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Back in the 80's there was a very good and entertaining movie called "War Games" with Matthew Broderick who played a young hacker who one day stumbled upon a government computer network and he thought he was playing a computer game but it was a simulator for nuclear war. The problem was it was actually nearly starting world war 3.  It's really a movie that was ahead of it's time with artificial intelligence and this is also 10 years before the internet even was a thing.  It's aged well.  Worth a watch if you have teenager kids.

Today's war games are real trade wars and it's no simulation or game for that matter.  The players are powerful and the repercussions will hit consumers and businesses in the US and China.  It won't matter today as it takes time to deploy both sides tariffs.  The markets have not initially liked the headlines yet as seen today the buy the dip crowd comes in mocking the bears. I have to say it's rich of them when the overall market is down 10% off the highs which they completely missed.  

It's a lot harder today in the markets today than back in January when it was clear with bullish sentiment at record levels, multiple upside exhaustion signals across the board, in the final upside Wave 5.  We see today's bullish sentiment as low levels, a lot of downside DeMark signals only on daily time frames, but the downside wave is in Wave 3.  I can't tell if this week's lows are the lows for the week or April for that matter but I do have confidence it's not the lows for the year.  A corrective Wave 4 would be a lower high bounce stopping below Wave 2 (the February lower high bounce).  For the Nasdaq and FANGS it's only in Wave 1 down.  Bulls will tell you earnings and economy are strong yet look how poorly many of the large retailers performed after earnings in late February and March.  The ISM today was a miss and Friday's employment report will be watched close.  The ADP jobs number today was better than expected so the bar will be high for the NFP.  I'm watching the unemployment rate as I believe it's a better reading than the NFP.  It's been 4.1% for 4 months in a row.  Expectations are for 4.0%.  My overall advice is to stay nimble, trade smaller, respect stops.  

Notable:

• US Markets - Sentiment bounce a few more downside DeMark exhaustion signals
  
• Hedge Fund Telemetry Trade Ideas
  
• European Markets - Still nothing to do here
  
• Asian Markets - A little more risk to the downside to go
  
• Bitcoin Update - A potential new closing low for 2018.  
  
• Commodity Update - Soybeans, Copper, Crude, Natural Gas
  
• Bonds - Stuck here and could sell off just a little
  
• DeMark Screens
  

SPX bullish sentiment is at  24% up from 9% the previous day.  
Here's a link to the Hedge Fund Telemetry market sentiment page with 40 charts of sentiment including equities, bonds, commodities, and commodities updated each day.   

SPX Index has to close under 2582 to lock in the 3rd wave down.  There is a downside red Countdown on day 1 of 13 while there was a over a week ago a downside red Countdown 13.  

Nasdaq bullish sentiment is at 24% too up from 8% the previous day.  

QQQ moved lower to support and has a red Countdown on day 2 of 13.  Its on Wave 1 down and could bounce and make a lower high Wave 2 then Wave 3 lower lows.  This is a different Wave count since the NDX is the only index that made a new high in March.  

Dow Jones Industrials  had a downside red Countdown exhaustion 13 yesterday and did lock in Wave 3 to the downside.  A corrective Wave 4 upside could happen then Wave 5 lower.  As you know I'm not a fan of buying downside exhaustion signals in Wave 3.  

This is a custom index of the top 10 largest weights in the SPX.  It's down 13% from the recent highs.  There is also a downside red Countdown on day 3 of 13.  This is a real risk to the overall market considering the top weights did the majority of the heavy lifting in the past year.  

FANG + Index also looks dangerous with it on day 2 of 13 with a downside red Countdown

It's been debated on what would be the best way to accurately show recent trade ideas and we've settled on using Bloomberg's TMSG function.  We were setting it up yesterday and did a few test trades.  Note, I cannot change a price or remove a trade in this system. I also can't put old trades into the system that are open.  This will be equity and ETF only.  For people on Bloomberg I will  allow linking them soon in real time to the ideas and perhaps will send out a separate trade idea email as I get them.  Otherwise, I will show on the daily note.  Each trade will be at inception either 2.5% or 5% total capital ($1,000,000) with strict mechanical stop.  I will be closing these test trade today.  

Euro Stoxx 50 still nothing to do yet.  

Euro Bank Index did get the red Countdown 13 today.  It's in Wave 3 so let's look for a bounce

Shanghai is on day 12 of 13 with its downside Countdown in Wave 3

Korean Kospi Index is on day 8 of 13 with its downside Countdown.  Wave 3 price objective below

Hong Kong Hang Seng has a green Setup 9 today while the red Sequential Countdown is on day 9 of 13.  This is rapidly approaching the February lows again

Bitcoin is nearing a new low close for 2018.  

Soybean bullish sentiment is at 35% and down from a recent high of 86%

Soybean Futures having a wild day with the China Tariffs.  We recommended shorting Beans in February with the combination of the upside DeMark Countdown exhaustion 13 and sentiment at extreme levels

Copper bullish sentiment is at 34% and recently made a low at 21%

Copper Futures was a recent long idea after it hit the support level.  The next red Countdown today on day 1 makes me a little nervous so set stops at 297.90.  We basically entered the trade here  so it's not too much of a loss if stopped out.

Crude bullish sentiment is at 54% and has made a negative divergence from Crude price

Crude is now under the 50 day moving average with next support at 61.14 then 60

Natural Gas bullish sentiment is at 64% and quite elevated considering Natural Gas hasn't been able to break out.  I still like it on the long side

Natural Gas has seen the DeMark Setup 9's control things in a tight range.  A move over 2.82 then a strong move over 2.90 is needed.  Stay long but tighten stop to 2.60

Bond bullish sentiment is at 48% stuck here and having a problem breaking out

TLT had an upside green Setup on day 8 of 9 but the count was cancelled with the price lower than 4 previous bars.  If it had been able to lock in the upside 9 then the pending red Countdown would have been cancelled.  I wouldn't doubt a little pullback from here but it it can rally later today then bond bounce is back on.  Lack of conviction with this is pretty evident right now.

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