Market Health Tracking

[PuddinHead42]

Investors finally raise some cash in case Powell spoils the party tomorrow. Naz picked up its first distribution day and came to rest on the 50dma. Naz and SPY had outside down days.

Notably, Nvidia stock held above its 50-day line, while Tesla fell below that key level.

Tomorrow might be like a big earnings day.

Update: 8/24/24:
Yup, Fed day was like a big earnings day and they seemed to beat expectations. This big move on higher volume brought us the second “subsequent FTD” (more on this in a sec)

The S&P finished with the 21dma either overtaking the 50dma or becoming equal with it. When the 21dma makes this cross it is a sign of strength. The Naz still has a bit to go. The Naz daily low stayed above the 50dma, a good thing and the S&P has been doing so for longer.

Small caps up over 3%, they love falling rates and the Russell 2000 has lots of regional banks that want to see rates fall.

IBD’s analysis of all historic FTDs shows this…
• The first 3 days are important because if you see professional distribution on day 1,2, or 3, that is a yellow flag and rally will rarely be good. If 2 of first 3 days is distribution, there has never been a “Life Changer” rally after that. [no worries this rally]
• The first 25 days are also important, you want to see some subsequent FTDs, as major rallies average 2 to 3 subsequent FTDs and about 8 accumulation days. [We have already had 2 subsequent FTDs]

A subsequent FTD is 0.2% gain or more on heavier vol than the day before (the stronger the better). These show professional accumulation and correlate with better rallies. Heavier Vol and less than 0.2% rise is “stalling” [but I have not found out the difference between an accumulation day and a subsequent FTD]

Another powerful indicator is the “Power Trend”.
A power trend starts when these four events occur simultaneously on a major index:

1. The [index] low is above the 21-day exponential moving average (EMA) for at least 10 days.
2. The 21-day EMA is above the 50-day simple moving average for at least five days.
3. The 50-day line is in an uptrend.
4. The market closes up for the day.

looks like this could happen as early as next Friday now.

What I want to see next: NVDA earnings don’t hurt market. Naz 21dma rises above 50dma, a power trend starts on the S&P.

[PuddinHead42]

8/27: everyone just hanging around waiting for NVDA earnings tomorrow night. Know what you want to do with your AI-related holdings if NVDA tanks or soars. What non-AI stocks do you want to pick up if the market tanks?

Update: 8/28/24: NVDA beats EPS, Sales, and outlook. Announces $50B buyback, so of course it is down and dragging the futures down with it. OKTA and NTAP beat, but also fell. No one wants to buy beats? Somone said NVDA is beating the estimates by less each time, so maybe that is the problem. You aren’t beating the estimates by enough! Bad Stock!

Is all the good news built into the market for a while? Everyone betting on 100 basis points in September? Will the Larry Williams precedent chart overlay come true and bring us to a bottom in September?

We can’t know, just take it day by day.

[PuddinHead42]

8/31/24 (Friday). Market still looking good. The S&P 500 has entered a power trend, adding another sign of strength to the lucky charm bracelet. The Naz is forming a handle but it is vibrating around the 50dma. We need to see it start closing above the line and then we need to see the 21dma rise above the 50dma. Then a power trend would be a great sign.

AVGO is the important earnings report this week, though it should align with NVDA and other AI chip plays. They have said their non-AI chip product lines are putting in a bottom, so forward guidance may be better than that for NVDA.

[PuddinHead42]

9/3/24 - Terrible Tuesday…
The market was bad today and it went beyond just having a big down day. This was an expectation breaker at several levels.

We got by NVDA earnings without much pain, then we got by PCE on Friday. Friday finished with a nice surge at the end, but that was most likely end of quarter fund rebalancing. We could expect a small decline to offset that artificial buying on Friday. What we got was a huge down day. We could also expect that the new S&P power trend would take us to new highs. The Naz opened below the 50dma and never looked back, ending with a 3.26% loss on higher volume. The S&P fell 2.12% but was able to find support at its 50dma.

This was a big expectation breaker and must make us rethink the near-term future. Will the decline continue? Will we retest the lows of 8/5? Will Larry Williams’ chart pattern prediction be right when it says we won’t rebound until mid-October? Or is it another 1-3 day correction?

The Nasdaq, which has been lagging for weeks, led Tuesday’s downside. The Nasdaq is now below the top of its Aug. 13 follow-through day. A close below the FTD low would be a very bearish sign.

Due to the Nasdaq’s weak price action, IBD lowered the recommended invested percentage to 40% to 60% from 60% to 80%.

That means it’s time to trim some holdings by taking partial profits in some of your winners. You could even take full profits in some stocks that are up at least 20% from your purchase price.

[Carpian]

Double-top on S&P weekly chart. Not looking good at the moment.

[PuddinHead42]

9/4/24 Markets down a bit, but on lower volume. S&P holds at 50dma - critical. Naz almost undercuts the low of the FTD - critical. Look back at the early August plummet and you will see day two was much worse and much different from this day 2. Gives me a little hope.

Update 9/5/24:
Once again, markets up in the morning, but down by end of trading - shows weakness. The S&P closed below the 50dma - shows weakness
The Naz was up a bit, keeping it from falling below the low of the FTD, which historically a bad sign for a rally.
Labor number out Friday, can they change the market?
In the end, it seems certain we will get 100 basis points of Fed cuts by end of year, that has to put a floor on the market, but where is that floor?

[PuddinHead42]

Friday 9/6/24 - Fugly Friday!

The S&P 500 tumbled 1.7% for the day, which slammed it below its 50-day moving average (finally joining the Naz). It also turned in a painful weekly drop of 4.3%, its worst since last year, while its year-to-date gain has atrophied to 13.4%.

The Nasdaq composite had the toughest time among the major indexes Friday, plummeting 2.6%. Its weekly decline of 5.8% was its worst since January 2022. It ended the week below the low of the Aug. 13 follow-through day and sits just 2.5% above its 200-day moving average.

SMH below 200dma. Russell falls 1.9%, slicing well below its 50dma.

IBD drops exposure to 20-40% from 40-60%, but I think in previous terminology they would have said “Market in Correction”. I suspect they want exposure at 0-20%, but didn’t want to jump to that correctly.

Look at the market charts for last fall. Are we looking like a 3-waves down again? Just keep that as a possibility. Is Larry Williams right - bottom around mid-Oct?

Eric Krull, a friend if IBD, once tool all their FTD-rally data and analyzed every FTD rally (I forget the time range, 1900? 1950?) He found they fell into 4 categories, as displayed in the graphic below. The lines are averages of each category and run into the 25th day of the rally. You know, but you can see that this rally (red line) is a bad one. It is tracking like a “Whipsaw” and is all but over. Not that we had hopes the Fed will do a surprise 50 point cut on Monday.

Update: 9/9/24:
Positive day for SPY, NAZ, but still below 50dma, low volume and an inside day for each. Most likely an oversold bounce. Watch to see if they can move above their 50dmas this week.