Stock Market Analysis 2-19-19

[00:00:00]hi this is Randy Finney with right side of the chart and today is Tuesday February 19th 2019 couple housekeeping items before we get started here I just want to mention that we'll continue to have some changes going through the site this week you know any outages at this point should be temporary if at all you should be able to access the site there's a little message on the new login page that you might have something about cookies that will get rid of that soon I'm working with a team of developers and been consumed with this project over the weekend I waited to the three-day weekend to do most of the changes although they'll do a lot of the nitty gritty work most of the you know the changes that I want to do I need to go in and start working on those myself and you know and then you know hit a wall and then steer it to the programmers to like finish out a project so I have no less than 40 hours over this weekend alone and that pales to what I did over the last week or so preparing for this so I wanted to say that I will I'm behind on notifications I'm but behind on the updates but remember on the official trades if I don't post an update in advance a profit target or a stop is to stop on that official trade but remember those are just suggested stop suggested price targets you know have a lot of traders that say they use their own stop so take the trade ideas I take what they like out of it maybe they revise take a different entry maybe they use different targets and you know I recommend do that yourself and I also talked about this market being volatile recently a lot of a lot of stop pops off or you know well-placed levels and so you know it in a lot of these trades it'll help if you can do a 60-minute candlestick close above a certain stop point or below a certain stop point and in some cases a daily close but I'm not adding that to the official trades lately it's it leads to a lot of confusion people that you know don't have the luxury being in front of the computer there isn't not that I'm aware of an automated automated system with any trading platform that will calculate that for you it's just something you manually have to watch so you let us stock you know go above a target you know a certain level and then at the end of that 60-minute candlestick period if it's still above that level that's where you close out all right so let's let's get into the charts and we'll look at a few examples on that but before we do I think this is the most important thing right now I want to talk about there's a lot of you know a lot of buzz in the trading room traders that you know basically say they're feeling a lot of pain they're they're uncomfortable they're they're in the inn and some of the index shorts whether it's the official QQQ short trade or they shorted spy or IWM or something else and are very concerned and at this point you know want to know where to stop out being underwater and I wanted to talk about that a little bit it ties into what I'm working on one of the things I rolled out last week a new new feature on the site is the position size calculator and with that right now you can plug in what's your average typical position size is it'll come up with the you plug in your price targets your stop-loss and it'll come up with the risk reward ratio how many shares you need to buy it did add that feature to it just recently and one other feature that I will be adding to that as soon as possible hopefully get to that this week no later the next is another feature at the top I may add it as a toggle wherein you enter your total portfolio size and the amount of the amount the percentage of your portfolio you were willing to risk on each trade because this is critical and I'm suspecting that you know anybody who is feeling pain right now on a QQQ short trade that they entered anytime unless they took that back here you know and again you know people do their own analysis I they supplement their analysis with mine but I was adamant even leading down into the lows that the risk reward was not favorable and then you know once we saw the reversal come consistently and persistently bullish even on that first pullback and dip and they didn't start getting bearish to write about here and let me show you that I'm gonna go over something here on the chart before I do go over to QQQ in a second here I want to this is what I'm trying to get out here the bulk of the gains came very early on here's the lows back here and we're looking again at the futures there's the lows when the market bottomed and you can see up to this point which was right around January what's I think January 18th or so I'll put a crosshair on it in a second the bulk of the gains were made since that point here's what the markets done and I'm gonna show you right now in percentage terms so again here's the bulk of the gains early on in the market it's gone up but it's relatively speaking again guys relatively speaking it is hardly moved so anybody that shorted back here and that's somewhere in here is where we are at least I you know put on the first official QQQ short trade and since then let's see since the market peaked these lines that I put here measure three point eight nine will call this 4% so right here I have a line it's about four percent and again that was about January eighteenth up until now QQ and this is QQQ or the Nasdaq futures have only gained four