I believe that the probabilities are high that a top to this market will be found this week with the only question in my mind is whether it will be before the Fed rate decision of after it. As such, I am offering 2 short positions, one of which has an evident resistance level close by above and the other one is into new highs much like the indexes are.

Nonetheless, I did some reading this week given that in many ways this is a pivotal week that could go either way and I wanted to see what the fundamental outlook can be as seen by other people. I found several articles of people predicting the DOW will be moving up to 50,000 as well as a few articles predicting an immediate 4,000-5,000 loss in the index. Since fundamentals are not "my thing", none of these articles made much of an impression with me. Then I ran into a couple of articles that talked about China and Chinese stocks will outperform all markets over the next few years and the reasons given made a lot of sense.

As such, I am offering one buy mention this week in a Chinese stock that I liked the chart outlook on it. I do have a few more Chinese stocks I will begin to follow and give you mentions on them when I see a buying opportunity.

I also want to mention that several of the presently held stocks have unclear charts and it is possible that I may be liquidating them this week as their charts and fundamental outlooks are gray to say the least and since I am expecting some strong moves over the next few weeks, I may move the money from the gray stocks to those that may be shining either up or down. Stocks in the oil market for example.

SALES

PEP Friday Closing Price - 131.27

PEP has moved up from $105 to $135 over the past 7 months and did most of it without a retest of the low or any correction of consequence. In the process and 15 weeks ago the stock made a new all-time high above 121.94 (weekly close) but now and over the past 7 weeks has shown inability of to go higher and has built a double top at 135.24 that looms ominous, especially if the indexes fail to go higher this week.

PEP made generated a positive reversal this past week, having made a new 7-week low and then closing in the green on Friday and near the high of the day, suggesting further upside above last week's high 132.24 will be seen this week and that suggests the double top will likely get the required/needed retest of that double top before the bears climb aboard. That retest had not yet happened. If the stock does move higher this week than last week but then retest is successful, last week's low at 128.29 will become pivotal support that if broken would make the previous all-time high weekly close at 121.94 a clear downside objective.

PEP is not a company that has much innovation in its products and having moved up 30% in value over the past 8 months compared with the 62% it had moved up in the previous 10 years during the raging bull market suggests that this move up is overdone and that the stock is ready for at least a good correction back down to the previous all-time high or more if the index market has found a top.

The strong reason for the short positions in PEP at this time is the double top made while the indexes were making new all-time highs. It does strongly suggest that even before the new highs were made that the stock was at a price where no further upside was to be seen, at least at this time. In addition and with the expected rally to be seen this week, it will put the stock at a level where the risk factor is small but the profit potential excellent and with a decent to high probability rating.

The intraday charts of PEP suggest the stock will get up to around the 133.20-133.40 which will be the desired entry point. Nonetheless, the weekly chart suggests the stock could get up as high as 134.71 so keeping a close eye on the action once 133.20 is reached is the way to go.

To the downside, PEP has at least an objective of reaching last week's low at 128.29 but in all likelihood, a drop down to the $122 level is the expected result with a possibility of more if the indexes start to break down.

Sales of PEP above 133.20 and using a 135.55 stop loss and having at 122.00 objective offers a 5-1 risk/reward ratio.

My probability rating on the trade is a 3.25 (on a scale of 1-5 with 5 being the highest.

MDT Friday Closing Price - 102.55

MDT is a bit of a shot in the dark given that the stock is into all-time highs and shows no resistance above other than general resistance $3 above the psychological resistance area at $100. It is showing the same kind of chart as the SPX and NAZ. Nonetheless, the stock has moved up 19% in value over the past 3 months and without any pullback or correction, meaning the stock is overbought and without any area of support other than the previous all-time high at 98.37. By the same token, it should be mentioned that the previous all-time high made in September did generate a failure signal, having gone down and closed below the previous all-time high for more than a few weeks, meaning that a correction is not likely to stop at the previous high but continue lower.

In looking at the chart, the one area of support that has held perfectly for the past 10 years has been the 200-week MA, currently at 84.10. That line has been tested every single time that a correction has occurred (a total of 5 times) and therefore it is more than likely that when a top is found, that the traders will target a drop down to that line, meaning the risk/reward ratio on this trade is excellent.

