The Dow Jones Industrial Average remains above its 200-day simple moving average at 25,005. The S&P 500 nearly tested its 200-day SMA at 2,742.63. The Nasdaq, Dow Jones Transportation Average and Russell 2000 remain below their 200-day SMAs at 7,457.60, 10,558.95 and 1,587.74, respectively.
All five equity averages have been below “death cross” patterns that begin when the 50-day simple moving average falls below the 200-day simple moving average to indicate that lower prices would follow. These patterns were in play when the averages set their lows on Dec. 24 or Dec. 26. The Dow 30 and S&P 500 set their lows on December 26 and that day was a “key reversal” where these averages closed above their December 24 highs setting the stage for the bear market rally.
- The Dow is above my semiannual pivot at 24,340, which can now be considered a value level.
- The S&P 500 popped above my semiannual pivot at 2,668.8 on the dovish Fed statement released on January 30.
- The Nasdaq tested my semiannual risky level at 7,274, which is a magnet along with my annual pivot at 7,370.
- Dow transports held its semiannual value level at 8,858 as 2019 began and now faces this month’s risky level at 10,229, which was tested last week.
- The Russell 2000 tested my semiannual and monthly pivots at 1,504.17 and 1,509.34, respectively.
The weekly charts for all five equity averages are positive with weekly closes above their five-week modified moving averages with 12x3x3 weekly slow stochastic readings rising above the oversold threshold of 20.00.
The Federal Reserve continues to tighten monetary policy by unwinding its balance sheet: As of February 6, the balance sheet was marked at $4.026 trillion, down $474 billion since the end of September 2017 when it was $4.5 trillion. The total drain in January was $32 billion assuming the $14 billion unwinding last week was due to maturing treasuries on January 31.
The Scorecard for February 8, 2019
The Dow Jones Industrial Average (25,106.33 on Feb. 8) set its all-time intraday high of 26,951.81 on October 3 and is 6.8% below this high. The Dow is up 15.6% from its December 26 low of 21,712.53. The daily chart shows the average above its 200-day SMA at 25,005. My weekly value level is 24,268 with my semiannual pivot is 24,340 and my monthly and annual risky levels at 25,827 and 25,819, respectively.
The S&P 500 Index (2,707.88 on February 8) set its all-time intraday high of 2,940.91 on September 21 and is 7.9% below this level. The S&P 500 is up 15.4% since trading as low as 2,346.58 on December 26. SPX is below its 200-day SMA at 2,742.63. My weekly value level is 2,617.5 with my semiannual pivot at 2,668.8 and monthly and annual risky levels at 2,791.9 and 2,867.1, respectively.
The Nasdaq Composite (7,298.20 on February 8) set its all-time intraday high of 8,133.30 on August 30 and is in correction territory, 10.3% below the high. The Nasdaq is up 17.9% since trading as low as 6,190.17 on December 24. The index is below its 200-day simple moving average at 7,457.60. My weekly value level is 7,047 with my semiannual and annual pivots at 7,274 and 7,370, respectively, and my risky level at 7,485.
Dow Jones Transportation Average (10,177.88 on February 8) set its all-time intraday high of 11,623.58 on September 14 and is in correction territory, 12.4% below the high. Transports is up 17.8% since trading as low as 8,636.79 on December 24. The 200-day SMA is 10,558.95. My weekly and semiannual value levels are 9,874 and 8,858, respectively, with monthly, quarterly and annual risky levels at 10,229, 10,882 and 10,976, respectively.
The Russell 2000 (1,506.39 on February 8) set its all-time intraday high of 1,742.09 on August 31 and is in correction territory, 13.5% below the high. The Russell 2000 is up 18.9% since trading as low as 1,266.92 on Dec. 24. The 200-day SMA is 1,587.74. My weekly value level is 1,464.60 with semiannual and monthly pivots at 1,504.17 and 1,509.34, respectively, and annual and quarterly risky levels at 1,590.63 and 1,619.28, respectively.
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