To gain an edge, this is what you need to know today.

Nvidia Causes Negative Sentiment

It is seldom that an individual company is the headline of the Morning Capsule.  An individual company is highlighted in the Morning Capsule only when it has significant impact on the rest of the market.  Today is one of those days.

Nvidia (NVDA), a semiconductor company, has been the poster child of the excesses committed by the momo crowd in this bull market.  In the past, even when the company reported earnings less than the consensus and whisper numbers, the momo crowd cheered and bought the dip aggressively.  Finally the momo crowd is sitting on such huge losses in Nvidia that they no longer can prop it up by buying blindly. Nvidia is trading down $36.57 at $165.82 as of this writing.  The 52 week high is $292.76.

This is causing negative sentiment across the whole stock market.

Cold Water On Trade Optimism

Commerce Secretary Ross is throwing cold water on trade optimism.  He is saying that Xi and Trump may agree only on a framework

Momo Crowd And Smart Money In Stocks

The momo crowd is aggressively selling stocks in the early trade.  The smart money is inactive.

Gold

Gold is flying on the dollar weakness.

Oil

Oil is bouncing as margin calls appear to be over.  There is an attempt to cause another short squeeze leg in natural gas.

Marijuana

Momo crowd is aggressively buying marijuana stocks in the early trade.  The smart money is lightly selling into the strength.

Technical Patterns

None of note.

This is powerful information and many investors use this to enter trades in addition to our official signals.  Here are the three most common uses: 1) Short-term trades in ETFs  2) Decisions to trim or add to long-term positions, and 3) New option trades. These should be used judiciously only in conjunction with macro, fundamental and quantitative indicators.  To learn more please click here.

Markets

Our very, very short-term early stock market indicator is negative but can quickly turn positive.

Interest rates are ticking down and bonds are ticking up.

The dollar is weaker.

Gold futures are at $1221, silver futures are at $14.29, and oil futures are $57.85.

S&P 500 resistance levels are 2740, 2765 and 2800; support levels are 2700, 2688 and 2661.

DJIA futures are down 91 points.

To gain an edge, this is what you need to know today.

Powell Address

In a much anticipated address, Fed Chairman Powell said that the U. S. economy is strong but there may be headwinds in 2019.

We carefully listened to see if anything could be inferred from his speech about the future direction of interest rates  He struck a balanced note.  He is well aware that rising interest rates can cause problems but sees the needs to raise rates due to the strong economy and prospects of inflation.

Strong Retail Sales

The U. S. economy is about 70% consumer based.  Therefore we pay attention to retail sales.

Retail Sales ex-auto came at 0.7% vs. 0.5% consensus.  We exclude auto because the volatility makes it difficult to make good predictions.

Jobless Claims

Initial Jobless Claims came at 216K vs. 214K consensus.  This is a leading indicator.

Brexit

Prime Minister May is facing a rebellion in her cabinet over Brexit proposal.  It is unclear if the deal can get through the Parliament.

British currency is coming under pressure.

Momo Crowd And Smart Money In Stocks

The momo crowd is acting like a yo-yo.  Earlier in the morning the momo crowd was aggressively buying but is aggressively selling as of this writing.  Yesterday afternoon, the momo crowd was also acting like a yo-yo. The smart money is inactive.

Gold

Gold is seeing buying after it successfully tested support at $1,200.  The weaker dollar is also helping gold.

Oil And Natural Gas

Margin calls in oil seem to have subsided.

API crude inventory data showed a rise of 8.8 million barrels vs. consensus of 3 million barrels.  EIA data will be released at 10:30 am ET.

Short squeeze in natural gas appears to have lost it ferocity but it is too early to tell if the short squeeze is over.

Marijuana

There appears to be wider recognition that Canadian marijuana stocks’ valuations are divorced from reality.

The momo crowd is buying marijuana stocks in the early trade but smart money is inactive.

Technical Patterns

Gold miners are tracing an engulfing line.  This is bullish.  ETF of interest is GDX.

This is powerful information and many investors use this to enter trades in addition to our official signals.  Here are the three most common uses: 1) Short-term trades in ETFs  2) Decisions to trim or add to long-term positions, and 3) New option trades. These should be used judiciously only in conjunction with macro, fundamental and quantitative indicators.  To learn more please click here.

Markets

Our very, very short-term early stock market indicator is neutral but a break of the market here can cause a major decline.  Conversely, a successful test here can start a major relief rally.  Please pay attention to the ‘What To Do Now’ section.

Interest rates are ticking down and bonds are ticking up.

Currencies are mixed.

Gold futures are at $1211, silver futures are at $14.13, and oil futures are $56.50.

S&P 500 resistance levels are 2700, 2740 and 2765; support levels are 2688, 2661 and 2658.

