Broad Market Analysis – June 29, 2018

Hi there, this is A.J. Brown on the evening of Saturday, June 30th with your Trading Trainer weekend edition of your daily insights. What we’re 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’re 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’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.

Team, take a look at the recommendations we have for Monday, July 2nd’s trading session. Slight changes in these recommendations could have a major impact on your trading. You’re 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 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’s start right at the Daily Insights tab and the Index Stats sub-tab.

Our trading bias is currently at neutral/bullish. Our industrials, shown by the Dow Jones Industrial Average gained 0.23% this past Friday on heavy, below average New York Stock Exchange volume, and fell 1.26% this past week on light, mixed average New York Stock Exchange weekly volume. Our technology stocks, shown by the NASDAQ Composite Index edged up 0.09% this past Friday on light, above average NASDAQ Exchange volume and fell 2.37% this past week on light, above average NASDAQ Exchange weekly volume. And our large caps shown by the S&P 500 index edged up 0.08% on Friday and fell 1.33% for this past week.

Moving onto our secondary indexes. Our 100 best stocks out there, shown by the S&P 100 edged up 0.03% this past Friday and fell 1.26% for this past week. Our mid caps shown by the S&P 400 index edged up 0.07% this past Friday and fell 1.91% for this past week. Our small caps shown by the S&P 600, and the Russell 2000, two different perspectives on small caps fell 0.28% and 0.12% respectively this past Friday. And fell 2.42% and 2.52% respectively for this past week. Our New York Stock Exchange Composite Index gained 0.23% this past Friday and fell 1.07% for this past week. Our VIX volatility index fell 4.51% this past Friday and gained 16.85% for this past week, closing Friday at $16.09 per share. Our Gold ETF gained 0.36% this past Friday and fell 1.4% for this past week. And our oil ETF gained 1.35% this past Friday and gained a whopping 7.42% for this past week.

Team, let’s check out our Daily Insights tab and our Economic Calendar sub-tab. First thing I’d like you to do, from this past Friday, June 29, is to read the Market Reflections summary. Then I’d like you to look at this Monday, July 2, and read the Market Focus pointers. Also, I’d like you to read the weekend International Perspective report and Simply Economics report. These two reports are must reads as they summarize what happened the previous week and give insights into what to expect for the week to come. They are must reads for over this weekend.

Coming back to Friday, June 29, in the morning before the market opened, we had our Personal Income and Outlays released. Personal Income month over month for April was up 0.3%. We’ve revised that April number this time around to be up only 0.2%. In May, we’re reporting an increase of 0.4%. Consumer Spending in April was up 0.6%. We’ve revised that April number this time around to be only up 0.5%, and in May an increase of 0.2%. Our Personal Consumption Expenditures (PCE) Price Index month over month in April was up 0.2%. in May, another 0.2%. Our Core Personal Consumption Expenditures (PCE) Price index month over month in April was up 0.2% and in May another 0.2%. Our Personal Consumption Expenditures (PCE) Price Index year over year in April was up 2% and in May up 2.3%. And, here’s the one that the Federal Reserve looks at most definitely is the Core Personal Consumption Expenditures (PCE) Price Index year over year. In April it was up 1.8%. In May, up 2.0%. This 2.0% is the Federal Reserve target rate, so we’re going to watch carefully the upcoming Federal Open Market Committee meetings.

Also on Friday, we released our Chicago Purchasing Managers Index (PMI). In May, the business barometer index was 62.7. In June, it’s reporting in at 64.1.

Our Consumer Sentiment was reported on Friday. The sentiment index level last time was 99.3. This time, we’re reporting 98.2. A little bit weaker.

Looking forward to Monday, the main news is that we have a holiday on Wednesday, July 4. The markets will be closed. Still, for the rest of the days, we have a lot of economic news being released, including on Friday our much-anticipated employment situation report. Also, July 1st marks the entering of the summer doldrums. This is when trading and investing tends to quiet all the way up until Labor Day. We’ll see if that plays through for this year as well.

Moving on to our Trading Tools tab and our Watch List sub-tab, we had two tickers identified by our covered call writing candidate filter and options trading candidate filter. These two candidates are new to us, this is why they are highlighted in yellow. We will evaluate them for liquidity and patterns before adding them permanently to our list.

Moving on to our Trading Tools tab and our Daily Picks sub-tab. Here, you’re going to find our Trading Trainer ‘Daily Picks’ report generation tool. We’ll go ahead and do a deeper dive on our indexes by looking at volume and trends. Our volume was about the same as it was on Thursday, about the same as the 50-day, about the same as the 200-day. Our oscillator shows that we’ve been having heavier volume than usual these past days. Our short duration trends are clearly bearish. Our long duration trends are mixed between neutral and bullish. We’ve either found a top or we’re testing our long-term bull trend.

Team, let’s take a look at our template algorithm filters. These mathematically go through whatever raw data they’re presented with and look for patterns in the numbers. We’re going to supply them with our index ticker data. 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. Now, on our trend continuation templates, we have a lot of accrued long-term trend, and as you can see here, the latest pullback from that trend has triggered these templates telling us that we are set up beautifully for a trend continuation in the bullish direction. At the same time, our trend reversal templates are saying that it is not a trend continuation we’re seeing, but rather it is a trend reversal down. Although our short-term trend test lost some of its bites this past Friday, perhaps going into a period of range contraction. We need to let this pattern mature because right now, again, we don’t know whether we’re reversing down or we’re about to swing back up. Our pattern alteration template is telling us that our Bollinger Band Width index is on the wider side, and in addition to that, we’ve popped out of the Bollinger bands probably to the downside.

