The Market Perspective

Using Moving Averages as Signposts

Tuesday January 31, 2012

Richard Russell, the dean of market letter writers, warns that Patience is one of the necssary ingredients of investing. A TMP reader mentioned AUY Yamanna Gold and we took a look.My purpose here is not to necessarily recommend AUY ( Investors Daily has a positive piece on it) but to use it as a good example of how the market does observe 50 and 200 day Moving Averages MAs. 

 

First note that the MACD is only really useful here in helping identify lows. 

Second AUY did form a pattern of higher lows, bounded by the MAs, and that is the foucs of this post. 

June - AUY breaks over the 50 only to re test the 200. It then takes off through both.

Sept  - AUY tops out and then comes back to test the 200 day MA. It forms a second higher low. 

Dec - AUY forms a lower high and then pulls back to the 200 day MA again It then repeats the pattern from October, moving up from teh 200, hanging around the 50, and then Ka Boom.

Trying to trade in and out using he MAs as buy and sell signals would only have made money for your broker. Gold is in an uptend. The 200 day MA was a useful buying level.   The 50 day MA is more magnetic, price seems to hang around before making a move.  This is what frustrates most investors. but price spent very little time hanging around the 200 day MA. 

Moral of the story, there is no magic bullet, patience to buy the lows is the key to success. Placing successive GTC orders around the 200 day MA and below would have been been the way to accumulate a longer term position. 

Class dismissed. 

The Baltic Shipping Index Explained

Tuesday Jan 31, 2012

Here is an excellent explanation of why the Baltic Shipping Index is so volatile. 

This also explains why I heavily weighted my retirment account to energy services. When all the 

drilling rigs

workover rigs

fracking units

are spoken for, one has to outbid everyone else to get one. And so energy service sector prices soar faster than energy service itself in such a situation. 

Let there be 5% more of any of these things than are demanded and prices sink ,just that simple.

XLP Flashes Warning

Tuesday Jan 31, 2012

I noticed Procter and Gamble reported poor earnings for the last quarter. Here is an interesting parallel to 2008 for Consumer Staples courtesy Business Insider.

This is typical of the 'false breakout' that most chart programs follow these days. Note the final thrust avoe the blue line in 2008 and then the collapse. The parallel is amazing. Again this is why we do not want to overstay our welcome at this party!

Lifestyles of the Top .1%

Tuesday Jan 31, 2012

 

Tuesday Jan 31, 2012

I noticed a Maserati GT parked at the neighborhood tennis court while walking Bentley this past weekend. Gee massive cross drilled rotors to handle the (I would guess) 175 mph top speed, unless it is electronically limted to less than that. Hm does one really need this to get down our street, speed limit 35, to the tennis court. 

Uh no, but then one does not need a diamond necklace either, and how fast will a neckalace take yo anywhere?  Here are the ten fastest cars. I never heard of half of them but my point is, this is flaunt it while you got it social mood, only seen at or near the top of markets. 

Most owners rent track time to let these ponies run.....

Commander Bond, your  Bentley Continenal Supersports...Gossip has it that Bentley sold so many Continenal GTs in it was being referred to as the Beverly Hills Chevy.....

 

End of Euro Crisis?

Tuesday Jan 31, 2012

Here is the link for the Euro details.  But frankly who cares?  In technical analysis the saying is that there is always a fundamental event to validate the technicals. We noted the low in the Euro a couple of Fridays back on the downgrade of banks and entire countries. The Euro has rallied ever since. Now we have a fundamental reason for it. Oh I don't expect this to actually work, but it will buoy confidence for a couple of months, and perhaps support the rally to 1.40 Euro. 

Euro Up as 25 of 27 Agree

Tuesday Januaray 31, 2012

FRANKFURT (MarketWatch) — U.S. stock futures pointed to a higher start for Wall Street Tuesday as investors applauded an agreement to enshrine tougher euro-zone budget rules and amid signs of progress in Greek debt talks. Investors also awaited earnings results from oil major Exxon Mobil Corp. and a slew of other heavyweights.

This article details a deus ex machina agreement apparaently saving our Club Med group fromfinancial evaporation, at least for now. Yesterday was a typical weak start of the week as CNBC viewers nervously sold into the negative news from Europe. We have been cheerleading for  a Euro recover, probably to 1.40

 Euro versus Dollar - 

Note the capture here is the Euro divided by the Dollar. This is the latest off Bloomberg and updated from the US Market close yesterday 1.3192 versus 1.3141 on the US Market close Monday. ONe can see the peak i late October over 140 which seems a reasonable target. 

This means a lower dollar and indeed gold and oil are up already in Tuesday trading. So why are bonds still up, beats me. The 50 day MA for the Euro is 1.313, so quant programs will vbe generating buy signals as price tops the 50 day MA, and the news will be positive  about Europe today. 

The Economy

Tourism has improved in Hawaii. Like going to Vegas, a trip to the Pacific is a vote of economic confidence. As ,mood imroves more money will flow into stock funds the next month or two. 

