For Sunday, November 4, 2018 

 
 


S&P 500 (SPX) & Nasdaq 100 (NDX) Timing
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Current Strategy Positions
Fibtimer currently has 13 successful strategies

  S&P 500 Position -       BEARISH
  Nasdaq 100 Position -  BEARISH
  SmallCaps Position -
   BEARISH
  U.S. Dollar Position -    BULLISH
  Bond Fund Position -    BEARISH
  Gold Fund Position  -    BEARISH

These positions were started over previous weeks.
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S&P 500 Index (SPX) Chart Analysis

Last week:

"When we have a rally after steep losses, one of the things we look for is follow-through. Does the stock market continue its advance the following day? Without follow-through the rally is suspect. The odds increase that it is a dead-cat bounce."

This week:

The steeper the fall the bigger the bounce back. But what happens after that bounce? That is where we are now.

After a decline of -11.4%, this week the S&P 500 Index (SPX) bounced back +2.32%. The index almost made it to its 200-day moving average line on Friday before turning lower and closing with a one-day loss of -0.63%.

We expect the 200-day line to act as resistance. There is a long way to go before this selloff becomes history and another test of the lows is likely.

Only Monday of this week the SPX rallied at the open to gain +1.8% before reversing midday, and declining to a full day loss of -0.7%. Close to a 3% daily trading range from high to low, ending with a very bearish close.

When looking at the rally days and wishing you had entered for just one or two of those rallies, remember Monday. It is likely to happen again and you never know ahead of time on which day it will occur.

Over the past weeks we have discussed the potential of an Elliott Wave top. The weekly chart of the SPX has been labelled with this wave series for months.

Basically we could well be starting a correction that would be expected after a five wave Elliott Wave pattern is completed.

This has been a two year pattern and it certainly looks like wave 5 may well have been completed.

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A decline after such a five wave pattern could be expected to erase up to 61.8% of the gains.

That is a worst case scenario and it might not even happen. But the potential for substantial declines is something to be watching for.

The extreme weakness in breadth is disturbing.

Look at the lows reached in the NYSE Advance-Decline Line last February. Compare that decline to this decline. We are at almost double the losses.

And this time the 200-day moving average line was breached.

Yes this week the A-D line is rising, but it remains way down near its October lows and there is no indication that the selling has ended, only that we are bouncing after a steep loss and extremely oversold market.

We wrote about the loss on Monday for the SPX. But what happened to the Nasdaq 100 Index (NDX) on Monday.

The Nasdaq 100 Index (NDX) closed the previous Friday at 6852. The NDX gapped up at the open on Monday to 6954 and rallied to 6973, a +1.8% gain.

By the close on Monday those gains had been completely erased and the NDX closed at 6714. For the full day a loss of 2.0%.

Something to keep in mind when thinking about a short-term bullish entry.

The number of stocks in the NYSE trading above their 200-day line broke well below the February-March lows two-weeks ago.

At the lows only 26% of stocks in the NYSE Composite Index of 1600 stocks were still above their 200-day moving average lines

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This week with the three rally days this chart improved.

But it only made it to 31.83% of stocks in the NYSE above their 200-day lines.

This is what you would see in a bear market and we are only just now in correction territory.

Lastly we look at the daily chart of small caps using the Russell 2000 Index (RUT).

We have been writing about the bearish divergence between big cap and small cap stocks for several weeks.

Bearish divergences are almost always a bearish indicator. We have been in a cash position in small caps since September 18th.

The chart tells a simple story. Yes small caps rallied this week. But they were down some 16% from their highs. Extremely oversold.

This week's big rally still leaves small caps some -12% from their highs.

Big cap indexes will not start a sustained advance without small caps.

What are other market analysts saying?

Michael Wilson, Morgan Stanley’s chief U.S. equity strategist, said, during an interview on CNBC midday Thursday, that a then-current market rebound belied a market that is badly damaged and ready to sink further.

Wilson describes current conditions as a “rolling bear market,” which began in February, and predicted that the S&P 500 index SPX, -1.73% could fall to between 2,450 and 2,500.

That represents a roughly 8% to 10% drop from the broad-market benchmark’s current levels. “And we think we get there in four to eight weeks,” Wilson said.

Prominent market technician Ralph Acampora says the stock market is in bad shape and it’s worse than many on Wall Street investors appreciate. “I’ve been a bull for a long, long time and like everyone, I was waiting for a correction but this is something different,” said Acampora, who many chartists refer to as the “godfather” of technical analysis.

“Honestly, I don’t see the low being put in yet and I think we’re going to go into a bear market,” he said. He speculates that the market may not be healed until around the first quarter of 2019.

 

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Regularly Followed Weekly Charts

NYSE Advance-Decline Line

The NYSE A-D Line has broken below important support at its 50-day average line and last week broke below and closed below its 200-day line.

This week the A-D line managed to close above its 200-day line.

