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Support levels on the major averages are intact, despite the decline in early March.  Technical indicators based on market breadth and volume is in the process of working off its overbought condition from the rise since the election.  In addition historical research shows after January and February are strong months; the year has the potential for additional gains. This doesn’t mean a short term decline will not occur, however the odds favor declines could be a buying opportunity.

The optimistic tone of the market has changed somewhat as the expectations of rising rates became a concern for investors.  The 10-year Treasury note yields have been rising steadily since the end of February spooking investors.  There has been an overall weakening in market breadth indicators that need to be monitored. Our stock market timing models remain neutral-positive indicating a potentially profitable market climate and further gains over the next several weeks.

The overall technical picture of the market remains positive. The cumulative advance decline line of the NYSE advance/decline line confirmed the highs made in February.   When market breadth confirms price, usually that suggests the final high has not been made.  The Technology sector is acting well. The NASDAQ 100 (QQQ) is not far from its recent all-time high.  It’s also bullish that the Nasdaq Composite is leading in relative strength vs the S&P 500, a condition which has historically overall characterized more profitable market climates.

Watch The Strength of Technology:

PowerShares QQQ ETF (Nasdaq 100 Index) Weekly Price and Trend Channels (Top), and MACD 12-26-9 (Bottom)

The top part of the chart shows the weekly Power Shares 100 (QQQ), an exchange-traded fund based on the Nasdaq 100 Index and its active trading channels.  The QQQ includes 100 of the largest domestic and international nonfinancial companies listed on the Nasdaq stock market based on market capitalization. As of 03/10/17, Apple, (AAPL) is the largest holding comprising 11.91%, Microsoft Corp (MSFT) 8.11%, Amazon.com, Inc. (AMZN) 6.50%, Facebook, Inc. Class A (FB) 5.22%. Alphabet Inc. Class C (GOOG) 4.67% and Alphabet Inc. Class A (GOOGL) 4.11% totaling 40.52%.

The QQQ broke out at 123.00 (red circle above) on January 6 and has been steadily rising. The QQQ has now slightly penetrated the channel objective at 130.00 (top blue channel line), now trading at 131.30. The intermediate trend is up as long as the QQQ remains above the up trendline line (pink). The next upside target is 139.00.   Keep an eye on Apple, (AAPL) the largest holding of QQQ.   Apple has moved sideways for 10 days giving up no ground.  If Apple continues making new highs, this could be positive for the technology sector over the next several months.   If the QQQ falls below 123.00, breaking the up-trend, my bullish outlook would be negated.

The bottom half of the chart is MACD (12, 26, 9) a measure of momentum.  Its bullish MACD has confirmed the price high made in QQQ suggesting any weakness in the QQQ most likely would be temporary.

 

A Breakout in the S&P 500 ETF (SPY) is Possible?

The chart above is the weekly SPDR S&P 500 (SPY) ETF that is comprised of 500 stocks of the largest companies in the U.S.   The S&P 500 (SPY) hit its weekly upside channel on March 1st at 240.32 and pulled back.  Market breath has weakened however the SPY has not given up much ground over the last two weeks, a bullish sign.  If the SPY can get through the old highs, higher projections above 260.00 will be given.

The lower portion of the chart is the 12-26-9 MACD, a measure of momentum.  Like the QQQ discussed above, MACD has confirmed the price high in the SPY and is in a clear uptrend.  This is the sign of a healthy market.   Look for the SPY to at least test the old highs.

Summing Up:

Market breadth has been weak as of late after being very strong for many months. There has been no real thrust on the advancing days to get excited about, however not much ground has been given up either.  Market breath indicators have worked off its overbought condition since the election.   Our stock market timing models remain neutral-positive indicating a potentially profitable market climate and potential further gains over the next several weeks. MACD over the intermediate term for the Nasdaq 100 (QQQ) and the S&P 500 (SPY) have confirmed the strength of the overall market.   Continue to give the benefit of the doubt to the bulls.

I would love to hear from you.  Please call me at 516-829-6444 or email at bgortler@signalert.com to share your thoughts or ask me any questions you might have.

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*******Article published by Bonnie Gortler in Systems and Forecasts March 15, 2017

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Disclaimer: Although the information is made with a sincere effort for accuracy, it is not guaranteed that the information provided is a statement of fact. Nor can we guarantee the results of following any of the recommendations made herein. Readers are encouraged to meet with their own advisors to consider the suitability of investments for their own particular situations and for determination of their own risk levels. Past performance does not guarantee any future results.

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February had a strong month of gains following January’s advance.  The Dow Industrials rose 12 straight days.  Healthcare (XLV), Utilities, and Financials were the leading sectors for the month along with solid gains by the Dow, S&P 500, and the Nasdaq.  Our trading models remain neutral-positive and the tape remains bullish.  Up trends are intact.  Some indices have met their intermediate channel objectives including Regional Banks, (KRE) Nasdaq 100 (QQQ), and Russell 2000 (IWM); however there is a good chance more gains are ahead. The bulls remain in control.

What Do You Want To Watch Now?

The top portion of the chart shows the weekly iShares Russell 2000 Index ETF (IWM) which is made up of companies with a market capitalization of between $300 million and $2 billion. After the election the Russell 2000 (IWM) skyrocketed.  The IWM made a high of 138.85 on 12/08/16 overshooting slightly its channel objective at 138.00 (green rectangle).  After making a high, the IWM moved sideways for about 8 weeks, not giving up much ground.

As of March 1st, a potential breakout may have begun.  The upside objective is 157.00 while support is at 133.00.

The lower portion of the chart is MACD, a technical indicator that measures momentum.  MACD is overbought, confirming the new high made in IWM.  If the rally stalls MACD can give a sell quickly.  Its bullish, the uptrend from January 2016 is in effect, and MACD has confirmed the IWM high.

iShares Russell 2000 ETF (IWM) Weekly Price (Top), and 12-26-9 Week MACD (Bottom)

The top part of the chart is the weekly (IWM) Russell 2000 Index / (SPY) S&P 500 Index Ratio (IWM/SPY).  A rising line means the IWM is stronger, and if falling, the SPY is stronger. The IWM/SPY ratio peaked on 12/05/16. The IWM has clearly been losing strength, however the uptrend from January 2016 (black line) is intact.

The lower portion of the chart is MACD, already on a sell warning of a potential change of leadership.  Not only is momentum weakening, but at the same time the IWM/SPY relative strength ratio has broken it’s up trend. Also, the average daily trading range for the past 25 days has been more than double the SPY.  Even though the IWM has the potential to be breaking out, if you are heavily weighted in small caps, it may be a good time to reduce your exposure and lower your risk, shifting part of your assets to the SPY.

