Broader Market Review
We are right in the middle of the dip I described and projected last week in my report “Weed, Bitcoin and Fake Meat“, dated February 17, 2019.
I wrote:
“Short term, the model shows another dip soon. Before the end of the month the Dow Jones Industrial Average could begin another 1,000 point retracement (price adjustment) to the ascending pink line support, just like it did two weeks ago.
If you want to take some profits, now would be a good time. I would especially recommend this on any leveraged products you might own. In addition, you can take advantage of adding to or initiating new positions at likely lower levels.
I think this will be another steep and deep affair just like two weeks ago with another surge higher from the buy zone in early March. The projected short term reversals are the red and green circles I drew on the charts. The price forecast is drawn in white.”
So far, the broader market is right on the projected dip track and we are down almost 600 Dow points and I expect we could give up another 300 before reversing back up. As I have been describing and wrote two weeks ago:
“Expect multiple support reversals that will offer buying opportunities along the way up. The lower ascending pink line should provide a rising floor that can be bought on each dip for the next few months. Price may default down to the lower, ascending yellow line support (good buy zone), however, that is more likely to occur in the seasonally weak summer months when that price level will be higher.”
Short term, price wants to go to that rising floor (ascending pink line) where I would expect the next reversal higher to occur. We could reverse from right where we are which is at the mid point of the move higher off the February 3rd low but it’s more likely that we will stretch all the way down to the pink line before reversing and springing back up. It would not be a surprise to get a little drift higher early in the week before completing the trip down to the pink line.
Longer term, my forecast is unchanged; higher.
So, if you are putting new cash to work I would look for the reversal to occur around 286.40 on the Dow ETF (DIA). This should provide the next lowest entry that we are likely to see for at least a few months.
The following two charts provide my long and short term forecast for the broader market. Expect most everything to follow suit directionally.
Dow Jones Industrials (DJ-30) 2015-2021
SPDR Dow Jones Industrial Average ETF (DIA) short term
I don’t know what all these other analysts are looking at but to my eye everything looks just fine. I like all the ETF’s and individual stocks on my Entry List. I still don’t like energy related companies longer term and I’m not sure why gold is moving up but I suspect it may be due to the coronavirus. Interest rates have been going down a little more than I expected but still in the sweet spot in the larger scheme of things.
I still expect rates to rise into summer, move sideways towards fall then possibly higher with stocks expanding late summer/early fall. My price forecast for the 10 Year Treasury remains unchanged.
CBOE 10 Year Treasury Yield Index (TNX-X) 2011-2022
So, if you have been following along for awhile, you know we are smack dab in the middle of the expansion I have been describing for about a year now. It’s playing out exactly as expected and is catching everyone off guard, also as expected. They will continue to try and explain it after the fact but I’m not sure how that’s ever supposed to ever help anyone. Insert “sigh” emoji.
So, at the risk of sounding like a broken record, the broader market is positioned to continue expanding. I think the two sectors positioned best are technology and financials although all sectors should participate with energy lagging. Look for small caps to begin a higher ramp soon as they typically start expanding later in the cycle as do other companies that are at the lower end of the quality spectrum.
iShares Russell 2000 Index Fund ETF (IWM) 2011-2022
Interesting Chart Segment
I could put a bunch of “before and after” charts up from the list of Entries on the Trade Alert page but let’s suffice it and say they are mostly behaving as expected.
Oh, maybe I’ll just do one. I shared Carvana Co (CVNA) last week. Just look at the before and after chart. Zero to +25% in five days. Zoom!
Carvana Co (CVNA)..before
Carvana Co (CVNA)..after
Here are some charts that caught my eye this week…
Skyworks Solutions Inc (SWKS) looks like it still has a nice long runway up to $180 before it quits. It has been very consistent over the years and if the broader market continues to expand I see no reason why this one won’t continue to ramp higher.
Skyworks Solutions Inc (SWKS) 2010-2021
Look at this beauty. Fair Isaac Inc (FICO) is an $11.7B software company with a long history of consistent price action. It looks to be on a serious mission to get up to $550. They don’t report again until May 5th so we don’t have to deal with earnings for awhile. Just a beautiful chart.
Fair Isaac Inc (FICO) 2015-2021
Interactive Brokers Group Inc (IBKR) looks like it wants to head back up to its old high. It’s running into some congestion at the brown line so it will probably pull back from here a bit. Look for it to move into the green circle and if it can push up and through the brown line it should ramp to $80.00.
Interactive Brokers Group Inc (IBKR) 2015-2021
Here’s another one quietly moving higher. TransDigm Group Inc (TDG) has a nice history of steady growth. It began a new trajectory in early 2019 and has its sights on $1,100.00. This $34B company should continue to ramp steadily higher.
TransDigm Group Inc (TDG) 2011-2021
And, for those of us who are members of the Missed the Tesla Inc (TSLA) Spike Even Though We Knew To Buy It But We Still Want To Own It club there is a possible lower entry coming soon. It looks like it wants to re-test the previous high and double top before retracing back to a price closer to $650.00. Whether this happens or not is obviously uncertain but this is what I will be looking for. Stay tuned.
Tesla Inc (TSLA)
Believe it or not, New Age Beverages Corporation (NBEV) is showing signs of life. This little thing might finally be turning around. Anything can happen with these under $5.00 stocks but this sure looks like it wants to spike higher soon. High risk, be careful. It’s a flyer. Remove cap slowly, contents under pressure. The longer term chart will give you an idea of what the potential is and the shorter term chart provides a better view of the resistance cross over and potential bottoming.
New Age Beverages Corporation (NBEV) longer term
New Age Beverages Corporation (NBEV) shorter term
It should be a very interesting year in so many ways. As always, let me know if you have any questions.
Have a great week,
Don