Saturday, 28 February 2015

February 28, 2015 – Weekend Market Comment

February 28, 2015 – U.S. stocks posted gains of 5 percent or more in February, despite closing modestly lower on the last trading day of the month on Friday amid lackluster data and oil gains. 

The Dow Jones Industrial Average closed down 82 points, or 0.45 percent, at 18,132.38, with American Express the greatest laggard and Coca-Cola the greatest of seven blue chip advancers. The Dow gained 5.64 percent for the month, its best since January 2013. The S&P 500 closed down 6.24 points, or 0.30 percent, at 2,104.49, with information technology the greatest decliner and consumer staples and telecommunications the only two advancing sectors. The S&P was up 5.49 for the month, the best since October 2011. The Nasdaq closed down 24.3 points, or 0.49 percent, at 4,963.53. The index gained 7.08 percent for the month, its best since January 2012. Advances were a step ahead of decliners on the New York Stock Exchange, with an exchange volume of 738 million and a composite volume of 3.3 billion in the close.


What I Think
Well here we are in the upper atmosphere. There is very little oxygen up here and we are all feeling a tad giddy. Almost every single market index from the DOW to the Russell 1500 hit a 52 week high this week. But if you were listening the real star of the market was... as predicted here... The NASDAQ...Up 7 percent (in February), so this month the Nasdaq was really phenomenal in and of itself.

The technology-heavy index, which tracks the 2,500-plus stocks that are listed on the Nasdaq stock market, has advanced 4.6 percent this year, and is up 16 percent in the last year.

Almost half the companies in the NASDAQ index are technology stocks, and the Nasdaq is outperforming both the Dow Jones industrial average and the Standard & Poor's 500 index this year, as the technology sector is coming back in favor. One stock in particular is giving the Nasdaq a lift: Apple. The technology giant has gained 17 percent this year, pushing its market value over $750 billion. The surge means that the stock now accounts for about 10 percent of the Nasdaq's market value. That compares with its 4 percent share for the S&P 500.

Since companies on the NSADAQ tend to be riskier smaller firms than the giants on the NYSE it is a sign of a risk on environment. Of course when the NASDAQ leads it means we are in a bull market. That said . . . a 7% gain in a month is a heck of a run and we might be over extended. 


Don't forget rookies think of gains, pros think of risk. So paranoid is a good thing. The math of percentages shows that as losses get larger, the return necessary to recover to break-even increases at a much faster rate. A loss of 10 percent necessitates an 11 percent gain to recover. Increase that loss to 25 percent and it takes a 33 percent gain to get back to break-even. A 50 percent loss requires a 100 percent gain to recover and an 80 percent loss necessitates 500 percent in gains to get back to where the investment value started. Be a pro stay safe!


It All Shows Up In The Charts . . . 

Bull Bear Lines

Nice bounce and the bull continues, I do see the little peak here and yup it looks like the start of a small correction. 




Primary Sell 
Clearly the market pros were embracing this rally, but ah is that a bit of hesitation?






Aggressive Defensive Graph
The Slow Stochastics on the top of the graph has hit a new peak and heading over the hump.. now red over black, Clearly aggressive equities are already over done and a slow move towards safety has begun.



Bond vs Equities
Ah the dance of the markets... bonds hit bottom of normal range and bounce as smart money takes some profits in stocks and looks for safer harbours. Risk off has begun.



S&P500 Over 50 Day
The percentage of stocks over the 50 day moving average is peaking as bargains are getting rare and only weak stocks are left in the "day old bin". As you can see we are probably about ready for topping out. 


Green Arrow Graph
Our Green arrow graph is stalling... not a good time to put new money to work. 



Nasdaq Summation
The Nasdaq Summation index shows that is is good time to be in high tech Nasdaq stocks. Full on bull run. Even if the market does pull back here this long term risk on behavior is encouraging. Notice we are reaching a prior top point. If the market pulls back but this graph stays green over red it will be time for bargain hunting. 



NYSE New High Low
Still showing strength on the big board. This is still a long term bull market.



Sectors
Great to see safety stocks particularly utilities decline and the new leader is consumer discretionary and the high tech stocks of the Nasdaq. However it also is clear that this is about the max of the normal range... anything COULD happen, but it probably is time for the higher risk stocks to get tired. 
XLF - Financial Stocks - Dark Blue
QQQ - Nasdaq - Purple
XLY - Consumer discretionary - Green
XLU - Utilities - Red
DEF - Defensive stocks - Brown




OBV
On Balance Volume is not keeping pace with the current market at all. This is showing that institutional large volume buying is going to the sidelines. It looks like the "smart money" was late to the party this time and is not hanging around. I have great respect for the early warning signals that come from OBV , yes it is not perfect, but it often warns very early. So it is this chart that has me the most concerned this week. 


