Written by A.J. Brown

Broad Market Analysis - October 20, 2017


Hi team, this is A.J. Brown with Trading Trainer on the evening of Friday, October 20th, 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 look at both daily and weekly charts. But before looking at any charts, team, we are actually going to login to the Trading Trainer “Learning Community” web portal by going to login.tradingtrainer.com. And of course, once we have logged into the “Learning Community” web portal, we are actually going to go 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 24’s trading session. Slight changes in these recommendations could have major impact on your trading. You are also going to find here a link 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 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 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 Charts of Interest video series, let us click on the Index Stats sub-tab. Team, our trading bias is full-on bullish.

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Our industrials shown by the Dow Jones Industrial Average gained 0.71% today on heavy, above average New York Stock Exchange volume, and gained 2% for this past week, on heavy, above average New York Stock Exchange weekly volume. Our tech stocks shown by the NASDAQ Composite Index gained 0.36% today on light, below average NASDAQ Exchange volume, and gained 0.35% for the week on flat, below average NASDAQ Exchange weekly volume. Our large caps shown by the S&P 500 Index gained 0.51% today and gained 0.86% for this past week.

Moving on to our secondary indexes, our 100 best stocks out there shown by the S&P 100 gained 0.4% today and 0.81% for this past week. Our mid caps shown by the S&P 400 gained 0.57% today and 0.85% for this past week. Our small caps shown by the S&P 600 and the Russell 2000, two different perspectives on small caps, gained 0.57% and 0.47% respectively for today, and gained 0.59% and 0.44% respectively for this past week. Our New York Stock Exchange Composite Index gained 0.4% today and 0.63% for this past week. And our VIX Volatility Index fell 0.8% today and gained 3.75% for this past week. Our gold ETF fell 0.64% today and fell 1.78% for the week. Whereas, our oil ETF gained 0.77% today and gained 0.58% for the week.

Team, let us take a look at our economic calendar. To do so, we will go to the Daily Insights tab and further to the Economic Calendar sub-tab. First thing I will have you do is read today’s Market Reflections summary. Then I will have you go to Monday, October 23 and read the Market Focus pointers.

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While we are here at Monday, October 23, I will ask you to read the once-a-week International Perspective report and Simply Economics report. These two weekly reports lay a good foundation of what has been happening both domestically and around the world, as well as get us prepared for the upcoming week.

Coming back to today, Friday, October 20.

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We’ll take a look at the existing home sales. The existing home sales level, the seasonally adjusted annual rate for August was 5.35 million. For September, we report 5.39 million. In August, the month-over-month change was down 1.7%. In September, the month-over-month change was up 0.7%. The annual change in August was up 0.2%, in September down 1.5%. And, taking a look at our treasury budget. In August, our treasury budget was a $107.7 billion deficit. Whereas in September, we’re reporting an $8 billion surplus. Taking a look at the highlights for next week, we have more regions reporting their manufacturing information. We have new home sales on Wednesday. We have GDP numbers on Friday.

Let us move on to our watch list by taking a look at our Trading Tools tab and our Watch List sub-tab. Quite a few tickers were identified by our Options Trading candidate filter. The tickers highlighted in yellow are new to us. The ones not highlighted are just reaffirming their position as they are already on our watch lists. We are going to evaluate those highlighted in yellow for liquidity and patterns before adding them permanently to our list.

Let us move on to our Trading Tools tab and our Daily Picks sub-tab. Here we will find the Daily Picks report generation tool. We are going to do a deeper dive by looking at volume and trends on our indexes.

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Team, the volume today was much higher on the New York Stock Exchange, higher than the 50 day, and slightly higher than the 200 day. On the NASDAQ, the volume was about the same as yesterday, slightly lower, and slightly lower than the 50 and 200-day simple moving averages. We are below the oscillator, which is telling us that we have not had consistently heavy volume for a while. Our short duration trends are bullish and our long duration trends are bullish as well.

Backing this up, taking 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 are going to present these with the raw data of our index tickers. That is going to give us an idea what the broad market personality is doing, as well as what to look for in our watch list.

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Our trend continuations are still showing a large amount of long-term trend, but still no solid signals of the trend continuation pattern itself.

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Short-term trend test is still showing neutral. Our trend reversal test for the most part is still showing bullish.

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We still have large Bollinger Band Width Index. Our bar counter has now entered double digits. We are getting to the point where our market is going to be labeled as channeling sideways. I repeat we are getting there. We are not there yet.

