Searching for Support

After another ugly week of down-side, reports all over the internet insist the futures are indicating a drop for the US stock markets today. Will it happen? Maybe.

Over the weekend stocks dropped in Europe, China, Japan and the like. US Futures were also down about 1% or so from Friday’s close. But futures have climbed back to about even overnight. This puts the markets in an interesting spot.

The 2630ish level was a big one as it markets the October and November low points for the SPX. The index has now visited this level 4 times. The prior three times markets found support and rallied. The fourth time was last Friday – and the markets closed at this level.

So, does the market rally from this point? Trade sideways? Or is there more downside?

From a technical perspective, it’s difficult to call. The short-term signal is for a bounce higher from here. Markets appear over-sold, and the news driving things down appears to be more about rumors than it does about economic data. If one wrong utterance about China and trade can take the markets down 100 SPX points, one has to wonder what a right utterance could do.

Longer term, the technical picture is concerning. It’s a tale of two big-picture events. Does the bull market regroup can go higher, or are we in for a more significant big-picture pull back (aka bear market)? And IF it were a bear, how far does it drop from here? On one hand, there’s a figure of about 27% decline. On the other, more than 40%.

The thing is, the economic data doesn’t support a 40% pull-back. It just doesn’t tell this story. Even if you can squiggle some lines on charts and talk about how this could happen, what economic reality must come to pass in order to generate such a mess?

Answer: who knows? We can all speculate. Perhaps it’s the failure of a major state pension plan. Perhaps it’s a full-blown trade war with China. Perhaps it’s a nuclear missile launch from North Korea. Whatever the black swan event, it’s not ‘known’ by the markets. So it’s tough to call it priced in.

At this point, the markets have priced in a lot of bad news. Multiples have fallen. Many stocks are in bear market territory. And, in many cases, if it weren’t for the cap-weighted nature of the indexes, you’d see that many of the non-mega-cap stocks have already gone through bear-like corrections.

This week should be interesting. If 2630 or so holds, it’s a good sign. If not, there’s little indication where the next level of support is. We will likely re-visit the February lows for the market. For the SPX, that’s another 100 points of downside from here (or just under 4%).

Get your Santa rally caps on. This market may need it.

IMPORTANT DISCLOSURE INFORMATION

Please remember that past performance may not be indicative of future results. Different
types of investments involve varying degrees of risk, and there can be no assurance
that the future performance of any specific investment, investment strategy, or product
(including the investments and/or investment strategies recommended or undertaken by
BigFoot), or any non-investment related content, made reference to directly or indirectly
in this blog will be profitable, equal any corresponding indicated historical performance
level(s), be suitable for your portfolio or individual situation, or prove successful. Due
to various factors, including changing market conditions and/or applicable laws, the
content may no longer be reflective of current opinions or positions. Moreover, you
should not assume that any discussion or information contained in this blog serves as the
receipt of, or as a substitute for, personalized investment advice from BigFoot. To the
extent that a reader has any questions regarding the applicability of any specific issue
discussed above to his/her individual situation, he/she is encouraged to consult with the
professional advisor of his/her choosing. BigFoot is neither a law firm nor a certified
public accounting firm and no portion of the blog content should be construed as legal
or accounting advice. A copy of the BigFoot’s current written disclosure statement
discussing our advisory services and fees is available for review upon request.

Market Macro Fails

For the first time since 2016 the BigFoot Market Macro Signal has gone negative. And we’re already set up for a potential whipsaw, as futures are pointing to a higher open that would put the SPX above the threshhold to flip the Macro back into buy territory.

Over the weekend the big announcement was a temporary truce between the US and China. The details are a little fuzzy, but basically, no new tariffs, and some rollbacks on a few – at least for the next 90 days.

This doesn’t mean the trade war is over. But it is positive progress. So we should be good to go, right?

Woah, woah… slow your roll. Just because we have a deferral of action doesn’t mean everything is okay. And technically, things are still unclear. In fact, if the futures pop higher today as expected, there’s good chance a pricing gap will materialize.

We’ve spoken many times on conference calls about how the markets abhor pricing gaps. And in this case, unless the market managed to push above 2825 or so, it’s likely we’ll dip back down to 2760 some time this week first to fill that price gap.

From a Macro perspective, we just want to see the markets finish the year above 2754. This should be enough to flip the signal back to a buy. Which is interesting, because last Friday’s close would have done it. But, alas, that’s not how the signal works.

