deGraaf’s Weekly - New Renmac Website Test · 2018. 11. 19. · deGraaf’s Weekly Survival Guide...

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Jeffrey deGraaf, CMT, CFA 212-537-8822 [email protected] Rob Ginsberg 212-537-8819 [email protected] Alex Meintel , CMT 212-537-8820 [email protected] Chetan Jain 212-537-8818 [email protected] [email protected] deGraaf’s Weekly Survival Guide to the Markets Important legal disclaimer on page 49 October 15, 2013 1 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

Transcript of deGraaf’s Weekly - New Renmac Website Test · 2018. 11. 19. · deGraaf’s Weekly Survival Guide...

Page 2: deGraaf’s Weekly - New Renmac Website Test · 2018. 11. 19. · deGraaf’s Weekly Survival Guide to the Markets Important legal disclaimer on page 49 October 15, 2013 1 Click here

Policy Index and Volatility

2

Washington has been a consistent driver of volatility over the last 5-yrs. Equities seem to be seeing through this latest issue.

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Thursday’s Thaw Was Accumulative

3

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Volume Skews Were Unusually High

4

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5

Strongest Portion of Equity Seasonality

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Daily Seasonality for Q4

6

Typically a trading range for first 3-weeks of October, and then acceleration in last week that rarely looks back. Note year end surge.

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Low Quality Dominating High

7

We would expect high quality names to outperform low quality if the economy was on the brink of weakening. Not happening.

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Industrials Still Strong

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IPO Index Outperforming

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Russell 2000 Makes a New High

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Attribution in Month Before Peak – Russell 2000 (Sector Neutral)

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Peaks of 1990, 1994, 1998, 2000 & 2007 Peaks of 1989, 1994, 1998, 2000 & 2007

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Attribution in Month Before Peak – S&P 500 (Sector Neutral)

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Peaks of 1990, 1994, 1998, 2000 & 2007

Current attribution is inconsistent with previous peaks. Usually valuation is shunned, while price momentum and historical growth rates are endorsed. This time may be different, but we believe behavioral mistakes tend to be an irresistible force near peaks.

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Internal Trends Weakening

13

600

800

1,000

1,200

1,400

1,600

1,800

S&P 500 (SP50)

Price - Close or Current Intraday

2009 2010 2011 2012 20130%

20%

40%

60%

80%

100%

Renaissance M acro Rese arch - Te chnic al Analysis

10/14/2013 = 77.00%

% OF ISSUES WITH 50 DAY M.A. > 200 DAY M.A.

Part of this weakness is due to the bond substitute trade unwind, but not all of it. This may be an early warning of breadth divergence. Very little additional evidence of a problem exist.

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Consensus Sentiment Neutral

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Put/Call Spike Coincided w/ Low

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Term Structure Also Gave Buy Signal

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Cyclical Trend Repelled Yield’s Advance

17

We believe positioning needs to moderate, and yields can contract back to 2.50% as mean-reversion to the most recent momentum. We can not turn bearish until the cyclical trend has been broken.

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Bond Sentiment Still Offsides

18

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Bond Market Priced Extreme Outcome

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1-Year US Default Risk

20

Approaching levels last seen during the debt downgrade of 2011 and equity lows of 2009. Forward returns post these types of spikes are obviously decent.

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Overall Credit Remains Firm

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Page 22: deGraaf’s Weekly - New Renmac Website Test · 2018. 11. 19. · deGraaf’s Weekly Survival Guide to the Markets Important legal disclaimer on page 49 October 15, 2013 1 Click here

HY Spreads Remain Tame

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Page 23: deGraaf’s Weekly - New Renmac Website Test · 2018. 11. 19. · deGraaf’s Weekly Survival Guide to the Markets Important legal disclaimer on page 49 October 15, 2013 1 Click here

S&P 500 Leverage at a Low

Financials account for a large proportion of this contraction in leverage.

