Saturday, 29 October 2016

October 29, 2016 – Weekend Market Comment

October 29, 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).

What is the problem? Well the markets are generally not happy right now and when you see the charts you will see why. The Equal-Weight S&P 500 ETF (RSP) is down around 1% since mid July and has gone nowhere the last three months. Many key sectors are also looking very weak.

Lets see what is in the chart this week:





101 Bull Bear
Bull market (dark green over red) and now the short term (light green) is down sharply. Also note the dark green 50 day average has begun to fall off. NOTICE THE SLOPE (second window), this could be part of a long term down trend.  Bull market -- expect bullish outcomes.

103 NYSE High Low Market Forces
Nothing but strength. Bullish. Our last hope...

105 Non Farm Payroll
Lots of jobs! But beware this is lagging indicator. The smart money is gone before this turns down.

107 Industrial Production
Could be turning up again, if not expect rally to fail.

115 Renko
Market is breaking down new black bricks! BEARISH!
!
203 OBV
OBV (red line) is below the market. DANGEROUS.

207 VIX
VIX fear is up, looks like it has maxed out and might retreat from here, mean revision generally rules, until it doesn’t. . Rising VIX is bearish!

209 VIX Evaluator
Sideways to down still. Neutral

211 S&P500 over 50 day
Now 33% stocks are above their 50day MA, slight move down from last week when it was 35%. Neutral.
!
213 Green Arrow
Only put new money to work when I draw a green arrow. TRIX says no way we draw a green arrow here. VERY Bearish!

!
301 NASDAQ Summation
Notice how the NASDAQ was leading, but as this chart shows now falling apart on weak breadth. Trouble was coming for aggressive tech stock and looks like it is here.
!
303 Aggressive Defensive
Very defensive, but as an optimist you might say the worst might be over?
!
305 Consumer Bonds vs Equities
Bonds SUCK. Consumer SUCKS a bit. Ewww Bearish

307 Bond Direction
Weakness in bonds indicates overall market caution of coming rate hikes.

309 Sectors
Defensives rise! Tech falls off, we saw this coming!

311 Nations
Oh Canada, look at you go with a new interest in gold mines. Third world sucks, good bye Philippians!

313 Major sectors
Canada looks good. Commodities look brighter.

! = Pay attention this chart is important this week.


What I Find Interesting
So each week we come here and we see the charts go up and down and we look on a small scale at what is happening. But of course the big money is the big trends, bubbles inflating and bubbles bursting. In 2007 I predicted the housing crisis. In my thoughts blog I predicted the end of the commodity bubble, the end of the gold cycle and the super boom now underway in America I called the new momentum. I saw the parity for the Canadian dollar ending in 2012. Bubbles are fairly easy to see if you know what to look for. I look for something that is a big deal and is changing everything from the way it was and sit back and listen as people tell you this bubble is different, this will never end. I saw it in Japan in the 80's and I saw it in Alberta a few years ago in the Oil boom.


Unfortunately seeing a bubble too soon can be a problem too, there were men trying to short the U.S. housing market in 2006 and that must have been hard. Jessy Livermore called this "seeing the market through a telescope". I have been predicting a catastrophic economic disaster in China since 2007, I also was very confident that 2015 was the start of the sell off -- it was not. But one of these days . . .

Still the bubble in China will pop, and when it does it will be the disaster and possibly an opportunity of lifetime. I have finally had the time to write the whole idea what will happen in my CME4PIF Thoughts blog,  and I urge you to read this comprehensive work. Especially the paragraph in red the talks of the 83 billionaires in the National Peoples Congress, the flight of cash out of China and the 40 min BBC video called "How China Fooled the World". The forces at work here are truly monumental. This will be as big as the American great depression, The French revolution or 9/11. This is a game changer and it will come in your lifetime. 
Click here to read The China Problem


Bitcoin Explodes upward
Bitcoin has jumped 10% in value this week, I believe in large part because of frantic attempts by the Chinese government to stem capital outflows. No I did no say to jump in this is a very violent investment and could drop 10% next week, bu it sure is interesting.




What Works Now

CA$H baby!! take some profits!!

