The Market Perspective

Investors Love the SPX

5/17/2025

The SPX is outperforming the INDU and NDX.  Is the rally still alive and well?  The SPX is only about  150 points from its February all time high.

60% of the NASD stocks are over their 50 day MA.

Click here to read about Buffet's $325B cash hoard.

That is 28% of Berkshire assets.  That is enough money to buy all the shares of 476 of the 500 SPX companies.

He held more cash Prior to the dot.com and 2007 melt downs.

Diamondback warns investors that  $62 crude oil is a tipping point, the firms need higher prices to justify new wells. It may be that US production has peaked as OPEC produces more oil.

More oil could bring lower prices making Putin's war difficult but he has endured so far.

WSJ Reader asks Is the Labor Market Wobbly?

5/15/2025

The April employment report, as illustrated in graphics with “U.S. Added Jobs at Steady Clip in April” (U.S. News, May 3), reveals a growing imbalance in the U.S. labor market. Of the 177,000 jobs added, the healthcare and social-assistance sector accounted for nearly a third of all gains. In contrast, most other major industries posted modest increases or outright declines.

This narrowing base of job growth should raise serious concern. A labor market overly dependent on healthcare hiring isn’t a sign of economic vitality but of fragility. Such sectoral concentration may mask underlying weakness in consumer demand, private investment and public-sector support. If healthcare—currently buoyed by demographic trends and structural demand—falters, the broader job market may have little cushion. Without more balanced and broad-based job creation, the risk of a stalled or uneven recovery grows, particularly if external shocks or policy tightening intensify.

German A. Contreras

 

Optimism Abounds

5/15/2025

Optimism Abounds

The Roaring 20s stock market provided derivative support to real estate and automobiles.  The Auburn Cord Dueseneberg company would finally close its doors during the following Depression. Duesenberg became part of the lexicon with the phrase, she’s a duesy. It meant the object or project was really something special.

The same thing is happening now.  There are now four stand-alone Ferrari dealerships in Texas. Not to be outdone, Lamborghini has also opened stand-alones in the same four cities, Houston, Dallas, Austin, and yes San Antonio.  I mention stand alone as historically one just cold not sell enough $250K+ automobiles to make a go of it alone. But no longer apparently.

Shoppers ae bidding up Gulf Coast Properties. Some of the most expensive properties ever  now exist on the Miami Beach waterfront. However, there are now more homes for sale in San Antonio than at anytime dating back to 1990. And this includes many for over one million dollars.

Near the peak of the dot.com boom the stars of Seinfeld wanted GE stocks rather than more cash pay. They got what they wanted but GE has never seen those high prices since, and has been taken out of the Dow Industrial index.

The desire for stock is back, from Washington DC no less.  Senator Ted Cruz proposes that every child in America get $1,000 at birth to invest in the Stock Market. In a fine irony this is part of the ‘tax cut plan.’ The last minute proposal would cost billions a year.

Trump’s tariffs are finally having an effect rumored all my life. In elementary school I recall The Weekly Reader publication continually predicting that Brazil would be the country of the future. It never happened, until now. Realizing the loss of US soybeans, China’s Cofco Agriculture conglomerate is building the biggest export terminal ever outside China. It will triple the size of the Santos port. China has a 90% stake in the southern port of Paranagua. China Railway is building needed track from farmland to the coast. Cosco Shipping has built a deep water port in Peru for better trade between Asia and South America.  Careful what you ask for Donald.

The Magnificent Seven stocks are back accounting for 48% of the NASD and 28% of the SPX, which is how both have recovered this year’s loss.  Fixating on a handful of stocks is a signature event at market highs.

Keep an eye on the bond market, The thirty-year Treasury now looks to exceed the 5.2% high yield recorded last year. T Bill rates are back to 4.3% far exceeding the SPX dividend yield around 1.5%. The post April 7 rally has re-kindled bull market expectations. Don’t be so sure about that.

Counter Trend Rally Ending?

5/14/2025

I have written extensively about how at the end of a move, the market focuses on a handful of stocks.

Now those are the magnificent seven which comprise by weight a staggering 48% of the NASD andd 28% of the SPX, no  wonder those indexes are up?

 

the value line geometric is an equal weighted index all stocks count the same.it has reached the previous fourth wave high a common re-tracement level. Stocks should top in the next few days.

Bond yields poised to take out 2023 high

The thirty year T bond peaked yield at  5.1% in 2023, It is set to take that out and move to higher yields.

