technical analysis, trading systems, investing, market-timing methods, stock market, money management
www.robertwcolby.com
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
Page Links:
Robert W. Colby Can Manage Your Account

February 21, 2020

Stock Market: is a downside correction at hand?

Preview from my weekly report*

Our asset management clients have made significantly positive absolute and relative returns while taking much less risk. We offer complete transparency, anytime access to your funds, and low fees. You keep control over your money. See:
ColbyAssetManagement.com

RSI and MACD oscillators rolled over to signal a downside correction, after failing to confirm the higher high by the S&P 500 on Wednesday 2/19/2020.

The S&P 500 price index (now at 3337.75) rose to a new all-time closing price high on Wednesday 2/19/2020, but it could not hold on to its gains and closed 1.25% lower for the week.

Long term, the S&P 500 has remained consistently systematically bullish since 10/10/2019, when price moved above both the 50-day SMA (now at 3274.01) and 200-day SMA (now at 3041.55), and with the 50-day SMA above the 200-day SMA. (SMA means Simple Moving Average of price over the most recent n days.) Keep in mind that trend following using moving averages always lags at price turning points.

The Dow Jones Industrial Average rose to a new all-time closing price high of 29,551.42 on Wednesday 2/12/2020, but the Transportation Average fell short of its closing price high on 1/16/2020 at 11,304.97 by 2.41% in February. The failure of the Transportation Average to confirm the higher high by the Industrial Average is known as a non-confirmation, which is a warning that not all parts of the stock market are in gear and pulling together in the same direction.

The Cumulative Daily Advance-Decline Line for Common Stocks Only Listed on the NYSE peaked on 1/17/2020 and shows a bearish divergence this month compared to the S&P 500. It rolled over on Friday, suggesting a downside correction.

The Cumulative Daily Advance-Decline Volume Line also peaked on 1/17/2020. It is indicating a downside correction by making lower highs and lower lows.

Investor sentiment weakened to neutral from bullish complacency.

Historically, stock market seasonal tendencies have been mixed for the month of February. Seasonal tendencies easily can be overwhelmed by news headlines as well as price momentum.

Economic reports have been better than expected in recent months, surprising the consensus of economists. It is highly uncertain, however, whether the coronavirus global health emergency could have the potential to significantly dampen economic activity going forward from here.

Easy monetary policies of the global central banks have been and remain bullish for the financial markets.

Long-term U.S. stock sector rotation shows some movement toward Defensive sectors and away from Cyclical sectors in February, indicating investor caution about long-term economic prospects. The following best-performing sectors are demonstrating the greatest trend strength: Technology, Health Care, Communication Services, Financial, and Utilities. Cyclical sectors such as Technology tend to rise and fall in anticipation of the ups and downs of the general business and economic cycle.

The following sectors are relatively weak for the long term: Energy, Real Estate, Materials, Consumer Staples, and Consumer Discretionary. Cyclical sectors such as Materials and Consumer Discretionary tend to rise and fall in anticipation of the ups and downs of the general business and economic cycle.

Foreign (EFA) and Emerging (EEM) stock markets fell further below their 50-day SMAs last week. Both remain above their 200-day SMAs and remain systematically neutral. Both have underperformed U.S. stock indexes for the past 25 months since 1/26/2018. 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 ETF (UUP) fell sharply after hitting upside resistance on Friday but still held on to part of its gains from earlier in the week. UUP remains systematically neutral. UUP may benefit from safe haven money flows.

Gold (GLD), Gold Miners (GDX), and Silver (SLV) rose strongly last week and remain systematically bullish. Precious metals are safe havens that some investors switch into when they become fearful.

Copper (JJCTF) finished nearly unchanged last week . Copper is systematically neutral, with price below both its 50-day and 200-day SMAs and with the 50 nearly at the 200 last week. The price of Copper is sensitive to prospects for global economic growth, which some investors fear may be dampened by the possible spread of coronavirus.

Oil (USO) price recovered modestly over the past two weeks, following severe weakness in January. USO remains systematically neutral, below its 50- day SMA and below its 200-day SMA. The declining 50 SMA is moving down toward the 200 SMA--a cross below would be systematically bearish, but the 50 SMA remains above the 200 SMA at this time. USO traded in a wide trading range between 7.67 and 16.27 since bottoming on 2/11/2016.

