Stock Market Analysis: The Good and the Bad

Bill Poulos began investing and studying the Stock Markets as a hobby in the early 1970’s. He was employed with General Motors as an automotive executive for 36 years. Bill retired from GM in 2001 and co-founded Profits Run, Inc. with his son, Gregory Poulos. Bill is the president of Profits Run. Poulos shares his investment experience through Profits Run’s programs. Bill wrote the book, Bill Poulos’s Simple Options Trading For Beginners: How to trade options from A to Z explained in plain English. Profits Run reviews how to invest with confidence while minimizing risks with online courses, software, coaching, and publications. Read this article titled, Donald Trump Saves Christmas?. Bill and his wife of 50 years live in Wixom, Michigan, where Profits Run is headquartered. They have 3 sons and 2 grandchildren.

In last week’s “Stock Market Analysis” we looked at the possibility of prices in the market to either push into new all-time highs or bounce down off these areas and move lower. As we moved through the week, it looked like we may see prices try to sell off but in the end the bulls continued their movement higher. In fact, we ended the week where we saw new all-time highs being made on some of the indexes. The market continues to be driven by the news that is coming out as well as comments made regarding the overall economic conditions. This is likely to continue as we move into the last 2 months of the year.

We are continuing to see earnings announcements come out and impact that market. This will also continue through the month of November. This last week was a big week in terms of economic announcement. We had the FOMC statement released on Wednesday where they said they were lowering interest rates from 2.0% to 1.75%. Then on Friday, the Non-farm Employment Numbers were released which showed an increase of 128k increase in jobs. This was much better than the forecast of 90k. It also showed that the unemployment rate increased as expected from 3.5% to 3.6%. Overall, the news has been positive, and we have seen the markets respond with more bullish movements.

This next week we don’t have as many big economic announcements scheduled, although there are several smaller ones coming out. Internationally, we will see several governments come out with their interest rate statements which may have some effect on what happens here in the U.S. Even with smaller reports coming out, we still can see volatility increases, especially if we hear more about the U.S./China trade agreement. As always, make sure you are using good risk management in all your accounts.

This week we are going to look at the daily chart of all 3 major indexes to see how they compare.

DJ-30:

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This week we saw the DJ-30 chart move up to the prior swing highs. This will be an important area to see if the bulls can continue to push prices higher and take out the all-time highs that were made this last summer. Continued good earnings and economic news will likely achieve this target. On the other hand, this level seems to be a strong area of resistance so it may take some time for this to be broken.

NASDAQ:

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On the chart of the NASDAQ, we saw prices take out the old all-time high to move into areas that have never been seen. After a new all-time high is made, it would not be unusual to see prices settle back down and retest this break out point. While we have seen a strong month of October, we are in an area where it would not be unusual to see prices cycle down for a bit.

SP-500:

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With the SP-500, we saw prices take out the all-time high on Monday and remain above it for the entire week. We even ended the week on another strong bullish day where it made a new high. With this current upcycle that we saw in the month of October, it would not be a surprise to see a bearish cycle being at some point. The key will be to see if prices can pull back but hold above this breakout point from the old high.

This upcoming week begins the start of the holiday season. These last 2 months will bring market closures over the various holidays that are coming up. This means that the liquidity in the markets may be lower and cause that trading to become a bit more volatile. Make sure you are prepared for this and know when to cut back on your own trading as well as properly managing your trading risk.

Bill Poulos is an author, retired automotive executive (General Motors), and co-founder of Profits Run, Inc. Bill offers insight into the economy and trading.

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