Editor's Note: This article was originally published in Martin Pring's Market Roundup on Friday, November 1st at 1:36pm ET.

At Pring Turner Capital, the registered investment advisory firm where I serve as investment strategist, our investment approach involves the proactive rotation of client’s assets around the business cycle. That’s because every cycle goes through a chronological sequence of events, just like the calendar year transitions through four seasons. In the business cycle, we call them stages, as turning points in financial markets represent part of this sequential approach. Since there are three markets (bonds, stocks and commodities), each of which has a top and a bottom, an individual cycle experiences six stages (three times two). Just as farmers generally do not plant seeds in winter, we take measures to reduce risk and reduce our equity exposure during bear markets, lowering the overall beta level at the same time. On the other hand, the start of an equity bull market is the time to take on added risk. Our indicators identified a bull market in bonds and stocks earlier in the year; stocks have now tentatively broken to the upside. Using the sequential approach, the next event in the business cycle calendar, so far as financial market turning points are concerned, is a bottom in commodities. That will obviously be important for commodities, but even more-so for resource-based equities such as energy, mines and materials. Arguably most importantly, it will represent a signal that the economy is emerging from its 18-or-so-month slowdown, since commodity prices are very sensitive to global economic conditions. Sector leadership changes are taking place and portfolio performance will depend on identifying the emerging leaders and laggards.

Right now, the major commodity indexes are trading below their 12-month MAs and experiencing a bearish long-term KST. As long as those conditions remain in force, count me as a bear. That said, there are some potentially bullish signs that lead me to believe commodity prices may be in the process of bottoming.

First, Chart 1 shows that the Coppock Curve for the CRB Composite has started to turn up. The solid green arrows show valid signals, while the three dashed ones show failed ones. What I conclude from this is that the Coppock reversal is an encouraging factor, but we really need to see some confirmation from the CRB itself in the form of some trend reversal evidence. In effect, we need something to tip the balance in a bullish way.

Chart 1

The obvious point would be a break above the dashed green 2014-19 downtrend line for the CRB Composite in Chart 2, which has started to happen in an anemic way. The connection between the CRB and the Canadian dollar is also featured in the chart. It also looks as if the currency has broken out. If that does prove to be the case, the implied strength in the dollar will result in a KST buy signal. The arrows show that previous such signals were followed by a very significant commodity rally.

Chart 2

Good luck and good charting,

Martin J. Pring

The views expressed in this article are those of the author and do not necessarily reflect the position or opinion of Pring Turner Capital Group of Walnut Creek or its affiliates.

The Nasdaq AD Line is not keeping pace with the Nasdaq Composite, but this is not bearish for the Nasdaq or the market as a whole. Note that the Nasdaq hit a new high in July and again on November 1st, even though the Nasdaq AD Line has been falling since April. How can this be, what does it tell us and why is it not bearish? Let's address this questions.

First and foremost, note that the Nasdaq has some 3200 listed stocks ($NATOT) and the listing requirements are not as stringent as they are on the NYSE ($NYTOT). This means there are quite a few "questionable" listings on the Nasdaq and this is reflected in the AD Line. All stocks are equal in the eyes of the AD Line because an advance counts as +1 and a decline counts at -1, regardless of market cap or listing quality. This means an advance in AAPL counts the same as an advance in Ruhnn Holdings (RUHN), which is a Chinese listing with a market cap of $454 million. You may want to watch "The China Hustle" before you consider investing in RUHN.  

The chart below shows the Nasdaq, the Nasdaq AD Line and the NYSE AD Line. The Nasdaq AD Line is currently near its 2010 peak and has pretty much moved sideways for 10 years. In contrast, the Nasdaq is up over 200% the last ten years and the NYSE AD Line shows a consistent rise. The Nasdaq Composite is a market cap weighted index where the biggest stocks drive the index. Thus, the index can, and often does, rise on days when declines outpace advances.

The Nasdaq AD Line is not useless though. Because of the relatively easy listing requirements, the AD Line provides a good litmus tests for the risk appetite in the stock market. There are basically two types of advances in the Nasdaq Composite: selective advances and indiscriminate advances.

The market is more selective when the Nasdaq AD Line declines and the Nasdaq rises, which occurred from 2010 to 2012, April 2014 to March 2016 and over the last six months. The market is more indiscriminate (risk on big time) when the AD Line and the Nasdaq are rising together, which occurred in 2013 and from March 2016 to August 2018. These were the glory days! Almost everything went up and everyone looked like a genius.

We are currently in a selective advance because the Advance-Decline Line is not keeping pace. This is not bearish because for the market as a whole and or for the Nasdaq Composite because the Nasdaq price chart sports a bullish continuation pattern and the AD Volume Line is keeping pace. See this extended analysis in a free article on TrendInvestorPro.com.