We’re in a bit of technical no man’s land. There markets have had a double-dip this year, but the fundamental news is pretty optimistic. Jay Powell and the Fed gave the market the gift it was looking for (a more dovish stance), and Trump has softened on the trade war. Pricing multiples have fallen to essentially their low-point for the year. So there’s room for the markets to go up, but the mixed pricing signals also mean there’s room for the markets to dip a bit yet.

Given we’re already into December, and most of the earnings for the year area already over, it’s difficult to see a rationale for why the markets should push to all-time highs before the end of the year. In fact, given the mixed Macro signal from the software – and the anemic 40% long positions ratio – it’s difficult to see much more than a sideways market from here – even with the ‘big news’ about the deferral of the trade war with China.

Make no mistake, Monday is shaping up to a be a positive day for the markets, with the SPX likely to push above 2800 intra-day. But Monday may not be enough to shake off the bear-market chatter just yet… Tis the season for miracles, sure. And perhaps Santa is bringing more than coal for the year. But it doesn’t look like yuge breakout to finish the year at this point.

Interestingly enough, the ‘bear market’ may have already silently happened in the form of asset rotation. Many of the high-flying tech names have already had over 20% corrections in pricing. We just haven’t seen the entire market dip simultaneously. A move like that may be reserved for our next recessionary environment. When that actually occurs is still a subject of much debate.

For the week – enjoy the reprieve. Just don’t let a few days in the market head-fake you into thinking everything is all clear. Plenty of up days happen in bear markets. Better to keep your cool and play this one by the numbers IMO.

IMPORTANT DISCLOSURE INFORMATION

Please remember that past performance may not be indicative of future results. Different
types of investments involve varying degrees of risk, and there can be no assurance
that the future performance of any specific investment, investment strategy, or product
(including the investments and/or investment strategies recommended or undertaken by
BigFoot), or any non-investment related content, made reference to directly or indirectly
in this blog will be profitable, equal any corresponding indicated historical performance
level(s), be suitable for your portfolio or individual situation, or prove successful. Due
to various factors, including changing market conditions and/or applicable laws, the
content may no longer be reflective of current opinions or positions. Moreover, you
should not assume that any discussion or information contained in this blog serves as the
receipt of, or as a substitute for, personalized investment advice from BigFoot. To the
extent that a reader has any questions regarding the applicability of any specific issue
discussed above to his/her individual situation, he/she is encouraged to consult with the
professional advisor of his/her choosing. BigFoot is neither a law firm nor a certified
public accounting firm and no portion of the blog content should be construed as legal
or accounting advice. A copy of the BigFoot’s current written disclosure statement
discussing our advisory services and fees is available for review upon request.

Don’t expect much from a three and a half day trading week. Holiday weeks like this traditionally mean lower trading volume – and often higher volatility. Given the most recent few weeks in the market though, sentiment seems to be shifting. The Q4-Santa Claus Rally is in danger of passing us by. Post-Thanksgiving we’re really only talking about four more weeks of trading for the year when you consider window dressing, capital gains reporting, and the other holidays that will keep people home and away from the trading floor. Given the lack of trading momentum headed into this week, this market may not have much left in the tank.

This week should be a decent tell for the remainder of the year. Watch to see if the markets can find support above 2715. Otherwise, this market may find itself on Santa’s naughty list for the rest of the year.

IMPORTANT DISCLOSURE INFORMATION

Please remember that past performance may not be indicative of future results. Different
types of investments involve varying degrees of risk, and there can be no assurance
that the future performance of any specific investment, investment strategy, or product
(including the investments and/or investment strategies recommended or undertaken by
BigFoot), or any non-investment related content, made reference to directly or indirectly
in this blog will be profitable, equal any corresponding indicated historical performance
level(s), be suitable for your portfolio or individual situation, or prove successful. Due
to various factors, including changing market conditions and/or applicable laws, the
content may no longer be reflective of current opinions or positions. Moreover, you
should not assume that any discussion or information contained in this blog serves as the
receipt of, or as a substitute for, personalized investment advice from BigFoot. To the
extent that a reader has any questions regarding the applicability of any specific issue
discussed above to his/her individual situation, he/she is encouraged to consult with the
professional advisor of his/her choosing. BigFoot is neither a law firm nor a certified
public accounting firm and no portion of the blog content should be construed as legal
or accounting advice. A copy of the BigFoot’s current written disclosure statement
discussing our advisory services and fees is available for review upon request.

