(Bull) Market April 2021

Skate said:

Nice summation @ducati916
Adding an Aussie twist - there are more blue bars than red bars indicating the strength of the Aussie market. The ribbon displays the period precisely. This is the very reason why we are all rolling in it at the moment.

I should also comment
Trading the red bars have been difficult but not impossible.

View attachment 123255

Skate.

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Mr @Skate chart is a weekly, which continuing on from the previous post, avoids the current issues with the daily charts and the breaking of daily technical indicators.

I just had a look at the 'Monthly' for the S&P500. The 'indicators' that I use have only just triggered the 'sell' criteria. The Weekly (has) already triggered last week, of which the 'dip' was very aggressively bought.

With the sheer volume of liquidity in the markets now, I think that the 'Daily' chart is purely to finesse an entry/exit based upon at least a Weekly signal, if not a monthly.

The issue is this: when the collapse comes, it will trigger on the Daily if not Hourly charts. That is to say (looking at BTC) it will compress time and be very fast.


jog on
duc

Nothing really interesting happening.

Higher Taxes, meh:



Sell in May and go away, data:



Sectors: Energy having a bounce.



BTC seeking to reverse the sell-off. It will be very important for the Bulls to get back above that 50EMA.



If they fail to do so, then watch out below, the losses will accrue rapidly. Do not underestimate the 'hate' (some, many) market players have for BTC. Call it envy, schadenfreude, but it is a 'thing'.

Inflation still creeping higher:



Which means that yields will also start moving higher. My model has re-adjusted higher to 1.68%.

TNX: Has found support and ticking higher. Currently at 1.58% but destined higher.



The question then becomes: how high before the Fed move to YCC?

I think at the low end, 2%. At the high end 3%. That is quite a spread. If/when it happens we know (a) Gold/BTC would move higher, (b) DXY lower, (c) Commodities higher. The question is (d) Stocks. How long would they hang on in an inflationary environment before breaking? Possibly we will find out.

Mr flippe-floppe-flye:



jog on
duc

So have a look at this chart:

Now I cannot annotate it, but, using your imagination, draw two straight lines connecting the highs and lows. They converge as a triangle a little into the future of where we are.

Now I have no idea whether this 'triangle' resolves as a price triangle might, but if it does, which way do you think it moves?



If it goes the way I think, then:



jog on
duc

So the VIX.

Weekly:



Commodities:



As the saying goes; be careful what you wish for, you might just get it.


jog on
duc

Markets are meh. Very slow.

Sectors are rotating very slowly. Nothing standing out particularly.





DXY still weak. Adding fuel to the inflation fire.




10yr yields higher, taking fuel away from the inflation fire.



Commodities themselves are probably over-extended and need a rest, except for possibly Energy.

So now we go to a series of charts that show what happens in Year 2 of a Bull market:



So (in order from above) looking at the valuations:



We see that the valuation metrics all improved. PE moved from a higher number to a lower number. Inflation was trending lower from 1882 throughout this extended period. Interest rates were trending lower from the 1982 period, but trending higher from 1975 to 1982.

The thesis is that chart wise, fundamental wise, essentially the same digestion period is required. Earnings will improve, bringing PE ratios lower. A lower multiple, then allows for further multiple expansion.

The issue is inflation. Inflation (apart from the 1969 - 1982 period) was benign in the above examples. The PE actually dropped from 1976 into 1982. Today, we have, at least according to the Fed. little to no inflation. The Fed. is seeking to ramp up inflation. Assuming they get it, then the past will differ from the future in this respect. Interest rates are showing a propensity to rise. The great Bull market in Treasuries is over, or it is until the Fed. moves to YCC. DXY has been all over the place.

Extrapolating from past charts, for this analysis and conclusion, is dangerous in that we are not really looking at an oranges v oranges situation.

At these valuation levels, it is very much a guilty until proven innocent situation, shoot first, ask questions later market. The prevailing TINA psychology and FOMO reality makes for a very dangerous market.

Countervailing that mindset we have a strong recency bias, where the speed of the decline caught many off-guard and many came back to the market very late in the rally. Simply that the circumstances were (they believed) untenable for the market to rise. That belief that another (fast) decline is (or should be) just round the corner, is still with us.

We have rampant speculation: NFT's, SPAC's, Crypto's, Meme Stocks, you name it, we have it. This makes for a very dangerous market.

So you can't be outright short this market. That is a money losing proposition.
You have to be long.

However, given that an outright long position is playing with matches on a powder keg, you need a fast exit plan. The issue is (I think) that we have had so many examples of BTD, that when a serious decline occurs, it will not be recognised for what it is until too late (once again).

