Sunday, July 31, 2016

In 50 Years this has never failed to trigger a Bear Market | Jesse Felder


Jesse Felder (Jul 30, 2016 @ Zero Hedge) - Over the past half-century, we have never seen a decline in earnings of this magnitude without at least a 20% fall in stock prices, a hurdle many use to define a bear market. In other words, buying the new highs in the S&P 500 today means you believe “this time is different.” It could turn out that way but history shows that sort of thinking to be very dangerous to your financial well-being.

On July 29 CNN's Fear & Greed Index indicated "Extreme Greed"
Source
: CNN Fear & Greed Index
Citigroup's Panic/Euphoria Model on August 01, 2016 = Most 'euphoric' since August 2015.
S
ource
: Citigroup Panic/Euphoria Model

Weekly Chart Pattern Indicator Turned Bearish | Thomas Bulkowski

After the close on Friday, July 29th, Thomas Bulkowski's Chart Pattern Indicator for the S&P 500 Index turned bearish.
The indicator is a ratio of bullish patterns to the total of bullish and bearish patterns, expressed as a percentage.
More details on Thomas Bulkowski's Chart Pattern Indicator background (HERE)

The chart pattern indicator line is not as important as the signals which it generates, but I have included a chart of
the indicator itself so you can check for divergence. Divergence often gives hints as to which way the index moves in the
future. Look for lower/higher peaks in the indicator while the index is making flat or higher/lower peaks. The index will
often follow the indicator (HERE)
Warning:

If you use this indicator for periods shorter than weekly, you will likely be in for a nasty surprise. Due to the way I have it
configured, signals up to a week old can change or disappear. Thhe current sell signal may not be valid for another week or it
may change in a few days when more NR7s break out. Thus, this indicator is best used as a weekly signal (that
is, signals older than a week are reliable) of market trend (HERE)

Saturday, July 30, 2016

U.S. Oil Industry | Record Exports and Worst Profits since 1999

Big Oil had a horrible Q2 quarter. So far in Q3, oil prices had averaged lower than in Q2, and refining margins are
much lower too. Exxon has the worst profit since 1999, and the industry cannot survive on current oil prices. “What
we’re seeing is that there’s just no place for the supermajors to hide”, Brian Youngberg, an analyst at Edward Jones
& Co. in St. Louis, said in an interview. “Oil prices, natural gas, refining, it all looks very bad right now.” (HERE)

Friday, July 29, 2016

SPX vs Inverted 354 CD (Lunar Year) Cycle

The Lunar Year Cycle (Medium Term Delta) seems to have inverted recently (from L-L and H-H polarity to L-H and H-L polarity).
If the current polarity persists a major high in the S&P500 by mid August is likely.
SPY | Neural Network-Forecast | by Alphee Lavoie

Emerging Markets Business Cycle | Approaching Gradual Recovery

Source: Morgan Stanley Research
Morgan Stanley Research (Jul 21, 2016) - There are five phases of the emerging markets cycle:

1. Productive growth, a stage of moderate to high productivity-driven growth;
2. Misallocation, in which there is moderate growth driven by bad macro policies;
3. Adjustment;
4. Restoring Macro Stability, and finally
5. Gradual Recovery.

A large number of emerging markets have moved into the “restoring macro stability” recently — which means that growth is still weak, but the economy is stabilizing. Russia, Brazil, Turkey, and Thailand are in this category Global GDP growth might get a boost next year, as some economies approach the end of the “emerging markets business cycle” and begin a gradual recovery.

These economies are not necessarily strong yet, but do show signs of increasing stable growth — except for Turkey, whose economy could be negatively impacted after the failed coup attempt. Thailand, for example, still has weak domestic demand and exports, but its economy is growing, partly due to robust growth in tourism, and Russian oil has managed to prosper even with today’s low prices. Brazil is still dealing with an economic crisis, which is exacerbated by its political one — but financial markets reacted favorably to news of the possibility of the president’s impeachment, and a Brazilian economist said that “the expected changes in the government and its economic policies could represent the beginning of a gradual return of investor confidence in Brazil,” and that the economy should return to growth by 2017.

