Markets Macro Technicals Sven Henrich

Media

Below please find summaries of select media mentions/appearances. For detailed market commentary and analysis please refer to the Market Analysis section of the website.


cnbcJanuary 5, 2016

Bull market is in its final inning

On Friday, blue chip shares in the Dow Industrial Average flirted with the psychologically charged 20,000 level, which have largely been driven higher by anticipation over President-elect Donald Trump’s business-friendly policies. Yet a few observers think the party is nearly over, and the punch bowl is about to run dry.

“Risk has been priced out of the market,” said Sven Henrich of NorthmanTrader.com on CNBC’s “Futures Now.” Henrich, who is known online as the Northman Trader, said that despite the abundance of optimism on the part of investors, technical indicators could be pointing to some near-term pain.

 According to the Northman’s chartwork, every time the S&P 500 Index has hit new highs, it eventually retreats back towards its weekly 25-day moving average line, which would translate to a 4 percent pullback from current levels. The S&P 500 has rallied 6 percent since the election, and hit an intraday record high on Friday.

“I would expect that at some point there would be a buying opportunity for people who may want to invest in this market,” said Henrich. “But if this line breaks, we may see significantly more downside that we’ve seen in previous corrections as well.”

cnbchighs

What’s more, Henrich also believes that the S&P 500 has continued to trade in a “bearish wedge pattern” that began just after the end of the last recession. The wedge pattern Henrich speaks of consists of two trend lines: One that runs along the S&P’s highs and a second that runs along its lows, that look to meet sometime in 2017. It is at that point that Henrich believes the rally will have run its course, and a downside will soon follow.

cnbc-wedge

Summary Video Clip:

cnbc

Full video clip:

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marketwatch

December 22, 2016

With caution being thrown to the wind, it’s time to get some protection

Negativity has been replaced by positivity, any sense of caution has been thrown to the wind, bullishness is pervasive, and bears look like idiots. In short: All the conditions one wants to see if one is interested in a market fade or at least in getting some protection.

On Dec. 4, I suggested new highs on markets were a fading opportunity, especially in context of low volatility. I outlined technical upside risk into 2,235-2,275 on the S&P 500 SPX, -0.46% Subsequently, the SPX exceeded my risk range by two points before retreating a bit.

Firstly, a long-term monthly chart of the SPX reveals the entire 2016 rally to be a lot weaker than advertised as it comes with pronounced negative divergences in relative strength and a weak moving average convergence/divergence (MACD) in context of a very much narrowing bearish wedge pattern:

caution

In light of recent market strength I stand firm in my analytical view that risk is highly underpriced and markets continue to set up for major pain as recent highs have come in context of larger bearish structures that have produced a newfound bullishness in markets, perhaps a key ingredient that was lacking over the past couple of years.

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marketwatchDecember 12, 2016

The Twitter accounts investors need to follow in 2017

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@NorthmanTrader — Chartist who goes by “Northy” waxes wise on markets and technicals on his website here. Some of his tweets are locked, but he sneaks out a few that are always worth a look. You can also find him guesting at MarketWatch from time to time under his real name, Sven Henrich.

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marketwatchDecember 6, 2016

Red flags are flying for tech shares

One of the big technical red flags over the past few years has been weak internal participation. Particularly during the May 2015 highs we noted weakening internal structures that ultimately culminated in the August 2015 down move. The correction in January and February was no exception.

The reason this is of particular interest: This summer’s new highs were driven by technology, specifically the high-cap tech players that control most of the market cap of the index. While some call this sector rotation, I see it as money desperate for yield chasing whatever is popular at any given moment, a tale of headlines full of sound and fury, signifying nothing.

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While I see potential technical upside risk into 2235-2275 on the S&P 500 SPX, -0.46% the underlying picture continues to suggest what it has in the past several years: Selling strength especially in context of new highs and low VIX readings.

Bottom line: Downside risk is much larger than the upside risk in my assessment.

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marketwatchNovember 24, 2016

Hot Air?

Stocks have made new all time highs within days of falling below November 2014 highs following the election night lows on promises of additional government stimulus.

