The Market Perspective

Transports Fall below 200 day MA

Thursday May 23, 219

Transports and Small Caps lead market direction.

Transports are setting up a re test of the  10,000 level. Taking that out would suggest a re test of the  8,600 level.  The weakness in Fed Ex and trucking stocks suggests economic weakness ahead.

Fed Ex could not even challenge its  200 day MA.  UPS looks sick as well.

Trucking Hunt Transport

Same as Fed Ex

In multiple newspaper columns I have wondered just how long it would take for the negative political mood to infect the stock market. We are getting  our answer.

Trump walked  out of a Pelosi Schumer meeting yesterday saying he would not stand for the impeachment talk and a deal.   More Dems call for impeachment which means Dems who won in swing districts would have to vote on the issue. That would likely cause the independent voter some consternation, and Trump is of course aware of this.

Markets dislike uncertainty and that is all we are getting from both the  23 Dems running and various Republicans.

More Bears EMerge on Tesla

Tuesday May 21, 2019

Another bear emerges on Tesla. This fellow suggests $230 but maybe $10-97.

I agree. They are still burning cash and cannot deliver enough cars at target price. And now the majors who have profits from I/C engines, are building and delivering electric cars at the target price of  $35-37 K. Uh oh.   Hello Delorean.

DJIA Fails to Overcome 26,000, Tariff Woes

Weekend May 19, 2019

94% of the world's bicycles are made in China, now they are  25% more expensive.  An op ed this weekend reports on the  problems of mid west soybean farmers in the US.

Trump lifts metals tariffs on Mexico and Canada but I am guessing the Dems block approval of the new NAFTA before the election.

And the DJIA failed to take out 26,000. A recent article suggests all of this has been a dead cat bounce.

Those who bought thousands of points back now rally the market to recent highs. In that way they unload their purchases at high prices to the late comers.

I would suggest what has happened is distribution since January  2018.

  Let's look at that chart again.

Two Year Weekly

The blue arrows  at top show resistance this is as far as the buyers seeking to be sellers could push the average. Then it sells off. The far right arrow is a lower high than the previous two. Those distributing stock are running out of buyers. And notice this is confirmed by the much lower PMO at bottom.

Transports

Transports made  much lower high on the recent rally.  All of this suggests a correction into June. And that may simply be the start of  multiple stair steps down ala 2000-2002.

AMZ AMZN records a lower high as well. And notice the low level of PMO here.

FB looks much the same.

 

And the poor performance of Uber and Lyft suggest waning interest in buying IPOs.

Emerging Markets

Here is another example of markets peaking in January  2018 with distribution taking place since. The high two weeks ago takes on a lore more significance with the failure to rally since.

And as mentioned last week we are now at the typical seasonal high, after May go away. That looks to be the case this year.

 

TLT Bond Market

The rally in bonds looks overdone. Rates may be near the lows for this run.

Ten Year Yield

Ten year yields have fallen to the  200 week MA but are still above the 2016 low.

if this were the chart of a stock it is getting close to an important long term buy level. Kudlow and Trump are wrong, Powell is right, this has been the first of a correction in long term rising yields. And the reason is fear of default as in Tesla.

Gold has not rallied and continues to disappoint. It is probably headed to the e 200 day MA at 1250. Tom McClellan suggest 1210 based on a break of the head and shoulders top.

Silver

No one is interested in silver. The collapse gathered speed this week. Looks like it is headed back to 14. Silver miner shares are really in  the dumps.

Crude oil

rude oil is finding support at its  200 day MA.  Attacks on  shipping via Iran and Venezuela has helped buoy prices.

The increased  tariffs on LNG are keeping natural gas futures at  2.60.

Social Mood

And de Blasio makes 23 Dems now running.. The WSJ interviewed New Yorkers and one suggested announcing April 1 April Fool's Day would have been appropriate as NYC

continues to fall apart.

It is hard to see how one of the 22 are going to overcome Biden's 20+ point lead.

The Dems begin their debates in June and expect the language to be particularly vicious towards Trump, as most have nothing to run on.

https://www.foxnews.com/opinion/andy-puzder-2020-dems-clueless-when-it-comes-to-one-of-the-most-critical-economic-challenges-facing-the-us

Our bottom line is that markets are distributing stock making a 18 month top of some importance. Social mood trends negative.