If these countries move into the recovery stage in the next year, it would drive an acceleration in emerging market growth for the first time in four years. Morgan Stanley expects the GDP growth of emerging markets, excluding China, to accelerate from 2.7% to 3.8% in 2017. Those markets together make up 37% of global GDP. Countries that are already in this “recovery” phase include Mexico, which has the 11th-high GDP in the world but is still considered a developing country, and India, which has been called the “biggest turnaround story” in emerging markets because of its slow, gradual growth over the past few years. Meanwhile, China is still in the “misallocation” stage — the one with moderate growth but bad macroeconomic policies. Also in this category is Korea, whose low growth has been largely caused by declining trade with China.

Most Volatile Seasonal Period About to Begin | Nautilus Research

Source: Nautilus Research
Source: Nautilus Research

Tuesday, July 26, 2016

SPX vs BB 233 var 2 + 125 DMA | Resistance and Support

Upper Bollinger Band (Length 233 Days; + 2 Standard Variations) | 125 Day Moving Average

Thursday, July 14, 2016

VIX | Put/Call Ratio | AI Forecast | Extreme Greed

The VIX should turn up today, meaning the SPX turning sideways-to-down into Jul 20 (Wed).
The next lows in the VIX (= highs in the SPX) are likely Jul 14 (Thu), Jul 28 (Thu), and Aug 16 (Tue).
Source: CBOE
Source: CBOE
FFC Long Range Forecasts rely exclusively on Artificial Intelligence and Machine Learning to analyze and model.
Source: Financial Forecast Center, LLC.
90% of the stocks in the S&P 500 are now above the 20 Day Moving Average.
Source: CNN Fear & Greed Index

Tom McClellan: NYSE vs Haurlan Index | Not A Price Top (Yet)

Haurlan Index - A reliable “Not A Price Top” Indicator. Source: Tom McClellan
Tom McClellan (Jul 13, 2016) -  If you want to have a recipe for a sustainable bull market, the best ingredient to start with is “gobs of breadth”. Strong A-D data is a sign of plentiful liquidity. The stock market can encounter other types of problems, but if liquidity is strong then investors can get past momentary worries about Brexit, earnings, valuations, etc. I like to say that there are really only 2 fundamentals that matter for the overall stock market:
1) How much money is there? and
2) How badly does that money want to be invested?

Source: Tom McClellan

For the first one, we look at things like what the Fed is doing with QE, and what the A-D Line says about liquidity actually hitting the stock market. For the second, we use sentiment indicators of various stripes. In the wake of the June 23 Brexit vote, there were 2 hard down days, and then a long string of up days for the overall market, and with very strong breadth numbers. That brought us a new all-time high for the NYSE’s A-D Line, and a high reading for the indicator in this week’s chart [...] The 10% Trend of daily A-D can only get up to a really high level like this when there is a big surge of positive breadth like what we have just seen lately. And as the vertical lines in the chart show, a really high peak in this indicator seldom coincides with the final price high for the move. That’s the key insight. When this indicator zooms up to very high levels, it can serve as a reliable “Not A Price Top” indicator.  So there is your headline: Not A Price Top (yet).

The Annual-, Presidential- and Decennial Patterns of the DJIA have major highs in mid August and early September (also HERE).
Nautilus Research (Jul 12, 2016)
LPL Research (Jul 12, 2016) - After a new high [in the S&P 500) was made, the returns going out a year
were better than the average return. In fact, going out six months and a full year shows very strong
returns, up 7.3% and 14.0%, respectively, on average. A year later, the S&P 500 has been higher 12 out
of 13 times, with only the May 2007 new high lower a year later.

Wednesday, July 6, 2016

The British Pound's 100-Year Debasement & The City's China Wild Card

Bloomberg (Jul 5, 2016) - Sterling first slumped after coming off the gold standard in 1931 in which it had been overvalued, just as it was in 1944 when it joined the Bretton Woods system of managed exchange rates. Another 30 percent devaluation was swallowed in 1949 and then Wilson sanctioned another drop in 1967 amid Britain’s balance of payments crunch. While the IMF was called in to help avoid a sterling crisis in the 1970s, it fell again in the early 1980s. 

