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Market’s Bill of Health: Short Term Reversal, Otherwise Bullish

Courtesy of Doug Short.

Advisor Perspectives welcomes guest contributions. The views presented here do not necessarily represent those of Advisor Perspectives.


Wednesday’s selloff proved to change the short-term outlook of the market as indicated by a reversal commonly referred to by technicians as a bearish engulfing pattern. Such a reversal is also corroborated in the loss of short-term bullish momentum as the percentage of stocks within the S&P 500 with a daily MACD buy signal plummeted to 41% from last week?s 75% reading. With that said, the market?s long and intermediate-term momentum still remain bullish as does the overall market trend. Cyclical sectors continue to be market leaders though the defensive health care sector continues to hold onto its leadership mantle.

S&P 500 Member Trend Strength

As shown below, the outlook for the S&P 500 is clearly bullish as more than 60% of stocks in the 500 member-index have bullish short, intermediate, and long-term trends. What is perhaps most important for the S&P 500 is that its long-term health is incredibly strong given nearly 90% of its members have rising long-term moving averages.

S&P 500 Trend Strength

* Note: Numbers reflect the percentage of stocks with rising moving averages. 200d MA is used for long-term outlook, 50d MA is used for intermediate outlook, and 20d MA is used for short-term outlook.

Breaking out the 500 stocks within the S&P 500 into their respective sectors and viewing their long (200d SMA) and intermediate trends (50d SMA) shows the cyclical sectors are surfacing as short-term leaders as they possess the strongest short-term breadth (% of members above their 20 day moving average). The most important section of the table below is the 200d SMA column, which sheds light on the market?s long-term health. As seen in the far right columns, you have 89% of the S&P 500 members with rising 200d SMAs and 90.6% of its members above their 200d SMA with nine out of ten sectors in bullish territory and more than 60% of their members having rising 200d SMAs. The two sectors showing the healthiest overall trend are the financial and consumer staples sectors as they have the best long-term and intermediate-term trends.

The defensive sectors were market leaders until recently as there is a rotation away from defensive to more aggressive sectors. Perhaps this is most evident when looking…
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Getting Technical: Weekend Update

Courtesy of Doug Short.

Here’s the latest weekend update from Serge Perreault, a Chartered Professional Accountant and market technician located near Montreal, Canada. Serge has been following the U.S. market in a series of weekly charts. Here is his update on the S&P 500.


The S&P 500 bounced off its uptrend resistance and paused its ascension, on average volume and on falling momentum.

A break of this week’s low (1636) would confirm a correction in the direction of the EMA10 (1603).

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Note: For newcomers to technical analysis, here are brief explanations for the two key indicators that Serge features:

  • ROC (Price Rate of Change)
  • RSI (Relative Strength Index)

(c) Serge Perreault CPA Inc.

 

 

 

 





Margin Debt and the ’’Highway to the Danger Zone’’

Courtesy of Doug Short.

Advisor Perspectives welcomes guest contributions. The views presented here do not necessarily represent those of Advisor Perspectives.


Sir John Templeton first alerted me to the dangers of excess margin debt in the late 1990′s, and I’ve been a fan of keeping in touch with this key indicator ever since.

Fresh Margin debt numbers have just been released. My good friend Doug Short shared the chart below, reflecting that margin debt continues to move higher, reaching levels where the S&P 500 has struggled to move much higher!

Are we on the “Highway to the Danger Zone” due to these historically high debt levels? Will it be different this time? Was a Danger Zone level in the past, let’s see if it’s any different this time around!

 

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Negative net worth has only been this low one other time in history! First time it didn’t end real well!

 

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For information about Kimble Charting Solutions, send an email to services@kimblechartingsolutions.com.

 

 

 

 





S&P 500 Snapshot: A Fractional Loss Ends a Strange Week

Courtesy of Doug Short.

Durable Goods for April came in above expectations before the market opened, but the S&P 500 opened lower and slipped to its -0.89% intraday a little over 30 minutes later. The remainder of the day was a steady struggle higher with a touch of drama in the final hour of trading. The index closed the day with a modest loss of 0.06%, which tallies to a 1.07% loss for the week. This is the first negative week after five weekly gains.

The real drama this week was on Wednesday, which had the fourth highest intraday range of 2013. Why? Confusion over the Fed’s strategy for tapering QE. On Tuesday two of the Fed Presidents made dovish sounds, and Chairman Bernanke’s congressional testimony on Wednesday morning was harmoniously dovish. But the post-testimony Q&A sent mixed messages about the odds of near-term tapering, and the 2 PM release of the FOMC minutes added to the confusion.

