Tutor Your Trade

Tutoring for your Investment trading

Tutor Your Trade

Welcome to Tutor Your Trade

Tom Aspray is the driving force behind Tutor Your Trade.  Tom has been analyzing and advising institutions and investors on the financial markets since the early 1980’s.

From his extensive biochemistry research using computers in the late 70’s, Tom envisioned the potential for applying his research techniques to the financial markets.  Through rigorous and methodical analysis Tom developed his own unique methods of computerized technical analysis.  These methods have been taught to financial professionals around the world.

In 1982 Tom became the research director for a financial advisory firm and the early use of professional technical analysis software provided a platform for testing many of the analytical methods that are used by today’s traders and investors. Tom’s work has been highlighted in books by both John Murphy and Stanley Kroll and he is well respected in the financial community for his knowledge and approach to the markets.

For the past 8 years Tom has provided general market commentary through Forbes, Moneyshow and PA Stock Alerts. In Tutor Your Trade, his insights and techniques are available to a select group of traders and investors on a 1-1 basis or you can join in each day to his pre-market analysis session.

The Week Ahead: Will The Market Trump Skeptics

Posted by on 8:01 pm in Technical Analysis | Comments Off on The Week Ahead: Will The Market Trump Skeptics

The Week Ahead:  Will The Market Trump Skeptics

The 184 mid-day drop in the Dow Industrials last Thursday caused a spike in the bearish sentiment as most attributed the decline to the lack of real information in the Trump press conference. It did not take long until the Wall Steet Journal headline “Dow 20000, Maybe Never” emerged. Several of the traders in their regular mid-day appearance voiced concern over the outlook for the banks  which were down sharply in the morning. It had only been a month since there were some who wanted to buy them at any cost. In Wednesday’s technical review I reviewed the positive outlook from the advance/decline lines for both the PowerShares QQQ Trust (QQQ) and the Spyder Trust (SPY). The daily A/D lines do not show any signs yet of a imminent correction.  It would take several down days that were much worse than last Thursday to signal that a correction was underway. To learn more about A/D line analysis read “One Indicator Stock Traders Must Follow”. The daily chart of the PowerShares QQQ Trust (QQQ) shows the strong close Friday with the weekly starc+ band now at $126.44.  The initial yearly pivot resistance at $128.73 is the next target I am watching for traders. The width of the trading range, lines a and b, was upside targets in the $125-$126 area. The daily Nasdaq 100 A/D has turned sharply higher which is a very bullish development.  The A/D line had surged to a new high in December as it overcame the resistance at line c. There were signs in December that the tech sector was going to start leading the market higher. For Viper ETF clients long positions in the QQQ and the Technology Sector (XLK) were recommended in December. The ongoing media debate about the status of the Trump Bump or the post election stock market rally is becoming a prevailing media theme. It reminds me of the monthly debates over what the Fed will do at their next meeting which has been distracting investors for years.  In the past uncertainty about whether the Fed will act or not I believe has kept many investors out of the markets. The goal of my columns as well as my advisory services has always been to help investors gain a greater understanding of the markets.   I firmly believe that those who are willing to do the work can become their own investment advisor. Successful investors learn not to get caught up in the prevailing themes that are often the focus of the financial media. Over the years I have observed that many investors are often impacted by the media and do not act or worse have changed their strategy because of the headlines.   This is what happened during the severe market corrections in 2010 and 2011 when many were warning of another recession. The concern that the Trump rally will fail in my opinion is just a new addition to the wall of worry that has kept many investors out of the stock market.  In February of 2016 there were even more reasons to stay out of stocks  which I outlined in  “Should Investors Ignore “The Wall of Worry”?. It is my view that the tremendous surge in optimism after the election will have a lasting impact in 2017 even though reality...

