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Stock Market & FAAMG Stock Analysis 9-18-18

Technical analysis on the US stock market via SPY, QQQ, $SPX, /NQ, XLK & the market-leading FAAMG stocks to provide the intermediate to longer-term outlook for the US stock market.

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2018-09-18T15:52:22+00:00Sep 18, 2018 3:52pm|Categories: Equity Market Analysis|Tags: , , , , , , , , , , |11 Comments

11 Comments

  1. qq346841395 September 18, 2018 4:16 pm at 4:16 pm

    Hmm.. I wasn’t so sure about the “all the negative divergences in the past decade, and without fails, all leads to double digit correction” part.. I mean.. we can technically grinding up 10% before we see another double digit correction, and extending the divergent line there. If that’s the case, and we short here, the best outcome is breakeven…

    The main point is, although there has been some pullbacks, but the market is making higher highs and higher lows, I really don’t agree on the bearish outlook, for now, since we are seeing huge support at NQ’s 50 daily ma, and ES’s 20 daily ma. Without taking these supports out, I think shorting right now without a lower low, is kind of counter trend and hard to make money, although the risk/reward ratio is great, but that means the possibility is very low, we must take both risk/reward ratio and probability into account~ That’s my view.

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    • michael225 September 18, 2018 4:27 pm at 4:27 pm

      qq8675309, I agree, sometimes I get caught up in it too. I think (and Randy can correct me if I’m wrong) he’s just pointing out the building likelihood that this all comes crashing down on a weekly or monthly chart. It’s personally a weakness of mine when watching these videos is having that feeling of imminent downfall of the market and then it doesn’t play out that way. It doesn’t mean it won’t. And if your time frame is longer, he’s not calling for a short today on those time frames. Generally, I see him suggest shorts on an intraday and sometimes daily time frame and not much longer… I’ve won more than I’ve lost around here and that includes many, many self imposed bullets to the foot.

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      • qq346841395 September 18, 2018 4:48 pm at 4:48 pm

        Yep, I agree that Randy has a good grasp on a lot of fundamental analysis and sector effect etc., just that it maybe better to follow the trend until the end and loss the last trade than keep shorting and shorting and hope for a big drop~ I trade ES for 3 years, and my account grows from 30k now to 200-ish k, and my general rule is that keep on following the trend no matter how, yes, the last trade will be longing at the top/ or shorting at the bottom and thus a loss, but no matter, I have earned the previous 5 trades already.. Just my two cents~

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        • rsotc September 19, 2018 8:53 am at 8:53 am

          Although trend trading is not my primary style, I certainly see the value & would encourage you & other to share some of your strategies (when to buy & sell). In addition to trendlines & various trend indicators, the long-term & intermediate-term ones all of which remain solidly on buy signals for now, one of the most important levels that I’ve highlighted in the past is the 40-week EMA on the Nasdaq 100. That is the same as the 200-day moving average but waiting for a solid weekly break of the 40-week EMA helps to filter out whipsaw signals from intraweek breaks. The 40-week EMA coming in just below the trendline off the early 2016 lows in $NDX so when both those are taken out impulsive, with a solid weekly close or two below, that will be an early indication of an intermediate-term trend change. The primary bull market uptrend line comes in a fair amount below those level & at that point, I will be closing monitoring various long-term trend indicators for bullish to bearish crossover.
          Until then, I’ll continue to swing trade the smaller trends within the bull market but increasingly open to one of those swing shorts morphing into a longer-term trend trade when the charts align. Remember, stocks fall much faster than they rise. It is more than common to see weeks & even many months of gains wiped out in mere days or weeks. That’s one reason that I like shorting in a bull market as much as going long just as I love trading bear market rallies during a bear market (talk about explosive).

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    • FrancisQ September 19, 2018 4:11 am at 4:11 am

      Keep these points in mind.
      .
      When look at weekly chart, thing takes months to play out. When look at monthly chart, they takes years to play out. If you on a swing time-frame, you need to look at hourly chart, which takes hours to day to play out. Daily chart takes days to weeks to play out.
      .
      One can be right about the trend and wrong about the precise timing, which is tricky. The shorter the time-frame, the trickier to time, but the quicker the money make, if – a big if – you can time it right.
      .
      So there is,
      make money slowly the easy way. Just buy QQQ, and don’t look at it again. That investing.
      or
      make money quickly the hard way. Constantly analyzing charts, assessing risks, and executing trades. That’s trading.
      but
      there’s no making easy money quickly. We all want that. But they don’t exist.
      .
      Of course, there’s the 3rd way, combine the 2 with 2 separate accounts. One for investing, and one for trading.
      .
      Make your choice according to your ability and availability, not what your want.
      .
      Does diversification work? Somebody come up with a diversified portfolio, and back test for 2008. SPY dropped 55%, the diversified portfolio drop 59%. The diversified portfolio consists of bonds, foreign stocks, US stocks, small caps, large caps, commodities, etc. Don’t take my words for it, do the exercise yourself.
      .
      It shouldn’t come at a shock because SPX is very diversified. It contained XLU, and other bond proxies.

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      • FrancisQ September 19, 2018 4:46 am at 4:46 am

        For me the choice is very simple. I really (ok, extremely) enjoy the challenge of trading. I like it because it’s so difficult. I’m addicted to it. So it’s not really my choice. It chooses me. 🙂

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        • rsotc September 19, 2018 8:39 am at 8:39 am

          I feel the same way. I guess you can say that trading is our “Precious”, just call me Gollum. 😉

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    • rsotc September 19, 2018 8:37 am at 8:37 am

      I say this often & can’t repeat it enough: Divergences are merely an indication that an impending trend change of correction against the prevailing trend is likely to occur soon. Just like overbought & oversold readings, they are a heads-up but NOT a buy or sell signal. I use divergences to put me on alert for a potential reversal & then align that bullish or bearish outlook with sell signals. The more sell signals the better (e.g.- breakout on not just one index but most or all for broad market trades; a breakdown of a sector or leading stocks within that sector to confirm an entry on another stock within the sector or the sector ETF, etc.)
      The divergences not only help to provide a heads-up of a possible reversal in the trend but also the magnitude of that reversal when it comes. I was short (and clearly pointed those out in advance & when the time was right to short) at both of the major tops earlier this year. I also covered & was long at or very near the bottom of both, again posted here in advance & real-time on the site. Why? Because those were just corrections that brought the market down to key primary uptrend lines & other support levels.
      What I am pointing out in the videos highlighting those primary bull market uptrend lines along with the fact that unlike earlier in the year, we now have negative divergences not only on the daily & the weekly time frames but also what are extremely rare negative divergences on the monthly time frames with all previous divergences for decades now, followed by bear markets. Had I gone back just a little further on that $SPX monthly chart, I would have also highlighted the negative divergence that preceded Black Monday in 1987 when the Dow fell almost 23% in a single day. That can be seen on this chart below with the arrows marking all RSI divergent highs for decades:

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      • michael225 September 19, 2018 11:26 am at 11:26 am

        You should figure out a way to pin this explanation somewhere important on the site since you get the question weekly 😉

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        • FrancisQ September 19, 2018 11:41 am at 11:41 am

          I haven’t checked, but i suspect it could be found somewhere in the FAQ section. 🙂

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        • rsotc September 19, 2018 3:21 pm at 3:21 pm

          Funny (and true) but I don’t mind for as much as I highlight bullish & bearish divergences, it bears repeating that they are not buy & sell signals.

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