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April 16, 2016 – Weekend Market Comment

April 16, 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  For full details read my disclaimer (link at the bottom of this page).

The continued upward momentum took the bull bear lines this week in to the Bull sector. It was a pretty good week for the stock market with the Russell 2000 iShares (IWM) and the Finance SPDR (XLF) showing upside leadership for a change. IWM gained 3.21% for the week and led the major index ETFs higher. XLF gained 4.60% and was the second strongest sector (behind XLE). 

101 Bull Bear
Bull market (dark green over red) and now the short term (light green) is leading up. Bull market, expect bullish outcomes.

103 NYSE High Low Market Forces
In the right side highlight, we see green is above yellow. This is the number on reason I am still seeing possible upside. There is recovery now but it could disappear in a hurry. 

105 Non Farm Payroll
Lots of jobs! But beware this is lagging indicator. The smart money is gone before this turns down.
107 Industrial Production
Not good. Watch this carefully, all recessions have falling industrial production, new data is from the end of March, looking worse.
115 Renko
A new up white brick, nothing but strength for weeks. .

203 OBV
OBV says pros are with this market still no danger yet. .

207 VIX
VIX shows falling uncertainty now below 14.

209 VIX Evaluator
Nothing but good news and falling fear.

211 S&P500 over 50 day
Now over 88% stocks are above their 50day MA. Bullish but little place for growth.

213 Green Arrow
Only put new money to work when I draw a green arrow.
Declining interest in broad market is slowing a bit in the 20 day slope (top panel). 

301 NASDAQ Summation
Nothing but strength here.

303 Aggressive Defensive
Still aggressive mode but looking like it might roll-over since it is topping?

305 Consumer Bonds vs Equities
Disturbing, the consumer is lagging. Bonds are in an mild up-tick.

307 Bond Direction
Strength in bonds indicates caution. .

309 Sectors
Defensive staple stocks like dividends, utilities are strong but also the consumer is rising. Financials are lagging. A mixed sign.

311 Nations
A look like international stronger, but the mix moves here from growth countries to stable Europe.

313 Major sectors
I got nothing here!

 ! = Pay attention this chart is important this week.

What I Find Interesting
According to a just released report in Japan's Nikkei, Apple will continue its reduced production of iPhones in the April-June period in light of sluggish sales, according to parts suppliers notified of the plan. 
The website reports that slow sales of the flagship iPhone 6s and iPhone 6s Plus, which debuted last autumn, have forced Apple to adjust inventories. It lowered production for the January-March quarter by about 30% from the year-earlier period. With sales still sluggish, the U.S. company has told parts suppliers in Japan and elsewhere that it will maintain the reduced output level in the current quarter.

Apple apparently does not plan to produce a large enough volume of the small iPhone SE released last month to offset the slump of its flagship series. However, should Apple decide to release its next flagship model earlier than the usual September launch, parts production for that smartphone could take off around late May.

A prolonged production cut would hurt Japanese parts suppliers such as liquid crystal display panel manufacturers Japan Display and Sharp, memory chip supplier Toshiba and Sony, which provides image sensors for cameras. With their plants already operating at reduced rates, they may be forced to downgrade their earnings forecasts for the April-June quarter.
The current production cut could last longer than the one Apple implemented in 2013. Some 1.5 billion smartphones are shipped globally in a year, but the market's growth is slowing.

What Works Now
U.S. Financials (ticker:XLF)

Dividends paying large cap stocks (ticker:DVY)

Bonds: U.S. 30 year T-bills (ticker:TLT)

What I Think

There is only one side of the market to be on, they right side. There is no question that the Bull Bear lines are firmly in the Bull camp. 

If I were to guess there still will be a sell off in the coming month, but for now there is no way this market can be shorted. Yes it is an expensive market, yes there are warning signs particularly in global trade and manufacturing numbers. Look at chart 107 -- Industrial Production -- still very disturbing:

We also are within a few percentage points of the resistance, an all time high. That said you can not ignore this market it has been one direction for weeks now. To visualize that just look at our Renko chart of the Russell 2000 index.: 

While the S&P 500 hasn’t quite taken out its May 2015 all-time high (it needs about 2% more of gains), the index’s trailing 12-month P/E ratio is set to make a new six-year high if market gains hold today, now hovering at 19. That is up from 13 back in 2011. P/E ratio tells if stocks are expensive or cheep. In this case, today we could buy most firms in the S&P 500 and pay for them with 19 years of earnings. In 2011 it would only take 13 years of earnings to buy most firms. 

So the short story is be long, but play it slow. Place your stops closer than normal and be ready for trouble in the date range May 2 to May 20.

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