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Issue #501 
Oct, 30 2016 | Newsletter
The newsletter with chart analysis for stocks and stock indexes |
Stock Indexes Analysis/Evaluation
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| Bulls in Trouble? 74% of Earnings Reports Better than Expected but Indexes Near 2-month Lows!
DOW Friday closing price - 18161
The DOW has traded without direction and in a small 213 point trading range for the past 2 weeks as the traders waited for the first 3 weeks of the earnings quarter to end. Earnings came in better than expected in 74% of all companies that have reported so far but it has not enough to break out of the short-term downtrend that started in August when the index made the all-time high at 18668. The weekly chart now shows 2 successful retests of that high (rally to 18449 on 9/22 and to 18399 on 10/10) that has created a 3-point downtrend line that is likely to require a fundamental change in order to be broken, especially if the better than expected earnings reports failed to accomplish that goal.
In addition to the short-term downtrend line, the chart of the DOW is now showing a triangle formation with the triangle side being the downtrend line and the base side being the 2 lows at 17992 and 17959 that have occurred since the all-time high was made. The triangle formation offers a 17332 objective if the index breaks the bottom of the 18000 demilitarized zone (17970) on a daily and/or weekly closing basis and a break above 18399 would offer a 19000 objective. The bears have the edge simply because it is a triangle formation favoring the downside.
To the upside and on an intra-week basis, the DOW now shows minor resistance at 18275 and pivotal resistance at 18399.
To the downside and on an intra-week basis, the index now shows minor support between 18052 and 18062, minor to decent at the 18000 demilitarized zone (17970-18030) and pivotal at 17959. Below that level, there is no support until minor to perhaps decent support between 17713 and 17733.
The first 3 weeks of the earnings quarter are over and though the bulls were able to generate better than expected earnings reports the bears maintained chart control in the DOW, suggesting the end result will be to the downside. By the same token, the election is a fundamental "monkey wrench" that is impossible to factor into the equation, meaning that the probabilities favor "more of the same" this week until the election results are known on November 9th. By the same token and fundamentally speaking, a Clinton win is not likely to change the fundamental picture in a positive way and yet a Trump win would likely be a stronger negative to the charts than what the charts suggest will happen, suggesting that the negative chart formation does favor a negative resolution.
SPX Friday closing price - 2126
The SPX generated a negative reversal week, having gone above last week's high and below last week's low and then closing in the red and near the lows of the week, suggesting further downside below last week's low at 2119 will be seen this week.
Nonetheless and on a weekly closing basis, the bears were unable to make a negative statement, given that the SPX closed on Friday at the very pivotal weekly close level of 2126, which is the previous all-time high weekly close seen last year in July, as well as the close seen in July of this year at 2127, meaning that on a weekly closing basis no decision on direction for the rest of the year has yet been made. It is evident that the traders are waiting to see the election results before making any longer term decision.
By the same token, the SPX chart is identical to the DOW chart, inasmuch as a triangle formation is in place with 2 successful retests of the all-time high at 2193 and the base being the 3 recent lows at 2119. 2114, 2119 seen over the past 2 months.
To the upside and on an intra-week basis, the SPX now shows minor resistance at 2154 and pivotal resistance at 2170. To the downside and on an intra-week basis, the index shows pivotal support between 2114 and 2119. Below that level, there is no support of consequence until 2044 is reached.
It is evident that the better than expected earnings quarter did not help the bulls in the SPX as none of the previous resistance levels were broken. Like with the other indexes, the traders are likely waiting for the election results to come out on November 8th. Nonetheless, the chart is strongly favoring the downside in spite of the good earnings and that means a break of support is likely to occur within the next 7 trading days (if not sooner). The downside objective based on the negative triangle formation is 2035.
The levels to watch in the SPX this week is 2170 to the upside and 2114 to the downside. A break of either level is likely to generate an 80 point move above or below the levels mentioned above. Probabilities favor the bears.
NASDAQ Friday closing price - 5190
The NASDAQ generated a negative reversal week, having gone above the previous week's high and closing below the previous week's low and on the lows of the week, suggesting further downside below last week's low at 5178 will be seen this week. In addition, if the index does go below last week's low, last week's high at 5311 will become a successful retest of the double top at 5340/5342, which in turn would suggest that a major top has been built.
The NASDAQ did generate 2 additional negative signals with the first one being a minor sell signal having closed below the low weekly close for the past 7 weeks at 5214 and the more meaningful negative signal, having closed below the previous all-time weekly closing high July of last year at 5210 for the second time in the last 2 months.
