Notice: The weekend report is provided for informational purposes only and is not intended as a stock-picking service. The charts and information provided are intended to aid research and analysis and should only be used as indicators. They should not be considered as a direct trigger to buy or sell any security. The creator assumes no responsibility for any actions readers take and strongly advises each individual to fully understand the risks and potential consequences before making any investment decisions. Please note that the charts shared are not intended as signals to buy or sell but as a tool to add to your watchlist and analyze according to your trading ability. Remember that not all charts will result in buy or sell actions at any time.
Just a friendly reminder: The sector watchlists are updated every weekend. You may want to consider dedicating time to reviewing and creating your watchlist. Also, it’s essential to keep an eye on the Daily Setups and Workspace scan results, which can provide insights into potential future additions to stay ahead of the game.
If you’re facing challenges understanding the Daily Setups or need help crafting a trading strategy, don’t hesitate to ask for assistance. You can contact us via email at info@setyourstop.com or reach me through the Workspace. Let’s schedule a meeting to address your specific requirements and provide you with the guidance you need.
Sample Trading System
The following trading system is presented as an educational example and should not be interpreted as financial advice. Past performance does not guarantee future results, and trading involves inherent risks. Please consult with a qualified financial advisor before implementing any trading strategies.
SYS Daily Report – Weekend Edition
Market Commentary
The recent stock market correction reached heightened intensity in the past week, as major indexes tumbled to multi-month lows amidst a backdrop of mixed earnings. The S&P 500, a benchmark barometer of market sentiment, found itself thrust into correction territory, marking its most significant two-week decline this year. With this downturn, the S&P 500’s year-to-date gains have been whittled down to 7.2%, a marked shift from the nearly 20% advance it enjoyed back in July. The broad stock-market gauge exhibited fluctuations throughout the week, ultimately concluding the session 0.5% in the red, a notable distance below its 200-day moving average. This development officially classifies the S&P 500 and the Nasdaq as residing within the correction realm, as they’ve each suffered a decline exceeding 10% from their annual peaks.
S&P 500 – Daily Chart
The Dow Jones Industrial Average found itself particularly beleaguered amongst the major indexes, enduring a 367-point, or 1.1%, descent to levels unseen since March. Adding to its woes, the 50-day moving average appeared poised to dip below the 200-day moving average, a bearish sign often referred to as the “death cross.”
Dow Jones Industrial Average – Daily Chart
In contrast, the Nasdaq Composite managed to eke out a modest 0.4% gain, though it remained well off its session highs. Notably, the tech-heavy index had already entered a correction earlier in the week, suffering a three-week decline and closing below its 200-day moving average. For a resurgence in momentum, the Nasdaq needs to reclaim its 200-day moving average and recapture the 21-day moving average to break free from its current short-term downtrend.
Nasdaq – Daily Chart
Over the week, the S&P 500 retreated by 2.5%, the Nasdaq Composite followed suit with a 2.6% decline, and the Dow Jones Industrial Average declined by 2.1%.
Indexes
Amidst this market turmoil, the bond market has taken center stage. The rapid ascent of bond yields to historic heights has been a primary driver of market volatility. Notably, the yield on the 10-year Treasury note breached the 5% threshold for the first time in 16 years at the outset of the week, keeping investors closely monitoring bond markets throughout the subsequent days. By week’s end, it had settled at 4.846%.
10-Year US Treasury Yield
This sudden surge in bond yields has prompted turbulence across various asset classes, with the S&P 500 and the Dow Jones Industrial Average on course to record their third consecutive month of losses—a streak not seen since the three months ending March 2020. The yield on the 2-year Treasury edged down by 2.9 basis points to reach a two-week low of 4.99%, a decrease from Thursday’s 5.04%. Over the week, this rate experienced a notable decline of 7.2 basis points, marking its most substantial weekly drop in approximately a month. Conversely, the yield on the 10-year Treasury saw only a marginal increase, settling at 4.84% in comparison to the 4.84% recorded on Thursday afternoon. Despite this minor uptick, it registered a decline of 7.8 basis points throughout the week. Meanwhile, the yield on the 30-year Treasury exhibited a different trajectory, with a 3.7 basis point increase to reach 5.03% from Thursday’s 4.99%. However, over the week, this 30-year rate experienced a decrease of 6.4 basis points.
Bond Yields
As yields escalate, they exert pressure on valuation multiples. Presently, the S&P 500 trades at around 17 times the expected earnings per share over the next 12 months, a level considered elevated in the context of soaring yields, which erode the present value of future profits. Historically, the S&P 500’s multiple would typically gravitate towards the low teens when the 10-year yield, currently standing at 4.84%, is as elevated as it is now, as noted by Evercore.