Yet here we can observe a negative divergence: Stocks above their 50-day moving average (MA) are much lower than at recent highs, indeed following a similar trend we saw at the May 2015 highs: A declining number of stocks above their 50-day MA. And perhaps even more pronounced, note how the SPX has completely diverged from its components above their 200-day moving averages, a very strong negative divergence vs. summer highs:

Bulls have one big problem in further advancing markets here and that is complacency. As perfection and a stock nirvana are priced into markets, the VIX is back to the low end of the range with multiple open gaps above:

vix-60

While not all gaps fill, data history shows that all VIX gaps tend to, which strongly suggests a VIX spike to come with lower prices being part of the equation. It is how markets react then that we see how much of this advance was indeed hot air.

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cnbc

November 10, 2016

The line stocks can’t afford to cross

Summary:

There’s a key technical level which could disrupt the market rally sparked by Donald Trump’s win, according to a widely followed market watcher.

“If you look at the long-term chart of the S&P [500 Index] futures, this week we actually saw a test of the long-term support trend line back to 2009. That only happened after-hours and in overnight action,”said NorthmanTrader founder Sven Henrich recently on CNBC’s “Futures Now.”

However, he added “that confirms this trend line. It’s a very steep trend line. It’s an important trend line.”

Henrich argues investors are seeing ‘quite the panic sector rotation’ right now. And, it’s been helping to drive the Dow to all-time highs. He’s also forecasting volatility levels are bound to increase significantly going into next year.

“While we see this massive rally in the last week, we need to be keeping in mind that on the short-term chart, we actually have broken the February trend line that would support from February into Brexit,” said Henrich.

“We broke it in September and now we are re-testing it from the underside. Until we break above that, this rally is still very suspect,” he added.

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marketwatch

November 4, 2016

Why this ‘bull market’ is really a myth

Summary:

“Despite having made marginal new highs on select indices, markets haven’t been in a bull market since GAAP earnings peaked during the spring of 2015. If this thesis is correct, volatility is still much too low, and investors can expect volatility to rise into 2017.

The recent pullback has brought the S&P 500 SPX, -0.17%  back below its December 2014 highs, highlighting the fact that the larger market has gone nowhere over the past two years. It is true that select indices have made new highs this summer yet, as I highlighted in September (Time to Get Real), these new highs came on major negative divergences flashing warning signs. More troubling is that the broader indices have failed to make new highs and the recent pullback has caused further technical damage by breaking key support trend lines to the downside.”

perf2

These numbers suggest that this bull market is a myth. And these broad performance measurements highlight why so many funds are underperforming.

Where is the bull market? It’s in a very select group of high-cap tech winners that are largely responsible for propelling indices such as the SPX and the Nasdaq 100 NDX, -0.40%  to record highs this summer.

Yet their strength highlights the fragility of this market: Narrow leadership holding up a broader market that is weak. So should anything happen to these few leaders, markets are at risk of major damage beyond what we have already seen.”

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marketwatchOctober 6, 2016

Regarding $TWTR the stock:

October 6 chart:

twtr

Sven Henrich, otherwise known as Northman Trader, says Twitter has been in a “constant downtrend” since the IPO, making a “double bottom” in February and May. But he noted that shares are now back near that listing price.

“In lieu of buyout [talk], the stock must hold $20/$21 or risk heading back into the $14-$19 range,” he said, in emailed comments.

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October 10 chart update:

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marketwatch

October 5, 2016

The chart:

Exactly how much of a bull market do we have here? Not much, going by this chart from Northman Trader’s Sven Henrich:

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It shows market performance from May 22, 2015 to the present, covering the S&P 500, Dow industrials, Nasdaq, Russell 2000 and FTSE All World Index, among others.

Henrich says the Nasdaq has reached its highs on the back of a handful of high-cap stocks. “Much of the rally off of the lows has been driven by a renewed collapse in yields again driving the TINA (there is no alternative) effect,” Henrich tells MarketWatch.

