Hedge Fund Trends...03.11.16

The market's roller coaster ride continues with uncertainty still a major factor hampering any real trend development. Here are a couple charts from State Street (I like these guys) showing current sector strength, short interest and relative attractiveness from hedge fund perspectives (they are not always right, just most of the time). This weekend we'll look at the M3 oil model on the Insight tab.

Red Reversal....03.10.16

The nice pop at today's opening turned into a prime selling opportunity as SPY hit 201 (our overhead resistance target) and sellers stepped in with heavy volume.
Despite the generally positive tone of global economic news the markets are now looking for any excuse to go down so longs are likely to have some rough going for a while.
The current buzz in the risk world concerns finding non-equity and non-fixed income alternatives.
Almost 2 years ago I proposed a number of such mini-portfolios and today I dredge up a simple 3 ETF input model based on oil and gas...XLE, USO and UNG.  A thinking person may immediately conclude that this is a dismal portfolio fraught with risk and you would be right.
However, if we apply our MSD model with the short term momentum mode turned on and a top 2 sort we get the following results.  Note the disparate values of the stops based on an M1 run for each input...there's considerable variance here to reflect the intrinsic volatility in each input.
Over the weekend we'll explore this model in greater detail on Mosaic Insight.

Approaching Overhead Resistance....03.09.16

Checking the latest M6 update reveals that XLU is still the risk on choice with SH (SPY inverse) in position #2.  We can expect major resistance at SPY 200 and if we break through that then 202 may prove even more difficult to penetrate.
The new talking heads technical spin (today's version) is that equities will likely fall in sync with oil. That being the working premise the jury is still out on whether the current oil rally really has sustainability or whether its based on hope and manipulation.
Based strictly on a supply and demand argument oil is more likely to go down in price than up.
Below is the current Ponzo forecast for XLE (the SPDR diversified oil sector ETF).
Mauldin's extensive study of the Saudi situation supports this bearish position.

Not Out of the Woods Yet...03.08.16

Here's this week's Ponzo updates for SPY, VIX and XLU and the dreadful crash scenario is still evident via the SPY and VIX charts. Barron's this week opined not to get suckered in by the current rally due to both domestic weakness and geopolitical risks.  Mauldin had an interesting post on questionable accounting practices now in vogue....just another example of the rampant manipulation of market data.  Given the current level of market anxiety XLU looks like the best risk/reward profile although it too has an implosion scenario.
Nobody believes the FED will raise rates on the 16th (FED fund rate =0), and with good reason.
Bad news out of China today and a new low in the Japanese yield curve (currently negative) created a global selling blitz that may carry over for a few days.

VDX Updates for SPY, VIX & XLU...03.07.16

This week's VDX updates are in sync with the M1 SPY update posted yesterday.  As expected, we did see some modest deterioration of SPY momentum today and volume appears to be dwindling as well.  Traders are clearly testing overhead resistance and today's action could be termed a draw.
From a strictly technical standpoint the XLU  VDI+/- looks the most bullish of the charts.
Keep in mind these charts reflect Friday's prices and a quick check of today's (Monday) action bears out that XLU was the best bet.
The weakest link in the majors was QQQ while IWM made additional gains.
IWM bulls argue that the Russell's relative lack of exposure to international geopolitical turmoil makes them less likely to retreat when the more globally exposed SPY, QQQ and DIA sustain weakness.  All other factors being equal that argument does make some sense.

Technical Status of SPY....03.06.16

This is a update of the current SPY technicals using the M1 analytics. The most obvious change in SPY stability is the current best odds stop limit, which has fallen to .5%...a dramatic change from only 3 weeks ago when that value approached .9%.  This change in momentum can best be seen in the ATR and PCL charts and the 2 year long term stop volatility chart.  The leveling off of the of OC chart (open to close) is typical of low to moderate volume positive momentum trends...which is what we are now witnessing.  However, the VIX is now hovering around 16 and the RSI2 is in the high 90s and the odds suggest at least a modest pullback may be on the horizon.
Historically, down January and February conditions have been followed by strong March and April returns but the case is only encouraging for the bulls and not compelling.
Click once on panel below to enlarge.

Bear Market Rally or Something More?...03.03.16

It was a tenuous start today with technicals solidly red and then buyers slowly came in, bailed out and then ultimately pushed the markets higher.  There's still a number of caveats for the bulls and the squirrelly behavior of XLU, which should be fading if the bulls are in charge, still leaves room for suspicion.  Friday is biased bearish but the talking heads are now suggesting buying the dips rather than selling the rips.  Of course, they've were wrong before so trading small scale is not a bad idea.