Beneath the surface, this week bore witness to substantial fluctuations across a wide spectrum of sectors, from technology giants to energy conglomerates. Prominent firms that had previously propelled major indexes to record highs were particularly susceptible to market headwinds. Alphabet, for instance, unveiled earnings that failed to meet expectations, leading to a near-10% weekly decline, marking its worst performance since November. Meta Platforms also faced a challenging week, experiencing a 3.9% drop. Chevron suffered the most substantial weekly setback in over a year, with a 13% decline following the release of quarterly earnings that fell far short of the prior year’s figures.
GOOGL, META and CVX
Smaller companies have felt the brunt of the impact from the escalating bond yields, with the Russell 2000 index, representing small businesses, enduring a 2.5% loss over the week. This decline led to the index reaching its lowest point since at least November 2020. Moreover, price action continued to slide below the lower trendline of its pattern, indicating ongoing challenges for small-cap stocks.
Russell 2000 (ETF) – Weekly Chart
In summary, decliners significantly outnumbered advancers on Friday, with ratios nearly three to one on the New York Stock Exchange and over two to one on the Nasdaq. The number of issues trading at 52-week lows significantly surpassed those achieving new highs by a considerable margin.
Breadth
On Friday, the dollar experienced a slight dip against a basket of currencies due to portfolio rebalancing, but it remained on track to conclude the week in a stronger position, thanks to consistently reassuring economic data affirming the resilience of the U.S. economy. The dollar index, measuring the currency’s strength against six major rivals, closed the day 0.07% lower at 106.38, primarily attributed to portfolio rebalancing activities. Nevertheless, it managed to gain 0.4% over the week, underscoring the dollar’s enduring strength. In the realm of price action, the chart exhibited a precise bounce off the 10-week moving average and is currently consolidating in the form of a continuation pattern. A bullish signal would emerge with a breakout above the upper trendline and horizontal resistance, whereas failure to sustain a position above the 10-week moving average would negate any bullish scenarios for the U.S. dollar.
US Dollar – Weekly Chart
The yen has recently retreated from the 150-per-dollar threshold, a level that some observers have identified as a potential trigger for intervention by Japanese authorities. Meanwhile, the Euro has shown little change on the day. As the European Central Bank adopts a neutral stance and Eurozone data continues to exhibit weakness, the Euro’s near-term direction relies heavily on the movements of the U.S. dollar. Sterling, on the other hand, remains relatively flat for the session. In the absence of domestic data releases, there appears to be limited motivation to drive fluctuations in the pound’s value. Domestic attention, it seems, may be shifting toward next week’s Bank of England policy decision. In the case of the Canadian dollar, its underlying sentiment remains somewhat subdued, maintaining spot levels close to the highs reached in March, situated in the upper 1.38s. Looking ahead, the domestic economic calendar is set to gain momentum next week, featuring releases such as August GDP figures and October job and wage data.
Currencies
Canada’s primary stock index wrapped up the week on a downturn, marking its second consecutive weekly decline. This descent was primarily propelled by weakening energy and utilities stocks. Notably, the TSX composite index recorded a decrease of 138.25 points, representing a decline of 1.98% for the week, eventually settling at 18,737.39. This marked the eighth successive session of decline, a trend evident on the chart as price action breached and closed below the lower support line of its trading range.
TSX – Weekly Chart
Oil prices surged by approximately 3% to reach a one-week high on Friday, driven by concerns about the potential escalation of tensions between Israel and Gaza, which could disrupt global crude supplies. While this rise was notable, it’s worth mentioning that West Texas Intermediate (WTI) crude futures closed the week with a 2.88% decline, settling at $85.54 per barrel. The weekly trading session exhibited some volatility, particularly in response to U.S. military actions targeting Iranian sites in Syria. As geopolitical tensions persist, it’s important to anticipate further volatility in oil prices as we enter the upcoming week.
Crude Oil – Weekly Chart
Building upon last week’s discussion of the gold theme, the price of gold has experienced a notable surge, surpassing the $2,000 per ounce mark for the first time since May. This recent uptick in gold prices can be attributed to heightened concerns over the conflict in the Middle East, which have managed to overshadow the impact of the recent surge in bond yields. What makes this surge particularly intriguing is that it is occurring at a time when inflation-adjusted Treasury yields remain at their highest levels in over a decade.
