Saturday, 28 May 2016

May 28, 2016 – Weekend Market Comment

May 28, 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).

So did I nail that, or what? As predicted last week we had a strong dead cat bounce on oversold conditions. Monday and Tuesday were up strong, fading as the week progressed. The DOW and S&P500 posted the best week since March. All week it was financials leading all S&P 500 sectors higher. UnitedHealth and Goldman Sachs had the greatest positive impact on the Dow Jones industrial average as most constituents gained.





!
101 Bull Bear
Bull market (Dark Green over red). Nothing but strength. Notice the turn around pattern in the second window showing gaining momentum in the 50 day slope. Bull Market = Bullish outcomes.

103 NYSE High Low Market Forces
Nothing but strength.

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 this data is from the end of April. Notice a clear round top in the 12 period moving average. This is the sign of a recession looming.

115 Renko
New white bricks, the trend is up.
!
203 OBV
OBV lags the market. Pros are not buying this could be a sucker run up – Caution could signal a pull back from this run up.

207 VIX
VIX is the fear gage ... 13.31 – Fear has ebbed to a low point. Notice the CCI in the top window.

209 VIX Evaluator
Nothing but strength.

211 S&P500 over 50 day
Last week 63% this week now 67% of stocks are above their 50day MA. Now gaining momentum.
!
213 Green Arrow
Only put new money to work when I draw a green arrow.
ALERT! New Green Arrow this is a GOOD TIME to go long the market.
TRIX is green over red, expect positive outcomes.
No sign of a green arrow..


301 NASDAQ Summation
Nasdaq is recovering.

303 Aggressive Defensive
Finally a topping a roll over, end of the strong up trend?.

305 Consumer Bonds vs Equities
Consumer tanks but might recover about here. Bonds bottom. Bonds suck this week.

307 Bond Direction
Short-term bonds -- long term up trend is up.

309 Sectors
Notice the defensives/utilities are dropping fast, consumer is at bottom of normal range, financials are up and tech is recovering.

311 Nations
USA wins big this week.

313 Major sectors
Some recent signs of life in commodities Canada does well.


! = Pay attention this chart is important this week.



What I Find Interesting
In a ringing speech at the Hiroshima Peace Memorial, Obama said the nuclear attacks that ended World War II have a clear, simple legacy: We now have the ability to destroy ourselves. As the first sitting US president to visit Hiroshima, Obama didn’t offer an apology for the bombing. But he said the best way to honor its victims is to advance “the radical and necessary notion that we are part of a single human family.”



What Works Now

Nvidia (ticker: NVDA) makes graphics chips for computers and smart phones. For years the stock languished as PC sales dried up. More recently there have been some challenges to patents by Samsung. Recently the Nividia common stock has leaped up due to the companies agreed to a license a “small number of patents by each company to the other, but no broad cross-licensing of patents or other compensation,” they said in a joint statement Monday. The agreement came hours before the U.S. International Trade Commission in Washington was scheduled to announce its final decision in a case Samsung had filed against Nvidia. A trade judge had said Nvidia and its customers infringe Samsung patents for ways the chips are made.



Technology stocks have rebound the last few weeks, the technology ETF (ticker:XLK) has been part of the bounce.


The select Dividend ETF (ticker:DVY) has been a strong performer, as investors seek safety and returns. But is this the tun as the rotation to technology stocks?




What I Think
Well the head and shoulders pattern that was so evident last week has for the most part been eclipsed by a very strong rally. On the one hand we have come far and fast, even the pros have hesitated here. The OBV chart is telling you that it is the smaller players now propelling the market. Also we have failed to make new highs in the major markets in the last 12 months.  They can hold this market up for some time but in the long run they are the last to the party. Also if you look at the aggressive defensive chart you know we are at best a week or two from a more defensive cycle. Our VIX chart is down in the territory where complacency often turns to panic. Certainly the CCI on that chart is worth a glance.  With the Fed making more hawkish statements and the decaying results in industrial production I still think there is trouble coming in 2016. 

That said the Bull Bear lines are bullish and the NYSE High Low graph is showing no issues with breadth. The VIX Evaluator is showing nothing but good news.  Also there is no real compelling issues on the horizon.  So its a case of the market can remain illogical longer than you can remain solvent. 

So what I am saying is this is no time to short the market. Also this market is likely to see a pull back in the coming weeks. For now be long and watch for sudden down turns.  






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, 22 May 2016

May 21, 2016 - Weekend Market Comment

May 21, 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 market appears mid way in an in progress sell off as the charts form a classic head-and-shoulders pattern.


Despite an early morning rally on Friday, the overall tone of the market is glum. With the S&P breaking key technical levels, only Dow Transports remains in the green (up less than 1%) for the year now as Fed speakers pile on the hawkish tone.






!
101 Bull Bear
Bull market (Dark Green over red). That said the short term light green line is heading down. Notice the topping pattern in the second window showing loss of momentum in the 50 day slope. Bull Market = Bullish outcomes.
 !
103 NYSE High Low Market Forces
Loss of conviction began this week with a tiny bit of red showing in the lower window, but more importantly the upper part of the graph looks weak and ready to roll 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, This data is from the end of April. Notice a clear round top in the 12 period moving average. This is the sign of a recession looming.
 !
115 Renko
New black brick, the trend could be broken.

