Special Market Alert for 1/22/2018

Special Market Alert

In the recent weekly stock market update, I showed this chart with a discussion of an early sign of market weakness

Daily Market Timing 01192018

One item I like to watch for an early indication of a pullback is the advance/decline line.

The advance/decline line is a running total of stocks advancing vs declining and it can highlight weakness in the broad market while the headline indexes are looking good.

Picture a tree rotting from the inside – the bark looks great but the supporting wood is rotten.  The problem is you can’t see the rot until the tree falls (hopefully not on something you own – like your portfolio?).

In this case, the A/D line is showing a negative divergence as shown in the chart.  This is an early warning sign of market weakness but a sign ignored at your own peril

Today the technical situation has changed sufficiently to remove this worry stone from the trading strategy – at least for the immediate future.

Adv Decline Line 01222017

Advance/Decline Line 01222017

Today’s trading has reversed the technical situation back to a more bullish situation.

The advance/decline line has notched a new high which effectively removes the negative divergence I discussed.

This mornings market was under pressure from the government shutdown.

But by the afternoon news starting circulating that there was an agreement ready to be signed by President Trump that would re-open government operations.

As soon as that news hit the wire the market took off like an excited race-horse that had just been treated with a red-hot branding iron!

The market turned positively bullish by the afternoon pushing headline indexes to new highs with the S&P500 jumping almost 1%

As of 930 pm, eastern time, news was issued that Trump has signed the agreement and the government will re-open for business immediately.

Suggested market posture for the remainder of the week

Profitable Investing Stocks to WatchBased on today’s market action I will be actively seeking new portfolio investments from the best-stocks watchlist using these investing strategies.

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Sector Strength is Starting to Weaken Across Multiple Sectors

GE’s announcement of significant dividend reduction and a plan to shrink their overall business has led to a general deterioration of demand for stocks in many sectors.

The broader market as shown by the demand for VTI and SPY still retains the balance of demand/supply to the demand side – but this might be misleading.

Sector Strength has deteriorated in many sectors.

Weakening Sector Strength

Weakening Sector Strength

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