VIX
The CBOE Volatility Index (VIX), widely considered the best gauge of fear in the market, traded below 14.



VIX Evaluator
Don't forget this is an experimental VIX indicator... this week it looks like it is saying... my look how close I am to the edge of my range.....



Summary
OK well it is like this.... We are in a bull market and this last bounce is a real good one. A lot of money for the first time, in a long time, is very "RISK ON" with Apple creating a happy mood all around. In classic technical analysis there are signs of continuation everywhere and some of the best traders I know think things look great. But... there are these recent little bounces in both Gold and Bonds that tell me not everyone is loving risk. 



Also the OBV chart is deeply concerning. Plus the sector chart looks ready to change major players, like a drop in NASDAQ and raise in Utilities. 

Some of the other indicators like Primary Sell can behave this way weeks before trouble happens. So I might be paranoid but I am "gently pulling my horns in" I am slowly getting long safety.  In short we still might have a bit to run but I would not take big risks here, raise your stops, take some profits, sell your high beta and move in to stable plays like TLT (bonds) and DVY (big cap stable). If things begin to slide look at buying some protection with the VXX fund a bet on a higher level in the VIX. 








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


Saturday, 21 February 2015

February 21, 2015 – Weekend Market Comment

February 21, 2015 – U.S. stocks rallied on Friday to close at highs on an eleventh-hour resolution between Greece and its creditors in the euro zone. The Dow Jones industrial average closed up more than 150 points, its first record close for 2015. The S&P 500 ended the week at its third record close for the year. The Nasdaq also closed higher, within 50 points of the key 5,000 level.

The Dow Jones Industrial Average closed up 154.9 points, or 0.86 percent, at 18,140.70, with Procter & Gamble the greatest of five laggards and Boeing trading at all-time highs (since 1952) to lead blue-chip advancers. The S&P 500 closed up 12.85 points, or 0.61 percent, at 2,110.30, with health care leading gains across all sectors except energy. The Nasdaq closed up 31.27 points, or 0.63 percent, at 4,955.97. Two stocks advanced for every decliner on the New York Stock Exchange, with an exchange volume of 734 million and a composite volume of 3.1 billion in the close.

What I Think
Looks like the agreement ... was already "baked" into the market. Not much of a surprise here. The real issue is that this agreement only gets them to the next big debt maturity which puts them back at this all over again. A kick the can down the road for now. I think this market still has legs ... as long as corporate earnings stay positive. Obviously the safe haven money is exiting the bond market and has no place to go but into stocks.


It All Shows Up In The Charts . . . 

Bull Bear Lines

Nice bounce and the bull continues, I do see that we are a bit ahead of ourselves and a small pull back would be ok. Notice the bounce in Slope... this could be another long term up trend. 


Primary Sell 
Clearly the market pros are now embracing this rally. Also looks like a bit of room to run.


Aggressive Defensive Graph
The Slow Stochastics on the top of the graph has hit a new peak now black over red, Clearly aggressive equities are in play but perhaps already over done.




Bond vs Equities
Equities (stocks) outperform bonds this week. Risk on week.



S&P500 Over 50 Day
The percentage of stocks over the 50 day moving average is on rising as the market buy the dippers gobbles up bargains. As you can see we are probably a few weeks from a topping out.






Green Arrow Graph
Our Green arrow graph recently drew a new green arrow, when the time was ripe for market entry. As you can see great timing. 

Nasdaq Summation
The Nasdaq Summation index shows that is is good time to be in high tech Nasdaq stocks. Full on bull run.



NYSE New High Low
Still showing strength on the big board.



Sectors
Great to see safety stocks particularly utilities decline and the new leader is consumer discretionary and the high tech stocks of the Nasdaq.
XLF - Financial Stocks - Dark Blue
QQQ - Nasdaq - Purple
XLY - Consumer discretionary - Green
XLU - Utilities - Red
DEF - Defensive stocks - Brown


OBV
On Balance Volume is now keeping pace with the current market showing that institutional large volume buying is returning. It looks like the "smart money" was late to the party this time.  


VIX
The CBOE Volatility Index (VIX), widely considered the best gauge of fear in the market, traded near 14.


What Works Now
Well if Europe is happy that geraly bodes very well for Germany, conciser the Germany ETF symbol EWG.