 

What I Think
I think the market is not happy about a rate hike in December,  a global slowdown in trade, BRIEXIT and generally the Chinese up their designer hand bags in debt at 3:1 their GDP. 


I think the Bull Bear lines are still calling this a bull market, but if you study the Bull Bear lines lesson one in the CME4PIF school, you know that Bull Markets can still be a bad time to jump in. Believe me when the 50 slope line crosses negative in the Bull Bear chart start getting nervous. The 50 day slope is the lower window.  Look at the vertical red lines, these are points the market fell apart, when the 50 day slope went negative.
 
Yes technically it is a bull market and the mean-reversion guys are ready with fingers on the buy button as we are oversold. Sure you must be ready to take off your bear hat in a hurry here, but caution is warranted. 

Particularly concerning is the timing of all this, this is just about when the market should be catching fire as we enter the most profitable part of the trading year. 


In short you must really pay attention at times like this. Buying opportunity or sell-off this is where we find out.

What I see right now is breakouts are failing. Stocks are losing upward momentum, and the S&P 500 indices make it seem as if everything is fine and dandy.  We are in fact seeing really disturbing charts on everything except Gold and Banks. Even Gold is only Luke-warm and banks are typically the last sector to do well in the economic cycle. 

Lets see some sector ETFs

Well the engine of the U.S. economy is housing. . .Kaput! (Ticker:ITB)
 
The safe haven that would have saved your butt in the 2008 meltdown safe stable 30 year U.S. treasuries,  now looking pathetic as Janet Yellen plans to hike rates in December. If we switch asset classes (stocks and bonds), we see an odd thing about this new low in stocks. Jumping to the bond market, we see that yields, specifically the 10-year Treasury yield, are hitting 5-month highs. Now, as bond prices move opposite yields, it strikes us as odd that bonds would also be hitting multi-month lows along with stocks. In recent years, bonds have been a reliable haven in the midst of stock weakness. To see both assets at new lows is certainly a change of character for the market.  Global bond yields have started to rise (pushing bond prices sharply lower). Notice commodity prices have risen more than 20% since February. That's potentially inflationary. 

Treasury yields were on the rise as the 10 year treasury yield ($TNX) broke above 1.80% to continue its recent uptrend.  Selling in treasuries sent the yield higher and also provided a boost for certain interest-rate sensitive areas of the market like banks ($DJUSBK) and life insurance ($DJUSIL).  (Ticker:TLT)

MVV 2X juiced etf based on the midcap 400, small stocks are being abandoned. This ETF is the ultimate risk on play. (Ticker:MVV)

This ETF -- DVY is the ultimate risk off play. DVY is the largest most stable firms.  (Ticker:DVY)
 
The heart of the U.S. economy and the first area to recover in 2009 the American consumer, god bless their charge card debt filled lives. But alas it looks like a slim Christmas in 2016 as shoppers stay away.
(Ticker:XLY)

Looking lately just a little happier, that last hope in a disaster GOLD. (Ticker:GLD)
  
That leaves our one bright spot, regional U.S. banks and insurance firms will benefit from a rate hike. (Ticker:KRE)


Some tech internet is doing OK, but if you look at chart 301 the NASDAQ summation index you can see it is on an ever decreasing breadth. If you don't know why that's bad, don't worry, just know it is very bad news, expect trouble in tech soon. Although the same chart when looking at the bigger stock of the New York exchange looks better than this, the NASDAQ leads, and I expect this to be a warning shot for the whole market unless some big changes happen soon.



The election has been hanging over the market the last few months and we are into the final stretch. Earnings season is in swing and will wind down in early November. Clarity will not last long because the Fed is on hold and could make a move in early December. Thus, some of the air will clear in the next two weeks, but attention will then turn to the Fed - and likely to the new administration.

But for now, when Risk On  (Ticker:MVV) and Risk Off (DVY) and faith in the US government (Ticker:TLT) all are in a down trend. When the consumer is not powerful (Ticker:XLY) and no one wants a home (Ticker:ITB), I would not go sticking my neck out!!  

