The Guggenheim ETF mid cap has formed a candle over candle reversal on rising large players volume. The Guggenheim mid cap ETF tracks the Zacks Mid-Cap Core Index. The Zacks Mid-Cap Core Index includes the Russell Midcap Index, the S&P MidCap 400 Index, and more mid-capitalization securities, including master limited partnerships (“MLPs”) and American depositary receipts (ADRs”).
Guggenheim ETF Mid-Cap Holdings
Top 20 holdings as of 8/30/17:
Ticker Security Name
COL ROCKWELL COLLINS INC
ROK ROCKWELL AUTOMATION INC
A AGILENT TECHNOLOGIES INC
CCE COCA-COLA EUROPEAN PARTNERS
DTE DTE ENERGY COMPANY
ES EVERSOURCE ENERGY
HIG HARTFORD FINANCIAL SVCS GRP
MHK MOHAWK INDUSTRIES INC
BXP BOSTON PROPERTIES INC
PFG PRINCIPAL FINANCIAL GROUP
VNO VORNADO REALTY TRUST
IBKR INTERACTIVE BROKERS GRO-CL A
BAP CREDICORP LTD
CNC CENTENE CORP
MMP MAGELLAN MIDSTREAM PARTNERS
AGR AVANGRID INC
FTS FORTIS INC
AWK AMERICAN WATER WORKS CO INC
There is reduced volatility while prices have been consolidating in the most recent period which has created a Momentum Squeeze:
There is a resistance zone just above the current price starting at $61.28. Right above this resistance zone may be a good entry point. There is a support zone below the current price at $61.22, a stop order could be placed below this zone.
The Nasdaq Advance Decline ratio chart gave a swing long buy signal on Friday, August 25, 2017. The Advance Decline ratio chart shows the number of stocks that advance in value to the number of stocks that decline in value over a given time period. An increasing advance decline ratio signals a bullish trend while a decreasing advance decline ratio signals a bearish trend.
Nasdaq Advance Decline Chart
It wasn’t just the Nasdaq Advance Decline chart that gave a Parabolic SAR buy signal. The S&P 500 Volume Advance Decline chart also fired off a SAR buy signal on Friday, August 25, 2017.
The thing you need to know about market breadth (advancing stocks versus declining stocks) data is that the exchanges do not publish the data themselves. It is left up to the data providers like StockCharts.com. The exception to this is the Common Only A-D numbers generated by the NYSE (which formerly were available on the NYSE web site a day later). The differences you see in market breadth data are because of the different databases and datafeeds run by stock market data vendors. In order to calculate advancing and declining issues, a data vendor must first know what stocks are traded on the exchange. A data vendor must know the price at which each stock closed yesterday. The data provider must know the current price of each stock and be able to compare that to yesterday’s close to determine if a stock counts as an advancer or decliner.
Both the S&P 500 and Nasdaq Advance Decline ratio charts do not support the more bearish price action on the S&P 500:
I think in all cases with the Parabolic SAR buy signals, we need confirmation above the SAR buy level to confirm the signal. The S&P 500’s bearish inverted hammer candlestick on Friday does not support the SAR buy signals. Furthermore, the TSI is still giving a bear signal and the CMF just went negative which is yet another bearish signal.
Amazon.com reported an earnings miss last month which was a big blow to bulls. The e-commerce giant reported a Q2 EPS that fell to 40 cents from $1.78 a year ago which totally missed the FactSet consensus of $1.41. Not only did Amazon totally miss expectations for their profit in Q2, but they cut in half the expectations of what they’re going to make over the next 12 months.
It is too early to take an entry in Amazon right now. Price movement has been a little bit too volatile to find a good entry and exit point. It is probably a good idea to wait for a consolidation first.
Notice how well large players volume is holding up as the price of Amazon stock has dropped. This is a positive divergence and is bullish. The Twiggs Money Flow is starting to round up but we need more of an upward move before making that assessment.
Doctor Copper is signaling an improved outlook for the global economy as the price of copper has retaken the key $2.86 level.
