Weekend Report

Good Morning.

Hope all is well. A few notes before the Weekend Report.

I’ve added a like feature and a rating system to the comments. Hopefully this helps reduce the bickering. Feel free to vote on things you appreciate and don’t appreciate. It’ll also show me what is “valued” content and what is not. As for previous post limit rule that keeps getting brought up. I do not have the time to count posts and scold people when they pass their post limit. I’m looking into some plugins to potentially help with that. The site will be evolving and changing and more features will be added as I have the time.  For those of you who are attempting to use my father as a weapon against me you will be immediately banned if it happens again. I will say this one more time. Having the comments open does nothing for me, them remaining open is only for you who comment here. Keep that in mind when picking fights with each other or me.

Be Kind and have a good week.

Thanks to the OEW Group for providing this weekend report!

Weekend Report – April 13, 2019

This week was largely a consolidation period with most of the indices making marginal new highs in choppy trade.  After a quick move down to 2881 on Monday morning, the SPX rallied to 2896 in the afternoon.  Tuesday saw a gap down and the weekly low made in the afternoon at 2873.  Price traded in range of 20 points on Wednesday and Thursday.  On Friday, the SPX gapped up and rose to 2911 on earnings and merger news.  The SPX closed the week at 2906.

For the week, the SPX/Dow gained 0.3% and the NAS/NDX was up 0.6%.

On the economic front, we saw an uptick in the NFIB Small Business Optimism Index, CPI, PPI and Core PPI.  There were negative reports for factory orders, JOLTS – job openings, and the University of Michigan Sentiment Index.

Next week’s report will highlight the Empire State Manufacturing report, industrial production, capacity utilization, retail sales, Fed’s Beige Book, and Leading Indicators.

The ECRI Weekly Leading Index continues to improve to -0.7 (April 5th data).

erciwkly

LONG TERM: Uptrend

In the US, the long-term count remains unchanged with the Super Cycle SC2 low in March 2009.  The Primary I high occurred in May 2015 and Primary II low in February 2016.  Major wave 1 high occurred in October 2018 and Major wave 2 low in December 2018.  Intermediate wave i of Major 3 is now underway.

spxwkly

MEDIUM TERM: Uptrend

We maintain our SPX wave count with the Minor 1 top at 2817 and Minor 2 bottom at 2722 with Minor 3 underway.  As expected, Minor 3 is subdividing with Minute i at 2852 and Minute ii at 2785 with Minute iii underway.  Minor 3 will extend higher to all time highs in the coming weeks.

spxdaily

SHORT TERM

We are counting the high at 2852 as Minute i and the low at 2785 as Minute ii.  The rally off the Minute ii low also appears to be subdividing into Micro waves as shown on the 60-minute SPX chart with Micro 3 still underway.

spxhourly

Short term support is at 2900 and the pivots of 2884 and 2858.  Resistance is at the 2929 and 2995 pivots.  Negative divergences exist on daily SPX charts. SPX hourly was reset with drop on Tuesday, when RSI moved below 30.

FOREIGN MARKETS

Asian markets (using AAXJ as a proxy) were flat.

European markets (using FEZ as a proxy) were up 0.9%.

The DJ World index gained 0.4%, and the NYSE gained 0.3%.

COMMODITIES

Bonds are in an uptrend and were flat.

Crude oil remains in an uptrend and gained 0.8%.

Gold is in a downtrend and was flat.

Bitcoin is in an uptrend and gained 1.3%.

The USD is in a downtrend and lost 0.2%.

CHARTS: https://stockcharts.com/public/1269446/tenpp

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389 Responses to Weekend Report

  1. Good afternoon all. Another session where /ES rallied in the overnight session and sold off at either the GLOBEX or NYSE open, today, it was the NYSE open. Are large traders building a short /ES position?

    Today during the NYSE session, /ES declined to the 50% measured move long at 2894.88. That level was defended and /ES rallied off that level. In a snap shot in time, I would expect /ES to pullback into a 15 minute, micro long at 2903.13 which will lead /ES to test it’s profit target of this long setup at 2915.45. Should /ES break the micro 61.8% long at 2901.15, I would expect additional decline for a dangerous third test of the 50% measured move long, again at 2894.88. Dangerous because the probability increase that the corresponding 61.8% large, measured move long breaks. DH chart.

