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Head + Shoulders - >>> FTI Consulting, Inc. (FCN) provides business advisory services to manage change, mitigate risk, and resolve disputes worldwide. Its Corporate Finance & Restructuring segment provides turnaround, restructuring, business transformation, bankruptcy, interim management, valuation and financial advisory, transaction, dispute advisory, and tax services, as well as mergers and acquisitions (M&A), and M&A integration services. The company's Forensic and Litigation Consulting segment offers anti-corruption/anti-money laundering investigations and compliance, and data and analytics, as well as compliance, monitoring, and receivership services; cybersecurity, forensic accounting and advisory, and global risk and investigations practice; and construction solutions, dispute advisory, trial, insurance claims, health and environmental solutions, and export controls and sanctions. Its Economic Consulting segment provides financial, economic, and econometric consulting; business and expert valuation, and expert testimony services; intellectual property services; economic and statistical analyses services; services related to public policy and regulated industries, and healthcare economics and policy; international arbitration; and economic impact analysis, market modeling, and securities litigation and risk management services and other litigation services. The company's Technology segment offers e-discovery and data compliance management, managed document review, digital forensics, information governance, privacy and security, and contract intelligence services, as well as Radiance Visual Analytics software. Its Strategic Communications segment provides advice services relating to public affairs and government relations, crisis communications, corporate reputation, digital and, capital markets communications, transaction communications, and digital, analytics, and insights. The company was founded in 1982 and is headquartered in Washington, District of Columbia.
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Silver is starting to look near term overbought, with the RSI-Relative Strength Indicator for SLV now way up to 78. Levels above 70 indicate near term overbought territory. In 2016 and 2019, the SLV got up to a reading of 85 on the RSI before reversing, and a few more up days and SLV should be in that approx area (85).
The silver miner ETF (SIL) is at 74 on the RSI scale, and the small cap silver miner ETF (SILJ) is at 75. So a pullback is coming, but there may be a few more up days to go. Of course if you are long term buy/hold with these then don't worry about it.
Gold isn't as near term overbought yet, with the RSI for GLD at only 61, GDX at 68, and GDXJ at 71.
The S+P 500 still has room to rise, with an RSI reading of 57. I figure at minimum the S+P will test the 200 MA (2998). Once thru that level then it will become support instead of resistance. The S+P 500 ETF (SPY) has already been testing the 200 MA, yesterday and today. I'm figuring the S+P may have to hover around 3000 for a while, testing/re-testing, and 3100 could be a tough nut to crack in the near term.
Fwiw, my working hypothesis is we have more near term upside, maybe to 3000-3100 over the next few weeks, but then the danger level rises fast since by then we should see virus cases rebounding if they're going to. I predict (a guess) that they will rebound, at least enough to re-spook the market. Not necessarily a re-tank to the March lows, but back down to test the 50 MA (2716). So a fluid situation at the moment.
Looks like we'll be re-visiting the recent lows in the weeks ahead. Where the ultimate bottom will be is anyone's guess.
I'm figuring at minimum the S+P will enter the 1800-2200 broad support range. If it gets into the lower part of that range, 1800-2000, that might be the time to start re-entering the market, and then gradually add more if the market continues to fall -
2000 - 41% drop from the Feb high (3400)
1900 - 44%
1800 - 47%
1700 - 50%
1600 - 53%
1500 - 56%
1400 - 59%
1300 - 62%
1200 - 65%
I'm figuring we manage to get through the virus crisis without a complete monetary meltdown (SDR scenario), but that event will come later, perhaps in a few years.
It's also possible that realizing the current monetary system is nearing the end of its viability, the financial powers will convene a global 'Bretton Woods II' and jointly decide to move to the SDR in an orderly manner. That would be the best outcome.
Trying to gauge what will happen next to the market, first a review of where the market has been (approx figures) -
S+P was down 35%, and is now down 25%.
DJIA was down 38%, and is now down 26%
We've had two strong days in a row, and the big question is will the market return back to the previous lows (or even lower), or will it find its footing up around the current levels and then gravitate higher without a return to the previous lows?
That's the big question (wish I had the answer) :o)
One factor suggesting caution is that when charted, these epidemics tend to form a Bell curve. They start off slow, gain momentum, then go exponential, stop going up, and then drop exponentially (a mirror image of the rise).
So, in the US we presumably should soon be entering the exponential up phase, which should usually be the scariest phase (a lot of deaths and new cases). But having already seen the identical process unfold in China and Europe and then reverse, it may be a lot less scary for the US to go through.
Maybe, maybe not, but the possibility exists that we've already seen the lows in the stock market, and the future down legs will basically be a sideways consolidation, albeit with relatively high volatility.
Tough to say, but the case can be made for gradually re-entering the market over the next period of weeks.
A lot of stocks are in a 'pincher play' setup mode right now. Pinchers form after a big drop when the stock stops going down and stabilizes somewhat, and then shows early signs of a rebound. The I-hub poster 'MrBigz' was a master of the pincher play, and had designed a clever chart setup for it.
I no longer have a subscription to Stockcharts.com, so can't do the full chart setup, but can still do enough to see that a pincher pattern has formed for the main indices.
The upshot is that it looks like we'll be having a near term bounce that might be tradeable. These moves can fizzle out quickly however. Right now the DJIA is trying to hold at the key support level (20,000), and might have a bounce. Probably won't last, but might be a tradeable bounce for active traders.