“With financials and the larger $NYSE being down 5-6% compared with the highs last year and earnings being down 15%, it is perhaps a bull market in name only,” he says.

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cnbcSeptember 26, 2016

Discussing the potential risks of an upcoming recession

Summary:

“Despite all the uncertainty and rancor surrounding November’s U.S. presidential election, one thing is clear: Past trends indicate that the economy could be facing a recession — and could drag the market down with it.

So believes Sven Henrich of NorthmanTrader.com, who crunched the historical figures that suggest, regardless of who becomes the next president, the markets could be in trouble. According to Henrich’s analysis, data show that since 1960, 70 percent of new presidents face an economic downturn very early in their first term.

“In this particular cycle, we’re seeing something that we’ve never seen before in any U.S. election, and that is neither candidate, whether it’s Hillary Clinton or Donald Trump, have a majority support within the population,” said Henrich. “So no matter who wins, in January Americans are faced with a president that the majority doesn’t support.”

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marketwatchSeptember 23, 2016

Outlining how market price continues to be driven by the Fed.

Summary:

“So what have we learned? Northman Trader’s Sven Henrich says the market has been behaving like a kooky cartoon character. This chart shows just how wacky it was, as it followed the dictates of Fed utterances:

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Investors should be cognizant that higher prices here are driven by two factors only: performance-chasing by underperforming funds, and global central banks adding liquidity at a record pace as there is policy panic about the lack of global growth, productivity and real investment,” Henrich says.

“Markets are getting ever more expensive as a result of 100% multiple expansion and not driven by a strong fundamental underpinning,” he adds.

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marketwatchSeptember 14, 2016

Outlining rising wedge patterns in stocks and indices.

Summary:

A bust for the S&P 500 just in time for spring? That’s what one market technician says could be in the pipeline if a bearish chart pattern he’s watching pans out.

Sven Henrich, otherwise known as NorthmanTrader, flags what’s known as a rising-wedge pattern that he says points to a potential 20%-to-25% meltdown by spring. It’s a negative technical signal that starts wide at the bottom of the chart and narrows as it moves up, in step with rising prices and tighter ranges.

Henrich says this rising wedge is developing alongside “extremely steep support lines,” with the market still completely uncorrected. He notes that while there’s no guarantee that a wedge go to a peak apex, this wedge is getting harder and harder to sustain. Piling on the pressure are concerns about a brewing U.S. recession and presidential election uncertainty, he noted.

“Every major top in the past 30 years has come on rising wedges with major negative RSI (relative strength index) divergences,” he tells MarketWatch. “And every one retraced between 0.50% and 0.618% of the move at least. Every time.”

As for how investors should prepare for a potential big drop for the S&P 500 by spring, Henrich says his strategy has been to sell into strength over the past two months. “As a long-term investor, my personal view would be to not be afraid, to have some cash and be able to adjust. Valuations are high and using strength to diversify into some cash is probably a solid idea,” he said.

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See also detailed technical article: Time to Get Real Part III for further details.

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cnbcSeptember 13, 2016

Discussing the rising wedge pattern with Brian Sullivan.

Summary:

“Wedges are very powerful patterns, and when they break, they have a fairly sizable implication,” Henrich said Monday on CNBC’s “Trading Nation.” “The rising wedge demands a resolution in the coming months.”

For Henrich, this pattern is likely to resolve to the downside. He points to a series of divergences, including the spread between insider buyingand the S&P 500.

insider

In another sign of instability, Henrich points to the FTSE All-World Index’s inability to hit a fresh record high.

How could this play out? Given the rising wedge pattern and based on the market’s high valuation from historical norms, the chart-minded trader predicts that “we can see a 20 to 25 percent correction into 2017.”

“That’s actually not a historically outrageous correction,” added Henrich, who runs a subscription service and is not a professional money manager. “We just haven’t seen it in such a long time that no one’s used to it any longer.”

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cnbcJune 24, 2016

Discussing market risk ahead of the UK Brexit vote.

