Author

admin

Browsing

With just a week before Donald Trump re-enters the White House, Ukraine is bracing for some tough choices in the coming months. Its troops are on the backfoot against Russia along several parts of the long frontline, it is short of experienced soldiers and doubtful that military aid will continue to arrive at anything like the current rate.

In Kyiv, the government waits and watches the signals from Moscow and Washington and reiterates almost daily its desire for a “just peace.” Any thought of recovering the territory seized by Russia is on indefinite hold.

Despite taking heavy losses, Russian forces continue to push forward remorselessly in Donetsk region, one of four that Moscow has illegally annexed and is seeking to fully occupy. Their daily gains are measured in fields and streets as they creep towards the industrial belt of the region.

According to open source analysts WarMapper, Russia is occupying just over 18% of Ukraine – including Crimea and the areas of Donetsk and Luhansk that it had taken before 2022. Russian forces had taken some 150 square miles (400 square kilometers) in December.

Ukrainian units are vastly outnumbered in the east. One commander said this week that small groups of Russian infantry were conducting assaults from multiple directions at once, making it difficult for Ukrainian forces to concentrate fire.

“While the correlation of forces with respect to tactical fires, drones, and long-range strike appears to not be favoring either side to a significant extent, manpower remains the key differentiator between Russia and Ukraine,” says Mick Ryan, who writes the blog Futura Doctrina.

Russian units are now 3 miles (5 kilometers) from the hub of Pokrovsk and have taken control of Kurakhove and part of the town of Toretsk, according to geolocated video.

The commander of one Ukrainian battalion near Pokrovsk said Russian forces there had intensified shelling and glide-bomb strikes.

Military spokesman Viktor Tregubov told Ukrainian television that fighting continued around Kurakhove and troops were holding out at the power plant, “so we cannot say that Russian troops have taken the town completely. But, of course, most of the town has been reduced to rubble.”

The Russian “model of simple attrition is unchanged. The enemy inevitably wears down before the Russian steamroller wears down,” as analysts Keith D. Dickson and Yurij Holowinsky put it.

The goal for Kyiv is to defend what it still holds. Ukrainian Defense Minister Rustem Umerov said at a meeting with allies – the Ukraine Defense Contact Group – in Germany last week that Ukraine’s priorities this year would be stabilizing the front line and strengthening its defense capabilities.

Contact Group members have committed more than $126 billion in security assistance to Ukraine over the past three years. Partners pledged further aid in Germany this week, including 30,000 drones over the next year and more air defense systems.

US Defense Secretary Lloyd Austin said Friday that the coalition “must continue to stand foursquare with Ukraine — and to strengthen Ukraine’s hand for the negotiations that will someday bring Putin’s monstrous war to a close.”

It’s the “someday” that is the burning question. Austin said of the incoming Trump administration: “I won’t speculate on which direction they would go in.”

German Defense Minister Boris Pistorius even suggested the incoming US administration might discontinue the Contact Group meetings, saying that if so “it will need to continue in another form.”

Negotiations on ending the conflict seem unlikely at present.

“The reason is simple. Moscow is not ready for any compromises. It plays for victory, not a draw,” says Arkady Moshes, writing in 19FortyFive.

“Success can be achieved on the battlefield or at the negotiating table, but it must be unquestionable. In Putin’s view, Ukraine needs to be defeated, and the West has to admit Ukraine’s – and its own – defeat publicly,” Moshes adds.

Potential peace talks

Trump’s Ukraine envoy, former US general Keith Kellogg, said last week that he hoped to be able to come up with a solid and sustainable solution to the conflict within 100 days. Trump himself had said on the campaign trail that he would get the fighting stopped within 24 hours of taking office, but when asked more recently how soon he could end the conflict said: “I hope to have six months. No, I would think, I hope long before six months.”

How the Kremlin’s unchanged goals square with the incoming Trump administration’s plans is unclear.

Ryan, the Futura Doctrina blogger, believes Putin “is likely to ensure that no matter what, the 100-day objective fails. He has no compelling reason to come to the table right now, thinking he has the momentum in this war.”

Ukrainian President Volodymyr Zelensky has given little indication of the parameters that would be acceptable to Ukraine. He said Friday: “We will undoubtedly stand firm and achieve a lasting peace for our people and our country.”

His priority is to make Ukraine’s case to Trump directly. Foreign Ministry spokesman Heorhii Tykhyi on the same day said Ukraine was preparing for talks at “the highest levels.”

“Our stance is clear: everyone in Ukraine wants to end the war on terms that are fair to Ukraine.”

At the heart of any settlement for Kyiv would be short-term guarantees that a ceasefire could be monitored and longer-term guarantees for Ukraine that would deter Putin from using a ceasefire to re-group and renew hostilities.