Groupon - descending triangle, broke support today -
>>> Groupon, Inc. (GRPN) operates online local commerce marketplaces that connect merchants to consumers by offering goods and services at a discount in North America and internationally. The company provides deals in various categories, including events and activities, beauty and spa, health and fitness, food and drink, home and garden, and automotive; and deals on various product lines, such as electronics, sporting goods, jewelry, toys, household items, and apparel, as well as discounted and market rates for hotel, airfare, and package deals. It offers its deal offerings to customers through Websites; search engines; mobile applications and mobile Web browsers, which enable consumers to browse, purchase, manage, and redeem deals on mobile devices; emails and push notifications; affiliate channels; social and display advertising; and offline marketing. The company was formerly known as ThePoint.com, Inc. and changed its name to Groupon, Inc. in October 2008. The company was founded in 2008 and is headquartered in Chicago, Illinois. <<<
The TEVA recovery continues, blasting up 9% today. You could see this February breakout coming based on quasi 'cup+ handle' formation that had formed. It definitely had that 'look'. Upcoming resistance should be the 15 area (currently trading at 13.5).
GE's recovery also continues. It's made it to 13, so right in the middle of the 12-14 trading band from 2018. I figure it could move up to test 14 and then consolidate between 12-14 for a while.
Generac (GNRC) continues to elevate.
Ombow, you were right about SNES. After touching 40 last year it has plummeted to under 5, so a major disaster.
Kraft Heinz (KHC) might be setting up for a rebound after crashing from 85 to 25 since 2017. Looks like a bottom may have been put in during 2019, and an inverted Head + shoulders may have formed, almost. Will take patience though, and the company still needs to cut its dividend, though this is already widely expected.
Nice breakout for TEVA.
That was a nice chart setup. It had formed a quasi Cup + Handle (only as a reversal pattern rather than a continuation pattern). Also had a 'golden cross' in early January.
Near/mid term resistance looks like the 14 area.
REED - a near perfect pincher play (ADX, PPO pinch). Today it bounced and hit the Parabolic SAR, knocking it down below. The Full Sto (overlayed upon the PPO chart) has met the PPO line and has separated upward. TRIX had a sharp uptick, as did Willie (Wm %R).
Next resistance levels to watch are the EMA 13 (.92 and falling), then the 20 SMA (middle Bollinger Band) which is 1.07 and falling. Beyond that would be the 1.25 area from late Sept, and then the 50 MA (1.67 and falling).
Thanks to 'MrBigz' for his excellent Pincher Play tutorials :o)
GBTC (Bitcoin ETF) has formed a descending triangle over the past 2 months (bearish), with the support base at 12.
In this case the descending triangle would be considered a reversal pattern (instead of a continuation pattern), because GBTC has been in an uptrend since early 2019.
>>> Align Technology's Plunge on Thursday May Mark the Start of a Big Slide
A break of the stock's 2018 lows would mean that the $100 area from late 2016 is the next downside price target.
Real Money
By BRUCE KAMICH
Jul 26, 2019
https://realmoney.thestreet.com/investing/stocks/align-technology-s-plunge-on-thursday-may-mark-the-start-of-a-big-slide-15034140?puc=yahoo&cm_ven=YAHOO&yptr=yahoo
In his second Executive Decision segment of "Mad Money" Thursday, Jim Cramer checked in with Joseph Hogan, president and CEO of Align Technology Inc. (ALGN) , which saw its shares plummet 27% Thursday after the company delivered strong earnings but forecast significantly slower growth in the second half of 2019.
Hogan said there's still a broad-based growth story at ALGN, one the company needs to do a better job sharing with investors. He said Align continues to see growth around the globe except in China, which is the company's second-biggest market. While Align had forecast 70% growth in China, the company is now expecting only 20% to 30%. Hogan said it's not a competitive or operational problem in China, but more of a consumer backlash, one he expects will rectify itself.
When asked specifically about Chinese competitors, Hogan said Align hasn't seen any significant changes in market share. Align operates in the higher end of the market, Hogan said, and its market share is usually stable.
Let's check out the charts and indicators for some guidance.
In this daily bar chart of ALGN, below, we can see that prices were headed lower even ahead of Thursday's carnage. The slopes of both the 50-day moving average line and the 200-day line were negative. Prices gapped lower on very heavy turnover (volume) and the weak close put ALGN close to its January nadir.
The daily On-Balance-Volume (OBV) line made a new low for the move down, which started back in April. A declining OBV line says that sellers are more aggressive. The Moving Average Convergence Divergence (MACD) oscillator moved below the zero line in early June for an outright sell signal.
In this weekly bar chart of ALGN, below, the gap disappears. Prices are below the declining 40-week moving average line. Support in the $200-$180 area does not look that impressive. The weekly OBV line has been weak the past three months and the MACD oscillator is just slightly above the zero line.
In this Point and Figure chart of ALGN we used weekly data. No lower targets are projected but the sharp decline suggests that the late 2018 lows are vulnerable.
Bottom line strategy: Standing back and looking at the weekly bar chart we see a large top pattern. A break of the 2018 lows would mean that the $100 area from late 2016 is the next downside price target.
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The CHK chart looks interesting for a bounce. If it can make it thru 2.00 then next target should be the falling 50 MA at 2.11, then next targets 2.25 and 2.50 -
>>> Chesapeake Energy Stock Could Rebound as Debt Falls, Analyst Says
Barrons
By Avi Salzman
June 28, 2019
https://www.barrons.com/articles/chesapeake-energy-stock-could-rebound-as-debt-falls-analyst-says-51561742109?siteid=yhoof2&yptr=yahoo
Chesapeake Energy , a pioneering Oklahoma-based oil and natural gas producer, has struggled under a substantial debt load for years. But Morgan Stanley analyst Devin McDermott thinks the company is in good position to pay down that debt and benefit from asset sales in the months ahead.
