S&P 500 Watch Out For Headfake Going Into End of September!

The S&P 500 did a breakout today but I’m thinking it will turn into a headfake as the market goes down the week of September 25 – 29th. Be careful buying the S&P 500 because it did a breakout today. I’m thinking we get a sideways chop out for the rest of the week and then next week we get a sell off.

S&P 500 chart setting up for possible headfake.

The main reason I think this will happen is that September is the worst month of the year for the stock market. Specifically, it’s the last week or so in September that gives the month its bad reputation. But it’s more than seasonality.

Notice the big negative divergence on the CMF. We should have stronger buying pressure with the S&P 500 doing a breakout and hitting a record high. That’s really pathetic buying pressure as evidenced by the CMF which means we have an elevated risk of a headfake move.

S&P 100 Index Put/Call Ratio

The S&P 100 Index looks like a possible exhaustion gap up. Notice how the Equity Put/Call ratio chart looks like a coiled spring ready to pop to the upside:

Equity Put Call Ratio chart

If the gap up on the S&P 500 is an exhaustion gap, then tomorrow we would expect the gap to fill. If it’s a more bullish breakaway gap up, then tomorrow could gap up again as the S&P 500 hits new all-time highs.

What is the catalyst for driving the market higher? President Trump’s corporate tax cut may not happen as Mnuchin admits here. Here is a stock trading lesson on catalysts for your review.

The market exists to screw the greatest number of amateur traders at any given time. The S&P 500 hitting all-time highs during the weakest month of the year smells foul. What a great way for professional traders to really screw a lot of amateur traders! Buyer beware.

Amazon Stock Twiggs Money Flow Breaks Positive

The Twiggs Money Flow on Amazon stock has broken above the zero line and has gone positive for the first time since August 7, 2017.

Amazon just rolled out Amazon Fresh in my area of Fresno, California. I signed up for the 14-day trial for Amazon Fresh and immediately canceled it because of the poor delivery times. On Saturday, I ordered 4 peaches, and a bag of shredded mild cheddar cheese. Amazon Fresh said they could not deliver it until Tuesday, LOL. I cancelled and told them I’ll just go to the grocery store myself and pick up these items in like a hour. If Amazon Fresh is going to be successful, they have to get delivery times down to same-day and at most, one day later. If they can’t do that they might as well close down their Amazon Fresh website because only the elderly and disabled are going to be willing to wait 3 or more days for their groceries to be delivered.

I think Amazon is poorly executing on their Amazon Fresh division. Amazon Fresh wasted about an hour of my time when you include the time it took me to order and then to cancel my order as well as my Amazon Fresh trial. I won’t try Amazon Fresh again for a long time. Maybe I’ll never try it again. That’s the cold hard reality of retail: first impressions are everything. Amazon has blown it in their roll out of Amazon Fresh by promising too much and then not delivering. Still, if any company can turn this around it’s Amazon.

MKM Partners recently gave Amazon a target price of $3,330 which you can read about here.

I’ve been trading in and out of Amazon stock for about a month now and it’s been a great stock to swing trade.

Amazon Stock

Amazon stock looks strong.

That’s a good basing pattern and perhaps even an inverted Head and Shoulders pattern. The 50 day moving average (blue line) is setting up a possible breakout play. Here is a swing trading lesson on breakout chart patterns.

In addition to the Twiggs Money Flow going positive, the Effective Volume study shows large players volume is still in an uptrend.

Prices have been consolidating lately forming a momentum squeeze on the chart:

stocks-to-watch amzn chart 1100x823 - Amazon Stock Twiggs Money Flow Breaks Positive

The TSI is holding its buy signal cross from August 30, 2017.

There is very little resistance above the current price. There is a support zone below the current price at $972.24, a stop order could be placed below this zone.

Investors Pile Into PIMCO High Yield ETF

The PIMCO 0-5 Year High Yield Corp Bd ETF Effective Volume study shows large players are piling in to the ETF in big numbers.

You might be thinking that with the Federal Reserve raising rates, bonds and bond ETFs like HYS are in big trouble. I disagree. There will always be a need for bonds in a portfolio. Anybody who is cash flow sensitive or has a need for principal at a particular date in terms of fulfilling a certain funding or a certain drawdown, fixed income is a far more predictable and less volatile asset class compared to anything in the equity markets. It offers peace of mind for those who really want some predictability in terms of outcomes and reaching their goals.

PIMCO 0-5 Year High Yield Corp Bd ETF Chart

PIMCO High Yield ETF

HYS presents a decent setup opportunity with rising large players volume. There is a big accumulation going on in high yield bonds rights now. The Twiggs Money Flow supports the thesis that large players are accumulating HYS.

Prices have been consolidating lately. There is a resistance zone just above the current price starting at $101.31. Right above this resistance zone may be a good entry point. There is a support zone below the current price at $101.24, a stop order could be placed below this zone.

The stock screener I used to find HYS and its exploding large players volume is the screener I created on Chartmill here called GST Positive Divergence. I also did a lesson on the stock screener and finding positive divergences here.

