Volatile Week Ends Mixed
December 06, 2019
Volatile Week Ends Mixed
Market rebounds on strong jobs report.
Weak manufacturing data combined with tough talk on trade from President Trump sent stocks spiraling to start the week. The DJIA tumbled 725-points (-2.5%), wiping out all of Novembers gains, before the major averages bounced back on positive trade signals out of China and a strong jobs report. Energy (XLE) was the strongest sector after fresh cuts in production from OPEC sent crude oil prices higher. Consumer Staples (XLP), Healthcare (XLV) and Financials (XLF) also outperformed. Industrials (XLI), Technology (XLK) and Consumer Discretionary (XLY) lagged the broader market. Friday's spike in share prices had the S&P 500 and NASDAQ flirting with new highs, while the small cap Russell 2000 hit a new 52-week high, but the broader market finished the week mixed.
For the period, the DJIA gave up 36.35 points (-0.1%) and settled at 28015.06. The S&P 500 added 4.93 points (+0.2%) ending at 3145.91. The NASDAQ eased 8.94 points (+0.1%) finishing at 8656.53, while the small cap Russell 2000 outperformed rising 9.34 points (+0.6%) and closed at 1624.50.
Market Outlook:The technical condition of the market was little changed last week, and the underlying trend is bullish. The technical indicators finished the period in neutral to bullish ground and momentum remained positive while the market was able to work off its overbought condition. In addition, the DJ Transportation Index, which had been showing negative divergence, was able to trade back above its 50-day moving average on Friday, which is a plus for the market going forward, but closed the week down -1.4%. Internal breadth was mixed with the indicators deteriorating early in the week but reversing as the week ended. With Friday's surge the NYSE and NASDAQ Advance/Decline lines, leading indicators of market direction, were nearly flat for the period, while the number of new 52-week highs expanded as the week ended showing broader leadership in the market. While VIX shot up to 18 intraday on Tuesday's selloff, it finished the week at 13.62 showing traders were comfortable with the markets volatility and rebound.
Trade headlines continue to add to volatility and are dominating market direction. With the December 15 deadline for a new round of tariffs on China goods right around the corner, expect volatility to continue this week. Finally, the December FOMC Meeting gets underway on Tuesday, but the CME Group FedWatch expects less than a 1% chance that the Federal Reserve moves on interest rates. That should keep investors buying the dips as we head into a seasonally strong period for equities. Look for continued outperformance in small caps as a barometer for the rally's strength.
Cyclical Trend Index (CTI): The underlying premise of the CTI is that the market, as measured by the Dow Jones Industrial Average (DJIA), tends to move in cycles that often resemble sine waves. There are five identifiable cycles, each with different time durations at work in the market at all times.
Presently the CTI is Negative at -3, down two notches from the previous week. The counts for Cycles A, C and D are bullish while the counts for Cycles B and E are bearish. The cycles are expected to stay negative through December.
Momentum Index (MI): The market’s momentum is measured by comparing the strength or weakness of several broad market indexes to the DJIA. Readings of -4 and lower are regarded as bearish since it is an indication that a majority of the broader based market indexes are weaker than the DJIA on a percentage basis. Conversely, readings of +4 or higher are regarded as bullish.
The Momentum Index is Positive at +5, unchanged from the previous week. Breadth was mixed at the NYSE as the Advance/Decline line shed 62 units while the number of new 52-week highs out did the new lows on four of the five days. Breadth was also mixed at the NASDAQ as the A/D line lost 184 units while the number of new highs beat the new lows on four days. Finally, the percentage of stocks above their 50-day moving average slipped to 64.6% vs. 69.2% the previous week, while those above their 200-day moving average eased to 63.7% vs. 66.0%. Readings above 70.0% denote an overbought condition, while below 20% is bullish.
Sentiment Index (SI): Measuring the market’s Bullish or Bearish sentiment is important when attempting to determine the market’s future direction. Market Edge tracks thirteen technical indicators listed below that measure excessive bullish or bearish sentiment conditions prevalent in the market. In addition, we track money flows into and out of Equity Funds and ETFs which as of 12/04/19 shows inflows of $5.0 billion. Currently, the Sentiment Index is Neutral at +0, up two notches from the previous week.
Market Posture:Based on the status of the Market Edge, market timing models, the ‘Market Posture’ is Neutral as of the week ending 11/22/2019 (DJIA – 27875.62). For a closer look at the technical indicators and studies that make up the market timing models, check out the tables located below.
