Market Light Weekly Update September 12th, 2017: Recovering From the Hit

John Dupriest Market Light

Winston Churchill once said that nothing in life is so exhilarating as to be shot at without result. Well, we were winged and wounded. In some places badly. Seven million people are still without electricity, trees down, homes ruined. Lives turned up-side-down.

 

But we know the damage from Irma could still have been far worse. It was certainly projected to have been worse, and because it wasn’t the market rallied. Yesterday, after the storm moved into the whole southeast quadrant of the country with “only” category 1/tropical depression intensity,  the Dow jumped 259 points. Today, so far, another 70 up. When you expect the worst and only get very bad, it seems a relief.

 

The 259 rally was one of 27 one hundred point or greater moves – up or down – since the beginning of March. Just a week before yesterday the Dow had dropped 234. On May 17th, it fell 372. But next to March 1, when the Dow rose 303 points, yesterday’s bounce was the best.

 

The Market Light is improving. It is now Yellow – Cautious but Improving (and improving rather quickly). Other factors than relief that the storm wasn’t as bad as projected are aiding the Market now, too. US Household Income rose to new record levels and the number of people in poverty has lessened. Hurrah!  Besides, Apple has come out with a new $1,000 phone. What more could we ask? Life is good.

 

Strongest sector  performance on the upside this past week went to  (once again) Rare Earth Metals (REMX), Lithium (LIT), Biotech (FBT), Oil & Gas Services (XES), and Pharmaceuticals (IHE). On the down side, Telecommunications (IYZ), Regional Banks (IAT), Mexico (EWW), Financials (XLF), and Natural Gas (UNG).

 

The week’s Technical Tea Leaves leaves little to be desired (whether they are correct or not we always need to wait and see): Trend Status has changed to a strong upward trend. This indicates that an upward trend has started and may continue in this direction.  This is a moderate bullish signal.

 

The market closing average has exceeded the 21 day exponentially smoothed average price.  At the same time, accumulation is increasing.  In an uptrending market, this is taken as a weak bullish signal that could be followed by further price increases. 

 

Analysis of the rate of change of the exponentially smoothed average price suggests that this strongly uptrending market will continue. This is a strong bullish signal that is usually followed by advancing prices.