Nell's Trading Notebook: Techs Punished. Algos Strike. Tesla Smokes

09/07/2018 2:12 pm EST

Focus: MARKETS

Nell Sloane

Principal, Capital Trading Group

A quick note this week on a few things that stood out to us. Before we delve into the markets, we note that we lost someone special this week and our time has been devoted to celebrating a life, long lived and dedicated to helping those in need on Chicago’s west side.

For nearly 60 years this man dedicated his life to medicine, surgery and the city in which he loved. He was inspired to come here after the U.S. Army liberated his country and from then on, he knew he had a much larger purpose in life. That purpose was to give back all he could, when he could and at any cost. He will be missed by many.

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So, let’s move on then, and discuss a few charts that we think may be of influence this week.

Underlying the majority of our current economics are headwinds stemming from a tighter Federal Reserve and a subsequent stronger dollar. Add to all that the #MAGA movement full of tax cuts and tariffs and a deglobalization that has punished the emerging markets at a time where their massive debt loads are being decimated by a stronger dollar and America first policy.

These undercurrents are strong and will ultimately lead to an economic downturn as cycles do indeed eventually come to an end.

We aren’t going to make a call as to when, but we are cognizant of the undertow and we are willing to react on a moment’s notice.

We know where the money is hiding (U.S tech sector) and we know that the metals (hard money) is being culled by forced liquidation, something we have opined on many times in the past. In fact, the metals downturn led the equity downturn in 2007 and so it’s on our radar once again.

Earlier last week our friend David Wienke of Cabrera Capital sent us this quarterly chart of the S&P 500 (SPX). It is a quarterly chart with a 1x fib extension. Our readers know how much we admire the natural law of fibs and thus, we respect the set up in this chart immensely:

SPX

Another chart he so graciously sent us was this one for Coffee. Another important fib number beckons and thus this chart looks just as enticing as a nice hot mocha latte on a cold Chicago morning in the middle of a blustery winter, which BTW, this year’s winter we hear certainly won’t disappoint. 

Anyway, this chart is a function of the weaker Brazilian real and thus we must be cognizant of that, however, it still looks rather appealing:

Coffee

We have Nonfarm Payrolls Friday and of course the Fed meeting this month and as much as the Fed will most likely stay the course, we can’t help but think, what are the fixed income markets telling us?

Is the U.S. Treasury 2-year/30-year curve hinting at a possible pause? Or is this just a great location to reset some flatteners:

Tus

When we look at the German DAX market, we have noted lately the strong lower support band that has been used as stopping point for global equity markets.

Well, it has given away this week and thus pressure may continue to mount if we don’t see a quick reaction up move away from here.

DDU

The Nasdaq was punished Sept. 5 and you can see the algos having to dump the last few hours as every up move was clearly sold into:

ENQ-1

Just to highlight some obvious weakness our next two charts are posting sub 20% down moves since putting in their highs, first up Facebook (FB):

SFB

Netflix (NFLX) has also now rejoined the down 20% club from their recent highs:

NFLX

What would the equity market weakness report be without highlighting Tesla!

In what should be of massive concern to Mr. Musk, that is instead of his current cussing match with some no-name reporter, perhaps he would be better served noticing that his Tesla bond market tail is now wagging the Tesla (TSLA) equity market dog.

Reuters: Tesla rocked Friday by latest exec shakeup, Musk's behavior on webcast.

TSLA

Good luck this week and now that summer is officially over, back to the grind for all our trading and investing personnel, now the real fun begins…or not!

Cheers!

Nell

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