Tuesday, 16 January 2018

The accelerated mainstream

US equity indexes closed broadly weak, sp -9pts at 2776. The two leaders - Trans/R2K, settled -1.3% and -1.2% respectively. VIX settled +11.8% at 11.66. Near term outlook threatens a little further cooling, but even <2730 looks out of range. More broadly, 2950/3047 remains on track by early summer.


sp'daily5



VIX'daily3



Summary

Trading day 10 of 2018 began on a very bullish note, with all six of the main indexes breaking new historic highs. However, the market became stuck at sp'2807, and saw increasing weakness into the mid afternoon. The fact we actually filled the opening gap is something of a novelty.

With equities seeing a significant reversal to the downside, volatility picked up, with the VIX breaking into the 12s, for the first time since Dec'1st. The 12s aren't exactly anything for the VIX bulls to get excited about though.

S/t, there is moderate threat of further cooling to around sp'2750, which would arguably equate to VIX 13/14s. More broadly though, its all to be regarded as noise, as we're well on the way to first big target of 2950/3047.
--


The accelerated mainstream


An accelerated Santolli

Watching the cheerleaders this lunchtime, it was the same old nonsense. They are still overly twitchy as the market just keeps on broadly climbing. Now they are using words like 'Acceleration'. Anyone remember the Christmas tree picture I did? Anyone starting to fully realise what is actually happening here?

-Few are considering that commodities are on the edge of a major surge (CRB >197s)
-Price structure in many world markets (Russia, China, Italy) offers 'basic upside' of around 20%
-A number of key world markets are close/in the process of breaking out, giving high confidence for the spring/early summer
--


One more day closer to summer.
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Saturday, 13 January 2018

Weekend update - US equity indexes

It was a very bullish week for US equity indexes, with net weekly gains ranging from 4.2% (Trans), 2.0% (Dow, R2K), 1.7% (Nasdaq comp'), 1.6% (sp'500), to 1.5% (NYSE comp'). Near term outlook threatens brief cooling, but broadly, first big target is the sp'2950/3047 zone, where the market will likely get stuck within 4-6mths.


Lets take our regular look at six of the main US indexes

sp'500


A second consecutive week higher for the sp'500, +43pts (1.6%), with a new historic high of 2787. Underlying MACD (blue bar histogram) cycle continues to tick upward, and stands at the highest level since April 2015. Weekly RSI is 87, which is the highest level since at least 1980.

Best guess: there is s/t threat of a sporadic cooling wave, but probably no lower than the 2730s. More broadly, 2950/3047 is due late spring/early summer. The market will very likely get stuck, and see some degree of correction, at least on the order of 5%. The year end target of 3245 is on track.

Equity bears have nothing to tout unless a bearish monthly close. For me, that would equate to a monthly close under the monthly 10MA, which currently stands at 2536, and is rising by around 40pts per month. So, from June 1st onward, that 'line in the sand' will be around 2730s.
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Nasdaq comp'


The tech settled net higher for the week by 1.7%, with a new historic high of 7265. Soft rising trend from summer 2016 is around the 6700s, and looks comfortably intact into the late spring.The 8000s are clearly on the menu by mid 2018, with 9000s by year end, assuming no main market correction much above 5%.


Dow


The mighty Dow climbed 507pts (2.0%) to 25803, with a new historic high of 25810. The 26000s are viable within the immediate term. Keep in mind the next big Fibonacci level of 26702. Any price action >26800s would indirectly give confidence that the sp'500 will eventually break >3100s (to be decisive). The latter would then offer next big target of 3900/4000 in 2019, with Dow 34/35k. I recognise those numbers will sound crazy, but then so did sp'2683 in Jan'2017.


NYSE comp'


The master index climbed for an EIGHTH consecutive week, the best run since 2010, settling +1.5%, with a new historic high of 13299. The 14000s are clearly viable by late spring/early summer, with 15/16k valid for year end.


R2K


The second market leader gained 2.0%, with a new historic high of 1598. The 1600s are clearly imminent, with the 1700s viable by late spring. The 'R2K @ 2k' is something I've been teasing for the last few years. It won't be easy to reach by year end, but its 'just about' possible.


