Weekly Models Update - Straight Up 🔝

Weekly Market Model Update for May 18th

Welcome to the weekly report! This report is targeted at investors that don’t have time to monitor the ebbs and flows of the market day to day and still want to beat the market and avoid bear markets🚀. Just 10 minutes a weekend is all it takes.

I focus on the MAJOR themes and the MAJOR trends of the markets in this report. All the models I present are back tested with results so you can see that they work🤔.

This post is long - so make sure you read it on the Substack App or Website so you get to see the bottom of it - Email can often cut the message short. Let’s get into the weekly models!

What Happened This Week

This week we closed a streak of 5 in a row higher on continued optimism from the Trade War progress. Towards the end of the week, we started to see some selling materialize on some poor economic data (inflation expectations rising, Wal-Mart warning price increases are here). After hours on Friday, we saw Moody’s downgrade the US debt, which caused bonds to dump and stocks to get hit too. 😧 Trump wasn’t happy with any of that, and he was complaining all weekend on social media about it.

I won’t cover what usually happens after a US Debt Downgrade, I’ve seen a lot of people posting charts showing that but suffice it to say it’s not good. A correction would not be surprising here (something like a -3 to -8% move). I’m going to be watching the bonds more than the stocks to be honest because I’d like to see them rally on some bad news for a change and that would be a great sign a lot of gloom is already priced in.

We have a large gap on the weekly bars from Monday’s open - those always fill, most of them within a 1 or 2 weeks. It would not surprise me to see us go under last Friday’s high at some point next week or the following.

Weekly Show and Tell

Each week I review a chart or model that I would normally keep behind the paywall, I hope you can make a couple bucks off of it! 🤑

This week we’ll review a key sector and understand what is going on UNDER the surface with the breadth. I’m talking about the Semiconductors. These little guys have gone from Zero to Hero in the last few weeks.

This metric counts how many stocks in the XSD ETF have overbought RSI readings. It has flagged caution here because many, many stocks are very, very overbought here (yellow bars over the blue line). In the past, this has topped the sector, and we have needed to travel sideways to down for a couple months.

Breadth on the Semis is Too Hot - Toppy