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Technical Market Indicators
Dow Theory, W.D. Gann, MetaStock, system tester, indicator builder, custom formulas, momentum, overbought, oversold, buy, sell, signals, top, bottom, Bull, Bear, consolidation, sentiment, contrary opinion
August 19, 2019
Stock Market: short-term downtrend continues, with further price turbulence probable.
Preview from my weekly report*
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"With the recent yield curve inversion, the markets are again racing toward a U.S. recession forecast," according to ECRI, https://www.businesscycle.com
When the yield on 3-month Treasury Bills is higher than the yield on10-year Treasury Notes, the yield curve drops below zero and is said to be inverted. Yield curve inversions tend to be followed by economic recessions. Stock prices tend to decline in anticipation of recessions.
Current global political and economic backdrops still appear to pose significant risks.
A 37.27% minority of the S&P 500 stocks now are above their 50-day Simple Moving Averages (SMAs), down further from 43.29% the previous week. This indicates broad-based stock price weakness.
Despite a moderate oversold bounce on Thursday and Friday, the S&P 500 index closed the week further below its 50-day Simple Moving Average (SMA) and, therefore, remains no better than systematically neutral for the medium term.
The Cumulative Daily Advance-Decline Line (for NYSE stocks only) peaked on 7/5/2019 and also ended last week further below its 50-day SMA.
Sentiment indicators continue to suggest a correction of the previous overbought condition. It may take more price declines and more time to shake out stubborn bulls.
Historically, seasonal tendencies for the week ahead suggest choppy trading with reversals down and up.
Investment selection continues to make a significant difference. The LargeCap, S&P 500 stock price index ETF (SPY) is only 4.43% below its 52-week high, but the following index ETFs are underperforming and bearishly diverging: SmallCap (IWM) is 14.29% below its high, Dow-Jones Transportation (IYT) is 14.25% below its high, Emerging Markets ETF (EEM) 11.82% below, BRIC (BKF) 10.85% below, Foreign Developed Markets (EFA) 9.95% below, and MidCap (MDY) 8.67% below.
Long-term U.S. stock sector rotation is dominated by the outperformance of the Defensive sectors, indicating investor caution about economic prospects. The following best-performing sectors are demonstrating the greatest trend strength: Technology, Real Estate, Consumer Discretionary, Consumer Staples, Communication Services, and Utilities.
Meanwhile, the following Cyclical sectors are relatively weak for the long term: Energy, Health Care, Financial, Industrial, and Materials. With the exception of Health Care, which normally is Defensive, Cyclical sectors tend to rise and fall in anticipation of the ups and downs of the general business and economic cycle.
Foreign and Emerging stock markets remain substantially weaker than U.S. stock indexes. Both fell to their lowest prices since last January. Foreign markets are important because they have led the U.S. stock market at important price turning points in recent years.
The U.S. Dollar staged a moderate price recovery last week within its ongoing strong uptrend, making back most of the minor price pullback of the previous week. The Dollar rose to its highest price level in more than 2 years on 8/1/2019, reconfirming its systematically bullish long-term uptrend. Investors favor the U.S. Dollar when they lose confidence in the global economic outlook.
Gold (GLD) price rose to its highest price level in more than 6 years on 8/15/2019, reconfirming its systematically bullish uptrend. GLD remains systematically bullish. Gold Miners (GDX) and Silver (SLV) also remain systematically bullish.
Copper (JJCTF) rose slightly but remains systematically bearish. The price of Copper is sensitive to dimming prospects for global economic growth.
Oil (USO) rose slightly but remains systematically bearish. Oil broke down to its lowest price level in more than 7 months on 8/7/2019, confirming a long-term downtrend. The price of Oil also is sensitive to prospects for global economic growth.
U.S. Treasury bonds (TLT) and notes (IEF) both broke out to new all-time highs on 8/15/2019, again confirming their preexisting systematically bullish trends for the long term.
The full report offers clear and unbiased guidance on the following each week:
Global stock markets
The Defensive stock sectors
The Health Care sector
The Cyclical sectors
The Technology sector
The Financials sector
U.S. bonds and notes
Commodities (Oil, Metals, Agriculture)
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Analysis of market forces may offer a sense of probabilities. But the many variables that can impact market prices are notoriously difficult to predict. And, market analysis is something less than an exact science. So, sound trading tactics are always recommended. See my Money Management Rules.
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