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The Bear Market Rally Climbs Additional Risky Levels

Feb. 03, 2019 2:13 AM ETDIA, IWM, IYT, QQQ, SPY16 Comments
Richard Suttmeier profile picture
Richard Suttmeier


  • The Diamonds ETF is the first to be above its 200-day simple moving average at $249.86.
  • The Spiders ETF popped above its semiannual pivot at $266.14 on dovish FOMC, but remains below its 200-day SMA at $273.89.
  • The QQQs ETF is between my semiannual and annual risky levels at $167.53 and $169.27, but is below its 200-day SMA at $171.48.
  • The transports ETF is below its new monthly risky level at $183.46 and its 200-day SMA at $190.35.
  • The Russell 2000 ETF tested its monthly and semiannual risky levels at $149.65 and $149.77.

Today, I show the daily charts with their key technical levels.

The Federal Reserve continues to unwind its balance sheet: As of Jan. 30, the balance sheet was marked at $4.040 trillion, down $460 billion since the end of September 2017 when it was $4.5 trillion. The total to date for January is now up to $18 billion and that does not include any unwinding that may have occurred during the last two days of the month. The last day of the month is a maturity date for U.S. treasuries so I will assume that the release for Feb. 6 will be for January, not February.

My call for the FOMC: The Federal Reserve will likely keep the federal funds rate at 2.25% to 2.50% as their revised “normal”. The Fed balance sheet will become a primary monetary policy tool as the unwinding continues, but longer term they could increase the balance sheet without using quantitative easing measures.

How the Bear Market Rally Evolved:

  • SPY tested and held its “reversion to the mean” at $234.71 at its Christmas low of $233.76 set on Dec. 26.
  • IYT held my semiannual value level at $159.63 on Jan. 3. The close that week was above its “reversion to the mean” at $163.89.
  • DIA and SPY had daily “key reversal” days on Dec. 26. Both set their lows on Dec. 26 then closed above their Dec. 24 highs.

Here’s Today’s Scorecard

Scorecard for the 5 Equity ETFs

SPDR Dow Jones Industrial Average ETF (NYSEARCA:DIA)

Daily Chart for DiamondsCourtesy of MetaStock Xenith

Diamonds have been below a “death cross” since Dec. 19 with DIA above its 50-day and 200-day simple moving average now at $241.79 and $249.96, respectively. Investors following this signal should reduce holdings at the 200-day SMA. DIA set its all-time intraday high of $269.28 on Oct. 3 and is 7% below

This article was written by

Richard Suttmeier profile picture
I am the Founder & CEO at Global Market Consultants, Ltd. I consider myself as a Financial Engineer with an engineering degree from Georgia Tech and a Master of Science degree from Brooklyn Poly. In 1972 I began my career in the financial services industry trading U.S. Treasury securities in the primary dealer community. I became the first long bond trader for Bache in 1978, and formed the Government Bond Department at LF Rothschild in 1981, helping establish that firm as a primary dealer in 1986. This experience gave me the insights to be an expert on monetary policy, which I feature in my newsletters, and market commentary. I formed Global Market Consultants Ltd at the end of 1988 and expanded on my analysis to include proprietary analytics. While operating Global Market Consultants I was the U.S. Treasury Strategist at Smith Barney 1991 through 1995, was Chief Financial Strategist at William R. Hough in St. Petersburg, Florida 1997 through 1999, and was Chief Market Strategist at Joseph Stevens 1999 into 2008. I began covering U.S. equities in 1997 and began to use ValuEngine as my stock screening tool in 2002 before joining them as Chief Market Strategist between September 2008 and November 2014. I was the Chief Market Strategist at Niagara International Capital Limited between December 2009 and December 2014. In 2005 through 2007 I wrote columns on RealMoney.com and authored TheStreet.com Technology Report. My unique coverage called for the housing bubble to pop in 2005 and for regional banks to collapse in 2006 and early-2007. This is when my proprietary analytics became known as value levels at which to buy on weakness and risky levels at which to sell on strength. I became an Expert Contributor for TheStreet.com in April 2012 and currently write one or two stories a day covering subjects such as: The housing market, community and regional banks, momentum stocks, earnings profiles both before companies report quarterly results and provide scorecards after reporting results. Many of my stories we include moving averages, momentum readings, analysts’ earnings estimates, and value levels and risky levels. Over the years I made frequent appearances on financial TV beginning in 1993 on CNBC covering the U.S. Treasury auctions and as a substitute for John Murphy on his segment called ‘Tech Talk’. I also occasionally appeared on CNN and Bloomberg. On almost every holiday I appeared for an hour covering stocks on a call-in / email-the-expert ‘Talking Stocks’ show on CNNfn. In 2002 I had my own show on Yahoo Finance TV called, ‘Traders’ Club with Richard Suttmeier’. When Fox Business began in late-2007 I was a frequent guest on ‘Money for Breakfast’. I also made appearances on Reuters TV, Yahoo Finance Breakout and BNN in Toronto. In recent years I shifted my focus to making presentations to various investor groups such as: MBA students at the University of Florida and South Florida, The American Association of Individual Investors, Wells Fargo Advisors, The Executive Form at the National Arts Club in NYC, Investors Roundtable of Wilmington NC, The Market Technicians Association, The Information Management Network when they cover Florida Banks in Ft Lauderdale, and the University of Tampa Investment Club. I was president of the Society for the Investigation of Recurring Events in NYC from 2000 into 2009. My background began on Long Island, New York. I graduated from Bay Shore High School in 1962, and was a member of the Honor Society, Golf Team, Math Team and Band. I graduated from Georgia Tech in Atlanta with a Bachelor of Industrial Engineering Degree in 1966, and was a member of Chi Phi Fraternity, the freshmen Golf Team, and was the captain of the Bowling team. I won the South East Regional Bowling Tournament in 1964 and won the National Intercollegiate Bowling Championship in the Doubles Event that same year. I graduated from Brooklyn Poly in 1970 with a Master of Science in Operations Research, Systems Analysis. My first job out of Georgia Tech was with Grumman Aerospace on Long Island 1966 through 1970 with project assignments on the Lunar Module and F-14 Tomcat Fighter Jet contract proposal. I was with Bank of New York in 1971, as the Senior Systems Analyst for computer applications for the Bank’s International Division. When I shifted my to Wall Street In 1972 I became a U.S. Government securities trader at Briggs Schaedle, a primary dealer where my father was Vice Chairman and my brother was Sales Manager. In 1977 I joined Loab Rhodes as a U.S. Treasury trader. Then my career advanced as noted above. I have been married to Linda since June 1969 and we are the parents of Stephen and Jason Suttmeier. Stephen has been married to Jennifer since 2004 and we have a granddaughter Emily and a grandson Robert. We have been living in Land O’ Lakes, Florida with Jason and his partner James since June 2009.