The SPDR S&P 500 (SPY) Weekly With Channel (Top) and Weekly 12-26-9 MACD (Bottom)

The chart above is the weekly SPDR S&P 500 (SPY) ETF that is comprised of 500 stocks of the largest companies in the U.S. As of 03/01/17 its top 4 holdings in the S&P 500 were Apple Inc. (AAPL) 3.58%, Microsoft Corporation (MSFT) 2.45%, Exxon Mobil Corporation (XOM), 1.66% and Johnson & Johnson (JNJ) 1.64%.  Investing in the S&P 500 gives you a broad representation of the overall large-cap U.S. stock market.

The top part of the chart shows the S&P 500 (SPY) weekly trading channel.  The S&P 500 (SPY) has been in an uptrend since December 2016 and steadily rising since the election.  While the Russell 2000 (IWM) is at its top of its trading channel, the SPY still has some room to go before hitting its upper channel at 245.50.

The bottom half of the chart shows MACD, confirming the highs in the SPY. This is bullish.

Just To Sum Up:

The tape remains strong. Major averages continue to make new highs and pullbacks have been minor.  The Russell 2000 (IWM) has met its intermediate objective.  The SPY has taken over leadership in terms of relative strength. Even though the IWM has the potential for a break out, if you are heavily weighted in small caps, it may be a good time to reduce your exposure, lowering your risk by shifting part of your assets to the SPY.  Our models remain overall neutral-positive so stocks could rise for several more weeks. As long as the Russell 2000 (IWM) stays above its support at 133.00 and the SPY stays above its hourly support of 234.00, you can expect higher highs. Continue to give the benefit of the doubt to the bulls.

I would love to hear from you. Please call me at 516-829-6444 or email at bgortler@signalert.com to share your thoughts or ask me any questions you might have.

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*******Article in Systems and Forecasts March 2, 2017

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Disclaimer: Although the information is made with a sincere effort for accuracy, it is not guaranteed that the information provided is a statement of fact. Nor can we guarantee the results of following any of the recommendations made herein. Readers are encouraged to meet with their own advisors to consider the suitability of investments for their own particular situations and for determination of their own risk levels. Past performance does not guarantee any future results.

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The time of maximum pessimism is the best time to buy and the time of maximum
optimism is the best time to sell.
” ~John Templeton

New record closing highs seem to be a normal occurrence during 2017 as the Trump rally continues.  Equity markets have been going up on expectations of increased infrastructure spending, decreased regulation, and lower corporate taxes.  The advance has been broad, although some sectors have clearly been stronger than others.

Some major averages are near the top of their channels as some stocks have had hefty gains.  There are many favorable looking charting patterns, while others are in the process of the beginning stages of a parabolic advance.  This is a chart pattern in which prices rise (or fall) with an increasingly steep slope.   When the advance stops, a large decline follows that you want to avoid.

Our trading models remain neutral positive and the tape remains bullish.  The best kind of advance is the one where pullbacks are very minor and price continues higher, as investors wait for the decline which doesn’t happen.  This appears to be what is happening now.   The trend is your friend.  For now, enjoy the ride.

PowerShares QQQ ETF (Nasdaq 100 Index) Weekly Price and Trend Channels (Top), and MACD 12-26-9 (Bottom)

The top part of the chart shows the weekly Power Shares 100 (QQQ), an exchange-traded fund based on the Nasdaq 100 Index and its active trading channels.  The QQQ includes 100 of the largest domestic and international nonfinancial companies listed on the Nasdaq stock market based on market capitalization.

As of 02/13/17, Apple, (AAPL) is the largest holding comprising 11.83%, Microsoft Corp (MSFT) 8.25%, Amazon.com, Inc. (AMZN) 6.53%, Facebook, Inc. Class A (FB) 5.15%. Alphabet Inc. Class C (GOOG) 4.65% and Alphabet Inc. Class A (GOOGL) 4.09%, totaling 40.50%.   All the top holdings have rebounded this year after being out of favor before the election.   Apple (AAPL), its largest holding has had significant gains already this year, and has higher upside projections that will help the QQQ, and has favorable implications for the technology area over the next several months.

Revisiting the article in the Systems and Forecasts newsletter on 01/13/17 “Breakout in Technology Looms”, QQQ looked poised for a breakout.  This indeed did happen.  The QQQ is getting close to its 130.00 objective, closing at 129.40 on 02/15/17.

It looks like the QQQ could start another leg up, going through 130.00 to potentially reach 139.00 (orange line), the next target.  As long as the QQQ is above the up trendline line, the trend is up.    The trend line is important; it coincides with the break out at 123.00 that is now acting as support.  For another leg up to start, the QQQ needs to close above 130.00 for 2days and declines should be contained between 1-3%.  If the QQQ falls below the up trendline my bullish outlook will be negated.

The bottom half of the chart is MACD (12, 26, 9) a technical indicator that measures momentum.   MACD is overbought, however still rising, and gaining momentum which is positive.   MACD has confirmed the price high suggesting even if the QQQQ would decline another rally attempt would occur.

QQQ Performance Will Be Helped By Apple: Long Term Trend Is Up

AAPL Monthly Price and Up Trend Line (Top), and MACD 12-26-9 (Bottom)

** Apple’s stock underwent a 7-for-1 split, giving 6 additional shares to each shareholder on 06/09/2014.  The stock closed at 645 becoming 92.00/per share.

The top chart is a price chart that shows the high-low-close each month of Apple since 2005.  The Black line is the prevailing key uptrend line.  As long as Apple’s price is above the uptrend line, the trend is up and further profit potential on the long side is likely.   Apple was under selling pressure since its high in April 2015, when it was out of favor by investors.  In September 2016, Apple broke its down trend (orange line), and investors stepped in to buy.   After its quarterly earnings were announced on 01/31/17, Apple gained 11.7% (121.35-135.60 as of 02/15/17 intraday) and then soared ahead breaking its all-time intraday high of $134.54 set in April 2015 on February 14, 2016.

The bottom half of the chart is MACD (12-26-9), a technical indicator that measures momentum.  MACD is on a buy, and has a very favorable pattern turning up from an oversold condition below 0, where good buying opportunities develop.  This certainly has been the case for Apple.

In 2009 MACD was oversold, below 0, and generated a buy.  MACD rose into 2011 while MACD went sideways into 2012 as Apple stock continued to rise from 11.76 to 100.72, +756% gain.   MACD turned down crossing its signal line in 2012, generating a sell in 2013.  Apple fell from 100.72 to 52.55, a 47.8% loss.  MACD then started to flatten out forming a rising double bottom formation (one of the most bullish formations to look for on charts and make money).  Apple rose from 52.55 to 134.54, +156.0% gain. MACD peaked in 2015, turning down, losing momentum and Apple fell from 134.54 to 89.47, a -33.5% loss.

Apple’s latest rise off of the bottom is from 89.47 to 135.50, a gain of 51.5%. The good news is the MACD pattern remains very bullish even with its rise to new highs.  Next objective is 155.00 and support is 127.00.  There has been a definite shift in investor sentiment since the election and belief the company will benefit from potential changes down the road by President Trump. Time will tell.

