A bull case for 3500 in S&P plus weekly review

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Not bad for 74 days, eh?

the source for this article is delta market investment newsletter Screen Shot 2019-04-13 at 11.10.57 AM

Delta continue : “For the market to return to its previous high, it will advance about 1.7% from current levels.  This is hardly a compelling upside story.  Is there a case to be made for the S&P 500 index to run materially higher than 2,940 in the next year?  The bullish price action of the stock market year-to-date suggests there is upside to consensus earnings and growth estimates.

One simple, time-tested rule of investing is the Rule of 20.  The Rule of 20 says the S&P 500 Price/Earnings (P/E) multiple equals 20 minus inflation.  The Federal Reserve currently measures inflation at 1.4%.  20 less 1.4 equals 18.6.  If we apply the 18.6 P/E multiple derived from the Rule of 20 to the consensus S&P 500 2020 earnings forecast of $187.42, we arrive at a price target of roughly 3,500 on the S&P 500 about one year from now.  That is 21% upside from current levels.”

IBD says this : “Leadership in the stock market is still centered on software, electronics, computer and chip sectors. They are showing no signs of weakness.”

Fidelity Weekly Ending Friday April 12th 2019barchart weekly Ending Friday April 12th

even for this week, except for health care and energy sector, all other sectors ended the week at the top of the trading range

Happy trading !

 

What a stock market rally so far? Weekly review for week of April 1st – April 5th 2019

How do you know that the stock market is doing well so far?

Let’s look at the general market picture below

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we see the advanced decline line nicely surpassing the previous all times highs in the last one week!

what would some other sign be?

In the worst week for the top performing industry group (Software Group), it lost less than 1 % !!

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what about sectors, How did they do ?

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there has been nothing down – no sector was in the negative last 1 month and last 3 months !!

I am long on NQ and TQQQ

Have a wonderful weekend !!

 

Heikin- Ashi Candles – what are they saying about the market?

Heikin- Ashi Candles (H-A Candles) smooth out the rough edges and indicate if the patterns are continuing or they are just about to transition.

They are like regular candles but use averages. Something akin to the functioning of moving averages. I feel they are simple and effective. Why?

Let’s look at closing price on a H-A candle. It is average of high, low, open, close of the current time period. Isn’t that awesome! Why? because no matter what people say what they think, what the TV pundits think and say. No matter what – ALL INFORMATION IS IN THE PRICE. More so in the current world we live in – every information moves at speeds that was too much to even imagine for say Jesse Livermore – often quoted as the greatest speculator of all time.

Look what he says on page 11 of his own book under a pseudonym??

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So let’s smooth all all fluctuations and say what is the average closing price for today. How is it doing with respect with last few days.

let’s look at S&P 500 Stocks Above 50-Day Average ($S5FI). From 90 % of S&P 500 stocks above their 50 days moving averages it has fallen down to 60%. Basically the stocks are losing steam and falling off. This is invaluable information. Why? the best biggest companies are not being supported by biggest institutional monies and hedge funds and Pension funds like The California Public Employees’ Retirement System (CalPERS) which has 300 plus billions in assets. Individual traders and speculators like you and me cannot match their dollars. We do not move the markets. We just follow the price.

As Jesse said – the tape does not concern itself with why and wherefore!

So last 3 weeks the stocks composing S&P 500 are falling off. So we do not enter into newer positions and take our profits. That is what i did in TQQQ and NQ yesterday. I closed all my positions and am sitting in cash now.

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Now let us look at TQQQ – the triple NASDAQ 100. It went up 94.6 % since the start of the rally low on December 26th 2018 till close of the market price of Thursday March 21st. it gave up 14 % last two days. So we exited to preserve our profits. (all regular candle prices not smoothened H-A candle)

Now why is this last two days different from say March 7th and 8th 2019  when they were similar declines?Screen Shot 2019-03-26 at 12.04.21 PM

March 7th and 8th – the price decline was 5.3 % or 2.77 dollars. on 6th the volume is well below the 50 days SMA of the volume and on 7th the decline in price was accompanied with just about average volume. IBD still had market in confirmed uptrend.

From 8th to 21st of march the market was going up BUT S&P 500 Stocks Above 50-Day Average ($S5FI) BARELY BUDGED it held at 71 %!! TQQQ went up by 20 % but the best stocks did not move up!

On 21st March at the climatic top the volume was just above average in TQQQ – around 19 million. the 50 days Average volume was 17.8 million.

the 7.1 % decline in the last 2 days. were in volume of 33 and 26 millions! which is to say 83% more volume than average on Friday 22nd March 2019 and then 30 % more yesterday. IBD changed its market outlook on Friday to market under pressure.

Number 1 : price in the only true north star

Number 2 : Preserve your capital at all costs

Number 3 : Preserve your profits.

Market climbs the wall of worry going up in an escalator or slowing trudging up. It falls down like a rock or a free fall elevator.

lets look at the 5 min intraday chart.

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7600 price seems to be a support. lets just wait and see.

Finally lets look at 5 days 60 Min H-A Candle chart of TQQQ.

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look at the bottom pane the big green volume candle bar and the values for that particular hour. Volume was 300 % more from 2-3 pm the day of Wednesday March 20th 2019 price change was 56 to 59.66 – 6.5 % But then look at all the high volume red candles  that followed the price decline.

So i am staying out of the market for now. Right from 3/22 and 3/25 10:00 am high volume price declines. So i get out of the way.

Happy patience and staying put for now!

 

market is still not out of woods

last week, the day after Christmas we have had the best one day show in about 10 years in the market. But it was not convincing, why? because there was so small rise in the number os stocks going above the 50 days SMA in S&P 500. On the big day it went up by 3.39 which is insignificant compared to the drops (look at the big red candle o Dec 4th – one day drop of 23%!!)

Screen Shot 2018-12-29 at 12.49.46 PMScreen Shot 2018-12-29 at 12.53.15 PM

also checking QLD – we see that on the same close at 12/20 the OBV was 56 million and on 12/26 the OBV was 53 million. this is divergence and hence the market is going to go down further.

on the COMP 6630 is the next resistance (weekly low on the week of Feb 5th 2018)

One positive thing is the DMSI – quoting them “The Delta Market Sentiment Indicator (MSI) declined to 7.5% this week.  The range on the Delta MSI is from 0% to 100%.  A 7.5% reading is very low and a sub-10% reading has only occurred during four periods (including this week) in the past 15 years (a longer history is shown this week instead of the usual 12 month review).  Historically, the stock market has shown strong performance over the next twelve months post a sub-10% reading.”

Weekend Saturday September 15th Market analysis

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  1. NDX 3 months daily chart comfortably above the 9 EMA daily (7519), currently at 7545.50, about 25 points above 9 EMA Daily.
  2. on Friday NDX did not give up so much of any of Thursday’s gains.
  3. 2 red flags on QLD Wednesday and Friday last week 12th and 14th September – Green price candles on Red volume in Heiken – Ashi chart. good volume 1.39 and 1.27 million.
  4. ES broke all short term nasty resistances at 2890 and 2895.
  5. good sign – NYSE advance decline line 5 days of increase. 1433 stocks up in 1.58 million volume and 1344 down in 1.27 million volume.
  6. Accumulation Distribution – C- on S&P 500 and B- on NASDAQ.
  7. Market sentiment indicator – since Thursday (sept 5th) and Friday (sept 6th) was big fall in the market the sentiment indicator went down from 62.3 to 56.1.
  8. very good sign – the above chart – the percentage of S&P 500 stocks above their 50 day SMA has gone up top 68.45 !

decision – i am going to stay in the market.