Does it all Hinge on Sothebys [BID]?

The question posed in the title is essentially, “does the fate of the stock market hinge on the action of Sotheby’s Holdings” (ticker BID)?  Sotheby’s is the oldest stock on the NYSE and is the only publicly traded investment opportunity in the art market.  As the art market is highly sensitive to the overall economy it has been argued that BID is a potential stock market “bellwether”.
Still, the most obvious answer to the question posed above is of course “No.”  Of course the performance of the whole stock market does not come down to the performance of one stock.  That’s the obvious answer.
The more curious answer is arrived at by first looking at Figure 1.  Figure 1 displays a monthly bar chart for BID in the top clip and the S&P 500 Index in the bottom clip.  What is interesting is that historically when BID tops out, bad things tend to follow for the broader stock market.1
Figure 1 – BID tops often foreshadow SPX weakness (Courtesy WinWay TradingExpert)
Consider:
*The bear market of 2000-2002 was presaged by a dramatic top for BID in 1999, and confirmed again in late 2000.
*The great bear market of 2008 was also preceded by a top and breakdown in BID.
*The 2011 top in BID was followed by a quick but sharp -21% SPX decline.
*The 2013-2014 BID top was followed by roughly 2 years of sideways SPX price action.
*More recently the top in 2017-2018 top has been accompanied by much volatility and consternation in the broader market.
Figure 2 “zooms in” to recent years using weekly data.
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Figure 2 – BID Weekly chart (Courtesy WinWay TradingExpert)
In Figure 2 we can see how poor performance for BID presaged an extended period of sideways trading for the SPX.  At the far right we can also see that BID is at something of a critical juncture.  If it punches through to the upside and moves higher it could be something of an “All Clear” sign for the market.  On the other hand, if BID fails here and forms a clear multiple top, well, history suggests that that might be an ominous sign for the broader market.
Other Bellwethers
BID is one of four market “bellwethers” that I like to monitor.  The other 3 are SMH (semiconductor index), TRAN (Dow Transports) and ZIV (inverse VIX).  You can see the status of each in Figure 3.
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Figure 3 – Four stock market “Bellwethers” (Courtesy WinWay TradingExpert)
To sum up the current status of these bellwethers:
*All 4 (including ZIV as of the latest close) are above their respective 200-day moving average.  So technically, they are all in “up trends.”
*All 4 are also threatening to create some sort of topping formation.
In sum, as long as all four of these bellwethers continue to trend higher, “Life is Good” in the stock market.  At the same time, if some or all of these fail to break through and begin to top out, the broader market may experience more trouble.
Bottom line: Now is a good time to pay close attention to the stock market for “tells”.
Jay Kaeppel
Disclaimer:  The data presented herein were obtained from various third-party sources.  While I believe the data to be reliable, no representation is made as to, and no responsibility, warranty or liability is accepted for the accuracy or completeness of such information.  The information, opinions and ideas expressed herein are for informational and educational purposes only and do not constitute and should not be construed as investment advice, an advertisement or offering of investment advisory services, or an offer to sell or a solicitation to buy any security.

Dollar or Miners? It’s One or the Other

Gold, gold stocks and commodities in general are starting to get a lot of notice lately.  And not without good reason.  Consider the bullish implications for all things precious metal in the articles below – one from Tom McClellan of the McClellan Report and one from the Felder Report.
*Gold/Silver Ratio Tom McClellan
I have also previously touched on these themes time or two (or four) of late.
Where We Are Now
So on the one hand, it can be argued that gold, mining stocks and commodities in general are poised for a significant move to the upside.
Consider the “coiling” action displayed in Figure 1, which is a monthly chart for a mining index that I track that I’ve labeled GLDSLVJK.
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Figure 1 – Jay’s Gold Stock (GLDSLV) Index (Courtesy TradingExpert)
I look at the coiling action displayed in Figure 1 – in conjunction with the information contained in the articles linked above – and I can’t help but to think that a big upside breakout in gold stocks is imminent.
The “Fly in the Ointment”
When it comes to all of this metals/miners/commodities bullishness there’s just one “fly in the ointment” – the U.S. Dollar. Let’s be succinct here and invoke:
Jay’s Trading Maxim #102: Whichever way the dollar goes, a lot of things go the other way.
To wit, see Figure 2, which highlights the inverse nature of, well, a lot of things to the U.S. Dollar (a value of 1000 means 100% correlation and a value of -1000 means a 100% inverse correlation.
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Figure 2 – Things that trade inversely to the U.S. Dollar (Courtesy  TradingExpert)
In other words, when the U.S. dollar goes up, the things listed on the right hand side of Figure 2
Now consider Figure 3 – which appears to be showing a potential upside breakout for the U.S. dollar.
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Figure 3 – U.S. Dollar; breaking out to the upside? (Courtesy ProfitSource by HUBB)
Which brings us back to the title – Dollar or Miners, it’s One or the Other.
If the U.S. Dollar is truly staging an upside breakout, chances are gold miners will not.
Stay tuned….and keep a close on the buck.
Jay Kaeppel
Disclaimer:  The data presented herein were obtained from various third-party sources.  While I believe the data to be reliable, no representation is made as to, and no responsibility, warranty or liability is accepted for the accuracy or completeness of such information.  The information, opinions and ideas expressed herein are for informational and educational purposes only and do not constitute and should not be construed as investment advice, an advertisement or offering of investment advisory services, or an offer to sell or a solicitation to buy any security.