203 OBV
OBV leads market. Pros are still with this market – Caution could signal a upward pull back from this sell off.

207 VIX
VIX is the fear gauge ... 15.05 -- This turn could be short lived but the pros are buying insurance that is for sure!
 !
209 VIX Evaluator
Last weeks tiny tick upward, is gone. Still looks positive.

211 S&P500 over 50 day
Last week 60% degrading this week now 42.8% of stocks are above their 50day MA. This has been sliding lower since March 20th. Slow loss of momentum.

213 Green Arrow
Only put new money to work when I draw a green arrow.
ALERT! Notice the slope is loosing momentum.
TRIX is green over red, expect positive outcomes.
No sign of a green arrow..

 !
301 NASDAQ Summation
Nasdaq is weak.

303 Aggressive Defensive
Finally a topping a roll over, end of the strong up trend? Clearly more defensive.

305 Consumer Bonds vs Equities
Consumer up a bit. Bonds shooting ups . Bonds have done very well this week. Risk off -- fear on.

307 Bond Direction
Short-term bonds rise in a rounding top to the long term up trend.

309 Sectors
Notice technology is ready to bounce up.

311 Nations
Commodities bounce back and Canada rebounds on good news at oil sands fire.

313 Major sectors
Some recent signs of life in commodities.

  ! = Pay attention this chart is important this week.

What I Find Interesting
The head and shoulders pattern is generally regarded as a reversal pattern and it is most often seen in up-trends. It is also most reliable when found in an uptrend as well. Eventually, the market begins to slow down and the forces of supply and demand are generally considered in balance. Sellers come in at the highs (left shoulder) and the downside is probed (beginning neckline.) Buyers soon return to the market and ultimately push through to new highs (head.) However, the new highs are quickly turned back and the downside is tested again (continuing neckline.) Tentative buying re-emerges and the market rallies once more, but fails to take out the previous high. (This last top is considered the right shoulder.) Buying dries up and the market tests the downside yet again. Here is a long term look at the S & P 500, notice we had a head and shoulders in 2008.





What Works Now
Oil looks to be recovering a bit. I find this odd with the US oil reserves full, and Reuters saying many container ships full of oil are being parked near Singapore. There is some concern of a shutdown in the Canadian Oil Sands due to a forest fire. But that too looks under control.




Commodities?
Many people are waiting for the return of rising commodity prices. I am not a big fan of this, but there is a definite upturn of late. If you read what I wrote in 2013 -- pop goes the commodity bubble, you know I feel the post 2001 run up in commodity prices was mostly big funds allowed to trade in the space after regulatory changes. I see no catalyst for a commodity run now.


The CRB index (ticker: $CRB) index comprises 19 commodities: Aluminum, Cocoa, Coffee, Copper, Corn, Cotton, Crude Oil, Gold, Heating Oil, Lean Hogs, Live Cattle, Natural Gas, Nickel, Orange Juice, Silver, Soybeans, Sugar, Unleaded Gas and Wheat.





What I Think
The market is disintegrating at a steady pace. Industrial production is better this month than last, but probably will fall off again and perhaps trigger the next down leg. Don't bet the farm on a big short position here, when I look at the oscillators I have no trouble imagining a dead cat bounce here, but I am not in love with this market, advancing on low volume. The NASDAQ looks oversold and thus should bounce, but I think it will all be short lived if it happens at all. This is May and now 7 years in a bull market.




 

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, 14 May 2016

May 14, 2016 – Weekend Market Comment

May 14, 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).

As I mentioned last week we continue to loose momentum as we move in to May. It fits with my belief that we are entering a soft spot in the market and entering a correction. There was a quick exodus of money late on Friday. The Dow Jones industrial average and S&P 500 closing below their 50-day moving averages and posting their first three-week losing streak since January.




!
101 Bull Bear
Bull market (Dark Green over red). That said the short term light green line is heading down. Notice the topping pattern in the second window showing loss of momentum in the 50 day slope. Bull Market = Bullish outcomes.
 !
103 NYSE High Low Market Forces
Nothing but strength. Take this as a note of caution, all is not lost until we start seeing some red spikes. 

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 this data is from the end of March. Notice a clear round top in the 12 period moving average. This is the sign of a recession looming.
 !
115 Renko
New black brick, the trend could be broken.

203 OBV
OBV leads market. Pros are still with this market – Caution could signal a upward pull back from this sell off.

207 VIX
VIX is the fear gauge ... 15.05 -- This turn could be short lived but the pros are buying insurance that is for sure!
 !
209 VIX Evaluator
Last weeks tiny tick upward, is gone. Still looks positive.

211 S&P500 over 50 day
Last week 63% this week now 60.6% of stocks are above their 50day MA. This has been sliding lower since 4 weeks ago. Slow loss of momentum.

