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September 16, 2017 – Weekend Market Comment

September 16, 2017 – U.S. stocks rose to "cosmic" record levels Friday and posted strong weekly gains.

The Dow Jones industrial average rose 64.86 points to close at 22,2686.34, a new record! Boeing, 3M and Apple contributed the most to the gains. The index also posted an intraday high of 22,275.02

The S&P 500 also notched record highs, advancing 0.2 percent to finish at 2,500.23. Friday also marked the first time the index broke above 2,500. Information technology and financials were among the best-performing sectors. The Nasdaq composite outperformed, closing 0.3 percent higher at 6,448.47; it also managed to an intraday record of 6,464.27.

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 a rising uptrend. Notice the second window, could this be a long term trend change? BULLISH Bull market -- expect bullish outcomes.
103 NYSE High Low Market Forces
Breadth lines CROSS up! BULLISH

105 Non Farm Payroll
Lots of jobs! But beware this is lagging indicator. The smart money is gone before this turns down.BULLISH

107 Industrial Production
A new down trend in industrial production. Trump Bump goes to Trump dump? CAUTION 

115 Renko
4 Up Bricks BULLISH

203 OBV
OBV (red line) is with the market. BULLISH
207 VIX
Steady down

209 VIX Evaluator
Looking better

211 S&P500 over 50 day
Now about 65% of stocks are above their 50 day MA, above last week when it was 55%. 

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

CLICK HERE: To see the 300 series charts

301 NASDAQ Summation
Nasdaq breadth is bouncing up!Expect a strong rebound in QQQ.
303 Aggressive Defensive
Very aggressive, perhaps overdone?

305 Consumer Bonds vs Equities
Bonds fall consumer fail, mixed news.
307 Bond Direction
Long term bonds rise! BEARISH
309 Sectors
Nasdaq falls,  utilities gain.

311 Nations
World sucks less than USA. China and emerging best places to hide but that trade may be over.

313 Major sectors
China and emerging rule, gold weakens.

! = Pay attention this chart is important this week.

What I Find Interesting

The Warning
If you have not done so please read my rant on why the markets are set for a sell off. 

Bitcoin Tanks

After the Chinese made it clear that sneaking money out of China via Bitcoins was no longer allowed... the price tanked. Chinese trading, plunging from 25,000 yuan to as a low of 16,000 on local exchanges BTCChina (and as low as 20,000 on OKCoin), following confirmation of last week's Caixin report that Beijing would stop cryptocurrency exchange trading. China's second largest exchange, BTC China, said that it would halt all trading on the platform beginning September 30, launching a liquidation panic. 

Hong Kong-based Dr. Joseph Wang is an expert on Chinese Bitcoin use and said in an interview "It’s well known that the Chinese government has set up shop in local bitcoin exchanges to “monitor compliance” with anti-money laundering laws." He has some ideas that are better:

“There are a dozen ways of moving money, but it basically involves buying something (art, insurance, whatever),  Moving it across the border and selling it.”

Hmm who would have guessed that?

The Market Pros are Exiting
The Wall Street pros like the big fund managers are members of the National Association of Active Investment Managers (NAAIM). The Chart below shows the current market is rising (Ticker:SPY) ... but less and less professional NAAIM managers are participating (in the lower window).  If someone is buying (market goes up) and it is not the pros, it must be, the amateurs.

That downturn in the lower panel is a divergence.  As you can see in the past as the big money exits, the market often sells off. The amateurs think about returns, the pros worry about risk. Right now "mom and pop" are looking at how they had missed a chance to make 5 times there money in Amazon if they just got in a few years ago. Now they pile in, perhaps for a spanking.

Revisit Equal Weight vs Market Cap
I told a reader I would show this again so here we go . . .
You know this chart it is such a favorite I bring it up all the time. I showed this two weeks ago. The top panel is actually a ratio, of (ticker:RSP) divided by (Ticker:SPY). When it goes up it favors RSP when down it favors SPY. It compares two views of the S&P500 (Ticker:RSP) is the S&P500 adjusted to be exactly 1/500 for each stock. (Ticker:SPY) is cap weighted, without getting re-balanced. As big firms like Apple and Amazon grow they become a huge part of the index. So SPY is heavily influenced by big firms like Google, Apple and  Exxon. (read more here). I then draw a pink zone over the areas where SPY is doing better than RSP.