It is still a Bull Market. The broader market could come out of its funk when we see a more uniform performance from the sectors and industry groups. Upside breakouts in the Retail SPDR (XRT) and Metals & Mining SPDR (XME) would tilt the balance to the bulls.
 

Don't be a total bear, but play defensively. As I said in What Works Now, this is a great time to go to take some profits!







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.


Read My Disclaimer Here









Saturday, 22 October 2016

October 22, 2016 – Weekend Market Comment

October 22, 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).

Recently, the market has been led predominantly by tech names. Microsoft has been range bound for the last two months, which looks like institutional accumulation by trading in a tight range with no breakout or breakdown.  Microsoft’s share price hit a high on Thursday — up 6 percent to more than $60 a share in after-hours trading — after the company released the financial results of its most recent quarter. The last time Microsoft’s stock was this valuable was not as far back as this picture Microsoft's two baby faced founders, from the the late 70s, but it was back in 1999, when Bill Clinton was still president, Mark Zuckerberg was a high school student and Microsoft was heading toward an antitrust showdown with the Department of Justice. Despite the great news out of Microsoft, overall markets did not explode higher as concerns over valuation and a possible December rate hike cooled speculation.

Lets see what is in the chart this week:





101 Bull Bear
Bull market (dark green over red) and now the short term (light green) is down sharply. Also note the dark green 50 day average has begun to fall off. NOTICE THE SLOPE (second window), this could be part of a long term down trend.  Bull market -- expect bullish outcomes.

103 NYSE High Low Market Forces
Nothing but strength. Bullish.

105 Non Farm Payroll
Lots of jobs! But beware this is lagging indicator. The smart money is gone before this turns down.

107 Industrial Production
Could be turning up again, if not expect rally to fail.

115 Renko
The current sideways consolidation is obvious.
!
203 OBV
OBV (red line) is ahead of the market. Bullish.

207 VIX
VIX looks like it has maxed out and might retreat from here, mean revision generally rules, until it doesn’t. . Falling VIX is bullish!

209 VIX Evaluator
Sideways to down still. Bullish

211 S&P500 over 50 day
Now 35% stocks are above their 50day MA, good move up from last week when it was 29%. Bullish.
!
213 Green Arrow
Only put new money to work when I draw a green arrow. TRIX says no way we draw a green arrow here.

!
301 NASDAQ Summation
Notice how the NASDAQ was leading, but as this chart shows leading on weak breadth. Trouble is coming for aggressive tech stock if this does not shape up and soon.

303 Aggressive Defensive
Very aggressive, but faultering?

305 Consumer Bonds vs Equities
Bonds weak. Consumer wakes up a bit.

307 Bond Direction
Weakness in bonds indicates overall market caution of coming rate hikes.

309 Sectors
Consumers perk up!

311 Nations
Oh Canada, look at you go with a new interest in gold mines.

313 Major sectors
Canada looks good.

! = Pay attention this chart is important this week.



What I Find Interesting

McMansion Homes
Lately, these homes have been the subject of fresh scorn, thanks to an anonymously authored blog that breaks down the genre’s design flaws in excruciating detail. Posts lambasted builders for erecting garages bigger than the homes they’re attached to, dropping giant houses on tiny lots, plus shoddy construction and a mishmash of contrasting styles. (Gothic Tudor, anyone?)

McMansion Hell is a web site that pokes fun at the trophy houses of the nouveau-rich (think Tony Soprano). Come gawk at vast ugly oversize houses built on the cheep to look grander than they are. Click here for www.mcmansionhell.com

It’s fun reading that nevertheless raised the question: How well have these homes kept their value? Not well, compared with the rest of the U.S. housing market. McMansions cost more to build than your average starter ranch home does, and they will sell for more. But the return on investment has dropped like a stone. The additional cash that buyers should be willing to part with to get a McMansion fell in 85 of the 100 largest U.S. metropolitan areas. For example, four years ago a typical McMansion in Fort Lauderdale was valued at $477,000, a 274 percent premium over all other homes in the area. This year, those McMansions are worth about $611,000, or 190 percent more than the rest the homes on the market.