U.S. Treasury bond (TLT) and U.S. Treasury notes (IEF and SHY) prices rose strongly last week and remain systematically bullish. IEF set a new high. TLT remains below its 148.90 high on 8/28/2019. SHY remains below its 85.12 high on 8/28/2019. U.S. Treasury bonds and notes are safe havens that some investors switch into when they become fearful.

$VIX Volatility Index rose to an above-average and somewhat oversold level of 18.21 intraday on Friday, down from an above-average and oversold level of 19.99 on Friday 1/31/2020, and up from a below-average and overbought 12.10 on 1/17/2020.

The AAII investor sentiment survey remains overbought, now with 40.56% Bullish, 30.77% Neutral, and 28.67% Bearish. The Bullish plus Neutral percentage of 71.33% is up from a moderate 63.14% three weeks ago, but down from an extremely overbought 79.53% on 12/19/2019.

The Equity Put/Call Ratio remains overbought, averaging 0.56 last week, which is below the 200-day average of 0.62. Options speculators typically react to the price action: when stock prices go up they trade more calls, and when stock prices go down they trade more puts. The Art of Contrary Thinking would suggest becoming more bullish as this P/C ratio rises toward extremely high levels and more bearish as it falls to extremely low levels.

The CNN Money Fear & Greed Index declined to the neutral 40-60 range in recent weeks, down from overbought and extremely greedy levels in the 90-100 range in January, 2020. For details, see http://money.cnn.com/data/fear-and-greed/

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)
Objective Quantitative Rankings for hundreds of Exchange Traded Funds

Click here for my report

Now is the time to take action. Preserve your capital by placing your assets under our careful management--before the next major bear market of -20% to -50% devastates most portfolios.

Make no mistake, the ongoing global economic and financial crisis has not been fixed by any sound or lasting solution. History shows that the authorities will not protect you or give you any advance warning--but we will.

If you agree that making money while staying safe is better than taking big risks in the stock market and exposing your nest egg to potentially ruinous losses, we would be very happy to implement our time-tested strategies for all of your assets. It makes good sense to choose protection--especially at this time when the financial world is stretched out of proportion.

We are always happy to discuss your goals and concerns and answer all your questions.
Call us now for a free consultation.
Please contact
Bill Anderson
by phone: 646-652-6879
or by email: anderson@colbyassetmanagement.com

Robert W. Colby Can Manage Your Account

*For extensive coverage of major global markets with illustrative charts, take a free trial for my weekly report --
click here.


This Technical Analysis is made possible by use of MetaStock software. Try it at no risk. (Check out the great new version XVII released November, 2019)
Click this link to save 9%-10% on MetaStock® software.
MetaStock Software


11-Year Outperformance by the
Top 10 Exchange Traded Funds

Weekly Rankings of Major Trend Relative Strength

My weekly Top 10 ETFs ranked by the Major Trend Relative Strength outperformed the S&P 500 by over an 11-year period of real-time weekly tests. Click here for a graph of simulated performance.

Please note that my ETF rankings are available by subscription--NOW WITH A NO-RISK FREE TRIAL.
See The Colby Global Markets Report (click here).

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

My latest book was named one of the top investment books by Stock Trader's Almanac 2005. This book also received an excellent review in the November 2003 issue of Futures.
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

MetaStock® PC Software for Technical Analysis
MetaStock® is a powerful technical analysis software program for your personal computer. It offers more than 250 built-in indicators and line studies to enable you to explore a wide variety of methods. And it empowers you to build, back test, and optimize custom trading systems to suit your own particular requirements.

Click this link to save 9%-10% on MetaStock® software
.
Or, click the banner below for a one-month free trial.

MetaStock Software

My ETF Rankings are not investment advice. Rather, they are an objective ongoing research study.

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.

According to CFTC Rule 4.41, hypothetical or simulated performance results have certain limitations. Unlike an actual performance record, simulated results do not represent actual trading. Also, since the trades have not been executed, the results may have under- or over-compensated for the impact, if any, of certain market factors, such as lack of liquidity. No representation is being made that any account will or is likely to achieve profit or losses similar to those shown.

Trading and investing involve risk of significant loss. Your use of this site means that you have read, understood, and accepted my
Disclaimer.            
.

Syndicate content on these pages

Email Colby about his Custom Research, Analysis, Trading Systems Development, and Investment Strategy
Consulting Services.

Subscribe to The Colby Global Markets Report

MetaStock® technical analysis software powers this technical analysis. SAVE 7%-9% by ordering here.
Great new version just released November, 2019.

