Will Monday 12-17-2018 be a Split Decision? Markets Weekend Update 12-15-2018

Markets Weekend Update 12-15-2018

Update 12-17-2018

I should have trusted my original numbers and not attempted to overthink this. My original numbers, before trying to narrow them down - at least on the basis of other support levels - has indicated the following:

  • DJIA down
  • NASDAQ up (approximately 1.2%)
  • SP500 down

Had I not attempted to "add" anything to my original calculations the result would have been substantially better - two out of three correct directionally rather than only one.

Executive Summary

The DJIA and NASDAQ have a higher probability of closing higher on Monday 12-17-2018 vs. Friday's close while the SP500 has a higher probability of a lower close Monday 12-17-2018 vs. this past Friday.

Are the DJIA, SP500 and NASDAQ Setting up for a Split Decision 12-17-2018?

After Friday's market close, it appears possible that we could be setting up for a split decision on the close this coming Monday 12-17-2018? The DJIA, SP500 and NASDAQ are in different stages of their cycles and this opens up the possibility for the NASDAQ to rise on Monday while the DJIA and SP500. To see why more clearly, it's necessary to examine the longer term levels for each market.

DJIA

  1. 12,288 to 14,336
  2. 14,336 to 16,384
  3. 16,384 to 18,432
  4. 18,432 to 20,480
  5. 20,4380 to 22,528
  6. 22,528 to 24,576
  7. 24,576 to 26,624
  8. 26,624 to 28,672
  9. 28,672 to 30,720

NASDAQ

  1. 6,758.4 to 6,963.2
  2. 6,963.2 to 7,168
  3. 7,168 to 7,372.8
  4. 7,327.8 to 7,577.6
  5. 7,577.6 to 7,782.4
  6. 7,782.4 to 7,987.2
  7. 7,987.2 to 8,192
  8. 8,192 to 8,396.8
  9. 8,396.8 to 8,601.6

SP500

  1. 1,228.8 to 1,433.6
  2. 1,433.6 to 1,638.4
  3. 1,638.4 to 1,843.2
  4. 1,843.2 to 2,048
  5. 2,048 to 2,252.8
  6. 2,252.8 to 2,457.6
  7. 2,457.6 to 2,662.4
  8. 2,662.4 to 2,867.2
  9. 2,867.2 to 3,072

Friday's Closes

DJIA 24,100.51

NASDAQ 6,910.66

SP500 2,599.92

DJIA Close Within Long-Term Perspective

Friday's DJIA close of 24,100.51 puts it squarely in the 6th of 9 levels which stretch from 12,288 to 30,720. The 6th (or more accurately somewhere between the 5th and 6th levels) tends to be a point where price momentum accelerates. This is bi-directional, so if the previous momentum has been to the upside then that momentum could accelerate further to the upside. Likewise, if the previous momentum has been to the downside then that momentum could accelerate further to the downside. Near the 6th level market momentum could also reverse. This could result, for example, in a failed move higher. Additionally, within the 6th level of the DJIA is the psychological level of 24,000. For most of 2018 the DJIA has stayed above the 24,000 level. On a number of occasions when the Dow has dipped below 24,000 there has been sufficient buying to lift it back above that level. If that continues to hold true in the short-term, then the DJIA does not have much further to fall on Monday the 17th before some buyers come in and push the market back higher.

DJIA Probable Range for 12-17-2018

Probable, Not Probably

via GIPHY


Not going to go into all the details of how the probable range is calculated except to say the following:

  1. It accounts for volatility over a 10-day period;
  2. Utilizes Murrey Math to discover levels of support and resistance;
  3. Takes into account that daily price movements in either direction from the previous close tend to be no more than the square root of the closing price

DJIA probable range for 12-17-2018 = 23,625 to 24,721.88

A reminder of the DJIA long-term levels -

DJIA

  1. 12,288 to 14,336
  2. 14,336 to 16,384
  3. 16,384 to 18,432
  4. 18,432 to 20,480
  5. 20,4380 to 22,528
  6. 22,528 to 24,576
  7. 24,576 to 26,624
  8. 26,624 to 28,672
  9. 28,672 to 30,720

DJIA Weekly Chart

If we look at the above chart of the Dow Jones Industrial Average during 2018 we can see that the index has spent most of the year above the 24,000 level. 24,000 represents psychological support for the market. At extreme points it has dipped to near 23,500. Our DJIA probable range for 12-17-2018 has a low of 23,625. Given that the square root of the closing price of 24,100.51 = 155.24 we could reasonably conclude that the low for the DJIA on 12-17-2018 could be 23,945.27 (24,100.51 - 155.24) at the outside If we use the 6th level numbers as a guide we would notice that level 3 within the larger 6th level is 23,808. That 3rd level of 23,808 would also potentially offer some support should the market come under pressure and dip below 24,000 this coming Monday.

