Records Are Made to Be Broken

By Charlie Bilello

Viewing the New York City skyline from afar last month, I noticed something strange. I could no longer name a number of the tallest buildings.

The Empire State Building, the Chrysler Building, and the new World Trade Center were readily identifiable. But a new crop of skyscrapers was emerging from the shadows, seemingly overnight.

After doing some research, I learned that this was not just my imagination…

Within the next few years, a list of the tallest buildings in New York will look remarkably different. Of the top 20 tallest today, at least 13 will have been replaced. Explosive growth by any measure that few would have predicted back in the financial/real estate crisis that hit New York so hard just a decade ago.

Continue reading Records Are Made to Be Broken

Freight Volume Does Not Support Imminent Recession Theory

By Chris Ciovacco

FREIGHT VOLUME PEAKED WELL BEFORE THE FINANCIAL CRISIS

The Freight Transportation Services Index, calculated by the United States Department of Transportation, peaked in January 2005 or more than two years before the S&P 500’s major top in October 2007.   After the October 2007 peak in stocks, the  Freight Transportation Services Index dropped sharply as shown in the chart below.

short-takes-ftsi-2005.png

Friday Reveals Event Risk Complacency

By Tom McClellan

Friday up days stock market SP500

The SP500’s higher close on Friday was one of several up Fridays we have seen recently.  Moving up or down on a Friday can convey a message about investor sentiment, especially when multiple Fridays see the market go in the same direction.

To be a buyer on a Friday, one has to accept that you cannot get out again until Monday.  So it takes some degree of confidence that “event risk” won’t be a problem over the weekend.  When people are feeling fearful, Fridays are more likely to see a lower close.  And by the same token, bidding up the market on Fridays can be a sign of confidence.

Continue reading Friday Reveals Event Risk Complacency

I Hear 1987 New Wave is Back

By Kevin Muir

[biiwii comment: I prefer 1977 punk, personally; and as for new wave, Joy Division over New Order any friggin’ day of the week…]

I don’t know about you, but I’m worried. The economic cycle is long in the tooth. Equity valuations are stretched. The yield curve is flattening. Emerging markets and other liquidity-sensitive markets are sagging. The Federal Reserve is raising rates while also attempting the never-before-accomplished feat of reversing a decade of quantitative easing – seemingly oblivious to the hornet’s nest they are walking into. And President Trump seems determined to antagonize as many trading partners as possible before the summer holidays begin in earnest.

Continue reading I Hear 1987 New Wave is Back

Fool Me 666 Times, Shame on Me…

By Tim Knight

Well, surely you heard the news that Trump has ratcheted up the Chinese Trade War again:

Look, I’ve seen this movie before. I know how the story goes:

  1. Bears are about to lose hope since the market keeps going higher infinitely;
  2. Trump announces another salvo in the trade war;
  3. Market instantly plunges;
  4. Trump slips on a pink skirt and 38C bra and backpedals his threats;
  5. Market swiftly recovers to new lifetime highs.

Make no mistake, I’m short – – 54 positions – – and would love the market to fall 500 points every day until it was at 0 and every bull had committed a painful seppuku. Honest, I’d love that to pieces, since my hatred of bulls almost certainly exceeds that of Jews against Nazis, but I’m past hope at this point. It’s all a rigged game with no hope and no decency left. It will only end with apocalypse.

Expect Dow 30,000 in the morning. This is a sham, and I’m not getting hopeful anymore. Amazon with a p/e of 300 is just too damned CHEAP to pass up for John Q. Public, because he’s SO freakin’ smart.

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Is Friday’s Sharp Drop in VXO Meaningful?

By Rob Hanna

The rally on Friday was accompanied by a sizable drop in the VIX (and even more so for the VXO, which is the old calculation for the VIX). This triggered some old studies for me in which I noted that big drops in the VXO have had much different connotations depending on whether SPX is in a long-term uptrend or downtrend (as defined by its proximity to the 200ma). I decided to review those studies, which require a 15% 1-day VXO drop, in this weekend’s subscriber letter.

First let’s consider what has followed when the large VXO drop has occurred during a long-term downtrend.

2018-07-09-1

We see here some bearish statistics over the 1-2 day period. There is rarely upside follow-through when fear dissipates that quickly during a downtrend.

