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SPX Monthly Log Scale: -Despite last years 28% decline, the defining uptrends remain intact. In my view, the A1-B1 trendline best defines the bull market but decent arguments can also be made for C-D. A test of C-D would require that the market decline roughly 30% from the most recent close. - In the absence of overtly bearish behaviors and with the primary...

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It is pertinent to remember that there are always stocks to sell into rising markets and stocks to buy into falling markets. Even in a general market correction it is important to distinguish that all declines are not equal under the surface. By that we mean that while prices may all head in a southern direction, what is important is the point from which that...

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In last week’s macro outlook post we covered the outlook for intermediate and long bond yields. The analysis concluded that the long term technical trend has changed from lower to flat/neutral but that more work (i.e., a higher low) is needed to definitively turn the macro trend higher. That piece is linked below in the related idea section. 10 Year Yield Weekly:...

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I begin each year reviewing the long term technical positions of the "Big Four." 10 Year rates, SPX, Commodities, and the US Dollar. Since by profession I am a rates/credit portfolio manager and trader, I always start with rates. Granted, macro doesn’t typically impact shorter term (swing, daily and weekly) trading, but having a framework for markets and for...

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One of the more powerful but under-appreciated categories of patterns are very short term drift patterns in strongly trending markets. Flags, pennants and small lateral trading ranges can all fall into this category. The patterns are fractal, that is, they appear across all time frames. I find small multi drift patterns invaluable. First, they are ubiquitous....

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Visualizing Business and Market Cycles Through Market Momentum 5: Conclusions: In installments 1 - 4 we built a market momentum matrix and plotted the information onto a stylized business cycle. In this installment we will make final observations and thoughts around the current cycle. Capital flows into and out of commodities, sectors and equities have...

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In installments 1 - 3 we discussed building a market momentum matrix to help anticipate the business cycle. In this installment we introduce the OECD Composite Leading Indicator and plot the information derived from the momentum matrix onto a stylized business cycle. In the final installment we will make observations and share thoughts around the current cycle. ...

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In parts 1 and 2 we discussed using a market momentum matrix to anticipate the business cycle and how the MACD oscillator is used to build the matrix. In part 3 we will illustrate the logic of placing individual auctions into their quadrants, and illustrate the distillation process. As a reminder Individual markets and ratios are plotted in the quadrant (quad)...

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In part one, we discussed using a market momentum matrix to anticipate the business cycle, the potential inflection in the macro environment and shared the final distillation of the current momentum matrix. In part 2 we discuss how the MACD oscillator is used to build the matrix. Methodology: Individual markets and ratios are plotted in the quadrant that best...

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Visualizing Business and Market Cycles Through Market Momentum: Part 1 Effect of liquidity: Change in regime: It is often said that markets are discounting mechanisms, anticipating changes in the business cycle. I believe that it is generally true, and while it has been less true for most of the last two decades, that it is about to become true again. It is my...

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In part 4 we look at the all in yield of investment grade (IG) and high grade (HY) credit, and why, despite OAS spreads resting at long term median, there still may be considerable investment value in the all-in-yields of short to intermediate maturity IG notes and ETFs. Understand, this discussion does not constitute an investment recommendation, only an...

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As discussed in part two (prior installments linked below), the duration mismatch between LQD and HYG renders the ratio useless as a tool to assess credit distress or changes in investor preference. Credit ETFs, must be compared to a duration matched ETF, Treasury security or index to be useful. There is also the difficulty in comparing spreads across investment...

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In part 2 I take a quick look at high yield corporates and describe a common mistake made in using ETF ratios to monitor changes in credit risk. Part one and an earlier piece that described how to use the TradingView platform to monitor secondary market credit spreads are linked below. If there is any one thing that will produce a Fed policy a pivot, it is...

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Since credit has far greater potential to create systemic issues than does equity, corporate credit conditions are much more important to the Federal Reserve (Fed) than changes in equity prices. If you have interest in macro, monitoring and understanding the basics of corporate credit is a must have skill. If there is any one thing that might actually cause a Fed...

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All traders are different but I personally find it difficult to use standalone channels to consistently initiate profitable trades against. Not the least of the problem is that the channel continues to either rise or fall, making a secure place to hide a stop above/below more difficult. But I find them particularly useful in three aspects. The first, and by far...

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Before we get started on trendlines and channels I want to share a quick thought on the current market environment and how, at least in my opinion, the technical environment has changed. I believe that the weight of the evidence suggests that we are in the early to mid-stage of a primary bear market. If that is the case, momentum and sentiment extremes,...

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In the frustrating attempts to determine which rallies may represent the end to an overall market decline, one has to recognize, particularly in the throes of a bear market cycle, that “All Advances are Not Equal” even as all stocks may rally together with the market. Within any market trend, there will be rally phases. However, rallies may not carry all stocks...

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In part 2 we discuss how to construct and utilize sloped trendlines (TL) and Channels in order to better understand the ebb and flow of supply and demand. Like most other charting techniques understanding supply and demand and its relationship to trends and channels depends on you staring at hundreds and thousands of bar charts. Unfortunately, there just isn't a...