'Trumpenomics' Shatters Glass Ceiling: Dow 30 Hits 30,000

The success of President Trump's First-Term economic policies and programs, including Operation Warp Speed, were reflected in US markets today. The Dow 30 Index smashed through 30,000, setting an all-time record high! 

The Balance of Power lies with buyers...in fact, it also hit a record high today. 

With no overhead resistance, buyers are free to continue this bull run.

FNGU: Blow-Off Top Coming?

I last wrote about FNGU in my post of December 26, 2019.

FNGU is an exchange-traded note that tracks 3x the daily price movements of an index of US-listed technology and consumer discretionary companies. The index is highly concentrated and equally weighted.

Since then, price blew through both the 78.6% Fibonacci level and it's prior all-time high, as shown on the following weekly chart.

The Balance of Power still lies in the hands of buyers, in spite of a bit of a blow-off in the last weekly candle. We may not see a trend reversal until this indicator spikes to, and closes on, a new high in one of the coming weeks.

I've shown the input value on both the Rate of Change (ROC) and Average True Range (ATR) technical indicators as one period and both indicators in histogram format.

The ROC on this past week's candle is just below its all-time high (which may be reflective of its blow-off close for the week). No doubt, it may have been at an all-time high when price was at its high of 100.11 on Tuesday.

The ATR spiked to an extreme all-time high this past week.

While the Balance of Power appears to indicate that the buying may not yet be over, the ROC and ATR indicators are hinting at some volatility, choppiness and caution ahead. We may see price attempt to retest last week's all-time high before it, either consolidates in a sideways trend, or drops to near-term support around 80.00, or lower.

However, the Nasdaq Composite Index (IXIC) is only 480 points away from its 10,000 target (as of Friday's close)...a figure I mentioned in my above-referenced post. So, we may see a parabolic spike to that price in short order. If so, we'll likely see FNGU retest 100, or spike higher...before they both, potentially, form blow-off tops.

Nasdaq 9000 Tagged...9100 By Year End?...10,000 In 2020?

Technology has been one hot sector this year. Take a look at the percentages gained by the U.S. Major Indices, so far, this year.

The Nasdaq Composite Index (IXIC) hit and closed above 9000 today (December 26)...an all-time (round number) high, as shown on the following monthly chart.

The Balance of Power lies with buyers on this timeframe and has yet to equal previous highs, potentially signalling there is further upside.

The next major resistance level (potential target) sits at the 1.5% external Fibonacci Retracement at 9104.87...just over 80 points away.

Will we see 9100 hit by year end?

And, on a longer-term perspective, will it continue to rally to eventually hit its next milestone round number at 10,000 sometime in 2020? The 2.0% external Fibonacci Retracement level (potential target) lies at 10,076.43.

After all, it gained a total of 2,565.33 points, so far, this year...so 1,000 next year would not be out of the question.

Perhaps FNGU will offer some clues as to tech strength or weakness. I last wrote about it in my post of December 8.

The following weekly chart shows that it, subsequently, spiked sharply upward, blew through its 50% Fibonacci Retracement level and closed today at 62.75...just 0.01 point shy of its 60% Fib level.

The Balance of Power lies with buyers on this timeframe and has made an all-time new high.

If price can blow through and hold above 62.76, then its next major resistance (potential target) lies above at 73.74...the 78.6% Fib level.

Stocks vs. Commodities: Will Traders Dump All?

Looking back at a longer-term monthly view of the S&P 500 Index (SPX) compared with GOLD (GC) (blue bars) and WTIC Crude Oil (CL) (pink bars), we saw a broad correlation among these regarding rallies and pullbacks...until 2011 when the bounce in GC and CL stalled and, ultimately, sank in mid-2014, especially CL when it plunged to (just below) post-financial crisis levels in January of 2016.

As I write this post at 11:50am ET on Friday, we see that, while the SPX is just below all-time highs, GC faces major resistance at 1350, and CL is swirling around 65.00 (major resistance/support).

As shown on the following daily chart of GC (green & red) compared with CL (blue & pink), price in these two commodities has stalled the past couple of weeks, and is down, again, today.

