Friday, 27 November 2015

November 28, 2015 – Weekend Market Comment

November 28, 2015 – Welcome to my weekend market comment, an analysis tool I use in my own portfolio decisions, published free to the web every weekend before the New York opening bell. For full details read my disclaimer (link at the bottom of this page).

As predicted last week this has been a strong up week for the markets. We are now 7 years in to a bull market -- that has only happened 3 times before. The PE of the market is running about 17, historically high. Friday was a super low volume day, and the first figures from Black Friday were mixed. Gold plunged to 1050, do you recall the days when it was supposedly IMPOSSIBLE for it to break 1200, ha! Canada got taken out to the wood shed with a lower stock market  and more misery in the "Norther Peso" the Canadian dollar.  The Shanghai Composite Index slumped 5.5 percent as authorities in China continued their crackdown on brokerages, with three of the nation’s largest now being investigated for alleged rule violations. After the close, the Securities Association of China announced that it will ban brokerages from financing stock trading using derivatives. Big Brother says "stop selling". In other news Turkey decided to flirt with starting world war three by shooting down a Russian fighter jet. The encouraging thing is that with all this bad news, the market probably should have been down more.






101 Bull Bear
Dark green over red this is bull market.

103 NYSE High Low Market Forces
Strength returns as green attempts to pass yellow.

105 Non Farm Payroll
Still looks good. Based on Oct 1 data

107 Industrial Production
Based on Oct 1 data

115 Renko
A new white square up - bullish.
 !
203 OBV
Red line must keep up with price. It is ok if it lags for a day but this is more than a day. This is your big warning.

207 VIX
Bullish heading for possible bounce at 14.5

209 VIX Evaluator
Falling looks bullish

211 S&P500 over 50 day
Bizarre flat line at 70.8% - indeterminate 

213 Green Arrow
Only put new money to work when I draw a green arrow. Not yet.






301 NASDAQ Summation
Very Bullish

303 Aggressive Defensive
Very Bullish, seldom can hold these levels more than a week.

305 Consumer Bonds vs Equities
Consumer flat, odd at Christmas, rest of market is confused about bonds.

307 Bond Direction
Bizarre flat line

309 Sectors
Bullish but beware NASDAQ exhaustion

311 Nations
German and USA only bright spots

313 Major sectors
Nada, zip nothing here. Gold = Toast Canada = Bangladesh



! = Pay attention this chart is important this week.


What I Find Interesting


I thought you might enjoy some cartoons from the great depression. What is interesting is they are still applicable today.

1929:


1934:



The Problem: 
Goldman Sacks is sending this out it its clients, in case you are wondering, the way over-priced FANG stocks (Facebook Amazon, Netflix and Google) are under U.S. software and recent figures show, the other U.S. bright spot, housing starts are declining. The tiny green blip in China software is mostly Alibaba.  As for the rest of the 6 billion people on the earth, the 2016 recession is already in full swing.


Consumer Staples -- The Lifeboat
When it is late in the market cycle and investors get fearful, they hide in consumer staples, things people need no matter how bad things get. Stuff like basic food. Well the maker of Hormel Chili and of course SPAM, is doing well these days. (ticker: HML)
  


What I Think
 
A quote from "Reminiscence of Stock Market Operator": Union Pacific stock just would not go down. Livermore was heavily short, and his position looked increasingly futile. Even his associates urged him to cover. That friend of his from Atlantic City admonished, "You see, Jesse, the market never lies." To which Livermore replied, "Yes, the market never lies, but it doesn't always tell the truth on an instant, either." And so it is now, the market is not telling the truth on the instant, but I feel strongly if OBV does not head up, we are going to see a pull back in the next 2 weeks. 

Still I see some resilience in the market until either the fed hikes rates in December or a sell in May 2016. When that big sell off comes, your budget might change your eating habits . . . might I suggest . . .






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


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Saturday, 21 November 2015

November 21, 2015 – Weekend Market Comment

November 21, 2015 – Welcome to my weekend market comment, an analysis tool I use in my own portfolio decisions, published free to the web every weekend before the New York opening bell. For full details read my disclaimer (link at the bottom of this page).

Well like the sign says, despite a strong rally this week, I would like to report some market "suspicious activity". Market tops have many "tells" that an astute market technician can read. Below are a few I see this week. This is not a time to panic, but you are kidding yourself if you don't arm yourself with good market intelligence. 





