Written by A.J. Brown

Broad Market Analysis - June 4, 2017

Hi, team. This is AJ with Trading Trainer on the morning of Sunday, June 4, 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. Because it is the weekend, we’re going to 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. 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 tomorrow, which is Monday, June 5’s trading session. Slight changes to 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 and its sub tabs. Go ahead and click on that link. An audio is going to start playing automagically in the background in another browse 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 and its sub tabs, 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 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 Index Stats.

indexstats

Our trading bias is still Neutral Bullish. Our industrials, shown by the Dow Jones industrial average, gained 0.29% this past Friday on light, below average New York Stock Exchange volume, and gained 0.6% for this past week on heavy, mixed average New York Stock Exchange weekly volume.

Our tech stocks, shown by the Nasdaq Composite Index gained 0.94% this past Friday on light, below average Nasdaq Exchange volume. Gained 1.54% for this past week on heavy, below average Nasdaq Exchange weekly volume.

Our large caps, shown by the S&P 500 Index gained 3.7% this past Friday, 0.96% for this past week.

Moving onto our secondary indexes, our 100 best stocks out there shown by S&P 100 gained 0.43% for this past Friday, 0.85% for this past week. Our mid-caps, shown by the S&P 400 Index gained 0.19% this past Friday, 1.38% for this past week. Our small caps, shown by the S&P 600 and Russell 2000, two different perspectives on small caps, gainined 0.62 and 0.67% this past Friday, gaining 1.72% and 1.67% for this past week. The New York Stock Exchange composite index gained 0.16% this past Friday, 0.75% for this past week. The VIX Volatility Index, falling 1.42% this past Friday, falling 0.61% for the week. The Gold ETF gaining 0.74% this past Friday, 0.89% for the week. Our Oil ETF falling 0.5% this past Friday, 4.09% for this past week.

Team, let’s take a look at our Economic Calendar. First thing I need you to do is on Friday, June 2nd, please read the Market Reflections summary. Then on Monday, June 5, please read the Market Focus pointers. You want to do those two tasks at the end of every trading day. And for the weekend, make sure you read the International Perspective report and the Simple Economics reports found on Monday.

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Back to Friday, June 2nd. The Employment Situation. Non-farm payrolls, month over month change in April were up 211,000. That was revised this time around to be 174,000. For May, the number came in at 138,000, way below expectation. The unemployment rate level in April was 4.4%, it dropped to 4.3% in May. Looking at the participation rate level, it was 62.9% in April, it has dropped to 62.7% in May. Very low. Average hourly earnings year over year, in April, was 2.5%. It stayed that way in May, a little bit below expectations. The average work week, in April, was 34.4 hours, and that’s where it stayed, in line with expectations. The employment report DID look like it disappointed.

International Trade. In March, our trade balance level was at a 43.7 billion dollar deficit. That was revised higher this time around to be a 45.3 billion dollar deficit. In April, we reported a 47.6 billion dollar deficit, higher than expectations.

Moving forward to this upcoming Monday, we’ve got Productivity and Costs. We’ve got our services and non-manufacturing index reports, and our factory orders. We have our labor market condition index, one of my favorite indicators from the Federal Reserve. And throughout the week, we’ve got some information on jobs. And otherwise, it could be a somewhat quiet week with respect to economic news.

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Team, let’s take a look at our watch list by going to Trading Tools and Watch Lists. We don’t have any tickers identified by our covered call writing or option trading candidate filter for this past Friday.

Let’s take a look at our daily picks report generation tool. Let’s go to our indexes, and take a deeper dive on volume and trends. Volume on Friday was especially low. But compared to the 50 and 200 day volume SMAs in the oscillator, it was about average, slightly lower. Short durations trends on the Big Three remain up, but on our secondary indexes, are neutral. Long duration, we have the Nasdaq and the S&P 500 pointing up.

volumeandtrends

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 the index tickers. That’s going to give us an idea of what the broad market personality is doing, as well as what to look for in our watch list.

Trend continuation shown by the Reactive, Buffered, and Chaikin templates are coming up neutral.

templates1

Short term trend test and trend reversal tests are showing bullishness.  Looks like we might be, in some cases on the second cycle. We’ll take a closer look.

templates2

And in some cases, we’ve broken out of our Bollinger Bands, other cases we’re channeling sideways.

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Let’s take a look at the charts. Trading Tools and Charting. We’ll start with a Quick Review template. This is a six month, daily chart, linear scale, open high low close bar, separate pane for volume and volume average. I’m going to add to that the 200, the 50, and the 30 day simple moving average as lagging indicators that help me determine trend. I have those three indicators added to the quick review template in a user defined template I have here in my personal profile.

