Stretched

Thomas Thornton, Hedge Fund Telemetry info@hedgefundtelemetry.com

2/19/2019

From the lows in December when the market was stretched on the downside, we’re getting stretched on the upside.  From bullish sentiment at 88% bulls from a low in December of 4% bulls, DeMark upside Countdown 13’s on major indexes (S&P 500, 100, Russell, Nasdaq Composite) and with 96% of all signals in the past month being upside Countdown 13’s vs 90% of all the signals in December being downside Countdown 13’s within the S&P universe.  Market internals are getting stretched too with the percentage of stocks within the S&P above the 10 day and 50 day moving averages above 90% vs in December when they were both under 10%.  The Nasdaq Summation Index has moved from the deepest oversold level to back near levels seen where things start to top out.  

Where things exactly stop going up occurs is hard to pinpoint but with these indicators moving from the deep oversold to back to overbought the risk reward from here is poor.  I’m generally early by a week or two on significant turning points but with my indicators it usually works out well.  Some hedges have limited the upside with the Trade Ideas Sheet while still being up ahead of goal into February.  I’m comfortable we’ll see the pullback soon.  

Sorry for the late note but there’s a lot below to chew on.  

US EQUITY MARKETS

S&P bullish sentiment is at 88% up from 4% and now in the extreme zone.   

 

S&P 500 Index daily had an upside Countdown 13 on Friday

S&P 500 Index 60 minute tactical time frame nearing a 5th wave price objective

Bespoke put out this chart of % of stocks that are overbought.  They did a study when this happens and it’s mixed to positive going forward.  We’ll see

OEX Index S&P 100 with some Countdown 13’s

Nasdaq 100 Index bullish sentiment is at 75%

Nasdaq 100 Index daily has a secondary Countdown on day 6 of 13 but I’m focused on the first Countdowns

Nasdaq 100 Index 60 minute tactical time frame is like the energizer bunny 

Nasdaq 100 Equal Weight with some upside Countdown 13’s

Nasdaq Summation Index was oversold in December and now getting overbought

Dow Jones Industrial Average Index daily with Countdown 13 today

Custom Index of top 5 Dow weights shows upside Countdown 13 which worked well at last top and bottom too.

Russell 2000 IWM ETF daily has a secondary Countdown but I’m still focused on the first Countdowns

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%.  REMOVED GDX SHORT -2.5% LOSS,  ADDED 2.5% SIZED LONG UGAZ 

FOCUS OF THE DAY – VIX and High Yield Spreads about to move again

VIX Index with Sequential Countdown 13

High Yield Spreads could widen again after this Countdown 13

STOCKS I AM WATCHING TODAY – Some found off the DeMark Screens

Honeywell has some Countdown 13’s

MCD lifted while I was away but still feel short story is there

Citi with some Countdown 13’s

SLB has been one of my preferred longs in Energy sector but its on day 12 of 13 so I could be selling this tomorrow

CHK is a flyer that if you wanted to buy with a small amount go for it but use 2.13 as a stop

CHK has lots of known problems and shorts are heavily involved with short intensity rank at 84% and days to cover at 6.56.  

UGAZ 3x Levered ETF for Natural Gas still has a one more down day but I’m buying a 2.5% sized position.  Keep in mind this is highly volatile but I feel it’s overdone on the downside with positive seasonality starting in March

Natural Gas Futures with downside Countdown 13

SECTOR FOCUS

PPO (Percentage Price Oscillator) shows a few overbought things.  Lots of 20 day highs (green) under highs.  And the average above the 50 day is 6.9% which is overbought.  +5% is typically overbought

IBB Biotech with Sequential Countdown 13

Consumer Discretionary (a lot of AMZN) on day 10 of 13 with upside Countdown

FANG + Index on day 12 of 13 with Sequential Countdown

EUROPEAN MARKETS

Euro Stoxx 50 bullish sentiment is at 54%

Euro Stoxx 50 Index daily should pullback here

Euro Stoxx 600 should pullback here

UK FTSE 100 Index bullish sentiment is at 79% and rarely gets this high for long

UK FTSE 100 Index daily price flip down (green 1) after recent upside Countdown 13’s

CURRENCIES

US Dollar bullish sentiment is at 71%

US Dollar Index daily hit wave 3 price objective new support at 95.57

Euro bullish sentiment is at 14%

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Euro Spot daily still narrow

Chinese Yuan daily should work a little higher (lower on this inverted chart)

US BOND MARKET

Bond bullish sentiment is at 76%

US 10 Year Yield has support at 2.62%

US High Yield Corporate Bond ETF should top here

GOLD 

Gold bullish sentiment is at 75% and remains elevated

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GLD Gold ETF daily has one more day for upside Sequential Countdown 13

Gold Futures have a couple more upside days before the Countdown  Sequential 13

GDX Gold Miners ETF daily spike up and pullback was too shallow.  Exiting short with 2.5% loss

Copper vs Gold ratio looks like Copper wants to lead

Copper looks good as a long with a low Countdown at the breakout point

Hong Kong 

Hong Kong Heng Seng Index getting late in the move

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