Articles

By: Chris Rowe — September 10, 2019

The Results Are IN. "Be Bullish"

Happy Tuesday folks!

This week I'll share with True Market Insider readers, like you, what I wrote in Sector Focus. Then update you on what's happened since.

Chris Rowe Bio 9.1Basically, I stated that the market was deciding what it wanted to do and we would get a signal soon, on whether the market wants to charge higher or sink lower.

The results are in!

It wants to push higher again.

I'll explain it all in a minute.

But first, let's just make sure you're aware of True Market Insiders' editorial schedule (a schedule I'll admit to breaking here and there!):

  • TUESDAYS: I (Chris Rowe) write "Technical Tuesdays"
  • WEDNESDAYS: I (Chris Rowe) write for you
  • THURSDAYS: Options Guru, Costas Bocelli writes for you
  • SATURDAYS:  Our Editor in Chief, Bill Spencer writes "Small Cap Saturdays" for you

Now let's talk about why you've got to buy this stock market breakout.

In one of our paid publications, Sector Focus, sent last Monday September 2nd, I wrote about how the stock market was deciding which way it wanted to break - up or down.

For context, here's one part of what I wrote.

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Intermediate-Term Market Timing With the "%30-week"

2019-09-02_12-29-31

This is the "%30-wk" ("The percentage of stocks listed on the New York Stock Exchange trading above their thirty week moving average").  When more and more stocks are moving above their 30-week moving average, it's viewed as a bullish sign for markets.   When this is happening, the above indicator will show a column of Xs in the far right column, as it is now.

For example, let's look at just ONE STOCK (Apple) along with its 30-week moving average.

2019-09-02_13-41-04

Notice how when it moves below the blue line, the stock is pretty weak.  When it moves above, it's generally pretty strong.  So the "%30-week" shows us when lots of stocks are doing this all at the same time.

Although the %30-week is in an X-column, this only speaks to the short-term.  What we want to see is the current X-column move above the previous X-column.  In fact, I'd like to see it move even further up... preferably past the entire green shaded area, which includes the previous high.

2019-09-02_12-29-31

So if the %30-week makes a higher high, that means that a larger number of stocks will then be participating in the current stock market rally, than participated in the previous one.  That's strong breadth, and a sign of a resumed bull market.  You'll probably see this even before seeing a new X-column in the NYSE Bullish Percent Index.

If you aren't currently a member of Sector Prophets Pro, then write into info@truemarketinsiders.com and get set yourself set up.

Conclusion:  We are in wait-and-see mode with this indicator, but it's probably going to be THE INDICATOR to watch that will give us the best picture when demand takes control.

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So what I was saying a week ago was, while most people are focusing on the S&P 500 chart to determine whether or not demand or supply will take control of the stock market, our focus is on "The TRUE Market".

The True Market is the "internal market" otherwise known as stock market's "breadth".  We look at the most effective breadth indicators - not the basic "advance decline ratio".

If you want to know what's really going on, you follow breadth.

There are many breadth indicators but the three most effective are:

  • The "%10-week" (for the very short-term horizon)
  • The "%30-week" (for the short-term to intermediate-term horizon)
  • The "Bullish Percent Index" (for the intermediate-term to long-term horizon)

What I told members of Sector Focus was the %30-week is going to tell us what's happening in the intermediate-term, and the results are in.

2019-09-09_22-30-40 2019-09-09_22-31-45

 

The %30-week put in a big old X column that clearly breaks above the last two!

Again, it's showing us that a much large number of stocks are participating in the current move higher than in all of August.  And this time around, it's also reflecting in the S&P 500.

This is what multi-billion dollar fund managers are thinking about right now.

And to put the icing on the cake, I'll show you one more thing I brought up last week.   It's the image that pops into my head whenever anyone asks, "How the stock market is doing".

In the September 2nd. issue of Sector Focus, I went on to say...

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Well, there is one other indicator that will give a more complete view.

2019-09-02_13-51-32

The sector bell curve will move more slowly because it's based on the sectors' BPIs.  Again, you'll see movement in the %30-week before the BPI.  And each sector has their own %30-week just as they have their own BPI.

Not to be confused with "the stronger sub-sectors", but the sub-sectors that currently have demand in control (more and more stocks managing to break above key resistance levels) are:

  • Steel (STEE)
  • Retail (RETA)
  • Electronics (ELTR)
  • Gaming (GAMI)
  • Textile and Apparel (TEXT)
  • Energy Other (ENER)
  • Precious Metals (PREC)

You can see how the bell curve is pushed over to the left because all but 4 are currently below 50!

That's some serious firepower when markets do decide to reverse back up.    Sectors' BPIs and major market average BPIs tend to first make their way up to the 70s before they're done giving us bullish profits, and before they call it quits for the bull market.  And that hasn't happened yet - not by a long shot.

These sectors are pulled back right now like a sling shot.  Again, while I'm giving you the complete picture and telling you about less complacency signaled from bullish action in Fixed Income and Precious Metals, what I am saying is I think this bull market in stocks does have a ways to go to the upside before it's done.

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Well here's a look at what's happened to the sector bell curve since.

2019-09-09_22-44-30

This isn't some corny "heat map" that they show you on one of those brokerage firm commercials that people seem to think are so cool.   The change so frequently that those following it get to see their computer screen blinky-blink from red to green to red again.

Waste of time.

THIS is a picture of the market that doesn't change easily.  For those letters to change from red to green, we need to see at least 6% (net) of all stocks in the sector to push above their historic resistance levels - and it must happen in a significant way for it to even register.

The fact that this bell curve moved a bit to the right and that the sectors changed to green, showing demand in control, is a very big deal.   It's good to note which were the first sectors to change from red to green so do use the information from the September 2nd Sector Focus.

Anyway, the market has decided to resume its uptrend.  Long live the Bull Market.

Of course I'm not calling a straight line higher for eternity.  But I'd be a buyer of the dips and I'd be focusing on high relative strength sectors and stocks.

Trade Safely,

Chris Rowe

Chris Rowe Bio 9.1

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