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Weekly Top Down View of the Markets – 2/26/2017

General Market Analysis

Weekly Top Down View of the Markets – 2/26/2017

This week the markets featured the Dow Jones industrial average extending its recording setting new all time high streak for an 11th straight day. Other indexes also made new highs but not as tenaciously as the Dow but there are still plenty of reasons to be optimistic about the bullish case even if recent signs of weakness persist into next week.

Dow Jones World Stock Index – Weekly

The Dow Jones World Index remains elevated above the all time high breakout level it attained last week but has put in a potentially bearish inverse hammer candlestick pattern at the top of an ascending channel. This could be the first sign of some further consolidation that may feature a bit of sideways price action for a few weeks or perhaps something more sinister which would be a break down back below the all-time high support to retest the other side of the rising channel.

RSI has turned down on the daily DJWO chart perhaps foreshadowing a sideways move or a test of 340 support.

 

FTSE 100 – Weekly

The negative divergence between price and MACD seems to be playing out on the FTSE right now. A descending wedge maybe forming but with so much support from the breakout, rising MA’s and trendlines it would seem that the resolution out of the pattern should be to the upside but if does break to the downside it may not cause too much damage before rebounding higher back above support.

 

The daily chart shows the steady overall uptrend in the FTSE which strengthens the case for any breakdown in price to be a short lived opportunity for investors to jump in with the trend.

 

Nikkei 225 – Weekly

This continues to be one of my favorite charts to view. The ascending wedge remains picture perfect hitting the top and falling down to and respecting the rising bottom trend line. An upward breakout is usually what is expected from this bullish pattern but a break down is not an impossibility especially with the lazy drift lower in the MACD signal line. From a trading perspective its always smart to wait for price to make a move and not attempt to anticipate which direction it will go before hand.

 

A daily look at the live action battle between supply and demand playing out before our eyes…free market price discovery at its finest.

 

Daxx – Weekly

The Daxx continued building the right side of a potential cup pattern by adding a spinning top exhaustion candle. I mentioned the negative divergence between price and the MACD histogram in previous updates of which this candle maybe the first signs of that divergence coming to some sort of fruition.

 

The daily chart shows what I like to call a four part evening star. Not an official candle stick pattern but I think essentially the same thing. Lower prices maybe in the Daxx’s future especially if it loses its rising 20 period EMA.

 

Moving on to the domestic indexes.

Dow Jones 30 – Weekly

Not much has changed for the Dow. Still rising. Still extended. Still waiting for a pullback.

Daily chart still features a bit of negative divergence between price and RSI. Not a reason to try to go short though as divergence can remain unresolved for long periods of time, yet it is always consistent warning sign that should be respected when it does appear.

 

S&P 500 – Weekly

The S&P 500 continued last weeks break out above its rising channel with further gains this week with MACD continuing to confirm the advance.

A bit of divergence on the daily chart with MACD possibly preparing to cross to the downside.

 

Nasdaq Composite Index – Weekly

The Nasdaq put a pause on its parabolic run higher with a doji on the weekly chart. This is a candlestick that conveys indecision on which way investors feel prices will move in the future. It can be a powerful indicator once confirmed by the next candle as to which way prices will trend in the near future.

 

A Friday gap down at the open but a close above the previous days is a bullish price indicator.

Russell 2000 – Weekly

Small caps maintained their break out from the bull flag this week but put in a bit of an indecisive candle stick above flag support. Momentum towards the rising channel continues however and remains our near term target for the index.

 

The daily chart shows a very constructive bullish dragon fly doji right at flag support. A bullish close above this doji would be a very good sign.

 

Sector Analysis

Adding a new section in the weekly update. We are ratcheting down another level in our top down analysis with brief commentary on the top sectors.

Consumer Discretionary – Weekly

In a solid uptrend after breaking out from all time highs. A good time to consider investment in this sector.

 

Materials – Weekly

The materials sector ETF has recently broken out to all time highs and is currently consolidating at support. A break higher from here will be an excellent time to find a strong materials stock in a strong industry.

 

Healthcare – Weekly

The healthcare sector ETF broke out of a beautiful symmetrical triangle this week. If it holds the next stop will be an assault on all time highs.

 

Technology – Weekly

The technology sector is on an outright tear after breaking out of a triangle continuation pattern. Investment in this sector at this point may not be ideal as its over extended but a pull back with a healthy consolidation may present a good time to invest.

 

Energy – Weekly 

The energy sector ETF broke down from a descending triangle this week but found support at least for now at its 200 period EMA. We do not recommend investment in this sector at this time until a more bullish case can be presented as a break down below the 200 period EMA could mean a continuation of its previous down trend has begun.

 

Utilities – Weekly

The Utilities sector is currently in a strong bullish trend. Investment in this sector could be made with little risk current risk on the downside.

 

Industrials – Weekly

The industrials are running strong after a break out of a rising wedge. Any investment should be made after a pullback to support as it is currently extended.

 

Consumer Staples – Weekly

Also in a strong uptrend. Investment can be made with little downside risk.

 

 

Financials – Weekly

The financials recently broke out of an ascending triangle and look poised to continue running after catching their breath during a red week last week. It is a bit extended however and investment in the sector should be made cautiously in the strongest industries and stocks.

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