1. Moving the markets

Equities headed south in early trading, which was the validation confirming yesterday’s “Sell” signal for “broadly diversified domestic equity ETFs.” The markets dumped at first then see-sawed higher in what can be considered a drop, pop, drop and pop kind of session, during which all 3 major indexes ended in the green for a change ending a skid of 5 consecutive losing days for the S&P 500.

Our main directional indicator, the Domestic TTI, recovered a bit but remains stuck on the bearish side of its trend line. This will keep us on the sidelines until the TTI breaks back above it and shows some staying power at the same time. With the current wild swings in the market, and a projected year-end rally, we may find ourselves back in sooner rather than later.

Today’s roller-coaster was all about the latest version of the trade headlines. First, there was news of a trade truce causing a market bounce, then a drop, as the trade truce was denied, followed by a rally on news that next batch of tariffs have been shelved for the time being.

This back and forth surrounding one event make it questionable whether this late rebound will have legs or falter again, as we’ve seen in the recent past. Additionally, there is ongoing tightness of financial conditions which, if not resolved, may have a negative effect on equities, if this chart forecast is correct.

Read More

1. Moving the markets

For a while it looked like the opening bounce had some starch in it, but that hope dissipated in the hurry, when a mid-day dive gave the bears the upper hand and south went with the Dow being down -250 points at one time.

A late afternoon levitation gave the bulls some hope that we might conquer the various unchanged lines again, when suddenly the sell-off resumed, and the major indexes dove into the close but off their lows for the session.

A host of worries occupied Wall Street traders. The latest Brexit developments appear to have a live of their own and are not giving anybody the warm fuzzies. Powerhouse Germany, the economic engine of Europe, started to sputter by seeing its own economy contracting -0.2% in Q3, its worst GDP print in 3 years, as car production collapsed.

China’s numbers are showing a mixed picture with retail sales slowing but industrial output and investment ticking higher. Domestically, consumer prices rose as expected, even though the increase of 0.3% was the fastest rate since the start of 2018. The good thing is that gasoline contributed to much of that, so we can expect that to reverse in view of collapsing oil prices.

With the markets, and our Trend Tracking Indexes (TTIs) as well, having wavered in and out of bullish territory, one trader summed up the current environment perfectly by noting that “we’re now in a deer in the headlights environment,” as every move looks to be tentative and unconvincing.

In the end, today’s move pushed our Domestic TTI to -2.18%. Despite having been patient only partially invested in a low volatility ETF, we have now reached a point below the trend line that warrants a move out of the market and onto the sidelines. Unless, a bullish move is happening tomorrow, I declare this domestic “Buy” signal to be over effective 11/15/18.

However, in this current market environment nothing surprises me. It could very well be possible for the markets to turn around again and generate a new “Buy,” which would let us participate in the much-anticipated year-end rally, in case it materializes.

Read More

1. Moving the markets

Despite several attempts to pull the major markets out of yesterday’s hole, the efforts failed with the Dow and S&P 500 sinking moderately while the Nasdaq ended the session unchanged. Not helping matters was the fact that oil prices tumbled -8.11% and ended up barely hanging on to the 55-handle after having now fallen for a record 12^th day. Ouch!

The reason is not that far fetched in that I believe this trend is a sign of a sluggish or even reversing global expansion. We’ll have to watch and see if this turns out to be a canary in the coalmine as far as the future direction of equities is concerned.

The initial market levitation was helped by news that China’s top trade negotiator is set to meet Mnuchin in Washington later this month to work on resolving the trade dispute. That headline was later questioned due to lack of information about concrete steps which, as we’ve seen many times before, resulted in the markets losing their early upward momentum and south we went, while dip buyers were still conspicuously absent.

Stock specific news did nothing to encourage any bullish behavior. While GE’s stock finally bounced back, its bonds did not and moved into junk territory. Heavyweight Apple slipped back below its 200-day M/A and gave back 1% on the day. The FANGs had an early bounce but closed unchanged.

In the end, it was a day that offered no clue whatsoever as to future market direction. We remain on standby with our next potential domestic “Sell” signal and will act once we get a better clue as to where things are headed next.

Read More

1. Moving the markets

Friday’s market weakness continued through today with the major indexes getting spanked and surrendering just about all last week’s gains, which makes Wednesday’s robust bounce suspicious in terms of resumption of the bullish trend.

At least for right now, it appears to have been a giant head fake, just enough to generate a new “Buy” signal, as our Domestic TTI crossed its long-term trend line to the upside by a solid margin. As mentioned before, we got our feet wet via some conservative low-volatility ETF exposure, which has held up better than the S&P 500.

Several events have contributed to this sudden turnaround from bullish to bearish sentiment. For one, oil prices haven doing their best imitation of a swan dive and have reached a point that is 20% off their recent highs with prices barely hanging on to the $60 handle. That has been a shock to investors and brought up the so far unanswered question as to whether this is simply a result of a slowing global economy.

And, as we all know, the markets have elevated during the bullish periods of this year by a handful of big hitters like Amazon and Apple, along with the FANG stocks, all of which have seen corrections, which are magnified in the varies indexes due to their enormous market capitalizations.

Our Domestic TTI crossed is trend line to the downside by -1.52% (section 3) making it questionable whether the current “Buy” signal can be maintained. I will watch the market for a day of two, but will act quickly to liquidate our position, should more downside come into play.

This entire situation of directionless trending reminds me of the dot-com bubble, which burst in 2000, when we had 3 whip-saw signals before the bear market finally established itself and lasted around 17 months. As frustrating as it is to some, this is exactly why we must participate in all “Sell” signals, so that we have a chance of avoiding financial disaster whenever it strikes.

Read More