Kirkpatrick's Weekly Market Strategist

Kirkpatrick’s Weekly Market Strategist The technical stock market letter published weekly since 1976 september 29, 2017

long-term u.s. tREASURY bONDS

Intermediate-Term Trend Table

Index Signal

BKX Dn BOND Up UTY Up

Date

Sig Pr

Cur Pr

6/2 87.38 99.26 2/10 149 4/32 152 26/32 2/17 627 673

*Change from last week

The 30-year US Treasury Bond future has corrected over the past three weeks and is now at the point where it makes it or breaks it. The DMI crossed negatively on Friday which means that if the price declines below the recent low on Wednesday (153 1/2), a sell signal will likely be generated.

Conclusion: The position is long.

GOLD The short position in gold had a significant drawdown of approximately 4.7%, just short of its maximum, before turning down. Presently the position is at a break even level. The DMI is still negative with the DI- above the DI+, and the trend is steadily downward.

Conclusion: The position is short.

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Crude oil The price of crude oil has passed through the classic technical pattern following a breakout out of a symmetrical triangle as it did in July. It rallied after the breakout, then threw back to the cradle where the two triangle bounds crossed, and finally bounced off the cradle, resuming its earlier upward trend.

Conclusion: The position is long.

Emerging stock markets The emerging markets ETF (EEM) continues to be contained within a rising channel that began around first of this year at 36.43. At one point it looked like it might go into a speculative mode whereby the price breads above the upper bound of the channel in an accelerated curve, but the bound has held and kept the advance orderly. Last week it corrected to the lower channel bound and bounced off it, thus confirming the strength of that channel.

Conclusion: The position is long.

bitcoin market

No buy signal occurred last week, suggesting that unless the Bitcoin price breaks convincingly out of its small trading range, it will continue downward on the sell short signal given in September. The trading zone can be broken either way, but the most likely is downward.

Conclusion: The position is short.

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STOCK MARKET Trend Table

Index Signal

DJIA Up NDX Up OEX Up VIX Up

* change last week

Date

Sig Pr

Cur Pr

3/25/17 5/27/16 7/15/16 6/2/17

17,621 4,760 948

22,350 5,932 1,107

The short-term decline expected for last week took place in one day, Monday. Since then the upward trend has resumed. The price is contained within a rising channel pattern and failed to break below the lower bound. When it does, we will have a warning that the upward advance is likely over. We could also see a speculative market develop whereby the price breaks the upper bound and skyrockets to even higher highs. In any case, the odds still favor a continuation of the advance until the lower bound is broken. The only thing that bothered me last week is that while the small caps roared upward, the small caps in the Bargain List did not. In other words, it appeared that the rest of the market was catching up to the leaders, and this usually occurs just before a downward break. This evidence is not quantifiable, just a hint.

Strong underlying support exists around the 2,420

earlier breakout line in the S&P 500. We likely will not get any intermediate-term sell signal until that line is broken.

In the Nasdaq 100 hourly future the system was finally profitable this past week. After the steep correction on Monday that was not profitable, the turnaround at the bottom was caught nicely and held onto for the remainder of the week. The result was a 100.5 point gain or $2,010 per contract for the week.

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Market Timing

Intermediate-Term - Both technical indicators remain in sync on the upside. This is portrayed in the charts above. As would be expected, the Diff-model, buy signal occurred when the price broke to a new high above the 2016 congestion in the DJIA and S&P 500. Now you can see that the DI+ is arching over while the DIhas yet to turn upward. This is an early signal that the intermediate-term cycle is peaking. The buy signal in the moving-average crossover model remains the same, yet the Buy-line average is close to negative, and the sell-line appears to be slowly decline as well. Both methods together suggest that a portfolio should be 100% invested in the Bargain List for the intermediate-term. On the other hand, early signs of deterioration are beginning to appear.

STOCK SELECTION

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BARGAIN LIST For Week Ending 9/22/17

Security Description SYMBOL

PRICE RELATIVES Close PCNT PRICE P/SLS

ADDED SUGGESTED DATE PRICE G/L STOP

**BARGAIN LIST - COMPLETE 58.Com Inc

WUBA

63.14- 5.5%

97- 1

87- 2

8/25/2017

Alibaba Group Holding Lt

BABA

172.71- 3.1%

94- 3

96

7/14/2017

151.83 + 13.8% 147.50

ANET

189.61- 0.8%

2/17/2017

119.06 + 59.3% 169.61

Aerojet Rocketdyne Holdi Align Technology I

Arista Networks Inc Autohome Inc

Baozun Inc Ads

Esperion Theraptc

Exact Sciences Cor Ferrari N.V.

