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March 18, 2019
Stocks: overbought with bearish divergences.
Preview from my weekly report*
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The S&P 500 rebounded to its highest price level since 10/10/2018, but it is overbought at two standard deviations above its 20-day SMA (simple moving average).
Sentiment indicators are overbought.
MidCap and SmallCap stock price indexes are lagging below their highs of 2/25/2019, thereby demonstrating bearish divergences.
Momentum indicators, such as RSI, Stochastic, and MACD, are lagging below their February highs, thereby demonstrating bearish divergences.
Breadth (advances-declines) is lagging price, diverging bearishly.
On-Balance Volume is diverging bearishly below its peak on 2/25/2019.
The percentage of S&P 500 stocks above 50-day SMAs is 80%, versus 92% on 3/1/19.
The percentage above 200-day SMAs is 59%, down from 62% on 3/1/19.
Historically, seasonal tendencies have been bearish for the week ahead.
Long-term U.S. stock sector rotation still appears Defensive and risk averse: Utilities, Real Estate, Health Care, and Consumer Staples are outperforming, suggesting cautious investor sentiment.
Meanwhile, economy-dependent Cyclicals, including Energy, Materials, Financial, Technology, Communication Services, Industrial, and Consumer Discretionary, remain relatively weak for the long term, also suggesting cautious investor sentiment.
The U.S. Dollar declined last week but remains systematically bullish. Global investors prefer the U.S. Dollar when they lack confidence in the global economy.
U.S. Treasury bonds rose again last week and remain systematically bullish. This also suggests diminished confidence in stocks.
Crude oil (USO) and Energy stocks (XLE) rose last week but remain no better than neutral for the long term.
Breadth is lagging price. The cumulative total of daily advances minus declines for NYSE common stocks peaked on 2/22/2019 and is now showing bearish divergence compared to the large-cap price indexes, such as the S&P 500.
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
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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.
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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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 Market Technicians Association (www.mta.org) after demonstrating professional competence and ethics over a period of many years. Robert has been a member of the MTA since 1980, and he strongly supports the MTA's high standards. He also supports the MTA Educational Foundation (www.mtaef.org), which works to have technical analysis included in the curriculum of major business schools. Please click the following banner for information about the Market Technicians Association.
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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.
Please click here to view this article.
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INTERVIEW of Robert W. Colby in Technical Analysis of STOCKS & COMMODITIES magazine, December 2006 issue.
Please click here to view this article.
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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.
Please click here to view this article.
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"Which gold indicators are best? Divining gold's next move."
by Robert W. Colby, CMT.
Please click here to view this free article.
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"Applying the Relative Strength strategy to ETFs."
by Robert W. Colby, CMT.
Please click here to view this free article..
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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.)
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TradingMarkets.com interviewed
Robert W. Colby, CMT.
View the entire interview online.
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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."
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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.
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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 May, 2018.
Click this link to save 7%-9% on MetaStock®
software.
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