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June 03, 2017 – Weekend Market Comment

June 3, 2017 – 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).

U.S. equities rose to record levels on Friday as Wall Street shrugged off a jobs report that came in well below expectations. On the brights side, the U.S. economy has added jobs for 80 straight months now, the longest positive streak dating back to the 1930s.

The Dow Jones industrial average traded about 65 points higher and reached its first intraday record since March 1, with Boeing contributing the most gains. The S&P 500 also managed a new all-time intraday high, trading 0.3 percent higher. The Nasdaq composite outperformed, rising 0.8 percent to reach an all-time high.

Here is what our charts say:





101 Bull Bear
Bull market (dark green over red)  the dark green 50 day average is in an uptrend.  NOTICE THE SLOPE (second window), we might be starting another long ride up.  Bull market -- expect bullish outcomes.
!
103 NYSE High Low Market Forces
Breadth lines are firmly up. BULLISH!!

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
Strong industrial production.  That is good news. BULLISH

115 Renko
Notice how overall we are going nowhere in the broad market.

203 OBV
OBV (red line) is with the market.
!
207 VIX
Fear is way low. Beware the calm before the storm.

209 VIX Evaluator
Sweet! BULLISH


211 S&P500 over 50 day
Now about 68% of stocks are above their 50 day MA,  up a lot from last week when it was 60%. BULLISH

213 Green Arrow
Only put new money to work when I draw a green arrow. Getting more aggressive.  Notice loss of TRIX momentum.


301 NASDAQ Summation
Nasdaq breadth is returning. Pay attention -- could be volatile.

303 Aggressive Defensive
BULLISH.

305 Consumer Bonds vs Equities
Conflicting signals -- consumer and bonds up.

307 Bond Direction
Bonds UP! 
!
309 Sectors
Everything is doing well but banking. Bazaar.

311 Nations
Germany and Canada tank. Asia looks strong.

313 Major sectors
See above.

! = Pay attention this chart is important this week.


What I Find Interesting

Part of Brain Linked to Pigging Out
When scientists at Yale University activated cells in a part of mouse brains called the zona incerta, a patch of neurons just underneath the thalamus and above the hypothalamus, mice dropped everything and began shoveling food into their mouths. This dramatic response, described May 26 in Science, suggests a role in eating behavior for a part of the brain that hasn’t received much scrutiny. Nom Nom Nom.


Once Again Even the USA Noticed Vancouver
Bloomberg this weekend pointed out Vancouver home prices climbed back to a record in May, suggesting the impact of a foreign-buyer tax imposed last year is fading.


One has to wonder if this is so obvious to the world, if it is maintainable. Whats next 9 million dollar homes?

I also wrote again on the subject in my thoughts blog, showing how homes in key cities are being used as secret bank accounts. 


Penicillin and Incest
In 1945, Alexander Fleming, the discoverer of penicillin, warned that bacteria could become resistant to the wondrous antibiotic. Yet our love affair with antibiotics is still going strong — with consequences. In 2014, U.S. doctors prescribed close to 266 million outpatient courses of antibiotics — at least 30 percent of which were probably unnecessary. In the United States, more than 2 million illnesses per year and at least 23,000 deaths are caused by antibiotic-resistant infections. In 2016, E. coli in the United States showed new resistance to the last-resort antibiotic, colistin. In the enclosed Map CDC figures show prescriptions of antibiotics in the United States ranged from as low as 500 people to more than 1,200 per 1,000 people — and 30 percent of those prescriptions were probably not needed. It also noted there is a direct correlation to over prescribing and odds that you live in a state where it is common to marry your cousin.


Where the Jobs Are
Data is in for U.S. Jobs... its all about a boom (bubble?) in housing and the end of Obamacare:
  • Healthcare (+32K): As expected, with ACA repeal dead, Healthcare hiring returns
  • Leisure/Hospitality (+31K): As expected, restaurant demand kicks in
  • Professional Services ex temp (+25K): As expected, relatively mild Temp worker demand
  • Construction (+11K): Mild weather pulled in payrolls, leaving little for May
  • Financial (+11K): Housing boom continues to drive financial payrolls
  • Transportation (+4K): Supply chain pressure and manufacturing pause slowed demand for trucking
  • Manufacturing (-1K): Factories hit the pause button (Trump rhetoric not yet translating into actual activity boost)
  • Wholesale (-2K): Consistent with general macro trends (lack of inflation, retail supply chain pressure, inventory pressure)
  • Retail (-6K): Grocery store and brick-and-mortar store pressure

Housing Bubble
Forbes had a interesting Video this week on how to spot a local housing bubble. 

Human Population
It took 200,000 years for our human population to reach 1 billion—and only 200 years to reach 7 billion. But growth has begun slowing, as we have fewer babies on average. When will our global population peak? And how can we minimize our impact on Earth’s resources, even as we approach 11 billion?

Watch this fascinating 6 min video from the American Museum of Natural History:




What Works Now
Canada in Flight
Among all the gloom in Canadian markets, a gem. Canada's Aerospace giant is on a run. (ticker:CAE.to)

Gold
(Ticker: GLD)
Yeah gold is not going to make you rich, but unlikely to crash this summer either. I like those odds of adding a bit of a position.


What I Think
I think we are in a cyclical bull market (since February 2016) within a near record long, secular bull market (since early-2009), and neither show signs of abating - Yet.

That said it is summer and the markets tend to move sideways until fall. A small sell off or more consolidation, would not be surprising. Small cap participation is getting better, transportation is down and housing is the strongest part of the economy. Many think the market went up on hope in the new President and many expect disillusion with Trump and he appears ready to deliver. That said, it all looks very good now and no one knows when or if that will end any time soon.



To my amazement a reader asked me if this is a good time to be short and I said HELL NO! As long as the green line is over the red on the Bull Bear Lines -- it is a bull market and we never go short in a bull market. If you think the market is too aggressive now, you could get a tad defensive, but defensive long, not short.  You can be defensive with things like adding some gold or bonds to your portfolio, but only a fool would be short in a bull market this strong. The markets can do anything, but our charts are used to keep us (for the most part) on the right side of things. Until the red line passes the green don't even consider shorts. Below is our Bull Bear Lines chart:

If you don't know about the Bull Bear lines, click this link, it is lesson one in the cme4pif school.

Lets close on a funny note . . .





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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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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