Skip to main content

August 06, 2016 – Weekend Market Comment

August 06, 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).

Well the Market did really well this week. Financial stocks did well, breaking through its spring high to reach the highest level this year.  Of all the sectors in the market, financials are the most sensitive to the direction of interest rates. Their upside breakout appears to reinforce the view that bond yields have bottomed, and that bond prices have peaked. The three financial groups that benefit the most from from rising yields are banks, brokers, and life insurers. Not surprisingly, those three groups are leading the XLF ETF higher.

101 Bull Bear
Bull market (dark green over red) and now the short term (light green) is up sharply. NOTICE THE SLOPE (second window), this could be part of a long term up trend, which 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
OBV is still with market and new break out of consolidating range. Bullish.
207 VIX
VIX should bounce about this red line for a while but very bullish for now, could even head in to a new range.

209 VIX Evaluator
Nothing but strength.
211 S&P500 over 50 day
Now over 73.4% stocks are above their 50day MA, slightly down from last week 76%. Strength.

213 Green Arrow
Only put new money to work when I draw a green arrow.
Still rising.

301 NASDAQ Summation
After a little blip, nothing but strength here.

303 Aggressive Defensive
Very aggressive.

305 Consumer Bonds vs Equities
Bonds drop, 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. As I mentioned last week, gold unable to rally in face of strong market.

! = Pay attention this chart is important this week.

What I Find Interesting
The Economist has long used an index to compare the purchasing power of currencies using local prices of Big Macs. In July, Nomura introduced its own index using the iPhone 6S. They clash. In the countries shown, Big Macs cost less than in the U.S. at today’s exchange rates, which indicates their currencies are undervalued. But iPhones cost more abroad, indicating those same currencies are overvalued.

By contrasting the two "indexes" you get a sort of index of disparity, where there is very high poverty, but an elite ruling class you see the biggest disparity in the two indexes. Russia, Brazil and Mexico lead in these areas.

What Works Now
Emerging Markets -- The Vanguard Emerging Market ETF (ticker:VWO)

or PowerShares RAFI Emerging Market Index. (Ticker: PXH)

or for a single stock consider materials giant BHP Billiton (ticker: BHP)

Canadian pipeline company Veresen (Ticker: VSN tsx exchange)

What I Think
I think that was a bit of a surprise, the normal cycle of pull back and move forward was short circuited this week as the US jobs report was strong than expected. Again fundamentals trump technical indicators. This market is strong and resilient and you had hints of that in the OBV and 52week High Low charts that have remained strong for weeks now. As a I said a few weeks ago, when the market is this strong, long equities is the only game in town.

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.

Read My Disclaimer Here