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04/20/2018
Thomas Thornton

Comfortably Numb

Hello.
Is there anybody in there?
Just nod if you can hear me.
Is there anyone home?

Come on, now.
I hear you're feeling down.
Well I can ease your pain,
Get you on your feet again.
   Comfortably Numb   Pink Floyd

Recent catalysts Syria, China, and Mueller investigation have unusually made people comfortably numb.  Although its been a week now Syria fears have come and gone, but the China tariffs and the Mueller investigation continues to be front and center but people are not as concerned as they were a month ago.   The rhetoric picked up again overnight as China called the US a trade “bully” and as having “inconsistent” policy.  This after Treasury is considering an emergency law to prohibit Chinese investment into sensitive US technology companies.  The Mueller investigation has various headlines whipping around the markets.  Nothing is resolved there and the comedy from all the Comey disclosures is something else.

The equity market bounce off the early April low occurred with exceptionally light volume and as expected made another lower high. Many people will site low volume as not a concern but when the market is down for the past four months, some sort of breadth surge was needed.  The narrative of strong earnings expectations were going to propel the markets higher yet I've seen many stocks beating estimates (81 S&P 500 stocks reported ahead of today with 70% beating on revenues and 83% better EPS) and the reaction was met with selling.  

Yesterday's Taiwan Semiconductor guide down continues to reverberate in technology.  Apple's iPhone sales have been weak and it's generally a known thing and this morning Morgan Stanley's analyst (Katy Huberty - one of the most respected on Apple) guided down her iPhone estimates to 34 million with consensus at 43 million.  If the stock was down 20% from the highs, I'd say it's likely priced in but it's not and she even lowered her price target to $200 from $203.  Seriously.  Her reasoning is that the shareholder cash return will be huge and to buy any dip after earnings.  Earnings will be reported on May 1st.  The stock has been sold off in the last few days and there is likely more downside ahead.  It's the largest weight in the S&P and Nasdaq 100 so it matters.  

Bonds have been weak since last September's peak. Sentiment in bonds was +90% and there were numerous DeMark exhaustion signals confirming the timing of start of the bond selloff.  US treasury's have been crushed and investment grade has been smashed.  High yield has held in with sideways action mostly due the large weighting with energy and small/mid cap companies stabilized after the 2015/2016 beat down. That won't last.   I see too often people who are misguided looking at spreads saying there is nothing to be concerned about and my favorite "risk appetite remains healthy."  What they don't consider is that higher rates equate to investor losses.  The amount of money lost in treasuries since September is massive and the number of investment grade bonds making new lows is troubling as the Fed induced low interest rate environment has been a key driver of corporate buybacks and thus higher stock prices.  If Goldman Sachs says they are holding off on their buyback program for now, others will follow their lead.  

VWAP support levels I continue to watch are calculated from the 4/2/18 lows are SPY 263.50, QQQ 160.00, IWM 152.90, DIA 242.25.  If and when these levels are broken expect some heavy selling.  Essentially this calculates where the average volume is from a given time thus it's a perspective of where people might start to become underwater.  

I hope everyone has a great weekend.  Thanks for all your support.  And please tell a friend about Hedge Fund Telemetry!  

Notable:

  • US Markets - Sentiment fading was a good tell.  Downside red Countdowns look stronger than the green upside Setups
  • Hedge Fund Telemetry Trade Ideas  - No changes
  • PPO Monitors - Investors buying recent strong sectors and selling the weakest sectors heavily
  • Currencies - USD trying to move but it could be short lived, Euro has 2 support levels, GBP has 1.40 as support
  • Asian Markets - Shanghai still looks lower
  • Bond Update - Bonds continue to sell off with investment grade quite concerning
  • DeMark Screens - Daily, Weekly, Monthly upside/downside exhaustion signals within the S&P 1500 and Euro Stoxx 600 - Seeing more upside exhaustions again and could be a sign of this lower high bounce is over

US Markets


Here's a link to the Hedge Fund Telemetry market sentiment page with 40 charts of sentiment including equities, bonds, currencies, and commodities updated each day.   

SPX bullish sentiment is at 40% and just couldn't hold above 50%.  Should be lower later today


SPY down again today and now has a downside red Countdown on day 3 of 13.  The green Setup on day 7 of 9 is at risk unless there is a rebound in the next couple days


Nasdaq bullish sentiment is at 48% and will be down a lot later today.  It's not a good thing when sentiment makes lower highs with the indexes.  


QQQ is zoomed in so you can see how the green Setup is at risk of being cancelled as it has to make 9 consecutive closes above 4 previous closes.  


The Dow's green Setup was cancelled with this reversal and now is on day 4 of 13 with a downside red Countdown.  


