Baseline Analytics Blog

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The Williams Analytics LLC Blog has just posted a new article on the state of the US housing market and what could be in store for the S&P 500 E-mini and 10-Year US Treasury Note.

As a brief preview, housing market indicators are continuing to indicate a general slow down in the post financial-crisis recovery in single family housing. This could prove troublesome given single family housing's significant role and impact in the US economy and, by extension, asset prices.

With respect to asset prices, while Williams Analytics is currently predicting a leveling off in the S&P E-mini and a "U"-Shaped price pattern for the 10-Year, both the S&P E-mini and 10-Year have significant premiums relative to general asset prices, possibly indicating a coming correction.

Gain more insights today by visiting the Williams Analytics Blog and downloading Williams Analytics' many FREE Indicator Reports!

Watching the S&P 500 decline from the 2000 level appeared to be a classic technical retracement.  Indeed, a bearish wedge had formed (see below) that underscored the "obvious" technical pattern, which culminated in chart-watchers setting their sell signals and shorting equities. 

wedge

Continuing on our Market Tour, however, there are a few signs of positive divergences.  The problem is that these positive divergences may not be strong enough to counter-act the chart-watchers expectation that the August lows may be revisited.

In the chart below, note how the S&P 500 deflected from the 2000 level as it reacted to the rising wedge. Two positives, however, are the moving average cross seen in the KST, as well as seeing VIX settle close to its 50-day moving average.

BLA109182015

In the next Market Tour chart, two positives are worth citing.  One is the slightly positive divergence in market breadth, which did not take it on the chin as equities did on Friday, and the other is what appears to be a bottoming out of the Summation Index following its match to the October 2014 lows.

BLA209182015 

Finally, our "economic proxy" charts are not announcing much on the bullish divergence front, except for the continued outperformance of discretionary stocks vs. staples, a possible reaction to the pickup in employment and lower fuel prices.

BLA309182015

So despite the technically-obvious chart patterns suggesting a revisit to the August lows (which is perhaps a contrary indicator that it will not happen), we do see some signs of life in a potential bullish rebound.  This could manifest itself (one way or the other however) as earnings season begins in two weeks.

Baseline Analytics has refined a series of stock and ETF-screening algorithms that pinpoint timely, high-probability trades and investment opportunities.

The results of Baseline Analytics' stock and ETF screens are delivered in a downloadable Excel file.  This file can be sorted to identify various performance and technical criteria to help provide a further edge to your trading and investments.  Instructions are provided to guide you through your review. Our goal is to deliver such opportunities at your fingertips, with minimal research and analysis needed on your end.  We do provide a link to Yahoo Finance for each of our timely picks should you want to delve further into particular equities or ETF's.

As a special offer, Baseline Analytics is providing a list of stocks issuing technical buy signals from the market close of 9/16/15. 

Subscribers to Baseline Analytics receive our proprietary screens regularly, as well as our TrendFlex family of market trend signals and risk assessment tools.

Click here for the report.

Sign up for a Free Trial and check out our reports and TrendFlex signals for the next 30-days.

 

Time to post a quick update on Dow Theory divergence.  

The Transports led the Dow on the downside by about 5 months: Transports reached their high in January, while the Dow peaked in May.

Following the late August lows, Transports have bounced back and closed above their 34-day moving average.  The Dow, however, has yet to surpass its 34-day moving average.  Perhaps Transports are leading the way this time, and the Dow will follow. 

 

DowTheory09152015 

False alarms do happen in Dow Theory Divergence.  Note below the weekly chart.  The Dow wobbled its way through an uptrend starting in September 2012, while the Transports remained flat.  The Transports ultimately joined the uptrend.

DowTheoryWeekly09152015

We will be looking for the Dow to catch-up this time and surpass its 34-day moving average.  By then, perhaps both indicators will be resuming at least a short-term uptrend.

 

 

August 12, 2015 Dow Theory Divergence Update

Last time we wrote on the Dow Theory divergence, the Dow was near its May top while Transports languished.

On the updated chart below, Transports have bounced from support near 8000, following retracement action in the Dow.  Could this suggest the resolution of the divergence and presage a climb in both averages? 

 dowtheory08102015b

For those interested in exploring Transports further, Baseline Analytics has run its Volume Surge Report against transportation industry leaders.  Criteria was to include only those Transports trading above their 200-day moving average. The list is sorted by "volume surge," showing yesterday's volume as a multiple of the 50-day average volume.  We also removed Transports that lost ground during yesterday's 1.3% gain in the S&P 500.

Click here for today's free report.  Subscribers to Baseline Analytics receive similar targeted stock lists regularly to identify timely trading and investment opportunities.  