That must include “significant investment in airpower, ballistic missile defense, a fully equipped, NATO standard heavy division,” say Dickson and Holowinsky. Meanwhile, they add: “Zelensky must take a strategic long view understanding that the lost territories in reality represent a gangrenous limb that must be cut off to save the healthy body.”

At an absolute minimum Moscow will demand that Ukraine cedes the territory it has lost and abandon its drive to join NATO, which Trump believes was a provocation to Russia.

Instead, Kyiv would have to negotiate other guarantees, as Zelensky said in an interview on Italian television this past week, that would “prevent Russia from returning with aggression.”

But the Kremlin is likely to demand much more.

Kyiv is “expected to accept extensive limitations on the size of its armed forces and on the kinds of weapons systems it is allowed to possess. These proposals are not a recipe for a sustainable settlement,” according to the Atlantic Council’s Serhii Kuzan.

Moscow has shown no sign of abandoning its maximalist demand for the totality of all four regions it claims to have annexed. “This would mean handing over large amounts of unoccupied Ukrainian territory including the city of Zaporizhzhia with a population of around three quarters of a million people,” notes Kuzan.

For now, both the White House and many commentators see no desire by either side to begin talks. “There is no expectation now that either side is ready for negotiations,” US National Security spokesman John Kirby said in recent days.

While both the Kremlin and Trump have expressed readiness for a summit, premature efforts to advance negotiations on the Ukraine conflict could backfire, according to Russian commentator Giorgy Bovt.

“If the meeting is held prematurely, when the conditions for peace are not yet ripe, it will do more harm than good. It could lead to an even greater escalation. At the same time, both warring sides are still betting on the continuation of hostilities, not considering their forces exhausted,” he wrote on Telegram.

This post appeared first on cnn.com

South Korea looks set for a dramatic political showdown this week as impeachment proceedings kick off against suspended President Yoon Suk Yeol, who remains holed up in his fortified residence evading arrest for a separate criminal investigation.

The embattled leader’s short-lived declaration of martial law in December triggered widespread public outrage and protests, and plunged the country into its biggest political crisis in decades.

For weeks, Yoon has barricaded himself in his hillside compound in the capital Seoul, surrounded by his Presidential Security Service (PSS) team, while outside the gates hundreds of his die-hard conservative supporters have vowed to protect him.

Yoon has indicated through his lawyer that he will not attend the first formal hearing in his impeachment trial on Tuesday, citing safety concerns relating to efforts to detain him for questioning, according to South Korea’s Yonhap News Agency.

The former prosecutor-turned-politician was stripped of his presidential powers last month after his declaration of martial law, and is wanted for questioning in multiple investigations, including allegations he led an insurrection – a crime punishable by life imprisonment or even the death penalty.

Yoon maintains he acted legitimately in declaring martial law and considers the warrant “illegal and invalid.” He has told his supporters that he will “fight until the end.”

Supporters are concerned Yoon will be detained if he leaves his residence to attend the impeachment hearings. Rival protesters have also braved cold conditions to call for his arrest.

Corruption investigators are determined to execute the arrest warrant against Yoon – the first time such action has been taken against a sitting president.

Tensions exploded earlier this month when investigators attempted to detain Yoon at his residence, resulting in a dramatic hours-long standoff between dozens of police and a “human wall” of around 200 soldiers and members of the presidential security detail.

The arrest attempt was later called off with investigators citing the safety of the people on the ground, though the arrest warrant was extended.

Yoon has also filed legal complaints against those who tried to arrest him including the head of the state anti-corruption agency.

Political fate in hands of top court

Yoon swiftly rescinded his late-night martial law declaration on December 3, after lawmakers pushed past security forces blocking their way into parliament and voted down the decree.

The National Assembly then voted to impeach Yoon after several members of his own ruling party turned on him. Parliament also voted to impeach the country’s prime minister and acting president Han Duck-soo. The finance minister, Choi Sang-mok, is now acting president.

The country’s Constitutional Court has the ultimate say over Yoon and Han’s political fate, and will determine whether they will be formally removed from their positions or reinstated.

Oral arguments for Yoon’s trial start Tuesday, with five sessions scheduled until February 4. If Yoon fails to appear on Tuesday, a second hearing will proceed on Thursday, with or without him in attendance.

The court has up to 180 days to decide whether to uphold or reject the impeachment vote, and vowed to make the case a “top priority.”

Complicating the court’s deliberations is that the nine-member court currently only has eight justices, due to a delay in filling vacancies left by retired justices.

Acting President Choi recently filled two out of three vacancies on the court appointed by the parliament, and the remaining position will be reviewed by the court later this month.

Under South Korea’s constitution, at least six justices must approve an impeachment for it to be upheld.

If the Constitutional Court upholds Yoon’s impeachment, he would become the shortest-serving president in South Korea’s democratic history. The country must then hold new presidential elections within 60 days.

