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

January 27, 2020

Stock Market: bullish complacency quickly vanished with fears of the coronavirus.

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

"It's still too early to draw conclusions about how severe the virus is...", according to the World Health Organization in Geneva.

Historically, 13 past pandemics produced surprisingly limited global stock price index declines: 7 fell less than 3%, 2 fell between 6% to 8%, and 4 actually rose over the next month. Looking out 3 months, 9 of the 13 instances saw global stock prices higher.

The S&P 500 price index fell 0.90% on Friday after setting another new all-time high of 3337.77 intraday on Wednesday 1/22/2019.

RSI and MACD oscillators plunged steeply to generate short-term sell signals. Extremely strong price momentum can't continue forever, and short-term downside shakeouts are to be expected from time to time.

Economic reports have been better than expected in recent months, surprising the consensus of economists.

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

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

The S&P 500 remains systematically bullish for the long term, because price remains above both the rising 50-day and the rising 200-day Simple Moving Averages (SMA), and the 50-day SMA remains above the 200-day SMA. Trend following using moving averages lags at price turning points.

Technically, the S&P 500 index is now less overbought at 3.1% above its 50-day Simple Moving Average (SMA), down from 4.8% a week earlier.

Stock market sentiment moderated substantially in reaction to coronavirus headlines. Until Friday, sentiment had been overly optimistic since last October, rising to levels indicating overbought extreme greed for some indicators. Sentiment is not always useful for precise trade timing, and it was not useful from October to January as bullish price momentum overwhelmed all other considerations.

The Dow Jones Industrial and Transportation Averages remain in strong rising trends, confirming a Dow Theory Primary Bull Market trend. This means that the stock market is in gear to the upside, with its key parts pulling together in the same upward direction.

Long-term U.S. stock sector rotation shows a mix of Defensive and Cyclical sectors, indicating investor uncertainty about long-term economic prospects. The following best-performing sectors are demonstrating the greatest trend strength: Technology, Health Care, Financial, Communication Services, and Industrial. Cyclical sectors such as Technology and Industrial 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, Consumer Discretionary, Utilities, and Materials. Cyclical sectors such as Consumer Discretionary and Materials 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 continued to underperform the U.S. indexes last week but still remain systematically bullish, because prices are above rising 50-day and 200-day Simple Moving Averages (SMAs), and the 50-day SMAs are above the 200-day SMAs. Both have underperformed U.S. stock indexes for the past 24 months since 1/26/2018, when global stock markets peaked together. 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) price rose last week reflecting safe-haven demand in reaction to news of the coronavirus. UUP remains below both its 50-day and 200-day SMAs, however, and these two SMAs appear to be converging toward a downside bearish crossover, which would confirm a downward long-term trend.

Gold (GLD), Gold Miners (GDX), and Silver (SLV) rose moderately reflecting safe-haven demand in reaction to news of the coronavirus. All three remain systematically bullish. Their performance has lagged the strong performance of the common stock indexes for several months, however.

Copper (JJCTF) fell steeply last week, crossing below both its 50-day and 200-day SMAs to turn systematically neutral. 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) fell steeply last week on fears that demand for oil could be dampened by the possible spread of coronavirus. USO remains systematically neutral: it fell below its 200-day SMA last week and remained below its 50- day SMA, while the 50 SMA remained above the 200 SMA. 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 note (IEF and SHY) prices rose last week reflecting safe-haven demand. All three are now systematically bullish, although all three remain well below their price highs of more than 4 months ago, on 8/28/2019 for TLT and on 9/3/2019 for IEF. Their medium-term correction/consolidation phase could continue or end depending on the spread of coronavirus. U.S. Treasury bonds and notes are safe havens that some investors switch into when they become fearful.

$VIX Volatility Index jumped up to an average level of 14.56 on Friday 1/24/2020, up from a below-average and overbought 12.10 of 1/17/2020.

The AAII investor sentiment survey reflects investors feelings through Wednesday of last week and does not reflect new coronavirus concerns that emerged on Friday. The survey remained overbought, with 45.60% Bullish, 29.63% Neutral, and 24.77% Bearish. The Bullish plus Neutral percentage of 79.53% on 12/19/2019 indicated one of highest levels of overbought bullish complacency in 13 years.

The Equity Put/Call Ratio rose to an above-average 0.70 on Friday 1/24/2020, up sharply from 0.48 on 1/17/2020, which was a very low level that indicated extremely overbought sentiment. It fell to 0.43 in December, one of the most overbought levels in history. 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 plunged to 62 on Friday 1/24/2020, down sharply from 89 on 1/17/2020, which was a very high level that indicated overbought extreme greed. 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