It is a conundrum.


jog on
duc

So oil news:


- New debt and equity issuance from U.S. E&P companies totaled $4.4 billion in March 2021, the most since August 2020.

- In fact, new financing has been on the rise steadily for each month since September 2020. Low-interest rates and higher oil prices have improved access to capital.

- The EIA forecasts U.S. oil production rising from 10.7 mb/d in 2Q2021 to 12.2 mb/d in 4Q2022.

Market Movers

- The California Public Employees’ Retirement System (CalPERS) said on Monday it plans to vote for Engine No. 1′s four director nominees to ExxonMobil’s (NYSE: XOM) board.

- Saudi Aramco (TADAWUL: 2222) is considering a sale of a stake in its natural gas pipeline network to free up cash.

- Range Resources (NYSE: RRC) beat earnings consensus.

Tuesday Aril 27, 2021

Oil prices posted some modest gains on Tuesday, despite the worsening conditions in India. “If the grim trend continues, the oil demand loss India will experience could be the single largest reduction in absolute terms that any country has suffered since the beginning of the pandemic,” Rystad Energy said in a note. The firm added that there is some optimism around the plans by OPEC+. “Should OPEC+ turn a blind eye to India though, the gains may quickly evaporate,” Rystad added.

Oil prices up on OPEC+ cuts. The OPEC+ group will not hold a full ministerial meeting on Wednesday as planned, delegates at the Joint Ministerial Monitoring Committee (JMMC) agreed at their meeting on Tuesday, signaling confidence in the current plans to ease the production cuts as of May despite surging COVID cases in major oil importer India.

White House wants 80% clean energy standard. The Biden administration is pressing to include a clean energy standard in the infrastructure bill, which would require the U.S. electricity grid to source 80% of its electricity from carbon-free sources by 2030. That would be up from 40% today. A recent report finds that such a target can be reached at no added cost. But it will require a lot more long-distance transmission and energy storage.

Exxon makes new Guyana discovery. ExxonMobil (NYSE: XOM) announced a new oil discovery at its Stabroek Block in offshore Guyana.

BP profits up, to resume share buybacks. BP’s (NYSE: BP) profit more than tripled to $2.6 billion in the first quarter due to higher oil prices. The company said it would buy back $500 million in shares.

Oil majors expected to post strong cash. The oil majors are expected to post strong first-quarter earnings, but much of the increased cash flow will go to servicing debt.

DAPL decision soon. Judge James Boasberg of the U.S. District Court for the District of Columbia on Monday gave the Army Corps of Engineers until May 3 to update him on the status of the Dakota Access Pipeline’s new environmental impact statement. The judge asked the Army Corps one last time to decide whether or not the pipeline should be shut down before he makes a decision himself.

Tesla posts record profit. Tesla (NASDAQ: TSLA) reported a $438 million profit in the first quarter, its highest ever. “We’ve seen a real shift in customer perception of electric vehicles, and our demand is the best we’ve ever seen,” Elon Musk said Monday on an investor call. Vehicle sales doubled from the same quarter a year earlier.

Washington State passes cap-and-trade. Washington State will become the second state after California to implement a cap-and-trade program, which will go into effect in 2023. Revenue raised will go to renewable energy projects. The state also passed a new clean-fuels standard.

California to phase out oil, ban new fracking in 2024. California Governor Gavin Newsom announced last week that the state would phase out oil production by 2045, and would ban new fracking permits beginning in 2024.

Libya targets 1.45 mb/d by end of year. News that Libya is now targeting 1.45 mb/d of oil output by the end of this year, 1.6 mb/d within two years and 2.1 mb/d within three to four years will compound a negative price sentiment on oil pricing for many traders.

Suriname aims to become an oil exporter. As Guyana prepares to become a major oil-producing nation, the spotlight is firmly on the Guyana-Suriname Basin and the former British colony’s neighbor Suriname.

Pembina “pauses” Jordan Cove LNG. Pembina has been beset by permit denials for its proposed Jordan Cove LNG project in Oregon and is now hoping to hit the “pause” button on a legal process over its FERC permit, another negative sign for the project’s viability.

Total declares force majeure on Mozambique LNG. Total (NYSE: TOT) declared force majeure on its $20 billion LNG project in Mozambique due to an insurgency.

Biden explores carbon tariff. The Biden administration is exploring the use of a carbon tariff, a duty on imported goods from countries with weak climate policies. The European Union is a little further along, looking at the policy more deeply.

Saudi Arabia to join new climate forum. Saudi Arabia will join the United States, Canada, Norway, and Qatar in forming a new platform for oil and gas producers to discuss how they can support the implementation of the Paris Agreement on climate change.

Department of Energy aims to cut costs for hydrogen. The U.S. Department of Energy said it would seek to cut the costs of hydrogen and batteries.

