Saturday, 29 April 2017

April 29, 2017 – Weekend Market Comment

April 29, 2017 – 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).

Stocks followed through this week with small-caps and large-techs leading the charge. Large-techs and QQQ have been leading the market all year. Small-caps were lagging the market from January to mid April, but turned it around the last two weeks as the S&P SmallCap iShares surged to a new high.


Here is what our charts say:






101 Bull Bear
Bull market (dark green over red)  the dark green 50 day average is in a flattening uptrend.  NOTICE THE SLOPE (second window), we might be starting another new slope upward.  Bull market -- expect bullish outcomes.
!
103 NYSE High Low Market Forces
Breadth lines are firmly up. 

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
Flat but strong industrial production.  That is good news.

115 Renko
Sideways consolidation, possible overhead resistance at this level. CAUTION.
!
203 OBV
OBV (red line) is below the market.  This is a big problem, if volume does not pick up soon this rally will fail. CAUTION

207 VIX
Fear craters... hmmm wow that is confidence.

209 VIX Evaluator
All good again.


211 S&P500 over 50 day
Now about 58% of stocks are above their 50 day MA,  up a nudge from last week when it was 57%.

213 Green Arrow
Only put new money to work when I draw a green arrow. Notice loss of TRIX momentum. 

!
301 NASDAQ Summation
Nasdaq breadth is returning. Pay attention -- could be volatile.

303 Aggressive Defensive
Aggressive but getting tired.

305 Consumer Bonds vs Equities
Bonds fail. Consumer big boost. BULLISH!

307 Bond Direction
Bonds still trending up, just not recently.

309 Sectors
Defensives and banking lag. BULLISH!

311 Nations
Germany rebound! Canada bounces on bottom of range.

313 Major sectors
Commodities fall


! = Pay attention this chart is important this week.



What I Find Interesting

Save that Vino
In France a cold spell nearly devastated vineyards in some of the country's most famous wine regions, including Bordeaux, Champagne and Burgundy. The weather has posed a severe threat to the annual harvest. Winegrowers in central France have had a busy few days trying to rescue their crops from frost, which is unusual for this time of year. To save the vines from the chill, winegrowers brought in hundreds of oil burning heaters, that they placed across the vineyards.


What Works Now
Microprocessor Chips 
Advanced Micro Devices (Ticker:AMD)

I have noticed this year many tourists caring laptops and over tablets as power users hang on to the bulk for power applications. The big processor is still important and Intel's arch rival still makes a nice bottom line. More importantly is the steady curve up. 

Memory Chips
Micron Technology (Ticker:MU)
recommended here many many times. . . 

Switzerland
Swiss ETF (Ticker:EWL)



What I Think

I think we are in a cyclical bull market (since February 2016) within a near record long, secular bull market (since early-2009), and neither show signs of abating. 

I cautioned last week against betting against the bull and now you know why.   It all looks really strong, except the OBV volume (chart 203) is not there, that means the big boys are late to the party or this is a sucker rally. Also the VIX fell vary hard very fast, you know when everyone is confident, get nervous. That said, for now the market's path of least resistance remains higher in the short- to -medium time frame, and higher in the long-term time frame. It is positive to see small-caps and the consumer discretionary sector leading the market. All I can say is WOW Baby!




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Saturday, 22 April 2017

April 22, 2017 – Weekend Market Comment

April 22, 2017 – 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).

Wednesday's rally was quite bullish with leadership coming from the small cap Russell 2000 ($RUT, +1.24%), financials (XLF, +1.69%) and industrials (XLI, +1.21%).  All three of those led the huge rally back in November and December - on an absolute and relative basis - so continuation of that earlier relative strength would bode well for U.S. equities.


There was no follow through on Friday due to, I believe, it being options expiration day, which tends to dampen volatility and keep prices steady. The direction is basically sideways.  U.S. stocks held mostly lower in choppy trade Friday as investors looked ahead to the French election. Wall Street also digested falling oil prices and comments from the Trump administration on tax reform. The Dow Jones industrial average hovered around the flatline with IBM contributing the most losses and United Technologies the most gains. The index briefly turned positive in afternoon trade after President Donald Trump told The Associated Press his administration will unveil a "massive tax cut" in a new reform, though the timing of that package was unclear. The S&P 500 declined 0.3 percent, with telecommunications falling more than 1 percent to lead decliners. Energy was also among the decliners, falling more than half a percent as U.S. crude dropped 2.15 percent to settle at $49.62 per barrel. The Nasdaq composite traded 0.2 percent lower.


