Dow futures signal another bumpy ride on Wall Street

Global Stock Markets

Wall Street could be in store for another bumpy ride.

Dow futures dropped about 150 points on Wednesday morning as the volatility that has rocked markets for more than a week lingers. The premarket losses signal a decline of about 200 points at the open. 

The mood has calmed down a bit though after Wall Street staged a dramatic turnaround on Tuesday. After sinking 567 points early in the day and stumbling into correction territory, the Dow ended the day with a mirror image gain of 567 points. 

The powerful bounce has given hope to the bulls that the market has begun to find a bottom after a period of extreme selling in recent days.  

Overseas markets have mostly calmed down after plunging earlier this week. Asian stocks closed mixed overnight, while European indexes are mostly higher

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The question now is whether "this draws a line under the recent stock market correction or whether this is merely a dead cat bounce," analysts wrote. 

Despite the market slump, analysts believe the fundamental backdrop looks solid. Corporate earnings have never been higher and U.S. and global economic growth has gained steam. 

Investors will keep a close eye on the bond market. Heavy selling in the U.S. Treasury market caused the 10-year yield to spike to 2.85% last week, worrying Wall Street about inflation and faster rate hikes from the Federal Reserve. Higher bond yields also make stocks look less attractive by comparison. 

The 10-year Treasury yield has receded in recent days and is trading around 2.77% on Wednesday.

Nasdaq futures fall as tech selloff continues

Nasdaq futures were lower on Tuesday as selloff in tech stocks continued, while the Dow was higher as investors looked to profit from stocks that would benefit from potential corporate tax cuts. 

The Senate approved its version of tax code overhaul in a 51-49 vote over the weekend. Talks will begin likely next week between the Senate and the House, which had approved its own version of the legislation. 

Once the bills are reconciled, the resulting bill could cut corporate tax rates to 20 percent from 35 percent.

The S&P 500 ended with a loss after hitting an intra-day all-time high earlier in the day, while the technology-heavy Nasdaq dropped 1.05 percent. 

The S&P tech sector .SPLRCT has been the best performing sector this year, far outperforming the broader index, but investors are worried about stretched valuations.

Regal Entertainment (RGC.N) was 6 percent higher after the company agreed to be bought by Britain’s Cineworld (CINE.L) for $3.6 billion in cash

Snap (SNAP.N) was up 3.8 percent after Barclays raised the stock’s rating to overweight and price target to $18.

Toll Brothers (TOL.N) slumped 8.2 percent after the company’s quarterly profit and revenue missed estimates and it forecast a decrease in full-year 2018 adjusted gross margin.

The Truth About Our Market Analysis

Last week one of our clients forwarded to us an email by another “analyst” about FM Wealth Management analysis.  And, that analyst suggested that our analysis is “useless as a tool for market analysis.”

So, please allow to us deal with the issues that was brought up, and that is the accuracy and usefulness of FM Wealth Management analysis.

As we have said before, Chairman Alan Greenspan, the former Chairman of the Federal Reserve, stated that markets are driven by “human psychology” and “waves of optimism and pessimism.”

Ultimately, as Mr Greenspan recognized, that it is this so-called social mood, which swings between optimism and pessimism that effect the movement of markets. As we have stated in our previous posts, news does not cause a change in the direction of the market, unless that trend is already set to change.

In fact, have you ever wondered why markets or equity will continue to go up after the announcement of bad news, or inversely will go down after good news?

So now you may start to understand why the stock market has continued higher despite all the bad news being thrown at it.

This is why investors who are able to rise above news and emotion, and identify prevailing social moods and trends, can have an advantage over other investors.

How does one accurately and consistently track these changes in sentiment?

Ralph Elliott postulated that mass psychology and public sentiment moves in a 5-wave cycle within a primary trend, and a 3-wave cycle in a counter-trend. Once a 5-wave cycle in public sentiment is done, then it is time for the subconscious sentiment of the public to shift in the opposite direction. 

This is simply a result of a natural cause of events in the human psyche, and not the effect from some form of “news.”

This mass form of progression and regression is seen to be hard wired deep within the psyche of living things.   This is what we have come to know today as the “herding principle,” and the herd seems to follow at “Fibonacci” ratios, as supported by many recent studies.

Human beings are hard wired for herding within their brains, which is a biological response they share with all animals. In fact, in studies performed by psychologist Dr. Joseph Ledoux, at the Center for Neural Science at NYU noted, “emotion and the reaction caused by such emotion occur independent and prior to, the ability of the brain to reason.”

