Articles

Standing On A Precipice

There are moments in the market, where we get to emphatically type bullish projections and outcomes. Those are a lot easier articles to write than to create fear that turns out to be nothing.

Forecasting the future is not what we do. We look for inflection points in the markets. At those inflection points, it is a place where the market can find support and push higher. Conversely, when the setup is there, and the market breaks down as dominoes start to fall, the action is usually swift.

For subscribers, the drop in February was not a surprise. The February 22nd newsletter reported a market running on fumes. Now that we had a 15% correction, is it all over and up we go?

We had many significant signs for a bottom to form, so that is what we watched for. Whether or not it will be successful, is the next piece of the puzzle. The next week should be telling.

“you DEFINITELY helped me avoid this downturn. Thanks so much” – Bruce C. March 2, 2020

We are in the next stage now of finding how the markets are reacting to the initial selloff. After the rally off the lows, I am watching areas like semiconductors to see if the lows of February can hold.

Transports have not been able to make any headway lately, largely dragged down by the airlines. However, the rails and trucking have been holding up better but still not great. The chart below is from the transportation index.

The momentum shown by the PPO for the trucking index has broken the uptrend and is close to going below zero on the chart below.

It’s an important time to watch the markets closely to protect capital or get ready to put it to work. If you are not currently following someone who helps you find strength in markets outside of technology, perhaps you might enjoy subscribing to my newsletter.

Follow this hint!

I currently have a promotion running if you sign up for an annual membership on the members tab, use the coupon code NETWORTH1 for a $363 discount! Click on this link to take you there –> Annual membership <–

It is really important at times like this to use the strength of the CMT designation to look through thousands of charts to understand what the risks out there are. For less than $10/week, you’ll receive a chart every week telling you the proprietary strength gauge of the market, the top 10 charts Greg is focused on and why, his chartlist of thirty interesting charts, a member’s only 1-hour weekly video, monthly conference calls, special edition reports, investing themes, opportunities in Commodities which move fast both ways, and unique perspectives outside of the same old crowded tech names. Most of all, the focus is capital preservation. Participate in the big up moves, avoid the big down moves!

If you join right away I can send you links to the March conference call video which I think is one of the most important big pictures views you can get in the industry. I’ll also send you the last two newsletters so you can see what I was saying to help investors miss the big downturn.

Here is my latest video on some ideas to find new places to look for opportunities.

Good trading, Greg Schnell, CMT, MFTA

Chief Market Strategist, GregSchnell.com

Thank you for sharing:

Time To Start Planning For Spring

It seems that the bears have taken control of the course. While my indicators have been oscillating lower, the market horsepower of the few kept leading higher. Much like a golf tournament where a few have an unbelievably good week, the rest of the field had an average week. As the market continued, the leaderships continued to thin out. We have just seen a market take that to the extreme. Now comes the reset.

With the optimism that was built into the market, the change in market sentiment will send a few to the portfolio hospital. The call options bought versus closed had accelerated to a level 50% higher than at any time since 2000. The move was so drastic, that defensive names pulled back as well. The concept of portfolio diversity to avoid correlation reverted to almost 1, where everything was correlated. While bonds were a ballast, the small yields aren’t enticing many new buyers.

We are at the start of a correction by my work. The market was stretched to the upside and we are now retracing some of those steps. I wrote an article on StockCharts.com covering this off. Dow Down 1000!

The 1/2 hour video included in that article is posted here for your access.

 

I do want to cover off the ‘What Now?’ question.

For me, trying to enter and exit high volatility is difficult if you don’t want to day trade. I wait for the setup to start improving and usually we can get into the market near the lows. The difficulty for most is waiting. There are lots of places to look. IPO names that were starting to improve. As an Example PTON Peleton was up on a down tape. Perhaps it is Uber, or Lyft or Pinterest that will be the next group of leaders.

The commodities were the first to get beaten down and will need to base before starting to work higher. With the move into electric cars, we should have massive opportunities in those areas in the coming months. We will need a 10X expansion of the power grid. Copper, Lithium, Steel, should all do well. The utilities related to that should do well also. Wind and solar also have been working but it has been selective. The ESG theme could use a reset as prices were extended there as well.

I continue to like the way the Canadian oils are setting up for a leg higher. Some of those can be traded on the US exchanges. We’ll need some stabilization there first.

Everyone will be anxious to get back into tech. While semi’s usually do lead, that would be a great area to watch and focus on the best setups as they start to improve.

I noticed that Payment systems charts were starting to weaken before this, so I would avoid thinking that the former glory will return instantly to that area.

Be cautious, but let’s start building watchlists instead of trying to rebuild the portfolio instantly.

Greg Schnell, CMT, Chief Market Strategist, GregSchnell.com

Thank you for sharing:

Watch For Currency Swings

Lots of internet information out there that is all over the map on the CoronaVirus. I don’t have a crystal ball, but watching what investors are doing can help provide ideas.

One of the things from the StockCharts article what to watch for in 2020 that I wrote about is the potential for the long trends in currencies to change this year.

 

These currency trends look like the breakouts are in the coming few weeks.

I also hosted a Canadian Technician Video about the differences seen in the breadth indicators for the various exchanges this week. That can be found here.

On the Market Buzz on January 27th, I covered off the commodities story. That story line has continued.

 

In the Market Buzz shows from last week and this week, we can use charts to help identify when investors are starting to buy up the names beaten down from the Coronavirus.

While the internet portends to be getting new information out to investors, it is hard to tell what is real and what is actual fact. When institutions start to buy up stocks, we’ll know the turn is coming.

 

Here is another one using the Shipping industry to help us out.

 

I also recorded this Video on the weekend talking about breadth and how it is different across the different indexes in the market. The breadth data can help us see what is changing in the flow of investing.

 

While the market is always rotating in some fashion, all these videos have one underlying theme. The breadth of the market is narrowing and only the largest large caps are working well. It is this potential downside that has me more concerned in the near future. Using the indicators and various breadth calculations, the market is hanging on, but could just as easily start to slip here. It is very finely balanced.

Try to keep your risk levels low this week as there is a tension with the momentums readings to be some of the highest in 10 years suggesting caution may be introduced by the large funds as they typically are not proponents of buying at extremes.

Good trading, Greg

Thank you for sharing: