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April 23, 2016 – Weekend Market Comment

April 23, 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).

Like a feather the markets drift up again this week, the long term up trend firmly in place. But clearly this week it is gentler ascent. We have come so far a rest here is not unexpected.
 
 



101 Bull Bear
Bull market (Dark Green over red). I have little faith in this bull and still expect it  dies in mid May. That said this recover is too strong to be short here. Notice the topping pattern in the second window showing some loss of momentum in the 50 day slope. Bull Market = Bullish outcomes.

103 NYSE High Low Market Forces
Nothing but strength.

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 this data is from the end of March. Notice a clear round top in the 12 period moving average. This is the sign of a   possible recession looming.

115 Renko
Obviously – 11 white up bricks trend is heading up. Clearly we have come a long way steady up. Hard to be a bear in an up trend this obvious
 !
203 OBV
OBV exceeds market. Pros are with this market volume holds! This could indicate a continued buying in a BEAR trap!
 !
207 VIX
VIX is the fear gage ... 13.22 and falling. The most you could say is this is about as optimistic as traders get and often where the market sells off due to shortage of buyers… perhaps.

209 VIX Evaluator
Nothing here but strength and conviction in the BULL. Again if you try you might say it is overdone… but that is no guarantee.

211 S&P500 over 50 day
Now 80.2% of stocks are above their 50day MA. This has been sliding lower since 2 weeks ago. Loss of momentum.

213 Green Arrow
Only put new money to work when I draw a green arrow.
ALERT! Notice the slope is loosing momentum.
TRIX is green over red, expect positive outcomes.
No sign of a green arrow..


301 NASDAQ Summation
Nasdaq is still strong, in fact it is the only index this strong, an optimist would see aggressiveness a pessimist would say the funds are stuck on FANG and NOSH.

303 Aggressive Defensive
Finally a toping a roll over, end of the strong up trend? Clearly more defensive.

305 Consumer Bonds vs Equities
Consumer declines a bit. Bonds bottom. Bonds have not done well this week.

307 Bond Direction
Short-term bonds fall in a rounding top to the long term up trend.

309 Sectors
Despite some poor earnings from the major banks, financials lead..

311 Nations
Global slowdown is pulling all nations down

313 Major sectors
Some recent signs of life in commodities.

 ! = Pay attention this chart is important this week.



What I Find Interesting


Economists were excited last month when the Philadelphia Fed manufacturing region index broke into positive territory. Economists expected a continuation (as they invariably do whenever there is good news). Instead, the index is back in contraction with a huge plunge in shipments. A PMI below 50 indicates a lowering of manufacturing output, and the figures always are a bit over optimistic

This week's Philly Fed poor numbers was more indicative as US Manufacturing (flash) PMI printed 50.8 (from 51.5 in March and notably missing 52.0 expectations). According to trading economics this is the lowest print since September 2009 with New Orders sliding (weakest since Dec 2015), and Employment at its weakest since June 2013. 


What Works Now
Zacks sent out a buy recommendation on Lithium and the commodity is in very high demand. You can even buy a Lithium ETF (Ticker:LIT)

Demand for lithium — the hottest commodity on the planet and the only commodity to show positive price movement in 2015 — is poised to continue on its upward trajectory, becoming the world’s new gasoline and earning the moniker of ‘’White Petroleum."

Driven by the rise of battery gigafactories and game-changing Powerwall and energy storage businesses, the world now finds itself at the beginning of a lithium super cycle that is all about securing new supply, much of which is poised to come from lithium superstar Argentina.

We have Tesla in the far corner, building its battery gigafactory in Nevada, for which it needs tons of lithium at a reasonable price, and just last week Tesla announced its plans for the Model 3, which has already hit over 300,000 pre-orders. To give you an idea of just how meaningful this is, Tesla produced less than 50,000 cars last year. Elon himself mentioned during the unveiling that Tesla will be gobbling up much of the world’s lithium supply with plans to produce 500,000 EVs per year. “In order to produce a half million cars per year…we would basically need to absorb the entire world’s lithium-ion production.” Remember – this is one man, one company. Tesla’s soon-to-be-completed gigafactory will produce more lithium-ion batteries than the rest of the world combined.


Tesla 3 consumer priced super car

Chinese billionaire Jia Yueting is stepping onto Tesla’s playing field with its own electric car start-up, Faraday Future, and Apple is planning one too, by 2019. Through its Alphabet holding company, Google is also getting into the game with plans for a self-driving car.

They are fighting it out not only to be the first to capture the most electric vehicle market share and the best engineers, but they are getting down to the core of this arena, which is lithium—the key element that will make it all work.


Ride the Rails
Followers of the DOW THEORY watch transportation stock as leading indicators of economic activity. It is encouraging that rail stocks are doing much better:




What I Think

Well we are in a bull market and so we must expect bullish outcomes. This market has been a monster and the strength in the NASDAQ, some uptick in oil prices, some uptick in China's economy and in the short term the OBV chart stronger than the market (for a day) all tell me you don't want to be short yet. 

Then again, on the bigger picture, we are still over bought as we have been for weeks. The 107 Industrial Production chart tells you this will not end well.  Many of my momentum indicators are flat or falling indicating a consolidation that my lead to a sell off. Finally as I have said in my blog since the new year, with global trade this bad 2016 is probably a recession year and the target for the sell off (this is a guess) May 15 2016.   So not likely we get a sell off this week, but this maybe a great Sell in May and go away year.




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…