In the 1997 paper entitled “Large Financial Crashes,” published in  iPhysica A, done for the European Physical Society, the authors, within their conclusions, present this summation for the overall herding phenomena that effect financial markets:

Financial markets are fascinating structures with analogies to what is arguably the most complex dynamical system found in natural sciences, i.e., the human mind. Instead of the usual interpretation of the Efficient Market Hypothesis in which traders extract and incorporate consciously (by their action) all information contained in market prices, we propose that the market as a whole can exhibit an “emergent” behaviour not shared by any of its constituents. In other words, we have in mind the process of the emergence of intelligent behaviour at a macroscopic scale that individuals at the microscopic scales have no idea of. This process has been discussed in biology for instance in the animal populations such as ant colonies or in connection with the emergence of consciousness.

One of the readers of one of our recent posts, made the following point regarding how news affects herding trends:

If we look at the stock market as a stream of ants marching bye in a single direction. Then run a stick across their path, though there will be a moment of confusion and reaction to the stick but ultimately the original parade of ants continues and the stimulus is forgotten.

Therefore, based upon much research, we can conclude that the market is on a path that is determined by a mass form of herding that is given its direction by social mood. That would explain the question of why markets go up on bad news or vice versa. It also takes out all the guesswork in attempting to determine how the next “big news”  may move markets.

So in order to perform an appropriate analysis on a an individual stock or the market as a whole, there is a significant amount of detail work which needs to be performed.  Since equity markets are fractal iby nature, any appropriately supported analysis must conform d to an appropriate wave structure.  

So we have developed a method wwhich takes much of the subjective analysis out of a standard waveform, and provides an objective analysis to our methodology. However, each wave must conform to these objective standards so we can predict movements with relative certainty.

That rarely provides an accurate analysis of tracking market sentiment, and when most of the projections based upon this type of “analysis” fail, you can now understand why.

This “analyst” also took issue with the fact that FM Wealth Management analysis suggests you should maintain both a primary analysis while at the same time maintaining an alternative analysis. 

This simply illustrates the foolishness of those who make who say we are calling it both ways.  As we have stated previously, financial markets are non-linear by nature.  For this reason, you need to adopt a methodology, such as this wave analysis, which adapts to the non-linear nature of the market.

SOUTH AFRICA SELLOFF

Elsewhere in currencies, Britain’s sterling built on strong GDP data boost to hit a 9-day high.

The dollar eased 0.2 percent to 113.515 yen JPY= after hitting a three-month top. It was also down 0.1 percent against a broader basket of major currencies.

South Africa's rand ZAR= was the day's big mover again though. It dropped another 1 percent after Wednesday's budget had slashed growth forecasts, ramped up debt projections and reignite fears for its investment grade credit rating. 

It left the currency down almost 4 percent and heading for its worst week since the sacking of a respected former finance minister in March. 

The Canadian dollar also saw a major shift. It was trying to claw back ground having fallen 1 percent to a three-month low of C$1.2816 per dollar CAD=D4 after the Bank of Canada sounded more cautious than of late in its policy statement. 

Among commodities, oil slipped a touch following an unexpected increase in U.S. crude inventories and high U.S. production and exports. 

Brent crude LCOc1 was down 15 cents at $58.29 a barrel by 0900 GMT. The global benchmark is not far below its 26-month high of $59.49 hit in late September. U.S. light crude CLc1 was 15 cents lower at $52.03. 

Markets have been supported by comments from Saudi Arabia’s energy minister earlier this week reiterating the kingdom’s determination to end a global supply glut that has weighed on prices for more than three years. 

Gold drifted higher, but the main metal market mover was aluminium CMAL3 which surged to its highest in more than five years as expectations grew that growing demand and cuts to output from China will squeeze supply.

Are The Markets Finally Ready To Correct

S&P
Last week we saw again the S&P500 (SPY) closed the week but also the month and quarter at an all time high. But if we take a look this isn’t how tops are made and a close at the high creates a ‘weak’ high. So in other words there is no sign of buyers rejecting prices.

Let’s look at last week’s SPY chart, which shows the rally was in line and it is moving in the same way as it did in March to July trading.

This would suggest that they may rally higher early this week, but it could fail and roll over near the middle to end of the week. If it were to do this we would have what we would consider a valid reversal pattern coming up. Most importantly, it will have the appropriate structure, and come in the right place.

