Kirkpatrick's Weelly Market Strategist by Kirkpatrick & Company, Inc.

Kirkpatrick’s Weekly Market Strategist The technical stock market letter published weekly since 1976 February 9, 2018

Intermediate-Term Trend Table

Index Signal

BKX Up BOND Dn UTY Dn

Date

Sig Pr

Cur Pr

9/22 97.04 108.18 10/27 151 15/32 143 26/32 1/12 640 618

*Change from last week

long-term u.s. tREASURY bONDS The 30-year US Treasury Bonds formed a small diamond pattern last week and then broke to the downside. The price curve is now accelerating on the downside. Where an upward accelerating curve denotes speculation, a downward accelerating curve denote panic. As such the eventual objective is almost impossible to predict. As with an accelerating upward curve, the first sell should be when the price either crosses above the lower channel line (large dashes in the chart) and back into the downward channel or the breaks above the internal trend line (small dashes in chart).

Conclusion: Position is short

GOLD The gold price is taking a short rest from its sharp upward rally and is forming either a head-and-shoulders top or a triangle. The neckline in the pattern was broken early last week, signaling a downward trend with an objective of 1310. The price reached that objective this past Thursday. It is unlikely that the price will now rise back to the cradle of the triangle formed by the head and right shoulder, and so we wait for more evidence of a base. Conclusion: Position is short on neckline break.

Crude oil The crude oil price has formed a head-and-shoulder top formation. This pattern seems to be common for this market. Last week, while not sure that such a pattern had formed, nevertheless switched positions on the break of the neckline with an objective of 60. That level was reached on Friday. Conclusion: The position is short on break of neckline.

Emerging stock markets The emerging markets ETF last week broke the lower channel bound confirming the end of the speculation signaled when the price broke below the upper bound in its speculative run. The anticipated low from the channel is usually the width of the channel projected from the breakout from the channel. This measurement gave us an objective of roughly 46.5 which was reached on Thursday. In addition to having reached its objective, the price is at a support level between 45 and 46 where buying will likely come in. Conclusion: The position is short.

bitcoin market

The Bitcoin market broke below its downward channel’s lower bound. This is the classic sign of panic, and like euphoria on the upside, the time to cover is when the price reverses upward through the same lower boundary. This it did last week, and we cover the short position at that point. We now wait for a new development. Conclusion: The position is flat on the break upward through the channel lower bound..

STOCK MARKET Trend Table

Index Signal

DJIA NDX OEX VIX

Date

Flat* 3/25/17 Flat* 5/27/16 Flat* 7/15/16 Dn 6/2/17

Sig Pr

Cur Pr

24,194 6,412 1,159

24,191 6,412 1,159

* change last week

So far, the market decline has followed the classic script of a speculative market. Let me review again what the characteristics are. On the monetary side, we received the old three-steps-and-a-stumble signal when the Fed raised short-term rates for the third time. We saw the excessively high margin debt, and the optimism in the option markets and in advisory opinion. These are the classic sign that the rally has gotten out of hand. On the pure technical side, we noted that the upward run in stock prices followed an accelerated curve and broke upward out of a rising channel. The gross enthusiasm and low priced money were contributors to this time of greed. Thus, when the price of the Dow Jones Industrial broke back down into the rising channel, we had our first technical signal that the rise was over. Classically, this is the time to sell all long positions. Then a very sharp and steep correction occurs for no apparent reason. Investors who are trained by the news to look for a “reason” were taken by surprise, and the decline became a panic. This is the opposite of a speculative rise but it is declining rather

than rising. The final panic occurs when the price declines below the downward trending, lower channel bound. At that point we look for a rally that breaks back into the channel to cover our shorts. Does this all sound familiar after last week? The last two weeks were a perfect example of a speculative rise and panic. Over the short-term we now await a Diff signal to initiate a new position. Over the intermediate-term, we have yet to complete the panic. The performance of the 60 minute NDX future last week was a considerable improvement over the previous week. The total gain was 179.75 points or $3,595 per contract for the week.

Market Timing

Intermediate-Term - Both technical indicators remain in sync on the upside. The damage done last week in the sudden sharp decline did nothing to the intermediate-term momentum indicators. It will take a few months for them to turn negative. The break of the upper bound in the DJIA is troubling because it is the classic sell signal in an accelerating market. The intermediate-term trend in the DJIA is now flat until a Diff Signal tells us what to expect next. The objective of the 24,000 level at the bottom boundary was the target and that was reached this week, A rally therefor is likely. We then wait for the next Diff signal.