Monday Monday Can't Trust that Day

Monday Jan 30, 2012

Even CNBC kicked off today by noting that the SPX na dother indices are about to experience a 50 day MA crossing up over hte 200 day referred to as a Golden Cross. 

Today was typical of recent morning action and particularly monday action. The market sold off as the weaker European markets were still open when the NYSE began trading today. After  a brief move lower the markets recovered registering small losses on the day's close. This is working off the recent overbought condition and setting up a breakout through 1345 and eventually 1370. 

Gold and silver are the leaders with shallow pullbacks today and later recovering with  a slight negative close. 

TBT fell but may be making  a higher low here with a close at 18.49. 

Luxury goods have pulled back and commodity stocks like TIE have pulled back working off their hourly overbought condition. 

Energy Serivce XES looks to be making  a higher low. 

UUP could not better its high from Friday.

 

TLT - Hourly overbought

Is that the lower high in TLT we have been expecting, could be. 

Our overall view is unchanged that TLT and UUP will decline.

Even VIX jumped to an hourly overbought MACD reading today. 

Okay just updating. Short market pullbacks are necessary to prove the underlying support to sustain ongoing conditions. The SPX has now tested its 1300 level and good buying came in. 

Stay the course, higher oil, gold, silver, stocks lie ahead. By the way we noticed on the Business Insider site this morning that full serve gasoline in CA is $4.75....OH that's right the legislature just mandated a certain percentage of electric cars by a certain date. Do all other cars cease selling if the quota is not met, just wondering....

Thanks for reading The Market Perspective. 

Jim Rogers- Nyet to Facebook IPO

Monday January 30, 2012

Legendary Jim Rogers won't be buying shares in an IPO for Facebook. As he notes the sellers are usually smarter than the buyers.

My guess, and I don't know when the IPO would be scheduled, is that the market wil probably top in the same timer period of the IPO. The biggest IPO in history after the 20087 meltdown, would be an inclusionary socionomic moment, just the event to cap the recent run from 1075 to what, say 1400 on the SPX.

Negative Article on Transocean

Monday Jan 30, 2012

Today's WSJ has a highly negative article on Transocean RIG on page B9. The article discusses the strategy of growth thru acquisition that has led to an aging fleet of rigs. One contract was cancelled as RIG was slow to meet safety standards and some high level execs are leaving. 

This is th difficulty of investing in a single company. I did not buy a large position and "RIG is up 20% from 40 to 48 since our recommendation. We will see how this impacts the trading in RIG today. 

Note the article on South Carolina's pension fund on page C1. Note the graphs on page C3 which show that it is coming up short of its funding assumptions. This is precisely what caused Meredity Whitney to issue a warning about municipal bonds. So far her detractors have been correct, nothing has happened and muni bonds have rallied after selling off after her prediction. But, something has to give, states and cities cannot underfund pensions, deliver services, and keep the perks that unions in Wisconsin are demanding AND pay the muni bond holders. 

Page C5 features a positive article on gold coin buying This precedes an interest in metals investing. We recommended going long GDXJ and CEF at the end of December. 

And on page C8 The Euro looks for More Gains. This backs up our belief that the US  Dollar will fall probably during February. 

Hawaii of China

Monday Jan 30, 2012

Some are calling for a 'soft landing' in China citing how the Chinese govt is reigning in speculation. 

Well take a look at these photos of Chinese Hawaii.  Just as we have Snow Birds who come to Central and South Texas to escape the northern winter in the US, here are developments just for the same group in China. 

In a country of well over a billion people, these are amazing photos. It is cearly well into the day when they were shot but notice there is not a person, or rarely an auto or even a bicycle or moped in any picture. 

Recall that banks loan real money for to buy the brick and mortar for such projects. But once complete the project is worth is discounted present value of future rentals, I am assuming rents since none of these are sold. A plunge in the PV means a plunge in the market value or the real value of the loan on the books of some Chinese govt backed bank. 

This won't end well.

Shanghai

Since breaking below the 200 day MA in May, the SSEC has had two failures just over the 50 day MA

and looks like it is setting up for another. Meanwhile the US SPX has rallied well over 20% from its Oct. lows. This is an ominous warning for all the Pacific Rim economies all of which are 'leaning' on China. 

The April high 3057.33, the Friday close 2319.12, a drop of 24.14%, a true bear market. Notice you hear little to nothing  about the Chinese growth economy in the media these days. Japan has had its first trade deficit in decades and all the news is on Europe. 

Meanwhile back at th SPX Ranch...

Recall that most software computer programs which generate buy and sell signals are couched in the action of th 50 and 200 day MAs. In August therefore when the 50 crossed over the 200 to the downside, a cascade of sell orders were generated and the market fell sharply. 

Now we are looking at the same thing in reverse. When the 50 crosses the 200 to the upside we are likely to have short positions being covered and fresh longs established. I covered this last week in  some daily updates. But it is pretty clear in this chart what is aobut to happen. The pullbacks the last few days and tenative pullback this morning are typical of the hesitation on the long side. 

I don't know when it wil happen, the bfreak out that is,  but February is shaping up to be an interesting month.