The Market Perspective

Don't Tread on Me

Friday Jan 27 2023

Don’t Tread on Me

 

Biden Administration Officials have publicly stated they intend to eliminate all ‘combustion appliances’ form your home. That includes your gas stove in the kitchen.

Kim Strassel WSJ Today

I wonder if combustion appliances includes Joe Biden’s Corvette? 

Rush Limbaugh commented that with the fall of the Soviet Empire, all the Centrists of the world gravitated to the climate lobby. Saving the climate would allow them as much or more control over our lives as a one payer medical every system. And that is exactly what is happening.

The Obama Administration wanted to claim every ditch or wallow was a navigable waterway subject to Federal control. Now we will be limited to only purchasing electric powered cars by 2030 or so, Never mind the Texas power grid collapsed amid a four inch San Antonio snow last year.  Not content with running our life outside the house, the climate lobby now focuses on the one great way to manage the heat cooking food- the gas range.

Team Biden denied this among Republican cries of no vote no representation but this is just a mere ploy in the long term picture.  The Sierra Club, the Rocky Mountain institute, and the Climate Imperative Foundation all have this as an objective.  You can add your hot water heater, clothes dryer, and furnace to the list. Never mind that electric appliances are nothing more than a direct short, hardly efficient. Or that natural gas only produces carbon dioxide and water when burned, eliminating methane, not creating it.  Never mind the coal plants in India and China, or John Kerry’s private jet, the problem is your and my catalytic converter equipped near maintenance free I/C auto and that pesky stove.   The real horror is that some bureaucrat in the name of climate can make this happen with the stroke of a computer key, you and I will never have a vote. Mark this down as a consumer alert.

Stocks have been working sideways to up since hitting bottom last October.  After racing from 2.9% to 4.4%, the thirty-year bond is trading at 3.6%. that is slightly above the December low just under 3.5%. This is a consolidation before rates head higher.  The bear bond fund TB F backs up this observation. TBF rises as bond prices fall and interest rates rise. It bottomed at $20.80 this month and now trades t $21.18. TBF is probably a good longer term hold at least into the summer.

The surprise is that West Texas Intermediate is breaking out over $80.  This is confirmed the energy shares which never wavered as crude fell to the low 70s. Get ready for a crude oil rally.

Every time I look at cable business news or the press, another company is laying off thousands of employees. That alone should slow the economy. The inverted yield curve remains with the two-year Treasury paying 4.17% while as noted the thirty-year is 3.6%.  A slow down lies ahead.

Analyzing Natural Gas

Tuesday Jan 24 2023

 

Natural Gas: Here's What Happened After a "Double Top"
A key technical pattern warns of a reversal

By Elliott Wave International

It probably won't be a surprise to you that Elliott Wave International is an advocate of technical analysis. After all, the Elliott wave method is a form of technical analysis.

You probably know that the term "technical analysis" refers to analyzing the behavior of financial markets themselves -- generally by studying charts -- as opposed to "fundamental" analysis, which is based on news and events outside of financial markets.

One of the many classic technical-analysis chart patterns is known as a double top. (Conversely, a double bottom is the same reversal formation after a significant prior down move.) Getting back to the double top, the first price high (or top) is followed by a moderate decline. The price then rises into the same territory as the prior high, which is the second top.

In August, the European Financial Forecast, a monthly Elliott Wave International publication which covers European financial markets and is also part of the monthly Global Market Perspective, said:

Natural gas has formed a bearish double top.

Keep in mind that this analysis was provided even though energy analysts were calling for natural gas prices to remain elevated due to "fundamentals," for example, "supply strains." Here's a July 25 headline (The Financial Times):

Traders expect European gas prices to remain elevated for years to come

Instead of remaining elevated, the price of natural gas fell, which was right in line with our analysis of that double top in the August Global Market Perspective.

The January Global Market Perspective provides a review with this chart and commentary:

The chart illustrates the continuous natural gas futures contract that trades on the New York Mercantile Exchange.

