Author Archive

Mind The Breadth

The markets internals continue to show strength.  The NYSE Advance/Decline line continues to move steadily higher.  This breadth indicator has done a great job of forecasting bear markets in the past:

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More on the A/D Line:  Advance-Decline Index:   This indicator, also known as the AD line, calculates the difference between advancing and declining stocks. Traders typically look for divergence between the indicator and a major market index, such as the Standard & Poor’s 500 index (S&P 500). For example, if the S&P 500 is rising and the AD index is falling, it indicates the current uptrend may be losing its momentum. On the other hand, if the S&P 500 is falling and the AD index is rising, it suggests that the move lower may be about to reverse.

Hat tip Ryan Detrick/Investopedia.com

The Atlanta Fed’s GDPNow Forecast

Remains at 4.5%:

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Quite a jump from the Obama years which had an average annual GDP growth of 1.48% during two terms… the only President to have not had even one year of 3% GDP growth:

 

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Rollbacks matter…

Hat tip Zerohedge.com

Eight Straight Weekly Gains For The Russell 2000 Index

Is this a signal for continued strength in the large caps(S&P 500 Index)?  Actually, it is.  The S&P 500 moved higher 6 months later 9 of the last 9 times the Russell 2000 has had a similar run:

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Impressive data.

Hat tip Ryan Detrick of LPL Research

Five Year Decline

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Is this right time to be long commodities?  We believe exposure to this sector should be part of a diversified portfolio. 

Hat tip  Columbia Management

 

New Lows, Again

The Bloomberg Agriculture Index continues to fall…

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A huge opportunity will develop here.  Timing a bottom is near impossible but it will happen. 

Hat tip The Daily Shot

Sweet Spot

At least for the next month, it doesn’t get much better:

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Hat tip Bespoke Research

Volatility is Back

This comes as no surprise.  After an extremely quiet 2017, market volatility has come roaring back.

From the desk of Charlie Bilello:   In 2017, there were only 12 days with >1% intra-day move, the fewest in history.  Yesterday was the 68th day thus far in 2018.

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Volatility=Opportunity

Hat tip Pension Partners

A Plan For Prudential

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Prudential Financial reached a new all-time high in January of this year after a powerful rally off the September 2017 lows.  In early February PRU was under extremely heavy pressure after leaving behind an ominous weekly downside reversal as January came to the close.  The stock has been struggling since as the 200 day moving average provided strong resistance.  In early May a fresh down leg began(post earnings)that eventually drove shares below the 2017 lows.  At mid year PRU is beginning to show signs of a major bottom.  For patient investors a very low risk buying opportunity is developing.

Trading notes:  The weekly MACD indicator has returned to oversold levels.  The daily MACD has been tracing out a divergent low since February.

Selling pressure has eased of late despite shares sitting close to multi-year lows.

The major support zone just below current levels includes the 2013, 2014 and 2015 highs($94.30-$92.60).  The 2018 low was set last month($94.50).

PRU’s 40 week moving average rests just above $92.00.  The last time PRU tested the 40W was back in September of 2016, a major low.

We consider PRU a low risk buy between $95.00 and $92.00.  A close below $90.00 would be a clear warning sign.

At time of publication we do not have a position in PRU.

 

 

Versus Stocks, Cash is Looking Increasingly Attractive

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Key bit from The Daily Shot:  Cash is looking increasingly attractive relative to stocks. The spread between the S&P 500 dividend yield and the 1-month T-bill yield is approaching zero for the first time in a decade.

Interesting…

Occidental Begins A Healthy Pullback

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Shares of Occidental mounted a huge rally after basing just below its 200 day moving average in March.  Aided by a powerful breakout following its May 8th earnings report the stock extended its gain off the March bottom to 40%.  OXY managed to put in a new monthly high in June but it was clear upside momentum had evaporated.  Over the last three weeks the stock has been drifting lower while working off an extremely overbought MACD(moving average convergence/divergence indicator).  On Monday OXY closed below its 50 day moving average for the first time since the April 9th breakout.   A healthy pullback appears to be underway.  When complete a very low risk entry opportunity will develop for patient bulls.

OXY left behind a major support zone following its huge May 9th breakout.  This key area includes the stock’s January and April highs, the 2016 high and the 5/9 upside gap.  Also near this level is the 1/3 retracement point of the entire 2018 range.  This very solid support zone runs from $79.00 to $78.00.  A dip down to this ares will provide a low risk entry opportunity.  On the downside, a close back below $75.90 would violate the May lows sending a clear warning sign that a more prolonged bottoming process is ahead.

At time of publication we do not have a position in OXY.

 

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