Monday, 28 March 2016

March 28, 2016 – Market Comment

March 28, 2016 – Welcome to my 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. You can read the latest version each week by bookmarking http://cme4pif.blogspot.ca/.  For full details read my disclaimer (link at the bottom of this page).

I know what your thinking, what happened to you? Well I have been sailing in the Caribbean ... sorry but Barbados and St. Lucia were calling. But you missed nothing, the story really has not changed up until now. 





101 Bull Bear
Bear market (red over dark green). The light green line has come a long way up, and the dark green line is turned up, clearly a strong recovery. In short this is impressive and although still technically a bear market this no time to go deeply bearish, trying to time a sell off.  Bear Market = Bearish outcomes.
  ! 
103 NYSE High Low Market Forces
Very important: This is the chart that makes me rethink my stand. Notice the second panel of this chart, as red disappears you begin to see that this recovery is getting very broad and that is the sign of a healthy market.

105 Non Farm Payroll
Lots of jobs! But this is a lagging indicator. 
  ! 
107 Industrial Production
Not good. Watch this carefully, all recessions have falling industrial production, but data is from the end of February. I see a clear round top in the 12 period moving average

115 Renko
Obviously – 7 white up bricks trend is heading up. Clearly we have come a long way back. Hard to be a bear in an up trend this obvious
  ! 
203 OBV
Pros are lagging the market volume fades! Don’t ignore this, with volume comes safety.
  ! 
207 VIX
VIX is the fear gage .. over 15 and rising. Notice what often happens when the top panel CCI is in the oversold brown zone, it often is the start of a rise in VIX and in this case that would mean the end of the bounce. Be ready to play your short plays.

209 VIX Evaluator
Heading down clearly. Caution.

211 S&P500 over 50 day
Now 90% of stocks are above their 50day MA. However top window shows a MACD near top. Clearly a monster move, but is this the roll over?

213 Green Arrow
Only put new money to work when I draw a green arrow.
TRIX has crossed signalling a possible green arrow in the future?.
Notice the slope is loosing momentum.
No sign of a green arrow..


301 NASDAQ Summation
NASDAQ looks over bought here.
  ! 
303 Aggressive Defensive
Finally a topping roll over, end of the strong uptrend?

305 Consumer Bonds vs Equities
Consumer still steady. Bonds bottom?

307 Bond Direction
Short term bonds stumble in a strong uptrend.

309 Sectors
Consumer and defensives lead in a mostly sideways chart.

311 Nations
Meh!

313 Major sectors
Also Meh!

  ! = Pay attention this chart is important this week.



What I Find Interesting

Is this the great global economic slowdown? That’s the question. Well the answer is in the DOW theory, that tells us to watch transportation stocks for an insight in to the future. Listen now to the expert, this is what CEO of the worlds largest container-ship company, Nils Andersen told the Financial Times in an interview after the earnings release in February:

It is worse than in 2008. The oil price is as low as its lowest point in 2008-09 and has stayed there for a long time and doesn’t look like going up soon. Freight rates are lower. The external conditions are much worse, but we are better prepared.” So revenues at container carrier Maersk Line plunged 25% in Q4 to $5.19 billion mostly due to the collapse in rates. Maersk’s shipping volume was flat at 2.4 million forty-foot equivalent (FFE) containers. And this, it said, was “in line with the global container demand which is estimated to have grown 0-1% in Q4 2015.
Nils Smedegaard Andersen


What I Think
Well we are at a tipping point. It is a bear market, we expect bearish outcomes. We have had a strong upturn. It looks overbought. 

So what could go wrong? Well as John Murphy points out the 200 moving average is just below the current price and he expects it to hold. You gotta respect the words of the god of technical analysis. 


So in short, it looks like it is about to roll over and go lower. Hot shots can buy some short positions here, a good place to take a shot I guess. Conservative investors don't try to be in too early, wait for a clearer sign, don't catch falling knives, stay in cash.



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



Don't squint, All graphics can be enlarged by click on them.


Sunday, 13 March 2016

March 12, 2016 – Weekend Market Comment


March 12, 2016 – 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. You can read the latest version each week by bookmarking http://cme4pif.blogspot.ca/.  For full details read my disclaimer (link at the bottom of this page).

The markets charge ahead this week, recovering much of the losses we saw in 2016. For weeks I have been saying we are overbought, well, we are and yet on we climb.







101 Bull Bear
Bear market (red over dark green). The light green line has come a long way up, and the dark green line is beginning to turn up, clearly a strong recovery. In short this is impressive and although still technically a bear market this no time to go deeply bearish, trying to time a sell off.  Bear Market = Bearish outcomes.
!
103 NYSE High Low Market Forces
Very important: This is the chart that makes me rethink my stand. Notice the second panel of this chart, as red disappears you begin to see that this recovery is getting very broad and that is the sign of a healthy market.

