The Market Perspective

Transports actually down for the day, can that happen, really?

Thursday May 28 2020

Clift Scene at end of posse chase

Butch

Kid next time I say let's go somewhere like Bolivia

Let's go somewhere like Bolivia

Sundance

Yeah, came the reply,, next time!

 

Next time I say let's take a counter trend position remind me to go long an equal amount on the market as a hedge.

Yes I have said this before but, May is typically a topping month and there is not much left of May. And the intraday charts are looking toppy, I would not go long here

On balance volume is topping in north panel

Price has had two gaps and now a sideways pattern selling off into the close, recall the Transports and small caps lead

PMO looks ready to roll over

SP 600 small Caps

Hmm off 2.37%, same toppy indicators

NASD New Highs

RSI has already peaked, PMO toppy, actual number looks to have peaked

MYSE Advance Decline

RSI looks to have topped  and actual indicator is bending over

Percent bullish over  150 day

RSI toppy,  indicator in vertical position,PMO peaked a month ago

 

DJIA sold off to  -147 right into the close down from being up about 180 today.

SPX 10 Minute

This reverses the entire day action,amazing how social mood turns on a dime, yesterday those same stocks were up  60 spx points!

Speaking of social mood, Trump is signing an exec order lifting some sort of protection on social media in his fight with Twitter,see WSJ Editorial today.

As the markets top this is a great socionomic moment, Trump versus Twitter which was his preferred media.

ttps://www.newsweek.com/trumps-executive-order-accuses-social-media-companies-profiting-partnering-chinese-government-1507179

"Twitter has now shown that everything we have been saying about them (and their other compatriots) is correct. Big action to follow!" Trump tweeted Wednesday.

Karl Rove's column today in the WSJ lists all the mistakes Biden made in his radio interview.  This guy can never be let on stage with Trump and the Dems know it.

Trump declares war on Twitter

DeBlasio declares war on shop keepers in NYC.

Dem Governors keep Churches closed

I mean this is a perfect example of how negative mood will move markets, the other way.

 

 

 

SPX 3,000

Wed May 27, 2020

An alert reader suggested SPX 3,000 might be the first level to encounter selling.  The NASD is actually down this morning.

 

These levels reach an extended rally. Too early to call but we are watching closely.

NASD

RSI and PMO  have been declining.  Social mood towards the market is over the top. All the bulls are even more bullish.

Yet reading about the re open, I see articles mentioning the necessity of borrowing money.  Debt caused the problem. And is the problem  It is doubtful small business will borrow its way out of the problem. I see one of the Cruise Lines issued junk bonds with a  12 % coupon. Good luck with  that.

Another Big Day

Tuesday May 26, 2020

Today the DJIA jumped to 25,000 + one of the last two targets for the completion of the A B C Wave 2.

This was a bit less spectacular than last Monday. That day saw 600 and finally 900 up. today we were up  600+ all day and faded ab it to +529 by the end of day. It is harder and harder to imagine a reversal up here as strong as last Monday and today, both first of week days.  But that happened Feb 12 and the markets reversed up after  March 23. But I should have recommended long positions equal to any short for a market neutral position overall.

Tune in tomorrow morning pre market for comments. Thanks for reading the Market Perspective.

 

Market up 500 Tuesday May 26 Open

Tuesday May 26 2020

120 minute DJIA

After two months of sideways action the DJIA makes a final thrust past the April  29 high. Start or end?

I will leave it to my friends at EW to count, they suggest this is a target or possible one more even higher.

Three of the four moving averages are converging so the stage is set for some kind of up or down resolution.

Reading the headlines this hardly aligns with reality. It will be  a good while before things are back to normal. Indeed I he argued normal may not return to

the concept of the office, the cruise, the airline, the University. 38 Million are out of work and not likely to be quickly called back.  Indeed I visited a nearby restaurant this weekend. With only 1/4 of the tables  left not as many workers will be needed.

Tuesday Morning Pre Market Open

Memorial Day Weekend

 

I  will be on  with comments  prior to the market open Tuesday,please join me

Data Analytics Video

Memorial Day Weekend May 25 2020

there are a host of resources on youtube.com for all sorts of things.

Kahn Academy has a review of statistics

Here is a review of data analytics

https://www.youtube.com/watch?v=9IIgH0hNtgk

Watching videos by multiple authors gives us a variety of points of view

Those of you in my ethics class will recall the fable of the Six Blind Men of Hindustan and the Elephant.

End of Rally inSight?

Weekend May 24 2020

 

I am guessing we have one  final fifth wave high this  next week. It should be short, sharp, and spiked. From that standpoint it will be the reverse of the March  23  low.