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Page 24: deGraaf’s Weekly - New Renmac Website Test · 2018. 11. 19. · deGraaf’s Weekly Survival Guide to the Markets Important legal disclaimer on page 49 October 15, 2013 1 Click here

Health Care is the Outlier

Leverage is expanding notably in healthcare.

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Leverage is Bullish

25

The Fed believes that higher leverage is negative, but on further testing, our econ team (Neil Dutta and Rudy Narvas) found that when it turns positive from a negative condition it’s very good for equities and the economy. In other words, from a depressed level, the increase in leverage is a sign of confidence, not rampant speculation.

Page 26: deGraaf’s Weekly - New Renmac Website Test · 2018. 11. 19. · deGraaf’s Weekly Survival Guide to the Markets Important legal disclaimer on page 49 October 15, 2013 1 Click here

When Leverage Turns Up From <0

26

Nonfinancial

leverage above

zero and rising

Nonfinancial

leverage above zero

and falling

Nonfinancial

leverage below

zero and falling

Nonfinancial

leverage below zero

and rising - Current

phase

DJIA 6% -5% 8% 16%

S&P 500 7% -8% 8% 19%

Energy 18% -22% 10% 20%

Materials 5% -19% 17% 18%

Industrials 8% -26% 17% 22%

Consumer Discretionary 7% -19% 24% 19%

Consumer Staples 4% -9% 15% 15%

Health Care 8% -16% 12% 19%

Financials 6% -30% 20% 23%

Info Technology 9% -29% 25% 20%

Telecom Services 10% -35% 12% 13%

Utilities 16% -33% 15% 6%

Russell 2000 9% -20% 18% 21%

CRB -2% 4% 7% 9%

Gold 11% 14% 6% 9%

Copper 12% -17% 10% 26%

WTI Oil 19% -13% 6% 14%

DXY 0% 3% -4% -1%

BoAML Corp Bond Index 6% 6% 13% 4%

Ryan Labs Securities Treasury Index 11% 8% 14% 0%

Source: Renaissance Macro Research, Haver Analytics

Note: Sectors, Russell and DXY data begins 1991; DJIA, S&P 500 & CRB 1974; gold 1975; copper 1990; oil 1982; BoAML 1987;

and Treasury index 1980.

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Global PMI Improving

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European Banks Breaking Out

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FX is an Important Window Into EM

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Page 30: deGraaf’s Weekly - New Renmac Website Test · 2018. 11. 19. · deGraaf’s Weekly Survival Guide to the Markets Important legal disclaimer on page 49 October 15, 2013 1 Click here

Several Optimal Entries This Week

New entrants

highlighted in

green

Optimal entry

points outlined in

blue

Top Technically Ranked S&P 500 Names

Bar Width: Higher Ranks – Thicker Lower Ranks - Thinner Color Coding: Overweight- GREEN Underweight – RED Last Week

Healthcare: Industrials: Materials: Tech: Energy: Staples:

KEY CME DLPH TRIP ACT BA ECL FLIR COG KR

NYX JPM JCI PCLN MYL DAL LYB TEL PXD WAG

MCO NDAQ GT WPO LUV PPG JBL SWY

BAC BRK.B BWA VIAB RHI DOW CSC CVS

C MHFI F GCI EFX IP MU COST

ICE LNC GM FOXA DNB WFM

HOG CBS NLSN

SBUX TWX

CMG IPG

NFLX

Financials: Discretionary:

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Page 31: deGraaf’s Weekly - New Renmac Website Test · 2018. 11. 19. · deGraaf’s Weekly Survival Guide to the Markets Important legal disclaimer on page 49 October 15, 2013 1 Click here

Equal Weight Ranking

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Page 32: deGraaf’s Weekly - New Renmac Website Test · 2018. 11. 19. · deGraaf’s Weekly Survival Guide to the Markets Important legal disclaimer on page 49 October 15, 2013 1 Click here

Discretionary is a Mixed Bag

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Page 33: deGraaf’s Weekly - New Renmac Website Test · 2018. 11. 19. · deGraaf’s Weekly Survival Guide to the Markets Important legal disclaimer on page 49 October 15, 2013 1 Click here

Seeing Some Weakening Internals

33

150

200

250

300

350

400

450

500

S&P 500 / Consum er Dis cretionary -SEC (SP285)

Price - Close or Current Intraday

2009 2010 2011 2012 20130%

20%

40%

60%

80%

100%

Renaissance M acro Rese arch - Te chnic al Analysis

10/14/2013 = 81.93%

% OF ISSUES WITH 50 DAY M.A. > 200 DAY M.A.

