Saturday, 27 September 2014

September 27, 2014 – Weekend Market Comment

September 27, 2014 – U.S. stocks plummeted Thursday over 1% in a day due to hawkish talk from the Fed's Fisher and rumors Russia may enact laws to seize foreign assets.  Thursday the S&P 500 stocks dived 1.3 per cent to 5313 points. At the forefront is the US Federal Reserve, which flagged it would next year begin raising interest rates — after six year of being near zero — as the economy picks up steam, driving bond yields and the greenback higher.

This was followed by Friday when stocks rose sharply, cutting losses for the week, after the government raised its estimate of economic growth in the second quarter and consumer sentiment rose in September.

After a 202-point jump Friday morning, the Dow Jones Industrial Average pulled back a bit and gained 167.35 points, or 1 percent, to 17,113.15 to mark a fifth day in a row of triple-digit moves, its longest such stretch since June 2013. Nike led blue-chip gains that cut the Dow's weekly drop to 1 percent. The S&P 500 added 16.86 points, or 0.9 percent, to 1,982.85, reducing its weekly decline to 1.4 percent. Energy and technology performed the best and all 10 of the S&P's main industry groups finished in the green for the day, and in the red for the week. The Nasdaq gained 45.45 points, or 1 percent, to 4,512.19, off 1.5 percent from last week's close. The Russell 2000 also gained, denting a weekly drop of 2.4 percent. The index of smaller companies had led the broad market declines in play three out of five sessions this week.

Of course this all shows up in the charts.

Primary Sell
And down we go. I look at this graph and I see a room full of nervous traders who are moving to the exit. Cover!!!


Long Term Bull Bear Lines:
Short term bounce complete clearly we have sold off. As you can see  we probably will dip below the 50 day moving average. You should be positioned in cash and low beta investments to weather this summer rainy day. Keep you powder dry a time to buy may be soon.

VIX:

Well the story here is clear, as we also saw in the primary sell, The pros are hiding and trying to cover their portfolios by hedging. As you can see if this goes the way the last pull backs went it is a ways to go until the bounce.


NYSE High Low:
Looks really bad, the big board is rolling over like it did in February, this could be more than a short pull back. Notice the red areas on the lower panel they are pullbacks and this one is looking uglier than the last one in August.

On Balance Volume:
Unfavorable -- Pros might be getting nervous! Don't panic yet. Not as bad as last week, but only has one day of improvement. Mmmm -- could still get worse -- watch it carefully.


S&P500 Percent Stocks Above 50 day MA:

Still looks really weak. Sit on your hands and wait for a better entry point.



Nasdaq Summation Index:
Yeach!, danger! danger! smart money moves to safety. Raise cash. You will note how effective this chart was as a canary-in-the-coal-mine warning of us of impending weakness long before the big pull back.


Aggressive Defensive:

Slow Stochastic is stalling at the bottom. This either means everything is falling apart or we have oversold small caps and we bounce up.... mehh who knows?? Wait for a better day.


Green Arrow Graph:
Slope still is falling. Move from aggressive high beta to more conservative low beta investments. This is no time to invest NEW money.

Some More to Ponder
Here is the renko chart of the US market, but I am using the small cap ETF -- IWM as the index, because small caps lead big caps. Renko charts are not based on time, you note the dates below have odd ball spacing, the chart draws a new brick when the market breaks into a new level. They often give clarity where the market is going. Right now its a pull back.


Now let do another Renko chart. This chart goes up when the US market is doing well and down when the Canadian market is out performing it. This chart make it obvious, Canada was not where you wana be lately. The reason is the end of the commodity bubble, an unproductive work force, a draconian double tax the middle class system and total route of the once thriving technology and manufacturing sectors. We are now ending an era of low volatility and a smoothly rising stock-market. Global markets are readjust to a new phase of dramatic policy change in the US and lower commodity prices from a slower China.  I warn you about this in the spring of 2013 in Pop Goes the Commodity Bubble. If you followed my advise you sold your "Northern Pesos" and bought US stocks.


Hmm Canada sucks . . . .



What Works Now
OK, so you are not listening to me and you really want to run with he big dogs, your just ichen to take a flier, well think about this one... Yahoo! has been sold short by many investors as a hedge against their long position in Alibaba. Once options become available next Monday, these hedges will be taken off and shares of Yahoo! should spike higher. If you do this keep your stops tight and run the moment you make some good coin. If you do this silly thing, don't linger!

If fuel prices keep low and things calm down in the Ukraine it could be good times for one time super stock Ryan Air. Now me I am not in this because I hate airlines, but the graph looks like it might turn around at about $54.


Summary
You will recall that last week, I warned that the sell off will gain speed this past week and this is not a good time to put new money to work. But is the action on Friday a sign the worst is over? In short - probably not, we bounced on Friday because we're oversold on the week and because we're wrapping up a quarter and a month, so there's a lot of position squaring, One good day does not a rally make. I feel, and yes its a guess, we probably have not competed the retracement, but we may be close. The last three pull backs were all about 4.5% but so far we are only down 3%. Also many of the markets worst crashes were in October, so that is not a time to take a big flyer.

Also for Canada I am particularly cautious as I am almost 100% in cash right now and when I return to the  market it will be conservative.  So wait for the market weather to clear, this is no time to come out and play now.






You can learn more about my indicators by visiting the CME4PIF school by clicking here.


Friday, 19 September 2014

September 20, 2014 – Weekend Market Comment

September 20, 2014 – U.S. large cap stocks mostly rose on Friday, with the Dow finishing at a record, as investors welcomed Alibaba's market debut and Scotland's vote to remain in the U.K. Just over 55 percent of Scottish voters supported sticking with the nation's 307-year union with the U.K. after Prime Minister David Cameron vowed to give additional policy-making powers to Scotland.

Friday's session also brought a quarterly scenario known as quadruple witching, with futures and options contracts on indexes as well as individual stocks expiring. Scaling back from an 84-point gain that had it setting another intra-day record, the Dow Jones Industrial Average ended up 13.75 points, or 0.1 percent, at 17,279.74, leaving it 1.7 percent higher on the week, with Microsoft pacing blue-chip gains that extended to 18 of 30 components. After setting an all-time high during the session, the S&P 500 lost nearly a point to 2,010.40, less than a point below its record close, achieved the prior day, and 1.3 percent higher from the week-ago finish. One thing that is concerning is that the higher beta stocks and the prior leaders like technology and financials fell the hardest and the flight to safety plays like utilities and telecommunications led gains among the S&P's 10 major sectors. If you believe in seasonality this will come as no surprise that October historically is the worst month for small caps. 

Overall things look economically stable. The jobless claims report showed the number of people still receiving benefits after an initial week of aid fell 63,000 to 2.43 million in the week ended Sept. 6. That was the lowest level since May 2007. A separate report showed U.S. housing starts and permits fell in August, but upward revisions to the prior month's data suggested the housing market continued to gradually improve. That said, this market is long in the tooth and we just can't see the same super week on week gains that we saw in 2013.


Primary Sell:

Mehh, so far dis is going nowhere, don't you love indecision! Don't Panic Yet, but don't make any big bet either, I look at this graph and I see a room full of traders with an eye on the exit.


Long Term Bull Bear Lines:


Short term bounce complete from here we trudge up at a slower slope or sell off. Move from aggressive high beta to more conservative low beta investments. 

NYSE High Low:

Looks really good, growth has been a bit too strong, so the street is still buying big cap. 

On Balance Volume:

Unfavorable -- Pros might be getting nervous! Don't panic yet. Pay attention to this bad boy, its not always right, but on the other hand this is often the first warning of big trouble coming. Yes you can run screaming like a little girl if this gets much uglier.  Move from aggressive high beta to more conservative low beta investments. 


S&P500 Percent Stocks Above 50 day MA:
Still looks really weak. No rush yet. Move from aggressive high beta to more conservative low beta investments.


VIX:

The CBOE Volatility Index, a measure of investor uncertainty, rose Friday 0.7 percent to 12.11. yeah that does not look like a rise because you are watching a moving average.... still caution.

Nasdaq Summation Index:

Yeach!, danger! danger! smart money moves to safety. Raise cash.


Aggressive Defensive:

Slow Stochastic is stalling at the bottom. This either means everything is falling apart or we have oversold small caps and we bounce up.... mehh who knows?? Move from aggressive high beta to more conservative low beta investments. 


Green Arrow Graph:

Now here is a nice clear graph, invented by me of course. Slope is falling. Move from aggressive high beta to more conservative low beta investments. This is no time to invest NEW money.

What Works Now

Gentlemen Prefer Bonds
Well does of the US Federal reserve still rule the roost and why are interest rates are still crazy low? 

