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June 24, 2017 – Weekend Market Comment

June 24, 2017 – The Dow Jones industrial average rose 5 points, or 0.03 percent, to 21,403, with Visa leading advancers and Home Depot lagging. The S&P 500 gained 4 points, or 0.2 percent, to trade at 2,440, with information technology leading seven sectors higher and health care lagging. The Nasdaq advanced 30 points, or 0.49 percent, to 6,267.

About two stocks advanced for every decliner at the New York Stock Exchange, with an exchange volume of 354 million and a composite volume of 1.81 billion.

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 up. But notice in the second window more red patches these days.  

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
New breakout up. BULLISH
203 OBV
OBV (red line) is sort of with the market but weak.  CAUTION

207 VIX
Fear is way low. Beware the calm before the storm. BULLISH

209 VIX Evaluator
Getting flatter.

211 S&P500 over 50 day
Now about 64% of stocks are above their 50 day MA,  down a tad from last week when it was 71%. CAUTION

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 fading. Pay attention -- could be volatile.
303 Aggressive Defensive
Very Defensive. CAUTION

305 Consumer Bonds vs Equities
Consumer splat. Bonds up BEARISH

307 Bond Direction
Bonds UP steady   BEARISH
309 Sectors
Everything down except NASDAQ

311 Nations
Anything but USA, even Canada rebounds

313 Major sectors
Anything but USA, even Canada rebounds

! = Pay attention this chart is important this week.

What I Find Interesting
Mortgage Fraud "Under Study"
The Vancouver Sun has uncovered a massive fraud with Canadian Mortgage Brokers offering the same liar loans that blew up in the US in 2007. The new twist is some are backed by imaginary assets in China, so called "ghost collateral". Be sure to watch the video in this link.

According to a December 2016 Bank of Canada report, Canada's shadow lenders now account for $1.1 trillion in debt — about half as much as the traditional banking sector. The trouble is these are often loans for down payments that secure CMHC government guaranteed mortgages. In short when it blows up Canada's tax payers will be on the hook to bail it all out.

The house picture was selected at random off the Vancouver MLS system. It is a $1.9 million dollar listing MLS R2171387 on French street in West Vancouver. Compare that to the United States where the median house price is now $244,800.

Incredible as it sounds, it turns out upper-middle class Canadian families with household earnings of $90,000 a year ($6,500 a month after tax) can NOT afford the average $1.8 million dollar home in Vancouver with a $10,103 a month mortgage. Who knew?

It is no surprise a newspaper figured this out long before our ivory tower financial regulators, who only continue to want more consultant studies. As Canadian Prime Minster Justin Trudeau told BNN, “There are all sorts of theories about what is going on in Vancouver and Toronto – there is more data we need.” But don't worry Premier Christy Clark is not going to be out done in the area of paying consultants to waste time, CBC News says she demands her own study. Perhaps she could pay for that herself, CTV News says her half-duplex is worth almost double in a year, inflating by $180,000.

Well it is summer and as CNBC points out the markets are not doing much. The VIX is at very low levels and the market does not swing much in any direction.

It is one big snore. But of course that often when surprises pop up.

What Works Now
Sangmao Therapeutics
Shares of biopharmaceutical company Sangamo Therapeutics (NASDAQ: SGMO) rose nearly 12% this week after a new analyst took over coverage of the stock at Jefferies. The analyst said an impressive showing at a recent conference influenced their increased bullishness on the company's prospects and set a $17 price target on shares -- representing a nearly 100% premium to current levels.

Additionally, the analyst sees Sangamo Therapeutics as a possible hedge against the emerging gene-editing technology of CRISPR. That argument has added weight following validation by Pfizer (NYSE: PFE). As of 11:34 a.m. EDT, the stock had settled to an 8.6% gain.  (Ticker:SGMO)

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.

We did have a long anticipated pull-back  this week after hitting new record highs. Nothing major and probably a buying opportunity.

After a long four month decline the Canadian market is leveling out, but it could be just a rest on the way down further.

Probably a happy reaction to Warren Buffet's injection of cash in to Home Capital. He is also loaning money to the firm at over 9% interest, so they can continue to float mortgages at 2%, sounds like good math to me. Well Warren always said buy when others are selling.

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