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6/4/18
Thomas Thornton

Energizer Bunny

Technology with the big mega cap names continue to rise and run like the Energizer Bunny.  Unlike the Energizer Bunny, tech will run out of juice soon.  Our DeMark indicators have upside Countdowns that are getting closer to exhausting.  Turn on CNBC or look online as financial sites and they are touting it just like they did recently when energy stocks were moving higher.  We saw the upside exhaustion signals and prepared for a pullback.  

Last week I took down some short exposure within the NDX recognizing the potential for a little further upside.  Today on the Trade Ideas page Apple and Google were also stopped out.  For now we will sit tight and wait for new signals.  A recent new long thematic idea - Consumer Staples are outperforming the S&P by double and even a little stronger than tech.  

Today's note is late and I've been buried with emails, meetings, and calls since I was out Friday.  A lot of progress is being made behind the scenes here at Hedge Fund Telemetry and I just can't wait to share.  

Notable:

  • US Markets - Sentiment slight improvement.  Indexes have limited upside potential with current upside Countdowns.  
  • Hedge Fund Telemetry Trade Ideas  - Stopped on AAPL, GOOGL
  • European Markets - Not convinced upside is durable ahead based on how they opened and closed today.  
  • Currencies - THIS IS THE MOST IMPORTANT MARKET TO WATCH.  Once the USD short term correction is over a new higher wave will begin.  That will affect everything else
  • Asian Markets - Nikkei has clear support at 50 day, Heng Seng looks constructive on the long side
  • Credit Spread Update
  • Energy Update
  • US Unemployment Rate - Long term charts using DeMark Indicators - Spoiler alert later this year expect a bounce in the Unemployment Rate and a potential recession next year
  • Tech Update - How much more is left on the upside
  • Consumer Staples Top 5 - I like these on the long side - A lot!!
  • Bond Update - Right in the middle of the recent range
  • DeMark Screens - Daily, Weekly, Monthly upside/downside exhaustion signals within the S&P 1500 and Euro Stoxx 600 - WEEKLY AND MONTHLY ARE UPDATED TODAY

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 51% up from 43%


SPY is on day 5 of 13 with an upside Countdown with a wave 5 upside price objective of 280.  There still is the downside wave count which started in January.  I do not expect a new high from this move.  


Nasdaq bullish sentiment is at 57% up from 47% the previous day


QQQ is on day 8 of 9 with a upside green Setup.  The 9's have been in the past good at inflection points.  A pullback of some fashion is likely in the coming days


Dow Jones is still a sideways chop yet there is an upside Countdown on day 3 of 13.  It could continue to chop sideways however there is a wave 5 upside price objective of 25,685


IWM Russell 2000 still has an upside daily Countdown on day 6 of 13

 
Hedge Fund Telemetry Trade Ideas


Trade Ideas:  Stopped on AAPL, GOOGL short.  Despite the PNL weakness, I am comfortable with the increased cash position and have plenty of bullets.  

 
European Markets


DAX opened on the highs today however traded below that open all day.  12,500 is important support


Italy still looks dangerous with a downside Countdown on day 2 of 13.  Notice the open higher but close lower

 
Currencies


US Dollar bullish sentiment is at 80% down from recent high of 94%


US Dollar Index had recent upside exhaustion signals and pullback was expected.  A little lower is needed to lock in the wave 4.  The next wave is wave 5 and that will move higher than the recent high.  When this happens expect a larger risk off environment across many equity markets


Euro bullish sentiment is at 16% which was down from the previous day of 23%.  The recent low was 4%


Euro has bounced off the recent downside exhaustion and ultra low sentiment

 
Asian Markets


Nikkei has bounced off the 50 day which now will be very important support


Hang Seng increased again after the recent downside exhaustion signals.  This looks good

 
Credit Spreads - Update


High Yield vs US 10 year stalled after making a wider mark in the past couple years.


The weekly still looks to me that this will widen over the coming months.  

 
Energy Update


Crude bullish sentiment is at 40% and it's down quickly from the recent high of 87%.  Watch for support at 30%


WTI has broken down after making a multi year high.  This could be the start of a 5 wave downside sequence.  


From a weekly time frame WTI has an upside wave sequence that now has is in a corrective wave 2.  This makes me believe longer term crude prices will go higher but that daily wave 5 might be more dominant before new highs are seen.  Seasonality is pretty strong from late January to the end of May.  That daily wave sequence could be drawn out over the coming 2 quarters.  


