Share

If you are having difficulty seeing this email, you can view in your browser or click here to print.
04/23/2024
Thomas Thornton
info@hedgefundtelemetry.com

Being right or making money
Ned Davis had a profound effect on me many years ago and it's inspired my process and investment approach.  Ned founded his research firm in the early 1980's which combined technical analysis and sentiment for institutional clients.  When I worked for my hedge fund I was fortunate to be the liaison between the firm and NDR.  I took total advantage and used my position to learn as much as I could on how he formulated his sentiment index as well a framework for investing in the markets.  I had access to every analyst at NDR and could have any custom study generated within a day.  It was like getting an MBA, CFA, and CMT all in one.  

Ned wrote a book "Being Right or Making Money" that in summary said being right and forecasting are overrated and not the keys to success, while there are four keys to making money.  First, you need objective indicators, second, discipline, third, flexibility and lastly you have to be risk averse.  I've built out and have utilized in the real world many indicators that work well in live market combat.  The discipline is where you stick to your guns and follow those indicators but remain flexible and can respond to the changes to market conditions.  And being risk averse is what all great money managers think about way before what type of gains they hope to achieve.  

When looking at the current environment, there is only one sector (tech) that has made a new all time high in the US and that sector is dominated by some of the largest weights in the S&P.  Tech has become 25% of the S&P and anytime there is too much concentration (tech in 2000 or financials in 2007) there is increased concentration risk.  And as I have posted often the narrow Nasdaq 100 attribution in the past has lead to market tops as people get overly comfortable and crowded into these few names.  When the market corrected in February most sectors and indexes in the US held the 200 day moving average and bounced but the FANG custom indexes held the 50 day that at the time I highlighted the relative strength. So it's not that surprising that the Nasdaq has been the only index to make a new high.  The Nasdaq indexes have negated the downside wave setup and has reverted back to the 5th and final wave.  No other index or sector has changed the wave pattern and I don't believe the risk reward is good to chase here.  It's not a matter of being right but examining the data and remaining risk adverse.  

Notable:
  • US Markets - Sentiment increase and detailed look at the major US indexes
  • US Unemployment Rate - Monthly chart that goes back to 1950's - Hard to get better than this
  • Financial Conditions Index - Worth monitoring overall stress in money markets, bonds, and equities
  • US Dollar Update - Potential for upside
  • fAng Index - Dominated by Amazon
  • Bitcoin Update
  • Bonds
  • DeMark Screens
US Markets

SPX bullish sentiment increased to 50% and no doubt will have a big bounce after today.
 


The SPX daily wave chart has not changed since the wave 2/B pattern would only be negated with a new high above January's peak.  It would then revert back to a continuation of the 5th wave.  It wouldn't make it any more bullish but just more extended. This week's action still hasn't recaptured the late February highs but the  day is young.
 


SPX daily with the Countdowns visible show the downside red 6/13 still there while an upside green Setup is on day 4 of 9.  For the Setup to complete 9 closes above the 4 previous have to occur.  By the way on 2/9 when there was an downside green Setup 9, it was also when I said a bounce was ahead.  
 


The SPX 30 minute tactical chart shows it hasn't moved above the 5th wave which peaked in late February.  The  current count is still 2/B unless the February highs are broken
 

Nasdaq bullish sentiment is at 53% and has been incredibly divergent with price action.  Sentiment is far away from the peak in January when it reached 97%
 

The NDX daily chart has lost the downside wave count and has reverted back to the 5th wave.  I've said with the narrow attribution within the NDX it was possible.  There is no upside wave 5 price objective since it was set at 150.  That goes to show how far extended this index has become
 


The NDX 30 minute tactical has a Combo upside exhaustion and a wave 3 upside target at 172.73.  Considering Amazon has been 30% of the attribution YTD and doesn't seem to let up and semi ETF SMH still has an upside Countdown this could continue
 


IWM Russell 2000 has had a strong week being the tariff resistant index with lots of regional banks making the push.  It's currently on day 4 of 13 with a downside Countdown but is on day 5 of 9 with the upside green Setup.  Again, when I called for a bounce the downside 9's were all over the place
 


IWM 30 minute tactical has a wave 5 target of 158.23 and there's another upside red Countdown present
 


The Dow Jones Industrial Index 30 minute tactical time frame has a pink Combo upside exhaustion present.  This index continues to make lower highs and is well off the January and February highs.  
 
US Unemployment Rate


I focus my energy on payroll days on the US Unemployment rate as the calculation and methodology is a better and more predicable measure than the Non Farm Payroll number.  I show this chart each month and the DeMark indicators have been pretty good at bottoms and peaks over the long term.  This has been a very long stretch of lower unemployment and in the past several downside Countdowns were triggered and recycled with another one. I really start to pay attention when this gets under 5% for a reversal up.   There currently is a 5 month streak at 4.1%.  In 2000 unemployment bottomed and went sideways for 5 months and in 2007 unemployment bottomed and went sideways for 5 months.  If this ticks up next month it will be a price flip (a high above 4 previous closes).  It's very hard to make a long term bullish case from these levels.  
 