Given the "shock drop" that began in the SPX on Tuesday and which continues today, as shown on the daily chart below (with the VIX overlayed on it), if GC and CL continue to decline next week, and beyond, this could signal the beginning of a pullback in the SPX, and equities, in general.

Keep an eye on the SPX:VIX ratio as one tool that can be used to gauge such a possibility/probability, as I more fully described in my post of January 31.

As well, the details I outlined in my post of January 27 regarding CL are worth monitoring.

P.S. And, this article was just released from Bloomberg.com...

P.S. How the SPX and VIX closed today (daily chart)...

...and how GC and CL closed (daily chart)...next week should be interesting.

January 2018 Market Wrap-Up

* See UPDATE below...

We could see a tepid recovery of yesterday's "shock drop" in equities (as I described here), until the Fed's next interest rate hike (possibly in March), to send Major Indices to levels somewhat higher than their recent all-time highs. But, we'll likely see higher volatility remain in play and, possibly, more wild price swings, until then.

As I promised in that post, here's January's month-end summary.

DOW 30 INDEX

The first daily chart shows that the Dow 30 Index failed to fill yesterday's gap down and closed 100 points above its low of the day.

Momentum remains above the zero level, but has dropped dramatically after failing to rise to a new high when the Dow made its last new high on January 26. It's an important level to hold in support of such a recovery. Otherwise, a drop and hold below zero would see further weakness in the Dow.

S&P 500 INDEX

The next daily chart shows that the S&P 500 Index failed to fill yesterday's gap down and closed off its low of the day. The VIX is overlayed on this chart and price remains above near-term support of 13.00.

Momentum remains above the zero level, but has dropped dramatically after failing to rise to a new high when the SPX made its last new high on January 26. It's an important level to hold in support of such a recovery. Otherwise, a drop and hold below zero would see further weakness in the SPX.

SPX "Shock Event"

I last wrote about volatility (SPX:VIX ratio) in my post of January 28.

Today, the major indices gapped down at the open and closed near their lows. Here's how the S&P 500 Index (SPX) closed, with the VIX overlayed (daily chart).

This monthly chart of the SPX:VIX ratio shows today's close below major support of 200.

The momentum indicator has fallen to just above the zero level on this timeframe...a drop and hold below would indicate increased selling pressure in equities.

And, for a slightly different perspective, the last monthly chart depicts the SPX in the upper half and the SPX:VIX ratio (in histogram format) in the lower half).

Price on the ratio has fallen below the 20-month moving average (yellow)...hinting of further weakness ahead.

I'll provide an update on where the monthly candle closes on this ratio in relation to major support, its momentum, and the moving average at the end of tomorrow's month-end trading, so stay tuned.

P.S. Throw a little news into the mix regarding volatility...

Source: Bloomberg.com

...plus the fact that the U.S. was not the only world market to be hit in today's large-scale sell-off...and we'll likely witness some interesting action tomorrow, world-wide.

Source: CNBC.com

Higher Volatility Threatens the SPX: Important Levels To Monitor

* See UPDATES below...

In my 2017 Market Wrap-Up post, I referenced major support (200) and resistance (280) as levels worth monitoring on the SPX:VIX ratio, on a monthly timeframe.

The following updated monthly chart of the SPX:VIX ratio reveals a few interesting things:

1. All of the monthly closes since July 2017 have been above 225.
2. December '17 and January '18 have spiked above the 280 resistance level, but not yet held above.
3. A long-term uptrend line (heavy blue arrow) indicates near-term support around 225, at the moment.
4. 225 is confluent with a major external Fibonacci retracement level at 228, as well as the bottom of the original long-term uptrending (green) channel.
5. In my post of February 24, 2017, I identified 200 as a new level to be held above, in order to support a new bull market in equities.
6. In April, 2017 we started to see closes above 200 (the next monthly chart shows the SPX in the upper half and the monthly closes (in histogram format) of the SPX:VIX ratio in the lower half, for a different perspective).
7. Monthly momentum on the SPX:VIX ratio began to weaken last November, which hasn't supported the price breakout on the SPX above 2600.

