Category Archives: Uncategorized

A couple of comments on current markets

3-26-20 saw the market on the third day of a rebound from the low of 18213 on 3-23-20. The chart below shows the Fibonacci retracements from the recent high to this low.

The retracement hit the 38.2% level and this level can offer resistance. The market is down again and could be we are headed down to retest at or near the last low.

If we rally passes the 38.2% the next resistance level will be at 23775 or so at the 50% retracement level.

AIQ Market Timing signals

The AIQ Market Timing system issued a 99-1 up signal on 3-10-20, the chart below shows the signal. The Phase indicator changing direction in the direction of the signal (moving down then moves up) provides confirmation market Timing signals. IN this case that didn’t happen.

Another up signal 99-1 fired on 3-24-20 and this time the phase turned up the same day and confirmed the signal.

Here are 3 of the bullish rules that fired to create this high up signal

  • The 21 day stochastic has advanced and crossed the 20% line and the price phase indicator is also increasing.  In this weakly downtrending market this is taken as a strong bullish signal suggesting an increase in prices.
  • Volume accumulation percentage is increasing and the 21 day stochastic has moved above the 20% line. In this downtrending market, this is taken as a   strong bullish signal that could be followed by an  upward price movement.
  • The price phase indicator is negative but volume accumulation has started to advance.  This is a  non-conformation that, regardless of the type of market, is a bullish signal which usually results in an upward movement of the market.

The counter trend AI system that generates these signals can be early in their firing. 

HiLo Indicator Nears an Important Point

The old adage is that we should “buy when there is blood in the streets.”  It basically means to buy when things look their worst.  Well, for the record I am not actually a fan of this intonation. While it is probably a fair statement, I for one prefer to see some sign of hope – some sign of a trend reversal at the very least – before taking the plunge. 

One historically useful indicator suggests we may be nearing that point. 

I refer to this indicator as JKHiLo.  I included my initials in the acronym because I “developed” it.  OK, all I really did was take one guy’s useful indicator and multiply it by another guy’s useful indicator and voila. 

In a nutshell JKHilo multiplies Norman Fosback’s HiLo Logic Index by Gerald Appel’s High/Low Indicator.

The Fosback HiLo Logic Index (FHLLI)

I wrote two articles here and here about this indicator.  In short, a very low number of stocks making new lows is bullish for the stock market – it indicates that stocks overall are going up and is bullish.  At the same time, a very low number of stocks making new highs is also (typically) ultimately bullish going forward, as it tends to signal a “washed out” market. 

So this indicator:

*takes the lower of new highs and new lows each day

*divides that number by the total number of issues trades

*takes a 10-day moving average of daily readings

Specifically, the Fosback HiLo Logic Index (HLLI) is calculated as follows:

A=Daily Nasdaq New Highs

B=Daily Nasdaq New Lows

C=The lower of A and B

D=The total number of Nasdaq issues traded

E = (C / D) * 100

FHLLI = 10-day average of E

Readings above 2.15% are considered a sign of “churning”, i.e., a lot of new highs AND new lows.  Reading below 0.40% are considered “bullish” because either new highs OR new lows is very low.

The Fosback HiLo Logic Index finally dropped below 0.40% on 3/23/20.  Figure 1 displays the OTC Composite Index with this indicator through 12/31/2019.

Figure 1 – Fosback HiLo Logic Index

The Appel High/Low Indicator

This indicator (heretofore AHLI) is more of a trend-following indicator.  It simply divides the number of new highs each day by the total of new highs AND new lows, then takes a 10-day average.

The AHLI is calculated as follows:

A=Daily Nasdaq New Highs

B=Daily Nasdaq New Lows

C = A / (A+B)

AHLI = 10-day average of C

Figure 2 displays this indicator versus the OTC Composite from 12/29/17 through 3/23/20.

Figure 2 – Appel High/Low Indicator (x100; blue line) with OTC Composite (/100; red line); Dec17 through 3/23/20

Extremely low readings tend to highlight oversold market conditions.  For the record, an actual “buy signal” for this indicator occurs when it drops below 0.20 (or 20 in Figure 3 since the blue line is the indicator x 100) and then rises back above that level.

The JK Hilo Index (JKHiLo)

So then one day some young punk comes along and multiplies the Fosback indicator by the Appel indicator and has the audacity to add his own initials.  Some people. Anyway:

JKHiLo = (FHLLI x AHLI) x 500

A “12-month Buy Signal” occurs when this indicator:

*drops below 5.00

*then turns higher for one day

The first part of this signal has happened.  As of the close on 3/23/20 JKHL has plunged to 1.8. 

Let’s look at previous instances when JKHL fell below 5.00 and then ticked higher for one day.

IMPORTANT: This upside reversal technically constitutes a “12-month buy signal”.  What does that mean?  It means:

*We expect the market to be higher 12-months later

*HOWEVER, it is NOT an “All Clear, Everything is Great, You Can’t Lose” signal

The bottom line is that it typically does NOT mark the actually bottom.  In most cases, another new low or at least a retest of the low follows within a few months.  But not always.

Figure 3 displays the 7 buy signals that have occurred since 1990.

A = Date of signal – i.e., date the JKHL indicator ticked up one day after dropping below 5

B = SPX closing price on date of signal

C = Subsequent low closing price for SPX

D = SPX closing price 12 months after signal date

E = # of trading days between date of signal and ultimate low

F = % decline by SPX from date of signal to ultimate low

G = % change in SPX closing price 1 year after date of signal

Figure 3 – JKHL 12-month buy signals

It is important to note that each previous “buy signal” was followed by further downside price movement prior to the ultimate low.  It ranged from 2 trading days in 2018 to 101 trading days in 2008.  6 of the 7 signals saw a further decline of no more than -6.3%.  But the 2008 signal saw the market continue to plunge another -31% of the following 3+ months.

So, like I said earlier, even when this indicator does turn up and generate a new signal, that DOES NOT mean “All Clear”.  Still, to get an idea of what we might expect, each of the previous signals are displayed in the Figures below.

Figure 4 – 1990 signal (-3.4% to low, +25.6% 12 months later)
(Courtesy AIQ TradingExpert)

Figure 5 – 1998 signal (-6.3% to low, +31.3% 12 months later)
(Courtesy AIQ TradingExpert)

Figure 6 – 2002 signal (-4.1% to low, +24.3% 12 months later)
(Courtesy AIQ TradingExpert)

Figure 7 – 2008 signal (-31.3% to low, +10.7% 12 months later)
(Courtesy AIQ TradingExpert)

Figure 8 – 2011 signal (-0.5% to low, +25.4% 12 months later)
(Courtesy AIQ TradingExpert)

Figure 9 – 2016 signal (-4.1% to low, +19.1% 12 months later)
(Courtesy AIQ TradingExpert)

Figure 10 – 2018 signal (-2.4% to low, +28.9% 12 months later)
(Courtesy AIQ TradingExpert)

We DO NOT have a new signal yet, but JKHiLo is below 5, so it is just a matter of waiting for the daily value to tick higher for one day (and then – if history is a guide – waiting for the ultimate low to be put in before a subsequent rally).

Figure 11 – As of 3/23/20 (Courtesy AIQ TradingExpert)

Summary

Are we on the cusp of a new opportunity?  Or on the edge of a cliff?  In this time of unprecedented uncertainty, I can’t pretend to know the answer.  So, I rely on objective indicators to guide me.

At this moment in time the “trend-following” indicators are bearish and so caution is undoubtedly in order.  But other indicators such as the one discussed here remind us to remain alert to new opportunities.

Jay Kaeppel

Disclaimer: The information, opinions and ideas expressed herein are for informational and educational purposes only and are based on research conducted and presented solely by the author.  The information presented does not represent the views of the author only and does not constitute a complete description of any investment service.  In addition, nothing presented herein should be construed as investment advice, as an advertisement or offering of investment advisory services, or as an offer to sell or a solicitation to buy any security.  The data presented herein were obtained from various third-party sources.  While the data is believed to be reliable, no representation is made as to, and no responsibility, warranty or liability is accepted for the accuracy or completeness of such information.  International investments are subject to additional risks such as currency fluctuations, political instability and the potential for illiquid markets.  Past performance is no guarantee of future results.  There is risk of loss in all trading.  Back tested performance does not represent actual performance and should not be interpreted as an indication of such performance.  Also, back tested performance results have certain inherent limitations and differs from actual performance because it is achieved with the benefit of hindsight.

