Share

If you are having difficulty seeing this email, you can view in your browser or click here to print.

2/13/18
Thomas Thornton
info@hedgefundtelemetry.com

Surveying the wreckage from last week continued

On today's note, I do a little more surveying of the wreckage  from last week.  Most notably how many of the longer term overbought indicators were woken up with the sharp move lower and how they are not yet oversold as compared with other corrections in the past.  Keep in mind, last week I found the move sufficiently oversold with a number of shorter term factors such as the rapid move lower with bullish sentiment from 96% to 9%, downside green DeMark Setup 9's (usually good for some short term inflection against the recent direction) and the daily RSI's just a touch under 30% down in record speed from 86%.  The pattern that potentially is setting up is a five wave down move and I'll get more granular on Thursday's webinar.  

Today's note will have an incredible chart of the massive ETF outflows (considering the amount of passive ETF inflows in the past year, this is not a surprise) while the Commitment of Traders data from last week didn't show much fear with speculators increasing long exposure with S&P futures (this is a little bit of a surprise).  The data for COT is compiled on Tuesday's and released on Friday afternoons therefore I do expect some of the later in the week selling to be reflected on the next reports.  I have to say it's nice to have a calmer session today and I put together a lot of markets views.  I'll send the Thursday 10:30am webinar log on details later today and again tomorrow.

Notable:

  • US Markets - Still think we bounce a little more, positioning too bullish, quick trigger fingers
  • US Dollar and Euro Thoughts
  • Nikkei - Daily, Weekly, Monthly - This market is one of my bigger concerns
  • US and German Bonds - Could see yields drop soon
  • More evidence the US markets are not oversold enough
  • Crude and Natural Gas Thoughts
  • Gold Thoughts
  • Grains - Wheat, Corn, and Soybeans looking constructive on the long side
  • DeMark Screens

US Markets


SPX bullish sentiment increased again to 26% as did the Nasdaq too.  I expect a lower high with sentiment to develop around 50%.  

 


SPX daily shows a nice narrow today (remember those?).  A lot of people will be watching for upside resistance the 50 day.   For the corrective 2/B wave to register, price needs to make an 8 day closing high.  That will be coming down quickly in the next few days.  

 


The SPX 30 minute time frame chart had a 5 wave down move play out and there is a wave 3 upside target now at 2743 (that's slightly above the 50 day) and as you see the wave 3 downside target at 2784 was met and couldn't find support for 200 points.  The recent past upside wave 3 and 5 targets were pretty good.  These are just computer generated targets and have a 50% track record.

 
Large speculators added huge last week into the down move (remember it was calculated last Tuesday)


ETF outflows that needs very little explanation.   Wait until we break the recent lows.  

 


SPY had inflows of $16 billion in January only to see large losses and outflows.  This chart shows how investors are  much larger and quicker to sell.

 
US Dollar and Euro Thoughts


US dollar bullish sentiment has increased from 8% to 48%.  Sometimes after a deep oversold reading sentiment will move and stall at the mid point.  

 
US dollar positioning remains in "wait and see mode"   Good way of describing it.  Thanks Hedgopia.com


Euro bullish sentiment is at 61% down from recent high of 90%.  

 
Euro positioning remains very crowded on the long side with speculators.  A little dip but still crowded
 


DXY US Dollar index gave back a decent amount today, erasing the upside green Setup count and price flipping down with a green and red 1.  This stalled at the red dotted TDST resistance.  This could chop around but I'm watching the weekly charts which are close to exhaustion now

 


DXY Index weekly remains on week 12/13 with a red Countdown and on week 8/9 with a green Setup count.  Perhaps next week

 
Euro weekly is the opposite of the DXY Index.  Perhaps next week this will top
 
The Yen has been strong (inverted) and could break out with big implications for the Nikkei. 
 
Nikkei - Daily, Weekly, Monthly


The Nikkei daily has a downside Countdown on day 4 of 13.   This might be a big story soon.  I know valuations are appealing so why does the JCB have the need to buy Japanese stocks?  

 
Nikkei weekly could bounce after the daily downside exhaustion and make a lower high.  That could start another five wave sequence as seen in 2015/16
 


The Nikkei monthly just had both a Combo (pink) and Sequential (red) upside exhaustion.  How many times did you hear about a breakout over the years in the Nikkei but if you were using the DeMark indicators you'd never buy it.

 
US and German Bonds


Bond bullish sentiment is at 15% and has been down in oversold territory for a while.

 


Positioning in the US 10 year had a huge increase in speculators positioning short.  Remember back in September when bond positioning was bullish, bullish sentiment was 90% and there was a downside DeMark exhaustion at 2.05% on the 10 year?  And NOW they come in to short!
  