Summing Up:

Major averages have made new all-time highs, a common theme of 2017.  The advance that is taking place is the best kind of advance, one where pullbacks are very minor and price continues higher as investors wait for the decline.  The Nasdaq 100 (QQQ) did break out in January, and could well be on its way to another 7% gain.  The trend is up.  Apple, its largest component has a very favorable MACD pattern suggesting there is more room to the upside on top of its recent gains.   The trend is your friend. Enjoy the ride.

I would love to hear from you. Please call me at 516-829-6444 or email at bgortler@signalert.com to share your thoughts or ask me any questions you might have.

Disclaimer: Although the information is made with a sincere effort for accuracy, it is not guaranteed that the information provided is a statement of fact. Nor can we guarantee the results of following any of the recommendations made herein. Readers are encouraged to meet with their own advisors to consider the suitability of investments for their own particular situations and for determination of their own risk levels. Past performance does not guarantee any future results.

If you like this article, then you will love this! 

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*******Article in Systems and Forecasts February  16, 2017

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Disclaimer: Although the information is made with a sincere effort for accuracy, it is not guaranteed that the information provided is a statement of fact. Nor can we guarantee the results of following any of the recommendations made herein. Readers are encouraged to meet with their own advisors to consider the suitability of investments for their own particular situations and for determination of their own risk levels. Past performance does not guarantee any future results.

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Many stocks finished October down for the month.  The weakness extended early in November where the S&P 500 index was down 9 consecutive days with concerns about the outcome of the presidential election.  A two day bounce followed, alleviating the oversold condition that was created.  As the votes were gathered investors were nervous and the overnight futures were down sharply suggesting a lower opening on Wednesday.  During the night, Donald Trump was named president.  The panic was gone by the time the market opened.

Many market averages rallied strongly off their lows. There was a split market. Sectors such as Health and Finance moved higher, and other sectors were under pressure such as Utilities, Emerging Markets, Consumer Staples and Real Estate.   Many investors, institutions and hedge funds were surprised by the outcome and had to change their investments quickly, or decide they wanted to be invested now that the election was complete.  It’s still early to forecast what is ahead.  Our trading models are in a neutral positive condition entering the most favorable seasonal period of the year, suggesting downside risk is limited.

You can expect more wide intraday trading swings in the market until the dust settles. This could take some time.   A test of the lows over the next 3-6 weeks would be a safer buying opportunity if investors shift from buyers to seller.

What to Monitor Now for a Safer Entry

  • Monitor overseas markets to see if they move higher than 11/09/16 close.  Watch the following international ETF’s, Ishares China (FXI), Emerging Markets (EEM) and Mexico (EWW).
  • Look for intraday trading swings to be less than 1% in the S&P 500 (SPY) and Russell 2000 Small Cap Index (IWM).
  • Long term interest rates stop rising.  Watch TLT iShares Barclays 20+ Yr. Treasury Bond (ETF).
  • High Yield Bond Mutual Funds turn up and take out their recent highs. Use (HYG) or (JNK) as a benchmark.
  • Momentum in intermediate and long term charts to turn more favorable, strengthening instead of weakening.
  • An improvement in market breadth daily and on a weekly basis.
  • Watch to see if the technology sector becomes a leader over the S&P 500. Watch the Nasdaq 100 (QQQ) and the Semiconductors HOLDR (SMH).  Also keep an eye on Apple, which has been under some selling pressure the past few weeks.
  • When the market declines notice the movement in VIX (an index that measures fear).  Look if VIX accelerates quickly or it moves up quietly.  When the market falls it would be a bullish sign if VIX moves lower.

The SPDR S&P 500 (SPY) Weekly Price And Channel

110916-weekly-newsletter

The chart above is the weekly SPDR S&P 500 (SPY) ETF that is comprised of 500 stocks of the largest companies in the U.S. The S&P 500 (SPY) broke below its trading channel breaking the uptrend (green line). The SPY looked like it would go lower however; there was no follow through to the downside and after the election reversed sharply higher.

What a difference a few days can make. An explosive rally developed after making a low during the night of the presidential election, the S&P 500 (SPY) closed at 216.50 on 11/9/16. The SPY is in the process of testing resistance between 217.00 and 220.00 from July 2016 highs (blue circle).  If the S&P 500 (SPY) can get through resistance, it could potentially go to the upper channel at 228.00.  If the market turns down, support is at 214.00 followed by 212.00 and 197.00.

The lower portion of the chart is the 12-26-9 MACD, a measure of momentum. It was a good sign MACD confirmed the high in July before generating a sell suggesting another attempt at the high would be made.  Momentum has stopped accelerating downwards, and has started to flatten, both good signs. Notice however that MACD is not in an oversold condition where major bottoms take place.  If the S&P 500 (SPY) does rise and break out to a new yearly high and touch the upper channel, there is a good chance MACD will not confirm and form a negative divergence.

Summing Up:

Investors’ perception changed quickly from bearish to bullish after the election upset by our new President Donald Trump.  The S&P 500 (SPY) rose sharply and is again challenging resistance at 217-220 area.  The upside target for the S&P 500 (SPY) is 228.00. Intermediate momentum indicators are not in position for a major bottom and not likely to confirm the recent strength, therefore upside potential could be limited once the dust settles. Stock selection is very important now, as the market is split. Investors are moving out of defensive sectors, market breadth is weak and new lows are increasing. More wide intraday swings are expected to continue. I recommend reviewing your holdings and not being overweight in one particular sector. Don’t rush into buying stocks; look for a safer entry in 3-6 weeks to add to your investments.

I would love to hear from you. Please call me at 516-829-6444 or email at bgortler@signalert.com to share your thoughts or ask me any questions you might have.

If you like this article, then you will love this! 

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*******Article in Systems and Forecasts November 10, 2016

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Disclaimer: Although the information is made with a sincere effort for accuracy, it is not guaranteed that the information provided is a statement of fact. Nor can we guarantee the results of following any of the recommendations made herein. Readers are encouraged to meet with their own advisors to consider the suitability of investments for their own particular situations and for determination of their own risk levels. Past performance does not guarantee any future results.

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No drama has occurred in the stock market as October comes to a close.  Investors continue rotating assets among different sectors as the major averages remain within a fairly tight trading range. For the short term the market is oversold and has favorable momentum patterns suggesting another attempt toward the highs is possible.  Supporting the market is strength in the Technology (QQQ) sector, trading near their highs for the year.   A big concern I have is the weakening momentum oscillators on the intermediate and long term charts on many stocks and several market indices.

As long as the support levels remain in-tact, the bulls remain in control.  Each time the market trades near the top or bottom of their range, prices stall and move in the opposite direction.  On 10/13/16, there was a small scare when the S&P 500 (SPY) slightly violated support at 212.00 intraday, tripping stops by investors. The S&P 500 (SPY) fell to a low of 211.21, however no heavy selling followed.  On the same day the S&P broke below support, the Russell 2000 Index (IWM) held above its key support at 117.00. These are very important levels that need to hold.