MACD has posted a bullish crossover but is now deep in bearish territory for the first time since March.


The Nasdaq 100 Index Advance-Decline Line remained below its 50-day average and MACD has fallen into bearish territory. MACD has made a short-term bullish crossover but weekly MACD remains bearish.

Last week the NDX A-D line rallied up to its 50-day average but then again fell. This week's rally has done the same thing with, so far, a failed test of resistance.

CBOE Volatility Index (VIX)

The CBOE Volatility Index (VIX) declined this week as would be expected with stock market gains. This week closed at 19.51.

At one point in October VIX reached a low of 11.34. That was a red flag followed by the October stock market declines.


Market Internals

The number of stocks trading above their 200-day average fell steeply last week but with this week's rally advanced to 31.83% of NYSE stocks above their 200-day line.

The losses substantially exceeded the February-March selloff which is a big concern.

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Fibtimer's timing strategies MAKE MONEY in BOTH advancing & declining markets. No more sleepless nights. No more upset stomachs.

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31.83% is still a very low number.

Consider that fully 68.17% of the 1600 stocks on the NYSE remain "below" their 200-day line.

This decline is pointing to potentially much lower lows in coming weeks.

Sentiment Indicator

This is a contrarian indicator. Typically, when advisors are mostly bullish, the markets are often near a top.

Note that these numbers are from a week ago. They reflect the preceding week's sentiment.

The number of bulls remains high. Remember that those who are neither bullish nor bearish have bullish positions and really should be considered bullish. Add bulls and those not specifically bearish and you get 80.2% with at least some bullish market positions.

  • Investor's Intelligence Bull vs. Bears as of Oct 30, 44.3% bullish vs. 19.8% bearish.
    Bull vs. Bears in the prior week with 50.5% bullish vs. 19.0% bearish.

Fibonacci Support / Resistance Levels

We are now looking at "support levels" from the correction lows. Fib support levels on the weekly chart are as follows; the 38.2% retracement support at 2508, the 50% retracement support at 2375 and the critical 61.8% retracement support at 2242.

Market Moving Economic Reports Released this Week:

The S&P/Case-Shiller 20-city index rose a seasonally adjusted 0.1% and was 5.5% higher compared to its level a year ago, the lowest annual increase in 20 months. Annual gains dipped below 6% for the first time in 12 months, according to the closely-watched index of home prices.

Americans’ confidence in the U.S. economy stood at an 18-year high in October, suggesting the recent slump in the stock market has not dimmed their optimism. The consumer confidence index rose to 137.9 this month from a revised 135.3 in September, the Conference Board said Tuesday.

Same store sales were up 5.9 percent year-on-year in the October 27 week, accelerating by 0.4 percentage points from the prior week's growth pace. Month-to-date sales versus the prior month were up 0.1 percent, while the full month year-on-year gain rose marginally from the prior week to 5.7 percent. Redbook's same store year-on-year sales growth remains exceptionally strong and points to strength in ex-auto ex-gas retail sales.

The S&P/Case-Shiller 20-city index rose a seasonally adjusted 0.1% and was 5.5% higher compared to its level a year ago, the lowest annual increase in 20 months. Annual gains dipped below 6% for the first time in 12 months, according to the closely-watched index of home prices.

U.S. employment costs rose by more than forecast in the third quarter as increases in private wages and salaries accelerated, indicating workers are gaining leverage in a tightening labor market. The employment cost index, a broad gauge monitored by the Federal Reserve, increased 0.8 percent in the July-September period from the prior quarter, according to a Labor Department report Wednesday.

Companies in October added the highest number of workers in eight months to U.S. payrolls, topping estimates and signaling the job market remains solid, according to data released Wednesday from the ADP Research Institute in Roseland, New Jersey.

The U.S. Treasury Department announced debt sales will surpass levels last seen when the country was digging out of its worst economic crisis since the Great Depression. This time around, fiscal stimulus is adding fuel to an already growing economy. A ballooning budget shortfall -- fueled by tax cuts, spending hikes and an aging population -- is driving the U.S. Treasury to raise its long-term debt issuance at its quarterly refunding auctions to $83 billion from $78 billion three months ago, the department said Wednesday.

October was a very healthy month for the labor market based on jobless claims data which show very little effect from Hurricane Michael. Initial claims edged 2,000 lower in the October 27 week to 214,000 with claims in both Florida and Georgia, the two states directly affected by the mid-month storm, falling roughly 4,500 combined to largely reverse the 7,000 increase in the prior week.

Led by a sharp increase in new orders, composite growth in October's PMI manufacturing sample is steady and solid at 55.7 vs 55.9 at mid-month and 55.6 for final September. New orders came in at a 5-month high despite only fractional growth in export sales. Production rates extended their strong growth pace while employment posted a 10-month high as the sample tries to clear backlogs in expectation of further growth in new orders.

