Technical Strategy Analysis December, 2014 Files/CV_14_12_09.pdf · Strategas Technical Analysis...

StrategasTechnicalAnalysis–PleaseDoNotRedistribute

TechnicalStrategy&Analysis

December,2014

ChrisVerrone,CMTManagingDirector

HeadofTechnicalAnalysisStrategasResearchPartners

(212)906‐[email protected]

ToddSohn,CMTAssociate

TechnicalAnalystStrategasResearchPartners

(646)292‐[email protected]

StrategasTechnicalTeam

2StrategasTechnicalAnalysis–PleaseDoNotRedistribute

62%

55%

66%

69%

57%

52%54%

55%

45%

60%

66%

77%

40%

45%

50%

55%

60%

65%

70%

75%

80%

JAN. FEB. MAR. APR. MAY JUN. JUL. AUG. SEP. OCT. NOV. DEC.

S&P500‐%ofPositiveMonthlyReturns1950toPresent

BEST STRETCH OF THE CALENDAR


99.5

100.0

100.5

101.0

101.5

102.0

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22DecemberTradingDays

S&P500HistoricalDecember PerformanceSince1950

DECEMBER STRENGTH OFTEN LATER IN THE MONTH


1.4%

1.9%

3.5%

3.3%

0.5%

1.0%

1.5%

2.0%

2.5%

3.0%

3.5%

4.0%

November December

S&P500PerformanceinNovember&December(DataSince1990)

OVERBOUGHT IN NOVEMBER / DECEMBER NOT USEFUL SIGNAL

NovemberPerformanceWhenMoreThan80%ofS&P500isAbove50‐DayMA

NovemberPerformanceSince1990

DecemberPerformanceSince1990

DecemberPerformanceWhenMoreThan80%ofS&P500isAbove50‐DayMA


POTENTIAL FOR PERFORMANCE CHASING

S&P500vs.HFRXGlobalHedgeFundIndexIndexedto100on12/31/13

S&P500

HedgeFundIndex


NEW HIGH DATA HAS EXPANDED

S&P50050&200‐DayMA

%ofS&P500at20‐DayHigh

Ex.Energy,thisdatahasbeenprettysolidacrosstheboard.


1983/84/85 IS AN INTERESTING COMPARISON

1983wasagoodyear...Themarketbrokeoutofa15‐year

rangeandthenewhighdataexpandedsharply(bullish).

1984wasa bigconsolidation...TheS&Pwasup1%buttheRussell

2000wasdown‐10%.Thenewhighdatawasalsoanemic.

1985wasastrongyear...Afteralongdigestiveperiodin1984,stocksresumedhigherin

1985asthenewhighdataexpanded.

S&P500(TopPanel)#ofNYSEStocksat52‐WeekHigh(BottomPanel)


S&P TREND MODEL REMAINS POSITIVE

S&P500

StrategasProprietaryTrendModel

OurS&Ptrendmodelhasbeenpositivefor

36consecutivemonths.


72%

64%63%

51%

42%

39%37%

20%

30%

40%

50%

60%

70%

80%

Nasdaq100 S&P500 S&P100 S&PMid‐Cap Russell2000 Nasdaq RussellMicro‐Cap

%ofStocksinanUptrend

PREFER LARGE-CAP TRENDS


0

20

40

60

80

100

0 20 40 60 80 100

WEAKM

OMENTU

MST

RONG

WEAKTRENDSTRONG

STRATEGASTECHNICALSECTORMATRIXDecember2nd,2014

0

20

40

60

80

100

0 20 40 60 80 100

WEAKM

OMENTU

MST

RONG

WEAKTRENDSTRONG

STRATEGASTECHNICALSECTORMATRIXDecember8th,2014

SECTOR MATRIX IN DECENT SHAPE, ENERGY WEAKEST *Thesizeofeachdatapointisproportionaltoeachsector’srelativestrength(i.e.,thebiggerthedot,themorestocksoutperforming).

Utilities

Telecom

ConsumerDiscretionary ConsumerStaples

Financials

Energy

IndustrialsMaterials

Technology

Healthcare


0

20

40

60

80

100

0 20 40 60 80 100

WEAKM

OMENTU

MST

RONG

WEAKTRENDSTRONG

STRATEGASTECHNICALSECTORMATRIXMarch24th,2000

MATRIX LOOKED DIFFERENT IN MARCH 2000

ConsumerDiscretionary

Utilities

Telecom

EnergyTechnology

Financials

Industrials

HealthcareMaterials

ConsumerStaples

*Thesizeofeachdatapointisproportionaltoeachsector’srelativestrength(i.e.,thebiggerthedot,themorestocksoutperforming).