Trans


The 'old leader' - Transports, is leading the way higher, seeing a powerful net weekly gain of 4.2%, with a new historic high of 11380. The 12000s are clearly on the menu this spring, with the 13000s seemingly probable for year end. It is notable that sustainably higher energy prices will be a downward pressure on transportation stocks, although that certainly doesn't mean they will be trading net lower in the months ahead.
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Summary

A very bullish week, with all six of the main US indexes breaking new historic highs.

The Transports is leading the way higher, despite rising energy prices.

Most indexes have around 4-5% of downside buffer, before first key support would be challenged.

Equity bears have nothing to tout unless the majority of indexes see a monthly close under their respective monthly 10MAs, and that looks out of range until at least July/August.
--


Looking ahead

Earnings will increasingly be pouring in...



M - CLOSED
T - Empire state manu'
W - Indust' prod', Housing market index, Fed Beige book
T - Weekly jobs, housing starts, phil' fed, EIA Pet' & NG reports
F - Consumer sent'.  *OPEX*

*there are three fed officials due on Wed', but none are likely to be of any importance.
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Friday, 12 January 2018

Strength into the long weekend

US equity indexes closed moderately higher, sp +18pts at 2786. The two leaders - Trans/R2K, settled higher by 0.8% and 0.3% respectively. VIX settled +5.0% at 10.16. Near term outlook threatens a little weakness, but more broadly, the sp'2950/3047 zone is a valid target, as early as late spring.


sp'daily5



VIX'daily3



Summary

US equities opened a little higher, and once again, built gains into the afternoon, and breaking new historic highs in the closing hour. All six of the main US indexes broke new historic highs today, which is indeed an aspect of the 'new normal'.

VIX settled higher for a second day, and notably the 6th day of 7, but whether its VIX 8s, 9, 10s, or even the 11s, its all to be seen as 'minor noise' at such levels. Any significant/sustained VIX >20 looks out of range until the market has at least climbed to the sp'2950/3047 in late spring/early summer.

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Thursday, 11 January 2018

Mainstream 3047 chatter

US equity indexes closed broadly higher, sp +19pts at 2767. The two leaders - Trans/R2K, settled very significantly higher by 2.3% and 1.7% respectively. VIX settled +0.6% at 9.88. Near term outlook offers a little weakness, but nothing below the 2730s. More broadly, first big target zone is 2950/3047, as even the mainstream are starting to recognise.


sp'daily5



VIX'daily3



Summary

US equities opened moderately higher, and clawed upward into the afternoon. All six of the main indexes I regularly highlight broke new historic highs.VIX was naturally subdued, and stuck within the 9s.

There is threat of a moderate wave lower, but that is within a market that has extremely powerful underlying upward pressure. There are an ever increasing number of unfilled gaps, and even last Friday's 2731/23 gap now looks almost out of range.
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Mainstream 3047 chatter

My day began with the usual browse of what the mainstream are saying, and I was not disappointed.


Must-watch Video: https://www.cnbc.com/video/2018/01/11/relentless-rally-mixed-with-low-volatility-is-a-recipe-for-problems-drw-trading-strategist.html

Lou Brien is the first (that I'm aware of) to make it on the mainstream financial networks who has dared to mention the next giant fibonacci extrapolation of sp'3047. It was very pleasing to see indeed!

For more chatter on that issue, see my 'outlook for 2018': http://permabeardoomster.blogspot.co.uk/2018/01/weekend-update-outlook-for-2018.html

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Wednesday, 10 January 2018

The twitchy mainstream

US equity indexes closed fractionally mixed, sp -3pts at 2748. The two leaders - Trans/R2K, settled +0.1% and u/c respectively. VIX settled -2.8% at 9.82. Near term outlook offers a little weak chop to around sp'2730. More broadly, things only get interesting within the sp'2950/3047 zone.


sp'daily5



VIX'daily3



Summary

US equities opened moderately weak, with a rather typical recovery into the afternoon. It was notable that the Transports did break a new historic high, a reminder of underlying m/t price momentum. Despite weak equities, the VIX could only push to the upper 10s, and even settled fractionally lower, reflective of underlying capital market confidence. No one seriously expects a sustained/significant equity down wave any time soon.


Twitchy mainstream

Reading around this morning, it was rather bizarre to see how twitchy some were. Did everyone already forget about 2017? Are we really going to have yet another year where the market broadly climbs, but most get borderline upset on every little down wave?