Here is what our charts say:





101 Bull Bear
Bull market (dark green over red)  the dark green 50 day average is in a flattening uptrend.  NOTICE THE SLOPE (second window), we might be starting another long ride down.  Bull market -- expect bullish outcomes.
!
103 NYSE High Low Market Forces
Breadth lines are firmly up. Also notice the second window red patches recently. We had many patches like this after mid 2007. This is the sign the market is running out of steam. 

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
Flat but strong industrial production.  That is good news.

115 Renko
Sideways consolidation CAUTION.

203 OBV
OBV (red line) is below the market.  If this gets any worse, worry.

207 VIX
Spike in fear and a one day retreat
!
209 VIX Evaluator
Don't panic yet but that is an up tick ... hmmm.


211 S&P500 over 50 day
Now about 57% of stocks are above their 50 day MA,  up a lot from last week when it was 43%.
!
213 Green Arrow
Only put new money to work when I draw a green arrow. Notice loss of TRIX momentum. CAUTION

!
301 NASDAQ Summation
Nasdaq breadth is returning. Pay attention -- could be volatile.

303 Aggressive Defensive
Aggressive. 

305 Consumer Bonds vs Equities
Bonds woosh! up up up. Consumer flat. CAUTION

307 Bond Direction
Bonds UP! 

309 Sectors
Everything is doing well but banking. Bazaar.

311 Nations
Germany kaput! 

313 Major sectors
Commodities fall


! = Pay attention this chart is important this week.



What I Find Interesting

The Way We Hire
Economists estimate that non-standard employment (gig work, temp work, contractors) accounted for a around 10% of American workers between 1995 and 2005, but grew to some 16% of American employment in 2015. Much of the increase is attributable to “workers provided by contract firms.” Firms of all sizes are increasingly outsourcing non-core functions. Many firms have used outside accountants or janitorial firms for decades, but thanks to gig websits like fiverr and Upwork, areas like website design, voice over announcements, copy writing, editing, graphic design and even marketing plans are done by starving beginners, and offshore vendors for a fraction of the local price. The Gigs section of Craigslist allows for quick jobs like moving or landscaping to be filled by underemployed locals. I know a woman from Huston who lives on a Caribbean Island entirely on correcting term papers for students.


Although work is going to India virtually, immigrant workers are another matter. President Trump’s “Buy American, Hire American” directive will force Indian IT firms—the top sponsors of visas from India—to rethink their recruitment models. Industry bigwigs like Infosys, Tata Consultancy Services (TCS), and Wipro, have been prepping for these restrictive measures for nearly a decade now with the knowledge that ramping up local hiring amidst America’s chronic skills shortage could prove to be a challenge.

Indian workers, who hold nearly 60% of the skilled foreign worker visas in the UK, faced similar woes as the country raised the salary threshold for different visas and added new English language requirements. Under the new rules, Tier 2 short-term intra-company transfers—the provision under which Indian tech companies typically take their workers to the UK—would be discontinued. This change went into effect on April 6. Although British Chancellor Phillip Hammond assured India that efforts to shrink migration of less-skilled labour would not impact India adversely, that did not hold true. At least 30,000 Indian software professionals currently working in the UK will not have their work permits renewed. 


New measures are also closing the door to Indian high tech workers in Singapore, Australia and New Zealand. Australia completely abolished its 457 immigrant worker permit. 


However more forward thinking countries like  Canada are embracing high skilled immigrants and "exporting" outsourcing contracts from the United States and Britain. The effect is an regulatory enforced "Brain Drain" with the benefits going to the more open minded players. 


Share Buy Backs

If you want to worry about something, look at rising interest rates in the U.S. mean fewer companies will be able to borrow money to pay dividends and buy back shares. About 30 percent of the jump in the S&P 500 between the third quarter of 2009 and the end of last year was fueled by buybacks, according to data compiled by Bloomberg. The chart below shows the declining net income (green bars), the almost flat share-buybacks (bars in blue), and the rising buyback-to-income ratio (red line, right scale). Note what happened last time income began to decline (2007) and share buybacks followed in 2008: the stock market crashed.



