The Market Perspective

FANG Stocks Continue to Keep Market Up

Weekend July 4 2020

 A handful of stocks continue to drive three of the ETFs

Technology - Apple and Microsoft

Discretionary - Amazon which is 25%

Communication  - Google, FB, Netflix

And Healthcare benefits from the pandemic

The others including energy and financials are in sad shape

That was my focus in remarking that stock market is not as strong as most think with charts like this

 

While the SPX has re regained a great deal of its post February loss the stocks in the index are nowhere near their January bullish percents

Volume has been declining s the market recovered from the March 23 low

The new high in the NASD is not confirmed by new highs in the SPX INDU TRAN SML.

Still our best indicator suggests that teh market may finally stop consolidating and start rallying

PMO crossed to the upside, the AD line is turning up and RSI is above 50 - all positives.

 

Thursday HIgh and Retreat

Weekend July 2 2020

Friday began with the President trumpeting the 5 m job gain, DJIA up 400 but by the end of the day only  92  points.

 

the retreat in price on good news suggests we may have finally seen the end of small wave 2 of developing larger Wave 3.

The MAs need to flatten but the 50 is already below the 87 which is already flat. Transprts and Small Cap 600 have a similar chart look.

Banks

If in fact we are in a bear market, and I think so, the banks will be in trouble. Already we have seen the German Paypal equivalent Wirecard inflate its books by $2 Billion Ernst and Young cannot seem to find  the money either, don't tell me it just now disappeared.

KBE has fallen below a ten year uptrend line, if our analysis is correct , the index has just touched the underside of the uptrend and failed. It was down 3.9% Thursday.

Monthly charts are slow to change but RSI and MACD are both headed much lower.

Daily

 

The A B C correction ended June 8, RSI and MACD are both headed down.

Proxy Stock Cullen Frost CFR

CFR only spent three days over its 200 day MA. Notw in three weeks it has dropped below all three of its MAs. RSI and MACD are headed lower. Now remember this is no dog stock.  CFR makes hundreds of millions of dollars each quarter and pays a 3.8% dividend. But it is being sold. Its range from high to close Friday was $4. That is a  5.4% decline. And it occurred on the best possible news of job gains.  Hello bear market.

Summation Index NYSE

Daily looks toppy

Weekly charts are always more important

These charts suggest the dizzy giddiness  of Thursday will soon end.

Check back tomorrow as we look at other markets.

thanks for reading the market perspective.

Identifying Market Tops

Weekend July  2 2020

 

Stocks, Oil: See How Elliott Waves Help You Avoid "Getting Married to the Trend"

By Elliott Wave International

Most investors make the mistake of linearly extrapolating a financial trend into the future, especially at junctures when that trend is near a turn.

In everyday terms, it's called "getting married to the trend."

Here's what Elliott Wave International President Robert Prechter said in his book, Prechter's Perspective:

Most published forecasts are at best descriptions of what has already happened. I never give any forecast a second thought unless it addresses the question of the point at which a change in trend may occur. ...

Read forecasts carefully. If they are unsophisticated, linear extrapolations of a recent trend, it's probably the best policy to toss them aside and go search for something potentially useful.

Employing the Elliott wave model helps a market participant to avoid the error of assuming that today's trend will carry into tomorrow. Why, even a 3^rd-grader can learn a tell-tale sign of when a trend is about to change. More on that in a bit.

First, let's look at a prime historical example of how trend extrapolation manifests.

A little background: the price of crude oil hit a low of $49.90 in January 2007 and then climbed dramatically in the following year and a half, reaching a high of $147.50 in July 2008.

Many energy market observers expected even higher prices.

Here are just a few of the headlines as crude oil was skyrocketing:

• Oil price 'may hit $200 a barrel' (May 7, 2008, BBC)
• An Oracle of Oil Predicts $200-a-Barrel Crude (May 21, 2008, The New York Times)
• WHAT IF OIL HITS $200? (June 28, 2008, Los Angeles Times)

In the same time frame, one chief executive of an energy firm had predicted $250 a barrel.