WILL THIS CHART MATTER NEXT YEAR?

S&P50040‐WeekMA

InvestorsIntelligence Bull/BearRatioBullsstillhandilyoutnumberbears.

VeryBullish

VeryBearish


PUT/CALL DATA IS IN NEUTRAL TERRITORY

S&P50050&200‐DayMA

CBOEPut/CallRatio

10‐DayMA


CREDIT CONDITIONS ARE KEY FOR SMALL-CAP CALL

HighYieldCorporateBondETF(HYG)Relativeto20+TreasuryBondETF(TLT)

Russell200050&200‐DayMA

It’seasiertobebullishonsmall‐capstockswhenHYcreditis

outperforming.


S&P500 Russell2000 S&P500 Russell2000

1984 1.4% ‐9.6% 1985 26.3% 28.0%

1987 2.0% ‐10.8% 1988 12.4% 22.4%

1998 26.7% ‐3.4% 1999 19.5% 19.6%

2007 3.5% ‐2.7% 2008 ‐38.5% ‐34.8%

2011 0.0% ‐5.5% 2012 13.4% 14.6%

S&P500Positive...Russell2000Negative...WhatHappensNext?

SMALL-CAPS LAGGING NOT ALWAYS BEARISH


SMALL-CAPS WERE NOT LEADERS IN THE 1980’s

S&P5001983to1991(LogScale)

Small‐CapsRelativetoLarge‐Caps1983to1991(LogScale)

12/31/1982to12/31/1990

S&P500,+135%Russell2000,+49%


SMALL-CAPS WERE NOT LEADERS HERE EITHER

S&P5001994to2000(LogScale)

Small‐CapsRelativetoLarge‐Caps1994to2000(LogScale)

12/31/1993to12/31/1999

S&P500,+215%Russell2000,+95%


OIL DECLINE IS A TAILWIND

S&P50050&200‐DayMA

WTICrudeOil–65‐DayRateofChange

WTIisdownroughly‐30%overthelast65‐days.


ECONOMIC BREAKOUT #1 (CONSUMER CONFIDENCE)

S&P50050&200‐DayMA

ConsumerSentiment(U‐Mich)

7‐yearhighforConsumerConfidence.


ECONOMIC BREAKOUT #2 (CONFIDENT ENOUGH TO QUIT)

S&P50050&200‐DayMA

JobQuitsas%ofTotalEmployment(JOLTS)


3.3%

5.8%

4.2%

3.9%

7.2%

5.1%

2.0%

3.0%

4.0%

5.0%

6.0%

7.0%

8.0%

S&P500&ConsumerDiscretionaryForward6‐MonthPerformanceWhen...

OIL DECLINE OFTEN BULLISH FOR CONSUMER STOCKS

...Trailing6‐Month%ChangeofWTIOilisPositive.

...Trailing6‐Month%ChangeofWTIOilisNegative.

S&P500


S&P500


S&P500


...Historical6‐MonthAveragePerformanceSince1990


SEMIS CONTINUE TO EXHIBIT MOMENTUM

U.S.SemiconductorIndex(SOX)50&200‐DayMA

SOXRelativetoS&P50050&200‐DayMA


BIOTECH HASN’T FLINCHED EITHER

S&PBiotechnologyIndex50&200‐DayMA

BiotechRelativetoS&P50050&200‐DayMA

TheCubistdealhelpedperformance

yesterday,butbroadly,Biotech

remainsleadership.


RELATIVE IMPROVEMENT FOR FINANCIALS CONTINUES

S&PFinancialsSector50&200‐DayMA

FinancialsRelativetoS&P50050&200‐DayMA Startingtoexhibitsome

leadership.


BANKS VS. GOLD REMAINS SUPPORTIVE

S&P50050&200‐DayMA

U.S.BankIndexRelativetoGold50&200‐DayMA

We’vealwayslookedtothis

relationshipasadecentbarometerofriskappetite.