OEX S&P 100 the meat of the market looks like a another lower high is set with a downside Wave 5 price objective of 1069

 
Hedge Fund Telemetry Trade Ideas


Trade Ideas - No changes.  

 
Currencies


Euro bullish sentiment is at 69% and has held the 60% levels of late and it will be important to look at what happens in the coming days if it breaks.  


Euro has been in a very tight range like many other currencies.  Watch first support at 1.22, then 1.20


US Dollar bullish sentiment is at 47% and could break out above 50%


DXY is on day 11 of 13 and if it does finally break out I'd be cautious for a short lived breakout


British Pound Sterling had a nice upside exhaustion red 13 signal and it's back to 1.40 the 50 day support.  

 
Asian Markets


Shanghai Composite had a recent downside exhaustion red 13 however a new secondary Countdown has started.  There is a Wave 3 downside price objective of 2864.  This chart has a lot of noise on it but I wanted you to see how well the signals have worked and this is the first downside Countdown in a while

 
PPO Monitors (Percentage Price Oscillator)


I'm running late and if you are new to this monitor reach out and I can explain.  This was yesterday's close - notice how sectors at the top have been the strongest (energy, utilities) were barely sold while people sold very hard the sectors that have been beat down the hardest (home building, biotech, staples, semi's)


This today's PPO very heavy selling across the board but notice the top sectors are poking above the VWAP today.  That's a sign of strength.  

 
Gold Update


Gold bullish sentiment is at 64% and has drifted lower but has held the midpoint 50% level. I'm not sure it will hold


Gold Futures in its sideways pattern now has day 10 of 13 with its recent Countdown

 
Crude Update


Crude bullish sentiment is at 84% and it's in the extreme zone


WTI still has an upside Countdown on day 5 of 13.  Brent did exhaust last week.  I don't have a position here but it looks as if it can work a little higher albeit with some unsettling chop


SLB has been a long on the trade ideas page and despite the pullback I am going to hold

 
Semi's, Apple, Amazon


SMH Semiconductors continues lower and needs to close under 99.45 to keep the Wave 3 locked in.  There is a downside Countdown on day 6 of 13 with a downside Wave 3 price objective of 91.04.


AAPL failed to make a new high and now has a Wave 3 downside price objective of 154.57. There is a downside red Countdown on day 3 of 13 that keeps me short.  


AMZN had a big week and is giving back some today.  Breaking 1500 again and sellers will likely get going.  

 
Bonds


Bond bullish sentiment dropped to 35% from 42% and made a new recent low


US 10 year yield chops higher and looks to be closing in on 3%.  2.95% is the recent closing high to watch for the downside Wave sequence to be cancelled.  


HYG High Yield continues lower after a strong bounce.  


TLT Bond ETF needs to close under 117.91 to trigger the downside red 13 exhaustion


LQD Investment Grade ETF really is concerning.  I widened this chart to show the downside Wave 5 price objective as it's now in Wave 5 breaking to a new low for 2018

 
DEMARK SCREENS - Daily, Weekly, Monthly Upside/Downside Exhaustion Signals

Daily/Weekly DeMark upside/downside exhaustion signals (Sequential) Weekly updated on Monday's.  Price flips occur when a stock closes higher/lower than four previous closes.    

S&P 1500 Universe: 

DAILY UPSIDE 13:   APA, BRC, CHE, IART, NBL
DAILY DOWNSIDE 13:  FL, PKI, SSD, TMP

DAILY UPSIDE WITH PRICE FLIP REVERSAL DOWN:    ADI, AEO, BC, FOSL MPWR, RTEC
DAILY DOWNSIDE WITH PRICE FLIP REVERSAL UP:   DAR, TCBI, TMP

Updated: 4/16/18
WEEKLY UPSIDE 13:   ANF, CHRW, DECK, ELY, IO, KORS, LLL, STE, TYL
WEEKLY DOWNSIDE 13:   APOG, BBOX, GGP, WAGE

Updated: 4/2/18
MONTHLY UPSIDE 13:      
MONTHLY DOWNSIDE 13:     

Euro Stoxx 600 Universe:

DAILY UPSIDE 13:   AM FP, BOL FP
DAILY DOWNSIDE 13: DUE GR

DAILY UPSIDE WITH PRICE FLIP REVERSAL DOWN:    BOL FP
DAILY DOWNSIDE WITH PRICE FLIP REVERSAL UP:   NONE

Updated: 4/16/18
WEEKLY UPSIDE 13:   KGX GR, SWMA SS, UBI FP
WEEKLY DOWNSIDE 13:   HUSQB SS

Updated: 4/2/18
MONTHLY UPSIDE 13:     ASSAB SS, BEZ LN
MONTHLY DOWNSIDE 13:  CPI LN



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