Yet, around the time these headlines were published, the Elliott wave model was suggesting a different price path for oil.

The June 8, 2008 Elliott Wave Theorist, a monthly publication which has provided analysis and forecasts for financial markets and cultural trends since 1979, said:

The Top of Wave 5 in Crude Oil Is Fast Approaching

Now, what is the significance of the completion of a fifth wave?

That means that a trend, whether up or down, is on the cusp of a turn. In this case, the trend had been up. So, the "top of Wave 5" meant that the next significant price move would be down. Well, as mentioned a moment ago, just a month later, crude oil's price hit that $147.50 top.

Here's what followed:

As Robert Prechter noted in his 2017 book, The Socionomic Theory of Finance:

Only someone extrapolating an Elliott wave could see that "one of the greatest commodity tops of all time" lay dead ahead. Those using supply-demand arguments and linear extrapolation ... were in the wrong place at the wrong time.

So, if you can count to five, you can anticipate trend turns, even when the majority are expecting the trend to continue.

Let's go a bit further back in history and see how "counting to five" helped our analysts call a top in the price of General Electric's stock.

In late October 2000, this chart was published in the Elliott Wave Financial Forecast, a monthly publication that covers major U.S. financial markets:

The completion of a quarter-century five-wave pattern portended a major reversal in GE's stock.

At the time, the Elliott Wave Financial Forecast made a straightforward forecast:

GE is going to go way down ... .

Here's what happened thereafter:

But, getting back to that 3^rd-grader who was mentioned earlier, you can see him discern a five-wave pattern in a market chart yourself and perhaps learn in the process.

Also, see how a college student picked right up on an even more detailed Elliott wave pattern -- in no time! Then, hear from one of Elliott Wave International's own wave experts who has more to say about the error of assuming a current trend will persist, well, merely because it's already in place.

It's all in a video titled "Anyone Can Learn the Wave Principle." Watch it for free -- compliments of Elliott Wave International.

Just follow this link to watch this fun little video now: "Anyone Can Learn the Wave Principle."

This article was syndicated by Elliott Wave International and was originally published under the headline Stocks, Oil: See How Elliott Waves Help You Avoid "Getting Married to the Trend". EWI is the world's largest market forecasting firm. Its staff of full-time analysts led by Chartered Market Technician Robert Prechter provides 24-hour-a-day market analysis to institutional and private investors around the world.

 

Market Gives Back Early Gains on Jobs Report

Thursday July 2 2020 after market close

After leaping  400 points the market gave back most of that to close up DJIA  92 points.

 

My proxy stock CFR had a huge 4 dollar range closing on the very low end.

The close was below all three MAs.

This is why I suggested in my column posted this morning we wait to see what happens Monday.

More updates this weekend, check back!

Fourth of July

Thursday July 2 20200

Economy on the Mend     

Five Million new job were created in May, record numbers

Dept of Labor today

Despite the increase in virus cases and civil unrest, the DJIA advanced some 400 points on the jobs data. The improvement was across the board with some 80% of small business now open again. Jobs for women and ethnic minorities expanded at a record clip.

Evidence mounts that the stock market will rally into September and then into Spring 2021. Let’s see how the market acts next week on the return from the July 4 holiday.

This outlook is confirmed by the action of the Transports and Small Cap 600 this morning.  Transports are up 1.7% while Small Caps advance 2%. Both are above their 200 bar moving averages on the 120 minute chart.

Admittedly there are some less than encouraging indicators. Not surprisingly car sales are down 33-50% versus same quarter last year among various manufacturers. And supply is down with factories closed. United Air is flying 40% of the routes it flew a year ago. And bankruptcies continue with the largest Pizza Hut franchisee being the latest.

Oil prices have been knocking on the $40 threshold. But the audis are threatening the rest of OPEC with another price war. The last one in March took prices into negative territory. While Russia and the Saudis agreed to a 10% production decrease, other OPEC members have not followed. Gee, imagine that.

