alice

NFTRH; Market Update and Admin Note

Let’s do the admin housekeeping first. Folks, about the Trade Log…

I may be talking to a tiny fraction of the base, but please remember that as someone with many different kinds of holdings (long in various industries/sectors, sometimes strategically short*, bonds, cash, offensive like Tech, defensive like Telecom or Staples, etc.) the Trade Log is not being kept by someone recommending trades. It is kept by someone documenting trades per subscriber request.

I have a feeling that some readers are literally interpreting these trades 1-for-1 as stand-alone transactions designed to make max profit, and that they simply are not. I am a portfolio balancer, not a fancy trader.

For example, last week in an update we noted the upside resistance parameters for HUI, which traders needed to respect. I noted that it was important for you to understand what you are (trader, investor or some combo) ahead of time. For my part I did some pretty good selling but held on to light positioning, which was my strategy. Take enough profits and understand that you’re likely to get hammered on what’s left. I could have just as easily dumped everything and looked to re-buy. But with my other work, that takes too much time, energy and focus. We nailed the parameter but the rest was up to you.

So I ask you again to filter the Trade Log page or better yet, I ask you to consider not even looking at it if it causes confusion. I am trying to be as transparent as possible all around, but if this begins to be detrimental to the overall service I’d have to consider whether it should even exist.

In my view, NFTRH+ updates and charts presented near the end of each weekly report are more valuable for those looking to max a trade, because these tend to be unencumbered views of singular stocks or ETFs. Finally, I realize that despite NFTRH’s modus operandi, pure traders sometimes sign up and while I value all clients, I would ask those people to consider whether the service is right for them. It is not for everybody.

Thank you for hearing me out!

* Yesterday the strategy, which was against Semiconductors, blew up in my face with a big elephant in the room called Semi Bearish?, which I felt was a pretty decent piece of cautionary work, but which one subscriber actually felt was the reason the Semi sector rammed upward yesterday. If only I had that kind of power…

Market Update – Uncle Buck Wakes Up

USD put on the short-term double bottom bounce that we’d yellow-highlighted in the Wrap Up segment on Sunday. Very sneaky Uncle Buck, or is it? The USD is bouncing from the 2009-2010 support area we have been noting.

usd

Very generally, a perhaps decent bounce in USD could pressure most of the markets that have spent the last 6 months going anti-USD. That would include global areas like EM, commodities, certain US sectors dependent upon the ‘reflation’ theme and of course the precious metals, which we have been noting were rallying for unhealthy reasons with the anti-USD ‘inflation trade’.

I have a rip roaring head and chest cold and a wacky schedule this week and so I have not been able to focus very well (another reason to take the Trade Log with a grain of salt?). But my plan is to take a look at the portfolio and reduce items that would seem not to favor a rising USD (enough gold sector selling has already been done, but there are other areas to address).

As you may recall, I did a bunch of buying at the bottom of the last correction leg and would look to lighten up at least on the more anti-USD and pro-yields stuff.

Here is the current daily view of USD. Target 1 is the declining SMA 50 and target 2 is the declining SMA 200. Let’s watch and evaluate whether the bounce is mini or maxi (within a still bearish situation as indicated by the state below the firmly declining SMA 200).

usd

Did Someone Say Yields?

Yes. 10 & 30yr yields are essentially at initial targets, at least. Again, we’ll save judgement on whether or not a grand new inflation phase along with a secular breakout in yields is in the future, but for now I’d plan for a coming easing of yields if USD gains a bid.

The thing about Tech is that it tends to be relatively yield insensitive compared to other sectors. Semi Equipment as well. Could we be correct on a future cyclical issue while the market drives the sector up again? Sure. It could simply be a market momentum thing. I am not going to fight it because the market can take a long time to shake out in price to your macro view, assuming your macro view is right. It could be the reverse of 2013, which had a lot of grinding before the economy’s brightening prospects came into more widespread acceptance. Similar dynamics held true in 2016.

Semi Signals

So let’s update the sensitive indicators. Daily AMAT/SMH is still at a lower high and LRCX/SMH is below the daily SMA 50. I still hold LRCX short but wonder if the likes of AMAT are trying to negate the signal.

The weekly offers more hope to the bearish signal as both indicators remain below the former trend lines, although there is AMAT again, looking better than LRCX above its EMA 25.

These stocks vs. broad Tech have broken through the daily chart’s lateral resistance, at least temporarily. LRCX is more suspect than AMAT.

The weekly chart has little wiggle room before we’d have to put this aside for a bit as a negative cyclical indicator.

The bottom line on the above is that the Semi Equipment signals are being tested harshly. It is so important not to marry a favored outcome but instead to let the internals tell a story. Right now the story is that the these negative signals led a stock market plunge that is in recovery at this time. The Semi signals are not yet repaired but the market as usual, is pushing things to the limit.

The Semi market will go its own way in the short-term despite the fundamentals, about which there remains reason to be cautious in 2018.

Wrap Up

I could go on about commodities, global markets, etc. But we should keep updates to manageable chunks if possible. Very generally, the US dollar is bouncing and it is logical to assume that what took advantage of its downside will be vulnerable to its upside. Aside from commodities and certain global markets (other global markets, like Europe, maybe Japan, could benefit) several US market sectors could be pressured. They might be the industrial and materials areas, which we’ve noted as part of the ‘reflation’ theme.

The gold sector? Let’s just say that before it becomes constructive, it has to get untangled from the greater interest rate and momentum-fueled ‘inflation trade’. It’s a process.