So this means that our charts are showing some reverse engineering that will identify a top forming and from there we will get an indication on where the market should go if and when it turns.

So if we look at the bigger picture we start to line up very well. If you were to ask us which areas are important retrace levels, we could answer with pretty good accuracy. the pre -election low, the 2015/2016 low, and the 2000-2007 highs. It is very interesting to see how they line up with the when we look at the Fibonacci retracement levels.

So what can we conclude from all of this; the longer-term outlook we see the S&P is ready for a large drop, and the shorter term could roll over by the end of the week.

We are seeing that equities could be nearing the end of their rally. I we step bag to look at the bigger picture then we see that a major top is approaching, but in the short term prices are likely to head above last week’s high. Any retrenchment later this week to below 2520 could well signal the top is in now.

No Topping Signal Yet

Metals
We know the GLD has invalidated a potential bottom from yesterday, and dropped a bit lower into support, but no support has been broken in GDX, GLD or silver yet.

But, we cannot say that we only have good news today.   You see, the drop in GLD and GDX “CAN” count as 5 waves down off the highs.  With that being said, the manner in which the GDX has dropped provided positive divergence all the way down in that “potential” 5 wave downside structure, which means that the technicals do not support that count as being 5 waves down, but more so a corrective drop.

However, the GLD technicals can support it as a 5 wave drop, which is a warning sign to longs, and one I have to consider strongly. That means that if we see a rally over 126.80 which is corrective in nature, then we may have a set up that can take us down to the 123-123.75 region next, in a larger degree (i)(ii), as presented on the daily GLD chart. 

Moreover, a strong break of the 125.20 region can open a direct drop to the 123 region as well in a c-wave down in that wave (ii) on the daily chart.
Moreover, GDX may also see a drop down to the 23.50 region in a bigger a-b-c pullback if we cannot move through the 24.85 region in an impulsive fashion.  But, the technicals in GDX make it more likely that the drop in the GDX was corrective rather than impulsive.

Ultimately, the market has provided a really nice 5 wave structure off the 2015 lows which we classify as wave 1 off the bear market lows.  Our issue for the last 9 months has been trying to resolve where the wave 2 ends and the wave 3 begins.  We have strong potential for that wave 3 to begin from this point.  But, we are going to keep an open mind that wave 2 MAY not be over, until we are able to break out through the pivot box on the daily GDX chart, as we have discussed over the last few weeks.

FTSE falls as consumer stocks falter, Greene King drowns sorrows

A fall in mining stocks put pressure on Britain’s top share index on Friday, while British consumer-facing stocks came into sharp focus after pub operator Greene King’s (GNK.L) shares plunged following a bleak trading update.

The blue chip FTSE 100 .FTSE index ended down 0.3 percent at 7,377.60 points, while mid caps .FTMC declined 0.4 percent.

A decline in the copper price weighed on the FTSE’s miners, with Antofagasta (ANTO.L), BHP Billiton (BLT.L) and Anglo American (AAL.L) all down more than 3 percent.

Shares in mid cap brewer Greene King slumped more than 15 percent to a five-year low after it reported a fall in sales at its pubs, warning of tougher times ahead.

The rise in inflation following Britain’s vote to leave the European Union last June has squeezed consumer spending, which has also been hit by muted wage growth. This in turn has made it a difficult environment for firms in the pub, restaurant and retail industries.

Shares in rivals Marston’s (MARS.L), Mitchells & Butlers (MAB.L) and J D Wetherspoon (JDW.L) all fell, by between 2.6 percent and 8.5 percent. Among blue chips, Costa Coffee operator Whitbread (WTB.L) declined 0.6 percent.

The FTSE 100 ended a week dominated by a European Central Bank meeting with a loss of 0.8 percent. Banks, however, were among top gainers on Friday after the central bank indicated it was preparing to scale back its stimulus programme.

Burberry (BRBY.L) rose 0.5 percent on the back of a positive note from Credit Suisse, whose analysts raised the luxury goods group to “outperform”, highlighting it as one of their top turnaround picks.

Everything Except Equities, a Market Update

Bonds (TLT)

We haven’t spoken about on bonds since late June when we proposed a pair trade of short TLT, long gold, based on extreme short term divergence. This divergence is much narrower to the point that the trade is no longer makes sense.

