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11/2/18
Thomas Thornton

Sources familiar with the matter

More talk of China tariff deals with the US being "drafted" lifted the market in the middle of the night that caused me to stare at my iPhone Bloomberg app in disbelief and have a restless sleep.  By the way deals are not "drafted" but negotiated over weeks and maybe months with the complex issues at hand.  And the stakes are high for both leaders so being friendly at the G20 will be a given.  The global markets want a deal ASAP and are willing to buy into any stories that hit the tape.  Anyone remember Euro/Greek crisis back in 2011?  There will be a lot of "sources familiar with the matter" that will bat around the markets up and down in the coming weeks so my recommendation is to stay nimble, flexible, and hold a decent percentage of cash.  When markets get rocked like they did in October, it's like an earthquake as it doesn't last that long when it hits but aftershocks continue for months.  

My comments on Apple yesterday were spot on as I was concerned another mega cap stock could get hit like all of the others. When they came out and said they will not disclose unit sales on iPhone, iPad, and Mac's, it was the real surprise.   Despite people cheering the strong earnings growth seen with earnings this quarter, stocks are not responding to those gains.  That's a sign, in my view, that earnings growth is peaking for this cycle combined with tougher comps ahead and the end to the benefits of the new tax laws.  Wiping off $8 trillion of global market cap since January doesn't help either.  

I'm tired after this week as I have been buried with market action, client calls, and working with our developers with the new website.  I am pushing to have Monday as the launch. Clients will get an email to how to simply update passwords.  The Daily Note will now be web based vs email having all the content.  There will be content usually on the Daily Note released earlier in the morning and major improvements with all the Sentiment Charts, Trade Ideas Sheets and DeMark Screens. I expect a few bugs to be discovered so please be patient as we roll it out.  This will be the last Daily Note by email so if you've been getting this from a friend or colleague you're going to need a log in to access our work.  You can sign up here.   We are very appreciative for your support.  Thank you and have a great and restful weekend.  

  • US Markets - Sentiment bounced off lows but expect choppy
  • Hedge Fund Telemetry Trade Ideas - Took a few profits and added to short exposure but remain will a lot of cash
  • US Unemployment Rate - NEW DOWNSIDE MONTHLY DEMARK EXHAUSTION - IMPORTANT
  • Copper Update - Still biased long
  • Apple Update
  • PPO Monitor - Percentage Price Oscillator Force Ranked Sector Rotation - Red day well under VWAP
  • Bloomberg Technical Pattern Recognition Screen
  • Currency Update - Still thinking USD can work higher
  • European Market Update - Euro Stoxx sentiment for the first time
  • Asian Market Update - Big bounces but no bottom call yet
  • Crude Update - Biased to the downside still
  • Gold Update - Flat today
  • Bond Update  - Sentiment in the middle of range and two wave patterns in tight range
  • DeMark Screens - Daily, Weekly, Monthly upside/downside exhaustion signals within the S&P 500 and Euro Stoxx 600 OCTOBER MONTH END SIGNALS 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 33% - expect choppy action


SPX daily has moved lower from this snapshot


Nasdaq bullish sentiment is at 31%


NDX Index 60 minute tactical should hold recent lows and that's why I'm short QQQ and SPY for this short term corrective wave.  


Dow Jones Industrial Average 60 minute tactical also should pull back into wave 2


IWM Russell 2000 wave 2 was lost but the downside wave 3 price objective when it does trigger will be quite low

 
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:   SOLD LONG: DWDP, MU, SOLD SHORT: 5% WEIGHT EACH SPY, QQQ, DOUBLED SHORT EXPOSURE TO 5% FROM 2.5%:  XRT, DIA, IWM, TSLA
Stops on everything.  TSLA 360, GDX 17.35 , FEYE 17.00, XLY 113,  XRT 50, IWM 163, DIA 260, XLI 77, GLD 111, IEF 98  TLT 112 , (RECENTLY ADJUSTED STOPS),  ITB 28,  MS, LOW, CELG use 7-10% stops for now.  Added yesterday to puts: SPY 267 and QQQ 168 for Nov. 

 
US Unemployment Rate - Monthly DeMark Countdown


The US Unemployment Rate has now triggered a monthly Countdown 13 seen at other lows.  So long market cycles saw two series of Countdowns as we now have today.  A move over 4.3% will be a price flip up.  I expect higher unemployment in the coming  months.  Each time this as risen a recession occurred.  

 
Copper Update


Copper continues to surprise me and I remain biased to the upside with this upside DeMark Countdown  

 
Apple Update


Apple going to wave 3 of 5 on the downside

 
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:  A very red day with everything under the VWAP due to the gap up on heavy volume.  Trapped buyers when under VWAP

 
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.  If you would like a PDF from Bloomberg with full details of how this is formulated, please email.  We will be doing a webinar in the coming weeks specifically on this system.

 
Currencies


US Dollar bullish sentiment is at 85% and still extreme


US Dollar Index off lows today


Euro bullish sentiment is at 18%


Euro Spot


Yuan lost some of the intra day strength

 
European Markets


Euro Stoxx 50 bullish sentiment is at 25%   THIS IS THE FIRST TIME SHOWING EURO STOXX SENTIMENT.  


Euro Stoxx show little accumulation as the intraday selloffs continue

 
Asian Markets


Nikkei bullish sentiment is at 33% down from recent high of 96%


Nikkei wave 2 of 5 now in play to the downside


China / Hong Kong FXI ETF big day but still under trend line

 
Crude Update


Crude bullish sentiment is at 40% down from 96% at peak


WTI Crude Futures still biased lower

 
Gold Update


Gold bullish sentiment is at 32%.  Look at the last two years in late November to January how it has great seasonality.


Gold stalling is OK in this tape


Gold Miners GDX ETF

 
Bond Update


Bond bullish sentiment is at 50%


US 10 Year Yield has two different wave patterns currently in this range.  

 
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:   BLL, CI, ICE, INCY, JEC
DAILY DOWNSIDE 13:  TSN

DAILY UPSIDE WITH PRICE FLIP REVERSAL DOWN:    NONE
DAILY DOWNSIDE WITH PRICE FLIP REVERSAL UP:   CELG, CERN, FBHS, LOW, LRCX, MAX, SIVB, TSN, WDC

Updated: 10/26/18
WEEKLY UPSIDE 13:  CME
WEEKLY DOWNSIDE 13:   ALXN, AMG, BHF

Updated: 11/1/18
MONTHLY UPSIDE 13:    ALXN, CINF, CRM, FFIV, JNJ, MSI, MTD, RTN, V, VRSK, XEL, YUM
MONTHLY DOWNSIDE 13:    WHR

Euro Stoxx 600 Universe:
DAILY UPSIDE 13:   ERICB SS
DAILY DOWNSIDE 13:  BMPS IM, SYDB DC

DAILY UPSIDE WITH PRICE FLIP REVERSAL DOWN:    NONE
DAILY DOWNSIDE WITH PRICE FLIP REVERSAL UP:   AZM IM, TSCO LN


Updated: 10/26/18

WEEKLY UPSIDE 13:   AZN LN, DRX LN, TOP DC
WEEKLY DOWNSIDE 13:   BME SM, DANSKE DC, FPE3 GR, HSBA LN, KN, FP, PNL NA, SAN SM, VOE AV

Updated: 11/1/18
MONTHLY UPSIDE 13:     NONE
MONTHLY DOWNSIDE 13:  DBK GR, TPK LN




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