Here are a series of 3 charts that I use to give me a quick snapshot of momentum trends across the SPDR sectors and a few other key areas like bonds, the Dollar and PM's.
Chart 1 Bonds, US Dollar, PM's and Gold Miners
Momentum for Bonds remains strong while the momentum behind the $USD is fading.
Momentum for the precious metals and gold miners remains in a persistent downtrend although with a push the gold miners could make a move above the zero line and DT resistance. If you look at the price charts of several individual gold miner names, they are behaving much better than the underlying metal.
Chart 2: XLE, XLB, XLI, XLF, XLU
Energy has pulled back to the zero line and is flattening; an upturn here would be very bullish. Industrials and Financials remain pretty weak. After a huge push up, momentum behind the utilities looks to be flattening.
Chart 3: XLK, XLV, XLP, XLY, XRT
Tech and Healthcare look strong from a momentum perspective. Indicators for both showing bull crosses either at the zero line or above.....bullish. Staples have flattened out. Retail is losing momentum. Consumer Discretionary has backed off, but is still positive and may be in the early stages of a bull cross move.
Market Wizard & Fortune Teller Kyle Bass explained the Trump Trade and China Tariffs 18mo ago, and nailed it
About Kyle Bass
The billionaire hedge fund manager started his career at Prudential Securities in the early - 1990's. From there he went on to Bear Sterns in 1994 and at 28 became one of the youngest Senior Managing Directors in the firm's history. In 2000 he moved to Legg Mason to form the firm's first institutional equity office.
How to make a Billion Dollars
In December 2005 he formed his own hedge fund, Hayman Capital with $33 million in AUM. In 2006 he identified the US Real Estate bubble and promptly nailed the trade.
Find out more on Mr. Bass' history HERE
Bass the Fortune Teller
I ran across a video of Kyle doing an interview with Bloomberg in January of 2017. Maybe it's just me, but I found it remarkable. Prior to the 2016 election, Bass had already done his homework on Trump. He had no idea Trump would win of course, but he had the "what if" scenarios all laid out and the bazookas loaded. Remember the huge spike down in equities and currencies the night of the election? Bass was firing the other way. You know who won.
Here in this interview recorded 18 months ago, Bass presents the Trump trade with remarkable accuracy. He also foretells the tariff / trade war with China and potential fall out. There may even be a few trade ideas in there for you.
Listen to Kyle Bass tell the story himself HERE
Run time 15 minutes
Bonus Video - The Big Short Vol 2 China Banking
If you have not figured it out, Bass is a macro trader. He has a thesis that the Chinese banking system is a stone's throw away from implosion. He reportedly has over $1B on the Big Short Vol 2. Right or wrong, you gotta respect a guy putting massive Dollars on the line
Listen to the 15 minute video recorded in February 2018 HERE
Don't know about you, but I am both fascinated and inspired listening to true Market Wizards. I hope you found the videos worthwhile.
Thanks for visiting!!
This morning, I take a look at the latest 5 week rotation of the SPDR sectors along with a number of popular tracking ETF's for various segments of the market.
Purpose and Usefulness of the Rotation Studies
In my world view, the direction of the broad market dictates roughly 60% of a stocks expected move, the sector dictates 20-25%, and the specific stock dictates around 15%.
If you can focus your bullish stock selections in leading and improving sectors, I think your odds are much improved in finding winners.
5 week SPDR Sector Rotation
The graph shows the path of each sector over the past 5 weeks relative to the benchmark of the SPX. You can also easily see the relationship between the sectors to each other.
The table below shows the absolute performance of each sector.
Popular ETF 5 week Rotation Study
I took a number of popular ETF's across industries to see what their recent rotation looked like. Some interesting findings. Again, the benchmark was SPX
Biotech ETF's IBB / XBI make bold moves into the leading quadrant. Retail ETF XRT looks strong. IYR maintains its strength while Semiconductor ETF SMH makes a small improvement.