Here is a 15-minute look at the week.

In case you’re wondering about the other three higher intraday ranges so far this year, see the chart below. The first trading session of the year following the disappearance of the Fiscal Cliff saw a 2.54% gain, the same as the range. The second, with a 2.55% range, was a 1.83% selloff on February 25th after the Italian election fiasco. The third, with a 2.36% range, was on April 15, the worst selloff so far in 2013. Factors included weak Chinese GDP, a swan-dive in gold and other commodities, and the Boston Marathon terrorism. The fourth, with an intraday range of 2.32%, was Wednesday’s befuddlement over apparent mixed messages from the Fed on the odds of near-term tapering of QE.

Not surprisingly on a relatively eventless day before an extended holiday weekend, volume for the S&P 500 was 25% below its 50-day moving average.

The S&P 500 is now up 15.66% for 2013 and 1.17% below the all-time closing high of May 21.

 

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For a better sense of how these declines figure into a larger historical context, here’s a long-term view of secular bull and bear markets in the S&P Composite since 1871.

 

 

 

 





The ’’Real’’ Goods on the Latest Durable Goods Data

Courtesy of Doug Short.

Earlier today I posted an update on the May Advance Report on April Durable Goods Orders. This Census Bureau series dates from 1992 and is not adjusted for either population growth or inflation.

Let’s now review the same data with two adjustments. In the charts below the red line shows the goods orders divided by the Census Bureau’s monthly population data, giving us durable goods orders per capita. The blue line goes a step further and adjusts for inflation based on the Producer Price Index, chained in today’s dollar value. This gives us the “real” durable goods orders per capita. The snapshots below offer an alternate historical context in which to evaluate the standard reports on the nominal monthly data.


 

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Economists frequently study this indicator excluding Transportation or Defense or both. Just how big are these two subcomponents? Here is a stacked area chart to illustrate the relative sizes over time based on the nominal data.

 

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Here is the first chart, repeated this time ex Transportation, the series usually referred to as “core” durable goods.

 

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Now we’ll leave Transportation in the series and exclude Defense orders.

 

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And now we’ll exclude both Transportation and Defense for a better look at “core” durable goods orders.

 

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Here is…
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Yet Another Debt Chart That Is Not Big Enough To Fit Japan

The problem with being off the charts is that it impairs the doings of pretty artwork. Zero Hedge complains.

Yet Another Debt Chart That Is Not Big Enough To Fit Japan

Courtesy of ZeroHedge

By now every single chart laying out every possible permutation of a hopelessly insolvent and overlevered world has been compiled, created, colored and in some cases, animated and socially networked. The following chart showing global debt dynamics over time from the WSJ is no different: it is animated (check) it has lots of pretty colors (check), and it is quite informative because it remembers that in addition to public sector debt, there is a thing called the private sector (sadly it avoids shadow debt: perhaps someone good at making 3D animated charts should take a stab?). This chart succeeds in incorporating everything in one cool animation.

Yet why it may be most memorable, or not as the case may be, is that it is merely the latest chart in a seemingly infinite series which are just not big enough to fit Japan.  Perhaps it is time to make a chart of all the charts that need to be bigger to show the true Japanese state of affirs.

That, or in reverence to the sadist joke, pardon "experiment" (as Jens Weidmann would say) that is Abenomics, we can finally start making bigger charts.

Interactive global debt dynamics chart after the jump:





NYSE Margin Debt and the S&P 500: A Sign of Vulnerability?

Courtesy of Doug Short.

Note from dshort: One of my economic correspondents, James Ross, called my attention to the fact that the NYSE has released new data for margin debt, now available through April. I’ve updated the charts in this commentary to include the new numbers.


The New York Stock Exchange publishes end-of-month data for margin debt on the NYXdata website, where we can also find historical data back to 1959. Let’s examine the numbers and study the relationship between margin debt and the market, using the S&P 500 as the surrogate for the latter.

The first chart shows the two series in real terms — adjusted for inflation to today’s dollar using the Consumer Price Index as the deflator. I picked 1995 as an arbitrary start date. We were well into the Boomer Bull Market that began in 1982 and approaching the start of the Tech Bubble that shaped investor sentiment during the second half of the decade. The astonishing surge in leverage in late 1999 peaked in March 2000, the same month that the S&P 500 hit its real all-time high. A similar surge began in 2006, peaking in July, 2007, three months before the market peak.

