Excerpted from NFTRH 336…
US Stock Market
We start with our perspective chart in case there is any doubt. Janet Yellen is not to be taken so seriously, but the distortions built into this chart by post-2008 policy are.
We will manage markets by daily charts with in-week updates as needed, but the weekly charts, beginning with the leading Biotech index continues to be just fine.
A trend is not broken until it is broken. This one is fully intact and last week’s put down or any to come that do not close below the blue arc line are just pullbacks within the trend. One day it will break and bears will say “I told you so”, but in the meantime BTK has been a guide instructing against active bearishness.
Meanwhile, Biotech continues to lead the Nasdaq 100 and more than that, the ratio is in a secular bull market. Now, I don’t want to go all bubble head on you but what is the implication here? To me, given the long-term nature of this chart one implication is that one technology really is standing the test of time vs. the average of so many other technologies, from critically important ones to those silly ones that allow people to take selfies and pictures of their food so they can bore other people with them.
In other words, I buy the Biotech story, long-term. That is different from calling Bio simply an important ‘momentum’ leader in the current late stage US stock bull market, which I believe it also is.
Small Caps continue to be in blue sky territory and so we continue to keep the measured target open.
That is what TA guys do; they act like Fanuc robots [ed: earlier #336 did an NFTRH+ study on a potential future buy point for Fanuc] to their chart’s instructions because the minute the TA guy starts trying to out think his chart he is a malfunctioning robot destined for the scrap heap. That is of course just the TA guy talking. The macro market writer guy has more than a few thoughts and opinions, as you know.
We have followed the little green uptrend channel since the RUT-SPX ratio broke out from the red downtrend channel. Last week it closed very firmly and Small Cap leadership remains strong.
Semiconductors got hit hard last week but the first important support level was not even hit at 650.
Indeed, if the market holds its bullish stance this remains a sector that I’d continue to be interested in trading along with Biotech.
SOX leadership remains intact, though it was punched back down into the uptrend channel.
Nasdaq 100 tested the top level of support last week.
S&P 500 stayed in its trend channel. We have 2000 and then 1900 on radar as corrective targets, but can we please at least break the channel before getting too beared up?
Dow is very similar to SPX.
Transports took a hard down from the dotted line we drew in recently. We had noted ‘key support’ and that is what it remains.
Banks really do look to me like they are in an extended topping process…
…which could paint the anti-Bank asset, gold as in an extended bottoming process.
It makes sense that one of these items is the direct beneficiary of much of the Fed policy since the system tried to end in 2008 and the other is the monetary version of an insurance policy against systemic crises, not to mention the distortions hard wired into the current system as it moves forward.
But for now, confidence is intact and so is the Bank index. By the same token, gold is not out of the bearish woods yet.
Homies continue to move up from the bullish Cup’s Handle breakout.
Internets dropped below the breakout line last week. Let’s keep an eye on this to see if it becomes a double top failure or a bullish Cup with a Handle in progress.
US Stock Market Bottom Line
While there are reasons to gather a bearish attitude (decelerating corporate profits is just one), there are not yet any real technical signs that the market is turning down for real. What we have is volatility, which could indeed be a precursor to an eventual top. But volatility cuts both ways and so my plan is to continue nimbly swing trading which ever way the market directs, with CASH as the default position.
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