Let look at a historical graph of 20 year treasury bond rates.


To which I say....

Holy Crap indeed interest rates are below the rate in the 1930 depression. Last I saw there was no dust bowl and soup kitchens. So why are these rates so low? Look at non-farm payroll now ahead of the 2007 boom. 

Well the answer is they should not be, and clearly we are going to need to raise interest rates in the coming months. 

Below is an interesting graph, the red line shows if you would make more money in the stock market or in the Bond market. A rising red line says you would be better off in bonds. It looks like the fed rate is about to fall again over the short term. Or is it? In other words rate very short term could even go lower, but the long term picture is another matter. 



If you think about the big picture, interest rates must rise, they are near zero, how low can they go? 

TBT is a an ETF that you can buy it allows you to make money as bond rates rise. 

I recently put a friend's retirment money (in part) in the TBT exchange traded fund -- and it has done zip for her so she was asking, should I dump this looser? My answer no -- in fact it looks like if you have a really long time horizon this might be the play of the decade. If we go back to a 4% bond rate this ETF could be a "ten bagger" (a stock that makes you ten times your investment)

Summary 
Continue to stay defensive.  Remember cash is a position too, I am now over 50% in cash. Daily drops of major indexes, of 1 and 2 percent are very possible. Have your "powder ready" if you need to buy the bottom of this dip. If you want to stay long only look at stable big firms that are low risk like, Canadian banks and Pipelines, and in the USA dividend aristocrats. Set your stops very tight! The market is soft, be timid, don't put new money to work, raise cash and invest in conservative equities. Long term trend is up.



You can learn more about my indicators by visiting the CME4PIF school by clicking here.


Saturday, 13 September 2014

September 13, 2014 – Weekend Market Comment

September 13, 2014 – U.S. stocks closed down on Friday, breaking five weeks of consecutive gains as investors awaited the Federal Reserve's announcement next Wednesday. The Dow Jones Industrial Average closed down 61.4 points, or 0.36 percent, at 16,987.51. The S&P 500 was down 11.9 points, or 0.60 percent, at 1,985.54, with energy and utilities the hardest hit as all 10 sectors closed in the red. The Nasdaq closed 24.2 points lower, or 0.53 percent, at 4,567.60. The CBOE Volatility Index (VIX), widely considered the best gauge of fear in the market, traded near 13.5. For every advancer, four declined on the New York Stock Exchange in the close, with an exchange volume of 672 million, and composite volume of 3.1 billion.

The Dow Jones Industrial Average and S&P 500 closed near 3-week lows, as energy led S&P declines for the week and the Dow recovered slightly from an earlier 110-point drop on Exxon losses. In addition to the impact of upcoming central bank news, most analysts said stocks were reacting to being overbought in the last few weeks. Despite some stalling over the last few weeks, the major stock indices remain in long-term up-trends. The S&P 500, S&P 500 Equal-Weight Index and the S&P 1500 all hit new highs in early September - and remain close to these higher. Oil is a fear asset, gold is a fear asset, and they're all coming down. The market is looking past the geopolitical risk. The lower cost of oil has both an upside and a downside. Oil acts as tax on consumer spending and an oversupply of oil is an economic stimulant, read more in The New Momentum. However this drop in oil prices is also due to a drop in demand out of China and corruption probes curb speculation and due to strategic move by Saudi Arabia to help the Untied States cut off much need revenue to the ISIS and Mr Putin in Russia.






Of course it all shows up in the charts.

Here is the price of West Texas Crude, oil is on sale!


Now lets look at our core indicators . . .


Primary Sell:

Pros Might be Getting Nervous! Don't Panic until a full turn down.


Long Term Bull Bear Lines:
 

Short term bounce complete from here we trudge up at a slower slope or sell off. This is still a bull market, just right now things are weaker.  Move from aggressive high beta to more conservative low beta investments.

NYSE High Low:
 
Deteriorating , it takes awhile for this puppy to fall off, so the down turn may be started.. 

On Balance Volume:
 
Is looking unfavorable -- Pros might be getting nervous! Don't panic yet. Move from aggressive high beta to more conservative low beta investments. 


S&P500 Percent Stocks Above 50 day MA:
 
Deteriorating, As I said last week the market can't stand when more than 80% of stocks are above the 50 day moving average and this week the weakest stocks started to sell off. Move from aggressive high beta to more conservative low beta investments.


VIX:
 
Deteriorating faster than expected, could still head down but the pros are getting nervous. 

