BLUE CHIP WEEKLY TREND REPORT
SUNDAY, DECEMBER 22, 2019
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MACRO MARKETS OVERVIEW
Markets made new highs this week with the S&P 500 (SPX) +1.65% for the week, to close at 3221, a new all-time high. Nasdaq (COMPQ) closed the week +2.18%, at 8924, also a new all-time high. 10-year US Treasury Yields closed the week +.98, at 1.91, up from last week’s close at 1.84. Gold was relatively unchanged for the week, down 30 cents, at 1480 and West Texas Intermediate Crude Oil closed the week +.37 at 60.44.
S&P 500 (SPX)
SPX, weekly close at 3221, continues to be very strong and continues to be buyable over the rising 40-week moving average at 2966. The consensus has been calling for a pullback for months now, but for longer-term position traders like myself, these 1-5% pullbacks, whenever they occur, are part of the process, and are not a reason to change the process or change open positions at all. Pullbacks can happen at any time, but the primary trend is very strong here, and I remain technically bullish over 2950.
Nasdaq, weekly close at 8924, is bullish as well, at a new all-time high and continues to be buyable over the rising 40-week moving average at 8100.
Some claim that the market is overbought, but from a Monthly RSI perspective, at 68.51, that reading is nowhere near the 87 RSI level that was reached in January of 2018. Not that the 87 RSI level has to be reached again, but the data does not support an “overbought” reading just yet.
US TREASURY BOND MARKET
US Treasury 10-year yields continue to make their way higher, closing at 1.917 for the week. My technical view continues to favor higher yields and lower bond prices. The September/October lows at 1.42 to 1.50 have held for now, and the 20 and 50-day moving averages have crossed and have turned up. The key test is at 2.00 above, and the declining 200-day moving average is at 2.01. This is a significant level and I am curious to see how any possible test plays out. Bond yields bottomed in early September, the week before the value/cyclical stock rotation had a breakout move, on September 9. Bullish price action in cyclicals is a market forecast of a stronger economy, which leads to higher yields. I do not have any open positions in bonds currently, as there is no clear trend for my time frame.
US TREASURY 10-YEAR YIELDS (TNX)
Weekly close at 1.917, are in an intermediate-term uptrend of higher lows, with a rising 10-week moving average.
iSHARES 20+ YEAR TREASURY BOND ETF (TLT)
Weekly close 136.65, is in an intermediate-term downtrend of lower highs, with a declining 10-week moving average. My technical view of Bonds continues to be neutral to slightly bearish.
Gold, weekly close at 1480, continues to be another market that I am neutral on, which topped out the same week that bond yields put in their cycle low, a correlation that I have touched on over the last few weeks. Gold is a counter-cyclical asset, and with the recent strength in cyclicals, the weakness is no surprise. At the current 1480 level, it is showing shorter-term strength, and my weekly momentum indicators are turning up. A close above 1500 would change my view to moderately bullish. Key support below is at 1450, 1420 and finally at 1400, which is the key long-term support line.
GOLD MINERS ETF (GDX)
I continue to be neutral on Gold Miners ETF (GDX) at 27.13. Key trading levels are 26 on the downside and 28.50 above. Whichever one of these levels breaks first on a closing basis, will dictate my directional view, up or down. Until then, I am observing only.
Crude Oil (WTI), weekly close at 60.44, continues to show signs of strength, with consecutive weekly closes over 60, for the first time since April 2019. My key levels for crude have been 50 on the downside and 60 on the upside. The weekly closes over 60 is a bullish technical signal. Oil has also closed higher for 6 of the last 7 weeks. Of particular interest is that crude has traded very closely to the now rising 200-week moving average all year, but with only two closes below it. My only crude oil positions are in energy equities/ETFs, and I am technically moderately bullish here on this market.
WTI CRUDE OIL WEEKLY
WTI CRUDE OIL 200-WEEK MOVING AVERAGE
US DOLLAR INDEX (USD, DXY)
The US Dollar index, weekly close at 97.27, has been weakening recently, with consecutive closes below the 40-week moving average for the first time since June 2019, and only the second time since April 2018. 95 is a key support level below. If USD should continue to weaken, this has historically been bullish for commodities, which are priced in Dollars, commodity equities and Emerging Markets equities. I do not trade currencies, but I am monitoring this market closely.