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Charts Talk In Spite Of Market’s Nervousness

Posted by on 6:21 pm in Uncategorized | Comments Off on Charts Talk In Spite Of Market’s Nervousness

Charts Talk In Spite Of Market’s Nervousness

The stock market has been nervous this week as it has the earnings season, confirmation hearings and president Elect Trump’s long awaited press conference to put it on edge.  The daily gyrations in the stock market often mask what is taking place internally. The Spyder Trust (SPY) was unchanged on Tuesday while the Dow Industrials were a bit lower and the NYSE Composite was a bit higher.  In contrast on the NYSE there were 1924 stocks advancing and just 1075 declining Tuesday which was a sign of internal strength. So far in 2017 the Powershares QQQ Trust (QQQ) has gained 3.38% versus just a 1.77% gain in the Spyder Trust (SPY).  In 2016 the QQQ came quite close to its yearly pivot levels as the high at $121.52 was close to the initial yearly resistance at $122.06 and the low early in the year at $93.80 was above the year  S1 support at $91.28. The Yearly Pivot Table shows the actual price ranges as well as the pivot projection for 2016.  For 2017 the pivot stands at $111.27 with the initial yearly pivot resistance at $128.73.  These will be the key levels to watch and if the QQQ should surpass the R1 resistance then the focus would be on the R2 resistance at $138.99. The daily chart of Powershares QQQ Trust (QQQ) shows that it has been testing the daily starc+ band for the past few days as it is well above the strongly rising 20 day EMA at $120.25. The QQQ dropped below its EMA at the end of the year. The Nasdaq 100 advance/decline  line made a new high on Tuesday as it slighly surpassed the December high. The A/D line is above the rising WMA with more important support now at line b. There are upside targets for the QQQ in the $125-$126 area. The Spyder Trust (SPY) formed a doji on Tuesday which is a sign of indecision and is quite close to its 20 day EMA at $225.78. The daily starc- band is at $224.65 with more important support at $222.73, line c. The S&P 500 A/D line moved above its WMA on November 8th (point 1)  and stayed above it until the latter part of December. The S&P 500 A/D line has not yet made a new high in 2017 (point 2) so it has been diverging from the December high. A decline in the A/D line below support at line d and the late December low is needed to confirm the divergence. A daily close above $228 will signal a move to the $230-$232 area. What to do?  The intermediate term analysis for stocks is still clearly positive as is the daily analysis. A correction back to good chart and retracement support would not be surprising in the next few weeks. The recent positive technical signs on the health care, biotech and transportation sectors indicated they are becoming market leaders. A Trading Lesson that focuses on the yearly pivot analysis for the key market tracking ETFs and the major sector ETFs will be sent out to new and existing subscribers of both the Viper ETF Report and the Viper Hot Stocks Report at the end of the...

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2016 Price Ranges Were Spot On, What About 2017?

Posted by on 2:09 pm in Stock market strategies, Technical Analysis | Comments Off on 2016 Price Ranges Were Spot On, What About 2017?

2016 Price Ranges Were Spot On, What About 2017?

Stocks opened the New Year on a positive note as the major averages closed with nice gains and the 3-1 positive advance/decline ratios were a good sign. The new high in the Spyder Trust (SPY) last week was confirmed by a new high in the S&P 500 A/D.  The daily A/D lines did turn higher Tuesday but to signal a new rally phase we need to see several more days of strong market internals. For many years I have lamented the financial media’s focus on year-end projections for the major averages. The gyrations in 2016 forced many Wall Street strategists to revise their outlooks throughout the year as I reviewed several weeks ago  (How High Can The Market Forecasts Go?) I am lucky that unlike many of these market professionals my job description does not require that I make a year end price forecast.  The price targets I provide are based on chart formations and other hard data not on projected earnings or macro views of the economy.   The pivot price projections focus on the yearly price ranges but not where stocks will end up at the end of the year. The discussion last weekend on the yearly price projections for the Dow Industrials spurred many email requests for a more in-depth discussion. The chart of the Dow shows that the pivot analysis based on the 2015 price ranges did a good job of identifying the Dow’s price highs and lows for 2016. The close on January 6, 2016 at 16, 906 was well below the Yearly Pivot at 17,048 and just nine days later the Yearly S1 support at 15,746 was violated with the Dow trading below it for two days. The actual low for the year at 15,450 (point 1) was 1.3% below the yearly S1 support.  At the February 11th low (point 2) the Dow dropped briefly to 15,503 but one week later it closed at 16,413. By early March, point 3, the Dow closed back above the yearly Pivot as it subsequently rallied 1000 points  to reach a high of 18,167 on April 20th. This was just below the Yearly R1 resistance at 18,727.  After the Brexit vote the Dow dropped to a low of 17,063 (point 4) but held just above the Yearly Pivot. The Yearly R1 resistance at 18,727 was surpassed the week of the election (point 5) which made the next upside target at 20,029, the Yearly R2 resistance. The yearly high for the Dow at 19,987 was just 0.2% below the pivot R2 resistance. For 2017, the pivot stands at 18,430 with the R1 resistance at 21,320 which is 7.9% higher than the 2016 close.  The Yearly S1 Dow support at 16,873 is 24.6% lower. The gains of the small cap iShares Russell 2000 (IWM) in 2016 were impressive. The chart shows that the January plunge took the IWM to $92.21 which was just below the Yearly S2 support at $92.39. It was not until early June, point 2, that the Yearly Pivot at $114.17 was overcome. On the sharp drop in late June IWM held above the May low. The Yearly R1 resistance at $123.42 was exceeded in September but was not convincingly overcome despite several attempts. The pre-election market correction dropped IWM to $114.41 which was just above the...

