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April 14, 2018 – Weekend Market Comment

April 14, 2018 – President Donald Trump said U.S., British and French forces had launched airstrikes targeting sites associated with Syria’s chemical-weapons capabilities, a reprisal for an attack last week that killed at least 43 civilians and injured hundreds more. Markets were closed during the attack so we have not seen the markets reaction. 

U.S. stocks fell on Friday as several banking companies weighed down the major indexes on the final day of an otherwise strong week for equities. The Dow Jones industrial average fell 122.91 points to close at 24,360.14, with J.P. Morgan Chase as the worst-performing stock in the index. The S&P 500 closed 0.3 percent lower at 2,656.30 as financials dropped 1.6 percent. The NASDAQ composite declined 0.5 percent to 7,106.65. The indexes opened sharply higher on the back of strong earnings from some of the big banks.

Here is what our charts say:

100 Series: In Market? Aggressive or Defensive?   CLICK HERE: View 100 series charts

101 Bull Bear
Bull market (dark green over red)  the dark green 50 day average is in a falling down-trend. Notice the second window, the slope is negative but rebounding.  BULLISH Bull market -- expect bullish outcomes.
103 NYSE 52 week high low market forces
Breadth negative. As I said before, recent dip below 400 on second window, says probably more pain to come.   BEARISH
105 Aggressive Defensive
Defensive but just barely.  BEARISH 

Long-term Investors: Stay the course it is still a bull market.
Swing Traders: Lighten up now, be defensive.

200 Series: Market Health   CLICK HERE: View 200 series charts

201 Renko
Sideways. CAUTION

203 OBV
OBV (red line) is with the market. The big boys still have faith! BULLISH

207 VIX

209 VIX Evaluator
Sideways.  BEARISH

211 S&P500 over 50 day
Only 41% of stocks are above their 50 day MA,  up from last week when it was 27%. CAUTION

213 NASDAQ Summation
Some bounce in price but worse breadth. CAUTION

215 Consumer Bonds vs Equities
Bonds downish. Consumer falls. CAUTION

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

219 Industrial Production
Strong industrial production.   BULLISH

300 Series: Market Segments   CLICK HERE: View 300 series charts

301 Bond Direction
Long term bonds sideways. CAUTION

303 Sectors
Finance dead, utilities get a lift BEARISH 

305 Nations
I got not much here

307 Major sectors
Commodities rise.

! = Pay attention this chart is important this week.

What I Find Interesting
The Warning
If you have not yet please read my post from last August: "The Warning of 2017"

Who is Afraid of the New Volatility?
This week Bloomberg published an article that said the market was going from extreme low volatility to a more normal period of swings. The idea being that the trend following buy the dip monkeys need to change there game or they will not survive. 

Well here is why you should fear volatility -- it proceeds sells offs. Yes another warning that we are very late in the cycle. Here is my big, big, big picture chart, 20 years of the whole US Markets (Wilshire 5000) in one chart, and look at that pink zone (4th panel) marked ... Nervous Investors. You see that as Average True Range (ATR) increases, the smart money refuses to participate. Also notice that the top panel shows the 14 month RSI and if the chart has a high RSI reading (+70 then drop under 70) the general market should be flat to down in the coming months. 

Mc Screw

According to the Chicago Trubine a law suit was thrown out against McDonald's because the fast food company charge more for a value meal than the items cost separately and that is OK. A federal judge in Chicago has tossed a class-action lawsuit that argued McDonald’s was duping consumers because a single “Extra Value Meal” costs more than the sum total of the individual components of the meal bought separately.

The Chicago Daily Law Bulletin reported Monday that Kelly Killeen said she bought a sausage burrito breakfast Extra Value Meal in Chicago for $5.08. But she said the "value" label was deceptive because buying the same two sausage burritos, hash browns and coffee individually would have cost a total of $4.97. Judge Elaine Bucklo noted that prices for combo meals and individual items are easily visible from the counter. She said just because some consumers don't want to bother to compare prices doesn't mean they can claim they've been fooled.

No one brought up that a diet of sausage burritos can be life threating and a kind of manslaughter. 

What to Do With 567 Ink Jet Printers?

Taken for a Ride
A Canadian Man has spent two years trying to fight with Mecdies Benz after his dashcam footage showed his car was not serviced as requested and in fact was used to make a run to Wendy's for fast food take out.

Mercedes-Benz Canada sent this response:
"We are aware of this video, which was recorded during a service appointment that took place on June 24, 2015. In no way do we condone or tolerate the behaviour shown in the video. We investigated this incident two and a half years ago and appropriate actions were taken at that time. Mercedes-Benz holds itself to the highest standards of customer service. The behaviour on the video is inconsistent with our policies and inconsistent with the professional pride with which Mercedes-Benz Canada personnel are expected to carry themselves. This was a learning experience; we always strive to be better for our customers."

Obviously some car owners leaned nothing from Ferris Buler's Day Off;

How the Markets Work
As you know I often say that pat answers to how the market is going to behave are going to be full of errors. (such as my blog post A Warning About Experts) The best you can hope for is "probable outcomes". After all markets are complex. If you could see how the market works it might look like this video . . . (or just watch for fun)

What Works Now
Mid Size U.S. Banks
This ETF will give you exposure to local banks in the USA who are making money as interest rates rise. Banks due well late in the economic cycle. (Ticker:KRE)

As of Saturday morning gold was trading at $1347.26 ... still looks like a good trade.

Rotating Nations
If you want to put a segment of your funds outside of US let's look at some top performing nation based ETFs. 

Here are my picks for April, hold until month end.

50% EWM Malaysia
35% EPU Peru
15% EPHE Philippians

What I Think
Well, the United States started bombing the middle east last night. What can I say, there is no chart that will tell you how the market is going to react to this. War is actually good for the U.S. economy. But who knows what the blow back on this will be. 

Our charts were almost showing some hope, until Friday. Traders were surprised that banks had good profits and the market closed down. Clearly everyone knew this attack was imminent, Trump tweeted as much. At least you were in a strongly defensive position.

I am repulsed as anyone at the use of chemical weapons. On the other hand I am not a fan of any weapons including drones, bombs or guns. But why attack now?  It is like a page out of politics 101 or Wag the Dog. When you want to avoid an FBI interview, while your closest confidants are quitting to write tell all books and a few messy law suits from your prior consorts... Just start a war. This one is bound to be a real crowd pleaser. America is feeling weak and vulnerable, so a proxy war is a perfect way to stir the national pride, divert attention and prove that the country is doing something "right". 

A cynic might point out worse atrocities in Africa don't get an military response, but we all know those people are the wrong color and they have no oil. 

As I look at the long-term 20-year chart of the markets (above) I feel we are late in the market cycle. This weekend is more like icing on the cake. But the charts have foretold trouble for a while now. 

One one hand, the vix is receding and earnings look good, also many of our indicators are near a cross over. This is still a bull market so you should be optimistic. So this well could be the bottom. I think it would be best to see how the markets open Monday before you decide if this the time to jump in.

As far as the markets go this weekend is a good time to be VERY careful. 

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