Share

If you are having difficulty seeing this email, you can view in your browser or click here to print.
2/7/18
Thomas Thornton
info@hedgefundtelemetry.com

Remember the record January inflows?

First of all, I have to apologize to several of you who have not received the last two days of the note.  We updated our email distribution systems as we have grown, to a more secure and robust system.  I've also become quite the expert with understanding how firewalls from Google, Yahoo, Me and others need to learn who is not spam.  Each day it's improved so there's some hope this gets resolved quickly.  It has been driving me crazy.  I just want to focus on the markets.  

Here's a link to Monday and Tuesday's reports

2/06/2018 - Now What?
https://hedgefundtelemetry.activehosted.com/social/70efdf2ec9b086079795c442636b55fb.9  

2/05/2018 - Daily Note
https://hedgefundtelemetry.activehosted.com/social/aab3238922bcc25a6f606eb525ffdc56.6

On February 1st, I reported on the note, how January was a record month for inflows into ETF's and funds of $78 billion.  The S&P 500 ETF "SPY" had the highest amount of inflows of nearly 20% of the total.  The market has started to wobble slightly and my battle plan was to watch for support on the major ETF's using the YTD VWAP calculations.  Essentially it would show where the most volume was located with the price and if that support was broken, people who put money in would start losing money.  When people start losing money they sell and it accelerates.  Each day I screen for 20 day highs/lows within the S&P and in the past two days there have been more than 300 more new 20 day lows and 4 new highs. Yesterday had 384 new 20 day lows recorded and that's huge.  This was one of the reasons I felt yesterday a capitulation type of bottom was likely and a bounce was possible.  As we move into the mid point of the range the data will get silent with few new highs and lows.  So where will this bounce lead to?  Let's go back to the YTD VWAP as old support now becomes resistance.  All of the people who held on through the down move will be wanting to get back to even.  Therefore, watch SPY 276.00, QQQ 164.40, DIA 255.30, and IWM 155.00.  I'm still cautious despite I seeing the potential for a bounce.  If you're playing the wave 2/B bounce (more on that below) on the long side be very nimble.  Markets typically do not correct for just two weeks and everything is back to normal.  

Notable:

  • US Markets - More examples of what to expect with the current wave setup
  • Sentiment - Equity and Bond bouncing together
  • VIX Index and VXX ETN - It wasn't that hard to see this was a flawed ETN
  • Euro and US Dollar
  • Asian Markets - No bounce and should continue lower
  • Transports - Update
  • Some Ratio Charts
  • Crude and Natural Gas Update
  • Bonds
  • Bitcoin Update
  • DeMark Screens
 
US Markets


Quite the last couple weeks to shake things up.  SPX bullish sentiment is now at 30% bulls bouncing from 18%.  Usually when there is a big move in either direction there is some reversal.  A bounce to 50% maybe or perhaps back to the 10 day moving average of sentiment now down from a record 90% to 60%.  
 
Investors Intelligence Bullish/Bearish Advisors took a big drop this week.  Bulls dropped from 66% (extreme) to 54.4% (elevated).  Bears moved from 12.6% to 15.5%.  As I mentioned recently they have a % expecting a correction which was very very low at 21%.  I was concerned people were highly complacent and a shock could catch them off guard.  It's now at 30.1%
 
The SPX daily chart has had quite a drop after a cluster of upside Countdown exhaustion signals.  As explained yesterday this is the first of five down waves or an "A, B, C" correction.  They can and often work in sync.  The wave application I use was also developed by Tom DeMark.  Some of the purist Elliott Wave people might have issues but I really find it works well.  For the corrective upside wave 2/B to trigger a new 8 day high has to occur.  Therefore, it's going to take a few days of up or sideways days to trigger.  From there we will get a calculated downside wave 3 target.  I like to short into this pattern and I will lay out the details when we get there, especially how to risk manage the trade.
 
