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October 28, 2017 – Weekend Market Comment

October 28, 2017 – The tech-heavy NASDAQ composite rose to a record high on Friday as Wall Street cheered the blowout quarterly reports from three of the world's biggest tech companies. The NASDAQ 100 rose 2.8 percent. NASDAQ leaders were shares of Amazon, Microsoft and Google-parent Alphabet; their stocks rose 13.6 percent, 7.3 percent and 6 percent, respectively. Information technology has handily outperformed the broader U.S. stock market this year. The sector is up about 30 percent in 2017, while the S&P 500 has gained approximately 15 percent. 


The broader market also rose on Friday, receiving a boost from stronger-than-expected economic data. The S&P 500 gained 0.7 percent and hit a record high.
 
Here is what our charts say:


CLICK HERE: To see the 100 and 200 series charts


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101 Bull Bear
Bull market (dark green over red)  the dark green 50 day average is in a rising uptrend. Notice the 50 day slope second window, could this be the beginning of the end a long term trend change? BULLISH Bull market -- expect bullish outcomes.
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103 NYSE High Low Market Forces
Breadth lines firm up! STRONG!  BULLISH


105 Non Farm Payroll
Lots of jobs! Small bump down, could be just weather. But beware this is lagging indicator.  The smart money is gone before this turns down. 


107 Industrial Production
A new up trend in industrial production. BULLISH

115 Renko
11 Up Bricks BULLISH

203 OBV
OBV (red line) is with the market.  BULLISH

207 VIX
Healthy rise.

209 VIX Evaluator
Small upturn, don't panic yet.
CAUTION


211 S&P500 over 50 day
Now about 68% of stocks are above their 50 day MA, a bit off last week when it was 77% unlikely to go much higher. 

213 Green Arrow
Only put new money to work when I draw a green arrow. Getting more defensive. But TRIX looks good! CAUTION

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301 NASDAQ Summation
NASDAQ breadth narrowing! Expect a top in QQQ. BEARISH
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303 Aggressive Defensive
Can't decide what to do.
CAUTION


305 Consumer Bonds vs Equities
Bonds drop. Consumer boost. BULLISH

307 Bond Direction
Long term bonds dead. BULLISH

309 Sectors
NASDAQ & Consumer rebound!!!
BULLISH

311 Nations
Sideways - China thrives. New life in Philippine market

313 Major sectors
Offshore does well.

! = 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. 

Celgene
Not the best week for biotech giant Celgene, on unexpected lower earnings. (Ticker:CELG) 

New Zealand Goes Where Canada Must
According to the BBC, New Zealand has finally hit a breaking point in affordable housing, prompting a bold move to ban foreign ownership. Chinese investors have been among the biggest offshore buyers of property in the New Zealand market as they continue to launder money by buying up overseas housing. 

Canada, particularly Vancouver, has been unable to build the political will to do this, being addicted to the juicy tax revenue despite the pain it causes for new families and the danger it puts property speculators in. 

Xi Drops the Property Bomb
As reported in Reuters. President Xi's speech at the opening of the congress on Wednesday, repeated his mantra that “houses are for living in, not for speculation”. In a clear series of moves to curb the rich and boost the middle class, it is clear China is looking for a new direction to GDP than just building empty apartment buildings. 

Among the biggest worries for investors globally is the health of China's real estate market. The concern is that after one of the biggest speculative booms in history, the market will come crashing down and take the global financial system with it. Outstanding credit at the end of 2016 in the world's second-largest economy amounted to 258 percent of gross domestic product, up from 162 percent a decade earlier.

However with each new policy intended to restrict home purchases, buyers are piling in. Stressed about the prospect of being left behind, many are borrowing heavily, believing prices will continue to rise despite the restrictions and will soar if the government has to lift restrictions to spur economic growth.

Another article of faith is that the Communist Party won’t allow housing prices to collapse. “The government will spare no effort to make sure there are no big swings in the property market,” says Ni Pengfei, a housing expert at the Chinese Academy of Social Sciences, a government think tank.

