Thursday, 16 January 2020

The algo-bot melt continues

US equity indexes closed broadly higher, sp +27pts (0.8%) at 3316. Nasdaq comp' +1.1%. The Transports settled +1.0%. Near term outlook offers broad chop into OPEX, and the long three day break.

sp'daily5



VIX'daily3



Summary

US equities opened moderately higher, and it was enough to generate another set of new index historic highs. Price continued to melt upward into late afternoon. Volatility remained subdued, with the VIX settling -0.8% at 12.32.


Open day Friday

Friday will (likely) be an open day at http://subscriber.permabeardoomster.com
First post will appear by 8.30am EST.

Whilst price action will be inclined to broad chop for OPEX - ahead of a long three day break, I'm sure there will be some dynamic individual movers that will merit attention.
--

Yours.. awaiting summer sun
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Goodnight from London
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Wednesday, 15 January 2020

Phase one signed

US equity indexes closed a little higher, sp +6pts (0.2%) at 3289. Nasdaq comp' +0.1%. Dow +0.3%. The Transports settled +0.3%.

sp'daily5



VIX'daily3



Summary

US equities opened a little choppy, but leaned upward to break new historic highs to sp'3298. The 12pm hour saw US President Trump, and (tier'4) Vice-Premier Liu He of China finally got around to signing a phase one trade deal...


Whilst the US was represented by Trump, there was no sign of Xi, whom I'm sure had 'better things to do'.  The afternoon saw a minor burst upward on the excuse of the Fed's latest beige book, but then price leaned weak to 3280, only to see a micro ramp to settle a little higher at 3289.

Volatility remained subdued, with the VIX settling +0.2% at 12.42. The three day break.... can't come soon enough.
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Post stormy Tuesday

Ray of hope
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Tuesday, 14 January 2020

This market is high

US equity indexes closed rather mixed, sp -5pts (0.2%) at 3283. Nasdaq comp' -0.2%. Dow +0.1%. The Transports settled +0.9%.

sp'daily5



VIX'daily3



Summary

US equities opened in minor chop mode, but leaned upward, with the SPX breaking a new historic high of 3294 in early afternoon.

There was a piece of spooky tariff-related news though, which saw the algo-bots panic. From a spike floor of 3277, the SPX settled just a little lower at 3283. Volatility saw an afternoon spike high of 13.82, but settling +0.6% at 12.39.


This market is high

It is unquestionably the case that the US equity market is grossly short/mid term over-stretched. Price action and structure is similar to late 2017/early 2018. We have no less than 12 downside gaps to the mid/low 2900s. It is almost inconceivable those aren't filled sooner, rather than later.

Even Wapner of CNBC recognises this market is getting kinda crazy...


In regards to Ark Invest' touting Tesla (TSLA) to $6000: "Is it just me, or is it the theater of the absurd?" - Wapner.

I will just add that whilst the US/China are set to sign phase'1 of a trade deal on Wednesday, I am guessing there will be a 'sell the signing' equity reaction.
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The closing theme to 'Happy Death Day' (2017).
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Monday, 13 January 2020

But the story is this

US equity indexes closed moderately higher, sp +22pts (0.7%) at 3288. Nasdaq comp' +1.0%. The Transports settled +0.8%.

sp'daily5



VIX'daily3



Summary

The equity week began on a positive note, with the SPX battling upward, with a micro ramp into the close, to break a new historic high (if fractional) of 3288.

Meanwhile...


CNBC recognising that even the 'money-losing companies' are also continuing to broadly rise. Spotify (SPOT) was downgraded by Evercore today, on the notion that the sector will remain unprofitable. Did they really just realise there is no money to be made in music streaming?

Regardless, it is the case that (most) of the garbage also climbs within a bull market... a natural mirror to when the best companies are dragged lower within a bear market.
-

Volatility naturally remained subdued, with the VIX settling -1.9% at 12.32. Tuesday will threaten a turnaround, even if the first set of financial earnings (JPM, C, and WFC) come in broadly as expected.
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Yours... hyper bullish the Witcher and his Bard. Eight episodes of 100% magic.
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Goodnight from London
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Saturday, 11 January 2020

Weekend update - US equity indexes

It was a bullish week for US equities, with the SPX breaking a new historic high of 3282, and settling at 3265, which made for a net weekly gain of 30pts (0.9%).


