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THE BIG COMFY C-OUCH OCTOBER 10, 2021

MARKET COMMENTARY

The indexes closed up marginally this week with the $SPX tacking on 0.9%. That was only ½ of last weeks’ loss, so nothing to get all

bulled up about. As commodities roar higher that would be the ‘comfy couch’ part of the title. However, with soaring commodity

prices and soaring bond yields, the tech names are under pressure making the ‘ouch’ part of the newsletter title. Commodities

exploded higher with oil ripping to $80 which I was not surprised at. Liquid energy and agriculture are breaking higher.

One of the big signals I have been looking for is the change in the municipal bond market to

confirm the breakout in yields. That happened last week. This means higher yield, lower bond

prices. That followed through in a huge way this week. Because tech is valued based on its’

future outperformance, as interest rates rise, tech’s outperformance from the benchmark

interest rate is less. This squeezes the future value of earnings which drops the target stock

prices on the analysts’ spreadsheets. A bit of a vicious circle that we saw play out in February

to May. Looks like this is now the sequel.

However, more important to me than the fundamental reasoning above is the technical

position. The Nasdaq Composite ($COMPQ) and Nasdaq 100($NDX) are breaking their relative

strength uptrend. From my perspective, the larger market rollovers start when the Nasdaq is

underperforming the $SPX. So that bullet arrived on the charts this week, killing my Nasdaq rally optimism.

The Nasdaq underperformance suggests a move towards value. This also happens to be directionally pointed into the ‘reopening’

trade 2.0 or the second time around for the reopening trade. Returning to all the things we know and love like travel and tourism,

road trips and restaurants, gaming and gambling, hotels and high-end goods all coming into the limelight.

I mentioned autos and auto parts last week. Those were big movers this week. I mentioned heavy construction, but buyers slept in,

forgetting to hit the buy button. We don’t want to see a double top on that chart but that’s what’s forming so far.

Banks like BAC, JPM, and FITB are breaking out to new all-time highs. JPM reports on Tuesday, October 12th with other bankers also

reporting throughout the week.

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THE BIG COMFY C-OUCH OCTOBER 10, 2021

Energy was on the boil again this week. Natural Gas can be the widow-makers trade. It was 15-years ago (Sept 29, 2006) that

Amaranth was wiped out by a Natural Gas trade gone wrong. The big reversal candle this week suggests having stops very tight. If it

continues to run, great, but it’s more important to keep profits than it is to have followed consensus, while the trade swipes lower.

Natural Gas may be supported, but it’s just as likely to send a volatile whop through the market first.

I still see higher for oil, and $80 is a breakout to a 7-year high. Inventories build around this time of year as I mentioned in the last

newsletter. Even though there was an inventory build this week, the markets still rallied crude oil, heating oil and gasoline higher,

with traders adding significantly to long positions.

The verbage has changed meaningfully in the last few weeks. People are suddenly questioning the all-out move to ‘green’ energy as

countries are out of fuel for power plants. It’s easy to turn everything fossil fuel powered off for virtue signaling. It’s an entirely

different move to put shovels in the ground, dig up minerals and elements required for the build out of ‘green’ energy. Government

leaders (Joe Biden and Justin Trudeau to name two) don’t want copper/aluminum/cobalt/steel/zinc mines because it doesn’t fit

the clean image and the virtue signaling of better days ahead. Thus, the crossroads of an all wind and solar backed electric grid. By

turning everything off before building out the resources for the transition, we start killing people, mostly low income folks who

can’t afford the energy bill. Copper is setting up for an upside breakout. Will it be this week?

As winter approaches, Lebanon announced they have no fuel for power. Germany is extremely worried about power. America has

power problems. Japan has power problems. China has power problems. India has power problems. Canada has power problems.

This is the backdrop while the virtue signaling leaders arrive on private jets for COP26 to discuss how average people should move to

green energy at all costs. I would bet not one mine site proposal rests on the table to lower future commodity costs for

construction.

The Congress and the Senate came to an agreement on debt ceilings one more time and tabled it to be debated again after the US

Thanksgiving. That got our little rally started. Can the bank earnings keep the rally rolling? On the flip side, supply chains are a

mess. Prepare for this to hinder the fourth quarter low price point retail sales where the shipping cost become significant, relative

to the price of the goods. From CNBC, container rates from Shanghai to Long beach dropped in ½ from Sept to October. Whew.

