Semi Sector: A Warning or a Buy?

By NFTRH

We began tracking this negative divergence in NFTRH last year as the leadership of two premier Semi Equipment companies began to decelerate vs. the broad sector.

amat/smh ratio

Over time the ugly patterns became even uglier with breakdowns to new lows. This chart shows that ugliness but more importantly it tries to illustrate AMAT & LRCX as leading indicators for the broad markets. In 2013 it was a big part of the macro signaling that told us to prepare for a coming economic upturn. In late 2015 it told us that the market top of that time probably was no such thing.

Continue reading Semi Sector: A Warning or a Buy?

New Highs on Low Volume During August

By Rob Hanna

SPX closed at a new all-time high on Friday. But NYSE volume came in at the lowest level since mid-July. Low volume at new highs can sometimes be a negative. Of course August frequently has low volume as many market participants are on vacation and not trading as actively. So I decided to look back at other times the SPX made a long-term high on light volume during the month of August. Results were bearish from 1-15 days out. The downside was generally realized over the next 3 days, though. Below is the list of instances along with their 3-day results.

2018-08-24

It appears these low-volume August moves to new highs have not seen short-term follow-through momentum in the past. The number of instances is low, but all 6 saw the market lower 3 days later. So perhaps it is worth some consideration when determining your market bias over the next few days.

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Powell, Greenspan and Whatever it Takes

By Doug Noland

Fed Chairman Powell is in a tough spot, one made no easier now that he’s on the receiving end of disapproving presidential tweets. The global Bubble has begun to falter, which only exacerbates divergences between various markets and economies. The U.S. is booming, while China struggles and EM economies now stumble into the dark downside of an epic cycle. The U.S. economy and markets beckon for tighter financial conditions, while higher U.S. rates pose significant danger to fragile global markets already confronting a major tightening of financial conditions.

Powell played it safe in Jackson Hole. I imagine he’d have preferred to sit this one out. As such, his presentation was too heavy on rationalization and justification. The FOMC is trapped in Greenspan-style “baby steps,” and it is curious that the Fed Chairman would choose to praise Alan Greenspan for his nineties policy approach:

Continue reading Powell, Greenspan and Whatever it Takes

Multi-Market Status: Precious Metals, Commodities, US & Global Stocks

By NFTRH

A general review of the current status across different asset markets. This is not comprehensive, forward-looking analysis as per NFTRH, but it is an up to the minute summary (as of Friday afternoon).

Precious Metals

Gold, silver and Gold Stock indexes/ETFs made what I had thought were bear flags yesterday, but today painted them as short-term ‘W’ bottom patterns, in silver and the miners anyway.

This chart of gold (courtesy of Barchart.com) shows a flag breakdown, whipsaw and new closing high for the short-term move. As we’ve noted for weeks now, the Commitments of Traders (CoT) is in a contrary bullish alignment with large Specs all but wrung out of the market (they were fleeced again; don’t believe hype about their increased shorting being some sort of conspiracy). All in all, not bad for the relic. The bounce lives on.

Continue reading Multi-Market Status: Precious Metals, Commodities, US & Global Stocks

Architecture Billings Index Flashes Warning on Economy

By Tom McClellan

Architecture Billings Inquiries Index
August 24, 2018

The news of a 4.1% rate of GDP growth in Q2 of 2018 got the financial media excited.  4.1% was the rate of change compared to the prior quarter.  When we use a 1-year lookback, it is not quite that strong of a number, but still good news in terms of what it does to getting more people working and paying taxes.

The troubling news this week is that the latest data from the American Institute of Architects, http://www.aia.org, shows that their Architecture Billing Inquiries Index is headed downward, and that tends to be a problem for future GDP numbers.  This week’s chart shows a 6-month moving average of that Inquiries Index, and its recent downward movement does not offer a lot of hope for another really strong quarter for GDP in Q3.

