Risk Gauges Still Flashing Yellow

February 17, 2020

Weekly Market Outlook

By Keith Schneider

blankUS stocks seem to like the bickering from democratic presidential contenders and the lingering threat of the Coronavirus, as three out of four US equity benchmarks hit new all-time highs.

Small caps and value stocks continue to lag.

As I am writing this (Monday), the spread of the Coronavirus seems to be subsiding with Chinese markets bouncing.

Meanwhile, Berkshire Hathaway is sitting on its biggest pile of cash ever ($128 billion) while Charlie Munger warns of a market meltdown.

Our risk gauges also suggest that now is a risky time to be long stocks.

The Euro got hit hard this week.  Its path toward its recent lows could US exporters, but help the US consumer.

If you’re thinking of chilling out and taking a vacation from whatever you do (such as reading this market commentary), Europe could be a much better deal than the Hamptons, assuming trade wars don’t ratchet up.


This week’s highlights are:

  • Our Risk Gauges improved from risk-off to neutral as the Dow, QQQ’s and S&P 500 all went to new all-time highs
  • Growth stocks continue to lead value, with Semis and Solar being the leading sectors
  • Biotech could ignite to the upside if it can clear recent highs
  • Market Internals improved but continue to diverge from bullish price action
  • Volume patterns improved with price action
  • Volatility is holding above recent lows but gave up both the 50 and 200 DMA’s
  • Energy looks oversold and ready for a technical bounce
  • The yield curve is still inverted out to the 10-year note
  • The number of stocks in the S&P 500 above their 10 DMA hit overbought reading on a short-term basis
  • Retail, Transportation and Regional Banks, all key members of the modern family are acting poorly

So, there’s a lot of mixed data that demands prudent risk control.

Passive buy and hold always looks best at new market highs, but of course, it has the highest risk.

If you’re interested in improving your ability to profit from the type of market uncertainty we’re facing right now….

Check out the replay of our recent training session about the “Complete Trader” program here (for a limited time).

Best wishes for your trading,

Keith Schneider

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