Bartometer March 8, 2020

Hello Everyone,

Over the last month the stock market has had one of its worst declines over the shortest periods of time in history. Not even did the 2008 declines beat the velocity of the declines we saw over the last month. In 2 days the NASDAQ fell over almost 11% because of the rightfully so, Corona Virus and its potential to not only kill people but mainly do disrupt the business process of selling and the supply lines to get product. Two things I do want to say is

1. You don’t base your long term financial goals based on a short term flu. 5 years from now this will be just another flu we had. People will have forgotten about it.

2. Over the last two months I have be saying to take profits as we were overvalued, I was getting Cautious with the Rising Wedge pattern and thought the S&P 500 would go to the 3280-3380 and top out. The S&P 500 topped at 3386 and fell through the trend lines to the 2900 area, down 13% from the 3380 level. As of this point I am still very Cautious, but looking for a bottom soon over the next 2 months.

This is why I do technical analysis. People can say that the Corona Virus did it, and it did contribute, but the market was positioning itself for a fall. I think the market will continue to be volatile and potentially fall more. With the outbreak just beginning the USA, the S&P should test the 2855 level it hit a week ago and either bounce from there but I feel it will probably break down below that and hit the 2600 to the 2750 level. There have only been less than 500 people who have gotten the tests. Once the US government opens the tests up to many more people there should be many many more people who have the virus. This will scare people to stop going out at restaurants, coffee shops, theatres, cruise ships, travel and more. It will take out a percentage out of the Gross Domestic Product, (GDP). It will probably cause the markets to fall another 5 to 10%+, but it will not kill Capitalism. It should only be a short term. Remember, if this is a flu where less than 1% of the people who contract it dies, then who are dying? The elderly and the sick who have immune problems. So protect yourself. Get the N95 masks on Amazon, get myricetin as a supplement people are recommending to build up your immune system. Talk to your doctor first. Call me to rearrange your portfolios with me and your 401(k). Remember too, this will pass, but I think we have more on the downside.

This is what’s happened over the last 20 years:

2000 Y2k is going to kill us all.

2001 Anthrax is going to kill us all.

2002 West Nile Virus is going to kill us all.

2003 SARS is going to kill us all.

2005 The Bird Flu is going to kill us all. 2008 The Great Recession is going to kill us all.

2010 BP Oil is going to kill us all.

2012 The Mayan Calendar is going to kill us all.

2013 North Korea is going to kill us all.

2014 Ebola is going to kill us all.

2015 Disney Measles and ISIS is going to kill us all.

2016 Zika virus is going to kill us all.

2020 Corona Virus is going to kill us all.

Now granted this is worse because it is a pandemic and it is worse than most of the others, not in life as we lose 30-60 thousand every year to the regular flu, but there is no vaccine yet, and it is creating FEAR. But mostly the FEAR is stopping people from spending money, this will cause the markets to fall. So FEAR is killing you. Protect yourself. Be smart. Use FEAR in the markets as an advantage. Over the last few months, go to the old Bartometers, I have been saying to take profits, the markets are too overbought, that we had a Rising Wedge formation that is a reversal pattern and I thought we could go down. Well now that that has happened, is the market a BUY yet? No, because I feel it will go down more, but it may bottom over the next month or two.

There may be buying opportunities that only come once every 10 years or so. With no guarantees, if the market goes below the 2855 level down to the 2600 level to the 2750 level you may want to call me for potential buying opportunities. Remember what Warren Buffet says, “ Buy when there is BLOOD in the STREETS” That’s when most make money over the long term, When Florida houses were plummeting in the 2008 recession, were there great BUYS? In the great recession, did stocks go so low that if you bought in early 2009 did you get unbelievable deals on stocks and funds? Yes… You make money in the bull markets by buying in the BEAR MARKETS. I am not saying to buy now but get your GREED hats on. You all need to contact me to discuss strategy now. Remember, can we go down more? YES and probably will. Can we go into a Recession because of this situation? Maybe and most likely, economists are giving it a 50-50% chance. Should you reduce equities more, possibly depending on your situation and how close you are to retirement? Last month I said to take money off the table because the markets were too high. Now it’s more of a shift between funds and change some of the bonds as if Oil keeps falling, you don’t want to have much in the High Yield Bond sector or Floating rate bond area. I am concerned, however, about the corporations continue to buy back their own shares while they are issuing debt to do it. This buying back of stock is building the asset bubble. This is one concern I have in addition Corona Virus.

An excerpt from Fundamental Economist Dr. Robert Genetski: from Classical Principles.com:
Stock Market Volatile as the Virus Gains

Investors switched from euphoria to fear and back several times this past week. When the dust settled, the Nasdaq, Nasdaq 100 and S&P 500 rose 1%-3% while small cap stocks fell 1%-2%.

The reason I recommend caution is related to the expectation of a sharp increase in the virus in the US. The US conducted only 473 tests through March 1. The number of tests will increase dramatically in the period ahead. More testing means more confirmed cases. The latest figures for the US show 226 cases.

Outside the US infections are growing at a rate of 20% a day. The rate of increase has slowed in Korea, but has increased dramatically in Italy and throughout Europe.

There is some good news. The daily rate of increase in China has slowed to less than 0.2% for the four days ending March 5th. Flexport, a global freight logistics company, reports that 60% of China’s manufacturing capacity is now back on line. Since US companies depend on China for critical supplies and medicines, the threat of shortages should soon be less pressing.
There was more good news this past week as surveys of business activity show the US economy remained remarkably strong in February. While various international companies are suffering greatly, recent indications show the US is weathering the storm well, at least through February. Amid the uncertainty over the spread of the virus in the US, it continues to make sense to be cautious about owning stocks.

Returns in 2020 Some of the INDEXES of the markets both equities and interest rates are below. The source is Morningstar.com up until March 7, 2020. These are passive indexes.

*Dow Jones -8.9%
S&P 500 -8.2%
NASDAQ Aggressive growth -4.4%
I Shares Russell 2000 ETF (IWM) Small cap -12.84%
Midcap stock funds -12.54%
International Index (MSCI – EAFE ex USA -10.4% Moderate Mutual Fund Investment Grade Bonds (AAA) Long duration -4.70%
High Yield Merrill Lynch High Yield Index -3.7%

Floating Rate Bond Funds -2.4%
Short Term Bond +1.3%
Fixed Bond Yields (10 year) .76% Yield

The average Moderate Fund is down -4.70% this year fully invested as a 65% in stocks and 35% in bonds and nothing in the money market.

Interest rates look stable going forward over the next 6 months

The S&P 500 is above. I used a weekly chart as I think the S&P will fall below 2855 and possibly hit the following support levels for support.
2822, 2721-2747, 2600-2630, and 2340.

These are points that investors are looking at as a support levels. I think we have more to go on the downside. The Blue arrows are areas that listed to the left I think the S&P can go too.

The middle graph is the SK-SD stochastics. This shows a breakdown, Last month I said anything over the 88 level is overbought. It’s 21 to 48 on the Daily, now it’s getting OVERSOLD but can go down more.

The third graph is the Stochastics chart. Anything below 20 is showing the market is very oversold. But can still trend lower.

The Dow Jones is above. I drew the last three years and notice the that the 23576 is support right at the red line , but I believe the low will breakdown as it could test and breakdown and test its 200 week moving average at 23,587. If that doesn’t hold then the old lows of 21,734 are next.

This could be the capitulation investors are looking at to starting getting back into the markets. If this happens then there is a much greater chance that a Recession will occur. Please call me to Strategize your portfolio at 860-940-7020.

 Support levels on the S&P 500 area are 2822, 2721-2747, 2600-2630 and 2340. These might be accumulation areas if you are a Long term investor.
 Support levels on the NASDAQ are 7658 to 7715, 7303, and 6861.
 On the Dow Jones support is at 23,587 (200 week moving average), 21,734, 19,794 and 17,863
 These may be safer areas to get into the equity markets on support levels slowly.

THE BOTTOM LINE:
Now that the markets have broken down the trend line I explained last month. I am more Cautious on the markets. The Corona Flu will scare people and they will pull in their horns towards traveling, going out and this act alone can cause a Recession. The market is starting to become somewhat oversold but I still would no Buy here, but wait until the Corona Virus Fear is nearing the worst it could get. That could be over the next 2 months or so. I think the S&P 500 and the markets could continue to fall as energy is also going down.


Best to all of you,

Joe Bartosiewicz, CFP®
Investment Advisor Representative
Contact information:

5 Colby Way
Avon, CT 06001
860-940-7020 or 860-404-0408

SECURITIES AND ADVISORY SERVICES OFFERED THROUGH SAGE POINT FINANCIAL INC., MEMBER FINRA/SIPC, AND SEC-REGISTERED INVESTMENT ADVISOR.