Summary: Bitcoin traded significantly higher this week. Buy signals in a few more industry groups. Trade well but be careful of a

downside break as the SSI’s are still low but bouncing. Tech names could feel a bond-based wind chill. Let’s hit the charts.

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THE BIG COMFY C-OUCH OCTOBER 10, 2021

SSIH 17%

The Schnell Strength Index (SSIH) has been below 25% for four weeks but increased this week. If you were looking for a momentum

low, 3% is probably it. However, if we were going to enter a prolonged downturn, these low levels are what we might expect to

precede the actual decline. The real question is can we rally from here through earnings? It’s a slow liftoff which is concerning.

Both panels have the same SSI indicator with different stock indexes in the background. I posted SSI readings in the daily setup

articles by Dwight every day. The idea of posting the SSI every day is to allow you to follow the change in trend. SSI Indicators are

based on weekly data so be careful about interpreting one strong or weak day.

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THE BIG COMFY C-OUCH OCTOBER 10, 2021

SSIF 42%

The Schnell Strength Index – Fast version – jumped up to 42%. I expect this to jump again next week as old data drops off the

calculation. I typically want to be long as this breaks above 25%. NDX in the background on the top, SPX in the bottom.

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THE BIG COMFY C-OUCH OCTOBER 10, 2021

SSIQ 37%

The Schnell Strength Index – quick version – is still only at 37% but it did move up 10% on the week. Look for strong stocks that held

up well during the pullback. As it moved above 25%, I want to be long. The flat red lines on the top panel are where the backdrop

was weak (falling SSIQ), but the market kept rallying – marking not profitable signals.

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THE BIG COMFY C-OUCH OCTOBER 10, 2021

SSIH SSIF SSIQ STACK

The Schnell Strength Indexes were higher on the week. The SSI’s as a group all moved up, but with light conviction, mostly due to

the selling underneath the surface in the tech sector.

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THE BIG COMFY C-OUCH OCTOBER 10, 2021

SSIH, SSIF, SSIQ OVERLAY

The chart shows the stock indexes in the top panel. Two of three SSI’s moved above 25%, suggested an oversold rally at hand. While

I like the improvement, I am not sure we’ll see much more unless the tech sector can start catching a bid.

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THE BIG COMFY C-OUCH OCTOBER 10, 2021

OCTOBER MONTHLY CONFERENCE CALL

Dwight and I hosted the October Conference Call on October 2, 2021. The Final Quarter.

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THE BIG COMFY C-OUCH OCTOBER 10, 2021

$SPX – A HIGHER CLOSE

The year-to-date line chart of the S&P 500 has the index 4% off the highs. The PPO has turned up. The PPO dipping to zero can be

considered a reset, but this is lower. I like using the PPO for watching the next high. When we dip down below zero, if the next rally

is muted, we need to be more careful of larger downside. $SPX. The market is up 17% on the year. PPO is signaling a buy point.

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THE BIG COMFY C-OUCH OCTOBER 10, 2021

$SPX 1-MONTH CHART

The $SPX was up 0.9% this week. I extended the chart from a one-month view to a few extra days to keep the previous high on the

chart. We made a lower closing low on Monday and rallied through to Friday’s soft pullback. Will we be watching another dip down

in October, like 2020? The selling continues and so far, we are still making lower lows and lower highs. What was resistance becomes

support, so the move above the Sept 20 and 21 closing lows and tops of Sept 29 and Oct 1 make that my level of support to trade

against (-3.8% level) on this chart. I would expect a break through the down trend line to bring in new buyers.

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THE BIG COMFY C-OUCH OCTOBER 10, 2021

$NDX – NASDAQ 100 DAILY CHART

The price action on the $NDX on the 60-minute chart is still in a downward trend, wiping out the gains of July and August. Watch to

see if the 100 MA continues as resistance. The PPO indicator is in positive territory. We have seen rallies start off a second low (See

the PPO). Will this be the start of the next one? I would suggest yes, and we can have a stop very close (14750).

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THE BIG COMFY C-OUCH OCTOBER 10, 2021

$NASDAQ COMPOSITE COMPARED TO OIL AND GAS

This chart is from an article by my good friend Martin Pring. Martin uses a lot of long-term charts in his newsletters, continuing to

help see the bigger picture. This ratio chart below shows the Nasdaq Composite soaring in outperformance compared to Oil & Gas

exploration. The same thing happened in 2000 when the Nasdaq topped and oil traded to $10. Tech traders then didn’t realize they

were looking at the beginning of an 8-year period of underperformance coming at them. Will tech investors today recognize the

changing times and focus on

energy rather than tech? My

guess is no and it will be

years of hard investing as

the tech stocks come into

more normalized values for

fundamental measurements

like Price/Earnings,

Price/Book, Price/Sales.

