6-25-17 Market Commentary



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Market Breadth: With this past week’s market advance, our Bull/Bear Point and Figure Ratio at 1.11 fell from 1.22 last week, declining slightly within bullish territory. The total count of securities in bullish or bearish patterns increased fractionally to 3014. The count of bearish stocks increased 6%, while the count of stocks in bullish patterns decreased 4%. The Sand 2 Pirls P&F Market Breadth Summary Chart shows us a market now five weeks in bullish 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 29 points for the third advance in nine weeks. At a positive 132.57 points, it continues below all seven 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 Accumulation mode with average daily volume higher than the prior week. In the last two weeks the NASDAQ had one (1) Accumulation day and two (2) Distribution days. (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 Distribution mode on higher average daily volume.

Momentum: Now at 42.69, up from -77.17 last week. At Wednesday 6/21 close, the CCI(20) daily signaled a ZLR (Zero Line Reject) Long entry and continued increasing through the remainder of the week. We will follow the results of this trade simulation in next week’s 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 sixty weeks ago, while the Daily CCI(20) began a Woodie’s up trend thirty-one weeks ago.
The CCI(20) weekly has risen to 112.05, from 93.60 last week. We await the return of the CCI(20) weekly to the +/-50 range for another CCI(20) weekly trade.
Industry Rotation the last two weeks: All of the top five industries are  positive and all of the bottom five are negative. Summary: Tech on top; Oil, Oil Services, and Banks on the bottom. Bullish: Comp Tech, Disk Drives, and S&P Retail have left the bottom five. Computer Hardware, Comp Tech, Disk Drives, and Networkers have entered the top five.  Bearish: Gold & Silver PHLX has left the bottom five. Brokers and KBW Bank have left the top five. KBW Bank, Oil Services PHLX, and Oil have entered the bottom five.  
Focus this week: From www.zerohedge.com“It’ll Be An Avalanche”: Hedge Fund CIO Sets The Day When The Next Crash Begins“. The following are some key points and charts.

  • On Sunday a prominent hedge fund manager, One River Asset Management’s CIO Eric Peters broke with that tradition and dared to “pin a tail on the donkey” of when the next market crash – one which he agrees with us will be driven by a collapse in the global credit impulse – will take place. His prediction: Valentine’s Day 2018.
  • Here is what Peters believes will happen over the next 8 months, a period which will begin with an increasingly tighter Fed and conclude with a market avalanche:

    “The Fed hikes rates to lean against inflation,” said the CIO. “And they’ll reduce the balance sheet to dampen growing financial instability,” he continued. “They’ll signal less about rates and focus on balance sheet reduction in Sep.”

     Inflation is softening as the gap between the real economy and financial asset prices is widening. “If they break the economy with rate hikes, everyone will blame the Fed.” They can’t afford that political risk.

     “But no one understands the balance sheet, so if something breaks because they reduce it, they’ll get a free pass.” 

     “The Fed has convinced itself that forward guidance was far more powerful than QE,” continued the same CIO.

     “This allows them to argue that reversing QE without reversing forward guidance should be uneventful.” Like watching paint dry. “Balance sheet reduction will start slowly. And proceed for a few months without a noticeable impact,” he said. “The Fed will feel validated.” Like they’ve been right all along.

     “But when the global credit impulse reverses, it’ll be a cascade, an avalanche. And I pin the tail on that donkey to be Valentine’s Day 2018.”

    Of course, the global credit impulse is something that we have been exclusively warning about for the past 4 months

    … but “apparently” it wasn’t until Citi’s report last week which explained it’s all that matters:

    … that suddenly everyone admits to paying attention. We’ll take it.

–Donald Pirl www.s2pmarketsignal.com

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