08/23/2019 UPTREND under PRESSURE, Big Distribution day; Indexes near 200-day m.a.!

Friday                                                                                            Volume 18 #160

ARMCHAIR INVESTOR(sm) MORNING MARKET NEWSLETTER 
A TREND-FOLLOWING STRATEGY

Join us at the IBD Dallas Meetup on Wednesday (8/28) at the NorthPark Microsoft store 6:30 – 8:30 p.m. Detail and Registration at   AUGUST IBD MEETUP SIGN-UP

CURRENT MARKET DIRECTION:    UPTREND under PRESSURE.   

 

Current Armchair Investor actions: Wait in CASH (sell QQQ)

 

The market was OK with Federal Reserve mid-day talk Friday. But then President Trump tweeted, “We don’t need China and, frankly, would be far better off without them.” And then added a disruptive (but not directly enforceable) tweet: “American companies are hereby ordered to immediately start looking for an alternative to China.” Was it meant to just scare China? Trump could take action to make dealing with China more difficult and expensive for US companies. (And I’m sure many US companies have already started looking for alternatives.) Will Trump’s New York bullying will get the results he wants at home and abroad?

 

NOTE: the Nasdaq is UP 17% this year.

 

MY PLAN FOR MONDAY

·       Sell the QQQ if the market stays lower for one hour. (Note: A Put-Call ratio over 1.15 predicts a market rise is likely the next day. Friday’s ratio was 2.0!!)

·       Build my Watch List of stocks to BUY as they breakout.

o   (Yes, I may buy a stock that has top-notch financials and technical (chart) ratings and is at a buy signal if the market is in “uptrend under pressure.”)

Watch the market action closely:

·        Closing below the 200-day moving average lines could put the market back into DOWNTREND (CORRECTION).

 

DAILY MARKET ACTION
8/23/19 Index Close Index % Change Volume % Change Volume vs 50-day Avg. Accumulation or Distribution Day? Recent Trend Gain/Loss from 8/13 UPTREND SIGNAL
Nasdaq 7,751.77 -3.0% +23.8% +5.2% Major Distribution +0.9%
S&P500 2,922.95 -2.6% NYSE Volume Major Distribution +2.1%
+36.1% +13.4%
DJIA   25,628.90 -2.4% Major Distribution -0.7%
An accumulation Day:   Price RISES 0.2% or more with strong Volume (either higher than the day before or is well-above average volume).    A distribution Day:   Price FALLS 0.2% or more with strong Volume.

 

NOTE: Look for days with higher volume than the day before to identify accumulation and distribution days.

 

This table tracks the returns you would now have if you had followed the Armchair Investor plan and bought the ETFs listed above at the opening price on the morning of 1/7/2019, the day after the new “Market in Uptrend” signal.

 

 

 

Notice the large drop in stocks with A or B ratings showing strong selling by institutional investors:

Over the last 4 weeks:

the As plus Bs fell from 54% to 33% today which confirms weakness (selling off) in this Uptrend.

The rise to 39% last Friday is smidge of encouragement!

PROGRESS IN ACCUMULATION/DISTRIBUTION RATINGS
    A B C D E As + Bs
4 weeks ago 7/26 11% 43% 24% 17% 6% 54%
3 weeks ago 8/2 8% 35% 25% 23% 9% 43%
2 weeks ago 8/9 8% 33% 24% 25% 11% 40%
1 week ago 8/16 6% 26% 22% 28% 17% 33%
Today 8/23 8% 31% 24% 25% 13% 39%
  # 500 2002 1521 1590 846  
Stocks with an A or B rating are under accumulation (being bought.)
Stocks with a D or E rating are under distribution (being sold).
“2 weeks ago” is 10 market days ago; “4 weeks ago” is 20 days ago. The ratings which are higher than two weeks prior are colored light GREEN.  Lower ratings are PINK.