Criminal investigations

While Yoon has been suspended from exercising his powers, he has not been officially removed from office. That means he still has presidential immunity from most criminal charges – except for insurrection or treason.

South Korea’s police, military, and anti-corruption body have formed a joint investigation team to examine the charges of insurrection and abuse of power against Yoon. Meanwhile, prosecutors are investigating key figures involved in the martial law operation, including commanders and the defense minister.

Yoon has refused to answer three summonses in recent weeks asking for his cooperation, according to the Corruption Investigation Office for High-ranking Officials (CIO.)

Meanwhile, corruption investigators appear to be pushing ahead with their second attempt to arrest the suspended president.

On Sunday, the CIO said it had asked the Defense Ministry and presidential security team for cooperation with enforcing the arrest and search warrant against Yoon.

Much of the spotlight has fallen on the presidential security team, the PSS, which has been accused of acting like Yoon’s personal bodyguards. Previously, the CIO said “it is virtually impossible to execute a warrant” at Yoon’s residence while security there remains in place.

The CIO on Sunday asked the country’s defense ministry to ensure soldiers dispatched to the security team protecting Yoon do not disrupt efforts to arrest him.

It also said the security team should avoid an “illegal act” such as mobilizing security personnel for jobs outside of their duties, and warned that disruption could result in criminal punishment.

There is also some confusion as to which agency has jurisdiction to carry out the arrest warrant. Yoon’s lawyers on Monday accused the police of being complicit in an “illegal arrest and abuse of power,” and that “any evidence obtained through such actions would be deemed illegal.”

Yoon’s lawyers argue the warrant should be executed by the CIO, not the police. South Korean law, however, states that police are authorized to assist other authorities in carrying out public duties.

On Friday, the head of Yoon’s PSS, Park Chong-jun, submitted his resignation before undergoing police questioning over his role in blocking Yoon’s arrest, according to the security team.

Once the warrant has been enforced, it starts a 48-hour countdown for investigators to hold and question Yoon. The CIO would need to apply for another warrant within that period to formally arrest him.

This post appeared first on cnn.com

Four years after exiting bankruptcy, Chuck E. Cheese is making a comeback, thanks to a dramatic makeover to introduce its games and pizza to a new generation.

In June 2020, just as some states began lifting their pandemic lockdowns, Chuck E. Cheese’s parent company CEC Entertainment filed for Chapter 11 bankruptcy protection. It emerged from bankruptcy months later with new leadership and freed from about $705 million in debt.

Even when Covid subsided, the company faced another existential threat: figuring out how to entertain children — and their paying parents — in the age of iPads and smartphones. The company has spent more than $300 million in recent years tackling that challenge — and the investment has started to pay off.

CEC Entertainment, which also includes Pasqually’s Pizza & Wings and Peter Piper Pizza, has seen eight straight months of same-store sales growth and is no longer in debt, according to CEO Dave McKillips. The company isn’t publicly traded, but it discloses its financial results to its bond investors.

CEC Entertainment’s annual revenue grew from $912 million in 2019 to roughly $1.2 billion in 2023, according to Reuters. And that’s with fewer open Chuck E. Cheese locations. The chain has 470 U.S. locations currently, down from 537 in 2019.

Sustaining the growth won’t be easy. Like all restaurants, the chain has to win over consumers who are eating out less often as costs rise. Chuck E. Cheese also has to draw the attention of children and parents in a fragmented media market.

Since Atari founder Nolan Bushnell opened its first location in 1977 in San Jose, Chuck E. Cheese has grown to become a staple of many childhoods, known for its pizza, birthday parties and animatronic mouse mascot and band.

After exiting bankruptcy, Chuck E. Cheese and its stores underwent a makeover, giving today’s locations a very different look. Gone are the animatronics, SkyTube tunnels and physical tickets of yore. Instead, trampolines, a mobile app and floor-to-ceiling JumboTrons have replaced them.

Those changes came from McKillips, a former Six Flags executive. He joined the company in January 2020, just months before lockdowns would temporarily shutter all of its locations. By April 2021, the company raised $650 million in bonds, which it’s been spending on its restaurants.

“The company was capital-starved for many, many years. It had not been remodeled. It had not been touched,” he said.

Apollo Global Management took Chuck E. Cheese private in 2014. Five years later, CEC Entertainment tried to go public through a merger with a special purpose acquisition company. But the deal was scrapped without explanation.

The new cash prompted a frank look at the Chuck E. Cheese model — including its iconic animatronic band, featuring Charles Entertainment Cheese and his friends.

“We pulled out the animatronics. It was a hot debate for many legacy bands, but kids were consuming entertainment in such a different way, you know, growing up with screens and ever-changing bite-sized entertainment,” McKillips said.

