Bear Market Rally Will Stall Or Accelerate Based On This Week's Closes

The bear market for stocks began when the five major equity averages began to crash in early-October. At the end of September, the 12x3x3 weekly slow stochastic readings were above 90.00 on a scale of 00.00 to 100.00. Readings above 80.00 are overbought and I consider readings above 90.00 as an “inflating parabolic bubbles” and bubbles always pop. By mid-October the weekly charts became negative.

At the Christmas bottom the five major equity averages were oversold with stochastic readings below 20.00 and each were down by 20% or more from their all-time intraday highs. The S&P 500 provided the signal that a rebound would happen when it held its “reversion to the mean” (200-week simple moving average) at 2,348.81 on December 26.

The signal that a bear market rally could be sustained came from the Dow Jones Transportation Average. My call as 2019 began was that Dow Transports would hold my new semiannual value level of 8,858 and the low was 8,850.49 on January 3. On January 4, transports closed that week above its reversion to the mean at 9,108.77, confirming the bear market rally.

We begin this week with all five averages still in correction territory, down between 11% and 17.2% from their 2018 highs. On the other side of the coin all five major averages are up between 10.5% and 14.2% above their Christmas lows.

For the bear market rally to continue all five averages need to close this week above their five-week modified moving averages as the 12x3x3 weekly slow stochastic readings are rising above the oversold threshold of 20.00. These averages are explained below.

 

The Scorecard for December 11, 2019

 

Scorecard For The Major AveragesGlobal Marker Consultants

The Dow Jones Industrial Average (23,995.95 on January 11) set its all-time intraday high of 26,951.81 on October 3 and is in correction territory, 11% below this high. The weekly chart will shift to positive given a close on January 18 above its five-week modified moving average at 24,022. The 12x3x3 weekly close stochastic reading ended last week at 26.07, rising from 19.83 on January 4, moving above the oversold threshold of 20.00. The Dow is up 10.5% from its December 26 low of 21,712.53. My weekly value level is 22,419 with semiannual, monthly and annual risky levels at 24,340, 25,578 and 25,819, respectively.

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Disclosure: I hold no positions Chevron, IBM, Coca Cola, Merck, Pfizer, Procter & Gamble, Verizon or ExxonMobil.

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