From these observations, I'd make the following statements (based on a longer-term monthly timeframe and outlook):

1. Watch 225 closely on the SPX:VIX ratio to see if price can continue to close above that level.
2. If so, I'd need to see the momentum on this ratio strengthen, again, to support higher SPX prices.
3. If we don't see a reversal in momentum, it's doubtful that the SPX will reach a target price of 3000 anytime soon, as I had described in my post of January 23.
4. If price on this ratio falls and holds below major support at 200, volatility will rise dramatically and we'll likely see some major profit-taking occur in the SPX.
5. In the shorter term, you can also monitor activity in HYG and XHB, as I recently described here and here, respectively, in connection with the SPX.

* UPDATE January 29 @ 1:55 pm ET...

One last indicator to monitor over the coming weeks/months is the monthly momentum of the VIX, as depicted on the monthly chart below. It's currently rising, but is still below the zero level, where it has languished since mid-2016. A crossover and hold above will see volatility increase.

Price will have to break and hold above 13.00, currently major resistance, for any meaningful volatility to affect equities...it's attempting to do so, at the moment, and has been swirling around that price all day, so far.

The next major hurdle lies above at 20.00, where it faces a confluence of price and trendline major resistance.

* UPDATE January 29 @ close...

The following daily chart of the SPX:VIX ratio shows that price fell below near-term support of 225 today to close just above 200 (major support) at 206.18.

The RSI, MACD and PMO indicators have all turned negative, again...hinting of more equity weakness ahead.

The VIX, itself, closed above 13.00 at 13.84. So, 13.00 now becomes major support, once again...an important level for equity bears to maintain, especially if the ratio falls and holds below 200.

Homebuilders ETF Poised to Make a New All-Time High

The Homebuilders ETF (XHB) is poised to make a new all-time high as it faces its peak set just before the 2007/08 financial crisis struck, as shown on the monthly chart below.

There are two interesting things I notice on this chart. The volume moving average has been steadily declining since September of 2013 as the momentum indicator is nearing its record peak set in May of 2013...hinting of potential profit-taking at current overheated levels.

So, whether, or not, we are about to see a rollover anytime soon should be revealed in coming days/weeks. Keep an eye on volumes and momentum, for possible clues. Furthermore, as the Fed considers 3 to 4 interest rate hikes this year, no doubt mortgage rates would rise, as well, negatively impacting this sector.

The S&P 500 Index (SPX) is shown in the background as the blue area. If the XHB rolls over, it may also bring the SPX with it, but, as I described in yesterday's post, keep an eye on HYG, as well.

U.S. High-Yield Corporate Bonds ETF in Jeopardy

The High-Yield Corporate Bonds ETF (HYG) is in jeopardy at major resistance.

The monthly chart below shows that price is facing double resistance at the confluence of a 60% Fibonacci retracement level at 89.29 and the upper edge of a large triangle formation (both of which began forming during the 2007/08 financial crisis to the 2009 lows).

Major support sits below at the confluence of the 50% Fibonacci retracement level at 83.98 and the triangle apex around 83.30.

The momentum indicator has dropped below the zero level on this timeframe, hinting of more weakness to come, as has been the case, historically.

The next monthly chart shows price action of HYG compared with the S&P 500 Index (SPX).

HYG began to diverge from the SPX as far back as April of 2013 and looks like it's getting ready to roll over again.

The momentum indicator has recently spiked and is at an all-time high on the SPX.

The gap in price action between these two began to accelerate right after the 2016 Presidential election, and is ever widening as SPX spikes in parabolic fashion.

If HYG drops to or falls below its major support around 83.30, we could see some serious selling afflict, not only the SPX, but also other major indices.

If that happened, the chances of the SPX reaching 3000 anytime soon (as I wrote about here) may be in question, so keep an eye on other factors that I mentioned in in my 2018 Market Forecast post.

SPX 3000?

Year-to-date gains/losses made in the 9 Major Indices and 9 Major Sectors  are shown on the graphs below...amazing gains after only 15 trading days.