 

 

 

 

 

 

MARKET FACTORS, COUNTS & RATINGS   8/23/2019
Type of Day for Nasdaq Index Major Distribution
Accumulation, Distribution or Neither
I track the Nasdaq’s price-volume because it usually leads the market direction.  
Market Direction UPTREND under Pressure
Uptrend, Under Pressure, Downtrend
     
Nasdaq Accumulation & Distribution Days (last 20 days) Accumulation Days Distribution Days
Only accumulation and distribution days since the last market change (1/4/2019) are in this count. 3 6
     
Count of Up Days and Down Days  Up Days Down Days
 Nasdaq’s last 10-days‘ price movement 4 5
Only days that move at least + or – 0.2% are included in the Up/Down count which does not always, therefore, add up to 10 days.    
Rising/Falling Ratio of Leader Stocks with High Volume 1.0
Nasdaq 10-day ratio
This indicator looks at leading stocks (high RS) and is, thus, biased to the upside.
Uptrend indicator: 1.5 or higher.   Neutral: 1.0 to 1.49.   Downtrend: less than 1.0
   
Market  Accumulation/Distribution Ratings Nasdaq D-
“A”: heavy accumulation, “B”:  moderate accumulation, “C”:  neutral,  “D”:  moderate distribution,  “E”:  heavy distribution. S&P 500 D-
Accumulation = Institutions are BUYING, Distribution = Inst are SELLING DJIA D-
     
Are Major Indexes Above or Below Moving Averages? 50-Day 200-Day
           Nasdaq    At Above
“At” is within 1% above or below the moving average.                 S&P 500 At Above
    NYSE Below At
DJIA Below At

 

 

MARKET ACTION (Nasdaq) OVER THE LAST 20 DAYS

 

(For a full explanation of the terms in  this table see end of this newsletter

# Date Close Index % Change Volume % Change Current Trend Day Count Type of Day: Accumulation, Distribution or

Neither (—)

CONSISTENT WITH: UPTREND or Downtrend?
20 7/29/19 8293.33 -0.4% -3.1% 35 –– UPTREND
19 7/30/19 8273.61 -0.2% -8.9% 36 –– UPTREND
18 7/31/19 8175.42 -1.2% +56.0% 37 Major Distribution DOWNTREND
17 8/1/19 8111.12 -0.8% +9.1% 38 Minor distribution DOWNTREND
16 8/2/19 8004.07 -1.3% -14.0% 39 –– UPTREND
15 8/5/19 7726.04 -3.8% +15.6% 1 Major Distribution DOWNTREND
14 8/6/19 7833.27 +1.4% -22.4% 2 –– DOWNTREND
13 8/7/19 7862.82 +0.4% +11.4% 3 Minor accumulation UPTREND
12 8/8/19 8039.16 +2.2% +8.0% 4 Major Accumulation UPTREND
11 8/9/19 7959.14 -1.0% -8.4% 5 –– UPTREND
10 8/12/19 7863.41 -1.2% -15.0% 6 –– UPTREND
9 8/13/19 8016.36 +2.0% +14.5% 1 Major Accumulation UPTREND
8 8/14/19 7773.94 -3.0% +16.1% 2 Major Distribution DOWNTREND
7 8/15/19 7766.62 -0.09% -18.6% 3 –– ––
6 8/16/19 7895.99 +1.7% -12.8% 4 –– DOWNTREND
5 8/19/19 8002.81 +1.4% -4.5% 5 –– DOWNTREND
4 8/20/19 7948.56 -0.7% -9.5% 6 –– UPTREND
3 8/21/19 8020.21 +0.9% -2.9% 7 –– DOWNTREND
2 8/22/19 7991.39 -0.3% +5.4% 8 Minor distribution DOWNTREND
1 8/23/19 7751.77 -3.0% +23.8% 9 Major Distribution DOWNTREND
 

 

 

 

 

Nasdaq Daily chart, 4 months (updated Wednesday).

Nasdaq fell 3% Friday but holds above the 200-day moving average!

 

New Uptrend

Declared 8/13>>

Nasdaq Weekly chart, 1 year (updated last Friday).

8/13: New UPTREND then….

8/14: Uptrend “under pressure”– Down 1.8% last week, 2nd week of lighter vol.

