The Market Perspective

DJIA Drops 600 PoInts

Monday After Market Close Nov 12, 2018

 

This weekend we warned that the Transports and Russell 2000 were not confirming the new high in the DJIA. We concluded that evidence was mounting that a significant top had occurred. Today only re enforces that idea.  WE also noted world wide deteriorating social mood which came on full force today.

DJIA Turns Down

Monday Nov12 2018

This weekend we noted the non confirmation by the Transports and Russell 2000. According to Dow Theory this is very negative. Sure enough the DJIA has begun the day down.

Negative mood continues with Trump angering Macron and not attending a ceremony this weekend with the other leaders.

The fraud continues in Florida, a negative mood holdover from the Gore Bush contest  not considering Obama's Supreme Court pick and the Kavanaugh hearing.

 

FANG Mania Ends

Weekend Nov 10, 2018

It is important to understand that the buying mania in the FANG stocks propelled the NASD to over 7,000. A look at the charts of those firms

shows the love affair has ended. The worst though not an official FANG is Yelp.

That is a 25% loss in ONE DAY! I suspect this is a warning of just how dangerous this overall market can be.

https://www.marketwatch.com/story/yelps-post-earnings-stock-plunge-exposes-a-fragile-business-model-yet-again-2018-11-08?siteid=yhoof2&yptr=yahoo

Facebook has lost a third of its value.

Dissatisfaction with FB editing of posts has no doubt contributed to its demise.

Social Media ETF SOCL

Social Mood Taking Negative Turn, Transports, RUT not Confirming DJIA

Weekend November 10, 2018

I am sending much better lawyers to expose the FRAUD (in Florida)

Trump on Twitter regarding Florida recount

I took a yellow highlighter to various articles in the Weekend WSJ, here are a few snippets

 

Florida repeats the heated 2000 election results

White House Tensionis  Grow over China

Gab to Reign in Calls for Violence

Trump Calls NMacron Comments Insultijhng ahead of Meeting

Trump Fires Sessions

Britain struggles with Knife Attacks

The Blue Wave Breaks Gently

America Could Use Some Deals

Eurozone's 19th Nervous Breakdown

 

All told social mood is trending negative world wide and it shows in the markets.  The New Civil War we have discussed so many times has taken on a renewed vigor.

While Nancy and Steny are no doubt savoring new found power again, they may be surprised at the community organizing efforts of the new Congressional Members. Look for an unforseen bid for power in the Dem ranks.

 

DJIA versus Transports

Dow Theory dictates that both indexes need to make new highs or lows to confirm a move in one direction.

But the Transports in purple are not confirming the move up in the Industrials

Note the downturn in the Transports in fact right at the DJIA 200 bar MA.

Russell 2000

The small cap Russell  2000 looks strikingly similar to the purple Transports above. Notice RUT did not even get close to challenging the  200 bar red MA, and the shortest MAs are already turning down.

%  Above 200 day MA

This indicator is hesitating right at the 52.5% level. And it is nowhere close to its Sept peak. 

I believe evidence is building that a market top of some significance has occurred.

TLT Bond Prices not Recovering

There was no rush to safety in bonds during the October sell off. This is another reason to doubt that the markets are AOK now.

Weekly TLT

The more important weekly chart looks worse. Price is well under all the MAS and the MAs are converging and about to turn down, the typical way trends change.

US Dollar

The USD is between 50 and 61.8% re tracement which suggests a top might well occur in the near future.

Gold via GLD to see 2 hour chart

The strong dollar beat gold down but it is still in an uptrend. I am still bullish on gold.

Crude Oil

Bullish Percent Energy

BPENER got whacked with the stock sell off just as it did last February. It has rebounded to those February lows which are now some resistance.

XLE versus XES in purple

Here is a graphic of what I mentioned in the column posted Friday. Energy Service in Purple is not confirming any recovery in XLE Energy producers. And XES has been falling since April. Somehow the market senses what might happen.

 

Crude Oil

Crude oil weekly has fallen below its 34 Exponential MA. And PMO shows no signs of bottoming

Did anyone notice the article about OPEC dissolving with the Saudis and Russia going it alone?  No doubt that would result in a production free for all, not that OPEC ever regulated anything anyway. No wonder price is falling just as in  2014.

Bottom Line

Evidence builds that a significant stock market top has occurred. No recovery has ever lasted longer than the ten years this has been in force.

Interest rates are rising, bond prices falling, and numerous cities and states are in serious trouble with pension obligations.

Gold and  the XAU need to hold these levels and recover. Hopefully that will happen amid a US Dollar top.

Finally oil, gasoline and heating oil appear to have broken down. Oil has fallen the  20% necessary to call it a bear market.

 

dennislelam@gmail.com

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.

 

 

 

 

 

Oil Prices Still Falling

Friday Nov 9, 2018

Oil Prices Decline Tenth Straight Day

The US just became the world’s largest crude oil producer, barely squeaking by Russia. That’s huge.