What Happened 17 Years Ago?
A few days ago Charles Schwab, the investment brokerage firm, announced that the number of new brokerage accounts soared 44% during the first quarter of 2017 -- a new 17 year record.  But wait a moment -- was that not the crash of 1999 and the top of the tech bubble ? So in other words, this is the same crowd that got in at the end of the last bubble just as "the music stoped".


PIZ Me Off

The PowerShares DWA Developed Markets Momentum  ETF (orange line below) (Ticker:PIZ) includes approximately 100 companies from the NASDAQ Developed Markets Ex United States Index that possess powerful relative strength characteristics and are domiciled in developed markets including mostly; Australia, Canada, Finland, France, Germany, Hong Kong, Italy, Japan, Norway, Portugal, Singapore, Spain and Switzerland. These are non U.S. firms that are doing well. As you can see for the last few years the American centred broad based S&P500 (Green line below) has out performed the worlds leading momentum stocks. Due to TINA type investing big money is poring blindly into US markets, but clearly the rest of the world is neglected. Sooner or later this is unsustainable. Either because the big U.S. firms have no global market or because the securities are over priced. 



The reson I am interested in PIZ is that a quant friend of mine is testing a new trading strategy and this ETF is rising on his list of ETF with strong upward correction presure. So I think it is intersting to see what it does. 


What Works Now
CRH Medical

First mentioned here in late 2015 the stock is up over 200%. 

Fancy Resorts
Wyndam Worldwide Corp (Ticker:WYN)


What I Think

I think we are in a cyclical bull market (since February 2016) within a near record long, secular bull market (since early-2009), and neither show signs of abating.  I wouldn't bet against the bull here I think we are setting upfor a pop.

The market's path of least resistance remains flat in the short- to -medium time frame, and higher in the long-term time frame. The intermediate-term is teetering on edge, and the trading next week will be important to see which side it comes down.

It is positive to see small-caps and the consumer discretionary sector leading the market. In fact, this week provided good signs that the market correction should be ending. It has not been much of a correction because the major index ETFs area essentially range bound over the last five weeks or so. 



As I have been saying for weeks, this is a bull market, expect bullish outcomes. However the question is when? U.S. shares should turn up now or basically stand still until August or September, in part because of flagging confidence in the so-called Trump reflation trade.

Coming Home
Well this is my last post from the warm Caribbean Sea, time to return to Canada, this time via Westjet, nice to see Canadian Airlines this far south.







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.


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Saturday, 15 April 2017

April 15, 2017 – Weekend Market Comment

April 15, 2017 – 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).

Stocks posted their second straight weekly decline in a holiday-shortened week, as investors digested bank earnings and as tensions with Syria, North Korea, and Russia, along with a bombing that targeted ISIS on Friday, prompted some unease in the markets. While the year started out with very modest volatility, it's realistic to expect periods of higher stock price movements, underscoring the importance of balance across sectors and asset classes. Overall, the backdrop for stocks remains mostly favourable, supported by improving economic growth expectations and earnings growth.

Here is what our charts say:






101 Bull Bear
Bull market (dark green over red)  the dark green 50 day average is in a flattening uptrend.  NOTICE THE SLOPE (second window), we might be starting another long ride down.  Bull market -- expect bullish outcomes.
!
103 NYSE High Low Market Forces
Breadth lines are firmly up. Also notice the second window three red patches recently. We had many patches like this after mid 2007. This is the sign the market is running out of steam. 

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
Flat but strong industrial production.  That is good news.

115 Renko
12 up but the latest is 1 down... caution.

203 OBV
OBV (red line) is below the market.  If this gets any worse, worry.

207 VIX
Fear is on the way up, but could stall here.
!
209 VIX Evaluator
Don't panic yet but that is an up tick ... hmmm.


211 S&P500 over 50 day
Now about 43% of stocks are above their 50 day MA,  down a lot from last week when it was 57%.
!
213 Green Arrow
Only put new money to work when I draw a green arrow. Notice loss of TRIX momentum. CAUTION

!
301 NASDAQ Summation
Nasdaq breadth is returning. Pay attention -- could be volatile.