Charts provided by AIQ Systems:
Technical Analysis is based on a study of historical price movements and past trend patterns. There is no assurance that these market changes or trends can or will be duplicated shortly. It logically follows that historical precedent does not guarantee future results. Conclusions expressed in the Technical Analysis section are personal opinions: and may not be construed as recommendations to buy or sell anything.

Disclaimer: The views expressed are not necessarily the view of Sage Point Financial, Inc. and should not be interpreted directly or indirectly as an offer to buy or sell any securities mentioned herein. Securities and Advisory services offered through Sage Point Financial Inc., Member FINRA/SIPC, an SEC-registered investment advisor.
Past performance cannot guarantee future results. Investing involves risk, including the potential loss of principal. No investment strategy can guarantee a profit or protect against loss in periods of declining values. Please note that individual situations can vary. Therefore, the information presented in this letter should only be relied upon when coordinated with individual professional advice. *There is no guarantee that a diversified portfolio will outperform a non-diversified portfolio in any given market environment. No investment strategy, such as asset allocation, can guarantee a profit or protect against loss in periods of declining values.
It is our goal to help investors by identifying changing market conditions. However, investors should be aware that no investment advisor can accurately predict all of the changes that may occur in the market.
The price of commodities is subject to substantial price fluctuations of short periods and may be affected by unpredictable international monetary and political policies. The market for commodities is widely unregulated, and concentrated investing may lead to Sector investing may involve a greater degree of risk than investments with broader diversification.
Indexes cannot be invested indirectly, are unmanaged, and do not incur management fees, costs, and expenses.
Dow Jones Industrial Average: A weighted price average of 30 significant stocks traded on the New York Stock Exchange and the NASDAQ.
S&P 500: The S&P 500 is an unmanaged indexed comprised of 500 widely held securities considered to be representative of the stock market in general.
NASDAQ: the NASDAQ Composite Index is an unmanaged, market-weighted index of all over the counter common stocks traded on the National Association of Securities Dealers Automated Quotation System
(IWM) I Shares Russell 2000 ETF: Which tracks the Russell 2000 index: which measures the performance of the small capitalization sector of the U.S. equity market.
A Moderate Mutual Fund risk mutual has approximately 50-70% of its portfolio in different equities, from growth, income stocks, international and emerging markets stocks to 30-50% of its portfolio in different categories of bonds and cash. It seeks capital appreciation with a low to moderate level of current income.
The Merrill Lynch High Yield Master Index: A broad-based measure of the performance of non-investment grade US Bonds
MSCI EAFE: the MSCI EAFE Index (Morgan Stanley Capital International Europe, Australia, and Far East Index) is a widely recognized benchmark of non-US markets. It is an unmanaged index composed of a sample of companies’ representative of the market structure of 20 European and Pacific Basin countries and includes reinvestment of all dividends.
Investment grade bond index: The S&P 500 Investment-grade corporate bond index, a sub-index of the S&P 500 Bond Index, seeks to measure the performance of the US corporate debt issued by constituents in the S&P 500 with an investment-grade rating. The S&P 500 Bond index is designed to be a corporate-bond counterpart to the S&P 500, which is widely regarded as the best single gauge of large-cap US equities.
Floating Rate Bond Index is a rule-based, market-value weighted index engineered to measure the performance and characteristics of floating-rate coupon U.S. Treasuries, which have a maturity greater than 12 months.
Money Flow; The Money Flow Index (MFI) is a momentum indicator that measures the flow of money into and out of a security over a specified period. It is related to the Relative Strength Index (RSI) but incorporates volume, whereas the RSI only considers
SK-SD Stochastics. When an oversold stochastic moves up through its MA, a buy signal is produced. Furthermore, Lane recommends that the stochastic line be smoothed twice with three-period simple moving averages: SK is the three-period simple moving average of K, and SD is the three-period simple moving average of SK
Rising Wedge; A rising wedge is a technical indicator, suggesting a reversal pattern frequently seen in bear markets. This pattern shows up in charts when the price moves upward with pivot highs and lows converging toward a single point known as the apex

March and April to the Rescue?

Well that got ugly quick.  For the record, if you have been in the markets for any length of time you have seen this kind of action plenty of times.  An index, or stock, or commodity or whatever, trends and trends and trend steadily and relentlessly higher over a period of time.  And just when it seems like its going to last forever – BAM.  It gives back all or much of its recent rally gains very quickly.  Welcome to the exciting world of investing.

I make no claims of “calling the top” – because I never have actually (correctly) called one and I don’t expect that I ever will.  But having written Part I and Part II of articles titled “Please Take a Moment to Locate the Nearest Exit” in the last week, I was probably one of the least surprised people at what transpired in the stock market in the last few sessions. 

Of course the question on everyone’s lips – as always in this type of panic or near panic situation – is, “where to from here?”  And folks if I knew the answer, I swear I would tell you.  But like everyone else, I can only assess the situation, formulate a plan of action – or inaction, as the case may be – and act accordingly.  But some random thoughts:

*Long periods of relative calm followed by extreme drops are more often than not followed by periods of volatility.  So, look for a sharp rebound for at least a few days followed by another downdraft and so on and so forth, until either:

a) The market bottoms out and resumes an uptrend

b) The major indexes (think Dow, S&P 500, Nasdaq 100, Russell 2000) drop below their 200-day moving averages.  As of the close on 2/25 both the Dow and the Russell 2000 were below their 200-day moving average.  That would set up another a) or b) scenario.

If the major indexes break below their long-term moving averages it will either:

a) End up being a whipsaw – i.e., the market reverses quickly to the upside

b) Or will be a sign of more serious trouble

The main point is that you should be paying close attention in the days and weeks ahead to the indexes in Figure 1.

Figure 1 – Major indexes with 200-day moving averages (Courtesy AIQ TradingExpert)

One Possible Bullish Hope

One reason for potential optimism is that the two-month period of March and April has historically been one of the more favorable two-month periods on an annual basis.  Figure 2 displays the cumulative price gain achieved by the S&P 500 Index ONLY during March and April every year since 1945.  The long-term trend is unmistakable, but year-to-year results can of course, vary greatly.

Figure 2 – S&P 500 cumulative price gain March-April ONLY (1945-2019)

For the record:

S&P 500 March-AprilResult
Number of times UP55 (73%)
Number of times DOWN20 (27%)
Average UP%+5.0%
Average DOWN%(-3.4%)

Figure 3 – Facts and Figures

Will March and April bail us out?  Here’s hoping.

As an aside, this strategy is having a great week so far.

Jay Kaeppel

Disclaimer: The information, opinions and ideas expressed herein are for informational and educational purposes only and are based on research conducted and presented solely by the author.  The information presented does not represent the views of the author only and does not constitute a complete description of any investment service.  In addition, nothing presented herein should be construed as investment advice, as an advertisement or offering of investment advisory services, or as an offer to sell or a solicitation to buy any security.  The data presented herein were obtained from various third-party sources.  While the data is believed to be reliable, no representation is made as to, and no responsibility, warranty or liability is accepted for the accuracy or completeness of such information.  International investments are subject to additional risks such as currency fluctuations, political instability and the potential for illiquid markets.  Past performance is no guarantee of future results.  There is risk of loss in all trading.  Back tested performance does not represent actual performance and should not be interpreted as an indication of such performance.  Also, back tested performance results have certain inherent limitations and differs from actual performance because it is achieved with the benefit of hindsight.

The Bartometer

Hello Everyone,

Market Recap:

It seems like a broken record, but the markets continue their upward trek. As the economy continues to be healthy, and the employment numbers continue to stupefy pundits, the markets continue to show optimism by pushing stocks higher. We had a slight 3-4% decline in the markets like I thought and then a resumption of its upward trend. At this point, the markets are now fundamentally overvalued by about 6-8% depending on the metrics used in determining overvaluation.

Warren Buffet said on CNBC a few months ago that “if interest rates stay where they are at 1.58% on the ten-year government bond, the stock market is reasonably priced. If interest rates rise to 2.5% that no one sees now, then the markets are 10-15% overvalued. At these prices, the markets are slightly overvalued.” CNBC also said that in 2000 the markets were 80-90% overvalued and in 2007, the markets were 30-35% overvalued. Again, the stock market is about 6-8% overvalued.

Market Perspective:

Could the market go up more? Yes, but if the Coronavirus scares the populous from traveling and going out, then the economic growth can surely suffer for some time. The stock market could easily have a 10% correction if the Coronavirus inhibits spending and keeps people in their homes. The best sector would be technology or things that are delivered to your home like online purchasing companies. I am CAUTIOUS on this market, as I can see optimism with no regard to the Coronavirus.