The SPX is already over half-way to the 10% target I had forecast in this post for the entirety of 2018.

An extended outlook for the SPX sees major resistance at 3000 (its next "Big Round Number"), which is confluent with two external Fibonacci retracement levels (2984 and 3047), as shown on the monthly chart below.

When would it hit that level? It's anyone's guess, as anything seems possible in the current buoyant market environment. The momentum indicator is still rising on this long-term timeframe and is making new all-time highs in the process. Another 5% gain would send it up to that price, so we could be looking at a year-end target date to bring total gains of 11% by then...not an unreasonable expectation.

Another scenario is that it could reach that level around August of this year (pinpointed at the pink arrow shown on the second monthly chart below), which would put it at the +4 standard deviation level of a very long-term upward-sloping regression channel (beginning from the March 2009 low). That would give it plenty of "wiggle room" to allow for some price dips in between now and then. At the moment, price is in between the +3 and +4 standard deviation levels.

Alternatively, we may see a hit of 3000 (or beyond to its next major external Fibonacci level of 3047) at the +5 channel deviation level sometime in February, potentially taking the Dow 30 along with it to around 26,700 (as I described recently in this post). Subsequently, these indices may move sideways for awhile to allow some of this parabolic surge (that began after the November 2016 Presidential election) to dissipate.

Other factors to monitor, in this regard, are outlined in my above-referenced market forecast post.

Congress Stages an OPEN/CLOSED "Revolution"

It's a good thing that OPEN/CLOSED signs are double-sided and can be easily flipped.

After a 3-day government shutdown, the Senate and House passed a temporary 3-week Continuing Resolution to continue funding the government through February 8th...it's now on its way to President Trump to sign (N.B. signed later today).

So, the OPEN sign is displayed, once again, but like a revolving door, the CLOSED sign will magically re-appear if the 2018 Budget is not passed by February 9th.

Caution...more political theatrics to come! 👀




Here's how the Major Indices closed today (shaking off the political sparks)...all at record-breaking all-time NEW highs and closing highs.

Dow 30 Index Hits 26,000 as U.S. Stocks Gain $7.8 Trillion in Value Since 2016 Election

* See UPDATES below...

TODAY'S NEW ALL-TIME HIGHS:

• the Dow 30 Index spiked above 26,000 briefly today (Tuesday), as shown on the following Monthly chart
• the S&P 500 Index spiked briefly above 2800, as shown on the following Monthly chart
• the Nasdaq Composite Index spiked briefly above 7300, as shown on the following Monthly chart
• ...amid reports that measurements of the Wilshire 5000 Index indicate that U.S. stocks gained roughly $7.8 Trillion in value since the November 8, 2016 Presidential election, as shown on the Daily chart below.

As I mentioned in my post of January 11 regarding the Dow, major support sits at 25,125 and major resistance lies at 26,702 (two external Fibonacci retracement levels)...anything can happen in between in the coming weeks.

As an aside, the President is in "excellent health," as reported in a lengthy and detailed White House press briefing today by his Physician, following a complete physical exam last week by Dr. Jackson and a team of 12 specialists, which should reassure markets...if anyone was previously concerned (other than some media pundits and "arm-chair psychiatrists" who have repeatedly questioned his fitness, ad nauseam...it's time to report the "real" news, folks, not imaginary news based on pure speculation and hypotheticals...Americans deserve honest, unbiased news, based on facts).

Watch the full White House Press Briefing (including Dr. Jackson's report and interview)...

And, a bit of humour thrown into the mix...

* UPDATE January 17 @ 12:55 pm ET...

Dow Hits Another New Milestone...25,000

Further to yesterday's post, the Dow 30 Index hit 25,000 today, as the S&P 500 and Nasdaq Composite Indices extended their rally above their Big Round Numbers, as shown on the following Daily charts.

We'll see if this breakout above December's consolidation zone lasts.

Meanwhile, volatility remains near record-level lows, as shown on the following Monthly chart of the VIX...

...and this year's breakout outpaces volatility, as shown on the following Daily ratio chart of SPX:VIX.