R²=0.86

‐30%

‐20%

‐10%

0%

10%

20%

30%

‐25% ‐20% ‐15% ‐10% ‐5% 0% 5% 10% 15% 20% 25%

IndustrialsQ

/Q%Change

S&P500Q/Q%Change

IndustrialSectorReturnsvs.S&P500ReturnsSince1989

INDUSTRIALS 0.86CONSUMERDISCRETIONARY 0.82FINANCIALS 0.73TECHNOLOGY 0.68MATERIALS 0.54HEALTHCARE 0.44CONSUMERSTAPLES 0.42TELECOM 0.40ENERGY 0.38UTILITIES 0.26

SectorR2toS&P500Since1989

INDUSTRIALS ARE IMPORTANT FOR THE MARKET CALL


SPREADS CONTINUE TO CREEP WIDER

BaaCorporateSpreadsvs.S&PHighQualityIndexRelativetoS&PLowQualityIndex

HighQualitystockshavecontinuedtooutperformwithspreadscreeping

wider.


6.2% 6.0%5.6%

5.0%4.4%

3.0% 3.0%

2.0% 1.9%

‐7.7%

‐10.0%

‐8.0%

‐6.0%

‐4.0%

‐2.0%

0.0%

2.0%

4.0%

6.0%

8.0%

Utilities HealthCare Financials Staples Telecom Discretionary Technology Materials Industrials Energy

BloombergHighYieldSectorPerformance2014YeartoDate

HIGH YIELD PERFORMANCE YTD


10’s CONTINUE TO STRUGGLE AT RESISTANCE

U.S.10‐YearYield50&200‐DayMA

Below2.69,thedowntrendinyieldsremains

intact.


FLATTENER TYPICALLY OK FOR STOCKS, INVERSION A PROBLEM

S&P500–LogScale

U.S.2/10YieldCurve

Invertedcurvesarethedealbreaker,stillalongwayfromthat.


1.50%

2.00%

2.50%

3.00%

3.50%

4.00%

4.50%

5.00%

5.50%

6.00%

'38 '41 '44 '47 '50 '53 '56 '59 '62 '65 '68

U.S.Long‐TermBondYield1938to1968

BOND CYCLES CAN TAKE A LONG TIME

TheFedliftedthecaponratesin1951,butitstilltookroughly15yearsbeforeyieldssaw5.00%.


0

9

13

2021

9

45

2

0

5

10

15

20

25

<2.50 2.50‐2.75 2.75‐3.00 3.00‐3.25 3.25‐3.50 3.50‐3.75 3.75‐4.00 4.00‐4.25 >4.25

#ofForecasts

10‐YearYieldForecast

U.S.10‐YearYieldForecastsAmongWallStreetEconomistsYear‐End2015,83Forecasts

CENTRAL TENDENCY STILL > 3.00% FOR 2015 YIELD FORECASTS


ANOTHER GOOD WEEK FOR JAPAN

JapanTOPIXIndex40‐WeekMA

WeeklyMomentumIndicatorAccelerating.


BULLISH SETUPS FOR JAPAN GROUPS

TOPIXElectricalAppliances13%ofIndex

TOPIXTransportationEquipment12%ofIndex

TOPIXBanks9%ofIndex

TOPIXMachinery5%ofIndex

TOPIXRetailTrade4%ofIndex

TOPIXInsurance2%ofIndex

TheBanksaretrying...


$ YEN, LONG-TERM

USDJPYMonthly

We’rebuyersofpullbacksfor

USDJPY.

110

124.14

135.15

147.66

160.20


93% OF DAX YIELDS MORE THAN GERMAN 10-YEAR

GermanDAXWeekly

%ofDAXStockswithYield>German10‐YearYield

28outof30DAXCos.haveadividendyield>theGerman10‐yearyield.


IRELAND BREAKING OUT (ANOTHER AIRLINE STORY)

IrishStockExchangeIndex(ISEQ)Weekly

RyanairHoldingsPLC(RYAID)Weekly

Ryanairis18%oftheIrishIndex.


WE REMAIN $ BULLS

EURUSD40‐WeekMA

StrategasOverbought/OversoldIndicator

TheEurochartcontinuestodistribute.Faderallies.

O/B

O/S


USDCAD REMAINS STRONG ALSO

USDCAD50&200‐DayMA

The45‐yearaverageis1.21.


AUSSIE $ BREAKDOWN

AUDUSD50&200‐DayMA

Thetrendremainslowerhere.Faderallies.


U.S. $ STRENGTH IS BROAD-BASED

USDSGD(SingaporeDollar)50&200‐DayMA

BigBase


U.S. $ STRENGTH IS BROAD-BASED

USDTWD(TaiwaneseDollar)50&200‐DayMA

BigBase


THAI BAHT LOOKS NEXT TO GO

USDTHB(ThaiBaht)50&200‐DayMA


ONE RISK TO THE CALL... NO SHORTAGE OF $ BULLS

U.S.DollarIndex(DXY)Weekly

ConsensusInc.%Bullish‐USD

Sentimentissomethingtobemindfulof,butwe’reinthecampthisisastructuralchange

fortheUSD.Pullbacksarebuyable.


