Dow Hits 28,000

Market Letter (Weekly)

November 15, 2019

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Dow Hits 28,000
Market at new highs on trade optimism.

The major averages hovered near record highs for most of the week as investors waited on word that a 'phase 1' trade deal was ready to be signed. The different indexes traded in a narrow range until word came on Thursday afternoon that China and the US were ready to 'put the pen to the paper.' Stocks rallied on Friday and the DJIA, S&P 500 and NASDAQ all closed the period at new all-time highs. Defensive sectors outperformed during the week as trade jitters kept investors cautious and Healthcare (XLV), REITs (XLRE) and Utilities (XLU) outperformed. Technology (XLK), Healthcare (XLV), Materials (XLB), Industrials (XLI) and Communication Services (XLC) all punched record highs as investors wagered that a trade deal would finally be signed. Friday's rally sent the DJIA higher for a fifth consecutive week as it added 323.65 points (+1.2%), led by a jump in shares of Walt Disney (DIS), and closed at 28004.89. The S&P 500 extended its win streak to six as it picked up 27.38 points (+0.9%) and settled at 3120.46. The NASDAQ made it seven in a row, advancing 65.52 points (+0.8%) and finishing at 8540.83, while the small cap Russell 2000 lost 2.41 points (-0.2%) and closed at 1596.45.

Market Outlook: The technical condition of the market improved during the week as the 'big three' major averages finished the period at new all-time highs. The technical indicators are in bullish ground and momentum is positive, but the DJIA, S&P 500 and NASDAQ finished the period overbought by several measures. The S&P 500 is stretched and trading 6.4% above its 200-day moving average. The DJ Transportation Index and small cap Russell 2000 finished lower for the week. Despite some consolidation in the transports, the index hit a 52-week high the previous week and triggered a Dow Theory buy signal. The Russell 2000, which tends to lead a healthy market higher, is showing negative divergence, but that could be about to change. A look at the chart of the Russell 2000 shows what looks like a bullish flag pattern. If the index can trade above 1605, it would be a bullish breakout and help support higher prices for stocks. Mid-December is usually the time when the small caps begin to outperform.

Breadth however, is showing negative divergence for a second straight week. The NYSE and NASDAQ Advance/Decline lines, which are leading indicators of market direction, were little changed despite the indexes marking several new record highs during the week. In addition, the number of new 52-week highs have contracted for the last two weeks signaling a smaller group of stocks leading the market. Finally, as mentioned last week, investors are too complacent. The last time VIX settled near 12 was in mid-July and the DJIA tumbled -7.5% over the next few weeks. Investor's bullish sentiment is also running hot and the Market Edge Sentiment Index hit an extreme level of -8 last week.

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 Positive at +1, down five notches from the previous week. The counts for Cycles C and D are bullish while the counts for Cycles A, B and E are bearish. The cycles are currently extended and the CTI is projected to crossover to a Neutral or Negative reading as early as next week.

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 +7, unchanged from the previous week. Breadth was positive at the NYSE as the Advance/Decline line gained 386 units while the number of new 52-week highs out did the new lows on all five days. Breadth was negative at the NASDAQ as the A/D line lost 395 units while the number of new highs beat the new lows on each day. Finally, the percentage of stocks above their 50-day moving average fell to 62.7% vs. 66.1% the previous week, while those above their 200-day moving average eased to 62.3% vs. 63.4%. 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 ETFs which as of 11/13/19 shows outflows of $3.8 billion. Currently, the Sentiment Index is Negative at -5, up three notches from the previous week.

Market Posture:Based on the status of the Market Edge, market timing models, the ‘Market Posture’ is Bullish as of the week ending 9/13/2019 (DJIA – 27219.52). 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 (76) – What’s Not (15). Of the 91 Industry Groups that we track, 73 are rated as either Strong or Improving while 18 are regarded as Weak or Deteriorating. The previous week’s totals were 72-19. The following are the strongest and weakest groups for the period ending 11/14/19. Strongest: Retail-Drug Based, Aluminum, Auto Parts and Transportation Equipment. Weakest: Semiconductor's & Related, Advertising, Precious Metals and Medical/BioTechnology. To review all of the Industry Group Rankings, click on the Industries tab. ETF Center: The top performing ETF categories for the week ending 11/14/2019 were: Bond-Government Long Term (+1.81%), Shorts (+1.01%), Growth-Mid Cap (+0.93%), Commodity-Precious Metals (+0.89%) and Sector-Consumer Staples (+0.77%). The weakest categories were: Commodity-Base Metals (-3.21%), Sector-Energy (-2.89%), Commodity-Energy (-2.07%), International-Emerging (-2.03%) and Sector-Internet (-1.44%). To review all the categories in the Market Edge universe, click on the ETFs tab.