That will weigh on the stock market as will the realization that the impact of tariffs has yet to be felt.

5/13/2025

The re trace ment has completed an A  B  C, this looks like the top pf th  previous fourth re tracement

Next update tomorrow morning

Crude Oil is Tracking Stocks!

Monday 5/12/2025

I suggested Friday that crude oil has been correlating with stocks. Stocks soared on the 90 day stand down in tariffs between the US and China.  This created a gap today on near all major indexes, the end or just the start of more?

Maximum momentum or sentiment occurs at the end of a move. That would be the set up here, after all there is no trade deal just an extension of time. The Chinese unlike Trump, are very patient.

One can see PMO and RSI are quite extended, this may extend a few more days until someone realizes we are way short of 90 deals in 90 days.

Crude oil traded to  63.61 but backed off to 61.98 by the end of the day.

 

 

A Look Back

5/11/2025

In the  2007-2009 meltdown INDU SPX and NDX all lost just over thalf their values from top top bottom

 INDU fell from 14,000 to  6500.

NDX 2200 to 1100

SPX 1550 to 700

 

In the 2000-2002 dot.com meltdown

SPX 1550 - 950 a 40% loss

INDU 11750 - 8250 a 30% loss

NDX 4750 - 1000 meaning it lost about 80% of its value

 

On April a mere 7.5% of NASD were over their 50 day MA, now 50%, a remarkable wave two recovery

The INDU  200 month MA is now at  22,430, it was last touched in the 2009 meltdown, that seems a reasonable target for the next two years, two years is the span of both the  2000-2002 and  2007-2009 sell-offs

No one on business cable tv is discussing anything like that now but they weren't in the prior crises either

Companies continue lay-offs and withdraw earnings forecastsl

90 trade deals in 90 days is bumper sticker, Trump has one and that was with the UK which we have a trade surplus, probably nothing much to neegotiate

Trump has backed off China from 145 to  80% but who knows what he will think of next

 

Semi Conductor Index

5/10/2025

Well before the AI craze, the SOX or semi conductor index used to get a lot of attention.

Even after the relief rally this index is down 24%. This reflects some expectation of less demand for chips, an economic slow down.

 

 

The Recovery May be Ending

5/9/2025

The Recovery May be Ending

The S&P is still down almost 8% from its February high. The S&P is down about 5% in gold terms from Liberation Day, and buys 18% less gold than it did at its February high.

Streetwise Wall Street Journal today

The Dow Industrials fell from the February high of 45,000 to the April 7 low around 37,000. The recovery rally has retraced about 61% of the total fall. This is a typical Fibonacci counter trend rally. Indeed the overall market is down 8% from the February high. But the rally since April 7 seems to have calmed the nerves of near all investors. Stocks have moved sideways the last week or so and are off today from earlier highs. The move down from the February high was a Wave One. The move up is a corrective Wave Two, A larger move down will be Wave Three which may have begun this week. Ralph Elliott in the 1930s suggested that markets move in five waves in the primary direction That consists of three waves in one direction, in this case down, and two corrective waves.  This is a reflection  of human behavior. One can literally see and hear this happening on business television and talk radio.  The talk in both arenas has gone for serious worry amid the near 20% drop to the April low to relaxation. Then Trump was changing his mind daily and the markets reacted violently. Now with the rebound I hear that he is not capriciously changing tariffs daily but ‘negotiating’ We are told this is what he does best. And a radio talk show host assured just this morning that he would outmaneuver China.  Never mind that Xi does not have to stand for re-election while Trump’s razon thin House majority will in November 2026.  Attempting to calm fears, Trump trotted out some deal with the UK. Did anyone know we had a trade problem with England?  Meanwhile China diverts goods to other markets. 

Lay-offs at business continue. Ford will lose one quarter of profit due to tariffs. The GDP dropped .3% annualized the first quarter.

Gold is the only real money. It is in limited supply and cannot be printed at will by politicians. Looking at stocks priced in gold removes the political inflation. This is why in dollars stocks are down 8% but in gold or real money terms, it is down 18%.

Crude oil has managed to rally with stocks. It is now trading above $60. But there is a high correlation since of crude oil with stock prices since that February high. Keep an eye on that correlation the next few weeks.

Five Year Pattern for Interest Rates

5/8/2025

 

This folllows Marc  G's analysis of rates and commodities in the previous post. Here we can clearly see the five wave advance in rates from the march 2020 low.

The market is now undergoing a sideways A B C correction.