One More Cry of ‘Wolf’

If I were the type to make bold proclamations I would probably consider “taking my shot” right here and shout “This is the Top” and/or “The Market May Crash.”  Unfortunately, on those occasions (well) in the past when I would make bold public predictions of what was about to happen in the financial markets I would almost invariably end up looking pretty stupid. So even if I did make a “bold proclamation” it wouldn’t necessarily mean that anyone should pay any attention.
Besides all that the last thing I want is for “the party to end”.  Even if you do think the market is about to tank it’s a pretty crummy thing to have to root for.  Even if you did manage to “call the top”, the ripple effect of the ramifications associated with a serious stock market decline can have pretty negative effect on just about everyone’s life.
So let’s put it this way: I am concerned – and prepared to act defensively if necessary – but still have money in the market and am still hoping for the best.
Reasons for Caution (Indexes)
Figure 1 displays four major indexes. The Dow keeps hitting new highs day after day while the others – at the moment – are failing to confirm.  That doesn’t mean that they won’t in the days ahead.  But the longer this trend persists the more negative the potential implications.
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Figure 1 – Dow at new highs, small-caps, Nasdaq and S&P 500 not quite (Courtesy TradingExpert)
Reasons for Caution (Bellwethers)
Figure 2 displays 4 “bellwethers” that I follow which may give some early warning signs.
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Figure 2 – Market Bellwethers possibly flashing some warning signs (Courtesy TradingExpert)
*SMH soared to a high in early June and has been floundering a bit since.
*Dow Transports tried to break out to the upside in July but failed miserably.
*XIV is comfortably in new high territory.
*BID tried to break out in July and then collapsed.  It is presently about 12% off of its high.
In a nutshell – 3 of the 4 are presently flashing warning signs.
Reasons for Caution (Market Churn)
In this article I wrote about an indicator that I follow that can be useful in identify market “churn” – which can often be a precursor to market declines.  Spikes above 100 by the blue line often signify impending market trouble
It should be noted that the indicators signals are often early and occasionally flat out wrong.  Still, a churning market with the Dow making new highs has often served as a “classic” warning sign.
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Figure 3 – JK HiLo Index (blue) versus Nasdaq Compsite / 20 (red); 12/31/2006-present
Summary
Again, and for the record, I do not possess the ability to “predict” the markets.  But I have seen a few “warning signs” flash bright red at times in the past.  As a general rule, it is best to at least pay attention – and maybe make a few “contingency plans” – you know,  just in case.
Here’s hoping my gut is wrong – again.
Jay Kaeppel Chief Market Analyst at JayOnTheMarkets.com and AIQ TradingExpert Pro (http://www.aiqsystems.com) client. 
Disclaimer:  The data presented herein were obtained from various third-party sources.  While I believe the data to be reliable, no representation is made as to, and no responsibility, warranty or liability is accepted for the accuracy or completeness of such information.  The information, opinions and ideas expressed herein are for informational and educational purposes only and do not constitute and should not be construed as investment advice, an advertisement or offering of investment advisory services, or an offer to sell or a solicitation to buy any security.