$COMPQ: $DJUSOG

One of the arguments Martin

uses to make is point is the

use of the long period Rate

of Change indicator, in this

case 18 months. In the

article he notes this level of

bias towards a particular

market never works out well

when it changes.

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THE BIG COMFY C-OUCH OCTOBER 10, 2021

$COMPQ – EARLY WARNING FOR A PPO SELL SIGNAL

The Nasdaq Composite monthly is a beautiful chart. The rate of change indicator touching 88 shows it to be the second highest level

in 35 years and clearly out of scale with history. Does this market trade like the 1996-1999 period, or is the end of the run here? The

chart above suggests it’s over. Monthly charts take time to play out and a few months against the big trend can be confusing. Early

in the month, the PPO is showing a potential sell signal after the second highest PPO advance on the chart.

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THE BIG COMFY C-OUCH OCTOBER 10, 2021

$TSX – CANADA RALLIES FOR THE FIRST WEEK IN FOUR

The Canadian market traded in the range of last week but closed at the top of the range. Seeing the Canadian market weaken

before the USA is what I would expect. At this point, there is no big signal. The question is: Will the Canadian market start breaking

down from here, or higher from here, giving us new clues? $TSX

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THE BIG COMFY C-OUCH OCTOBER 10, 2021

$NYSI – MCCLELLAN SUMMATION INDEX

The middle panel is the McClellan Oscillator, bouncing back above zero. The top panel is the McClellan Summation Index (NYSI),

cumulatively aggregating the $NYMO totals. Five weeks ago, the white bar (zoom panel) on the $NYSI looked like a good place to get

long. It rolled over. It closed on the lows this week and still black, implying a lower level than last week. The bottom line is it is

very weak. It closed below zero. Historically, that is not bullish if we look left. If it really started to plummet now that we are below

zero, is all we could say is it was telling us everything is very weak, and it played out that way. Please be cautious going long. $NYSI

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THE BIG COMFY C-OUCH OCTOBER 10, 2021

$NASI – NASDAQ SUMMATION INDEX

The Summation index is still above the -300 level where I have the red line. In the zoom panel we can see the white candle surging

to the highest level in 7-weeks, then pulling back. This week it is another red candle as the middle panel turns down. This looks

weak so need the $NASI to build a multi-week rally from this higher low. Currently it looks like lower highs and lows. $NASI

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THE BIG COMFY C-OUCH OCTOBER 10, 2021

BITCOIN SOARS

The Bitcoin weekly chart soared off the trendline bounce. It made a new 4-month high. The weekly PPO kicked off a nice signal with

a kiss-and-go. This is where the PPO approaches the signal line, then bursts higher which is a nice continuation signal. $BTCUSD As

we approach the prior highs around $65k, this is an important area to watch. If it fails here, it is a double top or a lower high. I

don’t suspect that is what is about to happen, but the volatility is significant.

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THE BIG COMFY C-OUCH OCTOBER 10, 2021

BITCOIN DAILY CHART

Bitcoin launched above the horizontal support and resistance line. Up top we can see the relative strength compared to the SPX in

purple rising quickly. The PPO is also doing the same thing, breaking to the upside. I like the trade looking higher. $BTCUSD

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THE BIG COMFY C-OUCH OCTOBER 10, 2021

$USD – US DOLLAR

The US Dollar traded inside last week’s range. The PPO is at one of the highest levels in the last two years. Hard to argue with 52-

week highs until proven wrong. The macro cycle in red looks higher from here as well. $USD Weekly.

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THE BIG COMFY C-OUCH OCTOBER 10, 2021

$USD – USD DOLLAR DAILY

The US Dollar closed above the horizontal resistance line again this week. Commodities like Copper have wobbled since May when

the dollar made the lows. US Dollar Daily. The PPO levelled off here. Make sure this continues higher, otherwise it is a false

breakout, and it can move very fast the other way. See Sept/October 2020.

