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The Bear Market Rally Stalled At Key Levels Last Week

Feb. 10, 2019 2:52 AM ETDIA, IWM, IYT, QQQ, SPY6 Comments

Richard Suttmeier

3.68K Followers

Summary

The Diamonds ETF closed above its 200-day simple moving average at again $250.06 last week.
The Spiders ETF stayed above its semiannual pivot at $266.14 but stalled below its 200-day SMA at $274.00.
The QQQ ETF closed between my semiannual and annual risky levels at $167.53 and $169.27 but stalled below its 200-day SMA at $171.65.
The transports ETF has stalled around my monthly pivot for February at $183.46.
The Russell 2000 ETF stalled around my monthly and semiannual pivots 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: The FOMC tightened monetary policy in January without raising rates. As of Feb. 6, the balance sheet was marked at $4.026 trillion, down $474 billion since the end of September 2017 when it was $4.5 trillion. The total drain in January was $32 billion, assuming the $14 billion unwind of last week was due to maturing treasuries on Jan. 31. Did this contribute to last week’s stock market volatility? I think so!

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.

Here’s Today’s Scorecard

SPDR Dow Jones Industrial Average ETF (NYSEARCA:DIA)

Courtesy of MetaStock Xenith

Diamonds have been below a “death cross” since Dec. 19 with DIA above its 50-day and 200-day simple moving averages now at $242.49 and $250.06, respectively. Investors following this reduced holdings at the 200-day SMA. DIA set its all-time intraday high of $269.28 on Oct. 3 and is 6.7% below that level. DIA is 15.8% above its 2018 low of $216.97 set on Dec. 26.

The weekly chart for Diamonds is positive with the ETF above its five-week modified moving average at $245.69. DIA is above its 200-week simple moving average or “reversion to the mean” at $208.81. The 12x3x3 weekly slow stochastic reading ended last week rising to 59.38, up from 51.95 on Feb. 1. Buy weakness to my semiannual pivot and this week’s value level at $243.47 and $242.23, respectively, and reduce holdings on strength to annual and monthly risky levels at $257.94 and $258.33, respectively. My quarterly risky level is $270.43.

SPDR S&P 500 Trust ETF (NYSEARCA:SPY)

Courtesy of MetaStock Xenith

The Spiders ETF has been under a “death cross” since Dec. 7 with SPY between its 50-day and 200-day SMAs now at $261.23 and $274.00, respectively. Investors following this signal should reduce holdings on strength to the 200-day SMA. SPY set its all-time intraday high of $293.94 on Sept. 21 and is 8% below that level. SPY is 15.7% above its 2018 low of $233.76 set on Dec. 26.

The weekly chart for Spiders is positive with the ETF above its five-week modified moving average at $264.76. SPY is above its 200-week simple moving average or “reversion to the mean” at $236.40 after this average held at $234.71 during the week of Dec. 28. The 12x3x3 weekly slow stochastic reading ended last week rising to 60.49, up from 53.40 on Feb. 1. My semiannual pivot is $266.14. Buy weakness to my weekly value level at $260.22. Reduce holdings on strength to my monthly and annual risky levels at $277.44 and $285.86, respectively. My quarterly risky level is $292.16.

Invesco QQQ ETF (NASDAQ:QQQ)

Courtesy of MetaStock Xenith

QQQ has been below a “death cross” on Dec. 3 with the ETF between its 50-day SMA and 200-day SMA now at $161.62 and $171.65, respectively. Investors following this signal should reduce holdings on strength to the 200-day SMA. QQQ set its all-time intraday high of $187.53 on Oct. 1 and remains in correction territory 10.1% below this level. QQQ is 17.5% above its 2018 low of $143.46 set on Dec. 24.

