Planes, Trains, and Automobiles

Every so often I run through planes, trains, and automobiles on the Daily Note and I have been watching two out of the three sectors that have been beaten down very hard with considerations on when or if it’s time to get long. I’m starting to look at the planes and automobile sectors as they have been trying to put in bases that would give us the conviction that these could work higher.

Yesterday we had the much anticipated upside DeMark Sell Countdown 13’s. When there are these signals trigger it’s best to start to adjust exposure and wait for a few confirming triggers. Trading below the 10 or 20 day is a decent trigger to use, or shorter-term a price flip down when something makes a 4 day low and follows up the next day lower. There still are a few upside Countdowns pending with a few indexes and big stocks so it might take a week to start working.

I’ve seen people say the market is climbing the “wall of worry” however when the put call ratios are trading near .50 and bullish sentiment has risen to 70%+, new brokerage account openings hitting records with celebrities who taking up day trading – things are not climbing the wall of worry but rather the markets have become a casino. This is a risky time and I am firmly on the side of Druckenmiller and Tepper.

On today’s Trade Ideas Sheet I am adding F (Ford) and TRIP as new longs. I am adding BYND as a new short. I’m also selling JO (Coffee) long at a loss of 4.5%. After the last two very strong long trades I should have walked away from the Blackjack table on Coffee.

US MARKET SENTIMENT

S&P bullish sentiment is at 67% and has been drifting a little higher

US MARKETS

S&P daily did lock in the DeMark Sequential sell Countdown 13. Trend Factor price targets better seen on chart below

SPX daily close up with Trend Factor price targets 2814 is the first one

Equity Put Call Ratio is back to the ultra complacent zone at .50. This counters the “wall of worry” nonsense

NDX daily with both Sequential and Combo sell Countdown 13’s

FANG+ with a new Sequential Countdown 13. Stall or fall? The difference with last Q4 and now is that there were two upside Setup 9’s completed which resulted in two upside Countdown 13’s completed and this run has only had one upside Setup 9 completed. We need to watch the current Setup on day 4 of 9 if it will fail. I want it to fail

As much as people talk about the rally the Dow hasn’t really gone up much in the last month

TODAY’S FOCUS – planes, trains, and automobiles

S&P Airlines Index has a base building and a slight turn up but it’s either on the first of five waves up or this bounce is a wave four of five down.

Boeing has been in a basing mode and hasn’t really been able to sustain an upside move. Perhaps over 150 it will signal momentum shift

It’s tricky picking which Airline to buy because they all look similar

S&P Railroad Index is overbought and could soften here

CSX and all trains look overbought

Decent base but would love to buy a wave 4 corrective pullback for a wave 5 upside move

Ford is my favorite auto stock and I’m putting it on the Trade Ideas Sheet as a long

GM a little late to buy here so perhaps we’ll get a pullback

Fiat Chrysler needs a little upside push and it’s a long

TRIP with a nice base or the Richard Pryor type of base. I am adding to the Trade Ideas as a long

FACTOR AND PPO MONITOR UPDATE

Factor monitor mostly a down day

The PPO monitor (percentage price oscillator) force ranks ETF’s by percentage above/below the 50 day moving average. This monitor is offered to Hedge Fund Telemetry subscribers who are on Bloomberg. Choppy day with a lot of dispersion up and down on absolute basis and above and below VWAP

demark observations

Within the S&P the DeMark Sequential and Combo Countdown 13’s and 12/13’s on daily and weekly time periods. Some notable sell Countdowns on day 12 and 13

Apple with Sequential sell Countdown 13. A move under 307 would confirm downside

BYND with a new Combo sell Countdown while we need the Sequential Countdown 13

CMG with a new cluster of Countdown 13’s

SHOP the largest stock in Canada can and might go a little higher with Sequential on day 10 of 13. Other infamous ex largest stocks in Canada were Nortel, Blackberry, and Valeant.

WING looks like it could STOP going up with a break of 120

bonds

Bond bullish sentiment still hanging around the midpoint and within a narrow range

US 30 year yield is starting to trend a little higher but needs to break above 1.50 to confirm

Volatility Update

VIX Index popped higher after the Countdown 13’s and then came back down. Normally a 12 handle VIX move would excite us but this is a new world. Watch for a move over the 20 day for confirmation

Euro Stoxx 50 VIX could start to rise

My friend Andrew Thrasher was awarded the Charles Dow Award for being a super technician with this study. He sent this to me last night. He’s one of the nice guys too. You can find him on Twitter.

Its built on what I wrote my Forecasting a  Volatility Tsunami paper about, narrowing dispersion within the VIX, and built some other forms of analysis on the volatility market into it to create a signal indicator. It often marks the low in spot VIX, sometimes vol will meander from there before spiking and other times it begins to move right away, but it rarely goes much lower after a signal has developed. One observation though is my VIX trigger did signal several times during the ‘decent’ in volatility in early 2009 which vix was still in the 30s. it’s much more effective when vol is lower than it is today. Going back to 1992, when its triggered with VIX over 25 it hasn’t been as great of a signal as when vix is under 25 so I’m wanting to see more confirmation in other data as well. 

Currencies

Currency bullish sentiment shows sentiment moving to the center which is typical of ranges

USD DXY Index frustrating range. No trade here

Euro at top of recent range

British Pound Sterling still believe this can move higher.

Bitcoin still flat with no trade idea

commodities

Commodity sentiment shows gold and silver sentiment extreme and will reverse down from here

Gold still has little momentum and it’s been over a month since a new high.

GDX reversal after a cluster of Countdown 13’s

SLV Silver reversal after upside Countdowns – happy to have taken profits on day 12 just to be sure.