 

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The next chart shows the percentage growth of the two data series from the same 1995 starting date, again based on real (inflation-adjusted) data. Margin debt grew at a rate comparable to the market from 1995 to late summer of 2000 before soaring into the stratosphere. The two synchronized in their rate of contraction in early 2001. But with recovery after the Tech Crash, margin debt gradually returned to a growth rate closer to its former self in the second half of the 1990s rather than the more restrained real growth of the S&P 500. But by September of 2006, margin again went ballistic. It finally peaked in the summer of 2007, about three months before the market.

 

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After…
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Recession Watch: ECRI’s Weekly Leading Indicator Up Slightly

Courtesy of Doug Short.

The Weekly Leading Index (WLI) of the Economic Cycle Research Institute (ECRI) is at 130.6, up slightly from last week’s 130.1 (a downward revision from 130.2). The WLI annualized growth indicator (WLIg) dropped to 6.8% from 7.0% last week.

Last year ECRI switched focus to their version of the Big Four Economic Indicators that I routinely track. But when those failed last summer to “roll over” collectively (as ECRI claimed was happening), the company published a new set of indicators to support their recession call in a commentary entitled The U.S. Business Cycle in the Context of the Yo-Yo Years (PDF format). Late last month the company added its most recent publically available commentary on their website: Nominal GDP Growth Falls Again.

Essentially ECRI is sticking to its call that a recession began in mid-2012, although the company calls it a “mild” recession, which is quite a shift from their original stance in September 2011: “…if you think this is a bad economy, you haven’t seen anything yet.”

ECRI posts its proprietary indicators on a one-week delayed basis to the general public, but last year the company switched its focus to a version of the Big Four Economic Indicators I’ve been tracking for the past year. In recent months, however, those indicators have slipped below the fold, replaced by the mixed bag of whatever Indicator du Jour might look recessionary, as in the “Yo-Yo Years” commentary linked above. Likewise, see this March 7th Bloomberg video. At about the 2-minute point Achuthan reasserts his call that a recession began in the middle of 2012. In previous interviews he has specifically mentioned July as the business cycle peak, thus putting us in the 11th month of a recession.

Here is a chart of ECRI’s data that illustrates why the company’s published proprietary indicator has little credibility as a recession indicator. It’s the smoothed year-over-year percent change since 2000 of their weekly leading index. I’ve highlighted the 2011 date of ECRI’s recession call and the hypothetical July business cycle peak, which the company claims was the start of a recession.

 

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Joe Friday: ’’Junk Bonds Look Bearish and Could Break Support’’

Courtesy of Doug Short.

Advisor Perspectives welcomes guest contributions. The views presented here do not necessarily represent those of Advisor Perspectives.


High Yield ETFs JNK & HYG have formed bearish rising wedges. Two-thirds of the time, prices end up lower in the future after forming this type of pattern. The support lines of the rising wedges are being tested very hard and appear to be giving way right now.


 

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This pattern becomes very important with the effective yield on high yields at the lowest levels in 20 years plus (most overvalued ever), reflected in the chart below.

Joe Friday: “Effective yield has formed a bullish falling wedge at (1). This pattern suggested higher yields two-thirds of the time. If yields do move higher, the majority of the time stocks end up lower in price.”


For information about Kimble Charting Solutions, send an email to services@kimblechartingsolutions.com.

 

 

 

 





Durable Goods Orders in April Bounced Back Partially from the March Plunge

Courtesy of Doug Short.

The May Advance Report on April Durable Goods was released this morning by the Census Bureau. Here is the Bureau’s summary on new orders:

New orders for manufactured durable goods in April increased $7.2 billion or 3.3 percent to $222.6 billion, the U.S. Census Bureau announced today. This increase, up two of the last three months, followed a 5.9 percent March decrease. Excluding transportation, new orders increased 1.3 percent. Excluding defense, new orders increased 2.1 percent.

Transportation equipment, also up two of the last three months, led the increase, $5.1 billion or 8.1 percent to $67.6 billion. This was led by nondefense aircraft and parts, which increased $1.9 billion. Download full PDF

The latest new orders number at 3.3 percent was above the Briefing.com consensus of 1.6 percent. Year-over-year new orders are up 2.4 percent. This is a welcome improvement over the previous month’s -5.9 percent MoM and -0.8 percent YoY.

