$AMZN – a leader stumbles?

Posted on by diogenes227

What if AMZN, after all the hoopla, only spends one day at a $1Trillion market cap?

As noted back on July 1, halfway through this year, in this link:

THE MARKET WALKS THE EDGE OF A LONG-TERM CLIFF

If a leading stock like AMZN stumbles…how mean will a reversion to the mean be? The stock’s 50-day moving average is nearly 150 points below today’s close (see chart below). Hard to believe in this the oldest of bull markets can end but a serious decline always begins with just one day down.

AMZN and AAPL have been the leaders. They both have had moves that resemble blow offs on this last upswing. Not often stocks as big as these run up 25% virtually out of nothing more than a buying panic. Now if AMZN follows today’s decline with more down to come, how long can AAPL alone hold up the market?

Just speculating here on a bit of market timing since it’s damn near impossible to call a market top, but more and more signs appear and one of these days one or the other of the signs will be telling.

Bear markets can come out of the blue. Out of the fog of complacency. Just when everyone believes the leading stocks and the bull itself can go up forever, they and it won’t.

(click on the chart for a larger view)

$SPY – Can Orange Become The New Black Swan?

Posted on by diogenes227

Four days up in a row for SPY and TNA while the Nasdaq, long the leader, now lags…

At the close of the day forty-one of the stocks on my nifty-50 stock list ended in the buy column with fourteen overbought.

Short-term breadth was up again but is now in overbought territory. Usually it takes time to unwind that even when it turns down.

Long-term breadth has been rising now for just three days, giving worthwhile advances in most everything — 40 out of the 50 stock on my list advanced today, and 41 or the 50 are positive on this three-day upswing. It should be noted if long-term breadth turns down now it will put in a fairly serious divergence with the SPY new high (see chart below).

Which bring us to the news?

I don’t ever trade the news but just taking in some market perspective one wonders if something is going to come along and blindside the complacency of this bull advance? Like the odd VIX spike today. Like AAPL gone crazy and possibly running out of buyers besides AAPL itself. Like some sector gone so frothy so fast it signals irrational exuberance has crossed over into insane exuberance (see the pot stocks in the post below).

Or like two of those closest to the jabbering President of the United States suddenly going down coincidentally on the same day, one with a guilty plea and flip, and the other found guilty on 80 criminal counts that could get him 80 years in prison. Trump claims always to be the best, be the greatest, know more than anyone else, likes setting records…how boastful can he be when his administration racks up more convictions than any other, including the Nixon administration?

What’s it mean to the market? As I write this, I see futures are down, with the Dow futures reversing the day. This bull market has been able over and over again to erase the overnight falls in futures. What if this time it doesn’t?

I guess then we might be able one day to look back and say: “Whattaya know…Orange
was the new black…SWAN!”

(click on the chart for a larger view)

#Bitcoin – Don’t follow this crypto mania much but…

Posted on by diogenes227

But I took a look today to see what’s going on lately.

Are you kidding me? There are people out there claiming this will replace the dollar? Replace gold?

Can’t anyone spell T-U-L-I-P-S?

I thought this would end when lap dancers in New Orleans started putting bar-code tattoos on their boobs to collect bitcoin tips.

Now that the drug dealers and money launderers have made a market a few notable institutions (like Microsoft for heavens sake!) had gotten sucked into, and computer nerds in bedrooms with potato chips are “mining” in their spare time, and even more than a few suburban crazies have gone crazy over, what is the real future for this crap? It is in market history (duh, the tulips), and it is not good.

Does anyone actually want to put their savings in this for a buy-and-hold overnight?

That this stuff is priced in U.S. Dollars should tell everyone everything that needs to be told.

(click to enlarge)

#MarketTiming the second biggest mountain in the stock market range

Posted on by diogenes227

Great article and charts from Visual Capitalist:

VISUALIZING THE LONGEST BULL MARKETS IN THE MODERN ERA

If this current bull market can hold for two more months, it will become the longest bull market in the modern era, topping the dot-come bubble.

Uh, did I slip and say “bubble”?

The question, as always, is what comes next and when.

What comes next is obvious – what goes up also goes down. The “when” is the tricky part but it would seem the when is getting closer by the day. I find it hard to believe in percentage gain it can top the dot-com mania but it is possible. If it does, it’s likely the higher it goes, the farther it falls.