A valid question: How terrified will the masses become when the market does eventually see a multi-week correction of 5%, or... more?
--

Bonus chart: Spain, monthly


Even one of the weaker markets - Spain, is offering a bull flag, with another attempt to challenge giant multi-year resistance of 12k.
--

A fine January day

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Tuesday, 9 January 2018

Day six for the equity bulls

US equity indexes closed a little mixed, sp +3pts at 2751. The two leaders - Trans/R2K, settled +0.2% and -0.1% respectively. VIX settled +7.3% at 10.08. Near term outlook offers a little weak chop, but the 2800s are clearly on the menu for February.


sp'daily5



VIX'daily3



Summary

US equities opened just a little higher, but once again, it was enough to generate new historic highs in all six of the main indexes I regularly highlight. Underlying m/t price momentum remains 'scary strong'. The sp'2800s will be technically viable in February.

Market volatility is naturally subdued, with the VIX sustainably printing the 9s. Does anyone seriously think the key 20 threshold is viable before the market at least hits sp'2950/3047 zone?  
--


I fully recognise almost none of you care, but this remains very important...

Italy, monthly


The MIB is currently net higher for Jan' by a rather powerful 5.3% at 23004. A monthly close >24k (by late spring) will be profoundly important for the Italian market, but also most other world markets to some degree. Its not just Italy of course, there is Russia, China... the list could go on.

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Monday, 8 January 2018

Meanwhile, at the Seagate crypto desk...

US equity indexes closed on the positive side, sp +4pts at 2747. The two leaders - Trans/R2K, settled +0.8% and +0.1% respectively. VIX settled -1.3% at 9.52. Near term outlook offers a little chop, but the 2800s will be 'technically' on offer in February, with broader key target of 2950/3047 by early summer.


sp'daily5



VIX'daily3



Summary

US equities open a little weak, but the Nasdaq comp' quickly broke a new historic high, and was later followed by the other five main indexes: sp, dow, nyse comp, r2k, and transports. With a sextet of index highs, it was indeed just another day for the equity bulls.

Volatility was naturally subdued, with the VIX stuck in the 9s. Even the low teens look a stretch in the near term. The key 20 threshold looks out of range until we've at least reached the sp'2950/3037 zone.
--


Meanwhile, at Seagate

As I was trawling through hundreds of stocks for my pre-market brief this morning, I noticed Seagate (STX) higher by around 15%. After a little digging, I discovered the stock was soaring on the news that it had disclosed it owns 4% of the crypto coin of Ripple.

The infamous Cramer, with some chatter on Seagate.

Whilst most just read the story for what it was, I am left with the following thoughts/questions...

-Someone at Seagate was given permission to start speculating in crypto coins.
-Who authorised this, and why?
-Seriously, what the hell? A drive maker, now has a desk, with an individual/team, buying/selling crypto coins.
-How exactly is this remotely a reasonable use of shareholder/company funds? How many other mid/large cap' companies are also (quietly) running a crypto desk?

-To me, today's disclosure is an ugly red flag for Seagate. Are they struggling that much, they feel desperate enough to start speculating in crypto coins? Or are they just overly confident that they can boost their profits via financial speculation?

-Should we expect sister stock Western Digital (WDC) to also be meddling in such things?

These are crazy times, and indeed, we really shouldn't be surprised at such things, but I guess I am.
--


STX, daily


That is one wild black-fail daily candle, and is inherently bearish in the near term. Interestingly, the news just kept on coming in AH...



The company issued a report with raised guidance, sending the stock up another 3% or so. Now I have to ask... is that partly based on expectations for the crypto coin of Ripple?

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Saturday, 6 January 2018

Weekend update - the outlook for 2018

It was a very bullish week for US equity indexes, with net weekly gains ranging from 3.4% (Nasdaq comp'), 2.8% (Trans), 2.6% (sp'500), 2.3% (Dow, NYSE comp'), to 1.6% (R2K). On balance, 2018 looks set for broad gains, at least to the 2950/3047 zone, with best case of the 3200/300s.


sp'500, weekly



Summary

The sp'500 settled net higher for the week by 69pts (2.6%), at a new historic high of 2743. Note the upper weekly bollinger at 2737, and which is climbing around 18pts each week. The 2800s will be technically viable in early Feb.
--



The outlook for 2018

First things first. A brief look back to 2017.