The chain also redid its menu, upgrading to scratch-made pizzas. Kidz Bop became an official music partner. Other kid-friendly brands, like Paw Patrol, Marvel and Nickelodeon, became partners for its games.

And then came the trampolines.

“We found one glaring opportunity for us … active play,” McKillips said. He added that growth in the family entertainment category is largely coming from activity-based businesses, like trampoline parks and rock-climbing walls.

The company first tested the trampolines in Brooklyn and then in Miami, St. Louis and Orlando. As of December, 450 Chuck E. Cheese locations now have kid-sized trampolines. And unlike the SkyTubes or ball pits of the past, customers have to pay extra to use trampolines. (The ball pits disappeared from Chuck E. Cheese locations in 2011, while SkyTubes lasted roughly another decade.)

After the company spent $230 million to remodel Chuck E. Cheese locations, McKillips now says that process is finished.

“We needed to fix the product. The product is fixed,” he said.

Reintroducing customers to the brand — especially adults who only know the Chuck E. Cheese of their own childhoods — has been another focus.

“You come in around three years old, you leave around eight or nine and you don’t come back for 15 years. We had to go and speak to a whole new generation of kids, and we were off-air during Covid. We had to build all that,” McKillips said.

For example, Chuck E. Cheese’s birthday business, one of the company’s best marketing tools, struggled in the wake of the pandemic. Today, it’s back at pre-pandemic levels.

And as Chuck E. Cheese started seeing the pullback in consumer spending that hit many restaurants last year, from McDonald’s to Outback Steakhouse, the chain had to come up with a way to appeal to the value-oriented customer.

Over the summer, Chuck E. Cheese launched a two-month tiered subscription program that offered unlimited visits and discounts on food, drinks and games. The membership encouraged families to visit more often than the typical two or three annual visits. The subscription starts at $7.99 a month, with additional tiers at $11.99 and $29.99 that promise steeper discounts and more games played.

“In 2023, we sold 79,000 passes. This year, we sold close to 400,000 passes during the same time period,” McKillips said, referring to 2024. “This shows that the value consumer will seek and will spend if they’re getting great return on their spend.”

In the fall, the company followed up on the success of the passes with a 12-month membership and has already sold more than 100,000 of them.

McKillips’ biggest dreams for the chain and its mascots lie outside of the four walls of its restaurants.

“There’s another cute mouse down in Orlando that does this pretty well, so I see us in the same way, but we’re just getting started right now,” McKillips said.

In addition to 30 licensing deals for everything from frozen pizzas to apparel, Chuck E. Cheese is also exploring different entertainment partnerships that would make its mouse mascot a starring character, according to McKillips.

And that’s not all. The company has looked into the possibility of a game show. It has a prolific YouTube channel, with videos focused on its characters, not its pizza or games.

Plus, Chuck E. Cheese himself has six albums available on streaming platforms, and his band plays live, choreographed concerts.

“My dream would be to have a feature movie,” McKillips said.

This post appeared first on NBC NEWS

McDonald’s will shutter three locations of its drinks-focused spinoff brand, CosMc’s.

To test the concept, the fast-food giant opened its first CosMc’s location more than a year ago in the Chicago suburb of Bolingbrook, followed by six more in Texas. McDonald’s has converted larger namesake restaurants into CosMc’s, in addition to building smaller prototype locations.

The smaller stores work better for the test, the company said Thursday. As a result, McDonald’s will close three of its larger format CosMc’s locations and open two more small Texas restaurants. The company didn’t disclose the locations for either the openings or closures, although CosMc’s website says a store is coming soon to Allen, Texas.

McDonald’s also shared other early learnings from the pilot on Thursday. Savory hash browns are the top-selling food — at any time of day — followed by McPops, the chain’s mini filled doughnuts. Best-selling drinks include the Island Pick Me Up Punch, Churro Cold Brew Frappe and the Sour Energy Burst.

The CosMc’s test will continue for the “foreseeable future,” according to the company.

McDonald’s created CosMc’s as its entry point into the growing “afternoon beverage pick-me-up occasion.”

While CosMc’s menu features some McDonald’s classics, it also offers a host of new items playing off other beverage and snacking trends, like its iced turmeric spiced lattes, tropical spiceade and pretzel bites. Starbucks, Dutch Bros. and bubble tea chain Kung Fu Tea have found success with younger consumers by offering customizable cold drinks.

The name for the new brand comes from CosMc, a McDonaldland mascot that appeared in advertisements in the late 1980s and early 1990s. CosMc is an alien from outer space who craves McDonald’s food.

While it’s unclear just how much McDonald’s plans to grow CosMc’s, it’s still a miniscule part of the burger giant’s overall U.S. footprint. The company has more than 13,500 U.S. restaurants. Still, McDonald’s is hoping to learn more about its CosMc’s customers; last year, it rolled out a loyalty program specific to CosMc’s.