Mark Waggoner at Excel Futures Friday WSJ

October 3 marked the high in stock indexes and oil prices at $76.41. Since then both have fallen. Oil prices have fallen 20%, notching a lower low than last June at $64. As I write Friday Morning WTIC fell below $60 and has now recovered above that level to $60.42. There is no shortage of headlines proclaiming that this20% price decline means oil has entered a bear market.

Looking back there were plenty of clues a top was at hand.

• Bullish bets on crude oil futures were 26 to one for higher price in June and still four to one on October 30. That is a crowded one-side trade.
• A Bloomberg writer reported spending $200 for a night in a Super Eight Motel in West Texas. That is a contra-sign in itself.
• We have noted for months that the XES Energy Service ETF did not rally to significant new highs with Energy ETF XLE. That is a non-confirmation. The service sector should be confirming higher energy prices but it consistently did not.

So what to expect next? Share prices are showing some strength this morning. Apache is up 2.28%.   The bullish percent of S & P energy stocks dropped below 10% but has risen to 26% since October 29. Shale ETF FRAK is struggling but up from its October 29 low.

This is like the top of May 2014 in that there is no shortage of supply. Russia and the Saudis ramped up production on the notion that Iran production was constrained. Don’t expect any supply shortage to rescue falling prices.

Gasoline prices are apparently falling even faster than crude oil prices. The refiner ETF CRAK is down from its $36 October 3 high dropping 2% today to $30.82.

On the daily chart WTIC has fallen below its 200 day moving average MA. The 50, 87 and 125 day MAs are all turning down. Crude will need to rally quickly here or lower prices are all we can expect.

The talking heads on CNBC want us to believe the correction is over given the DJIA rally. But the Transports and the Russell 2000 are failing below their 200-day MA. Those are both Dow Theory non-confirmations.

Finally the Democrats takeover off the House assures that the legislative good news has ended. Pollster Frank Lutz just remarked that 2020 will be the most contentious election since 1968. See our weblog for more updates on developing negative mood.

 

Stocks Recover, Fears of Bear Market Recede

Thursday Nov 8, 2018

Stocks had a big reversal the last three days.

With the Dems controlling the House the market is probably suggesting there will be enough gridlock that little will change the next two year.

The WSJ reminded readers today that two years ago they predicted Trump's erratic ways would lose the House in 2018 and let Dems regain control in 2020.  Unless he widens his base among independents that looks to be the case, but that is two years off.

The media is just now noticing oil prices have fallen for eight days in a row. This suggests an oversold condition that could bring a sharp rally as shorts are forced to buy back and cover positions.

The market bounced here in June at 13.00 for USO.

WTIC

 

WTIC has made a lower low which suggests this market is in trouble. The situation reminds me of 2014. Then as now prices were high, triple digit and then peaked in May 2014 at 107. In similar fashion priced peaked at  76 and are now at61.67. There is no shortage of supply and gasoline and heating oil fall as well.  Share prices have fallen and we could see some sharp rallies there but PMO and MACD indicators have not quite bottomed for most yet. But the sharp reversal means this might be a good time to begin accumulating now. I would not do so expecting a long term resumption of increasing oil prices. I have noted  on this weblog and in the weekly newspaper column that XES the energy service ETF was failing to confirm higher prices. That non confirmation has now come true. In the same wasy the Transports need to confirm the Industrials, XES needs to confirm XLE with both moving to new highs. That did not happen.

 

Here is the non onfirmation and then collapse

 

Crude Oil Tops Out

Tuesday Nov 6, 2018

 

It appears the rally from February 2016 in crude oil has ended with five waves up on the weekly chart.

 

We have noted that since the oil and stock market lows of February  2016, both markets have moved together. Interestingly both oil and stocks topped on October  3. Now one month's drop has erased all the gains going back to early April. This may well be telling us what to expect in the stock market.

 

Unleaded Gasoline

Gasoline topped in May and is already back to the February low.  The commentators on television and in the media always have it backwards. As oil and gasoline prices rise they complain. But this is the evidence of a strong economy that can afford higher oil and gasoline. Drops in these markets like 2008 usually for tell a slowdown in economic growth.

XLE Energy ETF

 

XLE collapsed along with the stock market and is bouncing off Feb-April support But the real test lies ahead with a re test of the 200 day moving average.  I suspect that will fail suggesting even lower prices.

The media has been worrying that a lack of Iranian oil might lead to higher prices. Instead just the opposite has

 

Market Predicting A GOP Victory?

Monday  Nov 5 2018

 

 

Our most important indicator has turned up a bit, is this indicative of the election outcome?

 

FANG Stock Update and Social Mood Comment

Weekend November 4, 2018

Global Social Media

Social media had been selling off well before Oct 3 change in markets.

Social Mood

We have reported on numerous over the top expensive autos which express expansive social mood at DJIA 25,000. Now

Aston Martin will offer 25 new James Bond DB 5s for $3.5 M each.  Aston is also planning its multi-billion IPO given

the success Ferrari RACE has had. The car is not street legal but is surely a collectible.

