Category Archives: Stock Indices

S&P 500 Cash Index Cycle Location 06212019

The S&P 500 cash index had a great week last week, but it closed on a weak note by falling below the previous all time high on Friday.  It is a good sign that S&P 500 was able to make a new all time high on Thursday, but caution is needed at this price level.

Technically the S&P 500 cash index is 14th day into the first daily cycle, it has entered top timing band in the beta cycle of the daily cycle which is why we had preferred the breakout to take place on the 8th day.  Typically when a breakout happens in the first 8 days, it has further energy to prolong the daily cycle into a long cycle which could be a 25-day cycle.  It is still a good sign to make a new all time high, despite the reluctance.

The NASDAQ is much weaker than the S&P 500 cash index. It lost 0.2% Friday with heavy volume.  The action in the Nasdaq was sufficient to qualify as distribution, which is a sign of institutional selling.  One day of distribution doesn’t change the present up trend.  Four or five distribution days over several weeks are needed to signal that stocks have topped and are heading for a downturn. When the Friday’s low is taken out, it would confirm the daily cycle top is in place.  So it’s realistic to expect the market to be sideways down next week.  The high flying growth stocks have taken a beating last Friday, lost much more than the NASDAQ.

Next week is filled with catalysts that could move the market in a big way.  Lennar, Fedex and Micron will release earnings report on Tuesday.  These companies can tell a lot about the state of economy and how the market pays attention to the earnings instead of hoping for easy money policy and trade war news.  The G-20 meeting is another important event.  The market is not expecting a deal out of G-20, maybe Trump will not put on additional tariffs.  No one knows for sure what to expect.

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Possible Retreat of The Rally

Since the Fed’s verbal intervention about a possible rate cut, the market rebounded from the 38% retracement level on June 4th.  The Sp&P 500 rallied 5 days for a total gain of 6.66% from high to low.  Then it bumped into resistance around 2900 level.  The volume of the five-day rally has not been impressive though.

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Can the Fed Alone Do The Heavy Lifting to New Heights?

With a hint of rate cut, the market immediately pivoted to the upside.  Last Tuesday, we sent out a member blog that detailed the reasons why we had a first valid rally attempt after last Tuesday’s close.  Now the question is when will the May high be taken out?

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The Unusual Madness

The stock market usually is chaotic and full of madness.  This time with a Twitter happy President, we have had unusual amount of madness that can make anyone dizzy.  The President’s economic policies are totally geared toward manipulating the stock market with the end goal of re-election in 2020.

This is evident with the passage of the Tax Cuts and Jobs Act of 2017 in December 2017.  Normally a fiscal stimulus is not deployed after an extended period of easy money policy, it is reserved for bad economic times to save the day.  The market was anticipating the good news in 2017, therefore it didn’t even have a 5% dip throughout 2017, which is quite unusual.  The equities surge in January 2018 promptly produced a two-year cycle top.  The market was sucker punched between the trade war and rate hike in 2018. Therefore the 2nd half of the four-year cycle was cut short, it couldn’t surpass the first two-year cycle high and only lasted seven months from February to September 2018.  The four-cycle that started in February 2016 ended in December 2018 with a total of 34 months.  The presidential economic policies definitely shaped how the four-year cycle played out.  It produced a rare four-year cycle bottom in December which is totally against seasonal tendencies.

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The Power of Price Reversal Action

With the recent development of blacklisting the Chinese tech giant Huawei, the scope of the trade war has expanded much larger than originally thought.  The semi-conductor sector has been hit really hard as China is the largest buyer of the U.S. made semi-conductor products.  This action against Huawei sure does look like an existential risk for Huawei.

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