Kirkpatrick's Weekly Market Strategist

Kirkpatrick’s Weekly Market Strategist The technical stock market letter published weekly since 1976 october 6, 2017

long-term u.s. tREASURY bONDS

Intermediate-Term Trend Table

Index Signal

BKX Up* BOND Up UTY Up

Date

Sig Pr

Cur Pr

9/22 97.04 100.75 9/22 149 4/32 151 29/32 2/17 627 673

*Change from last week

The negative crossover in the DMI this past week signaled a short sale in US Treasury Bond futures. This appears late in the scheme of a previous lengthy decline, but the optimal parameters for the bond market suggest a long period for the DMI and thus a slow reaction time to be sure of any signal.

Conclusion: The position is short.

GOLD The short position in the gold price was reversed this week with a buy signal in the DIFF model. The DMI has yet to cross positively, always opening the possibility that the DI- will begin to advance again at the peril of the DI+ and the signal be reversed again for a whip saw. For those nervous that such an event might happen, waiting for the actual DMI crossover would be wise.

Conclusion: The position is long.

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Crude oil The crude oil future has now defined a new symmetrical triangle from which it broke upward on the last buy signal. It is now throwing back to the cradle where the two triangle bounds are meeting around $49. This is usually a strong support level, and the price should resume its upward trend from there. If it fails and breaks below the cradle, then a short sale signal will be given.

Conclusion: The position is long.

Emerging stock markets All sorts of signals occurred last week. The Emerging Market ETF received a short sale signal after failing to reach the upper bound of the channel it has been trading in since January. The next step in a longer-term decline would be a break below the lower bound of the channel.

Conclusion: The position is short.

bitcoin market

Despite the positive crossover in the DMI in the Bitcoin price, a buy signal has yet to appear. The long, flat period or trading range has not give much evidence of a move in either direction leaving the short sale signal in early September the dominant signal.

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

22,774 6,065 1,125

The stock market is now in a speculative stage that will end quickly but at an indeterminable level. The evidence for this is the Dow Jones Industrial breaking above its upper bound in the rising channel it has been trading in since mid August. When this occurs, the price may even accelerate in an upward sloping curve, but the rise rarely lasts for long. There can be short corrections within the rise just as can occur in any normal advance, but when the price breaks back into the channel by breaking below its upper bound, the market should be sold. It is possible for a false breakout down to occur and the market reverse back upwards, but the air is thin now that the curve has accelerated, and the end will come rapidly. Some think that a negative news report will break the bubble, but that is rare.

The most reliable break will occur on little or no news, thus indicating that the end is part of the normal market cycle and not dependent on extraneous information. Additional evidence of the impending peak is the sell signal in the

breadth oscillator and the inability for the call/put ratio to reach a new high, thus diverging from the market’s new high.

In the Nasdaq 100 hourly future the system was profitable again this past week. It gained primarily from the sharp rise on the 5th, and it now may be forming a rising wedge pattern, normally a negative pattern after a large run up. The gain for the week was 34 points of $680 per contract.

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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 10/6/17

