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Issue #829 
September 24 20, 2023 , | Newsletter
The newsletter with chart analysis for stocks and stock indexes |
Stock Indexes Analysis/Evaluation
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| Bears in control but......could it end this week?
DOW Friday closing price - 33963
The indexes all generated a down week with the RUT and he SPX making a new 16-week low, the DOW making a new 12-week low and the NASDAQ making a new 6-week low. All indexes closed on the low of the week, suggesting further downside below the last week's low at 1776, at 4316, at 33947, and at 14686 (respectively). All indexes, with the exception of the NASDAQ gave new sell signals with pivotal breaks of support in the DOW and the SPX. The NASDAQ closed within 5 points of its pivotal weekly close support, meaning that unless something fundamentally positive happens this week, it too will break its pivotal weekly close support.
This coming week there are quite a few economic reports, some of which can have some impact if way out of line. On Tuesday, the Consumer Confidence and New Home Sales reports come out. On Wednesday, Durable Good Orders report is released and on Friday, Personal Income and Spending, as well as PCE prices (inflation) are given. It is doubtful that any of these reports will have much of an impact though.
Friday is the last day of trading for the month of September and already the DOW has dropped 4.5% in price, the SPX has dropped 4.2%, the NASDAQ has dropped 5.2% and the RUT has dropped 6.5%. This seasonal drop is higher than the average as the average over the past 73 years, has been a drop of 1%.
In looking at the monthly closes (next Friday), the DOW has support at 33843 (which is 120 points below Friday's close), the SPX has support at 4307 (which is 23 points below Friday close), the NASDAQ has support at 14689, (which is 12 points below Friday's close), and the RUT has support at 1749 (which is 27 points below Friday's close). As such, it does seem that this last week of the month is likely to close red but not by a lot. By the same token, a close next Friday below these levels will open the door to a lot more. For example, a convincing close next Friday in the NASDAQ below both of the support levels (14696 and 14689) will open the door for a drop down to the next weekly close support level at 14000.
Seasonally, October is an up month. It is not one of the top three up months of the year, but it is an up month. Then again, the scenario for this year based on the present fundamental scenario, does call for lower prices as some form of recession is expected to be seen. As such, it does seem that October is going to be the month that makes that determination. Certainly, September turned out to be more of a down month than the average seasonality called for, meaning things are not necessarily turning out as expected chart-wise.
For all of the reasons stated above, this week is important. It should start to the downside on Monday and the intraweek support in the NASDAQ is at 14557. If that level gets broken, it will be difficult for the bulls to mount a rally thereafter. In the DOW, the 200-day MA is currently at 33808, In the SPX the MA is at 4190, meaning its support is not likely to be in play this week, unless the other indexes break their support. In the RUT, there is an open gap at 1773 and intraweek support at 1757. These are the levels to watch this week (with the exception of the SPX).
As far as to the upside, the gap to the downside in the NASDAQ at 15069 is what needs to be watched. Closure of that gap, will strongly reduce the bear ammunition.
OIL generated a negative reversal week, having made a new 10-month high but then closing red. Oil closed slightly in the lower half of the week's trading range, suggesting a slightly higher probability of going below last week's low at 88.39 than above last week's high at 92.41. Nonetheless, it must be kept in mind that the fundamental picture does suggest that ultimately, Oil might be heading to the $100 level, meaning that whatever chart strength the bears have is going to be limited to a short period of time. Having said that, the rally from the $67 level has been mostly straight up and the traders likely to have established support nearby when buying. At this time, the closest intraweek support is at 77.59 and it is minor, meaning it is not a support the bulls can depend on. As such, this negative reversal does suggest that the trader will be attempting to build a new support level given the overbought condition of Oil. On a weekly closing basis, there is old but decent weekly close support at 85.02 (82.09 on an intraweek basis) and that is a likely objective should this reversal be confirmed on Friday. On an intraweek basis, last week's low at 88.39 is now short-term pivotal support. If broken, there is no support below until 84.40 (on a daily closing basis). As such, last week's high and low are important this week. Probabilities do favor the bears.
