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Stock Market Technicals For Week of February 10, 2020 [Premium Articles]

This premium report allows limited free access. The report is for week of February 10, 2020, and includes analysis of major market indexes, large caps, sector ETFs, a chart of the week and a forecast. Access to article requires Premium Articles subscription.

Report contents

  1. Weekly summary and recap
  2. S&P 500 weekly analysis
  3. Major index overbought/oversold conditions in daily and weekly timeframes
  4. S&P 100 overbought/oversold stocks in daily and weekly timeframes
  5. Low volatility versus high beta large caps analysis
  6. Sector performance
  7. Chart of the week

1. Weekly summary

  • Major stock indexes rebounded to new all-time highs.
  • Technology stocks gained the most since November 2018.
  • High beta large caps did not fully recover losses from previous two weeks.
  • Bonds took a breather and yields rose.

Recap (February 3, 2019 – February 7, 2020)

Index Week YTD
S&P 500 +3.2% +3.0%
DJIA +3.0% +2.0%
NASDAQ +4.0% +6.1%
Russell 2000 +2.6% -0.7%
10-Year Note +6 bps -0.34%


2. S&P 500 weekly analysis

The S&P 500 gained 3.2% on the week on better-than-expected data about the economy.

Last week we wrote:

It has never been tougher for the shorts to make money. It is interesting but call options have higher chances than puts in generating profit during a large correction or even bear market.

Expectations about continuation of the short-term correction in the previous two weeks were crushed by the strong rebound. However, the PAL OB/OS indicator is still below its 40-week moving average, as shown in the chart above. There is still weakness in price action due to back-to-back losses two weeks ago.

The weekly pattern of back-to-back losses of more than 3% followed by a rebound of more than 3% and with the close of Friday above the open of three weeks ago was backtested in S&P 500 since 1960. The holding period of long positions was set to one week only to prevent fitting on longer-term upward bias. The backtest generated a small sample of 18 trades.

Win rate is 55.6% and CAGR is slightly negative. This pattern has occurred near both tops and bottoms, as shown above (green arrows.) The results indicate random action after this pattern is formed.

Since the sample is small we tested this pattern on 24 major ETFs with data since 2005 and results were similar with a sample of 125 trades. Therefore, the strong reversal of more than 3% after back-to-back losses of more than 3% in weekly timeframe does not probably indicate strong upward bias for the following week.

3. Major index overbought/oversold conditions in daily and weekly timeframes

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This premium report allows limited free access. The report is for week of February 10, 2020, and includes analysis of major market indexes, large caps, sector ETFs, a chart of the week and a forecast. Access to article requires Premium Articles subscription . . .

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Specific disclaimer: This report includes charts that may reference price target levels determined by technical and/or quantitative analysis. No updates to charts will be provided if market condition changes occur that affect the levels on the charts and/or any analysis based on them. All charts in this report are for informational purposes only. See the disclaimer for more information.

Disclaimer:  No part of the analysis in this blog constitutes a trade recommendation. The past performance of any trading system or methodology is not necessarily indicative of future results. Read the full disclaimer here.

Charting program: Amibroker

Data provider: Norgate Data

Copyright notice: Any unauthorized copy, reproduction, distribution, publication, display, modification, or transmission of any part of this report is strictly prohibited without prior written permission

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