DJIA futures are down 26 points.

To gain an edge, this is what you need to know today.

Forced Sales In Oil And Buys In Natural Gas

Only a few weeks ago the consensus was that oil was going to go to $100 and natural gas was going to go to $2.50.  Investors, who specialize in oil and natural gas, had built massive long positions in oil and massive short positions in natural gas.  Its kind of like everybody on one side of a boat, and then it capsizes because everybody was on one side of the boat.

We have previously written about other fundamental factors relating to oil and natural gas, however those factors have caused only a very small fraction of the moves we are seeing.

A short squeeze is occurring in natural gas.  The short squeeze is causing forced buying.  Once the short squeeze is over and weather forecasts moderate, natural gas should give up a big part of its gains.

Oil is experiencing forced selling due to margin calls.  Once these margin calls are over and nothing new happens in terms of geopolitics and global growth, oil should recover.

Of course in this business nothing is 100%.  The above outcomes have high probabilities.  It is worth remembering Arora’s Second Law of Investing: No one knows with certainty what is going to happen next.

New Tariffs On Hold

It appears that new tariffs on Chinese goods are temporarily on hold.  This is causing optimism in stocks.  A big part of the selling over the last few days was due to the prospect of Trump imposing new tariffs right away.

CPI

Core Consumer Price Index (CPI) came at 0.2% vs. 0.2% consensus.  This indicates that although prices are rising at the producer level, they are not being passed on to consumers.  As soon as this data was released, more buying came into the stock market.

Momo Crowd And Smart Money In Stocks

The momo crowd is aggressively buying stocks this morning.  Smart money is also selectively and lightly buying.

Gold

Trading in  gold is listless as it hovers around $1,200 support.

Oil

See above.

Marijuana

Tilray (TLRY) earnings were of poor quality.  Canopy Growth (CGC) earnings were below consensus.  Keep in mind that these earnings are for a period before legalization in Canada.  Looking at these earnings is like looking in the rear view mirror and forgetting to look forward.

We will do more posts in ZYX Buy and ZYX Short at a later time.

Technical Patterns

Home building stocks are tracing an engulfing line.  This is bullish.  ETF of interest is ITB.

This is powerful information and many investors use this to enter trades in addition to our official signals.  Here are the three most common uses: 1) Short-term trades in ETFs  2) Decisions to trim or add to long-term positions, and 3) New option trades. These should be used judiciously only in conjunction with macro, fundamental and quantitative indicators.  To learn more please click here.

Markets

Our very, very short-term early stock market indicator is positive.

Interest rates are ticking down and bonds are ticking up.

The dollar is stronger.

Gold futures are at $1200, silver futures are at $13.96, and oil futures are $56.26.

S&P 500 resistance levels are 2765, 2800 and 2840; support levels are 2700, 2688 and 2661.

DJIA futures are up 122 points.

To gain an edge, this is what you need to know today.

Two Chart Patterns

The stock market is developing two chart patterns that all prudent investors should pay attention to. Let’s explore with the help of a chart.

Please click here for an annotated chart of S&P 500 ETF (SPY). Somewhat similar conclusions can be drawn from charts of Dow Jones Industrial Average (DJIA), Nasdaq 100 (QQQ) and small cap ETF (IWM). Please note the following:

• Those who do not like technicals, please click here for the chart of core Producer Price Index (PPI). Please read the following through the lens of the Core Producer Price Index chart.
• The S&P 500 ETF SPY chart shows three points marked as ‘top.’ Some will look at the two points on the right hand side and call it a double top. Others will look at all three points and call it a triple top.
• In any case, a double top or a triple top is a bearish pattern.
• The chart shows that the time between three tops is not very long.
• The chart shows that the price excursion from three tops is small, at least as of this writing.
• The foregoing two points make this bearish pattern a low quality bearish pattern.
• The chart shows a point marked as a ‘shoulder.’
• The chart shows a point marked as ‘head.’
• The chart shows a point marked as ‘possible shoulder.’
• The three points above form an inverse head and shoulders pattern if the market does not go below the head.
• An inverse head and shoulder pattern is a bullish pattern.
• This bullish pattern is also of low quality.

Battle Royale

What is the take away from the bullet points above? There are two contradicting patterns — one bullish and one bearish. Both patterns are of low quality.

This means that a battle royale is taking place between bulls and bears and neither side has an upper hand at this time.

Rolling Correction

This market has been going through a rolling correction. At one point not only retailers such as Macy’s (M), Kohl’s (KSS) and Nordstrom (JWN) were hit but Home Depot (HD) and Lowe’s (LOW) were also hit. Home Depot and Lowe’s are considered Amazon (AMZN) proof. Home builders such as Toll Brothers (TOL), Lennar (LEN) and KB Home (KBH) also have been hit.

