The Dow Jones Industrial Average, S&P 500 and Nasdaq Composite declined last Monday and Tuesday and then clawed back to where it started from. The all-time intraday highs occurred the day before Thanksgiving on November 27. All three have 12-week slow stochastic readings above 90 on a scale of 00 to 100, which is an extreme overbought reading called an “inflating parabolic bubble” formation.
When these readings are seen it’s a warning to reduce holdings in the stock market as the downside risk is 20% to 60% as the bubble pops. Its much easier to sell stocks on strength than to sell stocks on weakness.
The Dow (28,015.06 on December 6) is below weekly and quarterly risky levels at 28,454 and 28,537 after trading as low as 27,325 on December 3 between semiannual and monthly pivots at 27,266 and 27,783.
The S&P (3,145.91 on December 6) is below its weekly risky level at 3,214.7 after trading as low as 3,070.33 on December 3. The low held its quarterly pivot at 3,076.9 and Friday’s close was above its monthly pivot at 3,130.7.
The Nasdaq (8,656.53 on December 6 is below its weekly risky level at 8,884 after trading as low as 8,415.40 on December 3. The composite crossed below quarterly and monthly pivots at 8,591 and 8,563, then closed the week above those levels.
The Dow Transportation Average (10,708.54 on December 6) tested its 200-day simple moving average at 10,459 at the low on December 3. Transports is above its monthly pivot at 10,058, is just below its semiannual pivot at 10,720 and below quarterly, annual and weekly risky levels at 10,864, 10,976 and 11,298. As a warning, Transports ended last week below its five-week modified moving average at 10,720 with a declining 12x3x3 weekly slow stochastic reading, which makes its weekly chart negative. The 200-week simple moving average lags at 9,666.
The Russell 2000 (1,633.84 on December 6) set a new 2019 high on Friday but remains well below its all-time intraday high of 1,742.09 set back in August 2018. The small-cap index is above quarterly, annual, monthly and semiannual pivots at 1,599.40, 1,590.63, 1,577.49 and 1.572.85 with this week’s risky level at 1,679.18. Last week’s low of 1,589.73 was within the zone of pivots on December 3.
Here’s Last Week’s Scorecard
Scorecard For Major Equity Averages
Global Market Consultants