The Market Perspective

Stocks Congest, Oil Falters, Weekly Oil Turning Down, Fed Ex UPS flashing negative

Memorial Day Weekend May 25, 22019

See our previous post about a three year low in the Purchasing Manager index

In today's Weekend WSJ

• Brexit Strife Forces May Departure
• FAA Broadens Boeing Probe
• Tesla down  42% this year, closes under $2000
• Factory Orders point to slow down
• Deming New Mexico Strains to Handle Migrants
• Dissenter Stops Disaster Aid Bill
• War Spreads to Iran's Adversaries
• US China Rift clouds Japan's Economic Outlook
• Franchises are in Union Crosshairs
• China Tech Champion or Serial Theif
• Wall Street Isn't Buying What Silicon Valley is Selling
• Dow Declines for 5th Week
• Oil and Copper Prices Decline

And here in San Antonio the Governor of the State has the FAA investigating the SA City Council kicking Chik Fil A out for not serving on Sunday, Governor says this violates Chik's religious grounds, Council dislikes opposition to gay marriage, do we have enough rules here?

Point being, taken together this is all reflective of growing  negative mood. And mood drives the markets.

Percent of Stocks above MA

On the weekly chart PMO is toppy, not a great spot to initiate a new position.  Stocks did not turn down below  25,200 Friday so expect more congestion.

NYSE Daily  Advance Decline

The advance decline line flattens and the MAs draw closer together

Momentum via MACD and RSI has weakened.

Weekly

Here MACCD is toppy. The chart looks a lot like last Sept Oct, toppy.

Transports

Transports made a lower high and are now under all four MAs, PMO is negative, not good.

Russell 2000

Russell 2000 barely got over its  200 day MA and is now falling, PNMO also going negative.

I don't see any reason to be long the major indexes. Utilities and REITs are hitting  new highs in defensive position but I don't see buying them at new highs either.

DUG Short Oil and Gas

Dug is flashing a buy signal, this is a bear fund for oil and gas shares.

HAL

A re test of the  2009 low is not out of the question for the 2nd largest sesrvice firm. And the price of oil now is higher than at the previous 2016 low.

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

Mfg Activity Slows

Friday May 24, 2019

Manufacturing activity is collapsing, and “worse may be to come,” said Chris Williamson, IHS Markit’s Chief Business Economist.

Williamson’s grim statement came on Thursday, in response to the latest IHS Markit Flash U.S. PMI report, which showed business activity growth plunged to a three-year low in May.

“Growth of business activity slowed sharply in May, as trade war worries and increased uncertainty dealt a further blow to order book growth and business confidence,” Williamson said.

Specifically, the composite output index dropped to a 36-month low of 50.9 from 53.0 in April. Any reading above 50 signals growth, which means the index is very close to signaling an outright contraction in activity.

Amid the ugly data, “inflows of new business showed the smallest rise seen this side of the global financial crisis,” he added.

WTIC Cracks $60

Friday May 24, 2019

WTIC Cracks $60 to the Downside

 

Thursday US oil futures tanked 5.7%, the biggest percentage loss of the year. The DJIA recouped some of its losses in the final hour after falling 451 points earlier. Chip-makers have been hard hit.

 

Wall Street Journal Friday, markets hit As Trade Tow Escalates

 

We have warned for months in this column that the weakness in the Energy Service XES was flashing danger signals for oil prices. XES is already trading under its 2009 low of $12.50. And our prediction that the Trade War would not be easy to win is certainly coming true. China is surely watching the pain of soybean farmers, bicycle sales, and the 25% tariff on LNG shipments. Dorian LNG dropped 16.48% on Thursday. As previously noted, this will negatively impact the billion dollar investments in LNG export terminals along the Gulf Coast of Texas. Couple that with the Democrat call for impeachment. Indeed I suspect China, if not Canada and Mexico, as well, have decided to wait it out till the 2020 election before committing to anything.

 

Trump gets his wish for cheaper energy. Unleaded gasoline futures dropped 3.89% to $1.89. That and the drop in oil prices reflect inventory builds and the culmination of the 50% rally from $42 to $66 since December.   The world is settling in for a protracted trade war.   US Companies are not necessarily coming back to the US. Instead they are moving out of tariff bound China to other locales like Viet Nam or Mexico.

 

The big drop in stock prices yesterday suggests a short term low. IIf the DJIA does not fall under 25,222 today (now 25,490 and up over 100 points this morning) congestion will probably continue for another week or two.

 

 

 

 

 

 

 

Negative mood is quickly spreading to markets world wide. Prime Minister May looks to get ousted over Brexit woes. The German economy continues to slow. It is doubtful sanctions will oust regimes in Venezuela or Iran. India just re-elected Modi in on bright capitalistic move.

 

Instead of telling fellow Democrats to read the Mueller report, get over it, and accomplish something, Pelosi went for a compromise. Don’t impeach just insult. But that won’t satisfy the hard left. And if it comes to pass, the not so left Democrats may have to vote on impeachment. That will make for s tough sell to independents as a Republican Senate won’t confirm. Republicans need only to regain 18 seats to re-take the House. And now Trump has drooped infrastructure unless the Democrats back off. Expect conflict and impasse to continue.

 

Overall look for low stock and energy prices into Fall 2019.

 

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.