Financial Conditions Index

This index (white line) is combination of indicators that tracks overall stress in money markets, bond and equities.  Positive indicates accommodating conditions, negative tight conditions. Some of indicators that are in there: TED, OIS/libor, BAA/UST.  The spread above is the S&P.   As much as "everything is great" this was an early warning on both the upside ahead of the financial crisis and downside when it became clear accommodation was ahead.
 
US Dollar Index Update


US Dollar bullish sentiment is at 48% and is holding the mid point.  
 


DXY US Dollar Index made a 2 day high triggering day 2 of 13 with an upside Countdown even with is backing off midday.  
 
fAng


FANG + index has seen decent pullback after upside exhaustion signals on this daily chart and with it surpassing the January high it's now in the 5th upside wave with

 


The capital A in fAng is Amazon and it's been doing nearly 1/3 of the attribution YTD with the NDX.  It has an upside daily red Countdown on day 6 of 13 as does the SMH Semiconductor ETF.  
 
Bitcoin Update

Bitcoin has a mixed picture not as clear when in December the upside Countdown worked perfectly to call the top and then the move lower stopped exactly at the 6500 level where the green dotted line (TDST) worked as support.  The  current red Countdown is on day 4 of 13 but there's a downside green Setup count on day 3 of 4.  I'm watching the 7752 level very close (TDST)
 


Bitcoin has an interesting wave dilemma as we have been following the downside wave countdown where we seen 4 waves so far with a downside wave 5 price objective way lower.  But if the 6500 low close level holds this could mark out a new upside wave pattern with wave 3 upside price objective of 14,551.   
 
Bonds
 
Bond bullish sentiment rose to 28% from 22% but likely will fall back later today
 
Yesterday I showed the 10 year futures contract that I felt needed some more work to do to and today the TLT bond ETF registered it's 8th red bar of 13 and I expect a bond bounce once this exhausts.  
 
DEMARK SCREENS - Daily, Weekly, Monthly Upside/Downside Exhaustion Signals

Daily/Weekly DeMark upside/downside exhaustion signals (Sequential) Weekly updated on Monday's.  Price flips occur when a stock closes higher/lower than four previous closes.    

S&P 1500 Universe: 

DAILY UPSIDE 13:   ANDE, CNMD, DPZ, ESL, EXPO, FBP, IGT, MTB, PLT, THC, WYNN
DAILY DOWNSIDE 13:  SO, TSCO

DAILY UPSIDE WITH PRICE FLIP REVERSAL DOWN:    BGC, DECK, DPZ, MSCC, OXM, RUTH
DAILY DOWNSIDE WITH PRICE FLIP REVERSAL UP:   TSCO, WGL, WIN, WTR

Updated: 3/5/18
WEEKLY UPSIDE 13:   AFG, APH, BBT, EL, HSC, ISRG, HW/A, MCO, MINI, MSFT, VRTU, WEX, ZBRA
WEEKLY DOWNSIDE 13:   CRZO, HR, MSTR, RNR, SUP

Updated: 3/1/1
MONTHLY UPSIDE 13:     BDX, BMY, CAT, COL, CW, EBIX, GNCMA, IRBT, MMSI, NFLX
MONTHLY DOWNSIDE 13:    CHK, SVU, WIN

Euro Stoxx 600 Universe: 

DAILY UPSIDE 13:   CAP FP, EBS AV, HEXAB SS, INVP LN
DAILY DOWNSIDE 13: NONE

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

Updated: 3/5/18
WEEKLY UPSIDE 13:    BKT SM, LSE LN, RMS FP
WEEKLY DOWNSIDE 13:   SNH GR, TCH FP

Updated: 3/1/18
MONTHLY UPSIDE 13:    ASML NA, ENX FP, FI/N SW, INVP LN, SAB SM, SCR FP, US IM
MONTHLY DOWNSIDE 13:   NONE

Unsubscribe me from Hedge Fund Telemetry

Hedge Fund Telemetry LLC, P.O. Box 4675, Greenwich, CT 06861, United States

CONFIDENTIALITY NOTE and DISCLAIMER: This message is for the named person's use only. It may contain confidential, proprietary or legally privileged material. No confidentiality or privilege is waived by any accidental or unintentional transmission. If you receive this message in error, please immediately delete it and all copies of it from your system, destroy any hard copies and notify the sender. You must not, directly or indirectly, use, disclose, distribute, print or copy any part of this message if you are not the intended recipient. Hedge Fund Telemetry LLC. cannot guarantee the confidentiality of the material transmitted; therefore, information of a sensitive or confidential nature should not be transmitted. There is risk in trading markets.  Hedge Fund Telemetry LLC reports are based on information gathered from various sources and believed to be reliable, but are not guaranteed as to accuracy and completeness.  The information is subject to change without notice and Hedge Fund Telemetry LLC has no obligation to provide any updates or changes. Hedge Fund Telemetry LLC is providing this data for informational and educational purposes and does not believe that it is sufficient to base an investment decision on. This information should not be regarded as a solicitation or recommendation of any particular security or to engage in any trading strategy. One should always check with your licensed financial advisor to determine suitability of any investments.

 


Email Marketing by ActiveCampaign