Buying a long stock position an auto maker right now doesn’t seem to make much sense at first blush … however, I can’t help myself but starting to like the longer-term set-up of Ford here now. I bought a 1,000 shares so that it stays on my radar going forward. Here are the charts …
Ford – Monthly Chart
December was a large and rather nasty looking red candle for Ford on the monthly chart … the three subsequent monthly candles are all inside candles and to me we could have made a longer-term floor to trade against with that December 2018 low. Don’t get me wrong, the chart is not screaming a longer-term bullish move, but I am always on the look-out for stocks that may have been washed-out on the bigger time frames.
Ford – Weekly Chart
The weekly chart for Ford is actually showing a nice pennant/triangle formation. Generally, these type of price patterns are just consolidations that resolve themselves in the direction of the bigger trend that existed going into the consolidation phase – that implies another move lower in Ford. That could happen, but if it did, I think that could actually be the final thrust lower on the monthly/weekly charts for some time to come.
Ford – Daily Chart
So if price is going to break-out of that weekly consolidation pattern, we should be able to see the signs of that move here on the daily chart first. To me, the daily chart is more bullish looking than it is bearish looking.
Bottom-line … while Ford may not be finished with its move lower on the monthly/weekly charts, it looks to me we are near if not already there. I started a small position to keep a closer eye on this one going forward.
LULU reports after the close today … I have been keeping an eye on this stock lately and I am thinking any bearish news from this earnings report could see LULU become a pretty decent bearish short position for me. Here are the charts …
LULU – Daily Chart
To me the daily chart looks like one that is ripe to see price start to head lower … the price chart is in a bearish position – price itself is below its 20SMA; the 20SMA is below its signal line, and the ATRs are in a position of resistance.
The poor price performance of NKE since its earnings gives me more confidence that if the market doesn’t like what it hears today after the close, then we could get multiple days of a leaking stock price.
LULU – Weekly Chart
LULU – Monthly Chart
The bigger time frame charts are less bearish, so LULU may not be in any serious trouble here. The weekly chart shows that price is below its 10SMA but the 10SMA is still above its signal line (barely!!).
The monthly chart has broken its ATR support so that is what makes me a little more suspicious of the weekly chart’s bullish signals (ATR is a position of support). If the monthly chart has in fact made an important pivot high, then this bounce on the weekly time frame is just a bounce and the fact that price broke above the weekly ATR is nothing but a false signal.
More chopping may be necessary, but if LULU bounces after their earnings today, I will pay more attention for a possible spot over the next couple of weeks to try and start a long dated bearish option position in LULU. If price starts to weaken here after earnings, I think an outright short position will be a good risk/reward trade.
The cloud stocks have been wonderful stocks during this bull market … the longer-term weekly charts are starting to show that the best days for these stocks may be behind us.
CRM – Weekly Chart
Price pushed to new all-time highs last week, but that weekly candle actually looked like a potential doji topping candle. When I look at the Time Segmented Volume indicator on the second panel, it is clear to me that money flows have been weakening in this name since September 2018.
Relative strength vs the SPY is also showing weakening performance … the 8 period momentum indicator is fighting to stay above the +ve/-ve mendoza line.
The bottom line is that the days of leading the market by a large margin are likely a thing of the past.
CRM – Daily Chart
The daily chart shows in greater detail the weekly charts’ weakening … the ATR and 20SMA are still in bullish positions, but indicators are clearly showing a weakening of strength. Obviously, things can re-accelerate from current levels, but I think the bigger weekly chart is foretelling an overall weakening stock performer.
Bottom Line – I am going to start writing out of the money calls until the charts turn more bearish – at that point, outright shorting intra-day or positionally may be good risk/reward trades.
Stock market bulls have slowly come to the realization that the global synchronized growth that they were counting on since the beginning of 2018, has fizzled out and their only remaining hope for higher S&P 500 profits/PE multiples is the domestic economy.
Since small cap stocks in the US are widely acknowledged as the best barometer for the health of the domestic US economy, it makes sense for equity investors to pay attention to what small caps are doing here recently … let’s start with the bigger picture and then work our way down to the daily chart.
