The Market Perspective

Mortgage Rate Update

Tuesday May 17 2022

 

This is "Anything but Positive for Housing"
Has the rise in mortgage rates only begun?

By Elliott Wave International

A tug-of-war between bullish and bearish forces appears to be playing out in the U.S. housing market.

On the one hand, some areas of the country are still experiencing record-high home prices as buyers outnumber sellers.

On the other, the number of home sellers who dropped their asking price spiked to a six-month high of 15% during a four-week period ending on May 1, according to a Redfin report released on May 6.

Another development that falls in the bearish category for residential real estate is rising mortgage rates.

Here's what the April Elliott Wave Financial Forecast, a monthly publication which provides analysis of major U.S. financial markets, noted as it showed this chart:

The rising interest-rate story is anything but positive for housing. This chart shows a surge in the cost of financing a home. Over the last 15 months, the Freddie Mac 30-year mortgage rate rose from a record low 2.65% to 4.67%, a 76% increase. ... As the chart title suggests, mortgage rates have much higher to go.

In fact, about a month after that commentary published, a May 9 Fox Business news item said:

The 30-year fixed-rate mortgage surged to 5.27% annual percentage rate (APR) for the week ending May 5, 2022, according to Freddie Mac. ...

That's the highest 30-year fixed mortgage rate since 2009.

As the Campbell Real Estate Timing Letter noted (May 15):

In April 2022, a $1,000 principal and interest mortgage payment currently affords a loan that is 30% smaller than at the beginning of 2021.

Now, let's mention another bearish factor for U.S. housing -- and that's the action of the stock market.

You see, the stock and real estate markets tend to be highly correlated. They may not be in perfect synchronization, but generally, they both tend to rise and fall together.

And, as you probably know, the Dow Industrials and S&P 500 index have been in a downtrend since January.

Now is the time to pay close attention to the Elliott wave structure of the stock market, which, as mentioned, can help you get a handle on the housing market.

If you need a refresher on Elliott wave analysis, or are entirely new to the topic, you are encouraged to read Frost & Prechter's Wall Street classic, Elliott Wave Principle: Key to Market Behavior. Here's a quote from the book:

In the 1930s, Ralph Nelson Elliott discovered that stock market prices trend and reverse in recognizable patterns. The patterns he discerned are repetitive in form but not necessarily in time or amplitude. Elliott isolated five such patterns, or "waves," that recur in market price data. He named, defined and illustrated these patterns and their variations. He then described how they link together to form larger versions of themselves, how they in turn link to form the same patterns of the next larger size, and so on, producing a structured progression. He called this phenomenon The Wave Principle.

Although it is the best forecasting tool in existence, the Wave Principle is not primarily a forecasting tool; it is a detailed description of how markets behave. Nevertheless, that description does impart an immense amount of knowledge about the market's position within the behavioral continuum and therefore about its probable ensuing path. The primary value of the Wave Principle is that it provides a context for market analysis.

You can learn more about the Wave Principle by reading the entire online version of the book for free!

All that's required for free access is a Club EWI membership.

Club EWI is the world's largest Elliott wave educational community and is free to join.

You may be interested in knowing that Club EWI members enjoy complimentary access to a wealth of Elliott wave resources on investing and trading with zero obligations.

Just follow this link to get started: Elliott Wave Principle: Key to Market Behavior -- free, unlimited and instant access.

This article was syndicated by Elliott Wave International and was originally published under the headline This is "Anything but Positive for Housing". 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.

 

Is That All There Is?

Monday  May  16 2022

Peggy Lee, Is that all there is

 

The NDX displays a five wave pattern to  the bottom do you see it, not much bounce today, if this is the best the market can do

well as we say it is a bear market

and it is around the world  from  Germany to China to Indonesia to Brazil

 

all down

we had a weak tepid rally today, no follow thru from Friday, looking weak

Buy the dip Or Not?

Weekend may 14 2022

The market has shifted from bull to bear, the investing attitude has not. We might get a mlti month rebound we might get a one week rebound, we shall see.

But expectations need to re calibrated in light of  the chnage in market conditions. Our friends at EWI take a look.

 

Stock Markets: "What Happens When the Dip Keeps Dipping?"
These can "work tirelessly to keep investors trapped on the wrong side of a bearish trend"

By Elliott Wave International

It's been a rocky road for the Dow and the S&P 500 index since the start of the year. And, even longer for the NASDAQ, which topped back in November.

