Monday, 6 April 2020

Light at the end of the tunnel

US equity indexes closed very powerfully higher, sp +175pts (7.0%) at 2663. Nasdaq comp' +7.3%. Dow +7.7%. The Transports settled +7.3%.

sp'daily5



VIX'daily3



Summary

US equities opened powerfully higher, inspired by a rather positive US President.. from Sunday evening, whom believes he can see the proverbial 'light at the end of the tunnel'. On that note, my early title for Monday's post was indeed 'light at the end of the tunnel'.

Shortly after... the US President...



The afternoon saw considerable chop, with the closing hour seeing SPX spiking upward.

Volatility was in cooling mode, the VIX settling -3.3% at 45.24. Tuesday will offer a turnaround, and in theory, the mainstream should have another 'reality check' before the Easter break.
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Bullish moon.... 97.1%
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Saturday, 4 April 2020

Weekend update - World equity markets

It was a fiercely bearish month for world equity markets, with net monthly declines ranging from -29.9% (Brazil), -23.0% (India), -21.9% (Russia), -21.5% (Australia), -16.4% (Germany), -16.1% (South Africa), -13.7% (USA), -10.5% (Japan), -9.7% (Hong Kong), to -4.5% (China).


Lets take our regular look at ten of the world equity markets.

USA - Dow


The mighty Dow swung from a high of 27102, to settle lower for a third consecutive month, -3492pts (13.7%) to 21917. The intra low of 18213 was the lowest since July 2016.

Note the 10MA at 26600, and the technical divergence - that stretches back to Jan'2018, which has played out. Next key fibs' of the gains from 2009, are the 50% at 18019, and the 61.8% at 15293. Considering the current collapse into an economic depression, a back test to near/at the Oct'2007 high of 14198, is a very valid m/t target.


Germany – DAX


The economic powerhouse of the EU - Germany, saw the DAX fall for a third month, settling -1948pts (16.4%) to 9942. Note key price threshold of the 8000s... the old double top of 2000/2007. Note the 200MA, which was where the market floored around in 2011. Note the technical divergence (see red dashed line) that stretches back to mid 2015.


Japan – Nikkei


Japanese equities fell for a third month, settling -2225 (10.5%) to 18917. Note the technical divergence that stretches back to 2015. Next major support is around 12k, which appears a given before the Olympics, now delayed to July 2021.


Brazil – Bovespa


The Brazilian market imploded, settling -31151pts (29.9%) to 73019. Momentum has turned negative, as the giant ramp from Jan'2016 has concluded. Collapsing oil/nat' gas prices are going to be a major problem for the Bolsonaro administration. Key stock: Petrobras (PBR).


Russia - RTSI


Russian equities declined for a third month, settling -285pts (21.9%) to 1014. Momentum has turned negative, as the 600/500s look viable. The oil/economic war against the house of Saud continues, and Putin can be expected to win.


India – SENSEX


Indian equities imploded, settling -8828pts (23.0%) to 29468. Next support is the Feb'2016 low of 22.5K, with massive support in the low 21000s.


China – Shanghai comp'


Chinese equities cooled for a third consecutive month, settling -130pts (4.5%) to 2750. No doubt, the PBOC are massively meddling to prevent sustained/powerful downside.


South Africa – Dow


The South African market fell for a third month, settling -256pts (16.1%) to 1337. Note the spike from the 200MA.


Hong Kong – Hang Seng


The Hong Kong market declined for a third consecutive month, settling -2526pts (9.7%) to 23603. Note the spike from the 200MA, which was a key floor in early 2016.


Australia – AORD


Australian equities fell for a second month, settling -1400pts (21.5%) to 5110. Note the settlement from around the 200MA... as was the case in late 2008/early 2009.



Summary

All ten world equity markets settled net lower for March.

Brazil and India lead the way lower, whilst Hong Kong and China were most resilient.

All ten markets settled below their respective monthly 10MA, making for a bearish monthly close.

None of the March candles offer any definitive sign of a floor.

April, or somewhat beyond, could be expected to test, if not exceed the March lows.
-


Looking ahead

It will be a short four day trading week, as the US and most other world markets will be closed for 'Good Friday'. The market will clearly have to absorb another truck load of Corona related news.