Guess Week

Markets are yet to commit to anything from a technical perspective.  The SPX downtrend may extend toward 2532 (February’s SPX low), or it could rebound toward the 2800 resistance level.  That’s an election for you.  At this point, things are so tight we have little more than a guess to go on.

So for the week, hang on tight.  We could see anything.

Next week, we’ll get back to work.

IMPORTANT DISCLOSURE INFORMATION

Please remember that past performance may not be indicative of future results. Different
types of investments involve varying degrees of risk, and there can be no assurance
that the future performance of any specific investment, investment strategy, or product
(including the investments and/or investment strategies recommended or undertaken by
BigFoot), or any non-investment related content, made reference to directly or indirectly
in this blog will be profitable, equal any corresponding indicated historical performance
level(s), be suitable for your portfolio or individual situation, or prove successful. Due
to various factors, including changing market conditions and/or applicable laws, the
content may no longer be reflective of current opinions or positions. Moreover, you
should not assume that any discussion or information contained in this blog serves as the
receipt of, or as a substitute for, personalized investment advice from BigFoot. To the
extent that a reader has any questions regarding the applicability of any specific issue
discussed above to his/her individual situation, he/she is encouraged to consult with the
professional advisor of his/her choosing. BigFoot is neither a law firm nor a certified
public accounting firm and no portion of the blog content should be construed as legal
or accounting advice. A copy of the BigFoot’s current written disclosure statement
discussing our advisory services and fees is available for review upon request.

Correction Territory

Last week the SPX officially crossed into correction territory.  For those of you unclear what that means, it was a full 10% drop from the high-water mark set at the beginning of October.  This also send the major indexes into negative territory for their year-to-date return figures.  So it’s been a rough month.

Is there an end in sight?  Maybe.  But it’s always tricky catching a falling knife.

Currently, futures are pointing to a higher open this week.  But frankly, there’s little reason for markets to move significantly higher at this point given this week is election week.  Now next week on the other hand?

At this point there are no well defined support or resistance numbers, as the markets do not seem to be playing by technical levels at this point.  A different set of trading algo’s seems to be driving the day – that of underlying moving averages.  And there are lots of individual positions out there we negative moving price averages.

Post-election is an appropriate time to take stock of where we’re at and whether or not there’s much chance to salvage 2018.  For the time being, expect continued volatility.

On the plus side, at least the futures are indicating a higher open for today.  The question is, will this be another dead-cat bounce, or the beginning of a bottom to this market?  We shall see…

IMPORTANT DISCLOSURE INFORMATION

Please remember that past performance may not be indicative of future results. Different
types of investments involve varying degrees of risk, and there can be no assurance
that the future performance of any specific investment, investment strategy, or product
(including the investments and/or investment strategies recommended or undertaken by
BigFoot), or any non-investment related content, made reference to directly or indirectly
in this blog will be profitable, equal any corresponding indicated historical performance
level(s), be suitable for your portfolio or individual situation, or prove successful. Due
to various factors, including changing market conditions and/or applicable laws, the
content may no longer be reflective of current opinions or positions. Moreover, you
should not assume that any discussion or information contained in this blog serves as the
receipt of, or as a substitute for, personalized investment advice from BigFoot. To the
extent that a reader has any questions regarding the applicability of any specific issue
discussed above to his/her individual situation, he/she is encouraged to consult with the
professional advisor of his/her choosing. BigFoot is neither a law firm nor a certified
public accounting firm and no portion of the blog content should be construed as legal
or accounting advice. A copy of the BigFoot’s current written disclosure statement
discussing our advisory services and fees is available for review upon request.

Technical Outlook Still Unclear

While the long-term trend support seems to be in place (around the 200-day moving average), the intermediate-term numbers are all over the place.

This week is an interesting set-up.  The futures over the weekend are indicating a strong positive open for the week.  And over 1000 companies report earnings this week.  This, paired with very little Fed activity, should make for a decent backdrop for the markets.

Looking at the technical data, it’s a tale of two markets.  One market has the SPX running back to over 2825 this week.  The other has the SPX failing down to about 2675.  The volatility range looks like it could be quite high this week.  The bias, fortunately, appears to be positive.

The last several weeks have taken a lot of the wind out of the sales of this market.  While it doesn’t appear a full-blown bear is yet upon us, the BigFoot database has now fallen from the mid-70’s in terms of percent long, to low 50’s.  This is a meaningful shift.

On the one hand, money has been in motion, so some new opportunities should arise.  On the other hand, money has been in motion, and there’s clearly a shakeup.  Tech, in particular, has taken a hard hit in October.

