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US Stock Service
Daily Hotline
 
20 November 2014    By John Gray
Market Action
  • While the DJ I and S&P 500 ended just fractionally lower Wednesday there was a clear downside bias for the overall stock breadth and small-cap shares were hit hard. Their indexes dropped 1% moving charts lower and another NASDAQ oscillating indicator chart reversed down.
  • Volume also declined so the negative session did not signal institutional profit taking. Although that could occur today, the overall trend remains up. Other increasing worries were the weaker reading for new stock highs and lows, with the latter in the majority for the NASDAQ. The stock breakout ratio was also the worst in a month.
  • Target's positive surprise added to the building optimism for holiday spending. Lowe's boosted their sales projections for an additional good sign. Other positive domestic data continued, with single-family housing starts up.
  • World news counters the US improvement. In Europe and China weak data continues and Ukraine fighting is increasing with confirmation from the UK that Russian tanks are fighting in that nation.
  • Fed worries also added to the negative tone. The minutes show the ongoing debate over the timing of rate hikes after some hints of inflation vs. concerns the economic growth would slow.
  • The new oscillator downturn adds to the hints of impending weakness shown late last week and Monday. Some market pullbacks to regroup could be constructive to prevent investor exuberance from getting out of hand. The overall trend remains up.
Market Drivers
  • The Fed's typical lack of clarity left the debate over boosting rates intact. The takeaway was any move wouldn't occur until at least late 2015. The recent slide in energy prices could trim inflation pressures keeping rates low longer. That is generally good for stocks.
  • Also positive is the contrast between weaker data for Chinese and European growth which makes the US market more attractive. However if the world economic growth slows substantially it will also impact many US stocks.
  • Some new clues are due today, on CPI, weekly jobless claims and manufacturing.
Technical Outlook
  • Yesterday's weakness resumed our short term worries and new indicator downturns increase the chances for some modest market retreat to regroup. That would be normal after the long vertical index chart rallies and the overall uptrend would remain intact. The NYSE and NASDAQ Comp % 10-wk MA charts could retreat to mid-point levels and then rally again and achieve overbought highs. We still note the improving broad and industry sector bullish % charts as confirming that the overall direction is still up. Retreats could offer new buying chances.
Portfolios
  • Large Caps 90% invested, Mid Caps 80% and Small Caps 75%.
  • Bear Portfolio is 0% short.
 Indicators
Short Term Medium Term
II Short Term Composite Indicator
70.7% (n/c%)
Bull Confirmed
NYSE %10 Week Moving Average
58.59% (-3.73)
Bull Confirmed
II Short Term Sector Sum
-5.50      (n/c)
Bullish
New P&F Signals: US Breakouts
Close 1-Day Change
Bulls 6 -17
Bears 17 +12
NYSE Bullish % Indicator
53.13% (-0.36%)
Bear Correction
NYSE %30 Week Moving Average
56.11% (-1.72)
Bull Confirmed
II Long Term Composite Indicator
+132.00     (weekly)
Bullish
  • The short term comp and NYSE % 10-wk MA charts held upward direction but the NASDAQ Comp 10-wk moved lower.
  • The daily stock breakout ratio was the worst in a month, with new sells nearly tripling buys.
  • The NASDAQ Comp daily high low ratio chart reversed down from X 70%, shifting to bear confirmed status.
Index Trends
  Close Volume 1-Day Change P&F Signals Support
Signal Trend Start Date Trend Reversal
DJ Industrials 17,685.7 87.3m -2.09 -0.0% Bull Up 30 Oct 2014 15,800.00 15340.7/15855.1
S&P 500 Index 2,048.72 465.6m -3.08 -0.2% Bull Up 28 Oct 2014 1,820.00 1820.66/2001.01
NASDAQ Comp. 4,675.71 427.0m -26.73 -0.6% Bull Up 20 Oct 2014 4,100.00 4116.6/4594.91?
NASDAQ 100 4,222.66 143.7m -19.52 -0.5% Bull Up 28 Oct 2014 3,700.00 3700.22/4126.72?
S&P Midcap 400 1,430.82 113.4m -5.41 -0.4% Bull Down 17 Oct 2014 1,405.00
Russell 2000 Index 1,157.69 228.4m -12.60 -1.1% Bull Down 16 Oct 2014 1,100.00
Closing prices through Wednesday November 19, 2014
Chart Activity - Broad Index Moves 


Markets pulled back from Tuesday's positive session after the Fed minutes added little insight as to their next action. The debate over hiking rates has varying positions with some noting hint of inflation calling for higher rates by mid 2015. Others project lows rates for at least that entire year due to the impact of weak world economic readings. Indexes opened down yesterday, then rebounded before modest late retreats. The NASDAQ and smaller stocks averages again underperformed a sign traders are less willing to take risks. The primary index charts were steady and rising at their highs. They also show long overextended vertical upmoves so their reversals down will signal caution.