In August, we illustrated this contract along with 15 other key commodities and stated that gas prices had formed a bearish double top. In a matter of weeks, futures collapsed 50% and penetrated a key technical support level at [a key Elliott wave]. The same support level failed again last month.

True, not all analysis based on a market's "technicals" works out as expected, but often, it does -- or at least gets very close.

See how Elliott Wave International's global analysts apply Elliott wave and technical analysis to other financial markets -- free -- for a limited time.

Just follow this link to get the details.

This article was syndicated by Elliott Wave International and was originally published under the headline Natural Gas: Here's What Happened After a "Double Top". 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.

 

NDX Plays Catch Up

Tuesday Jan 24 2023

Judging by PMO and MACD it looks like NDX which lead the way down in  2022, will challenge its 200 day MA, the red line. I am guessing that will top NDX out.

NDX last year

 

NDX has stayed under its 200 day MA since its December 2022 high. No doubt investors are encouraged at teh multiple successful tests of  the  10,500+ bottom.

We remain skeptical but  MAs are flattening and an over sold rally could continue.

Bonds

TLT20 year bond fund

115 would be a 38% re tracement

and that is possible, PMO could rally more here. The continued talk of less FED raises makes this possible.

Notice the cluster of resistance in the  110-115 area.

Market Recovery Depends on Beating Inflation

tuesday Jan 24 2023

Here is an excerpt from a front page WSJ article today

_____________________

Behind this year’s improved start for markets lies a broad wager that inflation will soon post a once-in-a-generation decline.

Market-based gauges of inflation expectations project the annual pace of rising prices will tumble in the months ahead roughly as fast as during the recession that followed the 2008 financial crisis—or when Fed Chairman Paul Volcker used double-digit interest rates to crush the soaring inflation of the late 1970s.

_______________________

 

this is in contrast to the view of socionomic that social action is the  result of social mood. Socionomics questions the causality that the media endlessly claims is the cause of events.

Interest rates bottomed in March 2020 after a 39 year  decline from their peak in 1981. Rates had fallen to near zero and in fact went negative in Europe. Is is any surprise prices are rising in what is now a cycle of rising interest rates?   Or that inflation is rising as the Congress and FED spend trillions they do not have?

We are early in the cycle, it is 1975 not  1981-2 when Volcker attacked rates.  the article says expectations are for lower prices, yet crude oil just topped  $80 from its sub 70 lows, and gasoline at the pump is back over  $3.00  in Texas.

The better idea is examine  price patterns described by R N Elliott's waves of social mood.

 

 

NDQ Rallies, Closed End Munis Hold Gains

Monday Jan  23, 2023

NOt much movement on the closed end munis, holding recent gains.

EV CARZ rallied the last few days, note the tell tale stair step down action in this ETF, but the rally is likely to be short lived.

After losing a third of its value in the last year, NASD 100 is rallying, again likely to be another false bottom.

 

 

Nustar breaks out    

 

Ideal entry was last Oct and sorry I missed that but

this is a year long chart, NS has finally broken out of the  12-16 range that held it back for one year.

Here NS tests the 200 day MA one last time and Boom, off to a new high and breaks out of the year long pattern. /current yield is  9.3%

 

 

Inverted Yield Curve Unwinding

Monday Jan 23, 2023

 

A lot has been said about the two year rate exceeding the ten year rate. This is an inverted yield curve and usually anticipates a recession.

This morning the ten year yield is below  the thirty year yield, so this appears to be returning to normal.

Crude oil WTIC is trading just over $82. That is finally suggesting a break out from the sub 80 area where it has traded for several weeks. As we have observed, the price of energy shares have not fallen which  suggests the market somehow knew oil prices would re bound.

News suggests the FED may be less agresssive in raising rates, we will observe the bond market this week.