percent if anybody's shorted in this range in they're feeling pain with them on a neg deck short that's a four percent most likely it's because you took a leveraged ETF one of the two maybe three times leveraged etfs and or if it's a raw short on QQQ or the futures you took a very oversize position relative to what your portfolio's so you can see the line right here off the lows the market gained about the QQQ is about 17 percent a little over 17 percent will call it 17 so 17 percent in the first what is that about three weeks and then since that point which is now going on over a month we're talking about four percent so this is again it all comes back to position sizing again if somebody was unfortunate enough to short down here here here somewhere yeah you're you should be feeling pain that's that's a pretty nice lift but again most of the lift stopped right here at this point you can see we had a sideways you know sideways trading a pullback actually from that point traded sideways broke above that range and came back in and we've been trading in another range sense again about four percent off that point so now let's look at QQQ let me pull up a chart here all right QQQ let's go to a 60-minute chart and I put a marker on where that first QQQ short trade on the site came January 18th at 164 97 so call that 165 I can grab that number gotta go a little bit lower a little bit lower that's close enough 164 98 almost perfect so from that point again that's the entry on the first QQQ short rate and you know after we got stopped out clipped on that one I extended it there it is the markets up right now as of today about 4% a little over 4% from that point that wasn't too far off that initial high right there that I just showed you on the futures which came again on the January 18 all right so again I truly feel for those that are feeling pain and you know the old adage on Wall Street is sell down to the point at which you can sleep at night nothing has really changed in in my outlook there's certainly been some breakdowns that didn't pan out some technical developments it didn't and I'm not gonna spin this any other way but that I was wrong in this point on the extent of the pullback that I was looking for but that doesn't change going forward you know I did in other words you know I don't stop believing in technical analysis and the same tools that have worked for many years and as I always say nothing absolutely nothing is a hundred percent in trading or investing even the best looking chart patterns sometimes don't pan out sometimes technical patterns are overridden by fundamentals and you know I'm just firm believer if you know I wasn't reading the tea leaves right at this point that so it's not you know something to do with the all-powerful Fed I anticipated the Fed you know moving from a hawkish tone back here to a double tone here and that happened and that's being cited right now for in large part for the reason for this rally is that the Fed has shifted you know from pulled a 180 on their on stance but again so we'll talk a little bit more about this going forward I will add that position size calculator again it'll have either a separate calculator up towards the top you'll enter your total portfolio value in dollars the amount that you want to risk on each trade there is no set in stone rule of thumb on that or set rule that is but for the most part let's just say around 2% some people do a little more some a little less 2% of your total portfolio being risked on a trade and I'm talking about swing trading here not investing with swing trading and I'll do a write-up on that as well so if your risk 2 percent of your portfolio on a trade you know the calculator will tell you how much where your stop should be you know you tell it what you want to buy what the entry price is and it will then suggest a position size and a stop and so you know you have a you know ten thousand dollar portfolio you lose $200 on the trade if you have a hundred thousand dollar portfolio you can take a two thousand dollar loss on trade but if you're taking if you're risking 10 percent on a trade let's go back to a ten thousand dollar portfolio and you lose ten percent you're down to nine thousand dollars do you do that on a few more trades you will be out of business and the reason is it's the way math can be cruel and trading or investing the reason is when you have a loss let's say you take a 50% loss on a security or your portfolio guess what you don't have to make 50% on the next trade to get back to where you were you have to make 100% on the next trade that's how math works ten thousand goes down to five thousand dollars now you have to double your account just to get back to where you were so you know and that ratio it gets more extreme the bigger the losses that's why you want to keep them small and again you know factor in the leverage on these leveraged ETFs and you know diversify and you know when the market is not very conducive to trading keep the position sights sizes on the light side that would be my suggestion again I'll do a complete write up and I'll modify that stock position size calculator and I'll make a post once it's complete there okay and since we're on QQQ let's just take a look at it since last week I've revised this is a trend line I've been watching and I'm sure a lot of eyes are on it's a trend line off the lows again this is how it looks on the 60-minute chart but