Is Tech Party over Fed and Grandma Yellen, ECB and Grandpa Draghi..

Is the Tech Stock party over??

So did the Fed crash the tech party and the bubble it created - what will it do to other asset bubbles. What will happen in the future with all the debt built up into the system and why have the billionaires become even richer in this cycle. The answer is Greed!! The Fed, ECB and central banks know that there is no way out of this debt cycle and bubble they have created and are responsible for. In the name of trying to save doomed and heavily taxed economies of the world and then making promises they cannot keep, the central banks are in a big bind - keep printing money and grow the debt or try to drain the liquidity. They have boxed themselves into a corner. 

The whole world has now over 280% debt to GDP ratio - Yes over 280% - thanks to Central banks and our crazy fractional banking system. Every nation is going to pay the price and the Fed has tried to perk up stock prices and has created another massive bubble in stocks and housing - it is called lather, rinse, repeat - when will these folks ever learn - that asset bubbles created from such loose monetary policies allow the folks at the top to get even richer and the lower class and middle class really do not get any benefit. Wages are stagnant and all the house buying is supported by elevated stock prices.

So did the Fed finally realize that the end is near.. and that they need to do something to stop their balance sheet from growing - did the ECB just realize that they are also complicit in perpetrating an asset bubble - just take a look at student debt, auto loan debt, and credit card debt just in the US. Consumer debt in UK, Australia and all countries is at exorbitant levels relative to income. Then there is corporate debt which has grown massively while rates have been low - will these go into default - what about the energy sector companies - will these be able to service their debt loads and their dividends?? 

The tech stocks and Nasdaq have had a massive run up and the valuations are at nose bleed levels. All these companies have manipulated earnings by doing stock buybacks and cost adjustments via layoffs and outsourcing. Real revenue growth is evident in very few companies and lot of the semiconductor companies businesses are very cyclical. Many of these stocks - specially like NVDA are trading at multiples given to very speculative companies or IPOs. We are betting heavily against NVDA and believe it is going lot lower. The daily chart shows a climax high on the day it touched its all time high of 168.5. In addition, the chart is parabolic in nature and parabolic charts never end well. We like QCOM as a better investment even though it is in the middle of some lawsuits and fighting the FTC and Apple. But their purchase of NXPI is an awesome addition to their portfolio as NXPI has huge presence in China. We do not believe the true benefits of this acquisition is reflected in the current stock price. NXPIs' RFID technology is omnipresent in China and the rest of the world (ROW) and growing. QCOM has enough cash to keep the dividend payout and if the government decides to change the tax rate on dividends then watch out and all dividend paying stocks will crash. See our video on youtube at: https://www.youtube.com/watch?v=dFC5iVaTkQY

So we think the bell on the NASDAQ and the semi stocks. We advise taking profits aggressively. All key indicators of market bullishness are at levels seen only in 1929 and 2007. 2000 bubble mania was higher and was the biggest bubble ever.

DOW stocks are doing well and it appears that energy may be bottoming here. We like CAT, DE and BA (wait to buy this one). The biotech sector still looks good but we would sell JNJ and MRK. Housing stocks look ok. Bonds are down recently - watch these closely.

Futures are pointing to a higher open for Monday Jul 3. This is very typical action prior to Jul 4th holiday. Sell into this rally any tech stocks and take profits. AAPL is still cheap but we would wait to buy at lower prices. We like NKE but keep a stop at 55. Weekly chart looks good. Chart for NKE - www.trucharts.com/stockcharts.aspx?TICK=NKE

Good luck trading. 

B. Bhatia

Founder

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What a week - sorry, we could not post over the weekend and then we had huge market movements in China, US and then the Greek referendum. 