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The Week Ahead: Too Many Stocks & Too Much Holiday Cheer?

Posted by on 6:31 pm in Uncategorized | Comments Off on The Week Ahead: Too Many Stocks & Too Much Holiday Cheer?

The Week Ahead: Too Many Stocks & Too Much Holiday Cheer?

The stock market was quiet ahead of the Christmas holiday which is not surprising as many investors and traders started their holiday early.  For the 2nd week in a row the Spyder Trust (SPY) has formed a doji which is a sign of indecision. Clearly the enthusiasm over the Trump rally has waned over the past two weeks and the number of bearish articles has picked up. The concerns over the market’s health have again focused on the arguments that stocks are too expensive, sentiment is too bullish and the bull market is too old. It is not surprising that some are starting to acknowledge some potholes on the yellow brick road. It seems as though some of the proposed cabinet members are behind schedule in the vetting process. Many believe that uncertainty has limited the economic recovery over the past few years so talk about increasing the nuclear arsenal and heightening tensions with China are not reassuring. The better than expected 3.5% reading on 3rd quarter GDP did not give stocks much of a boost but the continued improvement fits in nicely with the bullish post-election scenario. Most economists are not that convinced as the Wall Street Journal’s survey of economists is looking for an average GDP growth of 2.2% in 2017 and 2.3% in 2018. They are looking for inflation to run at 2.2% and then 2.4% in  2018 with only a 19% chance of a recession. The most popular reason that some feel stocks can’t go higher is based on the P/E ratio. Of course the debate on which P/E ratio is more accurate has not slowed down since October when I featured this chart comparing the views of Robert Shiller and Jeremy Siegel. The post-election rally has triggered another dire warning from Nobel prize winner Shiller who warns that valuations are now near levels seen just before the 1929 crash. As a market technician I do not focus on the P/E or other fundamental data as long as the bull market is still intact. The P/E worries will be right at some point but I believe the technical studies will warn of a bear market well ahead of the P/E ratios as they did in 2000 and 2007. I do pay attention to the P/E of the key sectors and industry groups as those that are perceived to be cheap often have the best gains once the technical indicators give the signal. In my October 22nd column ” Market Insights From Past Election Years” I pointed out that for the Dow Jones Financial Sector ($DJUSFN)  ” The weekly relative performance broke its downtrend (line d) in August and then pulled back to its WMA. The way the RS line has turned up from its WMA consistent with a market leader.” The updated chart illustrates the close on October 21st (line 1) as $DJUSFN dropped to a low of 436.78 just before the election  and closed on Friday at 507.43 as it is up over 16% from the low.  The DJUSFN has been testing its weekly starc+ band for much of the past six weeks so a pulback would not be surprising. The completion of its long term trading range has major upside targets in the 540-560 area which is 10% above current levels. In last...

