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Morgan Stanley's technology team put out a note today that is getting no attention.  They are saying Cloud capex should slow into 2019.  They cite tough comps and a digestion period after heavy recent investment in past few years will see slower growth. Their Asian team has seen China capex slowing too (Ali Baba etc).  There has been a massive build out of mega data centers that has fueled the tech sector and from my tech analyst friends, it was front loaded for 2018 after a huge 2016-2017.   The semiconductor sector is most at risk since everything that goes into the hardware that powers the data centers has seen a large build up in inventories and semiconductor capital equipment makers have been beat up with the evidence of the large inventory of chips.  I've been saying watch the canary in the coal mine semi cap names for months and now MS is out strongly with this slow down call in not only capex spending but in US cloud demand.  One thing to look out for is a price competition battle between the large cloud providers.  Amazon and Microsoft have been the leaders while others like Oracle and IBM have a tough road ahead with inferior cloud offerings and at a higher price level too.  This matters since tech has been one of the best sectors since the lows in February 2016 and has powered the Nasdaq 100.  With earnings ahead for tech companies, the theme of lowered guidance will be what the stocks will move on after reporting.  

The Fed will be raising rates today and it will be interesting to see if the market fades as it has in the previous three hikes late in the day.  Bespoke has a great chart that I posted below. 

Tesla has risen after the DOJ announced a criminal investigation of Elon Musk and Tesla.  Mind boggling. There are clear signs of inventory, lack of demand, end of fictitious 420k backlog for Model 3 but it is the end of the quarter and they will pull out the stops to pump up production.  They report on Halloween afternoon and it will certainly be a "Trick or Tweet" earnings report and conference call.  

I'm headed to Dallas to visit my daughter who is attending SMU this Friday and will not be publishing a Daily Note.  And if any clients want a copy of "DeMark Indicators" by Jason Perl, please let me know and I will send you the book.  It's very informative and useful.  

• US Markets -  Sentiment still divergent from index prices.  
  
• Hedge Fund Telemetry Trade Ideas - IBM, WHR
  
• Risk-On Risk-Off Index and Goldman Sachs Financial Conditions Index
  
• Morgan Stanley Cloud Capex Index - And a look at semiconductors and Tech
  
• After the Fed announcement sell offs
  
• US Sector Focus - Communications Services XLC
  
• PPO Monitor
  
• Bloomberg Technical Pattern Automated Screen
  
• Currency Update - With USD sentiment so low a lower high bounce can't be ruled out
  
• European Market Update - Still hanging out at 50 day with little momentum
  
• Global Market Update  EEM holding firm... for now
  
• Asian Market Update - Nikkei is getting late in the upside move and FXI looks OK still
  
• Crude Update - Extreme bullish sentiment is a limiting factor
  
• Gold Update - Still sideways
  
• Bond Update - Upside in yields is limited from here
  
• DeMark Screens - Daily, Weekly, Monthly upside/downside exhaustion signals within the S&P 500 and Euro Stoxx 600 WE ARE NOW HIGHLIGHTING STOCKS ARE MOST ACTIONABLE
  

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.  When the new website launches we will be adding new charts and historical sentiment data for Euro Stoxx 50, UK FTSE 100, German DAX, French Cac 40.  We will be adding Japanese Bonds, German Bunds, and a few more.  
SPX bullish sentiment is at 70%

SPX daily still has potential for a nominal new high with recent upside secondary Countdown

Nasdaq bullish sentiment is at 72%

NDX Index bounced again off the 50 day and is on day 7 of 13

IWM Russell 2000

Trade Ideas Sheet - Long and short US equity ideas including ETF's.  We will be overhauling the Trade Ideas Sheets for long only, short only, ETF's when the new website rolls out soon.  There will also be a clearer email distribution with changes.  
Trade Ideas Changes:  Stopped on IBM short, and WHR long both 2.5% sized. No other changes
Stops on everything.  TSLA 320, GDX 18.35 , VOD 21.95, FEYE 16.00, FXI 41.95, NVDA 275,  QQQ 185.50, XLK 77, SPY 295, XLY 118, AXP 114,  WHR 120, XRT 53, IWM 172, XLV 95, BRK/B 225, IBM 153, DIA 275, XLI 81.50, IBB 123, AMD 35, ROST 100.50

From Bespoke Research today
"There have been 3  occurrences Fed hikes and fading since last September, and the pattern that the S&P has taken on these days has been noteworthy.
As shown, the S&P has gotten off to a good start in the morning of these Fed Days, but afternoon trading has been a different story.  After a drift lower from noon to 1:30 PM ET, we’ve seen the S&P catch a bid into the 2 PM rate announcement.  From 2 PM to the close, however, we’ve seen the equity market sell-off pretty sharply to take the index into the red by 20+ basis points by the close of trading.  It's a small sample size, but something to keep in mind especially with futures already off their highs."

Back to old highs for Risk-on Risk-off Index.  

GS Financial Conditions Index has not returned to the low levels seen back in January.

I created a custom index of the MS Cloud Capex names.  It's really clear how much this group has gained since the build out boom from 2016

The daily has been stalling and chopping all year

Semiconductors look vulnerable to the downside

XLK RSI (bottom indicator) has been relatively weak and divergent

Right at resistance and well off January highs

The PPO Monitor is a proprietary monitor developed to force rank Indexes, Sectors, and Stocks.  It ranks top down by strongest to weakest by percentage above/below the 50 day moving average.  Shorter term signals can be seen when the 10 and 20 day moving averages turn up (green) or down (red) which often are followed by the 50 day moving average.  This is useful to watch for historically overbought/oversold percentage above/below the 50 day moving average.  It is non correlated with the DeMark Indicators however we have found upside/downside exhaustion signals often occur when something rises to the top or drifts to the bottom of the monitor - increasing the timing aspect. We share this monitor with clients with Bloomberg Terminals.  An added feature is that each market/ETF can be expanded with each component force ranked in the same way.  A couple other features include price deviation from intraday VWAP (useful for intraday reversals) and new 20 day highs/lows on right side.  Please inquire if you would like to be permissioned to use the PPO Monitor.  

Today's highlights: They are buying what has been strongest and selling the weakest.  

The following chart shows the Percentage Price Oscillator (50 day moving average) in action.  IWM Russell 2000 has seen weaker and lower highs in %  above the 50 day moving average

S&P 500 Members/Absolute Price Performance and Relative Price Performance vs S&P 500 and Sector ETF's.  ETF's vs Index Sectors.  Pair Trades.  Long side  is first symbol, short side is second symbol.  

US Dollar bullish sentiment is at 16% down from recent high of 96%

US Dollar Index

Euro bullish sentiment is at 67%

Euro Spot

Yuan could break down under 6.90 soon and make headlines soon

Euro Stoxx 50 holding the 50 day for now

German DAX a little weaker than Euro Stoxx 50

EEM Emerging Markets ETF holding 50 day.  

Brazil could continue higher but way too early to tell today

Nikkei bullish sentiment is at 84% and extreme

Nikkei is getting close to another top

China / Hong Kong FXI ETF could breakout above 44

Hong Kong above the 50 day and really needs to prove itself above 29,000

Crude bullish sentiment is at 88% and is extreme.  This is a limiting factor to upside

WTI Crude Futures still has an upside Countdown in progress

Gold bullish sentiment is at 29%

Gold GLD still sideways

GDX Gold Miners pulling back after green Setup 9 as expected

Bond bullish sentiment is at 52% and the lowest level since early August

US 10 Year Yield is getting close to topping too

US 30 Year Yield has a little more upside potential

US 2/10 Year Yield Curve

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