Stock selection now is more important since market breadth has weakened considerably since the blast off from the February lows. There has been a lot of selling pressure in October by investors in health care (XLV), utilities (XLU) and real estate (IYR).  Recently there were 104 stocks on the New York Stock Exchange Index making new 52 week highs, diverging from their peak reading earlier this year in July when there were 414 new highs. This is not a sign of a healthy broad market.  The good news is 9/22/16, the New York Stock Exchange Cumulative Advance Decline Line made a new high.  It’s very rare a market top occurs without at least another rally attempt toward new highs.   As long as support levels hold, look for another attempt for the stock market to break out to the upside.

What Charts You Want To Watch Now:

 

The SPDR S&P 500 (SPY) Daily With Channel (Top) and 12-26-9 Week MACD (Bottom)

 102516-spy-daily-use

The chart on the top is a daily SPDR S&P 500 (SPY) ETF that is comprised of 500 stocks of the largest companies in the U.S.   The S&P 500 (SPY) is 1% from its lower channel and near its recent low.  On 10/13/16, the S&P 500 (SPY) fell below support at 212.00, and made an intraday low of 211.21. Since then, there has been an unconvincing rally staying within a tight range. There is resistance above at 217.00. If the S&P 500 goes above 217.00 this will get the bulls excited.  Under 212.00 the odds are likely the bears will rule and if the S&P 500 falls below 211.00 then expect heavy selling.

The bottom half of the chart shows MACD, a measure of momentum.   One of my favorite technical patterns has formed a positive divergence suggesting the S&P 500 will go higher.   A positive divergence is when you make a low in price (top chart) and the oscillator doesn’t make a lower low, instead the oscillator reading is higher showing positive momentum.   This is exactly what is happening now in MACD.   An added bonus, there is not only a positive divergence but there is also a slight penetration of the down trend. Until the uptrend is broken, give the benefit of the doubt to the bulls.

 The SPDR S&P 500 (SPY) Weekly Price And Channel

102416-spy-weekly

The chart above shows that the S&P 500 (SPY) has broken out of its trading channel, penetrating resistance in July 2016 (red circle).   The S&P 500 moved higher at first and then pulled back retracing its breakout and now is moving sideways.  Notice on the recent sell off, the S&P 500 fell slightly below the channel making a low of 211.21 holding just the above up-trend line.  For now, the intermediate trend is intact (the green line) and the trend is up.   If violated it would not be a good sign for the final week of October or the start of November.  Next support is the middle channel at 197.00, 9.35% lower from today’s close at 214.12.

iShares Russell 2000 ETF (IWM) Weekly Price With Channel

102416-iwm-weekly

The chart above shows the weekly iShares Russell 2000 Index ETF (IWM) which is made up of companies with a market capitalization of between $300 million and $2 billion.   The Russell 2000 (IWM) rose sharply from its February bottom. The IWM failed on 9/19/16 at 125.88 to penetrate its high made on 06/22/15 at 129.10.  The IWM turned down but is holding above the middle channel and above the uptrend line (blue line).   Both the middle channel and the uptrend line are in the same area acting as support. As is the case with the S&P 500 (SPY) the intermediate trend remains up for the IWM. The upside channel objective is 138.00.    As long as the IWM is above 117.00, higher prices are likely, however if the IWM falls below for two days on a closing basis, the intermediate trend would turn negative and the odds of a potential decline rise dramatically.

Summing Up:

The tug of war between the bulls and bears has not been decided.  The S&P 500 (SPY) and the Russell 2000 (IWM) remain in their trading range.   The market is short term oversold, and there is a positive divergence on the daily S&P 500 (SPY), bullish.   As long as the support level remains in-tact, I recommend giving the benefit of the doubt to the bulls.    If the S&P 500 (SPY) closes below 211.00 for two days expect the bears to come out of hiding and wider market intraday swings.   Another point of reference is watching the Russell 2000, (IWM) to hold above its key support at 117.00.  For now, the tug of war between the bulls and bears remain.

I would love to hear from you.   Please call me at 516-829-6444 or email at bgortler@signalert.com sharing your thoughts, or ask me any questions you might have.

If you like this article, then you will love this! 

Click here for a free report: Top 10 investing Tips to More Wealth

*******Article in Systems and Forecasts October 26, 2016

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Download a Free chapter of my book Journey To Wealth

 

Disclaimer: Although the information is made with a sincere effort for accuracy, it is not guaranteed that the information provided is a statement of fact. Nor can we guarantee the results of following any of the recommendations made herein. Readers are encouraged to meet with their own advisors to consider the suitability of investments for their own particular situations and for determination of their own risk levels. Past performance does not guarantee any future results.

Remember to share:

The stock market has quietly advanced during the first half of August. The daily price movements over the past 25 days in the S&P 500, Russell 2000, and the Nasdaq 100 have been extremely small, ranging from 0.28% – 0.43% as prices have moved higher. As long as this phenomenon continues of low day to day volatility, downside risk will be contained.

Tape action remains encouraging, many major indices have broken through resistance levels that were in place for over a year and have made new all-time highs. Market breadth has supported the advance with The New York Stock Exchange (NYSE) advance-decline line also making a new high. A market top rarely happens at a final price high that is confirmed by the (NYSE) Advance-Decline Line.
The August through October period historically is not an ideal low risk environment to be invested in the stock market. During the third quarter of an election year, like now, the negative bias is not true.
Instead, it’s positive for the market.

Our models continue to suggest favorable market conditions, although not at the level where risk is
at its lowest. There are no blatant warning signs of a potential serious decline ahead; however there are a few small non-confirmations. I would like to see the transportation average confirm the Dow’s recent high and for the Russell 2000 Small-Cap Index to outperform the S&P 500 (SPY) and make a new all-time high.

All in all, the tape remains favorable, the bulls remain in control and I believe the advance will continue.

What Are The Charts Saying?

The SPDR S&P 500 (SPY) Weekly With Channel (Top) and 12-26-9 Week MACD (Bottom)

081716 SPY WEEKLY

The chart above is the weekly SPDR S&P 500 (SPY) ETF that is comprised of 500 stocks of the largest companies in the U.S. As of 08/16/16 its top 4 holdings in the S&P 500 were Apple Inc. (AAPL) 3.12%, Microsoft Corporation (MSFT) 2.40%, Exxon Mobil Corporation (XOM), 1.92% and Johnson & Johnson (JNJ) 1.79%. Investing in the S&P 500 (SPY) gives you a broad representation of the overall large-cap U.S. stock market.