Through the rest of the summer and fall, we would expect a short-term pop up followed by start of a new downtrend. There is one option for a new high to $132, but this would be in a rare up wave and wouldn’t go too far anyway. The main thing to consider is that rates are going higher.

The Dollar (UUP)

We have had our issues in calling the Dollar this year  (we can blame many factors but until the US government is in circus mode it will continue to be hard) but we were bound to call the dollar correctly sooner or later.

As we said, the move to 93.53 after NFP hit our first target at the 23.6% Fib, and we would expect some sideways consolidation for now. The gap at $90.9 is now the new target for the expected decline.

So What’s the Take Away?

Last week gold made an attempt at a break-out but we remain unconvinced it is significant and silver dropped from its trend-line. However, the weekly lower close indicates some balancing of positions and the next attempt will have a higher chance of breaking and going on a run. Our target for Gold remains $1,330-40.

Oil is short-term inconclusive and we showed the two possible options. If the second bearish option were to play out, we would look to add at around $45. Otherwise just hold for north of $60.

Natural gas continues to drop. We are still looking for a reversal, but obviously we assumed it would happen sooner and the fall is extending further than we first expected.  We believe that this week will bring a lower low and we should then see a strong reversal higher.

TLT has most likely peeked at $128.5 and is in the first stages of the next  wave down.
The dollar finally found some solid ground and should stabilize above $92.3 for a few weeks before breaking lower in a new wave of declines.

European stocks spring higher on reviving reflation trade

Strength among commodity firms and banking stocks as well as a string of solid updates boosted European shares in early deals on Tuesday. 

Earnings season remains front and centre for equities investors though focus will also be on the two-day U.S. Federal Reserve meeting which gets underway later in the day. 

The pan-European STOXX 600 index rose 0.3 percent, bolstered by strength in mining firms .SXPP and banks .SX7P while blue chips .STOXX50E gained 0.4 percent. 

Germany's DAX .GDAXI rose 0.1 percent, and the commodity-heavy FTSE 100 .FTSE was up 0.5 percent. 

Corporate results season gathered steam with British property developer Segro (SGRO.L) and business media group Informa (INF.L) leading STOXX risers after well-received first-half updates, both gaining around 4.5 percent. 

Europe's tech sector .SX8P was also buoyant after iPhone supplier AMS (AMS.S) raised its mid-term revenue target, while computer peripherals and mobile speaker maker Logitech (LOGN.S) also raised its outlook. 

Dutch paints maker Akzo Nobel (AKZO.AS) was one of the biggest individual drags on the STOXX, however, falling 1.3 percent after its second quarter profit missed forecasts.

Updates also weighed on paper maker UPM (UPM.HE), chemicals firm Croda International (CRDA.L), chocolate-maker Lindt & Spruengli (LISN.S) and Domino's Pizza (DOM.L), which all fell between 3 percent to 6.5 percent. 

While it is still early days for the European second quarter earnings season as only 20 percent of firms have given updates, more than half of those firms have beaten analysts' expectations, according to Thomson Reuters data. 

European deal-making also rolled on with U.S. retailer Michael Kors (KORS.N) agreeing to buy luxury shoemaker Jimmy Choo (CHOO.L) for $1.2 billion, sending Jimmy Choo's shares up 16.8 percent to an all-time high.

Sterling slips back towards $1.30 as BoE rate hike bets fade

Sterling slipped back towards $1.30 on Wednesday, adding to falls the previous day after weak inflation data poured cold water on expectations that the Bank of England will hike rates this year. 

The pound had risen above $1.31 to ten-month highs earlier in the week as the dollar fell across the board, and as investors bet that the 25-basis-point cut in British interest rates after last year's vote for Brexit could be reversed in the coming months. 

But BoE policymakers have made it clear that any monetary tightening will be data-dependent, and Tuesday's below-forecast consumer price numbers therefore fed doubt that rates could be tightened in the coming months. 

Having priced in a more than 50-percent chance of a 2017 hike before the data, investors are now pricing in only around a 40-percent chance, according to UBS Wealth Management currency strategist Geoffrey Yu. And even that, said Yu, looked too high, given that markets were pricing in a similar chance of a hike this year by the U.S. Federal Reserve. 

Sterling was 0.1 percent lower on Wednesday at $1.3026, still not far from a high of $1.3126 touched the previous day. Against the euro, it was a little higher at 88.425 pence, but only around a cent away from an eight-month low hit last week.

