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Stock Market Technicals For Week of July 20, 2020 [Premium Articles]

The report is for week of July 20, 2020, and includes analysis of major market indexes and ETFs. Access to full article requires Premium Articles subscription.

Report contents

  1. Weekly summary and recap.
  2. Weekly analysis of major indexes.
  3. Major index overbought/oversold conditions.
  4. Analysis of popular and country ETFs.
  5. Low volatility versus high beta analysis.
  6. Sector performance.
  7. Chart of the week.
  8. Conclusion.

No 2 above includes:

  • S&P 500 weekly technical analysis.
  • NASDAQ-100 weekly reversal analysis.
  • NASDAQ-100 /S&P 500 divergence charts and analysis.
  • Correlation pattern of S&P 100 index constituents.

1. Weekly summary

  • Stocks were mixed on the week.
  • Tech stocks fell on profit taking.
  • Small caps gained momentum.
  • Bond yields fell slightly and prices inched up.
  • Gold gained as U.S. dollar fell.
  • Crude oil was unchanged for third week in a row.
  • U.S. dollar was lower for a fourth week in a row.

Recap (July 13, 2020 – July 17, 2020)

Index Week YTD
S&P 500 +1.3% -0.2%
DJIA +2.3% -6.5%
NASDAQ -1.1% +17.1%
Russell 2000 +3.6% -11.7%
10-Year Note -1 bps -1.29%
Gold (London fix) +0.2% +18.7%
Dollar Index -0.8% -0.2%
WTI Crude Spot +0.0% -33.7%
Bitcoin Futures -1.0% +30.4%

2. Weekly analysis of major indexes

The S&P 500 gained 1.3% on the week.

Last week we wrote:

There is higher probability after the weekly back-to-back gains of a test of June highs around 3233 followed by a test of resistance around 3260. After a test of those levels volatility may increase again.

The weekly high was 3238.28 and the close of Friday was 3224.73, or about 1.1% below the resistance level at 3260 that is shown in the above chart.

The odds are in favor of a test of 3260 probably early next week followed by a rise towards 3300. Then the index will become overbought in the weekly timeframe and volatility may increase. The PAL OB/OS indicator finished the week at 94.3 and just below the overbought level trigger at 95.

Last time the index became overbought in the weekly timeframe was six weeks ago and there was an immediate reversal of 4.8% . However, based on historical analysis, the index can remain overbought for several weeks before a correction, or the overbought conditions may be normalized with lateral consolidation instead of a short-term correction.

Overbought conditions do not increase the significance of directional forecasts due to the facts just mentioned. When traders realized that in the 80s, they started looking for ways of “following price” rather than trying to forecast turning points and that led to systematic trading. Needless to say that systematic trading has its own problems; for example, often traders are forced to choose between taking a large loss and accepting an even larger drawdown.

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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 and backtesting program: Amibroker

Data provider: Norgate Data

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