Samsung to develop $673 million solar plant in Texas. A unit of Samsung is aiming to build a $673 million solar project in Texas, according to Reuters.

Norway’s Hammerfest LNG outage extended. Norway’s Hammerfest LNG could be offline until March 2022 following damage from a September 2020 fire.

Housing data:





Then a summary of ETFs across all sectors:



Commodities are attracting plenty of attention across blogoland for price appreciation. Commodities as a whole are way off their previous highs. They have plenty of room to run.



Pretty much wherever you look, that market is in a bubble. The question is whether the bubble is still inflating with plenty of space available for further air or nearing bursting point? I don't think there is any real way to really tell until after the fact. We know it's a bubble. We know bubbles are dangerous. We hate to miss out (FOMO).

I think for the moment you pinch your nose and just keep going. The reason being (a) The Fed. is still pumping $120B/month into the stock market, that is a lot of buying pressure. And (b) the consequences of that (i) inflation or (ii) deflation are still being argued about, which means there is time to move higher before the answer and consequences come home to roost.

Or, simply move to undervalued areas, which is basically: gold/silver/energy and some of the other commodities. That means foregoing the gains, if in point of fact there are still significant gains to be had in other asset classes (stocks/crypto).


Good news (seasonality) for May:



jog on
duc

So lots and lots of noise. It's Fed. day and Powell has spoken.



Noise.

Moving on: Energy is having a big bounce today. Whether it continues its trend higher we'll see, but I'm thinking yes.



So this chart (lots of tax charts out there now) posted. The point is: tax rate hikes take place in good, strong economies. Politicians like to keep their jobs and be re-elected, so no-one hikes tax rates in a recession.

Except maybe Biden, as he knows he'll never run for re-election, so what the hell....right?



A survey of professional money managers on what they fear: pretty much what gets the market roiled and is endlessly debated across blogoland....all except deflation. I'm guessing that consensus is: in a deflation, the Fed. just buys all the defaulting shite out there, which is about $14T at last count.



Bubble mania is everywhere as a thing. Rightly so. We have bubbles everywhere. 2 points: recognising that there are bubbles is legitimate. Everyone knew in 1999 that there was a bubble. In 2007 blogoland was aflame with housing bubble discussions. It is the 'timing' of the pop that is hard.

So we know there are bubbles in various levels of size and duration. We are speculating on what trigger will pop them. Does an awareness add to the probability that they pop sooner than later?





The interesting price chart is BTC atm.





I have no BTC or any crypto. My interest is that BTC is the MEME that continues. TSLA is a bust (pretty much) SPACs are a bust. ARK is a bust atm. Only BTC continues the truly wild speculative mood. There are (if you believe blogoland) many small players in this. Some have been turned into paper millionaires. What do they do?

Interesting.

Mr flippe-floppe-flye:







jog on
duc

Some more chop in the indices.

Bit of a move in the Financials, based largely on the move higher in 10yr yields, which is again higher. My model shows 1.66%. Yields as of yesterday were 1.63% so already moving towards that nominal number.

You would expect Tech. to be a little weak based on that number, but the big Tech. firms have been blowing earnings out of the water. Some of it will be down to which ETFs hold larger positions in them, although MSFT I believe had good earnings and sold off.



Top pay for CEOs:



Still watching BTC.

It is faaaaaar from being out of the woods yet. It looks really vulnerable currently. It is (dare I say it) setting itself up for a short. Now I wouldn't sell it short with real money, too dangerous, but sitting back with no dog in the fight, it looks (almost) like a short. Possibly today or after hours trading might confirm that or of course negate that.



Mr flippe-floppe-flye:



I am in agreement here, Energy (XLE) has some potential to run higher. The second area, related to the first, Materials (XLB). Financials also (XLF) on the back of a steepening curve and I think, Real Estate (XLRE).

They are all (except XLE) pretty extended. Which of course means a pullback (reversal) could occur almost anytime.

Now that we are almost into May, the 'Sell in May' meme has been appearing everywhere across blogoland. April looks to be closing out a winner across the board, 1 last trading day tomorrow before the w/e and the start of May next week. Would you expect a sell-off into tomorrow's close? Psychological guessing games.


jog on
duc

So April closes out meh, but it has been an excellent month for the Bulls.



For the month, everything higher.

Historical returns:



So yesterday it registered 66. Today:



Moving into May, seasonality for the 11 sectors:



A mixed bag. We'll see how it plays out.

Mr flippe-floppe-flye:



And BTC:

Taking another run at that 50EMA. I'm guessing another fail, but who knows. Today, it is one of the very few charts that are up, so maybe.



jog on
duc

Great info duc.
Love the charts. Thanks for putting this together for everyone.

Gunnerguy