The Trend, the Trend, the Trend

In real estate, it’s “Location, Location, Location.” In the financial markets it’s “the Trend, the Trend, the Trend.”  There is a great deal of certainty about what will happen next in stocks, bonds and gold.  But the key to successfully navigating these turbulent times starts not with predicting the future but rather with identifying the current trend in the here and now and going from there.  So let’s take a look at, well, what else, the trends.
I have certain trend-following models that I follow to help me to determine which way to be leaning in the markets.  Like any trend-following method they are far from perfect (my stock market model for example, suffered not one but two significant whipsaws in the last year+).  But for me there is no expectation that they will be perfect.  The only goal is to catch most of the upside during major bull markets, and miss much of the downside during major bear markets.
Stocks
For stocks I look at the 10-month and 21-month moving averages for the S&P 500 Index and use the following rules:
*A sell signal occurs when the S&P 500 closes 2 consecutive months below its 21-month moving average AND is also below its 10-month moving average
*Following a sell signal a new buy signal occurs when the S&P 500 registers a monthly close above its 10-month moving average
stock-trend
Figure 1 – Stock Market trend-following signals (Courtesy TradingExpert)
This method avoided much of the 1973-1974, 2000-2002 and 2008 bear market destruction.  That’s the good news.  The bad news is that it sold at the end of September 2015 and at the end of February 2016 – both just prior to powerful upside reversals (like I said, trend-following models ain’t perfect).
The most recent signal was a buy signal on 3/31/2016.  
So the trend for stocks is presently BULLISH
Bonds
I have written several posts about this in the past.  My favorite bond timing indicator is Japanese stocks.  No seriously.  They have a string tendency to trade inversely to the 30-yr US t-bond.  I track ticker EWJ and watch the 5-week and 30-week moving averages.  Because Japanese stocks and t-bonds trade inversely I use the following rules:
*A buy signal for bonds occurs when the 5-week moving average for EWJ drops below the 30-week moving average for EWJ
*A sell signal for bonds occurs when the 5-week moving average for EWJ rises above the 30-week moving average for EWJ
The most recent signal was a sell signal for t-bonds on 6/10/2016
So the trend for bonds is presently BEARISH
bond-trend
Figure 2 – Bond trend-following signals(Courtesy TradingExpert)
Gold
For gold I use two moving averages on a weekly chart for something I refer to as Jay’s Anti-Gold Index.  Rather than go into a long explanation I will link to the original article on the topic and offer a short explanation.  In AIQ TradingExpert I created a ticker comprised of 4 other tickers (GLL, RYSDX, SPX and YCS) which all trade in a negatively correlated manner to the price of gold (er, usually).
One moving average I call the “FrontWeighted36DayMA” (“FrontWeightedMA” for short.  The calculations are based on someone else’s work – unfortunately I cannot recall the person’s name so cannot give proper credit.  Hopefully Karma will work and somewhere that person will  Have a Nice Day without really knowing why.  The calculations are a bit long-winded so the AIQ TradingExpert code appears at the end of this article.
The other is the 55-week exponential moving average.
(CAVEAT: Because some of these tickers did not exist until 2006 trading signals began on 12/31/1996, so yes, it is by my standards a relatively short test period for a long -term moving average method.  To put it another way, don’t bet the ranch on  gold basedon this one indicator)
The trading rules are as follows:
*When the FrontWeightedMA closes a week BELOW the 55-week MA then a BUY signal for gold occurs.
*When the FrontWeightedMA closes a week ABOVE the 55-week MA then a BUY signal for gold occurs.
gold-signals-3
Figure 3 – Gold Trading Signals (Courtesy TradingExpert)
The most recent signal was a buy signal on 3/18/16.
So the trend for gold is presently BULLISH.
Summary
These indicators represent “my opinion as to where the markets are headed next” (because the truth is I don’t know).  There are objective, mechanical measures of where things stand today.  Nothing more, nothing less.
Also, none these indicators falls into the “World Beater” or “You Can’t Lose in Investing” categories.  But then again they are not really designed to (BTW if you do posses methods that do fit into either of the aforementioned categories, I would love to hear from you – off the record, of course).  What they do achieve is to offer a decent frame of reference during times of doubt.
And that is one of the most powerful tools any investor can possess.
So in sum, the current trend (at least according to what you’ve seen here) for stocks and gold is bullish and the current trend for bonds is bearish.
How long any of these trends will remain in place is anyone’s guess.  So enjoy them while they last.

Jay Kaeppel

Chief Market Analyst at JayOnTheMarkets.com

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We’ve been watching MIDZ – Direxion Daily Mid Cap bear 3X

We’ve been watching MIDZ – Direxion Daily Mid Cap bear 3X in our barometer the last few trading days. This 3 x bearish ticker has been in a long down trend, but recently Moneyflow has begun to show signs of accumulation and the MACD diverged up when the price was still heading down.

The 5 day barometer readings on Moneyflow and MACD in our Quotes montage are showing some bullish signs either all green or green arrow up. Maybe times are a changing.

midz4-11-16