Most of the important stocks in the NASDAQ reported better than expected earnings (NFLX, GOOGL, AAPL, AMZN and FB) and yet the bulls were unable to make new all-time highs, suggesting that the bulls have run out of ammunition with which to continue the uptrend, at least not until the next earnings quarter in January.
The NASDAQ is now showing a double top and a probably successful retest of that top, meaning that from a chart point of view the chart is fulfilled to the upside. If the bears can generate a break of the 15 week low weekly close at 5125 that occurred in July, there is nothing to stop the index from dropping down to at least the psychological support at 5000. By the same token and based on October-November correction seen in 2112, the objective is likely to be the 4700 level.
To the upside and on an intra-week basis, the NASDAQ is showing minor resistance between 5275 and 5278 and pivotal resistance at 5311. To the downside and on an intra-week basis, the index is showing minor support at 5169 and pivotal support at 5097.
It is not likely that anything will be decided this week in the NASDAQ prior to the election results. By the same token, the chart is now heavily leaning to the downside and given that a Clinton win would not help the bulls all that much and a Trump win would be a major negative, it is possible that the traders will begin to sell this week. The key level to watch is 5097, which was the intra-week low seen in July. A break of that level would open the door for a fast drop down to the 4900-5000 level as there is no established support before that. The bulls would need to get the index back above 5311 to generate new buying interest and having closed at 5190 and being 121 points from that level and without any possibly catalytic earnings reports left, the probabilities strongly favor the bears.
The first 3 weeks of the earnings quarter are now over and in spite of the fact that 74% of companies reported better than expected earnings, the bulls were unable to generate a break of the recent downtrend lines or in the case of the NASDAQ (which received the bulk of the better than expected earnings) to make a new all-time high.
Attention will now shift to the election and thereafter to the Fed and the possibility of raising interest rates in November or December. The election though, is not likely to be of much help to the bulls given that a Clinton win (which is the expected result) will be "more of the same" and not stimulate much new buying (if any). A Trump win though, would be a big negative, suggesting that the negative chart formations built during the last 3 months are likely to be resolved in favor of the bears, especially considering that after the election there is a 64% chance of the Fed raising interest rates in December. Another big negative is that the breakout in the oil market was negated this past week, taking away one of the supporting factors helping the bulls.
The big question for the week will be whether the traders will wait for the election results before deciding or whether the negatives will cause them to sell this week.
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Stock Analysis/Evaluation
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CHART Outlooks
No mentions this week. Traders likely to await election results on November 8th before committing to any direction. By the same token, with the election not likely to be of help to the bulls, it is possible that decisions will start to be made this week and likely to the downside. As such, mentions will be made on the message board if that occurs.
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Updates
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| Updates on Held Stocks |
Closed Trades, Open Positions and Stop Loss Changes |
| ADSK generated a successful retest of the all-time high at 73.40 with a rally on Monday to 72.75 followed by 3 red closes in a row. The stock did rally back at the end of the week to close in the upper half of the week's trading range, suggesting that further upside above last week's high at 72.75 will be seen this week but if that happens, the successful retest on the daily chart will be negated and the bulls will get added ammunition to extend the uptrend. By the same token, Monday is an important day as it is the end of the month and a close on Monday below 72.33 (last month's close) will generate a negative reversal month and give the bears added ammunition. Short-term pivotal resistance is found at 72.75 and the same as support at 70.46. Longer term pivotal resistance is found at 73.40 and the same as support at 68.40. Probabilities slightly favor the bulls. ARNA generated a negative reversal week, having gone above last week's high and then below last week's low and closing in the red and on the lows of the week, suggesting further downside below last week's low at 1.51 will be seen this week. Pivotal intra-week and weekly closing support is found at 1.47/1.48 that if broken would suggest a drop down to the 1.30 level would occur. The company reports earnings on Monday, November 7th which suggests that this week it is unlikely that a break will happen. Nonetheless, the probabilities are favoring the bears as the stock is on the defensive and the indexes are leaning to the downside. COF generated a negative reversal week, having made a new 6-month high and then closing in the red. The stock is facing a strongly pivotal week that does favor the bulls, inasmuch as the stock has now closed above the 200-week MA, currently at 72.90, for 2 weeks in a row and is trading $1.39 above the highest Monthly close for the past 11 months. A close on Monday