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6/21/18
Thomas Thornton

Short Bait

Today's comments is just a little trading knowledge nugget I wanted to share. Often times I say "avoid the obvious" when it comes to long or short ideas.  Today was a classic example on the short side when a headline hit saying the Supreme Court ruled states could tax internet retailers even if they are not located in the state.  This was red meat "Short Bait" for day traders.   Naturally Amazon dropped quickly however it quickly recovered off the lows because it was just so obvious and there was no follow through to the downside.  Amazon and some of the other FANG stocks have incredibly very little short interest so saying the recent rise has only been shorts covering is untrue.   Amazon has only 1.22% of the float short.  So the quick move down was day traders thinking they lucked out catching the top. Not so fast.  Netflix was another one that moved down quickly.  The percentage short is at 4.65% of the float from the last reading at the end of May and that's not that high historically for them.  The stock is up 70 more points from that reading and I would imagine the short interest is even lower today.   

Once all of the shorts who got in at the lows cover, it creates a vacuum lower when the long selling starts again.  Same story with Tesla as the news when it was under 300 was flat out terrible yet the stock didn't break.  That was one of the reasons I covered.  Of course I added a little prematurely and was stopped but I'm back in at perhaps a better entry now and with a similar signal as I showed last February.  Tesla is an obvious short but when I hear people telling me I have guts to short it here after the big recent run up, I feel more confidence my entry will work. 

The Nasdaq futures bounced nearly 60 handles off that low and my guess is that we could start to see further weakness later in the day.  The real risk is having the long sellers start to sell absent the shorts who would normally be there to cover.  The Nasdaq 100 still has some upside DeMark Countdowns in progress yet it might be OK to be a little early taking down long exposure.  Following this email will be the weekly Currency Focus.  

Notable:

  • US Markets - Sentiment drifting a little off recent highs.  A look at various S&P's
  • Hedge Fund Telemetry Trade Ideas -  took profit in PM, Doubled up FB and TSLA short. Added XRT short
  • Short Bait - What is looks like in AMZN and NFLX.  And a chart of FANG+
  • Asian Markets - Shanghai longer term looks dangerous
  • Euro Markets - Still rolling over especially in Italy
  • Gold Update - A little good news soon for long's
  • First Day of Winter - Australia breaking out but limited upside targets
  • XRT Retail ETF - Upside exhaustion
  • Bond Update - I still like bonds on the long side
  • DeMark Screens - Daily, Weekly, Monthly upside/downside exhaustion signals within the S&P 1500 and Euro Stoxx 600 - Two days worth of data since we did the webinar yesterday.

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 63% drifting a little lower


SPX Index has turned lower and is on day 5 of 9 with a green Setup on the downside.  Watching 2700 for support


SPY also is on day 5 of 9 with the downside Setup.  It did have an upside pink Combo 13 and has a pending upside red Countdown on day 11 of 13.  If the green Setup completes 9 consecutive days down closing below 4 previous closes that upside pending Countdown will be cancelled.  


S&P Emini's same story.  I wanted to share all of the S&P's Index, ETF, and futures as sometimes they are not in perfect sync.  


Nasdaq bullish sentiment is at 68%


NDX remains on day 7 of 13 with an upside Countdown.  


QQQ in sync with NDX


Russell 2000 Index has upside exhaustion in play and did overshoot yesterday but is coming back down today.  


Micro Cap same story


Dow Jones is under the 50 day and looks the weakest of all the major US indexes.  It is on day 7 of 9 with green Setup and I bet will complete to 9 thus the pending upside red Countdown will be cancelled.  

 
Hedge Fund Telemetry Trade Ideas


Trade Ideas - took off PM (it was lagging the other Staples) +1.7% gain,  Doubled up FB and TSLA shorts to 5%  

 
SPY VS TLT - Bonds vs Stocks


SPY vs TLT weekly ratio has had quite the run since the lows in 2016's big Feb low last downside 13.  This long term chart isolates all the times this ratio turned going back to 2007.    But this run could be coming to an end.  