MetaStock Software

Preview Colby's Latest Book:

The Encyclopedia of Technical Market Indicators
, Second Edition, 2003.

Dow Theory Analysis

Gann Angles Analysis

Update on EMA Crossover Signals

Money Management Rules

How To Become A Top Trader.

Ranking Indicator Performance to Maximize Profit by using
"Annual Relative Advantage".


Ranking Indicator Performance by the "Profit/Loss Index".

Robert W. Colby, CMT,
is a consultant to institutional and private investors and traders, providing regular analytical reports, custom research services, and trading systems tailored to clients' objectives. Clients include the most successful traders and investors in the world. Robert is the author of The Encyclopedia of Technical Market Indicators, Second Edition, McGraw-Hill, 2003, which has become the standard reference for indicator and trading systems design. Previously, at several large Wall Street firms, Robert worked as a proprietary trader, technical analyst, and fundamental analyst. He also was adjunct professor at New York University and New York Institute of Finance, where he developed new courses on technical analysis and market timing.

Robert W. Colby is a Chartered Market Technician (CMT), an accreditation granted to members by the CMT Association (https://cmtassociation.org/) after demonstrating professional competence and ethics over a period of many years. Robert has been a member since 1980, and he strongly supports the CMT Association's high standards. He also supports the The Technical Analysis Educational Foundation (https://www.taeducation.org/about/), which works to have technical analysis included in the curriculum of major business schools. The CMT Association is the national organization of investment analysts, stock market analysis professionals, and certified market technicians in the United States.

 
"Robert W. Colby is America's foremost authority on testing market indicators."
--Bill Meridian, top-ranked investment analyst and international fund manager, www.billmeridian.com

Please click here to contact Colby directly.

Privacy Policy: Your privacy is important to us. It is strictly against the policy of this website to employ spam, popups, ad ware, or spy ware.

Copyright © 2000-2020
by www.robertwcolby.com.
All rights reserved.
Except as permitted under the
United States Copyright act of 1976,
no part of this publication may be reproduced or distributed in any form or by any means, or stored in a data base or retrieval system, without the prior written permission of the publisher.
However, quotations are permitted, provided that full attribution is given to: www.robertwcolby.com
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Ranking ETFs
"Robert Colby has evolved a system that, while hardly foolproof, is pretty clever," wrote Daniel Fisher, "Surfin' ETFs", Forbes, Investment Guide, Special Issue, June 4, 2007.
Please click here to view this article
.
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

INTERVIEW of Robert W. Colby in Technical Analysis of STOCKS & COMMODITIES magazine, December 2006 issue.
Please click here to view this article
.
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

"Gold's next move: History, logic, and intermarket relationships. See if testing gold's relationship to different markets over a 32-year period provides possible trade signals for the yellow metal."
by Robert W. Colby, CMT.
Please click here to view this article
.
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

"Which gold indicators are best? Divining gold's next move."
by Robert W. Colby, CMT.
Please click here to view this free article
.
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

"Applying the Relative Strength strategy to ETFs."
by Robert W. Colby, CMT.
Please click here to view this free article.
.
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

"PUTTING CANDLES TO THE TEST, How Profitable Are They Really?" by Robert W. Colby, CMT. Published in SFO, STOCKS, FUTURES AND OPTIONS MAGAZINE, Volume 5. No. 8. August 2006, pages 91-94. Please click here to buy this article. (Scroll to bottom of linked page.)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

TradingMarkets.com interviewed
Robert W. Colby, CMT.
View the entire interview online
.
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Active Trader magazine September 2004 interviewed Robert W. Colby. 4 pages. "Robert W. Colby: Technical collector. A discussion with Robert W. Colby about technical trading and his revised Encyclopedia of Technical Market Indicators, Second Edition. By Active Trader Staff."
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

For information about
methods that would have performed substantially better than systematic trend-following in back-testing simulation dating back 32 years, email me by clicking on the following link:
Please click here to contact Colby directly.

Click here for a simulated performance graph of one of my trading systems applied to a stock price index.
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

MetaStock® PC Software for Technical Analysis
MetaStock® is a powerful technical analysis software program for your personal computer. It offers more than 200 built-in indicators and line studies to enable you to explore a wide variety of methods. And it empowers you to build, back test, and optimize custom trading systems to suit your own particular requirements.
Great new version just released November, 2019.

Click this link to save 7%-9% on MetaStock® software
.
Or, click the banner below for a one-month free trial.

MetaStock Software