Lets take our regular look at the SPX

sp'500


On any basis, it was a week for the equity bulls, with the SPX breaking a new historic high of 3282. Whilst Friday settled a little lower, that still made for a net weekly gain of 30pts (0.9%). Weekly price momentum remains on the high side, but there is no real sign of that ending.

RSI 75s is the highest since Jan'2018. That didn't end so well, and the current market is clearly s/t vulnerable to a sporadic washout of 5/10%. Even if we do decline to the 3000/2900 zone, that won't take out of range the year end target of 3713. The m/t outlook remains bullish.



Looking ahead

It will be the start of Q4 earnings season. Whilst the market isn't expecting anything great, it will be more focused on guidance. Many mainstream analysts are seeking EPS growth of  +5% to +10% this year. Any earnings statements where that isn't the case, and a given stock/sector will get whacked.

Earnings:

M -
T - JPM, C, WFC, DAL
W - BAC, GS, PNC, USB, UNH, AA
T - CSX
F - SLB, FAST, JBHT
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Econ-data:

M - US T-budget
T -  CPI
W - PPI, Empire state manu', EIA Pet', Fed Beige book (2pm)

*Wednesday will likely see the US and China sign phase'1 of a trade deal. Right now, it would seem unlikely that there will be a signing of phase'2 until after the next election.

T - Weekly jobs, Phil' fed, retail sales, import/export prices, bus' invent', housing market
F - housing starts, indust' prod', consumer sent', jolts

*Friday will be OPEX. Price action can be expected to be choppy, on somewhat higher volume. As the following Monday Jan'20th is CLOSED, there might be an element of more traders selling ahead of the three day break.
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A sunny Sunday

Magnolia buds.. as Spring is coming!

... and night shall fall.
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Final note

We're only seven trading days into the year, but we've already seen some drama, with new equity historic highs, along with WTIC $65s and Gold $1613s.

I would imagine that mainstream attention will increasingly focus on whom the Democrat nominee might be. Its possible the market might use the fear of a President Warren or Sanders, as a excuse to sell lower. Regardless, Trump remains set for a second term, which the market clearly prefers.

There is the fed of course, and it should be clear, they'll print to oblivion and cut rates further on any sign of economic or equity weakness. I'd not expect any policy change at the Jan'29th FOMC.

Finally, there is the US/Iran situation, which is back to 'simmer mode'. Its difficult not to see things heating up again by the early spring, and who doesn't like some geo-political drama?

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

Friday, 10 January 2020

Wolf moon for the Witcher

Friday saw the full moon - the 'Wolf moon', for what was also a penumbral lunar eclipse. 

Note the slight eclipse-shadow to the lower right.

A little earlier...

Another sunset closer to spring

Someone out there knows I'm still alive
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For those wondering where I have been, I will merely say...  'Hmm'.

Yours, hyper bullish Netflix shows.... but bearish the stock.
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 *there will (probably) be a weekend post.

Saturday, 4 January 2020

The outlook for 2020

We are two trading days into the new year and decade, and its time to take a look ahead.

This post is comprised of two key parts. We'll start with the views of yours truly, and then move onto your views.
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My outlook for 2020

There are a fair number of aspects I'd like to cover. They are no in particular order. Lets start with...

The Fed, aka... Print Central. As at Jan'1st 2020, the balance sheet stood at $4.173trn.


The fed appear set to continue t-bill buying of around $60bn each month until at least end March.

Two s/t scenarios...
- Equities break/spiral to sp'3000/2900s, the fed are spooked, and continue to print across the spring and into the summer.
- Equities continue to battle upward to the 3300/400s into the spring. The fed halt QE, the market eventually spirals to 3000/2900s, with the fed then resuming QE.

It should be obvious that the fed are terrified the 'everything bubble' might burst. They are certainly feeling the pressure from the US President, whom continues to deem US equity prices a key indicator of his success or failure.

