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March 12, 2016 – Weekend Market Comment


March 12, 2016 – Welcome to my weekend market comment, an analysis tool I use in my own portfolio decisions, published free to the web every weekend before the New York opening bell. You can read the latest version each week by bookmarking http://cme4pif.blogspot.ca/.  For full details read my disclaimer (link at the bottom of this page).

The markets charge ahead this week, recovering much of the losses we saw in 2016. For weeks I have been saying we are overbought, well, we are and yet on we climb.







101 Bull Bear
Bear market (red over dark green). The light green line has come a long way up, and the dark green line is beginning to turn up, clearly a strong recovery. In short this is impressive and although still technically a bear market this no time to go deeply bearish, trying to time a sell off.  Bear Market = Bearish outcomes.
!
103 NYSE High Low Market Forces
Very important: This is the chart that makes me rethink my stand. Notice the second panel of this chart, as red disappears you begin to see that this recovery is getting very broad and that is the sign of a healthy market.

105 Non Farm Payroll
Lots of jobs! But this is a lagging indicator. 

107 Industrial Production
Not good. Watch this carefully, all recessions have falling industrial production, but data is from the end of January.

115 Renko
Obviously – 5 white bricks trend is heading up. Clearly we have come a long way back.

203 OBV
Pros are with the market volume jumps! Don’t ignore this, with volume comes safety.
!
207 VIX
VIX is the fear gage .. below 17 is calming but still in the dangerous zone. Notice what often happens when the top panel CCI is in the oversold brown zone, it often is the start of a rise in VIX and in this case that would mean the end of the bounce. 

209 VIX Evaluator
Heading down clearly.

211 S&P500 over 50 day
Now 90% of stocks are above their 50day MA. However top window shows a MACD near top. Clearly a monster move, but is this the end?

213 Green Arrow
Only put new money to work when I draw a green arrow.
TRIX may cross signalling a possible green arrow in the future?.
Notice the slope is loosing momentum.
No sign of a green arrow..



301 NASDAQ Summation
Looks solid for NASDAQ don’t bet against strength here
!
303 Aggressive Defensive
Well I was expecting a toping a roll over and instead we got a recovery and more strength… This says we are in a strong uptrend.

305 Consumer Bonds vs Equities
Consumer stumbles watch out. Bonds are fading.

307 Bond Direction
Short term bonds fall.

309 Sectors
Financials get a lift.

311 Nations
Emerging markets return

313 Major sectors
Equities beat gold! I selling my gold positions. Canadian markets hold their own.





 ! = Pay attention this chart is important this week.



What I Find Interesting
China continues to post news of slowing exports. The Baltic Dry Index (the price of space on cargo ships) is at record lows. Now here is a story on the BBC about the China slow down




This is a sign that the world is not well, most of those exports were headed to the USA so if America does not want auto part, it also is not selling cars... etc. 







What Works Now

Hormel foods, time to take profits?

 


What I Think

First off let me remind you that I am not a financial adviser, this blog is my thoughts said out-loud as I make my plans for my investments. As the disclaimer says, no one really knows the future. Here is where I think we are.

This is a bear market and you must temper your enthusiasm in bear markets. In the long view in 2016 I do expect a significant pull back, probably related to defaults on junk bands and the global slowdown finally catching up with China.

 
This week we saw a number of past levels past a real long BUY signal. Combine this with an exceptional breakout above very strong overhead resistance and one must begin thinking this could be more than a bear market rally. There were some temporary global positives, between London and Chinese markets closing higher, to quantitative easing in the EU that bolstered U.S. markets.

My true shorts have all been stopped out with small profits. You must respect the tape. Also I took profits in gold as the fear has begun to subside. 


Perhaps the most interesting chart is  103 NYSE High Low Market Forces -- this week the second panel was strong in the black indicating the rally is stronger than expected. On Balance Volume is clearly favoring the bull story. 

The current rally has been impressive and many of my stops were to my surprise hit, so I remain largely in cash. However the rally has come so far and so strong that we way overbought. I expect the buying to continue for another week or more but I do expect some point of resistance and retrenchment. That could be this week or it could be in May, but trees do not grow to the sky.

So now you listen to the above and you say, its too dangerous to be short (when in doubt get out) and it’s a bear market and so we will head lower soon. If that sounds a bit like “the market will defiantly go up or down.” I agree, it not very helpful. But technical analysis tells you the season, not the daily weather, and so you do get caught on the wrong side of the market sometimes. If you look at the long-term chart below you will notice the volatility section in pink.


In volatile bear markets the participants do get whipsawed and frustrated. That is why bear markets can sell off so violently. There are no opportunities without risk.

Again I am keeping powder dry and ready for a cresting to indicate a new leg down but don't anticipate, wait far a clear signal for sell off. For now I am not afraid to ride some defensive longs.




 
You can learn more about my indicators by visiting the CME4PIF school by clicking here.



Don't squint, All graphics can be enlarged by click on them.



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Yet another parabolic up week for the markets. Honestly folks valuations are really stretched here. The air is so thin at this altitude. Then again the markets can and do (on a short term basis) anything they want. Still I would expect a little pull-back in the next two weeks.


Lets see what is in the charts this week:

CLICK HERE: To see the 100 and 200 series charts



101 Bull Bear Bull market (dark green over red) and now the short term (light green) is up sharply. Also note the dark green 50 day average is in a firm uptrend. NOTICE THE SLOPE (second window), this could be part of a new long term uptrend.Bull market -- expect bullish outcomes…