Working Through the DJIA Numbers

So, at the more extreme - but still probable - end of our range would be 23,808 (or level 3 with the larger 6th level of the DJIA long-term range). The upside for the DJIA according to our probable range is 24,721.88. However, if we again consider the square of the closing price and add it to the close we would get 24,255.75 (24,100.51 + 155.24). Looking again at the 6th level we see that level 2 within the larger level is 24,320. So, at the outside we could take 24,320 as a potential high end of the range. That gives us 23,808 to 24,320 as a potential range. If we account for 24,000 as psychological support we could narrow our range to 24,000 to 24,320. That would leave us about 100 points of downside on Monday vs. Friday's close and about 220 on the upside. 220 is 2.2 times larger than 100.

Similarly if we used our original probable range of 23,625 to 24,721.88 we find we have 475.51 points to the Monday low end of the range vs. the Friday close (24,100.51 - 23,625) and 621.37 points to the upside (24,721.88 - 24,100.51). Given both the original probable range, psychological support at 24,000 and underlying support at 23,808 there is less room for the DJIA to move down and more to room up in terms of the ranges. This would imply (along with proprietary projections not included here) that it is more probable that the DJIA moves higher rather than lower on Monday 12-17-2018.

NASDAQ Probable Range for 12-17-2018

NASDAQ probable range for 12-17-2018 = 6,750 to 7,171.88

A reminder of the NASDAQ long-term levels -

NASDAQ

  1. 6,758.4 to 6,963.2
  2. 6,963.2 to 7,168
  3. 7,168 to 7,372.8
  4. 7,327.8 to 7,577.6
  5. 7,577.6 to 7,782.4
  6. 7,782.4 to 7,987.2
  7. 7,987.2 to 8,192
  8. 8,192 to 8,396.8
  9. 8,396.8 to 8,601.6

The NASDAQ closed 12-14-2018 at 6,910.66. This puts the price squarely within the 1st level. There is underlying support near 6,758.40. 6,758.40 also marks the line between the current 1st level of the NASDAQ and the previous 9th level. There is resistance near 6,963.20. 6.963.20 represents the line between the 1st and 2nd levels of the current market.

Narrowing the Range

The square root of Friday's NASDAQ close is SQRT 6,910.66 = 83.13. 6,910.66 - 83.13 = 6,827.53. 6,910.66 + 83.13 = 6993.79. If we look at support and resistance we see 6,835.20 at the 6th level within the larger 1st level of the NASDAQ's long-term range. To the upside we see resistance at 7014.40 or the 7th level within the larger 2nd level of the NASDAQ's long-term range. This would give us a potential range of 6,835.20 to 7014.40. 6,835.20 is at the 6th level within the larger 1st level. We should expect that 6,835.20 could provide some support should the price move lower on Monday. Therefore it would not be unreasonable to assume that 6,860.80 could be the more likely potential low closing level for Monday which would make the range 6,860.80 to 7014.14.

Given a range of 6,860.80 to 7014.40 we would have 49.86 points of downside vs. Friday's close and 103.74 points of upside. Similar to the DJIA, the NASDAQ has more probable upside than downside, so we can assign it more probability to close higher rather than lower on Monday 12-17-2018.

SP500 Probable Range for 12-17-2018

SP500 probable range for 12-17-2018 = 2,550.15 to 2,664.23

A reminder of the SP500 long-term levels -

SP500

  1. 1,228.8 to 1,433.6
  2. 1,433.6 to 1,638.4
  3. 1,638.4 to 1,843.2
  4. 1,843.2 to 2,048
  5. 2,048 to 2,252.8
  6. 2,252.8 to 2,457.6
  7. 2,457.6 to 2,662.4
  8. 2,662.4 to 2,867.2
  9. 2,867.2 to 3,072

Unlike the DJIA, which is currently within its 6th level and the NASDAQ, which is currently within its 1st level, the SP500 is in its 7th level. Yesterday's close took the SP500 below its 8th level. The SP500 all-time high price was 2,940.91 which fell within its 9th level. Relative to the DJIA and NASDAQ market at the current time, the SP500 does not have as much support immediately below its current closing level.

Narrowing the SP500 Range

Looking at the SP500 we can make the following calculations based up the square root of its Friday close of 2,599.95. 2,599.95 - 50.99 = 2,548.96. 2,599.95 + 50.99 = 2,650.94. That would give us a Monday potential closing range of 2,548.96 to 2,650.94. Looking within our larger 7th level we can see that 2,534.40 is at the 9th level within the larger level. At the higher end of the range straddling the larger 7th and 8th ranges is 2,662.40. There is though, some degree of resistance between the 7th and 8th levels of the SP500. So, even with a range of 2,534.40 to 2,662.40 the resistance on the upside is stronger than the downside support. A more likely probable high close for the SP500 would be 2,636.80 making the overall range 2,534.40 to 2,636.80. That would leave the potential upside as 36.85 points (2,636.80 - 2,599.95) vs. 65.55 potential downside points. We will assign a greater probability that the SP500 closes lower on Monday 12-17-2018. This is in contrast to the DJIA and NASDAQ which appear to both have a higher probability of finishing higher on Monday.

Split Decision?

Are we headed to a Split Decision Monday 12-17-2018 with the DJIA and NASDAQ moving higher and the SP500 moving lower?

via GIPHY