above 73.24 would give a buy signal on the monthly chart and open the door for a rally up to the $80 level. Nonetheless, the stock closed in the middle of the week's trading range and in a negative reversal week, meaning that the door is open for the bears to push down on Monday and close below that pivotal monthly close resistance level that in turn would keep the stock in a longer term 16-month downtrend. Intra-week resistance is pivotal at 76.30 and support is short-term pivotal at last week's low at 72.95. Probabilities slightly favor the bulls but the key word is "slightly". ENG made a new 8-week low and closed on the lows of the week, suggesting further downside below last week's low at 1.39 will be seen this week. An additional negative is that the stock closed below the 200-week MA, currently at 1.44, for the first time in the last 9 weeks, meaning that the recent uptrend is at the very least in a pause basis. The break of the line and close on the lows of the week strongly suggests that the strong intra-week spike support at 1.28 from October 2014 will be tested. If broken, it would give the bears the edge back but if held, would give the bulls new ammunition for resumption of the uptrend. Pivotal intra-week resistance is found at 1.60. Probabilities favor the bears for a drop down to 1.28 this week but longer term the bulls still have a strong edge. Company reports earnings on Friday before the opening and is probably the reason the stock is showing weakness at this time. Consideration should be given to adding positions between 1.29-1.30. FCEL made a new all-time low after it was announced on Tuesday that the company was not chosen for a lucrative fuel cell project that it had bid on. The stock closed on the lows of the week and further downside below last week's low at 3.50 is expected to be seen. This was a fundamental negative that chart-wise cannot be measured as there is no support below, meaning there is no downside objective that at this time can be ascertained. Intra-week resistance is now found at 4.10 and pivotal weekly close resistance is found at 4.70. Probabilities favor the bears until such a time that the traders can find a price that is attractive for purchase (yet to be determined). FSLR generated negative reversal week, having made a new 11-week high and then turning down to close in the red and near the lows of the week, suggesting further downside below last week's low at 40.17 will be seen this week. Nonetheless, the bulls were able to close the stock just 7 points below the pivotal weekly close support at 40.72, meaning that a green close next Friday would make it into a successful retest of that level and likely would bring new buying interest. It does need to be mentioned though that no retest of the 3-year low at 33.74 that occurred 6 weeks ago has yet occurred on the intra-week chart, suggesting that if the stock gets below last week's low it could end up being the needed/required retest, which in turn would fulfill the chart to the downside and give the bulls open air above. Minor to decent intra-week support is found at 39.18 and then pivotal at 37.23. Minor resistance is found at 41.70 and pivotal at 42.90. Probabilities favor the bears for an early week drop to 39.18 but a green weekly close next Friday. GS extended its rally with the 4th green weekly close in a row and confirmed the break of the 200-week MA, currently at 171.00, with a second green close in a row above that line. On a negative note though, the stock got into the gap between 177.50 and 180.03 that was created at the beginning of the year but the bulls were not able to close the gap as the high for the week was 178.85. The stock did close in the upper half of the week's trading range, suggesting the bulls will attempt to close the gap this week. Minor to decent Intra-week resistance is found at 181.13 that should not be broken at this time due to the overbought condition that presently exists. As such, this coming week is likely to be all about closure of the gap. Evidently, non-closure of the gap will be seen as a negative, meaning that is the only thing in the minds of the bulls. Pivotal intra-week support is found at 173.93 that if broken this week would be a strong blow to the bulls. It also needs to be mentioned that there is an open gap to the downside 167.63 and 168.45 that will become a magnet once a top to this rally has been determined. Probabilities favor the bulls but if the gap is not closed this week, it will be a strong negative. HON generated a positive week, having broken above the double high that had been built on the daily chart at the top of the 110.00 demilitarized zone, having generated a 110.87 high. Nonetheless, the stock closed in the middle of the week's trading range, leaving the door open for either side to gain some traction, likely off of what the indexes do. Intra-week resistance of consequence is found at 111.86 as well as at 112.01 on a weekly closing basis, suggesting that further upside above 110.87 could be seen this week but that it is not likely to cause the stock to rally more than about $1 above last week's high. Minor but possibly indicative intra-week support is found at last week's low at 108.42. On a monthly closing basis, the mid-point of the spike down month the stock is having is at 110.75, meaning that a close above or below that level on Monday could be indicative. On a daily closing basis, there is decent resistance between 111.32 and 111.60 that could be reached this week but is unlikely to get broken. Probabilities favor the bulls for "some" rally at the beginning of the week. Overall and for the mid-term, probabilities still favor the