Further, we have a mainstream that are twitchy on ANY degree of equity cooling. Tom Lee of Fundstrat correctly called it for what it is... a market that sees even a 5% drop as 'Armageddon'.

I would just add, interest rates can be expected to be cut twice more this year. The fed/Powell made it crystal clear at the Dec'2019 FOMC, they see no realistic scenario where rates will be raised across the mid term.
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Stocks for 2020?

The following three lists are periodically updated, and I will endeavour to highlight them via Twitter. 
 
The core list

Tier 1: $MSFT $JPM $AAPL $GOLD $PFE
Tier 2: $INTC $BAC $TGT $NEM $MRK
Tier 3: $CSCO $V $HD $AEM $BMY
Tier 4: $NVDA $MA $DIS $CAT $UNH
Tier 5: $AMD $PYPL $LULU $CVX $GILD

I'd like to give particular attention to AMD.


Thursday's break above the tech bubble historic high of $48.50 is a monstrously bullish event. Psy'50 could be hit as early as next week, and regardless of any cooling wave with the main market, I'd look for AMD to challenge giant psy' of $100 within 12/18mths.

The speculative list

Tier 1: $UAL $LK $BABA $SQ $PAAS
Tier 2: $DAL $ROKU $JD $RIG $CDE
Tier 3: $AAL $FCX $TWTR $AMRN $WPM
Tier 4: $JBLU $TECK $EA $ZM $AG
Tier 5: $SAVE $SCCO $ATVI $SPCE $HL

I will just note, I really like LK, AMRN, and the various silver miners.


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 $UTX
Tier 6: $TRV $DOW $BA $IBM $WBA

IBM continues to see broadly falling revenue, whilst Walgreens might be taken private (to be replaced by Target?).

I would like to add that I see Boeing (BA) as semi-toxic.


I don't say it lightly, but a company that tries to fix an inherent (unbalanced 737MAX plane) hardware issue, via a software update, is not a company I can respect, or whose planes I would fly on.

Price structure for the stock is a giant H/S formation, with a neckline currently around 320. Any price action <300 would merit alarm bells. Things would turn decisive <285, and that would offer 140. Is Boeing the next GE of the Dow? Maybe.

What I am sure of, whilst the 737MAX will be flying once again this year, if there are any further pilot reports of difficulties, the plane might be grounded.... permanently. The implications of that would be monstrously problematic for Boeing.
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Economy:

The US economy can be expected to continue to fair better than almost anywhere else, not least Europe. Ongoing Fed QE and US Govt' deficit spending continues to help mask some of the structural problems. Capital inflows continue to give the US economy an extra kick upward. There is zero reason to expect that to end any time soon.


Commodities:

WTIC - broader demand/supply issues still lean weak, but oil printed the $64s on Friday, largely due to geo-political concerns. Next soft target are the $66s. Is WTIC $100 possible this year? One of the ultimate 'doomer' scenarios would be if the Straits of Hormuz are closed off. For now, the US fleet (and others) remain there to prevent that.

Gold - The Sept' high of $1566s is set to be taken out, perhaps next week, and then onward to the 1650/1750 zone. A new historic high (>1923s) won't be easy, but Fed QE, and further geo-political upset will help. Whilst a cooler USD would inherently be bullish for gold, its not a necessity for new multi-year highs. Finally, as Friday showed, the dollar and gold can climb together. Key stocks: GOLD, NEM, AEM, AU

Silver - a push to the 2016 high of $21.23 is on track by late spring. Any price action >22.00 would be massively bullish for the mid/long term, Key stocks: AG, PAAS, WPM, CDE, HL

Copper - where gold and silver go, copper can be expected to follow. However, it will very likely be the laggard of the trio. Ongoing price action remains broad chop. Things only turn interesting >$3.00. Key stocks, FCX, TECK, SCCO

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The mainstream targets...


Consensus is expecting nothing <3k, but neither anything much above 3500/600.
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Your views

First, many thanks to those that voted, and who retweeted some of the polls, to help garner a better sample size!


Broadly inline with mainstream consensus. Its notable only 22.4% of you expect a settlement <3k.



A monstrous majority expect Trump to win a second term, and yours truly agrees, as I don't see the Democrat party able to select a nominee who could challenge Trump.