These charts are from StockCharts.com, a valuable site for investors with many free tools.

 

S&P500 Daily chart, 4 months  (updated Friday).

S&P500 fell 2.6% Friday but holds above the 200-day moving average!

 

Last New Uptrend

Declared 8/13>>

S&P500 Weekly chart, 1 year (updated Friday).

 

8/13: New UPTREND then….

8/14: Uptrend “under pressure”– Down 1.4% last week, 2nd week of lighter vol.

These charts are from StockCharts.com, a valuable site for investors with many free tools

 

 

LAST WEEK’S MARKET ACTION
8/23/19 Weekly Index % Change Weekly Volume % Change Volume Above/ Below 10-week Avg Type of Week
Nasdaq -1.8% -15.3% -9.0% Neither
S&P 500 -1.4% S&P 500   Volume Neither
-13.4% -6.0%
DJIA -1.0% Neither
The “TYPEs OF WEEK” are:    .
ACCUMULATION WEEK      PRICE RISES 0.2% or more and VOLUME RISES
DISTRIBUTION WEEK         PRICE FALLS 0.2% or more and VOLUME RISES
Another type of DISTRIBUTION(*): WEEK PRICE FALLS 0.2% or more & VOLUME is 15% or more above average even without an increase in volume.
The NYSE volume is used for the S&P500, DJIA and NYSE Composite.
HOW CLOSE ARE THE INDICES TO ALL-TIME HIGHS?
8/23/2019  Nasdaq  S&P500  NYSE   DJIA
  Date of Index All-time High* 7/26/2019 7/26/2019 1/26/2018 7/16/2019
 All-time High   8339.64 3027.98 13637.02 27398.68
 Current Price 7751.77 2847.11 12416.45 25628.90
 Below (-) or Above (+) Recent High  (%) -7.0% -6.0% -9.0% -6.5%
*New Highs are daily closing prices and updated each Friday. If an index makes a new high during the week, you will see how it rows past that high during the week.

 

 

MARKET ACTION 2019 YEAR-TO-DATE
8/23/19 2018 Closing Price Current Price Index % Change     Year-to-Date
Nasdaq 6635.38 7751.77 +16.8%
S&P 500 2506.85 2847.11 +13.6%
NYSE 11374.39 12,416.45 +9.2%
DJIA 23327.46 25,628.90 +9.9%
This yearly table is included for your reference. These returns have little relevance to trend-following returns since trend-followers do not hold during “Downtrends” and may lighten their holdings during “Uptrends under Pressure.”

 

 

 

 

HOW CAN YOU CAPTURE THOSE

GREAT MARKET TRACKING GAINS SHOWN ABOVE?

 

It’s as easy as 1- 2- 3!

 

THE ARMCHAIR INVESTOR PLAN:

 

ON 8/13/2019, THE MARKET MOVED INTO STEP 1: NEW UPTREND

 

STEP 1:  In an Uptrend, buy the QQQ, a Nasdaq 100  ETF.  

Find the market direction diagnosis every night in this newsletter. At the Uptrend signal, buy the QQQ (or one of the multiple Uptrend ETFs shown in a table above) the next morning.

 

Just in case protection: When you receive your confirmation of the purchase price, place an 8% STOP LOSS order to protect your portfolio from a sudden market reversal (executing this sale is rare – I almost always sell when the market goes into “under pressure or Downtrend – see Step 2 below). Your broker can help you set up this order.

 

This upward ride is the most exciting part of trend-following – Ride the escalator up, up, up as the market rises. Enjoy your ETF investment as it increases with the rise of the market.

Did you get your share of those are extraordinary rises in this UPtrend!

 

ON 8/14/2019, THE MARKET MOVED INTO STEP 2: Uptrend under Pressure:

STEP 2When the Uptrend slows down: “Uptrend under Pressure”

 

This week’s new Uptrend had a deep Distribution day on Wednesday, the second day of a new Uptrend. You should be very weary of that serious reversal!