This post appeared first on NBC NEWS

The 10-Year Treasury Yield has gone up a full percentage point, from a low of 3.6% in September 2024 to a level of 4.6% this week. So what does this rapid rise in interest rates mean for your portfolio? Let’s look at the shape of the yield curve by comparing multiple maturities, review how recent moves on the yield curve relate to previous recessionary periods, and analyze the most important charts to gauge a potential impact.

Higher Rates Mean Bad News for Borrowers

The chart of the 10-Year Treasury Yield ($TNX) has effectively been in a wide trading range since mid-2023. The 10-Year has fluctuated between lows around 3.6-3.8% and highs in the 4.7-5.0% range. As we’re now seeing a 4.7% yield on the 10-Year, we could be setting up for a retest of the 2023 high around 5.0%.

Higher rates can definitely put pressure on industry groups like homebuilders, because this move in the 10-Year means new home buyers can expect much higher mortgage payments. In terms of broad market implications, the shape of the yield curve could have even more significance in the coming months.

The bottom two panels show the spread between the 10-year point on the yield curve compared to two other maturities: the 3-month and 2-year points. In recent years, we have experienced an inverted yield curve, where the short-term yields are higher than long-term yields.  But with the Fed lowering short-term rates, and long-term rates turning back higher, we once again have a normal shaped yield curve.

The Yield Curve Is No Longer Inverted — So What?

Investors love to debate whether a recession is likely, because that confirms that the economy is no longer growing as it usually does. But given the lag in economic data, investors can actually look at the shape of the yield curve to determine if conditions are present that suggest a recessionary period is coming.

Here, we’re taking the 2-year vs. 10-year points on the yield curve and plotting that spread back to 1985. I’ve placed a red vertical line where the yield curve turned back to a normal shape after being inverted, and I’ve also included orange-shaded areas which represent recessionary periods.

You may notice that over the last 40 years, every time we’ve had an inverted yield curve where the spread then turned back positive, we’ve seen a recession soon afterwards. You may also notice that the performance of the S&P 500 (bottom panel) confirms that the yield curve moving back to a normal shape usually happens just before a bear market begins.

While the long-term implications of a normal shaped yield curve are bullish, as they imply optimism about future economic growth, the reality is that the short-term environment for stocks is usually fairly unstable.

Market Trend Is What Matters Most

So what do we do given this bearish headwind for stocks going into 2025? I would argue that now, more than ever, it pays to follow the trend. As long as the medium-term and long-term trends in the S&P 500 remain constructive, then I’ll want to follow that uptrend until proven otherwise.

My Market Trend Model is designed to track the trend in the S&P 500 on three time frames: short-term (a couple days to a couple weeks), medium-term (a couple months), and long-term (over a year).  As of mid-December, the short-term model turned bearish for the S&P 500. The medium-term and long-term models remain bullish through last Friday.

I consider the medium-term trend to be the most important, as it serves as my main “risk on/risk off” measure. When the model is bullish, that tells me to look for long ideas and take on additional risk. When the model is bearish, that tells me to focus more on capital preservation than capital growth.

The short-term model turned negative five times in 2024, but the medium-term model remained bullish in all five cases. This helped me understand that those were brief pullbacks within a longer uptrend phase. If and when the medium-term model turns negative, you’ll hear me take on a much more cautious tone on my market recap show, as I’ll be looking for opportunities to take risk off the table.

RR#6,

Dave

P.S. Ready to upgrade your investment process? Check out my free behavioral investing course!


David Keller, CMT

President and Chief Strategist

Sierra Alpha Research LLC


Disclaimer: This blog is for educational purposes only and should not be construed as financial advice. The ideas and strategies should never be used without first assessing your own personal and financial situation, or without consulting a financial professional.

The author does not have a position in mentioned securities at the time of publication. Any opinions expressed herein are solely those of the author and do not in any way represent the views or opinions of any other person or entity.

S&P 500 earnings are in for 2024 Q3, and here is our valuation analysis.

The following chart shows the normal value range of the S&P 500 Index, indicating where the S&P 500 would have to be in order to have an overvalued P/E of 20 (red line), a fairly valued P/E of 15 (blue line), or an undervalued P/E of 10 (green line). Annotations on the right side of the chart show where the range is projected to be based upon earnings estimates through 2025 Q3.



Historically, price has usually remained below the top of the normal value range (red line); however, since about 1998, it has not been uncommon for price to exceed normal overvalue levels, sometimes by a lot. The market has been mostly overvalued since 1992, and it has not been undervalued since 1984. We could say that this is the “new normal,” except that it isn’t normal by GAAP (Generally Accepted Accounting Principles) standards.

We use GAAP earnings as the basis for our analysis. The table below shows earnings projections through September 2025. Keep in mind that the P/E estimates are calculated based upon the S&P 500 close as of December 31, 2024. They will change daily depending on where the market goes from here. It is notable that the P/E remains outside the normal range.

