Last Tuesday’s weak ISM manufacturing data (suggesting a recession) caused the worse two-day start to a quarter since the fourth quarter of 2008.

The markets bounced aggressively after the subsequent negative ISM report, shrugging off the ongoing impeachment news, trade wars, and other global concerns.  The cooked market internals suggested an imminent bounce.

The rally continued on the news that the U.S. jobless rate hits a 50-year low and job growth continued at a moderate pace.  This suggests that the economy is holding up despite a broader global slowdown.  Analysts predict that earnings from S&P 500 companies will fall 4.1% from last year

The market negative reaction to the ISM made bonds rally and raised the odds of another FOMC rate cut to 77.5%.

 

TREND MATRIX

 

 

The majority of the markets and sectors have been in trading ranges for the last six months.

However, I cannot recall having so many neutral sectors and mixed messages.

Of course, it makes sense considering the extended range-bound markets.

If you are not aware, or new to the ETF letter, the first column under Weekly and Daily were the trends the prior week, and the second is the current trend.

Many moved from up, which were sideways not long ago moved back to sideways and some to down.

Overall, there has been a lot of “running in place” and makes for few opportunities.

The internal sentiment gauge that measures the activity of the wrong-way options traders supports a floor under the markets.

However, that doesn’t mean the markets can move right through the congestion above.

 

TREND MATRIX PERCENTAGE CHANGES

 

 

In last week’s commentary, I said,

“This pattern that formed last week of a move lower that has a “potent” bullish reversal (deep retracement and close) up, that turns and then negates the bullish reversal on the next bar or two, often results in a measured move to the downside.

A Measured Move is made up of a move equal in size and direction to the first move prior to the reversal.

Currently, we're looking at there being a greater potential for lower.”

That measured move happened on the surprise news that trapped so many.

The move drove the broader markets down between 2 and 4% from Tuesday’s morning’s high to Thursday morning’s low.

The rally from the low erased about half of those losses, and the top sectors closed with a small gain.

None of these sector charts look appealing for a large move, but they could move higher into the congestion above.

Maybe the worst hit last week has the best potential.

This is the concept that we call “catch-up,” where the under performer catches up with the leader.

The internal sentiment gauge that measures the activity of the wrong-way options traders supports a floor under the markets.

It doesn’t mean the markets can move right through the congestion above.

 

VIDEO REVIEW OF MARKETS AND INTERNALS

 

 

 

 

Master Trader Techno-Fundamentals Combined with Investing and Trading ETFs Course HERE

 

NEW ETF TRADE IDEAS

 

Below is a daily/weekly chart of iShares iShares MSCI Taiwan Capped ETF (EWT).

 

 

Trade:   Over $36.75, consider buying the ETF.

Technical Setup:   Breakout daily/weekly above r20/50/200-MA in strong uptrend.

Stop Loss:  $35.88.

 

Below is a daily/weekly chart of iShares MSCI Brazil Small-Cap ETF (EWZS).

 

 

Trade:   Over $17.54, consider buying the ETF.

Technical Setup:   Breakout daily/weekly at 20/50-MA.

Stop Loss:  $16.58.

 

 

OPEN AND CLOSED ETF POSITIONS WITH TRADE UPDATES

 

10/1: BOTZ – Bought the ETF at $20.05.  10/7:  Move Stop $19.13

10/1: IJH – Gapped over entry and was invalid.

9/25:  ITB – Bought the ETF at $42.81.  10/6:  Move Stop $42.07

 

 

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All the best,

Greg Capra
Managing Director of Master Trader

Dan Gibby
Chief Options Strategist

 

NOTE:  Master Trader will show opening and closing prices of all stock and options trades.  We recommend that all traders and investors use proper share sizing for positions and money management. However, we cannot recommend what that is for your particular trading style, risk tolerance, or account balance.

We urge you to calculate your own share/position size based on your individualized risk parameters, Trading Plan, and familiarity with the proposed trade strategy and risk. Advanced Management Strategies (AMS) covers in detail foundational and advanced position and money management.

 

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