The Market Perspective

Stocks on a Tear, Overbought Conditions Short Term

Weekend February 17, 2019

Wild Swings in the DJIA

I suggested a couple of weeks ago that a  4th wave was ending.That was clearly wrong as the market continues to soar. The PMO at bottom is overbought but not turning down as thought it would.

Breadth looks great in this bullish percent chart.

This is one heck of a rally.   And it is a mere 10 percentage points from where it topped and reversed,for no apparent reason, last September.

 

The Advance Decline line is making a new high.

I am not comfortable buying an index fund at this level after such a parabolic advance, are you ?

 

I did not participate in the down move nor in the recovery.  Again MACD at bottom and RSI at top  are way into over bought territory.

On the social mood front,things could not be much worse but that's wrong as the election is two years away and the lawsuits and vitriol will only get worse.  As noted before

will all this negative mood eventually sour the markets?

Five Year Yield

As stocks have soared yields have fallen meaning investors are buying more bonds.If the stock rally is real, why aren't investor selling bonds anincreasing yields.

We have a clear four wave pattern so  a fifth wave would take this chart to higher yields.

Energy

 

Big oil via XLE is doing much better. Smaller oil firms like Anadarko and Apache well, not so much.

 

From a pure chart standpoint PMO is bottoming.  And price has regained the 200 week MA. Those are big positives.

Gold

on the weekly chart gold made a higher low and took off again. Gold the US Dollar an Oil are all moving up. 

Bottom Line

Stocks are just too volatile to make a further prediction.  Gold looks to be higher into March.

We have more job openings than job seekers which should be good.  And stocks are still at an elevated level.

But mood is just awful. Social Mood is not a black and white indicator and there are lagging indicators as well.

Here in San Antonio positive mood has created numerous downtown building projects.  University of Texas San Antonio hastaken43 years to get to its current  30,000 enrollment . In a socionomic burst of optimism it now claims it will grow its downtown campus by 125,00 in just ten years. This is the sort of wild eyed optimism that takes place at a social mood peak.

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.

 

 

Gold and Dollar Moving in Tandem

Wed Feb 13, 2019

The red black bars are gold while the green line is the US Dollar. The indicators top and bottom are specific to gold.  And it is time for a  bit of pullback in gold.

But note that the US Dollar is moving in tandem with gold. Both are seen as safe havens as the China economy slows.  The MAs are turning up for gold. 1280 looks like god  support before another leg up resumes.

Jury Still Out on Correction Versus The Top is In

Weekend Feb 9 2019

 

Most forecasters do not follow the NYSE rather the SPX  or DJIA or NASD. But it is a much broader picture of what is happening.

I don't see much encouraging here despite the late day Friday rally in the DJIA.  this is a lower high and below the  200 day MA.

NYSE Advance Decline Line

This looks topped out to me MACD and RSI over done and price in a parabolic condition.

VLO looks to be completing a 4th wave up

I read a variety of letters and  cannot recall when I saw so many different opinions.

 

At Insiide Track Erik Hadik believes markets have ompleted five waves up from  2009.But he suspects this will be a long drawn out top like 2000 - 2002.

Art Hill and John Murphy at stockcharts note the rally will be ten years long next month and no rally ever lasted this long.  Their posts look like the above charts.

Tom McClellan is optimistic pointing to expanding breadth and a third year in the Presidential cycle. I think this President is so different that prior comparisons with other cycles are likely to be flawed.  He also points out a couple of days of ten to  one up to down volume.   And indeed the markets are up the last seven weeks. 

But,  the PMO on the NYSE is clearly over bought and trying to turn down. Same for the AD line

And I see the bullish percent charts are just at the 50% level. Take a look  at the  150 day CP chart

The indicator is right where it was turned back twice in November. I had thought the markets would have turned one way  or the other by now but that has not happened.

GLD is probably ahead of itself.

I am very bullish on  gold and silver but GLD is maxing RSI at top and MACD at bottom.  So expect some sort of pullback during February.

FRAK

I don't see anything encouraging about this chart of FRAK the Eagle Ford group.

The refiner chart for CRAK looks much the same.

Bottom Line  I am still epecting some pull back in stocks and gold. Stocks are certainly not the buy they were seven weeks ago.

Social Mood remains incredibly negative with the political parties further apart than ever.Chaos reigns in Virginia. Every week another progressive Democrat joins the Presidential race lurching further to the left than the one the week before.  Howard Schultz is right, most of these ideas are just plain ridiculous.

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.