McDermott resumed coverage on the stock with an Overweight rating and a $2.75 price target, more than 40% above current prices. Chesapeake Energy stock (ticker: CHK) was up 2.4% to $1.93 in midday trading on Friday. It was trading over $5 a year ago but has slid more than 60% since. Investors have been skeptical of the company’s decision last year to buy Houston-based oil producer WildHorse Resource Development Corp. Its largest holder has also been selling stock.
Chesapeake has historically been known more for its natural gas production, but it’s been shifting more toward oil, which McDermott thinks will drive better margins at the company—and means it deserves a better valuation than peers. Natural-gas prices have been hurt in recent weeks because the summer started with mild weather. There’s also been anxiety about a supply glut.
McDermott predicts that the company will produce negative annual free cash flow until 2023, when it will just about break even. While he acknowledges the company’s leverage is still relatively high, he writes that “we see a clear strategic plan to further reduce debt, which we believe the market is underestimating.”
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A few ideas to watch -
GE - could be getting ready to move up to test key resistance at 12 area in the months ahead.
SNES - should test 2 again, and then possibly enter the 2-3 area.
AXSM - could continue climbing to $1 bil market cap (~30), and then beyond with upcoming clinical news flow.
Gold - I'm figuring on (hoping for) a pullback to the breakout level (1350-65), and it might even re-test 1300. The recent breakout confirmed the uptrend that began in 2016, and from a TA perspective you wouldn't get too concerned until it drops below 1275, and even then it would have to fall below 1200 to negate the uptrend (the series of higher highs/higher lows made since bottoming in late 2015). However, central bank suppression is always a wildcard with gold.
NIO (Chinese electric car maker) - nice bounce, first resistance to watch is the falling 50 MA (3.59), and then the 4-5 area. Recovery may take a while however.
Gold breakout - it looks like gold futures zoomed up to around 1398 and then closed at 1381 (!) We'll see how it trades tomorrow, but it appears to have obliterated the key resistance level at 1350-65.
So.. this breakout looks like it could be a major turning point for gold. The ascending triangle took 3 years to form, and the 1350-65 resistance was tested numerous times in 2016, 2017, 2018 (and even in 2014), but was thrown back each time.
Looks like it finally made it thru, and the breakout could confirm a new uptrend, in which case the TA rules for gold will have officially changed to 'buy, and buy the dips'.
One caveat is that there will likely be a re-test of 1350-65 (now support), and ultimately this will have to hold. It could drop below for a while, but ultimately has to get above and stay above or the breakout would be nullified. So while aggressive investors may pile in long now, conservative investors may wait for the successful re-test before going long.
Pretty exciting though, since TA/chart mavens have been waiting for this moment for years. We'll also get to see if the Fed's suppression mechanism kicks in, which is possible. But one reason why the Fedsters might allow gold to rise right now is that it will give the impression of rising inflation, which is something they've been desperate to engineer for a long time. The Fed's worst nightmare is deflation, and they've been unable to generate even their 2% inflation goal despite years of ZIRP and QE. Tax cuts and deficit spending haven't done the trick either (at least not yet), so letting gold rise could create an inflationary mindset.
GE had a golden cross, the first since the death cross 2 years ago. The company still has lots of challenges (heavy debt), but the chart is starting to look promising for a rebound -
>>> 'A New Energy' Is Seen In GE As Aviation Unit Leads Transformation; GE Stock Up
Investor's Business Daily
6-19-19
https://www.investors.com/news/ge-stock-rises-potential-buy-point-ge-aviation-leads-growth/?src=A00220&yptr=yahoo
General Electric's (GE) core aviation unit is leading GE's transformation on the back of its stability and underlying growth, Citigroup said. GE stock rose.
Analysts at Citigroup acknowledged "teething issues" on the new GE9x jet engine, but said they "sense a new energy in Aviation and across GE" after meetings with management and a GE Aviation investor presentation.
"The business does seem to be operating on all cylinders," Citi analyst Andrew Kaplowitz said, citing military growth, Leap engine purchases, and aftermarket service-related growth. He also backed his buy rating and 14 target price for GE stock.
Meanwhile, GE Aviation has booked more than $52 billion in orders so far this week at the Paris Air Show. That includes $20-billion-plus orders apiece from India's Indigo airlines and Malaysia's AirAsia, as well as aircraft leasing deal with Amazon Air as Amazon (AMZN) builds out its delivery and transport network. In 2017, GE booked roughly $31 billion at the same show.
The Citigroup note highlighted more disclosure and improvement in an area closely watched by investors — cash generation. GE Aviation's $4.2 billion in free cash flow in 2018 represented 88% conversion, Kaplowitz said.
He added: "There will be expected (Boeing) Max drag in 2019 (close to $300 million in Q2 and we lower our overall GE free cash estimate for Q2 to -$1.6 billion from -$800 million to be more in-line with guidance of -$1 billion to -$2 billion), but we sense management confidence in improved cash performance moving forward (flattish Aviation working capital expected for the year) led by a strong aftermarket environment, favorable terms on new orders, and focus on 'daily' cash collection vs. an end of quarter bias."
Two Boeing (BA) Max jets were involved in fatal crashes in the past year, leading to groundings as well as a halt to deliveries and slowdown in production.
Shares of General Electric rose 0.2% to 10.44 on the stock market today, rising further above the 50-day and 200-day moving averages. While GE stock is forming a base with a potential 11.85 buy point, the entry is well below prior highs.
Fellow Boeing jet engine supplier United Technologies (UTX) was flat, while the Dow Jones Industrial Average advanced 0.2%. United Tech and Boeing are Dow Jones stocks.
The relative strength line for GE stock has been on an uptrend year to date. The RS line, shown in blue below, tracks performance against the S&P 500.
'Hard To Poke Holes' In GE Aviation
GE Aviation is testing and redesigning a compressor part in the colossal new GE9x jet engine that has delayed the maiden flight of the Boeing 777x, the world's largest twin-engine jetliner.