The S&P 500 (SPY) finally broke out of its trading channel beginning December 2014 after penetrating the 212-214.00 resistance on 07/11/16. Old resistance is now key support if a pullback would arise. It would be bullish if the S&P 500 (SPY) remains above this level, increasing the odds of the SPY reaching the upside target of 228.00, 5% higher. Another point of reference to watch is if the uptrend remains intact from the February lows. The green trendline in the chart shows that this uptrend remains intact. As long as 204.00 is not violated, the intermediate trend is up. Remember the trend is your friend.

On the other hand, if SPY breaks below 212.00 this would be an early warning that the intermediate trend is in process of changing, and risk increasing. If the uptrend is broken, the middle channel at 197.00 would act as the next support level.

The bottom half of the chart shows MACD, a measure of momentum. MACD is on a buy, rising, above 0, and has confirmed the price high made in the S&P 500 (SPY). MACD needs to be monitored to see if and when it turns down.

This would be an advanced warning that momentum is weakening and that a potential change of trend could occur.

MACD is now somewhat extended, but no negative divergences exist and the uptrend remains in effect.

Therefore, no need to worry yet, continue to enjoy the ride.

Summing Up:

The stock market advance quietly continues. Our models remain favorable. Market breadth and price action is positive. The advance decline line has confirmed new highs in the S&P 500 (SPY) suggesting a final top most likely hasn’t been made.

Major market averages have broken through resistance to the upside after many attempts earlier in the year.

The uptrend from the February lows remains in-tact. The trend is our friend.

In the near term, unless the S&P 500 (SPY) closes below 212.00 for two days, the benefit of the doubt goes to the bulls for the S&P 500 (SPY) to continue higher toward the upside objective of 228.00.

I would love to hear from you. Please feel free to share your thoughts, comments or ask any question you might have. Call me at 1-516-829-6444 or send an email to bgortler@signalert.com.

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*******Article in Systems and Forecasts August 18, 2016

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Disclaimer: This is a hypothetical result and is not meant to represent the actual performance of any particular investment. Future results cannot be guaranteed. Although the information is made with a sincere effort for accuracy, it is not guaranteed either in any form that the above information is a statement of fact, of opinion, or the result of following any of the recommendations made herein. Readers are encouraged to meet with their own advisors to consider the suitability of investments discussed above for their own particular situations and for determination of their own risk levels.

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0317 S&P 500 Key PointsInvestors’ fears disappeared quickly when an appetite for bargain prices outweighed worrying about a potentially possible serious decline forthcoming. The stock market proceeded to rally broadly, very strong tape action with extraordinary breadth that has accompanied the rise which has not been seen for many years. If market breadth remains favorable (more net advances than declines consistently), then higher gains are likely. The S&P 500 (SPY) has gained 11% from its lows on 02/11/16.

The global markets also participated in the
advance. In particular, emerging markets are performing better. There has been an uptick in relative strength compared to the S&P 500, (EEM/SPY) after peaking 5 years ago. It’s still early to tell if this will be the time that another failure in strength takes place, which has been the case in the last few rally attempts, or if the emerging markets keep going, and potentially even lead the US market higher.

Investors have purchased securities that were very weak during the decline. Materials, financials, gold, silver, energy and international stocks have come alive, encouraging signs for further rise. Brazil (EWZ) is up 16%, (had been up 26%) Spain (EWP) Italy (EWI) and India (EWI) are all up over 9% in March. China (FXI), Emerging Markets (EEM), Russia (RSX), Germany (EWG) and Korea (EWY) are all up over 7% month to date (through 03/15/16).

Our models have steadily been improving, now positive (bullish), meaning most favorable, above-average profit potential with risk well below average.

The odds favor the U.S. market moving higher. However the advance might be ahead of itself and need more base building before they work their way higher. Also expect further sector rotation to be the focus in the next few weeks, with investors and institutions’ rebalancing their portfolios as the quarter comes to a close. The best type of market advance is the one that price makes higher highs and higher lows and price doesn’t give up much ground on declines, 1 or 2%, only minor pullbacks. A larger decline wouldn’t be encouraging. If overhead resistance is penetrated then a breakout to the upside would occur.

More time is needed to tell what the outcome will be.

The biggest concern to me is the technical damage that was done during the decline earlier in the year. Longer term monthly charts still remains front and center to my eyes with all the upside trend lines that were broken.

For example, Biotech, the Valueline Composite Geometric Average, and the weakening momentum warning of the S&P 500 QQQ/SPY ratio (see my article in the 02/18/16 newsletter) of the MACD of the RSI, all had disturbing trendline breaks.

Another question I keep asking now that the Dow and the S&P 500 (SPY) have had a slight penetration above their 200-day moving average is, will the bulls stay in control like they have the last few weeks, and the market break out to the upside, or will the bears will come out of hibernation and the rally will fail? Another important question “Was the latest rise from the February low a relief rally or something more?” Even with the all clear message from our models and the global markets participating in the advance, I am not totally convinced that the market is out of the woods yet. I would like to see the S&P 500 (SPY) fall no more than 2%, turn up and penetrate the overhead resistance for the charts to confirm the potential bullish outcome (see below) that could arise. If the market does fall further the S&P (SPY) needs to hold above 195.00.

What Are The Charts Saying?

The SPDR S&P 500 (SPY) Weekly With Channel (Top) and 12-26 Week MACD (Bottom)

spyweekly macd 031616

The top chart is the weekly SPDR S&P 500 (SPY) ETF that is comprised of 500 stocks of the largest companies in the U.S. As of 01/05/16 its top 4 holdings in the S&P 500 were Apple Inc. (AAPL) 3.21%, Microsoft Corporation (MSFT) 2.39%, Exxon Mobil Corporation (XOM), 1.93% and General Electric (GE) 1.66%.

SPY was near its lower channel five weeks ago, successfully testing the August 24 and January 19th lows. The S&P 500 (SPY) recovered 11% moving through the middle channel with ease, and now could be ready to challenge the top of the channel. For the very short term, a break above 204.00 will get the bulls interested again and a break below 200.00 may bring out the sellers. A breakout would occur if the S&P 500 could get through the critical point of resistance between 212.00 and 214.00 giving a higher objective to 228.00. If the market stalls and turns down from here, then goes below the middle channel, this would not be a good sign. The fear is the pattern on the S&P 500 (SPY) might be a significant top formation spread over time that could have serious implications going forward. Potentially the lows would be tested and this time the decline could be worse, projecting down to 165.00. For now, the decline has been contained and I give the benefit of the doubt to the bulls. I will be watching closely the action of the S&P 500 (SPY) in case the bear comes out of hiding and once again takes charge.

The bottom half of the chart shows MACD, a measure of momentum. MACD, although on a buy, the downtrend from May 2015 remains in effect (orange line). A bullish sign would be if MACD keeps rising and the down trend is broken sooner rather than later, and goes above the November MACD highs. This would indicate that the SPY is gaining momentum and higher prices lie ahead.

