Given that the S&P 500 has gone sideways since July 14th, it is VERY easy for the market to reach oversold status. With today’s drop, my proprietary oversold indicator is at 38 on $SPY already. Normally, such a move would take it to the 50s.
A test of 2150 seems in order on the S&P 500 and that may take the oversold indicator under 30. From there we wait for a move back above 30 to initiate aggressive long ideas.
We will keep you up to speed at this progresses.
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Today is laughable into the FOMC announcment. $SPY is down at intraday support on the Erlanger Value Lines at $215.95. Meanwhile, $IWM is near pivot which is $120.56. $DIA is trading around pivot which is $184.44. So a pivot as opposed to a support day, so far.
The NYSE A/D line is at -633. The NASDAQ A/D line is at -47. That does not support a drop on the S&P 500 of -0.33%. So when you add all this up, it sets up for a buy on either IWM or QQQ. Why not SPY?
SPY has been struggling with oil weak here. Oil needs to firm up for $SPY to take off.
The takeaway is I am more in the camp of a rally than a puke at 2:00 p.m. EDT. In an hour we will know if this thought process was correct.
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The rally that began on Tuesday, June 28th is quite simply the most hated rally I have seen in my 30 years on Wall Street. Why?
Quite simply all the “smart money” moved to the sidelines in front of the Brexit vote. Merrill Lynch reported that cash in accounts was 5.7% at the beginning of July, the highest level since November 2001.
Hedge funds cut exposure into the Brexit. Then when the vote failed, they sat froze. They did not short on Friday and Monday (June 24th and 27th). We know this with the latest short interest data just released tonight. NYSE fell -0.38% and NASDAQ rose 0.73%.
They did not get long for the rest of that week, June 28th to July 1 and now are playing catchup. They have to chase if they do not want redemptions for missing a 15% or 20% year.
Let’s move on from the hedgies to the illuminati. Alan Greenspan should have been playing shuffleboard at the old folk’s home instead of proclaiming this would be a worse outcome than the 1987 stock market crash. Seriously why is he not fishing the Keys? Ditto other Federal Reserve and Central Bank experts who proclaimed the world was going to end. At this point, they need to “shut the fuck up and be put to sleep.”
Who thought that the British would have a new Prime Minister less than two weeks after the Brexit vote? The answer is no one!!!! The British Pound might be the buy of the century now as they cut the umbilical cord from the European Union which at this point is nothing more than the European Disunion. The United States could learn much from their political process. Short and sweet is what people want.
Back to the hedgies. They are trying to get their talking heads to talk down the market so they can get invested. Carter Worth(less) comes on CNBC day after day to say this is madness. No madness is him getting it wrong all year long. There are others.
Just tonight I read Scott Redler of T3 said a 75 point move on the S&P 500 is too much. Really? The funny thing is I respect this guy but cannot for the life of me understand what is going on here now with his thought process.
Since the fourth quarter of 2012 average up move is 139 points or 7.67% and we are up 151.60 or 7.58%. That is the average move. Since the fourth quarter we have seen four moves above 10% lest we forget (11.37%, 11.59%, 12.12% and 14.94%) Instead we are in blast off or as I like to call it Buzz Lightyear territory, “to infinity and beyond” (thanks Fred Meissner for the term).
The S&P 500 and the Dow Jones Industrial Average have broken to all time new highs and the tertiary indexes have to join the party. Oh, maybe they don’t if the bears are right. Then again the bears are not having a good year and have lost control.
Symbology is everywhere. The other day a Spanish matador was gored to death by a bull!!! What could be more appropriate as we make new highs.
The long short boys are getting hurt here because they buy relative value and as such are buying crappy charts. Meanwhile, they are shorting valuation extremes that have good charts. We see how this will end. Can you say Ackman months!!
There is carnage everywhere and we still have Mark Carney speaking before the week is out. Beware Thursday and a rate cut from the BOE just to say the hedgies, “do not fuck with the us!” If Carney gets it wrong, then he gets a do-over in Canada on Friday when he speak a day later. Me thinks he learned this from Super Mario and Grandmonster Yellen who love to call this audible.
The answer to all this is pretty simple get long and enjoy the ride. Many cannot do this mentally but if you are long then stay long and enjoy the ride. If you are not long, then it is time to dip a toe in the pool.
That is enough for now. More later.
P.S. On Monday, June 27th in this blog, “The best advice I can give here is be careful on shorts and start to make lists of names you want to buy on the long side”. No one is perfect and we get calls wrong, thankfully much less than most (just read what we have written since Day 1 here) but this is not a time to be paying attention to those that continue to get it wrong. The Fly has done a good job this year and his bond call is epic. I remind you to listen to those that get it right like The Fly. Eschew those that blow call after call. Life is too short unless you are an Eagles or Cowboys fan and love the pain.
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Geopolitical and Fiscal Events Of Note
Monday saw Kansas City Federal Reserve President Esther George speak about the economy at 9:00 a.m. EDT. The Fly pointed out she is back to her normal self of raising interest rates again. She is back on her rate Monday also sees Federal Reserve Cleveland President Loretta Mester speaks at 9:30 p.m. EDT.
