Written by A.J. Brown

Broad Market Analysis - August 18, 2017

Hi, team. This is A.J. with Trading Trainer on the evening of Friday, August 18, with your Trading Trainer weekend edition of your daily insights. What we’re going to do here is take a look at the broad market by taking a look at representative indexes of our watch list, namely the Dow Jones Industrial Average, the NASDAQ Composite Index, and the S&P 500 Index. We’re also going to take a look at the New York Stock Exchange Composite Index and the VIX Volatility Index, and because it is the weekend, we’re going to look at both daily and weekly charts.

Team, before looking at any charts, we’re actually going to log into the Trading Trainer ‘Learning Community’ web portal by going to login.tradingtrainer.com. Of course, once we’ve logged into the ‘Learning Community’ web portal, team, I’m going to direct you right to today’s ‘Daily Insights’ tab and further to the ‘Recommendations’ subtab. Team, take a look at the ‘Recommendations’ we have for Monday, August 21st’s trading session. Slight changes in these recommendations could have a major impact on your trading. We’re also going to find here a link to our audio commentary. This is the audio where I take you by the hand through today’s ‘Daily Insights’ and it’s subtabs. Go ahead and click on the link. An audio is going to start playing automagically in the background in another browser tab or another browser window, depending on how you have your browser configured. Go ahead and listen to that audio the first time you do click through today’s daily insights and its subtabs. It’ll make sure you hit all the high points. You can always drill down deeper on your own after the audio is over. Team, when you listen to the audio commentary, please pay special close attention to the opening and closing comments.

In the meantime, for this particular ‘Broad Market Analysis’ of this ‘Charts of Interest’ video series, let’s go right to our ‘Index Stats’ subtab. Our trading bias remains at bullish.

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Our industrial as shown by the Dow Jones Industrial Average fell 0.35% today on heavy, above-average New York Stock Exchange volume. It fell 0.84% for the week on heavy, above-average New York Stock Exchange weekly volume. Our tech stocks, shown by the NASDAQ Composite Index, edged down 0.09% today on light, mixed average NASDAQ Exchange volume, and it fell 0.64% on heavy, above-average NASDAQ Exchange Weekly Volume. Large caps, shown by the S&P 500 Index, fell 0.81% today, fell 0.65% for the week.

Moving onto our secondary indexes, our 100 best stocks out there, shown by the S&P 100, fell 0.24% today and fell 0.77% for the week. Our mid caps, shown by the S&P 400 Index, fell 0.23% today, 1.1% for the week. Our small caps, shown by the S&P 600 and the Russell 2000, two different perspectives on small caps, falling 0.18% and 0.08% respectively today, falling 1.52% and 1.2% respectively for the week. The New York Stock Exchange Composite Index fell 0.11% today, fell 0.54% for the week. Our VIX Volatility Index fell 8.3% today, 8.06% for the week. Our gold ETF fell 0.16% today, fell 0.4% for the week, and our oil ETF, it gained 3.64% today but fell 0.2% for the week.

Let’s take a look at our economic calendar. We’ll click on our ‘Daily Insights’ tab and our ‘Economic Calendar’ subtab. The first thing I need you to do for Friday, August 18 is click on the ‘Market Reflections’ summary. Fast forward to Monday, August 21, and click on the ‘Market Focus’ pointers. Also on Monday, August 21, please click on the ‘International Perspective’ and the ‘Simply Economics Reports’. These two reports are published weekly and give us a good foundation on what’s going to be happening for the upcoming week.

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Let’s go back to Friday, August 18. Consumer sentiment.

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Last time we reported, the sentiment index level was at 93.4. The preliminary numbers for August have it at 97.6. looking forward to the week ahead, Monday looks like a very quiet day. Actually, so does Tuesday. We start to get housing information on Wednesday and Thursday, durable goods orders on Friday. Overall, it seems like a slower week with respect to economic news.

Let’s take a look at our ‘Trading Tools’ tab and our ‘Watch List’ subtab. There were no tickers identified by our ‘Covered Call Writing’ candidate filter or our ‘Options Trading’ candidate filter. We’ll go to our ‘Trading Tools’ tab and our ‘Daily Picks’ subtab. We’re going to take our indexes and do a deeper dive by looking at volume and trends.

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Our volume was about the same as it was yesterday, about the same as the 50-day volume simple moving average, the 200-day volume simple moving average, and the oscillator compared to the oscillator average, showing that volume has been consistent. Short duration trends are showing for the most part bearishness. Long duration trends, at least in the big three and the 100 best stocks out there, shown by the S&P 100, showing bullish. That means either we have found a top or we’re looking at a long-term trend test.

Let’s take a look at our template algorithm filters. These mathematically go through whatever raw data they are presented with looking for patterns in the numbers. We’re going to present it with the raw data of our index tickers. That’s going to give us an idea what the broad market personality is doing, as well as what to look for on our watch list. On our trend continuation templates, we do have a lot of long-term trend, and now we have a trigger, meaning we’ve pulled back on that long-term trend to an extremely oversold condition.

