10-22-17 Market Commentary

 

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Market Breadth: With this past week’s market fractional advance, our Bull/Bear Point and Figure Ratio at 1.83 declined from 2.05 last week, yet remained within bullish territory. The total count of securities in bullish or bearish patterns increased 3% to 3125. The count of bearish stocks increased 11%, while the count of stocks in bullish patterns decreased 1%. The Sand 2 Pirls P&F Market Breadth Summary Chart shows us a market now eight 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 102 points for the ninth decline in twenty-six weeks. At a positive 625.36 points, it has formed a new top, has fallen below the July 2016 top, and continues above all remaining five tops, and continues above all five bottoms in the last 30 months. 

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 three (3) 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 also, the NASDAQ ended in neither Accumulation nor Distribution mode on lower average daily volume.

Momentum: The CCI(20) daily in a Woodie’s Up trend is now at 5.01, down from 105.09 last week. At Tuesday 9/26 close, the CCI(20) daily was within the +/- 50 range for a ZLR (Zero Line Reject) Long entry signal at Wednesday 9/27 close. At Tuesday, 10/17 close, the CCI(20) daily fell below +100 to signal our exit from the trade. The result of this trade simulation was a gain of 196.30 points on the Nasdaq or $5.08 per share of QQQ. We now wait for the CCI(20) daily to return to the +/-50 range for another trade.

 

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 seventy-seven weeks ago, while the Daily CCI(20) began a Woodie’s up trend six weeks ago.
The CCI(20) weekly at +158.08 fell from +173.59 last week after forming a ZLR (Zero Line Reject) Long entry signal for Tuesday 9/5 open. Our rule is to stay in the trade until the CCI(20) drops below +100. We will continue to follow the result of this trade simulation in next week’s commentary.
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 on top; Oil Services, Gold & Silver, S&P Retail, Brokers, and some tech on the bottom. Bullish: Semis PHLX and Comp Tech continue in the top five. Networkers and Disk Drives have left the bottom five. Gold & Silver PHLX has left the top five and entered the bottom five. Oil Services now leads the bottom five. Bearish: S&P Retail has left the top five and entered the bottom five. Brokers has entered the bottom five.

Focus this week: From www.hackernoon.com7 Thoughts On Blockchain, Cryptocurrency & Decentralization After Another Three Months Down The Rabbit Hole” by Lou Kerner. The following are some highlights.

  • Crypto is now so shiny, so luminous, I can’t divert my eyes. I’m living and breathing crypto 24/7.
     
  • 1. I’m A One Eyed Man In The Land of Other One Eyed People
    We’re still so early, that much about what people are saying and writing about crypto is more theory than fact.
     
  • 2. Bitcoin Is A Confidence Game, Utility Tokens Are Awesome But Legally Challenging, Security Tokens Are Going To Be Huge
     

  • The chart above provides a simple way to think about the three types of cryptocurrencies.
    Bitcoin is simply a confidence game as are ALL store of values. As with other assets, the higher Bitcoin’s value goes, the more confident investors become.

  • …the SEC is likely to deem [utility tokens] a security.

  • While most of the ICOs to date have been Utility Tokens, because of the massive advantages that Security Tokens have over traditional capital raising, I think the total market cap of all security tokens will be much larger than the total market cap of all utility tokens.
     

  • 3. Blockchain Technology Is Going To Be A Disruptive Force Across Industries

  • 4. DECENTRALIZATION Is Potentially The Most Disruptive Force

  • Blockchains, cryptocurrencies, together with other smart contracts are enabling Decentralization, which is the REALLY disruptive thing.
     

  • …all else being equal, the industries most at risk for disruption from decentralization are where the middlemen charge the highest tolls. Below is a list from Forbes of the 10 industries with the highest net margins in 2016:


     
  • To learn more about decentralization, read Vitalik’s “The Meaning of Decentralization” which goes in to the the three different dimensions of decentralization:

     

  • 5. It’s A Bubble….So What

  • The biggest sign that it’s not a bubble, is that almost everyone says it’s a bubble.

  • I say “so what” because I believe in Amara’s Law: We tend to overestimate the effect of a technology in the short run and underestimate the effect in the long run.
     

  • 6. Governance Is The Biggest Risk To Bitcoin

  • The Segwit2X debate, which could result in a hard fork November 18, is just the latest example of Bitcoin’s risk from governance by exit. The Balkanization of Bitcoin won’t be a good thing for the community.

  • 7. Don’t Hate The Haters. Love The HODL’er

  • I want to spend my time preaching to the choir. I want to spend my time learning from, helping, and investing in the believers.

–Donald Pirl www.s2pmarketsignal.com


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