Weekend April 12, 2015
An alert reader from Down Under sends us this link from Zero Hedge, StanDruckenmiller holds forth on the markets. I suspect he is way off on climate change but spot on correct about off balance sheet Fed Debt.
you present valued what we have promised to seniors in Medicare and Social Security and Medicaid payments, the federal debt right now under gap accounting would be $205 trillion, not 17 because we have a demographic boom, which is the other side of the baby boom. As everybody knows in this room, it's the grey boom. We are creating 11,000 seniors in this country every day. Every day we're creating 11,000 new seniors, and we're only creating about 18 percent of youth employed to support those payments to them. So, we've got a big problem, and it really doesn't start until 2024, 2025, but if you wait 'til 2024, it's too late. It's not unlike climate change.
Our friends at Elliott Wave have an interesting take on the new highs in the market. They note that
RCA was added to the Dow in 1928 and dropped in 1932
MSFT was added in 1999
And now Apple, a NASD stock,has been added to the DJIA just as MSFT was before the Year 2000 top.
Art Hill and John Murphy remain wildly bullish at stock charts.com.
Mark Hulbert notes leading indicators signal a market top. This shows utilities and financials lagging. But those same groups picked up and re-joined the advance this past week.
Remember, zero interest rates are now so low that seven countries have negative b bond yields.
This makes it cheap to borrow money (the interest is tax deductible)
buy back a company's own shares boosting the price
cash in executive stock options, ironically rewarded for boosting the stock price.
The Dow Global Index made a new high,what's not to like? Well the MACD is not exactly confirming theme to new highs but the media remains wildly bullish.
We noted the Transports were breaking down but like any good Saturday serial, they came back and
joined the party as well.
Dow 65 Composite
Utilities are still lagging but the Dow 65 composite picked up as did the MACD below.
Recall GE is the sole survivor from the original Dow, which nostalgically, that is probably the only reason it has NOT bee placed. Jack Welch knew when to quit handing GE to Immelt at thievery top of the market in 2000. Finally Immelt announced GE would be getting out of the loan business and actually get back to its roots of making things that work. Amazing that Immelt survived such a long period of underperformance.
A close up shows how GE goosed the Dow this past week.
Wow,all pile in now!
We have been looking for a high in the market and it is here,extending longer than we thought but
seasonally about spot on with tax deadline and seasonal market tops approaching.
China has been asleep for 500 years,it is now coming back as the world moves East.
Desperate measures are on tap in Europe,see negative rate articles listed in the intro, as Europe tries to rescue a moribund economy more notable for entitlements than production. Remember there is no food stamp program in China.
Breakout,what else is there to say? The World is moving east.I suspect we are witnessing a monumental world shift from the West to the East.
Even Israel has joined the party.Oddly while stock charts lists charts even for tiny Finland,country population 3 Million,there are no charts for the Tehran Exchange.It underperformed for 2014 but it just might be a great bet for the next year or two.
Long term bond prices are consolidating. MACD and RSI are back to mid points,this may last until the simmer wen the FED at the moment,says it is going todo something.
We have examined numerous charts of REITs. And they all look just like this.
Make no mistake,prices are turning down on America's New Savings Account, the REIT.
One sign of a potential top is of course when EVERYBODY wants in.
Now everybody wants to be an REIT, including Caesar's as part of its bankruptcy re structuring. It is notable that the switch was made in November or at least planned then just months before a potential top in this market.
REIT Weekly Five Waves Up
As we say REITs have become America's savings account.Few piled in at the bottom
Click on the chart to expand size,comments are on the chart.
This is classic Ellott Wave,to wit
Low participation Wave 1 which is often the greatest percentage gain.
Sub wave 2 in blue of larger Wave 3 in red actually chases some out of the REITs.
Maximum investment comes during sub waves 3 and 5 of larger Wave 3 in red. Indeed money flow peaks as the REIT has tripled from its low of 25.
Finally Wave 5 apparently ends as money flow while still very positive is lower than at the peak of Wave 3.
After a correction the US Dollar is coming back. Note how MACD has bottomed and turned up.
Gold has bounced along with oil.I expect both gold and oil to complete these counter trend rallies during April. Then we have a downturn with a final this summer.
Top Timing should come soon in the typical seasonal stock market pattern.
Bond prices are consolidating. With negative rates in Europe a turn in yields is surely on tap this year.
Commodity prices have re visited multi year lows or at least patterned in the same fashion.
Look for lows in commodity prices later this summer.
Socionomics offers an interesting look at the developing bear market in Russia. With war cycles heating up this summer, and a mere 18 months left in a window of opportunity knowing the US will not respond in military fashion,expect more from Putin,soon.
thanks for reading TMP.
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