Written by A.J. Brown

Broad Market Analysis - May 26, 2017


A.J. Brown:

Hi team. This is A.J. with Trading Trainer on the evening of Friday, May 26th with your Trading Trainer weekend and holiday 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 and holiday edition, 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 Training Trainer Learning Community web portal by going to login.tradingtrainer.com. Of course, once you’ve logged in the Learning Community web portal, team, I’m going to direct you right to today’s Daily Insights tab, further to the Recommendations sub-tab…

Team, take a look at the recommendations we have for Tuesday, May 30th’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 and it’s sub-tabs. Go ahead and click on that link. An audio’s 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 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 the audio commentary, please pay special 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

Team, our trading bias is Neutral Bullish. Our industrials as shown by the Dow Jones Industrial Average edged down one-hundredth of a percent today on light, below average New York Stock Exchange volume. Gained 1.32% for the week, on light, below average New York Stock Exchange weekly volume.

Tech stocks shown by the NASDAQ Composite Index edged up eight-hundredths of a percent on light, below average NASDAQ exchange volume. Gained 2.08% for the week on light, below average NASDAQ exchange weekly volume.

Large Caps shown by the S&P 500 Index edged up three hundredths of a percent today, gained 1.43% for the week.

Moving onto our secondary indexes, our 100 best stocks out there shown by the S&P 100, edged up four-hundredths of a percent today, gaining 1.39% for the week. Our midcaps shown by the S&P 400 Index fell 0.24% today, gaining 0.89% for the week. Our smallcaps shown by the S&P 600 and the Russell 2000, two different perspectives on smallcaps, edged down two-hundredths and eight-hundredths of a percent respectively for today, gaining 1.13% and 1.09% respectively for the week. The New York Stock Exchange Composite Index edged down six-hundredths of a percent today, gaining 0.77% for the week. The VIX Volatility Index, falling 1.8% for today, falling 18.52% for the week. The Gold ETF gaining 0.89% today, 0.95% for the week. The Oil ETF gaining a whopping 2.39% today but falling 1.91% for the week.

Team, let’s take a look at our economic calendar. First thing I need you to do, team, is I need you to read today’s Market Reflections summary. Then, let’s move on over to Tuesday, the 30th of May.  We want to read the Market Focus pointers for next Tuesday. Also, we have our International Perspective and we’ll also have, up here, our Simply Economics weekend reports. I highly recommend that we read both.

calendarmay26

Let’s take a look back at today. We had our Durable Goods Orders. For March, new orders were up month over month by 0.7%. We revised that March number today to be up 2.3%. Year over year, 5.8% in March, revised up to 6.5% today. When you factor out the volatile transportation component, month over month in March we were down 0.2%, revised today to be up 0.8%, year over year in March, 4.6% revised to be 6.2%. Then when you really narrow down to the core capital goods, month over month, up 0.2% back in March. We revised that number to be flat. Core capital goods in March, 3% gain, year over year, 2.6% after the revision for today. Moving onto April, new orders, month over month, down 0.7%, year over year, up 0.9%. Factoring out transportation, new orders for April, down 0.4%, year over year, up 4.9%. Core capital goods in April, flat. Core capital goods year over year, 2.9%.

Taking a look at GDP numbers. Last time we reported real GDP, seasonally adjusted annual rate, quarter for quarter numbers up 0.7%. GDP price index, quarter over quarter, seasonally adjusted annual rate, up 2.3%. Real consumer spending, quarter over quarter, seasonally adjusted annual rate, last time we reported 0.3%. This time, real GDP, up 1.2%. Price index, up 2.2%. Consumer spending up 0.6%.

Corporate profits. Last time, after tax profits year over year, 22.3%. This time, 12%.

Consumer sentiment, end of the month numbers, 97.7%. Last time, 97.1%. Final numbers for May.

Again, moving on to next week, we have a holiday on Monday, markets aren’t open. Make sure you check out the International Perspective and Simply Economics reports when they’re both posted. International Perspective looks like it’s already here. Simply Economics is pending.

calendarmay30

We have got Home Price Index, Consumer Confidence from the Conference Board, Personal Income and Outlay, and one of my favorite… the State Street Investor Confidence Index. We have more regional manufacturing surveys, the Beige Book published two weeks before the next federal open market committee meeting, Chicago PMI, Pending Home Sales, and Motor Vehicle Sales. We have our employment numbers coming up on Friday, ADP on Thursday. It’s going to be a condensed week. We also have our manufacturing numbers, it looks like PMI and ISM. Also Construction Spending. A lot of news, condensed into four days instead of five.

Let’s take a look at our watch list. No tickers identified by our covered call writing candidate filter and option trading candidate filter today.

Let’s evaluate our daily picks report generation tool. We are going to take a deeper dive on our indexes by looking at our volume and trends. Volume was about the same as it was yesterday, slightly lower, down below the 50 day SMA, down below the 200 day SMA (simple moving average applied to the volume number), the Volume Oscillator is down.Short duration trends are bullish, long duration trends for the NASDAQ and the S&P 500 have gone to bullish.

volumeandtrends

Taking our template algorithm filters, these mathematically go through whatever raw data they’re 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’s doing as well as what to look for in our watch list.

