The Market Perspective

New Highs Some INdexes

Friday Oct 11,  2024

Stocks Make New Highs, Oil Recovers

This column suggested $78 as a target for crude oil three weeks ago as the price rose above $689.  This past week managed $78.47 before falling back. It appears price is attempting to stabilize at the $74-75 level. November gasoline futures have rallied form the $1.90 level to $2.13. There is also some good news for the winter months ahead, at least for the grid providers wise enough to continue using natural gas.  In the last few days it has fallen from $3.00 to $2.55.

States that have abandoned natural gas have significantly higher electricity costs. The sun does not shine at night and the wind does not always blow. As always California has the highest electric rates in the nation. Florida which has chosen to rely on natural gas, has lower rates than Texas. Texas has a significant solar and wind component.

Stocks continue to advance, well most of the indexes.The Industrials make a new high at 42,745. Yes the index is overbought.  The tech heavy NASD 100 has not taken out its earlier August high.  SOX is making a new high at 5817.  The Russell 2000 and S &P Mid Cap Indexes have not recorded new highs. It appears the stock rally will continue into next week.

The financial press hails the FED Chair with the equivalent power on the order of King Arthur’s Merlin the Magician or perhaps Lord of the Rings’ Gandalf, the Wizard of the Istari order.  Not so fast, the FED merely follows the market rather than leading it.  The Fed had to reduce the overnight lending rate by  a half percent as  3 Month T Bills were even below five percent. The FED overnight rate was at 5.5% How is that working out?  The ten year note yield has risen from 3.6% to 4.1% since that cut.  The three month T Bill is yielding 4.5% still below the FED overnight rate. And now the Two Year Note rate is 3.396%, about the same as the Ten Year Treasury.  For a short time rates returned to normal with longer rates higher than shorter. Now we are going back towards another inversion. This rise in longer term rates tells us the market, always wiser than the politicians, does not believe inflation has been beat.

As Kamala ducks and dodges questions on her intended policies, evidence of much higher tax rates in her administration abound. One study noted that if all her corporate, capital gains, and ordinary rates were enacted along with high tasx states like California and New York, government would be taking about 50% of all that is produced. It is hard to see a growing economy with those onerous tax rates.

Digital Investing Ending, Commodities and Emerging Markets Begin, It looks like 1970s Once Again

Friday Oct 11, 2024

Kevin Hassett Chairman of COuncil of Economic Advisers during Trump, commented we are going to have at least a decade like the  1970s.. this means higher interest rates and higher inflation.

Click here for a great article on what to expect.

Market Re Thinks FED Rate Cut

Monday 10/7/2024

Today's action reversed Friday's up move.

Here is  a two hour chart showing the Friday rally and then today's  pullback. This is also an example that mood is unremembered, hey on Monday we forgot Friday and that mood can turn on a dime.

A bear market eventually takes the entire market. Here the Utility Index reached its 2022 high and then reversed today. Yes this reflects five waves up but it also reflects the expectation of higher interest rates. Higher rates are not good for utilities which constantly need to finance expansion.  the ten year note hjas quickly returned to 4%, so much for the FED controlling inflation.

Last week the think was that the FED (which follows not leads the markets) would cut yet again and further hte stock rally. I saw a piece today what Goldman is calling for a higher close for  224 and 2025. My friends at EWI and I are calling for lower, much lower year end closes. Here is the latest.

Crude oil has soared $12 in the last 21 weeks closing in on my next target of $78. This of course is due to increase wars in the Middle East not to mention Houthi strikes at oil tankers.

WTIC is up $2.86 just today or 3.83%. And the thinking was that the FED cuts to its overnight rate would lower long term rates, think again.  Here is the price of the ten year note.  Bond prices fall when interest rates rise. Friday its value dropped a good bit and rates rose which makes the day  end rally Friday out of synch with the bond market. The ten year not is now back to 4%. So the FED has done nothing to bring down longer term rates, one of several reasons for the market decline today.

The volatility index VIX is up 3% just today, this is the worry index, the more worry the higher it goes.

Here is our line up of bear funds that track at a reverse 1x to the actual fund,  in short if the SPX drops 1 %, the SH gains 1%

Bear Funds

Russell 2000 RWM

SPX SH

NDX NASD PSQ

DJIA Hdge

 

 

 

A Friday Rally

10/6/2024

DJIA SPX and NDX all rallied as Friday came to an end. The short term charts one and two hour suggest further rally.

I am surprise but  the end of the dock strike and the good jobs report no doubt buoyed an already over bought market.

 

19369 Ferrari 365 GT

Weekend 10/5/2024

 

https://www.youtube.com/watch?v=ed-Jz_qZzrM

 

 

Stocks Slump, Oil Price Rises

Thursday Oct 3 , 2024

Stocks Slump, Oil Rallies

The top in stock market indexes concluded July 11 with the final high in the NASD 100. Qualitative events since then are confirming worse conditions ahead.

