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S and P 500 in consolidation channel, may test resistance next week

Stock Market Prediction For Week of May 28 2018

A weekly Saturday financial show that attempts to predict market direction for the week ahead by looking at a variety of technical and fundamental indicators. Included are the top performing stocks from GuerillaStockTrading that could trend higher over the coming days and weeks driven by strong catalysts or strong fundamentals.

Hello my fellow stock trading masters, this is Lance Jepsen with GuerillaStockTrading.com

Three day Memorial weekend, right on guys! You guys have a great memorial day weekend.

Tick chart shows no institutional buying or selling

No institutional buying or selling was detected on the tick.

Libor rate going sideways

The LIBOR rate is consolidating after a big run up. At some point we’re going to remove the LIBOR rate chart from the Saturday shows because LIBOR is going to be obsolete after the rate was illegally manipulated but for now this chart favors the bears.

NYA50r at 63.5. Institutional investors selling Apple stock, reduced holdings by $153 million in the first 3 months of 2018. T Rowe Price sold 35.6 million shares, Fidelity sold 21 million shares, Wellington sold 9.8 million shares, and JP Morgan sold 8.7 million shares. Institutions selling on concerns of future iPhone sales.

The New York Stock Exchange percent of stocks above the 50 day moving average is at 63.5% that favors the bears.

NYA200R too close to 50 to say if it favors either bulls or bears

The New York Stock Exchange percent of stocks above the 200 day moving average is at 56.3%. Too close to 50 to favor either the bulls or the bears, no signal.

XTN testing resistance

Transports were at the upper end of resistance in a giant sideways pattern. We have to watch for a breakout above 66, that’s the level that we want to keep our eyes on. We have a bullish AROON spike up, which is bullish and the PPO is definitely bullish. Nevertheless, until we get a breakout above 66. No signal.

S and P 500 in consolidation channel, may test resistance next week

The S&P 500, we have a consolidation pattern that has formed here. The TSI has been rising into this sideways consolidation pattern, which is bullish. The ADX line is falling, which means we’re in a trading market. We’re above the 50, we have a Parabolic SAR buy signal that we’ve been operating under since back shortly after May 7. I think we have to assume continuation of the sideways pattern until proven otherwise. So the most likely pattern that we would have happen next week is a move up right here back up to test this upper resistance level. What I like about this consolidation pattern is that we have a very clearly defined support at 2710 and a resistance at 2750 so we can watch these levels and get a very good signal of, you know, obviously a breakout above 2750 would be bullish and a break down underneath 2710 would be bearish. I think that while we’re consolidating and moving sideways, I don’t think we can say that this chart favors either the bulls or the bears. You would think it’s got a slight bullish bias because of the Parabolic SAR buy, it’s above the 50, the strong TSI is rising, but with the SOFI AI giving us a fairly valued market rating, and really it’s in the high end of fairly valued, it just came out of an overbought rating, I think we have to exercise some caution here. I don’t that we can get too bullish while we’re in this consolidation channel. So for now sidelines rating. The bulls and the bears are just too evenly matched in this channel to say which way this is going to break next week.

Equity Put Call ratio chart rising as PUT hedging is occurring while S and P 100 index consolidates

Zooming in on the S&P 500, the equity put call ratio, while it was just so bullish over the last couple of weeks when this was falling, look at what we have folks. This to me is somewhat troubling and you gotta watch this stuff very closely. Very sneaky market. Check out the equity put call ratio. So after the equity put call ratio bottomed on May 18 on Friday, all last week, look at what’s happened. It’s been going up. So you’ve got this, I mean you’ve really got this, you can kinda just take this up here, so right in this section here, while the market’s chopped out and gone sideways, you’ve got very quietly puts rising and put hedging going up. That’s what I was worried about, the longer that this level here held, the longer that the, what is that I’d say 1210, 1206, 1210, resistance level holds, bears are going to gain confidence as bulls seem to be unable to take it above this level, and I think were seeing some of the bears gaining confidence in the fact that the put call ratio is rising as more traders are starting to hedge their longs. So the rising equity put call ratio into the consolidation pattern gives a slight advantage to the bears.

QQQ in consolidation channel, may test resistance next week

On QQQ, just like the S&P 500, we see this sideways consolidation pattern in here. It’s consolidating above the 50. We’re still operating underneath a Parabolic SAR buy signal, but so close to breaking that folks. It almost looks to me like, so if we bounced down off this channel wall and we come back down to test sideways channel consolidation support off 167, that may trigger a Parabolic SAR sell signal. It’ll be close because it’ll be about right in here, it’ll probably, maybe, rise one little more click. You’ve got the RSI just flatlining and going sideways, although it is above the 50 which is a little bit bullish. The MACD histogram bars are just barely holding above zero. We just don’t know which way they’re going to break yet. So the market’s really taking this pause, this this wait and see attitude, this sideways consolidation as the bulls and the bears just battle it out in here back and forth each one trying to gain dominance over the other, but unable to do so for pretty much all of May. Sidelines rating.

