Share

If you are having difficulty seeing this email, you can view in your browser or click here to print.

7/2/18
Thomas Thornton

Best house on the worst street

While the typical US investor remains complacent, the global investor is getting more concerned as we hit the halfway point of the year.  The US markets are generally flat on the year with the standout Nasdaq up 8.6% while the Dow is down 2.2% and the S&P 500 only up 1.3%.  In Europe all of the major indexes are down on the year with the Euro Stoxx 50 down 3.8% and even the best economy in Europe, the German DAX down 5.25%.  In Asia, it is a similar situation with the the Indian Nifty 50 up 1.2% and then the Japanese Nikkei down 4.2%, Hong Kong Hang Seng down 3.2%, Korean Kospi down 8%, and the Chinese Shanghai Composite down a very concerning 16.7%.  European Banks are down 17.5% with the US banks down 5%.  If you have watched any CNBC segment in the past few months, there has been zero real fear and the commentary on other markets around the world has been virtually non existent.  The US has been the best house in the worst neighborhood. 

How much longer will this last?  I am already seeing signs of early warning signs and one of the scenarios I see happening is that a down move could come quickly and deep.  Banks had stress tests that were designed to pass but the sector sold off after the initial pop.  They are back to the support levels from last week and a break could open up a trap door.  Other sectors and indexes have similar profiles too.  Cumulative breadth peaked in June and not a word from the typical people who point out tops.  Credit spreads are quietly widening although haven't woken anyone up yet.  The US Dollar is up again and the Chinese Yuan continues to weaken.  This will have profound impact when US companies start to release earnings in a few weeks.  Recall back in April, the expectations for earnings was quite high starting with the hockey stick chart of 2018 earnings estimates seen in January.  It was interesting then how stocks that beat on average declined and stocks that missed were hit harder.  Saving the day were Netflix, Amazon, and Apple. Don't be so complacent to think the same script will play out again.  The benefits from the tax plan will wear out in the coming quarters and comps will only get increasingly more difficult.  So what to do?  Raise cash levels, tighten stops on longs, and selectively look for short ideas if that fits your risk perimeters.  

Notable:

  • US Markets - Sentiment continues to remain complacent. Indexes at support
  • Hedge Fund Telemetry Trade Ideas - No changes
  • European Indexes - At support levels
  • Currencies - USD still should work higher, Euro stalled and Yuan continues lower
  • Asian Markets - Trap door still open
  • Crude Update
  • Metals Update
  • Tesla Update
  • Retail Update
  • Extend and Pretend Update and list of components
  • Bond Update
  • DeMark Screens - Daily, Weekly, Monthly upside/downside exhaustion signals within the S&P 1500 and Euro Stoxx 600 - NEW WEEKLY AND MONTHLY EXHAUSTION SIGNALS POSTED

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 45%


SPX is right at support and a break under 2700 tomorrow will likely start a new red Countdown to the downside


SPY similar support level at 270/269 level


Nasdaq bullish sentiment is at 41%


QQQ has support at 170 and couldn't continue the bounce I discussed last week on how to measure the start of a decline by the first bounce.  166.88 is support then a lot of air below


Dow Jones for sure has been the weakest of the large cap indexes and this does have a red downside Countdown in progress on day 3 of 13


IWM Russell gave back most of June's gains and has support at 161/160

 
Hedge Fund Telemetry Trade Ideas


Trade Ideas - No changes today.  

 
European Markets


Euro Stoxx 50 couldn't continue Friday's bounce


Italy still has a that downside Countdown in progress on day 10 of 13.  

 
Semiconductors


Semiconductors were one of the leading sectors last year but this year have struggled while the FANG and other large cap indexes like the NDX have lifted.  Times have changes and when semi's start to get weak, it bleeds into other sectors

 
Currencies


US Dollar Index is at 86% down from a very very high reading of 94%


US Dollar Index is back over 95 and still has an upside pending Countdown on day 9 of 13


Euro bullish sentiment is at 31% for the 3rd day in a row


Euro still stuck in a tight range down here


Chinese Yuan USDCNH on this chart has some upside exhaustion yet it has ignored other signals which is important in that this trend is exceptionally strong.  

