The market giveth; the market taketh away

 

Nov. 16, 2018 – It was a tough week for the market. Major indices opened lower Monday morning and saw a steep decline early as the stock market traded on light volume while bond markets were closed in observation of Veteran’s Day, sending the S&P 500 and the Dow Jones below their 200-day moving averages.

Much of this week’s news revolved around additional trade talks with China and additional tariffs on imported automobiles. Treasury Secretary Steven Mnuchin spoke with Chinese Vice Premier Lue He last Friday (11/11/18), with Lue set to visit the U.S. ahead of the G-20 meeting later this month. It is a positive sign to see the U.S. and China resuming talks after a long period of radio silence, but uncertainty remains high as China is unlikely to concede to U.S. demands. Chinese exports to the U.S. have grown by 5-10% in the last quarter, while U.S. exports to China have dropped 25-30%. With additional tariffs set to take place in January, it is unlikely that President Trump and China’s Xi Jinping to come to an agreement beyond agreeing to further talks.

Oil prices started the week higher but dropped again on news that OPEC was going to reduce supply in 2019 and that Saudi Arabia is planning to cut oil shipments to the United States. Despite a mid-week bump, oil prices continued to decline with prices reaching lows that haven’t been seen in 3 years.

Britain and the European Union reached a Brexit agreement earlier in the week, but still face the hurdle of pushing the deal through the British Parliament. The British pound took a dive as U.K. Prime Minister Theresa May pushed for her Brexit draft, with several cabinet ministers resigning in protest of the deal.

In earnings this week, General Electric (GE), NVIDIA (NVDA) and Walmart (WMT) were all down. Analyst have a bearish outlook on GE. Semiconductors continued to be pulled down with the tech sector. This could be, in large part due to Apple’s revelation that the demand for iPhones is waning.  While Apple can supplement this loss by charging higher prices for products and services, suppliers for Apple components are taking a hit. Walmart beat earnings expectations and provided a positive outlook for the next year, so it was surprising to see such a large  decline in stock price this week for the company.

Goldman Sachs is facing a multibillion-dollar fraud scandal as the investment bank is facing corruption claims from Malaysia, who seek to reclaim money over bond deals for its sovereign wealth fund.

In further news, we also saw Bitcoin fall below $6,000, reaching its lowest level in over a year.

Indices

All told, the S&P 500 dropped -1.9% this week. The Dow dipped -2.2% and the Nasdaq slid -2.2%.

S&P 500

      

The S&P 500, like all the other major indices, took a big hit on Monday. This moved the index below its 200-day moving average, as well as its 20-day moving average, which isn’t a good sign. We will want to keep a close eye on the 2,680 level of support, as it provides one of the strongest levels of technical support on the chart. Once the S&P encountered this level, it was able to bounce, taking it back above its 20-day moving average. We will also want to keep a close eye on how the S&P 500 reacts when encountering its 200-day moving average should the index rise. This will provide a very strong level of resistance.

Nasdaq

With the Nasdaq now below all of its major moving averages, we will want to keep a close eye on the levels of technical support around 6,900 and 7,100. These are strong levels of technical support, but support is running thin without having to start looking at a 2-year chart to find support, which isn’t encouraging. The Nasdaq will face several areas of resistance, both technical and in its moving averages, but we will mainly want to focus on the areas of concern at the moment, which are the levels of support on an index showing bearish signals.

Dow Jones Industrial Average

The Dow Jones remains the strongest of the major indices. While it did crash through its 20, 50, 100, and 200-day moving averages earlier this week, it found support in the 24,800 level. This is a level of support we will want to continue to watch should the index fall. Once the Dow Jones reached that level of support, it was able to bounce back, taking it back above its 20 and 200-day moving averages. While the index has plenty of resistance to deal with, the Dow Jones has more support to bounce from than its fellow indices.

Russell 2000

The Russell 2000 made a valiant attempt at a rebound a couple of weeks ago, but was hit hard last Friday, and again on Monday. This took the Russell 2000 down to one of its stronger levels of technical support around 1,500. Its 20-day moving average showed little support and served as resistance when the stock tried to bounce. It is a positive sign that the index was able to hold above the 1,500 level and close the week back above its 20-day moving average. Hopefully, the Russell 2000 can follow on this late-week strength and use its 20-day moving average as a launchpad. Should the index fall, it will hopefully continue to find support in the 1,500 level, as little technical support remains when looking at the 1-year chart.

This week’s activity in Full Swing Stocks

We’re flat headed into the weekend.

We closed one trade this week for a loss:

  • EHTH -4.0%

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