Saturday, 21 April 2018

Weekend update - US equity indexes

It was a bullish week for US equity indexes, with net weekly gains ranging from 2.0% (Trans), 0.9% (R2K), +0.6% (Nasdaq comp'), +0.5% (sp'500, nyse comp'), to +0.4% (Dow). Near term outlook offers further upside of 2-3% into early May.


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

sp'500


Despite ending the week on a moderately weak note, the sp' still saw a net weekly gain of 13pts (0.5%) to 2670. The weekly candle is somewhat spiky, but we do have a higher high and higher low, which leans to upside into end month/early May. Soft target is the 2740/50 zone.

However, its important to note that if the US 10yr yield breaks/holds above 3.00%, the equity market will almost certainly re-price. Most natural target would be the 2470/50 zone, which is some 7.5-8.0% lower. There is a notable unfilled 'legacy gap' from Sept'11 2017 of 2474/61.
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Nasdaq comp'


The Nasdaq was pressured into the weekend by negative AAPL chatter, but still managed a net weekly gain of 0.6% to 7146. Big support around 7k, with major upside resistance in the 7400s.


Dow


The mighty Dow was the laggard this week, gaining just 102pts (0.4%) to 24462. Note that declining trend/resistance from the Jan' high of 26616 was fractionally broken. It does lean s/t bullish, with soft target of 25400/500s.


NYSE comp'


The master index climbed for the third week of four, settling +0.5% at 12607, notably just shy of the key 10MA. S/t bullish to the 12900/13000 zone.


R2K


The R2K gained a borderline significant 0.9% to 1564, with an intra high of 1592, which was notably close to the Jan' historic high of 1615.


Trans


The old leader saw a very significant net weekly gain of 209pts (2.0%) to 10578. There was a notable fractional break of descending trend/resistance from mid January'. Considering rising WTIC/fuel prices, the weekly gain was especially impressive.



Summary

All six of the US indexes saw a second consecutive week of gains.

The Transports lead the way higher this week, whilst the Dow was the laggard.

Price action since late January is still rather choppy, as volatility remains relatively elevated.
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The 10yr yield

Friday saw the US 10 year bond yield hit 2.96%, the highest level since Jan'2014. That was clearly one reason the equity week ended on a somewhat bearish note. After all, the mainstream are still spooked at the notion of the 10yr approaching the psychological threshold of 3.00%. Indeed, psy' thresholds do matter!



I want to be crystal clear on the following...

-A higher bond yield is neither a 'good' or 'bad' thing. Bond prices (and their yields), like equities, are largely determined by supply/demand factors. Inherently, a rise in bond yields does make equities less attractive. However, as the chart above shows, you can have times when yields and equities rise together.

-The yield curve means little, even if inverted. Much is made of the yield curve in the mainstream, but it doesn't necessarily equate to anything in the 'real world'. Just because the 10yr yield is only marginally less than the 30yr yield doesn't directly mean a recession is due.

-Keep in mind there is still a great deal of ongoing global QE, and some of that money flows into the US, and that will affect bond prices/yields. Further, the central banks themselves will periodically meddle in the bond market (whether directly, or via their 'institutional friends'), to skew prices/yields.

-The US Fed's QT program (set to max out at $50bn a month from October onward) is increasing the supply of bonds, and thus is inherently an upward pressure on bond yields.

-rising bond yields, the 'normalisation', is arguably a very good thing. Do we really want interest rates (and related bond yields) at near zero in perpetuity? I would hope few, if not none of you, want that. 
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A sideline consideration...

The Trump administration has decided to further raise govt' expenditure and cut taxes, and thus increasing the deficit. More govt' T-bonds will be issued. An increased supply of bonds saturates the market... reducing bond prices, and that inherently pushes up bond yields.