bears. KGC generated a negative reversal week, having made a new 3-week high and then closing in the red and on the lows of the week, suggesting further downside below last week's low at 3.66 will be seen this week. Minor intra-week support is found at 3.58 and pivotal at 3.42. Monthly close support of consequence is found at 3.39. Daily and weekly close resistance remains decent around the 4.10 level. Probabilities favor the bears at this time as the burden of proof is squarely on the shoulders of the bulls. MT generated a negative reversal week, having made a new 54-week intra-week high and then closing in the red and near the lows of the week, suggesting further downside below last week's low at 6.46 will be seen. The bulls ran into the last minor to perhaps decent resistance at 6.96 with a high this past week at 6.90 and were unable to get above that level, meaning that nothing of longer term trend consequence has yet been accomplished by the bulls. Minor intra-week support is found at 6.27 and stronger at 6.08. Pivotal support on the weekly chart is found at 5.98. On a small positive note, the bears were unable to generate a failure signal on the daily closing chart with the stock closing on Friday at 6.57, still above the daily close breakout point at 6.55 that occurred 6-days ago and if the bulls are able to generate a green daily close on Monday, the bulls will get some new ammunition. Probabilities are evenly favored at this time with much to be decided as early as Monday. SINA generated a negative reversal week, having made a new 3-week intra-week high and then closing in the red and on the lows of the week, suggesting further downside below last week's low at 75.38 will be seen this week. The reversal was also indicative as the intra-week resistance at 79.30 that was built 6 weeks ago will be successfully retested if the stock does go below last week's low this week. In addition, the stock will also generate a successful retest of the 80.42 high seen 4 weeks ago, and will also generate a second successful retest of the 32-month high at 85.02 that was seen in September. Important and pivotal longer term support is found at 72.42 that if broken will open the door for a drop down to at least 62.85 if not to the $57 level that is a monthly chart objective. There is some support at 73.35 that is seen in all charts (daily, weekly, and monthly) that is a viable objective for this week that if broken would give the bears additional ammunition but if held will give some hope to the bulls. Nonetheless, the chart favors the bears. XON made a new 6-week intra-week and weekly closing low this week and closed in the lower half of the week's trading range, suggesting further downside below last week's low at 25.54 will be seen this week. Nonetheless, the 2-point uptrend line that started in January at 18.52 is presently at 25.45 and should offer some pivotal support this week. Drops below 25.45 will start to weaken the chart though no break of support will occur unless the intra-week support at 24.30 is broken. If the stock does get to the line and turns around to close in the green on Friday it will be a positive. A break above 27.18 would be a strong positive. Company reports earnings on Wednesday after the close of the market. Probabilities slightly favor the bulls overall as the uptrend has been consistent all year and likely requires a negative piece of news to break.
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1) FCEL - Averaged long at 2.2275 (4 mentions). No stop loss at present. Stock closed on Friday at .295 (new price 3.55). 2) FCEL - Purchased at 5.27. No stop loss at present. Stock closed on Friday at 3.55. 3) ENG - Averaged long at 1.92 (3 mentions). No stop loss at present. Stock closed on Friday at 1.39. 4) ARNA - Averaged long at 3.725 (4 mentions). No stop loss at present. Stock closed on Friday at 1.52. 5) MT - Averaged long at 5.57 (3 mentions). Stop loss now at 5.23. Stock closed on Friday at 6.57. 6) FSLR - Averaged long at 44.87 (4 mentions). Stop loss now at 33.64. Stock closed on Friday at 40.65. 7) GS - Averaged short at 167.61 (3 mentions). No stop loss at present. Stock closed on Friday at 177.14. 8) HON - Averaged short at 117.09. No stop loss at present. Stock closed on Friday at 109.83. 9) COF - Averaged short at 71.656 (3 mentions). Stop loss now at 76.40. Stock closed on Friday at 74.63. 10) SINA - Averaged short at 76.855. No stop loss at present. Stock closed on Friday at 75.44. 11) XON - Purchased at 25.96. Stop loss at 24.20. Stock closed on Friday at 25.94. 12) ADSK - Averaged short at 70.96 (2 mentions). No stop loss at this time. Stock closed on Friday at 71.86.
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Encyclopedia of Chart Patterns. A must have for chart aficionados! |
The opinions and commentaries by Mr. De Vito are not a recommendation to buy or sell, but rather
a charting guideline, based on his own knowledge and experience, regarding the stocks he is following or
that are brought to him by others. Mr. De Vito does not presently offer a track record of his trading experiences.
No inference of success and/or failure should be assumed. The
information enclosed above, regarding his background, length of trading, and experience, is correct
but is not meant to suggest, state, or infer any future success in trading, based on his opinions. The information herewith included should only be used by investors who are aware of the risk inherent in securities trading. Mr. De Vito accepts no liability whatsoever for any loss arising from any use of the information and/or comments he supplies. |
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