UK Equity Markets Dip Below 5%.
Source: Bespoke (Jul 5, 2016)
The U.K. joined the Exchange Rate Mechanism, a precursor to the Euro, in 1990 but was forced out just two years later because it couldn’t sustain a link to the Deutsche Mark. Now there is speculation that life outside the EU will cost the pound its place in the top tier of reserve currencies. It currently accounts for 5 percent of foreign exchange reserves, according to the IMF. A weaker currency may not do that much to prop up the U.K. economy. While it should boost manufacturing and tourism, three-quarters of the economy is dependent on services such as finance and their future is subject to whatever access to the EU the British government can negotiate. There are also
British Pound Sterling (GBP) to Chinese Yuan Renminbi (CNY)
Source: www.xe.com
structural weaknesses leaning against the pound. The U.K. ran a near-record current account deficit of 6.9 percent of output in the first quarter and is suffering from weak productivity. Demand remains weak abroad and prices may not be that sensitive to swings in the exchange rate because producers still rely on foreign components for their goods.

Thierry Meyssan (Jul 04, 2016) - The Western Press keeps repeating the same message – by leaving the European Union, the British have isolated themselves from the rest of the world, and will have to deal with terrible economic consequences. And yet, the fall in the Pound could be an advantage within the Commonwealth, which is a far greater family than the Union, and present on all six continents. Famous for its pragmatism, the City could quickly become the international centre for the yuan and implant the Chinese currency in the very heart of the Union [...] The London Stock Exchange announced an agreement with the China Foreign Exchange Trade System (CFETS), and, in June, became the primary Stock Exchange in the world to rate Chinese treasury bonds. All the elements were in place to transform the City into a Chinese Trojan Horse in the European Union, to the detriment of US supremacy.

Ahmed Farghaly (Jul 6, 2016): GBPUSD: Contradicting the EUR

Sunday, July 3, 2016

Gold + Silver vs COT

The latest Commitments of Traders (COT) report suggests Gold and Silver could see a pullback.
Source: Fibbo SR (Jul 03, 2016)

SPX vs Mercury – Venus Cycle


SPX vs Jupiter – Saturn Cycle


SPX vs Mercury Speed


SPX vs SoLunar Map


SPX vs CBOE Equity Put / Call Ratio | VIX | Fear & Greed Index | NR7

Jul 01 (Fri) = NR 7
The 4 Lunar Month Cycle suggests sideways-to-up of the VIX into Jul 6 (Wed) = sideways-to-down in US-Stock Indices

Near a top.
Source
: CNN Fear & Greed Index

Saturday, July 2, 2016

New Insights in Commodities | Cyclic Vibrations

Ahmed Farghaly (Jul 1, 2016) - The first chart is a synthetic chart of commodities. The way it was constructed was by isolating the second 18 year cycle of three 54 year cycle. The reason why I extracted the second 18 year cycle is because this is the cycle we are in right now in terms of commodities hence it should be correlated more with its counterpart in past 54 year cycles. I have also altered the length of the cycles to match the current average length of the 18 year cycle which is approximately 14.4 years. I then combined those cycles together in order to get a continuous series so I can isolate the cycle via spectral analysis and run neural network models on this particular position of the Kondratieff wave. The indicator that you see above is a neural network model with an 14.4 year cycle used as an input and the detrended zigzag as the output. This indicator's turning point should mimic those in the future provided that no significant changes occur to the length of the nominal 18 year wave. The second chart depicts the dates more clearly.

It is worth mentioning that the 14.4 year cycle with 4 harmonics was used as the input rather than just one harmonic, the reason for this was to aid us in depicted the peaks and troughs of the cycles smaller than the 14.4 year wave. As is visible on the chart above, we seem to have a clear path in the CRB index until late 2017. The projection also suggests that 2018 is likely to be a bad year for commodities. This correction should then be followed by a move into 4th quarter of 2020 followed by a correction to 2022 and so on (third chart).

In the neural network model below the price chart is an up percentage move indicator (fourth chart). It is calculated by having the cycle as an input and measuring the position of moves of over 7% a month and projecting something similar for the future of the current cycle. The likelihood of large percentage months on a closing basis is greatest from here going into mid 2019. Hence capital is best allocated in the commodity market now rather than chase the move after most of the large percentage gains have already been realized (fourth chart).

This indicator (fourth chart) is a forecast of the volatility index indicator using the same input as the charts above. It seems evident that the likelihood of high volatility is greatest from now going into 2020. This would mean that the purchase of call options are likely to be a better play than their sale in the upcoming environment. Trading in expectation of low volatility will probabalisticly lead to a loss going into 2020.