STOCK SELECTION

BARGAIN LIST For Week Ending 2/9/2018 Security Description SYMBOL

PRICE RELATIVES Close PCNT PRICE P/SLS

ADDED SUGGESTED DATE PRICE G/L STOP

**NEWLY SELECTED STOCKS Array Biopharma Inc

ARRY

17.03+14.4%

99+ 1

97+ 1

Twitter Inc

TWTR

31.51+21.5%

99+ 2

92+ 3

Haemonetics Corp

Virtu Financial Cm A

HAE

68.69+ 8.2%

VIRT

27.95+44.0%

98+ 2 99+10

72+ 5 80+ 2

**DELETED FOR REL PRICE Hollyfrontier Corp

HFC

44.50- 4.1%

92- 1

On Semiconductor

21.15-10.8%

87- 8

37- 4

Michael Kors Holdings Lt Valeant Pharmaceuticals

KORS VRX

59.80- 8.4% 17.79- 1.2%

94- 3 88+ 9

44- 2

11/17/2017 12/22/2017 1/19/2018

12/22/2017

44.41 + 63.40 -

0.2% 5.7%

25.04 - 15.5% 21.67 - 17.9%

**BARGAIN LIST - COMPLETE Abbvie Inc

ABBV

111.30- 3.4%

1/26/2018

123.21 -

9.7% 107.07

Abiomed Inc

ABMD

229.38- 7.6%

1/26/2018

238.89 -

4.0% 212.43

ARRY

17.03+14.4%

99+ 1

97+ 1

Abercrombie & Fitch Comp Align Technology I

Array Biopharma Inc Autohome Inc

Blackberry Ltd Boeing Company

China Lodg Grp Ads Cree Inc

Fiat Chrysler Automobile First Solar Inc Five Below Inc

Global Blood Ther Grubhub Inc

Grupo Supervielle S.A. Haemonetics Corp Iac/Interactive Kohl’s Corp

Lendingtree Inc

Mercadolibre Inc

Nektar Therapeutics Netapp Inc Netflix Inc

Neurocrine Bioscienc Nutanix Inc Nvidia Corp

Overstock.Com Inc

ANF

ALGN ATHM BB BA

HTHT CREE FCAU FSLR FIVE GBT

GRUB SUPV HAE

20.65+ 0.5%

229.37-10.9% 74.37- 4.1% 11.61- 6.5%

332.83- 4.7% 134.00- 5.0% 32.75- 1.6% 21.52- 3.5% 61.22- 7.9% 63.67+ 1.1% 57.15- 6.1% 85.54+21.0% 28.71- 5.6% 68.69+ 8.2%

