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June 4, 2016 – Weekend Market Comment

June 4, 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).

U.S. stocks closed slightly lower Friday, as gains in utilities offset declines in financials after a sharp miss on the May jobs report. The major averages came well off session lows to close slightly lower on the day and narrowly mixed for the week. The Dow Jones industrial average closed about 31 points lower after earlier falling 148 points with Goldman Sachs contributing the most to declines.





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. The most you could say negative is that the 4 day (light green line) is a long way from the 50, and so a bit of revision to the mean would not be a surprise. 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. The newest data was a small disappointment and it shows as the lines have slightly converged, this is not time to panic yet.  

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
Three white bricks, the trend is up.
!
203 OBV
CAUTION: 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 ... 13.58 – 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 67% this week now 69% 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.
Recent New Green Arrow this is a GOOD TIME to go long the market.
TRIX is green over red, expect positive outcomes. ..


301 NASDAQ Summation
Nasdaq nothing but strength.
!
303 Aggressive Defensive
Still aggressive but late in the game, expect a defensive move in the next few weeks?
!
305 Consumer Bonds vs Equities
Consumer slowly fades (concerning). Bonds explode up. Experts are buying bonds to avoid a equity pull back?

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

309 Sectors
Notice the defensives/utilities are rising fast, consumer is at bottom of normal range, financials are dropping and tech is sliding a bit.

311 Nations
Finally some interest in global markets as commodities ignite interest.

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
Venezuela continues to disintegrate loosing the ability to generate power from many major dams. This article on Bloombergs site details some of downward spiral.  

This is what $25 U.S. dollars looks like in Venezuelan Bolivars once peg to US dollars, now worth about 10 cents to the dollar. As reported in the New York Times it takes a purse full of cash just to buy 3 cups of coffee. 


This is what tap water looks like in Caracaus as government employees are unable to run treatment facilities. 




What Works Now
The theme now is things are good... it might not last. 

Commodities march ahead. If you haven't been following the breakouts week after week in commodities, it's time to check in and see what is going on. We continue to see new breakouts every week. We continue to see more commodities moving above the 200 DMA. The rally in oil, the rally in natural gas, and the breakouts in some agricultural commodities, are generating good results. 


Bonds
this is TLT 20 year US treasuries

Defensive stocks (not defense stocks) 


A Reader Writes
A reader of this blog wrote to me this week and asked about advice about if this is a good time to sell Canadian financial stocks. 

To answer this I took our standard Bull Bear chart and used it to chart the Bank of Nova Scotia and its recent performance. Other major Canadian banks should be similar (except Canadian Western Bank another animal altogether) 


First off I think Canadian banks are a license to print money. By law Canada only has a small handful of Charter A banks who work together to screw their clients. In the 2008 financial crises they held up far better than most other equities. For example two companies that weathered the storm well were Scotiabank and the Prudential Insurance company -- but look at the difference in how hard they were hit. This chart is the 2008 crash and Prudential is in red, Scotiabank is in blue.

So the answer is according to the Bull Bear lines it does look like Canadian Banks might have run too far too fast. Perhaps they will rest or pull back a bit but perhaps not. But this is for sure, if things go bad you will have more time to get out. I think as long as that dark green 50 day moving average is heading up I would not get spooked easily. 


What I Think
Its a bull market and you must in the long run expect bullish outcomes. That said if you look at the Bull Bear lines our light green 4 day ema is way above the 50 day average. Clearly we can see that the recent run up is a bit over done and a pull back would be in order. The recent moves in the graphs under What Works now show you that the market is long, but long safety.  The OBV chart is telling us that the volume is not coming from the big funds and that is always a sign of caution. 

Also the market has shrugged at the decrease in industrial production now going on a few months, but we also saw some concern in employment growth slowing. That may be the tip of a growing problem and might be the start of a recession, it bears watching.  Financials were doing great until that report, now they are selling off. 





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


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Lets see what is in the charts this week:

CLICK HERE: To see the 100 and 200 series charts



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