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6/25/18
Thomas Thornton

Running for the exits

People are running for the exits today with narrative being increased trade war threats.  This isn't a new story however investors are starting to notice global indexes, sectors, and stocks making multi month/quarter lows.  For us, we've been watching the global markets trading poorly for months.  Recently the US Dollar lift and bond bounce has caught our eye and I still like US bonds long and expect the USD to continue higher in a risk off trade.  Most US markets have traded in a range (S&P, Dow) while the FANG's/NDX and small cap have been where people have been chasing the highs.  The narrow NDX attribution that has worked well on the upside can also work in a disastrous way on the downside.  I'm listening to CNBC commentators saying there is no panic, and pundits are still calling for upside.  Market sentiment did lift back to elevated levels and has been in the past week started to fade although we haven't seen it break the middle point of 50% level.  Some indexes are breaking some support levels yet nothing is oversold yet and combined with the CNBC/sentiment the risk remains on the downside.  Nothing motivates people more to sell like seeing weakness and potential for losing gains or worse further losses.  A breakdown below today's lows would not doubt bring out a whole lot more volume on the downside.  

I've been cautious, for some to a fault, however I have seen too much complacency and thus I expect market risk.  I do my best to find good risk reward opportunities and one area I have liked on the long side have been consumer staples.  They have done well in the past month, however I am starting to see them get close to upside daily exhaustion signals.  On a relative basis, it has been the best sector in June, even better than tech.  Stay with a large allocation to cash, tighten stops, and look for short ideas if you can.  Today's action is significant and if we see follow through, you'll be happy you have cash.  

Notable:

  • US Markets - Sentiment drifting lower was a good tell
  • Hedge Fund Telemetry Trade Ideas - Took profit on PEP +13%
  • PPO Monitor and S&P 500 Cumulative Breadth - toppy action
  • Global Markets - New lows again
  • Currencies - Still expect higher USD
  • Asian Markets - Nikkei at support Hong Kong breaking
  • European Markets - DAX breaking support and others still look weak
  • Gold Update - Still no downside exhaustion
  • Crude and Energy Update - Give back of Friday gains on energy ETF's
  • Semiconductors and Intel Update
  • Consumer Staples Update - Should see some upside exhaustion soon but buy the dips
  • FANG - First reversal down after upside exhaustion
  • Bond Update - Bonds still are buyable
  • DeMark Screens - Daily, Weekly, Monthly upside/downside exhaustion signals within the S&P 1500 and Euro Stoxx 600

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  59%.  Tonight the sentiment read will be  very telling


SPY below the 50 day.  A break under 270 or 2700 could really bring out the sellers


Nasdaq bullish sentiment is at 62%


QQQ has more room to the 50 day but it has given back the entire month's gain


NDX attribution today.  I've shown this with a YTD example in the past and today's action shows how the mega cap names are weighing on the market and breadth is terrible 10/93.  This was highly expected


Dow under the 200 day.  There still is a wave 5 downside price objective of 22,188


Russell 2000 also a big reversal down


Micro Cap IWC reversing too

 
Hedge Fund Telemetry Trade Ideas


Trade Ideas - PEP long removed +13%.  No other changes.  

 
PPO Percentage Price Oscillator Monitor and S&P Cumulative Breadth


The PPO monitor is showing most sector ETF's under the 10 and 20 day moving average and many now under the 50 day.  Look on the right side for 20 day highs and lows.  (green/red).  Recall I was showing 3 energy ETF's on the top way overbought just a few weeks ago and now OIH is near the low.  XLP Staples was on the dead lows a few weeks ago and has rotated higher.  