Earnings: LEVI (Tues')

Econ-data: 

M -
T - JOLTS, consumer credit (3pm)
W - EIA Pet', FOMC mins' (2pm)
T - Weekly jobs (consensus 5.0M, vs 6.6prior), PPI, consumer sent', wholesale trade, Fed' bal' (4.30pm)
F - CLOSED*

*Data scheduled: CPI, US T-budget, although those might brought forward a day, or delayed until w/c Apr'13th.
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Final note

These remain the most bizarre of times, in almost every sense. April is an economic write-off. The issue is whether May will see an attempt - by at least a few countries, to return to semi-normalcy. I'm not particularly optimistic of that, as the original projections I saw in late Jan/early Feb', were often suggestive of a peak in Corona cases, no earlier than mid May. If correct, most will remain on lockdown into June.

A grander issue is whether Q3 will offer a 10/15% recovery of a likely Q2 GDP of -25/35%. Can we expect a hyper V shaped recovery, or a more drawn out U into 2021? If we see a second wave of Corona related issues into winter 2020/21 - as I'm guessing, then the recovery will drag out into spring/summer 2021.

Considering February broke a new historic high, I count April as month'3 down. The notion March saw a key floor from 2191... no. No way, not least when you consider price action and structure in other world equity markets.

At some point, equities will find a mid/long term floor, and begin another multi-year ramp. My best guess is for a key floor from within the sp'1700/1500 zone.

For the next cycle, we all know the good names by now, right?

The Dow components

Tier 1: $MSFT $JPM $AAPL $DIS $PFE
Tier 2: $INTC $V $HD $JNJ $MRK
Tier 3: $CSCO $AXP $CAT $PG $UNH
Tier 4: $MCD $GS $CVX $WMT $KO
Tier 5: $MMM $VZ $XOM $NKE $RTX
Tier 6: $TRV $DOW $BA $IBM $WBA

You could argue for days about whether INTC should be ranked above CSCO. The key point is that these are (mostly) fine companies with a global customer base, that will be around for the very long term. I say mostly, as Boeing remains problematic, not least as its still intent on trying to get the 737MAX back into the skies.

There are many other valid targets of course, not least AMD, NVDA, GILD, BMY, and the tier'1 gold miners of GOLD and NEM.

In the meantime, try to enjoy these wild market days within the twilight zone. One day, we'll be back to sustained and mind-numbing algo-bot upward melt. Whilst you won't likely miss the lockdown, you will miss the crazy price action of 2020!

Yours... bullish four day weeks.

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*the next post on this page will likely appear 5pm EDT on Monday.

Thursday, 2 April 2020

Bad News Thursday

US equity indexes closed on a positive note, sp +56pts (2.3%) at 2526. Nasdaq comp' +1.7%. Dow +2.2%. The Transports settled +1.3%.


sp'daily5



VIX'daily3



Summary

The latest weekly jobless claims data made for a classic 'Bad News Thursday', printing 6.648M vs 3.307M prior week (revised). Equity futures swung lower from SPX +40pts to -30pts, opening in chop mode.

The US President appeared...


That tweet helped give oil and the main equity market a very significant kick upward in mid morning. Whilst a supply cut is necessary - not least as global storage capacity is near 100%, it will do little to stall the looming bankruptcy of most of the US energy industry.

Yes, I would agree its possible the US Govt/taxpayer will also issue a bailout to this sector. Again though... extracting a resource - in this case WTIC and Nat' Gas, at a perpetual loss, is sheer madness, and is NOT. SUSTAINABLE.

... but hey, we're in the twilight zone, and in these times, loss making companies are still something that many think is 'fine'.

The afternoon saw considerable chop, leaning

Volatility remains extremely elevated, with the VIX settling -10.8% at 50.91. A major drop, but we're still talking about VIX in the FIFTIES!
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A fair number of you won't listen, but it merits hearing...



Denniger just calling the monsters... for what they ARE.

Its fascinating to see how most of those whom have long touted 'freedom and liberty' act like little sheep to the political hacks, who are using the Corona virus to quietly pushing through some very dark sided legislation. Disagree? Well, I'm guessing you were the one panic buying in early/mid March, as you've never seen anything coming further than your next Dominoes pizza delivery.

To the rest of you... hang in there, the collective can't stay 100% insane forever. At some point, semi-normalcy will return... if only for a few months until the second wave, from October onward.
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Sunset in the city of Corona
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Wednesday, 1 April 2020

Ugly start to April and Q2

US equity indexes closed powerfully lower, sp -114pts (4.4%) at 2470. Nasdaq comp' -4.4%. Dow -4.4%. The Transports settled -4.9%.

sp'daily5



VIX'daily3



Summary

It was an ugly start to April and Q2, with US equities opening powerfully lower on renewed concerns of Corona. The market leaned broadly weak into the closing hour, with the SPX printing 2447, just 103pts shy of min' downside target of the upper end of red gap,

Volatility picked up, with the VIX settling +6.6% at 57.06.