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Investment Services are tucked within the Financial Sector and, on Friday, Morgan Stanley (MS) was the first past the post to make higher highs. The chart looks good. Probably one of the changes I like the most on it is the purple-shaded area where Morgan Stanley has broken the downtrend. On the PPO, notice how the trend lower in momentum is also breaking for the first time in years. I like that that they are both starting to break together.

Another big player in the space is Goldman Sachs (GS). If Goldman can break above $222, that will be a new 52-week high. While the chart is not showing the same uplift in momentum, that is what I would be watching for on Goldman - or stay with the leader, MS.

I like Piper Jaffray (PJC) as a company. The chart is a little behind Morgan Stanley, but very similar to Goldman Sachs. It wouldn't take much to get going as volume showed up this week, so someone is interested in buying the stock here. It needs to push through $82, but another week like this week and that's a done deal.

I like the space and these charts look set up to run into the fourth quarter here.

I did launch my new website this week; if you are interested in subscribing, you can find the options on the Private Investor tab at gregschnell.com.

Thanks for following my work!

Today saw fresh all-time highs hit on most of the broad market indexes. The weekly Price Momentum Oscillators (PMOs) just generated new Intermediate-Term BUY signals on all four DecisionPoint Scoreboard indexes (SPX, NDX, Dow and OEX). These signals are triggered when the weekly PMO crosses above its signal line on close of business of the last trading day of the week. Yet, despite all of the bullish price activity, the Swenlin Trading Oscillators are in decline - a steep decline, at that.

Typically, when we see these types of negative divergences on these indicators, it happens before a short- (or even intermediate-) term price decline. The negative divergence right now is quite severe; it is very concerning to see the steep declining trends on the STOs paired with steep price rises on new all-time highs.

These conditions are not unique to the SPX. Notice that we are seeing the same phenomena on the other major indexes, including the NYSE, S&P 400 and S&P 600.

Conclusion: I want to believe this rally will continue; certainly the new weekly PMO BUY signals suggest it should. However, when I look at these negative divergences, I have to remain cautious. I'm not adding any new positions just yet and, as you can read in the DecisionPoint Daily Diamonds Reports, I am still 60% cash in my portfolio.

Watch the latest episode of DecisionPoint with Carl & Erin Swenlin LIVE on Fridays 4:30p EST or on the StockCharts TV YouTube channel here!

Technical Analysis is a windsock, not a crystal ball.

Happy Charting! - Erin

erinh@stockcharts.com

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We are now deep into earnings season and, as we can see by the record highs in the NASDAQ and S&P, traders are mostly liking what they are hearing and seeing from companies who are reporting their numbers. We've seen some phenomenal moves in stocks - both to the upside and downside - which have turned into big gains and big losses, particularly for those individuals who chose to hold positions into earnings reports. For example, look at the chart below on Ultra Clean Holdings (UCTT), one of 15 companies our Chief Market Strategist Tom Bowley unveiled to EarningsBeats.com members last week. He felt it could attract a lot of buying interest once it released its earnings last Wednesday, based on its relative strength.

As you can see, within two days of its earnings release, the stock was up by as much as 26%; not too shabby!

Of course, it's impossible for anyone to predict every stock that might go higher or lower when they release their earnings, but it certainly helps to increase the odds of success if you can zero in on those charts showing the companies with the greatest relative strength. In fact, of the 15 companies Tom revealed to our members last week, 10 of the stocks did move higher, with the first 5 released gaining an average of 7% and the next 10 released gaining an average of 3.5% (including the 5 stocks that ultimately moved lower).

I want to point out that holding any stock into its earnings report is a risky proposition; you can never be certain how the market will react to the numbers. For example, even though UCTT gained 26% in 2 days, another stock, MDC, missed expectations - the "worst performer" - that showed promising relative strength into its report. The stock lost 11% the day after its earnings were released, though that was trimmed to roughly 5.5% at its high one day later. Still, if you were holding just that one stock, it might feel painful.

Since Tom got such a positive response to sharing promising stocks to our members, he's decided to conduct a FREE webinar this Monday, November 4 at 4:30pm ET, where he will release a new batch of stocks on companies set to report their earnings throughout the week. This event will be open to both our full service members as well as those who subscribe to our free EarningsBeats Digest newsletter, which is published 3 times a week on Mondays, Wednesdays and Fridays and focuses specifically on earnings-related topics. So, if you are NOT currently an EarningsBeats.com subscriber but want to attend this FREE, timely, educational and potentially profitable webinar, just click on this link to save a seat and we'll send out a webinar link to you prior to the start of the event. It's going to to be an outstanding event and we'd love to have you join us!

Traders are constantly looking for ways to get an edge to profit. Zeroing in on those companies set to report earnings with charts that look solid on a relative basis is something worth examining.

At your service,

John Hopkins

EarningsBeats.com

Better Timing. Better Trades.