303 Aggressive Defensive
Defensive. CAUTION

305 Consumer Bonds vs Equities
Bonds woosh! up up up. Consumer flat. CAUTION

307 Bond Direction
Bonds UP! 

309 Sectors
Everything is doing well but banking. Bazaar.

311 Nations
Germany and Philippians doing well boads well for global markets. Expect this too fizzel.

313 Major sectors
Safe haven up ticks


! = Pay attention this chart is important this week.


What I Find Interesting

Bill Gross
Hedge fund wizard Bill Gross thinks we are in an overvalued market.

"Equity markets are priced for too much hope, high-yield bond markets for too much growth, and all asset prices elevated to artificial levels that only a model driven, historically biased investor would believe could lead to returns resembling the past six years, or the decades predating Lehman. High rates of growth, and the productivity that drives it, are likely distant memories from a bygone era."


Well Bill Gross is THE Bond King and if he says bonds are over priced he should know.

Go Solar and Wind

Acording to the Independent (a UK paper). Just ten years ago, generating electricity through solar cost about $600 per MWh, and it cost only $100 to generate the same amount of power through coal and natural gas. But the price of renewable sources of power plunged quickly – today it only costs around $100 the generate the same amount of electricity through solar and $50 through wind. The cheap price of solar and wind energy is already encouraging companies to build more plants to harvest it. The US is adding about 125 solar panels every minute, according to the Solar Energy Industry Association and investment in renewables in 2015 rose to $286 billion, up 5 per cent from the year before.


What Works Now
Gold

With the market in a pull back, bond rates rising, global tension, a falling US currency, debt in China, there is no alternative (TINA). That one thing left to invest in is GOLD.


Wind

Vestas Wind Systems A/S is a Danish manufacturer, seller, installer, and servicer of wind turbines. It was founded in 1945, and as of 2013, it is the largest wind turbine company in the world. (Ticker: VWDRY)



What I Think

Stocks may be in for a deeper pullback, now that the so-called fear index is finally breaking out higher. The CBOE Volatility Index (.VIX), considered the best gauge of fear in the market, closed above its 200-day moving average for the first time since the election this week. The indicator jumped more than 2 percent Thursday afternoon at one point to a fresh high for the year. 

Notice chart 209 that compairs short and long term VIX futures, it has begun an uptick, and as you can see it generally only goes down... so that tells you the smart money is getting nervous. Just like it did at the start of 2016.




Our Bull Bear chart says this is a Bull Market and so the odds favour a pull back not a sell off. That said as I pointed out last week this bull is tired and old. Also Sell in May is coming, you would be foolish to be too eager to bet the farm on a market like this. Raise your stops, take profits on your high fliers and sit in cash, bonds, gold and some solid dividend payers.



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.

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Saturday, 8 April 2017

April 08, 2017 – Weekend Market Comment

April 8, 2017 – 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).

U.S. stocks advanced Friday after an early session of switching between small gains and losses, as investors weighed a weaker-than-expected March employment data and President Donald Trump’s late Thursday airstrike against Syria. The Labor Department report showed that the U.S. created just 98,000 new jobs in March, marking the smallest gain in almost a year, as hiring cooled. Many economists had predicted a 185,000 increase in nonfarm jobs.


Here is what our charts say:






101 Bull Bear
Bull market (dark green over red)  the dark green 50 day average is in a firm uptrend.  NOTICE THE SLOPE (second window), we might be starting another long ride down.  Bull market -- expect bullish outcomes.
!
103 NYSE High Low Market Forces
Breadth lines are firmly up. Also notice the second window three red patches recently. We had many patches like this after mid 2007. This is the sign the market is running out of steam. 

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
Flat but strong industrial production.  That is good news.

115 Renko
12 up but the latest is 1 down... caution.
!
203 OBV
OBV (red line) is below the market.  If this gets any worse worry.