In our 01/08/16 Systems and Forecasts newsletter when the market started to fall fast I raised the question, “Will the decline continue, or will the market turn up from here? “ I gave the following positive signs that could indicate the end of the decline.

  • Overseas markets start to rise. Keep an eye on Emerging Markets (EEM), China (FXI) and Europe (IEV) as benchmarks.
  • The Value Line Geometric Composite, an unweighted average of roughly 1700 U.S. stocks gains strength showing more broad participation than only a few stocks rising.
  • Firming action in Biotechnology (XBI) and the Financial Sector (XLF, KRE)
  • Apple starts to rise again (APPL).
  • High Yield Bonds stabilize. Use HYG or JNK as a benchmark.
  • Less intraday volatility. Watch to see if VIX moves lower and can get below 18.00.
  • Oil stabilizes and stops falling. Watch oil (USO) and the energy sector (XLE).
  • Small caps (IWM) stabilize, turn up and then gain in relative strength compared to the S&P 500 (SPY).
  • S&P 500 (SPY) moves above 195.00 and stays above.

All of the above criteria occurred and the stock market rose sharply. The S&P 500 (SPY) is overbought in the short term, not necessarily bearish. Now once again is another critical time for the market. The principles above are all viable guidelines to give further clues if the S&P 500 (SPY) will breakout to the upside or if a market top is forming.

Summing Up:

Our models are bullish, giving the all clear signal with above-average profit potential with risk well below average.

For the very short term, a break above 204.00 on the S&P 500 (SPY) will get the bulls interested again and a break below 200.00 may bring out the sellers. I recommend having an exit plan in case the bears come out of hiding and the S&P falls below 195.00. Watch to see if the S&P 500 (SPY) goes through resistance between 212.00 and 214.00, giving a higher objective to 228.00. The odds favor the bulls!

I welcome you to call to share your comments, feedback or questions at 516.829.6444 or email bgortler@signalert.com.

*******Article in Systems and Forecasts March 17, 2016

 

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The Fed’s action in December of increasing rates for the first time since June of 2006 added to an already challenging year for stocks in 2015.

The last few days of 2015 disappointed investors. After the stock market started to show some encouraging technical signs, a year-end rally did not materialize. Buyers quickly turned into sellers after major market indices failed to get through overhead resistance, the same pattern that had occurred numerous times during the year.

The Nasdaq Composite finished positive for the year gaining 5.7%, mostly from a few stocks; Amazon (AMZN), Microsoft, (MSFT) Google, (GOOGL) Facebook (FB), and Netflix (NFLX). The S&P 500 index didn’t fare as well, finishing down for the year -0.7% (excluding dividends).

In case you were wondering why it was so difficult to make money in 2015 I will share some research by Glenn Gortler, Director of Research at Signalert. Out of approximately 4100 stocks tracked in our database:

• 57% of stocks were down for the year.
• 44% of stocks were down more than 10% for the year, and
• 32% of stocks were down more than 20%.

Even though some of the major averages showed small losses, only a few stocks led the indexes higher. If this trend continues, it could be even more of a problem going forward.

In my experience, during the first week of January crazy things happen. Large swings up and down occur frequently, and this year is starting off no differently. The first trading session of the New Year started poorly, after China’s Shanghai Composite lost 7%, halting trading overnight. The Dow Jones Industrial Average followed China’s lead, down more than 250 points at the opening bell, falling over 400 points intraday, before recovering some of their losses.

As I am writing this article (on January 7th) the market is down for the fourth day in a row, with double digit losses intraday.

My favorite sectors to watch for the direction of the market are not acting well. Technology (QQQ) Biotechnology (XBI), Semiconductor (SMH), Transportation (IYT), Finance (XLF) and Small Caps (IWM) all remain under selling pressure, and are not showing any strength yet, indicating that the decline is not coming to an end. Investors have moved away from high risk sectors.

On a positive note, research taken back to 1950 (by Joon Choi, Senior Portfolio Manager) shows if the S&P 500 is down more than 1% but less than 2% on the first day of January, the rest of the month is up 1.6% on average. Another hopeful sign is that momentum oscillators on some averages are no longer extended short term, and stocks are displaying potential positive divergences if they could turn up from here. Many stocks are down more than 20% from their peaks, already creating favorable buying opportunities when the market quiets down and selling pressure subsides. Time will tell. It remains to be seen if the market can hold on and turn up from here.

What Are the Charts Saying?

0107 spu weekly use with labels

The SPDR S&P 500 (SPY) Weekly ETF With Channel (Top) and RSI14 (Bottom)

The top chart is the SPDR S&P 500 (SPY) ETF which is comprised of 500 stocks of the largest companies in the U.S. listed on national stock exchanges, including over 25 different industry groups.

As of 01/05/16 its top 4 holdings in the S&P 500 are Apple Inc. (AAPL) 3.24%, Microsoft Corporation (MSFT) 2.49%, Exxon Mobil Corporation (XOM), 1.92% and General Electric (GE) 1.64%.

The SPY was near its top of its channel only 6 weeks ago. Each time the S&P 500 rallied, it was unable to break through resistance between 211.50 and 214.00. Failing to get through resistance, the S&P 500 (SPY) pulled back towards its up trendline from July of 2015 (orange line). The trendline was holding, but with today’s action (on 01/07/16) now it has been violated, and that’s not a good sign. The intermediate trend has changed to down. Also, the channel (the blue line), was penetrated at 195.00 and will act as short term resistance. The downside projection is towards the old lows, the bottom of the channel, at 180.00 (lower blue line).

The bottom half of the chart shows the Relative Strength Index, a measure of momentum developed by Welles Wilder. RSI is based on the ratio of upward price changes to downward price changes. In this case over the last 14 weeks RSI looked like it was going to rise and break through the down trend (pink line). This would have been a sign indicating that the SPY was gaining momentum, however with the decline it has turned down, signifying the S&P 500 (SPY) is losing momentum and potential lower prices lie ahead. The downtrend would have to be broken (pink line) for the bulls to regain control and the trend change from down to up.

The Big Question on all of our minds is: Will the decline continue, or will the market turn up from here? Positive Signs That Could Indicate the End of the Decline:

1. Overseas markets start to rise. Keep an eye on Emerging Markets (EEM), China (FXI) and Europe (IEV) as benchmarks.

2. The Value Line Geometric Composite, an unweighted average of roughly 1700 U.S. stocks gains strength showing more broad participation than only a few stocks rising.

3. Firming action in Biotechnology (XBI) and the Financial Sector (XLF, KRE)

4. Apple starts to rise again (APPL).

5. High Yield Bonds stabilize. Use HYG or JNK as a benchmark.

6. Less intraday volatility. Watch to see if VIX moves lower and can get below 18.00.

7. Oil stabilizes and stops falling. Watch oil (USO) and the energy sector (XLE)

8. Small caps (IWM) stabilize, turn up and then gain in relative strength compared to the S&P500 (SPY).

9. S&P 500 (SPY) moves above 195.00 and stays above.

Watch the last hour of trading if the market rallies or falls. If the market indices close near their highs of the day, it’s a good sign that this decline is short lived and better times are ahead. If the last hour of trading moves lower and prices settle near the lows of the day, then this decline could continue for a longer duration.

