Written by A.J. Brown

Broad Market Analysis - October 13, 2017


Hi team, this is A.J. Brown with Trading Trainer on the evening of Friday, October 13, with your Trading Trainer weekend edition of your Daily Insights. What we are 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 are also going to look at the New York Stock Exchange Composite Index and the VIX Volatility Index. And because it is the weekend, we are going to take a look at both daily and weekly charts. But, before looking at any charts, team, we are 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, I am going to direct you right to the Daily Insights tab and further to the Recommendation sub tab.

Team, take a look at the recommendations we have for Monday, October 16’s trading session. Slight changes in these recommendations could have major impact on your trading. You are 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, the 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 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 Charts of Interest video series, we are going to go to the daily insights tab and the index stats sub tab. Team, our trading bias is bullish.

indexstats1

Our industrials, shown by the Dow Jones Industrial Average gained 0.13% today on heavy, mixed average, New York Stock Exchange volume and gained 0.43% for this past week, on heavy, below average New York Stock Exchange weekly volume. Our tech stocks, shown by the Nasdaq Composite Index gained 0.22% today on light, below average NASDAQ Exchange volume, and 0.24% for this past week on flat, below average NASDAQ Exchange weekly volume. Our large caps shown by the S&P 500 Index edged up 0.09% today, and gained 0.15% for this past week.

Moving on to our secondary indexes, our 100 best stocks out there, shown by the S&P 100, gained 0.1% today and 0.1% for this past week. Our mid caps, shown by the S&P 400, edged down 0.05% today and edged up 0.02% for this past week. Our small caps, shown by the S&P 600 and the Russell 2000, two different perspectives on small caps, fell 0.12% and 0.16% respectively for today, and fell 0.74% and 0.5% respectively for this past week. Our New York Stock Exchange Composite Index gained 0.12% for today and gained 0.29% for this past week. Our VIX Volatility Index fell 3.03% today and fell 0.41% for this past week. Our gold ETF gained 0.76% today and gained 2.25% for this past week. Our oil ETF gained 1.37% today and 4.01% for this past week.

Team, let’s take a look at our economic calendar. We will go to the Daily Insights tab and further to the Economic Calendar sub tab. First thing I’m going to have you do is click on the Market Reflections summary tab. Check out the market reflections for today.

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Then, let us fast-forward to Monday, October 16 and click on the Market Focus pointers for Monday.

calendaroct16

Also, on Monday, October 16, click on the International Perspective and the Simply Economics, once per week reports. These reports give us a good foundation of what happened the past week and what is expected for the week to come. They are must reads.

Let us go back to October 13, today, Friday. The Consumer Price Index was released. The month-over-month change for August was 0.4%, for September 0.5%. The year-over-year change for August was 1.9%, for September, 2.2%. When you factor out the volatile food and energy, the month-over-month for August was 0.2%, for September 0.1%. Year-over-year for August was 1.7% and it stayed the same for September. Consumer price index is correlated with retail inflation.

Retail sales were released. For August, retail sales month-over-month dropped 0.2%. We revised that August number this time around to be a drop of 0.1%. For September, retail sales gained 1.6%. When you factor out the more volatile automobile sales, in August, retail sales were up 0.2% and we revised that August number this time around to be up 0.5%. For September, we were up a whole 1%. When you factor out both automobiles and gasoline sales, in August, we dropped 0.1%. That August number was revised this time around to be a gain of 0.1%, and for September, we are reporting 0.5% gain.

Business inventories were reported. For July, month-over-month inventories were reported with a 0.2% gain. We revised that July number this time around to be 0.3% gain. For August, we’re reporting 0.7% gain.

Mid-month consumer sentiment was reported. The sentiment index level, last time we reported was 95.1. This time, 101.1.

Looking to the upcoming week, we have housing data reported throughout the week and the Beige Book for the upcoming FOMC meeting on Wednesday. Also, many of the regions are reporting their monthly manufacturing numbers.

Team, let’s move on to our watch list by clicking on the Trading Tools tab and the Watch List sub tab. Quite a few tickers were identified by our options trading candidate filter. We will evaluate these for liquidity and patterns, before adding them permanently to our list. You will notice that the CBOE Holdings entry is not highlighted in yellow. It is already on our watch list. It is reaffirming its place there.

Let’s move on to our Trading Tools tab and our Daily Picks report generation tool sub tab. Let us start by doing a deeper dive on indexes, by looking at volume and trends.

volumntrends2

Our volume was about the same as Thursday, maybe a little bit lower, and about the same as the 50 and 200-day simple moving averages. The oscillator shows that there has been consistently low volume to date. Our short duration trends are neutral. Our long duration trends are bullish.

Now, taking a look at our template algorithm filters. These mathematically go through whatever raw data you present them with and look for patterns in the numbers. We are going to present it with the raw data of the index tickers. That is going to give us an idea of what the broad market personality is, as well as what to look for in our watch list.