Team, let us take a look at our Trading Tools tab and our charting sub-tab. Let us start with a Quick Review template. This is a six-month daily chart, linear scale, open-high-low-close bar with a separate pane for volume and volume average. To that, I want to add our 200, our 50, and our 30-day simple moving averages. These lagging indicators help me determine trend. These simple moving averages are applied to the Quick Review template here in a user-defined template in my personal profile.

Team, I’m going to apply that user-defined template to the indexes, specifically starting with the Dow Jones Industrial Average. As soon as this chart loads, team, I’m going to expand it to full screen. Because it is the weekend, we’re going to look first at a weekly two-year chart.

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This week was another beautiful S-bar. Volume for the week was similar to the past two weeks, but still on the low side. Higher highs, higher lows means we have a weekly bullish polarity. Switching back to a six-month daily chart.

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Today was a nice S-bar on heavy volume. The heavy volume most likely from options expiring. Our 30, our 50, and our 200-day simple moving averages are trending up. Our seven-day simple moving average is trending up as well. All our simple moving averages are oriented correctly. Let us switch to a five-minute chart.

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Team, as you can see here, we gapped up on open on the Down Jones Industrial Average and continued to trend up for the whole day. Moving back to our daily chart, we will take some notes. We closed at $23,328.63. We are right between our support and resistance lines. All our parameter stay the same. Our trading bias remains bullish. We are in a bull trend.

Moving on to our NASDAQ exchange and to a weekly two-year chart.

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This week was very much a doji week, where the Bulls and Bears equalized each other out, especially after the Bears brought us a little bit low. The Bulls came back with vigor. Higher highs, higher lows, the polarity remains bullish. Switching to the six-month daily chart.

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Today, we continued to stay solid, nice volume, recovering from yesterday’s dip. Our 7, our 50, our 30 day SMAs remain trending up, so does our 200 day, and they are all oriented correctly. Taking look at our five-minute chart.

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We can see a gap up at open and then basically sideways choppy movement throughout the day. Back to our daily chart. We closed at $6,629.05. That is between our support and resistance lines. Our other parameters stay the same. We are in a bullish trading bias. The personality is range contraction.

Moving on to the S&P 500 Index, the index I feel like most represents our watch list. We will start with a weekly two-year chart.

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And for the week, we can see a nice S-bar. Volume is growing. Higher highs and higher lows mean that our polarity is bullish. Switching back to a six-month daily chart.

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Today, we saw some nice increase on some heavy volume. That heavy volume can be attributed to options expiring. The 30, the 50, the 200 remain trending up. Our seven day remains trending up as well. The simple moving averages are oriented correctly. Let us move to a five-minute chart, where we can see a gap up at open and then nice trending up, at least through the early afternoon, and then a switch to sideways price action.

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Back to our daily chart. We see we closed at $2,575.21, just barely over our resistance line. Our low is below, so we will take a note that says closed above resistance. The rest of our parameters stay the same. Our personality is bull trend with a trading bias of bullish.

Moving on to the New York Stock Exchange Composite Index starting with a weekly two-year chart.

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We can see the trending up and S-bar from this past week. Higher highs, higher lows means bullish polarity. Switching to a six-month daily chart.

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Our 7 is up, our 30 is up, our 50 is up, our 200 is up. Our conclusion on the New York Stock Exchange Composite Index secondary index is that we continue with a bullish trading bias in a bullish channel.

Switching to a VIX Volatility Index, we will start with our weekly two-year chart with a 40-week simple moving average.

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The 40-week simple moving average is analogous to the 200-day simple moving average. The 40-week simple moving average times 5 days per week equates to the 200-day simple moving average. Implied volatility was all over the map this past week with a high above our mean, but ultimately ended where it started. Switching back to a six-month daily chart.

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With the 200-day simple moving average, you can see the implied volatility pop on Thursday and then the drop today. Our implied volatility was down 0.8% closing at $9.97.

Our overall trading bias does remain bullish.

Our broad market personality is trending up. We are overbought. We are somewhere in between a range contraction and a bullish trend. I am going to leave it at range contraction for now, but it looks like a bullish trend is restarting. And we keep seeing this increase and decrease in hedging. Overall, it seems like we are seeing an increase in hedging.

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

Team, that is all I have got. Please take care.

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