And of course this is a celebration of the 1964-66 market high at dJIA 1,000.

 

 

 

 

 

 

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 B1 Thursday WSJ Investment Bankers offering College Grads $300,000

It's Crazy says one banker.

No it is an outward expression of unbounded positive mood towards the markets. This will be especially telling if Wiley Coyote market has already run off the cliff.  Such offers are out of touch with reality. Like the energy sector, brokerage and banking are always expanding at the top and contracting at the bottom.

____________________

Social Mood is unremembered - One of the five tenets of social mood.

The Thursday Nov 1 WSJ Headline is

October's Wild Ride Jolts Investors

Yet there is a clear two year cycle of stocks losing ground the last few Octobers, and the big crashes of 1929 and 1987 and  2008 all happened in October

______________________

Trump blames the FED for raising  interest rates but the market does that.  Another Thursday Headline

From Coke to Clorox Inflation Hits Home

The bond market sees this coming, Central Bank excess the last few years, too many low interest bonds issued will have prices moving up.

________________________-

 

Friday economic reports were all stunning, wage increases, job increases, yet Dems don't seem to want it, as the WSJ notes low taxes and less regulation work a lot better than income re distribution

_________________________

More troops at the border to repel the invasion from Central America.

The Weekend WSJ reports New Breed of Gangs Chokes Latin America

Not content to smuggle drugs, the gangs of Central America are extorting tribute from locals. This has torn apart the countries. It is hard to see any real solution

but the solution will not be moving the populations here if Trump retains power.

 

___________________________

 

Echoing Alan Hall's findings that negative mood leads to public health problems, page A 18 Thursday  notes Venezuela's Health Crisis Jumps Border. Now disease spreads to Brazil and Colombia.

 

____________________________

 

Rich Lowry in a National Review column notes Nancy Pelosi claimed it was ridiculous to blame Dems for the Republican baseball game shooting. But now they claim Trump is behind some of the latest shooting. There will be no civility  for the next two years no matter how the elections go Tuesday.

 

 

 

Stocks Run Into Resistance on Bounce. Int Rates move Up

Weekend Nov 3

I regret thru no fault of mine by typepad's that this site was down during all the rapid activity. We will catch all of you up this weekend.

Stocks

Stocks have rebounded but think about what is happening. To bet the market is going down one way back when had to borrow the stock and sell it.When the lower price was reached, the stock had to be re bought and delivered back to the original owner. Thus short sellers had to buy back. These days one can sell futures, buy puts, or buy a bear position ETF to do that,  But in taking profits on the short position, one has to exit which mean buying back some stock one way or another. Hence we get a bounce back rally.

 

Two Hour DJIA

100 of the 109 point drop Friday was due to Apple. Apple announced lower earnings over the upcoming Christmas season.

the three arrows at top show the three moving averages breaking down thru the 200 bar MA, not good. At bottom PMO looks toppy already.

The right facing arrow shows price not breaking to the upside.  This is far more revealing than the daily chart showing PMO bottoming.

A rebound Wave A will usually not exceed the previous 4th wave and indeed it did not.

Look for lower action Monday Tuesday.

Transports

 

Here is the same picture in the Transports.  Wave A re bound is falling short of the previous 4th Wave.

NYSE Advance Decline

Notice the same format exists on our most reliable indicator the NYSE Advance Decline line. And note it is about to roll over in the bottom panel.

The Big Five Wave Picture

 

this is what you will not hear from the financial planners, talking heads on CNBC, and the mutual fund companies. Over ten years the market has completed five waves up and is now reversing direction.  Stocks fall seven times as fast as they advance.   Expect Trump to blame  the FED but that will not be the case. John Murphy and Carl Swenlin are in the bear camp.

Bonds

 The drop from the head to the neckline targets  95 on the downside for TLT.

The danger in the bond market is immense. We have reached the same  2.5% long bond yield seen in 1949, 1949-1981 = 1981 - 2016,  32 years on one side and 34 on the other.

Inflation  is rearing its head but the real danger will be the possibility of default.

Meredith Whitney was merely early on her municipal bond breakdown call.  Chicago and Illinois are the leading pension zombies followed by many others. The firefighers in AAA San Antonio

have a ridiculous measure on the ballot to keep their gold plated plans, thanks Henry Cisneros.

 TBF

 

Emerging Market Europe Africa Far East EFA

 

ON the two hour chart EFA looks like DJIA and TRANS in the US, this is is a world wide event!

Gold an d the US Dollar are both advancing.

HUI Gold Bug Index of Gold Miners

HUI and XAU did exactly what they needed to do, bounced at support this past week.  Note the convergence of the moving average lines, a prelude to a change in trend.

Silver

Her

 

Here is another market doing what needs to be done, bouncing up at support. We need a weekly close over $15.

Gold and silver  are showing strength as currencies like Argentina, Brazil, and Mexico collapse or pull back.

 

dennislelam@gmail.com

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.