Sector Performance:

One of the best sectors again in the stock market is the Large Cap Technology growth stocks, like Apple, Microsoft, Tesla, Amazon and more. Because of the massive size of these companies now, i.e., Apple and Microsoft each being $1.5 trillion, any increase in their prices has a significant influence on the markets. The NASDAQ went up 38% last year and why it’s up 10% this year. It was due in large part due to the large growth sector with stocks like Apple Computer going up 88% and Microsoft up 56% over the last year. These extremely large tech companies are pushing up the market. Most stocks are not doing that well this year. It’s large tech stocks for the most part pushing this market higher.

This year the market is doing the same thing with Apple 11%, Microsoft +18%%, Alphabet +14%, and Amazon +16% and more. When stocks are so large and they go up a significant amount they can skew the market averages, making people think the markets are doing better than they are on average, when in fact, the small and midcap stock indexes are up only 1-2%%. In conclusion, either the small and midcap stocks have to catch up or the large growth and technology stocks have to fade.

Proceed with Caution:

Going up without a correction is not a good thing for the markets especially when people are now throwing money at the market. It’s called FOMO, or the Fear of Missing Out. This sort of panic to throw money at the index funds shows me that psychologically people think the markets will continue to rise steeply. It’s called a MELTUP. That’s a concern to me somewhat. The rise might continue and I am still relatively bullish as I think the S&P could hit 3450 to 3500 later in the year.

At this point, if you are in or nearing retirement and have more than 65% of your money in equities, you may want to scale back your equity exposure to below that amount. Remember the old saying, “you don’t make it until you take it.” Also, markets go down a lot quicker than they go up.

Expert Opinion:

An excerpt from Fundamental Economist Dr. Robert Genetski: from Classical Principles.com:

“A sharp jump in reported infections in China was due to an improved technique for diagnosing the disease, not a new explosive outbreak. There was no similar spike in cases outside of China. Japan has the second most cases outside of China at 255. 218 of Japan’s cases are on a quarantined cruise ship. The large number on the ship shows how infectious the virus can be. The good news is that there has been no upward trend in the number of infections outside of China. They continue to average close to 15 a day.”

Stock Market Outlook

Stocks racked up another strong week with gains ranging from 1⁄4% on the Dow to 1 1⁄2% for the NASDAQ and Nasdaq 100. Increases brought the S&P500 to 7 1⁄2% above my estimate of its fundamental value. Although stocks are slightly overvalued, strong growth in the economy and earnings can send them higher. Investors should remain cautiously bullish. Maintain a high level of exposure to stocks in equity portfolios despite the likelihood of some correction.

Interest Rates

Interest rates remained relatively stable this past week. While further upward pressure can be expected when the economy accelerates, the Fed’s efforts to keep interest rates low will continue to hold them close to current levels.

With central banks around the world, creating liquidity, any correction in the bull market should be limited. Stay bullish on stocks.

Monetary Policy

The Fed continues to purchase securities, and banks continue to adjust their excess reserves to accommodate the demand for loans and investments. Monetary policy is sufficient to allow for an expansion in business activity this spring.

Some of the INDEXES of the markets both equities and interest rates are below. The source is Morningstar.com up until January 10th, 2020. These are passive indexes.

Dow Jones +3.36%
S&P 500 +4.89%

NASDAQ Aggressive growth +10.3%
I Shares Russell 2000 ETF (IWM) Small cap +1.35%
Midcap stock funds +1.81%
International Stock Markets -0.3 of 1.0%
Moderate Mutual Fund +2.2%
Investment Grade Bonds (AAA) Long duration +2.2%
High Yield Merrill Lynch High Yield Index +.95%
Short Term Bond +.69%
Fixed Bond Yields (10 year) +1.6% Yield

The average Moderate Fund is up +2.2% this year fully invested as a 65% in stocks and 35% in bonds and nothing in the money market.

Interest rates look stable going forward over the next 6 months

The first chart is the NASDAQ. Its largest companies are Apple, Microsoft, Google, Amazon and more. These stocks continue to get the bulk of the money. Because they are all over $1 Trillion, any increase to them skews the market averages on an equal weighted position. In other words, these 4 stocks are worth more than 15% of the market.

This is why, the markets are going straight up. Any increase in these stocks puts a large percentage increase in the average, basically it is because they are so large, and the Nasdaq and the S&P are market weighted indexes.
Notice the channel. There are 3 touches of the channel. This means that if those trend lines in Black are broken, it could mean the end of this rise. So CURRENTLY, a break and close below 9274 in the Nasdaq could mean the beginning of a correction. That is a 4% drop in movement before I would get concerned.

NASDAQ Channel
Charts provided by AIQ Systems:

The next chart of the NASDAQ Advance Decline Line. Notice as the Nasdaq is reaching new highs, it is doing it on fewer and fewer stocks. It means the rally is narrow. Not a great sign. It’s a watching point.

NASDAQ Advance/Decline Line
Charts provided by AIQ Systems:

The next two charts are Money Flow and On Balance Volume. Both look good and confirming the upside.

The biggest concern is that although my computer models are at a BUY-HOLD. The Nasdaq is at the upper band top and it’s a narrow rally.

NASDAQ Moneyflow and On Balance Volume
Charts provided by AIQ Systems:

A Support or support level is the level at which buyers tend to purchase or into a stock or index. It refers to the stock share price that a company or index should hold and start to rise. When the price of the stock falls towards its support level, the support level holds and is confirmed, or the stock continues to decline, and the support level must change.

– Support levels on the S&P 500 area are 3340, 3263 area, 3210, and 3186. These might be BUY areas.
– Support levels on the NASDAQ are 9588, 9299, 9160, and 8975.
– On the Dow Jones support is at 28,692, 27783 area, and 27385 Breakout and 200 days moving average.
– These may be safer areas to get into the equity markets on support levels slowly.
– RESISTANCE LEVEL ON THE S&P 500 3450.

THE BOTTOM LINE:

The market is somewhat overbought and about 6-8% overvalued at this time. There are now some cracks in the dam showing as explained above, but my computer systems are still at a Buy-Hold for the market direction. The markets are rallying on large-cap growth and technology stocks and watching the other smaller to midcap companies up only slightly with international stocks declining. Either we start to see the small and midcap stocks begin to rally or the market could begin to fall. The S&P could hit 3450 later in the year. Earnings could potentially grow 5 to 7% or more this year and that is why there is the possibility that the S&P 500 could reach 3450+ in 2020, a much smaller rise in the stock market than in 2019 but hopefully, a decent return, with obvious no guarantees expressed or implied. The Corona Virus COULD put a scare in the market that could put the travel industry and restaurant industry and more on hold, dropping earnings. The Federal Reserve could be more accommodative if this happens.

Best to all of you,
Joe Bartosiewicz, CFP®
Investment Advisor Representative
5 Colby Way
Avon, CT 06001
860-940-7020 or 860-404-0408

SECURITIES AND ADVISORY SERVICES OFFERED THROUGH SAGE POINT FINANCIAL INC., MEMBER FINRA/SIPC, AND SEC-REGISTERED INVESTMENT ADVISOR.

Technical Analysis is based on a study of historical price movements and past trend patterns. There is no assurance that these market changes or trends can or will be duplicated shortly. It logically follows that historical precedent does not guarantee future results. Conclusions expressed in the Technical Analysis section are personal opinions: and may not be construed as recommendations to buy or sell anything.

Disclaimer: The views expressed are not necessarily the view of Sage Point Financial, Inc. and should not be interpreted directly or indirectly as an offer to buy or sell any securities mentioned herein. Securities and Advisory services offered through Sage Point Financial Inc., Member FINRA/SIPC, an SEC-registered investment advisor.

Past performance cannot guarantee future results. Investing involves risk, including the potential loss of principal. No investment strategy can guarantee a profit or protect against loss in periods of declining values. Please note that individual situations can vary. Therefore, the information presented in this letter should only be relied upon when coordinated with individual professional advice. *There is no guarantee that a diversified portfolio will outperform a non-diversified portfolio in any given market environment. No investment strategy, such as asset allocation, can guarantee a profit or protect against loss in periods of declining values.

It is our goal to help investors by identifying changing market conditions. However, investors should be aware that no investment advisor can accurately predict all of the changes that may occur in the market.

The price of commodities is subject to substantial price fluctuations of short periods and may be affected by unpredictable international monetary and political policies. The market for commodities is widely unregulated, and concentrated investing may lead to Sector investing may involve a greater degree of risk than investments with broader diversification.

Indexes cannot be invested indirectly, are unmanaged, and do not incur management fees, costs, and expenses. Dow Jones Industrial Average: A weighted price average of 30 significant stocks traded on the New York Stock Exchange and the NASDAQ. S&P 500: The S&P 500 is an unmanaged indexed comprised of 500 widely held securities considered to be representative of the stock market in general.

