Month: March 2021

Friday Surprise – March 26, 2021

The S&P 500 closed on a new high, gaining 1 ½% in the final 1.5 hours to do it. The entire week was up 0.1% before that. It was a very odd run up. Chinese stocks were getting smashed all week due to new data requests from the SEC. Stocks like TME (Tencent) traded 300 Million shares instead of 17 million! Leaders in Communication Services were sacked rapidly on the week. Some of my scans produced bizarre results compared to the S&P’s positive return on the week. As an example, over 1100 stocks were down more than 5%. Only 120 stocks were up 5% or more. By any stretch to have the market close up with that type of backdrop is truly odd. Just add that to the Ever Given blocking the Suez Canal. Weird week.

Once again, the NASDAQ under performed the S&P 500. The real problem with that is trying to figure out if it’s ready to accelerate higher after a six-week pullback. The vaccination data for the USA continues to get more promising. America expects to have 200 million people vaccinated within the first hundred days of the new president.

Globally we also saw more weakness. Asian countries as well as commodity countries didn’t fare as well as the US. The exception would be Australia which was up on the week. The US made a new high on Friday on the S&P 500, but anytime we test the previous high we need to be careful to see if we have enough strength to hold it. I will be watching carefully. Even in nature as the picture shows, testing a prior high can lead to failure.

The transports and industrial’s look extremely bullish. That should be enough to say just get long. But the top performing areas of the market were all the defensive ones. Staples, utilities, healthcare, REIT’s.

The Aussie dollar and the emerging market currency ETF (CEW) both broke trend lines. EEM also broke below it’s trend line with a bounce Friday afternoon to close right on the line. Not a good look for commodities. The US Dollar pushed meaningfully higher.

Summary: The bizarre price action this week makes it really hard to figure out what’s going on. Defensive sectors leading, while stocks like Tesla and Shopify break up trends. Doesn’t sound bullish at all. I got more buy signals on gold charts this week, carrying over from my gold trade ideas last week. Oddly gold and silver miners were weaker. Let’s hit the charts.

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ClearWater Market Commentary as of March 29th, 2021

Conflicting signals about progress in fighting the coronavirus appeared to be a major driver of sentiment. However, investors seemed encouraged by AstraZeneca’s release of data showing its vaccine was highly effective and safe in U.S. trials

ClearWater Market Commentary as of March 22nd, 2021

The week began on a strong note, due to a combination of fiscal and monetary policy stimulus, more retail investor support, and the better economic outlook given progress in containing the coronavirus.

The Dance – March 19th, 2021

The S&P 500 broke out to a new high, and then failed to hold it and fell back below the prior high to end the week. The NASDAQ tried to rally, but ended up having a down 3% day on Thursday. That’s not what we’re expecting for our next leg higher. We also saw Crude Oil fall down heavily 7% in one day for a big reversal on the week. I got a sell signal on oil related charts this week.

With the Fed meeting and quadruple options expiration, there was a reason for all kinds of volatility. The market responded with a wild and whippy Thursday and a little bit of a bounce on Friday on the NASDAQ. The two steps forward, one step back, dance party isn’t that bullish. The NASDAQ has the potential for a topping structure to complete.

Globally we also saw more weakness. We have some charts starting to break down on other parts of the world. Asia looks particularly weak. Some European markets were hitting new highs this week so that seems to be better but definitely an area to watch in the week ahead.

I saw this uptrend in the picture while driving this week. I chuckled relating it to the stock market! when I am using tree-tops to draw the trend line you know we are up significantly. A few weeks ago, I posted a short 2-minute video about the comparison to 2000 and the current market. I’ve updated the video this week and posted a link in this newsletter. We continue to be right on track with it. This is one of those weeks where we could break the analogy and not end up in a bigger bear market correction. But we’re at that point. Let’s not fall asleep here and assume that all the stimulus is going to work out well.

The Australian market, the Australian currency, the emerging market ETF (EEM), and the emerging market currency ETF (CEW) all are trying hold important trend lines. With the Shanghai market breaking the trend last week and continuing lower this week it’s not a good look. Why are these other markets starting to weaken?

Summary: The SSIH indicator rolled over mid-week. Is it whiplash or are we heading down lower now? We only moved down a few percentage points, but it is hard to flip this indicator back-and-forth as it uses weekly data. I would suggest making sure your profits are protected or try to find a way to reduce position size if this market starts to break. It is a really important week as charts like Tesla are barely hanging on their trend line. Further weakness in theme stocks like Tesla as an example probably won’t be helpful. I got more buy signals on gold charts this week, carrying over from my gold trade ideas last week. Let’s hit the charts

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ClearWater Market Commentary as of March 15th, 2021

On Thursday, President Biden also signed into law the USD 1.9 trillion American Rescue Plan Act, following its passage in Congress on a party-line vote. Treasury Secretary Janet Yellen stated that direct USD 1,400 payments to most Americans, a key part of the bill, should begin showing up in bank accounts as early as the weekend.

Hitting New Highs – March 12, 2021

The S&P 500 smoothed out its path this week. After a brief dip down on Monday, the S&P pushed up all week and had a good close into the weekend. The leading areas of the market are energy, financials, consumer discretionary, marijuana, cryptocurrencies. It doesn’t end there as industrial companies like Boeing are breaking out to the upside. All the transports including railways, trucking, and airlines are all pushing higher. Having industrials and transports push to new highs is bullish. Tech continued to lag as investors focus on the reopening economy trades.