Citigroup's Kaplowitz noted that, but found it's "hard to poke holes" in the aviation unit's strong commercial portfolio.
The International Air Transport Association's "2019 current forecast growth of 5% is still strong and GE's visibility toward continued aftermarket-led growth is impressive," he said.
He called the Indigo deal a "large win" for GE's Leap-1A, since the airline previously used United Tech's Pratt & Whitney engines.
Simultaneously, GE Aviation's revenue from military orders is growing, Citigroup said.
Meanwhile the GE9x debuted at the 2019 Paris Air Show this week, and has received more than 700 orders. The Leap engine has reached a record 17,000-plus orders, with GE on pace to deliver more than 1,800 Leap engines this year.
General Electric is focused on its "crown jewel" aviation segment even as CEO Larry Culp accelerates efforts to return its power segment to profitability.
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The VTGN chart now looks iffy based on today's close, so it's back to watch mode since a test of .50 now looks likely. Odds are increasing that this one could go lower.
They have clinical date due by late summer, but the bad data from last week in a related trial has likely poisoned the well and a rebound looks difficult.
LWLG is starting to firm up, having held at .86 yesterday and so far today. Currently it's re-testing former support at .90 (which is now resistance). In the period ahead we might see it move up to test the 200 MA (.94) and then it wouldn't be surprising to see it return to retest .85 and then possibly .80 in the absence of positive news. Still early though, so will see how the support/base develops over the next week or so.
SNES is taking a breather at 1.83. It could use a modest pullback / consolidation before resuming the climb to 2.00.
VTGN - one of their two key trials bombed, so the stock was cut in half yesterday. You could see it coming, but several of the guys on the VTGN board had huge positions.
LYFT looks like it might be ready for a bounce after it's less than inspiring post-IPO performance.
PINS - air still coming out after the big IPO pop, so will see where it settles in over time.
BYND - Best performing IPO in a long time. Market cap now up to $4 bil. Much above $5 bil seems like a stretch at this point considering revenues are only $88 mil, albeit growing fast. The stock might make it to 100 (currently 71) prior to a pullback, or maybe not. Looks like an interesting company, and probably gets bought out eventually by one of the big food companies.
>>> Sell in May and go away? Maybe not this year.
CNBC
MAY 1 2019
Bob Pisani
https://www.cnbc.com/2019/04/30/sell-in-may-and-go-away-maybe-not-this-year.html
It is May, but this year don’t sell and get out just yet.
The “Best Six Months” strategy has become legendary on Wall Street. “Sell in May and go away” means investing in the Dow Jones Industrial Average between Nov. 1 and April 30 and switching into fixed income for the other six months. This has dramatically outperformed owning the Dow Industrials from May 1 to Oct. 31.
While the outperformance has not been as strong recently — the Dow has been up between May and November in 5 of the last 6 years — the overall strategy remains one of the greatest mechanical trading models ever devised.
An investor putting $10,000 into the S&P 500 between May 1 and Oct. 31, 1950 to the present would have $4,138, an astonishing loss of $5,862.
An investor putting $10,000 into the S&P 500 from Nov. 1 to April 20 over the same time period would have a gain of $2,836,350.
That is not a typo. We are talking about a gain of $2,836,350, versus a loss of $5,862.
These results were obtained by adding MACD triggers, certain buy and sell signals developed by the Stock Trader’s Almanac. Even without those MACD triggers, the results are amazing: Simply owning the Dow with an initial $10,000 investment from May 1 to October 31 since 1950 would have produced a gain of just a little more than $1,000, while simply owning the Dow with an initial $10,000 investment from November 1 to April 30 since 1950 would have produced gains north of $1 million.
“Thus far we have failed to find a similar trading strategy that even comes close over the past six decades,” said Jeffrey Hirsch, who runs Stock Trader’s Almanac. His father, Yale Hirsch, discovered this “Best Six Months” strategy back in 1986.
What could possibly account for this outperformance? First, there are still clear seasonal trends in market trading, particularly around the summer.
“It falls during a time when traders and investors prefer the golf course, beach, or pool to the trading floor or computer screen,” Hirsch said. “Trading volume can decline throughout the summer and then, in September, there’s back-to-school, back-to-work, and end-of-third-quarter portfolio window dressing that has caused stocks to sell off in September, making it the worst month of the year on average.”
October is also a traditionally a poor month for stocks, which Hirsch partially attributes to the Oct. 31 mutual fund deadline. The Tax Reform Act of 1986 mandated that Oct. 31 was the cut-off date for mutual funds to realize capital gains and losses.
Once the fourth quarter comes around, Hirsch says end-of-the-year strategies drive stocks.
“Institutions’ efforts in the fourth quarter to beef up their numbers can help drive the market higher, as does holiday shopping and an influx of year-end bonus money,” he said. “This is followed by the New Year, which can tend to bring a positive ‘new-leaf’ mentality to forecasts and predictions and the anticipation of strong fourth- and first-quarter earnings and drives the market higher into the second quarter.”
As he has many times in the past, Hirsch emphasizes that “sell in May” does not necessarily mean May will be down, or that the six-month period will be down.
“We are not the ‘sell in May’ people, we are the ‘reposition in May’ people,’” he said. “The point is that most of the market’s gains occur November through April and that the market tends to drift sideways and is more prone to sell-offs and bears May-October.”
Hirsch, in fact, is fairly bullish about the short-term prospects for the market. “The market will most likely drift higher on the bullish GDP, earnings backdrop and the dovish Fed,” Hirsch said. “Plus it’s the preelection year, and that is the best of the four-year cycle up 15.8% for DJIA and 28.8%.”
