Stocks Hitting 52 Week Highs Most Since 2013

Short-Term View

In my Monday Update to TradeWinds subscribers,  I predicted Tuesday's rally, calling for the $QQQ to test last week's VAH (Value Area High) of ~116.80. But I also cautioned against an impending move aiming to retest, and possibly breach, the election night knee-jerk reaction. This call for prudence was further conveyed in the below chart of the $SPX (S&P 500), in which a contracting triangle and the post-triangle breakout are depicted. Elliott Wave (EW) practitioners know full well the implications of a triangle in the fourth-wave position within an impulsive wave structure (i.e., high likelihood of a reversal). 


Chart 1. $SPX - Is it a symmetrical triangle (aka. contracting triangle) in the fourth wave position? If so, the post-triangle breakout should soon give way to a  trend reversal. We're looking for he election-night low to be challenged without being breached. (Estimated reversal point: 2193-2201).

The NQ/Z6 (Nasdaq December contract) appears to have traced out a broadening formation on the back of last week's decline. If my wave interpretation in chart 2 below is correct, the next leg down is due to begin in the coming few hours. 


Chart 2. A very complex pattern that can only be interpreted as a triple zigzag. 

Intermediate-Term View

Should the short-term forecast unfold, I'd be on the lookout for a significant buying opportunity to follow. After all, the market's underpinnings remain pretty healthy, as I'll posit below.

For starters, the number of issues setting a new 52-week high rose to its highest since 2013, as shown in chart 3. And while it's true the tech-heavy $NDX (Nasdaq 100) had negatively diverged from the other major indices ($SPX, $RUT, $DJIA, $DJT, $SOX) in recent days,  I really don't see anything particularly alarming. For example, chart 4 sports a side-by side view of the $NDX and its equal-weighted brethren, the $NDXE. Clearly, the weighted nature of the $NDX is partly to blame. Also to blame is the rotation out of Tech and into Industrials and Financials, as depicted in chart 5. Obviously, this is taking place due, on one hand, to the 'Trump victory' and the prospect of major infrastructure spending, and on the other hand, to the anticipation of an impending interest rate hike in December. 


Chart 3. The number of issues setting a new 52-week high rose to its highest since 2013.


Chart 4. The $NDX (Nasdaq 100) and its equal weighed version, the $NDXE. 


Chart 5. S&P sectors - The weakness in Staples ($XLP) and Utilities ($XLU) are conveying a risk-on attitude on the part of investors, bolstered by the soaring Industrials ($XLI), Materials ($XLB), and Financials ($XLF). As for the atypical weakness in Tech ($XLK), it's due to the weighted nature of the $NASDAQ and the rotation into infrastructure- and rate-sensitive issues.

Tranports ($DJT), $SOX (Semis), and Financials ($BANK)

The next few charts serve to bolster my intermediate-term bullish view (i.e., beyond December) that I've been touting all along. Starting with the Transports ($TRAN) in chart 6, the recent break out of an inverse Head-and-Shoulders (HS) base is reminiscent of the bullish break of late 2012, which in retrospect set the stage for an anomalously bullish 2013 (The Presidential Cycle). Furthermore, Semiconductors ($SOX, $SMH) continue to press on toward new highs (chart 7) in what looks like a massive, multi-decade bullish base (Rounding Bottom). Add to that the notable strength of the Semiconductors relative to the S&P 500 ($SOX/$SPX) depicted in chart 8; the decisive break above the 2007 high is no small matter, technically speaking. Finally, the Financials, as represented by the Nasdaq Banking Index ($BANK) in chart 9, are conveying an unmistakable message of strength by soaring to a new high by managing to exceed the decade-old all-time high set in December 2006. This massive Cup will soon be in search of a Handle.


Chart 6. $DJT (Dow Jones Transports) - A bullish break reminiscent of late 2012 / early 2013.


Chart 7. $SOX (Philly Semiconductor Index) - A Massive Rounding Bottom (Cup) formation. 


Chart 8. $SOX/$SPX Relative Strength - A notable break above the 2007 high. 


Chart 9. $BANK (Nasdaq Banking Index) - A notable break above the all-time high of 2006.

Trade Smart,

Peter Ghostine (@peterghostine)


Tradewinds subscribers are raving over Options Education Series - Course #1: Foundation. GET ACCESS TO IT NOW with your 2-month trial subscription to the TRADEWINDS STOCK MARKET GUIDANCE AND EDUCATION SERVICE for $50. If you're delighted with the results, consider subscribing for a full year for just $240. The cost of the annual subscription will be raised to $600 after the December 31st deadline. Existing members won't be affected.

The focus is on mentoring and education for the remainder of 2016, and throughout 2017! Without a solid foundation in Technical Analysis and Options Theory, you'd be trading like a deer in the headlights.  61point8.com's mission remains unchanged: to foster a network of intelligent, goal-oriented traders who, like me, wish to take matters into their own hands. 





 

 

 

 

 

2 Comments

Join In on this conversation, post a comment below.
Visitor - jimmy: The traditional series of frames as well as lenses is just what replica ray bans has actually made them a prominent have to have.
Reply Flag
Visitor - abhi: Why we are wasting time in search of words in words game with friends when we use unscramble word for solving this.
Reply Flag

Related

etfs

Stock Bull Keeps Charging

The analysis I presented on Monday (To Brexit or Not to Brexit) has proven to be accurate. S&P 500...

November 10, 2016

What will Markets do with a Brexit like Outcome?

While I continue to favor the conclusions cited in the October 14th analysis titled Looking Ahead,  I...

November 07, 2016
stocks

Surfing the Profit Waves in US Stocks

We timed Thursday's INTERIM BOTTOM with pretty good precision, and now it's time to look ahead in...

October 17, 2016
etfs

Nail the SPY Closing Price

When it comes to market structure, there's certainly no shortage of theories; Elliott Wave Theory...

October 13, 2016
stocks

What AAPL's 5% Day Means

Given the stellar performance of the TradeWinds Market Guidance Service in September, I've been...

October 11, 2016
stocks

BIDU Options Strategy - Probabilities and Profits

Yesterday, I published this write-up titled A Long Swing Trade in BIDU, in which I articulated the...

October 05, 2016