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November 4, 2024

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Stock prices fell despite strong earnings reports. 

The S&P 500 stock price index (symbol: $SPX, 5,728.80) fell 1.37% last week, and indicators for the broader stock market have turned weak relative to the $SPX. Although $SPX price held above its October low, On-Balance Volume (OBV) and RSI broke below their October lows, signaling clear negative divergences. The price trend would turn systematically neutral if the price falls below the 50-day SMA now at 5,804.74. Longer-term overvaluation and risks to the fundamental outlook still call for caution.

Scheduled reports of third quarter corporate earnings, wars, the US presidential election, and economic data probably will contribute to a volatile week ahead for the financial markets.

So far, the stock market’s reaction to the good news of rising earnings has been disappointing, as the S&P 500 stock price index fell 2.23% over the past 2 weeks. Of the companies in the S&P 500 that have released Q3 earnings, 76% surpassed estimates. According to Bloomberg Intelligence, companies in the S&P 500 are expected to report an average +4.3% year-over-year increase in quarterly earnings in Q3—but that is a slowdown compared to the +7.9% growth rate for Q2.

The "Magnificent Seven" megacap market leaders showed mixed reactions to earnings reports, with 2 gains and 3 losses: Alphabet (GOOGL) rose 3.64%, Microsoft (MSFT) fell 4.15%, Meta Platforms (META) fell 1.06%, Apple (AAPL) fell 1.06%, and Amazon (AMZN) rose 5.38%. Microsoft and Meta both reported better-than-expected earnings but the stock prices fell anyway. Apple fell after reporting earnings that matched analysts’ estimates.

Semiconductor-leader Nvidia (NVDA) has benefitted from overwhelming demand for its products, but the stock fell 4.34% last week as some investors began to worry about delivery delays and a potential slowdown in artificial intelligence spending in the future. 

Berkshire Hathaway Inc.’s cash pile reached a record high of $325.2 billion in the third quarter, as Warren Buffett continued to sell stocks. Buffett thinks stock prices are too high, and he says he can’t find attractive deals. So, he is in no rush to put his cash to work “unless we think we’re doing something that has very little risk and can make us a lot of money…. I don’t mind at all, under current conditions, building the cash position.”

See The Colby Global Markets Report (click herefor our complete analysis of global markets and specific investment rankings.

Every day, we use technical, fundamental, and quantitative analysis to judge the Reward/Risk probabilities of trend continuation or reversal. We strive to control risks and to make sure that all of our clients are safe and protected from large losses. If you want to earn reasonable returns while avoiding large losses, move your wealth to our professional fiduciary asset management. We always put our clients’ best interests first, and we are always here to help you in times of stress.

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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.

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.

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Dow Theory Analysis

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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

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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.
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INTERVIEW of Robert W. Colby in Technical Analysis of STOCKS & COMMODITIES magazine, December 2006 issue.
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"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.
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"Which gold indicators are best? Divining gold's next move."
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"Applying the Relative Strength strategy to ETFs."
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"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.
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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:
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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 is a powerful 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 7%-9% on MetaStock® software. And you get a risk-free, thirty-day free trial.
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