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May 28, 2016 – Weekend Market Comment

May 28, 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).

So did I nail that, or what? As predicted last week we had a strong dead cat bounce on oversold conditions. Monday and Tuesday were up strong, fading as the week progressed. The DOW and S&P500 posted the best week since March. All week it was financials leading all S&P 500 sectors higher. UnitedHealth and Goldman Sachs had the greatest positive impact on the Dow Jones industrial average as most constituents gained.

101 Bull Bear
Bull market (Dark Green over red). Nothing but strength. Notice the turn around pattern in the second window showing gaining 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 April. Notice a clear round top in the 12 period moving average. This is the sign of a recession looming.

115 Renko
New white bricks, the trend is up.
203 OBV
OBV lags the market. Pros are not buying this could be a sucker run up – Caution could signal a pull back from this run up.

207 VIX
VIX is the fear gage ... 13.31 – Fear has ebbed to a low point. Notice the CCI in the top window.

209 VIX Evaluator
Nothing but strength.

211 S&P500 over 50 day
Last week 63% this week now 67% of stocks are above their 50day MA. Now gaining momentum.
213 Green Arrow
Only put new money to work when I draw a green arrow.
ALERT! New Green Arrow this is a GOOD TIME to go long the market.
TRIX is green over red, expect positive outcomes.
No sign of a green arrow..

301 NASDAQ Summation
Nasdaq is recovering.

303 Aggressive Defensive
Finally a topping a roll over, end of the strong up trend?.

305 Consumer Bonds vs Equities
Consumer tanks but might recover about here. Bonds bottom. Bonds suck this week.

307 Bond Direction
Short-term bonds -- long term up trend is up.

309 Sectors
Notice the defensives/utilities are dropping fast, consumer is at bottom of normal range, financials are up and tech is recovering.

311 Nations
USA wins big this week.

313 Major sectors
Some recent signs of life in commodities Canada does well.

! = Pay attention this chart is important this week.

What I Find Interesting
In a ringing speech at the Hiroshima Peace Memorial, Obama said the nuclear attacks that ended World War II have a clear, simple legacy: We now have the ability to destroy ourselves. As the first sitting US president to visit Hiroshima, Obama didn’t offer an apology for the bombing. But he said the best way to honor its victims is to advance “the radical and necessary notion that we are part of a single human family.”

What Works Now

Nvidia (ticker: NVDA) makes graphics chips for computers and smart phones. For years the stock languished as PC sales dried up. More recently there have been some challenges to patents by Samsung. Recently the Nividia common stock has leaped up due to the companies agreed to a license a “small number of patents by each company to the other, but no broad cross-licensing of patents or other compensation,” they said in a joint statement Monday. The agreement came hours before the U.S. International Trade Commission in Washington was scheduled to announce its final decision in a case Samsung had filed against Nvidia. A trade judge had said Nvidia and its customers infringe Samsung patents for ways the chips are made.

Technology stocks have rebound the last few weeks, the technology ETF (ticker:XLK) has been part of the bounce.

The select Dividend ETF (ticker:DVY) has been a strong performer, as investors seek safety and returns. But is this the tun as the rotation to technology stocks?

What I Think
Well the head and shoulders pattern that was so evident last week has for the most part been eclipsed by a very strong rally. On the one hand we have come far and fast, even the pros have hesitated here. The OBV chart is telling you that it is the smaller players now propelling the market. Also we have failed to make new highs in the major markets in the last 12 months.  They can hold this market up for some time but in the long run they are the last to the party. Also if you look at the aggressive defensive chart you know we are at best a week or two from a more defensive cycle. Our VIX chart is down in the territory where complacency often turns to panic. Certainly the CCI on that chart is worth a glance.  With the Fed making more hawkish statements and the decaying results in industrial production I still think there is trouble coming in 2016. 

That said the Bull Bear lines are bullish and the NYSE High Low graph is showing no issues with breadth. The VIX Evaluator is showing nothing but good news.  Also there is no real compelling issues on the horizon.  So its a case of the market can remain illogical longer than you can remain solvent. 

So what I am saying is this is no time to short the market. Also this market is likely to see a pull back in the coming weeks. For now be long and watch for sudden down turns.  

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

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