As the complacency and momentum divergences that have been gnawing at us begin to play out, we want to be mindful of attractive entry points in stocks as they come in. Hoping to avoid the trillion-dollar babies, I wanted to provide a handful that caught my eye in flipping through the charts last night. While the broader markets likely still have some work to do on the downside, keep these charts handy…compelling setups are developing.
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Over the last two days negative momentum divergences have become a bit more acute in our work. What’s a negative divergence? A negative divergence occurs when the movement in a particular asset is unconfirmed by its corresponding momentum indicator. Negative divergences can persist for some time which means that it’s hard to use such a sign as a timing signal, but the information provided usually tells us that the negative divergence will have to be resolved – either because the asset in question (a) works sideways or (b) corrects. For the market right here we think that (b) option extends further.
25 years in and we’ve become inured to the 4:00am alarm. But upon waking today and checking the news – and the futures (“What? No future?”) – “Smells Like Teen Spirit” by Nirvana popped into our brain. Why this song? Who knows…it could’ve very well have been “Everybody Plays the Fool” by The Main Ingredient and that would’ve fit just as well, we think. Yet the lyrics for “Smells Like Teen Spirit” found above will tell you exactly what we were thinking when we saw that the SHCOMP was down 5.6% overnight and that downside opening gaps galore followed for the Euro Equity Markets.
Have we just experienced an epic ‘V Shaped Recovery' or epic ‘Bull Trap’? Against a mixed economic backdrop, one could argue that a vast majority of the move off the December low can be attributed to a combination of the dovish Fed pivot and what seemed like daily jawboning of a pending trade deal with China. With the latter being called into question, the bears might finally have their say. Admittedly, I have been too cautious for the past 200 handle move in the S&P 500 (I just gagged typing that), as a fair majority of the conditional factors that I monitor (small caps, financials, cyclicals, bond market, etc.) have been hesitant to fully embrace the strong price moves of the larger cap indices over the past few months. This weekend’s news caught many offsides, as put/call ratios and record short VIX positioning highlighted the growing complacency and confidence among investors. Make no mistake, the burden of the proof still rests with the bears, but we all know that the markets have a funny way of not rewarding the consensus view - how they respond will be telling. Keep an eye on 2872 support for the S&P, failure there and the 50-day (2852) will likely be the next battleground.
As an homage to Jerry Seinfeld and his “Comedians in Cars Getting Coffee” we’re going with “Investors Looking at Charts Having Coffee.” Please click on the attached PDF and take a look at our Weekend Technical Team Chart Life Global Equity Indexes chart packet.
We have some brief comments on page 1 (seen here, too) and then you’ll find 79 charts (3 per page for 26 pages plus one straggler at the end). We promise you’ll be able to flip through these charts before you finish your first cup of coffee.
Every time we see a chart for the EURUSD we’re reminded of “Hotel California” by The Eagles. There’s nothing remotely technically redeeming in the chart or trend for it yet, just as The Eagles first sang in 1977, “they just can’t kill the beast.”
With baseball season in full swing we can’t help but think of famous 5s like Joe DiMaggio (#5 for the NY Yankees), Johnny Bench (#5 for the Cincinnati Reds), George Brett (#5 for the Kansas City Royals), Albert Pujols (#5 for the St. Louis Cardinals and the Anaheim Angels), Hank Greenberg (#5 for the Detroit Tigers and Pittsburgh Pirates, born in Greenwich Village, went to James Monroe HS in the Bronx and was known as the Jewish Babe Ruth, one of the more underrated all-time great baseball players), and Brooks Robinson (#5 for the Baltimore Orioles).
FTM (Fundamental Technical and Machine-learning) is a highly systematic process that identifies informative Open Market Insider Purchase transactions. The system utilizes our proprietary factors to improve signal efficacy. SEEKING ALPHA FROM INSIDER TRANSACTIONS: Adding Fundamental and Behavioral Finance Overlay.