The US president is (likely unknowingly) digging a rather big hole for himself, and the broader US populace. The bigger the deficit, the more bonds will be issued, and the higher bond yields will go. That in turn will pressure equities, at least to some degree. The net effect on equities doesn't necessarily mean net annual declines.
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I'll merely conclude by saying that it seems a given the 10yr yield will break >3.00%. Will it be next week, in May, or even some considerable time beyond? I don't know, as I don't have a Delorean. I can say though, when it happens, equities will be very significantly whacked lower, if only for a short while.
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The ultimate sell signal


Its a generally overlooked issue, but it is the case that once the fed cut rates, that is when alarm bells do merit being sounded. For the moment, the econ-data is coming in broadly fine, with corp' earnings beyond superb. A rate hike in June should help to bolster confidence, and of course, the financials especially benefit from such hikes. Until then.... yours truly has few concerns.
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Looking ahead

Another very busy week with a truck load of earnings. Most notable: GOOGL, CAT, FB, F, QCOM, AMZN, MSFT, INTC (Thurs'), CVX, XOM


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M - Existing home sales
T - Case-Shiller HPI, New home sales, consumer con'
W - EIA report
T - Weekly jobs, durable goods orders, intl. trade
F - GDP Q1 (first estimate), employment cost, Chicago PMI, consumer sent'

*there are no fed officials scheduled, as the blackout period will be in effect, ahead of the next fomc meeting of May 1-2.
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Have a good weekend
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*the next post on this page will likely appear 6pm EST on Monday.

Friday, 20 April 2018

Cooling into the weekend

US equity indexes closed broadly lower, sp -22pts (-0.8%) at 2670. The two leaders - Trans/R2K, settled -0.8% and -0.6% respectively. VIX settled +5.7% at 16.88. Near term outlook offers renewed upside to the sp'2740/50s.. so long as the 10yr yield remains <3.00%.


sp'daily5



VIX'daily3



Summary

US equities opened in minor chop, and saw weakness into the afternoon. There was a largely failed attempt at a latter day rally. Its notable that despite ending the week on a bearish note, the sp' still saw a net weekly gain of 13pts (0.5%).

With weak equities, volatility climbed for a third consecutive day, settling in the upper 16s.
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Another summer day in the latter half of April. Bullish!
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Extra charts in AH (usually around 7pm EST) @ https://twitter.com/permabear_uk

Goodnight from London
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*the weekend post will appear Sat'12pm EST, and will detail the US equity indexes

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Thursday, 19 April 2018

Waiting for a delivery

US equity indexes closed moderately weak, sp -15pts at 2693. The two leaders - Trans/R2K, settled -0.9% and -0.6% respectively. VIX settled +2.3% at 15.96. Near term outlook offers opex chop into the weekend.


sp'daily5



VIX'daily3



Summary

US equities opened a little weak, and saw gradual cooling into the afternoon. The low of 2681 should hold into the weekend. Tomorrow is opex, and it would be natural if the market markets want to pin the market to around sp'2700.

Volatility did pick up, but with sp'2681, the VIX maxed out at 16.92, and settling in the upper 15s.
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Waiting for a delivery

Over the years, some of my calls have been terrible, but some... profoundly right. Since the spike high of $31.18 in July 2016, I've been increasingly bearish on the corporate giant of General Electric.

GE, monthly


We saw a key break of trend in May 2017, and with the loss of the $27s, I boldly called for the $22s. I warned at the time that if that threshold failed to hold, the stock would see the $13s. Naturally... most laughed.

see: https://twitter.com/permabear_uk/status/926600542725529605



The $22s were of course lost, with a straight implosion to the $13s. Having already seen the $12s, its not that bold to call for capitulation sub $10. Further, I do see the stock being kicked from the Dow, and by definition... Flannery would have to quietly walk away, likely no later than spring 2019. So... about those arms and legs...

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ps. Hello 'Wells'. I do tend to remember such tweets. A subscription would suffice, rather than a shipping delivery.
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London, April 19th 2018, sunshine and 80f. Bullish.
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Extra charts in AH (usually around 7pm EST) @ https://twitter.com/permabear_uk

Goodnight from London
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Wednesday, 18 April 2018

Looking ahead

It was a day of mostly minor chop in equity land, with the sp' settling +0.1% at 2708. Meanwhile, oil remains very strong, breaking a new multi-year high of $68.72.


sp'weekly1b



WTIC weekly



Summary

sp: as things are, the sp' is comfortably on track for a second consecutive net weekly gain. It could certainly be argued price structure since late January is a giant bullish pennant, offering new historic highs this summer/autumn. Original big target of 2950/3047 would still be the more natural level at which this market might max out, whether you start from early 2016... or even back to March 2009.