The following table shows where the bands are projected be, based upon earnings estimates through 2025 Q3.

This DecisionPoint chart keeps track of S&P 500 fundamentals, P/E and yield, and it is updated daily — not that you need to watch it that closely, but it is up-to-date when you need it.

CONCLUSION: The market is still very overvalued and the P/E is still well above the normal range. Earnings have ticked up and are projected to trend higher for the next four quarters. Being overvalued doesn’t require an immediate decline to bring valuation back within the normal range, but high valuation applies negative pressure to the market environment.


Watch the latest episode of DecisionPoint on StockCharts TV’s YouTube channel here!


(c) Copyright 2025 DecisionPoint.com


Technical Analysis is a windsock, not a crystal ball.


Disclaimer: This blog is for educational purposes only and should not be construed as financial advice. The ideas and strategies should never be used without first assessing your own personal and financial situation, or without consulting a financial professional. Any opinions expressed herein are solely those of the author, and do not in any way represent the views or opinions of any other person or entity.

DecisionPoint is not a registered investment advisor. Investment and trading decisions are solely your responsibility. DecisionPoint newsletters, blogs or website materials should NOT be interpreted as a recommendation or solicitation to buy or sell any security or to take any specific action.


Helpful DecisionPoint Links:

DecisionPoint Alert Chart List

DecisionPoint Golden Cross/Silver Cross Index Chart List

DecisionPoint Sector Chart List

DecisionPoint Chart Gallery

Trend Models

Price Momentum Oscillator (PMO)

On Balance Volume

Swenlin Trading Oscillators (STO-B and STO-V)

ITBM and ITVM

SCTR Ranking

Bear Market Rules

S&P 5850 has been the most important “line in the sand” for stocks since the pullback from the 6000 level in November 2024. With the SPX closing below that 5850 level on Friday, we see further corrective pressures with the 200-day moving average as a reasonable downside target. Today, we’ll break down a series of projection techniques that have helped us hone in on this potential area of support.

The Break of 5850 Completes a Head-and-Shoulders Top

One of the most widely-followed patterns in technical analysis, the fabled head-and-shoulders topping pattern, is formed by a major high surrounded by lower highs on each side. After the S&P 500 established a lower high in December, we immediately started looking for confirmation of this bearish pattern.

To confirm a head-and-shoulders top, and initiate downside targets on a chart, the price needs to break through the “neckline” formed by the swing lows between the head and two shoulders. While price pattern purists may advocate for a downward-sloping trendline to capture the intraday lows of the neckline, I’ve been focused on the price level of SPX 5850. As long as the S&P remained above that level of support, then the market could still be considered in a healthy bullish phase. But a close below the 5850 level on Friday tells me that this corrective move may just be getting started.

Let’s consider some ways to identify a potential downside objective, first using the pattern itself.

Calculating a Minimum Downside Objective

As delineated in Edwards and Magee’s classic book on price patterns, you can use the height of the head-and-shoulders pattern to identify an initial downside objective. Basically, take the distance from the top of the head to the neckline, and then subtract that value from the neckline at the breaking point.

Based on my measurements on the S&P 500 chart, this process yields a downside target of right around 5600. It’s worth noting that Edwards and Magee considered this a “minimum downside objective”, implying that there certainly could be further deterioration after that point has been reached.

Now let’s consider some other technical analysis tools that could help us to validate this potential downside target.

A Confluence of Support Confirms Our Measurement

If we create a Fibonacci framework using the August 2024 low and the December 2024 high, we can see a 38.2% retracement around 5725, which lines up fairly well with the swing low from late October. Perhaps this could serve as a short-term support level during the next downward phase?

As I review the chart, however, I’m struck by the fact that the 50% retracement lines up almost perfectly with our price pattern objective. Many early technical analysts, including the infamous W.D. Gann, favored the 50% retracement level as the most meaningful to watch.

You may also notice that the 200-day moving average is gently sloping higher, rapidly approaching our “confluence of support” around 5600. Given the agreement between multiple technical indicators on this price point, we consider it the most likely downside target given this week’s breakdown.

I would also point that while I feel that identifying price targets can be a helpful exercise, as it gives you a framework with which to evaluate further price action, the most important signals usually come from the price itself. How the S&P 500 would move between current levels and 5600 may tell us a great deal about the likelihood of finding support versus a more bearish scenario in the coming weeks.

RR#6,

Dave

P.S. Ready to upgrade your investment process? Check out my free behavioral investing course!


David Keller, CMT

President and Chief Strategist

Sierra Alpha Research LLC


Disclaimer: This blog is for educational purposes only and should not be construed as financial advice. The ideas and strategies should never be used without first assessing your own personal and financial situation, or without consulting a financial professional.