Given that all three macro indicators remain positive, the backdrop for a major decline still hasn’t materialized yet.  Once the elections are over perhaps the markets can get a better idea which direction they’d like to commit.  For now, look for continued volatility, with a positive bias for the week.

IMPORTANT DISCLOSURE INFORMATION

Please remember that past performance may not be indicative of future results. Different
types of investments involve varying degrees of risk, and there can be no assurance
that the future performance of any specific investment, investment strategy, or product
(including the investments and/or investment strategies recommended or undertaken by
BigFoot), or any non-investment related content, made reference to directly or indirectly
in this blog will be profitable, equal any corresponding indicated historical performance
level(s), be suitable for your portfolio or individual situation, or prove successful. Due
to various factors, including changing market conditions and/or applicable laws, the
content may no longer be reflective of current opinions or positions. Moreover, you
should not assume that any discussion or information contained in this blog serves as the
receipt of, or as a substitute for, personalized investment advice from BigFoot. To the
extent that a reader has any questions regarding the applicability of any specific issue
discussed above to his/her individual situation, he/she is encouraged to consult with the
professional advisor of his/her choosing. BigFoot is neither a law firm nor a certified
public accounting firm and no portion of the blog content should be construed as legal
or accounting advice. A copy of the BigFoot’s current written disclosure statement
discussing our advisory services and fees is available for review upon request.

Pivot Week

IMPORTANT DISCLOSURE INFORMATION

Please remember that past performance may not be indicative of future results. Different
types of investments involve varying degrees of risk, and there can be no assurance
that the future performance of any specific investment, investment strategy, or product
(including the investments and/or investment strategies recommended or undertaken by
BigFoot), or any non-investment related content, made reference to directly or indirectly
in this blog will be profitable, equal any corresponding indicated historical performance
level(s), be suitable for your portfolio or individual situation, or prove successful. Due
to various factors, including changing market conditions and/or applicable laws, the
content may no longer be reflective of current opinions or positions. Moreover, you
should not assume that any discussion or information contained in this blog serves as the
receipt of, or as a substitute for, personalized investment advice from BigFoot. To the
extent that a reader has any questions regarding the applicability of any specific issue
discussed above to his/her individual situation, he/she is encouraged to consult with the
professional advisor of his/her choosing. BigFoot is neither a law firm nor a certified
public accounting firm and no portion of the blog content should be construed as legal
or accounting advice. A copy of the BigFoot’s current written disclosure statement
discussing our advisory services and fees is available for review upon request.

Disconnect

Equity markets had a pretty solid pull-back last week.  The question is why?  Is there a fundamental shift in the economic data?  Profit taking?

It may have been a derivative of the ‘Trade War’ with China.  China has threatened to sell off $3B or so of US Treasuries.  Assuming this is credible, the front running of this decision could explain the move in the 10-year treasury.

While stocks and bonds are supposedly not highly correlated, that relationship is not always true.  Last week’s price action seemed the opposite certainly.  The question is, will this persist?

The technical action in the SPX is a bit early to call.  The next line in the sand to watch is the 2877 level — the 50-day moving average.  Beyond that and we get into more material pull-back areas closer to 2800.  The 2900-level provided little resistance last week as the SPX fell below this support area.

So, for now at least, we wait and watch.  It’s a tale of 2 levels.  Will the SPX retreat to the next major support level at 2800?  Or will it find footing near the 50-dma and begin the climb back toward 2900 and beyond?  Historically speaking, October, despite some key outliers, it usually a positive month for the markets (as is Q4 in general).  While the bias for the next day or two may be negative, we’ll see if this is just a trader’s blip, or something more significant.

IMPORTANT DISCLOSURE INFORMATION

Please remember that past performance may not be indicative of future results. Different
types of investments involve varying degrees of risk, and there can be no assurance
that the future performance of any specific investment, investment strategy, or product
(including the investments and/or investment strategies recommended or undertaken by
BigFoot), or any non-investment related content, made reference to directly or indirectly
in this blog will be profitable, equal any corresponding indicated historical performance
level(s), be suitable for your portfolio or individual situation, or prove successful. Due
to various factors, including changing market conditions and/or applicable laws, the
content may no longer be reflective of current opinions or positions. Moreover, you
should not assume that any discussion or information contained in this blog serves as the
receipt of, or as a substitute for, personalized investment advice from BigFoot. To the
extent that a reader has any questions regarding the applicability of any specific issue
discussed above to his/her individual situation, he/she is encouraged to consult with the
professional advisor of his/her choosing. BigFoot is neither a law firm nor a certified
public accounting firm and no portion of the blog content should be construed as legal
or accounting advice. A copy of the BigFoot’s current written disclosure statement
discussing our advisory services and fees is available for review upon request.

