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November 26, 2016 – Weekend Market Comment

November 26, 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).

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:





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.
!
103 NYSE High Low Market Forces
Wow look at this take off. Nothing but strength.

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.

115 Renko
Market is rebounding 10 white bricks! SUPER BULLISH!
!
203 OBV
OBV (red line) is NOT with the market. clear keeping distance from price. This means the big funds are participating tepidly. Tread carefully -- Not wonderful.
!
207 VIX
Ahh fear subsides. ccci says perhaps done for now, notice the slight up turn!! Bullish

209 VIX Evaluator
Very much bullish

211 S&P500 over 50 day
Now about 70% of stocks are above their 50day MA, way up from last week when it was 59%. Bullish.

213 Green Arrow
Only put new money to work when I draw a green arrow. TRIX says things might be safe soon. Notice how this was a great early warning.  Still Bearish!


301 NASDAQ Summation
New happy days, breadth returns to Nasdaq expect an on going bounce up! Bullish
!
303 Aggressive Defensive
Aggressive but the Slow stochastic says its a bit long in the tooth. Perhaps the best of the move is over. 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
Notice on Friday some move to safety with small gains in Defensive and Utility stocks.

311 Nations
Meah, there is only one trade this week, U.S. equities.

313 Major sectors
Meah, there is only one trade this week, U.S. equities.

! = Pay attention this chart is important this week.


What I Find Interesting

One of the most touted list of stocks in the world is the Investors Business Daily 50 or IBD50 for short. This stock picking system was made famous by William O'Neil and became the whole basis for the website (http://www.investors.com/) and newspaper, Investors Business Daily. O'Neil's book "How to Make Money In Stocks" is a staple on the book shelves of investors everywhere. Essentially, Bill O'Neil's motto is "buy the strong, sell the weak." His criteria for identifying a stock that's about to head for the stratosphere are summarized in his well-known acronym CANSLIM.

Mr. O'Neil has twice tried to run a mutual fund based on the system. He first tried in the '60s with some immediate success, but then the market crashed in 1968-69, taking his fund down as well. The fund had a total loss of -53.6 percent from 1969-74, compared with a loss of 18.8 percent for the S&P 500. O'Neil sold the fund in 1975 with just $6 million in assets, down from a peak of $49 million.


In 1992, O'Neil launched his New USA Growth Fund, which was managed by David Ryan, an O'Neil follower who won the stock-picking contest known as the U.S. Investing Championship in 1985, 1986 and 1987. However, the fund showed lackluster results. According to Barron's, the fund had a total return of 3 percent from April 1992 through June 1994, versus 17.4 percent for the S&P 500.

Mr O'Neil's system CAN SLIM, picks hot stocks and follows them. To hear the the people at IBD this is the best and only logical way to invest. According to the Investor's Business Daily Web site, the IBD 100 (which is an index of the top 100 stocks according to the CAN SLIM system) has trounced the S&P 500 Index 132.8 percent to 20.8 percent for the S&P 500 since May 2003.

Well now the claims at IDB are easy to test. There is an ETF (Ticker: FFTY) called The Innovator IBD® 50 Fund. It buys and sells the CAN SLIM stocks for you so you don't even need to look, buy and hold CAN SLIM. In effect this a manged fund like a mutual fund. You know what I think about Mutual Funds if you read my Thought posting "A Warning About Experts" to quote me... 

"Standard and Poors research found that most mutual funds can't beat indexes because of the fees involved."

So lets see if this "magic formula" fund of hand picked stocks beats the bench mark SnP500 unmanaged ETF (Ticker: SPY). Well If you bought both a year and half ago, you would be underwater with FFTY (red line) -6% and in profit +8% with SPY (black line). I admit it is true during this mid November bull run, the "dog" is catching up a bit, but still long term -- it just is not worth it.




Deck the Halls with Trump?
Hey what could be more festive than a good old right wing, misogynistic, xenophobic, we shall over comb -- iconic Christmas ornament. Available on Amazon, buy two so your Mexican nanny can enjoy one as well (not available in Spanish). Order now to get your tree trimmed before Christmas eve. 



Below is singer Jess Greenberg -- she draws a six figure (in pounds) paycheck as a London Investment Banker with Winton Capital Management.  Of course she only got this important job because of earning a degree in economics, statistics and finance from University College London. As you can see she has great "assets" to offer her employer. Please no emails on this one, I swear I don't have her bloody cell phone number -- OK, you can reach her at work, the main number in London is +44 20 8576 5800




What Works Now
Recommended a few weeks ago and still going strong in to Christmas. Foot Locker. By the way this stock is on the IBD50.



Stock Brokers are raking in the bucks. Look at discount broker Charles Schwab (Ticker: SCHW)

CyberSecurity
With more and more prominent websites getting hacked everyday you might make a long term buy on one of the cyber-security plays, either the etf HACK or a stock like CYBR FEYE.

Adult Friend Finder Network has reportedly been hacked. The site is famous among swingers and people with kinky fetishes. With over 412 million accounts, email addresses, and passwords from their websites made available on criminal marketplaces. Notably, the database does not include more detailed personal information, but could still be used to confirm whether a person was a user of the service. Read about it in the hacker site Leaked source.

Here is the chart for the cyber-security ETF (Ticker: HACK)

Hasbro
 Break out your action figures from Star Wars to The Avengers to My Little Pony and Play-Doh... Predictable Christmas favorite Hasbro (Ticker: HAS) just reached a new 52 week high and it pays dividends too.

In 1923, three brothers named Herman, Hillel and Henry Hassenfeld founded Hassenfeld Brothers, a company selling textile remnants. Since then they have seen highs and lows from G.I Joe to a disaster of law suits with lawn darts. Today Hasbro is the third largest toy maker in the world with revenues of approximately $4.45 billion.



A Reader Asks
A reader said a company was pitching her that now was the perfect time to own gold. Really? Gold Now? In a super bull market you want to invest in the currency of last resort? Gold is at a nine month low according to MarketWatch. But just look at the chart it says it all. What about this Gold chart below makes it more exciting than the charts (above) for owning Charles Schwab or Foot Locker? 



What I Think

I think this is one of the most remarkable bull runs in history. On the other hand that OBV line refuse to follow the market, often a sign of coming trouble. But OBV is like a weather chart, and it is not 100% perfect. VIX CCI is also near the edge of its range, a return to fear could be here.

So the questions on your mind are the same as mine . . .
  • Is it too late to get in? Who knows?
  • Will it pull back? It should, but then again it should have by now too.
  • The Fed Meets in about 2 weeks and probably will raise interest rates, won't the market sell off before then? Yeah that sounds plausible, but on the other hand where are all those t-bill dollars going to flee to, probably equities. So meah -- who knows? 
  • Is it going to continue? A trend in motion is your friend. So long term probably. 
  • Should I fear the High Valuations and low volume in the market? Well they should be on your mind, but remember the "Market can remain irrational longer then you can remain solvent" so don't go betting against a bull market. 
Bottom line: I am long, I have locked in some profits with stops loss orders, but I plan to be "long, until I am wrong". 





 

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