China markets were down over 30% and the Chinese government made or passed laws to arrest folks who were aggressively short selling, then increased margin leverage, forced brokers to plead a measly 120B Yuan to buy stocks, banned companies from selling their own stock and I am not sure when this list will end. Well in response to all these wonderful government interventions, the markets rebounded yesterday to the tune of 200 points and everyone was getting excited. We are non-believers of this rally and think it will still take its own course eventually - we believe the China growth engine is slowing due to their shadow banking and debt problems of the state owned entities. We expect the Chinese GDP growth to drop to below the 7% number and the Chinese are very concerned. We stated that the world is mired in overcapacity and China is at the root of this overcapacity. We expect a slight bounce in the markets here, but the downtrend should resume - timing not clear. When you are minting a billionaire everyday, you will eventually have more billionaires than anywhere in the world... Bubbles, bubbles and more bubbles and the Chinese government does not know how to handle bubbles - amateurs. And they have been printing money non stop - this will come to haunt them someday.

Now Greece - well the referendum passed with an overwhelming NO to the Eurozone and it is not clear what the Grexit will look like - we believe the Eurozone members Germany and France are extremely concerned about the future of the Euro zone if they allow Greect to exit - this is called dismembering - if one falls will others follow - Italy, Spain, Portugal and who else!! That is the reason the Eurozone leaders are scrambling to prevent Greece from exiting - we still expect that this is inevitable.. 

US markets - We stated in our previous blogs that the markets were exhibiting topping action and sure enough we had the markets trying to hold levels of 18000 for the DOW, 2100 for the SP500 and the 5000 level for NASDAQ. This topping action was ongoing for 4-6 weeks with 3 digit moves every other day. Eventually the markets broke down and now the earnings season is in full bloom. Markets broke 200D SMA for DOW and we are closely watching the 17700 level now as resistance and 2070 for the SP500. VIX is elevated and we have to be on our toes. 

We had earnings report from Micron, which were lower than forecast and their outlook was grim. AMD re-enforced the slowdown in the PC markets and we expect the same from the overall semi sector. We stated to go short INTC or SMH and overvalued stocks such as AMBA, SWKS, NXPI and AVGO. We believe INTC buying ALTR was a desperate move from INTC and they paid a hefty premium for this. And as did AVGO buying BRCM for a hefty premium. There is no questions there is a major slowdown in this sector and we do not expect any major driver for this sector. Overcapacity is a definite issue and the phone markets are getting severely saturated in China and India.

Some good reads from this and the past week:

http://www.marketwatch.com/story/why-beijing-cannot-let-its-bull-market-die-2015-07-05?siteid=yhoof2

http://finance.yahoo.com/news/zeroing-empty-homes-china-throws-developers-lifeline-210739138--sector.html

http://www.zerohedge.com/news/2015-07-04/feds-full-normalization-will-crush-casino

http://www.zerohedge.com/news/2015-07-05/volatility-confusion-reign-pboc-intervenes-chinese-stocks-surge-then-tumble

http://www.zerohedge.com/news/2015-07-06/tumbling-futures-rebound-after-varoufakis-resignation-most-china-stocks-drop-despite

http://www.zerohedge.com/news/2015-07-05/hillary-ropes-everyday-reporters-creates-media-spectacle

http://www.zerohedge.com/news/2015-07-05/china-crosses-rubicon-stock-bailout-bofa-says-pboc-risks-hurting-its-credibility

http://www.zerohedge.com/news/2015-07-05/nightmare-euro-architects-coming-true-jpm-sees-grexit-base-case-split-eurogroup-comi

http://www.bloomberg.com/news/articles/2015-07-05/china-brokers-dust-off-wall-street-s-playbook-from-crash-of-1929?cmpid=yhoo

http://www.huffingtonpost.com/stacey-alcorn/inside-the-tank---mr-wond_b_7726504.html?ncid=txtlnkusaolp00000592

http://www.bloombergview.com/articles/2015-07-02/china-s-boom-has-world-bank-worried?cmpid=yhoo

http://www.bloombergview.com/articles/2015-07-04/ritholtz-s-reads-401-k-s-are-horribly-flawed

http://www.fool.com/investing/general/2015/07/01/greedy-drugmakers-change-could-be-coming.aspx?source=ihpsitota0000001&lidx=2

http://finance.yahoo.com/news/big-banks-spending-even-more-than-vcs-on-future-of-finance-145337246.html

http://finance.yahoo.com/news/chinas-stock-market-crashing-chinese-095900183.html

We are long BIDU,CYBR with covered calls written and short INTC,SWKS,AMBA. We went long WBA today for a short term trade. 

