Point & Figure Analytics October 17, 2019

Tuesday and Wednesday saw further internal improvement, expanding rally participation, with two P&F buys for every sell signal. Tuesday was the stronger session, plus upside volume on the NYSE clocked 72%. Major indexes are all up over 2% over the past five sessions, the NASDAQ 100 and Russell 2000 are higher by over 3%. Semiconductors continue to climb, an encouraging sign for the market overall.

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Indexes

The S&P 500 chart trades less than 2% away from a fresh Double Top breakout. All P&F patterns on the index, so far this year, have been positive. Low Pole in January, Triple Top in March and a Double Top in July. The rising trend cannot be faulted here.

 

 

The Russell 2000 is now 1% away from a 3 box reversal up. Turning back up would commence another rise off the range floor. Clearing the seven month range ceiling via a box fill at 1620 would suggest the primary uptrend is finally resuming. Although not as strong as the S&P 500 chart, the Russell 2000 certainly has catch-up potential.

 


Market Breadth

Short-term breadth, the NYSE % 10-week moving average (constituents trading above the average), has strengthened further since our last report of two days ago. The indicator has lifted through 50%, encouraging since neutral can serve as resistance in an unsure market. Expansion expected to continue, returning to the 5 month range ceiling across 70%.

 

 

The NYSE Bullish % (constituents with P&F up trends) remains in reasonable shape. The trend since January has been up, with a suspected bullish continuation pattern underway since April. Providing no sell signal prints, via a box fill at 38%, general market health is deemed as satisfactory, with ample room for improvement.


ETFs

The SPDR Consumer Discretionary ETF printed a 3 box reversal up with Tuesday’s market rally. Two more box fills, $2 a box at this level, will trigger a Triple Top breakout plus record high. With price and relative charts both on P&F buy signals, entry is worth considering ahead of that breakout.

The XLY P&F relative ratio, against the NYSE Composite, is presently in a down column, as of September. However, an entry opportunity more than anything else, given similar depth retreats over the past several years, all followed by upside reassertions.

Components of the XLY are listed in the fund’s factsheet.

 

 

P&F direction on the VanEck Semiconductor ETF reversed up late last week, with a Triple Top breakout following on Tuesday of this week. 2019 uptrend has resumed. As with the XLY, if markets were topping out, this fund would not be trading around record highs at all.

The SMH P&F relative ratio, against the S&P 500, holds the buy signal from January. Recent sessions have seen a fresh Double Top breakout with upside follow-through.

The fund’s factsheet, listing constituents, can be found here.

 


Stocks

JPM [PRICE DOUBLE TOP – expected INDEX RELATIVE DOUBLE TOP] | Target = $140, Stop = $110

JPMorgan Chase rallied 6.3% over the past week. A fresh Double Top buy signal is just one box away. Given the rising trend this year, coupled to price and relative buy signals, longs may be an idea ahead of the imminent breakout. Earnings were released on Tuesday.

The P&F relative chart has provided upside follow-through this month to the September buy signal, against the S&P 500. Bearish Trendline, dating back to 2018, has been defeated.

 

 

CBSH [PRICE QUADRUPLE TOP INDEX RELATIVE LOW POLE] | Target = $84, Stop = $57

Commerce Bancshares printed a Quadruple Top breakout on Wednesday, clearing the ceiling of the past six months. Long-term uptrend is attempting a resumption. Earnings are already out, boosting the price. As a result, may be an idea to wait for a few days for the price to settle.

The CBSH relative ratio, against the S&P 500, is on a sell signal. However, against the NYSE Composite, the relative ratio reversed up with Tuesday’s session. An outperformer over the longer term.

 

 

CCMP [PRICE DOUBLE TOP SECTOR RELATIVE DOUBLE TOP] | Target = $160, Stop = $132

Cabot Microelectronics printed a fresh Double Top breakout on Tuesday. 2019 uptrend has resumed, with trading around record highs. The price and relative charts have held buy signals since June. We last reviewed the charts in the July 30th report, along with other semiconductors. Earnings due on November 6th.

The P&F charts plots CCMP against the S&P 500 Information Technology sector. The ratio printed a 3 box reversal up yesterday, confirming support from the 2018 relative peak. Strong outperformance since June.

 

 

TXN [PRICE DOUBLE TOP INDEX RELATIVE DOUBLE TOP] | Target = $140, Stop = $122

Texas Instruments printed a Spread Triple Top breakout on Tuesday, with the price also hitting a record high. The strong 2019 uptrend continues, with June price and relative buy signals still in effect. Results will be released on October 22nd.

The P&F relative ratio, versus the S&P 500, has also broken higher this month. Outperformance positioned to continue.

 

 

NVDA [PRICE DOUBLE TOP INDEX RELATIVE DOUBLE TOP] | Target = $225, Stop = $176

NVIDIA has gained 7.5% over the past week, pushing out to a new 2019 high. Strength has also enabled trading to clear a yearlong base development. The ceiling of that range, across $190, should now serve as support should there be a drop back. Earnings are out on November 14th.

The P&F relative ratio plots NVDA over the NYSE Composite. The ratio has also just pulled out of a base, ending the relative downtrend that started a year ago.

 

 

LSCC [PRICE LOW POLE INDEX RELATIVE DOUBLE TOP] | Target = $25, Stop = $17

Lattice Semiconductor has traded sideways since August, enabling momentum to unwind following the strong rally over the first half of the year. Low Pole confirmed, next signal to watch would be a Triple Top breakout at $22. Earnings due on October 29th.

In July, the relative ratio, against the S&P 500, broke above a 15 year base. Pulling up from the range signals outperformance over the medium-term at least.