Page 34: deGraaf’s Weekly - New Renmac Website Test · 2018. 11. 19. · deGraaf’s Weekly Survival Guide to the Markets Important legal disclaimer on page 49 October 15, 2013 1 Click here

REITs Dominate Lower Ranking

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Industrials Strength is Persistent

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Technology is Decent

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Page 37: deGraaf’s Weekly - New Renmac Website Test · 2018. 11. 19. · deGraaf’s Weekly Survival Guide to the Markets Important legal disclaimer on page 49 October 15, 2013 1 Click here

Optimal Entry Point In Staples

37

35

40

45

50

55

60

65

CVS-US RenMac Rank: 1CVS Caremark Corporation Drug Retail

Price 50 Day Moving Average 200 Day Moving Average

1/12 4/12 7/12 10/12 1/13 4/13 7/13 10/13

100

105

110

115

120

125

130

Page 38: deGraaf’s Weekly - New Renmac Website Test · 2018. 11. 19. · deGraaf’s Weekly Survival Guide to the Markets Important legal disclaimer on page 49 October 15, 2013 1 Click here

Optimal Entry Point In Energy

38

15

20

25

30

35

40

COG-US RenMac Rank: 1Cabot Oil & Gas Corporation Oil & Gas Exploration & Production

Price 50 Day Moving Average 200 Day Moving Average

1/12 4/12 7/12 10/12 1/13 4/13 7/13 10/13

80

100

120

140

160

180

Page 39: deGraaf’s Weekly - New Renmac Website Test · 2018. 11. 19. · deGraaf’s Weekly Survival Guide to the Markets Important legal disclaimer on page 49 October 15, 2013 1 Click here

Optimal Entry Point In Financials

39

6

7

8

9

10

11

12

13

KEY-US RenMac Rank: 1KeyCorp Regional Banks

Price 50 Day Moving Average 200 Day Moving Average

1/12 4/12 7/12 10/12 1/13 4/13 7/13 10/1395

100

105

110

115

120

125

130

135

140

Page 40: deGraaf’s Weekly - New Renmac Website Test · 2018. 11. 19. · deGraaf’s Weekly Survival Guide to the Markets Important legal disclaimer on page 49 October 15, 2013 1 Click here

Optimal Entry Point In Financials

40

70

80

90

100

110

120

BRK.B-US RenMac Rank: 1Berkshire Hathaway Inc. Class B Multi-Sector Holdings

Price 50 Day Moving Average 200 Day Moving Average

1/12 4/12 7/12 10/12 1/13 4/13 7/13 10/13

95

100

105

110

115

Page 41: deGraaf’s Weekly - New Renmac Website Test · 2018. 11. 19. · deGraaf’s Weekly Survival Guide to the Markets Important legal disclaimer on page 49 October 15, 2013 1 Click here

Optimal Entry Point In Financials

41

30

35

40

45

50

55

JPM-US RenMac Rank: 1JPMorgan Chase & Co. Other Diversified Financial Services

Price 50 Day Moving Average 200 Day Moving Average

1/12 4/12 7/12 10/12 1/13 4/13 7/13 10/13

90

95

100

105

110

115

120

125

130

Page 42: deGraaf’s Weekly - New Renmac Website Test · 2018. 11. 19. · deGraaf’s Weekly Survival Guide to the Markets Important legal disclaimer on page 49 October 15, 2013 1 Click here

