#MarketTiming – bellwether stocks to surge again…

After a three-day pause in long term breadth it appears the bull market is ready to move these stocks up once again.

What to look for right now?

Buys on the open tomorrow (Friday) for a bullish surge into the weekend with the likelihood this continues for a time next week.

My “bellwethers” are TSLA, NFLX, AMZN, GOOGL, TWTR, BIDU, AAPL, FB, NVDA, BABA.

Notice most of the stocks have been in consolidations for the past week or so (see the chart panel below). Some are in clear bull flags – NVDA, TSLA — while others simply remain in strong up trends – AMZN, GOOGL, FB. Since stocks generally move with the market, and the mass psychology of the market is again bullish after a pause, I expect most of these to move up more now.

For gamblers looking for the quick bounce — NFLX!

(click on the chart panel for a larger view)

$SPX $SPY – walking the edge of the long-term cliff…

As we end another month and the first half of the year, I thought I’d take a quick look at a long-term monthly of chart of the SPX/SPY, the S&P 500 index and its primary ETF.

Someone (probably the great trader, Linda Raschke) once said if the short term is confusing in the stock market just back to a longer term view and all will become clear.

So what is clear in the here and now?

The bull market is still in progress (see chart below) although that progress has been stalled for this year to date.

The current upswing is completing a three-month rally so a sell-off could come any day now.

The technical indicators MACD and CCI are lagging, setting up as in the past (see the red rectangles on the chart) for a possible sell-off. But at the moment the pattern this time is not complete.

If the SPX had closed lower this month than it closed last month and its volume finished higher than its volume last month, I’d have to say the sell-off is likely right now. But that didn’t happen.

Obviously, the market in general is walking along a cliff (see the blue trend lines)… But until it falls off that doesn’t matter.

So is it going higher? I hate to but I have to shrug on that. Could be but with that cliff edge so close better to be be alert, and best to put in place some protections like trailing stops on any long-term investments.

Buying this? Okay, it remains a bull after all. But, me thinks, only for the short-term while standing every day next to the exit door. If the market charges higher, the short term will have you in, and if it goes screaming lower the short term will take you out.

(click on the chart for a larger view)

#MarketTiming the second biggest mountain in the stock market range

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)

#MarketTiming – $TWTR leads latest swing with 33% gain

Been on vacation from this blog for awhile but am back now and will try to be more diligent in posting here.

Now, as it turns out, appears to be an appropriate time to return since latest swing trade on the long-term breath signal will close officially on the open tomorrow. This swing began on the open of the market on 5/31, twelve trading days ago.

In the bellwether stocks (see chart panel below), as of the close Friday, TWTR led the stocks I consider to be bellwethers in this bull market with a 33.2% gain, followed by TSLA up 24.1% and BIDU up 12.6%. Twelve trading days – I’ve said it before but it bulls repeating…this is what swing trading is all about. The position in stocks will be in cash waiting for another swing to begin.

Should be noted, the 3X-leveraged ETF, TQQQ, which tracks the Nasdaq and makes general swing trading easier, is up 12.1% for the trade. FNGU, an 3X-leveraged ETN trading based on the NYSE FANG stock index, is up 33% (remarkably it was relatively small volume).

In addition to TWTR, TSLA, and NFLX, the bellwether stock list also has AMZN, NVDA, GOOGL, BIDU, BABA, FB, and AAPL. The gains for the up swing just ending are in the white flags on the lower right of the charts below. That is a calculation per $100K traded in each position in order to get both a dollar-earned and a percentage gain. Note AAPL is the laggard on the list, up less than one percent for the swing, $800 on $100K. Another example from the charts – NFLX is also up double-digits, 10.7%, $10,690 for the swing.

As for the general market, the sell signal for tomorrow’s open has come most likely because this rally — which longer term price-wise began in early May — is up a lot, overbought and tired.

I would not be surprised, however, by another bounce since short-term breadth has been declining for six consecutive days. Most likely that signals the bounce, at least a feeble one, before a bigger down swing, but if one if particularly bearish after this run up it could signal a hard down thrust this week before the bounce.

(click on the chart panel for a larger view)

#HousingStocks and the three little bears…

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

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)

#MarketTiming – Plunge to a climax low?

The general market seriously tanked today – Dow down 724 points, SPX down 68, the Nasdaq Composite down 178.

And it was an across-the-board slaughter as every one of the nine sector ETFs I follow slammed into sell signals, with eight of the nine now oversold on the close.

The all-important long-term breadth indicator – the McClellan Summation index — is on its fourth day down, making it obvious which side of the market to be on, but even more telling is that this is a wind down that began nearly two weeks ago on the first day down from the bounce top on March 12th (see the chart below).

There is a lot of stuff going on that could have led to this drop — Trump, Trump’s tariff plans, Trump’s saber rattling, Trump’s staff members bailing as fast as they can, the Trump chaos (we have a sitting President in litigation with a porn star and so far she and he lawyer are kicking his and his lawyer’s butt), uncertainties springing up everywhere; and the Fed is raising interest rates.

All that is taking a toll of course but this a market that has been moving up too far and too fast so the last two weeks were at some time inevitable.

Is this a bear market? Still hard to tell. The VIX, which measures volatility, is above 20, which is the territory for a correction in a bull market, but it is for the second time this year flirting with the 25-level (it closed at 23.34 today), and that is the door to a bear market. If the SPY (SPX) takes out February low either right now or after a bounce without a significant rally, a bear’s growl may, for sure, be heard.