Summary:

“According to NorthmanTrader.com founder Sven Henrich, 1,950 could be the number to watch on the S&P 500. Looking at a chart of the S&P 500’s key levels, Henrich had predicted that the index could have climbed to as high as 2,150 had the U.K. had chosen to remain in the European Union. But now with the Brexit referendum settled in favor of the leave camp, those levels are unlikely, especially given that the S&P 500 looks to be staying in its months-long trading range.

“We’ve been in a range, nothing has changed in that regard,” Henrich said Thursday on CNBC’s “Futures Now.” “But every time the S&P 500 gets above 2,100, volume kind of dies and the marginal buyers are disappearing. So we need some sort of trigger to get buying in.”

brexit-levels

“At the same time, they’re saying that equity prices are vulnerable to rises in term premiums at more normal levels, meaning that if we suddenly see some sort of move, equity prices could correct,” he added.

U.S. markets plunged Friday morning following the vote, with the S&P 500 seeing its worst open since 1986.

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marketwatchJune 17, 2016

Outlining a key technical support level.

Summary:

“If you’re looking for a potential sore spot in U.S. stocks right now, Northman Trader has a pretty good idea of where to find it.

“So far U.S. markets continue to handle the pressure of overseas markets well, and from my perspective no real damage occurs until a sustained break below 2,025” on the S&P 500, he says on his blog. Here’s that chart:

june-mk

Northman says U.S. stocks look set for a relief rally into the end of the second quarter/July Fourth, as long as U.K. voters opt to remain in the EU next week. Should that referendum go the other way, markets could get rattled and test that 2,025 zone, he told MarketWatch.

That test could happen before that decision, he says, especially if the Bank of Japan loses control over the yen or investors get a lack of follow-through from U.S. earnings growth.

Global market performance has been “decoupled” from U.S. markets this year so far, he says. “Markets could use some good news soon or risk breaking below 2,025, which could trigger another deeper dip similar to the prior three we have witnessed since 2014.”

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cnbc

May 18, 2016

Discussing a critical technical level that must hold before month end

Summary:

A closely followed market watcher has spotted a disturbing pattern that could bring the S&P 500 down to a level not seen since June 2013.

While Henrich doesn’t manage any money, his chart work on NorthmanTrader has garnered a significant amount of attention in the online world. His latest take on stocks comes as nearly all of Monday’s big market gains were wiped out Tuesday, when the index closed at 2,047.21.
The S&P 500 must stay above the 2,025 to 2,030 range in order to keep the S&P 500 from falling by nearly 500 points from current levels, Henrich said.

“If we break below this level by the end of May, then stocks may actually indeed retest lows or break lower because the technical targets on a break like that would be significantly lower from here,” he said.

Henrich’s bear case revolves around earnings declining by 7.1 percent in the first quarter, even as most central banks continue to pursue stimulative policies”.

On the other hand, if this scenario doesn’t play out, he believes a bull case could emerge.

“If GAAP earnings can reverse the trend and reverse higher, then markets can break to sustained new highs with technical targets of 2,334 and 2,458,” Henrich told CNBC.

Note: The S&P 500 hit 2025.9 2 days following the appearance and the support level held.

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marketwatchApril 18, 2016

Discussing technical range targets once consolidation range breaks

Summary:

The call

It’s been pretty quiet in the market lately. Too quiet, if the latest from the Northman Trader is any indication. But it won’t last.

“A big move is coming in the S&P 500, and it will take everyone’s breath away,” the blogger wrote over the weekend. It could go either way, but his technical take is that we’re looking at a double-digit swing sooner or later for the broader market.

“Northy” explains that the S&P SPX, +0.80% has been stuck in a “multiyear consolidation range” between 2,134 and 1,810, and if/when a breakout or breakdown finally occurs, it “could result in a measured technical move of the height of the range.” That’s 324 points, which would mean a burst 15% above record highs, or a 30% drop from them.

range

“This is a big battle for control,“ he says, pitting bearish fundamental and technical signals against highly accommodative central bank policies and the potential for incremental earnings improvements. “Clarity will only emerge once the range is decisively broken in either direction.”

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