My overall technical view on the core macro markets, is intermediate to longer-term bullish on equity indices, slightly bullish on crude oil, slightly bearish on US Treasuries, and neutral on Gold, Gold Miners, and US Dollar.
EQUITY MARKETS FOCUS
My core markets are the S&P 500 and Nasdaq, with a focus on large cap stocks over $10 billion market cap. I continue to maintain my max-long positioning, as has been the case coming out of the early October lows. I focus on the technically strongest industries and sectors and the strongest large cap stocks in each.
The 50 “All-Markets” ETFs that I track are ranked by daily RSI are below:
The top 10 groups, in order are: Health Care, Nasdaq 100, Lithium, Technology, Russia, Semiconductors, S&P 500, Solar, Small caps, and finally Software.
I focus on a select group of ETFs and stocks, what I refer to as the “Core Group”. My core top 10, not including the indices, SPY and QQQ, in order are:
Health Care (XLV), Technology (XLK), Semiconductors (SMH), Software (IGV), Emerging Markets (EEM), Europe (VGK), China Internet (KWEB), Energy (XOP), Europe Financials (EUFN) and US Financials (XLF). This is where I am looking to focus my efforts. One group that did not make the top 10, but is a key group here is the Metals & Mining ETF, XME. Following is each group and some of the technically strongest names in each group.
1. HEALTHCARE (XLV)
ABT, ABBV, AMGN, BMY, JNJ, MRK, UNH
2. TECHNOLOGY (XLK)
AAPL, FB, GOOGL, MA, NOW
3. SEMICONDUCTORS (SMH)
AMD, AMAT, INTC, MU, NVDA
4. SOFTWARE (IGV)
ADBE, MSFT, PAYC, SHOP
5. EMERGING MARKETS (EEM)
See China Internet names below
6. EUROPE (VGK)
ACN, BTI, NVS, NXPI, RIO
7. CHINA INTERNET (KWEB)
BABA, BIDU, JD, NTES, TAL, TCEHY, VIPS
8. ENERGY (XOP)
COP, HAL, SLB, VLO
9. EUROPE FINANCIALS (EUFN)
BCS, CS, DB, SCGLY
10. U.S. FINANCIALS (XLF)
BAC, JPM, GS, MS
METALS & MINING (XME)
BHP, FCX, MT, SCCO
All 50 Focus names are listed below, with weekly closing prices:
Some longer-term charts of interest:
Baidu (BIDU) $127.49
China internet leader BIDU closed over the 40-week moving average for the first time since July 2018, a bullish long-term trend reversal signal. $115 and $100 are key levels on any pullack.
Tencent (TCEHY) $48.15
China internet heavyweight, TCEHY, closed at an 8-month high and back above the 40-week moving average, a bullish signal.
Global Lithium ETF (LIT) $27.45
LIT has had consecutive weekly closes over the 40-week moving average, and had been below the 40-week since March of 2018, a bullish long-term signal.
Luckin Coffee (LK) $32.19
Luckin, a mid-cap at a $7.9B market cap, is a recent IPO coffee chain in China. Having made a new high this week, it is a bullish chart above $28.
Freeport-McMoRan (FCX) $12.71
FCX continues to be a top cyclical idea here, and is technically bullish above 10.50.
I continue to be technically bullish on equities here and maintain the max-long weighting that I have had since October 3. Charts and leading stocks are technically bullish and trending higher. While pullbacks can happen at any time, that is no need to alter the process or positions. I do not try to call short-term moves, and I trade only in the direction of the primary trend, which is firmly up for now. As long as charts are trending higher, I will continue to maintain my long side positioning.
My best strategy is to hold the strongest names in the strongest groups, and large cap leaders such as Apple, AliBaba, Bank of America, Bristol Myers, Google, Home Depot, Johnson & Johnson, JP Morgan, Microsoft and other names and groups on the Top 50 Focus list continue to be the best ideas on my screen.
Have a great week.