Tuesday's numbers showed consumer prices rose by 2.6 percent in June compared with a year earlier, down from a nearly four-year high of 2.9 percent in May.

The market is watching developments in Brussels closely, where Brexit secretary David Davis's team is in negotiations with the team of the EU's Michel Barnier to get a deal for Britain to leave the bloc. Any signs that Britain could lose preferential access to Europe's single market are likely to weigh on the currency.

U.S. makes lower trade deficit top priority in NAFTA talks

The United States on Monday launched the first salvo in the renegotiation of the 23-year-old North American Free Trade Agreement (NAFTA), saying its top priority for the talks was shrinking the U.S. trade deficit with Canada and Mexico. 

In a much-anticipated document sent to lawmakers, U.S. Trade Representative Robert Lighthizer said he would seek to reduce the trade imbalance by improving access for U.S. goods exported to Canada and Mexico under the three-nation pact. 

For the first time in a U.S. trade deal, the administration also said it wants an "appropriate" provision to deter currency manipulation by trading partners. The move appeared aimed at future trade deals rather than specifically at Canada and Mexico, which are not considered currency manipulators. 

The 17-page document asserted that no country should manipulate its currency exchange rate to gain an unfair competitive advantage, an often-cited complaint about China in past years. 

Shortly before the release of the document, President Donald Trump lashed out against trade deals and unfair trade practices, saying he would take more legal and regulatory steps during the next six months to protect American manufacturers.

The source said officials from the United States, Mexico and Canada would meet in Washington on Tuesday to discuss logistics of the talks. No date has been announced for the NAFTA talks, but they are expected in mid-August. 

Mexico's economy ministry said in a statement it would work "to achieve a constructive negotiation process that will allow trade and investment flows to increase and consolidates cooperation and economic integration to strengthen North American competitiveness." 

Trade experts have argued that shrinking the yawning U.S. trade deficit will not be achieved through trade deals but rather by boosting U.S. savings. 

Among the priorities, Lighthizer said the administration would seek to eliminate a trade dispute mechanism that has largely prohibited the United States from pursuing anti-dumping and anti-subsidy cases against Canadian and Mexican firms. 

There was no mention of active disputes between the United States and Canada over softwood lumber and dairy products, but the document targeted a range of agricultural non-tariff barriers, including subsidies and unfair pricing structures, that are currently at the heart of those standoffs. 

USTR said it would seek to strengthen NAFTA's rules of origin to ensure that the pact's benefits do not go to outside countries and to "incentivize" the sourcing of U.S. goods. It offered no details on such incentives and did not specify how much of a product's components must originate from NAFTA countries.

Healthcare and Biotech

The price of crude has somewhat stabilized, but for how long is the bigger issue. You can see in this daily chart of crude below, the commodity continues to hug its 3X3 DMA (blue line) lower. However, we would expect at some point at least a minor relief rally back above its 3X3 DMA before it does end up finding its way down around $37 per barrel.

It’s not for certain oil could rally in the interim, but we are pretty certain we’ll end up seeing $37 per barrel when it’s all said and done. It’s more a matter of how it’s going to get there.

It will be at that point we’ll start to strongly consider some quality energy names, but not before then. Unless of course we get some sort of majorly definitive reversal back to the upside, or more importantly some sort of strong fundamental change, but even that’s a reach at this point.

As for this morning’s early strength, it’s pretty broad based with transportation and tech leading the charge on the day so far, but even that’s questionable because everything is pretty much moving higher except for healthcare and biotech, which appears to be taking a slight breather following last week’s impressive rally in both sectors.

There’s no question at this point the bulls are winning the short-term battle, so there’s no technical context at this point to be short the markets, or even test the markets strength on the day. As a matter of fact, if you faded against these markets at any point over the last several days, Friday’s trigger above 6,255 takes those trades off the table now.

Even emerging markets are strong on the day with foreign driven U.S. ETF’s tied to Brazil, Mexico and Taiwan also doing very well on the morning so far.

We’ll need follow through to the upside, that’s for sure. However, based on what we’re seeing so far on the morning, it looks like we’ll end the month of June on new highs across all of the major indices. This once again suggests the trend is our friend until proven otherwise.

The bottom line is the possibility of a market selloff doesn’t appear to be in the cards until the S&P 500 potentially finds its way to that key 2,500 level.

