Numbers Please

Monday, August 5, 2019
Fred Goodman
We're traveling this weekend, so this report has the bare essentials.


AT A GLANCE: Welcome to August, the second worst month of the years since 1950. And, to make things worse, September has the worst record. Hopefully, since it came in as a lion, it will go out like a lamb. One bright spot was a bullish Hammer candlestick in Friday's Dow chart. A strong opening Monday will confirm it.

Reports will be brief until we return to Los Angeles after Labor Day. This one will be the shortest. However, if something you rely upon is missing, please let me know and I will try to supply it.

When trades are found for the Discretionary GPS Portfolio by the Goodman Price/Volume Stock Selection System (GPS), they will be listed here. Mental stop losses are updated every week.

You can check the current mental stop losses for all positions held in the portfolio by clicking here.

If you have questions about the GPS that aren't answered in our Frequently Asked Questions pages, please send your questions via e-mail.

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Trading Notes

Both QQQ and SPY fell below our mental stops at 187.51 and 293.46 by 10:15 Friday. They remained there until 20 minutes before the close when they rallied and made it appear that we were being granted a reprieve.

With that in mind we decided to hang on until Monday. They faded slightly by the close, so unless there's a rally Monday we'll sell during the day.

The upside resistance levels we identified over a month ago, at 195.62 and 302.79, were never penetrated.

A list of current and closed trades appears with the table above at the regular link (Discretionary GPS Portfolio), which you can also find among the links at the beginning of every report. The preferred ETFs for trading are QQQ, SPY, XLB, XLF, XLK, XLU, XLV and XLY.

The Dow Transportation & Industrial Averages and NASDAQ & S&P 500 Indexes finished the week T--I- and N--S-, arrangements with below average records of an advance the next day.

Together, the combination has been followed by an advance 53% of the time the next day, equal to the average result for any day selected at random since 1970. Surprisingly, together they have done a little better than either of them did when matched with a different arrangement.

The most reliable combinations are those in bold type. The very best performers are colored green, while the very worst are in pink. The tables will be updated each week so we can follow the results going forward. Additional explanatory material is posted here, here and here.

General Market Comment

Dow Industrials -- Bullish Hammer Candlestick
Through Friday, July 26, 2019

The Dow was hit with a few nasty days last week, but a Hammer candlestick Friday was a hopeful sign. It will be confirmed if the index opens higher Monday, especially if there's a gap opening.

The Dow opening thirty minutes indicator gave a 20-day buy signal at 2999.91 on July 11. The S&P 500 must gain 67 points by Wednesday to make it a winner. The current record for the indicator is 15 wins vs. 4 failures (83%) since 2013.

Of interest is the fact that the indicator gave another 20-day buy signal at 3003.67 on July 25.

Dow Industrials first 30 minutes-- Previous buy signals
Through Friday, July 26, 2019

The MACD indicator gave a timely sell signal at 2984.42 on July 17, when it fell below its signal line (red-dashed line).

S&P 500 MACD (Moving Avg. Convergence/Divergence)
Through Friday, July 26, 2019

The sell signal coincided with an abrupt drop in the number of S&P 500 stocks with positive MACDs. They fell below 50% on July 17, and have remained there since. On Friday, just 113 stocks were still positive.

Number of S&P 500 stocks with positive MACDs
Through Friday, July 26, 2019

Technical Indicators

The VIX Index has become 30% overbought and may be telling us to expect a bounce Monday. However, the VIX Oscillator has remained neutral.

VIX Volatility Oscillator Buy and Sell Signals applied to the S&P 500
Through Friday, July 19, 2019

The S&P 500 and NASDAQ Short Trend Indicators (STI) were mostly unaffected by the decline last week. They remain positive, but their Swing Indicators (SWI) are negative. However, the Dow STI turned neutral Friday, simultaneously with a drop below zero by its SWI.

This produced a combined sell signal that suggests the bullish hammer made by the Dow Friday may not be confirmed Monday. It may lead to nothing more than a one or two day bounce.

Dow Trend and Swing Indicators
through Friday, July 26, 2019

The Summary Index has been falling for three weeks. It closed Friday at 9.00 and will have to fall below its buy signal trigger at 4.50 before a regular buy signal can be generated. The SI will only reach 6.25 this week without changes in the indicators, so a buy signal will not be in the cards unless half of the neutral indicators turn negative in the week ahead.

The indicators ended with 14 negative, 14 neutral and 1 positive. The Quick Summary Index buy signal was not reversed to a sell when negative indicators increased last week, because they had only fallen to 5 before doing so.

Technical Condition of the Market
through Friday, July 26, 2019 >>Learn more

The S&P 500 200-day moving average (green line in the chart above) gained 4.94 points last week to close at 2790.21, while the 50-day moving average (blue line in the chart above) added 12.07 points to 2927.56. The separation between them ended at 137.35, but it grew just 7 points last week, half of what was added the week before..

The Trend Indicator (TI) (pink line below), on the other hand, added 0.42 points, three times the growth the week before. It closed at 12.02, still solidly in the Uptrend state.

Trend Indicator Long Term History
through Friday, July 26, 2019 >>Learn more

The S&P 500 14-day Relative Strength Indicator (RSI) fell sharply but remains neutral at 32.4%. It will turn negative if it falls below 30%, but it will move higher next week and reach 34.1%, if the S&P remains where it is.

S&P 500 with the Relative Strength Indicator (RSI)
through Friday, July 26, 2019

The S&P 500 Price/Volume Chart completed a negative pattern Wednesday when the market fell apart, but a low volume rally Monday followed by a high volume rally the next day will reverse it (orange and green arrows).

S&P 500 Price/Volume Chart
Volume = Total of Individual S&P Stocks
through Friday, July 26, 2019 >>Learn more

The Average Signature has two negative and one one neutral chart. It is now negative overall.

Average Signature -- Traditional Method 345 and 645 Triggers
through Friday, July 26, 2019 >>Learn more

Average Signature -- moving averages of the percent > 700
through Friday, July 26, 2019

Average Signature-- Traditional Method 20-day average
through Friday, July 26, 2019 >>Learn more


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Fred Goodman, CFP, is a fee-only Certified Financial Planner based in Los Angeles. To send Fred your questions or comments, click here: E-mail sent to Fred may be edited for clarity and brevity and published on this web site, and may include your name unless you request anonymity or specify not for publication. The charts and commentary represent what Fred thinks about the market and what he is thinking of doing for his own account and for accounts he manages at the time of writing. Fred, his clients, or his family may have positions or may make trades in securities mentioned in these commentaries. There is no guarantee that you will profit from trading as discussed herein. You may lose money and Fred assumes no responsibility for what you do or do not do with this information. Copyright©2001-2019 Fred Goodman. All rights reserved. For information purposes only, offered as a periodical of general circulation; not to be deemed to be recommendations for buying or selling specific securities or to constitute personalized investment advice. Derived from sources believed to be reliable, but no warranty is made as to accuracy.