12-10-17 Market Commentary

 

 
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Market Breadth: With this past week’s market fractional decline, our Bull/Bear Point and Figure Ratio at 1.34 was unchanged from 1.34 last week, remaining within bullish territory. The total count of securities in bullish or bearish patterns decreased 2% to 3086. The count of bearish stocks decreased 2%, while the count of stocks in bullish patterns decreased 2%. The Sand 2 Pirls P&F Market Breadth Summary Chart shows us a market now fifteen 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 74 points for the sixth decline in eight weeks. At a positive 137.00 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 three (3) 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 higher average daily volume.

Momentum: The CCI(20) daily in a Woodie’s Up trend is now at +53.4, up from +25.17 last week. At Wednesday 12/6 close, the CCI(20) daily was within the +/- 50 range for a ZLR (Zero Line Reject) pivot and Long entry signal at Thursday 12/7 close. We will continue to follow 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 eighty-four weeks ago, while the Daily CCI(20) began a Woodie’s up trend thirteen weeks ago.
The CCI(20) weekly at +108.27, down from +125.77 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: Brokers, Banks, and Oil Services on top; Some tech, and Gold & Silver on the bottom. Bullish: KBW Bank and Brokers continue in the top five. Gold & Silver PHLX continues in the bottom five. REITs has left the bottom five. Bearish: Semis PHLX, Disk Drives, and Comp Tech continue in the bottom five. Oil Services continues in the top five. S&P Retail has left the top five.
Focus this week: From www.zerohedge.comCrypto-Cornucopia Part 4 – “Without It, You’re Talking Mad Max”“. In order to more fully understand the new crypto currency and crypto token world we’re rapidly headed into, we highly recommend reading this entire article as well as the three articles preceding it in the series. Below links to the previous three article parts are a few highlights of the fourth and final article in the series.

Authored by Dr. D via Raul Ilargi Meijer’s The Automatic Earth blog,

Part 1 “Bitcoin Is A Trust Machine” here.

Part 2 “This System Is Garbage, How Do We Fix It?” here.

Part 3 “A System With No Justice, No Order, No Rules, & No Predictability” here.

  • …all parts of the system rely on accurate record-keeping
     
  • How do you know you own it? Morgan transferred a stock to Schwab but forgot to clear it. Doesn’t that mean it’s listed in both Morgan and Schwab? In fact, didn’t you just double-count and double-value that share? Suppose you fail to clear just a few each day. Before long, compounding the double ownership leads to pension funds owning 2% fake shares, then 5%, then 10%, until stock market and the national value itself becomes unreal. And how would you unwind it?

    Work backwards to 1999 where the original drop happened? Remove 10% of CALPERs or Chicago’s already devastated pension money? How about the GDP and national assets that 10% represents? Do you tell Sachs they now need to raise $100B more in capital reserves because they didn’t have the assets they thought they have? Think I’m exaggerating? There have been several companies who tired of these games and took themselves back private, buying up every share…only to find their stock trading briskly the next morning. When that can happen without even a comment, you know fraud knows no bounds, a story Financial Sense called “The Crime of the Century.” No one blinked.
     

  • But it doesn’t stop there. You don’t only buy stocks, you sell them. And you can sell them by borrowing them from a shareholder. But what if there’s no record of delivery? You can short or sell a stock without owning any. And the more you sell, the more it drives the price down and the more money you make. In fact, profits are infinite if you can sell enough that the company goes bankrupt: you never have to repay the stock at all. And this “naked” short selling can only occur if there’s openly bad recording and enough failures-to-deliver to hide it. You could literally own nothing, borrow nothing, post nothing, and with no more than insider access to an exchange, drive a company out of business. That’s how crucial recording is.
     
  • Yet we just said that to clean up the market would discover 10%, 20%, 40% fake shares, fake business values, fake pension values, therefore fake GDP values, and fake GDP to Debt ratios, and therefore would perhaps lead to an accurate Debt to GDP of 140%, which would crash the U.S. dollar and possibly the nation. Would a complete U.S. financial collapse lead to a nuclear war? And it all goes back to fraud we didn’t stop 20 years ago. How do you solve the problem? The only way out without collapse is to build an honest system parallel to the existing system and slowly transfer assets from the rotten, sinking ship to the new one. The captains of the old ship may not like it, but look at the incentives. No one can tolerate the old ship except the pirate captain; even the crew, the stock traders, don’t want or control it any more.
     
  • However, what if you created an honest stock market Blockchain that actually had the stock certificates and actually transferred them, cheaply and reliably without false duplication?
     
  • Once you cut the costs, have a more direct method, and reduce the time to minutes, not weeks, the choice is obvious, which may explain why Microsoft, Intel, and others are deep in ETH development. Why overpay for bad service, and support the overpriced bonuses of men who will use their power to turn on or shut off your livelihood at will? Blockchain costs less and does more. Being just software, there are many other software products serving hundreds of other business plans. These use-coins are generally called “Tokens”, whereas“Coins” are meant to be pure currencies.
     
  • there are over 1,000 coins now, and more every day. Isn’t that just another avenue to unlimited issuance and inflation by unlimited, unregistered people? Well, yes and no. It’s true that anyone can start their own Bitcoin – Litecoin for example is a faster duplicate of Bitcoin – but it’s also true that anyone can start their own Facebook. MySpace certainly did.

    So why don’t they? Basically because of financial inertia, the Network Effect, a coin you start and only you use is worthless. The value is in the belief that other people will use it. Without that, you’re banished to MySpace Siberia. Still, with a 1,000 coins, don’t they all compete? Yes, and that’s a good thing, not bad. This is no different than the competing Bank Notes of the 19th century. If you like this bank and believe in them, you prefer their notes to others. Or you might use one note in Missouri and another in Louisiana. So with Cryptos. You might choose Bitcoin, with slow traffic and high costs to pay for a house. But you would choose Litecoin to pay for coffee.
     

  • You already do this, no different than using cash to buy a hot dog, your debit card for groceries, and a bank transfer for a car. It’s overlooked because they’re all called “dollars,” but they’re not. One is currency, one is a short-term credit, and one is a banking ledger. Because of the Network Effect, you can’t have 1,000 equal coins and have them all work. The market will prefer some over others until there are only a few, just as AskJeeves and Infoseek gave way to Google, which may someday give way to someone else. Just as you can’t start a new Google today, there are only a few top coins, easily updated, and little space for new coins.
     
  • If coins can just “change” and “fork” whenever they want, then isn’t it like buying Australian Dollars, then waking up and finding they’re Yen? Yes and no… Ethereum forked, and Ethereum Classic still exists, and trades steadily but far less. Bitcoin Cash Forked and although 1/10th the price, both are trading briskly. No one knows what will happen, because it’s never existed before. So yes, you could wake up and find you don’t like what Bitcoin decided to do, just as you could wake up and not like your new bank manager or CFO of Dell, and then you sell that asset and choose another. That’s your responsibility. That’s competition.
     
  • Another objection is that cryptos depend on electricity and an expensive, functioning Internet. True. But while I’m no fan of technology, which is full of problems, so does everything else. Without electricity, the western world would stop, with no water, no heat, and no light.

    Without Internet, our just-in-time inventory halts, food and parts stop moving, banking and commerce fail. You’re talking Mad Max. TEOTWAWKI. That’s a grave problem, but not unique to Bitcoin.

–Donald Pirl www.s2pmarketsignal.com


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