Good morning, everyone, and welcome to Wednesday morning. It’s Stephen Whiteside here from theuptrend.com. In the pre market this morning, we’ve got stock index futures down across the board. Commodities are mixed with crude oil higher, while gold is lower in the premarket on Wednesday morning. Now, once again, Nvidia captured the headlines on Tuesday, but unfortunately, the rest of the market wasn’t paying attention. Look at the VIX trading up through the upper channel line for the first time in over a month. And on Wednesday, we’re looking for a close above 13.13 to give us a buy signal. And I’m kind of expecting that to happen. Now, typically, I don’t give a damn about the Dow 30, but I’ve just been watching the divergence between the Dow 30 and the rest of the market. And remember, Nvidia is not in the Dow 30, it’s in the Nasdaq 100. It’s in the S&P 500, but it is not in the Dow 30. So yesterday we saw Merck lead the Dow 30 lower, then followed by Amgen, then McDonald’s making a new low for this move. And the Johnson and Johnson down for the third day on a sell signal.
Then the Travelers group. These are all the biggest losers on the Dow from Tuesday’s trading action. And then Procter and Gamble, third day of a sell signal there. Now looking at the Dow Transports, another area we’ve been watching because of the big divergence between this area of the market and the major indices. We’ve got United Parcel making a new low on Tuesday. Now this morning, American Airlines is down a lot in the pre market this morning, so that’s pulling other airlines down. And we’ve been watching Air Canada, which made a new low for this move on Tuesday and is trying to hold support from the April low. But I think that’s going to fall apart this morning. So next logical areas to run down to the lows from March. Now, if airlines are going down, of course, the Jets ETF, which is already on a sell signal, will be moving lower as well on Wednesday. Now, looking at the ishares for the TSX 60, we generated a sell signal last week. On Friday we traded back up. On Monday the markets were open, but I really didn’t care what they did. And now we’re coming down on Tuesday and we expect to continue lower on Wednesday.
Now, two of the biggest losers on the TSX 60 on Tuesday were the transportation stocks. We had CP and CN down sharply on the day. And now we’ve got CN back on a sell signal, joining CP already on a sell signal. Now, the S&P 500 was up slightly yesterday, and that had a lot to do with Nvidia. If you look at the equal weighted S&P 500, so give every stock the same ranking, the same weighting in the index. You can see we’re still on a sell signal from last Thursday. Now, it was a similar situation for the Nasdaq 100, which was able to push slightly higher on Tuesday while the equal weighted Nasdaq was down three quarters of a percent and change, and is sitting right on the edge of a new daily sell signal. And if that were to happen, that would join the next generation Nasdaq stocks already on a daily sell signal. Now, because Nvidia was up sharply yesterday, that pushed the semiconductor ETF’s up on the day. And you can see the magnificent seven ETF also made a new high for this move on the back of Nvidia, which ended the day up just under 7%.
Next up, I wanted to just spend a couple of seconds talking about volatility. When you look at our nightly performance reports, and I’m referring to the first page, which has all of the sectors, some of the sectors continue to show up as the best performing sectors and the worst performing sectors, and that has a lot to do with volatility. Silver miners, for example, were the best performing sector on our watch list. They were up over 3% yesterday. Now, the average true range for the silver miners ETF is currently just under 3%. So you might not realize that, but for a sector that is quite large, the biggest loser yesterday was the us Marijuana stocks, down just under 2%. But that was a fairly quiet day, considering the fact that the average true range for the marijuana ETF is just under 5% right now. Now, those numbers might not sound big, but when you compare them to a baseline, when you compare them to the rest of the market, they are dramatically higher. If you look at the Semiconductor ETF, the current average shoe range is under 2%. So we think of the chip sector as being volatile.
Yes, it’s much more volatile than the rest of the market. But when you compare it to sectors such as Silver miners and Marijuana stocks, it certainly is not very volatile. And then when you get down to the baseline for us financial stocks, their average true range is under 1% per day. And for canadian financial stocks, it’s under three quarters of a percent per day. So the silver miners marijuana stocks dramatically more volatile than the rest of the market. And that’s why they continue to show up at the top and the bottom of the performance list. Now speaking of canadian financials, Bank of Montreal is out with earnings and is trading lower in the premarket. Last time I checked it was down about a dollar in the US markets in the pre market and that wouldn’t be enough to give us a sell signal on Wednesday. We’re looking for a close below $128.76 to give us a sell signal. If that were to happen that would join Bank of Nova Scotia, CIBC and the National Bank already on sell signals. The Royal Bank traded down into the channel yesterday. A close below $142.56 would give us a sell signal on Wednesday.
Joining the TD Bank already on a sell signal. Let’s finish off with a quick look at the commodity ETF’s. We saw a pop in crude oil yesterday. We’re back on a buy signal that can help the energy sector. Gasoline still on a sell signal. A close above yesterday’s high would give us a buy signal on Wednesday. Natural gas after trading in the channel ended the day closing above the upper channel line and higher on the day. No change in trend there. The GLD still on a sell signal and we’re trading lower in the pre market this morning. So no change there. No change for palladium on Tuesday. Platinum back on a buy signal. Not something I would chase. Remember the low risk opportunity came off the bottom of the panic zones. Pressure zone had formed. You’ve had a nice run up and then anything that you’re doing up here is high risk. That doesn’t mean it’s not going to work, it just means it’s high risk. And then last up, silver continued to move higher and is up pretty close to the recent high. But unfortunately it’s trading slightly lower in the pre market on Wednesday morning.
Okay folks, that’s all I wanted to cover this morning. We are looking for some selling on Wednesday and we may see a whole bunch of new sell signals as of Wednesday’s close and I’m certainly expecting a buy signal in the VIX. Enjoy the rest of your day. Next time you’ll hear my voice is on Thursday morning.
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Stephen Whiteside
TheUpTrend.com
Wednesday, May 29, 2024
