Issue #878
September 15, 2024 , | Newsletter
The newsletter with chart analysis for stocks and stock indexes |
Stock Indexes Analysis/Evaluation
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| Resumption of up trend? or simply a rally to retest of the highs? Fed rate decision is pivotal this week.
DOW Friday Closing Price - 41393 The indexes voided all the negative signals given the previous week and ended up generating a rally that now puts the bulls in a position to turn things around if follow through of consequence occurs this week. All of this happened after the CPI (inflation) report came out that was slightly higher than expected (but not enough to feel inflation is coming back) but showed a slowing economy with unemployment ticking up. This made the traders believe that the Fed will now begin to key on boosting the economy and not on keeping inflation in check. The DOW and the RUT generated a positive reversal week but in the case of the SPX and the NASDAQ the bears were not even able to generate follow through to the downside after the previous week's close on the lows of the week. All indexes closed on or near the highs of the week, suggesting further upside above last week's highs (DOW at 41533, SPX at 5636, NAZ at 19556 and rut at 2183) will be seen this week. Having said all of the above, the market is presently experiencing extreme volatility (on both sides), which is not truly reflecting the present fundamental picture, given that nothing has been "clearly" determined as to what the Fed is going to do. As such, the kind of action and volatility seen are difficult to evaluate with confidence. By the same token and from a chart perspective, the rally this week was not totally unexpected given that the DOW had not yet had a retest of the all-time high and the other 3 indexes have had 1 retest but often a change of trend does not occur until 2-3 successful retests have occurred. This clearly suggests that the previous week's fall was not likely to generate any follow through (to the downside), as it would break pivotal supports. The Fed will give its rate decision this Wednesday at 2:00 pm. Most analysts expect a Fed rate cut of 25 points but there are still a fair amount of analysts that expect a 50 point cut. The DOW has not been an indicative index for some time. The SPX has been somewhat indicative but recently the traders have been sensitive to emotion (rather than fundamentals) and it has made the index sensitive to volatility. The RUT has been all over the place, meaning it has not been a good indicator of anything. This means that the NASDAQ is the index the traders will be watching this week for "tangible" clues as to "what is to happen the rest of the month". The NASDAQ has been faithful to the charts. It still is in a long-term uptrend but the all-time high has been tested successfully, and the previous all-time high weekly close now shows 2 successful retests of it, meaning that there is now a definite chart picture in play where a break of daily or weekly close support or resistance will be indicative. On the weekly closing chart, a weekly close above 19720 or a daily close above 19824 will be a break of short-term pivotal resistance, while a weekly close below 18339 would give a sell and failure-against-the-bulls signal that would put the index into a downtrend. On the daily closing chart, a close below 18421 would suggest that the bears have gotten a new edge, a daily close below 18320 would generate a failure signal against the bulls and a close below 18208 would break the 200-day MA, which has not been broken for 18 months. The index closed on Friday at 19514, meaning that the resistance levels are close by and in-play this week. It is unlikely though, that any break of resistance will happen before the Fed announces the rate decision and even then, it is unlikely that it will happen unless the Fed cuts rates 50 points. As such, what should we look for this week? For one thing, volatility is likely to continue unabated. If the Fed cuts rates 50 points, the bulls could generate a big move up and vice versa, if they only cut 25 points, there could be a big sell off. Then again, if the Fed cuts by 50 points, it could cause traders to think that the economy is very bad and as such, selling could be seen. If they only cut by 25 points, it could be seen as a sign that things are fine and that more cuts will continue to occur and it might cause the market to rally. What this all means, is that no one knows anything for sure. As such, the NASDAQ chart is the only thing to watch this week. HSI generated a new 5-week low but got down close to a decent intraweek support at 16879 (low was 16936) and turned around to close in the upper half of the week's trading range, suggesting further upside above last week's high at 17543 will be seen this week. If that occurs, last week's low will become the 3rd successful retest of the 14794 low seen in January and that could be exactly what the bulls need to generate a new uptrend. Presently and for this week, support will be found at 17232 and at 17008 and resistance at 17635 and at 17839.
