The S&P Set New High While Transports, Russel 2000 Remain In Corrections

Tweet This

Photographer: Michael Nagle/Bloomberg

BLOOMBERG NEWS

The S&P 500 set a new all-time intraday high at 2,964.15 on Friday. The Dow Industrial Average and Nasdaq Composite are below their all-time intraday highs at 26,951.81 (on Oct. 3) and 8,176.06 (on April 29).

The Dow Transportation Average and Russel 2000 remain below their annual risky levels at 10,976 and 1,590.63, respectively, and are in correction territory versus their all-time intraday highs of 11,623.58 (on Sept. 14) and 1,742.09 (on Aug. 31).

My second quarter risky levels for the S&P 500 and Nasdaq are 2,985.1 and 8,367, respectively.

Last week’s rally was fueled by a dovish Federal Reserve and Wall Street now predicts a rate cut in July and perhaps two more by year end. I disagree with that notion as quantitative tightening continues through September. The first rate cut (if there is one) will be in the fourth quarter.

For the week ended June 19 the Federal Reserve reduced its balance sheet by $6 billion. This quantitative tightening move takes the balance sheet down to $3.844 trillion down $656 billion since the end of September 2017. The unwinding is expected to be $35 billion per month in June through September.

Here’s Last Week’s Scorecard

Scorecard For The Major Equity Averages

Global Market Consultants

The Dow Jones Industrial Average (26,719.13 on June 21) is up 23.1% from its Dec. 26 intraday low of 21,712.53 and is just 0.9% below its all-time intraday high of 26,951.81 set on Oct. 3. The all-time closing high of 26,828.39 was also set on Oct. 3. Semiannual and monthly and value levels are 24,340 and 23,997, respectively, with weekly and annual pivots at 25,484 and 25,819, respectively, and quarterly risky level at 27,891. The weekly chart is positive with the average above its five-week modified moving average at 26,020.50 with its 12x3x3 weekly slow stochastic reading rising to 54.37 last week up from 43.87 on June 14.

The S&P 500 (2,950.46 on June 21) is up 25.7% from its Dec. 26 intraday low of 2,346.58 and set an all-time intraday high of 2,964.15 on June 21. SPX is just 0.5% below the high. The all-time closing high is 2,954.18 set on June 20. Semiannual and monthly value levels are 2,668.8 and 2,586,4, respectively, with weekly and annual pivots at 2,821.4 and 2,867.1, respectively, and its quarterly risky level at 2,985.1. The weekly chart is positive with the index above its five-week modified moving average at 2,874.37 with its 12x3x3 weekly slow stochastic reading rising to 59.78 last week up from 51.58 on June 14.

The Nasdaq Composite (8,031.71 on June 21) is up 29.7% from its Dec. 24 intraday low of 6,190.17 and set its all-time intraday high of 8,176.0 on April 29. The Nasdaq is 1.8% below the high. The all-time closing high of 8,164.00 was set on May 3. Semiannual and monthly value levels are 7,274 and 6,802, respectively, with annual and weekly pivots at 7,370 and 7,540, respectively, and quarterly risky level at 8,367. The weekly chart is positive with the index above its five-week modified moving average at 7,815.26 with its 12x3x3 weekly slow stochastic reading rising to 51.99 last week up from 46.05 on June 14.

The Dow Transportation Average (10,352.49 on June 21) is up 19.9% above its Dec. 24 intraday low of 8,636.79 but is in correction territory 10.9% below its all-time intraday high of 11,623.58 set on Sept. 14. The closing high is 11,570.84 also set on Sept. 14. Weekly, monthly and semiannual value levels are 9,803, 8,941 and 8,858, respectively, with annual and quarterly risky levels at 10,891 and 11,372, respectively. The weekly chart is positive with the average above its five-week modified moving average at 10,330.06 with its 12x3x3 weekly slow stochastic reading rising to 34.49 last week up from 32.51 on June 14.

The Russell 2000 (1,549.63 on June 21) is 22.3% above its Dec. 24 intraday low of 1,266.92 and in correction territory 11% below its all-time intraday high of 1,742.09 set on Aug. 31. The closing high of 1,740.75 was also set on Aug. 31. The monthly value level is 1,310.12 with weekly and semiannual pivots at 1,483.41 and 1,504.17, respectively, and annual and quarterly risky levels at 1,590.63 and 1,667.15, respectively. The weekly chart is positive with the index above its five-week modified moving average at 1,533.98 with its 12x3x3 weekly slow stochastic reading rising to 37.15 last week up from 34.08 on June 14.

How to use my value levels and risky levels:

Value levels and risky levels are based upon the last nine weekly, monthly, quarterly, semiannual and annual closes. The first set of levels was based upon the closes on Dec. 31. The original semiannual and annual levels remain in play. The weekly level changes each week; the monthly level was changed at the end of January, February, March, April and May. The quarterly level was changed at the end of March. My theory is that nine years of volatility between closes are enough to assume that all possible bullish or bearish events for the stock are factored in. To capture share price volatility investors should buy on weakness to a value level and reduce holdings on strength to a risky level. A pivot is a value level or risky level that was violated within its time horizon. Pivots act as magnets that have a high probability of being tested again before its time horizon expires.

The close on June 28 is the second most important for 2019. This close is an input to my proprietary analytics and will generate new weekly, monthly, quarterly and semiannual levels.

 

Follow me on Twitter or LinkedIn.

I am CEO and founder at Global Market Consultant, Ltd., and an expert contributor to TheStreet.com. I hold an engineering degree from Georgia Tech and a masters degree ...

Intelligent Investing is a contributor page dedicated to the insights and ideas of Forbes Investor Team. Forbes Investor Team is comprised of thought leaders in the area...