Corona updates

First, the Denniger...




Second, from a few days ago, Dore, on a spiraling situation in Italy...



When the Government order you to stay home, taking away your source of income, and when you finally run out of food, what do you expect MILLIONS of people are going to do? The societal and economic implications should be clear, and they are ARE terrifying, as the lockdown is set to continue for weeks to come.


Finally, Rogan with Dr Hotez


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Tuesday, 31 March 2020

A fiercely bearish March

US equity indexes closed significantly lower, sp -42pts (1.6%) at 2584. Nasdaq comp' -0.9%. Dow -1.8%. The Transports settled -0.7%. Near term outlook offers cooling to at least the mid sp'2300s.

sp'daily5



VIX'daily3



Summary

US equities opened a little weak to 2592, but swung upward to break a fractional new cycle high of 2641. Meanwhile...


So... if that is eventually agreed, the Fed will no doubt be buying (if indirectly) another $2trn of bonds. If you think that is a valid solution to the current economic depression, I got a bridge that spans the Atlantic ocean I can sell you.

The afternoon saw renewed weakness, with the market ending the month/Q1 on a pretty weak note. Volatility was in cooling mode, with the VIX settling -6.2% to 53.54.


A fiercely bearish March

Despite a seven day swing from 2191 to 2641, it was unquestionably a fiercely bearish March, as February's bearish engulfing candle played out.

spx'm1b


For the month, the SPX saw a net decline of -369pts (12.5%) to 2584, having printed a low of 2191.

I would merely ask... what 'drama' will April/Q2 offer? 
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The sun sets on March/Q1

Full moon is April 7th
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Monday, 30 March 2020

Peter Schiff has the high ground

US equity indexes closed very significantly higher, sp +85pts (3.3%) at 2626. Nasdaq comp' +3.6%. Dow +3.2%. The Transports settled +1.2%. Near term outlook offers a turnaround Tuesday, into the March/Q1 settlement.

sp'daily5



VIX'daily3



Summary

US equities opened choppy, leaning on the upward side, but the gains were shaky, with a few indexes briefly turning red, and then resuming upward.

Social distancing between the Faber and Cramer

The afternoon saw considerable chop, but leaning upward to print sp'2631 in the closing hour. Volatility remains extremely high, with the VIX settling -12.9% at 57.08.

As for the Corona, much of everything I expected is coming to pass. Here in the UK, the lockdown is now expected to continue into May... if not June. There is even talk of 'social distancing measures' to extend into 2021.

For now, I'll merely suggest you listen to the following from Denniger. Its the best 13mins and 45 seconds of audio so far this year.



Whilst you might not like what he has to say, he is merely stating the facts.
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Peter Schiff has the high ground

Of the many Star Wars memes, 'Peter Schiff has the high ground' came to mind.



I guess you could also say... he was the chosen one.

ps. Its safe to assume Youtube (via Comcast or Sony) will pull this video sooner, rather than later. Download a copy!
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Sunset in the city of Corona

Full moon will be April 7th
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Saturday, 28 March 2020

Weekend update - US equity indexes

It was another wild, but net-bullish week for US equity indexes, with gains ranging from +12.8% (Dow), +12.6% (Trans), +11.5% (NYSE comp'), +10.3% (SPX), to +9.0% (Nasdaq comp').


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

sp'500



Nasdaq comp'



Dow



NYSE comp'



Trans





Summary

All five US equity indexes settled very powerfully higher.

Four of the indexes broke new cycle lows on Monday, the Transports being the exception.

The Dow lead the way up, with the Nasdaq a little laggy.



Looking ahead

Another very busy week can be expected, not least with literally hundreds of Corona related news headlines each day. The Friday jobs data from the BLS will not be pretty, and will be indicative of the US economy collapsing into an economic depression.

Earnings: RH (Mon'), BB (Tues'), STZ (Fri').

Econ-data: 

M - Pending home sales, Dallas Fed manu'
T - Case-Shiller HPI, Chicago PMI (market con: 40, vs 49prior), consumer con'
W - ADP jobs, PMI/ISM manu', construction, EIA Pet'
T - Weekly jobs, intl' trade, vehicle sales, EIA NG', Fed bal' sheet
F - Monthly jobs, PMI/ISM serv'
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*UK/European clocks jump ahead one hour, the night of Mar'28/29.
**As Tuesday is end month/Q1, I would expect more dynamic price action on extremely high volume.
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Final note

Last week was wild, swinging from sp'2191 to 2637, for what was a classic 'bear market rally', and such extremely powerful rebounds have to be expected. I could highlight a fair number of monthly charts for some perspective, and after some thought, this sums up what I want to emphasise...