Summing Up:

2016 has started with a bang: an onslaught of selling pressure in both U.S. and global stocks that is still taking place as of this writing. The first month of January has historically had many roller-coaster rides. This year is no different. The tape is not acting well, to say the least, giving me the feeling that this decline could be more serious. The S&P 500 (SPY) weekly chart broke below support at 195.00, changing the intermediate trend from up to down. Daily volatility is increasing, ]not a good sign. The average daily movement in the S&P 500 (SPY) the past 25 days is now over 1% and rising. It looks like more selling to come. There is plenty of room to the downside towards the old lows, that coincides wth the bottom of the channel at 180.00 on the S&P 500 (SPY). Bottom fishing now without the market stabilizing could be dangerous. Be aware, there is a possibility the major trend has changed and a bear market has started.

If you have questions or comments on this article, please feel free to contact me at bgortler@signalert.com; phone: 1-516-829-6444.

Bonnie Gortler, Senior Portfolio Manager

 

*******Article in Systems and Forecasts January 8, 2015

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For the first five months of 2015 the S&P 500 (SPY) traded within a tight trading range that resolved to the downside in May, not amounting to much, and short lived. No real follow-through to the upside occurred, and then a 13.4% decline occurred in August. Healthy pullbacks along the way occurred as the market consolidated its gains.

The wall of worry remains. Sharp, quick trading swings up and down would keep one up at night, leaving one on pins and needles wondering if and when a major correction would occur.

So far none has happened and all is well.

Since the last newsletter on 11/12/15, the S&P 500 (SPY) left some clues indicating a further rally, showing its best week since October 2014, gaining over 3%. The odds favor the bulls over the next several weeks, with favorable seasonality upon us now, but the tape action needs to improve for the rally to be sustained into the New Year.

It’s been a challenge to be profitable. Few stocks are making new highs, and many stocks are down more than 10% for the year. There is room to the upside for the S&P 500 (SPY) along with other major averages if the rally could broaden in scope and penetrate the overhead resistance. With favorable seasonality here, I am optimistic that resistance will be broken soon.

Let’s Review the Tape Action of the 10 Clues for Further Guidance
New 52-week lows on the New York Stock Exchange were mostly above 100 in recent trading sessions. On 11/24/15 the reading was 67, the lowest since 11/05/15. I would like to see new 52-week lows under 50. It would be even better if the new 52-week lows could fall and stay below 25.

An optimistic sign is that the 10 Day Ratio of NH / (NH+NL) on the NYSE has turned up from an oversold condition, with a bullish double bottom formation in place.

Market breadth on the New York Stock Exchange continues to be disturbing even with last week’s advance. A consistent reading of more than 500 advances is still needed and would be a good sign of further gains ahead for a broader sustainable rally.The CBOE Volatility Index (VIX) (a measurement of fear) has gone below 19.00. The VIX as of 11/25/15 intraday is at 15.40. This is a good sign.

During the recent advance there was not a trading session when there was 9 to 1 more upside than downside volume on the New York Stock Exchange. On 11/16/15 the reading was close with 8.66:1.

Overseas markets appear stable but are not gaining in relative strength compared to the U.S.equity’s. Emerging Markets (EEM) as a benchmark remain above 33, but so far has not gone through the key level above 36.00. (On 11/25/15 intraday the EEM is at 34.67)

The Value Line Geometric Composite, an unweighted average of roughly 1700 U.S. stocks, remains below 473.00, the level that would imply another rally attempt will occur. (On 11/25/15 intraday the Value Line Geometric Composite was at 467.06).

More risky areas of the market are acting reasonably well. Healthcare (XLV), Biotechnology (XBI), Technology (QQQ), and Semiconductor stocks (SMH), are holding their ground well and look like they will move higher. No selling pressure in these areas is a plus for the overall market. Continue to observe if these sectors are stronger than the S&P 500 (SPY).

High yield funds and high yield ETF’s have been falling while U.S. equities were rising. The good news is December and January are historically good months for high yield bonds. I’m looking for more interest in this area from bond investors who are looking for yield. Continue to watch how the hi yield ETF’s (HYG) and (JNK) are doing intraday. They closed at 82.87 and 35.26 on 11/24/15.

A bullish signal of further advance ahead, is if the Russell 2000 (IWM) is stronger than the S&P 500 (SPY). In addition if the Russell 2000 (IWM) could get through resistance at 120.00, an upside objective to 130.00 is given. The intraday reading on 11/25/15 is 118.79.

What Do The Charts Say?

Daily (IWM)/ (SPY) Ratio (Top) MACD of IWM/SPY Ratio (Bottom)112515 iwmspy ratio daily

The top part of the chart on the right is the daily Russell 2000 /S&P 500 ratio (IWM/SPY ratio). A rising line means the IWM is stronger, and if falling, the S&P 500 is stronger.

As of 11/24/15 the ratio is rising. I am updating again because I feel it’s very significant for the small caps to participate for the rally to be sustainable. The Russell 2000 (IWM/SPY) ratio downtrend line was broken (orange line) to the upside.

Daily charts tend to give advanced notice of a potential trend change, however sometimes they are too early which was the case when a turn-up took place at the end of October. Once again, the ratio has turned up, but this time a bullish double bottom has developed. Another positive sign is the confirmation of the weekly ratio that has also turned up. (The chart is not shown).

The lower chart shows the MACD of the IWM/SPY ratio. A bullish rising double bottom is in place. The downtrend from June of 2015 (pink line) is close to being broken and could occur in a few days. The Weekly IWM/S&P ratio has also turned up, confirming the short term change in strength. As of 11/24/15 the IWM/SPY ratio is rising.

SPDR S&P 500 (SPY) Weekly with Operating Channels and MACD (Bottom)

112015 spy week channel
The top part of the chart above is the weekly SPDR S&P 500 (SPY) showing the operating channels that are acting as support and resistance areas. A break through the resistance area, above 211.50 and 213.78 would give further upside of the S&P 500 (SPY), to the channel objective of 229-230 (the green line). If the market were to decline now instead of going up, the next support area is 197.00. If this support area doesn’t hold, a more serious decline toward the old lows would occur near the lower channel at 180.00 (pink line).

The lower portion of the chart is the technical indicator MACD, (a momentum indicator). MACD is below 0, in oversold territory and now on a buy. The downtrend (green line) remains in effect for now and potentially could take 3-4 weeks of strength in the S&P 500 to be violated to the upside.

Summing Up:

The market has stabilized, as it rides along a wall of worry. U.S. equities are still digesting last week’s gains while investors position their portfolios for the final weeks of the 2015.

