Rotation Report: Signs of life

Germany and China are in major corrections, but things appear pretty good here in various U.S. groups.

Sentiment is amazing these days and continues to drive the market.  The Fed Statement lit the wick (just as it did in March) and ripped the guts out of The Fed must raise rates now crowd.  Check out this week's link-fest for a full primer on sentiment.

MACRO

Germany is 10% off the highs, Shanghai is 14% off the highs.

Then there's the major U.S. indices at or near all time highs.  We could say that's a sign of relative strength, but the U.S. markets have just done their own thing year-to-date.

This week's candle in the S&P 500 sums it all up.  Resistance in the 2120's, support in the 2060's

The market saw it's sharpest buying pressure since the last FOMC press conference.

The put call ratio is at the toppy end of the range.

Breadth is still pretty much in-line with price.

The 2-10 year US Treasury yield curve made a lower high as longer end Bond ETFs staged bullish outside weeks (EMB, HYG)

Groups

The homebuilders stood out Friday.  They're at a key point, trying to break out of a multi-month base

Industrials have consolidated for months and touched the 200D MA.  If this group is going to rally, now is the time.

Materials have formed a symmetrical triangle near all time highs.  Names that stand out: DOW, ECL, VMC

Biotech broke month long consolidations to new highs...

...just as seasonality is turning higher.

Defense & Aerospace is at a key point.

Apparel retail has formed an apparent durable low near the 200 day moving average.

Other Markets

It sure looks like there is more downside coming for Europe ETFs just looking at weekly charts of Germany and France(not shown)

Brent Crude is at a key price point after seeing weaker bounces at trend-line support.  Energy ETFs like OIH and XOP can't seem to hold a bid.  This is the key space to watch early the week.

Gold ran to the 40 week moving average.  The larger structure is very interesting and will eventually lead to a monster move (direction yet to be decided).  The waiting is the hardest part.

Other Thoughts and Commentary

Uber's court battle in California is highly relevant.  A large portion of the 'new economy' is reliant on this independent contractor classification.  We'll see how big this gets, but the uncertainty could weigh on valuations/possibly offer opportunity for awhile.

Looking around the world, what market's actually look good?  Yes China(thanks to government pulling 3 levers a week to increase/open up investment) and some emerging Asia.  It's a global shit show and not that great of an investing environment in general.  That said, the U.S. could be the main beneficiary in the second half of the year.

Trade 'em well!

Thoughts into FOMC

In last week's Top Trading Links, I shared this under-appreciated piece by @MylesUdland.

Myles notes that the market is slow to react to tightening cycles as evidenced in the mid 2000's hiking cycle courtesy of @RobinWigg 

Now as the FOMC statement approaches we have numerous macro technical tourists discussing how the Fed Funds Futures aren't expecting a rate hike here as if the market is all knowing.

Well if these Futures are what the market expects, and they're slow to expect rate hikes - this tells us where the risk is.

This is all very un-comforting given where the market is here.

Again, we'll turn back to the golden ratio fib extension from the 2007-2009 range in the S&P 500 via @andrewnyquist

Then we look at the NASDAQ Composite and we see it testing the 2000 high.  

Where else would be a more appropriate spot for an intermediate market correction?  

The risk is evident and it's no wonder why there was selling into the Fed announcement.  

The people getting played today are those who expect anything.  Going with the flow has paid and it will again. 

Trade 'em well!  Read and react!

KITE

KITE bounced right in that 50/20 day moving average area and formed a bullish engulfing candle.  Is it setting up to take out the downtrend line above?

It's an explosive look.  Now we have some decent stakes in the ground to trade against in the 55s.  I'm long.  If it works the plan is to peel 1/3 into that resistance and move the protective stop to break-even and let this thing ride.

Trade 'em well!

Greece

What's the main difference between this Greece debt negotiation and all the others over the years?  It's just sentiment.  The consensus sentiment among market commentators is 'Greece doesn't matter'.