WTIC: a net daily gain of 2.9% to $68.47, as a more natural s/t high would be from psy'70. Jim Iuorio is seeking a near term top, with a downside target of the $63s, and his view is always to be considered.



Looking ahead

Thursday will see the usual week jobs, phil' fed, and leading indicators.

Key earnings: BK, BX, and NVS.



Earnings continue to come in fine...



Its merits some reflection that the earnings beats are on analysts estimates that have generally been recently raised . AXP is fine, but far superior alts are MA and V.  Alcoa is warning of a global aluminum deficit for 2018, and it'll perhaps be useful to check on aluminum prices at least occasionally this summer.
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Normal service to resume

Today sure didn't go as planned. I woke up, boot up my desktop, only to find my private server was offline (malicious attack). So, it was back to my old home here. Tomorrow I'll be back at http://subscriber.permabeardoomster.com.

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A taste of summer
Goodnight from London
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*the next post on this page will appear Thurs', around 6pm EST.

VIX and Index update

US equity indexes closed a little mixed, sp +2pts at 2708. The two leaders - Trans/R2K, settled +1.7% and +0.2% respectively. VIX settled +2.3% at 15.60. Near term outlook offers Thursday cooling, but the market looks comfortably on track for a second consecutive net weekly gain.


sp'daily5



Nasdaq comp'


Summary

sp: a daily of minor chop. Note the settling black-fail doji candle, which does warn of s/t bullish exhaustion. Thursday's do tend to favour the equity bears. Soft downside would be the lower hourly bollinger, which will be in the 2680/70s tomorrow.

nas: a day of minor chop for tech, with the Nasdaq comp' settling +0.2% at 7295, notably holding above the 50dma. Thursday does threaten some cooling, soft support 7200, with secondary at 7k.



VIX'daily3


With equities seeing a touch of cooling into the close, the VIX managed a net daily gain (intra high 16.90), settling +2.3% at 15.60. There is a notable upside gap of 19/20, which would surely equate to sig' downside in equities of 1.5-2.0%. Its something to keep in mind across the next few days.


Looking ahead by 6pm EST

Closing Brief

US equity indexes closed a little mixed, sp +2pts at 2708. The two leaders - Trans/R2K, settled +1.7% and +0.2% respectively. Near term outlook offers Thursday cooling, but the market looks comfortably on track for a second consecutive net weekly gain.

sp'60min



Summary

closing hour action: further micro chop, as market volume remains very light indeed. leaning fractionally weak into the close.

*awaiting AXP earnings, which should be fine, but like many financials... it looks s/t vulnerable. 
Also due: Alcoa (AA)
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... and that concludes Wednesday. A day of mostly minor chop. We're seeing some rather quirky post earnings reactions in some stocks, but the underlying issue... earnings are coming in broadly superb.
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notable stock: BAC, daily


Note last Friday's bearish engulfing candle, and then two consecutive black-fail candles. Today's weakness shouldn't be much of a surprise, as many of the financials are struggling despite earnings continuing to come in fine. If BAC sees a daily close <29.00, the 200dma will be tested in the mid/upper $27s. Due a bearish macd cross, and indirectly suggests the main market will see a red Thursday
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Here in my part of world...


A rather perfect end to the day. A touch of summer warmth, 74f, and the next few days should be equally fine. Have a good evening.

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more later on the VIX and Indexes by 6pm EST

3pm update - awaiting AXP

US equities remain a little choppy, with the s/t cyclical setup leaning weak into the close. Due in AH, earnings from AXP, which should help to keep everyone awake... not least yours truly. VIX is battling to avoid a seventh consecutive net daily decline. Oil has seen a renewed push upward, +3.1% in the mid $68s.


sp'60min



VIX'60min



Summary

The hourly equity cycle is offering a bearish macd cross into the close, which does lean to the equity bears. Note the lower hourly bollinger at 2666, and that will offer big support in the 2680/70s tomorrow.

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notable stock: AXP ,daily


American Express has earnings in AH, and they should be good, but far superior alts are MA and V, whose profit margins are massively better by 5-6x.