The NASDAQ market was harder to trade as it was in yo-yo mode. It was alternating between up and down all week. With the stimulus checks coming out this week, and the vaccination process going extremely well, I expect more upside across the market but less so in tech than in the other leadership areas.

I mentioned gold was weak last week but the miners started to behave. Gold was a little better this week but the miners were even better. I like buying near the lows when I’m buying commodities, so gold miners fit the bill this week. If they don’t hold up, I’m out. I do like the set up as it starting to shape up, so I explained that in this weeks newsletter.

Global markets are bullish as many of them broke out to new highs across Europe, Canada, Mexico and Russia. Seeing this broad strength encourages me to focus on being bullish. The Schnell Strength Indicators (SSI) are all popping higher which makes them supportive of the new highs.

Summary: The clues given last week by the SSI indicators were to be bullish. We reluctantly agreed with them and that seems to be the correct direction. That’s the strength of using data rather than intuition. Now I want to focus on continuing to follow strength into the market. I’ve put bearish thoughts aside because we have the new stimulus and we also have an infrastructure bill that should be going through the government offices this month. Commodities continue to perform well which also suggests demand. I’m focused on the upside.

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ClearWater Market Commentary as of March 8th, 2021

The rise in rates again weighed on growth stocks by increasing the discount on future earnings, while value stocks managed gains.

Being an Optimist – March 6th 2021

The wild swings on the $SPX ended up with a slightly higher finish than last week. The Nasdaq was down a little. Friday had a big hammer candle. A hammer candle is a market open near the top of the candle, goes lower during the day, then reverses and closes near the highs again.

Many of the momentum names have come down 50%. Is this their low? Or is this just the beginning of the move down? Optimism is always warranted with big 4% intraday swing. Very hard to be short with that price action too. Energy and financials continue to be solid.

The US senate passed the 1.9 T stimulus bill this weekend, so it should probably be signed by President Biden sometime soon. Next is a $3T infrastructure bill. Hard to comprehend how trillions can be spent so fast. The spending ignites the Bitcoin bulls, who talk about the currency printing debasing the world, but the same debasing continues to deny the gold bulls a bid. Gold had a tough week, failing to rally even in a rocky market.

I could sit in a waffle house all week, waffling back and forth between bullish and bearish. With the stimulus backdrop, can it possibly pay to be bearish? Conversely, we haven’t broken the analogy to the 2000 market top. A break above the downtrend lines will get everybody bullish. My Schnell Strength indicators started to bounce. Money showed up with volume on Thursday and Friday, creating the hammer candles. I lean into being an optimist. I bought stock on Friday after sending out my article to look higher, not lower. Conviction level is about as good as the one-out-of-two-popping odds of Orville Redenbacher, the popcorn king. Last week I was all bearish, but seeing that second hammer candle, suggests the buyers are there.

Summary: I have added to my oil positions on the back of the extremely bullish OPEC announcement and bought a few stocks Friday as the Schnell strength indicators improved. The market is hard to judge here. It is definitely not the wind-at-your-back investing moment. If you’re a market technician, right now it’s a pretty confusing control panel. Spin the dials, and we’ll see what happens. Let’s hit the charts.

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ClearWater Market Commentary as of March 1st, 2021

Most equity markets were lower, as expectations of inflation and rising costs challenged the outlook for corporate profitability and stock valuations.

Breakouts Fail – February 26th 2021

The rotation away from momentum names was on full display the prior week. The trend continued as the Nasdaq was one of the weakest indexes in the world again. The big drop in the markets (NDX down >4.9%) suggests more caution. While you may or may not watch the videos each week, try to watch the video up to the 40-minute mark. I mentioned the expensive price multiple times this week.

I continue to be distracted each week by subtle positive moves, but the underlying for the market looks so risky. The areas I liked last week were down the least, but they were down, with the exception of energy. Issues like: market price action this week with a big down percentage overall, the drop in Tesla that fell 16% in two days before a buyer stepped in, lots of 10-week moving averages breaking on the high-flying names, the weakness of all of the big-name tech stocks; is definitely concerning.

 The US vaccination rollout is greater than 20% of the eligible population. JNJ’s vaccine was approved over the weekend. America will have 3 vaccines for distribution, so March should be a massive month for vaccination. We also saw the 1.9T stimulus get rolled through congress, following the $900B in December, and now the infrastructure bill has a nod of $3T. WOWZA.

Interesting Reading.

Two Questions I Have. When Everyone’s A Genius. Jay Woods Former NYSE Board Member on GME.

It’s been two weeks since my Two Questions I Have article. So far, that marked the recent market high. The charts are playing out like they should if I am right. This newsletter focuses on that data. The article When Everyone’s A Genius is also relevant. The market rallied extravagently when we all saw the economy cratering. But not only did it rally, it became one of the most expensive valuations of all time, with little hope of a damaged economy keeping up. Another question of mine is : While the economy improves, will the stock market suffer, to bring valuations back into line with market prices?

From all the success with the ARK investing group, it sounds like the world can go to infinity and beyond. Unfortunately, they have already pushed pricing there (infinity), well in advance. When Tesla plummeted, they stepped in and started buying in the $600’s. The real question is: Where were the rest of the buyers? Tesla has dropped 30% in 4 weeks, and it has been 3 weeks since they announced they will accept Bitcoin for cars and hold $1.5B in Bitcoin in the corporate treasury.

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