The author does not have a position in mentioned securities at the time of publication. Any opinions expressed herein are solely those of the author and do not in any way represent the views or opinions of any other person or entity.

The markets extended their decline over the past five sessions and ended the week on a negative note. While the week started on a bearish note, the Nifty violated a few key levels on higher and lower time frame charts. Along with the weak undercurrent, the trading range widened again as the Nifty moved in a 745-point range. The volatility spiked up, and India Vix surged 10.16% to 14.91 on a weekly basis. Following a thoroughly bearish undertone, the headline index closed with a net weekly loss of 573.25 points (-2.39%).

The week that has gone by has remained important from a technical perspective. The Nifty started the week by violating the 200-DMA placed at 23940 and has closed significantly below this crucial level. On the weekly charts, the Nifty has breached another critical level of 50-week MA, currently at 23659. In the process, the Nifty has dragged its resistance points lower; any technical rebound will find resistance at this point. It is important to note that the 50-week MA has been violated after three retests, and the breach of this level will have bearish considerations for the markets. Unless the Nifty crosses above this level again, it will stay vulnerable to a prolonged phase of weakness.

Monday is likely to see the Nifty beginning on a soft note; the levels of 23650 and 23880 are likely to act as resistance points. The supports come in at 23300 and 23050 levels.

The weekly RSI is 43.53; it has marked a new 14-period low, which is bearish. The RSI also shows a bearish divergence against the price. The weekly MACD is bearish and stays below the signal line. The widening Histogram hints at accelerated momentum on the downside.

The pattern analysis of the weekly chart shows Nifty completing a painful process of mean reversion by finding support at the 50-week MA in November. Since then, it has retested this level three times and has breached it by closing below this crucial level. The 50-week MA is placed at 23659; so long as the Index stays below this point, it remains vulnerable to an extended period of weakness in the near term.

Over the past week, the technical developments have created a strong resistance zone for the Nifty between 23650-24000 level. So long as the Index stays below this zone, it will likely trade with a weak undercurrent. Given the current technical setup, cutting down on leveraged exposures and keeping them at modest levels is extremely important. While initiating fresh exposures, staying in the stocks with strong or improving Relative Strength will be necessary as that would provide resilience to the investments. While staying highly selective, a highly cautious outlook is recommended for the coming week.


Sector Analysis for the coming week

In our look at Relative Rotation Graphs®, we compared various sectors against CNX500 (NIFTY 500 Index), which represents over 95% of the free float market cap of all the stocks listed.

Relative Rotation Graphs (RRG) show that Nifty Bank, Services Sector, Nifty Financial Services, and Nifty IT indices are inside the leading quadrant. Barring the Nifty IT index, all others are seen giving up on their relative momentum. The Nifty Midcap 100 has rolled inside the leading quadrant and may relatively outperform the broader markets.

The Nifty Pharma Index stays inside the weakening quadrant.

The Nifty Metal Index has rolled inside the lagging quadrant. Along with the Media, PSE, Energy, and Commodities, it is likely to underperform the broader markets relatively. The Infrastructure, Auto, FMCG, and Consumption Indices are in the lagging quadrant but are improving their relative momentum against the broader markets.

The Nifty Realty index is well placed inside the improving quadrant. The PSU Bank Index is also inside the improving quadrant, but it is seen paring its relative momentum against the broader markets.


Important Note: RRG charts show the relative strength and momentum of a group of stocks. In the above Chart, they show relative performance against NIFTY500 Index (Broader Markets) and should not be used directly as buy or sell signals.  


Milan Vaishnav, CMT, MSTA

Consulting Technical Analyst

www.EquityResearch.asia | www.ChartWizard.ae

The stock market is in pullback mode with the S&P 500 EW ETF down 5.15% over the past month and down 1% year-to-date. This makes it a good time to monitor relative performance and create a relative strength watch list. Stocks and ETFs holding up best during pullbacks often lead when the market regains its footing. Today’s report will show a starter list and analyze the chart for an AI Robotics ETF.

The table below shows 1-month and year-to-date performance for a selection of industry group ETFs. With the S&P 500 EW ETF down on both timeframes, ETFs with gains are holding up well and ETFs with smaller losses show relative strength (less weakness). Five ETFs are up on both timeframes and holding up well in the face of broad market weakness.

Note that this list is simply the first cut. I would make a further cut by insuring that the ETF is in a long-term uptrend. For example, the Clean Energy ETF (PBW) is below its 200-day SMA and would not make the cut. The Medical Devices ETF (IHI) and Robotics AI ETF (ARTY) are in long-term uptrends, and make the cut. Let’s look at ARTY. A recent Chart Trader report/video highlighted the recent breakout in IHI.