NASDAQ: the NASDAQ Composite Index is an unmanaged, market-weighted index of all over the counter common stocks traded on the National Association of Securities Dealers Automated Quotation System (IWM) I Shares Russell 2000 ETF: Which tracks the Russell 2000 index: which measures the performance of the small capitalization sector of the U.S. equity market.

A Moderate Mutual Fund risk mutual has approximately 50-70% of its portfolio in different equities, from growth, income stocks, international and emerging markets stocks to 30-50% of its portfolio in different categories of bonds and cash. It seeks capital appreciation with a low to moderate level of current income.

The Merrill Lynch High Yield Master Index: A broad-based measure of the performance of non-investment grade US Bonds MSCI EAFE: the MSCI EAFE Index (Morgan Stanley Capital International Europe, Australia, and Far East Index) is a widely recognized benchmark of non-US markets. It is an unmanaged index composed of a sample of companies’ representative of the market structure of 20 European and Pacific Basin countries and includes reinvestment of all dividends.

Investment grade bond index: The S&P 500 Investment-grade corporate bond index, a sub-index of the S&P 500 Bond Index, seeks to measure the performance of the US corporate debt issued by constituents in the S&P 500 with an investment-grade rating. The S&P 500 Bond index is designed to be a corporate-bond counterpart to the S&P 500, which is widely regarded as the best single gauge of large-cap US equities.

Floating Rate Bond Index is a rule-based, market-value weighted index engineered to measure the performance and characteristics of floating-rate coupon U.S. Treasuries, which have a maturity greater than 12 months.

Money Flow; The Money Flow Index (MFI) is a momentum indicator that measures the flow of money into and out of a security over a specified period. It is related to the Relative Strength Index (RSI) but incorporates volume, whereas the RSI only considers

SK-SD StochasticsWhen oversold stochastic moves up through its MA; a buy signal is produced. Furthermore, Lane recommends that the stochastic line be smoothed twice with three-period simple moving averages: SK is the three-period simple moving average of K, and SD is the three-period simple moving average of SK.

Rising Wedge; A rising wedge is a technical indicator, suggesting a reversal pattern frequently seen in bear markets. This pattern shows up in charts when the price moves upward with pivot highs and lows converging toward a single point known as the apex.


The Bartometer

January 14, 2020

Hello Everyone,

Market Recap:

Last year was an excellent year for the markets in general, with the markets appreciating 19-38%, depending on the indexes. One of the best sectors was the large growth sector with stocks like Apple Computer going up 88% and Microsoft up 56% over the last year. That is why the NASDAQ went up 38% This year; the market is doing the same thing with Apple +5%, Microsoft +3%, Alphabet +6%, Facebook +6%, and Amazon +3%.

When stocks are so large, and they go up a significant amount, they skew the market averages and make people think the markets are doing very well when in fact, the small and midcap stock indexes are down .5% -1.6%.

The participation of this current rally is VERY NARROW, meaning just a small number of large stocks are pushing this market higher and when the markets are climbing on only a few stocks then either the small and midcap stocks have to catch up or the large growth and technology stocks have to fade.

On my December Bartometer, I thought the market would rally towards the rest of the year and I thought the FIRST level of resistance would be 3280 on the S&P 500. Friday, the S&P 500 hit 3281 intraday high and closed at 3265. Even though I am still Bullish longer term, I think the markets require some healthy pullback… Going up without a correction is not suitable for the markets especially when people are now throwing money at the market. It’s called FOMO, or the Fear of Missing Out. This sort of panic to throw money at the index funds shows me that psychologically people think the markets will continue to rise. That scares me a little.

The rise might continue and I am still relatively bullish as I think the S&P could hit 3400 later in the year, but I am worried that one of the only sectors that are moving is the large-cap technology sector. At this point, if you are in or nearing retirement and have more than 65% of your money in equities, you may want to scale back your equity exposure to below that amount. Remember the old saying; you don’t make it until you take it.

An excerpt from Fundamental Economist Dr. Robert Genetski: from Classical Principles.com:


Another week of good news and another week of record-high prices for the major stock indexes. Technology remains the most robust sector with both the Nasdaq and Nasdaq 100 gaining more than a percent. The S&P500 and Dow were up ½%. Small caps continue to languish.

Trump’s strategy in dealing with Iran increases the odds of his reelection. Iran looks even less competent for failing to protect Soleimani, having more than 50 people trampled to death at his funeral, and then possibly shooting down their civilian airplane.

With central banks around the world, creating liquidity, any correction in the bull market should be limited. Stay bullish on stocks.

Some of the INDEXES of the markets both equities and interest rates are below.

The source is Morningstar.com up until January 10th, 2020.


Dow Jones +1.1%
S&P 500 +1.2%
NASDAQ Aggressive growth +2.7%
I Shares Russell 2000 ETF (IWM) Small cap – .47 of 1%
Midcap stock funds -.48 of 1%
International Index (MSCI – EAFE ex USA 1.0% Moderate Mutual Fund Investment Grade Bonds (AAA) Long duration +.56 of 1%
High Yield Merrill Lynch High Yield Index +.46 of 1%
Short Term Bond +.22 of 1%
Fixed Bond Yields (10 year) +1.8.% Yield
The average Moderate Fund is up .62 of 1% this year fully invested as a 65% in stocks and 35% in bonds and nothing in the money market.

Interest rates look stable going forward over the next 6 months

The Dow Jones Average is above. This index for the 5 largest stocks are Boeing, Apple, United healthcare, Goldman Sachs and Home Depot. They are the mix of American industry, but only contain 30 stocks. Even though the Dow is rising,

Look to the 3 graphs below the chart. You will see the horizontal blue line. When that is over 88 as it is, it shows that the market is OVERBOUGHT. Then when the green line falls below the green line you see the market selling off. It is there again, so be careful. The second graph shows Money flow/ Volume Accumulation. When this goes negative like it is below zero or the horizontal line, it shows that there is some distribution or selling pressure.

The last graph shows the Advance decline line. This is the number of stocks going up compared to the number of stocks going down on a running total. As you can see the Dow Jones is going up, but the Advance/decline is going DOWN. This means only a few stocks are going up. If this doesn’t change, the market could be ready for a little decline There is trend-line support at 28400 if it drops there. But unless the indicators change for the better, the market may fall and correct somewhat.

The NASDAQ is above. As you can see the NASDAQ is going up and is at the upper part of channel with-overbought and oversold indicators like the SK-SD stochastic indicators (the first graph) are very overbought. When the horizontal blue line is above 88 where the indicators are currently the market is overbought. Many times, when this indicator is above 88 you will see some sort of a correction or a give back.

See the last three times this indicator hit this level and crossed below it, the market fell. The NASDAQ can fall to the 8900 level where the bold trend line is above and still be bullish. It’s when we break that dark blue trend-line, then I will get very Cautious. Right now, the NASDAQ is overbought, and there are only a few stocks pushing this market higher. The third graph is the Advance decline Line. Notice, as the NASDAQ is going higher, it is going higher on a few stocks, that is why the Advance Decline Line is falling.

What is the Advance-Decline Line?

The advance/decline line (A/D) is a technical indicator that plots the difference between the number of advancing and declining stocks daily. The indicator is cumulative, with a positive number being added to the prior number, or if the number is negative, it is subtracted from the prior number.

The A/D line is used to show market sentiment, as it tells traders whether more stocks are rising or falling. It is used to confirm price trends in major indexes, and can also warn of reversals when divergence occurs.

The on-balance volume (OBV) is a technical analysis indicator intended to relate price and volume in the stock market. OBV is based on a cumulative total volume.[1] Money flow is calculated by averaging the high, low and closing prices, and multiplying by the daily volume. Comparing that result with the number for the previous day tells traders whether money flow was positive or negative for the current day. Positive money flow indicates that prices are likely to move higher, while negative money flow suggests prices are about to fall.

Source: Investopedia

A Support or support level is the level at which buyers tend to purchase or into a stock or index. It refers to the stock share price that a company or index should hold and start to rise. When the price of the stock falls towards its support level, the support level holds and is confirmed, or the stock continues to decline, and the support level must change.

  • Support levels on the S&P 500 area are 3248, 3217 area MAJOR Trend line support, 3182, 3119, and 3088. These might be BUY areas.
  • Support levels on the NASDAQ are 8900, 8655, and 8474.
  • On the Dow Jones support is at 28,420, 28245, 26093 (200-day moving average) and 27764
  • These may be safer areas to get into the equity markets on support levels slowly.
  • RESISTANCE LEVEL ON THE S&P 500 3280.

