Written by A.J. Brown

Broad Market Analysis - December 15, 2017

Hi team. This is A.J. Brown with Trading Trainer on the evening of Friday, December 15 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 watchlist 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 take a look at both daily and weekly charts. But before looking at any charts team, we’re actually going to log into the Trading Trainer “Learning Community” web portal by going to login.TradingTrainer.com. And, 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 sub-tab.

Team, take a look at the recommendations we have for Monday, December 18’s trading session. Slight changes in these recommendations could have major impact on your trading. You’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 tab and its sub-tabs. Go ahead and click on that link. An audio is going to start playing automagically in the background in another browser tab or another browse 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 tab and its sub-tabs. It will 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 Chart of Interest video series, let’s click on the Index Stats sub-tab to start.

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Our trading bias is bullish. Our industrials shown by the Dow Jones Industrial Average gained 0.58% today on heavy above average New York Stock Exchange volume, and for the week, it gained 1.33% on heavy above average New York Stock Exchange weekly volume. Our tech stocks shown by the NASDAQ Composite Index gained 1.17% today on heavy above average NASDAQ exchange volume, and gained 1.41% for this past week on heavy above average NASDAQ exchange weekly volume. Our large-caps shown by the S&P 500 Index gained 0.9% today and 0.92% for this past week.

Moving on to our secondary indexes, our 100 best stocks out there shown by the S&P 100 gained 0.86% today and 1.35% for this past week. Our mid-caps shown by the S&P 400 Index gained 1.05% today, and fell 0.22% for this past week. Our small-caps shown by the S&P 600 and the Russell 2000, two different perspectives on our small-caps, gained 1.75% and 1.56% respectively for today and gained 0.49% and 0.57% respectively for this past week. Our New York Stock Exchange Composite Index gained 0.56% today and 0.45% for this past week. Our VIX Volatility Index fell 10.2% today, and fell 1.67% for the week, closing at 9.42 which is extremely low. Our gold ETF gained 0.21% today and 0.59% for this past week. Our oil ETF gained 0.26% today and fell 0.26% for this past week.

Team, let’s take a look at our economic calendar. Let’s click on our Daily Insights tab and our Economic Calendar sub-tab. First thing I want to draw your attention to is today’s Market Reflections summary. Most of today’s stock market session was dominated by transient external stochastic shocks around the back and forth of the tax program done as part of the fiscal policy of the United States.

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Now we’re going to fast forward to this upcoming Monday, December 18, and I want you to read the Market Focus pointers.

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After reading the Market Focus pointers, please read the International Perspective and Simply Economics reports found on the Monday, December 18 column. These reports are once a week and give us a foundational understanding of what happened this previous week and what’s coming up for the week to come. These reports are must-reads. Take a moment over this upcoming weekend to check these reports out.

Back to today, Friday, December 15. Today was quadruple witching. This happens four times a year. This is where single stock futures, index futures, index options, and of course stock options all expire on the same day. It creates volume that is not just from the normal buying and selling pressures on price.

The Empire State Manufacturing Survey was released this morning at 8:30 AM Eastern time. The general business conditions index level, last time we reported for November, was 19.4. This time for December we’re reporting 18. Still above the boom/bust line, but getting smaller.

At 9:15 AM Eastern time, Industrial Production was reported. For October we had reported production at 0.9% and manufacturing at 1.3%, and the capacity utilization rate at 77%. We revised that October number this time around. Production went up from 0.9% to 1.2%. Manufacturing went up from 1.3% to 1.4%. Taking a look at November’s numbers, production came in much lower at only 0.2%, and manufacturing came in lower at 0.2% but the capacity utilization rate increased to 77.1%.

Taking a look at our Treasury International Capital numbers, our foreign demand for long term US securities back in September was $80.9 billion. Then in October it looks like demand went down but was still positive, $23.2 billion. This is the amount of money that folks in other countries invest in the United States’ debt, so it’s both a good and a bad thing. Good in the short term, bad in the long term.

Moving forward to next week, on Monday, it’s a slow news day with only the Housing Market Index being released at 10 AM Eastern time. Next week is filled with a lot of housing data, especially in the beginning of the week. Actually, throughout the whole week. And a little bit more economic news reported on Thursday and Friday.

Taking a look at our Trading Tools tab and our Watchlist sub-tab, let’s check out what our watchlist screeners did for today. Our covered call writing candidate filter identified two candidates. Our options trading candidate filter identified five candidates. We’ll evaluate these candidates for liquidity and patterns before adding them permanently to our watcv list.

Moving on to our Trading Tools tab and our Daily Picks sub-tab, our Trading Trainer Daily Picks report generation tool can be found here. We’ll start by taking our index tickers and doing a deeper dive by looking at volume and trends.

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Our volume was very much higher today. Higher than the 50-day, higher than the 200-day simple moving average, and the oscillator’s up again because of quadruple witching. Our short duration trends are bullish. Our long duration trends are bullish as well, mainly on the big three indexes.

Back to our report menu. We’ll take a look at our template algorithm filters applied to our indexes. These template algorithm filters mathematically go through whatever raw data they are presented with looking for patterns in the numbers. We’re going to present them 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 in our watchlist.