    Bottom line remains unchanged, /ES 2888.12…bullish above and bearish below.

    Like

  2. sixpack says:

    I think it’s been a great environment for investing and trading. If investing you just stay long as we now start to enter the middle period of what started in 2009. If trading, just buy the dips when you get a signal and use a close stop. Stick with the trend and stop trying to pick a top. Oh sure, we’ll get a nice stiff sell off eventually, whether it be micro 4 or intermediate 2. But after that you just start doing it all over again. Wait until it tells you the trend is back up using the MA or some other method and then start buying the dips again with a close stop. That’s how Phil is doing it. He has a system and he’s following it. I don’t see him going short though. Although I’m sure he will when the trend changes.

    Which reminds me, we’ve had a nice little selloff in the RUT. Looks like it s forming a cup n handle. Good spot to be looking for an entry IMHO. Good luck all!

    Like

    • riderbobo says:

      I saw a headline on CNBC today but I can’t find the article.

      Bank of America warned about small caps today, FWIW. The seasonal period of strength ended in February. RUT peaked on February 25..

      Like

    • mcgcapital says:

      Lol sixpack clearly we aren’t going to convince each other on this. It’s been great for buy and hold this year obviously, if you feel comfortable doing that when the move is purely multiple expansion. I must have a lower risk tolerance than you because I’m completely uncomfortable with that to the point where I don’t care if I miss out, I’d rather wait until I do like the environment to increase my exposure.

      As for trading, whether the market goes up or down, if you’re active it’s so much better when there’s volatility, and I’d expect most traders to have a strong preference for that over a drift up. Obviously you can associate vol with down markets, but it’s also easier when it trends up with greater vol. For example, 2011-2015 there were frequent 3-5% pullbacks that lasted for weeks at a time within the context of a long uptrend, so it felt like the market was more robustly supported. I know the bulls will argue that the fact we keep making new rally highs at least once a week is a sign of strength, but when you don’t pullback it often means that when selling comes its vicious as it’s unclear where support is. September 2017 to February 2018 is a good example of it with the 4 month melt up and nearly full retrace within a few days. Hard to know whether we avoid that this time when there is some selling coming in, which there inevitably will be at some point.

      As for this being the middle period since 2009, I’ll have some of what you’re smoking lol. As I’ve said before here, for the market to rise you need earnings or multiples or both to rise. Multiples are already high, but can obviously go higher. On the earnings side, the article I posted earlier from Bridgewater was a decent summary of why the tailwinds over the last 30 years are now becoming headwinds. For this to be the middle of the move since 2009 implies that earnings will grow quicker than they have over the last decade. It just seems very unlikely, if there’s one thing I feel confident on it’s that there are these headwinds to earnings coming through… the only thing I can think of that negates it is productivity growth and technological advancement. But projecting that is a grey area, and whilst it’s possible I wouldn’t be betting on it when the traditional drivers of earnings are going to cause contraction. So if earnings growth is flat or very modest, it would need to be an expansion to multiples from already high levels which drives further upside.

      All I can say is that after 10 years of this, things are very extended. I do believe markets go significantly higher as they always have on a 30 year view but not without a bear market first. Everyone should be concerned about how reliant we are on central bank liquidity… everything up 2017, everything down 2018, everything up 2019… uniform returns are disturbing because it means you can’t diversify risk away, so it creates systemic risk. Who wants to hold investments which will all fall if central banks pull away again. They can’t control this forever… many things can disrupt what they’ve done, if the economy runs too hot they may have to raise rates again and then we’re back to 2018 type action. Or there are diminishing returns to extend and pretend with debt saturation and it stops making a difference. Or populism leads to politicians coming in and forcing change because of the wealth inequality caused by a decade of artificial liquidity. There’s a lot of reasons why it’s unlikely they will be unable to just run with easy monetary policy indefinitely.

      Keep posting as I enjoy your posts for balance to my own view.

