MARKET SUMMARY (10/14/19) – BULL IS BACK

It’s really easy to over-analyze, over-think and over-trade.

Especially when you’re me and trying to tweet daily market thoughts and write these weekly newsletters.

But more often than not, the market gives simple signals and it’s best to just relax and do nothing until something really significant happens. 

So for now, it’s time to just sit back and accept that things are almost all lining up for a fully bullish market. As I’ve been saying for weeks, once SPX breaks above my moving target level to go fully bullish, I’d load the boat fully long and just let the market lead the way.

That happened this week with the Friday close above 2,970.

So let’s check the boxes for the bull case:

1. Long-term (into next year) bullish stance since the massive, outlier December bottom. 
2. Moving averages in bullish configuration.
3. Weekly uptrend line firmly established and successfully tested.
4. Multiple levels of support below.
5. 4 weeks into a weekly consolidation cycle, so ready to turn up again.
6. Daily downtrend broken.
7. Daily momentum just turning up.
8. Bellwethers like V, MSFT, AAPL, semiconductors all bullish across the board.

There are some minor bearish signals, but they’re hanging by a thread:

1. Weekly MACD and DMI still in technically bearish configuration, with negative momentum divergence from the recent highs.
2. Momentum sectors like SaaS software still broken and far from being truly bullish, beyond short-term bounces.

Bottom line, the weight of evidence says the market is bullish, and the last signs of bearishness could disappear with a continued rally this week.

It’s times like this when we should stop getting enticed by bearish charts and the permabear sirens calling to us with songs of recession, earnings disappointments, and trade deal failures. We’ll stay open to whipsaw and fakeout possibilities, but avoid overreacting to news like this morning’s trade deal “disappointment.” 

The market is telling us that the Bull is Back.   


4 THINGS ON MY MIND

1. Every trader, no matter how much they claim to be objective and robotic about following their charts, always has a bias. There’s really no chart or analysis that doesn’t involve some sort of interpretation.

Luckily for us, my bias has been right so far. Its a simple one, though unpopular with the Financial Twitter masses that love to be bearish. We are in a bull market that should last well into next year. Framing every dip in that context has paid handsomely, so I don’t see any reason to stray from that view.

2. For short-term traders, my new line in the sand to get cautious again would be a close below the 100-day moving average at around SPX 2,930. Until then, I’ll just let it ride.

3. Bitcoin continues to trade heavy. There’s strong resistance up above and the long consolidation that finally resolved itself to the downside will weigh on it. This is actually a good thing if you’re looking to eventually get a nice buyable dip. I’m looking for complete apathy when it finally does start breaking above downtrends and resistances. Positive divergence on the techncials is building.

4. Let’s check in with the list of individual stocks I gave out on 8/19/19.

Those stocks were BABA, ATVI, QCOM, CGNX, NXPI, PLAN, MU, LRCX.

Assuming a pure buy-and-hold on that portfolio, you’d be up +3.7%, including some nice winners with ATVI and LRCX both up +14%. That beats the SPX return of +1.4% over that same time frame.  


A CHART THAT CAUGHT MY EYE

DXC – DXC Technology

Staying with my theme of simplicity this week, let’s keep it old school and go with a classic formation that I’ve cited many times in this weekly section and in my course.

DXC Technology is a long-time hedge fund favorite because of its low valuation and diverse technology product and services portfolio. 

The chart is probably obvious to my long-time followers: massive positive divergence on the daily MACD and DMI as we keep making lower price lows. With a positive MACD right around the corner, we have a set-up for a nice short-term pop and enough juice to probably send it higher on a longer time frame as well.

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