Commentary

39 Month Review

Longer time frames probably don’t get the attention they deserve. I don’t look at monthly charts much, and then with only the 13 month moving average plotted, so I was surprised to notice that the 39 month average was in play for major ETFs in December and January.

VTI

This chart summarizes the overall issues well.

  • The ominous looking triple top from January 2018 through April 2019.
  • The December decline was serious enough to put the 39 month moving average in play.
  • Current prices proximity to the 13 month moving average.
  • Large relative monthly price ranges over past 18 months.

Of course, there are also positive points:

  • The late 2018 decline was severe enough to cause the slope of the 13 week moving average to flatten, but it is now rising.
  • Current prices are above the 13 month moving average.
  • The distance between the 13 month and 39 month moving averages is not decreasing.

The current decline is obviously targeting a minimum 61.8% (or 38.2% depending on whether one starts measuring from the top or bottom) retracement of the December 2018 through April 2019 advance. The major question is how much of the January 2019 candle it will chew through. The 131.58 October 2018 low looks like a reasonable midpoint between the all time high and the 39 month moving average at 125.

Wherever it winds up, should be a good place to buy, presumably for a fourth quarter rally.

SPY

The SPY chart is almost identical to VTI. The major technical question is how much trouble will the market have with the triple tops. My guess is that they will be a significant hurdle.

The normal short term potential downside target here is the 13 month moving average at 275. This appears to be formidable support, but with the increased volatility at long term averages, the October 2018 swing low of 257 could be threatened.

The worst best case scenario is a decline to the 39 month moving average. It is appropriate to note that the 13 and 39 month have not crossed since 2010 and this 18 month period isn’t a convincing reassurance that this won’t happen relatively soon.

SMH

SMH has already crossed below the 13 month moving average. It looks like it has a a decent shot at hitting the rising 39 month average at 85.71 if it has another bad month (and the summer is the time of year for it. Interestingly, SMH did not hit the 39 month moving average in December. The good news, is that there is no triple top.

The Fibonacci retracement study doesn’t give a good place to stop within the body of the January candle. Nontheless, I bought some of this yesterday.

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