MBS Risk 2018 Version

No, not Mortgage Back Securities risk, I'm talking about Mohammed bin Salman, the Saudi Crown Prince who came to power in 2017. Known as "MbS." He's only 33 and has made some successful liberal reforms notably with women's rights. These include allowing women to drive, ability to go to sports venues, and a few workplace reforms. Essentially these rights are now about 100 years late with the modern world but it's a step. He's taken an active interest in economic affairs and will likely be the one who will decide when Saudi Aramco goes public if ever. He even broke with Islamic leaders and voiced support for a Jewish homeland. The darker side is he rules in a brutal way to stamp out dissent even within the royal family members and with the richest and most powerful business leaders under the guise of purging corruption. The recent disappearance (and suspected murder) of Washington Post journalist Jamal Khashoggi has turned the spotlight on MbS.

Here's the market risk from my view: Trump and MbS have had a friendly beneficial relationship but Trump's hand was forced to made it clear there will be a severe response if Khashoggi was found to be murdered by Saudi/MbS direction. Saudi Arabia responded sharply by saying crude could "go to $200" if the US imposes sanctions and Saudi chooses to retaliate in any one of several measures (less oil production, allowing Russia to have a military base, weapons purchases from Russia, etc. I don't see crude going to $200 anytime soon. This is not 1973 as OPEC was united against US and Europe with support for Israel. The US was caught flat footed as there was very low domestic energy production but today production is strong. I see the risk not in higher crude but with instability in the region if MbS loses control of power. The markets do not want to see an "Arab Spring" in Saudi Arabia. The markets will want this to go away like other negative catalysts have in recent years. We'll see if it does fade from headlines in the coming days but let's just add this to the pile of potential negative catalysts.

Risk remains after Friday's bounce especially with Q3 earnings starting to pick up in volume. So far, the big banks were not bought after reporting generally inline quarters. They didn't give big guidance and I expect the theme of weak guidance to be the biggest risk for the equity markets.

Please note, there will not be a Hedge Fund Telemetry Daily Note on Friday as I am traveling to Austin for the US Formula 1 race. For those in Austin, let me know if you want to get breakfast on Saturday.

US Markets - Sentiment still very low. Setup's on day 8 of 9 with SPX and NDX but Russell has downside red Countdown
Hedge Fund Telemetry Trade Ideas - ROST, ORCL, IBM, AMZN, LULU
Saudi Arabia Market and collateral damage - Softbank
Vanguard Total US Market and World Market ex US - Update
Netflix and IBM ahead of earnings
Sector Focus - Financials on support
PPO Monitor - Percentage Price Oscillator Force Ranked Sector Rotation - Defensive still on top
Bloomberg Technical Pattern Recognition Screen
Currency Update - Range bound for now
European Market Update - New lows
Global Market Update - Sidelines for now
Asian Market Update - Nikkei still looks lower
Crude Update - No response with Saudi situation and threats
Gold Update - Looking good long
Bond Update - Reversals on yields down after recent upside DeMark exhaustion signals
DeMark Screens - Daily, Weekly, Monthly upside/downside exhaustion signals within the S&P 500 and Euro Stoxx 600 New weekly signals updated

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: CLOSED ROST SHORT +.5%, LULU SHORT +10%, ORCL SHORT +6.5%, REDUCED AMZN TO 2.5% FROM 5% SHORT. DOUBLED UP IBM SHORT TO 5% FROM 2.5%
Stops on everything. TSLA 285, GDX 17.35 , FEYE 16.00, NVDA 250, QQQ 178, XLK 75, SPY 285, XLY 113, AXP 109, XRT 50, IWM 163, XLV 94, BRK/B 110, DIA 260, XLI 77 IBB 116, ABT 75, AMZN 1850 DXJ 56 , GLD 111, IEF 98 TLT 112 , AAPL 225, BA 370, IBM 150, NFLX 360

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: Still see risk off ETF's at the top.

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: GS, PNC, SO VAR

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

Updated: 10/15/18
WEEKLY UPSIDE 13: NONE
WEEKLY DOWNSIDE 13: IVZ, SYMC, WHR

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: GJF NO, HEIO NA

DAILY UPSIDE WITH PRICE FLIP REVERSAL DOWN: NONE
DAILY DOWNSIDE WITH PRICE FLIP REVERSAL UP: SW FP, ZAL GR

Updated: 10/15/18
WEEKLY UPSIDE 13: MUV2 GR
WEEKLY DOWNSIDE 13: BAS GR, FHZN SW, FRA GR, IMB LN, JMT PL, ONTEX BB, OSR 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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