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October 01, 2016 – Weekend Market Comment

October 01, 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).

Well the markets rally and things look good ... loose money from the fed, and Saudi-es are raising the price of oil. If Deutsche Bank does not blow up it could be a great fall season, if it does blow up it could be a big fall in the market. 
 




101 Bull Bear
Bull market (dark green over red) and now the short term (light green) is up. NOTICE THE SLOPE (second window), this could be part of a long term sideways or down 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. However we have not cleared our prior 2016 high. If you had gone into a long slumber on July 14 and woke up on September 30, you wouldn't have missed a thing.
!
203 OBV
OBV is still sort of with market but technically still lagging. .

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 51% stocks are above their 50day MA, slightly up from last week. Strength.

213 Green Arrow
Only put new money to work when I draw a green arrow.
Still rising but TRIX says no, no, no.


301 NASDAQ Summation
Kind of meah.
!
303 Aggressive Defensive
Very aggressive.
!
305 Consumer Bonds vs Equities
Bonds drop, but consumer wakes up. Bullish.

307 Bond Direction
Weakness in bonds indicates overall market excitement.

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

311 Nations
USA only bright spot.

313 Major sectors
USA only bright spot.

! = Pay attention this chart is important this week.



What I Find Interesting
I was reading in the Wall Street Journal this:
Hedge funds that have placed bets against Deutsche Bank AG are reaping the rewards.

Deutsche Bank shares are down nearly 50% since the start of the year on concerns about its capital position, leading to large profits for a number of hedge funds who have been running short positions on the German lender, betting its stock will fall further.

However, it has been a bumpy ride. Deutsche’s shares fell as much as 8% in morning trading Friday, reaching a record, following reports that clients, including several large hedge funds, have pulled billions of dollars from the bank. But they later recovered to close up 6.4% in Frankfurt; in New York, the bank’s U.S.-listed shares advanced 14%.

Greenwich, Conn.-based AQR Capital Management, which runs $159 billion in assets, revealed that it had a short position in Deutsche Bank on Wednesday, according to a filing made public by the German regulator on Thursday.
Notice how the stock has reacted. (ticker:DB)

It is dragging down the whole financial sector as insiders try to decide if this is another Lehman Brothers. Look at the financial sector ETF (ticker:XLF)

So what is the problem? Well it looks like this, Deutsche Bank is a major counter party in some of the worlds largest derivatives. A derivative is a security with a price that is dependent upon or derived from one or more underlying assets. You can think of it as an insurance policy or even as a bet. As you know, it is a problem if you bet with someone, then if you win the other guy can not pay -- that is trouble. That is what happened to AIG in 2008 and might be happening again in Germany. Since Deutsche Bank is very big, so is the risk to all of us. Here is a chart from Bloomberg:

What this tells you is that if those bets go bad, they are the only protection out there for a huge part of the world's financial system. 

If that all sounds a bit complicated let me put it this way . . .


What Works Now
Want to know your credit score? Well Equifax is the company that does that, and it is a license to print money. (Ticker:EFX)

I recently noticed buying in airlines and air freight. Rails, however, have been the strongest part of the transportation group and are leading it higher this week. Transports are now outperforming utilities which is a positive sign. A transportation breakout would be another good sign for the market and the economy. As things get better in Canada and oil is starting to roll down the rails again, look for a turn around in Canadian Pacific Rail (ticker: CP.to)

If Canadian rails are humming so are rail repairs, for a real rocket of a stock that might just take off soon, look to Stella Jones (ticker:SJ.to) 

Well we have all forgotten about the Deep Water Horizon, (well except for this new movie):
 

 and energy is picking up, have a look at oil and gas giant BP Amoco. (Ticker:BP)



What I Think
Its a bull market, consumer stocks are picking up, oil is rising in price, employment is strong.



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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…