11-26-17 Market Commentary


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Market Breadth: With this past week’s market fractional decline, our Bull/Bear Point and Figure Ratio at 1.46 rose from 1.18 last week, advancing within bullish territory. The total count of securities in bullish or bearish patterns decreased 1% to 3084. The count of bearish stocks decreased 12%, while the count of stocks in bullish patterns increased 9%. The Sand 2 Pirls P&F Market Breadth Summary Chart shows us a market now thirteen 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) rose 91 points for the first advance in six weeks. At a positive 124.76 points, it  continues below all seven tops in the last 30 months, 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 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 Distribution mode on higher average daily volume.

Momentum: The CCI(20) daily in a Woodie’s Up trend is now at 188.55, up from 94.21 last week. At Wednesday 11/15 close, the CCI(20) daily was within the +/- 50 range for a ZLR (Zero Line Reject) pivot and Long entry signal at Thursday 11/16 close. We will stay in the trade until the CCI(20) daily falls below +100.
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 eighty-two weeks ago, while the Daily CCI(20) began a Woodie’s up trend eleven weeks ago.
The CCI(20) weekly at +153.02, rose from +135.87 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.
IIndustry Rotation the last two weeks: All of the top five industries are  positive and four of the bottom five are negative. Summary: Some tech and Retail on top; Oil, Oil Services, and REITs on the bottom. Bullish: Computer Hardware, Disk Drives, and Networkers continue in the top five. S&P Retail has entered the top five. KBW Bank has left the bottom five. Oil, and Oil Services have entered the bottom five.  Bearish: REITs has entered the bottom five.
Focus this week: From www.DavidStockmansContraCorner.comThe Delirious Dozen of 2017“. The following are some key points.

  • Yesterday we noted the massive market cap inflation and then stupendous collapse of the Delirious Dozen of 2000. The latter included Microsoft, Cisco, Dell, Intel, GE, Yahoo, AIG and Juniper Networks—plus four others which didn’t survive (Lucent, WorldCom, Global Crossing and Nortel).
  • Together they represented a classic blow-off top in the context of a central bank corrupted stock market. 
  • What we didn’t mention yesterday, however, is that this bubble top intumescence never really came back. In fact, the market cap of the eight surviving companies—all of which have continued to grow—-today stands at just $1.3 trillion or 34% of the 17-years ago peak.
  • We revisit the rise and fall of these turn of the century high flyers because we believe the same process of market narrowing into a diminishing number of momo names is exactly what is happening again as we reach the asymptote of this latest and greatest central bank fueled bubble.
  • …we have identified a new roster for the Delirious Dozen of 2017—and have tracked their course over the last 40 months.
  • Accordingly, our new Delirious Dozen consists of the FAANGs (Facebook, Apple, Amazon, Netflix and Google) plus eight additonal high flyers (Tesla, NVIDIA, Salesforce, Alibaba, UnitedHealth, Home Depot and Broadcom).

    Not surprisingly, their combined market cap has soared from $1.7 trillion to $4.0 trillion during the last 40 months in a pattern which is highly reminiscent of the last go round. And for our money, that $2.3 trillion gain represents the same kind of bottled air.

  • S2P Note: See Stockman’s blog for a quick analysis of each.
  • In short, among the Delirious Dozen for 2017, only Apple has a reasonable multiple at 19X. But then again, Apple has been cycling along the flat line for more than three years at its towering sales level of $230 billion and $50 billion of net income.
  • In short, aside from the unique case of Apple, the Delirious Dozen of 2017 are set-up for a repeat of the massive 2000-2002 deflation of bottled air. That is, in June 2014 the group (ex-Apple) had a market cap of $1.1 trillion, representing 34X its combined net income of $32 billion.
  • Needless to say, the business cycle has not been abolished and this expansion is now 101 months old. In fact, the chart below suggests it may be reaching its “sell-by” date.

    But here’s the thing. The bottled air resident among the Delirious Dozen of 2017 is where all the top of the bubble mania has again gotten concentrated.

    So when the Black Swan, Orange Swan or Red Swan, as the case may be, finally arrives and they begin to sell AMZN, FB, TSLA or CRM—-look out below.

    That’s where Wall Street’s next central bank fueled bloodbath is hiding in plain sight.

–Donald Pirl www.s2pmarketsignal.com

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