Until recently, most sectors have experienced a rolling correction or a bear market but technology stocks held up. Among technology stocks, first to suffer were semiconductor stocks such as Micron (MU), Applied Materials (AMAT) and Intel (INTC). The high flying AMD (AMD) finally crashed. The turn of big tech stocks, such as Apple (AAPL), Facebook (FB), Google (GOOG) (GOOGL) and Netflix (NFLX) finally came. The reason this feels so bad now to some investors is that their portfolios are disproportionately and imprudently heavily weighted in large cap tech stocks and cloud stocks. If the market falls further, there may be a lot of pain ahead in cloud stocks such as Salesforce (CRM), Workday (WDAY), Eventbrite (EB) and Match Group (MTCH).

Many investors have tried to hide in marijuana stocks such as Canopy Growth (CGC), Cronos (CRON), Aurora Cannabis (ACB) and Tilray (TLRY). Such stocks have also experienced several very volatile swings. Interestingly, precious metal stocks as Barrick Gold (ABX), Newmont Mining (NEM) and Wheaton Precious Metals (SLW) have experienced less swings that their norm. Oil stocks such as Exxon (XOM), Chevron (CVX), Schlumberger (SLB) and Halliburton (HAL) have also suffered.

Two Important Things

If an investor could do only two things, here are the two:

• Pay attention to money flows segmented by smart money, momo (momentum) crowd and short squeeze. Follow a proven model with a great track record in both bull and bear markets. The ideal model would include macroeconomic indicators from across the globe, fundamentals, technicals, quantitative factors, currencies, commodities and intermarket analysis. An example is ZYX Asset Allocation Model that produced 45.90% return in 2008 when most portfolios lost one half of their value. Market conditions change and for this reason static models that may have worked in the past may not work in the future.   For this reason, investors may consider adaptive models that automatically change with market conditions. To learn more about adaptive models, please click here.

Momo Crowd And Smart Money In Stocks

The momo crowd is aggressively buying stocks in the early trade.  The momo crowd was aggressively buying stocks yesterday afternoon.  The smart money is inactive.

Gold

The momo crowd is selling gold.   The smart money is inactive.

Oil

Trump crashed oil by sending a tweet to put pressure on Saudi Arabia.

Marijuana

CRON earnings were better than the consensus. However earnings were of low quality.  The momo crowd is buying marijuana stocks in the early trade after selling them yesterday afternoon.  Smart money is inactive.

Technical Patterns

None of note.

This is powerful information and many investors use this to enter trades in addition to our official signals.  Here are the three most common uses: 1) Short-term trades in ETFs  2) Decisions to trim or add to long-term positions, and 3) New option trades. These should be used judiciously only in conjunction with macro, fundamental and quantitative indicators.  To learn more please click here.

Markets

Our very, very short-term early stock market indicator is neutral but it can swing either way.

Interest rates, bonds and currencies are range bound.

Gold futures are at $1202, silver futures are at $13.98, and oil futures are $58.5.

S&P 500 resistance levels are 2740, 2765 and 2800; support levels are 2700, 2688 and 2661.

DJIA futures are up 35 points.

To gain an edge, this is what you need to know today.

OPEC Plans Oil Production Cut

Soon after oil entered a bear market, OPEC is planning on production cuts.  Russia has signaled support for production cuts.

China Creates Positive Sentiment

China is promising more support for the private sector and getting tough on yuan shorts.  Professionals have been short selling Chinese currency yuan.

This is creating positive sentiment for stocks throughout the globe.

Momo Crowd And Smart Money In Stocks

The momo crowd is buying stocks in the early trade.   Smart money is selectively and lightly selling some stock and buying others.

Gold

Gold is falling on the stronger dollar.  The momo crowd is selling gold.  The smart money is inactive.

Oil

The momo crowd is selling oil.  The smart money is lightly buying oil.

Marijuana

ACB reported revenues below the consensus.

CGC and TLRY earnings are ahead.

The momo crowd is buying marijuana stocks in the early trade.  The smart is inactive but remember that smart money was selling last week

Technical Patterns

None of note.

This is powerful information and many investors use this to enter trades in addition to our official signals.  Here are the three most common uses: 1) Short-term trades in ETFs  2) Decisions to trim or add to long-term positions, and 3) New option trades. These should be used judiciously only in conjunction with macro, fundamental and quantitative indicators.  To learn more please click here.

Markets

Our very, very short-term early stock market indicator is negative but can quickly turn positive.

The bond market is closed.

Gold futures are at $1205, silver futures are at $14.06, and oil futures are $61.01.

S&P 500 resistance levels are 2800, 2840 and 2860; support levels are 2765, 2740 and 2700.

DJIA futures are down 70 points.