Homebuilder ETF's XHB and ITB make slight improvements.
Oil services ETF OIH falls hard from a leading position. Banks, Gold, Gold miners, metals & Mining, and EEM weakened over the study period.
I hope these rotation studies give you some added insight to how markets are behaving and give you solid clues on where to hunt for good prospects.
January 2016: In the midst of a Global Deflationary Spiral, the commodity index $CRB was below support that had been in place since 1973. Oil was trading sub-$30 and Copper was at post crisis lows of around $2/lb.
June 2018: In the last 30months the $CRB has bounced from 155 to 200. Not really very much despite oil's recent run. Copper surged from $2 to $3.31.
Copper falls 11% in 3 weeks
Since June 11, Copper has fallen 11%. Today July 5, Copper futures indicate its off another 1.5%. From the chart below we can see price at key support at $2.875. It's gotta hold here. On a measured move basis from the double top, price is projected to move into the low $2.60 area; another 11% lower from here if this last bit of support is broken.
The Monthly chart of Copper shows a darker picture. Price retraced 50% from the 2011 high of $4.60ish but is now rolling over. In my experience these big sweeping trend changes on a monthly chart are so important. They just don't turn on a dime. I think copper goes much lower.
The tradeable ETN for Copper is JJCTF
It's not just Copper - Look at Base Metals ($DBB)
Below is a weekly chart of the base metals ETF $DBB. You can clearly see price dropping out of the rising uptrend channel that has been in place since January 2016. Going lower from here.
I am bearish on commodities near-term. Aside from a fairly productive chart on oil, everything else is pointing down. Is it all trade talk related? No idea. I just don't see any bullish charts. I am curious about the meager bounce over all. Is demand that tepid or has over-supply simply swamped the system?
Keep an eye on this stuff. They call it Dr. Copper for a reason. Its often a precursor / canary in the coal mine for other markets. Let's see what the summer brings.
With June and Q2 in the bag, I thought it was a good time to review several of the key global markets that I monitor. I cover off the monthly and weekly charts of Brazil, Germany, UK, Spain, Indonesia, Hong Kong, South Korea, Japan, Russia, China, Euro Stoxx 600, and Canada.
This is my virgin run at attempting to produce videos so your patience will certainly be appreciated. I am sure the production quality will improve over time. Regardless, I hope you find the information useful. The video is 20 minutes.
You are welcome to watch the video here or if you prefer, use the link below to view on YouTube. You'll be able to view the video on full screen.
YouTube video can be found HERE
As US Markets forge ahead, I wanted readers to take note of developments occurring in several Key world markets.
Of particular interest is China which just lost a key support level. It seems like just yesterday but 3 years ago this August we saw the effects of a China mini devaluation of the Yuan. We opened down 1500 points down. Then we had 6 months of turmoil that culminated in the Jan / Feb 2016 flush. With the trade debates swirling, I think its smart to pay some attention to the Chinese Market.
Aside from China, several of the other larger exchanges, namely So. Korea and Hong Kong are following suit. Brazil has it's own can of worms to deal with. Much of the problem for the Latin American and other Emerging Market economies is the rising US Dollar.
Below is a chart blitz of the developments I found interesting. They are the Weekly charts of the exchanges. When looking at world markets, I like to look at the exchanges themselves vs the tradeable ETF's to negate the currency effects often present in those instruments. Here goes....
China Weekly ( $SSEC )
This market lost its 2 year uptrend in early 2018. It has subsequently lost key support at 3000. Under 2600 and "its over". Tradeable instrument is $FXI among others.