Russell 2000 Small Cap ETF (IWM) – Monthly Chart
So to me, the IWM looks to have completed a 3-wave pattern right at the 1.618x extension target back in August 2018 (ahead of the Sept top in the SPY). The move off of that possible 3rd wave high looks impulsive to me, so I think that Wave 3 to the upside is almost certainly complete. Let’s see if the weekly chart gave a complete wave pattern into that possible monthly Wave 3 high.
Russell 2000 Small Cap ETF (IWM) – Weekly Chart #1
Again, it looks like the August 2018 high completed a 3-wave price pattern on the weekly chart … that makes me completely confident that the monthly chart’s price pattern has completed and that we are now in a corrective pattern on a monthly time frame.
That monthly correction will need to make its way down into the SLOT support zone identified above, and that move lower will take the form of either an ABC or a 3-wave price pattern. Since one of these two patterns is now a certainty, traders should look for support at either the 1.272x (in the case of an ABC move) or the 1.618x level (if the move lower morphs into a 3-wave price pattern).
Where are those levels, and how do they relate to the bigger monthly SLOT support zone?
Russell 2000 Small Cap ETF (IWM) – Weekly Chart #2
Again, let me restate that I am very confident that the monthly chart has completed a 3-wave price pattern to the upside and therefore I think we need to correct that move in the SLOT support zone as drawn above … that implies that one way or another, price is going to get at least to $103.82.
I state that minimum target because if the current move lower finds support at the 1.272x extension target and “solidifies” its characteristics as an ABC move, that to me would be only the first leg of a bigger corrective pattern – i.e., price would bounce from that 1.272x level but that move higher would fail in SLOT resistance before making another move lower into the SLOT support zone.
If price breaks below the 1.272x target level at $112.87, then I would look for price to find support at the 1.618x level (or $96.41) … that type of move would be inside the SLOT support zone and in theory be enough of a correction to have completed IWM’s monthly corrective price pattern.
Even if price were to get to that 1.618x level, that does not guarantee a move back to re-challenge all-time highs, but it does imply a bigger, and a more swing-tradeable bounce for traders to enjoy.
Russell 2000 Small Cap ETF (IWM) – Daily Chart
The daily chart saw price break below its March 8th pivot low this past Friday … everything on the daily chart to me looks weak, and I think the weekly chart is driving the bus here now in the IWM. That means that the daily fib supports shown above will not hold as support and that we are going to break below the December 2018 pivot low. I would expect the S&P 500 and NASDQ 100 Indexes to follow suit as well.
The fear of missing out is likely soon to be replaced by investors’ fear of capital losses … we should be in for a fun 2nd Q 2019.
My buddy Francisco mentioned to me today that bonds look like they are ready to move higher … that immediately made sense to me as I knew that bonds had broken out of the downward broadening price pattern at the end of 2018, and from all that I have recently been watching, US equities have run out of juice in the bounce from the late December lows.
I’m not going to put on any swing trades here in bonds yet, but when the bond ETF (TLT) gets back above the 195-min 20-ema and the 20-ema’s signal line (i.e., price gets back into a bullish position), I will just watch it a bit closer and probably look to trade it long intra-day or for a max of 2 or 3-days at a time. Here are the charts …
20-Year Plus US Treasuries Bond ETF (TLT) – Weekly Chart
Like I mentioned above, the TLT price broke out of its downward broadening price pattern in late-2018. Will that be a fake break-out? Maybe, but I think the strength shown by the Relative Strength indicator tells us to expect further strength in TLT in the weeks ahead.
20-Year Plus US Treasuries Bond ETF (TLT) – Daily Chart
So the pullback here in early 2019 has all the looks of a ABC sideways consolidation … price poked below the A-pivot low and therefore it technically has created a complete ABC price pattern. Is price finished with the C-Wave?
20-Year Plus US Treasuries Bond ETF (TLT) – 65 Minute Chart
The 65-min chart is not the best one to rely on for assessing then end to a weekly price pattern … however, all reversals have to begin somewhere. Price broke above the 65-min ATR resistance level today, so traders looking for evidence of the near-term top in equities should take heed.
Again, I think there is a good chance that bonds do well going forward here for the next several months … I do not believe that a new all-time high in bonds is in the offing, but I think that we can at least get a second leg higher out of the broadening price pattern.
So thanks again, Francisco for the heads-up … let’s see if we can make some money in bonds here over the next little while.