This is the SPX from 2010-2011.  This shows the wave patterns 1-5 on the downside.  The market peaked on May 1st in the fifth upside wave with good news of Osama Bin Laden meeting the US Seal Team 6.  The first wave down went down for 6 weeks and many people thought that was the correction and quickly bought things back up but that wave 2 failed to make a new high and failed.  The sharp move squeezed shorts very hard (trust me, I was squeezed like Mr. Whipple squeezes Charmin).  Wave 3's are very strong and this one was a crusher.  (I was still massively short and vacationing in Nantucket and couldn't believe what my trader was telling me about my PNL). Then it got tough in wave 4 and it was probably a better idea to flatten out but it got choppy until October when a new low under wave 3 happened giving the wave 5 confirmation.  The internals in the market were horrendous and SPX bullish sentiment hit 4% bulls combined with the downside DeMark exhaustions.  The first up move was typical as nobody believed it and the sharp drop in wave 2 had people thinking more new lows ahead.  The market never looked back.  By the way Tom DeMark called the bottom in October within 1 point of the low 1076.  Hope that helps understand some more of the wave analysis.  
 
 
VIX Index vs VXX ETN
The VIX Index and the VIX ETN's had a come to Jesus moment this week and the writing was on the wall as I've shown the massive short positioning in volatility and even showed the guy who used to work at Target who made millions selling volatility ETN's.  The good news is he is going back to his old job at Target but the bad news is he lost everything.  I heard he raised $100 million to start a fund to sell volatility which is gone too.  Here's the VIX on a monthly chart.  
 
Here's the VXX ETN on the same time frame.  If you shorted this in 2009 you minted money but with a multi hundred percent move shorter term players were taken out behind the barn and shot.  
 
This is the XIV on a monthly time frame.  It's an inverse index of the VIX but had some risks if the VIX ever went up.  The risk was lose all your money.   Another great DeMark chart worthy of putting on the fridge.  
 
Euro and US Dollar


Euro bullish sentiment has increased from the lows in Q4 to a very extreme 90% and now it's 73%.  Positioning with COT data still shows speculators very very long.  
 
Euro on a weekly time frame is on week 12 of 13 and it's unlikely it will trigger this week.  The USD Index has the opposite Countdown on the downside.  
 
US Dollar Index bullish sentiment is at 34% up from 8% at the lows.  Sentiment is also turning on all the major currency crosses too.  See them all on the Hedge Fund Telemetry website.  Subscribers only Sentiment Charts
 
US Dollar Index on a daily time frame did have the downside Countdown exhaustion last week and has started to turn up.  Watch your crosses.  
 
Asian Markets


Asian markets did not have a very strong day yesterday unable to bounce with the US market. 

Hong Kong Hang Seng has support at 28,821. 

 
Nikkei Index went up fractionally but closed on the low of the day.  There's also now a downside red Countdown on day 2 of 13.  This is concerning and might have bigger consequences ahead.  
 
Transports Index
I follow the Transports Index very close as it can often lead the overall market and perhaps the economy too.  There is a new red Countdown on the downside on day 2 of 13.  If this can bounce a little more I will be looking for short ideas in this group.  
 
Some Ratio Charts


This is the ratio of High Beta Index vs Low Volatility Index.  I could see this dropping hard - that would include a lot of energy, tech, industrials. 

 
SPY vs TLT made a recent spike with another upside exhaustion signal and has started to move lower
 
SPY vs VIX had a monthly upside green Setup 9 after a massive spike in 2016 and 2017 and even more insane give back.  Wave 5 monthly target achieved (top blue line)
 
The same ratio of SPY vs VIX I created years ago.  I showed recently the very high momentum readings as a concern.  Well that resolved itself didn't it?
 
Crude and Natural Gas Update
Crude bullish sentiment is at 61$ dropping from a recent extreme high of 96%
 
WTI Crude has now rolled over after the last upside exhaustion.  Watch the 50 day for support at 60.95
 
Natural Gas bullish sentiment is at 47%
 
Natural Gas on a daily time frame was a perfect buy situation in December with both a downside red Countdown 13 combined with very low sentiment at 13%.  It moved up, backed off and continued but I found myself a bit spooked when it approached the 50 day where I said I cut my position in half to lock in gains for risk management purposes.  I'm holding the rest with a stop at the entry.
 
