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Tuesday Market Outlook 02202024

Good morning, everyone, and welcome to Tuesday morning. It’s Stephen Whiteside here from I hope everyone had a wonderful long weekend and you’re all rested and ready to go. In the pre-market this morning, stock index futures and crude oil are trading lower while gold is trading higher in the pre-market on Tuesday morning. Now, there’s a lot going on in the pre-market this morning. One of the big headlines is Capital One is buying Discover. Capital One, of course, is trading lower this morning while Discover is trading higher in the pre-market. Market. Now, this week, we’ve got NVIDIA coming out with earnings, and that could certainly shake the market. We’re also going to see the minutes from the last Fed meeting that, again, could certainly disturb the market. Now, looking at a weekly chart of the VIX, we’re entering what is seasonally a strong period for the VIX. If we go back to 2023, you can see that we had a couple of weeks where we really spiked before reversing and coming down again. We’re expecting that to happen once again in 2024. Of course, the VIX spiking is negative for stocks. We thought it started last Tuesday with a big spike in the VIX, but the market pulled back going into the end of the week.

We’re still long-term bullish on the market as long as the VIX does not close above 15.02 this coming Friday. Now, looking at a daily chart of the VIX, you can see that spike on Tuesday, and then we retreated on Wednesday, Thursday, and moved up a little on Friday. But we’re going to still be short term bearish on the market as long as the VIX continues to close above 13.40 on Tuesday. And you can see the lower trend line is starting to trend higher. So if we don’t close below 13.40 on Tuesday, then It’ll be a higher level Wednesday, Thursday, and Friday. Now, last week we were talking about the S&P 5,000, and we were able to break out above that and trade above it. We ended the week closing above it, but we’re currently trading below that level level, so it’s not holding in the pre-market on Tuesday morning. Now, once we broke through the S&P 500, 5,000 level, we were looking to see how long it would hold. Unfortunately, it’s not holding that long. We are trading below that level in the pre-market. And looking at the SPY ETF, we closed Friday just below the $500 level, and we are trading lower in the pre-market this morning.

Now, looking at a daily chart of the Dow Diamonds, we generated a sell signal on Tuesday. That was the only major index to do so. And then we came right back on Thursday, back on a buy signal. So we’re coming into this week with all the major index ETFs on buy signals right now. The first thing we look for in the weekly charts, if we’re going to see a pullback in the market as it closed below the previous week’s low. For the Dow, since the October low, we haven’t had that happen. For the S&P 500, we certainly did. And for the Nasdaq 100, we also had a week where we closed below the previous week’s low, but we did not have any fall through to the downside. So anytime there’s a one bar event, whether you’re looking at a daily or a weekly chart, we’re looking for a follow through in the same direction, and you can see we had complete reversals to the upside. So Again, it’s the first thing you look for. It isn’t all you look for, but it’s the first sign that something is about to change, and then we look for confirmation.

So we are looking for a close below last week’s low this week to see if the market is ready to head lower. Now, one bullish sign last week was a lot of interest in mid-caps, small caps, and micro-caps. You can see the Russell 2000 trading up to the previous high, and the Russell micro-caps also trading up to the previous high. Then looking at the Canadian market, the iShows for the TSX-60 had a wild week. We traded down through the lower channel line and then ended the week making a new high. That was quite a wild week. One stock that’s in the news this morning that’s in the TSX-60 is Loblaw. They’re out a big announcement, spending a lot of money, creating a lot of jobs. Let’s see how the market reacts to that news. But as you can see, the stock is doing incredibly well at the moment. Now, what worked last week was actually Canadian energy stocks were the big winners, up over 4%, not enough to give us a weekly buy signal, but enough to extend the daily buy signal that started recently. We made a new high for this move and started to break out above the high from a couple of weeks ago.

And we’re stuck at the 200 and 100 day moving averages, looking to see if we can break out above that this week. US Energy stocks were also big winners, up 2.71% and back on a weekly buy signal. Now, going through the Dow 30 this morning, I noticed there were three Dow 30 stocks that generated weekly sell signals last week, including Apple, Amgen, and Cisco, are all back on weekly sell signals. Now, a couple of stocks that are not on weekly sell signals. We’ve got Home Depot out with earnings, and they beat expectations, but not making investors happy this morning. And on the daily chart, we’re looking at a new daily sell signal for Home Depot. On the other hand, we’ve got Walmart out with earnings, and Walmart is trading higher in the pre-market this morning. So Walmart’s winning, Home Depot is losing on Tuesday morning. Now, Apple’s back on a weekly sell signal, and I just want to look at Apple for a minute. We’re looking at a daily chart here. You can see we peaked back in December. Then we drove down into year-end, and then we made a higher low, and then started to move up.

Then we actually made a lower high, and after that lower high, we made a lower low. So that’s a pattern that we want to break. Unfortunately, in February, it looks like we recently put in a lower high, and now we’ll look to see if we can put in a lower low and see if that pattern continues. Now, there’s a lot of support at the 181.25 level. Yes, We did below it several times, but pulled back very quickly. The 181.25 level is the high from back in October. Now, if we look at when we started to trade above that level back in the start of November, Most of the trading activity has been between 181.25 and 193.75. Yes, we traded above it, but the majority of the trading activity has been between those two levels. If we start breaking down and take out that recent low, then 175 and 168.75 do come into play. So just be aware of that. Let’s finish off looking at the world of commodities. Starting with the metals, we had a nice up week for copper. Not enough to give us a buy signal, but copper stocks were up nicely.

Again, not enough to give us a weekly buy signal. Gold finished the week on a sell signal. It’s reversing that in the pre-market this morning. The GLD, on the other hand, did not generate a sell signal. We need a close below 185.82 this coming Friday. And then looking at gold stocks, we had the GDX close slightly lower on the week after making a nice low last week. We had a new low for the XGD and then close slightly lower on the week. Similar situation for the junior gold miners. The price of silver was up nicely last week for both the Futures contract and for the SLV. Unfortunately, silver miners ended the week lower on the week, so the interest in silver miners needs to catch up with It might do that this week. Then looking at crude oil, we’re still on a buy signal here trading higher. Unfortunately, natural gas was down another 10% and change. Looking at the seasonality of natural gas, this is a very weak period and the weakest period of the year. As we get into March, we’ll hopefully look for the seasonality to kick in and for natural gas prices to start to move higher.

Energy stocks, as we mentioned, were up on the week. Not enough to give us a weekly buy signal in Canada, but we did get a weekly buy signal in the US. Of course, energy stocks in the US, a lot of them have a global presence, which the Canadian energy stocks do not. Okay, folks, that is all for this morning’s presentation. So far, it looks like we’re going to see some selling at the open on Tuesday morning. Have a great day. Next time, you’ll hear my voice is on Wednesday morning. And on Wednesday morning, we’re going to take a closer look at the Canadian stock market.

Stephen Whiteside
Tuesday, February 20, 2024

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