Lance Roberts of RealInvestmentAdvice comments, ““Barring a breathtaking plunge, the bull market in U.S. stocks on Aug. 22 will become the longest in history, and optimistic investors argue it has miles to go before it rests.” – Sue Chang, MarketWatch
Depending on how you measure beginnings and endings, or what constitutes a bear market or the beginning of a bull market, makes the statement a bit subjective. However, there is little argument the current bull market has had an exceptionally long life-span.
But rather than a “siren’s song” luring investors into the market, maybe it should serve as a warning.
“Record levels” of anything are “records for a reason.””
VIX made a two-month high before retracing 67% of the rally from last week’s low. This triggered a probable buy signal in the VIX, despite the retracement. The Cycles Model shows a likely surge strength for the VIX through late August and mid-October.
(Bloomberg) Your nerves are lying.
Don’t believe them when they say the past week in U.S. stocks was crazy. Or volatile. Or in any way unusual, when laid side by side with all the others in a bull market that by some definitions is about to become the longest ever.
Stocks bounced around on alternating days, the VIX had two 10 percent spikes, and high-priced tech stocks lurched. By now, investors should be used to it.
SPX retracement not enough for a new high.
SPX made a strong retracement of its decline, managing to neutralize 86.8% of its losses. However, new all-time highs have eluded the SPX since January 26. There are 4 days left to making this the longest US equity bull market in history. Will history be made next week?.
(ZeroHedge) We’re almost there: in just 4 trading days, the S&P 500 “bull market” which has purchased by central banks with trillions in liquidity and by companies with even more trillions in buybacks, will become longest of all-time.
And yet away from the S&P, BofA’s Michael Hartnett notes that “there have been so many grizzly bond, commodity & equity market returns this year”: for example, global bonds are annualizing their worst price return (-3.5% local currency) since 1999; 11 of 21 commodity markets have experienced “bear” markets; 1254 ACWI constituents out of a universe of 2273 are in bear markets (i.e. down >20%).
Just as ironically, less than a month after the record bull run anniversary comes September 15th, which marks the 10-year anniversary of Lehman bankruptcy & Global Financial Crisis; what happened next is precisely why the bull market is about to be longest in history:
NDX lingers near the high.
NDX continues to linger just beneath the July 25 high at 7511.39. Whether the longest equities rally is exceeded this week remains to be seen. The Cycles Model suggests that the next several months may bring pain to equities. The period of weak seasonality may be about to begin.
(Reuters) – A steep downturn in heavyweight Chinese internet stocks and recent weakness in half of the so-called FANG group have some investors worried that a key component of Wall Street’s near-decade long rally may be low on fuel.
Outstanding gains in Facebook (FB.O), Amazon (AMZN.O), Netflix (NFLX.O) and Alphabet (GOOGL.O) have underpinned much of the U.S. stock market’s rally in recent years, along with the broader tech sector, but the group is widely viewed as overbought and valuations remain expensive.
Backed up by strong earnings growth and investor confidence in Silicon Valley’s innovation track record, the S&P 500 technology index .SPLRCT is up 16 percent in 2018, making tech Wall Street’s top performer.
High Yield Bond Index up against trendline resistance.
The High Yield Bond Index continues to rally to a marginal new 70% retracement of the February decline. A sell signal is confirmed beneath Intermediate-term support at 191.92. “Flag” consolidations such as this imply a continuation of the previous trend.
(USNews) Shopping for junk doesn’t exactly have a luxurious ring to it, whether you’re hitting a salvage yard for a ’62 Ford Falcon horn or combing through VHS tapes of “Sweatin’ to the Oldies” at a rummage sale. So think about it: Why would anyone buy a product called a junk bond – conceived, after all, by that legendary felon Michael “the Junk Bond King” Milken?
As fine a question as that might sound, it overlooks the obvious. Wall Street, that funny little financial district where irrational exuberance is king, bases a good part of its existence on curious ways to wealth. So people not only invest in junk bonds, they can also buy exchange-traded funds that deal in them. The SPDR Barclays Capital High Yield Bond even has a cheeky stock exchange ticker to go with it: JNK.
UST consolidates above support.
The 10-year Treasury Note Index consolidated above Intermediate-term resistance at 119.76 this week. UST is on a buy signal with additional confirmation at a breakout above 120.32. If so, we may see UST rally back toward the Head & Shoulders neckline near 123.00. This rally may be painful for the speculative shorts in treasuries.
(CNBC) U.S. government debt yields curbed their decline Friday on headlines that U.S. and Chinese representatives are working to develop a plan to end the ongoing trade dispute between the two nations.
The Wall Street Journal also reported that the talks would culminate in a meeting bet President Donald Trump and Chinese leader Xi Jinping.
The yield on the benchmark 10-year Treasury note was lower at around 2.864 percent at 2:28 p.m. ET, while the yield on the 30-year Treasury bond was in the red at 3.02 percent. Bond yields move inversely to prices.
