World Indices Roundup 2020

@pwt see Commitments of Traders (COT) Charts - Barchart.com

 

Here is another piece of evidence that supports US equity markets are over-heated.

It's the CBOE (Chicago Board Options Exchange) equity put/call ratio - 30-day moving average. Puts are options purchased betting a specific equity will go down in price. Calls are options purchased betting a specific equity will go up in price.

The area of interest is the record low at the bottom right-hand corner. What it means is traders have never been more optimistic about a continued rise in equity prices than now.



Source: Tonny Starks

 

Interestingly, this 10% correction has happened faster than the start of the COVID plunge.

The Nasdaq has now closed below its important 50 DMA or 10 week average. There does appear to be a change in character in the indices. Some leaders look damage, but others look like they are consolidating nicely.

During a correction, those stocks that hold up better than the market usually have a better chance of outperforming during the next uptrend.

 

Nasdaq is now solidly below the 50 DMA. Despite the correction, there are leaders making new highs such as ZM, PTON, APPS and BAND. Others are setting up in bases (e.g. BYND) or consolidating well near their 50 DMA (e.g. SQ).

These are the kind of stocks to watch if the market starts a new rally as they are showing strength in a down trend. This is a key benefit of a correction.

 

Supporting trend line and shelf broken. DJIA looks to be in trouble.

 

IXIC has behaved as it has previously and respected the long-term trend channel by moving back into it.

 

SHCOMP has paused as forecast, now in a fourth wave.

 

While the Nasdaq is below the 50 DMA, there are some leaders acting well beneath the surface. This is a potential tell.

Some potential leaders to watch include: SQ, NVDA, BYND, PINS, FSLY, SE, DDOG & NET.

 

Anyone know know the reasons behind the late sell off across markets today?

 

Yer kidding, right? Every news site has the headline.

'Someone' tested positive for coronavirus.

 

He can take some hydroxychlroquin and ask doctors to put him on a bleach drip so there's nothing to worry about, market will bounce back next week.

 

2020 ... The second move will be the most telling - the reaction to the reaction. Do institutions come in to buy at lower prices, or do they clamber out the door on the bounce?

The NDX is now above the 21 EMA and 50 DMA. Leaders have been acting well with some good breakouts (PINS, DDOG, SAIL) and others have been taxing into place. Today the NDX's 50 DMA will probably be tested and show us how strong the strength in the leaders really are.

I will be looking for stocks which can look strong, or resist, any selling.

 

Looks like we got our answer.

The Nasdaq is now above its 50 DMA and 21 EMA. Volume has been light, something to note.

Leaders like SQ, BYND, PINS, DDOG, SAIL, SE, TWLO, FSLY, NET and ETSY have now broken out. How these were acting during the correction and the few weeks of chop were potential early clues about a strengthening market.

Notice how TWLO broke out on a negative day (when the President was diagnosed with COVID). Not exactly bearish.

It will be interesting to see whether the big caps like AAPL and MSFT now join in.

I'm watching ZM and TSLA - they are the two big leaders in this rally and how they act could provide clues going forward.

 

Really look forward to your posts, keep it up & thanks.

 

The Nasdaq is now forming a cup with handle, along with its main constituents like FB, MSFT, AMZN, etc. Many of the leaders are extended in their trends.

It was an interesting week. The Nasdaq became somewhat extended from its short-term moving averages, which leads to an expectation of a sharp pullback. There was also a gap up on Monday, which leads to an expectation of a gap fill. Just because there is an expectation doesn't mean it will happen.

Nonetheless, there was a big gap down on Thursday, closing the gap. Gap downs like this are a good opportunity to assess the strength (or lack of) in the leaders. Many leaders such as CRWD, SQ, DDOG, TWLO and others showed strength - they gapped down and then recovered.

However, FSLY gapped down hard by -30% on revenue news and is now below the 50 DMA. It is something to be aware of when a leader reacts negatively like this and to keep in mind, particularly as we enter earnings season and if other leaders stop acting like leaders.

ZM broke out to all time highs (notice it went straight up on the negative Thursday - a tell). TSLA is consolidating in a tight range prior to earnings.

 

I don't trade the ASX, but it is interesting to note that the ASX200 is now above its 200, 50 and 21 DMA. The 21 and 50 are also above the 200. Price is now breaking out of a trading range. It might not continue to go up from here of course, but interesting behaviour given the ASX has many old world stocks.

Notice how it found resistance at the 200 DMA previously, but never made a new low in its trading range.

 

Latest chart for XJO attached. The identified trend line is critical support. My forecast is for a further minor push higher to complete Intermediate wave (A), once the current small correction is completed. Target is 6270 - 6446. A further refinement of the final target is possible once the small correction is finished.

 

hi kitdoctor, so looks like GFC2 is not arriving earlier than you anticipated and we still have a good few years to go before it gets here ?

 

The Nasdaq traded in a tight range just above its 21 EMA. The 50 DMA is just below, which it could test at some point. We still have a cup with handle forming in the index, with many tech stocks doing the same (AMD, MSFT, AAPL, etc).

Leaders are a mixed bag:

• Many leaders broke out and have now pullback to the top of their constellations (DDOG, TWLO, BYND). Most have done so on lighter volume. It would good if they found support here.
• SNAP broke out on Weds with huge volume on earnings news and then followed through. ALGN another one. Typically (but not always), these types of breakouts don't happen in a market with underlying weakness.
• TSLA is testing its 50 DMA for the third time. ZM is still holding its 21 EMA.

Big week for earnings. How leading stocks react to their earnings reports will provide us with information on the market environment.

 

To be expected undecidedness due to upcoming election. If Trump wins I expect the US market to push up decisively to new highs. If Biden wins, I expect an immediate short, sharp fall in the order of 10%, then a slow reversal back up and then a push back up to new highs.