207 VIX
Fear is on the way up, but could stall here.

209 VIX Evaluator
Don't panic yet but that is an up tick ... hmmm.


211 S&P500 over 50 day
Now about 57% of stocks are above their 50 day MA,  down a bit from last week when it was 61%.
!
213 Green Arrow
Only put new money to work when I draw a green arrow. Notice loss of TRIX momentum. CAUTION

!
301 NASDAQ Summation
Nasdaq breadth is returning. Pay attention -- could be volatile.
!
303 Aggressive Defensive
Defensive, may not hold.

305 Consumer Bonds vs Equities
Bonds flat. Consumer up tick. BULLISH

307 Bond Direction
Bonds sideways moving average. 

309 Sectors
Everything is doing well but banking. Bazaar.

311 Nations
Germany and Philippians doing well bods well for western markets.

313 Major sectors
Not much to say



! = Pay attention this chart is important this week.


What I Find Interesting

Are We Due for Recession?
Of course the big problem we are trying to solve in my Market Comment is are we due for a recession? This bull market has run for 94 months since the last recession ended (as I write this in April 2017). Does the length of this tell us that we are about due for another one? In economist’s lingo, a business cycle is an expansion, when the Gross Domestic Product (GDP) and other measures are increasing, a recession is when GDP falls off.


According to Forbes Magazine:


  • The lengths of recessions vary from 6 to 18 months
  • The lengths of expansions vary from 12 to 120 months
But 120 months of bull market is a record and far from typical. In fact most bull markets last about 55 months.  The chart below is the broad market the grey bars are recessions, as you can see this bull market is getting old. 





Since the market always moves in waves, not every decline is a reason to exit the market. However, when a series of signals align, it can provide evidence that the market is creating a top and could be entering a larger correction. 


The NYSE advance/decline line (green and yellow on the top of chart 103) and the number of stocks making 52-week highs (black red on the second window of chart 103) can provide early warning that the number of stocks participating in the market advance is declining. If these indicators fail to reach new highs (or move lower) along with the market, this may be a sign of weakness in the market. Right now they look just fine, the recent red is a small concern but don't run away yet. 


But the truth is no one knows with certainty. All you can do is say, so far, so good, then watch the 100 series charts for signs of trouble. My ultimate line in the sand is to Bull Bear Lines, and they say this is still a bull market. Just remember the market often is weak after mid April, and we are in very thin air up here. I am not saying to panic, far from it. Many fools have played the game of predicting market tops, see my post A Warning About Experts, but I can say this. As bull markets go…. this one is very old but for now it still looks like it wants to continue.  

A Very Odd Market

The market is consolidating sideways. But some strange things are going on. First lets look at my favourite example of American manufacturing the Ford Motor Company (Ticker: F). Despite positive results and good demand the stock is wandering lower. This is a longer term view than the next charts:



If the market is in a dangerous place we would expect to see defensive stocks like soap makers and food companies to do well, but they are not. See the defensive ETF (Ticker: DEF) 





OK well if the market is excited and bullish we would expect mid caps to out perform. Lets see the Midcap 400 ETF (Ticker:MDY)




So what is driving the market up? Hedge funds buying the biggest growth stocks, here is the Top5 institutional stocks:




In other words too much money chasing FANG (Facebook Amazon Nike and Google). We have seen this before every pull back, Greedy hedge funds are the next to the last stupid money in. 



What Works Now
Qorvo

Qorvo is an American semiconductor company that designs, manufactures, and supplies radio-frequency systems and solutions for applications that drive wireless and broadband communications, as well as chip foundry services (Ticker: QRVO).




What I Think

I think we are in a cyclical bull market (since February 2016) within a secular bull market (since early-2009), and neither show signs of abating. I expect the market to continue correcting the excesses from the advance off the October lows, but I wouldn't bet against the bull. 

As I said last week; Many indicators, especially breadth look a bit better, but this is not the roaring market of last year. Chart 213 the Green Arrow Chart has a TRIX that has rolled over. In other words the greater trend maybe lower or at least sideways.  We also had the red splashes recently on the chart 103 and that is always concerning.


On Balance Volume continues to fade and it is getting concerning:

 
In three weeks we come up to the Sell In May and Go Away pull back, perhaps it is just starting a bit early. 


So yes it is a bull market... but this is a very tired bull. Don't panic, but proceed with caution. This is a fully valued market and it only has select opportunities.







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