Russell 2000 testing Parabolic SAR support

The Russell 2000 has really been our bullish life line here. Previous resistance turned into support. We had a rally off, over the last week. It’s pulled back, tested the Parabolic SAR support level which has held. I think this is a key level that you want to keep your eyes on, about 160.50 or maybe Parabolic SAR support at 160.62, this is the previous swing move high so in a bullish market we would expect previous resistance to turn into support as it did here. So we really want to see this level hold at, I would say about 160. The PPO is rounding over. The green line is closing in on the red line, which is a bit ominous. Notice that the ADX line has stopped rising and it looks like it’s flatlining and starting to fall a little bit so, and that’s what happens, we go through a trending market, and then we go into a trading market. Stayed in a trading market. Then we went into a trending market and now we look like we’re transitioning back into a trading market, or range contraction, but I think as long as we hold above that 160, we should be fine folks. We have less of a sideways consolidation than we have on the S&P 500 and the NASDAQ. The Russell 2000 was actually going up during the period that the rest of the markets were going sideways, and now we’re getting a little bit of a pullback here, and maybe now we get the next leg up here. So this chart gives a slight advantage to the bulls.

ITB chart is below its 50 day and 200 day moving averages.

On the US home construction ETF, it’s definitely looking a bit more bullish, we have this kind of trend line here. We’ve got a Parabolic SAR buy signal, although the last time we had a Parabolic SAR buy signal back in here that really didn’t help out too much as the market just rolled over and went even lower. We have a PPO going positive on histogram bars here, but when we had the PPO go positive last here, and here, it didn’t amount to much. The 50 day moving average has crossed underneath the 200 day moving average so we have a burial cross in home construction. We know that the costs of interest rates are going up. The cost to finance a home is going up. The cost to service your debt, credit cards, even gasoline is going up. So the burial cross to me makes a lot of sense. That’s the home construction discounting the future by anywhere from 3 to 9 months. So with interest rate hikes, what two or three more in the next nine months, the market’s betting that, that’s gonna have a slowing effect on home construction and I think the market is absolutely right about that. It’s the market pricing in the future. So with the burial cross folks, this chart gives a slight advantage to the bears.

SOXX lifting off its 50 day moving average line

The semiconductor ETF SOXX definitely looks bullish. We have a a bounce off of the parabolic star support level holding above the 50 day moving average. That’s what we were looking at last week was that hey, that’s too close to the 50, let’s see what happens off that 50. Well it’s lifting and moving away from the 50 which is very nice. We have a little breakout above this 187.67 high, but we’ve got a lot of resistance levels, 189, 193, that still need to be broken. PPO histogram bars are still positive. This chart gives a slight advantage to the bulls.

Nasdaq Advance Decline Issues chart in uptrend. Semiconductor stocks benefit from truce with China. Micron stock surged higher as did other chipmakers because they do a lot of business with Chinese companies

The NASDAQ advance declines issues chart, very strong consolidating a big move up since the start of May, this chart favors the bulls.

S and P 500 Advanced Decline chart in uptrend

S&P 500 advance decline percent chart, within a strong uptrend this favors the bulls.

XLF walking down the 50 day moving average line

XLF continues to look so weak. Look at this folks. It’s just falling and is banging against the 50 day moving average as the 50 day moving average continues to fall and get closer to the 200 day moving average. The money flow has finally gone positive but we don’t see that translating into the price of XLF. The PPO looks like it’s rounding over and we have a cross. We could see a break below the zero line, where we would go negative next week. But I think we have to see what happens off that 50 day moving average line, this blue line. Do we break underneath the 50 day moving average or do we bounce and get a move off of this. So for now, no signal.

XRT will resistance become support

The S&P retail ETF, previous resistance has become support, but we’re operating underneath a Parabolic SAR sell signal. TSI is rising looks choppy, looks ugly, but it, but it is rising. I can’t believe that retail is actually holding up this well folks. I have to say this chart gives a slight advantage to the bulls.

10 year treasury yields versus the S and P 500. 10 year yields cracked the uptrend line for the week ending May 25, 2018

The 10 year treasury yield has absolutely plunged folks. The uptrend that we saw has cracked. So we had like a trendline about right in here and that got broke last week. So this is something that we have not seen folks. Keep in mind that this was a bull flag pattern here, and then we had the bull flag breakout move up, a consolidation breakout headfake rollover, and now it’s heading down hard-core, and it’s taken out this previous support level in this sideways consolidation zone that we had. Folks, if we can get that 10 year treasury yield to continue to drop and we get a steeper yield curve that would definitely be bullish for stocks. I wouldn’t bet on that quite yet though but with the uptrend in the 10 year cracking this last week, just over the next five days, I think we have to say that this gives a slight advantage to the bulls.

