Point & Figure Analytics March 5, 2020

A volatile market reaction since the emergency rate cut on Tuesday, with big swings in either direction. Likewise this morning, the IMF’s $50 billion pledge failed to lift European markets, inducing little confidence, with a sell-off following. Needless to say, when a doctor administers medicine to a patient and the patient then deteriorates, it is not at all encouraging. We maintain our recent switch to caution, viewing market pops as dead-cats in a bear market climate. Stock level focus today is purely short candidates – primarily identified through weak and vulnerable relative ratio charts.


Indexes

The S&P 500 printed a 3 box reversal up on Monday but given the recent breadth deterioration, and our indicator flagging a bear market situation, the index will struggle to maintain upside traction. A reversal back down would validate the High Pole, now evident off the record high, 2950 needed.

 

 

The NYSE Composite also exhibits a High Pole, with a 3 box reversal following with the oversold bounce. This index provides greater evidence that U.S. equities will struggle in the weeks ahead – trading is back to the confines of the previous two year range. The pop through the range ceiling at the end of 2019 is now a confirmed failed breakout, a bearish 3SR.

 


NYSE Breadth

Short-term breadth for the broad market, the NYSE % 10-week moving average (constituents trading above the average), reversed up on Wednesday. An immediate recovery, to an internally strong condition is highly unlikely, rather back-and-forth base building.

 

 

Medium-term breadth, the NYSE % 30-week moving average (constituents trading above the average) has turned up from an oversold condition. A basing process lasting weeks now likely as per the end of 2018.

 


ETFs

The VanEck Oil Service ETF has dived to record box lows (fund listed in 2011). Price downtrend is strong, recently breaking south via a Triple Bottom. Oversold bounces provide the best selling opportunities.

The P&F relative chart, against the S&P 500, also maintains a strong downtrend. The present column of Os is relentless, underway since October 2018.

OIH constituents, plenty of short-candidates, are listed in the fund’s factsheet.

 

 

The iShares France Index ETF has gone nowhere over the past two years. Trading has rolled over from the top end of a decade long range, printing a 3 box reversal down last month. A sell signal has been in effect since October 2018.

The EWQ relative chart, against the S&P 500, has trended down for the past decade, with no sign of a bottom at all. Underperformance highly likely to extend.

 


Stocks

XOM [PRICE DOUBLE BOTTOM INDEX RELATIVE SPREAD TRIPLE BOTTOM] | Target = $40, Stop = $64

Exxon Mobil bounced from last Friday’s low, alleviating an oversold condition, correcting an overextended column of Os. Strength is an opportunity to sell, entering shorts into the long-term downtrend.

The P&F relative ratio, versus the S&P 500, also shows a strong downtrend, a severe underperformer.

 

 

COP [PRICE DOUBLE BOTTOM INDEX RELATIVE DOUBLE BOTTOM] | Target = $42, Stop = $55

ConocoPhillips staged a bounce from oversold over recent sessions. Support in 2019 is now resistance, across $50, neared yesterday. Medium-term downtrend expected to soon reassert.

The P&F relative chart is at a long-term low, a level not seen since the year 2000. Sharp relative deterioration last month.

 

 

NCLH [PRICE DOUBLE BOTTOM INDEX RELATIVE TRIPLE BOTTOM] | Target = $25, Stop = $38

Norwegian Cruise Lines has sank to its lowest level since 2014, weighed down by coronavirus fears. $35 provided support at the end of 2016 but that is now broken, has now become resistance, thereby providing a level to work with for short positions.

In February, the P&F relative ratio against the S&P 500, collapsed through a long-term support shelf. New era of underperformance entered.

 

 

HOG [PRICE TRIPLE BOTTOM INDEX RELATIVE DOUBLE BOTTOM] | Target = $22, Stop = $37

Harley-Davidson has held a price downtrend for the past three years. Support across $30 last year, but now broken, with yesterday’s strength falling shy. Next big downside level to watch for – support at $22.

The P&F relative chart is at a 20 year box low. Downtrend shows no sign of turning around anytime soon.

 

 

LNC [PRICE DOUBLE BOTTOM SECTOR RELATIVE DOUBLE BOTTOM] | Target = $30, Stop = $49

Lincoln National is breaking down to new 52-week price and relative lows. Trading has slipped through the floor of the 2019 range, now resistance to any rally attempt. Major downside level to watch is the 2016 low, just above $30.

The relative ratio, against the S&P 500 Financials sector, accelerates towards its 2011 low, beneath that, potential major support at the 2009 low. Either way, sector underperformance to continue.

 

 

IVZ [PRICE DOUBLE BOTTOM INDEX RELATIVE DOUBLE BOTTOM] | Target = $9, Stop = $15.5

The past week Invesco broke down through a support shelf that had repelled sell-offs for a decade. That level is now resistance and consequently just above it may be used as a stop-loss for shorts.

The relative ratio, against the S&P 500, is trapped in a severe downtrend, also breaking historic support shelves.