Stocks Top Once Again

Weekend January 22, 2023

SPX

Again all major stock indexes topped between Nov 2021 and january  2022/ Since then waves of varying degree have just touched the same trend line, which is down, and reversed again

Yet in the news media one does not see the term bear market. Rather one sees, just becuase 60 stocks 40 bonds had one of the worst years in decades, don't give up on it. I think even more decline lies ahead, my eventual target is the  200 month MA/\.

Here is the long term view on a monthly chart. Notice RSI t top and PMO at bottom, PMO esp, have both turned down. remember this is a monthly chart, such turns are rare. We have not visited the  200 month MA since the  2007-2009 melltdown.  The 200 MA is currently 2161 about half or  54%, of where we are now.

SPX has already fallen 21% from its 221 high but the public is buying stocks like it was  1984.

I expect the downtrend to resume in stocks. IF so that may at least support a siideways move in bonds until the FED or the market starts racheting rates up again.

BLE one of our closed end munis has performed very well, wonderingiif a stock sell off will attract even more money to this sector.

 

Is 11.60 out of the question?  We shall see. I am considering easing into TBF a bear bon fund as a hedge.

TBF bouncing off its 200 day MA

 

Stocks Top Again

Friday Jan 20 2023

Stocks Top Once Again

Best Image of the Week – Fashionable Maria Bartiromo in stunning outfits interviewing big wigs on Fox Business at Davos, outside with gorgeous Swiss background

Worst Image of the Week – Microsoft CEO Nadella arriving on a private jet at Davos announcing 10,000 lay-offs due to slow economy, do you suppose he took a ceremonial pay cut?

The last low on the DJIA was December 223 at 32,573.40. It has now rallied into January 130at 34,342.30.  A larger drop has begun.   The DJIA as dropped about 1,300 points this week, now trading at  33,072 . Not exact but this is similar to the beginning  of 2022. Then the DJIA topped early in January, dropping to January 24. A corrective rally of 1,50 points lasted into early February. The decline then resumed.

All of this is very much like 1973-74 which is our historic template. Stocks topped in January, 1973 and then fell 50% I into December 19741.

One can easily follow the decline with some ‘proxy stocks.’  Amazon was cut in half in  022, an only rallied from 80 to 100 (our target) and is now falling again. Berkshire Hathaway dropped from 360 to 260, rallied to 320 and is now falling again. IF your financial advisor has not realized this is a bear market, I suggest you shop for someone more attuned to the new normal.

About the debt ceiling, there is no debt ceiling. Congress has been raising it all my life. We have warned that if interest rates continue to increase the next few years, debt service on the $30 trillion will swamp the entire budget.  The result would be a Weimar Republic melt down of the US currency, just what China and Russia would like to see.

Bond prices have rallied as stocks sold off this week.   Our recommendation to buy closed end municipal bond funds has worked well. It may be that these funds will hold recent gains as investors flee stocks and look for tax-free dividends.

The energy markets have surprised. Warmer than expected weather has knocked natural gas prices back to the $3.50 area.   Shares of energy companies have soared.  West Texas Intermediate has clawed its way back to the $80 area.  A weekly close over $83 will turn the trend back up.  That is good for the Permian Basin. However, gasoline prices have now bottomed at $2.00 (continuous futures contract). Prices have already risen to $2.60 Team Biden never got their chance to re-fill the Reserve for $70 or less.  After claiming credit for lowering prices, they didn’t, what will they say as futures return to $3.00?

Oil Prices Fall in Face of Supply Shock

Thursday Jan 19 2023

 

Why Oil Prices Fell in the Face of "Supply Shock"
"Crude should be at the forefront of a..."

By Elliott Wave International

Looking back on 2022, one of the biggest fears about oil was that prices would skyrocket even more than they did due to a disruption in supply from Russia.

Of course, Russia has been a major world supplier of oil, but after Russia invaded Ukraine, many global financial institutions refused to back transactions involving Russian oil.

