Hello my fellow stock trading masters, this is Lance Jepsen with GuerillaStockTrading.com.
Alright guys looking at the S&P 500 two-minute chart, this chart is definitely bullish folks. We have a kind of like this basically downtrend channel. I’ll probably put this about right in here. Breakout, so this is a bullish flag pattern and then a breakout. Very nice. On the breakout we had this huge volume surge into the close. You could see the force index, boom, the two minute chart on the S&P 500 favors the bulls.
On the tick, unbelievable, on Friday, June 1, look at that folks. The tick has picked up institutional buying for the first time in many months. You could see that the close puts this above any period, any close, in 2018, look at that kaboom, 831 close. Now it’s been a while since we’ve looked at the tick. So just so that you understand, new viewers, what’s going on. The tick, using this tick chart, and I kind of coined a method of using this to gauge institutional buying. Basically anything above 700, maybe 600, but I feel more comfortable with anything above 700, suggests institutional buying. Conversely, anything below -700 indicates institutional selling. The reason is that this basically looks at the close and the market makers, in a perfect world, market makers would always match up a buy order with the sell order. So a +1 tick is a buy, a -1 tick is a sell. So in a perfect world with market makers in there, they would always close their books at the end of the day at zero. They were able to match up a buy order with a sell order and to do the trade. Now that doesn’t always work that way. When institutional traders step in, they buy across entire sectors and these marketmakers are trying to make, you know they’re trying to make the market. So in many times they’ll take on the trade and then they’ll try to make money off of a spread. They’ve got different advanced strategies that they’re trying to use to make a market and make a little bit of a profit as well. But when institutional traders come in and buy across entire sectors then the tick closes for the day with an imbalance, that is the market makers were not able to match up a buy order with a sell order to where we got close to zero. Now we never really get close to zero. If you can see this on your screens, little bit difficult to see I know, but see how this 200 and 50 and 13 exponential moving averages. I mean really the 200, which is this red line. You could see that that stays constant at about, I’d say about 240, 230. So it never quite matches zero but that’s why you use the 700. So anything underneath 700, that is 0 to 700, is just normal retail trading. Same thing underneath zero. Anything from zero to -700 is normal retail trading. Okay, so the 200 exponential moving average here is within just the normal retail trading. That’s about where it flat-lines. There’s always a little bit of a positive bias where marketmakers on average are not able to achieve a perfect zero otherwise we would have this 200 exponential moving average closer to the zero line. So the tick on Friday, June 1, picks up a massive surge of institutional buying. Now what we do, and this is part of this method that I kind of coined here, so when the tick picks up institutional buying then what we want to do is we want to go in and look at the sectors that performed, or really all sectors for that day, and say okay what sectors did the best because the sectors that did the best, or the worst, are going to be the most likely that’s going to tell us what institutions bought, what sectors did institutional traders buy into. And then what you want, what you could do, and this is beyond the scope of this Saturday show, but you could then do a market carpet for that sector and then pick out and drill down into the top performing stocks within that sector and then you’ve got, nothings perfect. The world of institutional trading is top secret. I’ve seen websites and products come and go that claimed that they had this inside track on institutional trading and they didn’t okay, and their businesses went belly up because it was totally bogus. So basically the tick, so, so nothing’s perfect but this method is going to give you a good approximation, a good estimation of what institutional traders bought. Now I don’t do a market carpet within the sectors, that would make the show way too long. For me, it’s more important to try to gauge the underlying currents of the market to make a forecast prediction for what I think markets are going to do next week. So we have institutional buying on Friday, June 1. Now let’s look at the sectors because sometimes the incisional buying can shock you. Sometimes you’ll go and you’ll look at the sectors and you’ll see oh, it’s utilities that were up the most, or or it’s some kind of defensive sector that was up the most, in which case then the institutional buying takes on a much more bearish connotation than just looking at the tick would suggest. Okay, so let’s let’s look at those sectors now.
Looking at the top performing sectors on Friday. Look at this folks. So the right side of this chart are typically the defensive sectors and the left side of the chart are typically the offensive sectors. So right off the bat, you can see that the left side of the chart or the offensive sectors, absolutely destroyed the right side of the chart or the defensive sectors. And look at that, utilities is down -1.53% on the day and oh man, I mean technology is the winner up 1.7% and then there’s materials which is up 1.53%, and then close behind that you have industrials up 1.1%. Even if you look at cyclicals and staples, staples was flat on the day, the defensive staples just flat, but cyclicals were up 0.74% or consumer discretionaries. So again looking at the cyclicals versus the consumer staples you can kinda get an idea too, but clearly folks, the institutional buying on June 1, Friday, favors the bulls.