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Looks like silver may be heading back into the 13's before too long. Interesting how silver has formed a bearish descending triangle over the past 5 years, while gold's is an ascending triangle.
Palladium looks like it might be a good short. It tripled over the last 3 years and had gone parabolic, but looks like the crash phase has begun.
SNES looking strong, up to 1.79 on increasing volume. I'm figuring it moves up to test the 2018 highs (2.00-2.20) though it may need some consolidation prior to getting there.
LWLG looks like it may test .80-.85 as it searches for a bottom/support.
VTGN - looking weak and a test of 1.00 could be coming.
PINS (Pinterest) - should be interesting to watch. Had a big post-IPO run up, now consolidating. Market cap $16 bil, $750 mil in revenues but still losing money. They apparently book only $3/year per subscriber from ad revenues, which doesn't sound like much.
SNES is moving higher, now at 1.65 after hitting 1.75 earlier today. Near term target is 2.00-2.20, which was the June 2018 high.
LWLG is currently sitting at the 200 MA (.94) after falling thru it briefly this morning. Will see if the 200 MA holds, otherwise next support is .90 and then the band from .85-.90.
VTGN - will see if it can stay above the 1.00 level. They have key clinical data coming over the next 4 months or so in 2 trials. Objectively the odds aren't very good, but if by some chance the data is good, this is a major moonshot. Personally I wouldn't make that bet, but it will be interesting to watch, and I hope they succeed.
MBRX is trying to stabilize at the 200 MA (1.39) after the big recent spike.
AXSM - will watch the nice uptrend. I'm figuring it continues to gradually levitate heading into the numerous clinical trial readouts that are coming this year.
The Russell 2000 small caps (RUT) have lagged the other indices, but now it looks ready to finally get thru near term resistance (1600) and move to the upside.
While it will need to get to 1740 to reach the Oct highs, having the small caps moving higher by itself is reassuring for the rest of the market. TA experts have warned that if the small caps started falling in earnest while the large cap indexes reach new highs, that would be a harbinger of trouble ahead.
Resolving the China trade problems should be a big positive all around, but the markets will still need to correct the current overbought situation at some point since it won't be sustainable once the S+P gets to 3000-3100 or more. There will have to be a correction since the chart will be too overextended.
Summarizing, I'm thinking the S+P reaches 3000-3100 prior to the correction. Resolution of the China trade problem could raise that near term target higher than 3100, but then the need for a correction will be even more acute from a TA/chart perspective.
>>> U.S. Small Caps at Two Crucial Junctures, Strategist Says
Bloomberg
By Joanna Ossinger
April 21, 2019
Russell 2000 has been underperforming S&P 500 for weeks
Smaller stocks also struggling to break above their 200-DMA
https://www.bloomberg.com/news/articles/2019-04-21/u-s-small-caps-at-two-crucial-junctures-strategist-says?srnd=premium
Smaller U.S. stocks may be worth watching right now for both their relative performance and their technical picture.
The Russell 2000 index of small-cap stocks has fallen 1.5 percent since Feb. 22, while the S&P 500 index, which tracks the biggest American companies, has risen 4 percent. And that difference could bode ill for the entire stock market, equity strategist Matt Maley of Miller Tabak + Co. wrote in a note Friday.
“This divergence is a concern because the Russell has been an excellent leading indicator for the rest of the market on many occasions in the past,” Maley wrote. “We all know about how it topped out just over a month before the rest of the market did in the second half of 2018, but it also led the rest of the market higher during the spring and summer of last year.”
Russell 2000 remains near its 200-DMA
The performance of the Russell 2000 is often seen as reflecting sentiment about the U.S. economy, as the companies tend to be more domestically focused versus the relatively international firms in the S&P 500. So, if the Russell is underperforming, it could mean softening expectations for American growth. Earlier this month, Societe Generale SA strategists recommended betting against the Russell, while going long on its components with strong balance sheets, as a way to position protectively against a credit crunch.
Smaller stocks are also at a key technical level, with the Russell close to its 200-day moving average for several months now and unable to make a decisive break above it.
If the Russell “finally gets tired of trying and breaks down from here, it’s going to be quite negative,” Maley said. “If, however, it can finally break seriously above that line, it will force us to question our more cautious stance on the small-cap index.”
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$NIO NIO Inc. is a pioneer in China’s premium electric vehicle market, founded in November 2014. NIO’s mission is to shape a joyful lifestyle by offering premium smart electric vehicles and being the best user enterprise. NIO designs, jointly manufactures, and sells smart and connected premium electric vehicles, driving innovations in next generation technologies in connectivity, autonomous driving and artificial intelligence. Redefining the user experience, NIO provides users with comprehensive, convenient and innovative charging solutions and other user-centric services. NIO began deliveries of the ES8, a 7-seater high-performance premium electric SUV in China from June 2018 and officially launched the ES6, a 5-seater high-performance premium electric SUV, in December 2018.
The NIO chart does not currently qualify as a pincher, based on the classic PPO/ADX chart setup. NIO's runup in February wrecked the setup.
You can still try to trade NIO, but not based on the normal pincher rules. It broke key support, so is still a falling knife.
To see a classic pincher, see the GE chart, which pinched in Nov/Dec.
Fwiw, I'll stick with my prediction for the S+P - that it will consolidate back to around the 200 MA (which is converging with the 50 MA), and from that base (2740-2750) will launch the assault on the Sept/Oct high, with the Fed/PPT as a prime mover if needed.
They simply can't afford to let a Head + Shoulders become a reality, and thus will juice the market to put in a new high. The Fedsters have enough problems with the slowing global economy without a bearish stock market to deal with.