Reactive, Buffered, Chaikin, coming up neutral.

templates1

Short Term Trend Tests, bullish. Trend Reversal Tests, for the most part, bullish except for the small caps. Only two days of trend.

templates2

That means we’re in Cycle 1 of this new bull trend, the most fragile cycle. Bollinger Band Width Index is almost all across the board at sixes, bar counters in the single digits. Need about two to three more weeks of this movement for us to say that we’re horizontally moving.

templates3

Let’s take a look at our charts. Let’s go ahead and take a look at 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. I’m going to add in some lagging indicators, namely the 200, the 50, and the 30-day simple moving averages to help me determine trend. I have those pre-programmed into a user-defined template here in my profile. I’m going to apply that to the indexes, specifically the Dow Jones Industrial Average to start.

djia-daily

As soon as this chart loads, team, I’m going to expand it to full screen. All right, the 30’s up, the 50 is flat. The 200 is up. What I want to do before I go any further is actually change gears and take a look at the weekly two-year. It is our weekend holiday edition. We can see that we’re, again, wrestling with 21,000. We’re seeing whether or not we can pull out a higher high at this point. All the simple moving averages moving up. We’ve been here before. 21,000 always seems to be providing us a ceiling. We’ll see what happens come Tuesday of next week. Today was light. This week was a light volume week.

Coming back to our daily six-month, again, we’ve also got our seven-day we like to keep track of. Seven day is on its way back up as well.

djia-weekly

Let’s take a look at our five-minute chart, drill all the way down.  Today our five-minute chart was basically flat. Back to our daily. We’ll take a look at our notes. All right, our close was at $21,080.28. Our low, $21,050.49, so because we have our complete open-high-low-close bar above $21,000, we will adjust our support numbers. $21,000 and we’ll use round numbers because we’re at basically all time highs. $21,250 for our level of resistance. Our 30-day is now up again, our 50 remains flat. Our 200 is up. Our polarity now is gone from having lower lows and lower highs to now having a higher high and so we’re going to be testing bull.

djia-5min

Let’s move on over to our NASDAQ. We’ll start on our weekly two-year. The NASDAQ just keeps reaching higher and higher, this is truly a bullish moving index.

nasdaq-weekly

Six-month, daily. NASDAQ, $6,100, $6,150. We closed at $6,210. Our low was $6,196.66. It looks like it’s best if we make our support here $6,200, $6,250 for resistance, and that would be the next round number. So far, everything remains up and bullish. We’ve got a higher high, we’ve now gone to testing bull. We’re going to keep this with a bullish bias here. This was transient external stochastic shock in the polarity, but for the bias, it continues to be bullish.

nasdaq-daily

Let’s take a look at our 200-day. Let’s take a look at our five-minute chart. Today was a flat trading day. Investors looked to have already disappeared for the United States holiday.

nasdaq-5min

Let’s move on to our S&P 500 Index. This is the index I feel like most represents our watch list. It, too, continues higher. In fact, the simple moving averages look to be trending as well. Today was a light volume day. Let’s move to the weekly two-year. Really popped, again light volume. Got our higher highs, higher lows. That’s a bullish weekly polarity.

sp500-weekly

Our six-month daily chart. $2,415.82, low is $2,412. I think we’re going to go with our $2,400, $2,425, round number. Up and now we’ve got a testing bull polarity. It does look like that this has resumed its bullish move. What I’d like to see is a test so that our polarity becomes a full-on bull before I pop this up into the bullish, or we’ll see some more price gains next week as investors return from the holiday season.

sp500-daily

Let’s take a look at our seven-day and our five-minute chart. Again, on the five-minute chart, we tend to be going sideways. Daily.

sp500-5min

New York Stock Exchange Composite Index, our trading bias is, let’s take a look at the weekly and two-year. Seems to be wrestling with this upper level. Polarity still has a higher low and we’ll see if we make a higher high.

nyse-weekly

Coming back to six-month daily, it looks like things are pulling up. If we go back to our 200-day. Today was a little bit of a knock-back. We’ll keep our neutral bullish trading bias.

nyse-daily

We’ll move onto the VIX volatility index. Look at a weekly, two-year chart. I’ll disable the 30-day and the 200-day, and actually these are now 30-week and 200-week, and I’ll substitute the 50-week for the 40-week. The 40-week is very analogous to the 200-day that we’ll look at when we’re on the daily chart. You can see, implied volatility with respect to the S&P 500 Index has dropped.

vix-weekly

Coming to our six-month daily chart, applying the 200-day simple moving average, implied volatility is incredibly low. We are down 1.8% and that’s closing at $9.81. Traditionally, when implied volatility has gotten this low, it usually precedes a very large market shakeup.

vix-daily

Our overall trading bias, we’re going to remain at neutral bullish, even though we’re knocking on the door of bullish.

Our broad market personality, well, let’s take a look at the S&P 500 one more time. We’ll just say that it is trending up.

The market is responding to the following including, but not limited to, transient external stochastic shocks, US fiscal policy, US Federal Reserve monetary policy, monetary policies of China, Europe, and Japan, the price of oil, US economic news, the employment, housing, manufacturing, and retail, market news of mergers, acquisitions, and initial public offerings, public companies going private in earnings.

I’m actually going to update our trending up market personality and make sure we say “Cycle 1.”

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

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