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9/19/18
Thomas Thornton

High Times

Cannabis stocks are all the rage again.  Tilray is up over 1200% since their IPO in June.  It's up 45% today alone.  They have a market cap of $21 billion with revenue last year of $20 million and $42 million expected in 2018 and $155 million expected in 2019.  Incredible growth but the valuation makes zero sense.  As a comparison, Constellation Brands has a market cap of $41 billion and will have revenues in 2018 of $7.6 billion.  The stock is up like this since there is a low float and no borrow ability and thus people are using options which can drive up a stock in the same way a short squeeze happens.  The vols on the options are about as high as I have ever seen.  My advice is to stay away from these situations.  A better way to take advantage of the cannabis market is to look at GW Pharma.  They have medical solutions for cancer patients, multiple sclerosis, and neuropathic pain.  This is a business that will make $12 million in 2018 and is expected to make $93 million in 2019.  The market cap is $4 billion.  Not a value stock but how about the growth potential! Growth stocks as we have seen especially in this sector can be volatile, really volatile. Stay with a moderate sized allocation.

On the theme of high times, I looked at the recent 20 day highs and low data and found a rather low relative number of new 20 day highs considering the market has been so close to all time highs and also a relative high number of new 20 day lows.  The S&P 500 had 104 new 20 day highs and 38 new 20 day lows.  NDX 10/5, Midcap 39/71, Smallcap 62/85.  A lot of people have talked about the Hindenburg Omen indicator and I have seen clusters of the signals recently and when there are clusters the signals have more potency.  The indicator is triggered when there are high numbers of new 52 week highs AND lows and a couple other metrics.  To me it represents a confused market with a lot of dispersion and breadth deterioration.   On that note I am tightening stops on all Trade Ideas and suggest doing the same on all your positions.

I'm delaying the launch of the new website as we finished the new charts and they didn't meet the standard and goal.  We went back to the drawing board and brought in another programmer to make the sentiment charts interactive and really useful.  Stay tuned.  It will be a big improvement.

Just a heads up, I'm traveling for the next two Friday's and there will not be a Daily Note published.

  • US Markets - Sentiment diverging, still a little possible nominal new high potential on SPX, Nasdaq Summation showing some real divergence and it's an early warning indicator
  • Hedge Fund Telemetry Trade Ideas - Added back GS long and doubled FEYE long
  • Cannabis - High Times
  • Some recent stock ideas
  • Bloomberg Technical Pattern Screen - Some cool ideas, especially the pair trades
  • Currency Update - No change to recent thoughs
  • European Market Update - Another tick up but hard to buy
  • Global Market Update - EEM doing a little better, India a new recent low
  • Asian Market Update - Nikkei should continue higher, FXI back above 50 day
  • Crude Update - Stuck under resistance but I think it will work higher
  • Gold Update - GDX acting well but Gold sideways
  • Bond Update - US Yields are going higher no change to the call
  • DeMark Screens - Daily, Weekly, Monthly upside/downside exhaustion signals within the S&P 500 and Euro Stoxx 600 - NOTE I HAVE CHANGED BACK TO S&P 500 SO PEOPLE CAN FOCUS ON THE LARGEST STOCKS

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 73%


SPX daily holding 2900 and could make nominal new highs


Nasdaq bullish sentiment is at 63% and very divergent from index pricing.  


NDX Index again weak.  7371 is next support


Nasdaq Summation Index is an early warning indicator that is a mix of volume and breadth.  As you see it's made lower highs and divergent from the NDX price.  If this breaks zero, the market will be falling faster


Dow Jones Industrial Average is the best of the US Indexes thanks to some of the industrials and banks showing life


IWM Russell 2000 has been the relative weaker link in the US.  