 
Asian Markets


Shanghai continues lower on day 4 of 13 with a red Sequential Countdown.  


Nikkei has also broken to the downside as expected

 
Crude Update


Crude bullish sentiment is at 88%


WTI Crude Futures haven been very strong in the past 10 days however the green Setup 9 is due tomorrow and combined with extreme sentiment I would sell this today


XOP as mentioned on Thursday with an upside exhaustion and now fading.  Careful if long, I'd be out
 
Metals


Gold bullish sentiment is at 12% but up from 8%


GLD had the downside exhaustion first ahead of Gold Futures and it is a little disappointing that it didn't turn up and hold today.  I'm still long and remember the best seasonality starts in later July


Silver Futures still has a downside Countdown on day 11 of 13.  Patience


Platinum bullish sentiment is at 11% and very depressed


Platinum has a very strong downside trend that has seen 13's stall out for a couple weeks and then resume lower.  With lower sentiment I would only buy this with a move back over 850


Copper still looks lower with a downside Countdown in progress on day 5 of 13

 
Tesla


Tesla announced they produced a number that they targeted.  There is some controversy with the numbers as typically Tesla does frequently.  The weekly chart below shows a big reversal after popping higher.  The potential downside wave 3 price objective is 193.  Love how well it held the 250 TDST line


Daily shows the real wide bar from today on large volume too.  Today's action is quite a tell on the news... this is also long sellers and not shorts pressing.  

 
Retail


Retail XRT ETF has had a nice reaction after the upside exhaustion signals

 
Extend and Pretend Custom Index


There is a lot of room to the downside here for these names

 
Bonds


Bond bullish sentiment is at 72%


TLT Bond ETF still has an upside Countdown but stalled at resistance.  I still like bonds long


US 10 year yield stalled as well


HYG High Yield really breaking down

 
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:   ACXM, CIEN, EQT, NE, WDFC
DAILY DOWNSIDE 13:   CEVA, MYE, PZZA, TWI

DAILY UPSIDE WITH PRICE FLIP REVERSAL DOWN:   NWE, OGE, PEP
DAILY DOWNSIDE WITH PRICE FLIP REVERSAL UP:   ALLE ASGN, CELG, CGNX MHO, MMC, MMM, NEM, TMO, TRMB, XYL

Updated: 7/1/18
WEEKLY UPSIDE 13:   AES, BBY, CACI, DPZ, EAT, MGLN, MUSA, WCG
WEEKLY DOWNSIDE 13:   AYI, FTR

Updated: 7/1/18
MONTHLY UPSIDE 13:    ADI, AEE, BAX, BCOR, ETFC, ICUI, ITG, MED, MOH, NEE, SMTC, THG, TTEK, TXN, VICR, VSH, WCN, WST
MONTHLY DOWNSIDE 13:    TUES

Euro Stoxx 600 Universe:

DAILY UPSIDE 13:   INCH LN, SUBC NO
DAILY DOWNSIDE 13:  ML FP, SAZ GR

DAILY UPSIDE WITH PRICE FLIP REVERSAL DOWN:   NONE
DAILY DOWNSIDE WITH PRICE FLIP REVERSAL UP:   FI/N SW, GLE FP, JM SS, PRY IM, TOP DC

Updated: 7/1/18
WEEKLY UPSIDE 13:  NONE
WEEKLY DOWNSIDE 13ISS DC, ORK NO

Updated: 7/1/18
MONTHLY UPSIDE 13:     BLND LN, CDI FP, CRH ID, DCC LN, DOM LN, RACE IM, REL LN, RMS FP, SXS LN, WKL NA, ZAL GR
MONTHLY DOWNSIDE 13:  BMPS IM




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