Weekend August 25, 2012
Admission - Some of you have noted the existence of typos in our work. While we attempt to run spell check and such, we readily admit a difficulty in spotting such errors on screen. After both cataract and retinal detachment surgery in both eyes, it is difficult to spot our own errors. I see much better as a result of the surgery but as my opthamologist put it, as much as we beat up the back of your eyes, no wonder.
The Bottom Line
Stocks have recorded a nice run from the June 1 bottom. Commodity funds and producers are breaking out and exhibiting 2008 like leadership. Expect much higher prices and a return toteh old highs for internal indicators like the summation Index. Social mood is expansive with bright colors for men's wear. But a darker mood is evident in various fashion and movie selections.Such a mixture of lagging mood oftenprecedes a change in market direction. We expect stocks to top before commodities as they did in 2008, as we transition to an overall bear market in 2013-2014/5.
For those of you that enjoyed out higher risk TLT trade in options, we should get another opportunity at TLT might peak this next week, that would be an opportunity to scale in positions. Stay tuned.
Saks (which is producing a four-pocket Harris tweed topcoat for fall under its own label) has toyed with the idea of selling Harris tweed items with magnifying glasses so that customers can fully appreciate the fabric's subtle interplay of dyed threads.
Both Givenchy and Jean-Paul Gaultier presented kilts in their fall collections, and Marc Jacobs wears them so often that it's become a personal signature of sorts. "I think they're really sexy," Mr. Jacobs said. "I just
like it, the fabric moving around your knees—it's a good feeling."
Off Duty Weekend WSJ, The Scottish are Coming
We usually defer our socionomic observations until the end of TMP. But we have laid out the strategy, things are coming along as planned, and frankly there is not a lot more to say technically. And when I saw the Off Duty section in the WSJ, well our lead article as the saying goes, leaped off the page at me. (Does the outfit at far left remind you of Danny DeVito as The Penguin in Batman Returns, 1992, an upbeat period by the way when Batman was more comic than its current dark state).
Bull markets and market tops in particular are marked by vibrant colors and toying with new daring fashions. The hemline indicator tells us that the hemlines of ladies fashions tend to become shorter in bull markets. The bikini came public just as the 1930-1948 bear market ended and the baby boomer bull market was about to kick off.
Here is a screen shot at left from the Marc Jacobs website. Note the bright colors. And note Marc's description of how he feels when he wears his kilt, the fabric moving around your knees, it's a good feeling.
This is precisely the lesson of socionomics, bull markets are generated by good feelings, bright colors, and an expansive attitude. The t shirts and tanks at left are priced at $48-$68 which is pretty darned expansive for my closet I must say.
Note the close cropped hair, dramatic pasty make-up and of course, the black color of the entire outfit.
Bob Prechter has noted that Women's Wear Daily may tell us as much about where we are in the market as stock market data itself. Here is a great example. Note the title, Dark Victory. I am not kidding, there is more than coincidence that one of the movie titles this year and in 2008 was
The Dark Knight. New readers are encouraged to scan our references to those two films in our posts over the last month. (August 18,20,26,29, August 5).
In 2008 I was suggesting to my classes that the popularity of The Dark Knight $500 M in a couple of months) suggested that mood was becoming more negative. A few students denied that but the Fall experience of 2008 confirmed the outlook . Put this photo at right on the refrigerator door as a guide to what to expect later this fall.
GM A Case Study in Why Fundamentals Don't Work as Expected
My suggestion that GM on its return to 19-20, the low since it came public after the bankruptcy, was met with derision by TMP readers. An article in the WSJ today mentions that GM has $33 Billion in cash in the bank while needing only $20 Billion, and is orking on credit agreements for more cash.
GM trades are roughly book value, it has $20.83 per share in cash, it trades at a rock bottom 5.27 Price Earnings Ratio, it earned $4.69 Billion available to common shareholders, at $21.18 one is paying 35 cents for the entire company over the cash per share in the bank. Thanks to the generous union bailout GM will pay little or no Federal Income Taxes for years given all the credits on their books.
So what's wrong? Simple, social mood has not embraced GM as a great stock to buy, no one likes it. The more I write about social mood the more I am convinced it is not part of the investing equation, it IS the investing equation. Apple is at the other end of the scale. It is now the most valuable company on earth. HPQ, DELL, Accer all make money but no one loves them anymore, no tablet, no giddy feelings toward those companies.
GM will probably duplicate the overall market itself, and get pulled up with the SPX. Above GM tests its break out line, note the line is red when the price is under the line, green when over the line.
The Dollar and the Euro, Yin meets Yang
The US Dollar has been considerably more stubborn than long dated bonds on dropping in price. But the moment of truth appears to be upon us. My guess is that the 81 support line for the buck and the 1.25 resistance line for the Euro are both about to fall. Gold leads and that is probably why gold was up $30 on Thursday. It is interesting to note the same support and resistance levels shown in the last two graphs in other internal indicators. Taken together they are all signalling a break out in the Euro, Gold, GM, and a breakdown in the Dollar and TLT.