there's a trend line that I think at this point in time is more significant and it's also we'll call it the bee I like to call it a bo D benefit of the doubt trend line because it comes in slightly lower you don't really see it here I'll show it to you on the futures but on QQQ and on spy yes it's the initial that trend line starts off the initial pullback that we had remember the markets bottom down Christmas Eve Peruvian trading day we had the big rally on the 26 when they opened there was a little pullback there but I like it because we have more reactions my opinion that's where I give the higher o higher waiting to a trendline the more reactions you have the higher the wait against this one has quite a few and I'll show it to you again on the futures in a second now they come in very close so one breaks the other it's probably gonna break and I can guarantee there's probably more traders watching this one off the lows there than this one but again this markets been extremely resilient had some web salt you know a lot of these short-term you know minor trendline breakdowns have played out for little pull backs but this is a bigger picture and again nothing's changed in the technicals and sooner or later this we're gonna see a sizable correction and right now this is a very one-sided trade it has blown out a lot of short interest undoubtedly you don't even have to look at the numbers there's dated anyways anytime you look at short interest data they only report it by monthly it's twice a month and even then there's a what I did I believe an 11 day lag time between the the actual date where the numbers were taken to the dissemination date when it was released to the public so that's basically useless information in a fast-moving market for years I've always had to try to extrapolate you can do a pretty good job you can look at jars see where what level is probably cleared out you know popped a lot of stops on shorts and so I think it's safe to say that just word interest has dropped off in recent week and what that means it just it just sets the stage for a more swift drop when you don't have the shorts in there to cover like you do on these little pull backs what happens the long starts selling and there's nobody to take the other side of the trade when you have a high short interest on a stock or an index you have shorts taking profits on the way on the way down since when you clear out a lot of that short interest that's when you get the quick move so I'm still very much open to a pull back to these targets let's look at the official QQQ short trade and we'll move over to spy QQQ short trade here it is so they popped the stop on Friday and again I've been consumed with a lot of these changes I you know these these stops I stick with the official stops whether the trade goes on to plan out or not there's never been a trade that's run a stop if I didn't modify that stop in advance on a front page post for all members of C then it is considered stopped out now whether you want to hold on to it or not that's up to you I mentioned in the trading room last night I'm still catching up on replies you know a couple strategies as to you know if you're feeling the pain at this point and I get that and it doesn't matter what I said earlier doesn't matter what I you know say how you know I still can make a case for a decent correction and will come and it's just a matter of how much more it's gonna go up remember you can always enter trade if you get that objective entry but you know you have to at some point especially if you've taken a large-sized you have to protect your your portfolio and there are no guarantees that this market will correct very soon anything is possible I've learned that over the years that absolutely anything is possible so it's pushed up without a decent pullback to this point and it could certainly do so again I don't think that's going to be the case but again we have to see right now these are the levels I'm watching I'd put good it's put some good odds on the last couple breakdowns and those odds didn't pan out that's that's just statistics probability and and you know calculated risks it would take but this these trend lines here they're more developed now than they were more reactions more valid you have clean you know divergence here it's not yet confirmed but we need to see the PPO turned down and again watch up watch up for break down there watch for a big red candle that's that would be impulsive and then watch those futures even if you don't trade the futures investing calm will give you free futures accounts you can create an account and save your annotations on the charts in real time and then you can replicate the same trend lines and it might give you a little heads up or a little additional confirmation because right now you have to give this market the benefit of the doubt and you know shorting spy I looks like a Christmas tree of different colors are trying to distinguish each trendline here's at that comparable trendline on spy and I'll get to yes I'll jump back to the futurism because we looked at NQ before but well we have the the white trendline off the lows right there and that's hugging prices it's certainly both are valid trend lines don't get me wrong I wouldn't have the trend lines on the chart so if I didn't think they were significant and the thing about technical analysis and trading is you have to look at and I do this with