I Fell Into a Consolidation Last Week

For the most part, the pace of my life is pretty fast. As the Chief Market Strategist at Chaikin Analytics, I write a daily research note that we publish before the market opens on trading days. This means that I am at the desk by 5:30am Monday – Friday in order to be up to speed on what is happening in the market, the current trends that are in place and how likely those trends are to continue. This is not new to me, in my former role, I was in charge of running my firm’s morning research call which would take place at 7:15am every trading day and would require a solid hour and a half of preparation before that call could take place.

In addition to my morning note, I host a live show on StockCharts.com everyday at 8:45am which requires time to prepare. After the show, my days are filled with further market research, reading about the latest developments in the world and how they might impact the trends in the market and attending meetings with my co-workers at Chaikin.

From time to time, I am a guest on Bloomberg TV which puts me at their studio in New York City and as you can imagine, requires a lot of preparation and research before going on the air. In addition to all of this, I teach a night class on Technical Analysis at Baruch College on Mondays and Wednesday in New York City. I love teaching the class and want to give the students the tools that they will need in order to be successful when they graduate and begin working. Needless to say, I spend a few nights of the week preparing my lectures for these classes. 

I somehow manage to get to the gym three to four times a week and can usually fit in a nice run on the weekends thanks to the help of my amazing wife who holds down the fort with three children while I am out “being healthy.” Then it is off to ballet for my two daughters followed by a lot of quality time with the family on Saturday night and during the day on Sunday. Amazingly, my wife and I are able to grab a date night during the week when she will come into New York City to meet me after one of my classes.

I choose this schedule for myself and I can honestly say that I am not doing anything that I do not want to do…but every now and then, it catches up to me. Last week was a case in point. I woke up on Tuesday not filling 100% and after hosting my show found out that I was running a fever. I went to the doctor who told me that all was well and that I just needed to rest. I am not good at resting (I know, I know). I felt slightly better on Wednesday and went about my normal day. Thursday was more of the same, including spending time with my two daughters in the evening. Then the alarm went off on Friday morning and I could not lift my head from the pillow. The fever was back and I needed to take a “sick day.” I can count on one hand the number of times that I have had to do this in a nearly 20-year career. Another trip to the doctor was met with a scolding look and a command to rest, literally do nothing. This time I followed the orders and recruited my support team of family members to help me out on Saturday. 

While I was sitting (laying) doing nothing on Friday and Saturday, it struck me that my condition was similar to what the market was experiencing, a consolidation that has been in place since July after it had been running at a blistering pace for the most part throughout 2019. The SPDR S&P 500 ETF (SPY) had been rallying sharply from December 2018 lows. From a December 31st close of $249.92, the fund rallied to close at $302.01 on July 26th; an advance of more than 20%. 

Perhaps that was too far, too fast. Perhaps trying to outrun the slowing global economy, Brexit, trade wars and a myriad of other negatives was beginning to wear on the market’s trend. It seems that, like me, the market needed a rest. And that is exactly what it has been doing.  

The key now is to figure out if this rest is enough to rejuvenate the market’s legs, setting it up to continue to run higher. There are two ways that we can do this. First, we can see that the SPY has a Bullish Chaikin Power Gauge ETF Rating which is a combination of fundamental and technical factors that actually uses our 20-factor model to drill down on the strength of the holdings of the fund. This leads us to the second datapoint that can clue us in on the health of SPY, which is the ratio of bullish to bearish stocks based on this model. As of now, there are 106 stocks with Very Bullish or Bullish ratings and 92 with Very Bearish or Bearish ratings. This “bullish” ratio in conjunction with the rating, is a sign that SPY is likely to recover from the consolidation to the upside.

As for me, by the time Saturday night rolled around, I was feeling much better. Two days of rest seems to have done the trick. I went for my run on Sunday morning and actually clocked one of my fastest paces of the past six months. After that, we all went to a family party and I managed to hit the pillow at a decent time and can say that I am back in gear, breaking my personal consolidation to the upside. 

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