Calendar of Technical Events:

Date  EventConnotation
11/15/2019  Stock reached new 52 week high of 279.95Bullish
11/15/2019  Relative Strength turned bearishBearish
11/07/2019  Point & Figure Double Top breakoutBullish
11/07/2019  Price gap upBullish
10/25/2019  21 day SMA slope turned upBullish
10/25/2019  MACD LT turned bullishBullish
10/21/2019  10 day SMA cross above 21 day SMABullish
10/16/2019  Up/Down slope turned upBullish
10/15/2019  MACD ST turned bullishBullish
10/11/2019  50 day SMA slope turned upBullish
09/20/2019  21 day SMA cross above 50 day SMABullish
08/29/2019  200 day SMA slope turned upBullish

**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: 28004 - Resistance - The 11/15/2019 high
DJIA: 27019 - 50-day simple moving average
DJIA: 26359 - 200-day simple moving average

S&P 500: 2855 - Support - the 10/03/2019 low
S&P 500: 3120 - Resistance - 11/15/2019 high
S&P 500: 3005 - 50-day simple moving average
S&P 500: 2909 - 200-day simple moving average

NASDAQ: 7700 - Support - the 10/03/2019 low
NASDAQ: 8540 - Resistance - the 11/15/2019 high
NASDAQ: 8170 - 50-day simple moving average
NASDAQ: 7926 - 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):     1   6   Positive
Momentum Index:     7   7   Positive
Sentiment Index:   -5   -8   Negative
Strength Index - DJIA (DIA):     80.6   83.0   Positive
Strength Index - NASDAQ 100 (QQQ):     79.7   85.3   Positive
Strength Index - S&P 100 (OEX):     81.0   85.5   Positive
Dow Jones Industrial Average (DJIA):   28004.89 27681.24   1.2%
S&P 500 Index: , 3120.46   3093.08   0.9%
NASDAQ Composite Index:   8540.83 8475.31   0.8%
 **Connotation is Positive or Negative Divergence from the DJIA          
Momentum Index Components   Current Reading Prior Week Connotation
**Dow Jones Industrial Averages (DJIA):   28004.89 27681.24  
**DJ Transportation Average   10876.29 11067.16 Positive
**S&P 500 Index 3120.46 3093.08 Positive
**NYSE Composite Index 13492.96 13407.81 Negative
**NYSE Advance-Decline Line 456384 456384 Positive
**10 Day MA Advance-Decline Line 1.04 1.10 Positive
**NDX 100 Index 8315.52 8255.89 Positive
**NASDAQ Composite Index 8540.83 8475.31 Positive
**DJ Utilities Index 848.47 835.30 Negative
**Russell 2000     1596.45   1598.86 Positive
Trin (5 Day Average) 1.24 0.90 Neutral
NYSE Weekly New Highs-New Lows  412-101 410-116 Positive
Zweig Breadth Indicator 0.61 0.53 Positive
McClellan Oscillator 16 17 Neutral
McClellan Summation Index 2917 3142 Positive
Unchanged Issue Index 0.03 0.03 Negative
Sentiment Index Components Current Reading Prior Week Connotation
Fear-Greed Index(5 Day Avg) 87.60 86.80 Bearish
Shares Sold Short NYSE - Monthly (000) 16839030 17123588  
NYSE Short Interest Ratio----(NYSE Only) 4.8 4.6 Bullish
Shares Sold Short NASDAQ  - Monthly (000) 8255893 8313537  
NASDAQ Short Interest Ratio 5.3 4.6 Bullish
AAII Bull-Bear Ratio 1.6 1.7 Bearish
Put/Call Ratio (5 Day Avg.- All Equity Options) 0.98 0.86 Bearish
Dividend Yield Spread 0.54 0.37 Bullish
NAAIM Exposure Index 72.3 92.3 Neutral
Bullish Investment Advisors 57.6 57.1 Bearish
Bearish Investment Advisors 17.9 18.1 Bearish
Bullish - Bearish Investment Advisors Ratio 3.2 3.2 Bearish
VIX (CBOE Volatility Index) 12.05 12.07 Bearish

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Market Indicators

Market Posture Cyclical Trend Index
As of: 09/13/2019
As of: 11/15/2019

Second Opinion Performance

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Current Opinions
As of: 11/20/2019


Long Accuracy
As of: 11/20/2019


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As of: 11/20/2019
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Market Recap - 11/20/2019

Index Close Day Change Day % Change YTD % Change
NASDAQ COMPOSITE 8526.73 -43.93 -0.51% 28.5%
DJ UTILITIES 855.01 6.7 0.79% 19.92%
DJ TRANSPORT 10695.04 -152.5 -1.41% 16.62%
DJ INDUSTRIALS 27821.09 -112.9 -0.4% 19.26%
NYSE COMPOSITE 13419.3 -47.05 -0.35% 17.98%
S & P 100 INDEX 1382.01 -5.58 -0.4% 24.07%
RUSSELL 2000 1591.57 -6.72 -0.42% 18.01%
S&P 500 3108.46 -11.72 -0.38% 23.99%
CBOE MKT VOLATILITY 12.78 -0.08 -0.62% -49.78%
AMEX COMPOSITE 2429.73 0.06 0% 5.99%
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