The Euro bounces from a new 13-month low.
The Euro bounced from a new 13-month low to test the mid-Cycle resistance at 114.34. The bounce is likely to be short-lived. The Cycles Model suggests a probable decline through the end of August that may take it to its Cycle Bottom at 102.95.
(Reuters) – The euro rose for a second day in a row on Friday as hopes that next week’s talks between the United States and China will ease trade tensions between the two limited dollar demand, although a fresh dive in the Turkish lira kept investors edgy.
The euro has been under pressure in recent weeks on worries about euro zone bank exposure to Turkey after the lira crashed this month. Concerns that Italy’s governing parties will agree a budget with high public spending have also weighed.
The dollar has benefited as investors rush towards safety, helping the greenback extend its four-month long rally. The U.S. currency this week hit a more than 13-month high versus its major peers.
EuroStoxx challenges mid-Cycle support.
The EuroStoxx declined through mid-Cycle support at 3376.61, closing beneath it. The Cycles Model calls for an approximate four week decline that, in all likelihood, may take EuroStoxx to the Head & Shoulders target.
(CNBC) European stocks closed lower on Friday afternoon, as Turkey’s ongoing currency crisis appeared to keep investors wary of taking on riskier assets.
The pan-European Stoxx 600 closed provisionally down 0.56 percent with almost all sectors and major bourses in negative territory.
Europe’s technology stocks were among the worst performers, down exactly 2 percent following a weak forecast from U.S. company Applied Materials. The world’s largest supplier of equipment used to make chips said late Thursday that it expected current-quarter profit to fall below Wall Street expectations, fueling fears a two-year chip boom could be coming to an end. Silicon wafer group Siltronic slipped more than 4 percent on Friday.
The Yen bounces between support and resistance.
The Yen appears to have bounced from Short-term resistance at 90.10 to challenge Intermediate-term resistance at 90.62. Although there is more overhead resistance, XJY appears capable of reaching its potential target at 92.50. The Yen may pull back over the next week before resuming the rally.
(JapanToday) Japan’s politically sensitive trade surplus with the United States shrank sharply in July, according to official data published Thursday, as the two allies continue to cross swords over U.S. trade policy.
The surplus with the U.S. shrank 22.1 percent with reduced shipments of motor vehicles and microchip-making equipment dragging down the figure.
Despite a close political and economic relationship, Japan was not spared from President Donald Trump’s tariffs on steel and aluminium products and Tokyo has warned it could retaliate at the World Trade Organization.
Top officials from both sides met in Washington last week but no breakthrough was announced after the talks.
Nikkei retraces 43% of losses from July high.
Nikkei retraced approximately 43% of its losses since July. However, it closed beneath Long-term support at 22400.65. Violating that support confirms a new sell signal. The Cycles Model calls for a new Master Cycle low in mid-September.
(Nasdaq) Japan’s Nikkei rose on Friday on hopes that talks between China and the United States next week would ease trade tensions, but chip-related stocks fell after Applied Materials disappointed investors with worse-than-expected earnings forecasts overnight.
The Nikkei share average .N225 ended 0.4 percent to 22,270.38. The benchmark index edged down 0.1 percent, following two straight weeks of declines.
The Wall Street Journal reported that the trade talks in Washington would take place on Aug. 21 and 22, just before $16billion in new U.S. tariffs on Chinese goods take effect, along with an equal amount of retaliatory tariffs from Beijing.
U.S. Dollar reverses from a new retracement high.
USD made a marginal new high on Wednesday before reversing into a loss for the week. With that, the USD rally may be over. Attention may be turned lower, as the Orthodox Broadening Top has a target that is quite deep.
(MarketWatch) The U.S. dollar index saw a solid pullback on Friday, notably against the euro and the British pound, putting the gauge on track for a 0.2% loss this week—its worst performance in about a month, according to FactSet.
The ICE U.S. Dollar Index DXY, -0.48% which measures the greenback against six developed market rivals, slipped 0.5% to 96.133.
The buck also weakened against the Canadian dollar USDCAD, -0.7221% which rallied on the back of an inflation report. The data showed that Canada’s consumer prices rose 3% in the year leading up to July, beating consensus estimates of 2.5%. Inflation is one of the key data points used for central banks to determine their monetary policy path, and Friday’s data gave hope of a Bank of Canada hike. The U.S. dollar last bought $1.3063, down from $1.3157 late Thursday.
.Gold bounces off the Cycle Bottom.
Gold resumed its decline in a dramatic fashion as it gave up more than 4% before a bounce off the Cycle Bottom at 1169.87. The Cycles Model suggests a possible week or more of additional decline ahead. The Head & Shoulder target may still be in play.