Juicing the S+P a couple hundred points to a new high is a relatively easy task for the Fed/PPT, and once the new high is in place the TA/chart threats are greatly resolved -- the ominous spectre of the Head + Shoulders is gone, the long term bull market uptrend is officially reconfirmed, etc. These TA signals may seem arcane, but they are what 99% of Wall St go by, and set their computer algos for.
The calls may be looking good, but the chart not too hot at the moment. It had good support just under 6.00, which corresponded roughly with the IPO price (6.25), but that hasn't held. It was tested and held 3 times since the IPO, but in March it broke support. It's still early, but will need to find a new support level.
Chart-wise I would be wary of further downside. But of course news flow/events could occur which override the chart signals. I've never been big on Chinese stocks in general (burned a few times), NTES being one exception.
Here's some info on the NIO class action suit -
>>> Class-Action Suits Shouldn’t Stress, or Surprise, Nio Stock Owners
InvestorPlace
James Brumley
March 21, 2019
https://finance.yahoo.com/news/class-action-suits-shouldn-t-143728455.html
Has owning Nio (NYSE:NIO) stock made you seasick yet? It would be surprising if it hadn’t. Following its September IPO, which was priced at $6.25, NIO stock surged to a peak of more than $13 three days later, back to less than $6 by late October, rallied to more than $10 last month and then fell back to less than $6 per share, where it stands as of this morning. NIO Inc. stock has put investors through the wringer.
And some shareholders aren’t happy about the volatility… particularly the volatility that’s inflicted damage on their portfolios. In fact, a class-action lawsuit has been launched for those who invested in NIO and feel they were duped.
It may be a colossal waste of your time to jump on that bandwagon, though. The volatility of NIO stock was inevitable, and in the end its volatility will be irrelevant to most judges and juries.
That kind of uncertainty is what investors who bought NIO stock signed up for.
A Typical Post-IPO Story
NIO has been called the Tesla (NASDAQ:TSLA) of China, and for good reason. While many electric vehicles to-date have looked and felt like glorified go-karts, Nio — like Tesla — understands that form and function can also look cool. Nio’s ES8 is a luxury vehicle.
NIO is also a relatively new company, however. It was founded in 2014, only started to make vehicles in late 2017, and NIO stock only went public in September of last year.
NIO stock has also dished out the usual post-IPO swings. The volatility wasn’t caused by changes in the company’s outlook. Instead, it’s a reflection of the market’s ever-changing perception of what Nio is, and where it’s going.
But Tesla stock was also all over the map in its early days, as are most newly-minted stocks.
And that’s what makes the class-action suit by at least a few investors, bluntly, a little bit sad, if not terribly surprising.
The key tenets of the suits are (there are more than one, but they are all based on the same main complaint) summed up in a filing by one group of plaintiffs:
“The lawsuit focuses on whether the Company and its executives violated federal securities laws by making false and/or misleading statements and/or failing to disclose that: (1) NIO would not be building its own manufacturing plant and would instead continue to rely on JAC Auto to manufacture its vehicles; (2) reductions in government subsidies for electric cars would materially impact NIO’s sales; and (3) as a result, Defendants’ statements about NIO’s business, operations, and prospects were materially false and misleading at all relevant times.”
Voiced in fairly typical legal-ese, it sounds dastardly.
Read it again, though. Is NIO actually “guilty” of anything?
Poor Arguments
It’s true that Nio will continue to work with JAC to develop electric vehicles. But the company never gave a definite time frame as to when it might build its own facility.
Here’s the kicker on the matter: Nio is actually trying to help itself and the owners of NIO stock by not taking on the steep expense and risk of committing to its own plant right away. Ironically, one of the chief complaints about Tesla in its early stages was how much it spent (and arguably shouldn’t have) on building its own production facility.
As for the subsidy issue, the company has actually said little about the impact of subsidy changes. It would be naive on everyone’s part, however, to think that a termination of subsidies wouldn’t create some sort of headwind for NIO stock. That is, to borrow a term from the patent-law world, “obvious” and therefore should not be grounds for a lawsuit.
Moreover, the plaintiffs haven’t shown that subsidy changes have had a quantifiable, verifiable impact on NIO’s business.
As for the charge that the company’s business, operations, and prospects are “materially false and misleading at all relevant times,”clear definitions of “material,” “misleading” and “relevant” must be provided. Those are tricky words for any judge or jury to define.
If the class-action suit ends up being successful, then almost every company in the world that’s ever disappointed investors for any reason at any time is now subject to litigation. That’s just not going to happen.
The Bottom Line on NIO Stock
The real story isn’t the class-action lawsuits that are taking shape. Indeed, it would have been surprising if such litigation didn’t materialize. Most companies whose stocks drop in the wake of their IPOs face some sort of legal pushback because we’ve become a litigious society.
Facebook (NASDAQ:FB) — one of the most rewarding investments since the subprime meltdown — was sued shortly after going public in 2012 for allegedly covering up worries about its growth prospects. It settled for a laughable $35 million last year, which was probably cheaper than continuing to fight the case.
The real story is that this sort of legal and even philosophical wrangling is all part of the growing pains that any new company has to face.
Nio didn’t do anything wrong. All equity investments always carry some risk. The shareholders of a company don’t receive a contract.
When you own a stock, it’s understood that you’re granting decision-making authority to the company’s management, who have every right to change their minds about issues. It’s a given that a company may never turn a profit; it’s possible that a company may crash and burn. Just ask the people who bought Groupon (NASDAQ:GRPN) stock based on the company’s brilliant concept that, as it turns out, isn’t a terribly profitable one.
Groupon settled its post-IPO suit for a scant $45 million.
The plaintiffs suing Nio probably won’t be able to prove any actual malfeasance by the company. At best, they will prove that they are frustrated because they bought into the hype of the media and the mob vis-a-vis NIO stock.