Continue reading Architecture Billings Index Flashes Warning on Economy

Bond Market Volatility

By Callum Thomas

Following on from yesterday’s post on Cross Asset Volatility, the chart of today is a focus on bond volatility.  Specifically what we’ve got here is a look at the rolling annual sum of daily changes in the US 10 year treasury bond yield which exceeded varying hurdles (the smallest hurdle being 5 basis points).  What the chart shows is a collapse in bond volatility.  What’s interesting about this is that the smallest hurdle indicator is starting to turn up, and typically when these types of indicators turn up from such low levels it can mark a major turning point.  The issue is that a rise in volatility can come in a falling yield environment as well as a rising yield environment.

Continue reading Bond Market Volatility

Money Show

By Tim Knight

I’m on my way to the San Francisco Money Show right now, where I hope to spend a little time with my Tastytrade colleagues (which only happens about once a year). I’m bouncing along a train right now trying to hack together something resembling a post, so I’ll share a few thoughts on some ETF charts I find more interesting than the others.

First up is the commodity ETF symbol DBC, which is forming a beautiful top; it looks like the pattern is about 90% done. Here’s hoping for a break beneath that horizontal.

I realize EUR/USD isn’t an ETF, but I wanted to use it to mentioned something else: I believe the Euro is going to start pushing lower, and that’s going to drag emerging markets with it (as if they needed any other anchor this year).

Continue reading Money Show

Cross Asset Volatility

By Callum Thomas

This unassuming chart contains a wealth of information about the challenges we currently face with active asset allocation and the global macro backdrop.  Basically what it shows is an alternative measure of the average volatility across stocks, bonds, commodities, and currencies.  The bottom line is volatility across asset classes is starting to wake up from a deep sleep.

What’s driving this?  We can talk about how you should expect higher volatility as the market/business cycles mature (and indeed they are), but a big driver is and will continue to be politics and policy.  We’re in the middle of a major monetary policy experiment (quantitative tightening or QT) – if QE was a force for volatility suppression, it’s pure logic that QT should work in the opposite direction.  So investors need to start thinking about how to deal with this in their investment process, because with greater volatility comes greater opportunity.

Continue reading Cross Asset Volatility

Bad News For That Massive Treasury Short As Goldman Slashes Bond Yield Forecasts

By Heisenberg

Well, bad news for that crowded spec short in the 10Y: Goldman just slashed their year-end targets for G10 yields across the board.

Last Friday, when the latest CFTC data hit, Jeff Gundlach was pretty adamant about the possibility that a short squeeze might be imminent.

“Massive increase this week in short positions against 10 &30 yr UST mkts. Highest for both in history, by far”, Jeff tweeted, before warning that the lopsidedness “could cause quite a squeeze.”

As a reminder, the net non-commercial short in the 10Y increased to a record 698,194 contracts in the week through last Tuesday.

USTShort

(Bloomberg)

Continue reading Bad News For That Massive Treasury Short As Goldman Slashes Bond Yield Forecasts

Mortgage Purchase Applications Rise 4.2% WoW! And 2 More Fed Rate Hikes To Go

By Anthony B. Sanders

But Refi Apps Still Dead and Purchase Apps Declining

The good news is that mortgage applications, according to the Mortgage Bankers Association (MBA) rose 4.2% from the preceding week. Both purchase and refinancing applications rose.

mbastats08178.png

The bad news? Refi applications are still dead.  Notice that the last large increase in mortgage rates (end of 2016) produced a large decline in refi applications. But the large increase in 2018  has produced a much smaller reaction.

Continue reading Mortgage Purchase Applications Rise 4.2% WoW! And 2 More Fed Rate Hikes To Go

The Winners Will Lose and the Losers Will Win

By James Howard Kunstler


Who doesn’t want to think that they are a good human being? That they are a person of good intentions, clear conscience, fair-minded, generous, loving, and merciful? On the other hand, who wants to be a loser?

The current political predicament in the USA has America’s winners turned losers and the consequent pain of that flip-flop has propelled the new designated losers into a fury of moral indignation. The deplorable Trump insurgents were supposed to be put in their place on November 8, 2016 — stuffed back into their reeking WalMarts — but instead, their champion with his gold-plated hair-do presides over the nation in the house where Lincoln, The Roosevelts, and Hillary lived. “Winning…!” as the new president likes to tweet.

Continue reading The Winners Will Lose and the Losers Will Win