Fiat Chrysler Automobile First Solar Inc Gopro Inc Cl A

Grupo Supervielle S.A. Iac/Interactive

Juno Therapeutics Kite Pharma Inc

New Oriental Education & Nvidia Corporation Ptc Therapeutics

Puma Biotechnology Sanderson Farms In Scientific Games Shopify Inc

Sina Corporation Square

Tableau Software Inc Cla Take-Two Interacti

Tal Education Group Vertex Pharmaceutic Wayfair Inc

Weibo Corp. Ads

Weight Watchers Internat Winnebago Industries YY Inc GROUP

AVERAGES

AJRD

35.00+ 3.2%

ALGN

186.27- 1.0%

ATHM

60.08- 6.4%

BZUN

32.75-13.2%

ESPR

50.12+ 1.6%

EXAS

47.12+ 2.5%

RACE

110.48- 2.7%

FSLR

45.88-10.8%

FCAU

17.91- 0.3%

GPRO

11.01+ 2.4%

SUPV

24.69+ 4.2%

IAC

117.58- 0.4%

KITE

179.81+ 0.2%

NVDA

178.77- 0.2%

PBYI

119.75+14.5%

JUNO

44.86- 0.7%

EDU

88.26+ 3.1%

PTCT

20.01+ 8.0%

SAFM

161.52- 1.5%

SGMS

45.85+ 6.7%

SHOP

116.49- 3.2%

SINA

114.65- 0.9%

SQ

28.81+ 0.2%

DATA

74.89- 1.0%

TTWO

102.23- 0.6%

VRTX

152.03+ 0.5%

TAL

33.71+ 1.6%

W

67.40- 9.7%

WB

98.94- 1.1%

WTW

43.55+ 1.8%

WGO

44.75+ 5.5%

YY

NUM=

86.78+ 7.7% 35

====== 0.0%

98

94- 2 93- 3 96- 2 97- 2 92- 1 97- 1 92- 4 98- 1

33+ 1 94- 1 93

88- 1 61- 7 0

97

82- 1 2

87-10

41- 4

97

36

94

90- 3 99 99 92

95- 1 95+ 3 99

28

58- 1 98 99

89+ 1 95

86+ 1 0

96- 1

27

96- 2

96- 1

99

95- 2 95- 1 91- 3 97- 1 98- 1 86- 4 63-29 97- 1 98

98+ 1 98+ 1 ===== 94- 2

32+ 2 86 83

86- 1 82- 1 95 96

35- 3 97 49

24+ 1 64+ 2 ===== 70

9/22/2017 4/28/2017 8/25/2017 9/15/2017 6/23/2017 4/14/2017 7/14/2017 8/25/2017 7/28/2017 9/15/2017 9/22/2017

67.33 33.89 +

6.2% 3.3%

34.84 22.97

134.62 + 38.4% 165.18 63.70 -

5.7%

46.38

44.34 + 13.0%

43.06

37.70 - 13.1% 23.27 +102.5%

25.74 36.10

93.90 + 17.7% 107.31 14.85 + 20.6%

11.53

48.87 -

6.1%

23.69 +

4.2%

16.83

1.3%

26.40

71.59 + 23.3%

74.21

11.52 -

4.4%

8.67

5/12/2017

102.59 + 14.6% 100.57

6/ 9/2017

87.79 +104.8% 105.61

9/15/2017 5/12/2017

44.30 +

5/19/2017

136.00 + 31.4% 152.91

9/ 8/2017

104.25 + 14.9%

6/ 9/2017 9/15/2017 9/22/2017 2/17/2014 5/19/2017 2/24/2017 8/ 4/2017 5/26/2017 7/14/2017 4/ 7/2017 5/12/2017 5/19/2017 3/ 7/2017 9/22/2019 7/14/2017

16.39 + 22.1%

160.08 + 42.95 +

71.14

0.9% 118.79 6.8%

33.70

102.11 + 12.3%

89.80

61.52 + 89.4% 17.43 + 65.3% 71.31 +

5.0%

0.00 +

1.0%

77.07 + 32.6%

88.21 24.22 63.41 78.10 26.63

115.88 + 31.2% 147.18 60.68 + 11.1%

65.30

17.01 +156.0%

32.55

78.31 + 26.3% 42.40 +

5.5%

63.49 + 36.7%

71.70 33.15 68.44

0

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Legend for Stock List u EX = If an “XX” is present, it means that the stock has met the sell trigger under the new rules for deleting stocks from the Bargain List. u Security Description = Name of underlying company. u SYMBOL = Exchange symbol for stock. u PRICE = Includes the Close and the percentage change (PCNT) over the previous week. u RELATIVES = Each column includes the percentile and its change from the previous week. The relative percentile columns are different for each list and are listed in the table below: u ADDED = Data pertaining to when and at what price the stock was added to the list. “G/L” is the gain or loss in the stock as of the report date (upper right corner).