The New York Stock Exchange percent of stocks above the 50 day moving average came in at 64.7%, that favors the bulls.
The New York Stock Exchange percent of stocks above the 200 day moving average came in at 57.4%, that gives the advantage to the bulls.
Transports are at the upper end of their range. So we talked about this in last Saturday show, we have this big sideways range from here and right across here and so we’re up in the upper end of this range. So we’re really looking for a break above 66 as our bullish indicator here and we just don’t have that. We’ve been watching this since last week and we you know, I mean we do have this AROON spike up on May 21, which favors the bulls. But the PPO is coming down. Look at those histogram bars coming down like that. Typically, not always, but typically when histogram bars start to come down like they did here then ultimately we go negative and the market, you know soon as the histogram bars and the PPO begin to come down, the market begins to pull down too. You can see that back here. Here’s where the histogram bars started to come down and sure enough we ultimately had this move down. So fast forward to the present, we’re chopping out sideways in here, but look at the histogram bars. So definitely an ominous signal up at the top end of this channel. I mean if the PPO suddenly starts to climb back up on the histogram bars and we get a breakthrough 66, then I think we have something here, but until that happens, how can we say that this favors the bulls just because it’s in the top end of this channel? I don’t think we can. We could very easily see an AROON spike up and then transports do a move as we’ve had previously in 2018 back down to 60.75 support. So for now, no signal on the transports until we see what happens off that 66 level.
So the S&P 500, what a wild week. So what we were looking for last Saturday was that we were very close to cross right in here, and that was somewhat ominous up here and so we wanted to see what was gonna happen with this sideways channel here. Let me just kinda go like this just to refresh your memory in case you don’t remember last Saturday’s show. To be honest I barely remember last Saturday’s show. Okay, so, so this 2710 level maybe 2700 level is what we were looking for on the downside. Well man, the week started off on Tuesday after the long three day weekend and the Memorial Day holiday last weekend, the market starts off on Tuesday, boom takes out that 2700 level. We immediately get a Parabolic SAR sell signal, and it came down and it tested the 50 day moving average and that was what we talked about. If this level’s taken out and the 50 day moving average is going to be the next support level that we test and sure enough beautiful move down right off that level, boom. Now we’re back up at the top end of this channel. We’re testing Parabolic SAR resistance. Now the Parabolic SAR often does that where, when we get the sell signal on the Parabolic SAR, we don’t really have a good example on this chart, but when this sell signal triggers then we get a countertrend rally that ultimately runs back up and breaks above SAR resistance, we get the next buy signal, okay. So the fact that we get a Parabolic SAR and then we get an immediate countertrend up to that level is not a real shocker. I do like the fact that the 50 day moving average has held, but we’re still within this sideways channel, granted we have institutional buying for the first time in 2018. So this gives us real hope that we could take out this 2743 level, maybe 2745, but until we do that, I think it’s premature to say that this chart favors the bulls. We’ve got the TSI that did a bearish cross at an elevated level, but now it looks like it may be a bogus headfake signal and we could get a buy signal here. We just, we just don’t know yet. Coming back down to the ADX, so we had this ADX spike up, which is bearish, but look at this folks. This is amazing. The positive DI line has crossed above the red negative DI line. So this, I know it’s really hard to see, but this is bullish, we have a slight cross. Now you may want to say that it’s testing, it’s so close it just broke above it by what is that like $.40? So if you want to say that, that’s still testing, I think that’s a valid point. We’ve got the ADX line falling, which means we’re in a trading market and sure enough we can see very clearly on this chart that here’s the trading market. So the fact that the ADX line is falling like this makes perfect sense. We go through range expansion and now we’re going through range contraction, into a trading market where the bulls and the bears are just too evenly matched, they’re battling it out. The profit margin that you can attempt to make profit and sell is very squeezed and and so now you understand why on a lot of my trades for premium members you’ll know I don’t mess around. I’m in. I’m out. I may hold a day. I may hold two days tops. Sometimes I only hold for a few hours because you, you have to compress your profit targets, you have to go for maybe a 1% or 2% or maybe 3% gain, and then jump out instead of our traditional swing trading at a 5 to 10% gain because the markets not trending, we’re in a trading market. And if you miss it, that’s fine. But then you have to hold your stock longer as it goes down and then wait a few more days until the stock bottoms and then comes back up again, you know during these these trading cycles and then hopefully you can sell out then. I, I don’t like to do that in a trading market. I like to get my profits and get out quick. Set your stop losses and if it breaks underneath the stoploss, get out quick. So for now folks I, I know there’s there’s some really positive things, I mean here’s another point. The SOFI AI has been all over the place. This is really messing, this sideways market in here, this battle between the bulls and the bears as it swings back and forth and we’re compressing into this channel, it’s really messing with the SOFI AI. I haven’t seen the SOFI AI jump back and forth between an overbought and a fairly valued market in a single week like this ever, since I’ve been using the SOFI AI. Right now the SOFI AI says that the market is overbought. So we’ve moved back into an overbought market. Now the market can stay overbought for, for days, for, for weeks even, so that signal alone from SOFI is not enough to, you know try to short the market, but I think you have to be careful in a market that’s overbought, that’s a trading market, with the ADX line falling that the range has compressed so you have to take just very small wins, you just have to be careful. So I feel very confident in saying this week that the bulls and the bears are just too evenly matched, so a sidelines rating.