DOLLAR continued higher this week but on a very limited basis in which no new signals were given. On an intraweek basis, pivotal resistance is at 105.88 and last week's high was 105.78. On a weekly closing basis, resistance is at 105.63 and Friday's close was 105.61. As such, nothing was broken but it does put this coming week in a position of it being highly pivotal. Based on the present fundamental picture, chart picture of the Dollar and chart picture of the index market, a negative reversal week is what is expected. The Dollar has been moving straight up for the past 10 green weeks and from the 99.59 low seen in July. It is strongly overbought and the fundamentals do not yet support more strength. Intraweek support is found at 104.64, at 103.45 and at 102.94. The latter, if broken, would be a short-term negative statement, meaning that the probabilities do favor a drop down to 103.45. A breakout above 105.88 would offer a $108 objective.
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Stock Analysis/Evaluation
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CHART Outlooks
I have no mentions for this week as the outlook is 50-50 for further downside or the beginning of some form of recovery. This week is important and pivotal as it comes (explained above in the evaluation of the indexes and below in the evaluation of the shorted stocks).
The suppoort areas below that are likely to be reached this week are pivotal support. There are economic reports that could make the indexes lean one way or the other, meaning that before next Friday's close, nothing is clear. Under normal circumstances, the probabilities would favor these levels holding up but these are not normal circumstances, meaning that a sharp break of support could happen.
Fortunately, the closes this coming Friday (across the board) will go to great lengths to determine what happens in October and the rest of the year. This means that this week is not only pivotal for now but likely for the rest of the year.
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Updates
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Closed Trades, Open Positions and Stop Loss Changes |
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CAT had a down week and closed on the lows of the week, suggesting further downside below last week's low at 271.60 will be seen. Nonetheless and much like the NASDAQ, the bears were unable to generate a sell signal on the weekly closing chart, having closed at 273.06 and the pivotal support being at 272.56. This is a stock that has generally been outperforming the other stocks during the past 3 months and this past week was no different. Pivotal intraweek support is found at 268.80 but if broken, there is daily and weekly close support at 264.54, that at this time, it looks like it will hold. The stock has an open gap at 265.21 that is now a strong magnet given the fundamental weakness seen in the market of late. Daily close resistance is now found at 276.44, which if broken would take some ammunition away from the bears. Probabilities do favor a drop down to the $265 level but thereafter, it is a mystery. DD generated another red weekly close (the 3rd in a row) and in the process gave a new sell signal, having closed below the pivotal weekly close support at 74.64 (closed at 72.84). The stock closed on the low of the week, suggesting further downside below last week's low at 72.74 will be seen this week. Much like with the indexes, the downside this week could be limited. There is an open gap at 71.40 that is a clear objective and given that the 200-day MA is currently at 71.69, that level is further strengthened. In looking at the weekly chart and on an intraweek basis, there is some support at between 71.81 and 72.11 but below that, there is open air down to the 65.50-66.50 level. The 200-week MA is currently at 66.54. On a monthly closing basis, there is support at 70.32 that looks like it could stop the downside. Nonetheless, there is additional monthly close support at 67.99 and pivotal at 67.19. Of all the shorted stocks, the chart of DD looks the weakest. A daily close above 73.89 would take some ammunition away from the bears. ENG continued to trade sideways as it has done for the 5 months. There is nothing new that I can say this week. Any drop below .30 would be a negative and any rally above .40 would be a positive. LXRX generated another red weekly close (14 out of the last 15 weeks) and closed "at" the all-time low weekly close at 1.07. This means that if the bulls are unable to generate a green weekly close this week, this stock will be an almost guaranteed loser. The all-time low monthly close is 1.11, meaning that the bulls must generate a green weekly close