THE BOTTOM LINE:

The market is somewhat overbought and at FAIR VALUE. There are now some cracks in the dam showing as explained above, but my computer systems are still at a Hold for the market direction. I expected the S&P to hit 3280, it did last week and sold off very quickly to the 2165 area. The markets are rallying on large-cap growth and technology stocks and watching the other smaller to midcap companies decline. Either we start to see the small and midcap stocks begin to rally, or the market could begin to decline. The S&P could hit 3280 to 3400 later in the year. Earnings could potentially grow 6 to 7% or more this year and that is why there is the possibility that the S&P 500 could reach 3280 to 3400+ in 2020, a much smaller rise in the stock market than in 2019 but hopefully, a decent return, with obviously no guarantees expressed or implied.

Best to all of you,

Joe Bartosiewicz, CFP®
Investment Advisor Representative
5 Colby Way
Avon, CT 06001
860-940-7020 or 860-404-0408

SECURITIES AND ADVISORY SERVICES OFFERED THROUGH SAGE POINT FINANCIAL INC., MEMBER FINRA/SIPC, AND SEC-REGISTERED INVESTMENT ADVISOR.

Charts provided by AIQ Systems:

Technical Analysis is based on a study of historical price movements and past trend patterns. There is no assurance that these market changes or trends can or will be duplicated shortly. It logically follows that historical precedent does not guarantee future results. Conclusions expressed in the Technical Analysis section are personal opinions: and may not be construed as recommendations to buy or sell anything.

Disclaimer:

The views expressed are not necessarily the view of Sage Point Financial, Inc. and should not be interpreted directly or indirectly as an offer to buy or sell any securities mentioned herein. Securities and Advisory services offered through Sage Point Financial Inc., Member FINRA/SIPC, an SEC-registered investment advisor.

Past performance cannot guarantee future results. Investing involves risk, including the potential loss of principal. No investment strategy can guarantee a profit or protect against loss in periods of declining values. Please note that individual situations can vary. Therefore, the information presented in this letter should only be relied upon when coordinated with individual professional advice. *There is no guarantee that a diversified portfolio will outperform a non-diversified portfolio in any given market environment. No investment strategy, such as asset allocation, can guarantee a profit or protect against loss in periods of declining values. It is our goal to help investors by identifying changing market conditions. However, investors should be aware that no investment advisor can accurately predict all of the changes that may occur in the market. The price of commodities is subject to substantial price fluctuations of short periods and may be affected by unpredictable international monetary and political policies. The market for commodities is widely unregulated, and concentrated investing may lead to Sector investing may involve a greater degree of risk than investments with broader diversification. Indexes cannot be invested indirectly, are unmanaged, and do not incur management fees, costs, and expenses.

Dow Jones Industrial Average: A weighted price average of 30 significant stocks traded on the New York Stock Exchange and the NASDAQ.
S&P 500: The S&P 500 is an unmanaged indexed comprised of 500 widely held securities considered to be representative of the stock market in general.

NASDAQ: the NASDAQ Composite Index is an unmanaged, market-weighted index of all over the counter common stocks traded on the National Association of Securities Dealers Automated Quotation System
(IWM) I Shares Russell 2000 ETF: Which tracks the Russell 2000 index: which measures the performance of the small capitalization sector of the U.S. equity market.

A Moderate Mutual Fund risk mutual has approximately 50-70% of its portfolio in different equities, from growth, income stocks, international and emerging markets stocks to 30-50% of its portfolio in different categories of bonds and cash. It seeks capital appreciation with a low to moderate level of current income.

The Merrill Lynch High Yield Master Index: A broad-based measure of the performance of non-investment grade US Bonds MSCI EAFE: the MSCI EAFE Index (Morgan Stanley Capital International Europe, Australia, and Far East Index) is a widely recognized benchmark of non-US markets. It is an unmanaged index composed of a sample of companies’ representative of the market structure of 20 European and Pacific Basin countries and includes reinvestment of all dividends. Investment grade bond index: The S&P 500 Investment-grade corporate bond index, a sub-index of the S&P 500 Bond Index, seeks to measure the performance of the US corporate debt issued by constituents in the S&P 500 with an investment-grade rating. The S&P 500 Bond index is designed to be a corporate-bond counterpart to the S&P 500, which is widely regarded as the best single gauge of large-cap US equities.

Floating Rate Bond Index is a rule-based, market-value weighted index engineered to measure the performance and characteristics of floating-rate coupon U.S. Treasuries, which have a maturity greater than 12 months.
Money Flow; The Money Flow Index (MFI) is a momentum indicator that measures the flow of money into and out of a security over a specified period. It is related to the Relative Strength Index (RSI) but incorporates volume, whereas the RSI only considers SK-SD Stochastics. When an oversold stochastic moves up through its MA, a buy signal is produced. Furthermore, Lane recommends that the stochastic line be smoothed twice with three-period simple moving averages: SK is the three-period simple moving average of K, and SD is the three-period simple moving average of SK

Rising Wedge; A rising wedge is a technical indicator, suggesting a reversal pattern frequently seen in bear markets. This pattern shows up in charts when the price moves upward with pivot highs and lows converging toward a single point known as the apex

The Bartometer

December 14, 2019

Hello Everyone,

Market Recap:

The last month has been very good for the stock market. With the stock indexes rallying 25% or more this year, the market is now at fair value. This means that even though I feel the market could rise next year to my potential forecast of 3280 to 3380, the market based on this year’s earnings is currently where it should be. Barring any Trump slump in the impeachments or Chinese tariffs blow ups, the markets could sell off in the first part of 2020 but if earnings grow 6-7% and interest rates stay low then any market sell off should be just a correction and nothing more than a 4-7% selloff possibly. But because some hedge fund managers are underperforming the S&P 500 this year, any sell off over the next week or so maybe shallow as they want to show their investors at the end of the year that they were fully invested. Beware of a possible sell off after January 2, 2020.

An excerpt from Fundamental Economist Dr. Robert Genetski: from Classical Principles.com:

Stocks rebounded this past week with gains in the vicinity of 2%. The S&P500, Nasdaq and Nasdaq 100 hit new all-time record highs. Christmas came early for investors as trade agreements with China and with Democrats over the USMCA appear wrapped up. The USMCA trade agreement is not a major move in the direction of free trade. It involves only minor adjustments to trade affecting relatively few industries. The main benefit of the agreement is it reduces the uncertainty businesses face over the potential for a major disruption in trade. While details of the agreement with China are not yet available, the main benefit of an agreement will be to reduce uncertainty. This makes it easier for businesses to plan for the future. The resolution of key trade issues and the Fed’s purchases of securities mean the immediate outlook for both the economy and stocks remains positive. Stay bullish.

Longer-term interest rates should remain in the present vicinity for the immediate future.

On the Technical Side:

In November the S&P 500 broke out of the Ascending Triangle that was very Bullish. Now that the S&P 500 is at 3169 and at Fair value it would be normal to see a little correction that I don’t see until the first quarter of next year possibly.

Interest Outlook:

I see the Federal Reserve remaining stable with interest rates.

Some of the INDEXES of the markets both equities and interest rates are below. The source is Morningstar.com up until December 13th, 2019. These are passive indexes.

Dow Jones +23%
S&P 500 +27%
NASDAQ Aggressive growth +34%
I Shares Russell 2000 ETF (IWM) Small cap +23%
International Index (MSCI – EAFE ex USA) +19%
Moderate Mutual Fund +16%
Investment Grade Bonds (AAA) Long duration +13%
High Yield Merrill Lynch High Yield Index +12%
Floating Rate Bond Index +3-5%
Short Term Bond +3%
Fixed Bond Yields (10 year) +1.80.% Yield
The average Moderate Fund is up 16% this year fully invested as a 65% in stocks and 35% in bonds and nothing in the money market.

S&P 500

Source: AIQ Systems on graphs

The S&P 500 is above. I thought it would break out in October and it did and continued in November and December, but now it needs to Breakout ABOVE and close above 3190 to 3195 or it tops out here. There is a Rising Wedge that I am pointing to above. These tend to be topping and reversal patterns. So watch for a continuation of the breakout above 3190-3195 or it can stall here. If the S&P 500 closes below 3120 I will be getting Cautious. The 50 Day moving average at 3063 should find some Buying support. But the 3030 level is Key Support. If it is closes below 3120 I get Cautious, this means reduce exposure in equities a little if it closes below there. If it closes below the 50 Day Moving average of 3063 I may want to reduce a little more. And a Close below 3030 gets me Very Cautious.

I like the Midcap and some of the smaller stocks and the international and emerging markets going into next year and a reduction of the ULTRA large companies as they are fairly valued.