Click here to see charts: Charts 100 and 200 series.



Weekend Market Comment Core Charts

101 Bull Bear
Dark Green passes Red. The Bear is dead.
!
103 NYSE High Low Market Forces
This is looking a tiny bit better, notice the cross over in the lower window, now red is black, but it is important to watch. In the upper window, Yellow OVER green, still not real healthy.

105 Non Farm Payroll
Looks good date but Chart date is  Oct 1


107 Industrial Production
Not good but this is data from Oct 1

115 Renko
One down block could be a new downtrend
!
203 OBV
Red line must keep up with price. It is ok if it lags for a day but this is more than a day. This is your big warning.

207 VIX
Fear subsided a bit this week, could have a Nov 1 repeat?

209 VIX Evaluator
Drops slightly fear subsides.

211 S&P500 over 50 day
Leveling out here? Should keep going lower, if things are so fine.

213 Green Arrow
Only put new money to work when I draw a green arrow. This is NOT the time.
 
Click here to see charts: Charts 300 series

301 NASDAQ Summation
Summation dropping, expect market to follow soon.

303 Aggressive Defensive
Could continue or as in last summer just fizzel out here. Positive so far.

305 Consumer Bonds vs Equities
Equities beat bonds as a rate hike in December may happen.

307 Bond Direction
turning down again
!
309 Sectors
Beware when utilities and defensive stocks rise. Good news consumer stocks (Amazon mostly) prepare for Christmas.

311 Nations
China rally on government protected (you sell you go to jail) market.

313 Major sectors
Gold and Canada suck - like that is news?


! = Pay attention this chart is important this week.



What I Find Interesting

Carl Icahn
Please go to http://carlicahn.com/ and watch his video, except for endorsing President Donald Trump, I agree with all that is said, we are in a huge credit bubble.


Commodities In Free-fall
I'm worried about what we have is a near deflationary free fall going on in commodities. The other side of this is the very strong U.S. dollar hurting U.S. exports.

Commodities CRB index:

Copper:

Crude Oil WTI broke below $41 a barrel:

Natural Gas $2.33:


According to Bloomberg, it has gotten so bad that Goldman Sachs this week closed, what was 12 years ago, one of the worlds most popular funds, the BRIC fund (Brazil Russia India China). As each of these nations enters an all out depression. (Canada and Australia are you next?).

So why do you care? Well we already had a market meltdown in 1997 when developing countries could not pay back U.S. denominated debt when their currencies were falling. Now look at today -- the world is awash in easy credit and outside of the U.S. dollar and the Swiss franc, the worlds currencies are falling hard. As emerging market currencies decline, the income streams needed to service all the debt denominated in U.S. dollars declines, a self-reinforcing dynamic: as income and valuations fall, capital flees, pushing the relative value of the currency down even more, which further raises the risk premium that then triggers even more capital flight. Their is a lot at stake, (estimated $11 trillion in emerging market debts denominated in other currencies). If you are wondering where that debt came from it is U.S. banks making easy money on loans collateralize by the last U.S. bail out (TARP) in 2008. We could be setting up the second act.



The Market is Weaker Than It Looks

First lets look at the really really big picture this is 20 year view of the Wiltshire 5000 stock index, the broadest U.S. market index of them all.

In the main window I have a bollinger band with a cyan colored dotted center line. I have placed large blue shaded boxes at each point the dotted center line went sideways or declined. Look in those blue boxes...you see the problem?

The next window down is the MACD, I placed a red arrow showing where MACD is now showing both a high end of the range and a recent decline (cyan over gray). Guess what is next?

Finally at the bottom is (green line) ATR or Average True Range, think of this as how wide prices move on a daily basis, it is a kind of volatility measure. Big ATR swings is a sign of greed and fear frantically switching back and forth. Notice investors hate too much volatility and step aside when the market becomes a casino. I have drawn a pink zone where any rising volatility becomes uncomfortable. The deeper the 14 month ATR rises in to the zone of discomfort, the greater the overall volatility and the more investors give up. So you see what I am getting at?