Indeed, speaking of technology stocks, some of the most popular names took a big beating in April alone. As the Wall Street Journal noted (April 29):

The FAANG stocks, consisting of the popular quintet of Facebook parent Meta Platforms, Apple, Amazon.com, Netflix and Google parent Alphabet, have collectively lost more than $1 trillion in market value [in April], the most since Facebook started trading in May 2012.

So, you might think that this bumpy ride in the stock market would have many investors at least considering moving to the sidelines, especially those with a sizeable nest egg to protect.

Well, according to a UBS Investor Sentiment survey of millionaire investors -- conducted between April 5 and April 18 -- most of those surveyed plan to stick with stocks.

Here's a May 4 CNBC headline:

More wealthy investors would rather hold or add stocks than sell if markets keep sliding, survey says

Granted, this survey was taken before some of the roughest trading days in April. Still, it shows a recent willingness by even the "cream of the crop" in society to "buy the dip."

No doubt, that same lingering bullishness has persisted in other nations too.

With that in mind, the April Global Market Perspective, a monthly Elliott Wave International publication which provides analysis of 50-plus worldwide financial markets, provided an object lesson in buying the dip, using past bear markets in Germany's DAX as examples:

[These two graphs illustrate] the multi-week and multi-month rallies that work tirelessly to keep investors trapped on the wrong side of a bearish trend. The left graph depicts every plus-10% rally from March 2000 to March 2003, a three-year span that saw the DAX drop by 74%. The right graph illustrates the bear market from July 2007 to March 2009, which saw seven rallies of 10% or more.

So, "buying the dip" can be a financially dangerous strategy.

In our view, it's best to consult a financial market's Elliott wave structure before making a decision about your portfolio.

If you'd like to learn how the Elliott wave model can help you analyze financial markets, you are encouraged to read Frost & Prechter's Wall Street classic, Elliott Wave Principle: Key to Market Behavior. Here's a quote from the book:

"When you have eliminated the impossible, whatever remains, however improbable, must be the truth." Thus eloquently spoke Sherlock Holmes to his constant companion, Dr. Watson, in Arthur Conan Doyle's The Sign of Four. This advice is a capsule summary of what you need to know to be successful with Elliott. The best approach is deductive reasoning. By knowing what Elliott rules will not allow, you can deduce that whatever remains is the proper perspective, no matter how improbable it may seem otherwise. By applying all the rules of extensions, alternation, overlapping, channeling, volume and the rest, you have a much more formidable arsenal than you might imagine at first glance. Unfortunately for many, the approach requires thought and work and rarely provides a mechanical signal. However, this kind of thinking, basically an elimination process, squeezes the best out of what Elliott has to offer and besides, it's fun! We sincerely urge you to give it a try.

You can read the entire online version of Elliott Wave Principle: Key to Market Behavior for free once you become a Club EWI member!

Club EWI is the world's largest Elliott wave educational community and is free to join. Members enjoy free access to a wealth of Elliott wave resources on investing and trading.

Get started by following this link: Elliott Wave Principle: Key to Market Behavior -- free, unlimited and instant access now.

This article was syndicated by Elliott Wave International and was originally published under the headline Stock Markets: "What Happens When the Dip Keeps Dipping?". 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.

 

the Importance of Point of View

weekend May 14 2022

I have students read the fab le of the Six Blind Men of Hinidustan and the Elephant to emphasize the importance

of point of view. Here are two views of NFLX, one suggesting a deeply oversold condition and the other suggesting the rout is just getting underway.

Here is NFLX on a log sacale, this makes changes shown ni a constant percentage. Point being that NFLX started from near nothings and soared to 700.  the plunge so far is still a fraction of the overall gain.

Now here it is on a non log chart.

The drop on this chart suggests NFLX is a great buy or at least shold be nearing an important low.

I just finished reading Bob Prechter's latest EW Theorist. He makes the point that this is a higher degree of trend than the  1929 high. That high erased 90% of the DJIA value in by summer 932. Now as then as we have reported a handful of heavy weighted stocks, now FANG, have held up the averages. As shown several tiimes the percent of NASD stocks above their MAs peaked way back in February  2021 around 85%. Friday's rally carried it out of single digits to 12%.

While the market was over bought  on just about every indicator the last few yeasrs, one must mentally adjust to the other way of thinking. the major trend is now down.