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The Week Ahead: How High Can The Market Forecasts Go?

Posted by on 7:13 pm in Uncategorized | Comments Off on The Week Ahead: How High Can The Market Forecasts Go?

The Week Ahead:  How High Can The Market Forecasts Go?

The one-day market decline on the long awaited Fed rate hike was well supported even though the potential plan for three hikes in 2017 rattled a few investors.  The market bulls are still clearly in charge with the financial media beating the drums with a fervor that has not been seen in some time. Even though there is no reason to doubt the market’s rally right now anytime the financial press chants “no reason to sell” I do get nervous. Typically it would take a 3-5 day decline to change the tune of the headline driven financial press but without a correction the bullish commentary still dominates. Clearly the market sentiment has seen a dramatic shift.  In my column published last August “What’s Missing From This Bull Market?”  I focused on the fact that throughout the bull market there had not been a period of investor euphoria. This goes back to the famous quote from legendary investor John Templeton that bull markets “die on euphoria.” The psychology of a market cycle is nicely illustrated in the chart above and typically the euphoric phase is accompanied by greater individual participation in the stock market. The most recent data suggests that a large percentage is still not invested in stocks but the interest has clearly increased. According to AAII the most recent survey of individual investors 44.7% are now bullish but only 23% were bullish before the election.  The bearish % stands at 32.3% and is well above the extreme low in the 20% area.  The professionals have also become much less bearish as the very high cash levels have dropped significantly in the past month. It should be no surprise that the forecasts from the major Wall Street strategists have seen a major turn. Seasoned investors but not all columnists realize that these forecasts often go through dramtic changes during the year. Frankly these forecasts do not play any role in my outlook and I often use them as a contrary indicator. In August I commented that “The new high in the major averages and leading action of the advance/decline lines has still not convinced everyone of the positive market outlook as Goldman Sachs advised their clients on August 1st to “avoid all stocks for the next three months”. They are also sticking with their year-end target for the S&P 500 at 2100 which is 3.7% below current levels.” This table from the Wall Street Journal  reveals their forecasts for 2017 and the high end at 2400 for the S&P 500 would imply just a 6.6% rise from current levels. If you want to learn more about the accuracy of their forecast I would suggest you read this excellent New York Times article by Jeff Sommer.  In reviewing the strategist’s forecasts he quotes independent statistician Salil Mehta “It’s not easy to be as bad as they are.” The post election rally is not unprecedented as the Wall Street Journal pointed out (Stocks’ Biggest Postelection Rally Ever) there have been “five other instances in which the Dow jumped at least 5% in a five-week period following a presidential election.” The most recent example occurred in 1996 as the Dow Industrials rallied from 6081 on November 5th to a high of 6606 on November 26th which was a gain of 8.6%. This...

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The Week Ahead – The Markets According To Trump

Posted by on 11:03 pm in Technical Analysis | Comments Off on The Week Ahead – The Markets According To Trump