So Korea Weekly ( $KOPSI )
A significant bear flag is playing out which, more or less, targets key support around 2200. Below 2200 its looks like nothing but air for a while. Tradeable ETF is $EWY
Hong Kong / Hang Seng Weekly ( $HSI )
Chart isn't terrible but you can see price slipping beneath key support as shown. Treadable ETF is $EWH
Brazil Weekly ( $BVSP )
Brazil has been in free fall for weeks as you can see. Time will tell if it can find its footing here or if another leg lower is in the cards. Watch for an oversold bounce which could set up a massive head and shoulders top down the road. Tradeable ETF is $EWZ
Anyhow, keep an eye on Asia, especially China and Japan. Even if you aren't inclined to try and trade them, at some point they will hit the headlines, and you'll be 3 steps ahead.
Thanks for reading and hope it helps.
As many readers of mine already know, I am not a big fan of mainstream financial media. I think most of what is offered on CNBC and other outlets does more to clutter and confuse the mind rather than provide insight and clarity. I have, for the most part, eliminated watching these types of investment shows from my routine. Where I have made a notable exception is for RealVision TV.
'RealVision TV is a subscription - based video-on-demand channel for investing, where the world’s best investors share their ideas. In essence, they are the Netflix of Finance. Their content features exclusive in-depth interviews and presentations from the world’s sharpest independent analysts, fund managers, investors and economists. Fresh content is released several times each week and subscribers also have access to the ever-expanding video vault. RealVision presents its viewers with the very best economic information and financial insight available and then allows them to make up their own minds.
RealVision is the brainchild of co-founders Raoul Pal and Grant Williams. Pal, an economist and strategist, has been a semi-regular guest on CNBC. Grant Williams has 30 years of finance / trading experience mostly on the trading desks of Singapore and Hong Kong.
I have been a subscriber of RealVision TV for almost a year. At $365 / year it isn't particularly cheap but I still find it offers a nice value. As long-time readers of mine know, I get great inspiration and knowledge reading about Market Wizards. RealVision offers me the opportunity to tune into the Market Wizards of today and listen to what they have to say. I mean, where else would you get to hear an hour long interview with Jeff Gundlach or Kyle Bass? RealVision has also introduced me to many titans of the trading world that I'd never heard of before. I've learned so much listening both to their perspectives on the world and them describe their trading processes.
RealVision does a nice job of covering a diverse cross-section of the investment landscape from precious metals, equities, bonds, portfolio construction, monetary & fiscal policy, commodities and currencies. There is certainly something for everyone at RealVision. Best of all there does not seem to be a hidden or obvious agenda here. Certainly guests have opinions and freely share them, but they are not out there trying to sell anything. Viewers are left to make up their own minds without any arm twisting. The site keeps content fresh by adding 2-3 lengthy interviews each week. The site also offers a searchable database of content which is handy when you find a guest or topic that you'd like to dig deeper on.
If however you are looking for specific trade ideas I think you would be disappointed. The most you are going to get is that, for instance, Kyle Bass is bearish on China. He will lay out his thesis with nice detail but he isnt going to tell you exactly how to short the Yuan or the Chinese financial sector. The site offers much in the way of global macro trends and trading ideas which for me is a useful addition to my primarily technical approach.
My subscription to RealVision TV will be up for renewal soon. I plan to re-up for another year.
RealVision offers a free one -week trial, but after that, they ask you to pony up for a full year in advance. It would be nice if they offered a pay as you go subscription but that is mostly nit-picking around the edges.
You can find out more by visiting their website: www.realvision.com/trial/regular
Disclosure: I received no compensation from RealVision TV for this endorsement.
The $TED spread is the difference between the 3 month LIBOR rate and the 3 month T-Bill rate. The TED spread is a proxy for perceived inter-bank credit and liquidity risk. As you can see, in 2008-09 the TED spread ballooned as credit markets locked up and liquidity dried up.
Today, the $TED spread stands at its highest level since 2009. Additionally, the volatility in the spread is increasingly getting jiggy as the steepness of the ascent sharpens. The why's, what-fors, and how comes are way above my pay grade but I can say for sure it is not a data point that can be ignored.