Looking at the S&P 500 in the one hour time frame, so we currently watch our 13 and 30 moving average crossovers and here’s our bullish crossover so very nice. So back on, you know what is that, May 24th, we had a bearish crossover that lasted 1, 2, 3, 4, about 5 trading days and boom, now we’ve got a bullish crossover. Notice the CTM on the bullish crossover, it’s definitely within this green band here, which is an uptrend. So the one hour chart on the S&P 500 favors the bulls.
The S&P 100 index to the equity put call ratio, look at that equity put call ratio folks. So for most of the week last week, it was flatlining in here and now look at what’s happened, it’s taken the next leg up. So this is moving, the equity put call ratio is moving higher which means puts are increasingly outpacing calls, this favors the bears.
QQQ, this is absolutely awesome folks. So we’ve got this sideways channel in here, we have a breakout of the sideways channel this last week. The NASDAQ really began to come on strong in the latter half of this last week. Clearly this chart favors the bulls.
The Russell 2000 Bollinger Bands are coming together. We’re having some range contraction. We’re still operating underneath a Parabolic SAR buy signal. PPO still positive. Plus DI line, the green line is on top of the red line, which is bullish. The ADX line is flatlining so we don’t really have a trend, trending market or a trading market right now. We’re kind of in this wait and see mode but you can see this chart is uptrending. So I would be looking at a trendline about right in here. So if we break underneath this lower trendline and it cracks this uptrend channel, then we may be in store for a pullback but until that happens folks, the Russell 2000 favors the bulls.
US home construction looks weak folks. Rising rates environment hitting the affordability of homes, slowing down home sales. We’re operating underneath a burial cross with the 50 moving average crossing underneath the 200 day moving average. This chart favors the bears.
SOXX absolutely beautiful. Parabolic SAR support level holding. Breakout above the previous highs, this chart favors the bulls.
The NASDAQ advance decline issues chart favors the bulls.
The S&P advance decline percent chart favors the bulls.
XLF very weak, walked down the 50 day moving average and then boom, broken, broke underneath that this week, temporarily was underneath even the 200 day moving average. Came back, but now the 50 day moving average is acting as resistance, we have a doji and the 50 day moving average is closing in on the 200 day moving average. Let’s hope we don’t get a burial cross, but this chart is very weak folks. It’s in too close proximity to the 50 to say that this favors either the bulls or the bears. Let’s wait for resolution off that 50 day moving average before we make a call. No signal.
S&P retail ETF, like I said last week, I can’t believe that this chart looks this strong folks. What I’m watching is this uptrend channel here. So as long as this uptrend channel is not cracked and we break underneath that lower trend channel wall, I think you have to say this chart favors the bulls. Look at the TSI even. That, that’s awfully close to a cross but overall you could see that the TSI is rising, so this chart gives a slight advantage to the bulls.
So the big news event this last week was that Italy and the political drama there caused a lot of money to sell out of Italy bonds and that money flowed into US bonds and as money flow’s into US bonds, it pushes the price of the bond up and the yield of the bond lower. And you could see that boy those you know the 10 year yield really came down. So just kinda charting this out, we had this bullish flag pattern back in here we had a breakout of the bullish flag, nice move up. We had this kind of symmetrical triangle if you want to draw a sideways consolidation, that’s fine too. We had another breakout came up headfake rollover plunged all the way down to about it’s bull flag channel breakout level, and now it’s, it’s come off of it a little bit, but folks, this big move down here is quite bullish for the stock market and that was one of the things I said in a video earlier this week is that you know don’t panic about what’s going on in Italy because it actually helped our markets it actually helped push our interest rates lower as a lot of money flooded into US bonds. So overall, looking at the last week’s worth of market action here, the fact that the U.S. Treasury yield is down for the week that gives the advantage to the bulls.
