The Dow Jones Industrial Average, S&P 500 and Nasdaq Composite set all-time intraday highs on November 19. In the process all three have 12-week slow stochastic readings above 90 on a scale of 00 to 100, which is an extreme overbought reading that I call an “inflating parabolic bubble.”
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.
The Dow set its all-time intraday high of 28,090.21 last Wednesday with its semiannual pivot at 27,266 and its quarterly risky level at 28,537. November 19 was a “key reversal” day as the close at 27,934.02 was below the November 18 low of 27,969,24.
The S&P set its all-time intraday high of 3,127.64 last Wednesday and is above its monthly and quarterly pivots at 3,089.5 and 3,076.9, respectively, with a weekly risky level at 3,134.2. Its semiannual pivot is 2,955.6.
The Nasdaq set its all-time intraday high of 8,589.76 last Wednesday is between its monthly and quarterly pivots at 8,469 and 8,591, respectively, with a weekly risky level at 8,686. Its semiannual pivot is 7,999.
The Dow Jones Transportation Average is 7.2% below its all-time intraday high of 11,623.58 set more than a year ago on 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 is 8.8% below its all-time intraday high of 1,742.09 set more than a year ago on August 31, 2018. slipped last week. The key level to hold is its semiannual pivot at 1,572.85 as the index is below its annual and quarterly pivots at 1,590.63 and 1,599.40, respectively, with a weekly risky level at 1,606.02. The weekly chart is positive but overbought with its five-week modified moving average at 1,567.85.
Here’s Last Week’s Scorecard