 

Industrials versus commodity prices

The FED and Congress have inflated the money supply the last few years and given us inflation. Here is the non log chart as with NFLX.

Log scale

This view suggests inflaton is just getting started. /and it is not baby formula or Putin's war, it is throwing money at imagined problems.

Conversely the CRB has just bottomed in  2020.

Fishing for a Bottom

Friday May 13 2022

Fishing for the Bottom

Apple has been displaced as the most valuable company in the world. It is now Sadui Arabia’s Aramco.

What a difference a few months make. Here is the box score on major index declines since their November through January highs.

DJIA down 14.8%  SPX down 18.75%  NASD down 32%

The tech heavy NASD led the way up soaring to 16,750 (all numbers rounded by eyeballing the charts). The decline erases the entire advance from November 2020 to the high a year later.  A one-third loss in six months is certainly heralding the bear market we have been discussing.

There are precedents for what is happening. From the NASD high of  5,000 in March 2000, he index fell to  3,000 in just three months. It rebounded 61% of the fall to 4,250, and then spent over two years sinking to 1,250. That erased 75% of the high.  The 1929 experience was similar. A big drop occurred from the October high of 390 based on the DJIA to 198..60 by November 13, 1929.  A rebound carried to 294.07 by April 17, 1930.  It then began a slow collapse into July 8, 1932 at a mere 41.22.

The decline in the Industrials took out the February low this year. That suggests we have seen the final highs in most indexes. A rebound as in  2000 and 1930 should take us into the Fall of 2022.

The markets are quite oversold.  The percent of NASD stocks over their  50 day moving averages has plunged to 7.9%. So 92% are below that measure. The same is true now, I count ten columns of new lows. This week  there were 27 new highs and over 2,700 new lows, that is a factor of 100x to 1, wow.

Bear markets wipe out the excesses of the previous bull market. That is starting in the murky crypto currency markets.   Losses run to the billions yet El Salvador continues to cling to Bitcoin as its legal tender.

Speaking of which, we now learn the US Government is distributing drug gear including crack pipes. $18 million worth of Meth was just seized at the border. The Administration reaction is to lift Article 42 which will increase border crossings. 

The latest response to record high in all things energy is to  halt offshore lease sales in Alaska, drawing criticism from that industry.

Bull markets float higher on positive mood. Negative mood is on the rise. For the first time in US History, the Supreme Court is surrounded by a fence. Shoplifting is apparently legal in California.  Monstrous is the latest horror movie release.   The Ukraine War began at the lowest point of the Russian stock market since 2008.

Use the upcoming rally to lighten up your holdings, it may be the last opportunity for some time.

A Look back at 2000-2002

Thursday May 12, 2022

he NASD is falling as fast as it rose las year. Let's see if 2000-2002 offers an explanatory map.

NASD 2000-2002

The nidex shot form Fall 1999 at 2500 to double at  5

000by March 2000.. It then collapsed to near 3000. A bounce, wave 2 ensued, back to 4250.  That wave 2 was a near perfect .618 retracement of the entire fall.  No doubt this brought a mistaken sigh of relief but like 1930, it did not last. It took more than two years to find a bottom at 1250 in Fall 2002.  that would be Farrell's rule two excesses in onoe direcxoin will lead to an opposite excess in the other direction.The index lost 75% of its March 2000 value. 1250 was the  200 month moving average.  That is Bob Farrell's rule 1, markets tend to return to the mean over time.

It did recover into  2007 but only to  2750.  It thenm returned to  1250 by march 2009.

NASD 2000-2009

This is somewhat like the period from  1972-1982.  The DJIA peaked in January  1972 around  1,040.  It did a slow crash into Dec 1974 at 577. By 1982 it had only recovered to  around 750-800. I expect a similar future at this point.  The air pocket drops, the crypto mania mirrors dot.com 200-2002 and then sub prime 2007-2009. Pandemic stocks like Peloton already look like zomobie stocks headed for bankruptcy.

 

 

 

Bitcoin Headed to Zero?

Wed May 11 2022

 

Is Bitcoin Headed to Zero?
"40% of bitcoin investors are now underwater"

By Elliott Wave International

Charlie Munger is Berkshire Hathaway's co-chairman, and on April 30 at the firm's shareholder meeting, he said:

[Bitcoin] is stupid because it's very likely to go to zero.