One of the most famous quotes in investing history is from Bernard Baruch: “I made my money by selling too soon.”

Might want to keep Baruch in mind as each market pundit, each brokerage analyst, each brokerage, continues to say invest now, invest for the long term, while staring at the second highest mountain in the great rocky stock market range.

(click on link or this chart for a larger view)

#HousingStocks and the three little bears…

Posted on by diogenes227

It is nearly impossible to call a market top before it becomes obvious it has already happened but the housing stocks have come closest in the past to doing it.

Which is why I keep an eye on LEN, KBH, DHI, MDC, NVR, TOL, PHM AND TOL. If all is not quite well with the market (and the economy for that matter), they are often the first to show the strain.

As far back as December of last year I posted an entry here at what I suspected might the first warning sign:

Gonna Huff and Puff and Blow Your House Down

And again in early February of this year, as the SPY began to break down, being led by the housing sector, I posted a warning here to also watch the banking stocks:

Housing stocks – the tails that wag the banking dogs

And finally this last April 24th, another post looking back at the history of these tell-tale stocks:

Housing stocks – Remembering 2008

Which bring us to today.

The ten-year bond rate went through 3% for the first time since 2011, with no sign of turning back, and it appears (obviously) the housing sector did not like it (see the chart panel below).

In 2007, this sector had a long sideways to up move after the initial hard break that had all the stock pundits (on CNBC and elsewhere) proclaiming the market pull back was over. The banks were even making new highs at the time (they are not now).

Then the plunge began into 2008.

The hard break in this sector this year has many of these same housing stocks down 20% already. And they have moved generally sideways — some with a downward bias — since mid-February before today’s four and five percent drops as it appears they are breaking down from their months-long consolidations just like last time.

On the chart panel below, see LEN, DHI, TOL and HOV particularly.

Is this the sign the bears have noticed this Goldilocks bull market has been eating their porridge and sleeping in their bed for far too long? There is a chance they are about to chase her out of the house running for her life into the deep dark forest of the time to come. And if so, the banking stocks will scurry after…

(click on the chart for a larger view)

Declining Margin Debt – the bullish scenario

Posted on by diogenes227

Margin debt, money borrowed to leverage the market, has for now topped and is in decline. Before the top in February it had reached levels far beyond the surges in 2000 and 2007, which could be an ominous indication of what is to come when and if margin debt continues to unravel.

See the chart below and the charts in the link.

Does the fact that it is coming down as major players try to ease out of their leveraged positions mean the market, measured by the S&P 500 stock index (SPX), has also topped? For the time being it would appear it has but history would say that’s not necessarily so.

MARGIN DEBT AND THE MARKET

From the link:

“The first chart shows the two series in real terms — adjusted for inflation to today’s dollar using the Consumer Price Index as the deflator. At the 1997 start date, we were well into the Boomer Bull Market that began in 1982 and approaching the start of the Tech Bubble that shaped investor sentiment during the second half of the decade. The astonishing surge in leverage in late 1999 peaked in March 2000, the same month that the S&P 500 hit its all-time daily high, although the highest monthly close for that year was five months later in August. A similar surge began in 2006, peaking in July 2007, three months before the market peak.”

Simply put, that would mean there is at least another new high coming in the new few months (the summer rally?) before any significant bearish behavior in the stocks.

The heads up is to say those highs, if they come, will be opportunities to sell, or at least tighten stops on long-term investments. A second look at the chart shows that the SPX, coming off highs in margin debt, declines close to 50%. Those were real bear markets. The next one could be worse. Regardless, no matter how low it goes, it is best to be avoided.

There are two possibilities it could be somewhat different this time. One, margin debt itself could surge to another new high along with a strong months-long market rally (see the jingle-jangle in 2015 on the chart); or two, the top is already in and the next leg down (given how astronomically high the margin debt is beyond 2000 and 2007) could be a dead bull dropping right out of the sky (they can not fly forever).

(click on the chart for larger view)

#BankStocks – as GS and DB tumble…

Posted on by diogenes227

It is on my my mind that we’re seeing 2007 all over again in the financial sector stocks.