Team, Let’s go to our trading tools tab and our charting sub tab. Let’s use our Quick Review template. This is a six-month, daily chart with a linear scale and open-high-low-close (OHLC) bars. There’s a separate pane for volume and volume average, and, to that, I like to add, my 30, 50 and 200-day simple moving averages. These lagging indicators help me determine the trend. I’ve got 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 template to the indexes, specifically starting out with the Dow Jones Industrial Average.

We’ll actually transition this chart to a weekly, two-year chart, and as you can see here, more than ever, it looks like we are channeling sideways ever since the pullback in the middle of January, a strong sideways channel. And it looks like we’ve gone from testing resistance to where we’ll soon be testing support. Still, our simple moving averages are pointing up and it looks like we have a lower low after a higher high, so we’re testing bear on the polarity. Let’s transition to a six month, daily chart. As you can see here, we also have a higher high but it is preceding a lower low. So here we’ve also switched to testing bear. Our 30-day is pointing down, our 50-day is pointing down. Our 200-day is pointing up. Our seven day has closed down below both the 30 and the 50. These transition our bias on the Dow Jones Industrial Average to neutral. Let’s take a look at a five-minute chart. Interestingly enough, team, we gaped up on Friday and then just traded sideways all the way until late afternoon and professional hour, where there were mass amounts of profit taking. Perhaps, a lot of profit taking before folks went away for the week. A lot of investors, traders, and individuals alike are taking the whole week off next week given that Wednesday is a holiday. So, they’re taking the other four days off. With that said people decide that they don’t want to worry about the risk in the market and so they sell off. And I believe that’s what we’re seeing here on the industrials. Let’s go back to our daily chart. Team, we closed at $24,271.41. That’s between our support and resistance lines. We will change our trend of our 50-day to be pointing down, and we’ll change our weekly polarity to be testing bear. And we will change our bias on the Dow Jones Industrial Average to neutral.

Let’s take a look at the NASDAQ Exchange. Starting with a weekly, two-year chart, we can still see a strong bullish trend, but this week was undoubtedly a down week for the NASDAQ. Our polarity remains bullish with a higher high and higher low. Transitioning to a six month, daily chart, we can see that in this case, we also are still with a bullish polarity as we have a higher high, and still a higher low. We’ll watch this carefully. The 30 and the 50 continue to trend up. The seven has crossed down below the 30 just this past Friday. Our 200 continues to trend up. Our five-minute chart shows a gap up at open, sideways trading, then again, right during the late afternoon and professional hour, a large profit taking. Again, probably as an effect of folks wanting to put their money safe before going away for holidays. We closed at $7,510.30. Our high was $7,573.59. It’s time for us to adjust our level of support and resistance. It looks like we’ll be going with 7,400 to 7,600. We’ll mark that the seven has closed down below the 30-day simple moving average. We’ll keep our polarity as bullish on the weekly, and I can see here now with this high, and this high, and now this low, and this low that we are testing bear on the daily polarity. We’re going to keep our trading bias as bullish, but it is definitely tapping on the neutral/bullish door.

Let’s move on the S&P 500 index. This is the index I feel like most represents our watch list. Starting with the weekly, two-year chart, we can see all of our simple moving averages trending up, and we can see that we have a lower high but still a higher low. With that lower high we’re testing bear. Moving to a six month, daily chart, we can see that our 30 and our 50 are flat. Our 200 is trending up. Our seven has crossed down below the 30. Other than that, perhaps we are testing a new bottom at 2,700. Let’s go ahead and take a look at our five-minute chart. Here’s that gap up at open and the sideways trading all the way to late afternoon and then the sell-off. Again, I think that was an attempt to remove risk while people are away on holiday. We closed at $2,718.37 and that puts us back into our described channel. We’ll keep our trading bias of neutral/bullish. I see testing bull for the daily polarity until we actually establish that higher low.

Let’s take a look at our New York Stock Exchange Composite Index starting with a weekly, two-year chart. This consolidation in the New York Stock Exchange has bothered me for six or seven weeks now, and it continues to bother me as we get tighter and tighter. Our polarity currently looks as though it is testing bear, but if anything I’m seeing consolidation. Let’s switch to a six month, daily chart. When you see simple moving averages all converging, like we see here on the New York Stock Exchange, it tends to mean that a breakout is imminent. Now, we’ve been channeling fairly consistently between 12,400 and 12,800, so we’ll watch those levels of support and resistance clearly. I’m going to keep our trading bias at neutral.

Switching to the VIX Volatility Index and starting with a weekly, two year chart, with a 40-week simple moving average applied, you can see that our implied volatility is much higher at this point than our 40-week simple moving average, hinting to us that now is the time really to be selling premium; selling premium into the summer doldrums, the next two months, July and August. I think with the consolidation that we’re seeing in the New York Stock Exchange, it does make sense to protect those premium sales with collared positions. Switching to a six month, daily chart with a 200-day simple moving average, which is analogous to the 40-week simple moving averages. There are five trading days in every trading week. We can see here that the implied volatility is living at a higher level than the simple moving average. That simple moving average often time is represented or labeled ‘the mean’. And again, with those higher premiums, premium selling seems like the strategy that should be in vogue. Our VIX did go down on Friday, 4.51% closing at $16.09 per share.

Our overall trading bias remains neutral/bullish.

Our broad market personality: ‘trend reversal, top found”, although I’m not sure if that’s fair or if we should say: “trend continuation or trend reversal”. We can further quantify that, or qualify that, by saying: “bullish trend continuation or bearish trend reversal”.

Our market is responding to the following, including but not limited to, transient external stochastic shocks, the US fiscal policy, the US 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 market news including mergers and acquisitions (M&A), initial public offerings (IPO), public companies going private, and earnings.

That’s all I’ve got, team. Please, take care.