Team, our trend continuation templates show no triggers or confirmations.

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However, the long-term trend is definitely present.

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Our trend reversal template is showing for the most part, bullishness. The small caps have turned bearish.

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The short-term trend action, however, is neutral, telling us that we are in some sort of range contraction phase, perhaps. Our pattern alteration template shows that the Bollinger Band width index is still incredibly large, whereas the candlestick bar counter is still incredibly small.

Team, let us take a look at our charts by going to the trading tools tab and the charting sub tab. We will start with a Quick Review template. This is a six month daily chart with linear scale and open high low close bars and a separate pane for volume and volume average. We are going to add to this Quick Review template, by adding the 200 day, the 50 day and this 30 day simple moving averages. These lagging indicators help me determine trend. We have added these simple moving averages to the Quick Review template in a user-defined template, here in my personal profile. We will apply that template to our indexes, specifically starting out with the Dow Jones Industrial Average. Once this chart loads, team, I’m going to expand it to full screen.

We are going to start with the weekly, two year chart.

djiaweekly2

As you can see here, team, this week was an up week, just barely. Volume was light. Still, an up week is an up week. We have got higher highs and higher lows, our polarity is bullish. On the weekly chart, we are in an uptrend.

Let us go to our six month, daily chart.

djiadaily2

We made a slight gap up in opening today. Otherwise, we created a Doji bar. Our 30 day, our 50 day, and our 200 day simple moving averages are trending up and oriented correctly. So is our 7-day. Volume is building. When volume builds on very little price action, you know that the Bulls and the Bears are putting equal pressure on each other. It usually signals an impending break.

Let’s take a look at our 5-minute chart.

djia5min2

As we thought, team, we had a gap up on open and then a choppy, sideways price action for Friday. The Bulls and the Bears were battling it out. Now, back to our daily chart. Let’s take some notes. We closed at $22,871.72. Everything else remains the same, our trading bias is bullish.

Moving on to the NASDAQ Exchange. Going to a weekly, two-year chart.

nasdaqweekly2

A Doji week on light volume. Still, higher highs, higher lows, our polarity is bullish.

Returning to a six month, daily chart.

nasdaqdaily2

On Friday, we gapped up and actually traded slightly down on light volume. Our 7 day, our 30 day and our 50 day are all trending up and oriented correctly. So is our 200 day.

Taking a look at our five-minute chart, we see the gap up at open, and we see the sideways, choppy price action with a lower close for the day.

nasdaq5min2

In the tech stocks, we also see the Bulls and the Bears going head-to-head. Back to our daily charts. We closed at $6,605.80. Our low was $6,602.20. It looks as though our level of support is at $6,575. We’ll set our level of resistance at $6,650. It’s a round number resistance as we reach for new highs. All the other notes stay the same. Our trading bias remains bullish.

Moving to our S&P 500 Index. This is the index I feel like most represents our watch list. Going to a weekly, two year chart.

sp500weekly2

Again, a Doji bar on a slightly heavier volume. Still, higher highs, higher lows. Our polarity is bullish. Switching back to our six month, daily chart.

sp500daily2

Similar to the Nasdaq, on Friday we had a gap up at open, and then a close lower. Our 30, our 50, and our 200 day simple moving averages are trending up and oriented correctly. Our seven day simple moving average is doing the same.

Our five minute chart shows the gap up at open and then the sideways, choppy action throughout the day, ending lower.

sp5005min2

Again, showing that the Bulls and the Bears are starting to be present and putting pressure against each other. Back to our daily chart. We closed at $2,553.17. Our low is $2,552.09. Our level of support does look to be at $2,550. Our level of resistance, we will set at $2,575. Again, that is round number resistance as we reach for new highs. Our other notes stay the same and our trading bias remains bullish.

Taking a look at the New York Stock Exchange Composite Index and going to a weekly, two year chart to start, our index closed slightly higher.

nyseweekly2

We have higher highs and higher lows. Our polarity is bullish. Returning to a six-month, daily chart.

nysedaily2

Our 7 day, our 30 day and our 50 day simple moving averages are trending up and oriented correctly. Friday, we had a gap up at open and a little bit of negative price action. Still, higher highs, higher lows. Our 200 day simple moving average is also trending up and oriented correctly. Our trading bias remains bullish.

Looking at our VIX Volatility Index, moving to a weekly, two year chart with 40 week simple moving average.

vixweekly2

The 40 week simple moving average is analogous to the 200 day simple moving average, seeing as how there are 5 days in every week. As you can see here, implied volatility of the S&P 500 is incredibly low. A leading indicator to hint that this is unsustainable. Returning to a 6 month, daily chart, with a 200 day simple moving average.

vixdaily2

Again, you can see how low the implied volatility really is. Our implied volatility closed down 3.03% from $9.85 to $9.61.

Our overall trading bias remains bullish.

Our broad market personality is still trending up and is overbought. We are in, what we call, second cycle range contraction and we are seeing an increase in hedging.

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

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

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