Indices Outpace Large Cap Stocks

The major US equity indices (located on the far right) continue to technically outpace some the larger cap names like Apple, Amazon & Alphabet. The one exception being Microsoft, which like the Dow (DJIA), seem poised to retest last years highs.

STRATEGY:

LONG:  BA, NFLX, MSFT


AAPL:
   
       Aggressive BUY on positive resolve of current 2-week bull flag or
       BUY on a pullback to the 20-day MA &/or 168.33 or
       BUY near 161.01 gap top or 50-day MA

       IGNORE BUY ideas & implement SELL if bull flag resolves negatively and price-action  
        fails to reclaim 168.00/33 after breaking below it.

AMZN:

       Aggressive BUY on clean break of the 20-day MA  or
       BUY on a pullback to the 50-day MA or near 1566/77 or marginally below it or
       BUY near 1520  or 1460 

       IGNORE BUY ideas & SELL if 1566 fails to hold and reverts as resistance

COT Update

COT: The last COT report was published on December 21, 2018. Reports going forward from that date will be published in chronological order beginning with the report previously scheduled for release on Friday, December 28, 2018 (based on data from Monday, December 24, 2018).  The CFTC expects to publish this report on Friday, February 1, 2019.  After this, the CFTC expects to publish one report on Tuesday and another on Friday of each week until the reports are current as per the normal schedule.

Equity Indices: Key Levels To Watch

The DJIA (Dow Jones Industrial Average) has retraced more than 38.2% of the latest decline in two strong thrusts and is consolidating the second 4-day wave up. The only pullback (Jan 3rd) was short-lived and suggests that while (downward) counter moves remain limited to a single day or two, the next region of interest is located up near 24.5K, where the key range midpoint and 50-day MA lie.

That said, corrective dips within a medium-term recovery phase such as we're in right now can suffer deep pullbacks towards the low before eventually resolving further strength. The fact is, however, that we haven't seen that as of now, but that the potential always remains.

If subsequent dips were to break cleanly below 23.4K, then the wave-count will have to shift negatively and a potential large lower top could be setting-up.

The previous two turning points that marked the end of the November and December rally both ended in exhaustive-style thrusts that marked big up days that ended at or near the highs, only to be quickly followed by big reversal days. Again, we have not seen this either, but rather a sort of melt-up type advance thus far.



The S&P 500 (chart below) is in the same situation as the Dow with the highlighted region to watch located at 2638/2642, where its 50% retracement and 50-day MA coincide. Similarly, the bullish wave-count would be at risk if the 2500 region were taken-out to the downside.

Strategy: Buy Dips (DJIA/S&P 500)

VIX: Watch The 200-Day Moving Average

Volatility has settled substantially since Christmas and has just dipped below its 50-day MA to probe the 20 threshold as of this writing. This exposes the 200-day to a re-test as seen back in November and December (now in the 16.68 region). If, however, this key support fails to hold, then the base formed (in the 10 to 12 region) between last year's volatility spikes will be targeted.

CFTC Special Announcement

During the shutdown of the federal government, the Commitments of Traders report will not be published. When the federal government operations return to normal, CFTC will resume publication of the Commitments of Traders report.

Getting Closer!!!!!

This is a chart of the S&P 500 overlayed with the percentage of stocks above the 200-day moving average. Stocks are quickly getting close to that area (-3 standard deviations or 20% above their 200-day)  which helped the bottoming process back in 2016. 

FX Markets Focused on 1.14 & 114

After failing last week at 1.14, the EUR/USD is ranging beneath a trendline that lies near the key metric. It appears to be forming a large triangle, a consolidation pattern that typically resolves when the converging trendlines near one another. In this case, both the top-end of the triangle and a 3-month falling trendline intersect near 1.14. This provides more relevance to an upside breach of the euro through 1.14 vs the US dollar.

Meanwhile, the greenback is flirting with a trendline at Y114 after having traded right up to it last week before Fed Powell doused expectations for future rate hikes. While, the USD/JPY's trendline is not as steep as the EUR/USD's, it is part of a larger pattern, namely a 2-year triangle. This suggests that an upside break would carry more relevance for the pair compared to an upside breach of 1.14 for the EUR/USD.

While the US dollar continues to consolidate what has been a strong year, a solid indication which way it will go next could depend which will go first....114 or 1.14!