GOLD(Dec 24 chart) made a new all-time intraweek and weekly closing high and closed on the high of the week, suggesting further upside above last week's high at $2610 will be seen this week. Gold has now moved up 24% over the past 8 months and done it all (using the monthly chart) without one single correction or retest of the yearly low at $1987. Using the same monthly chart, there has not been one single occasion in the past 20 years where Gold has generated 7 green monthly closes in a row (likely to be 8, if Gold closes above $2527 at the end of the month). Gold is now way overdue for a correction of consequence but for that to even begin to be a possibility, the bears need to generate a red daily close below $2560. That is what to watch for this week after Wednesday's Fed rate decision. Otherwise, there is open air above and no way to determine how high it could go. OIL generated a positive reversal week, having made a new 15-month intraweek low and then closing green and near the high of the week, suggesting further upside above last week's high at 70.33 will be seen this week. Over the past 3 years, there have been 5 previous occasions where Oil made an intraweek low below $70 (61.74, 62.43, 64.12. 63.70 and 67.71) and then rallied "at least" $19 thereafter. Nonetheless, it is important to note that on the 4 previous occasions, the previous low did not get broken (or the one time it did get broken, it was by a small amount = $.42 cents). On this occasion, the previous intraweek low at 67.71 did get broken convincingly (by $2 43) and that does weaken the chart substantially. As such, the bulls have a lot of work to do if they want this overall all support area to not get broken in the next month or two, given that a break of this support area would likely mean a drop down into the $40's. The first thing the bulls need to do is generate a failure signal against the bears with a daily close above 71.93 and a weekly close above 71.27, then they need to generate a buy signal on the weekly closing chart above 74.94 and lastly, they need to generate a monthly close above 71.65. If all of those things get done, the threat of a breakdown will be diminished (but not negated). For that threat to go away and for Oil to have the potential for at least a $19 rally, a monthly close above 81.54 is needed, this month or next. For this week though, at least for Monday and Tuesday, Oil should be supported and trying to move up.
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Stock Analysis/Evaluation
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CHART Outlooks
Once again, I have no new mentions for this week. With the Fed rate decision due out on Wednesday and it likely being a catalyst (one way or the other), it is impossible to anticipate what it will be or what will happen thereafter. Nonetheless, after 2:00 pm Wednesday, things could be clear (clearer) and if so, I might put on some new trades. If so, I will let you know on the message board.
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Updates
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Closed Trades, Open Positions and Stop Loss Changes |
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AAPL generated a positive reversal week, having made a new 4-week low and then closing green and near the high of the week, suggesting further upside above last week's high at 224.04 will be seen this week. Having said that, the bulls did not accomplish anything of any consequence and keeping in mind what was done in the index market, the action here was disappointing. There is intraweek resistance at 225.60 and at 228.34, which the latter should not be broken without fundamental help or a big win in the index market. Intraweek support is found at 216.73 and at 214.62. AXP generated a new all-time high weekly close, having closed $.35 cents above the previous all-time high weekly close at 258.65 (closed at 259.00) but the bulls failed to do the same on the all-time intraweek high at 261.75 or even above the daily closing high at 259.84. The stock did close on the high of the week, suggesting further upside above last week's high at 260.21 will be seen this week. At this time, the probabilities do favor the bulls making new all-time highs across the board but since they are now committed to doing so, given that "any" weakness will take away the edge and give it to the bears. This means that starting on Monday, no red closes can happen until after they make a new all-time daily closing high and get sufficiently above the all-time intraweek high so that any pullback thereafter would not generate a failure signal. Any daily closing low below 254.05 would generate a failure signal against the bulls and give the bears new ammunition. BABA generated a positive reversal week, having gone below the previous week's low and then closing green and above the previous week's high. The stock closed near the high of the week and further upside above last week's high at 85.68 is expected to be seen. Having said that, the bulls did not accomplish any breaks of resistance, meaning that they have more to do. The daily close parameters in play right now are at 88.54 and at 69.62. With the stock closing Friday at 84.69 and the bulls having the edge at this time, it is more likely that the daily close resistance will broken than the daily close support. Nonetheless, until one or the other breaks, the stock will trade sideways in that range. DD generated a positive reversal week, having made a new 5-week intraweek low and then closing green and near the high of the week, suggesting further upside above last week's high as 81.91 will be seen this week. The stock did make a new 8-month daily closing high 4 weeks ago that has not yet been tested and if the stock does go above last week's high, it could end up being the required/needed retest of that high. There is daily close resistance at 82.16 that is likely to be seen but should not be broken. To the downside, any daily close below 78.53 would be damaging to the bulls. FSLR generated a positive reversal, having made a new 4-week low and then making a new 