Earnings Slump Markets Retreat

Friday Feb8, 2019

Earnings Slump, Markets Retreat

 

More than 30 companies have offered first quarter earnings forecasts that fell short of analysts’ estimates in recent weeks citing deteriorating outlooks for he global economy as well as uncertainty around trade policy.

 

Bull Markets Test An earnings Slump, Wall Street Journal Feb 8 2019

 

It is fashionable to make annual forecasts in market-oriented columns like this. So here is my forecast. The stock market will probably not surpass its October 3 high of 26,600 (round number) this year. It is likely the markets are at best in a trading range defined by that high and the recent low at 22,200. And if my Elliott Wave count is correct, the lower level of 22,200 will be tested this spring.

 

No stock market rally has ever lasted more than ten years.   And the ten -year mark is up in March, 2019.   Indicators reveal peak momentum for near all major stock indexes .

 

The Dow Industrials and chipmaker SOX index barely squeaked above their 200 day MA.

The Transports, NASD 100, Russell 2000, and NYSE    have fallen short of the same target.

Defensive asset classes such as REITs and Utilities are hitting new highs. Treasury yields are falling, indicating investors are retreating to safe ground than stocks.

 

This column has noted the poor performance of energy service stocks as well as bell weathers like Anadarko and Apache.   Sadly that observation continues to be accurate. Anadarko APC has fallen from $50 to $42.60 the last three days. S 14.8% decline!.   Apache’s APA rally from $26 to $33 has ended.

 

Energy oriented ETF XLE is also well below its 200 day Moving Average, falling   2.21% yesterday.

 

Energy Service ETF XES fell to $8 and rallied to $11.50 and is falling once again.

 

Halliburton HAL is a mainstay of the energy service sector. It fell 478% yesterday amid forecasts of declining revenue. Likewise Schlumberger SLB dropped 3.57%.

 

Shale producers represented by the ETF FRAK fell 4.62% Thursday. This ETF is likely headed to single digits from its current price of $11.76.

 

Even the refiners are being hit. The refining ETF CRAK fell 2.16% yesterday and is rolling over at $29, up from $26.

 

This weakness in the energy sector seems to be broadcasting lower demand for energy which speaks to a weaker economy.

 

It is notable that weakness took hold immediately after the State of the Union. As the President announced all time low unemployment, the opposition party could only frown in their seats. The new Democrat voic AOC touts government take over of everything.

 

That sets the stage for political discord. The stock market typically leads the economy by six months.   Get set for a slow summer.

Stock Indicators Peaking

Weekend Feb 3 2019

I had thought we would have resolution by now but the rally has extended into February. Still momentum indicators are in the over bought area arguing more for pullback than continued advance.

Transports

 

Most indexes look just like this.  Price is below the  200 day MA and PMO looks toppy. Berkshire Hathaway is finally breaking out above all its MAs.

Bullish Percent

Bullish percent failed twice before at the  50% level, and again MACD is really high as is RSI.

XAU

 

XAU looks to have completed five waves at its 77-78 target level.

Silver

Silver have surmounted all its MAs and faces resistance at  16

WTIC

 

Crude oil prices are likely range bound in the 50s. Share prices of energy companies show weak rallies. Internationals like XOM and CHV did rally nicely Friday.

 

Crude nd Stock Prices Rally

Friday Feb 1 2019

Crude and Stock Prices Rally

 

Stocks Post Best January in 30 Years.

An average of 718,000 barrels of crude traversed America’s railways as of October, an 88% increase from a year earlier.

Wall Street Journal Today

 

Among stock market ‘watchers’ there has been a lively debate. Did the 4,000 point drop in Q4 of 2018 begin a new bear market, or was this just a much needed correction? To be fair to the bears (down market) the NYSE advance decline line actually reversed on both a daily and weekly basis. And the DJIA has yet to surmount its previous high. The Transports have not done that either so we don’t have a genuine Dow Theory buy signal. But those with the courage to hang long since December 24 600 point drop have done well.

 

There has been plenty of negative action to give rise to bearish action. Facebook lost half its entire market value in six months falling from 220 to 125. On better than expected earnings, it soared back to 166. Chalk another on up for social mood turning on the proverbial dime.

 

And it has been tough sledding for General Electric. GE was the only stock in the original Charles Dow 1896 list still in the index. But honestly the social mood red flags abounded amid CEO Jack Welch exit around year 2000. He divorced his wife of decades for a 20-year younger model. He authored a series of books, one of the last titled Jack: Straight from the Gut. (how’s that for modesty and hubris?). And then there was his $400 M severance package including a swanky NYC condo.   The stock price fell from $30 to about $7.50 last week. It has now recovered to $10.16. Its external auditor KPMG of some 110 years looks to get the boot amid questions about its procedures.

