Follow us on Twitter @renmacllc 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 212-537-8822 212-537-8819 technical@renmac.com rginsberg@renmac.com Alex Meintel, CMT Patrick Nipper, CMT, CFA 212-537-8820 212-537-8825 ameintel@renmac.com pnipper@renmac.com Michail Adzhiashvili 212-537-8818 madz@renmac.com Kevin Dempter, CMT 212-537-8821 kdempter@renmac.com Important legal disclaimer on last page sales@renmac.com 1
Despite New High, Internals Still Grinding Historical excess returns since 1957. Today s reading suggests below average returns out 1- and 3-momths out. 2
So Far February Stronger Than Average Market tends to pause in February, but the drawdowns are generally muted. 3
10yr Yield Consolidating 4
2-yr Yield Signaling Economic Strength Yield breakout now consolidating 5
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
US $ Poised to Resume Uptrend Tactically bullish, but we d say this trend is in the later innings. 7
S&P Tops $20 Trillion As a percentage of GDP, this remains well off the peak of 1999. 8
Global Country Strength Momentum U.S. continues to be vulnerable to risk adjusted under-performance for 2017. If we re right about global growth and the relative deltas associated with Europe and EM, we want to be there. Contrarian 9
European Bond Spreads Widening ECB s quasi-taper starting to get a reaction in bond spreads by country. 10
Euro BBB Spreads Rising, Not Breaking Out 11
European CDS Spreads Starting to Diverge 12
Global Industrials Still Firm Breakout 13
EM CDS Spreads ARE Confirming Strength 14
Topix Looks Good (In Yen) Handle BASE 15
Seeing Modest Momentum Contraction 16
Continued Cyclical Bias in Our Work Momentum Contrarian 17
SERM & Ranking Heat Map(9M) Top number = XS return Bottom number = Expected return Given path probability and associated return 18
Sentiment in Materials Suggests More Upside Semis and banks are seeing the biggest contraction in supportive option positioning. 19
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
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
Aluminum Breaking Out Solid Bullish Base 22
Steel Resuming Trend Post Consolidation Big Bullish Base 23
Select Steel Names 24
Lumber Breaking Out 25
Forest Products Bullish Base 26
Select Forest Products 27
Energy Net 20-day Highs - Lows Net 20-day highs lows at an oversold level consistent with buying opportunities in uptrends. 28
Air Freight Buyable Out of Oversold Condition 29
Auto Components Breaking Out BASE Confirming 30
Select Auto Components 31
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
Signs of Internal Capitulation Spikes in 65-day lows tend to imply a capitulative attitude for the group. 33
Realized Volatility Also Suggesting Capitulation 34
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
Strong Group in Discretionary Base Breakout 36
Internals Confirming Strength A surge in 65-day highs tends to be a bullish intermediate indication. Buy weakness. 37
Good Charts in Space 38
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
Bullish Base 40
Bullish Base 41
Oversold and Bouncing, but Ugly Trend 42
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