The desperate home buyers are exposing Beijing’s inability to control a housing market it has been relying on for economic growth. A decade ago, the real-estate sector, including construction and home furnishings, accounted for about 10 per cent of China’s gross domestic product, according to Moody’s Investors Service. It now accounts for almost one-third, reflecting both a dearth of other investment options and the petering out of manufacturing growth.


Vancouver Prices Drop 1/2 a mil
According to the Vancouver Sun prices in metro Vancouver have begun to decline. Real Estate Association of Greater Vancouver figures show the median price of a detached home is down more than $500,000 since February, to only.... $1.7 million. Ah nice to see a return to reasonable prices.

Saudi Arabia presents: NEOM -- 
Sun, Hookers, Booze, Robots, Traders in a New Tax Haven
Offshore money has been flooding in to the UAE because of the zero tax status. Now the Saudis want to build a $500 billion dollar, robot run Dubai clone, for hiding offshore wealth from the USA, Russia and China. It will be a special zone where western style debauchery like drinking alcohol and un-vield woman (so far) will be permitted, details are vague. This could put the royal family on a collision course with conservative elements. It is a desperate move as the country admits that the oil glut and the new China petro-dollar could be the end of the free ride the Saudi Royal family was dependent on.


MIT Bra Alarm?
I am not making this up... MIT is one of the best government funded research centers in the world. In a new cutting edge tech. innovation, a researcher at MIT has come-up with a rape-alarm based sensing underwear removal. The product is named Intrepid, but I think they should look at Fit-Bits marketing and call it the Tit-Bit, but then again, I was never good at marketing.  It might keep a lot of mall cops running around change rooms if the owner were to forget. Of course this also could change dating . . . "Dude she is so in to you, she just disabled her app... ;) "




The Smell of Musk
As you read in The Warning of 2017 -- Tesla is all talk, no product. Hota Industrial Manufacturing Co, a Taiwanese automotive components maker and long-time Tesla supplier, has been told to dial back its production of Model 3 components from 5,000 units per week in December to 3,000 per week – a 40% drop, Reuters reports that Hota Chairman Shen Kuo-jung said that the company has received a notice from Tesla to reduce its December order quantity due to production “bottlenecks.”

Notice Tesla is no longer the "sure thing stock" it was just a year ago. With a market cap equal to GM and not a profitable product in the line is this a case of all story no earnings?

 
What Works Now
Offshore
With U.S. markets overpriced and global trade picking up -- look offshore. As I mentioned before India is the new China for growth and investment. (Ticker: INDA)


After a long slide ... 
Friday went well for the Philippines ETF (Ticker: EPHE)



Internet Domain Host
Go Daddy famous for its too hot commercials, also this one, has now been getting attention to its too hot profits. (Ticker:GDDY)




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.

Yes another new market top this time for the NASDAQ. Yes this is a bull market and you should not short a bull market. But as I have been saying, the market could begin to sell off in early November. There are little warning signs, like Wednesday, when U.S. equities post their largest decline since September 5th.  I don't recall the last time we saw all nine sectors lower.  Healthcare (XLV, -0.14%) was the best performing sector while industrials (XLI, -0.99%) were hit the hardest.  Transportation stocks ($TRAN) had a very rough day as airlines and railroads were the two worst performing industrial groups. It didn't last a full day and the market took back a good chunk of its big losses by the closing bell.

Things tried to firm up on Thursday with Twitter and Ford hitting targets. Then it all exploded to the upside on Friday with the FANG stocks jumping after Amazon announced strong profits, leaping 13% higher on Friday on huge volume. Now if you read my "Warning of 2017" you will know I think Amazon is fudging the numbers on sales and profits... but the street bought the story and the party continues. 



Also notice the slope (second window) on chart 101 Bull Bear lines. This could be the end of the up-trend, well at least a more reasonable climb, like April 2017. 

That said, our charts are very bullish, yes the market is selling at way to high a price and we are overbought.. but this could also go on a long time.  Our OBV chart says the pros are still with this market, also some pre-Christmas consumer stirrings (primarily due to Amazon) and other charts show bonds are in the tank.. still looks strong. 

I am still a cautious bull. 









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