Of the eight ETFs representing different sectors of he economy, energy remains the weakest. The XLE Energy ETF at $37.36 is still ten dollars below its 200 day moving average. It sports a n11.5% yield thanks to the determination of firms like Exxon not to cut the dividend. Note that Royal Dutch Shell already has cut.

Meanwhile social mood trends negative in many areas. The CHOP separatist move in Seattle is being dismantled. Statues and monuments come are lowered by protestors many of whom I doubt have any idea as to their historic significance. An advertiser boycott has begun against Facebook.

Negative mood finds solace in horror movies. So The Wretched about a teen and an evil witch, is doing well at the 300+ drive in movie theaters still open. But our prize for social mood moment of the month goes to Netflix for its new series, Warrior Nun.   A 19 year-old woman discovers she is part of an ancient order tasked with fighting demons on Earth, forces in Heaven and Hell want to control her. And trust me, the Pope will not approve of these Nun Habits.

I can’t make this stuff up. Happy Fourth of July.

Bank Stocks Weak Today

Wed July 1 2020

The markets will be closed  Friday, so today is probably significant. Next update tomorrow morning.

It may be that  the markets topped today or nearly so in the major indexes. Once again a handful of tech stocks kept the market higher

See our previous post, the market is weaker than you think.

Tom McClellan on Oil Stock Market Parallel

Wed July 1 2020

https://www.mcoscillator.com/learning_center/weekly_chart/crude_oil_10-year_lead_update/

 

 

Tom McClellan hows that crude oil prices predate the tock market action by about ten years. That suggests a final high in Spring 2021.

I mentioned that I was beginning to discard  the uber bearish positioon in favor of a near term low leading to a rally by end of August.

CFR Proxy Stock

 

The  125 and  200 day MAs are coming together. MACD is bottoming and turning up on the 240 minute chart.

July 4 is Saturday o expect to start drying up by Thursday afternoon which is tomorrow. Reolution of these bottom pattern probably delayed until next week.

 

 

More Evidence of Negative Social Mood

Wed June  30 2020

Today’s WSJ

In bear markets negative mood seeks solace in gangster and horror movies, and so right on time we have...

Page A 12 The Wretched is number one at the nation’s 124 drive in movies, this is a home made horror film about a teen ager and an  evil witch, hmm Wizard of Oz anyone

Page A 13, I am not making this up, Warrior Nun, billed as too nutty not to have a Season 2

Meanwhile FB is falling from grace with advertisers, Page B 3  Clorox, Denny's Ford abandon FB

Page B 11 FB Policies are not aging well

INDU Down 700 now up 5680

Bear markets stair step down featuring surprising rallies like the  580 points yesterday. But in context the rally just reached the downtrend line above. Volume peaked at the June 8 high.DJIA trading down  60  points in pre market this morning.

 

 

 

Market Rebounds as Expected

Monday June 29 2020

In the weekend up date I suggested that HDGE could return to its lower uptrend  line, that is exactly what happened today.

I suggested this morning that we might be on the cusp of  a five week rally.

Transports 2 Hour chart

This chart is breaking to the upside not the downside.. PMO is bottoming. prepare for rally.

 

 

Next update Tuesday morning pre-market open

 

Stocks Making a Stand at 25,0000

Monday June 29 2020

10 49 AM CST

I suggested this weekend that stocks were liable to rally Monday and that has happened now up about 400 points.

New Research suggests we may see a near term low in early July. That could lead to a nice rally into August.

Yes that is counter to what I have been saying but the market is making a stand at the current level.

120 Minute Chart

PMO has fallen enough to be alert for a reversal. Note it has reached the low last seen mid May. 

With the  50 day MA now under the 87, one can make a case for the  50 87 125 coing together. That usually precedes a change in direction

 

240 Minute Charts

This is the  third bounce at the  200 bar MA on this chart. The three shortest MAs are rising  which will eventually raise the  200 bar MA.

Proxy Stock CFR

This erases the Friday loss. Notice how this looks like the INDU chart aboe, that is why CFR is a proxy stock.

And it has reached the previous PMO low in May where it bounced.

Next update after market close.

July 4 falls on this Saturday, expect volume to dry up Thursday Friday