The trouble with bear markets is by the time everyone feels enough pain to panic they are over. I suspect if this becomes a bear market that pain is going to last a lot longer than anyone believes.

But back to today. So was this drop enough downside to make a climax low. Probably not but it could lead to another quick bounce. Given that there are now pretty defined resistance trend lines in place (see the chart), this next bounce might be worth trading but it is not likely to do anything more than produce another selling for shorting opportunity.

Regardless, this is a market that after two weeks down is oversold everywhere. Four times in the last seven days, my nifty-50 stock list has had 40 or more stocks on sells, which usually indicates the bottom of a swing or the beginning of a bottom. CNN Finance’s “Fear and Greed” index is at an “extreme fear” level (at 9…it can’t go below zero), which longer-term is usually buy territory. As noted above all of the sector ETFs, as well as the index ETFs I follow like TQQQ, UPRO and TNA, are also oversold.

All in all, time for another bounce…

Except this time, maybe a crash into a climax bottom tomorrow and Monday instead (an echo of 1987)…

SWING TRADING SIGNALS:

LONG-TERM BREADTH: Sell (Day 4).

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

CONTEXT:

SPY CLOSE – 263.67
QQQ CLOSE – 162.8
CNN MONEY’S FEAR AND GREED INDEX: 9, falling, extreme fear level).
NIFTY-50 STOCK LIST: 8 Buys; 3 Overbought, 24 Oversold, 1 new buys today, 13 new sells.

(click on the chart for a larger view)

$SPY options – another freaky Friday?

Last Friday, the calls in what I’ve ironically labeled for myself the “Fool’s Game” exploded 250%.

In my post in this link below I noted that going into that Friday, my game was looking at its first losing week this year and there had been no trending day during the week also for the first time this year. I define a trending day as any day either the weekly SPY calls or the puts close with a 100% or more gain.

TRENDING DAYS IN THE FOOL’S GAME

So what’s this week look like? Pretty much the same as last week.

As of today’s close, this day-trading system, buying SPY calls and/or puts, expiring either Wednesday or Friday, is losing money, a jarring 81% for each $10K traded (it was losing 152% at last Thursday’s close). Obviously, one does not trade this with any more than a small portion of any account. In addition, this week again there has been no trending day.

Can last Friday be happening again this week? I’m going to suggest — yes!

SPY is down this week four days in a row (not much) which tends to be a magical number for a turn-around in my experience with swing trading, especially in this bull market. The Nasdaq Comp is down three consecutive days. CNN Finance’s “Fear and Greed” Index is down four days to 21, an “extreme fear” level, a neighborhood in which one should consider going long. Yesterday, 40 of the stocks in my nifty-50 stock list were on sells (that is usually the bottom or the beginning of the bottom in any downswing, however small). Today those stocks clicked up to just 38 on sells. The VIX gave a swing buy signal to go long on tomorrow’s open.

And tomorrow is Friday. There have been twelve trending days by my definition so far this year and seven of them have come on Friday. Freaky.

Added all up, tomorrow looks like a run to the upside again and the calls could go crazy, again, if its another trending day.

Or the market could have a monster fifth-day-down crash…but then that would also be a trending day, only in the puts instead.

#SwingTrading – 3x Leverage for the short-term swings

If one is a swing trader in ETFs 3x-Leverage is the name of the game.

For example, the currently short-term breadth indicator I follow gave a swing buy signal last Thursday for Friday’s open and the market exploded to the upside Friday. While the Dow and the SPX stalled out today, the Nasdaq put on another up day, actually the seventh in a row. The same short-term breadth signal that gave the buy for Friday morning has now given a sell for tomorrow’s open.

I will not be surprised if tomorrow the entire market takes a dip, likely just a dip, not a tumble.

The sells on the ETFs are on tomorrow’s open but, in the face of today’s heads-up on the sell signal, let’s take a look at how the leveraged ETFs done and why they are the name of the game in short-term index and sector ETF trading.

Take a look at the charts below. The white flags on the lower left are the gains on the swings so far this year (longs only) and the white flags on the lower right are the current gains. Both numbers are calculated on buying $100k on each trade in order to not only give a dollar amount but also to correlate with the percentage gain.

We’re talking a mere two-day bullish trade, and TQQQ (the Nasdaq) is leading the indexes, up 5%, while SOXL (semiconductors), up 7.6%, among the sector ETFs, leads TECL (tech) up 4.5% and LABU (biotechs) up 4.3%.

Two days. Not a bad trade if one chose to close on the close today. Regardless, because of the signal, they all will be cashed in on the open tomorrow.

Consider for a moment the three charts in the column on the right of the panel. The top two are 3x-leveraged financial ETFs — FAS (big banks) and DPST (regional banks) – and the one in the lower right corner, NAIL, is a 3x-leveraged EFT for home building stocks. NAIL, down year-to-date, had a nice move on this swing, up 6.7%, but note where it is in relation to the two financial ETFs above… This is housing lagging the banks, particularly the regional-bank stocks.

I bring this up because of history — the action in those sectors looks a lot like, almost identical in fact, to how they looked in 2007.

With that I leave this post. As far as swing trading goes, will be in cash tomorrow.

(click on the chart for a larger view)

#BellwetherStocks – markups in current upswing

Since the current market rally began on the open of February 12th by my market-timing measure, my list of bellwether stocks are all in the black.

Once again, an example of the value of market timing – when the market moves almost all stocks move with it. And if a stock doesn’t, beware the next down swing.

NFLX leads the rally up 30% so far, FB lags up only 4%.

For the rest of the list, see the chart panel below.

(click on the charts for a larger view)