UST and SPX both up for the week ending May 25, 2018

For the week, money went into both stocks and bonds that favors the bulls.

Two paths IBB could take, one is bullish the other is bearish

Our biotechnology ETF IBB, it’s banging right up against the 200 day moving average and what concerns me is that the longer that continues to bang up against this 200 day moving average and not break through, the bears can get emboldened, we don’t see it yet. We have a positive money flow, but it could be starting to rollover, so I think bulls really need to take it through that 200 day moving average and what I’d like to see is not only a break of the 200 day moving average, but then the market to come back and test it. So if this is the 200 day moving average and we just kind of extend this out a little bit further, what we’d like to see is a break above the 200 day moving average, turned back down, boom, the 200 day moving average holds turns into support, and then we get a move higher that breaks above the previous high, this would definitely be bullish. A more bearish pattern that we could see is an immediate bounce down off this level, and then we go back and we test and actually by then, the 50 day moving average would kinda be more out here, we would come back test that 50 day moving average, break underneath it, come back up hit the 50 day moving average and then the 50 moving average would become resistance and then we get a move down and we break that previous swing low. So which way biotech’s go could have a big influence on the stock market folks. We’re in sell in May and go a way so it’s a very cautious time. At the same time we have the Trump administration working with the FDA, pushing more FDA drug approvals through, doing things that stimulate the local economy and so we have small caps and domestic companies and biotechnology companies doing quite well in this market. So we have to see, are investors risk on, and we get a break above the 200 day and the yellow path occurs?– or are we a risk off and the cyan path occurs? That’ll give us some insight into investor psychology, but for now, while we’re chopping out sideways right underneath that 200 day moving average line, no signal.

Japanese and the US lost in the currency wars for week of May 21 - 25, 2018

In the currency wars, we, we got pretty roughed up this last week folks, but not as roughed up as the Japanese yen. The Japanese lost in the currency wars and then the, and then we were right behind the Japanese, so this chart gives a slight advantage to the bears.

Margin debt levels continue to rise on the rising price of oil

We have new margin debt levels to look at for April 2018. Margin debt continues to rise a little bit, it’s definitely holding above that 10 month moving average gold line. The margin debt of course is rising because the price of oil rose during this timeframe. Keep in mind that the biggest sovereign wealth funds in the world hold oil. As the price of oil rises, more margin is extended to the sovereign wealth funds and that money is used to buy stocks and all sorts of different assets. When the price of oil falls, it’s like a giant margin call that goes out as sovereign wealth funds have to sell assets to reduce their margin levels and meet margin calls so with the price of oil rising and margin debt levels, rising, this gives the advantage to the bulls.

Negative divergence between the S and P 500 and the NYAD

The NYAD to the S&P 500, for the first time in several weeks we actually have a signal here folks. We have a divergence as you can see. So notice that Friday closed just a little bit underneath Monday, but yet on the NYAD Friday’s close is well underneath Monday here, this is a negative divergence and gives three points to the bears.

Russell 2000 above its pivot level and R1 level

The Russell 2000 is above, way above the pivot level. It’s above its R1 level, folks this favors the bulls.

S and P high low index rising

S&P high low index, blue, fading higher, favors the bulls.

S and P 500 trading above EMA envelope lines

The S&P 500 percent of stocks above the 50 day moving average with our EMA envelope lines, it’s above the EMA envelope lines. The TSI looks very strong, this favors the bulls.

Utilities top performing sector for the week of May 21 - 28, 2018

Looking at our sector rotation chart over the last week, utilities were the top performing sector for the week, financials were the weakest performing sector. Folks, utilities are a defensive sector, so in sector rotation over the last week, it favors the bears.

VIX short term futures in downtrend

The VIX short-term futures is within a strong downtrend, that favors the bulls.

S and P 500 in consolidation channel

Folks my rating for trading next week is sidelines. You should be on the sidelines and in the safety of cash. Looking at the S&P 500, we’ve been in this sideways consolidation channel for the last few weeks. The bullish market to me looks like we could get a move up to the upper trend channel resistance wall somewhere around 2750, but until we clear that 2750 level, we can’t say that the bulls have the upper hand, especially with the close proximity to this lower consolidation channel support level at 2710, that’s the level to keep your eyes at on the downside. We’re just a bit too close to that for my comfort. Overall we’re going perfectly sideways and that’s why this market does not favor either the bulls or the bears.

Alright you guys, you have a great three day Memorial Day weekend, as we honor those who paid the ultimate sacrifice for our freedoms. Alright you guys, love you, and talk with you soon.