There are two interesting articles in the Economist magazine this week, one says it is time for India to shine and the other says it is getting hard to hire programmers. Well you could buy this company that outsources programing jobs to India ticker CTSH. 


Summary
This week went sideways as the big fund money waited to hear the final call on Greece. Now they are buying up the market. As one of my readers you have been long for a couple of weeks and you are enjoying fantastic gains. 

It is minus 13C in New York, plus 4 in London, and plus 27C here in Belize. Well I am off to convert my market gains in to rum on the dock while I glance lazy eyed at the Caribbean and work on my golden brown tan. 







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


Saturday, 14 February 2015

February 14, 2015 – Weekend Market Comment


February 14, 2015 – U.S. stocks closed at highs on Friday, with the Dow above 18,000 and S&P 500 setting a new record as firming oil prices sent the energy sector higher. The Dow Jones industrial average closed up 46.97 points, or 0.26 percent, to 18,019.35, with Caterpillar leading 16 blue chip advancers and American Express the greatest laggard. The last time the index closed above 18,000 was on Dec. 26, 2014. The S&P 500 closed up 8.51 points, or 0.41 percent, at 2,096.99, with the energy sector up 1.95 percent to lead six sectors higher and utilities the greatest decliner. The Nasdaq closed up 36.22 points, or 0.75 percent, to 4,893.84, its highest level since March 2000, the peak of the dotcom bubble. The Russell 2000 also closed at a record high. 

Amoung the good news, the European Central Bank allowed Greek banks to access extra emergency financing from the Bank of Greece because deposit outflows have increased and to ensure they have liquidity while discussions continue in Brussels next week, Greek banking sources told Reuters on Friday. Perhaps more importantly on Sunday, Russia is expected to enter a cease-fire with Ukraine as announced early on Thursday.

Recent data has been strong, especially the strong January employment report, further support PNC's baseline forecast for an initial increase in the Federal funds rate at the Federal Open Market Committee's July 2015 meeting

What I Think
Last week I ended with a big red BUY button and if you did you did very well this week. As you read a few weeks ago markets would be volatile until oil finds a bottom. The most important news this week is that oil might have bottomed. Stocks typically rally into idea that oil might be bottoming.



It All Shows Up In The Charts . . . 

Bull Bear Lines

Nice bounce and the bull continues, I do see that we are a bit ahead of ourselves and a small pull back would be ok. Notice the bounce in Slope... this could be another long term up trend. 



Primary Sell 
Clearly the market pros are now embracing this rally. Also looks like lots of room to run.




Aggressive Defensive Graph
The Slow Stochastics on the top of the graph has hit a new peak now black over red, Clearly aggressive equities are in play but perhaps already over done.



Bond vs Equities
Equities (stocks) outperform bonds this week. Risk on week.
 


S&P500 Over 50 Day
The percentage of stocks over the 50 day moving average is on rising as the market buy the dippers gobbles up bargains.




Green Arrow Graph
Our Green arrow graph just last week drew a new green arrow, when the time was ripe for market entry.



Nasdaq Summation
The Nasdaq Summation index shows that is is good time to be in high tech Nasdaq stocks. Full on bull run.




NYSE New High Low
Still showing strength on the big board.


Sector Rotation 
Great to see safety stocks particularly utilities decline and the new leader is consumer discretionary and the high tech stocks of the Nasdaq.
XLF - Financial Stocks - Dark Blue
QQQ - Nasdaq - Purple
XLY - Consumer discretionary - Green
XLU - Utilities - Red
DEF - Defensive stocks - Brown

VIX
The CBOE Volatility Index (VIX), widely considered the best gauge of fear in the market, dropped to trade near 16. You can learn more about the VIX index here.


Renko IWM  
Using a Renko chart, it is obvious that the market is near a point of resistance where it failed at before. 




OBV
On Balance Volume is not keeping pace with the current market showing that institutional large volume buying is lagging. It looks like the "dumb money" is pushing this round higher. Lets see if it catches up next week. This is the most concerning indicator. 



What Works Now

One January 24 I recommended an ETF called XIV -- up 9%

On January 24 I also mentioned MVV up about 10%

On January 24 I also mentioned FISV up about 12%



On January 24 I also mentioned juiced Nasdaq ETF...QLD up about 15%


Summary
Last week we got a nice strong buy signal. We could see a growing support for the tech heavy NASDAQ from the summation index and this was followed during the week by all most all the indicators getting stronger. I expect a small pause and a continuation.  





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