The Dow Jones Industrial Average, S&P 500 and Nasdaq Composite set all-time intraday highs the day before Thanksgiving on November 27. All three have 12-week slow stochastic readings above 90 on a scale of 00 to 10,0 which is an extreme overbought reading called an “inflating parabolic bubble” formation. When these readings are seen it’s a warning to reduce holdings in the stock market as the downside risk is 20% to 60% as the bubble pops. Its much easier to sell stocks on strength than to sell stocks on weakness.
When I screened the 30 stocks in the Dow 30 after November ended, the four momentum leaders through the first 11 months of 2019 are in “inflating parabolic bubble” formations. The reading for Apple (AAPL) is 96.50; it’s 94.10 for JPMorgan Chase (JPM); 90.21 for Microsoft (MSFT) and 93.16 for United Technologies.
There is not a single Dow stock that I would recommend as a buy as December begins.
Book profits now! Your allocation to Dow stocks should be reduced to at least 50%.
The Dow (28,051 on November 29) set its all-time intraday high of 28,174.97 on November 27 with its monthly value level for December at 27,703 and weekly and quarterly risky levels at 28,439 and 28,537, respectively. Semiannual and annual pivots lag at 27,266 and 25,819, respectively.
The S&P 500 (3,140.98 on November 29) set its all-time intraday high of 3,154.26 on November 27 with its monthly value level for December at 3,130.7 and its weekly risky level at 3,192.8. Quarterly, semiannual and annual pivots are 3,076.9, 2,955.6 and 2,867.1, respectively.
The Nasdaq (8,665.47 on Noember. 29) set its all-time intraday high of 8,705.91 on November 27 with its monthly value level for December at 8,563 and its weekly risky level at 8,827. Quarterly, semiannual and annual pivots are 8.591, 7.999 and 7,379, respectively.
The Dow Jones Transportation Average (10,857 on November 29) set its all-time intraday high of 11,623.58 way back during the week of September 14, 2018. The key level to hold is its semiannual pivot at 10,720 as the average is below its annual pivot at 10,976. A close this week below its five-week modified moving average at 10,689 will downgrade its weekly chart to negative.
The Russell 2000 (1,624.50 on November 29) set its all-time intraday high of 1,742.09 set more than a year ago on Aug. 31, 2018. slipped last week. The small-cap index is above quarterly, annual, monthly and semiannual pivots at 1,599. 40, 1,590.63, 1,577.49 and 1,572.85, respectively, with its weekly risky level at 1,661.21. The weekly chart is positive but overbought with its five-week modified moving average at 1,579.18 and its 12x3x3 weekly slow stochastic reading at 85.31.
Here’s Last Week’s Scorecard