105 Non Farm Payroll
Lots of jobs! But this is a lagging indicator. 

107 Industrial Production
Not good. Watch this carefully, all recessions have falling industrial production, but data is from the end of January.

115 Renko
Obviously – 5 white bricks trend is heading up. Clearly we have come a long way back.

203 OBV
Pros are with the market volume jumps! Don’t ignore this, with volume comes safety.
!
207 VIX
VIX is the fear gage .. below 17 is calming but still in the dangerous zone. Notice what often happens when the top panel CCI is in the oversold brown zone, it often is the start of a rise in VIX and in this case that would mean the end of the bounce. 

209 VIX Evaluator
Heading down clearly.

211 S&P500 over 50 day
Now 90% of stocks are above their 50day MA. However top window shows a MACD near top. Clearly a monster move, but is this the end?

213 Green Arrow
Only put new money to work when I draw a green arrow.
TRIX may cross signalling a possible green arrow in the future?.
Notice the slope is loosing momentum.
No sign of a green arrow..



301 NASDAQ Summation
Looks solid for NASDAQ don’t bet against strength here
!
303 Aggressive Defensive
Well I was expecting a toping a roll over and instead we got a recovery and more strength… This says we are in a strong uptrend.

305 Consumer Bonds vs Equities
Consumer stumbles watch out. Bonds are fading.

307 Bond Direction
Short term bonds fall.

309 Sectors
Financials get a lift.

311 Nations
Emerging markets return

313 Major sectors
Equities beat gold! I selling my gold positions. Canadian markets hold their own.





 ! = Pay attention this chart is important this week.



What I Find Interesting
China continues to post news of slowing exports. The Baltic Dry Index (the price of space on cargo ships) is at record lows. Now here is a story on the BBC about the China slow down




This is a sign that the world is not well, most of those exports were headed to the USA so if America does not want auto part, it also is not selling cars... etc. 







What Works Now

Hormel foods, time to take profits?

 


What I Think

First off let me remind you that I am not a financial adviser, this blog is my thoughts said out-loud as I make my plans for my investments. As the disclaimer says, no one really knows the future. Here is where I think we are.

This is a bear market and you must temper your enthusiasm in bear markets. In the long view in 2016 I do expect a significant pull back, probably related to defaults on junk bands and the global slowdown finally catching up with China.

 
This week we saw a number of past levels past a real long BUY signal. Combine this with an exceptional breakout above very strong overhead resistance and one must begin thinking this could be more than a bear market rally. There were some temporary global positives, between London and Chinese markets closing higher, to quantitative easing in the EU that bolstered U.S. markets.

My true shorts have all been stopped out with small profits. You must respect the tape. Also I took profits in gold as the fear has begun to subside. 


Perhaps the most interesting chart is  103 NYSE High Low Market Forces -- this week the second panel was strong in the black indicating the rally is stronger than expected. On Balance Volume is clearly favoring the bull story. 

The current rally has been impressive and many of my stops were to my surprise hit, so I remain largely in cash. However the rally has come so far and so strong that we way overbought. I expect the buying to continue for another week or more but I do expect some point of resistance and retrenchment. That could be this week or it could be in May, but trees do not grow to the sky.

So now you listen to the above and you say, its too dangerous to be short (when in doubt get out) and it’s a bear market and so we will head lower soon. If that sounds a bit like “the market will defiantly go up or down.” I agree, it not very helpful. But technical analysis tells you the season, not the daily weather, and so you do get caught on the wrong side of the market sometimes. If you look at the long-term chart below you will notice the volatility section in pink.


In volatile bear markets the participants do get whipsawed and frustrated. That is why bear markets can sell off so violently. There are no opportunities without risk.

Again I am keeping powder dry and ready for a cresting to indicate a new leg down but don't anticipate, wait far a clear signal for sell off. For now I am not afraid to ride some defensive longs.




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



Don't squint, All graphics can be enlarged by click on them.



Saturday, 5 March 2016

March 6, 2016 – Weekend Market Comment


March 6, 2016 – 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. You can read the latest version each week by bookmarking http://cme4pif.blogspot.ca/.  For full details read my disclaimer (link at the bottom of this page).

Confused? I bet -- so are some of the best experts. I can quote many famous market technicians who are asking what the heck is going on and I have heard lots of the bull and bear case. Keep in mind even in big bear markets there are strong up turns before final capitulation look at spring 2008:






CLICK HERE: To See the 100 and 200 series charts


!
101 Bull Bear
Bear market (red over dark green). The light green line has come a long way up, and the dark green line is beginning to turn up, perhaps the end of this sell off. Bear Market = Bearish outcomes.
!
103 NYSE High Low Market Forces
In the right side highlight we see green is above yellow. Breadth issues are drying up, the sell off may be over.