Welcome to the stock market.
As of this writing, James Brumley did not hold a position in any of the aforementioned securities. You can learn more about James at his site, jamesbrumley.com, or follow him on Twitter, at @jbrumley.
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$NIO anyone grabbing some calls today? They are looking good here
>> NIO <<
Not a classic pincher chart, but it does look interesting for a possible bounce. But it also has that 'Danger Will Robinson' look to it, and could decide to plunge further.
Btw, speaking of pincher plays, by any chance do you know what happened to 'Mr Bigz'? I remember he was the king of the pincher play here on I-Hub back in the day. He had developed a great chart setup for detecting and playing the pincher, and had it down to a science. I think this (link below) was his I-Hub board at one time. If you can ever locate the video series he made on the pincher play, it was really excellent -
https://investorshub.advfn.com/%22House-of-Pinchers%22-Pinch-9737/
$NIO Pincher Play Chart
The SNES gradual climb continues. It broke through the Oct high resistance level (~1.18), and chart-wise 1.50 now looks like a realistic target for the near/mid term, then possibly up toward the Summer 2018 highs in the low 2s. It should also put in a golden cross next week (50 MA crossing back above the 200 MA).
Gold breaks out above 1300 this week, and above the recent Jan trading range. The GLD had a 'golden cross' early last week. Key resistance for gold is the 1350-1365 area, which were the highs from the last 3 years.
With the Fed having hit the temporary 'pause button' for March, the dollar has weakened some, but it's still too early to tell where it's headed based on the chart, though looks like a downside bias for now. It's in a wide trading band from 90-100. Rickards said the Fed has signaled a pause until further notice.
The main stock indices are consolidating between their 50 and 200 MAs, The DJIA is the closest to testing its 200 MA, which is at 24,978, so further recovery in stocks would make the DJIA the first main index to get back above its 200 MA..
Impressive market, looks like it might zoom up to the 200 MA without a pullback. Once there though (2741) I would expect a pullback and consolidation.
Watch the RSI (Relative Strength Indicator) - when it hits 70 or higher next week (currently 61.52 and rising) we'll probably be at the 200 MA and then will come the pullback.
The CCI indicator is also a useful timing tool. When it hits 200 that should correspond to the S+P reaching its 200 MA and also 70 on the RSI. The CCI is currently 131.64 and rising.
The S+P is now up 13% from the December bottom, and has entered into what will likely become the next trading range -- the area between the 50 and 200 MAs, which also corresponds to the Oct-Nov trading zone.
So that will be the area to watch for the S+P -- 2625-2741 (50 and 200 MAs) and more broadly 2600-2800 (Oct-Nov trading range).
Since the S+P is only barely into that range and is near term overbought, it might first pull back under that range temporarily (and under the 50 MA) before settling into the range. But that will likely be the new trading range for the next few months.
I'm not a shorter, and think we'll likely see a sideways trading range, but for those who are considering going short, the areas to watch are 2600 and then key support at 2350. 2600 will be more important once the S+P has settled into the new trading range for a while. If it's been in the range for several weeks and then breaks down under 2600, the shorters might step in for a short term swing trade. If the S+P breaks below 2350, that would confirm a new downtrend and the operative strategy will be to stay out of the market, or be short, and sell/short the rallies.
So that would be the strategy (according to 'the rules') -
A break under 2600 -- near term short swing trade
A break under 2350 -- stay out of the market or be short, and sell/short the rallies.
Today the Russell 2000 is back above its 50 MA, joining the Nasdaq. The S+P is nearly there, and the DJIA needs another 50 points or so.
The 50 MA is particularly important right now since it also happens to correspond with the Nov/Dec lows, which is key resistance. Once thru that obstacle the bullish side looks even better, and the next target to shoot for will be the 200 MA.
So the charts look promising, though not out of the woods yet. Some wildcards include continued progress (or setbacks) in the China trade war saga, resolving the current US govt shutdown, and the endless political soap opera for Trump, which could be worsening with the Dems now in control of the House.
The Mueller investigation has to wrap up eventually, but will the Dems just replace it with additional investigations running all the way to the 2020 election? Probably, though whether they go the full impeachment route is questionable. Either way, political turmoil looks like the new normal for the foreseeable future.
The S+P is back up to test the key resistance (former support) level of 2550-2600. The falling 50 MA is now at 2639, so this is the general range to watch.
Though it's possible, I wouldn't expect it to blast through this resistance quickly. I figure it will back off and try a few times, then back and fill within the zone, and then with luck, proceed higher. Just guessing though, since plenty of problems are still lurking out there that could send us back down again.
Personally I wouldn't be short right now, but would wait for confirmation that we are actually in a bear market - that signal would be a failure to hold the recent lows. If so, then the operative strategy (by 'the rules') would be to sell/short the rallies, but right now it's still too early to say that the bear is here to stay.
The charts are starting to look more promising for a rebound of the main indices after the big surge on Friday. 'Buy the dip' mentality could re-emerge, though it's still early.
Could be time to cover short trading positions to lock in some profits. Still early, but the odds are staring to improve for the bullish side, though we need to see some follow through.
The first target to watch for the S+P is the 2550-2600 resistance area, then the falling 50 MA at 1645, which will also be around 2600 soon.
Fibonacci retracement levels for the S+P, as measured from the post 2016 election breakout (approx) -
S+P - breakout began 2200, high 2931, rise of 731 points
38.2% decline - 279 points = 2652
50% decline --- 367 points = 2564
61.2% decline - 447 points = 2484
Measuring from 2100 (2015/16 support) - rise of 831 points
38.2% - 317 points = 2614
50% --- 416 points = 2515
61.2% - 509 points = 2422
Current S+P level - 2468
So currently we're sitting right near the 61.2% Fibonacci retracement level, which represents a support level, and if broken will be a bearish signal.