IAC

137.19- 5.1%

TREE

339.55- 3.2%

NKTR

74.64-15.2%

KSS

MELI NTAP NFLX NBIX NTNX NVDA OSTK

61.47- 3.2%

335.86- 8.9% 56.17- 6.8%

249.47- 6.8% 79.28- 4.9% 31.60+ 1.0%

232.08- 0.7% 58.60+ 4.6%

99 85-10 95- 1 87- 3 97

87- 2 82+10 97

86- 6 91+10 99

94- 1 92 85 47

96- 1 99

94- 2 98

96- 1

46- 2 60+ 2 0

40- 1 65- 2 11+ 1

1/ 5/2018 1/12/2018 7/29/2016 9/22/2017 2/ 9/2018 5/12/2017 1/12/2018

11/10/2017

1/26/2018 1/12/2017 1/26/2018

11/17/2017

5/19/2017

83+ 1

99+ 1

18+ 2

1/ 5/2018

12/15/2017

16.39

0.0%

12.13

13.83 - 16.1%

11.07

82.67 - 10.0%

33.85 -

97- 1 55- 1

17.03

10/20/2017 7/28/2017

3.7%

134.62 + 70.4% 229.24

348.91 -

12/ 8/2017

19.92 +

2/ 2/2018

92+ 8 96+ 1

1/ 5/2018

8/25/2017

72+ 5

1/19/2018

50+ 1

98+ 2 98

2/ 9/2018

12/29/2017

93+ 1

92- 1

4/28/2017

99+ 7 93- 2

1/19/2018

144.43 -

65.75

4.6% 309.05 7.2% 117.82 3.2%

30.98

48.87 + 25.3%

56.66

14.85 + 44.9% 72.37 - 12.0% 56.60 +

1.0%

37.92 +125.6% 23.69 + 21.2% 68.70 -

0.0%

63.87 -

3.8%

21.21 61.33 40.85 66.44 26.02 57.96

102.59 + 33.7% 122.75 315.05 +

56.64

7.8% 303.54

381.86 - 12.0% 309.82 32.50 +129.7% 62.77 - 10.5%

274.60 72.28 +

65.45 54.61

9.2% 232.14 9.7%

36.91 - 14.4%

69.81 28.71

136.00 + 70.6% 204.03 68.35 - 14.3%

48.22

Ptc Therapeutics

PTCT

Revance Therapeutics

RVNC

Restoration Hardware Hol Sage Therapeutic Com Sarepta Therapeutics Twitter Inc

Vipshop Holdings Ltd Virtu Financial Cm A

Weight Watchers Internat Westlake Chemical Corp Xpo Logistics Inc YY Inc GROUP

AVERAGES

22.99- 6.8%

86- 1

29.70- 5.8%

84- 3

86.70- 5.9%

SAGE

152.14-18.6%

TWTR

31.51+21.5%

SRPT

55.14-12.7%

VIPS

15.34- 2.0%

VIRT

27.95+44.0%

WTW

69.17+10.2%

WLK

102.66- 3.6%

117.64- 8.4%

XPO

NUM=

86.01- 8.4%

====== - 1.6%

85- 3 99

10/20/2017

11/10/2017

12/ 8/2017

89- 8

21+ 1

99+ 2 99+10 99+ 1 94

96- 1 97- 1 ===== 94

1/12/2018

92+ 3 80+ 2 66+ 6 39

14- 1 78- 2 ===== 66

10/ 6/2017 2/ 9/2018 1/26/2018 2/ 9/2018 1/12/2018

12/22/2017 12/22/2017 7/14/2017

23.29 -

1.3%

17.98

34.65 - 14.3%

26.42

83.79 +

3.5%

76.48

96.04 + 58.4% 129.63 50.71 +

8.7%

52.61

19.65 - 21.9%

13.53

31.51 27.95

0.0% 0.0%

59.44 + 16.4%

104.09 90.01 -

23.53 22.06 51.12

1.4% 101.34 4.4%

82.38

63.49 + 85.3% 102.17

ADDITIOns TO THE bargain list

DELETIONS TO THE bargain list

ETF BARGAIN LIST Security

EX Description

== ========================

PRICE

SYMBOL

======

PCNT

=====

====

RELATIVE PRICE

ADDED

DATE

======== ==========

PRICE =====

G/L

=====

**NEWLY SELECTED STOCKS XX Ultrashort Natural Gas P

KOLD

45.89+18.4%

97+40

**DELETED FOR REL PRICE XX Semiconductor Bull 3X Di

SOXL

XX Ultra DJ-UBS Crude Oil P

UCO

XX Technology Bull 3X Direx XX Ultrapro QQQ Proshares

XX Velocity 3X Long Crude O XX VS -1X VIX Short Term

TECL

133.44-15.1%

73-22

22.58-17.6%

93- 5

107.03-14.3%

TQQQ

136.13-16.1%

UWT

23.15-25.4%

XIV

79-16 80-16

1/19/2018

179.11 - 25.5%

1/12/2018

26.71 - 15.5%

12/ 8/2017

168.38 - 19.2%

12/ 8/2017

123.75 - 95.7%

12/ 8/2017

45.89+18.4%

97+40

2/ 9/2018

-18.3%

76- 6

0-70

2.6%

1/19/2018

95- 4

5.38-95.4%

109.94 -

21.45 +

7.9%

45.89

0.0%

**ETF BARGAIN LIST COMPLET XX Ultrashort Natural Gas P REPORT

AVERAGES

KOLD NUM=

======

=====

additions to THE ETF bargain list

DELETIONS FROM THE ETF bargain list

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:

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)

Relative Price Percentile = < 58 Sell on close below nine-week low or last two-bar reversal low Peak in ADX

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

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.

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.