213 Green Arrow
Only put new money to work when I draw a green arrow.
ALERT! Notice the slope is loosing momentum.
TRIX is green over red, expect positive outcomes.
No sign of a green arrow..

 !
301 NASDAQ Summation
Nasdaq is weak.

303 Aggressive Defensive
Finally a topping a roll over, end of the strong up trend? Clearly more defensive.

305 Consumer Bonds vs Equities
Consumer up a bit. Bonds shooting ups . Bonds have done very well this week. Risk off -- fear on.

307 Bond Direction
Short-term bonds rise in a rounding top to the long term up trend.

309 Sectors
Notice the defensive/utilities are leaders up hard, consumer is up but financials and tech are down. Bearish.

311 Nations
Commodities bounce back and Canada rebounds on good news at oil sands fire.

313 Major sectors
Some recent signs of life in commodities.

  ! = Pay attention this chart is important this week.


What I Find Interesting


Pork Barrel Airplanes in Canada
According to Bloomberg, Justin Trudeau is trying to negotiate a bit in a planned $1 billion bailout for Quebec biggest corporate welfare company Bombardier. Since 1966 Bombardier is Canada's leader in corporate welfare. The new pretty-boy Prime Minister claims he is asking for less family control, but it can not work -- the Liberals are eager to get started on election favor paybacks. They must immediately remind Quebec that supporting the Liberals means flowing money from English Canada in to Quebec. Really the only private project in Quebec that can use up that much Western Canada tax money and still make a few high tech jobs is Bombardier. Bombardier management knows they can play hardball and the federal government must give in. The Prime Minster knows it too, but he can't just hand over the money until it looks like he tried to play tough -- in this next of a long line of bail outs. Of course it would be cheaper to just pay the staff of Bombardier to stay home, but that would be politically incorrect.




U.S. Debt reaches 1929 levels
Debt continues to rise. The following chart from the U.S Federal Reserve shows the last century of US non-financial leverage in context. As of this moment, consolidated US non-fin debt/GDP is about 275%, or roughly where it was US when the great depression stuck. Notice the "tipping point" threshold levels, keep an eye on 300% - that's when the system collapsed last time leading to a devastated economy.



Global Slow Down
My Marketing professor at Harvard Business school used to refer to Larry Summers as "that little twirp from across the river". Classic business school vs the rest of Harvard rivalry. 

These days Larry Summers continues to worry that an extended period of ultra-low and even negative rates will cause bubbles in assets like stocks and housing, as desperate investors chase after higher returns. He says fiscal policy needs to play a much bigger role than it has. He has some plans that are very FDR like to save the world.  Read more about it here in Business Weekhttp://www.bloomberg.com/news/articles/2016-05-12/how-to-pull-the-world-economy-out-of-its-rut.


Drones Become Art
This video of drones being used in Japanese ballet type performance has gone viral. Japan has some fairly strict drone regulations that bar private pilots from flying the devices in public parks, but that hasn't stopped a fleet of the remote-controlled vehicles from taking to the skies to perform a "ballet" accompanied by traditional Japanese shamisen music, set against the beautiful backdrop of Mount Fuji. The performance was produced by Japanese company MicroAd, which used more than 20 of its LED-encrusted Sky Magic drones to fly in formation with the music, their 16,500 lights twinkling in the dusk gloom.

The effect marries the old and the new, sandwiching the modern drones between players of centuries-old instruments and Fuji itself, an immovable and ancient symbol of Japan. In the half light, the drones first look like part of the landscape, like lanterns or fireflies, before their technological origins are given away when they start twitching and turning in unnaturally precise patterns.


Stunning to watch!





What Works Now
 

Be Defensive
Defensive stocks are still gaining. The Defensive ETF (ticker: DEF) invests in big firms with stable cash flow particularity consumer staples like soap and basic pharmaceuticals -- not to be confused with weapons and defense contractors.


Love is on an Upswing
Yes one firm is selling love and not in a alley lit with a red light. Match Group (Ticker: MTCH) operates 45 relationship networks to help solve the lust for love. This company recently IPO'd and the stock is starting to behave a little better after an initial decline.

 

What I Think

I think we are late in a 7-year bull market, and beginning a correction. My own Bull Bear lines still have this as a bull market, but I am not convinced. Also many experts I respect do not agree. Two of the smartest men on the street, Arthur Hill and John Murphy both see this as continuation of the long term up trend. They see no serious threat to the U.S. economy. I will agree that right now there is a certain buoyancy due to money being created through debt in China and fleeing to western investments particularly real estate. 

However from my charts it looks like a classic topping pattern. I think in the months to come and corrections will come more often as the market is fully priced. Manufacturing is in decline and that is often a sign of trouble. Money will start to rotate out of the markets if a recession looms. Watch chart 103 NYSE High Low Market Forces for any signs of a decrease in market breadth. 

It helps to step back sometimes and look at the really big picture.  Have a look at my long term PMO chart, still looking long-term negative. 

Notice the top window of the chart ... the red line cross the black generally when a long-term term down trend has begun. No chart of the past data can perfectly predict the future, but in the long run -- the market does trend.





 
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.