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October 21, 2017 – Weekend Market Comment

October 21, 2017 – U.S. stocks closed higher on Friday after the Senate took a step toward achieving tax reform.

The Dow Jones industrial average rose 165.59 points to 23,328.63, reaching intraday and closing records. Boeing and Goldman Sachs both rose about 2 percent to lead advancers. Shares of JPMorgan Chase, meanwhile, hit an all-time high after jumping 1.4 percent. The S&P 500 also notched record highs, advancing 0.5 percent to close at 2,575.21 as financials led advancers by rising 1.2 percent. The NASDAQ composite gained 0.4 percent to 6,629.05 in a record-setting session.

Here is what our charts say:

CLICK HERE: To see the 100 and 200 series charts

101 Bull Bear
Bull market (dark green over red)  the dark green 50 day average is in a rising uptrend. Notice the 50 day slope second window, could this be a long term trend change? BULLISH Bull market -- expect bullish outcomes.
103 NYSE High Low Market Forces
Breadth lines firm up! BULLISH

105 Non Farm Payroll
Lots of jobs! Small Bump down, could be just weather. But beware this is lagging indicator.  The smart money is gone before this turns down. 

107 Industrial Production
A new up trend in industrial production. BULLISH

115 Renko
12 Up Bricks BULLISH

203 OBV
OBV (red line) is with the market.  But it is mostly sideways. BULLISH

207 VIX
Healthy rise.

209 VIX Evaluator
Steady down. Looking great.

211 S&P500 over 50 day
Now about 77% of stocks are above their 50 day MA, a bit above last week when it was 76% unlikely to go much higher. CAUTION

213 Green Arrow
Only put new money to work when I draw a green arrow. Getting more defensive. But TRIX looks good! CAUTION

301 NASDAQ Summation
NASDAQ breadth narrowing! Expect a top in QQQ.

303 Aggressive Defensive
Turning defensive.

305 Consumer Bonds vs Equities
Bonds Sideways. Consumer flat. Mixed signal.

307 Bond Direction
Long term bonds flat.

309 Sectors
All about the banks, a bit of a perk up in utilities.

311 Nations
Sideways - China dives.

313 Major sectors

! = Pay attention this chart is important this week.

What I Find Interesting

The Warning
If you have not done so please read my rant on why the markets are set for a sell off. 

Heed 301
This is a very strong bull market, so don't panic... but if we are going to have a sell off in the Oct 23 to Nov 10 time period this could be the first whiff of trouble. We only have one really pessimistic chart in the whole bunch... Chart 301 NASDAQ Summation, shows the NASDAQ breadth. As you can see breadth can head down long before the inevitable sell off but the sell off does generally come. Its cousin chart 103 looks very happy, but 301 sets off sooner and with little provocation.  

MidCap 400 lags DOW 30 is on Fire
As the market moves higher, the money is betting on the big boys. This can be a bad sign as too much money chases the same play. In a bullish market, smaller firms (with room to grow) should outperform the giant firms, but that is not how the market is leaning right now.

Midcap 400 (Ticker:MDY)

DOW30 (Ticker:DIA)

An incredible comeback in General Electric shares from a 6 percent deficit to positive also helped lift market benchmarks. Some investors bet the worst is over for the troubled conglomerate which reported abysmal earnings Friday morning and cut its forecast for the year.

Bitcoin $6,000
What a week for Bitcoin top $6000 each -- almost a double in one month. 

Interesting Comment on Our Modern World
This YouTube video has 2 million views and climbing... all watched on cell phones.... ahem.

Rise of the Machines.
Imagine if your pension fund paid for your job to go off shore, you might be pretty upset. But the truth is more jobs are now lost to automation than overseas outsourcing. Your pension fund probably has a piece of the ROBO ETF that buys into the worlds leading robotics companies. Maybe even a algorithm picked the investment. "I am sorry Dave I can't sell that investment, perhaps you should take a stress pill." Well on the bright side -- now you can stop worrying about the chronic shortage of nursing home workers. (Ticker: ROBO)

What Works Now
Construction and Mining Equipment
Check out DOW stock Caterpillar (Ticker: CAT)

What I Think
I think we are in a cyclical bull market (since February 2016) within a near record long, secular bull market (since early-2009), and neither show signs of abating.

The "Icarus market" keeps going up as money flows out of bonds and in to global and U.S. equities. Valuation mean nothing as everyone is afraid to be left behind.  Particularity the 30 stocks of the DOW are at near insane levels with stock like CAT reaching crazy new highs, whiles sales are only up slightly. 

Consumer demand being flat was also a concern, then look what happened to Under Armour this week.

I think next week the march up continues, but I think we are way overbought and as we saw in 2016, a pull-back at the start of November is a real possibility. Here is the weekly SPY.


I remain long equities but defensive. I have some bonds and gold as a hedge and I must say as of Friday .  . . they don't look so great.

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