The U.S Stock Market Cycle Turned Bullish Two Weeks Ago
All of the major U.S. stock market indices turned bullish the day after Christmas, as the first in a series of Major Accumulation Days (MAD) alerted us to a change in character. Portfolio managers were busy at work buying beaten-down shares of solid companies with good balance sheets. No sector went without punishment. Now the character in the market has changed and those who ignore it are missing an opportunity, just as the bearish trend alerted us to a change in character in late September and early October. Ignoring this change in December decimated many trading accounts.
Summary
The U.S. Stock Market Cycle
The NYSE Composite represents a broad measure of market participation, with 2000 stocks held across major sectors and industry groups. The major cycles assist us in being on the right side of the investment pendulum as major waves play out. The daily noise has less of an impact on these major oscillations, as portfolio managers and institutions buy and sell large swaths of the economy.
Traders and investors are able to make more informed decisions, by comparing the cycle in play before adding or subtracting risk. This was really apparent after the first wave down in October, where the cycle dropped below the zero-line accelerating as its downward slope became more apparent. Now the reverse is true, with bears refusing to acknowledge the change in character, hoping to be right at some point in the future. The problem then becomes one of cognitive bias decision processes, instead of price and volume based strategic approaches.
Since the cycle is based on price momentum, we can rest easy in the knowledge that the major wave upward and downward will continue until some catalyst imparts a counter-trend reaction. Until then we ride the current bullish wave until its “rate of change” oscillators decelerate. Once that happens we’ll see a peak.
Watchlist and Market Cycles
The current watchlist and stocks we’ve traded recently show the one-week performance during this current cycle. The top three (3) stocks all show the power of momentum and rate of change based cycles. Netflix gained 47.68 points (+17.81%), while ROKU was a mention during the LIVESTREAM broadcast last week.
The latter had a favorable news catalyst on Monday, imparting additional momentum as it added 27 million active accounts in the 2018 fiscal fourth quarter. ROKU also reported streaming hours increased (+68%).
Seven (7) stocks in total were added to the watchlist this week. All seven (7) broke higher yesterday.
New positions in SPY, QQQ and IWM are benefitting from the current cycle. We have been adding to long-only equity funds in our (401(k) and IRA accounts during this new cycle.
Futures are higher this morning.
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Happy Trading,
Vinny
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Disclaimer: Do your Own Research
Our content is intended to be used and must be used for informational purposes only. It is very important to do your own analysis before making any investment based on your own personal circumstances. You should take independent financial advice from a professional investment advisor in connection with, or independently research and verify, any information that you find on our Website and wish to rely upon, whether for the purpose of making an investment decision or otherwise. Trades and or positions listed and taken from the watchlist are my own and should not be considered “advise” to enter any particular position or asset.
Investment Warnings
We would like to draw your attention to the following important investment warnings. The value of shares and investments and the income derived from them can go down as well as up; Investors may not get back the amount they invested – losing one’s shirt is a real risk; past performance is not a guide to future performance.
Live Sessions
Live broadcasts are educational in their content. Proper risk management is considered on every trade or asset mentioned.
*** Stocks highlighted are for information purposes only and should not be considered as advice to purchase or to sell mentioned securities.
As always, the use of technical and fundamental analysis is encouraged in order to fine tune entry and exit points to average seasonal trends.
These mentions are stocks that we may or may not decide to trade as outlined in the watchlist. Always use a stop.