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July 07, 2018 – Weekend Market Comment

July 7, 2018 – Stocks rose on Friday on the back of stronger-than-expected employment data. The U.S. economy added 213,000 jobs in June, while economists polled by Reuters expected a gain of 195,000.  Investors also shrugged off concerns over an escalating trade war between the U.S. and China.

The Dow Jones Industrial Average jumped 140 points, with Walgreens Boots Alliance and Microsoft outperforming. The S&P 500 traded 1 percent higher, with health care rising 1.6 percent. The NASDAQ composite climbed 1.4 percent as the iShares NASDAQ Biotechnology ETF (IBB) surged 3.7 percent. Facebook rose to an all-time high, also boosting the NASDAQ.





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 an upward trend. Also, the current price is still above the 50-day moving average.  BULLISH Bull market -- expect bullish outcomes.
!
103 NYSE 52-week high low market forces
Breadth slightly positive, but sideways right now. February dip below 400 on the second window, is not great. CAUTION
!
105 Aggressive Defensive
Aggressive. The path of least resistance is UP!  BULLISH 




Conclusion:
Long-term Investors: Stay the course it is still a bull market.
Swing Traders: Get back in your equity longs but beware the overhead resistance. 

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

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



201 Renko
UP Bricks! BULLISH


203 OBV
OBV (red line) is ahead of the market. The big boys are in buying the dip! BTFD. BULLISH 

207 VIX
VIX flirted about 13. BULLISH 
!
209 VIX Evaluator
Clearly down here, not good. BULLISH


211 S&P500 over 50-day
57% of stocks are above their 50-day MA, rebounding from last week when it was 53%.   

213 NASDAQ Summation
Much better.  CAUTION


215 Bonds vs Consumer
Bonds way up. Consumer flagging? CAUTION

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

219 Industrial Production
Strong industrial production, with a tiny downtick. But beware this is a lagging indicator.  BULLISH



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





301 Bond Direction
Long-term bonds rising. CAUTION 

!
303 Sectors
NASDAQ strength, Utilities top out, financials suck. CAUTION

305 Nations
Canada tops out German rebounds.

307 Major Sectors
All weak only US strong. 

! = Pay attention this chart is important this week.


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


China -- New Controls
China is trying to lower speculation and investment and increase spending. It is a tricky dilemma because a cooling property bubble could become panic selling, but most of the nation's wealth is due to speculation. 

According to the New York Times, the latest plan also includes property taxes and new measures to combat tax avoidance, which is rampant in China for individuals. These include measures to strengthen real estate tax collection, prevent use of offshore tax havens, and crack down on “unreasonable commercial arrangements” designed to avoid taxes.
 

China is also moving forward with plans to impose a property holding tax. China has already run a trial program in Shanghai and Chongqing, levying a tax on the owners of spacious and expensive houses as well as owners of multiple homes. However, the scheme failed to put the brakes on housing prices in Shanghai, the mainland’s commercial capital.

At least 20 mainland cities launched market-cooling measures -- such as higher down payments and restrictions on owning more than one property -- in 2016, in a bid to rein in runaway house prices.

There have been early signs that the measures are taking a small effect. National Bureau of Statistics data showed that new-home prices in first-tier cities increased an average of just 0.1 percent in November, compared with 0.5 percent the previous month. Momentum in second-tier cities also slowed.



What is This?
This is one of my long-term charts, the yellow area is the price of housing, the black line is the value of stocks of home builders. Home builders are getting squeezed as material cost are rising and mortgages are getting less affordable.  One huge increase in cost is re-bar as Trump steel tariffs have sent the cost skyrocketing. If the yellow housing prices start to fall then the current economic cycle is over. As you can see in 2006 it was a predictor of the financial crises ... however in 2015 the falling black line meant nothing at all. As you can see we are at new all-time-high for U.S. home prices.


Just Forget the World!
Between 06/29/2018 - 07/05/2018 investors pulled just shy of one Billion dollars out of the iShares MSCI EAFE ETF. This is an ETF that invests in global markets. In the same period the big winner was Bond ETFs. (Ticker: EFA)





Who Wants to be a Millionaire?
CNN has a calculator to see how long it will take you to be a millionaire. For example: if you have $50,000 and put away $300 a month at 10% return you will hit a million in 2047 (taxes not included).

About 1 in 20 Americans has a Million dollars in non-real-estate assets.  In the U.S. including homes, there are; 9.4 million individuals with net worth between $1 million and $5 million, 1.3 million individuals with net worth between $5 million and $25 million, and 156,000 households with more than $25 million in net worth, the report says. Excellent . . .


Huge Fine for CS
Credit Suisse is paying $77 million to the Justice Department and the Securities and Exchange Commission to settle charges. Prosecutors said Credit Suisse’s managers in Asia admitted that between 2007 and 2013 they hired job candidates suggested by powerful people in China’s government and state-run corporations with the expectation that the bank would receive lucrative new deals in return.


Is this the End?
Ray Dalio tweeted Friday that July 6 2018 was the first day of the trade war. His firm world's biggest Hedge Fund, Bridgewater Associates has been very cautious this year.

2019 is setting up to be a dangerous period for the economy, as the fiscal stimulus rolls off while the impact of the Fed’s tightening will be peaking,” Bridgewater Associates in a recent note to clients. 

They advise of market exposure danger:
"We are bearish on financial assets as the US economy progresses toward the late cycle, liquidity has been removed, and the markets are pricing in a continuation of recent conditions despite the changing backdrop."

Stock markets lead the economy by about 6 months, so if correct, the danger is already upon us.


 
Ponder This

   "Now this is not the end. It is not even the beginning of the end. But it is, perhaps, the end of the beginning." 
    - Winston Churchill

Ha Ha

Lubrication
WD-40 is doing well (Ticker: WDFC)

Your Doctor's Landlord
REITs are performing very well and so is healthcare so mash them up and you get Sabra Healthcare REIT.

REITs
Canadian real estate is doing well

Biotech
Biotech is recovering nicely. This week when stocks were rising, and all eleven market sectors are in the black, healthcare was the standout performer.  



If you want to put a segment of your funds outside of the U.S. let's look at some top performing nation based ETFs. 

Here are my picks for June buy on the last day of May and hold for the month.
50% EIRL Ireland (they are not in the news now)
35% EIDO Indonesia 
15% KSA Saudi Arabia (they have oil)


I think we are in a weak cyclical bull market (since March 2018) within a near-record long, secular bull market (since early-2009).


Last week there was a lot of doom and gloom, but as I said this is still a bull market and you can't get too negative. Sure enough this week the Dow bounced off the 50day moving average.

The market has had no fear of the consequences of a trade war, seeing the U.S. the net winner in such a conflict. The market sees some favorable signs this week, such a solid employment numbers. Even global banks had a slight tick upward. 

Remember we still have not broken out of the triangle, in fact it is getting very tight.  


We are range bound and it would take an unlikely strong bullish thrust next week to break-out of the current range. Therefore I think we have little cause for celebration yet. So far investors have had zero returns in 2018 and soon they are getting their second quarter broker statements.  <--(not good)


The Dow transports are turning up a tiny bit, but are weighed down because airlines are facing higher fuel costs.


Its summer and volumes are light. If you are a long term investor you are already long. If you are a swing trader I would ratchet up your risk this week. Mind the overhead risk.


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