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2/25/19
Thomas Thornton

So much winning!

President Trump has started to Tweet again about the stock market gains while he's excited about progress with a China trade deal.  Recall he called the 20% drop in Q4 a "glitch."   He's flying to Vietnam to meet South Korean President Kim Jong Un this week to perhaps lock down a deal to eliminate nukes in North Korea.  All of this would be  great but another President once said "Trust but verify" which I believe is not really something that is being done with Trump and his team.  The US trade team seemed pretty far off recently with resolution on how to verify technology IP theft and nothing has come out from China that is more than they promised to some more US goods far short of closing the trade deficit.  Trump did get China to squeeze Kim Jung Un last year with pretty rigorous sanctions that nearly collapsed the North Korean economy.  I'll give him that, but haven't we seen this type of deal with North Korea before with his father?   My view is this "winning" isn't really winning but more of the same talk.   Or perhaps all of the "winning" is meant to distract from some of the potential negatives coming this week.  Michael Cohen, Trump's lawyer testifies in front of Congress and that won't be a lot of "winning" and the Mueller investigation is wrapping up and I'm on the fence on what type of impact it will have on the markets.  As most of you know, I can't stand politicians on both sides and what I believe is about to happen will be people seeing through the talk without any real results.  

The point of today's note is to call to strongly reduce risk into all of the "winning".   Nine straight weeks up!  Take some profits!  In February, within the S&P 500 index, there have been 247 DeMark Sequential and Combo upside Countdown 13 sell signals and 6 downside Countdown 13 buy signals.  In December, it was nearly the opposite with a ton of buy signals.  Bullish sentiment in December hit 4% bulls and recently it hit 88% bulls.  The move up has moved further than I expected without any interim pullback which I expected before these higher levels.  This increased the risk of something sharper to the downside especially with the absence of meaningful short sellers which would hold up the market with liquidity in down moves.  Without the shorts a vacuum lower could happen at any moment.  A lot of catalysts this week with politics and Fed Chairman Powell speaking tomorrow.  Again take down some risk.  

US Markets


SPX bullish sentiment is at  85%


SPX daily with Setup 9.  9-13-9 pattern in play


SPX 60 minute tactical time frame hit the upside wave 5 price objective


Ned Davis Research trading sentiment is back to overbought as well  


Nasdaq bullish sentiment is at 71%


NDX Index with Setup 9 and that was the top in September


NDX 60 minute tactical time frame got the Combo 13 a little while ago that we didn't have Friday


Dow Jones Industrial Average with 9-13-9 pattern too


Dow 60 minute time frame with Wave 5 target met


IWM Russell 2000 Setup 9 and Combo 13 too  

 
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:    TOOK PROFIT ON GE LONG +55%, ADDED 2.5% SIZED SHORT  NVDA, ANTM, ASHR, LULU

 
FANG UPDATE - NEARLY ALL OF THE INDEXES EXHAUSTED ON UPSIDE


FANG + Index with Sequential 13 today


FAANG with Apple and FANG without Apple on day 11 of 13

 
Stocks I'm watching today


AMZN on day 10 of 13.  This is important since it has been the biggest attribute in the past few years within the S&P and NDX


Anthem daily with some upside Countdowns


ANTM weekly with some upside Countdowns - Adding 2.5% short here


BBY with some sideways Countdowns


GE took profits on day 12 of 13 on the gap up just because I wanted to lock in 55% gain.  


LULU is on day 12 of 13 with an upside Countdown and I've been waiting but I decided to pull the trigger and short 2.5% sized


LULU short interest is VERY low as people covered this all the way up.  


NVDA with some Countdown 13's and I'm adding 2.5% sized short today


NVDA short interest is also very low.  This is a type 4 (long squeeze potential) with Erlanger

 
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:  Lots of 20 day highs but many are under intraday VWAP (volume weighted average price) which says supply is coming into the market


The following chart shows the Percentage Price Oscillator (50 day moving average) in action.    SPX is nearly 7% above the 50 day similar to January 2018 before the drop.  

 
Currency Markets


Euro continues sideways.  Not much to discuss


Yuan is on day 11 of 13.  This could be something to watch in the coming days for a risk off moment

 
European Markets


Euro Stoxx 50 bullish sentiment is at 69% and is elevated


Euro Stoxx 50 Index with green Setup which has been pretty good at inflection points and with a Combo 13 today

 
Asian Markets


China A Shares went up 5.6% last night.  I expect this to pull right back down and that's why I shorted 2.5% sized position today


Hong Kong with some upside Countdown 13's


Nikkei Index also with some Countdown 13's too

 
Crude Update


Crude bullish sentiment is at 85% and down from recent bell ringer high of 93%


WTI Crude Futures reversing after some Countdown 13's

 
Gold Update


Gold bullish sentiment is at 78% and also down a little from recent highs


Gold with some recent upside Countdown 13's

 
Bond Update


Bond bullish sentiment is at 75%


US 10 Year Yield sideways and I really have very little conviction right now either way


TLT Bond ETF also sideways

 

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