The market is not out of the woods yet, with market risk higher than I would like. Our equity models remain overall neutral, but if stocks continue to rise, the models would uptick to neutral-positive.

I am optimistic since we are in a time of the year that is historically very favorable for stocks. Tape action is starting to improve. Small caps are showing some signs of leadership over the S&P 500.

Many market indices are still below their overhead resistance, but could change soon. Follow the tape action that will give you clues to the strength of the advance. Watch the price levels of the S&P 500 (SPY) and the Russell 2000 (IWM) to see if investors are more interested in buying for a potential year-end rally. A break through 211.50 and 213.78 on the S&P 500 (SPY) would give further upside to the channel objective of 229-230 and if the Russell 2000 (IWM) could get through resistance at 120.00, an upside objective to 130.00 is given.

I wish you and your family a very happy Thanksgiving and a healthy wealthy happy holiday season.

It’s almost the end of the year. Need a second pair of eyes to take a look at your portfolio? Please feel free to call me at 1-844-829-6229 or email me at bgortler@signalert.com. I’d be happy to help.

*******Article in Systems and Forecasts November 25, 2015

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This is a hypothetical result and is not meant to represent the actual performance of any particular investment. Future results cannot be guaranteed. Although the information is made with a sincere effort for accuracy, it is not guaranteed either in any form that the above information is a statement of fact, of opinion, or the result of following any of the recommendations made herein. Readers are encouraged to meet with their own advisors to consider the suitability of investments discussed above for their own particular situations and for determination of their own risk levels.

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State of the market: The prospect of a December interest rate hike has increased, with the latest release of the employment numbers on 11/06/15. The unemployment rate fell to 5%, its lowest level since April 2008. This report has sparked some selling pressure in the bond sector. In addition, traders are processing the latest round of earnings and beginning to think about what is needed to rebalance their portfolios at year-end. All of these factors have caused a change in investor psychology as to where to invest and what to look for over the next few weeks.

The likelihood of a rate hike in December led to higher yields and profit-taking in stocks that pay higher dividends than the S&P 500 Index (2%). Investors took profits in stocks that pay higher dividends. Utilities (XLU) Real estate (IYR) and Consumer Staples (XLP) lagged the S&P 500 (SPY). Utilities (XLU) failed to get through their August highs, stopping at weekly resistance and not breaking the downtrend. With interest rates expected to rise sooner rather than later, it’s best not to have a large amount of capital allocated to these sectors until they stabilize. As rates rise, more selling pressure is likely in bonds.

The talk of a rate rise helped the financial sector, especially the banks, and the U.S. dollar, which is now close to highs made in April 2015. The rise in the dollar was bad news for Gold (GDX), Gold Miners (XME), and other commodity related stocks which fell sharply, and again are now near their lows. Emerging Markets (EEM) also has been weak so far in November, having given back some of the October gains. EEM failed to get through resistance at 37.00 as discussed by Marvin Appel in the 10/30/15 newsletter. However, (EEM) is not yet at the ideal bottom-fishing level of 31.50 for swing trading or covered call writing.

U.S. stocks have stalled as the Fed signals the likelihood of a rate hike in December. Time was needed to work off the near-term overbought condition that we have had since the large gains in October. Yet there has been no significant sell-off to speak of. My interpretation is that the pullback that has occurred so far has been healthy, with the market consolidating its recent gains.

I am looking for this consolidation period to end sooner rather than later. Our intermediate-term models remain neutral-positive. No changes have taken place as of yet to give an all-clear signal indicating that risk would be contained if a decline instead of a year-end rally were to occur. If market breadth improves along with small caps gaining strength over the S&P 500, the remainder of the year could signal further gains ahead.

SPDR S&P 500 (SPY) Monthly with Andrews Pitchfork ETF (Top) and MACD (Bottom)

S&P Monthly 111015 Newsletter
The top portion of the above chart is the monthly ETF S&P 500 (SPY) using an Andrew’s Pitchfork to show a low-high-low point configuration that I have connected with an upward trendline.

The pitchfork developed by Alan Andrews is one of my favorite charting tools. I have used it for over 30 years to help identify major trading channels. You can find the Andrews Pitchfork on most charting software packages, and it is easy to use. It requires three points, each marking an important pivot. You can use the Andrews Pitchfork on charts of any time period, adjusting it to your needs to help identify significant channels.

  • The S&P 500 (SPY) bounced off the monthly up trendline when it fell to 182.40 on 08/24/15, with
    investors stepping in to buy.
  • A quick, sharp rally followed.
  • Now, after large gains, the S&P 500 (SPY) has stalled.

There is more room to the upside with the upper channel at 220, but first the S&P 500 (SPY) needs to penetrate resistance at 211.50, the high made on 11/4/15, followed by 213.78, the old high from June 2015.

If investors decide to focus on rising interest rates, or investors decide to lock in some profits for the year before option expiration, a short term pullback or sideways action is possible, and would still be considered healthy after October’s large gains.

Support is at the 2015 October lows of 186.00.

As long as the up-trend line holds, I expect higher prices going forward. Favorable seasonality starts in November, which is historically a strong month, so I am not expecting a severe pullback at this time. The lower portion of the chart  is MACD; a momentum indicator.

MACD is not in the best condition after breaking the uptrend from 2009 and presently trading above 0. MACD will take months before the S&P 500 (SPY) resets and goes below 0 and a low risk buy could develop for the long term. The good news is MACD has no negative divergence in place, with MACD making a high along with the S&P 500 (SPY). Momentum is waning, but after many years of rising, this is normal. Keep an eye out to see if the S&P 500 (SPY) does takes out the high and if MACD doesn’t, forming a double top with a negative divergence. If this happens it would be bearish.

Summing Up

The long term uptrend is intact. S&P 500 has had a big run to the upside from the October lows, and is now trading in an area of overhead resistance.

Some profit-taking has transpired in recent trading sessions, as the S&P 500 (SPY) was short-term overbought after October’s big rally.

More backing and filling could occur, but no serious decline is expected with favorable seasonal tendencies upon us.

As long as the S&P 500 (SPY) remains above the up trendline the bulls will remain in control. Watch to see if the SPY can break through resistance above 211.50, followed by 213.78 with an objective to 220.00.

I would love to hear from you! Please feel free to share your thoughts, ask your questions or share your comments with me. Call 1-844-829-6229 or email me at bgortler@signalert.com.

*******Article in Systems and Forecasts November 12, 2015

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This is a hypothetical result and is not meant to represent the actual performance of any particular investment. Future results cannot be guaranteed. Although the information is made with a sincere effort for accuracy, it is not guaranteed either in any form that the above information is a statement of fact, of opinion, or the result of following any of the recommendations made herein. Readers are encouraged to meet with their own advisors to consider the suitability of investments discussed above for their own particular situations and for determination of their own risk levels.