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 predictions.

dennislelam@gmail.com

 

 

 

 

 

Stock and Oil Prices at Resistance

Friday May  17 2019

Stocks and Oil Still Facing Resistance

 

5/17/19 8:15 AMC CST The United States is now a net energy exporter with production exceeding that of Russia or Saudi Arabia. If you are in the USA conducting the energy service business, what could go wrong?

 

Weatherford International delisted from eh New York Stock Exchange. It is now traded on the pink sheets and plans a July Chapter 11 (Reorganization) bankruptcy.

 

China’s decision to impose 25% tariffs on US LNG comes as developers are poised to make final investment decisions for several Gulf Coast Projects.

San Antonio Express-News today

 

Two-thirds of CFOs expect the US economy to enter a recession by third quarter 2020. Half expect a recession by the end of 2019.

Duke University Survey

 

And by the way the SA Express News is owned by the Hearst Corporation which itself is in Chapter 11 proceedings. The Chinese specifically targeted the multi-billion dollar projects underway along the Gulf Coast. If this ‘trade war’ is prolonged (which is my guess) that will lower return on investments for those companies. The construction of export terminals assumed a growing Chinese market for LNG.

 

Volatility is back in the stock markets. The DJIA fell from 26,400 (rounded) May 6 to 25,300 by may 13 and had regained 25,862 by Thursday May 16 close. To challenge the previous 26,600 high the DJIA will need to close over 26,000 today, the end of the week. But the DJIA is trading down 200 points this Friday Morning. For now trends are up but keep the big picture in \mind.

 

The Dow Transports tend to be the leader in direction for the markets. The first peak was in January 2018, the next in September 2018 and then the recent high in April 2019. That last high was lower than the previous two. This is a negative. The Russell 2000 small capitalization index has the same look as the Transports, another negative.

 

The US sent both a carrier and bomber group to the Mid East transiting the Straits of Hormuz with little interference from Iran. Reports today indicate that the US thought Iran would attack first and apparently Iran thought the same of the US. That activity raised thee price of crude 1.37% Thursday.

But if trade wars slow the world economy, demand for crude will ease.

 

All of this reminds one of President Harry Truman’s wish for a one-armed economist. In that case, quipped Truman, he could not say, well Mr. President, on the other hand…..

Thursday May 16 2019

 

Below is the latest from EWI on war and stock markets. The best parallel to right now is Figure 15.  then the Democrats managed to drive President Nixon from the White House. This time they assumed the Mueller report would do the same as  Watergate then. It has not provided any ammunition and in fact found nothing on Trump.  Unable to yet accept the  results of the  2016 election,  the Dems rage on.  The irony is Hillary's shriek when Trump said he would not accept the results of the election if it was not fair. Ironically the opposite happened, the Dems do not accept the election.

 

Still the atmosphere is negatively charged. if the  275 point rally this morning holds, the DJIA will likely close the week over  236,000 which suggests another leg up trying out  26,600.

War! Good or Bad for Stocks?
Take a look at stock market behavior in times of war... and peace

By Bob Stokes

After the U.S. recently announced new sanctions against Iran, tensions have escalated between the two countries.

USA Today reported (May 7):

The Pentagon is rushing additional military muscle, including B-52 bombers, to the Middle East to counter Iranian threats to U.S. troops on the ground and at sea.

Of course, it's always best when military conflict can be avoided because as U.S. President Abraham Lincoln said in an 1864 speech:

War at the best, is terrible ...

How true. Yet, shifting to the financial arena, what can stock market investors expect during times of war? Is war also "terrible" for market participants?

Some market observers believe so and argue that war diverts resources from productive enterprise. Others posit that war is good for stocks and the economy because the government forks over big money to companies to produce war materials.

So, who has the winning argument?

Well, among many countries in the world, the U.S. has been fortunate to have not had an international military conflict on its soil in the 20th century. If it did, the outcome for the U.S. economy and stock market may have been different. But as it stands, we looked at the path of U.S. stock prices during World War I, World War II, the Korean War and the Vietnam War to see if we could find any consistent correlations.