Until then, we’ll continue to look for more ideas to exploit in an effort to maximize profits, while minimizing any potential downside risk.

BioTech Breakout

Biotech continues to rip higher following our bullish analysis earlier this month regarding LABU – one of the bullish leveraged ETF’s tracking the sector – and the biotech space in general.

Although we did recently suggest an exit of LABU for those who picked it up earlier in the month, we’re still convinced biotech, healthcare and pharma may end up leading these markets higher once the major indices are ready to resume their long-term bullish trend.

We’re noticing many small and large biotech stocks are starting to behave much better finally, which should be a welcomed event for many of you out there who like exposure to the space.

Below is a daily chart of BIB, another bullish leveraged ETF tracking biotech, and as you can see here, the ETF has made a tremendous move over the last few days.

Problem is, when you drill down into the weekly chart on much more of a long-term basis, you can also see the ETF has made a new multi-month high, and when we consider there’s probably an overly crowded trade setting up to the long side across the entire biotech space in recent days, don’t be surprised if these bullish leveraged ETF’s tracking biotech end up getting reversed in fairly sharp fashion soon.

It would be at that point – depending on where the major indices are – we’d likely suggest getting long the space yet again, and more importantly start exposing ourselves to even more quality healthcare and pharma names, in addition to select biotech names, in anticipation of a much bigger move to the upside over the next several months.

Something’s going to have to lead when these markets are ready to move much higher again, and considering the above mentioned sectors have been beaten down – both technically and fundamentally for quite some time – we’re assuming this is where the value will end up being.

It’s important to remember when it comes to stocks and the sectors they live in, money has no home. So, it’s likely to be those lagging sectors, including small caps, that will lead these markets higher when it’s time.

Potential Bottom Developing In Copper – Oil Update and the Russell 2000

What we’re saying here is if the Russell is any indication of the long-term landscape, these markets are NOT in the process of developing an extremely long-term top. Sure, we might get lower levels from here, but there’s just not enough volatility on the monthly charts to suggest a major developing top.

 

That’s good news for those of you who are looking to increase exposure in the months ahead, or for those of you just getting into the markets now. Although a little patience could go a long way right now, we do think the markets are going to end up going higher again when it’s all said and done.

On the commodity front, oil is seeing strength, which probably has a lot of oil bears a little frustrated. We’re not referring to our recent call for a reversal in oil back to the downside, but we are referring to those oil bears who continue to buy the headlines about building inventories and softening demand.

We’ve always been extremely skeptical about oil inventories etc. as it always seems to be a bit of a puppeteering game, but we do still believe oil should move lower now that it has found its way to $50 per barrel. We’re not saying oil’s moving dramatically lower on long-term basis, but we are saying it could be on the verge of a nice short-term reversal soon.

One commodity that has definitely resurfaced from a bullish technical perspective right now though is copper – and with our currently long Freeport-McMoRan Inc. (FCX), it’s entirely possible both of these stock and the more industrial precious metal could start trading substantially higher from current levels.

As you can see in this monthly chart of COPX, the primary ETF tracking the price of copper found its way thrusting above its 3X3 DMA (blue line) for pretty much all of 2016 and into early 2017. Since then, it has pulled back to its 3X3 DMA, but the 3X3 DMA did recently cross the 25X5 DMA (purple line), which can often be an early sign of developing strength.

Basically, we’ve got a number of solid technical reasons here to suggest a potential reversal in copper from current levels. As a matter of strong opinion, we’d be extremely surprised if copper didn’t start trading much better very soon.

The bottom line is any developing strength in copper soon should help FCX. No guarantees, but we do still like the long-term valuation metrics for FCX, and we definitely don’t think the demand for copper is going to wane anytime soon.

Potential Bottom Developing In Copper – Oil Update and the Russell 2000

Good day everyone. At least let’s hope it is considering what happened on Wednesday. There’s still some carnage out there for many, but despite Wednesday’s horrific single day selloff – something we’ve actually seen on many occasions over the last few years – the markets did come fighting back as expected yesterday. More importantly, the open ideas we have exposure to here weren’t all that compromised.

Where we go from here becomes the much bigger issue at this point. Although these markets could go either way, if you’re looking to take advantage of the weakness with a bullish bias, now’s probably not the time, not yet anyway. We pointed to the possibility yesterday of roughly 5,921 on the NASDAQ Composite or somewhere right around 2,300 on the S&P 500, but we haven’t gotten there yet, so a little patience for the bulls right now is probably warranted.