by at least $.04 cents this week on Friday (monthly close). The all-time intraweek low is 1.03 and the low this week was 1.07, meaning that no more than another $.04 to the downside can be seen this week without causing new selling to occur. The stock has fallen 24.8% over the past 5 trading days and yet, there has been no fundamental news to support the drop. In fact, there has been no news on the company for the past 11 days and the news then was actually considered positive. This drop is not understandable unless there is something that is not yet public. It is evident that this week is highly pivotal. PLNHF had an uneventful inside week, though it was a red weekly close, which does strengthen the daily and weekly close resistance at 1.00. The good fundamental news has already been factored into the prices, meaning that from here on in, the charts will decide the outcome. The stock did close in the upper half of the week's trading range, suggesting further upside above last week's high at .98 is expected to be seen. Though the 1.00 level is resistance on a daily and weekly closing basis, the 1.20 level is pivotal resistance on the intraweek chart. The stock does show strong intraweek support at .60 and minor to perhaps decent at .70. Nonetheless, the 200-day MA is currently at .76, and that line had not been broken to the upside for 30 months, meaning that the line is now considered decent support on a daily closing basis. Intraweek resistance is found at 1.05 and pivotal at 1.20. The probabilities favor the stock trading between .76 and 1.05 for the next 2 weeks and then breaking out. SCCO generated a sell signal on the weekly closing chart, having closed below the most recent low weekly close at 77.25 (closed at 74.43). The stock closed on the low of the week and further downside below last week's low at 74.47 is expected to be seen this week. Like with the Indexes, the 200-day MA, currently at 73.99, is likely to be seen this week. In addition, there is quite a bit of established daily close support between 73.59 and 74.44, given that there are 3 previous closes (2 as support and 1 as resistance) over the past 8 months. Last but not least and using the monthly chart, the stock has support between 75.90 and 76.83 that may be in play if the index market holds up. Any daily close below 73.59 would open the door for a drop down to 71.20. There is a runaway gap to the upside from July at 74.15, that may decide what the stock is going to do for October. Closure of that gap will give new ammunition to the bears. Closure of the down gap seen 3 days ago at 77.83 could suggest the downside is over. SNDL generated a red weekly close and closed on the low of the week, suggesting further downside below last week's low at 1.88 will be seen this week. The stock broke above the 200-day MA, currently at 1.76, 3 weeks ago and a retest of that breakout is likely happening. Important and likely indicative daily close support is found at 1.81. A confirmed close below that level would weaken the chart. The fundamental picture has changed toward the positive, meaning the probabilities favor the bulls. As such, a drop down to 1.81 could be seen as an opportunity to add positions. If this level holds up, the monthly chart suggest that over the next 6-12 months, a rally to the 4.00-4.40 level could be seen. Any intraweek break below 1.70 would negate this outlook. TCEHY made a new 10-month intraweek low as the Chinese market saw weakness during the week. Nonetheless, on Friday the Chinese market rallied in what could be an indicative sign and the stock rallied as well. The stock did close red but closed on the high of the week, suggesting further upside above last week's high at 40.12 will be seen this week. On a weekly closing basis, the stock did make a new 10-month low but stayed in the $40 demilitarized zone as it closed at 39.78 on Friday. On a monthly closing basis, there is pivotal support at 39.53. If the stock can close above that level on Friday, probabilities will continue to favor the bulls. Any daily close above 41.07 would take away the edge from the bears. Any daily close below 38.30 would give the bears new ammunition. TNC generated a new sell signal on the weekly closing chart, having closed on Friday below the low weekly close for the past 5 months at 75.25 (closed at 74.42). Having said that, there is decent weekly close support at 73.78 and even a bit stronger at 71.91, which does include the 200-week MA, currently at 71.04. On a monthly closing basis, there is decent support at 73.95. On a daily closing basis, there is quite a bit of important and pivotal support between 73.00 and 73.10. As such, consideration should be given to covering the shorts somewhere around the 