The Longshoreman are not satisfied with a 50% raise over six years, bumped from an original 40% due to White House pressure, instead they demand 77%.  The auto industry is in trouble.  Inventories are piling up, interest rates have risen, Aston Martin and Tesla warn of lesser expectations. An extended strike will slow delivery of European models not made in the USA.

Levi Strauss cut its earning forecast and is considering selling the Dockers brand. Its stock price dropped 9.8%.

Asian stocks are lower after Iran rained missiles on Israel. And that brings us to the topic of oil prices.

The Organization of Petroleum Exporting Countries OPEC was created in 1960 with five members.  The idea was to influence production and maximize profit. Today there are 12 members. I believe OPEC has only been effective in raising prices with the two embargoes in 1973 and 1979.  The problem is that there is no enforcement mechanism to ensure the members will abide by a decision to cut production to raise the prices. Most members like Venezuela have nothing to sell other than oil. In the 1980s after oil reached $36. The Saudis became the ‘swing producer.’ When other members did not throttle back production as price was clearly falling, Saudi Arabia did. By 1986 the Saudis were tired of the misbehavior, refused to cut back and price fell from $20 to $12.

Now the Saudi Oil Minister warns that prices could fall to $50 if members do not follow the suggested production cuts.  Everyone who thinks a Kuwait Prince is going to cut lifestyle, raise your hand.  Last week we observed the price trend is down.

But wait. Now, as mentioned, we have a wider ware with Israel, Iran and its proxies. Earlier in September prices dropped to $656.Now tensions have raised that price to $73.85, up 9% in the last five days., Exxon Mobil has jumped from $111 to $122 in six days while the overall market is falling. Transocean RIG is up 5.6% just today but still trading well below book value.

The next resistance is $78, then $80, and $84. Israel is ignoring Team Biden’s advice on restraint as they are fighting for their very existence. For now, the safer bet is on higher or at least firmer oil prices.

Stock indexes are exhibiting their typical October seasonal weakness. I suspect there is much more involved than just a seasonal weakness. A perfect storm of events is underway. FEMA says there is no money for the Southeast digging out from Helene. The money has been spent on illegal immigrants. What must our enemies think of the US now?

Auto Salews Idling

10/1/2024

 

1. Business

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2. Autos
    

Auto Sales Are Idling as Prices Remain High

U.S. car sales are stuck below prepandemic levels despite better vehicle availability, more deals

 

By

Christopher Otts

 

Updated Oct. 1, 2024 5:55 pm ET

 

 

 

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Automakers sold about 3.9 million new vehicles in the U.S. in the July-September period, according to an estimate. Photo: Scott Olson/Getty Images

High new-vehicle prices and borrowing costs are keeping some shoppers on the sidelines, pointing to what is expected to be another lackluster sales year for automakers.

Industrywide third-quarter U.S. vehicle sales fell 1.9% compared with a year earlier, according to an estimate from research firm Wards Intelligence. Most major automakers reported results for the July-to-September period on Tuesday.

General Motors GM 0.09%increase; green up pointing triangle

, the nation’s largest carmaker by volume, said sales fell 2% in the quarter compared with a year earlier, with the company’s mass-market Chevrolet brand accounting for most of the decline.

Toyota Motor’s U.S. sales fell 5.6% in the quarter from a year earlier, with popular nameplates such as the Rav4, Camry and Corolla posting declines last month.

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U.S. electric-vehicle leader Tesla is expected to report global deliveries Wednesday.

Analysts say the industry’s U.S. sales tally was dented by disruption from Hurricane Helene, which hit the Southeast on the final weekend of September, typically a busy selling period.

Meanwhile, auto executives also were bracing for any impact from a dockworker strike that took effect early Tuesday, shutting down ports from Maine to Texas. 

Toyota built up extra vehicle stocks in recent weeks anticipating the work stoppage, said Jack Hollis, operations chief for Toyota in North America. 

“They need to get to a solution quickly. It could be damaging to the whole economy,” he said.

The sluggish third-quarter results put automakers on pace to finish the year with U.S. vehicle sales of around 15.7 million—a slight increase from last year, when supply-chain snags were still crimping vehicle output, but still well off historic highs.

Carmakers posted five consecutive years of at least 17 million vehicle sales through 2019. Many analysts and dealers point to affordability as the primary reason why sales haven’t marched back to those levels.

 

 

2020'21'22'23'2401234 million

The average new vehicle in the U.S. sold for $44,467 in September, down nearly 3% from last year as automakers and dealers offer more discounts, according to industry tracker J.D. Power.

But that figure is up from about $34,600 at the end of 2019, reflecting years of sharp inflation during the pandemic, when a shortage of computer chips and other car parts crimped vehicle production. 

Those prices present plenty of sticker shock for consumers who might be returning to the dealership for the first time in five or six years, said Jessica Caldwell, head of insights at car-shopping site Edmunds.

“This market is still pretty unaffordable,” she said.

John Motroni, a retired television-news producer in San Francisco, said he and his wife were recently interested in Ford’s Maverick compact pickup truck, which starts in the high $20,000s. 

