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The Nasdaq 100 and the Philadelphia Semiconductor Index (SOX) set new all-time intraday highs on Friday. This had the S&P 500 pennies below setting a new high. Meanwhile the Dow Transportation Average played catch-up versus their key levels from my proprietary analytics.
The five major averages straddle their semiannual pivots. The S&P 500, Nasdaq and Dow Transports ended last week above semiannual pivots at 2,955.6, 7,999 and 10.720, respectively. The Dow Jones Industrial Average and Russell 2000 ended last week below their semiannual pivots at 27,266 and 1,572.85, respectively.
The Dow, S&P 500 and Nasdaq remain above their annual pivots at 25,819, 2,867.1 and 7,370 Nasdaq, respectively. Transports and Russell 2000 remain below their annual pivots at 10,976 and 1,590.63.
All five major averages have positive weekly charts, so the Dow, S&P 500 and Nasdaq are in striking distance of setting new all-time intraday highs.
The Dow, S&P 500 and Nasdaq remain below their October and fourth quarter risky levels at 27,657 and 28,537, 3,100.1 and 3,076.9, and 8,486 and 8,591, respectively, which are above their all-time intraday highs of 27,398.68 (July 16), 3,027.98 (July 26) and 8,339.64 (July 26). I still view new highs as an opportunity to reduce holdings and raise cash.
Dow transports is between its monthly pivot and quarterly risky level are 10,714 and 10,864 versus its all-time intraday high of 11,623.58 set on September 14, 2018.
The Russell 2000 is below its monthly and quarterly risky levels at 1,579.41 and 1,599.49, respectively, versus its all-time intraday high of 1,742.09 set on August 31, 2018.
Here’s Last Week’s Scorecard
Scorecard for the Major Averages
The Dow Jones Industrial Average (26,958.06 on October 25) is up 24.2% from its December 26 intraday low of 21,712.53 and set its all-time intraday high of 27,398.68 on July 16. The Dow is now just 1.6%% below the high. The weekly chart is positive with the average above its five-week modified moving average at 26,757 with its 12x3x3 weekly slow stochastic reading rising to 71.67 last week, up from 69.53 on October 18.
The S&P 500 (3,022.55 on October. 25) is up 28.8% from its December 26 intraday low of 2,346.58 and set its all-time intraday high of 3,027.98 on July 26. The S&P is now just 0.2% below its high and the high on October 25 was 3,027.39. The weekly chart is positive with the index above its five-week modified moving average at 2,975.72 with its 12x3x3 weekly slow stochastic reading rising to 75.35 last week, up from 71.31 on October 18.
The Nasdaq Composite (8,243.12 on October 25) is up 33% from its December 24 intraday low of 6,190.17 and set its all-time intraday high of 8,339.64 on July 26. The Nasdaq is just 1.3% below the high. The weekly chart is positive with the index above its five-week modified moving average at 8,078.27 with its 12x3x3 weekly slow stochastic reading rising to 61.86 last week, up from 55.87 on October 18.
The Dow Transportation Average (10,856.41 on October 25) is 25.7% above its December 24 intraday low of 8,636.79 and is 6.6% below its all-time intraday high of 11,623.58 set on September. 14, 2018. The weekly chart is positive with the average above its five-week modified moving average at 10,440 with its 12x3x3 weekly slow stochastic reading rising to 59.31 last week, up from 51.96 on October 18.
The Russell 2000 (1,558.70 on October 25) is 23% above its Dec. 24 intraday low of 1,266.92 and is in correction territory, 10.5% below its all-time intraday high of 1,742.09 set on August 31, 2018. The weekly chart is positive with the index above its five-week modified moving average at 1,531.33 with its 12x3x3 weekly slow stochastic reading rising to 51.12 last week, up from 47.39 on October 18.
How to use my value levels and risky levels:
Value levels and risky levels are based upon the last nine monthly, quarterly, semiannual and annual closes. The first set of levels was based upon the closes on December 31, 2018. The original annual level remains in play.
The close at the end of June 2019 established new monthly, quarterly and semiannual levels. The semiannual level for the second half of 2019 remains in play.
The quarterly level changes after the end of each quarter so the close on Sept. 30 established the level for the fourth quarter. The close on Sept. 30 also established the monthly level for October as monthly levels change at the end of each month.
My theory is that nine years of volatility between closes are enough to assume that all possible bullish or bearish events for the stock are factored in.
To capture share price volatility investors should buy on weakness to a value level and reduce holdings on strength to a risky level. A pivot is a value level or risky level that was violated within its time horizon. Pivots act as magnets that have a high probability of being tested again before its time horizon expires.