The Week Ahead – The Markets According To Trump

For investors 2016 is likely to be the best Christmas in many years especially in light of how the year started out. The stock market’s perception of how stocks will benefit in the new Trump world has clearly caused a stampede into stocks.  A several billion-dollar buy program hit the market last Wednesday afternoon which triggered one of strongest daily gains. The focus has been on the Dow Industrials as a number of traders were wearing their Dow 20,000 hats on the NYSE floor last week. Until last week the Dow’s rally has been narrowly based as according to Paul Hickey from Bespoke ” The top five stocks account for 700 of the just under 1,300 gain” with Goldman Sachs (GS)  contributing 400 points or almost 1/3 of the Dow’s gain. With Caterpillar (CAT) the Dows best YTD gainer up over 47%, there are four Dow stocks, Nike (NKE), Cocas-Cola (KO), Pfizer (PFE) and Disney (DIS) are all still down for the year. Disney has regained much of its losses as it is now up over 12% this quarter. The weekly chart of Goldman Sachs (GS) shows that it broke its weekly downtrend in August, line a, when it closed at $162.11. The weekly relative performance completed its bottom on October 14 (line 1) as the RS broke its downtrend (line a). This was confirmed by the move in the RS above resistance at line c. It is up 33% since the election. The stock is now very close to its all time high of $247.92 from the end of October 2007. Now maybe the stock ‘s strength is based on the anticipation that deregulation will make GS even  more profitable than it was in 2007. Of course it is also possible that the stock is rising because of the influx of Goldman executives into the new Trump administration. On a personal note  I am not in favor turning the Treasury Department over to another Goldman employee as their past performance has been less than impressive. Now either explanation could be bullish for the stock of Goldman Sachs but does that mean you should now jump into the stocks that have been leading the Trump rally? The powerful action last week (see Market Wrap) does favor even higher prices as we head into the end of the year but things may be different as we move into 2017. In my many years observing and investing in the stock market I have found that getting into crowded trades has generally turned out badly.  Instead those markets that are out of favor generally have a much better risk as well as reward profile. The dismal performance of hedge funds who often pile into the same trade is an example of how this approach does often not work.  Financial stocks make up about 12.8% of the S&P 500 while information technology makes up more that 21%.  Health care makes up 14.7% and it could bottom in the coming weeks. The beaten down consumer staples sector has a weighting of 9.9% but it is only up 4.8% YTD.  Both the Technology Sector Select (XLK) and Consumer Staples Sector Select (XLP)  have been recommended to Viper ETF traders. Both were recommended with just a 5% initial risk while buying the SPDR S&P Regional Banking...

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The Week Ahead: Risk Control In A Trump Market

Posted by on 12:13 pm in Uncategorized | Comments Off on The Week Ahead: Risk Control In A Trump Market

The Week Ahead: Risk Control In A Trump Market

As the euphoria in the stock market continues to build with each new high in the major averages .  The extent of the rally and the fund flows suggest that some investors are now  investing with little regard to risk. Some of the professional media analysts were not exhibiting much caution even though a guest analyst suggested waiting to buy the the financial stocks like the regional banks.  In the short period since the election it seems that many have thrown caution to the wind with a few analysts using those most dangerous words “this time is different.” The rally has focused on the Russell 2000 and the financial sector. The last fifteen-day winning streak in the Russell 2000 occurred in February 1996, According to the Wall Street Journal  the Russell 2000 was 2.4% higher after the long winning run in 1996 and was up 8.7% in the next three months. The gain in February 1996 was 6.1% much less than the current 12.7% gain. The starc band analysis has had a good record of alerting investors and traders to price extremes in stocks, ETFs and commodities. The bands were developed by the late Manning Stoller who was a colleague for many years and he had great market insights. These bands are based on adding or subtracting two times the average true range (ATR) from a moving average. Manning had determined that using 2 ATR would incorporate 92% of the price activity but if 3 ATR were used about 99% of the price activity would stay inside the bands. When prices are above the stac+ band prices are in a high-risk buy or a low risk sell area.  If prices are below the starc- band they are in a high-risk sell area or a low risk buy area. These bands are used extensively in both the Viper ETF Report and Viper Hot Stocks Report to indentify high or low risk buy or sell areas as well as to determine profit-taking levels. Three weeks ago the Russell 2000 Index closed at the weekly starc+ band and for the past two week’s it has closed well above the 2XATR band (point 3).  With Friday’s close at 1342 it is now just 1.3% below the 3XATR band (in blue) at 1360. Since 2001 the 2XATR starc+ band has only been tested and exceeded one other time which was in May through early June of 2003. After the 2XATR was first reached (point 1) it was tested for the next two weeks before a 3.7% correction that lasted one week. This was followed by a 14.7% rally that lasted three week as the 3XATR starc+ band was reached at point 2.   The Russell 2000 traded sideways to lower for the next four weeks as it corrected over 6% before the uptrend resumed. Clearly the Russell and the iShares Russell 2000 (IWM) are now in a high-risk buy area as using a stop under the 20 week EMA at $122.36 would mean a risk of 9%.   The current analysis indicates that a 3-5% correction is very likely before the end of the year but it still may come from higher levels. In the October 22nd column “Market Insights From Past Election Years”  I discussed the bullish action of the DJ US Financial Sector (DJUSFN) ...

