 200-day simple moving average is bullish. Our daily polarity is bullish. Let’s look at the five-minute intraday chart for the NASDAQ Composite. Here we see also a gap-up at open, but then continued price increase until early afternoon, and then a sideways stall. Back to our daily chart. We closed at $7,554.33. Our low was $7,487.23. We’ll take a note that says we closed above resistance. We will not adjust support and resistance levels until we have a complete open-high-low-close (OHLC) bar outside of our horizontal channel. It looks as though everything else in our parameters remain the same.

Let’s move onto the S&P 500 Index. We will start with a weekly chart looking at two years worth of data. We see that we’ve got now a higher high after a higher low. This week, we had the Bears test price, but the Bulls won out in the end, actually closing the S&P 500 higher for the week than where we opened. Volume this week was on the lower side. Let’s move to our six-month chart with daily bars and see that our 200-day simple moving average is trending up. Our 50-day simple moving average is flat. Our 30-day simple moving average is flat. Volume today was on the low side. Our seven-day simple moving average is flat. Today’s price action was up, giving us a testing bull daily polarity… maybe no. Maybe we’re still testing bear. We need to get our price to be a little bit higher, higher than the high from May 22. Let’s look at our five-minute intraday chart. Our price action shows gapping on open and an appreciation throughout the morning all the way into the early afternoon, and then a tight sideways channel stall. Back to our daily chart. We closed at $2,734.62. It looks as though all of our other parameters stays the same. Actually, we will update our 30 day simple moving average. Instead of saying it is an uptrend, we will say it is flat.

Our New York Stock Exchange Composite Index starting with a weekly chart looking at two years worth of data, we can see that our polarity remains bullish. We also see the consolidation of our simple moving averages on the weekly chart. We’ll switch to a six-month chart populated by daily bars. Again, we see that consolidation of the simple moving averages. We see our testing bear daily polarity. We see the seven thinking about crossing down below the 30-day simple moving average. We see our 200 trending up. We’re going to keep our trading bias at neutral.

Switching to the VIX Volatility Index. Going to a weekly chart with two years worth of data. We’ll add a 40-week simple moving average to see that implied volatility soared higher than the mean this week but then slammed back down to the mean. Switching to a six-month chart with daily bars, we can see how the volatility on Tuesday really erupted and then calmed down to pretty much where we closed last Friday. Looking at our 200-day simple moving average, that’s pretty much where our VIX ended for the week. Our VIX was down 12.77% today, closing at 1346.

Our overall trading bias does remain neutral.

Our broad market personality is that we’re sideways channeling. I like that we wrote, what we wrote yesterday, saying that the transient external stochastic shock has passed. I think we’ll keep that… or, how about we say sideways channeling, responding to transient external stochastic shocks because there’s been a lot of them this week; trade wars and exodus from the Euro thanks to some disruption in Italy, and this whole discussion around meeting with North Korea or not, and perhaps even releasing economic data before it was supposed to by Tweet.

The market is responding to the following including but not limited to: Transient external stochastic shocks; the United States fiscal policy or lack thereof; the United States Federal Reserve monetary policy; the monetary policies of China, Europe, and Japan; the price of oil; US economic news including employment, housing, manufacturing, and retail; and of course market news including mergers/acquisitions, initial public offerings, public companies going private, and earnings.