For the week, money went into both treasuries and the S&P 500, that favors the bulls.
Biotech’s are our leading indicator. This is how we gauge whether we’re in a risk on or a risk off market. Last Saturday’s show, you’ll recall I was concerned about this 200 day moving average because the, this red line here, because the more times that we sit there and we tested against it, boom, boom, boom, and it wasn’t breaking through, it emboldened bears. And as we start off on Tuesday, there we go, there’s a bounce down off of it, it hit the 50 day moving average, but look at what happened for the rest of the week, kaboom! Look at, look at the money flow, look at that CMF, a lot of money flow flowing into biotech’s probably on Gottlieb’s restructuring of the FDA, especially gene therapies in order to push through, I mean the FDA has over 500 gene therapy drugs in a backlog. These gene therapies, they modify DNA to cure something, and so Scott Gottlieb, head of the FDA now, is following the mandate by Trump to lower the price of drugs by speeding up the approval process and what Scott Gottlieb said last week was that when it comes to these gene therapies it doesn’t make sense to use the same model that was being used for drugs for, and, and, and that the main criteria that’s gonna be used for the gene therapies going forward is that does it work, does it achieve what it’s intended to do? That’s very interesting because the FDA said that their gonna first work on these hemophiliac drugs that are, you know with, with people with blood disorders that don’t have the clotting agents in their blood and so that that they constantly bleed and there’s some gene therapies are gonna modify the DNA and it’s gonna make the body produce more of the clotting agents that are needed and so their gonna fast track these drugs and you know the the FDA’s taking a slow and progressive type move here. They don’t just want to just, you know, flood through all these gene therapies and not adequately test them for safety. So you know they’re gonna start within the hemophilia market and then move move forward but awesome stuff folks and you can see well now this was a consolidation and here’s the breakout, kaboom. Rising money flow. PPOs turning up biotech’s favor the bulls.
For the week, once again, the US lost in the global currency wars. The euro was the winner last week. They were able to devalue their currency the most relative to the US dollar. The fact that the US lost in the currency wars last week favors the bears.
On the Russell 2000 it’s closed above its pivot level, that favors the bulls. Notice too that on the ADX we have the ADX line clearly rising, which means the Russell 2000 is the only major index to be uptrending and not within a trading market. Very nice folks.
The S&P 500 percent of stocks above the 50 day moving average, it’s above the EMA envelope lines, but the TSI has a bearish signal, it’s done a bearish cross, so no signal.
Looking at our sector rotation chart for the last week, the top performing sector was technology, this green line. The worst-performing sector was financials, this orange line. Consumer discretionaries, this blue line, out did consumer staples, this gray line. So the sector rotation last week, gives a slight advantage to the bulls.
Looking at the S&P 500 high beta to S&P 500 low volatility stocks with a zigzag overlay, we currently are moving up and this uses a Heiken-Ashi chart to smooth out some of the volatile days. We currently have the zigzag pointing up, which means high beta stocks are outperforming lower volatility stocks and that favors the bulls.
The Vix short-term futures we had a little bit of a move last week on Italy but it’s broken back underneath the 13 EMA line, this white line. The 50 EMA line is still falling. I think this is kind of a sideways move here over the last week. No signal.
Folks my rating for trading next week is sidelines. I wanted to give the S&P 500 a bullish rating. There’s so many indicators that look bullish this week, but I think we have to be cautious. We have not only the equity put call ratio rising, but the move this last week off the 50 day moving average really just put us right back into this sideways channel here. So until we get a breakout above 2745, I don’t think we can say that this market favors either the bulls or the bears. How do we know that we won’t continue to be in a trading market, as the falling ADX line tells us, and we’re gonna come back and test this 2700 support level and then break through it and go back and test the 50 day moving average again? Especially with all of the talk of the trade wars and now the trade wars have officially started and so now we can actually get other countries lobbing tariffs back and forth and really what I mean is lobbing tariffs against the US, I think we just have to play this market cautious while we’re in this sideways channel.
Alright you guys, thanks for listening, love you, and talk with you soon.