SHANGHAI CONTINUES TO IMPROVE... OIL?

ShanghaiComposite50&200‐DayMA

ShanghaiPropertyIndex50&200‐DayMA

BASE

BASE


CONTINUE TO PREFER EMERGING ASIA VS. LAT-AM

MSCIEmergingAsiaRelativetoMSCIEmergingLatinAmerica40‐WeekMA


2.20%

3.44%

6.52%

7.59%

7.63%

8.18%

9.01%

9.32%

17.51%

28.17%

0% 5% 10% 15% 20% 25% 30%

HealthCare

Utilities

Industrials

Materials

Telecommunications

ConsumerStaples

Energy


InformationTechnology

Financials

EmergingMarketsETFSectorWeights(EEM)

THERE’S NOT ENOUGH HEALTHCARE IN THE EEM

EMHealthcaresectorisup23%YTD.

EMEnergysectorisdown‐19%YTD


IS OIL SENTIMENT STILL TOO BULLISH?

WTICrudeOil50&200‐DayMA

CFTCLargeSpeculators,NetPosition

Faderalliesbacktoresistance.


58%58%

54%

52%51%

46%45%

41%

37%

34%

30%

35%

40%

45%

50%

55%

60%

Healthcare Energy Technology Industrials Discretionary Financials Materials Staples Telecom Utilities

Analyst"Buy"Recommendationsas%ofTotalRecommendationsS&P500Sectors

THE SELL-SIDE HAS NOT CAPITULATED ON ENERGY STOCKS

TheEnergysectorisstillnearthetopofthislist.

The2ndbestsectorYTD.


ENERGY WEAKNESS CONTINUES TO WEIGH ON BRAZIL

BrazilBOVESPAIndex50&200‐DayMA

BOVESPARelativetoS&P50050&200‐DayMA


KEEP AN EYE ON LAT-AM CDS

5‐YearSovereignCDSColombia,Peru,Mexico

Colombia

Mexico

Peru


FADE COMMODITY RALLIES

ContinuousCommodityIndex(CCIIndex)LogScale

EquallyWeightedIndex(5.88%WeightingforEachCommodity)

WTIOil

HeatingOilNaturalGas

CornWheat

SoyBeansLiveCattleLeanHogsSugarCottonCoffeeCocoa

OrangeJuiceGoldSilver

PlatinumCopper

Itdoesn’ttakeatechniciantosee

theproblemhere...

Fadestrength.Resistanceisnow

500‐515.


FCX CONFIRMING COPPER WEAKNESS

FreeportMcMoRanvs.Copper

Copper

FCX


REAL RETURNS... EQUITIES VS. COMMODITIES

S&P50050&200‐DayMA

S&P500RelativeCRBCommodityIndex50&200‐DayMA

RealBullMarket

Stocksgoup,andtheyoutperformcommodities.

NominalBullMarket

Stocksgoup,buttheyunderperformcommodities.


CONTINUE TO LIKE HEALTHCARE

S&PHealthcareSector50&200‐DayMA

HealthcareSectorRelativetoS&P50050&200‐DayMA


HEALTHCARE 52-WEEK HIGHS ARE ROBUST

S&PHealthcareSector50&200‐DayMA

49%

Expansionsinnewhighsarerarelybearish.

%ofHealthcareSectorat52‐WeekHigh


0

20

40

60

80

100

0 20 40 60 80 100

Weak

MOM

ENTU

MStrong

Weak TREND Strong

HealthcareIndustryGroupMatrixDecember8th,2014

HEALTHCARE TRENDS ARE FIRM

Equipment&Supplies

Pharmaceuticals


LifeSciences

Biotechnology Providers&Services

Technology


BIG BASE IN HEALTHCARE


BIG HEALTHCARE BASE


0

20

40

60

80

100

0 20 40 60 80 100

Weak

MOM

ENTU

MStrong

Weak TREND Strong

TechnologyIndustryGroupMatrixDecember8th,2014

TECHNOLOGY IS MIXED BAG


Semi&SemiEquipment

Software

InternetSoftware&Services

Computers&Peripherals

CommunicationsEquipment

ITServices

ElectronicsEquipment


SEMI NEW HIGHS EXPANDING

SemiconductorIndex(SOX)50&200‐DayMA

%OfSemiconductor&Semi‐EquipmentStocksat65‐DayHigh(54Issues)

Reluctanttogettoobearishwithnewhighsexpanding.


