The Market Perspective

Indexes Topping, Oil and Gold Pull Back

July 7 2019 Weekend

Tom McClellan has  year  2021 as a final high in stocks and for now that looks as good as any call.  I am wondering if that is also a prediction of how the  2020 election turns out.

Stocks Transports

It appeared Transports and Small Caps were breaking out, now not so much.  I suspect the usual summer doldrums have set in. MAs are converging which usually forecasts a change in direction, would that now be down?

Bonds

Ten Year Note

I must admit this vigorous bond rally caught me by surprise, sorry I missed that one!  But it is over done and probably topping now. Which meas despite what Donald Trump thinks of his FED Chair, we are probably at the low i rates now. That makes perfect sense given the way the public has just poured into municipal bonds.

Dollar

The dollar chart looks a lot like the bond chart above.   I am guessing the dollar holds here while gold pulls back.

Gold

The rectangles  speak to over bought and time to correct back to 1340-1360 where price broke out. GDX and XAU look the same.

If October to now is Wave One, we are about to experience Wave Two pullback and then a spectacular Wave Three up. Stay tuned.

Silver

Silver got creamed Friday down 34 cents.

Energy

I cannot get enthused about energy here.

Nat Gas

Nat gas jumped up Friday after I wrote my column in the previous post Wednesday. A low volume day but impressive. A low could be in the making here.

 

July Fourth

New S & P High, Happy Independence Day

 

The third year of a Presidential term is usually an up year. So far so good in 2019.

Tom McClellan

 

Wednesday, July 3, 2019, 10:44 AM CST

 

Last week we suggested that stock markets are reaching their typical summer peak, doldrums ahead. But we also got our wish. We noted the Russell 2000 small cap index and the Dow Transports had not moved above their respective 200 day Moving Averages MA. Now they have.

 

The Transports are trading at 10,492.   Taking out the April high at 11,100 would confirm the new high in the Dow Industrials.

 

The University of Michigan Consumer Sentiment index continues to improve along with the unemployment rate.   Positive sentiment, low unemployment both buoy a strong stock market.

 

Interest rates remain low world-wide and in fact are negative in some European countries.   Indeed most world stock markets lag the positive action in the US market.

 

OPEC and   Russia claim they are doing a great job supporting the oil price. Perhaps they did not notice the 4.81% drop this Tuesday to $56.25. Prices peaked last October 3 around $75. In the really big picture, oil prices have been falling since the 2008 high of $140. Next support is $50 but I am guessing we are looking at a re-test of the December low of $42.50.

 

Some 150 energy service companies have declared some form of bankruptcy since 2015. May 2014 was the final high over $100.  More oil is now being produced with fewer wells drilled. So great efficiencies are pressing the service sector.

 

Share prices are still falling for Halliburton HAL and Schlumberger SLB.   These are the largest energy service firms. Share prices are below the 200 month moving average for both. So expect even lower prices ahead.

The bull market in gold has gotten ahead of itself. The price peaked June 24 around $1,440. Expect a correction to $1,360-70 over the next few weeks.

 

That projected low in gold just might coincide with a final low moving average convergence in silver. Silver has not joined the party with a new high as seen in gold. But a positive sign is a narrowing of the moving averages. . This is one to watch.

 

The bear market in natural gas continues. Now trading at $2.24 prices look headed for $2.00.

Crude Oil Turned Back at 200 day MA

Weekend June 30 2019

Limited us of my hand so still recovering from surgery

 

Crude oil WTIC down 1.62% Friday right at the 200 day MA, lower to sideways  prices ahead

 

Finally Transports and Russell 2000 move over 200 day MA, very positive, ratio of those to DJIA improving

 

Gold reached upper targets and is now overbought short term.  Silver remains above its four MAs and my finally b e making a turn to the upside.

 

 

 

The FED Follows Not Leads, Please Someone Tell Trump

Tuesday June25, 2019

 

Elliott Wave: Market Signaling Fed to Cut Rates Soon
We have tracked the U.S. Federal Reserve's interest rates decisions for years. This week, the Fed once again decided to keep the funds rate unchanged. We expect the Fed to change course soon.

By Elliott Wave International

We have tracked the U.S. Federal Reserve's interest rates decisions for years.

In December, we wrote an article titled "Interest Rates Win Again as Fed Follows the Market," where we observed that although most pundits believe that central banks set interest rates, central banks actually follow the freely traded bond market in their rates decisions.

We noted that the December federal funds rate hike followed increases in the three-month and six-month U.S. Treasury bill yields set by the market.

In March, we pointed out that the Fed followed the market yet again. T-bill rates had gone sideways since November, and the Fed correspondingly kept the federal funds rate unchanged.

This week, the Fed once again decided to keep the funds rate unchanged. We expect the Fed to change course soon.

The chart shows the fed funds rate (red line) and the yield on both 3-month and 6-month U.S. T-bills (yellow and green lines, respectively). The latter two rates are freely-traded, while the former rate is set by the Fed. Observe the growing gap between the yield on short-term T-bills and the present fed funds rate. The market is leading the Fed to lower its fed funds rate.