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notable strength: MU, daily



After an early morning smack down (for no good reason, other than LRCX weakness), Micron is set for sig' net daily gains.
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weakness, IBM, daily


An ugly post earnings sell down in IBM, which we've seen in a very select set of stocks so far this earnings season. Underlying valuation remains cheap, but INTC, CSCO, MU... far superior.
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strength, BABA, daily


As there is increasing mainstream attention in this one. Notable call activity in the May 195/200s today.

back at the close...

2pm update - metals and miners

US equities remain a little choppy, and will be cyclically inclined to cool in late afternoon. Meanwhile, the precious metals are broadly higher, Gold +$2, with Silver +2.5%. The miner ETF of GDX is currently +0.8% in the $23.10s.


GLD daily


SLV, daily


GDX daily



Summary

Gold/GLD: gold is seeing minor chop, hovering around the soft magnet of $1350. Broadly, its all chop since early 2017. An eventual bullish breakout above the decisive $1400 threshold looks increasingly due. From there, target would be 2400/2500... which is an awful long way up. If correct, monstrous implications for the related miners.

Silver/SLV: unusually, silver is catching the real attention today. We've seen a break >16.90 (as highlighted by Jim Iuorio yesterday), and its open air to the Jan' high of $17.70. 

GDX: the miners are having a reasonable day, more helped via copper/silver, than gold. Broader price action remains choppy from early 2017. Things turn decisive if Gold >1400.  Best miners... NEM, ABX.
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notable miner: ABX, daily


Despite the recent run, Barrick Gold remains m/t bearish. That only changes >17s.

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Equities: sp'60min


Price action remains choppy, and cyclically, we'll be inclined to cool into the close. Minor net daily declines should not be a surprise, and (in theory) that weakness really should carry across into Thursday.

time for some sun...  back at 3pm

1pm update - oil and energy

US equities remain a little choppy, and due a cooling wave. Meanwhile, WTIC is currently +1.9% in the $67s (intra high $68.44). The energy sector ETF of XLE is currently net higher for the week by 3.1% in the $73.60s.

USO daily



XLE weekly



Summary

WTIC/USO: the post Syrian attack cooling sure was brief and minor. We've already seen a push into the $68s. Its effectively open air to psy'70. There will be huge price cluster resistance within 70/75.

*Jim Iuorio notes he is looking for a topping pattern, and looking to sell... with a buy target of $63s.
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XLE: energy stocks are naturally being helped via some pretty significant upside in oil. XLE looks set to challenge and exceed the Jan' high. I favour the quartet of APC, PSX, PBR, and LNG. More speculative; MRO, RIG, CNX, and CHK.
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notable energy stock: RIG, daily


Transocean is well on the way to soft target of the $13s. Things really only get interesting >16.66. The cautious will leave this one alone.
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Lunchtime trade...


Devon isn't one of the energy stocks I generally highlight, but its a fine company. I really like this trade, not least as there is plenty of time on the options clock. FPE 14s. Y 1.0%. NM 6.4%. Earnings May'1st.
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Equities: sp'60min


Price action remains minor chop. Cyclically, we'll be inclined to cool this afternoon. The fed beige book due at 2pm might be an excuse.

12pm update - the chop continues

US equity indexes remain a little choppy, still leaning on the positive side, as earnings are coming in broadly superb. VIX is similarly choppy, but yesterday's low of 14.57 looks intact for a few days. Oil is helping prop up the market, currently +2% in the low $68s... as psy'70 is indeed very close.

sp'60min



VIX'60min



Summary

Little to add, as the chop continues. Cyclically, we're s/t over-stretched, and due some cooling to the lower hourly bollinger, currently at 2651, but rising each hour.

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notable weakness, AMAT, daily


As LRCX has tainted most of the sector this morning, but Micron is now sig' higher....

MU, daily


Roughly.. a 6% swing, washing out the weaker bulls. Big target remains 70/75, unless a takeover arrives first!

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notable strength, X, daily


The bear flag is indeed fully negated. Earnings are due next Thurs' in AH, and should come in good, with a very positive outlook. FPE 7s... cheap.
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time to check on the cheerleaders...