Original post: http://permabeardoomster.blogspot.co.uk/2017/01/weekend-update-outlook-for-2017.html

My target of 2683 was just 9.39pts (0.35%) from the 2017 settlement of 2673.61.
Further, 3 rate hikes was correct, although I was off on the timing of hikes 1 and 2.

'3 to 4 minor corrections of 4-7%.... but nothing >10%'. Correct, in the latter, but even I was surprised we didn't see at least a few corrections of 4-7%.
--


Best guess for end 2018: sp'3245



The target is based on a fair number of things:

- At least one moderate correction of 5%.... but nothing >7%.
- broadly climbing at the rate of 40-60pts (1.75-2.0%) a month
- holding above the key 10MA, which by end year will be in the 2900s.


Primary issues for 2018

Earnings/growth. There has been a very significant shift in societal/financial sentiment since the Trump victory in Nov'2016, and I expect an acceleration in the US economy. I would seek annual growth of around 3.0%, with one print >4.0%

The tax cuts will be a boost, but far more so, the repatriation of corporate funds, which likely total at least 4-5 trillion. I'd expect a trillion to be wired back to the US by end 2018. There will be significant multiplier effects from such capital inflows, and frankly, the federal reserve should be somewhat concerned about an inflationary surge to 3.5-4.0%.
--

Inflation. For now, inflation remains subdued, but there are plenty of commodities - not least WTIC and Copper, that are both within m/t upward trends. If we see the CRB break >197 - as seems due by late spring, it will merit being seen as an important sign.

Rate hikes: I expect FOUR hikes (each of 25bps) in 2018, at the FOMC's of March 21st, June 6th, Sept'26th, and Dec'19th. That will take the target range to 2.25-2.50%, and would still be historically low. I don't see any reason the US economy - and associated capital markets, not being able to cope. Ohh, and don't forget the ongoing QT program. That will reach $50bn a month by end 2018, a rather significant annual rate of $600bn.



It remains ironically the case that the ultimate 'sell signal' is when the fed start cutting rates. As rates are now regularly being raised, the equity bulls can justifiably be increasingly confident.
--


Secondary issues for 2018

There are three secondary issues I'd like to highlight:

-Price structure in key stocks - BAC, INTC, X
-Price structure in world markets - China, Italy, Russia
-Commodities - CRB, WTIC, Copper
--


Price structure in key stocks

Frankly, I could list dozens, but I don't have the time, and it would overload the post. Instead, I will highlight just three: a financial, tech, and industrial.

Stock'1: Bank of America (BAC), monthly


BAC is clearly m/t bullish, and set for the $33s by late spring. Higher rates are a strong positive for the financials. Secondary target of 40/45 zone looks frankly... a given, considering the economy and broader equity market.

I've alluded to it a few times recently, but any price action above the 2007 top - the $45s to be decisive, would be monstrously bullish, on the order of a doubling to psy' $100. If you assume just 'reasonable' earnings growth, that'd still only see the forward price earnings (FPE) multiple climb to around 25/30 by 2020/21.
--


Stock'2: Intel (INTC), monthly


Yes, the stock has been rattled by recent processor 'issues', but broadly, the trend has been very bullish since the breakout in summer 2014. Any price action above the tech bubble top of 2000 (>$52.00 to be decisive) would be monstrously bullish, and offer far higher levels. I'd refer anyone to Microsoft (MSFT) which broke its 2000 top in summer 2014, that stock has since climbed from $40 to $85 across just three years.
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Stock'3: US Steel (X)


US Steel only has a market cap' of around $7bn, but its a fine example of US heavy industrials. The stock is nearing multi-year resistance of $40.00. It failed in Feb'2017 to break/hold it, and the stock promptly imploded to the $18s. If X can attain a monthly close >$40.00, its technical 'open air' to soft psy' $50, and then $60. The latter is 53% above current levels, and it can be argued would have indirect implications for the main market.
--


Price structure in world markets.

I refer you to last weekend's post :
http://permabeardoomster.blogspot.co.uk/2017/12/weekend-update-world-equity-markets_30.html

A number of markets are set to break up and away, lets take a look at three: China, Italy, and Russia...