If we exclude transportation, “core” durable goods were up 1.3 percent MoM. Year-over-year core goods up a fractional 0.9 percent.

If we exclude both transportation and defense, durable goods were down 0.5 percent MoM but up 1.4 percent YoY.

The first chart is an overlay of durable goods new orders and the S&P 500. We see an obvious correlation between the two, especially over the past decade, with the market, not surprisingly, as the more volatile of the two.

 

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An overlay with unemployment (inverted) also shows some correlation. We saw unemployment begin to deteriorate prior to the peak in durable goods orders that closely coincided with the onset of the Great Recession, but the unemployment recovery tended to lag the advance durable goods orders.

 

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Here is an overlay with GDP — another comparison I like to watch closely.

 

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Chart School

Getting Technical: Weekend Update

Courtesy of Doug Short.

Here's the latest weekend update from Serge Perreault, a Chartered Professional Accountant and market technician located near Montreal, Canada. Serge has been following the U.S. market in a series of weekly charts. Here is his update on the S&P 500.

The S&P 500 bounced off its uptrend resistance and paused its ascension, on average volume and on falling momentum.

A break of this week's low (1636) would confirm a correction in the direction of the EMA10 (1603).


Click for a sharper im...

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Zero Hedge

Jack Lew's Triple Whammy - IRS Ignorance, Corzine Corruption, And The 'War On The Poor'

Courtesy of ZeroHedge. View original post here.

Submitted by Tyler Durden.

While some, we are sure, will view this brief clip as partisan showmanship by Representative Steve Pearce, the questions he asks Treasury Secretary should surely be responded to in some manner that is anything but the typical perfunctory shrug these matters normally garner. From Lew's apparent disbelief that the IRS Audits debacle was in any way 'political' to Lew's "waiting for the investigation' on Jon Corzine's misappropriation of funds, and finally to the "War on the Poor" that Pearce describes the current administration's policies (for the benefit of Wall Street); these few minutes are well worth some time as we 'remember' this weekend.

"For New Mexico, we re...



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Phil's Favorites

Beppe Grillo Supports "Referendum on the Euro Within a year"

Courtesy of Mish.

Via google translate from Corriere Della Sera, Beppe Grillo is in favor of a "Referendum on the Euro Within a year"
"Europe needs to be rethought. We consider just one year of information and then hold a referendum to say yes or no to the euro and yes or no to Europe. " Beppe Grillo to ride a strong theme of the last election campaign the 5 Star Movement. "Europe on the euro and the British teach us democracy. No party can claim the right to decide for 60 million people. "

"I want to go to Europe and re-discuss a Plan B to be in five years, "added the leader M5S, explaining:" When we ...



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Option Review

Bearish Options Play Paying Off As Abercrombie Shares Lose Their Cool

Today’s tickers: ANF, XLU & XLV

ANF - Abercrombie & Fitch Co. – Shares in teen retailer, Abercrombie & Fitch Co., are getting hammered today, down 10% at $48.92 in early-afternoon trading after the company reported a wider-than-expected first-quarter loss and missed topline estimates, lowered its full year earnings forecast and said same-store sales would be down slightly for the rest of the year. A review of pre-earnings report activity in Abercrombie options yesterday indicates one trader was prepared for the pullback today. It looks like the strategist initiate...



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All About Trends

Mid-Day Update

Reminder: David is available to chat with Members, comments are found below each post.

Click here for the full report.




To learn more, sign up for David's free newsletter and receive the free report from All About Trends - "How To Outperform 90% Of Wall Street With Just $500 A Week." Tell David PSW sent you. - Ilene...

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Market Montage

Even Markets Where Central Bankers Directly Buy Stock Can Get Overbought

Submitted by Mark Hanna

Courtesy of MarketMontage. View original post here.

While the S&P 500 has had quite a year already the Nikkei has been the story of the globe as they are performing acts of central banking that even put the U.S. Fed to shame.  And Japan's central bank can buy ETFs and REITs directly per their charter versus the U.S. bank.  Combined with a yen in free fall it's been a heck of a move for the Nikkei since last November.  I noted last week we were seeing extremely rare weekly and monthly type overbought readings on bo...



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Insider Scoop

Long Setup in Herbalife Still Attractive; Stock Breaks Out as New Auditor Hired

Courtesy of Benzinga.

Few stocks have attracted more news over the last six months than nutritional supplement maker Herbalife (NYSE: HLF).