The close up of the weekly has this on week 12 of 13 and has made a lower high from earlier in the year.  A 13 could happen in the coming weeks and it would not have to make a new high

 
Short Bait


AMZN daily shows the big bar today and how it dropped and traded back well above the lows


Here's the intraday 30 minute chart that impulsively shows the drop and bounce on large volume.  This just ate up some day traders PNL


Netflix same thing.  The daily has a pink Combo 13 again and is on day 11 of 13 with a red Sequential Countdown.   A couple more days I'm thinking


NFLX 30 min chart - same thing


FANG + has a cluster of some upside exhaustion and that has been seen in the past ahead of pullbacks.  

 
Asian Markets


Shanghai Composite weekly long term chart.  Hard to see but it looks like this could break down further.  

 
European Markets


UK continues lower


Germany ignoring that upside red Countdown.  I had a feeling about this happening.  Watch the 12,500 level as support


Euro Stoxx 50 right at support.  I don't think it holds


Italy is on day 7 of 13 with downside Countdown and trades very heavy

 
Gold Update - A little good news soon for Gold buyers


Gold bullish sentiment is at 10% and it remains in the extreme bearish zone


Gold Futures is on day 9 of 13 with a downside Countdown - Getting closer to a buy


GLD ETF is on day 12 of 13 with a downside Countdown and could exhaust tomorrow.  I tend to like to see both the futures and ETF move in sync so this could be close to a buy.  Stay tuned.  

 
First Day of Winter - Australia


Sorry to my mates in Australia as it's the first day of Winter.  The good news is Winter is pretty nice there and your stock market is breaking out.  


The weekly has a little more upside targeted with wave 5 but there are some upside exhaustion signals in play.  

 
XRT Retail Upside Exhaustion


XRT Retail ETF did get the upside exhaustion as expected and I added a 2.5% short on the Trade Ideas sheet

 
Bonds


Bond bullish sentiment is at 57% and remains OK to buy


2/10 yield curve starting to see signals seen before some steepening happened.  


US 10 Year Yield still says buy bonds to me with the downside red Countdown on day 3 of 13

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

Daily/Weekly DeMark upside/downside exhaustion signals (Sequential) weekly updated on Monday's and monthly on the first day of the new month.  Price flips occur when a stock closes higher/lower than four previous closes and increases conviction of a price turn.

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.

S&P 1500 Universe:
DAILY UPSIDE 13:   AMED, AMP, AN, CHCO, EE, EHTH, FBP, MNK, NI, NTRS, NWE, POWI, TRIP, UBA, AAP, BK, CALM, CBU, DECK, DNR, FWRD, GBCI, HCP, LPSN, MDXO, PETS, SCSC, THS
DAILY DOWNSIDE 13:   AOI, BMS, CELG, LMT, SRCL, TMO, HRS, MAR, NOC

DAILY UPSIDE WITH PRICE FLIP REVERSAL DOWN:   CA, CREE, CSCO, ESRX, FFIV, MSCI, NPK, PAYX, RHI, SWKS, WCG, WEX, ALGN, AMCX, AMP, AMSF, ARW, IART, IDCC, RL, SNX, STMP, TECH
DAILY DOWNSIDE WITH PRICE FLIP REVERSAL UP:   FULT, HF, MHK, SJM, SPAR, THO

Updated: 6/18/18
WEEKLY UPSIDE 13:   ABT, AKAM, AMGN, KMPR, RMD, SYK
WEEKLY DOWNSIDE 13:   NONE

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:   IAG LN, HSX LN
DAILY DOWNSIDE 13:  FR FP, TNET BB, ZOT SM, AMS SW, CO FP, OERL SW, WTB LN

DAILY UPSIDE WITH PRICE FLIP REVERSAL DOWN:   BOSS GR, CAP FP, DSM NA, HLMA LN, ITRK LN, ITX SM, KSP ID, LOGN SW,  QQ/ LN, SAP GR, SPX LN, WDI GR, AIR FP, GBF GR, KINVB SS, PSPN SW, SAP GR, SW FP, VNA GR
DAILY DOWNSIDE WITH PRICE FLIP REVERSAL UP:   NONE

Updated: 6/18/18
WEEKLY UPSIDE 13:  AI FP, CAP FP, DSV DC, OCI NA, OMV AV, RR/ LN, STMN, SW, UTDI
WEEKLY DOWNSIDE 13: NONE

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




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