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Daily Ideas, Novermber 1 – 11, 2019


Last week was another record high week in the major U.S. indices SPY and QQQ. Also, making new 52 week plus highs or within 2% of are Japan, Russia, EAFE, Europe, Germany, Russell 2000, Technology, Financials, Semis, Health Care, Materials, and High-Yield corporate bonds, among others.

My outlook here remains the same. Price is leading the way to new highs in many of the above groups, and industries such as European financials, industrial metals and energy services are starting to show signs of longer-term trend reversal. These signs include forming price bases, making higher lows and higher highs, reclaiming their now flattening 200day moving averages, and also bullish 10 week and 40 week moving average crosses.1111spxice.png

Momentum tech stocks have broken down and I am continuing to avoid them, as has been my stance since the September 9 breakdown.  Defensive groups, utilities, REITs and staples are starting to show more weakness and I am avoiding them as well here.

Groups of interest: Semiconductors, mega cap tech, large cap value, money center banks, brokers, regional banks, European financials, industrials, industrial metals, rails, trucking,  heavy construction, energy and Emerging markets.

Focus group names, across various industries: AAPL, MSFT, NVDA, BAC, JPM, WFC, GE, CAT, CS, DB, SCGLY, UBS, AGN, BMY, AA, FCX, X, MPC, KSU, PCAR, and KHC, among others.

Japan, Europe and Emerging Markets are showing improving Relative Strength and also score high on my quantitative screens. The China A-share market has held up well vs. the rising 200 day moving average, and is a favorite idea along with China internet here.

My longer-term view is still bullish technically with S&P over 2800. I expect pullbacks at any time, and would look to add to any of the above groups on weakness.

10 year UST yields are continuing to shows signs of longer-term bottoming, as long as they stay over the 1.50% level. Currently at 1.945%, the 20 day and 50 day MAs have turned up, and the 20 day crossed the 100 day for the first time since last December.  Longer time frame moving average crosses are a major trend reversal signal. The main signal in UST yields is the 2.00% level on the 10 year, which I will be watching closely. TLT lost the 100 day moving average last week for the first time since December 2018, a bearish sign for USTs.  1111icetbx.png

As yields have improved, interest rate sensitive, defensive industries such as utilities, REITs, home builders and consumer staples have started to weaken and come under pressure.  REIT ETF, XLRE, lost the 100 day moving average for the first time last week since early January, a bearish signal. Utilities, XLU, also lost the 100 day MA, for the first time since January. Many of the stocks in these groups shows signs of topping out and rolling over, such as SO, AMT and MAA. I am avoiding these groups on the long side for now.

Gold closed at 1462 for the week, and below the rising 100 day moving average for the first time since the May breakout. This is a negative development and 1500 is a key resistance level overhead now. 1400 is the key longer-term support line. GDX is also in an intermediate term downtrend of lower highs and lower lows and the 20 and 50 sma’s have rolled over for now. I am neutral on both of these groups here.

Bullish technically on US stocks with SPX over 2800 and the 200d MA at 2898.  Global indices are strong as well, and value continues to outperform. Global financials are a top ranked group, as are semiconductors and basic industrials. I am technically bearish intermediate term on momentum tech, and high growth names in downtrends. I am avoiding defensive names, gold and gold miners and U.S. Treasuries here.   Current price moves could reverse at any time, and trend identification is not the same as trend prediction, but that is where I am positioned for now.



Financial, banks and brokers, continued their 52 week plus highs yesterday as BAC, JPM, C, MS, and WFC and the Financials ETF  XLF, all made the new 52 week high list. Also, regional banking names KEY, RF, FHN, USB, BBT made new highs along with the Regional Banking ETF, KRE. XLF also ranked #4 in daily RSI of 50 core macro ETFs that I track, and #1 on my focus group list.
This is significant for two reasons: One, banks are considered a leading sector, as strong financial stocks are considered by many to be a forecaster of future market conditions. Two, Financials, comprise 23.3% of the CRSP Large Cap Value Benchmark Index, it’s highest weighting.