The weekly chart for QQQ remains positive with the ETF above its five-week modified moving average at $164.17. QQQ is above its 200-week simple moving average or “reversion to the mean” at $135.37. The 12x3x3 weekly slow stochastic reading ended last week rising to 61.34, up from 53.34 on Feb. 1. Investors could have reduced holdings between my semiannual and annual pivots at $167.53 and $169.27, respectively. Buy on weakness to my weekly value level at $161.70 and reduce holdings on strength to my new monthly risky level at $174.44. My quarterly risky level is $192.04.

iShares Transportation Average ETF (NYSEARCA:IYT)

Courtesy of MetaStock Xenith

IYT formed a “death cross” on Nov. 26 with the ETF now between its 50-day and 200-day SMAs now at $175.72 and $190.18, respectively. Investors following this signal should reduce holdings on strength to the 200-day SMA. The transports ETF set its all-time intraday high of $209.43 on Sept. 14 and remains in correction territory 12.5% below the high. IYT is 18% above its 2018 low of $155.24 set on Dec. 24.

The weekly chart for IYT remains positive with the ETF above its five-week modified moving average at $178.53. The ETF is above its 200-week simple moving average or “reversion to the mean” at $164.41. The 12x3x3 weekly slow stochastic reading rose to 47.79 last week, up from 42.06 on Feb. 1. Buy weakness to my weekly and semiannual value levels at $166.48 and $159.63, respectively and reduce holdings on strength to my quarterly and annual risky levels at $195.81 and $196.35, respectively. My monthly pivot remains at $183.36.

iShares Russell 2000 ETF (NYSEARCA:IWM)

Courtesy of MetaStock Xenith

IWM has been below a “death cross” since Nov. 13 with the ETF now between its 50-day and 200-day SMAs now at $143.02 and $157.87, respectively. Investors following this signal should reduce holdings on strength to the 200-day SMA. This ETF set its all-time intraday high of $173.39 on Aug. 31 and remains in correction territory 13.6% below the high. IWM is 19.1% above its 2018 low of $125.81 set on Dec. 26.

The weekly chart for IWM remains positive with the ETF above its five-week modified moving average at $146.05. The ETF is above its 200-week SMA or “reversion to the mean” at $135.26. The 12x3x3 weekly slow stochastic reading rose to 60.48 last week, up from 51.98 on Feb. 1. Investors reduced holdings between my monthly and semiannual pivots at $149.65 and $149.77, respectively. Buy weakness to my weekly value level at $139.48 and reduce holdings on strength to my annual and quarterly risky levels at $157.49 and $160.93, respectively. My monthly and semiannual pivots remain at $149.65 and $149.77, respectively.

This article was written by

Richard Suttmeier

3.68K Followers

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 (6)

h

10 Feb. 2019

Comments (3.54K)

S&P technically never hit bear market at -19.8% decline. Some pause and backfilling is expected. When you go down for false reasons the recovery be pretty fast. Watching Fib Queen levels. I believe we’re still in a secular bull market.

Richard Suttmeier

11 Feb. 2019

S&P High: 2,940.91 on Sept. 21
S&P Low: 2,346.58 on Dec. 26
THIS IS A DECLINE OF 20.2%

W

12 Feb. 2019

Looking at S&P 500 closing high to closing low:

Closing High = 2930.75 on 9/20/2018
Closing Low = 2351 on 12/24/2018
Decline = 19.8%

h

13 Feb. 2019

Comments (3.54K)

CNBC reviewed the decline stats for S&P said 19.8%. Not saying they are right, but had a top technician on that didn’t refute it.

10 Feb. 2019

Historically when the FED relents and pauses, we are within several months of a recession.
The FED historically cuts into a declining market, with the exception of March 2009 when "mark to market" became "mark to fantasy," cuts do not support the stock market. The business cycle, recessions and Bear markets have not been repealed, though lord knows the communist central bankers keep trying to repeal them. Caveat Emptor.

M

12 Feb. 2019

Comments (4.26K)

Boechat1,

The fact that the market continues to fall after a cut does not imply that the cut did not support the market;m: it supported the market the market but did not negate the fall fully.

You remark that the Fed is communist is not even amusing. This remark should be addressed to one half of Democrats in Congress.

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