 

A noteworthy update since our 8/31 Market Tour is a recent development in our "bond risk premium" technical indicator.  Thie indicator, which is comprised of the ratio of the iShares Iboxx Investment Grade Corporate Bond Fund vs. Barclays 7-10 Year Bond Fund, saw a strong bounce last week.

See the top portion of the chart below:

BLA1b

This indicator generated solid returns for our TrendFlex signals, and bears watching.

Other charts in our Market Tour look about the same as they did in late August.  See below and the commentary within each of our Market Tour charts.

BLA1

 

BLA2

Equities remain deeply oversold.  Opportunistic long positions for traders and long-term investors may not be too risky at this point.  We look forward to an eventual resumption in the uptremd, characterizing the current setback as a correction in a longer-term bull market.

 

Despite the rally off the depth of Monday's lows, equities appear poised to struggle gaining upside in any convincing fashion.  Damage has been done as we note below that RSI (Relative Strength Index) collapsed through the "bull trend" 30 level and tries to battle back to the more bullish 50 zone. Resistance appears firmly at the 2000 level of the S&P 500.

BLA Tour 1

Known Sure Thing (KST) surely dipped below 0 confirming the trend shift.  VIX's extreme reading was a give-away to load up on speculative longs at the height of last week's selloff, and remains rather elevated while the Put/Call ratio settles back a bit from its extreme reading.  Note how these extreme readings in VIX and Put/Call precede sharp comebacks.

Market Breadth and momentum are rather dismal, as seen below.  We are particularly leary of the lows in the summation index, which matched the lows from last October.  Perhaps the bottoming out of the summation index is a potential sign of capitulation; we will see if it manages to change direction along with a turnaround in equities.  Too soon to tell right now, however.

 BLA Tour 2

Our "economic proxy" charts are bearish.  The ratio of corporate bonds to Treasuries remains below its 34-day moving average, despite a recent noteworthy bounce.  This bears watching for a potential shift in equity trend, however past bounce-backs have failed at resistance.  

 BLA Tour 3

Copper vs. Bonds remains at multi-year lows, while the stock/bond ratio and Small Cap vs. Large Cap ratios shift to downtrends. Discretionary vs. Staples has been see-sawing recently, the relationship remaining in a trading range.

The weight of the evidence suggests caution; no clear buying opportunity has surfaced. For opportunistic traders, as well as for long-term investors, going long at future market extremes (such as VIX shooting upward toward 40) may be a prudent move. Decent-yielding blue chips may be interesting at these levels for conservative long-term plays.

Otherwise, wait out this turbulence.

We continue to view 197 on SPY (1970 on the S&P 500) for initial resistance (see red line below), with additional resistance at the 2,000 level.  This is based on prior support and resistance levels and last week's low.

Support is drawn at the lows from Monday.  

ote today's rally on stronger volume.  Also, as noted recently, see the weaker volume on the sell-offs.  

With significant "backing and filling" going on, we would not be surprised to see a partial retracement of today's gains. 

 

spy08262015

Baseline Analytics has refined a series of stock and ETF-screening algorithms that pinpoint timely, high-probability trades and investment opportunities.

The results of Baseline Analytics' stock and ETF screens are delivered in a downloadable Excel file.  This file can be sorted to identify various performance and technical criteria to help provide a further edge to your trading and investments.  Instructions are provided to guide you through your review. Our goal is to deliver such opportunities at your fingertips, with minimal research and analysis needed on your end.  We do provide a link to Yahoo Finance for each of our timely picks should you want to delve further into particular equities or ETF's.

As a special offer, Baseline Analytics is providing a list of the S&P IQ 5-Star Stocks and their recent performance.  Perhaps a 5-Star gem or two will surface that is uncommonly oversold, representing an ideal investment opportunity for long-term investors. This list was developed following the 8/25/15 market close and is offered at no charge. 

Subscribers to Baseline Analytics receive our proprietary screens regularly, as well as our TrendFlex family of market trend signals and risk assessment tools.

Click here for the report.

Sign up for a Free Trial and check out our reports and TrendFlex signals for the next 30-days.

 

We are looking at 197 on SPY (1970 on the S&P 500) for initial resistance (see red line below).  This is based on prior support and resistance levels and last week's low.

Support is drawn at the lows from Monday.  

Note the weaker volume on the sell-offs; most likely a function of the summer holiday season.  

 

spy08242015

We have previously noted on this blog that extremes in VIX and the Put/Call Ratio tend to precede short-term market trend turns.  

Note in the chart below, the black circles highlight extremes in VIX and Put/Call.  Extremely high readings in these indicators (as we are seeing this morning) have tended to precede a bounce or resumption of the uptrend.  The block arrows demonstrate the upward turns in the S&P 500.

Probably not a bad time to wade into partial longs or an opportunistic e-Mini S&P 500 futures contract on the long side.

 

fear

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