      Liked by 2 people

      • I would tend to agree with you MCG on most of your posts about the macro-environment.

        That’s why I tend to steer away from trying to play the game of “calling the market” and instead, concentrate on trading a specific sector of stocks.

        In fact, I went through a period 25 years ago in which I tried to apply Elliott Wave to my trading, but given how subjective it is and with all kinds of “alternate” counts, I just couldn’t achieve the kind of execution that I wanted in order to obtain the gains I was looking for. By the time I came across a “working” wave count that I had a high degree of confidence in, the move in the market was already half over.

        Thus, I primarily focus on stock picking in just two sectors.
        Medical Diagnostics and Oil.

        For example, a couple of weeks ago I could see that the XOI was lagging in performance to the rally in crude oil – – – which by the way was one of the biggest quarterly gains on record. So I saw an opportunity for rotation into integrated oils and oil service companies and positioned myself accordingly for this group to catch up to what the underlying commodity was doing.

        That having been said, I continue to concentrate on the Medical Diagnostics sector as my primary investment/trading area… where I see numerous “catalysts” lining up for a couple of companies that I believe command “game-changing” technology with little to no competition, and facing a massive addressable market, similar to my investment in EXAS years ago.

        It’s been my experience that the younger crowd on blogs like this dont have any interest whatsoever in trading or investing in individual stocks . . . and instead, are primarily focused on trying to call each and every “squiggle” of the S&P. I know what that’s like, because when I was younger I did the same thing as a full-time stock index futures floor trader trading the NYA Composite in NYC for 10 years.

        But I guess that as I have grown older and gone through numerous market cycles, I now spend most of my focus on fundamental research of companies and whether their management teams are able to execute with their technology, while my secondary approach is to be aware of sector rotation that provides opportunities.

        I believe that in order to be successful, you need to have some kind of “edge”. And that edge must be leveraged from a methodology that is extremely simple to execute . . . employing the Keep It Simple Stupid (KISS) approach.

        Given the amount of program trading and algo trading in today’s market, I don’t have much confidence in having an “edge” when it comes to trading every squiggle of the S&P.

        But I do feel that I have an “edge” ( as well as an ability to execute ) when I see specific stocks that I follow and know extremely well on a fundamental basis, make moves that are based in fear or fact.

        Hope everyone is enjoying a Good Friday.

        Cheers!

        Like

  3. Lars Johansen says:

    Ok. So you expect wave 5 to complete above 4200! If this wave 1 completes at 3070 level. Then we get a big wave 2 down maybee to 2625 level (0.618%). Before wave 3 up. Dont mind the levels but the idea is correct?

    Like

  4. Drug stocks JNJ, MRK, and PFE all red today in the Dow…. while the biggest Dow gainer is healthcare insurer UNH bouncing back $5.25 from its recent collapse.

    Should be interesting to see what the Senate Finance Committee enacts in order to curb drug prices and allow rebates to go directly to the consumer, instead of being allocated by the drug companies to the PBM’s.

    Legislation could be enacted as early as next year.

    Like

    • UNH has lost $53 Billion in market cap since mid-November.

      This is the 2nd worst performance by the Healthcare Sector vs the S&P 500 for the YTD since 2000. The SPX is +16% while the S&P 500 health-care sector is down 0.9%

      https://www.wsj.com/articles/health-care-stock-rout-deepens-amid-political-pressure-11555516882?mod=djemMoneyBeat_us

      A good read.

      Like

    • Mr. Blue, I know you look very favorably on health care stocks.
      But trees don’t grow to the sky.
      I don’t know if you spend much time looking at charts, but this one isn’t pretty.

      “Medicare for all” seems like a huge boom in new business for Health care.
      Problem is, where is this money to pay for all this stuff?

      Good luck to you.

      Liked by 2 people

      • Tom, I think that you are mis-characterizing my comments with a very broad brush.

        I’ve never claimed to look “very favorably” upon healthcare stocks, let alone insurers like UNH. Let me be clear . . . I look “very favorably” on the medical diagnostic sector. There’s obviously a big difference.

        Why?