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As you can see here, our trend continuations are coming up with very little confirmation signals, but we see a nice amount of long duration trend in our long term simple moving average count.

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Moving on to our trend following templates, we can see some bullishness again in the big three indexes. More neutral when we’re talking about our mid-caps and our small-caps.

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Finally taking a look at our pattern alteration. Our Bollinger Band with indexes. They look wide and our bar count for the most part is still in single digits.

Let’s go to our Trading Tools tab and our Charting sub-tab. Let’s start with a Quick Review chart template. This is a 6-month daily chart with a linear scale and using open-high-low-close bars. There’s a separate pane for volume and volume average. To this we’re going to add our 30-, our 50-, and our 200-day simple moving averages. These lagging indicators help me determine trend. I have these simple moving averages added to the Quick Review template, defined here in a user template in my personal profile. We’re going to apply this template to the indexes, specifically starting out with our Dow Jones Industrial Average. Once this chart loads, team, I’m going to expand it to full screen, that way you won’t have to squint.

Let’s start with a weekly 2-year chart.

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This week we had a beautiful S bar, and heavy volume. Of course the volume is being influenced by quadruple witching volume. Still, higher highs and higher lows mean a bullish polarity. Switching to our 6-month daily chart our 200-, our 50-, and our 30-day simple moving averages are pointing up, along with our 7-day simple moving average.

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You can see today’s heavy volume quadruple witching day. Switching to our 5-minute chart you can see how price gapped, continued up for all of the day, and then during professional hour we see profit taking, a good chunk of so.

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Back to our daily chart. Let’s pull up our notes. We closed at $24,651.74. Our low was $24,584.44. We’ll go ahead and adjust our support and resistance. We’ll go to $24,500 for support and we’ll go with our psychological level of resistance at $25,000. All other parameters are pointing up. We’ll keep our bullish trading bias on the Dow Jones Industrial Average.

Let’s move on to the NASDAQ Composite Index. We’ll start with our weekly 2-year chart.

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Beautiful S bar for the week. Nice volume, again perhaps influenced by quadruple witching. Higher highs and higher lows means bullish weekly polarity. Switching back to our 6-month daily chart, all our simple moving averages continue to trend up.

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Today was a beautiful S bar day. Heavy volume due to quadruple witching. Let’s move to our 5-minute chart.

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Beautiful up day. Again, a little bit of a selloff at the end of professional hour, but nothing like the industrials. Barely took a notch out of today’s gains. Back to our daily charts. Our NASDAQ closed at $6,936.58. Our low was at $6,871.46. I’m going to take a note that says, “Closed above resistance.” Only when I get a complete open-high-low-close bar above our resistance level will I adjust our support and resistance numbers. Our trading bias remains bullish.

Finally, looking at the S&P 500 Index, this is the index I feel like represents our watchlist. We’ll start with a weekly 2-year chart.

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Beautiful S bar. Good volume. Bullish polarity. Moving to our 6-month daily chart, again beautiful S bar.

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Quadruple witching volume. Our simple moving averages all trended up and oriented correctly. Moving on to our 5-minute chart.

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A halfway point between the Dow Jones Industrial Average and the NASDAQ Composite Index. We see gains throughout the day and selling at the end of professional hour. A little bit of the chunk of today’s gains was gnawed away. More than what we saw on the NASDAQ but much less than what we saw on the Dow Jones Industrial Average. Back to our daily chart. We closed at $2,675.81. Our low was $2,659.14. We’ll take a note that says, “Closed above resistance.”

Moving on to our New York Stock Exchange Composite Index, starting with a weekly 2-year chart.

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Up week. Higher highs, higher lows telling us that we’ve got a bullish polarity. Moving to our 6-month daily chart.

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Simple moving averages all oriented correctly. Today was an up day. Our New York Stock Exchange Composite Index trading bias remains bullish.

Switching to the VIX Volatility Index, staring with a 2-year weekly chart with a 40-week simple moving average we can see our implied volatility for the week is very much lower than the simple moving average and is at extreme lows overall.

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We’ll switch to our 6-month daily chart with a 200-day simple moving average, which is analogous to the 40-week simple moving average seeing as how most weeks have five trading days.

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Again, you can see how low the implied volatility is compared to the mean, and it’s extremely low closing at 9.42. Today we were down 10.2%.

Our overall trading bias, team, does remain bullish.

For our broad market personality, we’re still trending up and we’re still very much overbought. We’ve got quadruple witching volume which means today’s price action can’t be associated with the volume we’re seeing. The volume is coming from artificial derivative sources. Overall we have confusion and uncertainty among investors. Transient external stochastic shocks like the fiscal policy are going to be keeping us on a roller coaster til a conclusion is met.

The market is responding to the following including but not limited to, again, those transient external stochastic shocks, and after that US fiscal policy, and after that US Federal Reserve monetary policy. Of course this past week our Federal Reserve met. The Federal Open Market Committee raised interest rates. That had an influence. Monetary policies of China, Europe, and Japan have an influence. The price of oil. US economic news including employment, housing, manufacturing, and retail, and of course market news including mergers, acquisitions, initial public offerings, public companies going private, and earnings.

That’s all I’ve got, team. Please take care.

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