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Yesterday was a difficult day for me as I'm set up net short and throughout the day I was staring at my screens in disbelief. I call it staring at the Sun and I've done it when I've had a hard day.  If you find yourself doing this, force yourself to shut down, get away, go workout, take a walk, hang out with significant other and kids, and if that doesn't work open a great bottle of wine like you crushed it.  You'll go blind staring at the Sun and insane if you stare at your screens to too long.

Besides the bounce from the political news, the gains were focused around small/midcap indexes with good action in regional banks (the tariff free trade) I couldn't believe how the average of the largest 10 weights in each US sector was as follows:  Financials -40 bps, Materials -25 bps, Consumer Goods -50 bps, Consumer Services - 105 bps, Utilities -94 bps, Industrials -43 bps, Energy -84 bps, Telecom flat, Healthcare +13 bps, AND Tech + 98 bps.  I've discussed the crazy narrow attribution with the big weights quite a bit but it's the market we have and as much as I cringe when I hear people say it's a "stock pickers market" it's true.  Those that have outperformed have owned Amazon, Apple, Netflix, Microsoft, Nvdia, Intel, Boeing, and Goldman.  I am asked often "How long can this last?"  I don't know the exact day but I am assured that stocks like these, that dramatically outperform, come back down to earth.  They run into tough comps, earnings growth rates and technological changes and habits.  Some run into regulatory issues with governments when they get too big and powerful.   

Stay nimble right now and I would advise against chasing some of the names mentioned above.  I'm still in the puts I bought for March and April.  March are only SPY and QQQ (2.5% allocated) and April I have SPY, QQQ, and IWM (5% allocated).  They are not working and could lose on the March but have plenty of time for April. 

Notable:

• US Markets - Choppy action with Nasdaq 100 leading but others still vulnerable to more downside
  
• European Markets - I like the DAX long but am still cautious on the Euro Stoxx 600
  
• US Dollar Update - Potential for more upside but need another day or two to confirm
  
• Bonds - Trying but just can't seem to turn yet
  
• Crude Thoughts - A lot of evidence that Crude continues lower
  
• The most important US sectors I'm watching today
  
• Brick and mortar is dead again and the online retail/consumer is OVERBOUGHT
  
• DeMark Screens
  

SPX bullish sentiment is at 44% up a point from the previous day.  

SPX tactical 30 minute time frame just had an upside red Countdown while potentially making another lower high.  The wave 3 downside price objective is 2572

SPX daily still is under the 50 day moving average.  It's a bit of a tug of war but a downside red Countdown remains on day 6 of 13.  If the green upside Setup count can make 9 consecutive closes higher than 4 previous closes the downside red Countdown will be nullified.  

Nasdaq bullish sentiment is at 48%

QQQ Nasdaq 100 has unquestionably been the strongest of all the US indexes and maybe in the world.  It's up at resistance and has not made a new closing high yet.  There is also a downside red Countdown on day 3 and a green Setup on day 3.  

QQQ with the wave setup is close to reverting back to the 5th wave if a new closing high is achieved.  I would not call this bullish in the sense of it being timely or with low risk because it remains overbought longer term and just had a monthly upside DeMark exhaustion (as did the FANG+ index).  In February 2016 - that was an optimum buying opportunity with downside exhaustion signals and very low sentiment 4% bulls.

QQQ tactical 30 minute time frame also had an exhaustion earlier .  This will either go up further to 172ish or break the recent March lows.  

IWM Russell 2000 has been very strong in the past week but is likely to stall with the recent upside exhaustion in wave 5.  Perhaps the upside wave 5 price objective will be challenged.  

Here's the YTD attribution with the Dow Jones.  BA is 4.5x the attribution from the next best attribute.  If any of these stocks split the market will be confirmed at a top.  

As I mentioned yesterday, I have been looking at a few European markets a little more constructively.  Notably the DAX with now has an upside red Countdown 4 on the upside.  I like it long here and would only allocate a small percentage for now.  12,075 stop

The broader SXXP Euro Stoxx 600 still has a downside red Countdown on day 8 of 13.  Pattern looks like a double bottom with some positive divergence however I am still not convinced downside is complete

US Dollar bullish sentiment is at 42% and needs to clear 50% to really make a move higher

DXY US Dollar index just price flipped (green 1 with it trading higher than 4 previous closes).  It needs to clear the 50 day then the recent high.  There is potential soon for a new red upside Countdown in the coming days.  

Bond bullish sentiment is at 22% and remains in the low 20's.  Recall it hit 7% on 2/2/18

US 10 year futures has some downside exhaustion but just hasn't been able to turn up enough to get the long bond trade moving

Crude sentiment is at 50% and it's make or break for Crude too with the price at 60.  There is a downside wave 3 price objective at 54.68. Considering positioning remains setup overly bullish with speculators, there is real risk to the downside.  

Crude on a weekly time frame had an upside exhaustion too last week.  

Here's the daily with the Countdowns visible and you see it's on day 6 of 13

My friends at Nautilus Research do great work and they did an analog with 2011 when crude was hit pretty hard.  On the other hand there tends to be positive seasonality in the spring.  

Tech is on the verge of making a new high. It's already in the 5th wave so there would be no changes to the wave structure

Financials is stuck at the 50 day but well off January highs and late February highs.  Breaking 463 support and it's not stopping there

Industrials continues to struggle.  This is a real problem for the overall market health in my view

Consumer Discretionary is holding the 50 day today but still feels like it's in no man's land.  In the sector there are only 27% above the 50 day moving average.  NOTE - When the new Cons Disc sector reweighting happens later this year (CMCSA, DIS, NFLX, and CHTR are moving to the Telecom sector) AMZN will grow in weight from 20% to 30%.  This is a big deal.  

Healthcare potentially will make another lower high too

Before I get into what's dying, AMZN continues it's steep climb higher.  I expect a top ahead of April.  I'm not short but it feels like I am looking at this chart

Costco  - wholesale - sells everything from food to electronics to jewelry  

Kroger - Groceries

McDonalds - Fast food losing appeal?

Target - diversified with food, clothing, electronics and the CEO has been on CNBC lately saying how great they are doing.  He's got a job at the White House waiting for him...

Dollar Tree - Discount stores.  The lower income shoppers have left the building

Walmart - The biggest diversified retailer in the world.  

Home Depot - The move up last year was likely do to all of the hurricane spending.  Tough comps for 2018 unless there are more natural disasters.

Priceline changed their name to Booking Holdings and it's been straight up.  But if the consumer is starting to pull back with the retailers shouldn't we start to wonder how spending on travel will be in 6 months?

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