Sunday, 29 March 2015

March 28, 2015 – Weekend Market Comment

March 28, 2015 – U.S. stocks closed mildly higher on Friday as investors digested Fed Chair Janet Yellen's remarks remained cautious ahead of first quarter earnings in April.

U.S. stocks closed mildly higher on Friday as investors digested Fed Chair Janet Yellen's remarks remained cautious ahead of first quarter earnings in April.

The Dow Jones industrial average closed up 34.43 points, or 0.19 percent, at 17,712.66, with Intel and UnitedHealth leading gains and Chevron the greatest laggard. The blue chip index fell 2.29 percent this week, for its worst week since Jan 30. The S&P 500 closed up 4.87 points, or 0.24 percent, at 2,061.02, with health care leading six sectors higher and energy the greatest laggard. The index closed down 2.23 percent for the week, its worst since the week ending January 30. The Nasdaq closed up 27.86 points, or 0.57 percent, to 4,891.22. The index closed down 2.69 percent for the week, its worst since the week ending October 10. Advancers were a step ahead of decliners on the New York Stock Exchange, with an exchange volume of 386 million and a composite volume of about 1.9 billion at 2:38 p.m.



What I Think
I think the market is spooked that the fed is about to raise rates or worse that there may never be good times again as the US enters a lost decade like Japan. Fridays fed comment clearly bolstered the market and employment is strong, my bet is long term the bull continues. 

It All Shows Up In The Charts . . . 

Bull Bear Lines
Well the bounce back up is clear. As you can see this was a very rapid pull back. Volatility is making market timing difficult. Still dark green is over red, we are in a bull market.



Primary Sell 
Looks like we have an all clear sign from the pros who are again buying insurance. 



Aggressive Defensive Graph
Notice the topping and lagging defensive stocks are getting a run now. 




Bond vs Equities
Well Bonds held up well last week but the clear winner this week is equities. 




S&P500 Over 50 Day
Negative sentiment from last week is obvious that does not mean that that this week will not be good.



Green Arrow Graph
Our almost a green arrow turned into a failed rally



Nasdaq Summation
Tech is looking disappointing as fear alst week griped the markets.





NYSE New High Low
Strength returns to the big board as the upward march continues. 




Sectors
This chart mirrors what the Aggressive Defensive Chart says. The new trend is safer stocks like the defensive ETF. 
XLF - Financial Stocks - Dark Blue dots
QQQ - Nasdaq - Purple
XLY - Consumer discretionary - Green
XLU - Utilities - Red
DEF - Defensive stocks - Brown




OBV
On Balance Volume is keeping pace with the current market. A great relief as smart money returns to the market.



VIX
The CBOE Volatility Index (VIX), widely considered the best gauge of fear in the market, traded near 15.





Summary
We are still in a bull market and are about to complete a pull back. But the current volatility is making me use safer bets and be less aggressive. Until the trend is stronger I don't recommend any hero plays this well could be a long term topping pattern, although I doubt it. 



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

Saturday, 21 March 2015

March 21, 2015 – Weekend Market Comment

March 21, 2015 – U.S. stocks jumped about 1 percent to close near highs on Friday, continuing several days of alternating gains and losses as investors weighed a weaker dollar amid options expirations. The Dow Jones industrial average and S&P 500 broke three weeks of consecutive losses to post gains of more than 2 percent for the week. The Dow Jones Industrial Average briefly rose more than 225 points before paring gains to close up 168.62 points, or 0.94 percent, at 18,127.65, with Nike leading gains and Apple and UnitedHealth the greatest laggards. The blue chip index posted gains of 2.13 percent for the week.

The Nasdaq closed up 34.04 points, at 0.68 percent, at 5,026.42, above the psychologically key level of 5,000 for the second time since the tech bubble in March 2009. The index had its best weekly gain since the week ending October 31 as the index approached its 15-year record closing high of 5,048.62. Biotech stocks and Facebook led gains. The S&P 500 closed up 18.79 points, or 0.90 percent, at 2,108.06, just shy of its record close of 2,117.39. Energy led gains across all 10 sectors as the index posted an increase of 2.66 percent for the week. Four shares advanced for every decliner on the New York Stock Exchange, with an exchange volume of 2.1 billion and a composite volume of 5.1 billion.