Take My Breadth Away

I presented this chart previously, but it is a goody! The chart is the RATIO of the SnP500 equal weight(RSI) vs the Cap Weight SnP500(SPY). You can take away two things from this:
  • The smaller SnP 500 stocks are often international firms and that the global economy sucks. 
  • As we discussed last week only 8 U.S. stocks are controlling most of the market: FANG (Facebook Amazon Netflix Google) and NOSH (Nike O'Reilly Starbucks and Home Depot). 


Just like produce at a supermarket, it is question of what you get for your money. You can not just blindly buy a "good company" stock in the stock market at any price. In any "market" it is always a question "what quality, at what price?". At the turn of the year, the FANG stocks (Facebook Amazon Netflix Google) had a combined market cap of $740 billion and combined 2014 earnings of $17.5 billion. That was a P/E multiple of 42.

Now look at where we are now, at this week’s close, the FANG stocks were valued at just under $1.2 trillion, meaning they have gained $450 billion of market cap or 60% during the last 11 months - even as their combined earnings for the recent earnings period were up by only 13%. To put that partial year market value gain, of 1/2 a billion dollars in to perspective, the GDP of Switzerland is $685 billion and Taiwan is $480 billion.  Now are you concerned?

As you can see when a market gets to concentrated on the big boys it is often a sign of an impending  bear market. I recall 1999 when all people would buy was Enron and Yahoo, that did not end well.  In all fairness, I should say that the Midcap 400 did do better this week, so there is hope. I am just saying, keep this chart in mind when you think everything is rosy.


What I Think
I did very well this week short until Monday when the market bounced back, my stops kicked in just before a meeting in Vancouver. Lesson here, let the computers watch your back.  In fact this was the best up week for the markets since December 2014. The run up was so dramatic that the DOW broke above "break even" so far for 2015. "Whoop Whoop" we are back to even!

Despite the current upward bounce I am very concerned that the pros are leaving the market. Here is a chart form Merrill Lynch saying that big institutional (smart money) is exiting the market. Always a sign of trouble.


We have our own indicators here, here is the Primary Sell and OBV charts. Both behaving like the big money is not participating.



The bottom line is this, we are in a bounce up, I expect mostly upside for the next few days. Have a look at the VIX chart, next week as the market rises, you will probably watch the VIX slip back another point to about 14.5 -- and if you look at the S&P 500 chart we might reach a double top about 2120. But expect a sharp reversal after that. In short this might be a huge bull-trap. This is a very dangerous market and so far the smart money is on the sidelines. I have listed in prior post all the problems globally and I see 2016 is going to be a tough year.

View here about Hedge Fund superstar David Tepper, who agrees about the common investor raising some cash.

To sum up, currently I am very cautious. To change my mind I will need to see a strong move up in the broader RSP index, some increase in the OBV line and a bit more positive action on the NYSE high low market forces chart. It is U.S. Thanksgiving this week, be careful in the markets and YOU won't be "the Turkey".






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

Don't squint, All graphics on this page can be enlarged by clicking on them.
Read My Disclaimer Here



Thursday, 12 November 2015

November 12, 2015 – Weekend Market Comment

November 12, 2015 – Welcome to my weekend market comment, an analysis tool I use in my own portfolio decisions, published free to the web every weekend before the New York opening bell. For full details read my disclaimer (link at the bottom of this page).

Yes I know Nov 12 is a Thursday but I am at a conference this weekend.


I am getting tired of writing the weekend market comment. It takes hours to do all the formatting. WHICH THANK YOU GOOGLE BLOGGER IS TOTAL FUBAR. So either I getn me an assistant to publish this (fat chance) or you can all suffer. On the good side I am lowing the price from free, to 20% off of free.  I think it is worth every penny!

This is the new experimental trimmed down version.  The charts are now in a pdf file you click to view. The Primary sell chart is gone, it is too much work to publish. Also expect a lot less guidance from me. I am not an adviser.

Click Here to see charts Charts 100 and 200 series.


Weekend Market Comment Nov 12 2015

101 Bull Bear
Still says it is a bear market (red over dark green) and now the short term (light green) is falling off
!
103 NYSE High Low Market Forces
In the right side highlight we see green is below yellow this is the number on reason I am pulling in my horns.

105 Non Farm Payroll
Still looks good
!
107 Industrial Production
Watch this carefully, all recessions have falling industrial production

115 Renko
Nothing but bullish
!
203 OBV
Red line must keep up with price. It is ok if it lags for a day but this is more than a day. This is your big warning.

