The Market Perspective

T Bond Margins

Tuesday March  19 219

 

I originally made all my money trading bonds in the 1980s, consider the margin requirements

 

As we are at  70 year lows in interest rates,this needs to be considered as a possible believe it or not

low risk high gain strategy.

 

Stay tuned here for details.

 

 

Three Markets at Extremes

Weekend March 17, 2019

The US Dollar,the stock and bond markets are all at extremes.

US Dollar

The Dollar has just about reached the  61.8% extreme re tracement form its 2017 high.

Stocks

After a great  2.75 year rally stocks either corrected or are doing something else.  Yes PMO looks better at bottom.

Ten Year Note Price

 

Crude Oil

 

Crude oil has both fallen and then rallied in  the same time frames as stocks.  Both are below their Fall 2018 highs.

 

FOMC meets this week.   I think the FED follows not leads the markets. But we can expect some sort of reaction.

I cannot shake this uneasy feeling that no bull  market in stocks has lasted more than  10 years. As noted last weekend this is ten years exactly from March  2009.

And sentiment continues to fall world wide, I see  riots are back  in France.  And there is no consensus  on  anything politically in the US.

Let's see how things play out this week. Note Friday was options expiration.

 

 

 

 

XLF Weakening Again

Tuesday March 12, 2019

Bank stocks rallied when it appeared interest rates were rising. Now that the ten year yield is falling the XLF is looking weak.

MACD is at its highest but XLF is failing at its 200day MA.

Cullen Frost Bank

 

 

I bought around  87 and enjoyed the ride to 105. Then CFR quickly dropped to 100. I put in a limit order to sell 102.21 and was filled. Looks like the rally is ending here.

 

Ger,amu Bans Short Selling

Tuesday March 12, 2019

 

IN desperate times politicians in particular do desperate things.  The most typical example is what we see now in the democratic socialist movement. All things will be free, AOC says our economy is garbage. Apparently she has not been to Caracas where the economy now literally is garbage. Hugo Chavez thought he could rule an economy by FIAT, simply ordering things to happen. It did not work and never does.

Elliott Wave is always an interesting read for their historic perspective. Here is an example.

 

 

Save Fintech? Ban Short Selling. It's Not That Simple

By Murray Gunn and Brian Whitmer

The pinhole puncture in the global "Fintech" bubble keeps growing, despite drastic attempts to seal it shut. The most recent and radical attempt occurred on February 18, when BaFin, Germany's financial regulator, issued a temporary short-selling ban in Wirecard after its shares plunged 40% in less than three weeks. Wrote one news source, "Germany bans speculative attacks on Wirecard stock", as if those shorting the market were wielding pitch forks and lobbing actual threats against the stock's upside.

Incredibly, vilifying short sellers is as old as the market itself. The first short-selling ban occurred in 1610, after the Dutch East India Company crashed. Notorious short-seller Isaac Le Maire was barred from the market, leaving Amsterdam a pariah. In the 1790s, Napoleon Bonaparte charged short sellers with treason during the financial chaos of the French Revolution.

And, most infamous is Jesse L. Livermore, the brilliant trader who shorted the U.S. stock market in September 1929, earning $100 million ($1.7 billion in today's money) in the ensuing crash. Livermore was publicly skewered in newspapers as the "Great Bear of Wall Street."

Still, history shows that the draconian move of banning short selling is hardly effective. Amidst the Livermore debacle, the newly minted U.S. Securities & Exchange Commission made plans to reinstate a century-old short-selling ban, which didn't go into effect until 1934 -- after the U.S. stock market had already lost 89% in value.

In 2008, the SEC, acting in concert with the UK Financial Services Authority, prohibited short selling in 799 financial companies to stem the bleeding from the subprime mortgage meltdown. SEC Chairman Christopher Cox gave this assurance of the ban's efficacy: "The emergency order... will restore equilibrium to markets." Yet, instead, the global financial sector entered an accelerated and prolonged period of chaos and value destruction.