What I Think
Well I said enough, this is a short pull back while people fear the fed will raise rates, followed by a relief rally that is not in the cards for at least 6 months.  The S&P 500 and Dow Jones industrial average have not had two days of consecutive gains or losses since the middle of February. Friday marks the eighth consecutive trading session in which the two indices have alternated between daily gains and losses, with the Dow moving triple-digits each day. If you follow the Bull Bear Lines you can see, we are still in a Bull Market. This is why I recently cautioned against counter trend moves in a bull market.


It All Shows Up In The Charts . . . 

Bull Bear Lines
Well the bounce back up is clear. As you can see this was a very rapid pull back. Volatility is making market timing difficult. 


Primary Sell 
Looks like we have an all clear sign from the pros who are taking off insurance. 


Aggressive Defensive Graph
Notice the topping and lagging defensive stocks are getting a run now. 



Bond vs Equities
Well Bonds held up well last week but the clear winner this week is equities. 



S&P500 Over 50 Day
Also the bounce is clear here as investors scoop up laggards and bargains..



Green Arrow Graph
Our Green arrow graph is turned up in fact almost at a green arrow. The climate for putting new money to work looks good.


Nasdaq Summation
Also very interesting, looks like tech is getting a bounce. A huge part of this is the strong performance of biotech and health care stocks.




NYSE New High Low
Strength returns to the big board as the upward march continues. 



Sectors
This chart mirrors what the Aggressive Defensive Chart says. The new trend is safer stocks like the defensive ETF. 
XLF - Financial Stocks - Dark Blue dots
QQQ - Nasdaq - Purple
XLY - Consumer discretionary - Green
XLU - Utilities - Red
DEF - Defensive stocks - Brown




OBV
On Balance Volume is keeping pace with the current market. A great relief as smart money returns to the market.


 VIX
The CBOE Volatility Index (VIX), widely considered the best gauge of fear in the market, traded near 13.



VIX Evaluator
Don't forget this is an experimental VIX indicator... recently I said it looks like it is saying... my look how close I am to the edge of my rangecool I am dropping a good sign for the market......Well THIS week it continued down... 





Summary
We are in a bull market and completed a pull back. Two weeks ago I was "gently pulling my horns in" this week, I put some cash to work in this buying opportunity.

If you read last weeks blog it was 360 degrees form this week. Volatility is making the market gyrations quicker and it is harder to time trends. But one trend is for sure the overall market is bullish. 










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


Sunday, 15 March 2015

March 14, 2015 – Weekend Market Comment

March 14, 2015 – U.S. stocks closed lower on Friday, as a week of mixed economic data, renewed dollar strength and sharply lower oil prices made traders cautious ahead of next week's Fed meeting.

As predicted here, again the Dow fell this week. Friday it dropped more than 250 points before recovering to close 145 points lower. The major indices declined, with nearly all blue chips lower and all S&P 500 sectors in the red. The Dow and S&P 500 posted their third week of declines, while the Nasdaq closed lower for the second straight week.

The Dow Jones Industrial Average closed down 145.91 points, or 0.82 percent, at 17,749.31 with IBM the greatest laggard and Microsoft leading seven blue chip advancers. The S&P 500 closed down 12.55 points, or 0.61 percent, at 2,053.40, with utilities leading all ten sectors lower. The Nasdaq closed down 21.53 points, or 0.44 percent, at 4,871.76. The U.S. 10-year Treasury yield traded higher near 2.12 percent. About two shares declined for every advancer on the New York Stock Exchange, with an exchange volume of 806 million and a composite volume of 3.4 billion in the close.


What I Think
I think the fear is the Fed is going to raise rates... to preserve their reputation. We're looking at a choppy market. Many traders are not going to put in many trades before next week's major events, That's part of the reason why we're seeing a very strong dollar, weakness in oil and metals. That dollar strength this week was straight up, in what is called a "parabolic rise", of course these are conditions often found at the top of panic buying, and often indicated a top and shift in sentiment coming soon. You can see it clearly on this chart of the US dollar.