Not looking good, the Oct/Nov support has failed (assuming there isn't a rally prior to the close today). Next support for the S+P is 2575 (early April low), and then approx 2550, which was the April closing low (although the actual intraday low was ~ 2535). So that's the general area to watch.
If that key support fails then there are no obvious support levels until you get back to where the breakout began back in 2016 (2100-2200 area). In between would be tentative support areas every 100 points (2500, 2400, 2300, 2200).
Another possibility is that the early 2018 lows hold and there's a series of rallies and retreats, and we spend an extended period in a sideways consolidation. That would be considered healthy considering the huge rally we've had since 2016.
2018 has basically been a 1 year sideways consolidation already. A two year consolidation wouldn't be bad all things considered, similar to the 2 year consolidation from 2014-2016.
Something tells me 2500 isn't going to hold and at minimum there's another couple thousand points of downside to come in the S+P in 2019. Just a guess, but there are a lot of negatives piling up. Fixing the trade/tariff fiasco would go a long way to fixing things. The trade war didn't have to happen at all at this time, other than Trump acting like a bull in a China shop.
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Gold breaks out, getting thru the October highs and also thru 1250 (at least for now).
Could this could be the turning point for gold? It will need to move back up to key resistance (the 2016, 2017, 2018 highs in the 1350-1375 area). Once there the chart will have formed a bullish ascending triangle, and you can also see an elongated inverse head + shoulders formed since 2013 (sort of).
But for now we have a breakout, and gold is approaching near term resistance at approx 1258 (200 MA). Of course with gold the price suppression mechanism could kick in again at any time, so I won't get too excited just yet.
Also, if the stock market really gets into trouble, gold could drop in the early part of the crisis, as happened in 2008. At that time, people initially sold their liquid assets like gold to raise money to meet margin calls, etc. Gold took off later, but you had to sit with losses in gold for some months.
Charts not looking good. Closed right near the low of the day, and the major indices are sitting right at the Oct/Nov lows. From the looks of things that support isn't going to hold, and we'll likely be down to test the key support (Feb-April lows) next week.
To add to the malaise, the S+P had its 'death cross' today. Not looking very promising at the moment, so hang onto that HDGE..
A 'Death Cross' for the S+P will come tomorrow or Monday. The Nasdaq already had its cross 2 weeks ago, and the Russell about 3 weeks ago. On the other hand, the DJIA chart could take a month or so to reach a death cross.
The Death Cross is a lagging indicator, and can actually be a buy signal for swing trading if the chart is merely taking a breather/correction.
The most important thing to watch right now is the key support area from Feb-April. If that fails for the S+P then the computer algos will start dumping/shorting and it'll be bombs away. But first the market has to drop further and test that key level. So far only the Russell has done that (today), and it held for now.
For the Nasdaq the level to watch is 6800, the DJIA 23,500, and the S+P 2550-2575. The Oct/Nov lows can fail, but the Feb-April lows for the S+P have to hold.
Markets are definitely starting to look vulnerable, though from a TA perspective the big test will come when key support is tested (support levels from the previous 2018 lows). Here are the levels to watch, with the lower number the most important -
DJIA - 23,500-24,000
S+P - 2550-2600
Nasdaq - 6600-6800
Russell - 1450-1475
These support levels are what Wall St is watching right now, and have their algorithms set for. Support levels for the Russell and Nasdaq could fail, but the big trigger to short will be if/when the S+P fails.
According to the TA rules, the time to go short is when the lower part of the support level/range fails. But it may bounce back up to re-test that level (which is now resistance, since 'broken support becomes resistance'), and when that re-test clearly fails, that is the time conservative TA traders will short. Alternately you can short after the fail but before the re-test, but that's riskier, although if support fails dramatically, more traders will short right away.
The Russell will be the first to break key support since it's almost there now (trading at 1482, with key support at 1450). The Nasdaq would be next.
Other bearish developments include -
The Russell recently had a 'death cross' (50 MA crossing under the 200 MA), the first one since mid-2015, and the Nasdaq will have a death cross in the next several weeks. The S+P will likely have one within the next month or so. Like the 'golden cross', the death cross is a lagging indicator. While every death cross doesn't indicate the start of a bear market, every bear market will start with a death cross..
Even if an investor isn't planning to short, it looks like the consensus on Wall St is that the rationale for 'buy the dip' has probably ended, at least for now. If the markets turn around and regain the 200 and 50 MAs and go to new highs, then 'buy the dip' could re-emerge since the bull market uptrend would be re-established. That is looking less likely at the moment, though you never know what 2019 holds, if the trade war with China is resolved, the Fed backs off, etc.
The main indices are all testing new support levels, but it doesn't look promising.
The apparent lack of help from the PPT could be an attempt to influence the mid-term elections, or to punish Trump for his bad-mouthing of the Fed/Powell, or perhaps they just think the markets got ahead of themselves and need a correction.
The timing though, 2 weeks before the election, is suspicious. But it is October, so who knows, and a lot of unknowns out there at the moment, the election, trade wars, Fed tightening/QT, etc.
Support levels currently being tested -
DJIA - 25,000
S+P - 2700
Nasdaq - 7000
Russell - 1500
The Russell 2000 Small Caps dropped thru near term support today (June/July lows), with next support at 1600 (Jan/March highs). The small cap index is often viewed as a gauge of investor's appetite for risk, or the 'canary in the coal mine'.
The Nasdaq also fell thru near term support (7400), with next support around 7250 and then 7200.
Looks like the market needs a breather, and some time to consolidate.
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