 
Hedge Fund Telemetry Trade Ideas


Trade Ideas - Added back GS long 2.5% size, Doubled FEYE long to 5%.  Tightened stops on everything.  TSLA 320, GWPH 155, GDX 18.35, AMZN 1850, FB 164, VOD 21.95, UPS 120, TIF 128, FEYE 16.00, FXI 41.95, XLP 54.25, NVDA 275, TXN 105.60, QQQ 184, XLK 75, SPY 295, XLY 118, AXP 114, GS 230, WHR 120, XLE 76.50, XRT 53, IWM 172, XLV 95, BRK/B 225, IBM 153

 
Cannabis - High Times


Tilray is just nuts.  The DeMark upside Countdowns failed


GW Pharma should continue higher


Weed Index with a Combo 13 today and Sequential with a few more days to go


North American Marijuana Index on day 10 of 13 with a Sequential Countdown

 
Rail Stocks with upside DeMark exhaustion signals


UNP with an upside exhaustion Sequential Countdown 13


NSC yesterday had upside exhaustion


Rail Index with a Compo 13 today

 
Some Recent Stock Ideas


Goldman Sachs was put back on the trading sheet as a long after a false breakdown.  


Boeing has lifted more than I'd like but will hold it for now as a short.  Still in the range


Fire eye has the potential to breakout above 17 and higher.  They have reported 4 great quarters and the management has been positive on the road with buyside analysts.  The more pressure put on China and Iran the more cyber attacks on US companies.  Fire Eye has the best cyber security for those attacks.

 
Bloomberg Automated Technical Pattern Recognition Screens


Check out these ideas.   I especially like the pair trades

 
Currencies


US Dollar bullish sentiment is at


US Dollar Index still in this tight range


Euro bullish sentiment is at 60%


Euro Spot


Yen with upside Sequential Countdown 13.  I'm skeptical if this will work.  

 
European Markets


Euro Stoxx 50 has more work to do


German DAX


Euro Bank Index having a good month but will it be a wave 2 of 5 down or is this a wave 1 of 5 up?  Too early to tell

 
Global Markets


EEM Emerging Markets ETF bouncing but more work to get over the 50 day


India Nifty 50 Index another recent low and under the 50 day

 
Asian Markets


Nikkei bullish sentiment is at 82% and back in the extreme zone


Nikkei should continue higher with next target 24,000 (resistance)


Shanghai two strong days in a row


FXI doing a lot of good work.  

 
Crude Update


Crude bullish sentiment is at 80% and is back in the extreme zone.  Sentiment can and might stay elevated for a while.  Shows the true sign of strength.  Wait for the DeMark upside exhaustion to sell


Crude remains under resistance but I still like it long

 
Gold Update


Gold bullish sentiment is at


Gold Futures sideways


GLD sideways


GDX Gold Miners acting better but still has more work to do.  I remain long

 
Bond Update


Bond bullish sentiment is at 57% and still remains relatively high despite the recent weakness in bonds


10 Year Yield going higher


30 Year Yield going higher

 
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 500 Universe:
DAILY UPSIDE 13:   EQR, NSC, RSG
DAILY DOWNSIDE 13:   NONE

DAILY UPSIDE WITH PRICE FLIP REVERSAL DOWN:   ADI, NWSA, TXN
DAILY DOWNSIDE WITH PRICE FLIP REVERSAL UP:   ANDV, FDX, GIS

Updated: 9/17/18
WEEKLY UPSIDE 13: COST, EFX, HON, IR, JWN, LOW, RCL
WEEKLY DOWNSIDE 13:   BHGE

Updated: 9/4/18
MONTHLY UPSIDE 13:    AFG, AJG, AMD, CBT, CECO, EIG, IR, MAA, MRCY, MSA, MSFT, NSC, ORI, ROK, TDY, TTWO, UNT, UNP, WCG, WTR
MONTHLY DOWNSIDE 13:    FTR, RRD, SMCI, SSI

Euro Stoxx 600 Universe:
DAILY UPSIDE 13:   CA FP, CABK SM, EBS AV, HO FP, PRY IM, SMWH LN
DAILY DOWNSIDE 13:  DOM LN, ENG SM

DAILY UPSIDE WITH PRICE FLIP REVERSAL DOWN:    BNZL LN, SAF FP, VPK NA
DAILY DOWNSIDE WITH PRICE FLIP REVERSAL UP:   INCH LN, TEF SM


Updated: 9/17/18

WEEKLY UPSIDE 13:  NONE
WEEKLY DOWNSIDE 13:   DIA SM, EOAN GR, INGA NA

Updated: 9/4/18
MONTHLY UPSIDE 13:     ACKB BB, GALP PL, IPN FP, KOMB CP, MTX GR, UCB BB
MONTHLY DOWNSIDE 13:  ALPHA GA, BARC LN, TL5 SM




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