Sunday Update: 08 December 2019
It was a wild ride for the markets this week, particularly for the S&P500 (C Fund)! After closing below the 10DMA on Monday and gapping lower on Tuesday, the C fund recovered for the remainder of the week finishing slightly higher. For the week the C fund gained 0.16%, the S fund was down 0.09%, and the I fund gained 0.75%.
Once again, the weekly perspective is a bit different from the daily perspective. We will take a look at both for the C fund, as well as the daily charts of the S and I funds.
The 3 year weekly chart of the C fund below is quite bullish. This week the market dropped down to the long term upper channel line which acted as a floor, supporting prices at that level. This is a great first test of that upper channel line acting as a floor and strengthens the argument for higher prices going forward.
The daily (short term) view is quite different than the weekly view above. In the 8 month daily chart of the C fund below we can see a close below the 10DMA on Monday then a gap lower on Tuesday. Looking at the 3 prior highs on this chart, you can see what happens when the price falls below the 10DMA; it almost always continues lower. The price action this week looks significantly different than any of the 3 prior highs. Volatility was higher and we still have overhead resistance of the upper channel line. A big volume move above 3150 would put us in a clear positive direction. A daily close below Tuesdays intra-day low of 3075 would mean the end of this rally. We could be in for a big week ahead…
The S fund gave us a tight consolidation for the first 3 weeks of November then a clear breakout day last week. This was a great technical set up but it clearly failed. Tuesday’s gap down took prices below 1450 which makes the late week rally extremely suspect. In addition, while Friday was an up day for the S fund, it finished in the lower half of the days trading range. All in all, a very uninspiring week for the S fund. A daily close below 1450 puts us right back into the long term sideways pattern…
The I fund had a volatile week, moving several percent in each direction. With a weekly close at the top of the consolidation that began at the beginning of November, the next direction for the I fund is still uncertain. Tuesday’s decline took the I fund down to just above its 50DMA. This is close enough to be considered a test of the 50DMA where it found support. This is very bullish. A big volume close above 68.75 would be a buy signal for the I fund, otherwise we are still in the consolidation pattern.
Bottom Line: The market is in a serious struggle. Tuesday’s gap down thru the 10DMA is significant. It’s the first time we’ve seen the C fund below its 10DMA since early October. At the same time, Friday’s gap up thru the 10DMA is also significant, usually leading to higher prices. I would not be surprised to see a strong move in either direction next week. Unfortunately, I’m not willing to guess which direction that might be… Stay tuned!
Have a great week!