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Weekly Trend Report, December 2, 2019

(free content, published before the launch of our new site)

Week of 12/02/2019

S&P 500 (SPX) closed the week at 3140, a new record closing weekly high. It is in an intermediate and longer-term uptrend.  For my time frame, stocks continue to remain buyable above the 40- week moving average, currently at 2937.

A popular narrative currently is that “the market is overbought”. As the below chart shows, however, from a Monthly RSI perspective, the current Monthly reading of 66.29 is well below the January 2018 peak at 87.73 and the September 2018 peak of 78.03. Also of note, is that the Monthly RSI stayed above 70, the technical definition of overbought, for three years, from Q2 1995 to Q3 1998.
The current negative correlation between 10-year US Treasury Bond yields and Gold prices (yields up, gold down) is evident in these two charts:
10-year UST yields (TNX) bottomed on 9/03/19 at 1.42%. Gold topped at 1566 on 9/04/19. Gold is a counter-cyclical asset. Rates rise when the market is forecasting a stronger economy, cyclicals rise and Gold has moved lower for now. I am observing this relationship and am still avoiding any new positions in Gold, Gold Miners, US Treasuries and rate sensitive industries such as REITs and Utilities here.  For my current view to change, Gold would need to close over 1500 and the Gold Miners ETF, GDX, would need to close over 28. US Treasury 10-year yields (TNX), 1.776 on Friday’s close,  are oversold here for my time frame and a move higher would not surprise.
10-year US Treasury Yields


Amazon (AMZN) closed on Wednesday over 1800, back over the 200-day moving average and over all key MA’s for the first time since July 2019. Slightly overbought on the daily, any pullbacks need to hold over 1685 to support the bullish case.

General Electric (GE) is improving longer-term, with a recent 10-week/40-week bullish cross. The 40-week moving average is also sloping higher, which signals an improving longer-term price trend. The weekly chart is constructive as long as there are no closes below $10.

The Dow Jones US Steel Index, (DJUUST), recently made a 7-month high and had a bullish 10 week/40 week moving average cross as well.  A bullish sign for this group and the US economic outlook. This group is still one of my favorite longer-term turnaround groups, along with copper, aluminum  and other industrial metals. FCX and MT are currently above or testing the 40-week MA.

I continue to remain technically bullish and fully long equities over the rising 40-week moving average in S&P 500 and Nasdaq. High relative strength stocks are key areas of interest: Tech, software, semis, financials, health care, industrials and building materials rank the highest. Cyclicals and value stocks do as well, and longer-term turnaround ideas in energy, industrial metals and European financials also. I am continuing to avoid interest rate sensitive trades such as Treasuries, Gold, miners and defensive names.  


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