United States Natural Gas Fund Being Accumulated By Large Players

The United States Natural Gas Fund is being accumulated by large players. Furthermore, large call option buying was detected in UNG on Thursday, August 31, 2017. Traders acquired 28,416 call options on the stock. This represents an increase of 245% compared to the average volume of 8,237 call options. I bought some UNG in my personal trading account this morning.

United States Natural Gas Fund had a large decrease in short interest in the month of August. As of August 15th, there was short interest totaling 53,619,325 shares, a decrease of 25.9% from the July 31st total of 72,332,529 shares. The current short interest days to cover metric is at 7.7 days.

United States Natural Gas Fund Chart

United States Natural Gas Fund

UNG is in a continuation pattern as it chops higher. Today’s gap down open took it right back to the $6.60 uptrend line support. The most bullish indicator though is the rising Twiggs Money Flow which supports the rising large players volume. The rising Twiggs Money Flow and large players volume suggests big players are accumulating UNG in the $6.60 area.

Nasdaq Advance Decline Gives Swing Long Buy Signal

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

Nasdaq Advance Decline chart gives swing long buy signal.

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.

SP 500 Advance Decline chart gives swing long buy signal.

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:

business spx chart 1100x823 - Nasdaq Advance Decline Gives Swing Long Buy Signal

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.

TheStreet published an article on Friday, August 25, 2017, about the strong market breadth here.

Over the last three trading days, the S&P 500 has been doing a late day fade which also favors the bears:

Late day fades on the SP 500 last week.

For more advanced day traders, I did this lesson on day trading stocks and late day fading.

Playing Falling Cocoa Prices in The Hershey Company Stock

The Hershey Company stock looks like a good swing long entry on rising large players volume as cocoa prices are plunging. TheStreet reports that Bernstein analyst Alexia Howard estimates a further 30% fall in cocoa prices could boost Hershey’s earnings per share by 8.6%.

I bought some Hershey stock in my personal trading account today.

The Hershey Company Stock

The Hershey Company stock

The relative strength of Hershey stock is great. August has been a bad month for stocks but Hershey is clearly bucking that trend.

The Effective Volume study shows that large players are really buying Hershey stock. The positive divergence of large players volume to the price of the stock is amazing. My GST Positive Divergence screener that I created for you is how I found this positive divergence. Here is the stock trading lesson on finding positive divergences on large players volume. Please make sure you review this lesson.

The Twiggs Money Flow is positive and rising which confirms The Hershey Company stock is being accumulated at this level.

Owens Corning Stock Candle Over Candle Off 50 SMA

Owens Corning stock has confirmed a candle over candle reversal off its 50 SMA line. I have taken a swing long entry in Owens Corning in my personal trading account.

Owens Corning last issued its earnings report on July 26, 2017. The residential and commercial building materials company reported $1.20 EPS for the quarter which beat the consensus estimate of $1.08. Revenue also beat coming in at $1.60 billion versus the $1.48 billion estimate. You can read more about the company here.

Analysts are Bullish On Owens Corning Stock

Royal Bank Of Canada reiterated its outperform rating and set a price target of $71 (up from $67) on April 27, 2017. Jefferies Group raised its price target on Owens Corning stock from $71 to $72 and gave the stock a buy rating on April 28, 2017. Stifel Nicolaus raised its price target $72 and gave the stock a buy rating on May 1, 2017. Instinet reiterated a buy rating and set a price target of $74 on June 1, 2017. Overall, one analyst has rated the stock with a sell rating, six have issued a hold rating and sixteen have given a buy rating.

Owens Corning Stock Chart

Owens Corning stock chart

There’s a good looking candle over candle bounce off the 50 SMA line. Large players volume has been rising while the stock has dropped which is a bullish signal. The Twiggs Money Flow is negative but its rounding up.

Prices have been consolidating lately and the volatility has been reduced forming a Momentum Squeeze.

stocks-to-watch owens corning momentum squeeze 1100x654 - Owens Corning Stock Candle Over Candle Off 50 SMA

A pullback has taken place which may present a good opportunity for an entry. There is a resistance zone just above the current price starting at $67.4. Right above this resistance zone may be a good entry point. There is a support zone below the current price at $66.5, a stop order could be placed below this zone.

Make sure to review this lesson on finding good stocks to buy.

Stock Market Correction and Waiting To Click The Buy Button

The stock market correction is likely going to push the S&P 500 to test its long-term rising trendline and support at 232.20. The bearish divergence on the Twiggs Money Flow likely signals that the pull back is not over yet.

Short-term stock market correction underway.

A few traders have asked me if now is the time to buy or if they should wait on the sidelines while the market pulls back. We all know that history does not predict future price direction nevertheless, it is useful to know what has and hasn’t happened in the past.

Looking at the last 110 years of stock market price action, the data reveals that waiting for a correction when the market was expensive would have reduced investor returns significantly. The reason is that the term “expensive” is a subjective term. Even if you use a more objective approach of looking at the P/E ratio, the data still shows that staying out of the market for months or even years waiting for a correction is a losing strategy.