If You Ignore the News…

If you ignore the news, the technical picture for this market looks strong.  The past several weeks have seen volatility reign in, so the over-bought conditions are a lot less menacing than they were a few weeks back.  As of right now, traders seem content with 2900 has the support for the SPX.

With Canada making some last-minute concessions to save (most of) NAFTA, the markets also seem to be pleased.  Futures are higher.  Don’t look now, but the sideways pattern of the SPX may have just been broken.  If so, 2950 should be on the radar in the next week or so.

For the week, the first level of resistance is 2940 — next level is 2960.  Support continues to hang around the 2900 level.

We’re also at the start of Q4.  Many analysts have been raising expectations since Q1.  This may end up being a tailwind that makes for a pretty decent late-year push.  A 5-to-7% move higher from these levels is not out of the question for the quarter.

IMPORTANT DISCLOSURE INFORMATION

Please remember that past performance may not be indicative of future results. Different
types of investments involve varying degrees of risk, and there can be no assurance
that the future performance of any specific investment, investment strategy, or product
(including the investments and/or investment strategies recommended or undertaken by
BigFoot), or any non-investment related content, made reference to directly or indirectly
in this blog will be profitable, equal any corresponding indicated historical performance
level(s), be suitable for your portfolio or individual situation, or prove successful. Due
to various factors, including changing market conditions and/or applicable laws, the
content may no longer be reflective of current opinions or positions. Moreover, you
should not assume that any discussion or information contained in this blog serves as the
receipt of, or as a substitute for, personalized investment advice from BigFoot. To the
extent that a reader has any questions regarding the applicability of any specific issue
discussed above to his/her individual situation, he/she is encouraged to consult with the
professional advisor of his/her choosing. BigFoot is neither a law firm nor a certified
public accounting firm and no portion of the blog content should be construed as legal
or accounting advice. A copy of the BigFoot’s current written disclosure statement
discussing our advisory services and fees is available for review upon request.

Markets Poised to Grind Higher in Spite of Mixed Trade Talks

It’s too early to take stock of the damage caused by Florence (though some of the smaller towns in the Carolina’s are likely to have extreme flood damage).  So far the markets, as dispassionate as they are, are taking the whole thing in stride.

Consumer confidence remains high, and the economy seems to continue chugging.  The question on most minds is whether or not trade deals are going to go sour.  Thus far we’ve gone past simple rhetoric, with the Trump looking to place additional tariffs on $200 billion of Chinese goods.  The question is whether or not China will come to the table or take their ball and go home.  (Judging from their stock market performance, they’ll probably come to the table).

So far, from a technical behavior perspective, markets have taken this news in stride.  In fact, the S&P500 appears to be consolidating around the 2900 level.

The basic setup for the week is a fairly narrow range, with the SPX likely hovering around the 2890 mark for the low, with a high of 2925 or so.  This appears to be a sideways pattern, with a slight bias to the up-side.  If the market holds consistent with recent behavior, a little bad news is going to be taken in stride.  Good news will push things higher.  And only if it’s really really bad stuff would the SPX move below the 2870 level.

IMPORTANT DISCLOSURE INFORMATION

Please remember that past performance may not be indicative of future results. Different
types of investments involve varying degrees of risk, and there can be no assurance
that the future performance of any specific investment, investment strategy, or product
(including the investments and/or investment strategies recommended or undertaken by
BigFoot), or any non-investment related content, made reference to directly or indirectly
in this blog will be profitable, equal any corresponding indicated historical performance
level(s), be suitable for your portfolio or individual situation, or prove successful. Due
to various factors, including changing market conditions and/or applicable laws, the
content may no longer be reflective of current opinions or positions. Moreover, you
should not assume that any discussion or information contained in this blog serves as the
receipt of, or as a substitute for, personalized investment advice from BigFoot. To the
extent that a reader has any questions regarding the applicability of any specific issue
discussed above to his/her individual situation, he/she is encouraged to consult with the
professional advisor of his/her choosing. BigFoot is neither a law firm nor a certified
public accounting firm and no portion of the blog content should be construed as legal
or accounting advice. A copy of the BigFoot’s current written disclosure statement
discussing our advisory services and fees is available for review upon request.