S&P Cumulative breadth has topped with the upside DeMark exhaustion signals seen back in January too

 
Global Markets


Vanguard Total Stock Market Index had several upside exhaustion signals and is rolling over


Vanguard Total International (ex US market) has been trading terrible for a while and is making a 10 month low.  This is not a surprise

 
Currencies


US Dollar bullish sentiment is at 81% and still in the extreme zone


US Dollar Index has backed off the recent highs yet I still expect a run higher


Euro bullish sentiment is at 26% and has been drifting up


Euro spot has bounced although there remains a downside red Countdown


Chinese Yuan weekly time frame making a move higher.  Look at 2015 when it spiked.  That was a very challenging time for global and US equity markets.  

 
Asian Markets


Nikkei is under the 50 day and has support at 22,000.  A potential downside wave 3 price objective at 18,450 is not out of the question.  


Hong Kong is breaking down and has a downside red Countdown on day 3 of 13.  

 
European Markets


German DAX broke the 12,500 support and could be headed back to the March lows


UK FTSE 100 had a big down day today making a new 2 month low.  I've been expecting lower levels


Euro Stoxx 50 also breaking support


Euro Bank Index is at support yet has a downside red Countdown in progress


Euro Stoxx 600 is now well off the recent highs.  A new 2 month low here too

 
Gold Update


Gold bullish sentiment is at 13% and remains depressed


GLD did not get the downside 13 exhaustion yet

 
Crude and Energy Update


Crude bullish sentiment is at 60% and up huge day over day from 46%


WTI Crude futures is either going to 80 or 60 with wave targets.  A break of the recent high or recent low will decide which target we will see


OIH Oil Service is giving back Friday's gains


XLE als has given back gains.  A break of 72.64 will see an air pocket lower

 
Semiconductors and Intel


SMH Semiconductor ETF is back under the 50 day and near the 200 day.  The upside pink Combo on the highs worked well


INTC is the largest weight in SMH (20%) and I added it to the Trade Ideas page with the green Setup 9.  

 
Consumer Staples - Update


Consumer Staples top 5 weight custom index has done well however it is now on day 10 of 13 and I should top out temporarily.  


PEP has done great and I removed it from the long side of the Trade Ideas sheet.  +13%.  There is a combo 13 and red Sequential on day 12 of 13.  I will look to buy dips


PG is on day 11 of 13 with its upside Countdown and I will be removing it from the long side or reducing it by half soon

 
FANG


FANG + did have several upside exhaustion signals and is reversing here.  There is a lot of room to the downside if this can follow through

 
Bonds


Bond bullish sentiment is at 65% and as expected is moving higher


US 10 year yield is on day 4 of 13 with a downside Countdown.  This is a big reason I expect lower yields in a risk off trade


TLT Bond ETF is also on day 4 of 13 with an upside Countdown.  I still like bonds as a long to buy today.  

 
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:   CF, FRAN, FRT, GPS, LOW, NR, RMD
DAILY DOWNSIDE 13:   AME, HII, RTN, VAR, XYL

DAILY UPSIDE WITH PRICE FLIP REVERSAL DOWN:   BK, CF, DECK, EAT, ENSG, HUBG, M, MATX, MDSO, MNK, OSIS, PTC, SCSC
DAILY DOWNSIDE WITH PRICE FLIP REVERSAL UP:   AOI, SRCL

Updated: 6/25/18
WEEKLY UPSIDE 13:   BLKB, CRVL, GOOG, HMSY, IDXX, JCOM, MATX, NEE, NP, NWBI, PAYX, SHLM, TBI, VIVO
WEEKLY DOWNSIDE 13:   CPWR, PRA

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:   BOKA NA
DAILY DOWNSIDE 13:  BTG LN, CA FP

DAILY UPSIDE WITH PRICE FLIP REVERSAL DOWN:   GLB ID
DAILY DOWNSIDE WITH PRICE FLIP REVERSAL UP:   CO FP, KBC BB, LLOY LN, TNET BB

Updated: 6/25/18
WEEKLY UPSIDE 13:  EDF FP, INF LN, MTX GR, OCDO LN, SCHA NO
WEEKLY DOWNSIDE 13LRE LN, MAESKB DC

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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