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August 2019 -- an amateur technician's observations.

Spending this afternoon looking at some long-term stock & equity-index charts. Just thought I'd jot down some impressions.. Just thought I'd memorialize some thoughts, for my own benefit as much as anyone else's...

Bonds (AGG) - At $112.xx, bonds appear to be at major L/T resistance, having reached this area in 2013, 2015 & 2017, only to then turn back down... Nothing prohibits a continued move up, but MAN, the YTD move has been a rocket. Nothing grows to the sky.

S&P index: Broke out past resistance in July, north of the mid-2900's. Then promptly fell back. (i.e. so far, could not hold the breakout). July is seasonally a strong equity month (and that is what we saw this year). Aug & Sept (& Oct), often give back a lot of points. Looking 'below the surface' of the index, here is how I interpret l/t charts of some of the larger stocks:

***For the optimists out there, I suppose you could replace the word "topping" with "consolidating prior gains, awaiting the next leg up".

AMZN 22% of XLY -- L/T topping? ***
HD 10% of HLY - L/T topping? ***
MCD 7.5% of HLY - No resistance, but PE 29. (while S&P categorizes MCD as 'discretionary', I view it as 'the poor man's kitchen' (i.e. a consumer staple).

GOOG /-L 24% of XLC – L/T topping? ***
FB 19.5% of XLC - - L/T topping? ***

MSFT 20% of XLK - No resistance. But extended?
AAPL 16.5% of XLK - L/T topping? ***

BRK.B 12.2% of XLF - L/T topping? ***
JPM 11% of XLF - L/T topping? ***

BA 7.9% of XLI - L/T topping? ***
HON 5.5 of XLI - only possible s/t topping
UTX 4.7% OF xlI -L/T topping? ***

DJT -- L/T topping. 2019 highs are below 2018 highs.

In most cases, as I write this, the stocks are not at "the top" (i.e. all time highs), but they do appear to be range-bound, somewhere between their high, and what might be deemed "support", technically speaking. As CNBC technician Randall Carlson likes to say "topping is a PROCESS, not a (single-) price".

Disclosure: As time was limited, I didn't view the Utes, or Materials (each ~ 3% of the index), or Energy & Healhtcare -- each of those seems to mostly move to their own tune, rather than general economic conditions.


World equities-EX-US (IXUS): These peaked in January 2018, then nosedived through 2018. Then rebounded in 2019 to $60.xx but turned back down. $59-$60 seems to have become the new resistance level.

European markets, removing the FX effects (HEDJ) seems absolutely refusing to breach a line of resistance in $66-67 area. Its tried and failed 7 times in the past 5 years to do so, including in July... How healthy can ANY equity market be, if it supported by interest-rate suppression like what we see there...? The UK (EWU) appears to be at/near support -- presumably the market is being avoided as we approach Brexit. Might be persuaded to dab a toe in here..?

Japan (DXJ, hedged for FX) -- I always find it hard to "read" the Japanese market technically. I can only say that in mid-August 2019, it certainly cannot be said to be in a bullish uptrend..

China (FXI)... Strangely, FXI seems to be "at support" ~ $38.xx. -- Off about 28% from its recent (early 2018) highs.

India (INDA). Another market that I find hard to "read" --- volatility is often intense/sudden, both up and down. That said, with the exception of a "blow-off top" in January 2018, $35-36 seems like rather dogged resistance. I'd be surprised if it broke above it

Gold (IAU) - Could definitely use a rest (i.e. pullback) after recent sudden move up. But, what I see is:a) higher-lows since the late 2016 low, b) successful breach through the intermediate-term line of resistance at $13.xx price area, and from a fundamental standpoint, any significant currency dislocations (e.g. US, China, UK or Europe) OR geo-political conflict (Persian Gulf, or more acutely, Kashmir) could return IAU to the 2012-2013 resistance area (or beyond)...

TAKEAWAYS: Bonds look extremely stretched/overbought. Foreign markets have not overcome their January 2018 highs, despite an enormous "up move" in H1-2019. In many cases, major growth stocks in the S&P, seem to be slightly under lines of price resistance -- suggesting at least a modest move up toward resistance is in the realm of the possible. However, much of the market does appear to be in a trading range, suggesting any move up will not have "legs" and may well be turned back as prices move into their zones of resistance. Risk/reward doesn't strike me as particularly attractive.


  • Thanks for this, @Edmond.
  • @Edmond: Nice work. Thanks!
  • edited August 2019
    @edmond: Nice work. I enjoyed reading your analysis. Please keep posting your thoughts. In converting Old_Skeet's market barometer to score AGG (bonds) this can be done; but, instead of using the earnings feed which I use for stocks I used a yield feed along with a breadth technical score measure (over a physical count measure) plus a technical score feed. With this, based upon these metrics, the barometer produced a reading of 125 indicating that bonds are extremely overbought.

    In comparison, based upon the last barometer reading for the S&P 500 Index, stocks came in with a reading of 157 indicating that they were under valued.
  • @edmond thanks so much for posting. very informative. I don't understand technicals so having you explain it is valuable.
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