Tuesday sees Federal Reserve Minneapolis President Neel Kashkari discuss the role of the Fed in the economy at 5:30 p.m. EDT. Tuesday also sees Federal Reserve St. Louis President James Bullard speak to the National Association for Business Economics chapter at 8:35 a.m. EDT. Last on Tuesday Federal Reserve Cleveland President Loretta Mester speaks about monetary policy at 10:30 p.m. EDT.
Wednesday sees Federal Reserve Dallas President Rob Kaplan speak about the economy at 9:00 a.m. EDT. Also Federal Reserve Philadelphia President Patrick Harker speaks at 6:00 p.m. EDT.
Thursday sees the BOE out with its latest interest rate decision. Thursday sees Federal Reserve St. Louis President James Bullard speak at 10:00 a.m. EDT. Thursday also sees Federal Reserve Atlanta President Dennis Lockhart speak at an economic summit 11:15 a.m. EDT. Finally on Thursday Federal Reserve Kansas City President Esther George speaks at 1:15 a.m. EDT.
Friday sees Bank of England Governor Mark Carney speak in Toronto. Finally, Federal Reserve Minneapolis President Neel Kashkari speaks at 5:30 p.m. EDT.
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I use several indicators to help with oversold conditions and pukes. Currently we are beyond oversold, puking and maybe moving into dry heaves. Thanks Phil Erlanger for the analogy on dry heaves!
I use a proprietary RSI that is not 14 days. That is the standard one. My version is sub 30 on the S&P 500. Once it breaks 30 then I wait for a move back above to be a buyer.
Second, I use a modified version of Bollinger Bands. Once below -20 we are oversold. The S&P 500 is now at -29.42 as I write. It is rare to hit sub -30. Once or twice a year.
Next I track the Erlanger Big Barf Indicators on a Daily, Weekly and Monthly basis. All are negative.
Last the Erlanger Nantucket Sleighride (ENS) OBOS (overbought/oversold) measure. It has yet to hit oversold on the daily.
So where are we in relation to dawn? My best guess is maybe 3:00 in the morning. The question is whether the sun is rising early due to the proximity to summer? More on this as it unfolds this week.
The best advice I can give here is be careful on shorts and start to make lists of names you want to buy on the long side.
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The Dow Jones Industrial Average fell for the week. The S&P 100 was also lower for the week along with the NASDAQ 100 and the Russell.
1.Geopolitical and Fiscal Events.
Monday sees ECB Head Mario Draghi speak along with Federal Reserve Chairman Janet Yellen at a European Forum. Tuesday sees the European Union leaders met. On Wednesday Federal Reserve Chairman Yellen speaks. On Thursday Federal Reserve St. Louis President James Bullard speaks at 2:00 p.m. EDT. On Friday Federal Reserve Cleveland President Loretta Mester will speak.
2.Economic Releases.
Releases of note this week include the weekly chain store sales, oil/gas numbers, mortgage applications and Q1 GDP (revised), personal income, Chicago PMI, ISM Index and construction spending.
3.Earnings Releases.
Notable releases include NKE CCL IHS FDS MON GIS AYI MRVL STZ CAG PAYX MU.
Monday, June 27
European Central Bank Head Mario Draghi speaks at a European forum on central banking with Federal Reserve Chairman Janet Yellen at 10:30 a.m. EDT.
Tuesday, June 28
The third estimate for Q1 GDP is due out at 8:30 a.m. EDT and is expected to rise to 1.0% from 0.8%.
At 10:00 a.m. EDT, June Consumer Confidence is due out and expected to rise to 93.1 from 92.6.
European Union (EU) leaders hold a Summit to discuss Europe in a post Brexit world.
Wednesday, June 29
May Personal Income is due out at 8:30 a.m. EDT and is expected to fall to 0.3% from 0.4%.
Then at 10:00 a.m. EDT, May Pending Home Sales are due out and expected to fall to -1.4% from5.1% in April.
Federal Reserve Chairman Janet Yellen speaks at 9:30 a.m. EDT.
President Obama meets with his counterparts from Mexico and Canada.
After the close, Federal Reserve Bank Stress Test Results are due out.
Thursday, June 30
June Chicago PMI is due out at 9:45 a.m. EDT and is expected to rise to 50.8 from 49.3.
Chinese Manufacturing PMI is due out at 9:00 p.m. EDT.
Friday, July 1
June ISM Index is due out at 10:00 a.m. EDT and is expected to rise to 51.4 from 51.3.
May Construction Spending is due out at 10:00 a.m. EDT and is expected to rise to 0.5% from -1.8%.
Eurozone Manufacturing PMI is due out at 3:30 a.m. EDT.
Puerto Rico bond payments of $2 billion are due and a default could be on the horizon.
Markets are closed in Canada and Hong Kong.
The U.S. bond market closes early ahead of the Fourth of July weekend.