moving averages to and trend line support levels you know what are other traders watching and really we're the majority eyes fall that's gonna be the trendline that matters but you know in in a tough market like this too short and again you're not making you know from as I said going back to January eighteenth you know it's not like it's been a runaway market we're talking a four percent lift in the Nasdaq over a month and you know sure in any given month that's good but relative to the big move down we just had you know we were having you know back in the fourth quarter we were going down four percent a day or having intraday price swings of four percent a day almost on a regular basis so again right now volatility is has been abating as we move up in the you know that's why these momentum indicators are rolling over you know the steepness of advanced is its declining we haven't gone down yet but it's not the sharp up it was in the beginning it's sort of leveling out here and that just shows that this rally is losing momentum okay and yes we might we might I might cap this video up once we finish the indexes I'll try to get dye to IWM I'm looking at the time on the clock and we'll keep this one short maybe I'll break it down to the other trade ideas in another video here's that comparable trendline on ESC S&P 500 emini futures and I did post a chart on this last night I believe both these were on the front page you can see 1 2 3 4 reactions on that trend line where we had at least five on that NQ and same story you know we continued to diverge and we have little micro divergences bullish and bearish within each of those lead to little rallies within the bigger uptrend so that's that's the you know the intermediate-term picture right here not long term but the intermediate term picture or intermediate term trend is bullish and so we have these little micro corrections and rallies within the larger trend but right now I believe these trend lines are defining this uptrend and a break of those again you want to see it happen on es you want to see happen on NQ and QQQ and spy as well that will most likely trigger the correction and you know targets remain as I've talked about before I'll jump back to NQ if I didn't know QQQ if I didn't do that already your spy let's just say rolling targets right now let's see when the breakdown comes let's see how it looks but at bare minimum you can see some lines that I have here on the chart bare minimum I think we come down here to that to 6555 level and to try to quantify it for you that would be a drop of about excuse me 4 percent there's a minor support level here that's probably gonna come into play first so I'll give you that number it's about 273 let's round it off people like round numbers and then down there and I do think there's a good chance that we're all is said and done based on on everything we could come down here and now these would be let's just say this is my bullish scenario the more bullish scenario that I have a range anywhere from that to 6555 target down here to 250 890 and as you know there's still sufficient evidence not rock-solid but sufficient evidence and with the long term trend indicator is long term breakdowns that this is still a bear market rally despite what everyone says I'd love to get to that I'll do a post on that actually I'm not gonna waste time in this video because I don't have the chart i annotated already but it's I had a little chuckle on Friday of all sources a Wall Street Journal sent out an article that said you know something to the fact that the bear market and the Nasdaq is now over it's officially over they declared it over because the Nasdaq had rallied 20% and it reminds me of those you've traded for invested for a while you're probably familiar with the famous there's some famous magazine covers you know Time Newsweek that declare you know either a bull market will continue for a long time and that was coming out right at the top or you know maybe have a correction like we just had and they you know on the rally they declare that the worst is over the markets going to new highs well anyways what I was trying to get at is I'll put up a long-term chart and I'll go back 20 years and I did it and I measured in every single rally cap first initial counter-trend rally after the first Lake down of a bear market without fail exceeded 20% so you have to look at the bigger picture people get tied up in numbers you know 20% drop okay do we have a bear market last fall technically speaking yes because we just went down over 20% to me you look at the long-term charts it's just a correction in an ongoing bull market you know what I'm talking about I think when you look at the long-term chart okay so you're gonna tell me this is a bear market and that's not or that's not no this is a this is a bull market and at this point in time all we can say is that's a correction time will tell if it is the initial counter-trend balance within a new bear market I still suspect that it is there's sufficient evidence to say that most likely it is but as I've done in recent videos some of the long-term videos there are some long term trend indicators and some long term trend lines or key support levels as well as some key market leading stocks that just came to the very edge you know tested those levels of support or those trend indicators and it's and successfully held them so while a lot did break down and are still