XOP and the other Energy sector ETF's all had upside exhaustion signals that gave us confidence of a top.  

 
US Unemployment - Long Term


This is the monthly chart of the US Unemployment Rate that is zoomed in so you can see the monthly downside Countdown is on month 10 of 13.  When there is an exhausted Countdown that fails to turn like what happened in 2015, it said a lot - specifically the trend was just very strong.  


The longer term monthly chart shows how the 13's have been seen before tops and bottoms in the unemployment rate.  Sometimes the 13's occurred with sideways action ahead of further downside.  I expect the next 13 to be very significant and not a good thing for the economy.

 
Technology Update


Often last year the tech ETF's saw upside exhaustion signals ahead of short term stalling out periods and a few significant pullbacks.  There is now a secondary upside Countdown on day 7 of 13.  Thus we could have another upside exhaustion next week.  


The weekly close up shows this is on week 8 of 9 with an upside Setup.  It lines up with the daily upside Countdown with potential for a reversal in the next 2 weeks.  

 
Consumer Staples Top 5


This custom index of the top 5 weights in the Consumer Staples sector has bottoming potential.   Stocks in this index are PG, KO, PEP, WMT, MO.  You get an average yield of 3.90% while you wait.  Considering these are down 20% a move higher in a mean reverting mode is likely.  

 
Bonds


Bond bullish sentiment 52% down from a recent high of 66%.  


US 10 Year Yield has bounced off the recent risk off bond bounce.  This will be very important to watch in the coming days as there is potential for a new red Countdown.  Stay tuned


German 10 year same story showing yields moving up after the risk off event.  

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

S&P 1500 Universe:


DAILY UPSIDE 13:   APC, BABY, HIW, JKHY, MSCI, NFLX, WOR
DAILY DOWNSIDE 13:   HP, JACK


DAILY UPSIDE WITH PRICE FLIP REVERSAL DOWN:   ARQL, HRL, OFC, PLT, RGS, SIG, XEL
DAILY DOWNSIDE WITH PRICE FLIP REVERSAL UP:   CAH, COO, HBAN, MANH, NUE, OMC

Updated: 6/4/18
WEEKLY UPSIDE 13:   AES, ASH, BA, CA, FTNT, IDTI, IPAR, MCHP, ORN, XOXO
WEEKLY DOWNSIDE 13:   DIS, EGOV

Updated: 6/4/18
MONTHLY UPSIDE 13:    BJRI, IDA, NSP, PFS, PVH, SCSC, SYY, TSCO, VDSI, VLO
MONTHLY DOWNSIDE 13:     CLW, LQDT

Euro Stoxx 600 Universe:

DAILY UPSIDE 13:   ALO FP, BRBY LN, BWY LN, CRH ID, HL/ LN, IMI, LN, INCH LN, POM PF, WG/ LN
DAILY DOWNSIDE 13:  NONE

DAILY UPSIDE WITH PRICE FLIP REVERSAL DOWN:   NONE
DAILY DOWNSIDE WITH PRICE FLIP REVERSAL UP:   ANDR AV, ASM NA, BBVA SM, BKIA SM

Updated: 6/4/18
WEEKLY UPSIDE 13:  AHT LN, ASML NA, AZN LN, DSY FP, LR FP
WEEKLY DOWNSIDE 13MS IM

Updated: 6/4/18
MONTHLY UPSIDE 13:     ADS GR, AMEAS FH, AV/ LN, BVS LN, DG FP, HELN SW, HLMA LN, ITRK LN, LEG GR, NESTE FH
MONTHLY DOWNSIDE 13:  NONE


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.    

The upside 13's are sell signals and downside 13's are buy signals.  Price flip's are confirmation signals that increases potential for a price trend change. For example, if you are long a stock and there is an upside 13, you will want to take cautious action by selling down or out of a position.  If initiating a short sale with the upside 13's, we tend to start with a 1/2 size and add with the downside price flip.  The opposite is true for when there are downside 13's.  Take a 1/2 size position and add with the upside price flip.  The DeMark Indicators are designed to assist the user with buying into weakness and selling into strength to anticipate trend exhaustion. Selling into a rally and buying into a decline often afford the opportunity to exit a trade without too serious a loss if wrong.

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