Feb 26, 2017
The market is the most expensive it has been in 15 years, and based on my work, you have 30% to 40% earnings growth priced in. The gap between operating earnings and reported earnings is more than 10%, where it was in 2007. All of the good stuff has to happen, none of the bad stuff has to happen. And it all has to happen this year. Sentiment is extremely bullish and I am a notorious contrarian. But the technicals have been positive and the market is being driven by momentum. It is not always about the fundamentals. When you get three things together—a sub-11 VIX [the CBOE Volatility Index], an 18 forward multiple, and 60%-plus bulls in Investors Intelligence— and you look at the history, you’ll see that upside to this market is extremely limited. Volatility and uncertainty are underpriced. There will be better buying opportunities this year. Are we going into a bear market? No. We will have a flattish year, with a tremendous amount of volatility. Fiscal policy is as tapped out as monetary policy is.
Caution on the Trump Rally - Interview with David Rosenberg in Barrons this weekend
Transocean’s longtime shareholders have spent more time underwater than most of its deepwater drills. From a peak of $161 in 2008, the stock seemed to find a bottom below $50 amid the financial crisis of 2008-09. A sharp rally ended in 2010 when one of Transocean’s rigs exploded in the Deepwater Horizon disaster, killing 11 workers. The stock had settled at a new plateau below $40 by 2011. Knocked from that shelf by last year’s oil price decline, the shares bumped along near $9. A post-election spike to $15 has been followed by a slow drift down to $14. In all, Transocean’s market value has plummeted some 90%, to $5.4 billion.
Patient, value-oriented investors should feel safe to dip a toe back into Transocean (ticker: RIG), which analysts think can rise more than 35% over the next year or two as it navigates through lower revenues and higher losses toward a turnaround. Last Thursday’s stronger-than-expected earnings report was another sign of management’s ability to control costs.
Transocean RIG would rise 35%
Add to this Insiide's prediction of a top now with a sell off in March April, and we have a repeat of the 2000-2001-2 sell off. This suggests a big drop before the 2018 elections which is way the 2000-2002 decline worked out. `fu\
Transports rallied in strong fashion Friday. CCI needs to bounce off the zero line.
Ratio of Transports to Industrials
And the ratio chart of Transports to Industrials rallied Friday.
Same Chart with solid Line
John Murphy sees this as weakness but I have the advantage of Friday added to his Thursday analysis. It just nicked the 125 day line and is still above the 200.
But the bullish percent chart is now near its previous high. Caution is warranted, this is not low risk entry point
as last November was.
After selling off Both Utilities and REITs had a good week, this is another cautionary signal.
Miners versus Metals
CDE versus Silver
Looks like the mining stocks are falling out of favor again. Better exit miners looking for lower lows.
Here RIG is testing its 50 week moving average, see remarks in intro quote.
Natural Gas is right on its 50 week moving average. Like Crude Oil it is in no man's land and needs the MACD to turn up.
After doubling in price we have sideways action. This may take some time to develop.
The stock market rally is looking like it moves into its seasonal high of March April. See Rosenberg comments at open.
Nat gas and oil need more break out or break down signals.
Miners are not following gold and silver higher.
This at least offers up an explanation for his thin skinned inabilility to withstand any criticism of any kind. And this is after only one month, what if something serious happens?
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