Now, we have BaFin's attempt to save Fintech by banning short selling in one of the sector's most iconic companies. BaFin noted the importance of Wirecard to the German market and economy, and heartened: "There was risk of further downward spiral without restrictions on shorting the stock," echoing Christopher Cox's confidence in 2008. The strategy won't work, because short selling isn't causing the market's decline; an ongoing negative social mood trend in Europe is. As the most sensitive meter of social mood, Fintech stocks warned of this shift long before there was a sustained downturn. (See other signs of a negative shift in social mood across Europe here.

The first signs began to emerge last fall. In September 2018, we observed how the financial technology sector had become another benefactor of society's blooming optimism. But that optimism had then reached a dangerous extreme, as evidenced in the soaring valuations and growth forecasts across the industry. Soon after, Wirecard replaced Commerzbank, a 149-year old institution, on the DAX 30 index. We warned, "The Global fintech Thematic Index [is]on course for a jaw-dropping setback. … In fact so many mania symptoms plague the sector that the sell-off could be catastrophic."

Depicted below is the sudden reversal in Wirecard and the Global fintech Thematic Index that followed, in which the latter's shares dropped 57%.

Jesse L. Livermore, the trader blamed for the 1929 U.S. stock market crash, was known to have said: "All through time, people have basically acted and reacted the same way in the market as a result of: greed, fear, ignorance, and hope."

When there's hope, and prices are rising, short selling is deemed a necessary part of a balanced system that encourages free will speculation. When that hope turns to fear, short selling is then vilified as the cause of market crashes. We believe many of the components of that shift are well underway in Europe now.

Radical politics. Secessionist movements. Crumbling economies. Follow this link to discover more signs of a shift toward negative social mood across Europe.

 

 

Boeing Drags DJIA

Monday March 11, 2019

A crash in Ethiopia has Boeing  737s grounded in multiple countries.  BA is down  12% dragging the DJIA down 200 points.

Gold advanced Friday and is down  4 bucks today. SPX and NASD are up so our scenario of two to three up days for stocks seems to be holding

 

 

Measuring the Social Mood

Weekend March 10, 2019

The talking heads on CNBC and such would have you believe nothing can go wrong as

the economy is just great

unemployment is low

Trade picture is improving

Tax Cuts worked

Socionomics allows us to anticipate change, what is the social mood. All one has to do is leaf through the Weekend WSJ and San Antonio Express News which carries lots of

syndicated stories.  Consider these headlines

WSJ

Hiring Lull Taps Brake on Growth

CohenTestimony

Warren Calls for Break Up of Tech Companies

US China Trade Talks Hit a Bump

Country wide Blackout Hits Venezuela

Get Ready for the Struggle Session

Chinese Economy Slows

Earlier this wee, auto inventories hit new high

San Antonio EN

France's Yellow Vest protestors Persist

There is plenty of un rest and we did not touch on the  14 declared Dem candidates

John Murphy notes this is literally the tenth anniversary of the March  9, 2009 low, no stock market rally has ever gone more than ten years.

SPX

 

The PPO correctly predicted the  2016-2018 rally. Now it is has turned down as SPX has traced out a lower high.

Daily SPX

Again the PPO predicted the post Dec 24 rally but now has topped and turned down.  

The stock market usually leads the economy by 6-9 months.

 

NYSE Advance Decline

The top shown in the A/D line is clear. This is not good news for Trump who has touted the stock market gains as a measure of his success. Let the markets slide for the next year and the Dems will jump on that.

Yes the employment stats are wonderful that is called a market high.  But we have multiple signs of worsening mood.

Consider China

Military moving to the South China Sea, three op eds this past week in the  WSJ suggest either we have already lost the West Pacific or no one there

trusts us to come to their rescue.   The latter will certainly be correct if the Dems take the White House, and  probably if they do not.

Monetary-Asian Infrastructure Investment Bank

https://www.aiib.org/en/index.html

 

Transportation - The New Silk Road

China is moving ahead on all fronts while here the Dems are investigating a sitting President

Gold and  the Transportation index have an inverse correlation. As the Transports sold off this week, Gold perked up.

Could the markets be worried about currency stability? Of course they could.

Stocks came back Friday to erase most of their losses, look for a two to three day counter trend bounce to the upside starting Monday.