Security Description SYMBOL

PRICE RELATIVES Close PCNT PRICE P/SLS

ADDED SUGGESTED DATE PRICE G/L STOP

**NEWLY SELECTED STOCKS Amicus Therapeutics

FOLD

15.06- 0.2%

98

98- 1

Fibrogen Inc CS

FGEN

55.20+ 2.6%

99

97

Dynavax Technologies Sarepta Therapeutics

Sociedad Quimica Y Miner Stamps.Com Inc

DVAX

23.10+ 7.4%

SRPT SQM

STMP

50.71+11.7% 58.94+ 5.8%

99 98+ 3

99 0

98

88+ 1

112.60+ 1.9%

91- 1

82

7/14/2017

93.90 + 19.9%

68.99+ 2.3%

62- 1

35

5/12/2017

60.68 + 13.7%

216.25+ 6.7%

97

91+ 1

**DELETED FOR REL PRICE Ferrari N.V.

RACE

Wayfair Inc

W

Ptc Therapeutics

PTCT

19.62- 2.0%

91- 4

85- 1

6/ 9/2017

16.39 + 19.7%

**BARGAIN LIST - COMPLETE 58.Com Inc

WUBA

64.85+ 2.7%

96- 1

87

8/25/2017

Alibaba Group Holding Lt

BABA

179.20+ 3.7%

95+ 1

96

7/14/2017

FOLD

15.06- 0.2%

Aerojet Rocketdyne Holdi Align Technology I

Amicus Therapeutics Arista Networks Inc Autohome Inc

Baozun Inc Ads

Dynavax Technologies Esperion Theraptc

Exact Sciences Cor

Fiat Chrysler Automobile Fibrogen Inc CS First Solar Inc Gopro Inc Cl A

Grupo Supervielle S.A. Iac/Interactive

Juno Therapeutics

New Oriental Education & Nvidia Corp

Puma Biotechnology Sanderson Farms In

Sarepta Therapeutics Scientific Games Shopify Inc Sina Corp

Sociedad Quimica Y Miner

AJRD ALGN

35.05+ 0.1%

187.04+ 0.4%

ANET

192.93+ 1.7%

BZUN

34.16+ 4.3%

ATHM DVAX ESPR EXAS FCAU FGEN FSLR GPRO SUPV

61.42+ 2.2% 23.10+ 7.4% 56.21+12.1% 48.63+ 3.2% 17.60- 1.8% 55.20+ 2.6% 48.21+ 5.0% 9.88-10.3%

24.17- 2.2%

IAC

122.24+ 3.9%

EDU

91.63+ 3.8%

JUNO

43.61- 2.8%

NVDA

181.30+ 1.4%

SAFM

149.53- 7.5%

PBYI SRPT SGMS SHOP SINA SQM

121.40+ 1.3% 50.71+11.7% 48.05+ 4.7% 97.92-16.0%

115.27+ 0.5% 58.94+ 5.8%

98

92- 2 98 93 96 97 99

32- 1 94

98- 1 93 88

62+ 1

9/22/2017 4/28/2017

10/ 6/2017 2/17/2017 8/25/2017 9/15/2017

99

10/ 6/2017

97

97

4/14/2017

99

97

75-19

25- 3

96+ 4 98 91+ 4 96- 1 91+ 1 98- 1 93+ 1 94- 1 99

0 2

42+ 1 35- 1 59+ 1 98 89 95 0

88- 8

24- 3

99

33+ 1

94- 1

86

98+ 3 62-34 98

6/23/2017 8/25/2017

10/ 6/2017 7/28/2017 9/15/2017 9/22/2017

33.89 +

3.7% 3.4%

151.83 + 18.0% 134.62 + 38.9% 15.06

0.0%

63.70 -

3.6%

23.10

0.0%

119.06 + 62.0% 37.70 -

9.4%

44.34 + 26.8% 23.27 +109.0% 14.85 + 18.5% 55.20

48.87 -

0.0% 1.4%

11.52 - 14.2% 23.69 +

2.0%

44.30 -

1.6%

5/12/2017

102.59 + 19.2%

5/12/2017

71.59 + 28.0%

9/15/2017 5/19/2017

136.00 + 33.3%

9/15/2017

160.08 -

9/ 8/2017

0

10/ 6/2017

96

2/17/2014

88+ 1

67.33 -

9/22/2017 5/19/2017

10/ 6/2017

104.25 + 16.5% 50.71

6.6% 0.0%

42.95 + 11.9% 61.52 + 59.2%

102.11 + 12.9% 58.94

0.0%

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Square

SQ

Tableau Software Inc Cla

DATA

Stamps.Com Inc

Take-Two Interacti

Tal Education Group Vertex Pharmaceutic Weibo Corp. Ads

Weight Watchers Internat Winnebago Industries YY Inc GROUP

AVERAGES

30.76+ 6.7%

96+ 1

84+ 1

77.37+ 3.3%

91

87+ 1

STMP

216.25+ 6.7%

TTWO

107.23+ 4.8%

VRTX

155.10+ 2.0%

TAL

33.95+ 0.7%

WB

100.40+ 1.4%

WTW

44.78+ 2.8%

WGO

43.20- 3.5%

YY

NUM=

88.74+ 2.2% ======

37

+ 1.7%

97 97 98 86 97 98

96- 2 98

===== 94- 1

2/24/2017

91+ 1

10/ 6/2017

83+ 1

5/26/2017

95 96 97

7/14/2017

23- 1 64

=====

216.25

71.31 +

0.0% 8.5%

77.07 + 39.1% 0.00 +

1.0%

4/ 7/2017

115.88 + 33.8%

3/ 7/2017

17.01 +163.3%

5/19/2017

49

73

8/ 4/2017

17.43 + 76.5%

9/22/2019 7/14/2017

78.31 + 28.2% 42.40 +

1.9%

63.49 + 39.8%

0

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

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deletions from THE bargain list

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The following stocks newly passed the relative strength test using only the closing price to a 61-week, moving average as outlined in my book “Investment and Trading Strategies, Chapter 5, pg 79” Warning!!!

These stocks are very speculative in the current market environment

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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 = smooth = LAG = PCUP= PCDN=

The length of the DMI in bars sometimes the dmi is smoothed with an average calculation.

SOMETIMES THE DMI IS LAGGED BY A NUMBER OF BARS

PERCENTAGE RETRACEMENT OF DI+ MINUS DI- TO GIVE A SELL SIGNAL 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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