U.S. Home-Building Drops
By the way as long as we are talking homes, it is very concerning how U.S. home-builders are suffering this fall. A large part of the U.S. economy is based on home sales, so it is a key indicator of economic health.


Scientific Super Discovery
What if the thing that we make too much of (and is killing us) could be turned in to the thing we are always most short of? Scientist at Oak Ridge National Laboratory have discovered an efficient process to turn the greenhouse gas CO2 into ethanol gasoline. Using basic copper and carbon they build structures called nanospikes, and viola you get gasoline. It is not the only process for doing this, but this process works at room temperature and uses low cost materials in a fairly simple process. In short it is economically feasible and scalable.

In my youth I met the Canadian scientists who discovered how to coax oil out of tar sands and recall the same feeling, "this could be huge".   Click here to read more in Popular Mechanics.



Hedge Funds Hit a Wall

Bloomberg this week pointed out how hedge fund returns are falling behind indexes and their clients are noticing. In large part because they have been buying the same tired 5 or 10 stocks, like Google, Facebook and Nike.

The elite, highly compensated men who run money for the world’s wealthy are having a devil of a time finding a way to make decent returns. As an asset class, hedge funds lost 0.4% during the first quarter, according to research firm Eurekahedge.

That might not sound like the end of the world. But it’s an especially poor showing, when you realize that investors who simply bought index funds tracking plain-vanilla benchmarks for stocks, such as the S&P 500, or bonds, such as the Barclays Aggregate US index, fared far better. The S&P 500 and the Barclays Aggregate returned 1.4% and 3%, respectively, for the first three months of the year.

Hedge fund clients have noticed that they’re not making money. As a result, they’ve yanked roughly $15 billion in assets from hedge funds in the first quarter, the worst stint of redemptions since 2009, during the nadir of the Great Recession.


What Works Now

Utilities: Well if your looking for safe and stable look at AES, one of the 200 largest companies in the USA and in the electric power utility business, yawn but safe sane and stable in an unstable market. (Ticker:AES)

Canadian Pipelines: As I said so often, a license to print money Canadian pipelines are safe sane and stable. I don't discuss my holdings much, but here is a hint, my biggest holdings in my retirement account are pipelines.  Look at Enbridge.  (Ticker: ENF.to)


Brazil: If you want to play global and you like come back stories, Brazil is on a come back from a huge sell off. Banco Bradesco is Brazil's third largest bank and probably the most respected. (Ticker:BBD)

Canadian Miners: Well no doubt Canada's gold miners have had a beating and now that gold prices have stabilized in area where profit is possible it might get interesting. The Junior Gold Miners ETF (Ticker:GDXJ) is doing well. Don't bet your retirement on this, but if you really want a long shot rocket, look at Canada's China Gold International. (Ticker:CGG.to)  

FANG: Well of course the Nasdaq has been doing better than the S&P500 so that means the hedge funds are buying up the core five hot stocks, known as FANG (Facebook, Apple, Nike and Google). Well you can't go any public place these days and not see a grown adult pushing "like" on someones selfie, so why fight it, buy Facebook. (Ticker:FB)

High Yield Bonds: Often used as a gauge of risk on mentality the bond market now favours the riskier cousins, called High Yield or Junk bonds.



What I Think
I think this is a bull market and you must be selectively long. We are also now officially past October 20th the scariest part of the cycle is over.

As for my charts, it is encouraging to see a snap back in the OBV line, and chart 103 says thing look stable on the NYSE big board. The VIX shows increasing greed and falling fear.  I still am nagged by the falling TRIX line on the Green Arrow chart. I also don't like chart 301 with a falling NASDAQ breadth indicator.

Overall it is bullish and heading in to a prime season for market gains. November through January is the best three consecutive month period in terms of equity performance during the year. Also February to April general is good. Followed by the famous sell in May.

We're still in a long-term uptrend and that won't change unless the S&P 500 drops below short-term support at 2115.  I expect the consumer and defensiveness to do better in the next week. I think valuations are stretched and a little diversification would not hurt, look at gold, bonds and international.

It is raining outside my den and it has been for days. I am thinking a lot about returning to Belize these days.







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.


