Tuesday Sept 11 2012
This weekend I heard a couple of guys on talk radio discussing the markets. Like most of the talking heads on cable business shows, they attempted to connect suggested action with what MIGHT happen in the news. Specifically there is yet another of the endless votes or conferences on Euro Debt. On Thursday the FED meets in a similar endless chain of events about FED easing. We showed you that as soon as the last two QEs began, bond prices tanked rather than rose. But I digress, these two chaps recommended a
well if the Euro vote goes this way do that
if the FED does A then B or if the FED does X then Y
Readers, this is not a strategy , this is a reaction. This is akin to watching the amoebas and paramecium under the microscope wandering around a water drop, bumping into something and then backing off.
A real strategy has reliable indicators and methodology,such as what we recommend here, let's look.
Read our comments here for June 5 when we used internal indicators to spot a low.
Now note that the 50 day in blue has yet to cross the 200 day in red. When that finally happens, we will look for Fidelity to post something like
Wall Street anticipates Growth,
What Stocks to Buy Now,
How to Play the Rally.
Or Time to Exit Bonds?
which by that point will have seen TLT down from 132 to under 120.
At that point the NYSE indicator above will be so close to its prior high of 77.5 that one should start planning an exit not an entry. The result however on the MA crossover will be an outpouring of money from bonds and a last minute rush to stocks. Remember you read it here.
SPX has crossed
Most quantitative programs use a crossover of the 50 day MA rising above the 200 day MA to generate a buy signal. Such lagging indicators delay an ideal entry.Two crossovers on the 125 and 162 did occur but the big move up happened at the Jackson Hole Bernanke Speech suggesting more QE.
And so we may be waiting until Thursday for things to get going again. Whatever we expect TLT will be going to the downside at that point.
On page D5 today, Bob Dylan's latest album features murder ballads. The title of the piece, Dylan and Killin' says it all. Take a read to grasp the depth of the dark mood he is embracing, or shall I say refelcting an emerging negative mood. Recall that the Eagles album Desparado about a gun fighter was released in 1973. That was near the top of the Dow at 1,000. Dylan now echoes that same sentiment at Dow 13,000 in a similar era. This is really an amazing similarity, two albums 40 years apart reflecting the exact same mood. Each is coming out at a top during an 18 year period of stagnation, the first being 1966-1984, this one 2000-2018.
We have also noted that various markets top at different times. On Page C1 the WSJ notes
Viet Nam Loses Glow as Market Darling
Those of us who lived thru the horror of the Viet Nam War, can only reflect on the irony of the Domino Theory in vogue at the time. The idea was that if South Viet Nam fell to the Communist North, then all of SE Asia would be taken over by the Red Menace. Today the area is tracked with the Ho Chi Minh Stock Index futures, how's that for a change in social mood?
Above the VIet Nam ETF reflects that the bear market got under way with the break of 24 in early 2011. We have noted that Shanghai and Bombay topped in Fall 2010. We are now seeing echoes and bounces in Shanghai as commodities rally.