Also, noteworthy in yesterday’s trading is that the S & P REITs ETF, XLRE, closed below the rising 100 day moving average for the first time since early January 2019. For many who employ moving averages in their trading, the longer a key MA holds the trend, the more significant is the break below it. Year to date performance leaders EQIX and AMT are also breaking down. EQIX below the 100sma and AMT down to the rising 200sma.xlre1111.png

On an RSI ranking, US Treasuries, Utilities and REITs are at the bottom 3 of 50 core ETFs that I track. 10 year yields have been picking up as well and this action could be interpreted as the market positioning itself for higher bond yields.

As a result, I have moved financials, both XLF and KRE up on the momentum/price strength ranking list and buyable on pullbacks, and have removed REITs and put them on the neutral list along with USTs.

The Value rotation does continue, as the top 20 large caps ranked by daily RSI was heavy in financials, healthcare and consumer goods, all high value factor weightings.


11/04/19 DAILY RECAP
SPY and QQQ both closed at new highs today, as did 383 NYSE listed issues and 176 Nasdaq names. This breakout continues to be broad based, with new highs also in semis, financials, EAFE, industrials, technology, Japan and Taiwan, as well as lage cap focus names JPM, C, BAC, AMD, AAPL, CDW, BAC, and INTC. China focus names JD, NTES, and VIPS all made new 52 week highs.

Recent new Energy ETF buy, XOP, was the leading core ETF for the day at +4.85%. It is still trading below the declining 100sma and below the September high of $26. $20 is still longer term support on any pullbacks, and this is the top turnaround idea group on my screen. xop1111.png

Semis continue to lead the momentum list higher, with new highs in leaders AMD, INTC, LRCX and the group, SMH, with NVDA not far behnd.

GE has been improving on higher volume, and I am adding SCGLY and KHC to the long-term best ideas list, both having recently reclaimed their 40 week moving average.ge1111.png

On the downside, leading large cap homebuilder NVR closed below it’s rising 100sm afor the first time since early January, and large cap leaders down for the day also included home builders, PHM and DHI.  REITs and Utilities are also showing some weakness here and is something that I am monitoring.


Global markets continued their breakouts last week with new all-time highs in S&P 500 (SPX), Nasdaq, many mega cap leaders like Apple and JP Morgan, and new 52 week or longer highs  in Russia, Germany, Japan, semiconductors and economically sensitive sectors like building materials, trucking, industrials and heavy construction.

The technical overview remains the same. As long as indices and leading industries are making new highs, this is bullish from a technical perspective. The stock market is the greatest economic forecaster and forecaster of future market prices.  Key levels on SPX are 3,000 shorter term and 2,800 long term. I maintain my technically bullish stance and long positioning with SPX over it’s rising 200 day moving average, currently at 2,887.

The top 10 core groups that I track, based on a proprietary price momentum ranking are: 1. Building materials, 2. Homebuilders, 3. Semis, 4. Utilities, 5. Technology, 6. Europe, 7. Healthcare, 8. Banks and Brokers, 9. Industrials, and 10. Freight and Trucking.

Energy is improving, with refiners PSX, MPC and VLO continuing their sharp breakouts. The Energy ETF, XOP, recently tested the 08/09 lows, and has major support at $20. If this level holds, this could prove to be a good longer-term entry point, just under $22.

Industrial metals, such as steel and copper, may be trying to put in a longer-term low as well. US Steel, X, has longer term support in the $10 range, and although this could break, offers a clear risk level to monitor. The 200 day moving average on XME is trying to flatten out, and is something that I am monitoring as well.
Eurozone financials continue to be showing signs of trying to put in a longer-term bottom, and China internets are moving up the list. I am continuing to avoid the downtrends in the SaaS space.

Gold over $1400 is still the key long term gauge and U.S Treasury yields have been very volatile, and the levels to watch there are 1.50 as downside support and over 1.90 and 2.00 would signal a new breakout in yields. I have some exposure long Gold and UST for now.

The techical positioning in global equities continues to be bullish and favor the long side. I am staying focused on the strongest stocks and the strongest groups, in uptrends. I do expect pullbacks at any time and volatility, but over 2800 on SPX maintains my bullish technical positioning. 

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