Bonds
 
Bond bullish sentiment is now at 19% up from the recent low of 7% last Friday.  
 
The US two year still appeals to me on the long side.  This run from September should come in and this weekly chart gives me conviction.  The daily did have an upside exhaustion too by the way.  
 
Bitcoin Update
I've been updating Bitcoin even if I have no interest in buying or selling it.  It remains on day 7 of 13 (the 8th red bar didn't stick with it bouncing yesterday.
 
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:   HAYN
DAILY DOWNSIDE 13: AIZ, BALFB, BLKB, BLL, CALM, CNP, FNB, HAS, HWKN, LDL, LMNX, OGE, SAFM, UGI, VICR, WAGE, XOXO

DAILY UPSIDE WITH PRICE FLIP REVERSAL DOWN:    FBP, FCFS, HRS, IEX, LMT, SMP, SRCL
DAILY DOWNSIDE WITH PRICE FLIP REVERSAL UP:   NONE

Updated: 2/5/18
WEEKLY UPSIDE 13:   ABMD, AON, AXE, BF/B, BIIB, BOFI, BR, CSCO, DGX, GD, LMT, MAR, RL, ROST, SGY, SPPI, STT, SYY, UFS, WAT, WSO
WEEKLY DOWNSIDE 13:   BELFB, EGOV, FSP, INT, RRC

Updated: 2/1/1
MONTHLY UPSIDE 13:     CHD, CLGX, CLX, CNMD, DVA, FICO, IDCC, MSCI, ORLY, PAYX, TFX, VMC, XYL
MONTHLY DOWNSIDE 13:    GPOR

Euro Stoxx 600 Universe: 

DAILY UPSIDE 13:   NONE
DAILY DOWNSIDE 13: GLB ID, HSX LN, ILD FP, INDUA SS, ORNBV FH, RR/ LN, SHBA SS, SPX LN, WPP LN

DAILY UPSIDE WITH PRICE FLIP REVERSAL DOWN:    NONE
DAILY DOWNSIDE WITH PRICE FLIP REVERSAL UP:   CPI LN

Updated: 2/5/18
WEEKLY UPSIDE 13:    ELM LN, JE/ LN, MC FP, TDC DC
WEEKLY DOWNSIDE 13:   AA/ LN, NG/ LN, SGC LN

Updated: 2/1/18
MONTHLY UPSIDE 13:    COFB BB, GAS SM, GKN LN, ING FP, KINVB SS, OML LN, VIS SM
MONTHLY DOWNSIDE 13:   NONE

Unsubscribe me from Hedge Fund Telemetry

Hedge Fund Telemetry LLC, P.O. Box 4675, Greenwich, CT 06861, United States

CONFIDENTIALITY NOTE and DISCLAIMER: This message is for the named person's use only. It may contain confidential, proprietary or legally privileged material. No confidentiality or privilege is waived by any accidental or unintentional transmission. If you receive this message in error, please immediately delete it and all copies of it from your system, destroy any hard copies and notify the sender. You must not, directly or indirectly, use, disclose, distribute, print or copy any part of this message if you are not the intended recipient. Hedge Fund Telemetry LLC. cannot guarantee the confidentiality of the material transmitted; therefore, information of a sensitive or confidential nature should not be transmitted. There is risk in trading markets.  Hedge Fund Telemetry LLC reports are based on information gathered from various sources and believed to be reliable, but are not guaranteed as to accuracy and completeness.  The information is subject to change without notice and Hedge Fund Telemetry LLC has no obligation to provide any updates or changes. Hedge Fund Telemetry LLC is providing this data for informational and educational purposes and does not believe that it is sufficient to base an investment decision on. This information should not be regarded as a solicitation or recommendation of any particular security or to engage in any trading strategy. One should always check with your licensed financial advisor to determine suitability of any investments.

 


Email Marketing by ActiveCampaign