DECISIVE BREAKOUT


APPLE NOT AS EXPENSIVE AS IT WAS IN 2012

Apple(AAPL)40‐WeekMA

AppleMarket‐Capas%ofS&PMarket‐Cap

3.8%

5.0%


BIG BASES IN TECHNOLOGY


TECHNOLOGY LAGGARD


0

20

40

60

80

100

0 20 40 60 80 100

Weak

MOM

ENTU

MStrong

Weak TREND Strong

FinancialsIndustryGroupMatrixDecember8th,2014

CAPITAL MARKETS IMPROVING

REITs

Thrifts&Mortgages

Div.FinancialServices


CapitalMarketsInsurance

ConsumerFinance

CommercialsBanks

RealEstateManagement&Development


NEW HIGH DATA EXPANDING FOR FINANCIALS SECTOR

S&PFinancialsSector50&200‐DayMA

%ofFinancialsSectorat65‐DayHigh

45%

Bestreadingsincemid‐2013.


I-BANKS & BROKERS CONTINUE TO LOOK GOOD


BIG-CAP BANKS IMPROVING


BULLISH SETUP FOR ASSET MANAGERS


BULLISH SETUP IN FINANCIALS


0

20

40

60

80

100

0 20 40 60 80 100

Weak

MOM

ENTU

MStrong

Weak TREND Strong

ConsumerDiscretionaryIndustryGroupMatrixDecember8th,2014

FAVOR HOTELS & RESTAURANTS WITH LOWER OIL

*Thesizeofeachdatapointisproportionaltoeachsector’srelativestrength(i.e.,thebiggerthedot,themore stocksoutperforming).

HouseholdDurablesDiversifiedConsumerServices

Distributors

InternetRetail

SpecialtyRetail

MultilineRetail

Hotels&RestaurantsLuxuryGoods

LeisureProducts

AutoComponents

Media

Autos


98

99

100

101

102

103

104

105

106

1 4 7 10 13 16 19 22 2 5 8 11 14 17 20 2 5 8 11 14 17 20 1 4 7 10 13 16 19 1 4 7 10 13 16 19 3 6 9 12 15 18

HistoricalS&P500RetailIndexRelative S&P500SeasonalPatternOctoberThroughMarch‐ Since1989

THE RETAIL SEASONAL

October November December January February March

Historically,RetailstockstendtooutperforminNovember,stallinDecemberandJanuary,andthenresumehigherinFebruaryandMarch.


ONE OF THE WEAKER CONSUMER CHARTS


3-MONTH LOW FOR TESLA... OIL?


ENERGY VERY OVERSOLD...

S&PEnergySector50&200‐DayMA

%ofS&PEnergySectorinanUptrend

ByalmostanyindicatorEnergy

stocksareoversold,butwedon’tthinkyougetmuchmorethanatactical

bounce.


...BUT ENERGY CREDIT REMAINS WEAK

S&PEnergySector50&200‐DayMA

HighYieldEnergySectorCDS

InvestmentGradeEnergySectorCDS

BothIGandHYEnergyCDScontinuetoshoothigher.


ENERGY SECTOR BOTTOMED AT 5% OF S&P MARKET-CAP IN 1999

S&P500EnergySector40‐WeekMA

EnergySectorMarket‐Capas%ofS&P500Market‐Cap


0

20

40

60

80

100

0 20 40 60 80 100

Weak

MOM

ENTU

MStrong

Weak TREND Strong

IndustrialsIndustryGroupMatrixDecember8th,2014

AIRLINES ARE LEADERSHIP


Conglomerates

Aerospace&Defense

Road&Rail

AirFreight

Machinery

ProfessionalServices

CommercialSvc.&Supplies

BuildingProducts

Elec.Equipment

Con.&Engineering

TradingComp.

Airlines


SOME PERSPECTIVE

NYSEAirlineIndex

Don’tfearstrengthwhenthechartlookslikethis.

MassiveBase


BASE BREAKOUT

Technical Strategy Analysis December, 2014 Files/CV_14_12_09.pdf · Strategas Technical Analysis...

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Transcript of Technical Strategy Analysis December, 2014 Files/CV_14_12_09.pdf · Strategas Technical Analysis...