DJIA Four Hour

The bulls have gushed about the big rallies but looking  at the chart, since early April this has been a sideways affair. the four hour 200 bar is about  25,400.

Daily

Approaching 26,3132 the daily 200 bar would get the bulls really excited.  I would be perfectly happy if we simply reversed this week but we shall see.

Best guess a spike this week to the 125-200 bar MA area which would finish the pattern. Higher prices than that would cause us to re evaluate the whole pattern.

Fundamentally we have shown you sky high P/E valuations in FANG, investors chasing stocks with no earnings but highly visible dduring the quarantine like Peloton. Enthusiasm has outpaced the reality of the re open, not to mention 38 M out of work.

SPX 3192 Top of Wave 2 of Wave 1 down

The sideways move coupled with the buy the dip mentality,the FANG stocks, the quarantine stocks, and bullish advisers warning investors to rush back in, could push us to 3192.

 

Put Call Ratio The Real Fear Index

Weekend May 23 2020

All Fear has abated.

A put is a bet that  prices will fall.

A call is a bet that prices will rise.

The put call ratio  measures fear versus confidence. The higher the number, the higher the numerator, hence the higher the fear.

The lower the number the more confidence has won the day.

 

The line on the left is pre virus, confidence was high and the P/C ratio was low.

Now the P/C ratio has returned to the what me worry level but the  S & P is t least 300 points lower.

Again this is a negative divergence.

Notice the ratio peaked during the third wave down i the  SPX at top.

The FED is 'goosing' the stock market. It buys bonds and  the money flows into stocks, since the money is in the hands of fund managers, it flows to the best performing FANG stocks.  And so  the FED has raised the stock market level artificially high.

Could the down turn be worse because of just that, an artificial sugar high courtesy of the FED billions pumped in every day

while mortgage payments and other loan delinquency proliferate?

A Significant Divergence

Weekend May  23 2020

 

In  a real bull market volume, price and participation, breadth all expand. That is not happening now

The bullish percent of stocks fell from  70 to  40%. But the black line of NYSE stocks did not. And PMO at bottom is clearly in decline.  The MAs have come together as the index approaches from below. MAs come together prior to a change i trend. Let's watch this chart this week.The market top was April 28 as shown.

SPX is even more pronounced

In both instances the percent of stocks participating in the rally has declined  But price of the index has remained high, ie, fewer stocks are holding up the rest off the bunch. This is how rallies end, with less breadth and higher final averages,

/Wiley Coyote is running off the cliff after the Road Runner.

Does Valuation In a Pandemic Mean Anything?

Weekend May 23, 2020

P E Ratios

Amazon            116

 

FB                    32

 

Apple                25

 

Google                50

 

Netflix                87

 

Earlier this week I looked at other quaratine stocks being bought like Peloton and Carvana which have negative earnings

This all reminds me of the stampede to own dot.coms who never made any money either.

Flip through the WSJ  of a major paper like your SA Express News, the headlines are not good

 

Mortgage delinquencies largest since worst of Great Recession which actually happened in  2010

Europe struggles, Luckin Coffee is a bust and a fraud, for the first time in years China is not claiming  double digit  GDP increase

When and how will this improve?

Student loans were 10% delinquent before the virus.

Anecdotal Observation

Bill Miller is a chain of bar be que restaurants in San Antonio. Also great fired chicken and popular breakfast tacos.

They never rate high in barbe que crazy Texas  Monthly but drive by any of the  50  in SA and pre  virus the parking lot is packed as is the dining room.

Texas is officially opening today, sort of, 25% open

That means 3/4 of the restaurant ables are gone, the condiment bar is empty as is the silver ware, I was pretty much the only one inside, the drive in did have a few backed up. Can the store be making any money?

Traffic is a fraction of its business as usual on a Saturday

Home Depot is going gangbusters, the W Mart grocery is quiet, a quick in and out.

Social mood is fractured as Blue State Governors refuse to let business open or pick and choose favorites, who is essential and who is not, liquor stores yes, churches not. This will only give rise to further herding of negative mood.

No doubt the bond and stock and junk buying by the FED is resulting in money moving into stocks but it is hard to see a fundamental justification. And the FANG stocks exhibit five waves up already from March 23 and as you can see hefty valuations via P/E. 

I readily admit to being dead wrong on stock market come back thus far.

39 M on Unemployment benefits, 14% unemployed, Airline, Cruise,Energy, Hotels, Restaurants, Tourist Destinations

all in the tank

so of course the stock market is in vertical position.