These four charts from Robert Prechter's 2017 book The Socionomic Theory of Finance show you what our research revealed:

Figure 12 shows a time of war when stock prices (normalized for inflation) rose, then fell; Figure 13 shows a time when they fell, then rose; Figure 14 shows a time when they rose throughout; and Figure 15 shows a time when they fell throughout the hottest half (1965-1975) of a twenty-year conflict. Who wins the war doesn't seem to matter. A group of allies won World War I as stock values reached fourteen-year lows; and nearly the same group of allies won World War II as stock values neared fourteen-year highs.

In other words, no consistent correlation was found between the performance of the stock market and war.

But, how about during times of peace?

Here are two more charts from The Socionomic Theory of Finance:

Figure 16 provides an example from the 1920s in which stock prices seemingly benefited from peaceful times. The Dow rose over 500% in just eight years as peace mostly reigned around the globe.

Figure 17, however, shows that in the three years immediately thereafter, peace likewise mostly reigned around the globe yet stock prices fell more than they had risen in the preceding eight years!

So, despite assumptions to the contrary, the evidence shows that there's no consistent relationship between U.S. stock prices and peace -- or war.

For other widespread beliefs about the stock market that are simply not supported by the evidence, see our free report, "Market Myths Exposed".

 

 

A Record for Monet Haystacks at $110 M

Thursday May 16 2019

I e mailed my friends at the Socionomics Institute about a record art sale. They were already writing about it!

 

Monet Monet Monet, must be funny, in a rich man’s world

A new record art sale comes right on cue.

Last night, at a private auction in New York, someone paid $110,700,000 for a painting. The 1890 work by the French artist Claude Monet set a new record selling price for an impressionist painting. It is from Monet’s “Les Meules à Giverny” series, often referred to as “haystacks”, which is famous for the way in which Monet repeated the same subject to show the differing light and atmosphere at different times of day, across the seasons and in many types of weather. There was an intense four-minute duel between the final two bidders before the hammer came down. The identity of the new owner is unknown.

This news comes at an appropriate time because, as EWI and the Socionomics Institute have been writing about for decades, record art sales tend to coincide with stock market tops. Excess money appears after a boom and that excess finds its way into unproductive use, such as art. It’s not a trading system, of course, but when such largesse manifests, it is a clue that the credit cycle could be peaking. The chart below shows a smorgasbord of examples in relation to the Dow Jones Industrial Average.

To compare apples with apples, Wikipedia shows a list of the 93 most expensive paintings adjusted for inflation. Incredibly, out of the top 15, 12 have set their price at auction since 2011, the era of quantitative easing and easy money. The other 3 in the top 15 set their price at auction in 2006, just as the bubble in credit and real estate was peaking, and the financial crisis was brewing. The amazing plethora of inflation-adjusted record art sales over the past few years is a sign that this top in the credit cycle is set to be of biblical proportions. In coming years, we’re confident that finding a buyer willing to pay a record sum for a work of art will be like looking for a needle in a haystack. 

 

 

Triple Head & Shoulders Top Back to Jan 2018

Tuesday May 14, 2019

Larry Kudlow's claim that the stock market has been soaring is simply untrue.  Take a look above.

The DJIA finished the rise from  2009 in a parabolic unsustainable move up. The a triple top looking like a head and shoulders formation unfolded.

Note the two shoulders peaked just under the spike high last October.

The FANG stocks have lost interest. And the poor performance of UBER already down  18% since its IPO last week shows little promise.

The markets are bouncing up this morning which is to be expected.

This is pre market at 7 44 AM CST.

October 2018 Versus Now

Monday May 13 2019

Fall 2018

As always most of the move happened in the final frenzy of December, a basic socio tenet.

Now as then price quickly moved below all the MAs. It then rebounded and failed. It then rebounded staying in the same  21,500 - 26,000range. 24,500 is not that far off and PMO is still headed down in decisive fashion. My earlier wave count on the two hour chart was too optimistic. Lower prices ahead.

Transports are down 3% today and Transports lead. INDU down  2.55%.

Remember trade wars are easy to win!

