Thread by @TihoBrkan

1/ It's time for a weekend summary.

Regards from Greece. I've taken some time from usual weekends off threads because I believe in spending time with family & friends is important.

Anyways, let's get into it. We start with the World Stock Market, which is still consolidating.

2/ For the majority of the last 19 months global equities have consolidated sideways. Keep in kind, Vanguard's World Index as the US weighting at almost 55%.

There was a sharp drop in the 4th QTR 2018 & identically sharp recovery in the 1st QTR of 2019. Similar to the US...

3/ ...but without the new bull market highs, which US equities have been able to achieve — first in September 2018 and even recently during mid parts of 2019.

There is a steady uptrend in relative strength by the US versus global equities.

4/ When analyzing the 3 key regions of the public equity space (US, EU & Asia) I like to view the total indices side by side and observe.

Global equities correlate closely, but relative strength is important. The US is the only region with a recent higher high & a higher low.

5/ This signals that (at least for now) the uptrend is intact. Furthermore, this is confirmed by the price remaining above the 1-year moving average (my fav MA indicator).

Drawdowns & short term trend?

US: -3.2% / uptrend
EU: -12.0% / uncertinity
Asia: -19.8% / downtrend

6/ Let's focus on some of the "key" indicators I look at every single weekend to gauge a "market pulse". The market of focus is the broad US equity index. $SPX $SPY

I look at volatility, breadth, sentiment, positioning, credit spreads, and relative strength.

7/ Do you guys all remember 2017? For some, maybe it's a distant memory. Every part of the market was up & volatility was extremely low.

However, since late 2017 VOL has been rising. Two major spikes in Feb 2018 & Dec 2018 shook the markets last year. VOL remains elevated.

8/ The rise in VOL coincides with strong selling pressure — something that can be noticed by tracking various breadth readings.

The # of new 52-week lows on the NYSE (very broad), shows a spike in Dec 2018, but recent sell-offs in May & Aug 2019 remain mild.

9/ Walked down the Ioa hillside & sat on some large volcanic rocks by the sea to do this weekend summary.

While analyzing the markets and checking the investor pulse, Santorini’s sunset was making this an experience not to forget (like the Bali sunsets from earlier this year).

10/ % of stocks above their 50-day moving averages. One of my fav breadth indicators.

A = panic washout, major bottoms
B = breadth thrust, new cyclical bull
C & D = normal corrections?

Do you agree with the working thesis of A, B, C & D? You might see it differently.

11/ Let's move onto the sentiment.

Posted an interesting chart earlier today from @hmeisler showing the Market Vane's Bullish Consensus.

A lot of fear out there.

https://twitter.com/TihoBrkan/status/1168050579756785664?s=20

12/ Newsletter advisors.

The recent sell-off, coupled with news articles focusing on the yield curve inversion & rising recession probabilities, got the so-called "pros" & "gurus" worried.

Percentage of bulls has dropped below 45% this week.

13/ Retail investors.

AAII sentiment survey spread of bulls minus bears, averaged over 4 weeks.

Since the bull market started in March 2009, only two dates (both of which marked major bottoms) had similar sentiment readings:

January 2016
December 2018

14/ Options traders.

I like to look at the 10-day average of total puts relative to calls. Spikes are evident in May 2018 (bottom), Nov 2018 (failed), Dec 2018 (bottom), May 2019 (bottom) and recently.

Furthermore, look at that cluster of readings over the ratio of 1 recently.

15/ Shorter-term sentiment checks, week by week & month by month, are important.

However, once in a while, it is also just as important to focus on the big picture.

Consumer confidence and clearly we can see the public is as bullish as it was in 2000. Something to keep in mind!

16/ Investment-grade spreads.

Not much has changed over the last few months. Spreads aren't widening during the yield curve inversion and Treasury rally.

Moreover, they are also not tightening either.

17/ Junk-grade spreads.

Similar story, but of course with more volatility in the high-yielding market.

When it's all said & done, spreads remain slightly elevated but pretty much quiet for now.

18/ The sun is about to disappear... it’s time for dinner, but first let’s look at the relative strength between US stocks and Treasuries, as well as the performance of the tech sector.

19/ US equities have gone through two major periods of underperformance against the US Treasury Long Bond zero-coupon, total return index.

First came in the 4th QTR of 2018 as stocks corrected sharply & second occurred just recently as Treasuries went into a parabolic blow off.

20/ Finally, the US technology sector $QQQ has held up even better. Only around -4% of a drawdown right now and sitting above the Jan 2018 highs as well as the Sep 2018 highs.

Tech continues to outperform the broad index & as long as this is the case, bulls remain in charge.

21/ The broad US equities has been flat. World equities disappointed. Treasuries & Gold have outperformed over the last 19 months.

Despite the on-going US-China trade war, one could say stock indices remain constructive. The sentiment is quite barish, too!

Fuel for a rally?

22/ Regards from Greece. Starting to get back to normal weekend posting and thread summaries again.

Next stop Australia.

If you are around (it's a pretty big contient 🤣)— drop me a line.