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THE BIG COMFY C-OUCH OCTOBER 10, 2021

MYI - MUNICIPAL BOND ETF

The MYI is turning lower which suggests the 10-year bond price will be heading lower as well. This chart is one of the clues I like to

use for the direction on the ten year. On the next chart, I’ll compare the two directly. This would confirm the inflationary bond

yield scenario. Lots more about the bond positioning on the video.

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THE BIG COMFY C-OUCH OCTOBER 10, 2021

MYI AND UST (10-YEAR TREASURY PRICE) MUNICIPAL BOND ETF

The MYI is turning lower which confirms the 10-year bond price heading lower as well. That is obviously very controversial at this

inflection point, but this chart is one of the clues I like to use for the direction on the ten year. Last week I expected the blue line

would break lower. It certainly did! MYI UST

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THE BIG COMFY C-OUCH OCTOBER 10, 2021

THE ENTIRE BOND YIELD CURVE MOVES HIGHER

The yield curve is moving higher. Since the Fed meeting, this has accelerated almost straight up. Yield Curve.

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THE BIG COMFY C-OUCH OCTOBER 10, 2021

HIGH YIELD BONDS DROP IN PRICE TOO

The HYG has moved to a cautious place where the price is below both the 10 WMA and the 40 WMA. High yield prices plummeted.

More importantly, it signals a risk off environment ($SPX at bottom). This adds to my concerns above that the Nasdaq may drop

faster than we might be expecting here.

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THE BIG COMFY C-OUCH OCTOBER 10, 2021

SOMETHING TO WATCH FOR THE 4TH QUARTER INTO YEAR END

The long bond – 30 Year Treasury - is resting on the 40-year trend line using the annual closing price. Will this trend stay supported,

or will bond prices break the trend and close the year below the line? $USB. That is how big a deal this breakdown in bond pricing is.

This would also correspond with the major change from deflationary to inflationary pressure.

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THE BIG COMFY C-OUCH OCTOBER 10, 2021

$CRB INDEX

The $CRB index rebounded this week and closed at another high closing level in six years. $CRB. In February, I made a note on the

chart about the high PPO being cautionary, but it continues to suggest big momentum in commodities. Price seems unencumbered

by a rising US Dollar. The PPO actually crossed back up again this week. Vroom Vroom.

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THE BIG COMFY C-OUCH OCTOBER 10, 2021

$NATGAS - NATURAL GAS

Price action on natural gas is extremely volatile here. As a percentage of the low price of the week, the range was 20% again. Wide

swinging price bars suggests the end of the rally in my opinion. Can it go farther? Sure, anything is possible. $NATGAS

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THE BIG COMFY C-OUCH OCTOBER 10, 2021

COPPER

COPPER. The top panel is the copper miners compared to copper. We’d like to see this ratio breakout topside. FCX had a 10% move

one day, so the buyers are showing up for work. We are waiting for Copper to break out of the pennant pattern. Is this the week?

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THE BIG COMFY C-OUCH OCTOBER 10, 2021

URANIUM

Cameco. Cameco is the heavyweight in the uranium space. The stock made a huge move on the back of the spot uranium price. The

stock dropped back below horizontal support and underperformed the $SPX meaningfully this week. Careful on this one.

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THE BIG COMFY C-OUCH OCTOBER 10, 2021

$WTIC – CRUDE OIL

The price of crude oil made a higher high, higher low, higher close. $WTIC. The PPO turned up, giving a PPO buy signal above zero.

All of a sudden, new investors are noticing. Margins continue to improve for producers after squeezing costs dramatically in 2020.

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THE BIG COMFY C-OUCH OCTOBER 10, 2021

XOP – OIL EXPLORATION AND PRODUCTION ETF

The exploration and production ETF is up 20% in three weeks. That’s an ETF! Wowza. This is a fresh breakout to two-year highs. Oil

is at 7-year highs, this is at two-year highs. Do you think there might be some upside still available? I definitely do. XOP. The PPO

followed through with a positive cross. Positive PPO crosses above zero are very bullish for the big picture.