(MarketWatch) Gold prices settled slightly higher Friday, but posted a nearly 2.9% weekly retreat, the largest such drop since early May of last year.
The precious metal edged up in the wake of losses over the past two sessions as the leading dollar index also churned in the red. The buck, which was currently down slightly for the week but up 4.5% year to date, has been the key driver for the precious metals. A firmer greenback, which makes buying bullion more expensive to investors using another currency, remains near a roughly 14-month peak.
Crude tests Long-term support.
Crude declined toward Long-term support/resistance at 64.26, after triggering a sell signal. The Cycles Model projects a potential decline through the month of August with potentially heavy losses.
(CNBC) A shipping revolution and a U.S. plan to impose targeted crude sanctions against Iran is likely to prompt wild swings in the oil price over the coming months, Vopak’s chief executive told CNBC on Friday.
Energy market participants are currently seen weighing bullish factors that include potential supply disruptions to Iranian crude exports against more bearish indicators, such as the darkening global economic outlook and a resurgent U.S. dollar.
International benchmark Brent crude traded at around $72.07 on Friday afternoon, up almost 1 percent, while U.S. West Texas Intermediate (WTI) stood at $65.77, up more than 0.5 percent.
Shanghai Index lowest since 2016.
The Shanghai Index is fast approaching its 2016 lows and likely to power beneath them. The decline appears to be headed for the 2400 handle. Exhaustion of the decline may not set in until early September.
(SouthChinaMorningPost) The Shanghai Composite Index slid 1.3 per cent on Friday, ending the week with a 4.5 per cent decline.
That is just 0.5 per cent shy of the nadir set in January 2015 after the rout that erased US$5 trillion in market value.
In contrast, Hong Kong’s Hang Seng Index rose for the first time after five days of losses, ending up 0.4 per cent.
Selling in the mainland equity markets accelerated in the afternoon session, with Shenzhen Kangtai Biological Products and other biopharmaceutical companies bearing the brunt of the hammering.
The Banking Index still consolidating above critical support.
— BKX bounced once more at Long-term support at 107.91. The strength we observed is waning, but a sell signal is not given until BKX declines through critical support. The Cycles Model calls for a reversal with a decline through the Head & Shoulders formation.
(Bloomberg) Louisiana is using the bond market to stick up for the Second Amendment.
The state’s bond commission voted 7 to 6 Thursday to ban Bank of America Corp. and Citigroup Inc. from working on its upcoming debt sale because of the banks’ “restrictive gun policies,” the state treasury said in a statement. Bank of America and Citigroup are the two top-ranked underwriters of long-term municipal debt, according to data compiled by Bloomberg.
“I personally believe the policies of these banks are an infringement on the rights of Louisiana citizens,” Treasurer John Schroder said in a statement. “As a veteran and former member of law enforcement, I take the Second Amendment very seriously.”
The ban is the latest example of how corporate America has been drawn into the nation’s polarizing debate over gun control. Earlier this year, Chicago Mayor Rahm Emanuel proposed using the city’s business to push for stricter gun controls by limiting work with Wall Street firms that didn’t cut ties with companies that sold firearms to people under the age of 21 or dealt in high-capacity magazines.
(Bloomberg) Few people can get inside your head—or at least the part of your brain that makes spending decisions—quite like Scott Grimes and Lynne Laube. The co-founders of Cardlytics Inc. deal in some of the most valuable and revealing personal data on the planet: how people use their debit and credit cards. They’re quietly helping some of the largest banks in the U.S. to mine what’s known in the trade as purchase data and use it to encourage customers to buy more things with their plastic.
Conventional banks are trying to raise their data game to fend off fast-growing financial technology startups and hold on to customers. “This is the bank’s secret weapon in the digital wars,” Silvio Tavares, chief executive officer of the trade group CardLinx Association, says of purchase data. But it’s a weapon they have to be extremely careful about using.
Although consumers are constantly being asked to trade some privacy for convenience and service, banks hold a particular position of trust. In early August the Wall Street Journal reportedthat Facebook Inc. had approached banks and asked them to share data about their customers, to help it create services such as a way to check balances inside a Facebook app. Facebook said it wasn’t using purchase data to push advertising. Several major banks quickly put out statements saying they weren’t sharing data with the social media company.
Have a great weekend!
Disclaimer: Nothing in this email should be construed as a personal recommendation to buy, hold or sell short any security. The Practical Investor, LLC (TPI) may provide a status report of certain indexes or their proxies using a proprietary model. At no time shall a reader be justified in inferring that personal investment advice is intended. Investing carries certain risks of losses and leveraged products and futures may be especially volatile. Information provided by TPI is expressed in good faith, but is not guaranteed. A perfect market service does not exist. Long-term success in the market demands recognition that error and uncertainty are a part of any effort to assess the probable outcome of any given investment. Please consult your financial advisor to explain all risks before making any investment decision. It is not possible to invest in any index.