Protect Your Portfolio 20190811

Hello everyone. It's Stephen Whiteside here from with this week's edition of Protect Your Portfolio. In this weekly presentation, we take a longer-term look at the North American markets using weekly charts. We use weekly charts to help filter out all of that market noise from Monday to Friday, so we're left with just one decision point and that is the closing price from 4:00 PM Friday afternoon. On Saturday morning we posted 33,000 new charts for our paid subscribers. Out of those 33,000, I have pulled out a handful and blown them up to help keep you on the right side of the major market moves.


Now the last five trading days were rather volatile, and we were certainly expecting that. We had a heads up as the VIX gave a buy signal on the previous week, and we saw volatility rise dramatically. Of course, when volatility's moving up or the Fear Index is moving up, we expect lower stock prices and an expansion in price volatility. Now if you look at the VIX, we would change our mind on a short-term basis if the VIX closed below $16.28 this week. On Friday it was an inside day for the VIX. It was also an inside day for the S&P 500. And of course, as we had the VIX rising, we had stock prices pushing lower. And they came back on Thursday and Friday, still on a daily sell signal. That has not changed at all.


Now you had lots of opportunity to take money off the table if you are shorting this market or if you are long any of the Bear ETFs over the past week or so, and so congratulations to you for locking in those profits. You should still have a partial position because we have not got kicked out of any of the major trades just yet. Now the S&P 500 came down to the 200-day moving average and found support there, came back up to the 50-day moving average, and that is now acting as resistance. So the world will be watching this week to see if the markets take out those 200-day moving averages.


Now stock prices usually fall faster than they rise and that's just normal, whether you're looking at any other asset, whether it's your house or your car. It can take you weeks, months, years to pick out the perfect house, but of course, if you start to smell smoke, people will run out fairly quickly. And that is also true with the stock market.


Let get back to our weekly charts. And if you were with us last weekend, we saw the VIX generate a weekly buy signal. That of course is negative for stock prices. We had a big expansion in the VIX this week, and it came down and settled down coming into weekend. We're still above the upper channel line there. So the VIX is still expanded, volatility has expanded, and this coming Friday, we're looking for close below $13.31 to tell us that the coast is clear.


Now what was weak coming into last Monday, generally lost the most on the week. And so when you look at the market cap of stocks, the microcaps which were the weakest coming in to last Monday lost over two percent on the week, so second week of a weekly sell signal there. The Russell 2000, which was looking pretty weak coming into last Monday, lost over one percent. Now there was a lot of volatility in the NASDAQ 100 and the S&P 500, but at the end of the week we closed back in the channel. So still no weekly sell signals there for those two major indices. A lot of price volatility, but at the end of the week we didn't lose that much coming into Friday's close.


Looking at the Canadian market, we came into the week on a weekly sell signal, whether you're looking at the TSX or the TSX 60, and then came up and actually closed higher on the week. And that had a lot to do with gold stocks. The gold sector was up over six percent on the week. No help whatsoever from the energy sector, which ended the week down another over one percent.


Looking at the bond market. And this trend started just before the end of the year in 2018, we see bond prices continue to move higher, whether you're looking at the futures contract, the TLT, or the XBB.TO.


Then looking at currencies. If you were with us last weekend, we were looking at a possible top in the U.S. dollar and a possible bottom in the Euro. And we certainly saw follow through in the directions we were looking for, but still no change in trend. No change in trend for the British pound, which continued to move lower on the week, down just under one percent. A wild week for the Canadian dollar, which ended the week actually higher after pushing through the lower channel line and recovering coming into the close on Friday.


Let's finish off with commodity prices. And starting in the metals, there's copper making a new low for this move. And of course, a lot of people look at copper as a major economic barometer. No joy there. We saw gold run up and trade through the $1,500 level, so congratulations to everybody who had orders in up at $1,500. And silver broke through the $16.50 level and traded up through the $17 level. So congratulations to you silver bugs.


Looking at the energy sector, we saw crude oil pull back, back on a weekly sell signal for crude oil. There's a nice chart pattern that a lot of people are going to be watching to see which way it breaks. If it breaks down because we're holding support from the May lows, and if those break that's not going to be a good sign for the energy sector. If the May lows break, then you expect a move back down here. And if you look over to the left-hand side of the chart, back to the December lows, that would be the next target to the downside. Then we've got gasoline prices which were down over six percent on the week. And I think we filled up the truck four times this week, so that would be a good thing if that would continue. And then natural gas traded lower, closed lower on the week. No joy for natural gas.


Okay, folks. That is all for this week's presentation. The VIX is still elevated, so we're looking for price volatility. And until we get the VIX back on a daily sell signal, we're certainly not expecting a breakout to the upside.


Have a great day. Enjoy the rest of your weekend. And the next time you'll hear my voice is on Tuesday morning. And at that time, we'll take a closer look at the U.S. stock market.


Stephen Whiteside