5-21-17 Market Commentary



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Market Breadth: With this past week’s market fractional decline, our Bull/Bear Point and Figure Ratio at 0.98 fell from 1.29 last week, declining into bearish territory. The total count of securities in bullish or bearish patterns increased to 3137. The count of bearish stocks increased 16%, while the count of stocks in bullish patterns decreased 12%. The Sand 2 Pirls P&F Market Breadth Summary Chart shows us a market now one week in bearish territory. Paid subscribers have access to the OpenOffice Calc data from which the chart is generated.

The well known market breadth indicator, the NASDAQ McClellan Summation Index (NASI) fell 69 points for the fifteenth advance in twenty-one weeks. At a positive 40.98 points, it continues below all eight tops above +100, and it continues above all five bottoms below -100 in the last 3 years. 

Volume Analysis: In this week’s volume analysis, the NASDAQ Composite Index ended in neither Accumulation nor Distribution mode with average daily volume higher than the prior week. In the last two weeks the NASDAQ had five (5) Accumulation days and one (1) Distribution day. (Accumulation days are counted when the index closes up on higher volume than the prior day while Distribution days occur when the index closes down on volume higher than the prior market day.) Last week the NASDAQ ended in neither Accumulation nor Distribution mode on lower average daily volume.

Momentum: Now at +15.52, down from +78,92 last week, the CCI(20) daily Woodie’s CCI(20) daily up trend continues. At Friday 5/19 close after 2 days below zero, it formed a valid ZLR (Zero Line Reject) long entry signal for Monday 5/22 open. We will continue to follow this trade simulation in next weeks commentary.
In Woodie’s CCI trading system, six consecutive bars above or below zero are required for a change of trend. The Weekly CCI(20) of the NASDAQ Composite Index began a Woodie’s up trend fifty-five weeks ago, while the Daily CCI(20) began a Woodie’s up trend twenty-six weeks ago.
The CCI(20) weekly has fallen to 125.40 from 138.49 last week. We await the return of the CCI(20) weekly to the +/-50 range for another trade.
Industry Rotation the last two weeks: All of the top five industries are  positive and all of the bottom five are negative. Summary: Gold & Silver, Oil, Oil Services, and some tech on top; , Banks, Brokers, and some tech on the bottom. Bullish: Semis PHLX continues in the top five. REITs has left the bottom five.  Bearish: Networkers continues in the bottom five. Brokers has entered the bottom five. Gold & Silver PHLX continues in the top five. Oil has entered the top five. Oil Services PHLX has left the bottom five and entered the top five. Computer Hardware has left the top five.
Focus this week: From www.zerohedge.comThe Housing Moment Investors Dread Is Here” By Danielle DiMartino Booth. Some key points and charts follow.

  • The May University of Michigan Consumer Sentiment survey showed a six-year low among those who think it’s a good time to buy a house and a 12-year high among those who say it’s a good time to sell. Disparities of this breadth tend to coincide with break points and that’s just where we’ve landed in the cycle.

    The beginning of May officially marked the advent of a buyers’ market, defined simply as sellers outnumbering buyers by a wide enough margin to trigger falling prices. Yes, it’s the moment buyers have been waiting for. It is also the moment private equity investors, those who’ve crowded out natural buyers, have been dreading.

    Three factors determine home sales: interest rates, unemployment and prices.

    The recent decline in interest rates has provided some semblance of relief; purchase applications have bounced off April’s levels, when they were down four percent over last year. April and May are obviously critical to the spring sales season.

    The low unemployment rate would seem to be a huge plus if it wasn’t for the stress building around thousands of layoff announcements across the retail and auto sectors that won’t find their way into this most lagging of economic indicators for months. That is not to say those getting pink slips don’t know their fate, which should influence home sales going forward.

    Price is the one bright spot, with one glaring caveat: Falling home prices tend to be associated with a negative macroeconomic backdrop, which does not bode well for any buyer of, well, anything. Dig into the Federal Reserve’s recently released first quarter Senior Loan Officer Survey and you will see nothing of note on the residential mortgage side — banks reported that both loan demand and lending standards remained unchanged in the first three months of the year.

    Demand and supply in the auto sector, where pricing has been under pressure for some time, looked quite similar to that for houses several months back.

    The sad truth is the optics of stifling clearing and encouraging borrowing among those who could ill afford payments was better than the alternative. Again.

–Donald Pirl www.s2pmarketsignal.com

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