The first indicator above is the SK-SD Stochastic indicator. This shows the market is a little overbought on a weekly basis but not tremendously overbought.

The second Indicator is the MACD or Moving Average Convergence Divergence Indicator. This is breaking out on the upside showing that the market is gaining its upward momentum again.

Also On-Balance on a monthly total is at new highs in the Dow Jones. This is also Bullish.

OLD HIGH RESISTANCE broken out. But going up in a Rising Wedge.

  • Support levels on the S&P 500 area are 3154, 3124, 3030, 3017 and 2966. These might be BUY areas.
  • Support levels on the NASDAQ are 8588, 8348, 8253, 8136 and 8019.
  • On the Dow Jones support is at 27,667, 27,389, and 27,269 and 26,726
  • These may be safer areas to get into the equity markets on support levels slowly.
  • RESISTANCE LEVEL ON THE S&P 500 3190-3195. We need a break of 3195 to void the Rising Wedge.

THE BOTTOM LINE:

The market has rallied a great deal this year after a moderately down 2018. We have made a nice gain this year depending on how aggressive you were in your portfolio. The 3130-3180 I called earlier in the year to reach hit its target at 3169 as of Friday, but it should be reasonably ok and going into the end of December, but I expect a little correction earlier in the first part of 2020 but if everything goes well in our favor with the Chinese Tariffs then earnings could potentially grow 6 to 7% or more and there is possibility that the S&P 500 could reach 3280 to 3380 in 2020, a much smaller rise in the stock market than in 2019 but hopefully a decent return, with obvious no guarantees expressed or implied.

Best to all of you,

Joe

Joe Bartosiewicz, CFP®

Investment Advisor Representative

5 Colby Way
Avon, CT 06001
860-940-7020 or 860-404-0408

SECURITIES AND ADVISORY SERVICES OFFERED THROUGH SAGE POINT FINANCIAL INC., MEMBER FINRA/SIPC, AND SEC-REGISTERED

INVESTMENT ADVISOR.

Charts provided by AIQ Systems:

Technical Analysis is based on a study of historical price movements and past trend patterns. There is no assurance that these market changes or trends can or will be duplicated shortly. It logically follows that historical precedent does not guarantee future results. Conclusions expressed in the Technical Analysis section are personal opinions: and may not be construed as recommendations to buy or sell anything.

Disclaimer: The views expressed are not necessarily the view of Sage Point Financial, Inc. and should not be interpreted directly or indirectly as an offer to buy or sell any securities mentioned herein. Securities and Advisory services offered through Sage Point Financial Inc., Member FINRA/SIPC, an SEC-registered investment advisor.

Past performance cannot guarantee future results. Investing involves risk, including the potential loss of principal. No investment strategy can guarantee a profit or protect against loss in periods of declining values. Please note that individual situations can vary. Therefore, the information presented in this letter should only be relied upon when coordinated with individual professional advice. *There is no guarantee that a diversified portfolio will outperform a non-diversified portfolio in any given market environment. No investment strategy, such as asset allocation, can guarantee a profit or protect against loss in periods of declining values.

It is our goal to help investors by identifying changing market conditions. However, investors should be aware that no investment advisor can accurately predict all of the changes that may occur in the market.

The price of commodities is subject to substantial price fluctuations of short periods and may be affected by unpredictable international monetary and political policies. The market for commodities is widely unregulated, and concentrated investing may lead to Sector investing may involve a greater degree of risk than investments with broader diversification.

Indexes cannot be invested indirectly, are unmanaged, and do not incur management fees, costs, and expenses.

Dow Jones Industrial Average: A weighted price average of 30 significant stocks traded on the New York Stock Exchange and the NASDAQ.

S&P 500: The S&P 500 is an unmanaged indexed comprised of 500 widely held securities considered to be representative of the stock market in general.

NASDAQ: the NASDAQ Composite Index is an unmanaged, market-weighted index of all over the counter common stocks traded on the National Association of Securities Dealers Automated Quotation System (IWM) I Shares Russell 2000 ETF: Which tracks the Russell 2000 index: which measures the performance of the small capitalization sector of the U.S. equity market.

A Moderate Mutual Fund risk mutual has approximately 50-70% of its portfolio in different equities, from growth, income stocks, international and emerging markets stocks to 30-

50% of its portfolio in different categories of bonds and cash. It seeks capital appreciation with a low to moderate level of current income.

The Merrill Lynch High Yield Master Index: A broad-based measure of the performance of non-investment grade US Bonds

MSCI EAFE: the MSCI EAFE Index (Morgan Stanley Capital International Europe, Australia, and Far East Index) is a widely recognized benchmark of non-US markets. It is an unmanaged index composed of a sample of companies’ representative of the market structure of 20 European and Pacific Basin countries and includes reinvestment of all dividends.

Investment grade bond index: The S&P 500 Investment-grade corporate bond index, a sub-index of the S&P 500 Bond Index, seeks to measure the performance of the US corporate debt issued by constituents in the S&P 500 with an investment-grade rating. The S&P 500 Bond index is designed to be a corporate-bond counterpart to the S&P 500, which is widely regarded as the best single gauge of large-cap US equities.

Floating Rate Bond Index is a rule-based, market-value weighted index engineered to measure the performance and characteristics of floating-rate coupon U.S. Treasuries, which have a maturity greater than 12 months.

Bartometer October 14, 2019

Hello Everyone,

Market Recap:
Over the last month, the market has gone down about 4%, then rebounded nearly 3% to a slight decline of 1% over the previous month. The continual news of the Impeachment, slower orders on manufacturing, and the Chinese tariff discussions have made the market more volatile. October is usually a bottoming month, and November and December are traditionally higher. Last year, this did not happen. The market bottomed on December 26, 2018, and surged from that date to July with a return of 21% from January to July 2019.

An excerpt from Fundamental Economist Dr. Robert Genetski: from Classical Principles.com:

“This week’s main positive event was Fed Chairman Powell’s indication that the Fed would resume purchasing securities. Assuming the Fed follows through, this represents a game-changer in terms of next year’s economy and conditions of the nearterm outlook for stocks. Another potential positive development is Trump’s view that talks regarding a trade agreement are going well. I continue to expect a limited deal as a first step in improving trade with China. The rise in stock futures last Friday indicates that investors expect an agreement”.

Adding to Bob’s his Comment:

With or without a trade agreement, the outlook for stocks has improved with Powell’s comments. Purchases of securities improve the odds the economy will do very well next year. If it does, there’s a better chance of avoiding a destructive move toward socialist policies. Stocks are still subject to a decline if there is a failure to reach a trade agreement. However, monetary policy is more important. Without sufficient money, the economy would decline even with a trade agreement. While the Fed’s purchases of securities won’t impact the economy until the spring, they should impact both stocks and interest rates almost immediately. The Fed’s decision to purchase securities provides a reason to move to a fully invested position in equity portfolios.

On the Technical Side:

Over the last almost two years, the markets haven’t done much at all. (See the Monthly Chart below). The markets have been volatile after the prior seven-year run. Earnings have been soft, but the markets seem to want to go higher. The stock market NEEDs to BREAKOUT of the old highs of the Dow Jones at 27400, S&P 500 at 3029, and the NASDAQ 8340. The markets are only about 1 to 2% from a Major Breakout. But it needs the volume and conviction of more certainty in the Chinese trade agreement and the economy that has been showing some signs of a slowing. Earnings have been slowing so we are at a critical point in the markets again. October can be a volatile month, so it is vital that if the markets don’t breakout soon it will cause sellers and traders to start the selling again. If the Dow closes below 25740, I will be getting Cautious, and 25335. I will be Getting Very Cautious.

Some of the INDEXES of the markets both equities and interest rates are below. The source is Morningstar.com up until October 11th, 2019.

Dow Jones +17%
S&P 500 +20%
NASDAQ Aggressive growth +24%
I Shares Russell 2000 ETF (IWM) Small cap +13%
International Index (MSCI – EAFE ex USA) +13%
Moderate Mutual Fund +10%
Investment Grade Bonds (AAA) +11%

High Yield Merrill Lynch High Yield Index +9%

Floating Rate Bond Index +3-5%
Short Term Bond +3%
Fixed Bond Yields (10 year) +1.72.% Yield

The average Moderate Fund is up 10% this year fully invested as a 60% in stocks and 40% in bonds and nothing in the money market.

Interest Outlook
I see the Federal Reserve reducing interest rates ¼% in December.