Continue reading Is Friday’s Sharp Drop in VXO Meaningful?

The Iron Lung

By Tim Knight

I shall refrain from the magnum opus of obscenities I would like to type right now and simply say: goodness gracious me, this market is annoying. Here’s what the NQ did from the opening bell forward:

After the past decade, I don’t think people would recognize a real market if they saw it right in front of their eyes. The market is not ALLOWED to go down, no matter what.

Continue reading The Iron Lung

This 2-Day Pattern Suggests the Bulls May Have A Short-Term Edge

By Rob Hanna

On Wednesday the bulls tried to make a move higher and failed, making for a higher high and a lower close. On Thursday the opposite happened. The bears failed in their attempt at a move lower. A study from the Quantifinder looked at 2-day moves like this. I found results to be substantially different based on whether the market is near the top or the bottom of its short-term range. When the pattern occurs in the lower end of the short-term range is has been consistently bullish over the next 4-5 days. This can be seen in the below test, which is updated.

2018-06-29

Odds strongly favor a move higher and the profit factors are very impressive over the next 4-5 days. The failure of the bears to take control when the market pressed downward and made a lower low on Thursday has opened the door for the bulls.

Continue reading This 2-Day Pattern Suggests the Bulls May Have A Short-Term Edge

Misconceptions About Volatility Can Lead To Investor Missteps

By Chris Ciovacco

VOLATILITY IS ALWAYS STRESSFUL

With lingering concerns about trade, markets sold off Monday with all three major U.S. indexes posting intraday declines of greater than 1%.  Red screens create stress and doubt.  Therefore, it can be helpful to take a step back and check the big picture.

In August 2016, the S&P 500’s 30, 40, and 50 week moving averages told us to be open to better than expected outcomes from a long-term perspective.  The chart below shows the same moving averages as of 1:15 pm ET Monday.  The NASDAQ’s chart looks even better.

short-takes-06-25-208-spx-a.png

To give us a bearish reference point, the same weekly moving averages over a one-year period in 2007-08 are shown below.

Continue reading Misconceptions About Volatility Can Lead To Investor Missteps

Mark It On Your Calendars

By Kevin Muir

It’s that time again. At the end of this month, the Federal Reserve has over $30 billion of notes maturing. I won’t rehash what this might mean for the market, rather for those not familiar, I ask you to go read Pink Tickets On QT Days.

Let’s do a quick recap at what happened at the previous big QT day – last month end – May 31st, 2018:

Another large QT maturity day, and another down day in spooz.

Let’s update the table with the recent QT maturity days to have a peek at what it looks like now:

Continue reading Mark It On Your Calendars

Moving Averages and Volatility

By Charlie Bilello

The Dow closed below its 200-day moving average this week for the first time in two years.

That ended the longest streak above the 200-day moving average since 1987. At 501 trading days, it was the seventh longest run in history.

Data Source for all charts/tables herein: Bloomberg, YCharts, Stockcharts.com. Note: all data in this post is price data, not total return.

How common is a close below the 200-day moving average and what has it meant for the Dow historically? Let’s take a look…

Continue reading Moving Averages and Volatility

June Swoon

By Tim Knight

In spite of all my pissin’ and moanin’ about the lack of direction in the market, if you take a step back, at least we’ve got a little bit of a trend since June 13th. On that day, equities were in many cases nailing lifetime highs, and the S&P was approaching an importance resistance point. On an intraday basis, we have been carving out a fairly clean set of lower lows and lower highs.

Around the 18th and 19th, there was an usually strong surge (was it due to North Korea? I don’t remember, and it doesn’t even matter at this point…) so it seemed that maybe this downtrend would be ruined, but we have “caught down” once more, cementing the firmness of the move.

Two weeks isn’t a lot of time, but sheesh, in a market like this, that practically constitutes a secular market cycle.

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Or better yet, subscribe to NFTRH Premium for an in-depth weekly market report, interim updates and NFTRH+ chart and trade ideas to get even more bang for your buck. You can also keep up to date with plenty of actionable public content at NFTRH.com by using the email form on the right sidebar. Or follow via Twitter @BiiwiiNFTRH, StockTwits or RSS. Also check out the quality market writers at Biiwii.com.