105 Non Farm Payroll
Lots of jobs! But this is a lagging indicator. 

107 Industrial Production
Not good. Watch this carefully, all recessions have falling industrial production, but data is from the end of Dec.

115 Renko
Obviously – 5 white bricks trend is heading up.
!
203 OBV
Pros are with the market volume jumps!

207 VIX
VIX is the fear gage .. below 17 is calming but still in the dangerous zone.

209 VIX Evaluator
Heading down clearly.

211 S&P500 over 50 day
Now 83% of stocks are above their 50day MA. However top window shows a MACD near top.

213 Green Arrow
Only put new money to work when I draw a green arrow.
I have added a new rule to eliminate too many arrows, now I do not draw arrows if the TRIX is red over green.
No sign of a green arrow..



!
301 NASDAQ Summation
Looks solid for NASDAQ don’t bet against strength here
!
303 Aggressive Defensive
Looks way overbought, expect market to fade in coming days. Be ready to go deeper short.

305 Consumer Bonds vs Equities
Consumer stumbles watch out. Bonds are fading.

307 Bond Direction
Bonds fall.

309 Sectors
Consumer is fading watch out.

311 Nations
Emerging markets return

313 Major sectors
Equities beat gold!






 ! = Pay attention this chart is important this week.



What I Find Interesting
This was an interesting article in the Vancouver Sun about a money laundering via real estate. This Vancouver home sold for $7.2 million to off shore Chinese investors.

What is happening is quite simple:

  •     Chinese investors smuggled out millions in embezzled cash, hot money or perfectly legal funds, bypassing the $50,000/year limit in legal capital outflows.
  •     They make "all cash" purchases, usually sight unseen, using lawyers, numbered companies, third parties intermediaries to preserve their anonymity, or directly in favored cities like Vancouver, New York, London or San Jose/San Francisco.
  •     The house becomes a new "Swiss bank account", providing the promise of an anonymous store of value and retaining the cash equivalent value of the original capital outflow.
  •     Then the owners disappear, never to be heard from or seen again.

What Works Now

Gold with the ticker:GLD ETF and ticker:DEF an ETF of stable defensive stocks. 







 Hormel:




What I Think
Several people have been asking what happens next? Well of course no one knows with prefect certainty but I can show you some charts and some rules of thumb and you can see how I came to my guess.
 

Right off we know the problem, the bull bear lines are dark green over red, saying this is a bear market. Bear market means expect bearish outcomes. Now the light green short-term line says we are half way recovered, so that is an impressive rally. Our daily price even passed the 200 day moving average. That says not to be overly pessimistic, and to be at least part in cash and do not mess with leverage, its just too dangerous. This is a short squeeze, people are selling to cover and those can rip your face off. 



Moving on lets look at another big picture chart, this one is the really big picture PMO chart and what is says is for the first time in 7 years we have a real chance of a secular long term bear market. You must respect this, this is no time to try and scoop a bargain on a high flyer like buying FaceBook or Amazon. 





Next we have the Value Line Geometric Index chart one of the best long term gauges showing no sign of recovery yet. 




Our OBV chart was lagging but now volume is catching up so that says the smart money is covering. 



We also see by the percent of stocks over 50 chart has hit 80% and the MACD (top line) is in nose bleed territory. It says that this recovery may be unsustainable and that we are be overbought. 



Against this we have some short-term signs of a strong recovery. Here we see green and yellow have crossed on the NYSE over 52 week high low chart. That tells you this recovery is broad and you need to respect this. This could be the bottom of the sell-off. 


Another sign that there may be real trouble on the horizon is that Gold is selling well.


Against all of the above let’s look at some fundamentals. China continues to slow down, global shipping is in a major stall with more container ships at the dock than in any time in modern history. The only bright spot is U.S. employment but that is mostly growing in low paying service jobs. We have a mess in the Middle East with a belligerent and emboldened Russia supporting the Assad regime. U.S. corporate earnings are week and the PE ratio of the market is high.

So the result is that we are not clear what happens next. My answer started on Monday when my stops kicked in on my risky shorts and I went mostly to cash. Now if I were to pick a position it would be a bit short, I continue to hold MYY and I am hedging this with defensive long equities like Hormel ticker:HRL


BUT I am ready with my figure on the button to change my long short ratio. I am still a bear but if SPY can test and hold above 2030 I will need to say this is over for a while, I am convinced 2016 will be a major sell off and I expect it now or in May. 

For the investors on the simple plan just go to cash.  In uncertainty you do not need to participate.



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



Don't squint, All graphics can be enlarged by click on them.