Well if you have tried to convert any kind of money to U.S. funds you know the U.S. dollar is soaring .... particularly against the Canadian dollar.  OK folks, part of why I write this blog is to put my predictions down with firm dates. So many people tell me when talking about current reality that "they saw that coming" but I put it here to see. In my blog people are free to look back and see if I was right. On June 28, 2012 -- I told you to sell your Canadian dollars and buy US funds. My prediction was met with many sneers about the end of America and a new world with not enough commodities to supply growing demand from China. There were also a few that felt I was wrong about Canada, I was told Canada was more stable because through over taxing the people the federal debt was shrinking (what a load of poop that comment was). Against that I set out 5 very good reasons the Canadian boom was unsustainable. Here is blog post:
http://cme4pif.blogspot.ca/2012/06/canadian-super-recession.html

Now people are either asking me how I knew that or they say they saw it too. Funny I don't recall many people that agreed with me back then. Nor can I think of anyone who actually listened and sold their Canadian dollars.  I gave a second warning July 2, 2013
http://cme4pif.blogspot.ca/2013/07/canada-vs-usa.html

Ok well that was a good run for my ego, now back to the present market. As I said last week readers are already hovering their fingers over the buy button. Please cut that out. the markets are very near a point they SHOULD turn around. But there is never a reason the markets MUST do anything.

The market can stay irrational longer than you can stay solvent.”
- John Maynard Keynes

What we are looking for now is a nice sold bounce, and more than a one day bounce, my moto:
One day is NOT a trend.”

So wait until you get a strong sign, like a green arrow on my green arrow chart and folks that is a ways away yet.


It All Shows Up In The Charts . . . 

Bull Bear Lines
The predicted pull back is right on time. Last week I said this will probably will run out of steam just beyond the 50 day EMA( dark green line) and we are there now . . . so could be soon. 


Primary Sell 
Clearly the market pros are running to buy some more insurance this week. The important take away is there is still room to run to the down side as we have just passed the zero line. 

The primary sell chart is a tool specifically designed to help gauge the overall sentiment (mood) of the market. The chart is calculated by dividing the number of traded put options by the number of traded call options. As this ratio increases, it can be interpreted to mean that investors are putting their money into put options rather than call options. An increase in traded put options signals that investors are either starting to speculate that the market will move lower, or starting to hedge their portfolios in case of a sell-off. An falling chart is a clear indication that investors are starting to move toward instruments that gain when prices decline rather than when they rise. These "put" options are what the pros buy to protect their long term positions, so I call that a type of insurance. 




Aggressive Defensive Graph
I wanted to highlight this chart because of the odd behavior. This is an example of why you can not just blindly foloow one chart.  The Slow Stochastics on the top of the graph has tuned a corner, but oddly the broad market has not, now Black over red. What is happening is that the broad market like the S&P500 is weak, especially the big DOW component stocks and high dividend stocks, like DVY, because they sell more products internationally -- but this chart uses MVV to represent smaller cap stocks and they are starting to pickup because of their strong US domestic weighted exposure. So I would normally find in a weak market big firms out perform small, but not this time. 



Bond vs Equities
Also behaving a tad irrationally. The bonds are picking up as the flight to safety continues BUT the consumer discretionary stocks are still rising. Risk off has begun but no flight to bonds.




S&P500 Over 50 Day
The percentage of stocks over the 50 day moving average has peaked weeks ago now, as predicted and the slide down begins.




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



Nasdaq Summation
Also very interesting, by crossing over this could be the beginning of a long slide. The Nasdaq Summation index is also now caught up in the sell off... Risk Off! So take a good hard look at where this chart COULD go, and you can see why I am in no rush to go long. 




NYSE New High Low
No longer showing strength on the big board. Greeen line looks ready to roll over. 


Sectors
The new leader is financial stocks, that is kind of odd it should be utilities, but they don't do well in rising rate environment. 
The strong jobs report is causing interest rates to rise and that drives trreasury bonds down. Stocks that are interest rate sensitive reacted this week with banks and stock brokers doing well and utilities 
XLF - Financial Stocks - Dark Blue dots
QQQ - Nasdaq - Purple
XLY - Consumer discretionary - Green
XLU - Utilities - Red
DEF - Defensive stocks - Brown




OBV
On Balance Volume is still 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. It certainly was our first tip off to this pull back. So it is this chart that has me the most concerned this week. In fact if this does not pull up soon ... it could get scary.



VIX
The CBOE Volatility Index (VIX), widely considered the best gauge of fear in the market, traded near 16. 



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



Summary
OK well it is like this.... We are in a bull market and but this is a pull back. Last week I was "gently pulling my horns in" I am long safety, I have raised some cash and I await a buy opportunity. I have bought a ETF called VXX to hedge my risk and NO you should not bet the farm of VXX it is only to protect other positions. Don't bottom fish, wait to see the turn in the market.






