The FAANGs: What I'm Watching

Together, the 5 FAANG stocks + 5 tech stocks make up FNGU (an exchange traded note that tracks 3x the daily price movements of an index of US-listed technology and consumer discretionary companies...the index is highly concentrated and equally weighted).

The following 1-year and 2-month daily charts of these 10 stocks, FNGU, plus INTC, show price action relative to their 20 and 50-day MAs, as well as the Rate-of-change (ROC) technical indicator.

Ten out of twelve of them have broken their uptrends, some more recent than others, while others have been mired in sideways consolidation zones for months. "Shock drops," together with high volumes and accelerating ROC, occurred last week on FB, TWTR, INTC and FNGU, while NFLX experienced those on July 17 and is attempting to stabilize.

The following daily chart of FNGU shows that price has dropped below the 40% Fib retracement level (69.00) and has broken its uptrend. Price closed last Friday at a low-volume level of the Volume Profile depicted along the right-hand side of the chart.

Near-term resistance lies between 68.62 and 69.00, while first support sits at 50% Fib retracement of 63.21, followed by  price support at 60.00. The Volume Profile POC (point of control) sits well below at 53.98.

Over the next few days/weeks, I'll be watching to see if FNGU, either breaks and holds above resistance at 69.00, or whether it continues to drop to the above-noted support levels, or lower. Accelerating volumes and ROC in either direction may provide clues for longer-term sustainability of trend...not only for FNGU, but, potentially, also for the eleven tech stocks mentioned above.

Chill Out...Over ICE

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U.S. Banks and 2 & 10-Year Yields

During the past year, or so, U.S. 2-Year Treasury Yields have shot up sharply, in comparison with 10-Year Yields, as shown on the following weekly price comparison chart and percentage comparison chart.

The next (longer-term) percentage comparison chart shows the weakness that ensued in the SPX when the 2-YT crossed below the 10-YT.

The following (short-term) percentage comparison chart shows that the 10-YT gained more this past week than the 2-YT.

Keep an eye on whether last week's outperformance of the 10-YT was just an anomaly, or whether it may be a signal of a potential tightening of the spread between it and the 2-YR. If we see a continued narrowing of this spread, it may signal bad news for U.S. bank stocks, and, potentially, the SPX.

At the moment, the Financials ETF (XLF) is hovering just above major support at 27.00, as shown on the following monthly chart, and the banks stocks are stuck in their respective consolidation zones, as shown on the last monthly chartgrid.

Watch for signs of weakness if:

• XLF drops and holds below 27.00, 
• bank stocks break and hold below their congestion zones, and
• the spread narrows between the above-mentioned 2 and 10-YR yields.

On a more ominous note, if, longer term, we see a crossover of the 2-YR below the 10-YR on accelerating momentum, we'll likely get quite an equity market downturn.

President Trump's European Wrecking-Ball Tour

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THE FALLOUT

One month after sabotaging the G7 meeting with his refusal to endorse the Joint Statement that was released (with which he originally agreed), President Trump met with NATO allies last week and, subsequently, British Prime Minister May, and criticized all of those world leaders in one way or another (he also rudely kept 92-year old Queen Elizabeth waiting in the heat for her meeting with him), he then met with Russian President Putin, long considered a foe of the U.S., and publicly failed to hold him accountable for meddling in the 2016 election. Instead he praised him at a press conference immediately following their meeting yesterday...as illustrated in the following video.

Furthermore, he played a victim (in front of his adversary) with his denials and accusations surrounding his election, which made him appear as a weak and pathetic whiner...rather than as a commander-in-chief of the most powerful country in the world. Hillary Clinton continues to play a victim, but she lost her presidential bid...Trump did not, but acts as though he did.

Even long-time Trump ally, former Republican Speaker of the House, Newt Gingrich, was critical of his performance...

For an interesting take on that press conference, check out this article by former Chief Assistant U.S. Attorney, Andrew McCarthy.

President Trump's damage-control statement that he made today failed to believably rectify his many blunders, nor did it assuage the gravity of his entire fawning posture on full display towards Mr. Putin at this press conference. Today's explanation (where he changed one word, "would" to "wouldn't"), unequivocally, did not fit the context in which his original statement was delivered (it's clear from his statements made just prior to and after the word, "would," that what he originally said at the press conference was what he did, in fact, intend to say)...nor did it excuse the entirety of his self-damaging remarks he made yesterday.

10th Year U.S. Bull Market Run Versus 'Summer Swoon'

Further to my post of March 10, we may be seeing the beginnings of a 10th year bull run, inasmuch as volatility of the SPX, NDX, and RUT has been attempting to stabilize recently.

However, this attempt is not yet a slam dunk. As noted on the following daily ratio charts of the SPX:VIX, NDX:VXN, and RUT:RVX, I'm still waiting for:

SPX:VIX ratio: a bullish crossover of the 50 MA above the 200 MA to form a Golden Cross
NDX:VXN ratio:  a bullish crossover of the PMO technical indicator
RUT:RVX ratio: a bullish crossover of the PMO technical indicator

All other technical indicators must continue to hold their present bullish formations, and price needs to hold above their respective major support levels, namely:

SPX:VIX: 200
NDX:VXN: 350
RUT:RVX: 80

From the next chart, which compares price action and percentages gained year-to-date of the four major indices, we see that the Dow 30 and S&P 500 Indices will need to pick up the pace in order to provide some kind of assurances to traders/investors that there is broad support for a 10th year bull run.

Otherwise, we just may see a 'summer swoon,' as I described in my post of June 30. In this regard, I'm continuing to monitor the World Market Index (last chart). If we see a break and hold above its next resistance level of 2000, a reversal of the bearish moving average Death Cross to form a bullish Golden Cross, and maintenance of bullish formations on all three technical indicators, such a swoon may be averted.

Keep an eye on the above three ratio charts, as well as the World Market Index for cross-confirmation of either scenario.