 
US 10 year weekly has an upside green Setup 9 which has spotted a top the last two signals
 
US 2 year weekly has an upside exhaustion and I continue to like the front end of the curve on the long side
 
German 10 year daily had a recent upside exhaustion.  The last downside exhaustion worked out well
 
The weekly of the German 10 year (like the US 10 year) has an upside green Setup 9 and has seen decent inflection
 
Some more evidence that the US markets are not oversold enough


This is the SPX weekly. Focus on the bottom yellow line - It's the weekly RSI.   I think I'm the only one who puts DeMark indicators on other technical indicators in order to increase the odds of timing tops and bottoms.  It's at 52.89 and bottoms typically happen closer to 30%.

 
The OEX S&P 100 Advance Decline is not oversold.  This says people are not afraid yet and are holding the biggest weights in the market.  Capitulation truly happens when people give up on the best companies.  Not there yet
 


OEX put call ratios moved up a little.  Especially with the OEX - again people are holding the biggest weights.  Also recall yesterday I showed the FANG index holding the 50 day vs the SPX holding the 200 day.  

 


SPX Advance decline is down but really not down that much yet

 
Crude and Natural Gas Thoughts


Crude sentiment topped at a very staggering 96% and now has dropped to 35%.  This could go lower based on the follow chart

 
WTI Crude had a recent upside exhaustion with that high sentiment and has rolled over and now has a downside red Countdown on day 2 of 13.  Support that should be watched is 56.88
 
Natural Gas sentiment is at 29% and much higher than the last time price was at these levels.  That's positive divergence.  
 
Natural Gas daily had a good downside exhaustion combined with very low sentiment and the trade worked until it broke down.  Recall I recommended for risk management purposes selling half when it came back down to the 50 day (blue line) to lock in a profit.  I said I'd stop out breaking the entry and it got close but I'm still long a 2.5% position hoping the green Setup 9 will turn this up.  13D Research did a good bullish Nat Gas report that gave me a little more confidence being long
 
 
Gold Thoughts


Gold bullish sentiment is at 70%.  It's really make or break now.  If it goes below 60% I'd be concerned (a new low for the cycle)

 
Gold speculators moderated a generally bullish position.  I see the big break out potential like many but I'm still skeptical
 
 
Gold futures had a recent downside green Setup downside 9 and it held the 50 day which is sloping up.  That's a positive if you're long.  Breaking the 50 day and stop yourself out.  
 
Grains - Wheat, Corn, and Soybeans looking constructive


JJG is a grains ETF which looks constructive breaking out a big base and is on day 7 of 13 with an upside Countdown.  

 
Wheat bullish sentiment is at 57% and has stalled here several times but popped to 80% last year.
 
Wheat futures had a recent upside exhaustion red 13 reversed but has reemerged higher.  If long stay long.
 
Corn bullish sentiment is creeping higher at 42% and should continue higher
 
Corn futures is also breaking out of a big base and should continue
 
Soybean bullish sentiment is also creeping higher at 42%
 
Soybean futures has an upside red Countdown on day 6 of 13 and should break out higher.  
 
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:   ABAX, PRAA
DAILY DOWNSIDE 13: AEGN, OI, VTR

DAILY UPSIDE WITH PRICE FLIP REVERSAL DOWN:    NONE
DAILY DOWNSIDE WITH PRICE FLIP REVERSAL UP:   CNP, DTE, ETR, GEO, GTY, HE, NEE, OGE, PNM, PPL, SJI, TUES, WEC, XEL

Updated: 2/5/18
WEEKLY UPSIDE 13:   ABMD, AON, AXE, BF/B, BIIB, BOFI, BR, CSCO, DGX, GD, LMT, MAR, RL, ROST, SGY, SPPI, STT, SYY, UFS, WAT, WSO
WEEKLY DOWNSIDE 13:   BELFB, EGOV, FSP, INT, RRC

Updated: 2/1/1
MONTHLY UPSIDE 13:     CHD, CLGX, CLX, CNMD, DVA, FICO, IDCC, MSCI, ORLY, PAYX, TFX, VMC, XYL
MONTHLY DOWNSIDE 13:    GPOR

Euro Stoxx 600 Universe: 

DAILY UPSIDE 13:   NONE
DAILY DOWNSIDE 13: ASM NA, PNN LN, SSE LN, UU/ LN

DAILY UPSIDE WITH PRICE FLIP REVERSAL DOWN:    NONE
DAILY DOWNSIDE WITH PRICE FLIP REVERSAL UP:   ABF LN, ATL IM, EDF FP, ELE SM, HSX LN, HWDN LN, ITRK LN, MAERSKB DC, REL LN, RR/ LN, RTO LN, SEBA SS, SGC LN, SHP LN, SN/ LN, SPX LN, SWEDA SS, ULVR LN

Updated: 2/5/18
WEEKLY UPSIDE 13:    ELM LN, JE/ LN, MC FP, TDC DC
WEEKLY DOWNSIDE 13:   AA/ LN, NG/ LN, SGC LN

Updated: 2/1/18
MONTHLY UPSIDE 13:    COFB BB, GAS SM, GKN LN, ING FP, KINVB SS, OML LN, VIS SM
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