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

Saturday, 7 March 2015

March 7, 2015 – Weekend Market Comment

March 7, 2015 – U.S. stocks closed down more than 1 percent on Friday as investors weighed a jobs report that indicated an interest rate hike could come sooner rather than later.

The Dow Jones industrial average closed below 18,000 for the first time since February 19. The index had its worst day in a over a month, briefly falling more than 300 points, down more than 1.5 percent. The report sent turbulence into bond markets, with the U.S. 10-year Treasury note yield rising to 2.25 percent and the 2-year surging to 0.73 percent on increased anticipation of an interest rate hike.

February's nonfarm jobs report showed a gain of 295,000, above expectations of 240,000 in February, down from 257,000 in January. The unemployment rate fell to 5.5 percent, while hourly wages ticked up 0.1 percent, below consensus and off the surprise 0.5 percent gain in January. The report sent turbulence into bond markets, with the U.S. 10-year Treasury note yield rising to 2.25 percent and the 2-year surging to 0.73 percent on increased anticipation of an interest rate hike.

The Dow Jones industrial average closed down 278.94 points, or 1.54 percent, at 17,856.78, with Johnson & Johnson leading all blue chips lower. The S&P 500 closed down 29.78 points, or 1.42 percent, at 2,071.26, with utilities down 3 percent to lead all 10 sectors lower. The Nasdaq traded down 55.4 points, or 1.11 percent, at 4,927.37. Five stocks declined for every advancer on the New York Stock Exchange, with an exchange volume of 903 million and a composite volume of 3.8 billion in the close.


What I Think
Well like I said last week we are overvalued and a little pull back is in order. The market is fearful of the Fed changing its line but clearly it also knows the market is over valued. The Wall Street Journal Friday mentioned that the P/E of the market is about 18 and the long run average is about 15. 

Ok last week I showed you how the bull and Bear Lines were toppy. This chart showed the start of a correction, one reader asked me about my negative tone last week and was this the start of a big sell off, should he go short? NO NO NO back to CME4PIF school for you . .  click here to learn how to read the Bull and Bear Lines. You NEVER short the market when the dark green line is above the red line. That is called a counter trend move, and we don't do those. Look back over the last four years and you will see that would often have you on the wrong side of the market. What I was trying to show is that the light green line is going to make a bit of a dip here and that will be a another buying opportunity. Remember the Bull Bear Lines are our big picture overview of the market and so long as dark green is over red it is a BULL MARKET. It is very hard to understand my system of market timing if you have not full grasped lesson one. Every big sell off starts as a pull back. In both cases (dip or crash) I will see the same negative divergences here ... but it is the Bull Bear Lines that show when to give up optimism and put on your bear suit. 

It All Shows Up In The Charts . . . 

Bull Bear Lines
The predicted pull back is right on time. Probably will run out of steam just beyond the 50 day EMA( dark green line).


Primary Sell 
Clearly the market pros are running to buy some insurance. 



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 the pace is increasingly moving towards safety.



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. But bonds are not bouncing as they should... looks like the bond game might be over as fear of fed rate hike takes place...scratch my TLT idea from last week.  Risk off has begun but no flight to bonds.




S&P500 Over 50 Day
The percentage of stocks over the 50 day moving average has peaked as predicted and the slide down begins.






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 is also now caught up in the sell off... Risk Off!



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




Sectors
The new leader is financial stocks, that is kind of odd it should be utilities, but they don't do well in rising rate environment. 
The strong jobs report is causing interest rates to rise and that drives trreasury bonds down. Stocks that are interest rate sensitive reacted this week with banks and stock brokers doing well and utilities (off an average of 3%) and gold the traditional safe havens taking a beating. As I said last week, 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. Expect pull backs in consumer discretionary and high tech.
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. It certainly was our first tip off to this pull back. So it is this chart that has me the most concerned this week. In fact if this does not pull up soon ... it could get scary.





VIX
The CBOE Volatility Index (VIX), widely considered the best gauge of fear in the market, traded near 15.


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




Summary
OK well it is like this.... We are in a bull market and but this is a pull back. Last week I was "gently pulling my horns in" I am long safety, I have raised some cash and I await a buy opportunity. I have bought a ETF called VXX to hedge my risk and NO you should not bet the farm of VXX it is only to protect other positions. 



Remember CASH is a position too!





Ahh the good old days of day trading. . . .






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