The Hunt For Red October

With six trading days remaining in October, it's likely this will be a down month on nearly every market in the world (Brazil notable outlier) and sector (Gold sector notable outlier). The narrative for market strategists to remain bullish on the US markets has been strong earnings growth. My theme in the past couple months has been expecting guidance cuts...after decent earnings. I've shown charts from Factset with earnings expectations along with continued high expectations with profit margins. My call has been the benefits from tax cuts would wear off into this quarter, tougher comps especially in retail, peak in consumer confidence and bottom in unemployment rate. Add the pronounced weakness around the world due to slowing growth, it was just a matter of time that the US would catch a cold too.

I do not believe the true bottom is here, as it will take more time, but a bottom ahead of a lower high bounce is likely forming here. Some catalysts could take the market higher which involve the usual suspects. Microsoft, Google, and Amazon by themselves can lift the markets by reporting earnings this week free of surprises. The China/US tariff war is far from over but with Trump and Xi scheduled now to meet soon could thaw out the poor relations to kick start serious talks. The pattern on the US indexes is now in the first of five waves down with a lower high wave two bounce potential ahead. Bullish sentiment hit 10% on the S&P last night and it will likely be lower this afternoon (it will be posted on the website at 5pm). Sentiment readings can stay oversold for a while as it is a condition and not a trigger. The trigger for a bounce could be the 60 minute tactical charts now carving out five down waves which have worked well as a road map from the top. At that recent top I moved my short exposure on the Trade Ideas Sheet to the highest level all year and today I reduced significantly short exposure and will hold a higher percentage in cash for now. There are a couple sectors and stocks that are now showing downside exhaustion worthy of buying with tight stops for a trade that I'm adding to the Trade Ideas Sheet.

US Markets - Sentiment oversold ripe for bounce
Hedge Fund Telemetry Trade Ideas - Lot's of changes today
Fun with Analogs
Alphabet - New long idea
Semiconductor Sector
PPO Monitor - Percentage Price Oscillator Force Ranked Sector Rotation - ITB oversold
Bloomberg Technical Pattern Recognition Screen
Currency Update - Range bound
European Market Update - New lows
Global Market Update - New lows
Asian Market Update - Japan has support a little lower
Crude Update - Should work lower
Gold Update - Still working but ugly and unloved still
Bond Update - Reversal down with yields is a sign of risk off
DeMark Screens - Daily, Weekly, Monthly upside/downside exhaustion signals within the S&P 500 and Euro Stoxx 600

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: REMOVED SHORTS: AAPL +2.5%, ABT +8%, AXP +4%, CUT SIZE IN HALF TO 2.5% SHORT: TSLA +25%, AMZN +13%, NVDA +18.5%, DIA +6%, NFLX +4.5%, BA +4%, QQQ +6.5%, XLK +7%, IBM +7.5%, SPY +3.5%. ADDED NEW LONGS 2.5% SIZE: GOOGL, TXN, ITB, SMH. DOUBLED LONG TO 5% FEYE
Stops on everything. TSLA 320, GDX 17.35 , FEYE 16.00, NVDA 235, QQQ 179, XLK 75, SPY 285, XLY 113, XRT 50, IWM 163, NSC 173, DIA 260, XLI 77 IBB 116, AMZN 1860 DXJ 56 , GLD 111, IEF 98 TLT 112 , BA 360, IBM 140, NFLX 345 (RECENTLY ADJUSTED STOPS) GOOGL 1000, TXN 90, ITB 28, SMH 90

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: Notice a lot of the sectors are trading above today's VWAP suggesting real buying is happening before they turn positive. Also the weakest homebuilding ETF's are up strong today.

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: MKC
DAILY DOWNSIDE 13: AMAT, BXP, MS, RHT, WU

DAILY UPSIDE WITH PRICE FLIP REVERSAL DOWN: BSX, DG, YUM
DAILY DOWNSIDE WITH PRICE FLIP REVERSAL UP: NONE

Updated: 10/22/18
WEEKLY UPSIDE 13: NONE
WEEKLY DOWNSIDE 13: COTY, IRM, VNO

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: IMI LN, KGX GR, NXT LN, REN NA, SMIN LN, SPR GR, STJ LN

DAILY UPSIDE WITH PRICE FLIP REVERSAL DOWN: NONE
DAILY DOWNSIDE WITH PRICE FLIP REVERSAL UP: HSBA LN, SBRY LN

Updated: 10/22/18
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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