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October 15, 2016 – Weekend Market Comment

October 15, 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).

It was a negative week for stocks with the major indexes losing between one and two percent. Large-caps and mid-caps held up relatively well as the S&P 500 lost just .96%, the S&P MidCap 400 lost .92% and the Nasdaq 100 lost 1.15%. Small-caps fared worse as the Russell 2000 declined 1.95%. Seven of the nine sectors were down with healthcare stocks leading the way.

Stocks are in a short-term downside correction and well below a falling 50-day average. It also leaves open the possibility that the September low could still be retested. Rising bond yields continue to weigh on stocks. Lets see what is in the charts this week.

101 Bull Bear
Bull market (dark green over red) and now the short term (light green) is down sharply. NOTICE THE SLOPE (second window), this could be part of a long term down trend.  Bull market -- expect bullish outcomes.
103 NYSE High Low Market Forces
Both an ominous narrowing of the lines on the primary indicator and traces of red in the lower window. Negative.

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
The current sideways consolidation is obvious.

203 OBV
OBV is still with market. By the dip, you sheep! Bullish.

207 VIX
VIX looks like it has maxed out and might retreat from here, mean revision generally rules, until it doesn’t. .
209 VIX Evaluator
Woah! Is that a bit of an upturn… or a head fake?

211 S&P500 over 50 day
Now 29% stocks are above their 50day MA, BIG GAP DOWN from last week when it was 43%. DANGER.

213 Green Arrow
Only put new money to work when I draw a green arrow. TRIX says no way we draw a green arrow here.

301 NASDAQ Summation
Notice how the NASDAQ was leading, but as this chart shows leading on weak breadth. Trouble is coming for aggressive tech stock if this does not shape up and soon.

303 Aggressive Defensive
Very defensive, but could be over done?.

305 Consumer Bonds vs Equities
Bonds drop, like a rock. Consumer looks weak.

307 Bond Direction
Weakness in bonds indicates overall market caution of coming rate hikes. .

309 Sectors
Defensives lead, who could have saw that coming?

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

313 Major sectors
Commodities are the brightest spot, but not precious metals, gold unable to rally in face of selling assets.

!= Pay attention this chart is important this week.

What I Find Interesting
Check out this chart, its the newest numbers from the PBOC. China's total debt is now 3 times its GDP, that is way more in debt than Greece. It is also more than the USA and Japan combined.

Junk as an Indicator
Each week I show you my core graphs that I use to look at the market, but in fact I have many others. Here is an interesting one, it looks at what is doing better junk bonds or quality bonds. It is a way of seeing risk appetite. As you can see when Junk bonds do well, generally so do stocks. So the way to look at this is sell your stocks when red is over green. Buy stocks when green crosses red.
Well now that is interesting -- RISK ON. 

What Works Now
Canadian Continence stores - Couche Tard runs the highly profitable MACS and Winks convenience stores in Canada, with almost zero competition. (Ticker:ATD/B in the TSX)

War - War is always good business, look at defense contractor Northrop Grumman. They make radar systems, bombers and even postal delivery vans. Recently winning an 80 billion dollar bomber contract is lifting this stock to space! (Ticker:NOC)

iPhones and flat screen TVs are still popular and Best Buy is the last brick and mortar store chain to stand up to Amazon. Buying Best Buy might be your best buy. (Ticker:BBY)

What I Think
I think this is a bull market and we are in a pull back. That is an opportunity.  There is great concern about a near certain rate hike from the fed in the last quarter of 2016 but little else is a problem.

That said, the market is "priced for perfection" and needs to pull back to attract buyers. Breadth is the core issue.  Click here to check out Bloomberg's warning. Keep a close eye on my second chart: 103 the NYSE 52 High Low, if this breadth indicator goes negative (yellow over green), expect trouble.

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.

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