Berkshire Hathaway chairman Warren Buffet also expressed a negative sentiment toward the cryptocurrency.

Bitcoin's recent price action appears to support the views of the two billionaire investors, at least at this juncture.

Here's a CNBC headline from the evening of May 9:

Bitcoin dips below $30,000, drops more than 56% from its all-time high

Keep in mind that just days ago, the cryptocurrency was trading north of $40,000. The last time Bitcoin traded below $30,000 was last July. As you might imagine, many crypto investors were quite fearful then.

Indeed, a July 9, 2021 Bloomberg headline captured the sentiment of the global chief investment officer of a major financial firm:

Bitcoin 'Crash' Risks Taking Its Price Down to $10,000

However, the cryptocurrency's Elliott wave structure suggested that its price was poised to move higher. The July 2021 Global Market Perspective, an Elliott Wave International monthly publication which provides analysis of 50-plus worldwide markets, said:

Bitcoin [is] at or near the end of its fourth wave-correction.

In other words, the then slide in Bitcoin's price was a countertrend move.

After that July 2021 low, Bitcoin went on to hit an all-time high of $68,906 in November 2021.

Of course, Bitcoin's price has taken a tumble once again.

Might this time be the time of a collapse?

It sure feels like it to a lot of investors (May 9, CNBC):

40% of bitcoin investors are now underwater, new data shows

These investors are naturally wondering, "what's next?"

The recently published May Global Market Perspective once again provides an Elliott wave perspective on Bitcoin's price action.

Remember, Elliott waves are a direct reflection of the repetitive patterns of investor psychology and these patterns offer "predictive value," as noted by Frost & Prechter's Wall Street classic, Elliott Wave Principle: Key to Market Behavior.

This doesn't mean that Elliott waves guarantee an exact future price path of a financial market, yet, Elliott waves do offer context.

One thing's for sure, there's a wide chasm between Charlie Munger's comments that Bitcoin will likely go to zero and other forecasts that say Bitcoin is headed toward a million dollars.

Elliott waves help you to put the big Bitcoin picture into perspective.

You'll find our Bitcoin analysis [as well as analysis of other cryptocurrencies], which includes charts, commentary and a video, under the "Cryptocurrency" section in the May Global Market Perspective.

Here's the good news: Now through May 18, you can test-drive the Global Market Perspective for only $9. That's a $50 savings!

See what Elliott Wave International's global analysts anticipate next for 50-plus global markets: U.S., European and Asian-Pacific stocks, FX, cryptos, bonds, oil, gold and much more.

Learn more about this rare chance to test-drive the Global Market Perspective for only $9 -- which means access to the May 2022 issue -- by following this link.

 

 

Another Tech Stock Drop

Tuesday May 10 2022

six months plus, geez, the bear market accelerates

NASD has now lost 28 % of its value since November

It's Graudation Time

Tuesday May 10 2022

Here's Dennis Elam's Andrews County News column from last Sunday. Enjoy!

Dennis Elam

Thursday July 14, 2016

Word Count 979

Note to readers, Dennis Elam departs from the usual business coverage to reflect on an upcoming Fifty Year High School Reunion in Andrews, Texas.

The Way We Were – 1966

We didn’t know it at the time but social mood, the Dow Jones Industrial Average, and just about every other positive was peaking at our 1966 graduation from Andrews High School. It had been up, up, up all the way from 1948 to 1966.

This was the first eighteen years of the group later named baby-boomers. We helped usher in the birth of rock ‘n roll (thanks Little Richard), I Like Ike, I Love Lucy and Ed Sullivan. Disneyland was, as Shrek would say, far, far away in California but I never knew any one who had actually BEEN there. Television provided a platform for the American fascination with the Cowboy from Roy Rogers to Cheyenne Bodie.

After nearly burning itself up in the Civil Rights Movement, the South did begin to rise as the Sunbelt Economy. Widespread production finally made air conditioning affordable. West Texas offered plenty of sand hills but no ocean, still we enjoyed Surf Crazy lyrics by the Beach Boys. And then there was the Beatles who ironically got famous by recording ole Carl (blue suede shoes) Perkins’ rockabilly tunes.