During the pullback in the SPX since January, housing stocks and the bank stocks have been breaking support and beginning to “stair-step” down (see the chart below), led to the a possible 2008 cellar by DB and now with GS (a bellwether, no less) following suit.

The rest of those I follow – JPM, BAC, WFC, USB – are sitting right on support. It the market takes another hard hit (like tomorrow?), they could all be in solid downtrends.

Needless to say, as the banks and the general market tend to feed on each other in up trends, they can also eat other alive to the downside too.

(click on the chart for a larger view)

#MarketTiming – Swing signals swing again…

Posted on by diogenes227

Yesterday my swing signals for Price, Breadth and Volatility were all on sells. The market went up. Today the signals (see below) have swung again to buys. Across the board.

I’m assuming the market is going up tomorrow.

But the indexes are overbought and the internals are falling apart. Something has to give, sometime…

Sometime, needless to say, is an awfully vague term.

If this sounds like I have no confidence in these signals I don’t intend it to. They are reliable for swing trading. XIV, for instance, is up 67% year-to-date on the Price signal, up 55% on the breadth signal and 80% on the volatility signal (appropriately). See the chart panel below – from left to right Price, Breadth, Volatility.

It’s the market, at this point, going up and up and up relentlessly that bothers me. We’ve seen this before and it’s great while it lasts but it is not, in the end, going to be different this time.

SWING TRADING SIGNALS:

LONG-TERM BREADTH: Sell (Day 17).

PRICE: Buy. (Day 1).
SHORT-TERM BREADTH: Buy. (Day 1).
VOLATILITY: Buy, (Day 1).

CONTEXT:

SPY CLOSE – 259.11
QQQ CLOSE – 176.24
CNN MONEY’S FEAR AND GREED INDEX: (54, falling, neutral level).
NIFTY-50 STOCK LIST: 23 Buys; 11 Overbought, 6 Oversold, 5 new buys today, 7 new sells.

(click on the chart panel for a larger view)

#MarketPerspective – waiting for the Fed…

Posted on by diogenes227

Given how strong the trend is at the moment, the only thing that could kill this stock market rally is the Federal Reserve… Oh, yeah, Wednesday is the “Fed Day.”

So is the Fed going to kill it? It would take a drastic rate increase maybe, or a statement that the sky is falling. And even then, given how this Bull has shucked off every lance it takes, even a drastic something or other might not do it.

I suspect once the Fed suspense is over, either in the aftermath of the meeting announcement Wednesday or Thursday, QQQ is going to vault past its two weeks of resistance at about 146.59 (see chart below) and run like a bull enraged. Needless to say, if that happens, it will take everything in the market with it. SPY has already limped on up.

What I’ve just said is the old market adage: “the trend is your friend.”

Now what if is isn’t, or we are at the end of it?

It is as if the market has been chopping sideways for a couple of weeks just waiting. My nifty-fifty stock list has just registered 25 buys and 25 sells for two days in a row as if completely confused as to which way to go. Going into the Wednesday’s Fed Day, two of my three swing signals are on sells – short-term breath and volatility – but swing price and the most important long-term breadth buys are still in place. Beyond the technical signals, there are many signs that this bull is vulnerable – NYSE margin debt alone at its astronomical level beyond 2000 and 2007 should be making everyone’s hair fall out. CNN Money’s Fear and Greed Index is at an extreme greed level and could turn at any time. Margin debt and fear can feed on themselves and when then do nothing can stop them.

And I’ve just saw a sentiment survey that says retail investors have never been so bullish. In the rhyming of market history that is not good, they always get screwed in the end.

Geez, it’s still a bull market but like all bull markets it doesn’t make it easy. It’s not like anyone want it all left up to the Fed.

SWING TRADING SIGNALS:

PRICE: Buy. (Day 3).
SHORT-TERM BREADTH: Sell. (Day 2).
VOLATILITY: Sell, (Day 1).

CONTEXT:

LONG-TERM BREADTH: Buy (Day 17).
CNN MONEY’S FEAR AND GREED INDEX: (81 rising, extreme greed level).
NIFTY-50 STOCK LIST: 25 Buys; 13 Overbought, 7 Oversold, 4 new buys today, 3 new sells.

Stocks meeting the criteria for a 5-minute on the open Wednesday: only FB.

(click on the chart for a larger view)