SPX, m1b


February's hyper bearish engulfing candle counts as month'1 down. March has seen severe bearish follow through, notably breaking the l/t upward trend from 2009. Further, I would note the technical divergence that stretches back to Jan'2018.

The grander issue - at least to yours truly, is whether the 10MA can be broken and settled above on a multi-week/month bounce. Even with trillions of QE being thrown at the system, it won't be easy to turn the m/t trend back to outright bullish.

If the bulls can't break and hold >3000 (to be decisive), then a subsequent wave to 1700/1500 could be expected. That is likely some very considerable time away though. First things first... the market needs to find/build a floor, and then push for 2900/3000.

On the Corona, I will merely say... as an onlooker to humanity, its fascinating to see how easy a society/species is willing to give up their freedom on the command of the very same political hacks, who never accepted the virus was a serious problem until just a few weeks ago. UK PM Johnson is a prime example, who chose to shake the hands of known infected patients, and now ranks as the first world leader to have the virus. Am I supposed to have any degree of respect for him? Never mind that he is the same arrogant fool that took away my right to live and work within the EU.

To the older and the ill... stay at home! To the rest of you, I offer the hope that semi-normalcy might occur by June/July. Be careful out there... in the twilight zone.

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Have a good weekend
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*the next post on this page will likely appear 5pm EDT on Monday.

Friday, 27 March 2020

Who should bail it out?

US equity indexes closed powerfully lower, sp -88pts (3.4%) at 2541. Nasdaq comp' -3.8%. Dow -4.1%. The Transports settled -4.3%.

sp'daily5



VIX'daily3



Summary

US equities opened very significantly lower, as the three day bear market rally - which is what it was, came to an end. The afternoon saw considerable chop, leaning on the upward side to 2615, but then spiraling lower to 2534, a rather classic (and not surprising) case of 'rats selling into the weekend'.

Volatility picked up, with the VIX settling +7.4% at 65.54.
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Who should bail it out?

As we proceed along the twisted path within the twilight zone, I'm hearing many of the same things I heard in 2008/09.

Original tweet thread/link:
https://twitter.com/NickPerrotta2/status/1243564831778779138



On an individual level, any failing business is a soul destroying event for both the owners and employees, but that is the nature of business. There is a risk of failure, as much as there is one of success.

Q. Is it such a radical thought (I realise to most it is), that a business have cash reserves to help them survive at least a few months of 'crisis' ?

Ohh, and I don't want to hear anything along the lines of 'this time is different'. The fact remains, the entire economic system has been perpetually on the edge of the financial abyss for years. Most companies are loaded with debt, leveraged to an insane degree, and have next to zero cash reserves.

I have ZERO sympathy for such companies, especially the mid/large cap' giants. Boeing is a prime example of the INSANITY in the early 21st century. A company that spent tens of billions on stock buybacks to manipulate their EPS and stock price upward, and when a crisis occurs... they immediately go to the US Govt'/taxpayer with a begging bowl... or rather... a 'request/demand' list. 

... and most pathetic of all, is that the US Govt' are doing exactly as they have been asked. The political elite really do care that CEO Calhoun* is able to afford a 100ft yacht. 

*Keep in mind, Boeing, lead by Calhoun, continues to attempt to pressure the FAA to re-certify the 737MAX, an inherently unbalanced plane, trying to fix a hardware problem, via a software update. Incredible!

Your view...


For the record, I would vote 3.

Ohh, and I want to make it clear, I don't much agree with the current lockdown, which is sending the US/global economy into a depression. The lockdown is almost entirely pointless, except for 'flattening the curve', in terms of the number of old/ill people who are being affected by the virus, and pressuring the healthcare system.

I'm well aware some of you don't wanna hear that. Further, is it now borderline illegal to suggest the lockdown is a 'net problem', rather than a 'net solution'?

I'm guessing you might also be the same person who in late Jan/early Feb', (even as late as early March?) who didn't see what was coming, and who didn't prepare ahead of the populace who would (inevitably) turn hysterical, and empty the shelves in your local grocery store.

We have an interesting summer, and more so... autumn/winter ahead. 
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Eyes on.. yours truly

One of the very few planes departing

A moment of peace

Twilight sky - Venus and the Crescent moon
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Goodnight from London
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