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The Week Ahead: Buy, Sell Or Hold?

Posted by on 5:45 pm in Stock market strategies, Technical Analysis | Comments Off on The Week Ahead: Buy, Sell Or Hold?

The Week Ahead:  Buy, Sell Or Hold?

The summer ended with a long list of big name investors who shared their dire forecasts for the global stock markets. Some were looking for a 10-15% correction but others were looking for much more.  Individual investors were also skeptical about the stock market as according to AAII just 23.6% were bullish on November 3rd while over 42% were neutral. In last Thursday’s survey 46.65% are now bullish while the neutral camp has dropped to 26.77%. The bearish % is at 26.6% as it has only dropped 8% from before the election.  The bullish % reading is the highest since February 19th 2015. According to AAII  “There isn’t a clear trend as to how the market has performed following unusually large two-week increases in bullish sentiment. The median six-month gain for the 13 periods when there was a larger two-week increase in optimism was 5.9%. Though above the historical median for all periods, the number is skewed upwards by a 34.5% gain following the two-week, 26.1 percentage-point increase in optimism on March 19, 2009.” The bullish % is still well below extreme levels as the highest reading during this bull market was 63.3% on December 23, 2010 (point 1). The S&P 500 did see a 6% drop in February and then peaked in May which was a 9% gain from the December 23rd close. As the chart indicates the bullish % rose to 57.9% on November 13, 2014 (point 2) and then the S&P 500 continued to grind higher until May of 2015 as it gained 4.5%. In my experience a high reading in the bullish % is not a sell signal as the market rally can continue for some time. Maybe this is the start of the stock market’s euphoric stage that is typically the last stage of a bull market as was pointed out in the famous quote from John Templeton .  I commented in August (What’s Missing From This Bull Market?) that historically major tops such as those in 1929 and 2000 have been accompanied by more investor participation and euphoria. The public participation in the stock market is still quite low which is also not normal for a bull market top. Maybe this is starting to change as $44.6 billion has moved into equity ETFs since the election. A good part of the funding has likely come from the bond market as the dramatic rise in yield and drop in prices has panicked many investors. Barron’s reported that the 4% decline in Bloomberg Barclays Global Aggregate Index was “the biggest two-week loss in more than a quarter-century.” It has been a tough eight days for those trying to buy the index tracking ETFs or the financial sectors as there has been little in the way of a pullback to buy. I think that those who jumped into the market late last week may have to take some heat as I think there will be a better risk entry point in the weeks ahead. I place considerable emphasis on the entry price for all ETF or stock positions as I discussed in a recent article “Finding The Best Entry Levels”. I have found that too many investors and traders get caught up in the emotion of the market especially when it is moving relentlessly higher and therefore they...

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The Week Ahead: Investors Dodge A Bullet

Posted by on 12:07 pm in Uncategorized | Comments Off on The Week Ahead: Investors Dodge A Bullet