Industry Group Rankings : What's Hot (59) – What’s Not (32). Of the 91 Industry Groups that we track, 59 are rated as either Strong or Improving while 32 are regarded as Weak or Deteriorating. The previous week’s totals were 61-30. The following are the strongest and weakest groups for the period ending 12/05/19. Strongest: Healthcare Products, Retail-Drug Based, Advertising and Steel. Weakest: Coal, Household Products (Non-Durable), Pipelines and Gas Companies. To review all of the Industry Group Rankings, click on the Industries tab. ETF Center: The top performing ETF categories for the week ending 12/05/2019 were: Commodity-Energy (+3.19%), Commodity-Blend (+1.40%), Shorts (+0.79%) and International-Emerging (+0.56%). The weakest categories were: Sector-Industrials (-1.96%), Sector-Technology (-1.77%), Sector-Internet (-1.39%), Growth-Mid Cap (-1.18%) and Sector-Consumer Discretionary (-1.16%). To review all the categories in the Market Edge universe, click on the ETFs tab.
Calendar of Technical Events:
**The above listed technical events occurred for the DIA on the date indicated. DIA is the ETF for the Dow Jones Industrial Average (DJIA).
Numbers To Watch:DJIA: 25743 - Support - The 10/03/2019 low
DJIA: 28174 - Resistance - The 11/27/2019 high
DJIA: 27264 - 50-day simple moving average
DJIA: 26524 - 200-day simple moving average
S&P 500: 2855 - Support - the 10/03/2019 low
S&P 500: 3154 - Resistance - 11/27/2019 high
S&P 500: 3042 - 50-day simple moving average
S&P 500: 2935 - 200-day simple moving average
NASDAQ: 7700 - Support - the 10/03/2019 low
NASDAQ: 8705 - Resistance - the 11/27/2019 high
NASDAQ: 9299 - 50-day simple moving average
NASDAQ: 8009 - 200-day simple moving average
”Dr. Market Edge Says" |
Dr. Market Edge has been involved in the stock market for over thirty years. He publishes informative articles every month that provide insight into the workings of the market and features of the Market Edge website. These articles are part of the Market Edge Education Institute located on the Market Edge ‘Home Page’. There are currently thirty-one articles ranging from how to interpret various chart formations to the proper placement of stop loss orders. Check them out today.
|Market Timing Models||Current Reading||Prior Week||Connotation|
|Cyclical Trend Index (CTI):||-3||-1||Negative|
|Strength Index - DJIA (DIA):||67.0||71.4||Positive|
|Strength Index - NASDAQ 100 (QQQ):||63.7||69.5||Positive|
|Strength Index - S&P 100 (OEX):||64.2||73.0||Positive|
|Dow Jones Industrial Average (DJIA):||28015.06||28051.41||-0.1%|
|S&P 500 Index:||,||3145.91||3140.98||0.2%|
|NASDAQ Composite Index:||8656.53||8665.47||-0.1%|
|**Connotation is Positive or Negative Divergence from the DJIA|
|Momentum Index Components||Current Reading||Prior Week||Connotation|
|**Dow Jones Industrial Averages (DJIA):||28015.06||28051.41|
|**DJ Transportation Av||10708.54||10857.57||Negative|
|**S&P 500 Index||3145.91||3140.98||Positive|
|**NYSE Composite Index||13588.29||13545.21||Positive|
|**NYSE Advance-Decline Line||463771||462974||Positive|
|**10 Day MA Advance-Decline Line||1.21||1.09||Positive|
|**NDX 100 Index||8397.37||8403.68||Positive|
|**NASDAQ Composite Index||8656.53||8665.47||Positive|
|**DJ Utilities Index||855.04||851.72||Negative|
|Trin (5 Day Average)||0.91||1.01||Neutral|
|NYSE Weekly New Highs-New Lows||286-66||272-170||Negative|
|Zweig Breadth Indicator||0.75||0.35||Positive|
|McClellan Summation Index||2348||2622||Positive|
|Unchanged Issue Index||0.03||0.04||Negative|
|Sentiment Index Components||Current Reading||Prior Week||Connotation|
|Fear-Greed Index(5 Day Avg)||70.40||72.00||Neutral|
|Shares Sold Short NYSE - Monthly (000)||16799814||16839030|
|NYSE Short Interest Ratio----(NYSE Only)||5.2||4.8||Bullish|
|Shares Sold Short NASDAQ - Monthly (000)||8223360||8255893|
|NASDAQ Short Interest Ratio||4.5||5.3||Bullish|
|AAII Bull-Bear Ratio||1.1||1.1||Neutral|
|Put/Call Ratio (5 Day Avg.- All Equity Options)||1.08||1.02||Neutral|
|Dividend Yield Spread||0.40||0.45||Bullish|
|NAAIM Exposure Index||77.8||76.7||Neutral|
|Bullish Investment Advisors||54.8||58.2||Neutral|
|Bearish Investment Advisors||17.3||17.1||Bearish|
|Bullish - Bearish Investment Advisors Ratio||3.2||3.4||Bearish|
|VIX (CBOE Volatility Index)||13.62||12.62||Neutral|