Interestingly enough, if we go solely on what small caps are telling us, specifically the Russell 2000 Small Cap Index, the longer-term chart here does suggest higher levels ahead. Not necessarily right away, but inevitably. As you can see on this monthly chart here, the Index has simply found its way back to its 3X3 DMA (blue line).

You can also see this comes after making new highs back in November, as well as spending the last several months sort of consolidating since then. This is actually very bullish to us long-term, because even though the Russell has sort of lagged that of the other major indices over the last few weeks, it does have every technical right to either finds its way below the 3X3 DMA for a few months and then rally from there, or simply start moving higher now that it has consolidate itself nicely.

Further, Energous has had a few very exciting news events over the last few months

Just last month the Company’s WattUp(R) won GOLD for its innovation at the Edison Awards. That’s a pretty big deal, because being recognized with an Edison Award has become one of the highest accolades a company can receive in the name of innovation and business.

Secondly, just ten days ago, the Company announced it has received Federal Communications Commission (FCC) approval of an advanced Near Field WattUp transmitter reference design. The updated transmitter is based on the recently announced DA4100 WattUp wireless power transmitter chip, which is made available through the company’s strategic partner, Dialog Semiconductor.

The DA4100 integrates multiple discrete components into a single silicon chip, reducing cost and implementation footprint, making an ideal in-the-box charging solution for many of today’s small electronic devices.

“This next generation Near Field transmitter reference design continues to advance the WattUp competitive advantages for small form factor and IoT devices with substantially lower bill of materials costs and a smaller footprint directly resulting from higher levels of system integration,” said Stephen Rizzone, Energous president and CEO.

That last line gives you just a few indications of Energous’ possibilities, and although there’s always an inherent risk associated with small stocks like this, WATT is one we definitely think is worth having “some” exposure to for the long haul.

Third, was the Company’s quarterly report just two days ago, and although the Company did lose $.57 cents per share on revenue of just $575K, the Company is projected to grow revenue next quarter by as much as 800%, over 600% year-over-year, and over 400% from this year to next.

As you can see, with the Company’s recent approval coming from the FCC, it should now be in position to start ramping up their revenue on a go-forward basis based on current projections.
Additionally, President and CEO, Stephen R. Rizzone said, “Energous is making substantial headway toward the successful commercialization of power at a distance.

The number of customers in the final stages of WattUp integration is growing rapidly, and consumer availability of these products is expected later this year. Demand for our technology is very high, progress with strategic partners continues to advance, and we are moving quickly to complete formal testing of our Mid Field power-at-a-distance transmitter to secure regulatory certification.

Technically, the stock has been on a bit of a tear over the last few days, so a short-term pullback would be no surprise. However, when we drill down into the monthly chart of WATT, we find the recent railroad tracks extremely attractive there. Meaning, last month’s red down bar has been matched by this month’s green bar back to the upside. At least so far anyway.

NASDAQ and Oil Charts – Short and Long-Term Analysis

Think these markets are ready to roar now following yesterday’s sharp move higher? Maybe. We’re not out of the woods yet. Sure, they do have every right to find much higher levels now, but we’ve seen these markets range bound now for the good part of two months. And, considering how they’ve continued to behave for quite some time, we can’t simply assume all that much just yet.

The bottom line is we must continue to maintain “an anything can happen” stance until proven otherwise. Nevertheless, yesterday’ rally was impressive indeed – one that was very broad based with financials, semis and transportation stocks leading the charge. The latter can probably be attributed to weakness in oil, something we’ll have a look at here today.

First, have a look at yesterday’s sharp rally, a move we pretty much were leaning toward with a modest degree of conviction. The lows were getting higher despite several single day attempts to tank these markets over the last several weeks. Now, we’re right back up against our all-time highs with yesterday’s close on the NASDAQ being a fresh new all-time closing high.

We do, however, have something brewing on the long-term chart of the NASDAQ that could end up being fairly definitive, a very long-term expansion level that sits just above 6,000 on this monthly chart below. Interestingly enough, it’s also roughly right around a key short-term expansion level as well.

Is it possible all of the major indices make new highs and then break down for a while? Yes, it’s entirely possible, because if we continue to get follow through on yesterday’s strength, it could end up breaking an awful lot of short sellers’ backs. Then, the markets could potentially rollover from there.

