Weekend Oct 22, 2016
It was an INTERNAl market correction
The percent of stocks over their 50 day MA has fallen from 95% ot 30%. But the SPX really had not corrected very much as far as the overall price. So we have had an internal market correction. This has taken us most of the way back to the February lows. Friday's action tested and bounced off market support in several indexes. So here we are. Does that make us want to buy three weeks before the election? Even with an Obama win, the markets fell hard prior to and after the 2012 election.
IN fact the market really started falling right about now, so far it it has not. But that could change.
Is there any thing to like here?
How about Barclays still trading at 39% of book value.
On this weekly chart, BCS fell with the Brexit vote then rallied and has pulled back. Just taking off again.
I think Crude Oil put in the low in February and is now trading around eventual support at $45-50.
One strategy would be to buy USO but it has moved a good bit already, the percentage gain is between here and $62.
How about RIG trading at 23% of book value?
A close up look at RIG
On this weekly chart price has had two big up weeks from the recent low at 8.75. Price is now above all three MAs. And the longer term of 34 weeks is turning up. This is a long term buy and hold as is BCS.
After months of consolidation, WFT is attempting to poke above its 200 day MA. Yes it is awash in debt but the current ratio is 2.0 and there is $452 M in the bank in cash.
These are probably long term holds requiring at least a year of patience.
Yields on the thirty year bond are not trying out the 200 day MA.
This is another clue that rates have seen their lows no matter what the FED does or does not do.
The ETF for Utilities is sending the same message.
Yes XLU made a bounce but that is about it, the downtrend channel remains in place.
The REIT charts look pretty much the same. This will eventually be good news for savers but for now, one would be trying to catch the falling knife in either of these two dividend payers.
The XAU index of gold stocks continues its weekly correction. Not time to buy here yet.
The outcome of the election may pose just as much mystery as we have before the election. It appears the Republicans will hold the House, Senate may go Democrat if Hillary wins enough of those states in play with Senate elections. but well then what? Then we are back to gridlock, executive orders, and exclusionary politics.
Cash seems like a comfortable spot for the next three weeks. And as I suggest above, it may be that the election results will cause more not less uncertainty, which cold lead to a stock sell off.
Robert Folsom presents a long look at Presidential elections. The paper presented shows that if the stock market is at least moving up at the time of the election, the incumbent is favored to win.That would tip the scale to Hillary.
As Rich Lowry notes in his column today, Mike Pence is twisting himself int o a pretzel rationalizing his support for Trump. The same can be said for both candidates who are still recording high negatives. But it is hard to imagine that the bookies could be wrong by this spread.
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 and 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.