Slope of Hope Blog Posts
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Stocks vaulted higher (once again) today, with many indexes at or very near lifetime highs. There certainly may be gasoline left in this most recent rally, but I wanted to point out some important thresholds in emerging markets that could mark a point of exhaustion, since these markets will be hitting their own lead walls of overhead supply.
First, very broadly, there is the emerging markets. I’ve placed a marker showing where SlopeCharts indicates the point of resistance.
With every single asset moving higher today, I wanted to point out that the laggards overseas have an opportunity to catch up as well. Although their topping patterns are well-formed, there is ample upside until such time as those overhead supplies are met. Such as emerging markets:
I was just about totally out of hope that any down market could ever take place and yet Trump, inexplicably, is making enemies of our largest trading partner. Hey, works for me – – nuclear war, alien invasion, I’ll take ANY reason for a down-move. If Trump wants to wreck the economy, I say: cool!
Price action on the following monthly chart of China’s Shanghai Index has been under the bearish influence of a very long-term downtrending Andrew’s Pitchfork channel since it peaked in October 2007 and bottomed the following October.
After a weak attempt to break out above this channel at the end of January of this year, it retreated and is currently dropping early Tuesday morning following President Trump’s latest threats several hours ago to impose tariffs on an additional $200 billion worth of Chinese goods in connection with their recent trade war. It has broken below its near-term major support level of 3000 that I had identified in my posts of April 9 and February 16.
If this index returns to its channel “median,” it’s in for one heck of a plunge! Look for a break and hold below its last swing low at 2638.30 to continue its current downtrend on this monthly timeframe. It’s already in downdrend on the weekly and daily timeframes following its failed channel breakout attempt and the momentum indicator is firmly in downtrend on all three timeframes. (more…)
Following is the opening segment of this week’s edition of Notes From the Rabbit Hole, NFTRH 504. For months now we have been tracking a divergence in the key cyclical Semiconductor Equipment segment (I am short AMAT & LRCX) to the broader Semi sector (ref. the most recent article from May 18th here) and this week we put more context to the divergence.
A Bull in a China Shop
In light of the developing trade war between the US and China, let’s review the all-important Semiconductor sector and in particular, the Semi Equipment segment, which is a key economic early bird (and canary in a coal mine).
Various sectors took hits on Friday as Trump moved forward with Tariffs on China. But most of those sectors and industries are follow-on aspects of the economic cycle, which got its start when the early bird chirped in early 2013.
With China in Trump’s crosshairs and China a very key player in Semi Fab Equipment, there is a fundamental reason that the Equipment companies are faltering. From SEMI by way of a post at nftrh.com in March.
“SEMI predicts Samsung will lead the pack in fab equipment spending in both 2018 and 2019, even though it will invest less each year than in 2017. By contrast, China will dramatically increase its year-over-year (YOY) fab equipment spending for the next two years – by 57 percent in 2018 and 60 percent in 2019 – to support fab projects from both overseas and domestic companies. The China spending surge will thrust it past Korea as the top spending region in 2019.” (more…)
Well, it’s nice to see at least ONE equity market getting blown all to hell. That’s Brazil. In a way, this collapse was neatly predicted by the ultrashort BZQ, which had a beautiful base. It has been a monster ever since.
Having gone to bed after writing last night’s post, I woke up at 2 a.m. and glanced at the iPad permanently placed at my bedside. I was very surprised to see – – well – – just about everything. For one, there was an absolutely huge spike in bonds (green tint) which, as I am typing this now, has almost totally faded.
The following year-to-date graphs of the U.S. Major Indices and Major Sectors show that market participants have favoured riskier technology, small-cap, and consumer cyclical stocks.