73.00 area. TOL generated several negative signals on Friday, starting with generating a new sell signal on both the daily and weekly closing charts, having closed below the 3-month low daily and weekly close at 75.05 (closed at 74.07. In addition, the stock generated a failure signal against the bears, having closed below the previous all-time high daily and weekly close at 74.61. If that is confirmed this week with another close below that level, the downside target could be as low as the 200-day MA, currently at 66.20. Using the monthly chart though, there is important support at 72.39, meaning that if the stock can close at (or above) that level, it may generate a recovery rally. There is some minor intraweek support at 71.60 that would need to hold up if the bulls have any strength. Closure of the gap generated on Thursday at 76.54 would negate this bearish outlook. The New Home Sales report comes out on Tuesday and could have some impact on the stock VWDRY generated a negative reversal week, having gone above the previous week's high and then closing red. The stock closed on the low of the week and further downside below last week's low at 7.25 is expected to be seen. Nonetheless, this outlook is not necessarily a negative, given that the stock made a new 11-month low 3 weeks ago and as such, a retest of that low is needed/required before the bulls climb aboard in a bigger way. There is intraweek support between 6.89 and 7.10, which should hold up. In looking at the monthly closing chart, there is important monthly closing support between 7.02 and 7.17. If this level holds up, the monthly chart suggests the stock would likely rally up to around the 10.70 level over the next 2 months. Any daily close below 6.82 would now be a big negative. Any daily close above 7.53 would now be a strong short-term positive. XOM generated a negative reversal week, having made a new 5-month intraweek high and then closing red and on the low of the week, suggesting further downside below last week's low at 114.60 will be seen this week. The stock shows intraweek support at 113.57, which if broken would make the gap down at 111.42 a target for closure. If that does occur, the 200-day MA, currently at 109.30 would become a target and probably a magnet. On a weekly closing basis, there is support between 110.75 and 111.92 that has a fair chance of holding up. Nonetheless and in looking at the monthly closing chart, which is also next Friday, if the bears can close below last month's close at 111.19, it would give the bears some new and possibly strong ammunition. The probabilities do not favor this happening as Oil is in an uptrend and expected to see higher prices before the end of the year. As such, I would be looking to take profits on the short positions between 109.30 and 111.19. Then again, if the index market breaks down, I would wait until Friday to make any decisions. ZLAB generated a negative reversal week, having gone above the previous week's high but then closing red and below the previous week's low, suggesting further downside below last week's low at 23.87 will be seen this week. The stock closed below the weekly close support at 25.30, which does take some ammunition away from the bulls. Now the weekly close support at 23.75 becomes important. On a positive note, the Chinese market generated a recovery rally on Friday that does suggest that perhaps the bottom to this correction has been found. If that is the case, buying interest should come in this week into the stock. Short-term pivotal intraweek resistance is now found at 27.98. If broken, a rally to $30 should be seen. Any print above 30.30 would bring in new buying interest. Intraweek support should now be found at 23.77.
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1) ZLAB - Averaged long at 71.955 (6 mentions). No stop loss at present. Stock closed on Friday at 24.47. 2) ENG - Averaged long at 2.876 (6 mentions). No stop loss at present. Stock closed on Friday at .343. 3) VWDRY - Averaged long at 8.67 (23 mentions). Stop loss at 8.67. Stock closed on Friday at 7.26. 4) 5) TCEHY - Purchased at 43.23. No stop loss at present. Stock closed on Friday at 39.78.
6) CAT - Shorted at 283.04. Stop loss now at 286.70. Stock closed on Friday at 273.06.
7) TNC - Shorted at 83.25. Stop loss now at 78.35. Stock closed on Friday at 74.42.
8) TOL - Shorted at 80.62. Stop loss now at 79.35. Stock closed on Friday at 74.07.
9) DD - Shorted at 77.65. Stop loss at 78.84. Stock closed on Friday at 72.84.
10) SCCO - Shorted at 79.94. Stop loss at 81.46. Stock closed on Friday at 74.73.
11) XOM - Shorted at 118.53. Stop loss now at 118.94. Stock closed on Friday at 114.94.
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