Quick Market Views
Stocks: Moderate index gains in another quiet trading session. Nvidia is up 4% after the CEO, who sold $700m worth of stock, is done with his sales. I don’t know if that would be enough for me to buy it but the momentum crowd is a different breed. Tesla is up a little more today. I have some views and charts below. The big story is that China pulled out a bazooka stimulus, which has our China tech exposure ripping higher. I’ve been clear that BABA has been my favorite idea in the space and one of the most undervalued tech names globally. I’ve discussed this numerous times, and a chart below shows the potential for more upside.
Bonds: Rates reversed from the morning. 2’s are now down 3bps, 10’s flat, and 30’s trying to lift 1bp. The 2/10 spread continues to steepen and is at +19 bps.
Commodities: The Bloomberg Commodity Index is up 1.1%. Crude is up 1.5%, Copper up 3.4%, Gold up nearly 1%, and Silver up 4%. On Sunday’s Commodity weekly, I discussed the potential for a continuation on several markets.
Currencies: Quiet for the most part. US Dollar Index is down 0.3%, Euro and Pound strength. yen is flat. Bitcoin is up 0.55%
Trade Ideas Sheet: Another good day for the long side
Changes: I will add 1% to recent HD short to bring weight to 3%.
Thoughts: Charts of BABA and BIDU below. GLNG continues to trade well, and I would still buy it here.
US Market Indexes and Sentiment
Here is a primer on how we use Daily Sentiment Index charts. Bond, currency, and commodity sentiment are posted on the website.
S&P bullish sentiment and Nasdaq bullish sentiment was unchanged yesterday at 77% at the high end of the elevated zone >70% and below the extreme zone >80% where it was last Friday.
S&P and Nasdaq bullish sentiment stalling. A break under the 20-day moving average of bullish sentiment would be the first breakdown indication we should be on alert.
Here is a primer on the DeMark Setup and Sequential indicators.
S&P futures 60-minute tactical time frame sideways action
S&P 500 Index daily did get a Combo 13 and sell Setup 9 yesterday. A Sequential remains that can pause and continue even in a sideways pattern. Momentum flattening.
Nasdaq 100 futures 60-minute tactical time frame shows the early choppy action down today that was bought back up. 20k is now first support
Nasdaq 100 Index daily with flattening momentum.
Old-school index fans watch the NYSE Composite with new Sequential and Combo 13s and sell Setup 9.
Vanguard Total Stock Market ETF is a broad index ETF with new Combo 13, Sell Setup 9 and Sequential getting closer.
The broadening market S&P 493 ex Mag 7 has new Sequential and several versions of the Combo 13
Trade Ideas Sheet
Long side working well. Shorts are a challenge but with the huge number of DeMark sell Countdown 13’s developing I can be patient.
I recently added HD as a new short idea. I knew the Sequential on the daily chart had a couple days to qualify which did today along with the strict version Combo 13. HD also has weekly Sequential and Combo 13 qualified from last week. Here’s the daily chart
Focus charts
Bank of America said last week that with the Fed cut, inflows were the third highest on record. Considering the markets are up as much as they are and people put this much money into them, it’s concerning if the momentum fails to continue higher.
BABA, BIDU, KWEB update
BABA has been moving sideways. We got involved on the long side last December at low levels. This is the weekly chart, and it shows a big base that could break out if it moves north of 100 or, even better, 120 (200-week moving average). I will continue to hold this long.
BABA trades at 10x earnings, they are buying back 10% of their float with the current buyback authorization. Even if this trades up to 12x earnings that’s a ~20% gain from here.
BIDU gapped up big and could keep going. I debated buying more but it’s been a tough one so I’ll wait and see if there is some consolidation.
KWEB ETF also gapped up and looks great. I am happy I added to this on the way down.
Tesla fundamentals
Tesla is up recently on no news but on hope that quarterly delivery numbers beat estimates. They might be estimates however when discounts and 0% interest payment plans are offered, the company is sacrificing earnings and margins to continue to move metal. This is what a company under pressure has to do to survive but the stock is up huge despite the negative fundamentals. It’s up also ahead of the Robo-taxi day scheduled for October 10th. I don’t have a full sized short position and am underwater currently but with a lot of landmines out there I have to keep some short. The current P/E is now at 113x earnings. Just a tad rich for an automaker.
Here are the EPS estimates in blue for the current year. They will be down year over year from around $3.00 per share to $2.26. Next year’s earnings estimates are about where they were last year. Analysts are excited about deliveries but haven’t raised earnings estimates.
Regarding deliveries last year came in at 1.8m cars. At the beginning of the year, analysts expected 2.2m deliveries and now are just below last year’s delivered cars. Next year deliveries are expected to go up to 2m cars. Continued price cuts, financing specials will just erode earnings. Also remember there are no new cars expected or any major upgrades to the current stale model lineup.
Tesla used to be a margin story with gross margins over 25%. Margins should just continue to decline especially with the factories not running at full capacity.
Hedge Fund Telemetry ETF Percentage Price Oscillator Monitor
The PPO monitor (percentage price oscillator) force ranks ETFs by percentage above/below the 50-day moving average. For information on this monitor, please refer to this primer. This monitor and others are offered to Hedge Fund Telemetry subscribers on Bloomberg. Moving to the top of the monitor today are the two China ETFs. Happy to see KWEB doing well and will continue to hold. Uranium continues to work.
Index ETF and select factor performance
This monitor with various markets and factors ranks today’s performance with 5-day, 1-month, and 1-year rolling performance YTD. Top HF holdings basket up the most today.
This is a similar monitor with major ETFs. Hong Kong was strong last night helping EEM which has a big China weighting. Crypto giving back recent gains.
Goldman Sachs Most Shorted baskets vs. S&P Indexes
This monitor has the S&P indexes and the Goldman Sachs most shorted baskets. Mixed action with some short baskets seeing squeezing inline moves and then materials short basket squeezing up 4.45% – due to China stimulus.
DeMark Observations
Within the S&P 500, the DeMark Sequential and Combo Countdown 13s and 12/13s on daily and weekly periods. Green = buy Setups/Countdowns, Red = sell Setups/Countdowns. Price flips are helpful to see reversals up (green) and down (red) for idea generation. The extra letters at the end of the symbols are just a Bloomberg thing. Worth noting: I had to take two snapshots below because of the high number of Sequential and Combo sell Countdown 13’s and developing 12/13’s on both daily and weekly time frames. There are also 50 new sell Setup 9’s
Major ETFs among a 160+ ETF universe. It is a similar story with many Sequential and Combo sell Countdown 13 on daily and weekly time frames. There are a large number of Sell Setup 9’s, too.
If you have any questions or comments, please email us. Data sources: Bloomberg, DeMark Analytics, Goldman Sachs, Street Account, Vital Knowledge, Daily Sentiment Index, and Erlanger Research