I’m going to apply those to the indexes, specifically starting out with the Dow Jones industrial average. As soon as this loads, team, I’m going to expand it to full screen. So as you can see on Thursday and Friday with respect to the Dow Jones industrial average, we had a couple of up days, but on decreasing instead of increasing volume, that gives us a little bit of uncertainty. We’d rather see building, above average, heavier volume to validate this movement.

But before we get further along, let’s go to our weekly chart. Let’s go to two years, and we can see that we have established higher highs, and higher lows. Our polarity is clearly bullish. The two past weeks have been low volume. This past week, of course, we had a holiday week, so it could be heavier than we think simply because it was only four days.

djia-weekly

Let’s take a look back at the daily chart. Six month and daily. Over here, we can actually see where we had our higher highs and higher lows now. So this Dow moves to a full bullish polarity. All of our simple moving averages are pointing up, they’re all oriented correctly, and the seven day is pointing up.

djia-daily

Let’s take a look at the five minute chart. Just like on Thursday, where we had a nice uptick in movement, Friday we did, at least until midday, and then froze out. Let’s come back to our daily. Let’s take some notes. We closed at $21,206.29. Our 30 day is up, our 50 day is up, our 200 day is up, our weekly polarity is bullish, our daily polarity is bullish. We’re going to change our trading bias on the Dow to bullish.

djia-5min

Let’s take a look at the Nasdaq. We’ll start off going right to the weekly, and the two year. Higher highs, higher lows. The Nasdaq continues to show light volume. Again, this is a shortened week, but it was followed by this one. We’ll have to see how next week rolls out.

nasdaq-weekly

Let’s move back to our six month and our daily. Higher highs, higher lows here as well. All the indexes are pointing, all the simple moving averages are pointing up and in the right orientation.

nasdaq-daily

Taking a look at the five minute chart. Similar to the Dow. Thursday was a nice up. Friday was a nice up. Maybe stalling towards the end of the day, as the weekend approached. Back to our daily, let’s take some notes. Closed at $6,305.80. Our low is $6,253. In this case, we’re going to adjust our support and resistance since we have a complete open high low close bar outside of the range. And since we’re dealing with new numbers here, we’re going to go ahead and use round numbers for support and resistance. Up, up, up. We’ll go with a full on bullish trading bias.

nasdaq-5min

Let’s go ahead with our S&P 500 Index, the index I feel like most represents our watch list. We’ll switch over to our weekly and our two year. Higher highs, higher lows. The light volume bothers me, although again this is a holiday week we’re looking at here, so we’re only looking at four days of volume.

sp500-weekly

Coming at daily, coming at six months. Again we have our higher highs and our higher lows. Taking a look at the seven day simple moving average, they’re all up, they’re all oriented nicely.

sp500-daily

Taking a look at the five minute chart. Similar to the other of the Big Three. Nice Thursday, nice Friday. The bulls are happy. Let’s move back to a daily chart. Closing at $2,439, our low was $2,427. So again, we have a complete open high low close bar outside of our range. So let’s go ahead and adjust this up to round numbers. $$2,425, $2,450. Full on bullish for our daily polarity. Full on bullish for our trading bias.

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Let’s take a look at the New York Stock Exchange composite index. We’ll start off with our weekly, two year chart. And as we can see here, also making new highs and higher lows.

nyse-weekly

Rolling it back to our six month daily chart. Also higher highs, higher lows. All the simple moving averages are oriented correctly and trending up, included the 200 day. We’re going to change our trading bias to full on bullish.

nyse-daily

Let’s take a look at the VIX Volatility Index. We’re going to move out to our weekly chart, two years. We’re going to ditch our 30, ditch our 200, and change our 50 to our 40. That makes it a 40 week. A 40 week is equivalent to our 200 day. Five trading days in a week, and therefore five times 40 is 200.

vix-weekly

So we’ll look at the 40 week simple moving average, and we see that our implied volatility is extremely low even compared to our moving average. Just for laughs and giggles, let’s go to the monthly and ten year. We’ve never had over the last ten years, this extremely low volatility. Let’s go to all the data we have and let’s look back. The last time we had this extremely low of implied volatility was in 2007, before the big bubble burst in housing. We also had it back, it looks like, in the mid 90s. And then we had some increase in implied volatility, and ultimately the dot com burst.

So is having this uberly low of implied volatility good? Not sure. Let’s come on back to our six month daily. We’ll switch from the 40 week to the 200 day. You can see where it’s still extremely low. We had dropped down 1.42%. And you can see that we closed at $9.75. Our overall trading bias is bumping up to bullish. Our broad market personality, we’re trending up.

vix-daily

Just some notes, the market is responding to the following, including but not limited to transient external stochastic shocks, the US Fiscal policy, the US Federal Reserve Monetary policy, the monetary policies of China, Europe, and Japan. The price of oil. US Economic News: employment, housing, manufacturing and retail. And, market news of merges, acquisitions, initial public offerings, public companies going private, and earnings. Team, that’s all I’ve got, please take care.

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