Nasdaq Summation Index:
 
Very troubling, the NASDAQ has been the one big bright spot and it is not looking well. We are not dead yet but this is worth watching!


Aggressive Defensive:
 
Slow Stochastic is falling. Be defensive! Move from aggressive high beta to more conservative low beta investments. 


Green Arrow Graph:
 
Slope is falling. Move from aggressive high beta to more conservative low beta investments. This is no time to invest NEW money.

Now lets look at our three lagging economy indicators, by the time these change it is too late but we can at least see what economic force got us here.

Nonfarm Payroll:
 
Looks really good, new record high.

Industrial Production:
 
Looks really good, new record high.


USA Renko Chart:
 
Looks really good, the bull shows no sign of ending soon.

What Works Now
Continue to stay defensive, that is raise cash, play safe bets like Canadian banks and Pipelines, and in the USA dividend aristocrats.


Summary 
Market is soft, be timid, don't put new money to work, raise cash and invest in conservative equities. Long term trend is up.

You can learn more about my indicators by visiting the CME4PIF school by clicking here.




Saturday, 6 September 2014

September 6, 2014 – Weekend Market Comment

September 6, 2014 – U.S. stocks erased losses and rose on Friday, with benchmark indexes extending gains into a fifth week, as investors detoured around a surprisingly disappointing jobs report. Wednesday the Dow Industrials and Transports tested their summer highs. The Dow Transports have hit new highs (led by rails and truckers). The Dow Industrials, are testing their July peak. After a 59-point fall, the Dow Jones Industrial Average rose 67.78 points, or 0.4 percent, to 17,137.36, leaving it with a we at weekly gain of 0.2 percent and less than a point from its record close of 17,138.20, set July 16. Nike led blue-chip gains that extended to 22 of 30 components. It might have been a great day for Nike but fellow consume discretionary stock the GAP had a big miss and sold off strong. A cease-fire in Ukraine gave a big boost to Russian stocks as well as European stocks closely tied to Russia. Energy paced gains among the 10 major industry groups on the S&P 500, up 10.06 points, or 0.5 percent, to 2,007.71, and 0.2 percent higher than the week-ago close.

For fun this week I am going to put out my whole list of core charts and then below each chart in big green words I will type my gut feel take on that chart. So you can see the way I analyse the market. As you will see not all the charts agree and the art is getting an impression from each and then come to a concussion.

Primary Sell:
Pros Might be Getting Nervous! Don't Panic Yet. 

Long Term Bull Bear Lines:
Short term bounce complete from here we trudge up at a slower slope or sell off. Move from aggressive high beta to more conservative low beta investments.  

NYSE High Low:
Looks really good, growth has been a bit too strong, may consolidate before continuing to move up.  

On Balance Volume:
Was looking unfavorable -- Pros might be getting nervous! Don't panic yet. Move from aggressive high beta to more conservative low beta investments.  


S&P500 Percent Stocks Above 50 day MA:
Nearing the last phase of bounce, when more than 80% of stocks are leading -- momentum seldom holds for more than 3 weeks. No rush yet. Move from aggressive high beta to more conservative low beta investments. 


VIX:
Expect VIX to complete a cycle of optimism and dip below 11.50 -- No rush yet, but in next 3 weeks expect a sign of low vix -- thus marking the rotation from those in the know to the over optimistic dumb money. 

Nasdaq Summation Index:
Looks really good, clearly the bounce has been all about high beta Nasdaq tech stocks.  


Aggressive Defensive:
Slow Stochastic is falling. Move from aggressive high beta to more conservative low beta investments.  


Green Arrow Graph:
Slope is falling. Move from aggressive high beta to more conservative low beta investments. This is no time to invest NEW money.

Now lets look at our three lagging economy indicators, by the time these change it is too late but we can at least see what economic force got us here.

Nonfarm Payroll:
Looks really good, new record high.

Industrial Production:
Looks really good, new record high.


USA Renko Chart:
Looks really good, the bull shows no sign of ending soon.

What Works Now
This week I bought some Stantec - a Canadian engineering firm with impressive results. I have a tight stop on this because this is not the part of the cycle for new investments, but I was tempted.


I also rotated out of all leveraged positions and raised a  "war chest" of cash. I sold some aggressive equities favoring more conservative stocks like pipelines, utilities and banks.

You can learn more about my indicators by visiting the CME4PIF school by clicking here.