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10/5/18
Thomas Thornton

Please make sure your seat backs and tray tables are in their full upright position and that your seat belt is correctly fastened

A lot going on today!  The equity markets did not bounce on the US jobs report which had a little for everyone with the payroll number missing likely due to hurricanes but had a big revision up from the previous month, unemployment rate beat, and wage growth was inline.  This wasn't enough for people to believe the Fed will stop hiking and I think that rational isn't valid.  Rates are little higher again and stocks are down.  I do not believe a low is close and I have some charts below of what I want to see.  I also believe the steepness of the decline makes this very vulnerable for a more severe move lower.  I've discussed the lack of liquidity the derivitive traders have been talking about - notably the lack of depth of market with futures and ETF's.    There's very little cash on the sidelines with mutual funds and people are fully loaded in passive funds that are fully loaded with some of the mega cap FANG Tech/Consumer names that are now rolling over.  I expected this in August and the market proved me wrong.  But here were are now and with earnings ahead I can say if the market cracks further the bar will be lowered and perhaps some misses or guide downs will be forgiven.  Or it could be like October 2000 again?

Bonds are triggering DeMark exhaustion signals and some signals are still due in the coming days so my call on bonds is to wait for the first up day and buy a starter and add as we see a turn.  Bond sentiment is only at 40% and I'd like to feel better about buying bonds with sentiment in the 20% level.  By the way the bond market is closed on Monday for a holiday and also the Chinese market will reopen after a week closed and after some rather strong moves in equity markets around the world (have you seen India?) And they can run to risk off and put it into US bonds until Tuesday. 

The making for a real rough landing is front and center.  How far do we fall is the question I don't have the answer to but I have some DeMark Trend Factor price targets to monitor on some major indexes.  I still would reduce risk here today if you haven't yet and hold a decent percentage of cash.  Put on your calendar,  I'm doing a webinar on Wednesday morning. I'm headed into NYC to film a piece on Tesla today so I hope everyone has a great weekend.  

US Markets -  Sentiment and internals still too high to call any bottom.  
Hedge Fund Telemetry Trade Ideas - No changes to positions.  Nice week helping the PNL
US Unemployment Rate - Monthly charts with DeMark Indicators suggest a higher rate for 2019
What took the market can take the market down - FANG, Top 5 S&P weights
Tesla Update
Sector Update - Retail
PPO Monitor - Percentage Price Oscillator Force Ranked Sector Rotation
Bloomberg Technical Pattern Recognition Screen
Currency Update - Interesting point for the USD
European Market Update - More lower highs and real risk below with the steep declines
Global Market Update - EEM new lows, India is crashing
Asian Market Update - Nikkei reversal working
Crude Update -  Stalling and sentiment remains extreme
Gold Update - Sideways is OK in this market and it's the new FANG

Bond Update  - MORE DEMARK SIGNALS TRIGGERING AND A FEW MORE EXPECTED EARLY NEXT WEK
DeMark Screens - Daily, Weekly, Monthly upside/downside exhaustion signals within the S&P 500 and Euro Stoxx 600 September Monthly data updated

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.  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 54%


SPX daily at support


S&P breadth starting to roll


Percent of S&P stocks over the 10, 50, and 200 day is not oversold


Quite the breadth thrust on the downside with 4 week lows.  


S&P 100 has more downside risk with the large mega cap stocks


Nasdaq bullish sentiment is at 61%


NDX Index under the 50 day in a big way


Nasdaq Summation Index is now well under zero.  This is a breadth/volume measure and a good early warning indicator.  This is very unusual for it to be under zero with the index so close to the highs. The momentum indicators on the NASI index are not oversold too.   When under zero long holders become aware of risk.   


Dow Jones Industrial Average has been the best but I wouldn't doubt a very large drop to the Trend Factor targets


IWM Russell 2000 continues to roll.  I think mid 150's it could become interesting but let's see how it looks when we get there

 
Hedge Fund Telemetry Trade Ideas


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:   No changes to positions and a really good week helping the PNL.
Stops on everything.  TSLA 320, GDX 17.35 , FEYE 16.00, NVDA 295,  QQQ 190 (raised stop), XLK 79 (raised stop), SPY 295, XLY 118, AXP 114,  XRT 53, IWM 172, XLV 95, BRK/B 225, DIA 275, XLI 81.50, IBB 123, AMD 30 (lowered stop), ROST 100.50, ABT 76, ORCL 53, LULU 165, AMZN 1990 (lowered stop to breakeven), DXJ 61, GLD 111