Bargain List Rules Addition to Bargain list – Stock is added to the Bargain list when all of the factors below have been met: Relative Price Percentile > 97 50 day SMA Volume times Close = > $50,000,000 Last Price= > $10 Deletion from Bargain list – Stock is deleted from the Bargain list when any of the factors below are met: Relative Price Percentile = < 58 Sell on close below nine-week low or last two-bar reversal low

Chart Legend On Weekly Price Chart Vertical Black Bars = Weekly Price Range Red Line = Forward line (16w SMA, fwd 16w) Small Red Dots = Important low carried forward Large Blue Dots = Broke above an important high Large Red Dots = Broke below an important low Below Weekly Price Chart Green Line = ADX (16-weeks) Blue Line = DMI buying pressure (16-weeks) Red Line = DMI selling pressure (16-weeks)

Peak in ADX

Note: Relative percentiles are between 99 and 0, with 99 the highest.

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ADDITIOns TO THE bargain list NONE deletions from THE bargain list NONE

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Glossary of Indicators KEVIN The KEVIN oscillator is simply the 8-day moving average of the daily up-volume divided by the total of daily up-volume and down-volume. It was presented to me by an old floor-trader friend named Kevin MacNamara, thus the name “Kevin.” I don’t believe you will find in it in any technical references, but as you can see it is very simple and effective.

FORWARD LINE When analyzing the cyclical nature of price behavior, I find that moving averages are very useful to dampen shorter- and longer-term price trends. This allows me to concentrate on a specific cycle in the data. Without going into great detail, however, let me give you an example.

Let’s say a stock index appears to have a 20-day cycle. Using a 10-day moving average, we eliminate the effects of price motion of 10 days and less, allowing us to concentrate on the next higher order cycle, in this case the 20-day and longer cycles. Half the suspected cycle length is usually the period for the calculating the moving average.

When we plot a moving average, however, it lags behind current price behavior because it is being affected by the past prices in the average. To be absolutely true, a moving average should be plotted half the period back from the present. Thus a 10-day moving average should be plotted 5 days behind the present. A moving average is not just an average of prices but also an average of time. The average of price in our example is 10-days, and the average of time is halfway through the period or 5 days earlier.

If a cycle of 20-days exists in the data, and we are representing it by a 10-day moving average plotted 5-days earlier, we will see the highs and lows in the average roughly 10-days apart - high to low and low to high.

The full cycle would be from high to high or low to low of 20 days. The rising portion and declining portion of a 20-

day cycle lasts 10-days, ideally. We now plot the moving average ahead 10-days from the true plot (or 5 days from the current price). This is called the “forward line.” When the current 20-day cycle is rising, the forward line should be declining because it is half a cycle forward. Crossing above the forward line should ideally occur when the rise is half over. Breaking the forward line can thus be a means of estimating where the next target will be. Because the rise is half over when the forward line is broken, the second half should occur at roughly the same distance (if the cycle is valid and flat).

I know, it sounds complicated. It isn’t really, but does sound that way from my trying to describe it. The thing to remember is that if the forward line is broken, say from the upside, the downward price target will be the distance from the top price to the forward line projected below the forward line. If the price stops at the forward line, we know that the underlying trend is strong. If the price exceeds its forward line target, a larger trend reversal is likely developing KIMM KIMM is used in the monthly overview as one measure of longer-term stock market momentum. It stands for Kirkpatrick Indicator of Market Momentum. It is a composite of the 12-week momentum of all stocks listed on the New York Stock Exchange. Each stock is given a weight of plus or minus one based on its 12-week price momentum, either upward or downward. The KIMM is the total of all the weights. Thus, a reading of +1000 says that the number of stocks with positive 12-week momentum is a plurality of +1000. That might be 2000 stocks with a plus rating and 1000 with a minus rating. The net is +1000. KIMM generally follows the market and is useful as an overbought/oversold intermediate-term oscillator. Generally, a bullish signal develops when the KIMM above the -1000 level from below, and a bearish signal develops when the KIMM declines below +1000 from above.

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Description of Notes on DMI max diff model charts Length = The length of the DMI in bars smooth = sometimes the dmi is smoothed with an average calculation.

LAG = SOMETIMES THE DMI IS LAGGED BY A NUMBER OF BARS

PCUP= PERCENTAGE RETRACEMENT OF DI+ MINUS DI- TO GIVE A SELL SIGNAL PCDN= PERCENTAGE RETRACEMENT OF DI- MINUS DI+ TO GIVE A BUY SIGNAL entry stop: le= The percent that the price must rise above the signal bar high to confirm a buy signal. se= the percent that the price must decline below signal bar low to confirm a sell signal. exit stop: stop or stop and reverse percentage from initial signal entry. lx= The percent that a price must decline from the first entry. sx= the percent that a price must advance from the first entry.

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