In a strong market equal weight does better than the market. (read more here). Cap weighted indexes do better when people are only buying a few big stocks... so called "follow the herd" (like the FANG stocks).

Here is the point, when the chart moves down (like now) it tells you that even in a rising market, trouble can happen easier in this environment. The pink zones are where SPY outperforms RSP.  In the lower panel is a quote or the "Whole market" Wiltshire 5000 index. Notice the pink zones coincide with eventual market weakness.

OK Florida did not have a breach at its aging Nuke plants but . . . Looks like aging U.S. infrastructure has come to haunt Florida as the recent hurricane IRMA unleashed a bunch of raw sewage. Millions of gallons of poorly treated wastewater and raw sewage flowed into the bays, canals and city streets of Florida from facilities serving some of the nation’s fastest-growing counties. More than 9 million gallons of releases tied to Irma have been reported as of late Tuesday as inundated plants were submerged, forced to bypass treatment or lost power. Read more in Bloomberg.

OH NO! Part of the Richest Nation on Earth Was Without Power!!!!
I am amazed at the front page stories on sites like BBC about Florida. Or of tourist moaning because DisneyWorld closed for two days. Many more fat assed Floridians moaning because Hurricane Irma knock out the power for a day and they could not post on Facebook, it even caused a sinkhole.  Mean while look at the huge damage in St. Martin. . .

Credit Bureau Slammed
Equifax was slammed for its massive disregard for the people its database crushes and its poor security. In a cover page story called Hackers paradise, the main credit bureau Equifax is given a poor score on data security that could bring down the whole financial system.  Read more in Bloomberg.

All Hail Cassini 
NASA says: "After two decades in space, NASA's Cassini spacecraft is nearing the end of its remarkable journey of exploration. Having expended almost every bit of the rocket propellant it carried to Saturn, operators are deliberately plunging Cassini into the planet to ensure Saturn's moons will remain pristine for future exploration—in particular, the ice-covered, ocean-bearing moon Enceladus, but also Titan, with its intriguing pre-biotic chemistry."

As much of a human victory it was, Cassini was also a bloated over budget government project. Cassini was under development for five years at a cost  of almost $1 billion. (That's half the budget of the atom bomb). At the time of its development Edward Stone, director of JPL said "Cassini was the last of the big, expensive missions for the foreseeable future says . For the next five years we'll be lucky to have a flat budget." And so it was that NASA began to bring in the private sector with spectacularly cheaper and more productive ventures like Space-X. All the Buck Rogers for way less bucks. . . 

What Works Now

Autoimmune drug Humira continues to power AbbVie’s sales, growing to 65% of total revenues for the first six months of 2017 This growth comes even after Humira’s US patents expired at the end of 2016. (ticker:ABBV)

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.

I had lunch today with a broker who I respect, but I just could not gather the enthusiasm for the market he has. Yes my indicators would say be long and aggressive, but I think it all looks so over priced. Sure I see the new record for the DOW and that can't be all that bad. This is a bull market.

I was not surprised at the markets Friday. This Friday was a quad witching day. That almost always creates a run up followed by a pull back the next week. but almost always has a few exceptions. 

Right on track, since Sept 5th, a buy the dip bump is in full play, with my guess, we are headed for a fall correction. (My guess 10% - 20%) but not a crash. That said I have been taking profits in gold for 2 weeks. As I have been saying, I will skip this dance and stay long -- but defensive -- until fall is done. Or as I often say "When there is nothing clever to do, don't be clever".  But hey if you want to play this rally more aggressively ... be my guest.

We have a lot bulls out there right now... bulls I did not see in 2009. I leave you with this thought: 

It ain't what you don't know that gets you into trouble. It's what you know for sure that just ain't so. 
- Mark Twain

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