Double Top in Stocks

Weekend May 12, 2019

No stock market rally has ever exceeded ten years. This rally hit he ten year ark two months ago

Trump is embarking on the biggest tariff war since Smoot Hawley of the Depression.  That disaster did not end uyntil after WW II with the General Agreement on Tariffs and Trade GATT.

https://en.wikipedia.org/wiki/Smoot%E2%80%93Hawley_Tariff_Act

Every other developed country stock market is trailing ours, by wide margins.

i posted this back in october and it has updated since. it looks like an A wave corrective up just ended which means a B Wave  down has begun.  if we take out 22,000, that would suggest 18,000 but we are getting ahead of ourselves.  Note PMO peaked with the 3rd Wave..

The administration brags about the stock market. Even Maria Bartiromo mentioned the market is still up  25% from December. But here is the truth, the DJIA made a lower high on this Wave A move up. And now has broken over.

Transports lead

The Transports made significantly lower high on this move and are already under the  200 day MA.

Energy

 

I have been warning about the weakness in XES despite the  42 - 66 rally in oil prices. RIG, Apache APA and XES are all below their 2009 crash low prices. This is a warning of real oil patch problems.

Social mood continues very negative with Democrat candidates trashing Trump supporters and vice versa.

Tom McClellan is the so of the couple who invented the McClellan Summations Index. And Tom says things are just great because the Advance Decline line is strong.

\

This weekly chart bears watching.  Yes it is a big move up,  rescue or last gasp of a ten year rally?

Summation Index Daily

 

I have never read of a politician who recognized the business cycle. Trump is no different.

Even Fidelity recognizes we are late in the usual business cycle.

And I do not think Trump understands the difference in a private negotiation over a golf course versus a very public one with China, a country who is resuming its world presence after  500 years of slumber.

As a college professor, I can assure you Asian students work hard, American  students do not.

And we have a raft of politicians offering something, health care, college, retirement, minimum wage, for nothing.

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 predictions.

 

Have We Seen the Top?

Weekend May 11, 2019

Have We Seen the Top?

 

China said on Friday that it would retaliate after the US moved to increase tariffs on hundreds of billions of dollars' worth Chinese products on Friday, effectively breaking a months-long truce and seriously complicating ongoing talks..

Following through on earlier threats by US officials, the US raised a 10 percent tariff on $200 billion worth of Chinese products, including electronics, clothes and toys to 25 percent, starting at 12:01 pm Friday Beijing time.

 

Global Times Today

 

The column title last week was Oil and Stock Prices Likely Topping. In closing we wondered how long it would take for the negative political mood to infect Wall Street. After a 1,100 point drop in the DJIA from May 1, we now know.

 

Amid massive optimism regarding stock and oil prices, this column has recommended caution. That prediction has now come true.   Let’s take a look at just what has happened.

 

The top was Tuesday April 23 at 26,695. The low yesterday was 25,577.   That is a drop of over 1,1100 points or 4.2%. After a 25% run-up this year that is not a surprising correction. But could this be something more significant? Watch the 200 day moving average at 25,419 for support or a breakdown.

 

This column (and many others) warned months ago that Trump’s ‘easy to win’ trade war would likely end badly/ See our opening for how this is playing out in China. The Democrat Congress is not likely to give Trump anything on his revised NAFTA deal. And despite Trump’s claims, NAFTA has generated a great deal more business than pre-NAFTA. He now threatens Germany which to be fair has far higher tariffs on US cars that we levy on German made autos. A tariff is a tax and will only increase prices for goods Americans buy.

 

Negotiating land deals for hotels and golf courses with his bull in the China Shop attitude may work behind closed doors. But when the reputation of an international politician like Xi is on the line, well, no one wants to appear to be appeasing Trump.

 

Now manufacturers are moving out of China, which may not be a bad thing. But it is also not likely to convince the Chinese to respect and pay for Intellectual Property.

 

Crude oil is testing its 200-day MA at $6089.   Momentum is breaking down after the big move-up from $42.   Energy XLE is below all four MAs as is XES Energy Service.

 

Remember that no stock rally has exceeded ten years in time. We passed the ten-year mark March 9. 2019. Much higher volatility will likely drive prices higher and lower this month. But we may have seen an important price high resulting from increasing negative mood this month