2-week high. The stock closed green and in the upper half of the week's trading range, suggesting further upside above last week's high at 243.81 will be seen this week. The positive reversal was because Kamala Harris won the debate and since she is for green energy, all the green energy stocks rallied strongly. Having said that, the stock did make a new 7-week daily closing high on Thursday but then on Friday, that breakout was negated. In addition, the stock failed to make a new 7-week intraweek high, having gone up to 243.81 but not break the intraweek high made 3 weeks ago a 244.21. More importantly, the bulls had the stock trading above the previous 11-week weekly closing high at 233.24 for 70% of the day on Friday and yet they gave up that advantage in the last 90 minutes of trading, to close at 228.79 and not generate an indicative break of of weekly close resistance. The stock closed on the low of the day on Friday and the first course of business on Monday, should be below Friday's low at 227.43. The stock gapped up on Wednesday after the debate and that gap is at 208.54 and likely to be a target for closure. Due to the fact that Kamala Harris did get a boost in the polls and is now slightly favored to win the election, if the stock does get anywhere near the $210 level, consideration should be given to taking profits. JD generated a positive reversal week, having gone below the previous week's low and then closing green The stock closed slightly in the upper half of the week's trading range, suggesting a slightly higher probability of going above last week's high at 26.75 than going below last week's low at 25.61. Overall, the week was uneventful except for one positive note and that is that the bulls were able to stay above the recent intraweek low at 25.24 and if the stock does go above last week's high this week, a 2nd retest of the recent multiweek low at 24.16 will occur. Any break of the intraweek high at 27.41 will give the bulls back the edge. LXRX generated an uneventful inside week but the stock did close green and near the high of the week, suggesting further upside above last week's high at 1.73 will be seen this week. If that does occur, the previous week's intraweek low at 1.56 will become the needed/required retest of the double low at 1.48/1.51 and that should give the bulls new ammunition. Short-term pivotal intraweek resistance is found at 1.87 and midterm pivotal resistance is at 1.99. Any drop below last week's low at 1.56 would be seen as a trigger for lower prices. The stock has now built the chart formation to its fullest degree, meaning that indicative things are now likely to start to happen (no sideways action anymore). SNDL chart has nothing new to report as things remain in the same trading range as has been seen for the past 17 weeks. Having said that, there is short-term pivotal intraweek support at 1.81 and at 1.84. A break of 1.84 will weaken the chart slightly and a break below 1.81 would likely cause the stock to drop down to 1.64 (based on a weekly close). Only a daily close above 2.22 would give the bulls a new edge. Stock closed on Friday at 2.07 VWDRY bulls (with the help of renewed hope that clean energy will get a boost if Harris wins) made a new 6-week intraweek and weekly closing and closed on the high of the week, suggesting further upside above last week's high at 8.00 will be seen this week. A failure signal against the bears was generated when the stock closed above the previous pivotal weekly close support level at 7.64 (closed at 7.96). A daily close above 8.21 (8.10 on a weekly closing basis) will give a buy signal of consequence as well as a sign that the bottom of the correction has been found. If that occurs, there is open air above to 9.31. Daily and weekly close support is now found at 7.62/7.64. ZLAB generated a new 17-week intraweek high and in the process, generated a breakout signal, having closed above the also 17-week weekly closing high at 20.08. The stock closed in the middle of the week's trading range, suggesting equal chances of going above last week's high at 21.61 or going below last week's low at 19.41. Nonetheless, having given a buy signal of consequence, unless there is negative news or the Chinese index goes down indicatively, the bulls should win. The bulls were able to close above the 200-day MA, currently at 20.00, and the bulls need to stay above that line (on a daily closing basis). On a potential negative note, the high daily close for the week was at 21.57 and there is an established short-term pivotal daily close resistance at 21.55 that needs to be broken to confirm the breakout. Daily close support is now found at 19.40. A close below that level would give the bears the edge again.
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1) ZLAB - Averaged long at 65.50 (7 mentions). No stop loss at present. Stock closed on Friday at 20.51. 2) ENG - Averaged long at 18.30. No stop loss at present. Stock closed on Friday at 1.20. 3) VWDRY - Averaged long at 8.68 (4 mentions). No stop loss at present. Stock closed on Friday at 7.96. 4) LXRX - Averaged long at 1.5447 (4 mentions). No stop loss at present. Stock closed on Friday at 1.70. 5) BABA - Averaged long at 75.37 (2 mentions). Stop loss at 72.62. Stock closed on Friday at 84.69. 6) SNDL - Averaged long at 9.05 (2 mentions). No stop loss at present. Stock closed on Friday at 2.07. 7) JD - Averaged lonf at 22.74 (2 mentions). Stop loss is at 23.55. Stock closed on Friday at 26.24. 8) IBM - Liquidated at 208.64. Shorted at 194.72. Loss on the trade of $1392 per 100 shares 9) AXP - Shored at 259.62. Averaged short at 252.16 (3 mentions). Stock closed on Friday at 259.00. 10) FSLR - Shorted at 231.37. Stop loss now at 244.35. Stock closed on Friday at 228.79. 11) AAPL - Shorted at 227.57. No stop loss at present. Stock closed on Friday at 222.50. 12) DD - Shorted at 82.07. No stop loss at present. Stock closed on Friday at 81.42.
Previous Newsletters
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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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