We recommend that you hedge your positions by buying some put protection and selling some covered calls. 

Check out some new features on our site and help us spread the word - we rely on word of mouth advertising - we focus our funds on driving development of our site. 

Here are some charts for DIA, SPY, and QQQ - weekly: 

 

Keep an eye on 50 week SMA for all the above symbols - these are critical support. In addition, watch IBB to see if it closes this week below 13 week SMA - if it does - it is ripe for a short.

Best of luck trading.

Trucharts team.

Was it a market Correction? Or the start of something bigger?

Market Correction or is the market going to crack here?

Markets on Friday pulled back and broke the 50d and 13d SMA from the wedge pattern we discussed in our last blog. The NASDAQ closed above its 50d SMA. Here are the charts with critical short term trendlines. We expect support for SP500 around 2048 area and for the DOW around 17450. For NASDAQ, around 4850. These will be short term critical support areas. 

There was news on new housing starts which was not good heading into the peak home buying spring season and the housing stocks - check (www.trucharts.com/stockview.aspx?TICK=LEN as an example). Then we had news from Greece and possible default, then the news of the slowdown in China growth and the stock market bubble - investors opened over 4.8M accounts in one week - think about that number 4.8M in one week - Wow!! China is experiencing the same bubbles we had in the US - stocks bubble, housing bubble and then now again stock bubble. There are bubbles brewing everywhere and now for the first time San Francisco median price crossed $1M - this is what happens when money printing machine is running non-stop.

Check the trendlines for the DOW, SP500 and NASDAQ. Watch the levels closely. We have been in a sideways consolidation pattern after the breakout in Oct of 2014. There have been breakouts, but the markets have still been in a sideways pattern. Support for DOW is around 17000, SP500 support is at 1980 area.

With the earnings season in full force there have not been too many surprises - PM raised forecasts and the tech companies have had lackluster earnings - even the forecasts have been muted. We think this is the peak of the tech cycle. 
We are looking to short XLK (www.trucharts.com/stockview.aspx?TICK=XLK) 
and/or SMH/IPGP (www.trucharts.com/stockview.aspx?TICK=IPGP) for the short term. 

There is a another set of earnings barrage coming next week and the week after - IBM, AAPl, TWTR, YHOO and many more - check this link on our site for the earnings calendar: http://www.trucharts.com/EarningsView.aspx?qst3=qstthisweek.

Our all long portfolio was down only 0.1% on Friday even though the markets were down over 1% each and our long/short portfolio was up 0.5% on Friday. We hedge all our positions and our TWTR position was called away on Saturday. We are long MO, USO, BIDU, TWTR. Short positions are AEM, IBB and SNDK position closed on Saturday.

Check out our special susbscription rates for full access - our features are bar none the best of the web - we are aware of other sites that charge just $35 per month for the real time news feature. Here is the link to our subscription page and our site features:

http://www.trucharts.com/truCharts_Services.aspx

http://truchartscom.blogspot.com/p/why-is-trucharts.html

Good luck trading.

Trucharts Team

Are you buying or selling? We are selling..

Trucharts.com - Free Stock charts - MACD charts & Technical Analysis

Markets pulled back today giving up most of the wonderful gains yesterday - a bull trap. We stated to take profits in the rally and hedge your positions. We are heading into earnings season and be ready for some nasty surprises from the tech sector for Q2 earnings, and energy sector earnings. Gold has been dropping and oil has been pushed down to a potential nuclear agreement with Iran and what this will do the current glut situation. Biotech stocks were getting clobbered today and we think this is profit taking in this sector by the mutual funds for end of quarter performance numbers. The biotech sector has been moving up in an exponential fashion and we are still short IBB. Be prepared - we are already in the sixth year of this bull market and expect a pullback and maybe a meaningful is coming. Check out our automated trading strategies on our site to see if your stock is on a buy/sell signal. We are long TWTR. and short SMH.

In addition, we are recommending selling AAPL. 

UPDATED:

Read this: Our theory of a top forming.


http://www.zerohedge.com/news/2015-03-31/april-anxiety-75-year-itch

Trucharts Team