Given that MDT is a producer and seller of medical machine equipment and has been established for years, it is unlikely that any unexpected surprises such as new medical equipment or increase in sales will be seen, suggesting that further upside will be based on sales and from everything I have read, it is likely that sales of everything will be lower the rest of the year. It also needs to be mentioned that this stock is very dependable as far as the charts are concerned and though the upside is still a bit of a mystery, the downside objective is quite clear. A drop down to the 200-day MA is to be expected at some point in the next 3-6 months. As far as resistance is concerned, MDT will show general resistance at the $103 area. The stock did get up to 103.29 this past week and did close in the upper half of the week's trading range, suggesting further upside above that level will be seen this week. Nonetheless and contrary to the indexes that all closed on the highs of the week, the stock fell back a bit at the end of the day on Friday, suggesting some selling is starting to be seen. In addition, this stock has moved straight up for the past 10 days without any drops below a previous day's low and shows absolutely no support other than very minor support at 98.46. Some slightly stronger support is found between 96.52 and 97.19.

MDT does show a breakaway/runaway formation with the breakaway gap between 89.12 and 90.12 and the runaway gap between 94.72 and 95.00, meaning that on any first correction that level is unlikely to be broken the first time around but likely to be tested, meaning that the minimum objective on this trade is $95. Using the intraday chart, the 101.80 level is pivotal support as it represents a recent low but also where the 200 10-minute MA is currently at. That line has not been broken for the past 14 days, meaning that if you do short the stock at these higher levels, you could add shorts when that line is broken, or wait for the line to be broken to short the stock with a bit more probabilities in favor.

Sales of MDT above 103.29 and using an objective of $95-$97 suggests that a stop loss be placed no higher than 104.79 in order for the risk/reward ratio to be no worse than 4-1. At this time though, there is no level where a stop loss can be placed based on the chart. By the same token, a drop back down at some point to the $95-$97 level is a high probability.

My rating on the trade is a 2.75 (on a scale of 1-5 with 5 being the highest). This rating is low only because the risk factor is unclear.

PURCHASES

JD Friday Closing Price - 31.55

JD is a large Chinese retailer with over 179,000 employees. It is a stock that started trading a bit over 5 years ago and has seen an all-time high at 50.68 and during the Trade War that has been occurring did drop to make a new all-time low at 19.21 that did break the previous low at 20.13. Nonetheless, the stock has recovered over the past 9 months with a high seen this past week at 32.28. The stock has tested the all-time low successfully with a drop down to 25.48 seen in May and gave a buy signal on the weekly chart on Friday when it closed above the first recovery weekly closing high at 31.24, which was just $.40 below where the 200-week MA was at the time at 31.63.

JD made a new 51-week high this past week, above that previous high at 31.63 (31.23 on the weekly closing chart) and closed slightly below the 200-week MA, currently at 31.56, but having given a buy signal with the weekly close above 31.24, suggests that this coming week is pivotal as another close above 31.24 next Friday would give the bulls some strong ammunition to take the stock up to the original weekly close breakdown point and established resistance at 37.95.

As I stated above, I read a few articles this weekend that strongly suggest that Chinese stocks will strongly outperform U.S. stocks for the next 10+ years and that means that if the indexes are to go higher that Chinese stocks should be purchased and if the indexes have topped out, it is safer and possibly even possible that U.S. stocks will go down but Chinese stocks go up. Either way, it is a way to protect against the short positions mentioned above.

As far as support and where a stop loss is to be placed, this trade offers a close by support level where the risk/reward ratio is good and the stop loss somewhat dependable, depending on whether a breakout is occurring or not. Five weeks ago, the stock got up to this same level where it is trading at now and during that time the low seen has been 30.16. If the stock is to continue higher, that low should not be broken and I do mean the $30 demilitarized zone given that it is also a psychological support. As such, a stop loss at 29.65 is a good one because if broken there is no support below until 28.26 is reached and that support is minor in nature. Stronger support is found at the $26.

JD only has 1 resistance above this level and that is at 33.68. Above that level and on an intraweek basis, there is nothing until 38.00 is reached. Evidently, if the bulls can establish themselves above the always important 200-week MA, the chart scenario that would likely occur is a rally to 33.68, a drop back to test the MA one time and then a rally up to 38.00, suggesting that the upside objective is highly probable if and when the bulls can break the long term MA.

JD made the high this past week on Wednesday and then had 2 red days on Thursday and Friday and closed on the low of the day on Friday, suggesting the first course of action for the week on Monday will be further downside below Friday's low at 31.52.

Purchases of JD below 31.52 and using a stop loss at 29.65 and having a 38.00 objective will offer a 4-1 risk/reward ratio.

My rating on the trade is a 3 (on a scale of 1-5 with 5 being the highest).