We can read that as 'i'm positioned as if Greece doesn't matter'.  In the other most recent Greece debt crises, the sentiment was exactly the opposite.  We'd hear things like Greece is going to lead to the end of the European Union etc

The question is how long does it take for that sentiment to turn?  Given how negative sentiment has been, maybe it's sooner than later.

More:

Over the weekend in the Rotation Report, I penned this

Frankly, it doesn't matter if Greece gets kicked out of the eurozone, defaults or whatever.  What matters is they're challenging the status quo of an antiquated system.  When all the cards are on the table, they know they have less to lose than the IMF.  It'd be quite easy for this rationale to catch on across the globe, given there are so many highly indebted parties everywhere.

It should be noted that's long term potential concern and nowhere near sentiment that's driving the market near-term. 

Thanks for reading!

Rotation Report: Same Ole'

What's new?  Not much in the markets.  Individual equity bulls continue to make the most money, while the S&P 500 continues to hold under monster Fibonacci resistance extension around the 2140 level.

Yellen's on deck Wednesday as the Fed lays out their economic projections.  Sentiment around the Fed is so bifurcated.  There are brilliant market minds convinced the Fed won't back down from their easy money stance and other brilliant minds sure that the writing is on the wall for a rate hike.  Yellen is studied enough to know they need to raise rates while they can..Draghi and Abe on the other hand....

Be sure to check out my favorite reads of the week over at See It Market (will add link when it's posted)

MACRO

We could argue resistance is strengthening in the S&P 500 while the ease of movement index starts to move lower.  The 4 month support line will tell us plenty near term.

The VIX ended the week testing the 10D MA from below.

Breadth is still disgusting, even in the S&P 500.

Stock Groups

XLE's Advance/Decline line has hit new lows.  Price is masking the underlying damage.

Biotech continues in this tight range.  It looks like a rollover setup to me.

It's worth repeating that Utilities have broken this long term trend

Cyber Security flashed major relative strength on Friday.  What a beautiful group.

Other Markets

Numerous global indices and have been under substantial pressure in Q2.  GAF has broken a two year support line

Also India is breaking a 9 month 12% head and shoulders top

This global weakness comes after massive flows have piled into international ETFs via @RyanDetrick

Smarter men than I are looking into the Yen:  I want to piggyback here soon.

@hertcapital points out a potential massive shakeout.

Yen remains in a key LT price range. A shake-out below sets up a major mean reversion rally. $FXY pic.twitter.com/LaQmo6LI19

— Sheldon McIntyre (@hertcapital) May 28, 2015

@kimblecharting notes the key resistance level in the dollar / yen pair

The 10 year US treasury yield tested long term resistance this week.  How long does this pull-in last?

Is that a golden cross in the 30 year treasury yield?  Fade 'em.

Base Metals are trying to base out (ha)

Nat Gas is also still working on a bottoming base

Other commentary:

Mike Shedlock wrote a provocative piece on Greece this week.  Frankly, it doesn't matter if Greece gets kicked out of the eurozone, defaults or whatever.  What matters is they're challenging the status quo of an antiquated system.  When all the cards are on the table, they know they have less to lose than the IMF.  It'd be quite easy for this rationale to catch on across the globe, given there are so many highly indebted parties everywhere.

How do we tie that into a trade is sure as hell NOT the right question to ask.  However, that short the S&P 500 versus the good ole' 2007-2009 fibonacci extension level around 2140 is still in play with this whole mess unfolding and the market looking for a downside catalyst.

RE: Dick C stepping down as Twitter CEO - It's almost like the market wants to see more of an 'emptying of the cupboard'.  It's worth noting the 'old boys network' is still in affect since Costello is still on the board of directors.   Kick all of the Gilfoyle and Erlich Bachman types to the curb and Twitter shares could get back on track fast.

Trade 'em well!