Optimal Entry Point In Industrials

42

60

70

80

90

100

110

DNB-US RenMac Rank: 1The Dun & Bradstreet Corporation Research & Consulting Services

Price 50 Day Moving Average 200 Day Moving Average

1/12 4/12 7/12 10/12 1/13 4/13 7/13 10/13

90

95

100

105

110

115

120

125

Page 43: deGraaf’s Weekly - New Renmac Website Test · 2018. 11. 19. · deGraaf’s Weekly Survival Guide to the Markets Important legal disclaimer on page 49 October 15, 2013 1 Click here

Optimal Entry Point In Industrials

43

30

35

40

45

50

55

60

65

EFX-US RenMac Rank: 1Equifax Inc. Research & Consulting Services

Price 50 Day Moving Average 200 Day Moving Average

1/12 4/12 7/12 10/12 1/13 4/13 7/13 10/13

100

110

120

130

140

Page 44: deGraaf’s Weekly - New Renmac Website Test · 2018. 11. 19. · deGraaf’s Weekly Survival Guide to the Markets Important legal disclaimer on page 49 October 15, 2013 1 Click here

Big Base Breakout

44

5

10

15

20

25

30

35

40

45

DOW-US RenMac Rank: 1

The Dow Chemical Company Diversified Chemicals

Price 50 Day Moving Average 200 Day Moving Average

'09 '10 '11 '12 '13

40

50

60

70

80

90

100

110

Page 45: deGraaf’s Weekly - New Renmac Website Test · 2018. 11. 19. · deGraaf’s Weekly Survival Guide to the Markets Important legal disclaimer on page 49 October 15, 2013 1 Click here

Vulnerable Name

45

4

5

6

7

8

9

10

20

30

40

50

60

70

EXPE-US RenMac Rank: 4

Expedia, Inc. Internet Retail

Price 50 Day Moving Average 200 Day Moving Average

'09 '10 '11 '12 '13

50

100

150

200

250

300

350

Page 46: deGraaf’s Weekly - New Renmac Website Test · 2018. 11. 19. · deGraaf’s Weekly Survival Guide to the Markets Important legal disclaimer on page 49 October 15, 2013 1 Click here

Vulnerable Name

46

15

20

25

30

35

40

45

URBN-US RenMac Rank: 4

Urban Outfitters, Inc. Apparel Retail

Price 50 Day Moving Average 200 Day Moving Average

'09 '10 '11 '12 '13

60

70

80

90

100

110

120

130

Page 47: deGraaf’s Weekly - New Renmac Website Test · 2018. 11. 19. · deGraaf’s Weekly Survival Guide to the Markets Important legal disclaimer on page 49 October 15, 2013 1 Click here

Vulnerable Name

47

6

7

8

9

10

20

30

40

50

60

70

RHT-US RenMac Rank: 4

Red Hat, Inc. Systems Software

Price 50 Day Moving Average 200 Day Moving Average

'09 '10 '11 '12 '13

100

150

200

250

300

Page 48: deGraaf’s Weekly - New Renmac Website Test · 2018. 11. 19. · deGraaf’s Weekly Survival Guide to the Markets Important legal disclaimer on page 49 October 15, 2013 1 Click here

Top 25 Portfolio

48

Sold STZ

Sold MCO

Sold EMN, CRM

Sold PHM, LYB

Sold FLS

Sold CCI

Sold MPC

Sold WHR, VLO

Sold CSC

Sold STX

Sold FSLR

Sold THC

Sold TSO

Sold NWL

Sold HD Acquisition S

Sold C

Sold SCHW

Current Holdings: NFLX HIG TRIP LOW

V BAC EFX

PPG PNR DLPH

Q2 Replacements: REGN EA ACT

MU GME WDC

Q3 Replacements: BBY SWY YHOO GT

DAL CELG ETFC

Page 49: deGraaf’s Weekly - New Renmac Website Test · 2018. 11. 19. · deGraaf’s Weekly Survival Guide to the Markets Important legal disclaimer on page 49 October 15, 2013 1 Click here

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. 2013. 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.

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