The same behavior occurred in 2007. By June 18, 2007, the 3-month U.S. T-bill yield had declined to 4.52% since trending sideways after the Fed raised the fed funds rate to 5.25% in June 2006. The market was leading the Fed to cut rates. The spread between the two became even wider, and at its September 2007 meeting, the Fed finally acquiesced to the market and lowered the funds rate from 5.25% to 4.75%. The Fed chased T-bill rates lower in a series of rate cuts all through 2008, finally dropping the fed funds rate to 0.25% in December 2008. Meanwhile, the DJIA declined more than 50% during the entire episode, highlighting the central bank's impotence in controlling markets.

Based on current dynamics, the market is signaling that at some point in the coming months, the Fed will lower its Fed Funds rate to align with T-bill rates. We'll be watching.

See Chapter 3 of The Socionomic Theory of Finance for more examples of central banks' acquiescence to markets around the world.

 

This article was syndicated by Elliott Wave International and was originally published under the headline Elliott Wave: Market Signaling Fed to Cut Rates Soon. 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.

 

Small Caps Follow DJIA Up

Weekend June 23, 2019

The small caps and transports do look like they are coming back.

 

Several things to like,, MAs coming together, PMO turning up, reverse head and shoulders possibly breaking neckline to upside.

Transports

We can say the same for transports and look how similar the two charts are

RUT appears further along but this is encouraging.

Gold Daily Big Change  in positive mood this week

Long Term Gold monthly chart, if cup and handle formation is taking place we could certainly see this overbought come back to where the MAs are converging.

 

 

Silver Daily gave everything back just as fast as it had risen, still waiting here, MAs need more work

my left hand is still in recovery from extensive surgery, that is about all  I can type today.

 

 

 

The Official Bull Market in Gold Begins

Friday June 21 2019

 

Gold and Oil Advance

 

 

Gold futures rose 3.6% to $1,392,90 an ounce, the biggest one day advance since June 2016and its highest settle since 2013.

 

WSJ Today

 

An ongoing theme of this column is that unremembered changes in social mood result in social action. This is in contrast to the news media’ conventional explanation. This morning the media cites a weak dollar as justification. But the dollar has been falling from its peak in mid May. The correct explanation is that enthusiasm for gold has been growing since its bottom last August. Weaker currencies around the world , Russia, Mexico, has been Venezuela, add to the mix.

 

The long-term picture is that gold peaked near $1,900 in 2011. It has been in a seven-year correction since then, bottoming in     2015. Since then a series of higher lows finally resulted in a break-out yesterday. Today’s price is now above the four moving averages (50.87,125,200) I track. And the conclusion is that gold and other metals are beginning a multi-year bull market advance.

 

AS noted in this space last week, one would think torpedoing ships and shooting down a US drone would have catapulted the price of oil to a new high. Instead it did rise 5.74% Thursday just over its 125 day moving average. Momentum measures have turned up and the moving averages are coming together. This usually precedes a change in direction. Look for further advances in the price of oil.

 

The move up in oil prices has not translated to a move up in energy share prices. The XLE ETF remains below its 200 day moving average. Worse, the energy service XES is below all four moving averages.   And it is down .32% today at $9.36.   FRAK, the Shale ETF is not doing much either. Investors are not voting for improved profits in shale producers.

 

The Dow industrials hit a new all time high yesterday now at 26,86. The ten-year Treasury yield has dropped under 2% and indeed that is sending money to stock in search of better yields.  The move in stocks would be more encouraging if Transports and the small cap Russell 2000 had hit new highs. But those two are flirting with their respective 200-day moving averages.

 

So there you have it. The move up in Industrials is unconfirmed by the Transports. Gold, the haven of worry, has taken off. And the oilfield, while busy, is not high on investors’ buy list.

Wednesday june 18 219

Gold Probably Entering Long Term Bull Market

Weekend  June 16, 2019

The above formation is referred to as a cup and saucer. We have the rounded saucer formation  lacking only a handle

that would be a pull back from this  1350 area which gold has yet to surmount. Then we would look for much higher prices.

Other positives in clude

The MAs are coming together, this typically happens prior to a change in trend

PMO is  coming off its lows and is above zero

The US Dollar may be topping and of course other currencies from the Mexican Peso to the Venezuela whatever are falling.

And this is happening as we suspecct the US stock market is topping.

And silver has yet to awaken, let's watch silver.

It may take until later this year for silver to have he MAs come together but the same sort of pattern is evident.

 

Gold Likley Entering Long Term Bull Market

Weekend  June 16, 2019

The above formation is referred to as a cup and saucer. We have the rounded saucer formation  lacking only a handle

that would be a pull back from this  1350 area which gold has yet to surmount. Then we would look for much higher prices.

Other positives in clude

The MAs are coming together, this typically happens prior to a change in trend

PMO is  coming off its lows and is above zero

The US Dollar may be topping and of course other currencies from the Mexican Peso to the Venezuela whatever are falling.

And this is happening as we suspecct the US stock market is topping.

And silver has yet to awaken, let's watch silver.

 

Growth Slows in the South

Monday June 10, 2019

An article in the WSJ claims growth is slowing in the south. I am not sure I completely agree given the auto industry move south.

I have maintained that the Civil War map, the Red Blue map and hte Right to Work map are all the same, take a look at this, same thing. Southern states recently restricted abortion, northern states are allowing it more than ever. The new Civil War continues.