A big upward revision to August offsets a no-change headline for September construction spending. But year-on-year rates tell the story, up a sharp 7.2 percent in September and 7.4 percent in August. Less fortunately for Realtors and home builders, however, the report's strength is not centered in residential investment which nevertheless is up 5.1 percent from September last year. Spending on new multi-units are September's housing headline in this report, surging 8.7 percent in the month for a yearly gain of 8.2 percent. But single-family homes look soft, down 0.8 on the month and up only 3.1 percent on the year.

The nation’s trade deficit rose 1.3% in September to a seven-month high as imports set a fresh record, confounding efforts by the Trump White House to bring deficits down. The deficit edged up to $54 billion from a revised $53.3 billion in August, the Commerce Department said Friday.

In a very strong showing in which wage pressures may be less severe than they look, October's nonfarm payroll growth easily surpassed expectations, rising 250,000 in the month and with strength centered in two sensitive components to economic pivots: manufacturing with a much higher-than-expected 32,000 gain and professional & business services where payrolls rose 35,000. And available labor in construction is now more scarce with payrolls here up a very sharp 30,000.

Up a higher-than-expected 0.7 percent, factory orders in October added to September's very strong gain which is now revised 3 tenths higher to 2.6 percent. October's increase for durable goods, also at 0.7 percent, is revised 1 tenth lower from last week's advance report with orders for non-durable goods, which are the fresh data in today's report, up 0.6 percent reflecting gains for petroleum and chemical products.

Conclusion:

After last week's -3.94% loss for the SPX, the index started this week in an extremely oversold position.

Even so, the SPX in a very volatile Monday, managed to lose an additional -0.7%.

Tuesday through Thursday saw gains and continued extreme volatility. The correction does not feel at all to be over.

The potential that we have finished a two-year bullish 5-wave Elliott Wave pattern (weekly chart below). If this is correct, the decline that follows truly could be substantial.

The SPX portion of this strategy is BEARISH. Aggressive traders should be in CASH (money market funds).

S&P 500 Index (SPX) Daily Chart


S&P 500 Index (SPX), Weekly Chart



Nasdaq 100 Index (NDX) Chart Analysis

Last week we wrote:

"Even after a solid rally on Thursday, the Nasdaq 100 Index (NDX) managed to lose -3.59% for the full week. The 200-day moving average line was decisively broken this week and the NDX closed well below this line on Friday."

This week:

The Nasdaq 100 Index (NDX) lost -3.59% last week. On Monday of this week, after initial +1.8% gains, the NDX closed the day with an additional -2.0% loss.

This is not a time to be picking a bottom.

The 200-day moving average line was decisively broken last week and the NDX remained below this line on Friday.

Though there were three rally days this week there were also two declining days. The -2.0% loss on Monday and a - 1.47% loss on Friday.


Fibtimer HALF PRICE Offer!

Get Our Full Reports Every Weekend
plus Updates Every Trading Day

These FREE reports are great, but getting our timing signals daily is what you need to beat the market!

only $12.25 monthly for full year
Bull & Bear Timer
10 Year Results

Fibtimer Timing + 287.0 %
3 Year Results
 Fibtimer Timing  + 67.2 %

Sleepless nights as your investments are consumed by a volatile Wall Street? Consider Fibtimer's trend trading services. Our trading plans are unemotional and are always invested with the trend, which ever way it is headed.

Fibtimer's timing strategies MAKE MONEY in BOTH advancing & declining markets. No more sleepless nights. No more upset stomachs.

We profit year after year after year. In fact, we have been timing the markets successfully for over 25 years.

Join us and start winning!

We are currently offering HALF PRICE to new and returning subscribers.

--- only $12.25 monthly for full year

Special HALF PRICE Offer - CLICK HERE NOW


For the full week the NDX managed to close with a +1.65% gain. But that was after a new correction low was made on Monday.

Breadth indicators improved a bit but remain near their lows.

MACD on the volatile daily chart is now deep in bearish territory though it had a bullish crossover for the week.

On the weekly chart MACD remains in bullish territory but has posted a sharply bearish crossover.

We have posted Fibonacci retracement "support" levels for the advance from the February 2016 lows. Those Fib support levels (weekly chart) are; 38.2% at NDX 6256, 50% at NDX 5804 and 61.8% at NDX 5352.

Conclusion:

The NDX was a leader until early October. Looking at the daily chart the NDX hit a high in the end of August and then tested that high in the end of September.

This test of the highs failed and has created a bearish double-top.

Last week the 200-day line was broken to the downside. This week the NDX was unable to close above this level which now becomes resistance.

Breadth is poor with the A-D line well below its 50-day average line.

The NDX portion of this strategy is BEARISH. Aggressive traders should be in CASH (money market funds).

Nasdaq 100 Index (NDX), Daily Chart


Nasdaq 100 Index (NDX), Weekly Chart

 


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