 

 

 

 

Stock and Energy Markets Roll Over

Weekend March  9 2019

Stock Markets Roll Over

 

The small cap Russell 200 is doing the same as the Transports. My conclusion is that we should expect some correction to the rapid stock price rise since late December. And given the high correlation between the two, expect the same for energy prices.

 

Gold prices have enjoyed a big rally since last August. A correction is taking place there from the high of $1,350.   I look for a re-test of $1,300. We are only about ten bucks from that level now.

This Column Last Week March 1, 2019

 

That prediction is playing out now. Let’s take the stock market first.

 

The Dow Industrials managed to reach 26,000 but fell short of the October high of 26,600. A divergent non-confirmation occurred in the Transports and Russell 2000.   The Transports briefly traded over the 200-day moving average around 10,500 and then quickly fell back, down 1% Thursday. The pattern in the Russell 2000 is very much the same, failing t its 200 day MA at 1,586. The top was recorded March 1, five months after the October 3 high, and then quickly reversed on Monday.   The NASD 100 also failed to reach the October highs of 7,700, failing at 7,200.

 

The FANG stocks also offer clues that a top of some significance has been forming. Amazon has traded sideways forming a lower high October 3. Facebook returned to its October high after falling from 170 to 125 and then back to 170, only to reverse Thursday. Google did not manage to regain its Fall high and also reversed Thursday.   Apple is the worst of the lot. AAPL toped at 230, fell to 145 and is failing now at 175. Apple has become a one trick pony attempting to sell a $800 series ten phone amid a sea of cheaper but competent competitors.

 

Expect a couple of days pop back up and then lower prices into March18-22.   Recall that no stock market rally has ever lasted more than ten years and we are literally ten years out from March 9, 2009. October 3, 2018 therefore may be a top of some significance. Markets do not like uncertainty which is the only certain thing from Washington, DC.

 

The XLE Energy ETF topped at 78,fell to 54and died at its 125 day moving average yesterday. I have bemoaned the plight of the XES Energy Service ETF. It barely reached double digits and also reversed yesterday.

 

Gold is finding support at 1,287 and rising amid falling stock prices.

 

Shale producers have drilled many wells spaced too closely together. This has actually lowered overall production as one well steals from the next in the same formation. Banks are predicting higher oil prices; the XLE and XES are not.

 

Markets Begin Correction

Thursday March 7, 2019

Stock markets finally rolled over the last couple of days.

The DJIA closed under  25,611 turning its intra-month trend down. I was too early on calling a fourth wave top but it has now occurred. If my count is right the markets are now entering a fifth wave down which should  take out the three wave low at 22,000.

Hedge HDGE is flashing a buy signal at  7.01. This is about as good an entry as one could get.

 

 

Gold Records Its 13.5 Month Low,Stocks Pulling Back

Tuesday March 5, 2019

XAU

 

Looks like the gold complex is completing a two week correction.  We should be seeing the start of a strong rally over the next ouple of weeks.

Looks like the MAs want to converge around 76 before the net leg up.

Paper Gold GLD

This is a similar orrection I suspect a three month call on GLD is worth buying but looking at the daily chart not quite yet.

Transports

Transports are rolling over predicting a two week sell off in stocks.

Moving Averages Are converging in  HEDGE

A crossover to the upside will be a guy in HDGE

 

 

Well Finally, A Corretion of the Post Dec 24 Rally

Monday March 3 2019

For some reason my screen capture for the charts is not working

If you listened to the radio on the way home you heard the DJIA was down 206.67 today. Not so.

 

The intraday drop was

26155 - 25611 = 544 points, a rather different picture.

Transports

10563 - 10333 = 230

Russell 1594 - 1564 = 30

So as we thought Transports and RUT are pulling back from their  200 day MA

 

Numerous indexes had  reversals today including the major market index.

I believe this is significant and lower prices lie ahead.

We will see if this continues tomorrow.

AU

The XAU actually had an up day closing at  74.61 off the lows of 72.95. With the 200day MA at 72.33 this may be shaping up for a good re test of that MA

 

We expected a low for the XAU in February but it is coming now in early March.