Lee Iococoa created the Mustang just for our generation. John DeLorean followed that up by inventing the GTO, spawning the Muscle Car Era. At the same time VW owned ten percent of the car market bragging about its oil capacity in pints not gallons. After all gasoline was 36 cents a gallon, and lower when ‘gas wars’ broke out, often offering a set of steak knives with eight gallons or more! And a new Chevy nicely equipped could be had for $3,000. Only problem was, no one had $3,000.

I worked all summer as a lifeguard earning a total of $750. But then tuition at Texas public universities was still affordable at $50 a semester.

We are told life is complicated now and there is not enough time for anything. How did we cram so much into a week back then. Consider a typical day for the Class of 1966.

I parked my 1957 Chevy in front of the first air conditioned high school in Texas. First up was Bin Goolsby’s fourth year math class.. Mr. Goolsby termed his tests as game day, and then winking would remind us it was in fact a test coming.

Then it was on to second period with Mr. John Hogue in the Little Theater. Mr. Hogue was a class act. He had Ron Ragsdale come by and treat me to a root beer at the K & W on North Main prior to the start of school. AHS had won the state debate championship the year before, so the bar was set high. Even then those of us involved in debate pondered just how Mr. Hogue got the very best out of all of us. It was a wonderful mixture of high expectations and a bountiful budget that had us at every tournament in West Texas. I had never done better than win two lose two at my previous high school prior to arriving in Andrews. Now in the Big Leagues, I saw how it was done and what was required. As seniors we always advancedfrom the first four rounds to however many final rounds to the play offs. And Ron Ragsdale and Dave Hendrick did win the state championship.

Third period was Mr. Shoffitt’s physics class. The textbook featured some sort of new-fangled physics, not the Isaac Newton variety. Mr. S was a fine fellow but physics remains a mystery to me to this day.

Time for lunch and then back to the Little Theater for training in the rest of the speech contests. Yes that is correct. John Hogue had not one but two specialty speaking classes, each aimed at producing winners. This encompassed persuasive, and extemporaneous speaking as well as prose, and poetry reading. I wish I had kept a written journal of all the awards won in, not to mention a few sweepstakes trophies.

Mrs. Brown’s English class was up next. Today universities are being urged to incorporate more speaking and writing in the curriculum. I suggest they study AHS curriculum in 1966! We were required to write a book report in each six-week period! That was in addition to the reading assignments and tests. I regularly encounter college students who have never written a book report. No wonder America scores low among international students.

And come to think of it, economics teacher Keith Harding was way ahead of his time. He was lobbying for an administration position and spent sixth period ‘in the office.’ We had our assignments to read and tests to complete. The classroom even included the Wall Street Journal to read, which we enjoyed. Gee, did Keith invent online learning?

I happened into Sam Hollis’ photography studio one day. While purchasing some film, he offered me a part-time job on the spot. This is what I meant by positive social mood!

The Statler Brothers recorded the Class of ’57 in 1972. For the official song of the Class of 1966 I suggest the Dave Clark Five hit, Glad All Over. The lyrics reflect the times and the upbeat attitude. What could go wrong after our first eighteen upbeat years?

I’m feeling glad all over

Yes, I'm glad all over

Baby, I'm glad all over

So glad you're mine

I'll make you happy (make you happy)

You'll never be blue (never be blue)

You'll have no sorrow (have no sorrow)

Cause I'll always be true (always be true)

The Academy Awards for 1965 and 1966 went to My Fair Lady and the Sound of Music. No one foresaw that just four years later we would be watching Midnight Cowboy. But that is another story for another column. In 1966,well, we were truly glad all over.

10 Columns of New Lows

Tuesday May 10 2022

In October  2008 amid the stock market collapse, Joe Granville was inrterviewed on CNBC. His comment was

When it takes  a foot and a half to print the new lows in the WSJ, that's a low!  Indeed that was the thrid wave and registered a maximum number of new lows. The final low in the actual index occurred in March 2009.

 

We are there again. I just counted and on page B 11 of today's WSJ, there are 9.66 columns of new lows. I am sure strung out that i smore than 1.5 feet of new lows. I did notice that among the slim number of new highs, Kellogg and Campbell Soup were on the list, two prominent consumer staples. People will buy cereal and soup before that  $75,000 electric car or a new computer.

So it is a bit late to be going short. Markets are up  a bit this morning, and as noted DJIA is challenging its February  25 low. Let's see what happens next.

consumer Staples are still in an uptrend. Re read my Friday column and the first  quote

 

Consumer Discretionary, not so much, setting a new low