        For the simple reason that there are numerous catalysts in “game-changing” DIAGNOSTIC technology and ways in which preventative screening will save our government and society BILLIONS OF DOLLARS.

        Money saving comes from preventative diagnostic screening.
        Not dealing with immunotherapy treatments AFTER one comes down with Cancer.

        😉

        Like

      • M Wags says:

        UNH is an insurer is it not?

        When I think of healthcare, I think of a pharma company like BMY, or a hospital service company like HCA, or a lab company like LH, or a diagnostics company like ILMN, or a biotech company like BIIB.

        To hold up UNH as an “example” of healthcare is a stretch, at best.

        Like

  5. maxcherry12 says:

    this is my count , the wave 3 high is Jan 2018

    Like

    • Lars Johansen says:

      Is it correct you expect new highs. Then a large selloff for wave 4 ?

      Like

      • maxcherry12 says:

        i believe wave 4 is done, the dec low , 2346.58 now in wave 5
        wave 1 was 82 % if 5 = 1 4200+
        from Dec 24th to now is wave one of five

        Like

        • Lars Johansen says:

          Ok. So you expect wave 5 to complete above 4200! If this wave 1 completes at 3070 level. Then we get a big wave 2 down maybee to 2625 level (0.618%). Before wave 3 up. Dont mind the levels but the idea is correct?

          Like

          • maxcherry12 says:

            yes, something along those lines wave five could equal wave, one i’ve seen .618 of one ,50% of one

            Like

  6. Frank Gaggia, Jr. says:

    While everyone is concentrating on the high print, 2918, the SPX has just quietly surpassed it’s recovery closing high of 2907.06!

    Like

  7. cj32 says:

    Cr. CBZ

    Like

  8. mcgcapital says:

    Out of shorts for modest gains.. any gain is good in this horrendous volatility environment. Don’t fancy holding over the long weekend. GL all

    Liked by 1 person

  9. fionamargaret says:

    UUP…long $US…next numbers 26.19, 26.45 and 26.72…then super breakout….and crazy.
    TVIX might come in handy.

    Liked by 3 people

  10. I definitely find it a lot easier to day-trade / swing-trade stocks like EXAS which is now over $4.00 off the low of the day, than the repeated “chop chop, fizz fizz” in the ES.

    🙂

    Like

    • riderbobo says:

      What happened to holding EXAS for the long haul and your concern about income tax related to it?

      Like

      • I still have a core investment position in my investment account.
        I’ve never claimed otherwise.

        Only 4.5% of the total addressable market has been penetrated. Moreover, the screening age for starting colon cancer screening in the U.S. has recently been lowered from age 50 down to 45 by the ACA.

        That adds an additional 18 million Americans to the market place for Cologuard.
        🙂

        Liked by 1 person

        • riderbobo says:

          I am not a candidate for Cologuard given my risk profite.

          Came up clean two months ago.

          Like

        • So that means that there is a TAM (total addressable market) of 120 million Americans. If just 30% of Americans use Cologuard once every 3 years, you are talking about over $6.0 Billion in annual revenue.

          In the United States, Medicare (CMS) pays $512 every 3 years for those age 65 and over to use Cologuard.

          Commercial insurers pay more… and there is no” out-of-pocket” cost or co-pay for the patient.

          Meanwhile, Cologuard enjoys 75% gross margins.

          I hear people saying that “fundamentals” don’t matter.
          I would seriously beg to differ.

          When you come across a “game-changing” medical diagnostic technology that achieves non-invasive performance on par with colonoscopy for the 2nd largest cancer killer of Americans over age 50 that claims 50,000 lives a year …. you have a Grand Slam!

          When the U.S. Preventative Services Task Force included stool-DNA (Cologuard) in its Final Guidelines in June of 2016 when the stock was trading $7.50 a share, that was the biggest GREEN LIGHT and “grapefruit” of a pitch being “served” up that I have ever seen in my life.

          I shared this idea with tons of people.
          I wanted them to become wealthy off of it. But few had the risk capital to do so.

          It pays to be able to “connect the dots”.
          Because when you do, you can swing for the fences with a high degree of success….. Stanley Druckenmiller style!

          🙂

          Like

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