 
US Unemployment Rate Near Exhaustion Signal


US Unemployment rate is on month 12 of 13 with a DeMark Sequential Countdown.  I expect a higher unemployment rate in 2019


Here's the long term monthly chart that shows the upside and downside signals

 
What lead the market higher can lead the market lower


FAANG starting to look more like a major top in the past quarter


Top 5 SPX weights custom index about to make a new recent low.  This looks like a head and shoulders top too


AAPL reversed on the recent green Setup 9


AMZN should work lower


GOOGL reversed on the green Setup 9 and now is in wave 5

 
Tesla Update

How stupid is this guy?  He just got off on a serious charge by the SEC and before the deal is signed he tweets out this??!!  There is no board oversight or control.  He's complaining about short sellers but harming the longs.  Keep it up Elon, you're making life very enriching for me.  


Tesla stock is a bit volatile?   Wide stops and limited sizing will keep you in the game.  Headed lower and under 250 I expect some longs to throw in the towel.  Under 200 and Elon will get a margin call.  

 
US Sector Focus - Retail


XRT Retail ETF daily is starting the first wave of 5 on the downside


XRT Weekly was my main guide here

 
PPO Monitor - Percentage Price Oscillator

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: Here's my full expanded ETF list.  A lot of new 20 day lows - red on the right side.  

 
Bloomberg Automated Technical Pattern Recognition Screens


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.  

 
Currencies


US Dollar bullish sentiment is at 56%


US Dollar Index at an interesting place.  


Euro bullish sentiment is at 33% and falling


Euro Spot


Yuan

 
European Markets


Euro Stoxx 50 lower highs again


France couldn't carry the early momentum  


Spain more lower highs and perhaps lower lows next week


Italy on support


UK FTSE 100 looks very risky to the downside

 
Global Markets


EEM Emerging Markets ETF new low... look out below


India is crashing.  The DeMark signals worked perfectly  

 
Asian Markets


Nikkei bullish sentiment is at 83% off the recent 96% extreme bell ringer reading


Nikkei reversing after upside exhaustion signals


China / Hong Kong FXI ETF

 
Crude Update


Crude bullish sentiment is at 85% and still extreme but off the bell ringer 96% seen a few days ago


WTI Crude Futures stalling

 
Gold Update


Gold bullish sentiment is at 17%


Gold sideways but in this market it's the new FANG!

 
Bond Update


Bond bullish sentiment is at 40% and I feel this should be in the 20% level for more conviction


US 10 Year Yield recent upside Countdown 13 with a risk level at 3.32


US 10 year on my Combo only chart shows it on day 12 of 13.  It's been good on both the upside and downside


US 30 Year Yield perhaps Tuesday we'll get the 13


TLT

 
DEMARK SCREENS - Daily, Weekly, Monthly Upside/Downside Exhaustion Signals

Daily/Weekly DeMark upside/downside exhaustion signals (Sequential)  updated daily, Weekly signals 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:  NONE
DAILY DOWNSIDE 13:   COTY, MAC

DAILY UPSIDE WITH PRICE FLIP REVERSAL DOWN:    CNC, COO, ESS, GILD, MA, PG, ZTS
DAILY DOWNSIDE WITH PRICE FLIP REVERSAL UP:   TSN

Updated: 10/1/18
WEEKLY UPSIDE 13:  BSX, HOLX, NKE, TDG
WEEKLY DOWNSIDE 13:   

Updated: 10/1/18
MONTHLY UPSIDE 13:    ADSK, ALL, CCI, CME, DE, DLR, DTE, ETN,  GLW, HPQ, INTU, PH, TPR, TXT, UPS, XLNX
MONTHLY DOWNSIDE 13:    NONE

Euro Stoxx 600 Universe:
DAILY UPSIDE 13:    NONE
DAILY DOWNSIDE 13:  BLND LN, EUROB GA

DAILY UPSIDE WITH PRICE FLIP REVERSAL DOWN:    CRDA LN, QQ/ LN
DAILY DOWNSIDE WITH PRICE FLIP REVERSAL UP:   GNK LN, TEF SM, TEL2B SS

Updated: 10/1/18

WEEKLY UPSIDE 13:  HELN SW, SKY LN
WEEKLY DOWNSIDE 13:   FNTN GR

Updated: 10/1/18
MONTHLY UPSIDE 13:     BNZL LN, EXPN LN, FPE3 GR, SBMO NA, SECUB SS, SWEDA SS
MONTHLY DOWNSIDE 13:  BAYN GR, HMB SS, TEF SM




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