China, monthly


China has started the year strong, currently +2.6% at 3391. There is a great deal of resistance within the 3400s. A monthly close in the 3500s would be decisive, and offer 4500 by end year.


Italy, monthly


The Italian market is already net higher for the year by 4.2% at 22762. Price structure from Nov'2017 is a bull flag, and will be fully confirmed with a break >23133. What really matters though is the 24000 threshold. A monthly close >24k will offer a grander run to at least 35k.


Russia, monthly


The Friday close of 1218 is the highest level since Sept'2014, and opens the door to a grander push of at least 20% to the 1500s. Implications for other world markets.
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Commodities.

Lets take a look at the broader CRB, then WTIC and Copper.


CRB, monthly


The CRB is set to push above the key 197s, which will offer at least the 220/30s this summer. That bullish outcome would still be far below the highs from summer 2014 and spring 2011.


WTIC, monthly


WTIC is currently net higher for a fifth consecutive month, having just seen the $62s. Consensus is already swinging to the 70s, even the 80s. A few are even speculating $100, but that would likely require serious geo-political turmoil in the middle east, an inherently impossible thing to foresee. In any case, I favour Phillips 66 (PSX), Cheniere Energy (LNG), and Anadarko Petroleum (APC) on a mid term basis, along with the sector ETF of XLE.


Copper, monthly


Copper has seen $3.31 so far this year, and the $4s are not a particularly bold target by late summer. If correct, bullish implications for the related miners, such as Southern Copper (SCCO), Freeport McMoRan (FCX), and Teck Resources (TECK). Indirectly, upside in copper would be strongly suggestive Gold and Silver will eventually follow upward. Implications for the related miners, such as Barrick Gold (ABX), and the sector ETF of GDX.
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Your guesses...

I'm not sure if it says something about your opinion of yours truly, but I only received one single submission.

2800: WavRider.
--


In closing

The 2018 target of sp'3245 might seem bold, but that only assumes a moderate acceleration in the rate of increase in various technicals (10MA, upper bollinger). I'm actually wondering if I'll be 100-200pts undershooting.

Clearly, a geo-political event - such as from the middle east or North Korea, is a valid 'wild card' threat. Yet, that was the case across 2017. I sure don't have a time machine, and I have to just assume things will remain in 'simmer mode'. One final note, and it has implications much further out...


sp'monthly5b


Most chartists recognised the importance of sp'2138 as far back as 2009, and we saw how the market stalled at 2134 in May 2015. The next big fib' level of 3047 is just as important.

Let me be clear. If we see ANY price action >3100s, it will be decisive enough to declare a further powerful run to the 3900/4000 zone, being viable in 2019. Finally, sp'4865/5000 would equate to Dow 40/42k.

At some point a cyclical recession will occur, and as noted earlier, the moment the fed start cutting rates, will be the ultimate sell signal. Right now, that looks to be at least another 18months away.
--



Looking ahead 

Earnings: JPM, WFC (Friday)

M - Consumer credit
T - -
W - Import/export prices, wholesale trade, EIA Pet' report
T - Weekly jobs, PPI, US T-budget
F - CPI, retail sales, bus' invent.

*there is a light sprinkling of fed officials, notably Bullard and Evans (Wed')

**the market will be CLOSED on Mon' Jan'15th for MLK day. The Friday Jan'12th session will thus be inclined to be very subdued, once the econ-data and corp' earnings are out of the way in early morning.
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Friday, 5 January 2018

A very bullish week

US equity indexes closed moderately higher, sp +19pts at 2743. The two leaders - Trans/R2K, settled higher by 0.5% and 0.3% respectively. VIX settled +1.2% at 9.22. Near term outlook is bullish to the sp'2750/60s. More broadly... next big target is the 2950/3047 zone, due in the summer.


sp'daily5



VIX'daily3



Summary

US equities opened higher, and settled higher for a fourth consecutive day, with new historic index highs in the sp, dow, nasdaq comp', nyse comp', and the trans. Only the R2K is missing out.

Volatility remained naturally subdued, with the VIX settling the week in the low 9s. Even the low teens look out of range within the near term. 2017 failed to see VIX >20. At things are, its difficult to see any chance of VIX until equities have at least climbed to the sp'2950/3047 zone.
--

Just another day closer to summer

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