below there and are on long-term sell signals we don't have every index and all the leading stocks or the majority of them on those sell signals yet so it's still anybody's game right here here's one example I was gonna get to the shorter term charts IWM and wrap this video up but you can here's a long-term trend line and goes back but it still left on the chart at least back into out 2009 lots of reactions and again as I say the more reactions on the trendline in my opinion the more valid it is so there's an example and then this is not the market leading index these are though this is the Russell 2000 small-cap index the 2000 companies in here if you add up all their market cap it pales in comparison to just the 500 or even the 100 in the Nasdaq 100 index or the S&P you know the 500 and the S&P 500 so IWM doesn't dictate where the US stock market goes but it is a component there you know if you look at the entire stock market small mid cap large caps it is a part of it and it shows that this index came and you know tested a long term primary bull market uptrend line that it hadn't tested in awhile and successfully defended it and with an impulsive move off so it you know the million dollar question is how much longer does this bull market go you know sooner or later you're just gonna break for every bull market you have a bear market that is just an immutable fact it's it's something that will happen the question is when will it happen so one of these trend line breaks will prove to be fleeting to bounce off it and then you'll go on to break it and so you see more more and more of these you know other obscure smaller lesser-known indexes or not as significant indexes break down and you see a majority of the market leading stocks and you can see just about every trend in the long-term trend indicator on the S&P 500 NASDAQ rollover all the support levels break then you know that we're probably in early stages of bear market I'm gonna tell you this now it's not gonna come you're not gonna have that green light so so to call it until we've probably fallen about another 20% from where we're at right now maybe a little less cuz you know the trend lines come in a little higher but I'd say 15 a good maybe 15 20 percent and that's about my target you know my next downside target the market I think yes would be 500 I'm getting a little bit off topic here but again we're talking long-term targets and where we were likely going somebody did ask me in the trading room the other day I thought I had a chart marked up here for it let's look at the spy daily no oh here we go I'll just draw it off here on this board it's a 10-year weekly chart of the spy that's a long-term trend line goes back to the 2009 lows right off the bottom there and can't see it's the left of the chart but I can tell you this this is a very logical and likely target for the next bear market and let's just call it at this point in time a let's just say a minimum minimum swing target or trend target could be worse than that but we'll see but right now I think there's a lot of that's just a natural level for the markets that want to come back and test at some point there's been there was almost two years you know year and a half or more of consolidation right there sideways consolidation and you can see the primary trend line is broken we're still well below that trend line and this is the bigger picture you know if you can take a look at the bigger picture this is what's formulating you know my long-term analysis we're not even close to we already back tested that trendline we're below it and of course some momentum indicators are pointing up as they should you know this on the daily chart we had two virgins here so again the rally this is everything that was expected off that December 24th low a sharp rally and again it's uh certainly and taking the upper end of where I'd expect without a big pullback so far but this is normal you have a low-level bullish ppl crossover and you can see what would happen and this would this is sort of how my snare would play out the the more bearish of the two scenarios again that I think assuming the market does not go on to take out the 2016 or 2018 highs excuse me we'd reverse soon come on down about two fourteen on spy you can see these trend indicators are clearly down in bearish territory as they we're back here you cross down below zero you came see that signal line the ninety ma I like to use came in back tested at the zero line when everyone thought they were going to new eyes and then boom the next leg down came that put in a divergent low on the weekly at least on the PPI you didn't have it here today the RSI made a slightly lower low on the PPO and then that's where you bottom and that's what I'm leaning towards right now so that would take us down that's about a twenty I think 20 something percent drop down to two fourteen from where we're at right now and come down here and put in a divergent low and then position for a nice multi-month swing trade that could could last for you know more than just a month and a half or whatever this one's done two months and here's IWM on the 60-minute chart you can see the trendline off the lows we broke it there had up correction pullback if I extend that trendline by the way it comes in with this minor uptrend line right here informs a perfect parallel channel so that seems to be what IWM is walking up for so we don't have any any