207 VIX
Clearly the pros are buying protection. The upper panel CCI says it may already be overdone.

209 VIX Evaluator
Looks like it wants to go higher.

211 S&P500 over 50 day
Falling as expected. Expect trouble if this continues.

213 Green Arrow
Only put new money to work when I draw a green arrow.

Click Here to see charts Charts 300 series


301 NASDAQ Summation
Says might be some hope

303 Aggressive Defensive
Very defensive

305 Consumer Bonds vs Equities
Consumer kicks in for Christmas, rest of market getting defensive despite danger of fed rate rise.

307 Bond Direction
Has been very negative
!
309 Sectors
Beware when utilities and defensive stocks rise.

311 Nations
German and USA only bright spots

313 Major sectors
Glimmer of a bounce in gold that has set new low recently and is fighting a strong US dollar.


! = Pay attention this chart is important this week.

What I Find Interesting

Fancy a Flat in London Mr. Wong?
Bloomberg points out that  new proof of income rules and taxes on foreign ownership are in both Australia and the U.K. making it harder for Chinese to use real estate to launder money. Canada (wink wink nudge nudge) has still not caught on, as Vancouver is still selling well. Here is what $1.5 million will get you in Vancouver. Lets see what you get in the USA under $200,000

Nosh and Fang to the 'Rescue'
This came to me from Goldman's client research . . . It says that the last recovery from the August sell off was primarily from just 8  darling stocks. FANG and NOSH refers to FANG (Facebook Amazon Netflix Google) and NOSH (Nike O'Reilly Automotive Starbucks and Home Depot)


These are the core holdings of mutual funds and hedge funds. They are sporting crazy valuations and fund managers know it. History has been here before look up the Nifty 50 era, people all bought the same stocks, then it ended in a terrible crash when big funds all sold at once. But at least that was 50 stocks now we are down to just 8.


What Is Hot Now

You can read this: at Bloomberg Energy Default Alarms Get Louder as Pain Seen Lasting Into 2016.
Now you know why Junk Bonds are toxic waste. SJB is the Short Junk Bond ETF



If the market has a pull-back think about being long the VIX with the VXX ETF. Caution this is a very volatile ETF don't play this with your core holdings.


 


What I Think
I have not believed in this market since Aug when the NYSE High Low Market Forces (52 week high low) chart sloped down. Yes I was bullish during the recent bounce, how could you not be, it was very impressive.

Right now I stand alone. Many experts just this week say this is a buy the dips market, I say it is a sell the pops market. We will see who wins. My logic is simple, every country in the world is facing a slowing economy including all of the G8. Economies number 2 (China) and 3 (Japan) are particularly in trouble.



Lets see how this week went:
  • S&P -3.2% - worst week in 3 months
  • Retail -8.2% - worst week in 4 years
  • VXX +17.9% - biggest week in over 2 months
  • VRX -8% - down 7 of last 8 weeks
  • AAPL -6.4% - worst week in 2 months
  • Financials -3.2% - worst week in 2 months.
  • Copper -3.5% - worst week in 2 months (down 5 in a row)
  • WTI Crude -8.7% - worst week since Dec 2014
  • HYG -1.7% - worst week in last 7 weeks
  • HY CDX +35bps - worst (non-roll) week since Decmber 2014
  • Long Bond +0.8% - best week in last 4
  • 5Y Yield dropped 5bps - most in over a month today

Most of the gains lately were concentrated in a few stocks (see above) and much of the increase in value in the market is coming from stock buy backs not real business. Meanwhile the USA is experiencing a pull back in manufacturing and the only thing people can point to is rising employment. That means service industry jobs - here is your paper hat.



Most of the market gains lately are concentrated in a few top 100 stocks and especially the big 8 (see above). Plus much of the increase in value in the market was coming from stock buy backs, not real business, but even that is ending. Overall debt is at a record high for both nations and individuals. The boomers are demographically downsizing and they are clutching on to their change purses. Both Hedge Funds and Mutual Funds are experiencing cash outflows and so their is little fuel for a rally.  Add to that we are 6 years in to a big bull run, on the verge of a interest rate hike and stocks are fully valued, I see nothing much to cheer about.



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

Don't squint, All graphics on this page can be enlarged by clicking on them.