But when a San Francisco-area Ford dealer was asking thousands of dollars more than the sticker price, Motroni and his wife decided to keep their 2009 Ford Flex sport-utility vehicle. “We just said, ‘To heck with it,’ ” he said. 

The Federal Reserve’s decision to cut the U.S. benchmark interest rate hasn’t yet translated into significantly lower borrowing costs for car shoppers. New-car finance payments averaged $734 last month, up slightly from last year, according to J.D. Power.

In a sign of consumers stretching their wallets, more are turning to leasing to walk away from the dealership with less money out of pocket. Leases accounted for 25% of new-car sales in the third quarter, up from 20% a year earlier, according to Cox.

Stock Index Sell Off

Tuesday Oct 1, 2024

Stocks sold off again today, Friday high in DJIA 42,628,today's close 42,156. Almost 500 points The PAR SAR should give a daily sell signal on any further weakness tomorrow.

Same for SPX.

NDX generated a daily PAR SAR signal today with a stopa t 20,273. It has lost about  500 points but at a value half that of the DJIA.

Bear Funds

PSQ inverse NDX should give a buy on further NDX weakness, same for  SH inverse SPX, and HDGE.

BEARX  is the  Prudent Bear Fund.  At 5:15 OM CST I do not have a closing price but it should be bottoming now and turning up.

The market is rolling over right in the usual seasonal period of weakness. It can get much worse as it did in  1987 and  1929 in the same month.

 

 

 

Nikkei Drops 5%

Tuesday Oct 1 , 2024

The Nikkei, Japan's major stock index, appears to have topped July 11 just like the US NDX. But it was hit much harder dropping 25% by early August. It rebounded to a lower high and then dropped 5% yesterday as a new Prime Minister takes office.

See the article today  on WSJ  page B10. The car market is not looking well. I commented that the new Stellantis looks a lot like the old Chrysler. Its market share has fallen from  10.4 to  8.4 % this past year. VW is having trouble. Aston Martin shares fell 25% in London in one day on lower operating margins and  a weak Chinese market.  On page B 11 luxury brands are  pinning hopes on micro handbags, less material to lower their cost, priced at $1200.

CARZ the auto ETF  also peaked in early July, fell into earl August, rebounded, and yes it also dropped .87% yesterday.

Yikes look at the STLA chart. Notice STLA also peaked around July 11.

I have expected the stock market to roll over in this time frame. News like the above suggests the move lower is under way. The start of a down turn is often coincident with a major storm.

Homeowners in Tamp Bay / St Petersburg are selling after four floods in four years, or make that trying to sell. The dock worker strike is underway as Biden does not believe in Taft Hartley, the law that allows for right to work states and intervention to end strikes.

Robert Frost wrote that the fog comes in on little cat feet. Bear markets do the same.

Hmm, here in San Antonio we have had a surge in acquisitions of CPA firms. State wide and national firms have bought local and regional firms here. MY experience is that larger firms pay wup for the  privilege of getting started. The local owners receive a big payment. The new owners raise prices to pay for their purchase. The same thing happened in the oil boom years pf 1973-1981 in the Permian Basin. In the oil price drop of  1986, those locals got to buy their own firms back from the newer owner.

The SA economy is quite diversified and times have been good. This is all part of the surge in real estate development downtown and across the City. This mirrors the surge in 1929 with the first 20+ story building down town and the largest movie theater in Texas, the Majestic. Will history repeat? This is typical of expansive social mood during a boom era.

Speaking of expansive social mood here is an e mail I just received from Charles Payne a TV host on Fox Business. He assumes that the bull market where he claims an 70% advance the last eight years will, of course, continue. Here is his pitch, brimming with the confidence that only a  42,000 DJIA could bring. Ironically the front page article in today's WSJ announces that  AI Fever Abates in the stock market latest quarter.

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Major Indexes Exhibit Topping Pattern

Weekend 9/29/2024

 

ech stocks have poered the rally so the NDX is the best concentration of Tech stocks and should be the focus of our attention.

NDX topped in a fifth wave July 11. Since then it exhibits an A  up, B down, and final C wave up. Notice PMO at bottom and RSI at top are much weaker than on July 11 which is as it should be.

On the two hour chart wave C shows an A B C fractal. The PAR SAR now shows a sell signal, the blue dots. RSI at top and PMO bottom are turning down. If the analysis is correct we should see a considerable sell off some time this week.

PSQ Bear QQQ NDX

This fund

This chart is mirror opposite of the NDX. And the PAR SAR just flashed a buy signal. PMO and RSI are turning up. This is a low rise entry at this point.

SH the bear SPX fund is about to show a PAR SAR buy, RSI and PMO turning up.

HEDGE HDGE is more industrial and lags SH and PSQ.

DWSH does not have the liquidity of these first three and lags PSQ.

I exited Sprott Silver PSLV Friday, it too has a PAR SAR  sell on the  120 minute chart.