 

Most of the major stock indexes are now testing downtrend lines from the October 2018 top. We will need another couple of weeks to see the outcome. The 400+ point increase Wednesday was impressive. Whether that was a start for a 2019 bull are a climax blow-off we still do not know.

 

Meanwhile oil prices have advanced from $42 to $53.69 this morning. Oil and stock prices remain in a sort of DMZ as we described last week. Energy ETF XLE like the stock indexes is testing its down trend line.   Even Energy Service XES rose from the dead at $8 rallying to $10.95. Again it is at resistance.

 

Like any great Saturday morning movie serial, return next week to see if the bulls or bears prevail.

CAT NVDA Are Giving Early Warning Signs of a Market Peak

Tuesday Jan 29 2019

CAT and NVDA announce lower earnings, DJIA drops 208 points.

CAT

 

NVDA

CAT is an industrial bell weather and NVDA is the same for semi onductor chip makers. Both toppe with the overall market Oct 3 and ave been in downtrends sine.

A9 and 13% drop yesterday is probably signalling bad news for the markets.  I m expecting a top in most indexes this week.

Transports

The Transports are a more sensitive index to the economy than the Industrials. Take a look, what do you see?

Transports peaked  in late Sept before the Industrials. Now TRAN is failing at its shortest moving average, the 50 day. The other MAs are converging which is usually a pre cursor to a change in trend.

Market Low Right on Time

Monday Jan 28 2019

I was expecting a market low this Wednesday, It is arriving right on time given the sell off in CAT.

Take a look at AMAT, looks like a  great weekly set up for a buy.

Markets in the DMZ

Friday January 25 2019

 

The big picture is that the fall 4,000 point DJIA drop ended December 24. Since then stocks, and oil have rallied together as they fell together.

Stocks attained the half-way point around 24,400. That is half-way between the low of 22,200 and the high around 26,600.   Friday morning stocks are up again at 24,615 and oil is trading eleven dollars of its low at $53.03.

 

For some reason the stock market replicates oil price movements ten years later. Looking back crude oil bottomed on December 24, 2008 closing at $39.39.   In an amazing repeat, crude oil closed at $42.53 exactly ten years to the day December 24, 2018. As noted, stocks and oil have rallied since.

 

I had thought a resolution in the two markets would be more clear by now but both are still in a sort of No Man’s DMZ, off the lows but not taking out previous highs.   The Energy ETF XLE and bell weather Apache APA are trading at their 50 day moving averages. Which is to say well below their 200 day Moving Averages.  Again I worry that Energy Service XES is failing at its 50 day MA.

 

Stock indexes were squeezing into a more and more narrow wedge and rally have yet to resolve that pattern. Usually such patters resolve to the downside.

 

Semi-conductor stocks are a key component of the technology index.   Thursday the SOX index of those stocks jumped nicely up 5.73%. That is a big positive.

 

Looking through the list of ETFs representing the overall economy, we see most well below 200-day Moving averages. The defensive XLU Utilities is the exception, closing over 50 and 200 day moving averages. But that is indeed cautionary as XLU is a defensive area where money flees the riskier ETFs.

 

The rally from December 24 has gotten ahead of itself resulting in a short-term overbought situation.   That suggests a pull back and test of lower support for stocks and energy shares this next week.

 

Nancy Pelosi only knows she beat down George W. and arl R. by saying no to every overture. And she is doing the same now. Trump had to give up delivering the State of the Union. Last night Judge Napolitano gave the Wall issue clarity. He points out the Wall would be built on private land in Will Hurd’s Texas district. But the land owners all oppose a Wall on their land. So even if Trump got the money he would face years of litigation.   So it seems the bet on Shutdown to get a Wall will fail. The lack of resolution is a huge negative regarding market sentiment.

 

For now we watch for an outcome, hunkered down in the Market DMZ.

 

Whither BRKB

Friday January  25, 2019

Berkshire Hathaway is surely the bell weather stock as to market sentiment. Take a look.

Price has re traced exactly 50% of the entire fall decline. It is below all three moving averages. And it has yet to rise above the resistance line form teh July lows.   Same for MACD in the lower panel.  At top on balance volume is not expanding .  Looks like a pull back is in store for next week.