Even casual market observers are aware of the circumstances surrounding the the initial bout of extreme volatility in the name back in December 2012. The shares went into free-fall at the end of the year after hedge fund manager Bill Ackman revealed in typical sanctimonious fashion that his firm Pershing Square Capital Management was short around $1 billion worth of the stock.

Amid much pomp and circumstance, Ackman laid out his short thesis at a New York investment conference and...



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Sabrient

Sector Detector: Fed tries to refill bulls’ fuel tank as cyclicals lead

Courtesy of Sabrient Systems and Gradient Analytics

The market went through some gyrations on Wednesday in reaction to Fed Chairman Bernanke’s testimony before the Joint Economic Committee. He first defended continued quant easing by warning, “A premature tightening of monetary policy could lead interest rates to rise temporarily but also would carry a substantial risk of slowing or ending the economic recovery.” Stocks dutifully rallied and all major indexes hit new intraday highs.

But alas, consensus is apparently not a given over the longer term. The minutes hinted that a tapering off could start sooner, “A number of participants expressed willingness to adjust the flow of purchases downward as early as the June meeting if the economic information received by that time showed evidence of sufficiently strong and sustained growth.” So …...



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OpTrader

Swing trading portfolio - week of May 20th, 2013

Reminder: OpTrader is available to chat with Members, comments are found below each post.

This post is for all our live virtual trade ideas and daily comments. Please click on "comments" below to follow our live discussion. All of our current  trades are listed in the spreadsheet below, with entry price (1/2 in and All in), and exit prices (1/3 out, 2/3 out, and All out).

We also indicate our stop, which is most of the time the "5 day moving average". All trades, unless indicated, are front-month ATM options. 

Please feel free to participate in the discussion and ask any questions you might have about this virtual portfolio, by clicking on the "comments" link right below.

To learn more about the swing trading virtual portfolio (strategy, performance, FAQ, etc.), please click here

Optrader 

...

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Stock World Weekly

Stock World Weekly

NEW: Newsletter writers are available to chat with Members regarding topics presented in SWW, comments are found below each post.

Here's the latest Stock World Weekly! Just sign in with your PSW user name and password, or sign up to try it out. 

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IRA Strategy/Income Trader

The IRA portfolio

Reminder: Craigzooka is available to chat with Members regarding his virtual portfolio performance, comments are found below each post.

By Craigzooka

I am going to share with you how I manage my IRA and the power of reducing your cost basis.  My goal each year is a 20% return in my IRA.  Sometimes I make it and sometimes I don't, but I believe that all of my success is due to reducing my cost basis.  To illustrate the power of reducing your cost basis here are some trades we did last year.  These trades are taken from an educational portfolio we ran in a paper-trading account for a little more than a year.

  • We bought RIG on 5/15/2012 for $44.13, sold it on 1/18/2013 for $46 but booked a profit of $1,154.
  • We bought MT on 1/4/2012 for $19.24, sold it on 12/21/2012 for $15 but booked a profit of $454.
  • We bought CHK on 1/27/2012 for $21.93, sold it on 10/19/2012 for $18 b...


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ETF Selector

Stock Market Gets Big News After Friday’s Close

Courtesy of John Nyaradi.

Stock market posts another record setting week, but the big news came after Friday’s close.

Courtesy of NASA

The stock market put on another record setting show with the Dow Jones Industrial Average (NYSEARCA:DIA) closing at a record high 15,118 and the S&P 500 (NYSEARCA:SPY) closing at 1633.70, another all time closing high.

For the week, the Dow Jones Industrial Average (NYSEARCA:DIA) gained 1%, the S&P 500 (NYSEARCA:SPY) climbed 1.2%, the Nasdaq Composite (NYSEARCA:...



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Pharmboy

Give Them an Inch, They Will Take a Mile

Reminder: Pharmboy is available to chat with Members, comments are found below each post.

Well, well, well....it is good to know that there are others in the scientific arena who believed that YMI Bioscience's data (cough - Gilead) is a better drug than Incyte's Jakafi.  Now, the definitive data are still unknown, but there was enough evidence from a Phase 2 trial to take a small risk for a huge reward.  So, let's forget about Apple (AAPL), and do nothing but biotechs from now until Congress passes universal health care coverage for prescriptions....and drive the prices down so that research and development is no longer feasible to conduct in the US. Even Seattle Genetics (SGEN) has been on a tear as of late...



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Philip R. Davis is a founder Phil's Stock World, a stock and options trading site that teaches the art of options trading to newcomers and devises advanced strategies for expert traders...

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