Gold – Daily Chart
Traditionally, a situation like this would place non-interest-bearing bullion under substantial selling pressure, as witnessed a few weeks ago. However, over the past year, this conventional relationship has started to unravel. A combination of continued central bank demand and persistent safe-haven buying has kept gold prices relatively stable, even in the face of rising real interest rates.
In the weeks leading up to the recent conflict involving Hamas and Israel, Federal Reserve policymakers signaled their intent to maintain tight monetary policies for an extended period. Simultaneously, the U.S. government has been engaged in significant monetary expansion by printing more money and creating more debt. These combined factors contributed to a sharp decline in bullion prices, indicating a potential shift in the established trend.
Yet, the recent escalation of the conflict in the Middle East, which could have broader implications for global energy supplies, has sent shockwaves through financial markets. If oil prices spike due to the conflict, this could lead to inflation that central banks find challenging to control without negatively impacting their respective economies. In such a scenario, gold tends to perform well as a hedge against economic uncertainty. On the technical front, gold’s price action is now setting up below all-time highs within a significant basing pattern, potentially signaling the beginning of a new uptrend or the continuation of the uptrend that began from gold’s all-time low price.
Gold – Weekly Chart
Bitcoin’s performance has been nothing short of impressive, with a year-to-date surge of over 100% and a recent 30% uptick in the past two weeks. This resurgence has rekindled optimism in the market, propelling Bitcoin to a 17-month high, where it crossed the $35,000 mark this week. Notably, this price surge is in line with the expectations outlined in our recent reports.
Bitcoin
What sets Bitcoin apart from traditional currencies is its inherent scarcity. Bitcoin’s supply is intentionally restricted, capped at 21 million tokens. Presently, roughly 19.5 million tokens are in circulation, and the actual number may be even lower due to instances where individuals have lost access to their Bitcoin holdings, like losing their seed phrases or disposing of old computers. Consequently, the available supply of Bitcoin tokens for trading on cryptocurrency exchanges has diminished to 2.3 million, the lowest level observed since April 2018, down from 2.6 million a year ago.
This diminishing supply hints at the potential for a supply shock within the market. In essence, there is a limited amount of Bitcoin actively available for trading, which may lead to a scarcity of liquid assets. This situation becomes particularly intriguing in light of the potential approval of multiple spot Bitcoin exchange-traded funds (ETFs), which could further fuel demand. For those familiar with the intricacies of Wall Street, it’s a well-established fact that when an attractive opportunity arises, investors are quick to capitalize on it. The current chart setup, combined with the potential liquidity crunch, lays the foundation for an asymmetric trade with the wind of momentum at its back.
Furthermore, on the horizon is the approaching Bitcoin halving cycle, which is less than six months away. During this cycle, the rewards for mining new Bitcoins are halved, meaning it will take twice as much computational work to produce a new Bitcoin. Historically, each halving cycle has corresponded with a tenfold increase in the Bitcoin price, as miners require higher prices to sustain their operations profitably. This convergence of factors renders the current Bitcoin landscape particularly enticing for investors.
Bitcoin – Daily Chart
Sector Watchlist Highlights: Weekend Chart Setups
In this segment of the weekly report, we delve into the setup section. As a friendly reminder, our sector watchlists receive updates every weekend. We strongly encourage you to review these updates and craft your own watchlist based on the information provided. It’s also worth highlighting that monitoring the Daily Setups and Workspace scan results can yield valuable insights into potential future additions, potentially giving you a competitive advantage in the market.
Upon reviewing the performance of the previous week, a recurring theme emerges that suggests the title “What Didn’t Work Last Week” might be more fitting than “What Worked Last Week.” This adjustment reflects the ongoing situation where the stock market continues to close below its 200-day moving average. Market internals are also showing signs of weakening. Given the consistent message from our daily analysis, it’s prudent for investors to consider maintaining a significant cash reserve. This is particularly important due to the activation of stop-loss orders triggered by individual stocks falling below their moving averages as per system rules. Within this challenging landscape, a few areas exhibit promise and merit closer scrutiny, including the Bitcoin and gold theme discussed last week. While the uranium theme closed the week on a bearish note, it still managed to remain above its moving averages.
What Worked Last Week
If you’re holding long-term winners or stocks floating above their moving averages within the bullish themes we’ve been tracking, holding onto those positions makes sense since no stop-loss orders have been triggered. However, for those not using a trend-following trading system, it’s essential to establish a clear exit strategy. This strategy will help you cut or exit a winning position before it turns into a loss, a situation we’ve observed with some recent market favorites.
