ARRESTED DEVELOPMENT

Thomas Thornton, Hedge Fund Telemetry info@hedgefundtelemetry.com

12/6/2018

I don’t think anyone had on their list of negative catalysts the possibility of the CFO and founder’s only child of Huawei being arrested for violations of American sanctions on Iran.  This sent backward the positive tone after the G20 between the US and China many steps.  It’s also strange that she was arrested on December 1st and the news just came out well after the G20 meetings.  This would be the equivalent of the CFO of Apple or Alphabet being arrested by China.  It’s big.  

The market reaction last night was big too and had an element of risk that I brought up the other day (again) which is lack of liquidity and shallow depth of market.  When the US futures opened last night someone put in an order to sell 7000 contracts and the CME had to halt trading twice.  This is not going to get better as large sell side firms who cater to institutions are not offering the use of firm capital to trade. What this means is I used to be able to call Goldman and say I wanted to sell 500k shares of SPY and I’d ask if they would stop me on it.  The trader would come back and give me a price usually a little below the last price and they would trade it themselves in the open market hoping to not lose money with what they were holding.  Fewer brokers are offering capital these days for many reasons and I’d say it’s a general fear they have with markets falling hard and there are also fewer traders on the desk that actually trade these days too.

Bonds continue to show a risk off bid and major equity markets around the world have hit multi year lows (see Europe email from earlier).  S&P 500 breadth has started to roll over again and new 20 day lows are spiking on the major ETF’s (see the PPO monitor below).  I feel the market is in need of getting some assurance from the Fed that they will pause after this December hike expected on 12/19.  News out of OPEC meeting today is that they have not made a decision on production cuts and a bearish build on WTI was reported today too.  There isn’t much left to hold on to headed into the end of the year.  My sell side traders have stressed to me over and over that retail investors have not capitulated yet.  S&P 2635 has been the level I’ve stressed that if broken things can come for sale in size.  We are under it earlier and back above now.  My positioning is on the neutral size of short as I’m not pressing as hard as I might normally.  I’m holding some longs (albeit I trimmed some today for risk management)underwater in energy as I expect a bounce soon.    Tricky market and getting through it is more important than trying to kill it.  

US EQUITY MARKETS

S&P bullish sentiment is at 39% down from 55% the previous day 

 

S&P cumulative breadth with lower high 

S&P 500 Index daily at TDST – read the cancellation potential scenario

S&P 500 Index 60 minute tactical time frame at support 

Nasdaq bullish sentiment is at 42%

Nasdaq 100 Index daily bounced off lows

Nasdaq 100 Index 60 minute tactical time frame shows breaking 6500 would be quite negative

Dow Jones Industrial Average Index daily also held the TDST support for now

Russell 2000 IWM ETF daily is below the October lows and if it can stay under 145.95 it will enable wave 3

TRADE IDEAS

Hedge Fund Telemetry Trade Ideas Sheet.  Equity ideas both long and short with one week to six weeks average holding period.  Sizing at inception is either 2.5% or 5% of AUM with stops set between 5%-10%.  

COVERED AMZN +7% GAIN, ADDED SHORT:  PG 2.5% SIZE,  SOLD HAL -5.5%, REDUCED TO 2.5% X, AND NOV.  

FOCUS OF THE DAY

Recent “Death Cross” of 50 day crossing below the 200 day moving average.  Some may dismiss this as some tend to be lagging indicators but…

Looking at the Death Cross from 2007 it was a very good early warning

STOCKS I AM WATCHING TODAY

Amazon got a Countdown 13 today but not at lows.  Regardless I covered recent short for a 7% gain.

Boeing falling out of the sky with a landing pad at 275

PG with recent upside DeMark Sequential Countdown 13.  Adding as 2.5% sized short today.  

CRUDE THOUGHTS

Crude bullish sentiment is at 25% and should work a little lower today

WTI Crude Futures still has a little potential lower with DeMark Countdown on day 9 of 13

Brent Crude same Countdown on 9 of 13

SECTOR FOCUS

PPO Monitor now shows mostly everything under the 10, 20, and 50 day moving average and a lot of new 20 day lows on the right side.  

ITB Home Construction was up early and did not make a new low – a slight positive

XLC Communications on day 11 of 1

XLF Financials — please read the DeMark Rule as a little knowledge nugget

XLK Technology 

XLY Consumer Discretionary on day 2 of 13 

OIH Oil Service nearing downside Sequential Countdown 13

XOP Energy Oil and Gas on day 10 of 13

Transports

CURRENCIES

US Dollar bullish sentiment is at 76% off recent highs over 90%

US Dollar Index daily no real change 

Euro bullish sentiment is at 22%

Euro Spot daily no change

US BOND MARKET

Bond bullish sentiment is at 93% and is very extreme.  

US 10 Year Yield on day 7 of 13 with a downside Countdown

US 2/10 yield spread slight steepening today

TLT Bond ETF on day 6 of 13.  I wouldn’t doubt some consolidation with this upside move

IEF 7-10 year Bond ETF nearing resistance but on day 6 of 13

GOLD 

Gold bullish sentiment is at 32% and slightly increasing 

GLD Gold ETF daily trying to lift but no momentum

GDX Gold Miners ETF daily 

ASIAN MARKETS

Watch the Nikkei at the TDST support 

FXI China Hong Kong ETF has a little more downside potential ahead

Hong Kong on day 12 of 13 but keep in mind it has to be under the 8th red bar

Shanghai Composite Index still has a little more downside potential ahead

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