The chart below shows ARTY hitting a new high in early December and price above the rising 200-day SMA. ARTY is in a long-term uptrend. There was a big breakout in mid October, an oversold reading in late October and then a 17% run to new highs. ARTY then formed a pennant and broke out with a surge earlier this week, only to fall back the last three days. Overall, I think the pennant breakout is still bullish and this is a throwback to the breakout zone. A break below the pennant lows would negate this pattern and argue for a deeper correction.

Chart Link

The middle window shows the price-relative (ARTY/RSP Ratio) breaking above its 200-day SMA in late November. ARTY shows relative strength and the price-relative hit a new high in early January. The lower window shows %B, which I use to identify oversold conditions within an uptrend. A dip below 0 means the close is below the lower Bollinger Band. This means there was a pullback within the uptrend, which is an opportunity.

I will be following ARTY and other leading ETFs closely in the Chart Trader reports and videos. Our reports warned of the breakout in the 10-yr Treasury Yield in before Christmas (HERE) and we also showed how to distinguish between a robust bounce and a dead cat bounce (HERE).

Click here to take Chart Trader trial and get immediate access.

//////////////////////////////////////////////////

To understand what makes the Dow Jones tick, you have to first understand one of the key differences between the Dow Jones and the S&P 500 indices. There are a few, but none more critical than the following:

Index Weighting

The S&P 500 is market-cap weighted, meaning that companies with the highest market capitalization have a stronger hand in moving the S&P 500 index value. Currently, these are the companies that play the largest role in moving this benchmark index, including their weighting:

  • AAPL – 7.58%
  • NVDA – 6.59%
  • MSFT – 6.27%
  • AMZN – 4.11%
  • GOOGL – 4.02%

These are 5 of the Mag 7 stocks and they carry 28.57% of the entire weighting of the benchmark S&P 500 index. It’s easy to see how the S&P 500 can be swayed easily by the performance of just these 5 stocks.

Well, guess what? We need a cute lil name for the Top 5 price-weighted stocks in the Dow Jones, because their collective weight is 32.43% of the entire Dow Jones Industrial Average. The Dow Jones, by contrast, is a price-weighted index. The highest priced stock carries the most weight, while the lowest priced stock carries the least weight. Market capitalization plays NO role in the weighting. Want to know who the “Fabulous 5” are? Here ya go:

  • GS – 8.25%
  • UNH – 7.29%
  • MSFT – 6.07%
  • HD – 5.60%
  • CAT – 5.22%

All 5 of these stocks now trade beneath their declining 20-day EMAs and only one (MSFT) still shows a 20-day EMA above its 50-day SMA. In other words, 4 of the 5 have experienced “death crosses”, which are bearish technical developments.

Looking at the RRG

Here’s another way to look at the change that’s taken place within the Fabulous 5, just over the past 5-6 weeks. But before we do that, let’s first pull up the chart of the entire Dow Jones:

Heading into December, there was a solid uptrend on the Dow’s absolute chart and mostly sideways relative action after a very strong relative performance in July. Since early December, even late November, everything has headed south on the Dow Jones.

We can now take a look at an RRG as of early December to show how the Fab 5 were leading at that time:

This shows how each of the Fab 5 were performing relative to the benchmark S&P 500. 4 of the 5 were situated on the right side of the chart in the leading or weakening quadrants. This means they were relative leaders. Now, just a handful of weeks later, check out how these 5 stand relative to the S&P 500:

All 5 are currently residing on the left side of this chart, indicative of relative weakness, not strength. Momentum is building in the majority of the companies, so if that continues, we could begin to see relative outperformance of the Dow Jones again. For now, though, caution is the word.

One last thing. I’ve updated my Dow Jones Components ChartList and have numbered them 1 to 30, in price order, which reflects the highest-weighted to lowest-weighted stocks in the Dow Jones. I’m sorting this ChartList based on 1-month performances (SCTR scores are also reflected):

Of the 7 worst 1-month performers, 5 of them are in the Top 7 in terms of market weight. In other words, many of the worst recent performers in the Dow Jones also happen to be among the most heavily-weighted. Also, it’s important to note that many of the top-weighted Dow Jones stocks are also among the worst relative performers, as measured by SCTR scores (StockCharts Technical Rank, a form of relative strength). This combination is what has been crushing the Dow Jones. Until this changes, the Dow Jones will remain under relative pressure vs. the other major indices.

My Favorite Dow Jones Component

There are a number of ways to rank the potential of the various Dow Jones component stocks for 2025 and, obviously, it depends on your criteria. But I’ll be providing my FAVORITE Dow Jones stock (and why) for 2025 in Monday’s EB Digest, our 100% free newsletter. If you’re not already an EB Digest subscriber, and you’d like to check out my pick for 2025, please CLICK HERE and enter your name and email address. Again, it’s completely free and there’s no credit card required!

Happy trading!

Tom