·       After only 6 days of the Downtrend, the reversal to Uptrend on Tuesday (8/13) was exciting! A new Uptrend can provide substantial, quick gains.

·       But the immediate 3% sell-off on the next day revealed a market that may be over-reacting to news and our President’s tweets.

·       When a market is over-reacting, it is unpredictable and, therefore too risky. Be sure your stops are in!

 

STEP 3:  When the market diagnosis changes to Downtrend.

Selling your Uptrend ETF position (QQQ, QLD or TQQQ) will capture gains earned in Steps 1 & 2 above. Wait in cash.  After exiting the Uptrend ETF, wait in cash until the next Uptrend signal. 

 

Also: Watch this box for a signal to invest in an inverse ETF.

NOTE: Not every market direction signal ends with a positive return. But overall, the ETFs have outperformed the market when traded according to these guidelines. Plus the market direction signals will help you by indicating when it is most effective to consider adding individual stocks to your portfolio (with a strong uptrending market.


DO YOU INVEST IN INDIVIDUAL STOCKS?––

 

 

Always consider taking some profit if significant distribution is showing up for your individual stocks. However, many individual stocks are rising with gusto! Look at all the lists in the Investor’s Business Daily newspaper for stocks breaking out with high volume. They are there!

 

To get a deeper sense of the health of the market, look at the MARKET FACTORS, COUNTS & RATINGS table included each day in the FULL Armchair Investor newsletter. It looks at 7 key market direction factors  and highlights the leaning of each:

·       If the factor leans toward the Uptrend, that box will be green

·       If the factor leans toward the Downtrend, that box will be orange or red

 

To schedule a class visit: Contact Charlotte Hudgin at 214-995-6702

 

One of the reasons I pay so much attention to the Investor’s Business Daily strategies and books (How to Make Money in Stocks series) is that they work consistently. If you or someone you know is interested in stock market investing, I encourage them to start with:

·       How to Make Money in Stocks – Getting started by Matt Galgani.

Then they can move on to some of the more advanced books.

 

Visit an ARMCHAIR INVESTOR CLASS

 

We have 4 classes given each week in Dallas, Addison and ONLINE:. Visit a class as my guest

·       Monday nights  7 – 9 p.m.

·       Tuesday afternoons 3:30 – 5:30 p.m.

·       Wednesday mornings 10:00 a.m. to noon

PRIOR REGISTRATION REQUIRED FOR YOUR FREE VISIT

CALL 214-995-6702.

Seating is limited to no more than 3 guests at each session to ensure the paid subscribers receive full value.

 

Monday and Tuesday classes are in north Dallas near Preston & Royal.

Wednesday classes are Addison.

Register at the same Armchair Investor classes OR CALL 214-995-6702

 

Access the FULL ARMCHAIR Investor newsletter in just 2 clicks 

 

 WWW.ARMCHAIRINVESTOR.COM

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Wishing you “Many Happy Returns,”

Charlotte Hudgin, 214-995-6702, Editor, the Armchair Investor

 

 

DISCLAIMER, “Buyer Beware” WARNING:

This newsletter shares the ideas I use in my investing.

It is not investing advice but should be taken as education only.

Your investment decisions are your responsibility as are the results.

If you are not comfortable with or do not understand a strategy completely,

I recommend that you paper-trade until you are successful and can sleep well at night.

 

Questions may be submitted to: Editor@ArmchairInvestor.co

ARMCHAIR INVESTOR TREND-FOLLOWING RETURNS

Current Uptrend

8/21/19 Opening Price on 8/20/2019* TODAY’s Closing Price ETF % Change Today Gain or Loss Since 8/20/19 Uptrend Signal
QQQ     (1x) 188.00 188.63 +0.9% +0.3%
QLD      (2x) 96.20 96.83 +1.7% +0.7%
TQQQ   (3x) 61.41 62.00 +2.5% +1.0%
This table tracks the returns you would now have if you had followed the Armchair Investor plan and bought the ETFs listed above at the opening price on the morning of the day after the Armchair Investor signaled a new Uptrend.

 

 

 

 

 

 

 

 

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