8-27-17 Market Commentary


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Market Breadth: With this past week’s market decline, our Bull/Bear Point and Figure Ratio at 0.91 rose slightly from 0.88 last week, yet continues in bearish territory. The total count of securities in bullish or bearish patterns decreased 2% to 2797. The count of bearish stocks decreased 3%, while the count of stocks in bullish patterns increased fractionally. The Sand 2 Pirls P&F Market Breadth Summary Chart shows us a market now three weeks 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 50 points for the eighth decline in eighteen weeks. At a negative 307.33 points, it continues below the six tops above +100, continues below the April 217 bottom, and continues above all three remaining 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 lower than the prior week. In the last two weeks the NASDAQ had two (2) Accumulation days 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 neither Accumulation nor Distribution mode on lower average daily volume.

Momentum: On Wednesday 8/16, the CCI(20) had 6 days below zero to begin a Woodie’s Down trend. The CCI(20) daily is now at -43.32 , up from -194.46 last week. Also at Wednesday 8/16 close, the CCI(20) daily within the +/-50 range formed a ZLR (Zero Line Reject) pivot with the Short entry signal next day, Thursday 8/17 close. At Tuesday 8/22 close, it rose above -100 for an exit signal Wednesday 8/23 open. The result of this trade simulation was a loss of 41.01 points on the NASDAQ or $1.07 per share of QQQ.
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-nine weeks ago, while the Daily CCI(20) began a Woodie’s down trend one week ago.
The CCI(20) weekly has fallen to +43.07, down from +54.42 last week. The CCI(20) weekly is now within the +/-50 range for another CCI(20) ZLR weekly trade if the CCI(20) weekly rises next week.
Industry Rotation the last two weeks: All of the top five industries are  positive and all of the bottom five are negative. Summary: Some Tech, REITs, and Gold & Silver on top; S&P Retail, KBW Bank, some Tech, and Brokers on the bottom. Bullish: Disk Drives continues in the top five. REITs has entered the top five. Bearish: Brokers and S&P Retail continue in the bottom five. KBW Bank and Semis PHLX have entered the bottom five. Gold & Silver PHLX continues to lead the top five. Oil Services and Oil have left the bottom five.
Focus this week: From the South Chine Morning PostMy prediction: the coming collapse of China’s Ponzi scheme economy”  by Jake Van Der Kamp. The following are some key points.

  • So much production in industries like steel is based on demand for more production, but should that demand falter, the whole system could come crashing down.
  • Friends who have a greater interest than I do in reading the tea leaves in Beijing tell me that the emphasis in relations with Hong Kong from now on will be on one country rather than two systems.
  • I think this phrases things the wrong way. The one country bit was never in issue.

    What they actually mean to say is that Beijing’s system of state command of the economy will become dominant and Hong Kong’s more freewheeling system will fade away.

    I don’t think it will happen.

  • In my view human society is so dynamic that no command system can last long in charge of an economy. Attempts at this particular form of hubris inevitably end in either war or financial crisis. For the Soviet Union it was financial crisis. I think the same fate awaits Beijing.
  • Steel was recently targeted for a reduction in capacity but then a regime of easy money intended to help the industry overcome a difficult period of contraction instead stimulated production.
  • Why is so much steel needed?

    Simple. It is needed to build more steel mills so as to build more shipyards, ports, railways and bridges so that more ships can be built to carry more iron ore to more ports and thence along more rails and bridges to more steel mills so as to build more shipyards, ports, railways …

  • What we have here, in short, is a giant Ponzi scheme. In a Ponzi scheme you pay out the winnings of the first entrants with what others later pay into it.

    As long as it keeps growing everything is fine. When it stops growing it collapses.

  • Command systems may be good at deciding where to direct economic effort in wartime but they are hopeless in peacetime at deciding when to stop and do something else.

    They just keep going down the same old track and then what you get is economic cancer, uncontrollable growth.

–Donald Pirl www.s2pmarketsignal.com

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