Not for the faint of heart

Thomas Thornton, Hedge Fund Telemetry info@hedgefundtelemetry.com

2/14/2019

Happy Valentines Day!  Don’t forget flowers and a gift for your special sweetheart.   Today’s note will be in bullets points as I’ve been notified I’m being taken away for the weekend by my wife to a mystery location.  Hopefully warm.  

This is not a market for the faint of heart

  • Market sentiment is elevated at 79% bulls for S&P.  The WSJ has a recent story that the “Market Indicators turn bullish after flashing red last year” as the indexes are back above the 200 day moving average gaining from the lows 17%.  My work turned bullish in December and now are turning bearish.  As a contrarian, it’s one thing to say it but everyday I hope to illustrate everything I’m looking at – which is a lot of data.  
  • There are a lot of indexes and stocks that have upside DeMark Countdowns triggering after this run.  I find myself with more conviction when I see power in numbers with these types of clusters.  
  • One of the strangest things from October to now was the absence of significant short selling.  Hedge Funds in October de-grossed or lowered long exposure but didn’t hedge by shorting.  When the market was on the lows in December, I heard a lot of people expressing the hope to short higher.  These were people who missed the move lower.   But all of the data from Erlanger Research (the best for short interest data) shows the few people who were short covered more on this move higher.  In summary, the market is vulnerable to a sharp and perhaps deep decline with the absence of short sellers who act as natural buyers when there are down moves.  
  • CTA’s are all in long according several derivatives desks just in time for about $55 billion to roll off primary dealers starting tomorrow with quantitative tightening.  I’ve found the CTA’s have been chasing up and down moves getting whipped hard.  They were one of the few alternative asset classes in January down on the month.  AAII also is showing individual investors holding historically low amounts of cash.
  • Lot’s of “good news” with Government shutdown fears ending and progress with China tariff talks.  I expect these to be “sell the news” types of news events.  The setup right now is unfavorable for a sustained up move.  Raise stops, have a decent amount of cash on the sidelines, buy put spreads, or short with a manageable size for your own risk tolerances.  

I’m taking tomorrow off therefore, there will not be a Daily Note published but will have a First Call email out pre market.  Have a great weekend.  

US EQUITY MARKETS

S&P bullish sentiment is at 79%

 

S&P 500 Index daily still waiting on the Sequential Countdown 13

S&P futures and a few other charts all showing the same thing.  Tired upside

SPY VS TLT RATIO – custom chart with upside new 13’s.  

Nasdaq 100 Index bullish sentiment is at 69%

Nasdaq Composite Index daily with some 13’s

S&P Equal Weight ETF with some 13’s

Dow Jones Industrial Average Index daily 

Russell 2000 IWM ETF daily 

TZA is a 3x levered inverse IWM Russell 2000 adding 2.5% long – NOT FOR THE FAINT OF HEART

Marco Rubio may not like buybacks but his timing was impressive 

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 AMD +5%, ADDED LONG 2.5% SIZED TZA, SHORT 2.5% SIZED HYG, REDUCED BY HALF TO 2.5% OIH +3.88%

FOCUS OF THE DAY – People are all in AFTER the move while there are few shorts

Thanks WSJ for telling us after a 17% up move… 

Mom and Pop investors are all in with low cash allocation of 13%

People always feel so much better buying AFTER the move.  I’m just wired differently 

NYSE % of stocks above the 200 day is only at 37% with new Countdowns.

Back in December I showed a chart like this when there were 2% of the SPX above the 50 day.  THAT was the time to buy

SPY short intensity is at 2% (very low) and short ratio has been cut down big.  (Nobody is short and there is less of a chance for a short squeeze)

QQQ short intensity is 0% and short ratio cut in half

Russell IWM had high intensity on the way up and is low

STOCKS I AM WATCHING TODAY – Recent DeMark Upside Countdown 13’s

 

PLEASE NOTE:  RATHER THAN SHOW DEMARK SCREENS ON THE BOTTOM, I AM GOING TO HIGHLIGHT SEVERAL UPSIDE AND DOWNSIDE DEMARK COUNTDOWN 13’S EACH DAY WITH CHARTS.  

EFX

Hanesbrands

Moodys

Oracle

SECTOR FOCUS – Natural Gas is a buy

Natural Gas with Countdown 13

UGAZ 3x leverage. Not for the faint of heart.   Going to add tomorrow 2.5% sized long

This guy from Option Sellers.com who blew up with the Natural Gas spike and Crude drop must look at the current charts and wonder if they will ever let him out of his strait jacket.  Is it me thinking, the Rolex was a over the top for a video when he’s explaining how he lost everyone’s money AND that everyone had a substantial margin call on top of it?

People used to love short volatility until they didn’t or were put out of business

EUROPEAN MARKETS

Euro Stoxx 50 bullish sentiment is at 45% and still didn’t get over 50%.  Odd

Euro Stoxx 50 Index daily Countdown 13 today

UK FTSE 100 Index bullish sentiment is at 71% reaching elevated level

UK FTSE 100 Index daily on day 12 of 13.  

CURRENCIES

US Dollar bullish sentiment is at 78% and elevated near extreme.  

US Dollar Index daily green Setup 9

Euro bullish sentiment is at 9% and very oversold

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Euro Spot daily still range bound for the most part

British Pound Sterling bullish sentiment is at 26%

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British Pound Sterling daily looks lower and with a new Countdown

US BOND MARKET

Bond bullish sentiment is at 71%

HYG High Yield ETF lot’s of 13’s adding 2.5% sized short

US Investment Grade Corporate Bond ETF  Should pull back 

TLT US 20 year + ETF still unsure from here

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