buy signals break of this minor trendline would trigger buy signal but you'd want to again see that confirm with both the S&P 500 and Nasdaq also breaking down at the time so watch those futures charts watch QQQ and you can see targets down here there's my minimum target right there I should add another one let's let's clarify here minimum somehow they buy this one up the next breakdown aggressively I think about 155 150 155 there's a nice gap there in a reaction high to target so that would be about a three and a half percent drop but I'd favor move down here to about 147 60 you're talking a pretty nice drop because small caps have really gotten ahead of themselves on this rally here that's about five point we'll call know about five point nine almost six percent and again these would be I gave you sort of what I called my maximum downside targets from my bullish scenario and that's down here that's if this market's going to new highs would be down here it shouldn't really violate that level if we are going up to new eyes anything's possible but right now that's where I'd be looking on well I'll tell you I'd like to throw up some Fibonacci's too and study this a little more so let's just call these tentative targets now if we start to break down get some traction to the downside all from this up and like always do some updates but there it is but you know we continue to diverge you can see the PPO making a lower lower highs that's about it and I showed you the longer-term chart on IWM with long-term support that's certainly level to watch for if we come down and visit that level again finally let's just look at IWM daily chart yeah this is the big picture you know we had again this correction was priced in you know these divergences work they had the divergent high such you know this charts been shared over the years negative divergence other divergent high and again it's not the divergences that are your cell signal it's the some type of break sometimes you get on a 60 minute time frame sometimes here on the daily even better when you get on the daily and you can see the corrections to come after the divergent highs and so this one just continued to wedge on up but in that last two virgin high and finally that's the one that really stuck and played out because you had a you know pretty close series of consecutive divergent highs though that's what really does the market in when you have little divergent eyes and people can't become complacent okay well you get these little Corrections or just buying ops but when you continue to diverge and rapid succession like that I know this is a two-year timeframe here we're looking at but again and then the weekly charts really kicked in that's what you had the divergence on the weekly charts and it played out for that huge drop on the IWM now as impressive as a rally in IWM has been and you know there's no knocking the vigor of the rally I'm trying to grab this high right here you remember we fell IWM fell what is that 20 almost 28% just three less than four months 28% drop and so as stellar as this rally seems it's only retraced about 2/3 of that drop here's Fibonacci retracements and we're just trading right slightly above the sixty one point eight so less than a two-thirds retracement so far off that high so that's a small cap still have a way to go and although anything's possible the likelihood of seeing a rally like this continue at the same you know rate of ascent is very very unlikely in fact usually when you have these near vertical rips just like a near vertical dip the ensuing reaction at least a correction will be pretty sharp the steeper the trendline and the more extended you get overbought you get usually the sharper the correction when it comes so I can tell you just looking at this daily chart not focus on all those micro levels I just showed you on the 60-minute chart I I would expect IWM is probably coming down here at about 1:45 and that would be a there's a healthy drop if we get it I know right now it seems like stocks are you know bulletproof but that's close to an eight percent drop if it comes so if you can get the timing right on that one start to skip those sell signals you have a position maybe you want to add to it set a stop you know wherever the top comes set a pretty tight stop once you see that trade pan out maybe trailer stops down and you might have a nice swing swing opportunity and IWM and just looking at that you can it looks like if it does pan out like that would set up an inverse Head & Shoulders pattern but we'll just have to watch that see this really is it should come after a bear market or a prolonged downtrend not not a correction so it really doesn't fit with where it needs to be but symmetry wise I just wanted to point that out all right I'm gonna wrap it up here and I will continue on updating the other trade ideas I'll do a video talk on those and try to get to as soon as I can move them out on the front page to the completed trade section and like always if I see another objective entry they will be back as official trades and if you're in those trades and you want you know you want an updated chart by all means that's what the gold membership is about I'm in the trading room a little behind on post now but I'll get back to your questions and your thoughts and post some some charts on any trades that you want this has been Randy Finney with right side of the chart I hope you enjoyed it