For years now, I've written the Rotation Report weekly. It's time for a change. I've decided to split the Rotation Report into two segments running bi-weekly. The Rotation Report will be trimmed down to only market rotation and group action. Then everything else will be fit into the Macro Market Outlook. Why? To make it easier to digest. Plus, things just don't change enough week to week to warrant discussion. This week we'll start off with the Macro Market Outlook. Cheers!
Market Internals
The NASDAQ Summation Index is reaching that of other key lows.
Breadth has improved in the last couple of weeks in the S&P 500 after the climactic drop. It hasn't quite broken the downtrend yet though (top subgraph).
The stock/bond ratio broke a smaller top. The larger picture still appears to be a larger congestion that eventually goes higher.
The Stock only advance-decline line is firming up as the lower bollinger band is now pointing higher. This is an interesting development.
Mid-week I wrote this post 'Something's got to give' on market sentiment. It's real tough to get a handle on right now.
Bonds
Long Term Treasuries are testing a thick resistance zone.
Preferred stocks are coiled tightly relative to the S&P 500
Commodities
Cotton bounced strongly at major multi year support.
Gold has turned the corner in the short term. How does it hold next week?
The falling 200 day moving average has just about caught up to price in Nat Gas. Watch the rising support line. If this can break higher, there is a tremendous seasonality tailwind.
Amazingly, the S&P 500 held the 40 week moving average again.
International Markets
The Edge
One of the cleanest edges I see this week is short emerging markets after EEM gave up the key 36 area. I'm short via EDZ.
Shanghai has some room to brick wall resistance around 4150.
A clear downtrend has been established in the World Index. Note higher lows forming.
A few thoughts
The Fed
The Fed
There is a TON of noise building RE: the September Fed meeting. The conversation around it appears to believe the long bond has a bearing on the FED's actions. The Fed controls the short end, and short end rates have been rising rapidly for the last month. So this whole point of view is twisted and an odd dogma. Check out the 3 month treasury yield.
Then of course, we have Fed Fund Futures. We can all agree Fed Fund Futures are likely a better tell of potential rate hikes than economists. However, the Futures also tend to be constantly slow to predict rate hikes. Let's not act like they're gospel.
China & the Yuan
Then of course, we have Fed Fund Futures. We can all agree Fed Fund Futures are likely a better tell of potential rate hikes than economists. However, the Futures also tend to be constantly slow to predict rate hikes. Let's not act like they're gospel.
China & the Yuan
China's Yuan devaluation told us nothing we didn't already know about the Chinese economy. The media and general noise is making a big deal about this, which piques interest on the other side of some of these commodity trades. At the same time, it has a large effect on global trade (we're already seeing repercussions in emerging markets and Europe and we've got to let price action guide us.
Valuations
Warren Buffett made his biggest purchase ever last week in Precision Castparts. He's hinted that he's looking to do more. Are you kidding me? Isn't this market 'extremely over-priced'? A lot of stocks have been hammered 20-40% off the highs and are still executing. The value is out there, but it certainly isn't as easy to find as it was in 2012.
Trade 'em well!
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