We’ve updated our watchlists, but opportunities are currently limited. There’s no need to rush back into the market. It’s crucial to observe the indexes for several days of strong performance. This, combined with a bullish signal from the SSIH, could signal the potential end of the downturn. A mere morning bounce, like the narrow gains led by Amazon that we saw on Friday, is insufficient, as such moves have often turned out to be bull traps.
SSIH
At present, very few stocks are in a favorable position, with a relatively low number of names approaching such positions. Remember, a momentum strategy is to focus on stocks demonstrating relative strength within sector themes that remain above their moving averages. Typically, holding onto stocks falling below downward-sloping moving averages is unwise unless, of course, you possess a crystal ball that can accurately predict the future.
Now, let’s explore the setup section of the report. As a reminder, our sector watchlists receive updates every weekend. It’s encouraged to review and create your own watchlist based on these updates. Additionally, it’s worth noting that keeping an eye on the Daily Setups and Workspace scan results can provide insights into potential future additions.
Crypto (Bitcoin) Related
Link – Crypto (Bitcoin) Related Watchlist
GBTC – Grayscale Bitcoin Trust
Grayscale Bitcoin Trust is currently consolidating after its recent breakout. Keep an eye on price action to ensure it holds the breakout line, indicating a potential continuation of the uptrend.
GLXY.TO – Galaxy Digital Holdings Ltd.
Galaxy Digital is still setting up on the right side of the bottom base that we’ve been highlighting. Keep an eye on it for a potential breakout.
MSTR – MicroStrategy Inc.
MicroStrategy is currently consolidating after its recent continuation pattern breakout. Keep an eye on the price to ensure it holds above the breakout line, potentially leading to a continuation of the uptrend.
Canadian Energy
Link – Canadian Energy Watchlist
KEL.TO – Kelt Exploration Ltd.
Kelt Exploration is currently set up in the form of a continuation pattern. Watch for a potential breakout.
SES.TO – Secure Energy Services Inc.
Secure Energy Services is currently attempting to break out from a bull flag continuation pattern.
TOU.TO – Tourmaline Oil Corp.
Tourmaline Oil continues to present one of the more favorable setups in the Canadian energy sector. Keep a close watch for the potential continuation of the uptrend.
Energy
AR – Antero Resources Corp.
Antero Resources is currently threatening to break out from a bottoming base.
FTI – TechnipFMC Plc
TechnipFMC is currently attempting to break out from a continuation pattern, positioned just below new highs.
NR – Newpark Resources, Inc.
Newpark Resources is consolidating in the form of a continuation pennant pattern.
Communication Services
Link – Communication Services Watchlist
NTES – NetEase.com, Inc.
NetEase is currently consolidating just below its 52-week highs. Keep a watchful eye for signs of a potential continuation of the uptrend.
Consumer Discretionary
Link – Consumer Discretionary Watchlist
CMG – Chipotle Mexican Grill Inc.
Chipotle is currently attempting to break out from an area of consolidation.
LRN – Stride Inc.
Stride is breaking out from its basing pattern with a notable increase in volume.
PDD – PDD Holdings Inc.
PDD Holdings is currently consolidating just below its 52-week highs. Monitor for the potential continuation of the uptrend.
Industrial
FTAI – FTAI Aviation Ltd.
FTAI Aviation is still in the setup phase, just below its 52-week highs. Keep a watchful eye for a potential breakout.
INSW – International Seaways, Inc.
The International Seaways setup continues its 52-week high breakout.
TNP – Tsakos Energy Navigation Ltd.
Tsakos Energy Navigation is currently attempting to trend higher from a consolidation pattern. Keep an eye on this potential uptrend.
Materials
USAP – Universal Stainless & Alloy Products, Inc.
Universal Stainless & Alloy Products appears to be breaking out from a continuation wedge pattern.
Precious Metals
Link – Precious Metals Watchlist
AGI – Alamos Gold Inc.
Alamos Gold continues to consolidate below the upper trendline of a consolidation pattern and under horizontal resistance. Keep a close watch for a potential breakout.
GLD – SPDR Gold Shares ETF
The Gold Shares ETF appears to be breaking out from an area of consolidation accompanied by bullish volume. This development is worth monitoring.
WPM – Wheaton Precious Metals Corp.
Wheaton Precious Metals is currently set up in the form of a continuation wedge pattern. Keep an eye on this setup for a potential breakout.
To bring our weekend report to a close, we thank you for your engagement and insights. Your feedback is of great value, and we encourage you to share your recommendations. Stay attentive to the Daily Setup, the Workspace, and the Watchlists for emerging opportunities. Until next time, happy trading!
