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Friday, December 1, 2017

Market Update 12/1/2017 - sector rotation

It's been a while since I've provided an update, except for the article I posed to LinkedIn - a couple weeks ago - in which I said there was "no market correction in sight", and that "Transports were now in a position to lead the Dow higher", and the rest is history.

This was my prediction on $TRAN, although it moved too far too fast. Not good. 

Transports & the Dow, both hit new all time highs, just yesterdays, so now what? Sell Transports & the broader market, of course.  

If you were following my twitter feed on Thursday, you were advised to "sell into strength", and sell the top of the channel, seen on the chart below.

Volume is up, which points to short covering, yet the RSI remains relatively weak, and that's because this rally lacked participation. Emerging markets - which had lead the entire rally... - are down, as is tech, semi-conductors, and the NASDAQ. What does this mean? What is means is nobody is making money, except those who engineered this fake rally, over the Thanksgiving holiday. New money has not come into the market, rather Hedge Fund managers, robbed Peter, to pay Paul, and this rally in the Dow is nothing more than a PsyOp designed to make the average investor feel good, and go deeper into debt. This rally has nothing to do with the proposed tax cuts, which are now stalled in the Senate, and have everything to do with driving the Dow up into the holiday shopping season, and Wall Street bonuses being paid out at the end of the year. Keep in mind most funds close their books, before the end of the month, so we could see a mad rush for the exits, before year end.

Regardless of my thoughts on this market, and the economy, the chart says "sell".

Short term support on the Dow looks like 23914, which is only a 350 point shakeout below where most technicians would believe obvious support is (at 23975 where I painted the green line). Support, and your buy signal is actually slightly lower, at 23914.

Short term support on the SPX looks like 2625, and the pattern resembles a blow off top in a broadening top (seen in blue). Expect a dead cat bounce off the top of that pattern, but I don't believe that will hold, as we trade into Dec. OPEX.When the 2597 level breaks, 2572 should provide support for a snap-back rally going into Hanukkah, and Christmas.  

The $VIX has shown signs of strength over the past couple day's, and that's something to be nervous about. It tells me, whoever has been pumping this market, is preparing to dump it, and get paid on their bearish options bets. The $VXO is up 22% this week. 

Most hated sectors:

Financials - The entire rally - since March - looks like a head fake (wave B triangle), and the throw-over in wave "e", seems to confirm it. Sets up for a powerful wave "C".


That's all the time I got. I have a lot going on including preparing for a lights out situation.... Hoarding gasoline, and propane, and such. I suggest you have a plan in place when the proverbial SHTF.

Take Care, AA  

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