As for oil, this is really starting to become a bit of major story in and of itself. We’ve got literally every last financial talking head out there speculating about inventories, the future of energy – black or green – around the world, and all of the potential geopolitical issues that could end up effecting a commodity Wall Street has been speculating on forever.

While we’re going to leave all of the inventory questions up to those who “think” they know, we’re going to focus solely on the technicals – and there’s two things we’ll point out today with respect to oil, one extremely long-term and one extremely short-term.

Something not many ever talk about is what oil was doing just prior to one of the biggest crashes in market history, the crash of 2008. Provided below is a monthly chart of light crude dating back to well before 2008. See when that long-term rally first started in oil back in 1999? See the arrow we’ve pointed to here in 2008? That was August of 2008, just a few months before the markets imploded.

We bring that up because not many people talk about how significant oil is to the overall markets these days, especially on an extremely long-term basis. So, there’s plenty of reason to believe oil isn’t going to be a cause for concern for quite some time. Not now, not next year, and who knows maybe not even five years!

Nasdaq opens at record high as Wall Street rallies

The Nasdaq hit a record high at the open on Monday, with other indexes also surging, as investors breathed a sigh of relief after Centrist candidate and market favorite Emmanuel Macron won the first round of the French election.

The Dow Jones Industrial Average .DJI was up 212.56 points, or 1.03 percent, at 20,760.32, the S&P 500 .SPX was up 25.41 points, or 1.08 percent, at 2,374.1 and the Nasdaq Composite .IXIC was up 69.55 points, or 1.18 percent, at 5,980.08.

What election? French yields fall, euro steadies as vote looms

Global markets appeared largely calm on Friday, the last day of trading before the first round of France's closely fought presidential election, with French bond yields hitting a three-month low and the euro treading water.

A fatal attack on police officers in Paris overnight caused investors some immediate jitters, with the gap between French and German 10-year borrowing costs -- a key indicator of election nerves in recent months -- rising sharply in the first few minutes of trading.

Traders said this was on concern the attack could sway the vote in favor of far-right anti-immigrant candidate Marine Le Pen, whose anti-European Union stance is of concern o many in the markets.

But that move reversed as the session wore on, with the yield on 10-year French government debt hitting its weakest since mid-January and the gap between it and its German equivalent falling to its tightest in three weeks

Although falling yields usually indicate investors seeking safety, in the case of the election uncertainty lower French yields imply a more steady-as-she-goes approach to the future.

Investors seem relatively confident that while Le Pen might well win enough votes on Sunday to make the second round on May 7, she will then be comfortably beaten, probably by the market-friendly, centrist candidate Emmanuel Macron.

Having hit a three-week high close just below $1.08 earlier in the week, the euro was flat at $1.0717 EUR=.

European stocks edged down a touch, with the pan-European STOXX 600 index down 0.1 percent by 0910 GMT.

But options markets EURVOL= suggested investors remain worried about strong results for Le Pen and/or hard-left challenger anti-EU Jean-Luc Melenchon that would point to the risk of another major political shock for Europe in two weeks time.

Trading 101 – Don’t Bet Against the Markets Until the Markets Bet Against Themselves

See all of those arrows? It’s like chipping and chipping away at an icy fishing hole in the dead of winter. Eventually it’s going to crack, and that’s what appears to be happening so far on the day. It’s what happens on the potential upside crack that’s going to be far more meaningful.

Here’s the takeaway today with respect to the overall market landscape on a near-term basis; there’s no guarantee the NASDAQ is going to make that new high today. However, we are fairly certain – based on what we’re seeing on the daily and weekly charts – that these markets are NOT in the process of topping out right now.

Could they move lower from where they’re at now? Sure, but we just don’t think we’re on the verge of that major selloff everyone keeps talking about. It is possible these markets may need to back up one more time before they do finally make a big move higher, but unless something seriously changes, we just don’t think we’re going to get the big selloff so many continue to anticipate.

At the point the markets confirm something significant, we can always adopt a firm bearish stance. However, as evidenced by all of our open ideas right now, we’re just not ready to make that big market bet on a big reversal just yet. We’ve been close to making that big bet on a few occasions, but have yet to pull that trigger.

So, it’s still all systems go to the upside until proven otherwise. It would just be a lot nicer to see some of our longer-term ideas start performing a little better, but at least we’re in the green on nine of our twelve open ideas, and the green still far outweighs the red. Let’s hope it continues to stay that way.