The Dow Jones Index is above. As it contains 30 of the largest industrial and American stocks. I wanted to show you the 10 year performance and the LONG TERM of the Dow Jones. Notice that the Dow has done very well from 2010 until 1/31/2018. Since then the Dow Jones has gone up and down and is up about 1% in about 2 years. It is right near its old high of the last 1.9 years. There are three indicators above that are important. The first one is the MACD and or Momentum index. As you can see from the index is that it has lost momentum. See the index drifting lower. This shows that the market have lost the upside breakout push. It needs the volume push upward and it needs volume and good news from the government to push it higher and break out to push it above the 27400.

There are two indicators that look GOOD The Money Flow Indicator is at a new high as well as the On Balance Volume Indicator. These indicators are important to determine where the overall market is headed. When both of them are at new highs but the market is not at a new high it shows that there is DEMAND for stocks. It’s not guaranteed that the market will breakout but is a pretty good indicator that it will. With all of the Tweeting and volatility in the market this is not a greatest of indicators but it is more accurate without all of the volatile news. There is a somewhat of a Bullish patter above called an Ascending Triangle. It shows a rise of the trend line and that is bullish. See the vertical blue arrow pointing upward. This will many time breakout to the UPSIDE. But if the Dow Jones closes below 25740 I will be getting Cautious and if it breaks below 25335 on a close I will be getting Very Cautious.

Support levels on the S&P 500 area are 2916, 2823, 2746, and 2921. These might be BUY areas.


 Support levels on the NASDAQ are 7967, 7782, 7644, and 7407.
 On the Dow Jones support is at 26,285, 25,763, and 25,458
 These may be safer areas to get into the equity markets on support levels slowly.
 RESISTANCE LEVEL ON THE S&P 500 IS 30280 Dow Jones breakout is 27,400. If there is a favorable tariff settlement, the market should rise short term.

THE BOTTOM LINE:

The Dow, the S&P 500 and the NASDAQ are all near new highs after rallying over the last two weeks. Since then, the markets have rallied near their old highs. There are technical patterns that show the markets could breakout to new highs, but IF THE MARKETS DON’T BREAKOUT OUT SOON, THE MARKETS COULD TOP OUT. I WILL CONTINUE TO ANALYZE THE TECHNICALs OF THE MARKET.

There are seasonal patterns that are usually weak. October is NOT SEASONALLY strong. It’s often a bottoming month. It looks like the market wants to go up, but with tweets coming out hourly, market timing will be more difficult. If things come in as Trump expects, watch for a substantial rally possibly to the old highs. But there are headwinds currently short term.

Best to all of you,

Joe Bartosiewicz, CFP®
Investment Advisor Representative
Contact information:

5 Colby Way
Avon, CT 06001
860-940-7020 or 860-404-0408


SECURITIES AND ADVISORY SERVICES OFFERED THROUGH SAGE POINT FINANCIAL INC., MEMBER FINRA/SIPC, AND SEC-REGISTERED INVESTMENT ADVISOR.

Charts provided by AIQ Systems:

Technical Analysis is based on a study of historical price movements and past trend patterns. There is no assurance that these market changes or trends can or will be duplicated shortly. It logically follows that historical precedent does not guarantee future results. Conclusions expressed in the Technical Analysis section are personal opinions: and may not be construed as recommendations to buy or sell anything.

Disclaimer: The views expressed are not necessarily the view of Sage Point Financial, Inc. and should not be interpreted directly or indirectly as an offer to buy or sell any securities mentioned herein. Securities and Advisory services offered through Sage Point Financial Inc., Member FINRA/SIPC, an SEC-registered investment advisor. Past performance cannot guarantee future results. Investing involves risk, including the potential loss of principal. No investment strategy can guarantee a profit or protect against loss in periods of declining values. Please note that individual situations can vary. Therefore, the information presented in this letter should only be relied upon when coordinated

10-9-19 Some Retail and some REITS our intraday snapsot revealed

The Dow was up a snap back from the prior fall into the close? We downloaded the snapshot 90 minutes into the trading day. This video shows what we found, and how you can use this to get ahead of the rest of the market.

The fastest way to browse hundreds of charts end of day is back with a vengeance. AIQ TradingExpert Pro has always been known for its ability to browse hundreds of daily price charts at blizzard speeds (one of the many unique features in the platform). 

The fastest way to browse hundreds of charts end of day is back with a vengeance. AIQ TradingExpert Pro has always been known for its ability to browse hundreds of daily price charts at blizzard speeds (one of the many unique features in the platform).  

Also includes historical data on US and Canadian stocks updated every night and Mutual Fund NAVs updated each night.

How do traders use this powerful data?

  • For the Chart Pattern Recognition traders this is the Ferrari of analysis tools. It’s simple to scan hundreds of charts to see the patterns emerging the same day it’s happening.​
  • For traders who look for groups or sectors on the move, our intraday snapshot updates AIQ’s powerful groups and sectors too, so you can get ahead of a move in the market segments before the rest of the crowd.
  • For traders who want to place trades in the last hour of the trading day,  downloading a snapshot in the last hour of trading day has almost the entire days action for your stocks, you can do your end of day analyze and place tomorrows trades today.

PLUS all the powerful features of AIQ TradingExpert Pro end of day including

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Also includes historical data on US and Canadian stocks updated every night and Mutual Fund NAVs updated each night.

LEARN MORE

Yes, the Stock Market is at a Critical Juncture (and What to Do About It)

As usual, you can pretty much see whatever you want to see in today’s stock market.  Consider the major indexes in Figure 1, displayed along with their respective 200-day moving averages.

Figure 1 – Major Indexes (Courtesy AIQ TradingExpert)

If you “want to” be bullish, you can focus on the fact that all 4 of these major indexes are presently above their respective 200-day moving averages.  This essentially defines an “uptrend”; hence you can make a bullish argument.

If you want to be “bearish”, you can focus on the “choppy” nature of the market’s performance and the fact that very little headway has been made since the highs in early 2018.  This “looks like” a classic “topping pattern” (i.e., a lot of “churning”), hence you can make a bearish argument.

To add more intrigue, consider the 4 “market bellwethers” displayed in Figure 2.

Figure 2 – Jay’s Market Bellwethers (Courtesy AIQ TradingExpert)

(NOTE: Previously I had Sotheby’s Holdings – ticker BID – as one my bellwethers.  As they are being bought out, I have replaced it with the Value Line Arithmetic Index, which has a history of topping and bottoming prior to the major indexes)

The action here is much more mixed and muddled.

*SMH – for any “early warning” sign keep a close eye on the semiconductors.  If they breakout to a new high they could lead the overall market higher. If they breakdown from a double top the market will likely be spooked.

*TRAN – The Dow Transports topped out over a year ago and have been flopping around aimlessly in a narrowing range.  Not exactly a bullish sign, but deemed OK as long as price holds above the 200-day moving average.

*ZIV – Inverse VIX is presently below it’s 200-day moving average, so this one qualifies as “bearish” at the moment.

*VAL-I – The Value Line Index is comprised of 1,675 stocks and gives each stock equal weight, so is a good measure of the “overall” market.  It presently sits right at its 200-day moving average, however – as you can see in Figure 3 – it is presently telling a different story than the S&P 500 Index.

Figure 3 – S&P 500 trending slightly higher, Value Line unweighted index trending lower (Courtesy AIQ TradingExpert)

The Bottom Line

OK, now here is where a skilled market analyst would launch into an argument regarding which side will actually “win”, accompanied by roughly 5 to 50 “compelling charts” that “clearly show” why the analysts’ said opinion was sure to work out correctly.  Alas, there is no one here like that. 

If the question is, “will the stock market break out to the upside and run to sharply higher new highs or will it break down without breaking out to new highs?”, I sadly must default to my standard answer of, “It beats me.”

Here is what I can tell you though.  Instead of relying on “somebody’s opinion or prediction” a much better bet is to formulate and follow an investment plan that spells out:

*What you will (and will not) invest in?

*How much capital you will allocate to each position?

*How much risk you are willing to take with each position?

*What will cause you to exit with a profit?

*What will cause you to exit with a loss?

*Will you have some overarching “trigger” to cause you to reduce overall exposure?

*And so on and so forth

If you have specific answers for the questions above (you DO have specific answers, don’t you?) then the correct thing to do is to go ahead and follow your plan and ignore the myriad prognostications that attempt to sway you one way or the other.

Jay Kaeppel

Disclaimer:  The data presented herein were obtained from various third-party sources.  While I believe the data to be reliable, no representation is made as to, and no responsibility, warranty or liability is accepted for the accuracy or completeness of such information.  The information, opinions and ideas expressed herein are for informational and educational purposes only and do not constitute and should not be construed as investment advice, an advertisement or offering of investment advisory services, or an offer to sell or a solicitation to buy any security.