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December 03, 2016 - Weekend Market Comment

December 3, 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 I am really getting poetic when I drag out the old Kansas songs. But is it time for "Don't hang on", time to get out? Is this a peak? Will the Fed kill the Bull? 


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 although not a maxed out as last week. 

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
Fear returns. cci 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 60% of stocks are above their 50day MA, backing off from last week when it was 70%. Bullish.

213 Green Arrow
Only put new money to work when I draw a green arrow. TRIX says green light, could be a green arrow soon. Notice how this was a great early warning. 


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 we are done clear down trend. Neutral

305 Consumer Bonds vs Equities
Bonds bottom. Consumer flat, perhaps ready for a run for Christmas?  Sorta 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. Consumer tanks, not good at Christmas.

311 Nations
Canada shows hope on Opec cut to oil production.

313 Major sectors
Some life in Canada and commodities.

! = Pay attention this chart is important this week.


What I Find Interesting

President Trump promised to save the coal industry in the U.S. but the problem is no one is building coal plants. China is doubling its Nuclear capacity and already creates more nuclear power then the U.S. Now Canada has a new clean initiative. Even India is lowering coal needs. Between green initiatives and super efficient appliances and light bulbs, global power demand is not where the experts predicted. 

The IEA is also skeptical of the marginal impact on coal mine profitability from Trump’s proposals. Market equilibrium for the U.S. coal industry will require further industry consolidation and more mine closures according to the group. U.S. coal won’t disappear completely, but the industry will keep shrinking through the early 2020’s in the IEA’s view. 

For the longest time, electricity sales and consumption went hand in hand with economic growth. In the last several years, not so much. Electricity retail sales peaked at 3.77 trillion kilowatt-hours in 2008, dropped in 2008 and 2010, recovered a bit in 2011, and fell in each of the next two years. The 2013 total of 3.69 trillion kilowatt-hours was down 2 percent from 2008.

Utilities are confronting the prospect of significant and widespread demand destruction. The reason for that demand destruction is starting to become evident: lighting. An LED bulb uses between 70 and 80 percent less electricity to produce the same amount of light as an incandescent light bulb. That differential has proven irresistible to large companies and organizations. Starting in 2010, Macy’s Corp. began replacing traditional light bulbs with LEDs in more than 800 Macy’s and Bloomingdale’s stores. By 2012, having changed some 1.1 million bulbs, the company reported that it had slashed the use of energy related to lighting by up to 73 percent. Los Angeles has completed its project of installing 140,000 LEDs in street lights, cutting energy use associated with that lighting by 62.9 percent. Detroit is in the midst of a program to install 64,000 LEDs as streetlights.


These bulbs, which are made up of LEDs (light-emitting diodes), are about 10 times more efficient at converting electricity into light than the old-fashioned filament variety. This explains the difference in the wattage needed. So, to replace a traditional 60W bulb you need just a 6W LED bulb. 


The total power consumption of the 10 lights with old-style bulbs comes to 600W or 0.6kW. Electricity is sold in units of kilowatt-hours (kWh) – the amount of energy that a 1kW device uses in an hour. So each hour the 10 lights consume 0.6kWh. Based on a typical unit price of 12.2cents per kWh, replacing 10 old fashioned incandescent lights will cost 7.3cents per hour to run. The daily cost is therefore 73cents if on for 10 hours. This is equivalent to savings of $5.11 a week, $21.90 a month or $266.45 a year.



What Could this be all About
 
Can you spot how these two articles are related?

Read this from the Elliman Report on New York Real Estate:
"The number of Manhattan area re-sales has fallen year over year in each of the last four quarters at an increasing rate.  Listing inventory reflected significant differences in the rate of growth between re-sale and new development.  Re-sale inventory expanded 8.2% to 5,290 while new development inventory surged 27.2% to 973 respectively from the same period a year ago."
 

Then read this yesterday in the Financial Times:
"The Chinese government intensified its efforts to stem capital flight from the world’s second-largest economy on Thursday, as it simultaneously moved to slow renminbi outflows and restrict gold imports. Curbs on international renminbi payments and gold imports are the latest in a string of capital control measures intended to relieve downward pressure on the currency and protect dwindling foreign exchange reserves. Days earlier, China’s cabinet circulated draft rules restricting large foreign acquisitions, while its foreign exchange regulator began to vet outward remittances as low as $5m, compared with a previous threshold of $50m"
 

In short, simultaneously Real Estate is tanking in New York and China is stemming money outflow. I will leave you dear reader to connect the dots. 

A Sad Megaproject
On Tuesday, officials from all over the world gathered about a football field away from the Chernobyl disaster site in Ukraine. They were there to celebrate the final placement of a massive, high-tech shelter over reactor 4, which exploded in April 1986. The shelter, called the New Safe Confinement (NSC), is a feat of engineering. Because it was too dangerous to assemble the NSC over the original shelter that was built in the weeks after the explosion, the NSC was instead built at a distance and moved—slowly, over days—on a pair of tracks parallel to the original shelter. But even that was no simple task. The NSC is 354ft (108m) tall and 843ft (257m) wide, making it the largest mobile metal structure in the world.





What Works Now
RPC Inc. 

The price of oil has risen due to planned cuts by OPEC. RPC Inc. (Ticker:RES) is an oil services firm traded on the NYSE.  







Surfer dude or skateboard punk they all shell out for this high markup junk. Tillys had a great earnings as the consumer comes back. (Ticker:TYLS).



I sure hope you were paying attention as I said banking would do well with upcoming interest rate hike. Behold the vampire blood sucking squid Goldman hits a new high again. (Ticker:GS)
 

What I Think
I think this is one of the greatest bull runs in history. However for now this bull is tired. The daily chart of the Nasdaq 100 doesn't really resemble any of the other large-cap indexes or even most small-cap indexes. Technology sectors have performed terribly. The Election "euphoria" enjoyed by the Dow Industrials and most other indexes really didn't do much for tech. The aggressive sectors are selling off or lagging. 




This chart is not a stock, it is an index of the 100 most favored stocks by hedge funds and mutual funds. If this chart lags the market it means the big money is stepping aside. 


Also from our chart list here is the OBV chart, again if the red line lags then only mom and pop are playing the market. 


Mom and Pop
"Look dear FANG and NOSH are a bargain at these prices. Sweet, I will call that nice man at Merrill Lynch and put all of our nest egg long. Last week he said bet the farm on an iron condor play on the Feb in the money calls, that sounds... exciting."
 
In my opinion we have a few days of retrace coming but this is not the end of the bull. So short term get defensive, but long-term the bull still continues. 
 
Bottom Line: It is a bull market. I am still long until wrong, but I am moving in to lower volatility plays, bigger stable firms as I take profits on my high flyers.

 


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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…

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