Bullish Percent 150 day MA
Now run your eye over the above three graphs, do you see it, do you see that while the Dollar was up during the exact same period of time, the Bullish Percent, GM and the Euro were slowly finding buyers edging up quietly in spite of the negative articles in the media. As soon as the break out occurs, my bet is this next week, the media will attempt to link some fundamental event to the break out, but clearly it has been underway for the last few months.
The weekly High Low indicator, the NASD and NYSE Summation Indexes exhibit the same patterns. Remember the stock markets cannot top until a majority of participants are out of the Safe Harbors of the Dollar and bonds and back in LULU and APPL up to their eyeballs.
MYSE Summation Index
Again the name of this site is The Market Perspective. For perspective run your eye over all FOUR of the above graphs. You should see the same bottoming pattern in all of them, thus one confirms the other.
Some Stocks Have Already Begun Their Bear markets INTC CAT MCD
Sure Proctor and Gamble and Disney DIS look great. But elsewhere something is amiss at CAT. They just signed a new labor agreement ending a three month strike. But the market apparently sees a slowdown coming. With the PX well up the drop under most MAs is a warning. At top INTC joins DELL and HPQ in a sagging PC market. Ys it is a shift in preferences to tablets but also a slowdown in job creation at those companies. At bottom the defensive McDonald's should be doing better, but it isn't.
I receive an update from one chap who continually tries to call THE TOP in THE MARKET using a mechanical timing system. As we have shown again and again there are multiple tops in markets which is how Mr. Market manages to confuse most of the players.
All the News FIt to Print - A Few Random Thoughts on the Weekend Journal
- The Monthly WSJ slick magazine is dripping with expensive advertisements. How about a week on a yacht for $20,000.
- Istanbul Turkey now sports as many billionaires as Londong and more than Paris. This is a clear shift in economic power to countries that have a robust economy, good-bye to France, its CAC index now trades at 2009 levels.
-Martha Stewart blames her 'time out' for several years barred from Board participation and five months in jail for MSO losing its focus. Perhaps but more likely it is the fall from grace that occurs to many prominent figures transitioning from bull to bear markets. Even Wall Street questioned the wisdom of a company tied to the physical existence of one person, Betty Crocker after all lives forever. Bear markets usually tear down bull market figures and we have plenty of examples from Martha to Tiger Woods to yes Lance Armstrong.
Lance gave up fighting a government funded we never sleep determined to dethrone you US Anti-Doping Agency. Why does such a thing exist other than to tear down folks? Perhaps if Lance had simply retired from racing, lowered his profile, and even moved elsewhere, this Agency might have focused on a more prominent figure. Instead he continued to fly too close to the sun, I have no idea about the real truth but he did pass 500 drug tests.
We have previously noted the importance of knowing when to remove yourself from Center Stage, Lucille Ball could not grasp that, Carol Burnett did and enjoys a successful retirement as a result. To a degree Martha and Oprah are having the same problem, having overstayed their welcome.
- On Page A 12 median household income is down $4,019 since Barack took office, the last time this happened was during the Carter years, another period od stagnation. It is doubtful it would have been a lot different under McCain as such periods are known for over regulation and the inability to tell who will be in charge and what they might do.
-Public murders in NYC and Norway were last seen going into the 1966-1984 bear market.
-Copper keeps rallying up 2% on the week, we recommended COPX.
-On page B 9 the article Gold Waiting for the Rally notes that gold is still a speculative investment. Investors in TLT are just now discovering a government bond fund can be speculative as well. In a few years as inflation returns to a world 'stimulate' by massive government spending, TLT will be the ultimate speculative investment probably falling back to 65-70.
-On page C 11 Joe Queenan notes that the latest Bourne movie is in fact an indictment of unaccountable governments. So true. And that's another interesting comment after three Bourne movies about the attitude towards governments.
-The buckle strap shoe second from right in this photo was made by Cole Haan and was quite popular when I begaqn college (1966). I vividly recall that our English teacher had one correctly attired Fraternity member stand up in class. In those days Fraternity guys wore Arrow button down shirts, Cole Haan shoes, and shopped at the Brooks Brothers that opened at Guadalupe and 24th Street across from UT Austin. The timing now as then is spot on as we transition to an upcoming bear market. Fashions of course wold then soon transition to ex-military garb worn ironically by those most opposed to the involvement in Viet Nam.
Thanks for reading The Market Perspective
The Market Perspective bases its information on techniques and sources that have been found to be reliable in the past, and The Market Perspective tries to base opinions on sound judgment and research, however, we do not guarantee that future results will match past performance ands no guarantee can be made that advice will be profitable. The Market Perspective accepts no money for stock recommendations and is purely motivated by its own research in recommending any stocks. Put another way, the responsibility for decisions made from information contained in this letter lies solely with the individuals making those decisions. The editor and persons affiliated with The Market Perspective may at times have positions in securities mentioned. Nothing contained herein represents an offer to buy or sell securities. The Market Perspective encourages investors to be diversified, and to maintain sell stops and risk control over their valuable investment capital. No guarantee can be made to the accuracy of text or charts.