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Short-term trend test and trend reversal test, bearishness.

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That actually aligns well with what we’re seeing in the trend continuation lifecycle. Our short-term trend has turned bearish as we test the long-term trend. The question is, have we found a top or is this really a test of the long-term trend, and are we going to get a swing back up soon?

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Pattern alteration shows that we have come out of the bottom of the Bollinger bands, and our Bollinger bands are actually quite wide.

Team, let’s take a look at our charts by going to the ‘Trading Tools’ tab and the ‘Charting’ subtab. We’ll use our ‘Quick Review’ template. This is a six-month, daily chart, linear scale, open high-low close bar, separate pane for volume and volume average. We’re going to go ahead and apply our 200, 50, and 30-day simple moving averages. These lagging indicators help me determine trend. I’m going to apply these lagging indicators to the ‘Quick Review’ template in a user-defined template found here in my personal profile. We’re going to apply that to the indexes, specifically the Dow Jones Industrial Average to start. Once this loads, team, I’m going to expand it to full screen.

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We’ll first go to our weekly, two-year chart.

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As you can see here, the bull trend is strong. We have had two Z bars in a row, but we still have not gone below our lower level of ascending support, and volume is slowly getting lighter and lighter. These two down bars are not being validated by volume. We still have higher highs and higher lows. Let’s move to our six-month, daily chart. In this case, we do have lower lows and lower highs. Our 30 remains trending up. Our 50 remains trending up. Our 200 remains trending up. Our seven is trending down, but still oriented correctly.

Taking a look at our five-minute chart, what you can see here is the stall in price, meaning the down trend looks to have already weakened.

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Back to our daily. Taking a look at our notes, we closed at $21,674.51, still above our level of support at $21,575. Everything remains yes. Everything remains up, bullish. Bearish daily polarity.

Let’s move onto the NASDAQ. We’ll switch to a weekly, two-year chart.

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Same thing. It looks like we’re just now peeking through with our second Z bar to the lower level of ascending support. Still higher highs, higher lows.

Switching back to our six-month, daily chart, you can see we’re testing our low from four days ago, doji bar for today.

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Our 50 is trending down. Our 30 is trending up. Our seven is trending down and has crossed the 30. Our 200 is up.

Taking a look at our five-minute chart, our five-minute chart for today has stalled.

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Looks like for the downtrend that was on Thursday, there’s already people saying, “Enough is enough,” but we’ll see. The weekend has a lot that can change. Taking a look at our broad market analysis notes, let’s see. $6,216.53, our high $6,254, so it’s time for us to complete a new level of support and a new level of resistance. Looks like we’re going to have resistance at $6,240, and it looks like support’s going to be down here at $6,100. The seven hasn’t yet crossed below the 50. The 50 is flat. Polarity is bullish for weekly, bearish for daily. Looking good, actually.

Let’s move on to the S&P 500 Index. This is the index I feel like best represents our watch list. We’ll start off at a weekly, two-year chart.

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Okay, Z bar, Z bar. Everything is pointing up. Volume is low. We still have higher highs, higher lows. Six-month, daily.

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In this case, lower lows, lower highs. Our 50 is flat. Our 30 is up. Our 200 is up. Our seven is down below the 50. We’re right on the verge of calling this one neutral-bullish. Let’s take a look at the five-minute chart.

In this case, the five-minute also has flattened out back to our daily.

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$2,425 for support. $2,475 for resistance. We closed at $2,425.55. We have a bullish bias, but right on the edge.

New York Stock Exchange Composite Index. Weekly, two-year coming down, still higher highs, higher lows.

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Six-month, daily, in this case bearish, really crashing down quickly. Things are flattening out. I’m going to go ahead and move this to neutral-bullish.

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We’ll take a look at the VIX Volatility Index. We’ll go to a two-year weekly.

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Our volatility is well above the mean. We’re using the 40-week simple moving average, which is analogous to the 200-day simple moving average, since every week has five days. Volatility stalled for the week, moving up, moving down, closing where it opened. Very high.

Let’s go to our six-month and our daily chart, use our 200-day simple moving average.

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Our volatility started out high, dipped down low, went back high, as extreme things are happening around the world, transient external stochastic shocks. Our implied volatility down 8.3%. That brings us from $15.55 to $14.26.

Our overall trading bias is bullish. Our broad market personality, we are in an emotional selloff. The market is responding to the following, including but not limited to transient external stochastic shocks, U.S. fiscal policy, U.S. Federal Reserve monetary policy, monetary policies of China, Europe, and Japan, the price of oil, U.S. economic news, employment, housing, manufacturing, retail, market news, mergers and acquisitions, initial public offerings, public companies going private, and earnings.

That’s all I’ve got, team. Be cognizant of identifying transient external stochastic shocks and then knowing what to do when you find them, which usually means sitting tight on both your entries and your exits. That’s all I’ve got, team. Please take care.

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