Its surprising that 29.5% of you expect rates to be net higher. Yours truly expects at least another two rate cuts this year.



Roughly, two thirds do not believe the US economy will fall into recession, and yours truly agrees.



I believe ALL three asset classes will be net higher for 2020, and I would agree to Gold being the leader.



I would agree with the 59.9% of you that believe the USD will be net lower to some degree.



Clearly, there is a major element of US partisan voting here. Regardless, I would agree with the 42.4% that voted for the Democrats.



A massive 84.2% of you believe the Fed's balance sheet will hit $5trn this year. It could be close. At the current rate of increase, the balance sheet will be around 4.8/4.9trn by year end.



Almost half of you believe WTIC will not print any higher than $80.00. I can understand that, but the middle east remains a tinderbox, with recent events a reminder.



61% of you believe Gold will break a new historic high this year. Certainly, its viable. I would see the 1800s as very probable, but I don't see >1923s this year. I'd imagine a great deal of resistance from the low 1800s upward, and some will no doubt be calling for a double top.
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Looking ahead

It will be the first full trading week of the year/decade. I would expect more active price action on higher volume, as everyone is back up and running.

Earnings:

M -
T -
W - STZ, BBBY, WBA, LEN
T - KBH, AYI
F - INFY
-

Econ-data: 

M - PMI serv'
T - Intl' trade, factory orders, ISM serv'
W - ADP jobs, EIA Pet', Consumer credit (3pm)
T - Weekly jobs, EIA NG', Fed' bal' sheet (4.30pm)
F - Monthly jobs, wholesale trade
-

3.53pm GMT, dusk in the London metropolis

Final note

So... its 2020, and we've already seen a little drama. For now... thats all it is. Broadly, the US economy is still ticking along, with equities m/t bullish, helped by Fed QE.

Q. What is my year end guess for the SPX? I'd look for something in the 3600/700s. If I had to pin a number, maybe 3713.

Again though, if any monthly close under the key monthly 10MA (currently spx'3016), and I'd consider the m/t bullish trend broken. For now, that doesn't look likely. Instead, whilst I expect a washout to 3000/2900s, I would have to see a cooling wave as such.

Its good, and somewhat fun to have targets, but more than anything, its important to be flexible. If there is anything I'm right about... its the latter.

I shall end with thanks to my mini legion of subscribers, and all those who regularly comment, request a chart, and retweet my work on Twitter. It means a lot.

Yours, still alive... in the 2020s.

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

Friday, 3 January 2020

Drama to end the week

US equity indexes closed moderately lower, sp -23pts (0.7%) at 3234. Nasdaq comp' -0.8%. Dow -0.8%. The Transports settled -0.8%.

sp'daily5



VIX'daily3



Summary

With some spooky geo-political news, equities opened significantly lower. However, the bears could only manage an opening low of sp'3222. There was considerable chop, with the closing hour seeing a slight case of 'rats selling into the weekend'.

Volatility printed 16.20 in pre-market, 14.96 in cash-market, and settling +12.4% at 14.02.



The weekend certainly threatens further developments between the US/Iran. Sunday night futures (the wheel spins up 6pm EST) might merit some attention.
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Cruising high above the London metropolis

First sunset of the year/decade

Next full moon is Jan'10th
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Goodnight from London
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Thursday, 2 January 2020

The 2020s begin positive

US equity indexes closed broadly higher, sp +27pts (0.8%) at 3257. Nasdaq comp' +1.3%. Dow +1.2%. The Transports settled +0.8%.

sp'daily5



VIX'daily3



Summary

US equities started the new year/decade on a positive note, with the SPX breaking a new historic high of 3250. There were a few swings, but priced leaned positive into the close.

Volatility remained subdued, with the VIX settling -9.5% at 12.47.


Don't forget to vote!

I will posting a number of polls Thursday evening on Twitter, which will be part of the weekend post. Go vote, and if possible, retweet the polls to your own followers, to help garner more votes to gain a better sample size.
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Yours.. awaiting the first sunshine of 2020
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Extra charts in AH (usually around 5pm EST) @ https://twitter.com/permabear_uk

Goodnight from London
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