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July 01, 2017 – Weekend Market Comment

July 1, 2017 – The Dow Jones industrial average rose 62.60 points, or 0.29 percent, to close at 21,349.63, with Nike leading advancers and Goldman Sachs lagging. The S&P 500 gained 3.71 points, or 0.15 percent, to end at 2,423.41, with industrials leading five sectors higher and utilities underperforming. The Nasdaq fell 3.93 points, or 0.06 percent, to close at 6,140.42. About nine stocks advanced for every five decliners at the New York Stock Exchange, with an exchange volume of 952.13 million and a composite volume of 6.58 billion at the close.

Here is what our charts say:

101 Bull Bear
Bull market (dark green over red)  the dark green 50 day average is in a flattening 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. Also notice the second window four red patches recently. We had many patches like this after mid 2007. Still very 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
Flat but strong industrial production.  That is good news.

115 Renko
Breakout up new high this week!

203 OBV
OBV (red line) is with the market. Notice Thursday was a thrill ride.
207 VIX
Fear is way low, but could turn here.

209 VIX Evaluator
Flat and dull.

211 S&P500 over 50 day
Now about 65% of stocks are above their 50 day MA,  flat from last week when it was 64%.

213 Green Arrow
Only put new money to work when I draw a green arrow. 

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

303 Aggressive Defensive
Aggressive but with no conviction. 

305 Consumer Bonds vs Equities

307 Bond Direction
Bonds UP! 

309 Sectors
Consumer toast, banks wake up.

311 Nations
Anything but Trump's America

313 Major sectors
Canada in an uptick?

! = Pay attention this chart is important this week.

What I Find Interesting

Then and Now
You might enjoy this look at the past thinking in a bubble;
These are words from old ad from a U.S. ratings agency. “ Today, it is inexcusable to buy a ‘bubble’—inexcusable because unnecessary,” the ad copy reads. Investors of the day possessed a wealth of facts about stocks compared to the punters of decades past, which “eliminate the hazards of speculation and substitute in their place sound principles of investment.” How old was that ad? Well the stock market crashed that year -- 1929 the Great Depression ensued.

Similar arguments have been put forward to explain Toronto’s house prices. An article in the Globe and Mail sums it up: “Mortgage rates are low. Ontario’s economy is superheated … and, to make matters worse, land is in short supply,” according to the piece. “Politicians and tenants’ groups have declared a housing affordability crisis—again—and have called for a tax on speculators’ profits to cool down the frenzy.” The article continues, “Dark words are muttered about how foreign money is to blame.” Other reasons are cited, too: Toronto is becoming a “world class” city and “acts like a magnet for thousands of migrants from elsewhere in Canada and overseas.” Instead of stocks, “owning a house is now the investment of choice for most of the middle class.” The unlucky masses priced out of the city are looking as far afield as Barrie, Ont. for a home. It’s probably worth mentioning this article above was actual not about now, it was  published in 1988—just before Toronto's last big Real Estate crash.

Housing is the Work in Canada
In this graph it shows that the only area of the economy (outside of Health Care and Government) with high paying jobs in Canada is housing construction. This chart shows the growth of the number of Construction jobs in Toronto.
Yup and my wife is an RN, we gonna buy an island in the Caribbean

What Works Now
Owens Illinois Inc.

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.

I think things are still looking strong, sure its summer and nothing big on the upside will happen, but there is a pickup in financial and the market looks more agressive. Thus my advice of never short a bull market.

However the very long term is more concerning; the VIX is at crazy low levels, often a sign of a turn in the markets in the coming months. Equities are very expensive and the Fed is deleveraging while raising rates. This is the second longest running bull market in my life time.  I of course have real concerns that the Chinese have built a house of cards in the property markets both domestic and foreign.  Housing speculation is now the global obsession for people everywhere. In the domestic market, besides mortgages there are too many car loans and extreme educational debt. Today there are record levels of debt in all economies. I fear in the next two years the bill will come due. But not just yet, for this week I say, it is not over yet.

Happy 150th Birthday Canada -- you are still young for a G7 country, well done!

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