China is the world’s largest importer of copper using more than three million tonnes a year. In an attempt to improve the environment, China is proposing a copper import ban. China’s copper industry is accelerating copper imports to build stocks ahead of the 2018 deadline. You can read more about China’s proposed copper ban here.
September copper futures trading on the Comex market in New York moved higher as the likely impact of new regulations in China spark another round of heavy buying in the US and Shanghai. Last Thursday more than 3 billion pounds of copper changed hands and the price jumped to $3.048 a pound ($6,720 per tonne) which is the highest in nearly three years. December copper hit $3.07 a pound. Analysts at DoubleView think copper is in a long overdue bullish cyclical move which predicts the next boom for the global economy is underway.
Price of Copper
Whether its a global economy thing or a China thing or even both, one thing is clear: The price of copper has confirmed the break above the key $2.86 level this month.
Federal Reserve Will Push Price of Copper Back Down
The problem I have with the Doctor Copper is signaling a global bull market thesis is the Federal Reserve. The Federal Reserve is hiking rates and that ALWAYS slows down the economy and thus the demand for copper. I talked about this on the Saturday show back in June here. Please make sure you review my commentary on the Saturday show before going long copper. You may also want to use this stop limit order strategy to trade copper.
As for me, I’m not swing trading copper as its too dangerous and I see safer opportunities with higher yields elsewhere.
If you have any thoughts on Doctor Copper, leave your comment below.
The SPHB:SPLV ratio chart is showing a compelling setup for small cap stocks. The SPHB:SPLV ratio chart tracks high volatility (high beta with tendency to be small cap) stocks to low volatility (tendency to be large cap) stocks. This ratio chart is another barometer for the risk on versus risk off trade.
In a risk on market, higher growth and higher beta stocks are the name of the game. Investors go on the offense for maximum profits and their less concerned about the economy and a recession. In a risk off market, investors go on defense and move into safer and more stable (low volatility) large cap stocks.
SPHB:SPLV Ratio Chart
The market has consolidated a little over the last week and that was the swing long signal we were waiting for. Notice that SPHB:SPLV has broken through resistance at 0.8050 and now is pulling back to retest that level. This is a classic set up we can trade. If the 0.8050 level holds, it means previous resistance has become support and we can take a beautiful entry off that level (green arrow). Make sure to review this lesson on trading for beginners so that you know which stocks to screen for to take advantage of a turn in the SPHB:SPLV chart.
Following high yield debt is an excellent way to time market swings. A high yield bond (non-investment-grade bond, speculative-grade bond, or junk bond) is a bond that is rated below investment grade. These bonds have a higher risk of default and so they pay a higher yield than better quality bonds. Bonds rated below BBB− are called speculative grade bonds, or “junk” bonds, and fall into the category of high yield debt.
Recessions increase the possibility of default in speculative-grade bonds.
The number of companies issuing high yield debt is abnormally high for August. What is happening is that investors are anticipating higher rates from the Federal Reserve and so the higher yields of safer investment grade bonds start to come into greater competition with junk bonds. It’s the crowding out effect.
Tesla and other debt heavy corporations are front-running the crowding out effect by issuing as much junk bonds as they can before more interest rate hikes occur. You can read about rising junk bond issuance here.
You have to be careful not to equate junk bonds in foreign countries with those issued in the US. In emerging markets like China and Vietnam, bonds have become increasingly important as financing options because access to traditional bank credits is limited, especially if borrowers are non-state corporations.
High Yield Debt Chart
Junk bonds act as a barometer for risk on versus risk off. In a risk on environment, investors chase after maximum yield and so they buy high yield debt. Junk bond investors are not too worried about a recession or default on their junk bonds. In a risk off environment, investors sell out of high yield debt and move to safer, lower yielding assets.
When non-investment-grade bonds spike up or down, the S&P 500 has a tendency to follow within 3 to 5 days.
Last week the high yield debt chart (HYG) spiked higher which is a bullish signal for the S&P 500 over the next 3 to 5 day period.