The Week Ahead: Investors Dodge A Bullet

It is doubtful that anyone will forget last week for many years to come. The political and financial ramifications will have an impact for the next four years or more.  Though it is way too early to guess what will happen it is doubtful than pollster will be one of the top ten career choices for new college graduates. It was certainly perplexing week for the market but last week’s action is should influence stocks for the rest of the year.  The corrective patterns in the A/D lines as we started the week suggested the bounce before the election did not mean that the correction was over but the post-election action has changed that view. The futures markets conviction over a Clinton victory ended about 8:00-8:15 EDT as after trading as high as 2152.50 it closed at 2140.25. The selling was relentless for the next four hours as the S&P futures bottomed out at 12:15 AM as the S&P futures hit a low of 2028.50. At the lows the S&P futures were down 107 points or over 5%. Just over four hour later the futures were back above the 2100 level. The fact that the selling was absorbed by the futures market overnight was a blessing for investors but not all traders. Those were long inverse ETFs or put options did not have the opportunity to reap the same gains as futures traders.  If the futures had even been down 40-60 points when stocks opened at 9:30 AM Wednesday morning it would have been ugly. It is likely that panic selling would have occurred as many widely held ETFs would have opened sharply lower taking many investors out of their positions near a short-term market low. This is why I feel investors really did dodge a bullet on last Wednesday’s open. It could have been as bad as August 24th of 2015 when the Dow Industrials dropped 1000 points in early trading. The chart above from an SEC Report shows that the S&P futures were  down slightly over 5% as the stock market opened.  In just five minutes the futures were trading almost 7.5% lower and the SPY was trading down 7%. The SPY had dropped 5.6% the previous week so the sharply lower opening added to investor’s pain but 10 minutes after the lows the losses had been cut in half. From the low on Monday August 24th at $177.63 the SPY rebounded to close the week at $194.03 as it was up slightly for the week. It was not until early October (A Surprising Turn In Stocks This Week?) that the market internals indicated that a bottom was in place and that a buying opportunity was at hand.  There are some ways that once can identify a panic low and one of my favorite techniques is to use the starc bands. This weekly chart of the continuous E-mini S&P 500 contract reveals that since 2014 prices have only dropped below the starc- band five times.  The long tail (the bar under the candle body) is an indication of demand at lower levels.  In early February of 2014 (point 1) the futures had a low of 1732 on Wednesday and then closed the week at 1793 as the NYSE A/D line moved above its WMA. There was a...

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The Week Ahead: A Trick or Treat Market?

Posted by on 2:10 pm in Stock market strategies, Technical Analysis | Comments Off on The Week Ahead: A Trick or Treat Market?

The Week Ahead: A Trick or Treat Market?

Just after noon on Friday it seemed as though stocks were going to finish the week slightly lower for the week but then the news from the FBI regarding new emails rocked the market. The S&P futures dropped 20 points in just over an hour. Though the market recouped much of these losses the tone of the market definitely changed. Investors are wondering whether the start of the new month will mark the start of a new more friendly market or whether the end of October is setting the stage for more investor pain. In last week’s column I looked at the last three-election year markets (Market Insights From Past Election Years) and concluded that the price action was the most similar to 2012 when there was a sharp post election decline. Let’s look at some of the positive and negative factors that are likely to impact stocks for the last two months of the year. The Positives According to the Investopedia  Sell in May and Go  Away  ” Since 1950, the Dow Jones Industrial Average has had an average return of only 0.3% during the May-October period, compared with an average gain of 7.5% during the November-April period.” Looking at the seasonal pattern for the Spyder Trust (SPY) going back to 1988 reveals that it typically bottoms in early October (line 1) and tops in late May (line 2). The weekly chart shows a short-term flag formation that requires a weekly close above $216.70 for an upside breakout and a close below $211.24 for a downside break. The weekly chart shows major support line a, is at $207.60 with the rising 40 week MA at $206.80. The bullish sentiment for the stock market is still quite low with just 24.8% bullish according to the AAII survey of independent investors. The level of bullishness is close to levels normally seen at market lows. As I noted at the February lows (Is There Blood In The Streets Yet?) “According to AAII the bullish% dropped 8.3% in the latest survey to 19.2% bullish just above the 17.9% reading from mid-January .”  At the bear market low on March 5, 2009 only 18.9% were bullish. The analysis of the number of the S&P 500 stocks above their 50-day MA shows that the 5 day MA is at 34% which is well below the mean at 56%. The trend of the MA is still down, line a and at the October 2015 and January lows the MA stropped below 16%.  These low levels when accompanied by bullish signals from the market internals created low risk buy signals for Viper ETF subscribers. The surprisingly strong advance reading of 2.9 for 3rd quarter GDP is an encouraging sign and is consistent with the improvement in some of the other economic data. The manufacturing sector could still do either way and needs to see significant improvement in the coming months. The strengthening economy is consistent with the sharp rise in yields from the July lows. The 38.2% resistance at 1.791% from the June 2015 high at 2.489% has been overcome. The 50% resistance is at 1.924% with the downtrend (line a) and the 61.8% resistance at 2.056%. There is additional resistance from the 2014 and 2015 highs, line b, at 2.258%. This earnings season so far has been better than...

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