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THE BIG COMFY C-OUCH OCTOBER 10, 2021

NEW INDUSTRIES TO WATCH - $DJUSAS – AEROSPACE

The relative strength (purple) broke a two-year downtrend on the Aerospace industry. Price is at a downtrend line that started at

the 2020 February high. Amazing this has underperformed for that long. This could be a big move higher. $DJUSAS

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THE BIG COMFY C-OUCH OCTOBER 10, 2021

NEW INDUSTRIES TO WATCH - $DJUSDN – DEFENSE

The defense industry is associated with aerospace, but to see them both turn up this week and break the downtrend line

simultaneously, suggests more than coincidence. All sorts of good signals on the chart. $DJUSDN

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THE BIG COMFY C-OUCH OCTOBER 10, 2021

LAST WEEK’S INDUSTRIES TO WATCH - $DJUSHV – HEAVY CONSTRUCTION

Heavy industry has traded in a sideways range for six weeks, building strength to blow through the old high. Relative strength in

purple is improving. It is really important that the price turns up from here not down. A big double top would be a bearish signal.

Notice that the price has held up while the indexes went lower. When the index rally starts, I would expect this to move higher.

$DJUSHV

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THE BIG COMFY C-OUCH OCTOBER 10, 2021

LAST WEEK - $DJUSAT – AUTO PARTS UP 5%

The auto parts have been in a downward trend since June. Price is at the juncture of the 10 week and 40 week moving averages.

The full stochastic and the purple RS line are turning higher for buy signals. The PPO has come back down to zero and is looking like

it wants to reset and go higher. The volume last week said the buyers were getting out of bed to hit the buy button. $DJUSAT

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THE BIG COMFY C-OUCH OCTOBER 10, 2021

ARKK – ARK INNOVATION FUND

This is an update on the ARKK chart I’ve been showing as a barometer for the aggressive tech stocks. Below is a daily chart. The PPO

(momentum) is gently trending lower, but it wouldn’t take much to break the PPO downtrend line.

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THE BIG COMFY C-OUCH OCTOBER 10, 2021

MARKET SUMMARY

For North America, the energy sector was the big, big leader this week. US Financials did better as a sector with Life Insurance and

banks doing well. Tech was generally weak. The defensive sectors were at the middle of the list. One thing to note is the Canadian

market showed a nice rally in materials. Precious metal miners improved. I am still trading the upside (mostly energy) as my

strength indicators turn and the SSIQ has moved above 25%.

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THE BIG COMFY C-OUCH OCTOBER 10, 2021

GLOBAL VIEW

The global markets were mostly positive returns. Japan dropped again, giving up the recent gains. Nasdaq was barely positive. Can

this finally be a turn higher? Silver and Gold were flat on the week, but the miners were raging higher. Normally an uptrend starts

when the miners stock prices turn up and start rising. Lumber was up, but I think the story is crude oil at 7-year highs. Natural gas

looks sleepy with a 1% drop, but that hides the 20% range this week.

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THE BIG COMFY C-OUCH OCTOBER 10, 2021

VIDEO OF THE WEEK

Dwight and I hosted the October Conference Call on October 2, 2021. The Final Quarter.

Here is the link to the chart list. I’m going to change this during the week. It’s gone stale. Weekly Charts

Here is a link to this week’s video. The Big Comfy C-ouch

Disclaimer:

Greg Schnell is an independent analyst and does

not invest for clients. Greg Schnell does not

collaborate to create a positive/negative market

bias, nor is he paid to promote any particular stock

or perspective. These charts and descriptions are

not an instruction to buy or sell. You as a reader,

are solely responsible for every investing decision

you make. Greg Schnell and any of his companies

or relationships with other companies, are not

responsible for trades. The ideas presented here

are opinion. Trading and investing involves risk to

you and is solely yours. Greg may or may not own

securities mentioned.

Good trading,

Greg Schnell, CMT, MFTA.

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THE BIG COMFY C-OUCH OCTOBER 10, 2021

BIOGRAPHY GREG SCHNELL, CMT, MFTA.

Greg Schnell, CMT, is the chief technical strategist at gregschnell.com specializing in intermarket and commodities analysis. Greg’s

work has been regular reading on the world-leading StockCharts.com platform for thousands of investors. Hedge funds, RIA’s,

portfolio managers, technicians and private investors consider the charts Greg displays. Greg Schnell is valued for his timely, in-

depth, unique analysis that generates a valued perspective. Greg has won multiple awards as the Top Independent Analyst of the

Year in Canada.

Based in Calgary, Canada, he is a past board member of the Canadian Society of Technical Analysts (CSTA) and past chairman of the

CSTA Calgary chapter. As an active member of CMT Association, Greg speaks throughout North America on technical analysis. Greg is

the co-author of Stock Charts for Dummies.