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If you track the S&P 500 and SPY, then you would think today is a bad day. SPY is below intraday support while DIA is above support and IWM is above pivot.
Moreover, the advance/decline line on the NYSE is +437 while NASDAQ is at -401. That does not validate the S&P 500 being off -11.48.
Remember SPY is off -1.05% due to a dividend adjustment with today’s expiration.
There are several indicators I follow that are saying we are at a bottom. Others are not confirming. More on this over the weekend. With that thought, I am more in the camp of being a buyer here than a seller. With the Brexit vote aside.
Now in terms of the Brexit vote, I am working with a firm out of Singapore, Sqreem, that is a generation beyond Palantir in terms of data scrapping. Here is their calculation on the vote. 50.9% want to stay. The polls are bullshit and the oddsmakers are closer to reflecting what will happen next week.
P.S. My image is of Howard “I am mad as hell” Beale. More on him as well over the weekend. Fly, I suggest that movie for your Saturday Cinema. I think you will see the parallels to today.
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Yesterday Exact Sciences (EXAS) was up 33% to close at $9.39. This morning it is up 17% at $11.07. Later it will present at the William Blair Conference.
To be upfront, I own this stock. It is based where I live, Madison WI, and think ultimately it will be a huge stock and get purchased given it is in the diagnostics space. More on this later. That is not the story today.
People traded yesterday on inside information no doubt. Volume was huge. This morning the USPSTF is out recommending that those 50-75 get screened for colon cancer. Really? How obvious is that? Here is the link:
http://www.uspreventiveservicestaskforce.org/Page/Document/UpdateSummaryFinal/colorectal-cancer-screening2
Funny the website is now temporarily unavailable. Maybe Preet should be looking into this pin action.
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1.Geopolitical and Fiscal Events. Tuesday sees the FOMC begin its two day meeting and Wednesday Federal Reserve Chairman Janet Yellen holds a press conference after the announcement. Tuesday also sees Secretary of Botox John Kerry meet with Iranian and European counterparts. Wednesday sees the Bank of Japan announce their latest rate decision. Thursday sees the Swiss National Bank and Bank of England announce their latest rate decision. Thursday also sees Treasury Secretary Jack Lew speak. Friday sees Russian President Vladimir Putin speak.
2.Economic Releases. Releases of note this week include the weekly chain store sales,oil/gas numbers, mortgage applications and retail sales (out this morning), PPI, industrial production, CPI, Philadelphia Fed Survey and housing starts.
3.Earnings Releases. Notable releases include BOBE CTRP QUNR JBL ORCL KR RAD.
Tuesday, June 14
May Retail Sales were out at 8:30 a.m. EDT and rose to 0.5% versus 0.3% expectations from 1.3% in April.
Washington D.C. holds the last primary.
The Federal Reserve Open Market Committee (FOMC) begins its two day meeting.
Secretary of State John Kerry meets with Iranian and European counterparts on the Iranian nuclear deal.
Wednesday, June 15
May PPI is due out at 8:30 a.m. EDT and is expected to rise to 0.3% from 0.2%.
May Industrial Production is due out at 9:15 a.m. EDT and is expected to fall to -0.2% from 0.7%
The latest FOMC Decision is due at 2:00 p.m. EDT. No change is expected. Press conference to follow at 2:30 p.m. EDT with Federal Reserve Chairman Janet Yellen.
The Bank of Japan holds their meeting and announcement on their latest interest rate policy.
Thursday, June 16
May CPI is due out at 8:30 a.m. EDT and is expected to fall to 0.3% from 0.4%.
The Swiss National Bank and Bank of England both hold meetings and announcements on their latest interest rate policy.
Treasury Secretary Jack Lew speaks about his latest discussions with China at the American Enterprise Institute Forum.
Friday, June 17
May Housing Starts are due out at 8:30 a.m. EDT and are expected to fall to 1,155,000 from 1,172,000.
Eli Lilly & Co (LLY) holds a business update and is a Type 4 Long Squeeze.
Russian President Vladimir Putin speaks at the St. Petersburg Economic Forum.
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Below are the Q1 and Q2 return numbers as well as the combined year to date. What are the key observations?
1.Treasuries are kicking the crap out of stocks again. Those that said to sell bonds continue to look like morons.
2.The only equity index down year to date is the NASDAQ Composite. If you own Mid Cap stocks you are crushing it. The $64,000 question that has to be asked is, “Why is this the worst year for hedge funds?” Pretty easy answer is they suck at shorting stocks and market timing.
3.Silver and Soybean are the best performers in the Commodity space. USDA WASDE Crop Data at 12:00 EDT. My favorite is CORN which is up 9.68% year to date.
4.The U.S. Dollar is down and all other currencies are up against it. We discussed this earlier in the week.
5.International markets see Brazil killing it to the upside gaining 35% and Russia up 20%. Emerging market is the laggard down -2%. it has some serious catchup.
6.In terms of Sector/Group tracking, Biotech is God awful at -18%. Utilities are the winner at 17%.
That is all, contemplate these stats and develop a process to follow them like we have or miss out on pretty obvious trends.
