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July 30, 2016 – Weekend Market Comment

July 30, 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 action on this week was different than what we've seen recently as investor focus seemed to turn to safety ahead of the GDP report and after the FOMC announcement on Wednesday. Consumer staples (XLP, +0.44%) and utilities (XLU, +0.39%) led the six advancing sectors while basic materials (XLB, -0.14%) was the worst.






101 Bull Bear
Bull market (dark green over red) and now the short term (light green) is up sharply but rounding. NOTICE THE SLOPE (second window), this could be part of a long term up trend, that might pull back here.  Bull market -- expect bullish outcomes.
 !
103 NYSE High Low Market Forces
Nothing but positive. In the right side highlight we see green is above is below yellow. Really positive.

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
Could be turning up again, if not expect rally to fail.

115 Renko
Nothing but strength.
 !
203 OBV
CAUTION: OBV is still with market but we are now consolidating in a range.

207 VIX
VIX should bounce about this red line for a while as traders start to understand a pull back here might help.

209 VIX Evaluator
Nothing but strength.

211 S&P500 over 50 day
Now over 76% stocks are above their 50day MA, down form last week 86%. Strength but looking a bit overbought.

213 Green Arrow
Only put new money to work when I draw a green arrow.
Still rising, notice MACD is fading.


301 NASDAQ Summation
Nothing but strength here.
 !
303 Aggressive Defensive
Aggressive but could be the end of the cycle. Overbought can go on how long?

305 Consumer Bonds vs Equities
Bonds gain a bit, but consumer does not react. Could be a bit of fear returns.

307 Bond Direction
Strength in bonds indicates overall market caution. .

309 Sectors
Its all about tech as the Nasdaq sweeps ahead.

311 Nations
International gains interest as U.S. market looks overbought, Germany marches ahead.

313 Major sectors
Only emerging markets are doing better than U.S. equities.

! = Pay attention this chart is important this week.


What I Find Interesting
Bloomberg had an interesting bit on a new type of weather called a rain bomb. It also pointed out this week the Empire state building was struck twice by lightning. I imagine what the guy in that office thought... Watch it on video here:




What Works Now
Canadian metals giant Teck Resources

Oshkosh by gosh!





You Asked
A reader of this blog asked me this week if this is a good time to be in gold. Well no one knows the future . . . If another 911 type event happens this week and sure buy some gold. But it is not the heart of my portfolio First off in general, I don't like gold if for no other reason than it has no value except if you fear everything else. Unlike equities that can rise due to hard work and earnings gold is a vote for apocalyptic visions. So it was a fine thing for the characters in a post-apocalypses movie to use to barter for food or medicine, but it is not a great investment, because often cooler heads eventually prevail.  



Now if you look at my 100 series charts, we see we are in a bull markets, with strong breadth, strong employment, rebounding manufacturing, not much of an apocalypse. But we are over bought...

If you zoom back and look at the big picture you can often see the overall direction of a market. By using Renko charts you eliminate the question of time and can just see direction. Here are two Renko charts one is for IWN the Russell 2000 stocks, used here to represent equities and one is for gold... So now ask yourself, would you rather be in equities or gold?




Don't get me wrong, I am expecting a small pull-back here in equities, after some sideways consolidation In a pull-back I expect gold will rise a bit. That said, so will t bills, VIX futures (very dangerous animals) and other safe haven investments so gold might advance, but you will probably do better with something else. 

Gold is in a rebound off its low, but as you can see it has come a long way already. 

So the final answer is, if you don't mind short term trading,  sure hold some gold in to this pull-back, if you like, but don't linger, it should sell off after the summer pull back, and IF the market is solid this fall it probably will not out perform equities.



What I Think

Look over my charts this week to see the plethora of BUY signals, you seldom see the market so strong for so long. Look how many charts I say Nothing but strength on.  Yet the market is traveling sideways and has been for 12 days. Should we expect an upside break or downside break?

There are two ways to approach this type of price activity. It is the "cup half-empty" or "cup half-full" approach. If you are in the bearish camp (half-empty), you would rightly point out that price has been unable to penetrate the top of this range for days and therefore, it is time for a decline. However, a bull "cup half-full", would point out correctly that price has held on to support for days and has refused to break down. Whose idea holds the most promise? Well by a tiny margin I would say the intermediate-term indicators are calling for a short decline.

Major indexes are extended after big gains the last five weeks. In addition to being ripe for a corrective period, August is here and this has been a weak month on the seasonal charts. SPY is up over 9% the last five weeks and a pullback or corrective period would be perfectly normal at this stage.  


If we look at the aggressive defensive chart we can see we have been in this over bought area too long, and the OBV chart is still going sideways, but I expect the support to fade. But then again I though that last week and we made an S&P500 high.




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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…