Analyst’s Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

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Comments (16)

the markets were about to price in a recession because Powell was hiking us into 1. Hopefully the fed slowed down soon enough, something they've proven inept at, but we can't know yet as the December hike takes 6 months to 1 year to tighten. Yes I realize the market sets the actual rates but the fed steers the banks.
You got Brain, the Fed was about to send us into a recession at warp speed. Now we have to wait and see if they went too far. We most likely will see some back filling. Not in a bear market. Technically S&P came .20% short of 20%.
Richard Suttmeier profile picture
S&P High: 2,940.91 on Sept. 21
S&P Low: 2,346.58 on Dec. 26

astro24102 profile picture
Appreciate the info....and your hard work.
schizoidmantoo profile picture
"should reduce holdings on strength to the 200-day SMA"
Does this mean sell when the price goes above the line? Does it mean any stock or just ETF that generated the curve?

I am a little nervous about the market because of all the talk of impeachment now that the Democrats control the House of Representatives. Historically, gridlock in DC has been good for the market, but I have never seen one party so antagonistic toward the other that people are being thrown out of restaurants, harassed at their homes, and even some politicians encouraging people to do more of it.
Investor since ‘73 profile picture
Those of us who see what’s actually happening in both our economy and the worlds, as well as the political typhoon about to engulf the acting president, have built cash reserves and we will enjoy the bargain prices that will present themselves later this year. I am excited by the impending opportunity!
Steven Jon Kaplan profile picture
Thank you for this excellent article!
Richard Suttmeier profile picture
Enjoy the bear market rally for what it is. Longer-term I do not see all five ETFs setting new highs in 2019. At best we have a wide volatile trading range which means trade but do not invest for the long term. Remember that it is difficult to buy at the exact low or sell at the exact high. Trade the levels and don't be greedy..
@William, yes, I was being serious. No need to be defensive, my post was not intended to insult or offend the author or anyone else.
I don't think we are in a bear market anymore… The jobs report came in extremely strong, so that means there is no recession in sight. Also, Jerome Powell's Fed is in an accommodative mode.....so noninterest rate increase any time soon, and the balance sheet reductions may even be reduced.

I would say thumbs up!
William Darusmont profile picture
Seriously? One month of non-farm payrolls? Rich is the best technician I have ever known. He is not saying its going to happen but to buy (sell?) some insurance at the 200 day. Ask yourself this: is there enough good news vs the bad news to cause a further rally and breakout? What you think...or I think...is of no consequence. In a market loaded with algo's and ETF's, do you honestly believe that makes for a strong market?...let alone a strong economy. Check back in a month...time will tell...always does!
BBDividendAndIndexer profile picture
But as Jack Bogle would say, even Rich knows nothing in the long run.
Investor since ‘73 profile picture
Previous month jobs were revised DOWN by 80,000, wages went up a whole 1/10th of one percent, most of the new jobs were McJobs that don’t pay a living wage. 78% of Americans can’t afford to miss a SINGLE paycheck. Great economy? If you’re already rich but the former middle class is now drowning in debt, millions have lost access to health care in the past 2 years, on and on go the FACTS. The effects of Tariff Man’s trade wars are only now about to be felt, ask the 10,000 workers at GM how well that’s impacting them and there will be many more in the same position very soon as the worlds economies cool too. It’s not all about charts, sometimes real economic factors matter too. Or not, hey, stay long, deny the facts. Wait until the bottom drops out before you panic and sell. I’ll be looking for bargains with most of my cash off the table now.
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