The S&P Mid-Cap reversed down, joining the S&P Small-Cap and Russell 2000 charts with pullbacks after failing to achieve new 2014 highs. The Small-Cap chart fell through its trading stoploss and the Russell ended near a negative high pole formation.

Chart Activity - Sector Indexes 

The upside momentum is also fading amongst the sectors. That is typical before declines begin. None of the S&P 500 industry group charts changed. The Biotech BTK chart edged up one-box but the Semiconductor SOX reversed down after a rally that ended just below its Sep peak.

Chart Activity - Commodities 

Spot gold gave back all of its prior day gain. The chart held its advance to X $1200. That was just enough for a bullish low pole formation. Gold is recovering from a recent 4˝ year low at O $1140. It had selling climax two weeks ago along with 20 gold stocks. The gold indexes [XAU & HUI] charts both reversed down but still hold trading buys. They followed bases and selling climaxes. The Precious Metals bullish % is near its upturn from a deeply oversold O 4% position.

Crude oil remained below $75. The chart held at O $74. That level was last seen in Sep 2010, when crude was recovering from its drop to $64.24 that May. The energy index [OSX & XOI] charts remain weak with the former reversing back down. Both show work on new bases, with longs not yet projected.


 


 

 

Index Breadth

% 10 Week Close 1-Day Change P&F Trends
Signal Status Date Changed
NYSE 58.59 -3.73 Bull Confirmed 23 Oct 2014
Nasdaq Composite 52.71 -6.96 Bull Correction 17 Nov 2014
S&P 500 83.13 -0.20 Bull Confirmed 23 Oct 2014
Nasdaq 100 82.69 -0.96 Bull Confirmed 23 Oct 2014
Option Stocks 69.54 -3.83 Bull Confirmed 23 Oct 2014
% 30 Week Close 1-Day Change P&F Trends
Signal Status Date Changed
NYSE 56.11 -1.72 Bull Confirmed 21 Oct 2014
Nasdaq Composite 51.65 -3.35 Bull Alert 20 Oct 2014
S&P 500 77.91 +0.20 Bull Confirmed 24 Oct 2014
Nasdaq 100 81.73 n/c Bull Confirmed 28 Oct 2014
Option Stocks 64.49 -1.95 Bull Confirmed 21 Oct 2014
Bullish % Close 1-Day Change P&F Trends
Signal Status Date Changed
NYSE 53.13 -0.36 Bear Correction 29 Oct 2014
Nasdaq Composite 51.79 -0.51 Bear Correction 29 Oct 2014
S&P 500 68.81 n/c Bear Correction 23 Oct 2014
Nasdaq 100 63.11 n/c Bear Correction 21 Oct 2014
Option Stocks 57.33 -0.05 Bear Correction 28 Oct 2014
Breadth Indicators oscillate between overbought highs, at 70% and above, and oversold lows, at 30% or lower.
The % 10-week moving average is short term, % 30-week moving average intermediate, and the bullish %s are longer term.

Short-term:

Indexes all ended lower Wednesday with the NASDAQ and Russell 2000 suffering the most. Declining shares exceeded advances, again with relative weakness for the areas above. All but one daily moving average breadth value fell. The only action extended Monday's one chart retreat but other potential pullbacks are getting close. They would confirm at least some consolidating market weakness. The NASDAQ Comp % 10-wk MA chart fell to O 54%. It is pulling back from below overbought territory and above a high pole formation so its status is still bullish. The NYSE ended less than 1% from its downturn.

Medium-term:

The % 30-wk MA charts held steady with lower readings. The NASDAQ is the closest to its downturn at O 50%. At present each shows a rally from mid-Oct lows with the S&P 500 and NASDAQ 100 reachiing overbought levels. Downturns will confirm market weakness.

Long-term:

The daily breakout data deteriorated to the worst in a month, with only 6 new buy signals and 17 new sells. That meant three lower readings for the broad area bullish %s values. The charts were steady and further declines are still needed to threaten reversals down. Each shows a rally from a 3-year low and four hold bullish low pole formations.

Current outlook:

We returned to Monday's comment noting chances for a small retreat after the latest weakness lowered most moving average breadth values. If the NYSE % 10-wk MA follows the NASDAQs reversal down that action would likely be underway. The longer term outlook remains positive so any retreat could still be followed by new rallies and higher markets by year end.


