FINANCIAL ICEBERG

Always consider hidden risks

​

CHARTS

SP500 : Warnings from Canaries in the Coal Mine ?

​( From MacroBusiness, Short Side of Long, Zero Hedge, Examiner )

If you would like to receive our free daily markets updates, please Sign-up



Caterpillar : CAT ( Right scale )

SP500 ( Left scale )​

It seems that the market is disconnect between the global economy based in construction and real demand from the transportation stocks...





​​​So on a macro basis, it is two more worries to add on...

Federal Express : FDX ( Right scale )

SP500 ( Left scale )​

Caterpillar Inc. (CAT) fortunes are tied to the macro situation, which is always a concern for many investors. In particular, the construction and mining machinery company is seen as highly exposed to the Chinese economy both directly and through Australian operations.



​​Caterpillar's retail sales of machines -13% Y/Y in three months to February vs -12% in three months to January, with AsiaPacific -26% in Dec-Feb, North America -12%, EMEA -9%, Latin America +3%. Power Systems sales -7% in February period, as in January period; electric power -8%, industrial -25%, transport +15%, petroleum -8%.

​

About FedEx : "The third quarter was very challenging due to continued weakness in international air freight markets, pressure on yields due to industry overcapacity and customers selecting less expensive and slower-transit services," said Frederick W. Smith, FedEx Corp. chairman, president and chief executive officer. "In response, beginning April 1, FedEx Express will decrease capacity to and from Asia and will aggressively manage traffic flows to place low yielding traffic in lower-cost networks. We are currently assessing how these actions may allow FedEx Express to retire more of its older, less-efficient aircraft. We remain focused on our strategic cost reduction programs, which are ramping up and on track."

From time to time, it is interesting to take a broader view of the market, a longer time horizon or different indicators that can warn us of a change in the major trend for the SP500 and his friends ; they are my canaries in the coal mine !

Technicals Canaries

SP500 Triple Top ?



​​ But the hard reality is that the great “Triple Top” that started with the 2000 highs is part of a massive distribution pattern of historical importance. This pattern becomes even more important when we look at the equity markets from the longer and larger historical framework of facts.

Cash avalaible for purchases for the MSCI World Index



​​For the first time since February 2011 (major market peak), global fund managers are now underweight cash. Furthermore, cash balance levels have fallen towards 3.8%, from the highs of 5.5% about a year ago. The above charts shows that the majority of funds are now close to fully invested.



With that in mind, it is definitely worth finding out where fund managers have exposed their capital?



SP500 in YEN



Since dec 31 over 16% performance for a Yen based investor vs ​​9.8% for the SP500 in US dollar . So we can expect that Japanese investors will take some profit this week, corresponding with their year end...



Read also : ​​

​​ SP500 and US Treasurys : their destiny linked to Mr Yen

SP500 High Beta Fatigue

​

SPHB is an ETF PowerShares S&P 500 High Beta Portfolio and is a good play for the risk-on environment. SPHB tracks 100 stocks from the S&P 500 index that have shown the highest betas and holdings are rebalanced quarterly. Top sector allocations include financials, energy, information technology, materials and industrials.

​​

The graph below shows the under performance of high beta stocks for the past two weeks...​

Fondamentals

SP500 Profit Margins



​​S&P 500 profit margins have dropped rather notably in the last two quarters - now at their lowest since Q1 2010 - not exactly what the stock market need for a continuation of the bull market...

SPHB ( Candle / Right scale )

SP500 ( Bar Chart / Left scale )​

SP500 in YEN ( Left scale )​

Credit disagree with SP500



HYG ​​is a High Yield Corporate ETF Bond Fund. And we see lately that the risk off within the credit spectrum... An early warning sign ?

HYG ( Candle / Right scale )

SP500 ( Bar Chart / Left scale )​

Two Bellweather - Caterpillar and Federal Express



​​​​It is very interesting to note the huge divergence between two bellweather global stocks ( one in construction and the other in delivery packages ) and compare to the SP500 ( See graphs below )