So, back in March of 2022, we had this headline from a major financial website (CNBC, March 4):

Oil market heads for 'biggest supply crisis in decades' with Russia's exports set to fall, IEA says

Conventional wisdom says that a disruption in supply, let alone the biggest in decades, would lead to soaring oil prices.

However, at the time that March headline published, NYMEX crude oil was trading around $115 a barrel -- and prices have been in a downtrend for most of the time since, for almost a year now.

In December, even the New York Times had a hard time explaining the disconnect (Dec. 9):

Oil Prices Drop, Despite Heightened Sanctions on Russian Crude

So, what's going on?

Well, Elliott Wave International has studied the historic price patterns of oil and has concluded that investors cannot count on a relationship between prices and the oil market's "fundamentals."

Indeed, Robert Prechter's Socionomic Theory of Finance provided historical analysis with this chart and commentary:

[The chart] shows the annual ratio between consumption and production worldwide. ... Take a look at the three shaded trends on the graph. The huge surge in the ratio between 1980 and 1982 -- the biggest rise on the chart -- did not cause the price of oil to rise; rather, it fell, a lot. Nor did the large decline in the ratio between 2002 and 2005 cause the price of oil to fall; rather, it rose, a lot. And the rapid plunge in the ratio during 2009 did not cause the price of oil to fall; rather, it tripled. These extreme anomalies render the proposed causality spurious.

What Elliott Wave International has observed is that oil's price does tend to follow Elliott wave patterns. As you probably know, Elliott waves reflect the repetitive patterns of investor psychology, the primary driver of financial markets.

Using the Elliott wave model, the December Global Market Perspective, a monthly Elliott Wave International publication which covers 50-plus financial markets, stated:

Crude should be at the forefront of a ... decline.

Indeed, as of this intraday writing on Jan. 9, NYMEX crude oil is trading lower than it was when the December Global Market Perspective published.

Now, the new January Global Market Perspective offers more insight into what you can expect for oil's future price path.

And, speaking of the Elliott wave model, if you're new to the subject, or simply need a refresher, read Frost & Prechter's Elliott Wave Principle: Key to Market Behavior. Here's a quote:

In markets, progress ultimately takes the form of five waves of a specific structure. Three of these waves, which are labeled 1, 3 and 5, actually effect the directional movement. They are separated by two countertrend interruptions, which are labeled 2 and 4. The two interruptions are apparently a requisite for overall directional movement to occur.

[R.N.] Elliott noted three consistent aspects of the five-wave form. They are: Wave 2 never moves beyond the start of wave 1; wave 3 is never the shortest wave; wave 4 never enters the price territory of wave 1.

... Elliott did not specifically say that there is only one overriding form, the "five-wave" pattern, but that is undeniably the case. At any time, the market may be identified as being somewhere in the basic five-wave pattern at the largest degree of trend. Because the five-wave pattern is the overriding form of market progress, all other patterns are subsumed by it.

Read EWI's new Global Market Perspective FREE

Now -- February 3

Dozens of markets around the globe are ending Elliott wave patterns right now. When they turn, they will make headlines.

And can change fortunes.

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Starting on January 16, and every two days, you'll get a section of the latest issue of EWI's Global Market Perspective.

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This article was syndicated by Elliott Wave International and was originally published under the headline Why Oil Prices Fell in the Face of "Supply Shock". 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.

 

Alvin Chau Gets 18 Years

Thursday Jan 19, 2023

Alvin Chau helped transform Macau into a major gambling center.

 

Alvin Chau, one of Macao’s high-profile gambling promoters, has been sentenced to 18 years in prison for racketeering and illegal gambling activities, the city’s public broadcaster TDM reported Wednesday.

Chau, 48, was the former chairman of Suncity Group, a Macao-based company that helped promote gambling by lending credit to high rollers. Macao is the only region in China where gambling in casinos is legal.

Chau was ordered by the court to pay the Macao government more than HK$6.5 billion ($830 million), the broadcaster reported, as well as $22.7 mlliion to $98 million to a number of casino operators.