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July 22, 2017 – Weekend Market Comment

July 22, 2017 –The three major indexes notched record highs this week as quarterly earnings from S&P 500 companies largely outperform expectations. Microsoft, Honeywell and Morgan Stanley are just a few of the companies that reported earlier this week. U.S. equities fell on Friday as General Electric led industrial stocks lower. The Dow Jones industrial average fell more than 100 points before closing 31.71 points lower at 21,580.07. General Electric fell 2.9 percent to lead decliners. The S&P 500 slipped 0.04 percent to close at 2,472.54, with industrials and energy leading decliners. The Nasdaq composite ended 0.04 percent lower at 6,387.75 and snapped its longest winning streak since February 2015.

Here is what our charts say:

CLICK HERE: To see the 100 and 200 series charts

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 so strong! Also notice the second window new red patch a few weeks ago. 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.

115 Renko
Breakout to new highs.

203 OBV
OBV (red line) is above the market, except for one day. BULLISH
207 VIX
Fear is way, way low, but could turn here.

209 VIX Evaluator
Fear is way, way low BULLISH

211 S&P500 over 50 day
Now about 73% of stocks are above their 50 day MA,  down from last week when it was 60%. BULLISH

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

301 NASDAQ Summation
Nasdaq breadth is strong.
303 Aggressive Defensive
Topping of aggressive cycle. CAUTION

305 Consumer Bonds vs Equities
Bonds rebound. CAUTION

307 Bond Direction

309 Sectors
Consumer toast, banks top. New life in Nasdaq. Utilities bounce up!

311 Nations
China and emerging rule

313 Major sectors
China and emerging rule

! = Pay attention this chart is important this week.

What I Find Interesting

BofA research ranks the returns of various investments in to a return carpet, in the newest version it shows that equities (global and domestic) are far out performing precious metals, commodities and bonds. (click to enlarge)

Have a Cow to Prevent Aids
In the Journal Nature there is a report that four cows injected with a type of HIV protein rapidly produced powerful antibodies against the virus. Learning how to induce similar antibodies in humans may be key to a successful HIV vaccine.

Researchers took serum — blood with the cells removed, leaving antibodies behind — from four immunized cows and tested it against different types of HIV virus in a test tube. All of the cows developed broadly neutralizing antibodies. The researchers then tested one cow’s antibodies on an even larger number of virus types. After 381 days, this cow’s antibodies prevented 96 percent of the 117 HIV types from infecting cells in a lab dish. The researchers also isolated an antibody from this cow that had a long HCDR3 of 60 amino acids and stopped infection by 72 percent of the HIV types.

Das Pick-up
The new Mercedes Benz X-Class truck starts at $43,200 and will be available from Germany to South Africa to Australia—but won't try to compete with Ford F-150s in the U.S. just yet.

Does this video show a typical German vehicle buyer?

Canada Business Load Up on Real Estate

According to Global News since 2011, Over the past five years, the value of commercial real estate held by Canadian companies went up by $269 billion and that of land by $226 billion. Canada has racked up an additional $1 trillion to its non-government debt, and most of the increase came from Canadian companies, not households, according to a new report by the Canadian Centre for Policy Alternatives (CCPA). Corporate debt increased $671 billion (in 2016 dollars) since then. As a result, Canada now leads advanced economies in private-debt accumulation, which is one of the best predictor of economic crises, according to CCPA economist David Macdonald, who authored the report.

American Express to Hell

American Express profits halved, from about 2 billion last year to 1 billion this year. As it blundered its relationship with Costco that represented less than 20% of its card holders, but many of its highest volume spenders. 

I blame for this mess on the shoulders of arrogant American Express management. The company knowingly created this over-reliance. They erased over $40 billion in shareholder value as key Costco customers walked away from the company over the last 18 months.

The stock should sell off more, but American Express announced a 9% boost to its quarterly dividend (a bribe) and added $4.4 billion to its share repurchase authorization to keep the stock afloat.

What Works Now
This is the India ETF (Ticker: EPI), many feel India could grow to be the new China without the high debt and capital outflows destroying China.

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.

Biotech and Semiconductors lead the market this week, but transportation stocks fell. The take away is the traditional markets are weak but new economy is it is still risk on.

A weak U.S. dollar is contributing to money flowing into emerging markets. American investors get the benefit of rising foreign currencies as well as stocks.

It is hard to be too pessimistic in such a strong market, but consider this. The aggressive defensive chart (chart 303) is near the point it often rolls over, and utility stocks are looking stronger this week (chart 309). On top of the the VIX is at a scary new low, complacency is here for sure (chart 207). Trees don't grow to the sky and its never too early to take some profit.

Not that I know everything.... most of the experts I respect say this bull is here for a while and yes I agree this is a bull market with new highs all the time.  I just prefer to step back from the most aggressive positions for now.

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