What if everything goes right?

Thomas Thornton, Hedge Fund Telemetry info@hedgefundtelemetry.com

1/7/2019

I know you’re thinking “Tom’s has lost his mind, first he covered his shorts when the world was ending and went long and now THIS??”  But actually let’s define “right” and what we should expect as “right” for 2019.  It’s going to be choppy and by no means an escalator up all year.  It will be controversial with positioning and gain of 10-20% will be a win and that would be “right” by my standards.  It’s going to take some flexibility and humility as there will be some mistakes along the way.  So when I say “everything” I mean all of the wins and losses combined in the year calculated in one score.  I don’t recommend being too rigid to wonder or guess where the market will be at the end of the year as we’re not the market this year.  We are not the S&P or any commodity, currency or foreign market. 

This is a tactical year that will require focus and discipline.  The tools that will work for us will be sentiment as a conditional factor and DeMark Indicators as one of our timing tools.  There are other factors that will layer into our strategy along the way weighted heavier or lighter at times.  Everything will go right if we stick to the disciplined plan knowing what to expect at every turn and that doesn’t matter which what any market goes.

I still believe there is upside in the market and will illustrate what I’m looking at with various markets and indicators.  Lot’s of positive feedback today on the 15 minute Emini chart on the First Call Note today so I’ll add it on each day.  I updated below too

US EQUITY MARKETS

S&P bullish sentiment is at 33% and should increase again today to make a 8 week high later today.  

 

S&P 500 Index daily still targeting 2604 

S&P 500 Index 60 minute tactical time frame still with upside target

15 Minute ES now in wave 5 cancelling the downside wave count

SPY vs TLT with recent downside Countdown 13’s

Nasdaq 100 Index bullish sentiment is at 28%

Nasdaq 100 Index daily still some upside left

Nasdaq 100 Index 60 minute tactical time frame 

Dow Jones Industrial Average Index daily 

Russell 2000 IWM ETF daily 

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%.  NO CHANGES TODAY.  

FOCUS OF THE DAY – Some internals that very oversold

Nasdaq percentage of stocks above the 50, 150, and 200 day hit levels not seen since the deep lows of February of 2016 when the market took off

Nasdaq Summation Index is a good breadth and volume indicator and it typically is early.  This weekly chart broke to the lowest level since 2009.  Deeply oversold and last week it moved up.  There is a lot of room to move up here even if this is a bounce

SPY vs VIX ratio has been a chart I’ve used for years and I didn’t update the annotations for a year.  What is CRAZY is the single line MACD momentum line had a massive drop last February and recovery (and negative divergence too) and now back to the lows.  This should bounce again and that’s bullish for the SPX

Can’t get much worse that this?

Two troubled companies – One will make it and one won’t 

Tesla is up today on the news that Elon Musk is in China breaking ground on a new “Gigafactory” auto factory in which he hopes to be producing autos by the end of the year.  For reference Volvo, a real auto company with real assets that can afford a $1 billion factory just completed a new factory in South Carolina that was started in 2015.  It took three years.  This is complete nonsense that they will be producing autos in a year.  I am holding my short no matter the volatility.  

By the way this is Elon Musk’s latest folly for his investors in Space X.  This is the Starship being built in Texas by a company that builds water towers.  I am not making this up.  Who wants to take the first trip?  

GE had quite a year and could be turning the corner into a 5 wave up move now.  I believe the end of the year was full of tax loss selling right into some downside DeMark Countdowns.  I’m still long 

SECTOR FOCUS – PPO and Energy coming off the lows

PPO Monitor (Percentage Price Oscillator) ranks sectors by % above or below the 50 day moving average.  The stronger move to the top and weaker to the bottom.  There is also the 10 and 20 day moving average which helps show thrusts off highs and lows.  Currently there is a thrust off the lows with many sectors well off the lows of the 10 day moving average.  Especially with Energy at the lows and as you know is a sector I am very bullish on into the first quarter 

Crude bullish sentiment continues to improve to 41% and OIH below is up 4% today

XOP Energy ETF was loved by Jeff Gunlach the “Bond King” at the highs.  He doesn’t have DeMark Indicators obviously

Energy seasonality is very strong from January – May

EUROPEAN MARKETS

Euro Stoxx 50 bullish sentiment is at 17%

Euro Stoxx 50 Index daily down on the day but I still am bullish here

UK FTSE 100 Index bullish sentiment is at 40%

UK FTSE 100 Index daily getting closer to the 50 day

CURRENCIES – Important Euro DeMark Studies Lesson

US Dollar bullish sentiment is at 60% down from peak of 96%

US Dollar Index daily new lows

Euro bullish sentiment is at 34%

Euro Spot daily has done something unique to the DeMark indicators which takes some explanation.  There were two green Setup 9’s which started red Sequential Countdowns.  Only one can be visible at once but I isolated each one to explain the recent downside Countdown 13 and the pending red +

This is the with the first green Setup 9

And with the second green Setup 9 – which started with red 5 

This is with them both together.  The 13 is there but with a red +

British Pound Sterling bullish sentiment is at 29%

British Pound Sterling daily another strong day

US BOND MARKET

Bond bullish sentiment is at 82% and cooling off extreme level Thursday at 93%

US 10 Year Yield still expect higher yields into wave 2

US 30 Year Yield still expect higher yields into wave 2

US Investment Grade Corporate Bond ETF gapped up today but on lows of day

TLT US 20 year + ETF should pullback further

GOLD 

Gold bullish sentiment is at 51%

GDX Gold Miners ETF daily should stall here and back off into wave 4

GLD Gold ETF daily should stall here

Bloomberg Automated Technical Pattern Recognition Screens

ATPR identifies when major chart patterns are just starting to form, alerting investors to nascent shifts in sentiment.  For more information on this strategy please email us and we will send a detailed explanation.

US Stocks

European Stocks

DEMARK SCREENS – Daily Upside/Downside Exhaustion Signals for January

Daily/Weekly DeMark upside (sell signals) /downside (buy signals) exhaustion Countdown Sequential and Combo “13’s updated daily.  Currently we are only screening the S&P 500 universe and daily in this beta stage.  Only Daily as there were no weekly signals

 

The DeMark Indicators are designed to assist the user with buying into weakness and selling into strength to anticipate trend exhaustion. Selling into a rally and buying into a decline often afford the opportunity to exit a trade without too serious a loss if wrong.  If you would like more detailed information on the DeMark Indicators, please email us.  

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