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November 12, 2016 – Weekend Market Comment

November 12, 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).

Last week all doom and gloom, as gold looked like the only long investment left. This week, wow. Within a week, the market went from egregiously oversold to overbought. They managed to repair all the damage done during the nine-day losing streak.

As it was every day after the election,
U.S. equities closed mostly higher on Friday, with the three major indexes posting their best weekly gains of the year on the back of a surprise Republican sweep. Looks like that news TRUMPED all the rest. (ha ha)

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 up sharply. Also note the dark green 50 day average has begun to rise up. NOTICE THE SLOPE (second window), this could be part of a new long term uptrend.  Bull market -- expect bullish outcomes.
103 NYSE High Low Market Forces
Rebound! Green over Yellow. But don't forget this is new trend and could fall apart.

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
Market is rebounding 4 white bricks! BULLISH!
203 OBV
OBV (red line) is NOT with the market. clear down trend. This means the big funds are not participating. Tread carefully -- Not wonderful.

207 VIX
Ahh fear subsides. Bullish

209 VIX Evaluator
Turned back up for the first time in ages. BEARISH!

211 S&P500 over 50 day
Now 54% stocks are above their 50day MA, way up from last week when it was 27%. Bullish.

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. Notice how this was a great early warning.  Still Bearish!

301 NASDAQ Summation
New happy days, breadth returns to Nasdaq expect a bounce up! Bullish
303 Aggressive Defensive
Very defensive, but as an pessimist you might say oversold? Very Bullish!

305 Consumer Bonds vs Equities
Bonds tank. Consumer flat, perhaps ready for a run for Christmas?  Bullish

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

309 Sectors
Consumer rise! Banks love rate hikes. Bullish.

311 Nations
Das Germans are looking safe and stable, rest of globe looks to America!

313 Major sectors
America the only star!

! = Pay attention this chart is important this week.

What I Find Interesting


Wow has copper ever been going crazy this week, there was a time in the 80s when copper would not budge for months. Not anymore look at the run from mid October. Copper has just had a one month 24% rise. Trying to capture 25% every month is hard to do. We are up against the 5-year channel. How you choose to trade it is obviously important, but it is probably too late to enter.

The important thing to know about copper is that it rise in price when demand for expansion is underway. Since copper is used to wire new neighborhoods, build house and power plants, it is generally a leading economic indicator. 

A Reader Asked
A reader asked if I should keep saying "Bull market -- expect bullish outcomes" If the Bull Bear Lines are dark green over red -- even if things recently are not going well in the market. Yes!!! -- That is the purpose of the chart and I mean what I say. 

Basically markets pull back and then rise in a series of wave like cycles. Of course every so often the market sells off very hard and keeps heading south, a true bear market. The Point of the Bull Bear Lines is not to tell you if this coming week is an up-trending market, the point of the chart is to tell when to "give up" and when to have faith. Basically as long as the 50 day moving average (dark green) is above the 200 day moving average (red), it is still a market that we should try to "err on the side of optimism". 

This week is a good example, if you were too pessimistic then the post election rally left you in a corner. For example what if you were to buy an inverse ETF like QID, or a VIX ETF just before the U.S. election, you probably got your lunch handed to you -- you would have been short in a come back rally. You know the rule NEVER SHORT  a BULL MARKET. Just look at the picture, that what a bull market can do to you. Now you know why. 

What Works Now

Insurance companies do well in a rising rate environment (Ticker:AIG)
Foot Locker
Christmas is coming and there will be a set of Nike cross trainers under the tree in every home from 5th avenue right down to the "hoods" of Baltimore.  (Ticker:FL)

What I Think

I think the macro events like a new U.S. president "TRUMP" the technical indicators all the time. The Bull Bear lines are a reminder that a market can and generally will rebound if it is a bull market. The Bull and Bear lines tell you when to keep your faith.  I saw a lot of weakness last week BUT I did not play any short side moves, I just lightened up (CASH was a recommendation) and I bought gold. Gold had been oversold and it had upside potential but probably little downside. I also "bought on the rumor and sold on the news"  exiting right after the election results were in. Thus I was ready when the indicators went positive mid week and am now long. However I still have only a partial position because of the recent history of failed rallies keep me wary. 

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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