Here is the S&P 500 Index. It is a five-year chart. Every candlestick represents a month.
The S&P 500 is the world’s most crowded trade. The largest ETF by market cap is the SPDR S&P500 ETF (NYSE: SPY). The Vanguard 500 Index is another popular, low-cost way to trade the index.
As you can tell by the chart, the S&P 500 has gone sideways for two years now. Today, we briefly hit an all-time high.
The problem is that this chart is like meeting a hot girlfriend at the beach. She is looking for fun, but are you the fun she had in mind? In other words, it is noncommittal — but once it decides, the party is on.
This chart could be a coiled spring, and today’s breakout would signal a jump to 2,700.
Or, given the state of earnings, debt, and the global deflationary slowdown, it could be a head fake, and that doji that appeared at the top of the up-trend is the true signal.
For those that don’t know, a candlestick shows four things in one image. The horizontal lines are the open and close. The vertical lines are the highs and lows of the period.
If a candlestick is red, it closed down. If it is white, it closed up. Candlestick trends average three to five days.
When you have a long run in one direction, a turnaround happens. When the bulls and bears fight to a standstill, you get a candlestick that looks like a cross. This means that the longs and shorts are at an impasse. The momentum has stalled, which sets up profit taking (or bargain hunting, in the case of a downtrend reversal).
Land of the Rising Sun
Speaking of a coiled spring… This is my favorite stock of the weekend. It’s Nintendo. It jumped about 40% this morning on the huge, crushing success of Pokémon Go.
The Pokémon Go app jumped to the number one app on the planet a day after it was released. It now has more active users than Twitter and a market cap of $26 billion.
The app uses maps on your smartphone, and you wander around and capture creatures out in the real world. Heck, it even made my teenage daughter get off the couch and go outside. Truly a remarkable product. Though I wouldn’t chase it here, I did put out a tweet @TheDailyHammer on Friday telling folks it was going to go much higher.
Nintendo Co. Ltd. $NTDOY is up 10% today on new Pokemon Go app. Will go higher. This thing is crushing it.
— Christian DeHaemer (@TheDailyHammer) July 8, 2016
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Japan Tells General MacArthur to Shove It
Speaking of Japan in a bit more serious tone, a new election means Japan will soon be free to gear up for war.
On Sunday, the Japanese voters gave current Prime Minister Shinzo Abe a clear two-thirds majority in the upper house. Abe said he will push forward with his fiscal reforms, which include cutting taxes and increasing defense spending. He will also push to end the constitutional amendment Article 9, which outlaws war. This is a platform that he ran on and the voters clearly want.
ARTICLE 9. (1) Aspiring sincerely to an international peace based on justice and order, the Japanese people forever renounce war as a sovereign right of the nation and the threat or use of force as means of settling international disputes.
(2) In order to accomplish the aim of the preceding paragraph, land, sea, and air forces, as well as other war potential, will never be maintained. The right of belligerency of the state will not be recognized.
Article 9 was forced on the Japanese by General Douglas MacArthur in 1947. The idea was to end Japanese aggression forever…
Forever isn’t as long as it used to be.
The Japanese, in response to the aggression of the Chinese in the South China Sea, are going to rearm in a big way. They will start producing tanks, battleships, and submarines like so many Toyota Camrys.
In last week’s Crisis and Opportunity, I advised my readers to buy a particular Japanese defense contractor that will see the bulk of this new money headed its way.
If you had bought Halliburton (NYSE: HAL) when Bush the Younger was elected, you would have made more than 600% gains.
All the best,
Christian DeHaemer
Check us out on YouTube!Christian is the founder of Bull and Bust Report and an editor at Energy and Capital. For more on Christian, see his editor’s page.