Read My Disclaimer Here

Friday, 14 October 2016

October 15, 2016 – Weekend Market Comment

October 15, 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).

It was a negative week for stocks with the major indexes losing between one and two percent. Large-caps and mid-caps held up relatively well as the S&P 500 lost just .96%, the S&P MidCap 400 lost .92% and the Nasdaq 100 lost 1.15%. Small-caps fared worse as the Russell 2000 declined 1.95%. Seven of the nine sectors were down with healthcare stocks leading the way.


Stocks are in a short-term downside correction and well below a falling 50-day average. It also leaves open the possibility that the September low could still be retested. Rising bond yields continue to weigh on stocks. Lets see what is in the charts this week.







101 Bull Bear
Bull market (dark green over red) and now the short term (light green) is down sharply. NOTICE THE SLOPE (second window), this could be part of a long term down trend.  Bull market -- expect bullish outcomes.
 !
103 NYSE High Low Market Forces
Both an ominous narrowing of the lines on the primary indicator and traces of red in the lower window. Negative.

105 Non Farm Payroll
Lots of jobs! But beware this is lagging indicator. The smart money is gone before this turns down.

107 Industrial Production
Could be turning up again, if not expect rally to fail.

115 Renko
The current sideways consolidation is obvious.

203 OBV
OBV is still with market. By the dip, you sheep! Bullish.

207 VIX
VIX looks like it has maxed out and might retreat from here, mean revision generally rules, until it doesn’t. .
 !
209 VIX Evaluator
Woah! Is that a bit of an upturn… or a head fake?

211 S&P500 over 50 day
Now 29% stocks are above their 50day MA, BIG GAP DOWN from last week when it was 43%. DANGER.

213 Green Arrow
Only put new money to work when I draw a green arrow. TRIX says no way we draw a green arrow here.



 !
301 NASDAQ Summation
Notice how the NASDAQ was leading, but as this chart shows leading on weak breadth. Trouble is coming for aggressive tech stock if this does not shape up and soon.

303 Aggressive Defensive
Very defensive, but could be over done?.

305 Consumer Bonds vs Equities
Bonds drop, like a rock. Consumer looks weak.

307 Bond Direction
Weakness in bonds indicates overall market caution of coming rate hikes. .

309 Sectors
Defensives lead, who could have saw that coming?

311 Nations
International gains interest as U.S. market looks overbought, Germany marches ahead.

313 Major sectors
Commodities are the brightest spot, but not precious metals, gold unable to rally in face of selling assets.


!= Pay attention this chart is important this week.




What I Find Interesting
Check out this chart, its the newest numbers from the PBOC. China's total debt is now 3 times its GDP, that is way more in debt than Greece. It is also more than the USA and Japan combined.







Junk as an Indicator
Each week I show you my core graphs that I use to look at the market, but in fact I have many others. Here is an interesting one, it looks at what is doing better junk bonds or quality bonds. It is a way of seeing risk appetite. As you can see when Junk bonds do well, generally so do stocks. So the way to look at this is sell your stocks when red is over green. Buy stocks when green crosses red.
Well now that is interesting -- RISK ON. 



What Works Now
Canadian Continence stores - Couche Tard runs the highly profitable MACS and Winks convenience stores in Canada, with almost zero competition. (Ticker:ATD/B in the TSX)


War - War is always good business, look at defense contractor Northrop Grumman. They make radar systems, bombers and even postal delivery vans. Recently winning an 80 billion dollar bomber contract is lifting this stock to space! (Ticker:NOC)

iPhones and flat screen TVs are still popular and Best Buy is the last brick and mortar store chain to stand up to Amazon. Buying Best Buy might be your best buy. (Ticker:BBY)



What I Think
I think this is a bull market and we are in a pull back. That is an opportunity.  There is great concern about a near certain rate hike from the fed in the last quarter of 2016 but little else is a problem.

That said, the market is "priced for perfection" and needs to pull back to attract buyers. Breadth is the core issue.  Click here to check out Bloomberg's warning. Keep a close eye on my second chart: 103 the NYSE 52 High Low, if this breadth indicator goes negative (yellow over green), expect trouble.







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.


Read My Disclaimer Here