 

Indicators

Close Change Chart Direction Chart Status Chart Action
Short term Composite Indicator 70.7 n/c Rising Bullish None
NYSE High-Low Index 77.63 -0.82 Rising Bullish None
Nasdaq High-Low Index 63.76 -2.85 Falling Bearish Reversal Down
NYSE On Balance Volume (by DJIA) 285,776 -737.00 Rising Bullish None
NYSE On Balance Volume (by breadth) 543,010 -737.00 Rising Bullish None
Nasdaq on Balance Volume by Composite 506.33 -1.62 Rising Bullish None
Nasdaq on Balance Volume by Breadth 37.27 -1.62 Falling Bearish None
NYSE Cumulative Advance/Decline 409,418 -762.00 Rising Bullish None
NYSE Money Flow Index 50,372.5 (weekly) Rising Bullish None

  • Monday's negative bias was repeated yesterday with the NASDAQ and smaller stocks again relatively weak. There was only one indicator move but it was negative. That increases our near term worries for a market retreat. A pullback for the composite would confirm that scenario.
  • The daily short term composite chart held at X 72%. That level was hit on 3-Nov and two weeks without any movement is somewhat rare. It is slightly overbought, near its early Jul peak at X 76%. It has reached even higher levels historically but watch for a downturn to signal near term weakness.
  • The single-day readings weakened notably and new lows outnumbered new highs for the NASDAQ. That helped reverse down that medium term daily high low ratio chart from X 70% and overbought territory. It shifts bearish. That move also came after the indicator chart failed to confirm the index high with a new high of its own. The NYSE value fell again and it will also turn down shortly if the data repeats a few more sessions.
  • The daily on-balance volume charts were steady. The NASDAQ breadth chart holds its new sell signal for another danger sign.
  • The medium term daily NYSE cumulative advance decline line chart had no change. Its status is bullish from its low-pole signal and it will equal its Sep high with its next advance. However its reading is in danger of falling below its 10-days ago level. That would show a loss of upside momentum.

 

Industry Bullish %s and Sector Sum
Daily Industry Groups Bullish %s: Wednesday's stock breakout ratio was the worst in a month, with 6 new buys and 17 new sells. Those are still relatively low totals with more sells needed to move the sector charts broadly lower. There were only 2 charts up and 1 down amongst the 46 broad area industry groups bullish %s. None of the changes were reversals or significant status shifts. That left the sector sum value at its 4-month high first shown last week.
 
The sector sum holds short and long term bullish status. The Bell Curve shows a major recovery from the mid-Oct pattern that was skewed well to the left side of 50%. We noted that was the area is attractive for longs. The sector sum indicator shifted short term bullish on 21-Oct, ending the negative status from 11-Jul. It also has a long term P&F buy signal at -15.0 barely a week after achieving a bullish low pole at -27.0.

The sector sum value was -5.5. It will reverse down at -9.0. Until then it is rallying from its Oct low at -40.0. That reading was down to historic low levels.

The sector sum short term status is determined by its chart direction, along with the direction of the groups' cumulative advance decline line and the last three day's direction on the NYSE bullish %. The sector sum and cum A-D charts reversed up 21-Oct. The NYSE bullish % already had three up days so that completed the positive shift. The rally to -15.0 showed a buy signal after a low pole formation to confirm its long term bullish status.

Sector Bullish% P&F Charts Higher:  
 

Sector
Bullish %
Comment
Chemicals
40%
Holds bull alert.
Textiles-Apparel
50%
Holds bull alert.



Sector Bullish% P&F Chart Lower:  
 

Sector
Bullish %
Comment
Steel/Iron
14%
Holds bear confirmed.



Sector Sum Indicator:

                      
Short term P&F chart status
 
Bullish
Value
    - 5.5
Change yesterday
     0.0
Last reversal
21-Oct up to -37.0
Short term stop
     - 9.0
Long Term P&F chart status
Bullish
Last long term signal
P&F chart low pole at -27.0 on 24-Oct
Long term P&F stop loss
Potential bearish at -26.0 (high pole)
Last major resistance (& date)
+45.0 (Feb 12 highs)
Last major support (& date)
-46.5 (Sep 11 lows)

 

Sector P&F chart direction:
 

Total number of sectors
46
Last signal UP, # of rising groups
 38
Trigger for bearish  status   
 35
Sector charts overbought
4
Sectors charts oversold
6








Stock Action

The NYSE bullish % value was down 0.36% yesterday. That was its first loss in two weeks. Its short term momentum is positive and will remain so until there are three straight falling sessions. It closed at 53.13%, holding at X 52% on its chart but missing a new move up. The NASDAQ Comp bullish % held at X 52% and the S&P 500 at X 68%. All three show rallies from 3-year lows.
 

Trading activity held at well below above average levels with 390 stocks moving on their P&F charts. There were 370 changes the prior session. Volume fell 0.2% on the NYSE and 1.1% for the NASDAQ.

 

Sector Action

The Chemicals Bullish % rose by 1.1% Wednesday, advancing the chart higher by a box. The status is “bull alert” and that would improve to “bull confirmed” at 58%. In the very least we would expect a continuation higher to neutral, 50%. Up trending stocks are worth consideration.
 
Compass Minerals (CMP) was the only buy signal yesterday, and prior to that was Air Products & Chemicals (APD) on Tuesday. The better chart is that of APD as it breaks out to new all-time highs, now up 5.5% over the past week and 27.2% year-to-date. Any weakness in APD should be seen as an opportunity to enter the strong uptrend.

 

 

 

 

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