Where long-term investors get themselves in trouble is that the correction they are waiting for may occur at a much higher market level than it is at today. Also, sitting on the sidelines for months or even years runs the risk of the investor losing patience and ultimately capitulating to the Bulls and buying back in to the market at a much higher level.

Few investors believe markets efficiently follow a random walk even though it’s a key component of market theory.

Short Term Stock Market Correction

Timing a stock market correction for profits is best done using a short-term swing trading strategy. The idea is that you don’t want to try and catch a falling knife.

Looking at QQQ, the Russell 2000, and the S&P 500, over the last week, you can see that the Russell 2000 and QQQ are leading the S&P 500 lower:

In stock market corrections, the Russell 2000 usually leads the other major indices lower.

The market is telling us that what happens in the FANG stocks and QQQ will likely dictate market direction on the S&P 500.

business QQQ chart 1100x953 - Stock Market Correction and Waiting To Click The Buy Button

With the Twiggs Money Flow breaking below zero for the first time in 2017, I think a retest of the $136 support level is likely.

Right now being in cash is an excellent move. Continue to stalk your favorite stocks for a swing long entry. I wouldn’t be too quick to jump back into this market yet. Consider using stop limit orders as taught in the lesson here.

The main thing to watch out for is the Establishment ‘Defeat Trump’ propaganda in the WSJ, CNBC, CNN, and elsewhere. These media groups are so dishonest that some were even claiming that the stock market went up because Steve Bannon left the White House. That was the propaganda narrative with CNBC claiming that traders on the NYSE floor cheered as proof. First of all, those old left-leaning talking heads in stock exchange clothing walking around looking stupid on the NYSE floor are not representative of the stock market as a whole.

Just as the Establishment media was advancing the false narrative that markets were up because of Steve Bannon being out at the White House, markets turned back down and so they quickly killed that false narrative. Another example is CNN’s propaganda that the entire market is worried because of Trump.

For the first time in our life-times, we have a President who is exposing the Establishment propaganda media in this country. There is a major information war going on right now.

As a trader, you can’t get caught up in the propaganda and the power struggle going on for control of public perception. You have to check yourself every day and make sure you aren’t making trading decisions based on propaganda. If you think the mainstream media is getting into your head too much, cancel your subscriptions like I did with CNBC Pro last week, and the WSJ and Barron’s the month before. Just turn it off because these propaganda machines are not going to help you make more money at stock trading.

Remember folks, markets mostly do random walks, especially during intra-day trading. No left-leaning propaganda media outlet can peer into the minds of millions of traders around the world and claim to know what they are thinking. These propaganda publications believe that perception is reality so if they can control the public’s perception, they can control reality.

The U.S. stock market is overbought, and the weak seasonal period is upon us. May through October marks the weakest 6 months of the year.

I don’t want to beat up on the mainstream media too bad so I’m not going to mention where I read the following bogus analysis:

Overbought markets look for excuses to sell off. Will Trump’s lack of leadership become an excuse for a big selloff in stocks?

The mainstream media is actually talking about a stock market correction as if it is some type of external beast that thinks for itself and makes up excuses. Reality check: you and I are the markets. People that work at institutional trading firms and hedge funds are the markets. Are you looking for an excuse for the market to sell off? I’m not either. Nobody is. We’re just reading the charts, analyzing the fundamentals, weighing external news events, and making our decisions. Nobody is searching under desks and looking everywhere for excuses to sell out of their positions. Especially not some make-believe entity called Overbought Markets.

Did you notice the Establishment propaganda “Trump’s lack of leadership…”? You can criticize the President on a lot of things but one thing you can’t criticize him on is a “lack of leadership”. President Trump is a strong leader with strong ideas and a vision on which he is moving to execute those ideas. Get in his way and “you’re fired”. Trump demonstrated his very strong leadership skills for over a decade on the hit-show The Apprentice. President Obama isn’t even in the same ballpark as President Trump when it comes to having strong leadership skills.

Mainstream media propaganda about stock market corrections.The main factors influencing a short-term stock market correction right now are: the speed of Fed rate hikes and balance sheet reduction, North Korea, the debt-ceiling, the economy, and the speed at which the Trump America First agenda is moving forward. Anything outside these main themes is likely Establishment propaganda by powerful groups battling to control public perception and thus reality.

ProShares UltraPro Short QQQ Swing Long Trade

The ProShares UltraPro Short QQQ is looking like an interesting swing long trade. With QQQ up for some 9 days in a row, a swing move down is likely to occur. This will likely be a short one or two day hold only. I took a position in SQQQ this morning in my personal trading account.

ProShares UltraPro Short QQQ Chart

Notice the positive divergence on the Twiggs Money Flow where the price of SQQQ is hitting lower lows but the Twiggs Money Flow has made a higher low.

Large players volume has stopped falling but it’s still too early to tell if large players are going to step in and swing trade this.

Are you are looking to short the market on a swing trade like this or a VIX long play? Leave your comment below if you are.

To learn more about stock screening for positive divergences, go here.