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7/11/18
Thomas Thornton

The Screwdriver

President Trump is in Europe this week at the NATO Summit, then headed to the UK to meet with Prime Minister May (if she's still PM) then the big one on one meeting on Monday with Vladimir Putin (ask for a Screwdriver at your local bar in honor of this meeting) In typical form, President Trump said that the meeting with Putin might be the easiest of the them all.  He might be right!  About 15 minutes into the meeting with NATO members he's done his best to insult Germany and other members for not paying enough into military budget.  He really hit a nerve with Germany since the country is still in shock with the quick exit from the World Cup.  And we should also mention last night news of $200 billion more targeted tariffs with China.  The markets dropped at the onset of today's trading around the world yet the standard play book to buy the FANG's is working once again.  Yesterday a couple of the FANG custom indexes did get the upside DeMark exhaustion signals and notably Amazon is on day 12 of 13 with its upside Countdown.  This mindless strategy of buying these mega caps won't work forever.  

China is now expected to retaliate and considering they can manipulate their currency pretty easily they might continue to devalue the Yuan.  The tariffs have absolutely crushed commodity pricing which is going to significantly hurt the US farmers and commodity producers.  Ironically these are the people and businesses who the tariffs are suppose to help.  I can read on Twitter traders dismissing the tariffs as they do not see anything yet that is of concern.  You have to think we'll hear a lot about tariffs and the stronger US Dollar during the upcoming earnings season.  

Notable:

  • US Markets - Sentiment is elevated and we will see Setup 9's tomorrow
  • The Three Most Important Stocks Right Now
  • Hedge Fund Telemetry Trade Ideas - A few changes
  • Currencies - Keep an eye on tonight's Yuan fixing
  • Asian Markets - Still risky
  • European Markets - New downside red Sequential Countdowns increases risk to downside
  • Gold, Copper, and Crude - Gold trade wobbling but staying with it for positive seasonal trade
  • Exxon - Upside exhaustion again and this signal has worked very well in the past
  • Netflix - Added small size to the Trade Ideas Sheet again. 
  • Bond Update - US 10 year auction today will be very important.
  • DeMark Screens - Daily, Weekly, Monthly upside/downside exhaustion signals within the S&P 1500 and Euro Stoxx 600 SEEING CONTINUED UPSIDE EXHAUSTION 13'S IN THE S&P 1500
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 70% and back to the elevated zone.  80%+ is the extreme zone.  The recent peak hit 75% bulls


SPX Index is on day 8 of 9 with a green Setup count.  2800 continues to be resistance


Nasdaq bullish sentiment is at 67%


NDX Index is on day 11 of 13 with the red Sequential Countdown and day 8 of 9 with the green Setup.  


Dow Jones is also on day 8 of 9 and baring any large pullback will get the 9 tomorrow.  This should see a pullback for a few days at least.  With the green 9 tomorrow the downside red Countdown will be cancelled.  


IWM Russell 2000 did have a secondary upside Countdown start and is on day 9 of 13.  


Mid Cap Index did get an upside red Sequential 13 two days ago
 
Hedge Fund Telemetry Trade Ideas


Trade Ideas - Removed PGR short +1.80%, XLY short +.1%.  Added 2.5% sized position in NFLX short
 
The Three Most Important Stocks Right Now


AMZN is on day 12 of 13 with an upside Countdown


AAPL still has a downside red Countdown on day 5 of 13.  


MSFT is on day 10 of 13 with its upside Countdown
 
Currencies


US Dollar bullish sentiment is at 73% and holding here for a second day


US Dollar Index is on day 10 of 13 and I'm having doubts that we will see much higher prices without a pause.  


Euro bullish sentiment is at 45%


Euro Spot stalling here at the 50 day and has a downside red Countdown on day 8 of 13.  


USD CNH still shows the Yuan weakening vs USD.  There is a new upside Countdown on day 7 of 13.  If the recent low is taken out tonight I would expect some alarm bells to go off and not happy alarm bells for equity markets around the world
 
Asian Markets


Nikkei yesterday closed on the dead lows and that never is a good sign and thus it gapped down today.  21,500 is important support


Hang Seng just can't get moving up and there is a downside Countdown on day 8 of 13.  I still see risk in Hong Kong and China
 
European Markets


German DAX gapped down today and now is on day 2 of 13 with a new downside Countdown


Italy still looks risky with 21,000 major support


UK is now making lower highs and we'll see if a new lower low under 7,500 can happen


Euro Stoxx 50 failed at the 50 day and now has a new downside red Sequential Countdown starting.  
 
Gold, Copper, and Crude


Gold bullish sentiment is at 22% and just continues to be sluggish


GLD now has a secondary downside Countdown on day 4 of 13.  I'm long 5% GLD and this is not what I wanted to see.  The positive is that seasonality turns positive in the coming weeks and I knew that July can and now is a little choppy.  Staying with it long


Copper bullish sentiment is at 13% and will be lower with today's reading


Copper has been straight down since the upside red 13 Countdown.  There was a pink Combo 13 and the red Sequential is on day day 9 of 13.  This is in wave 3 so once this bounces it will be a lower high bounce followed by a lower wave 5.  


Crude bullish sentiment is at 88% and remains in the extreme zone


Crude looks toppy especially with sentiment at extremes.  Watch support at 71.85 and resistance at 75
 
Exxon


XOM has a new upside red Sequential 13.  I am considering adding this to the Trade Ideas Sheet as a new short
 
Netflix


NFLX has seen a bunch of upside exhaustion signals and I added it again to the Trade Ideas Sheet with a 2.5% sized position.  
 
Bonds


Bond bullish sentiment is at 70%


TLT Bond ETF still is a long for me


US 10 Year Yield has a downside Countdown on day 9 of 13.  Today there is a 10 year auction and keep in mind yesterday's 3 year auction was terrible.  
 
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:   AAP, ACIW, ADM, AYI, BCC, BRKS, COP, CRM, CRUS, CTXS, EGL, EXLS, GILD, HOLX, HWKN, MRO, NP, PLXS, PTC, STMP, STX, TDC, UTHR, XOM
DAILY DOWNSIDE 13:   NONE

DAILY UPSIDE WITH PRICE FLIP REVERSAL DOWN:   AKR, ATU, AYI, BRKL, HR, LHCG, NTRI, OSII, RYN, VNO, WAGE
DAILY DOWNSIDE WITH PRICE FLIP REVERSAL UP:   TWI


Updated: 7/9/18
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:   EDP PL
DAILY DOWNSIDE 13:  NONE

DAILY UPSIDE WITH PRICE FLIP REVERSAL DOWN:   BPSO IM
DAILY DOWNSIDE WITH PRICE FLIP REVERSAL UP:   NONE


Updated: 7/9/18
WEEKLY UPSIDE 13:  D1 GR, GALP PL
WEEKLY DOWNSIDE 13:  ELUXB SS, JM SS, NCCB SS, WRT1V FH

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

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