degraaf s Weekly Survival Guide to the Markets February 14, 2017

Transcription

1 Follow us on degraaf s Weekly Survival Guide to the Markets February 14, 2017 Click here for Video Click here for Video on ipad (link enabled after you download and open this report on a PDF reader on ipad) Click here for Audio Only Jeffrey degraaf, CMT, CFA Rob Ginsberg technical@renmac.com rginsberg@renmac.com Alex Meintel, CMT Patrick Nipper, CMT, CFA ameintel@renmac.com pnipper@renmac.com Michail Adzhiashvili madz@renmac.com Kevin Dempter, CMT kdempter@renmac.com Important legal disclaimer on last page sales@renmac.com 1

2 Despite New High, Internals Still Grinding Historical excess returns since Today s reading suggests below average returns out 1- and 3-momths out. 2

3 So Far February Stronger Than Average Market tends to pause in February, but the drawdowns are generally muted. 3

4 10yr Yield Consolidating 4

5 2-yr Yield Signaling Economic Strength Yield breakout now consolidating 5

6 Baa Spreads Support Firm Economy Baa spreads contract when economy is improving. Earnings tend to rise, defaults contract and the economy runs hot. If Earnings don t improve market is vulnerable. 6

7 US $ Poised to Resume Uptrend Tactically bullish, but we d say this trend is in the later innings. 7

8 S&P Tops $20 Trillion As a percentage of GDP, this remains well off the peak of

9 Global Country Strength Momentum U.S. continues to be vulnerable to risk adjusted under-performance for If we re right about global growth and the relative deltas associated with Europe and EM, we want to be there. Contrarian 9

10 European Bond Spreads Widening ECB s quasi-taper starting to get a reaction in bond spreads by country. 10

11 Euro BBB Spreads Rising, Not Breaking Out 11

12 European CDS Spreads Starting to Diverge 12

13 Global Industrials Still Firm Breakout 13

14 EM CDS Spreads ARE Confirming Strength 14

15 Topix Looks Good (In Yen) Handle BASE 15

16 Seeing Modest Momentum Contraction 16

17 Continued Cyclical Bias in Our Work Momentum Contrarian 17

18 SERM & Ranking Heat Map(9M) Top number = XS return Bottom number = Expected return Given path probability and associated return 18

19 Sentiment in Materials Suggests More Upside Semis and banks are seeing the biggest contraction in supportive option positioning. 19

20 Bank Option Positioning Deteriorating Not yet bearish, but option positioning has taken a turn that s tactically less supportive of banks than where we were at the beginning of the year. 20

21 Option Score and Excess Returns Our option scoring system has efficacy out as far as 6-months. While out- and under-performance is modest, it is statistically significant. 21

22 Aluminum Breaking Out Solid Bullish Base 22

23 Steel Resuming Trend Post Consolidation Big Bullish Base 23

24 Select Steel Names 24

25 Lumber Breaking Out 25

26 Forest Products Bullish Base 26

27 Select Forest Products 27

28 Energy Net 20-day Highs - Lows Net 20-day highs lows at an oversold level consistent with buying opportunities in uptrends. 28

29 Air Freight Buyable Out of Oversold Condition 29

30 Auto Components Breaking Out BASE Confirming 30

31 Select Auto Components 31

32 Contrarian Call These are not good charts, but momentum and SERM so bad as to imply bullish forward returns 6-12 month forward. The names are responding favorably to external oversold condition. 32

33 Signs of Internal Capitulation Spikes in 65-day lows tend to imply a capitulative attitude for the group. 33

34 Realized Volatility Also Suggesting Capitulation 34

35 Good and Bad Charts in Group Potential base Potential turn, strongest name in group Downward momentum starting to wane Worst chart, potential climactic exhaustion, but risky 35

36 Strong Group in Discretionary Base Breakout 36

37 Internals Confirming Strength A surge in 65-day highs tends to be a bullish intermediate indication. Buy weakness. 37

38 Good Charts in Space 38

39 Top Technically Ranked S&P 500 Names New entrants highlighted in green Materials: Industrials: Discretionary: Staples: Financials: Technology: DOW LLL CMI IR CCL NFLX RAI MS NTAP GLW LLTC MOS NOC PCAR URI RCL MO NTRS HPE AMAT SWKS FMC GD DE FAST DIS ETFC AAPL QRVO ADI DD COL SWK GWW CMCSA STT XRX QCOM TXN EMN LMT PH NSC SNI SCHW HPQ AVGO LRCX ALB TXT CAT UNP CHTR GS STX KLAC NVDA MLM UTX DOV CSX FOXA WDC INTC FCX RTN ITW JBHT TWX TEL MCHP NUE BA FLS OMC APH XLNX PWR SNA CBS FLIR MU New entrants highlighted in red Bottom Technically Ranked S&P 500 Names Discretionary: Staples: Telecom: Utilities: MAT LKQ URBN WMT CTL NI COH TGT CVS FTR RL M KORS DLTR UAA DG VFC LOW PVH SIG NKE TSCO HBI BBBY GPC LB 39

40 Bullish Base 40

41 Bullish Base 41

42 Oversold and Bouncing, but Ugly Trend 42

43 Renaissance Macro Research, LLC Global Disclaimer This document has been prepared by Renaissance Macro Research, LLC ( RenMac ), an affiliate of Renaissance Macro Securities, LLC. This document is for distribution only as may be permitted by law. It is published solely for information purposes; it is not an advertisement nor is it a solicitation or an offer to buy or sell any financial instruments or to participate in any particular trading strategy. No representation or warranty, either express or implied, is provided in relation to the accuracy, completeness or reliability of the information contained in this document. The information is not intended to be a complete statement or summary of the markets, economy or other developments referred to in the document. Any opinions expressed in this document may change without notice. Any statements contained in this report attributed to a third party represent RenMac's interpretation of the data, information and/or opinions provided by that third party either publicly or through a subscription service, and such use and interpretation have not been reviewed by the third party. Nothing in this document constitutes a representation that any investment strategy or recommendation is suitable or appropriate to an investor s individual circumstances or otherwise constitutes a personal recommendation. Investments involve risks, and investors should exercise prudence and their own judgment in making their investment decisions. The value of any investment may decline due to factors affecting the securities markets generally or particular industries. Past performance is not indicative of future results. Neither RenMac nor any of its directors, employees or agents accepts any liability for any loss (including investment loss) or damage arising out of the use of all or any of the information. Any information stated in this document is for information purposes only and does not represent valuations for individual securities or other financial instruments. Different assumptions by RenMac or any other source may yield substantially different results. The analysis contained in this document is based on numerous assumptions and are not all inclusive. Copyright Renaissance Macro Research, LLC All rights reserved. All material presented in this document, unless specifically indicated otherwise, is under copyright to Renaissance Macro Research, LLC. None of the material, nor its content, nor any copy of it, may be altered in any way, or transmitted to or distributed to any other party, without the prior express written permission of Renaissance Marco Research, LLC. 43