Sunday February 19, 2012
Commodity producing firms and some energy service companies are sounding discordant notes. CNBC is as usual cheer leading for the market. Al those green dots, stocks opening to the upside on the opening are more a reverse indicator. Once everyone is in and the money runs out, the market tops out. We have noted how the bullish percent indicators are near their decade highs, as well as the summation indices.
The media continues to magnify the importance of the 'trophy' stocks making new highs. Let's take a look.
NYSE Summation Index Early Warning System

We have three reliable indicators flashing Early Warning Signals of a top.
NYSE Summation Index
Dow Theory Non Confirmation by th Transports
Bullish Percent of Stocks over 150 day Moving Average
Here is the New York Stock Exchange Summation Index. We can easily count five waves up. And this week recorded the FIRST NEGATIVE WEEK since the take off in December. We constantly harp about the market internals. ONe can easily see the NYSI here identified the dead low of August, the next low of October and now the high in February. Gee, whew, I feel a lot better about being in cash with exposure to natural gas.
Dow Theory Anyone?

In July the Indus trials failed to confirm the new high in the Transports. This time the Transports are failing to confirm th new high in the Industrial. One can see how August turned out as a result? Again this suggests extreme caution. While it may appear that all are easily making money (don't they always on CNBC?) note the violent reversal in late July when things turned.
Bullish Percent INdicator 150
Still topping is a process. The popular averages like SPX push higher, the Dollar forms stealth higher lows, the Bullish Percent over 150 days is at nose bleed 88.6!!!!!
We overlaid the BP indicator with the actual SPX. Both are coming to a crescendo. The BP may be making slightly lower high than on its last visits to this area. The alarming thing of course is that previously the price index was much lower. Now both are in social celebration mood!
Commodity Funds

To listen to the media one would think all stocks are making new highs, not quite. Here Metals ad minint XME, GDXJ junior gold miners in gold and Patterson PTEN have all been making lower highs, for a year!
Insider selling in tech stocks and mining stocks is up, buying is simply not happening.
Crude Oil

Most investing websites, subscription services, and such almost never admit an error. To read them one would think that someone had finally 'figured it out' No Fear, No Losses, No Dollar Left Behind, We Captured the Whole Move.....
We will not be so bold. It looks like my original analysis of oil going higher on a break over 102.50 was correct. The weaker dollar in green via UUP is in the bottom panel. That weakness friday finally lifted oil over the resistance. Continued talk of Israel potentially bombing Iraq of course helped things along as well.So s this a break out ot the upside, or a fake out designed to lure on in at the wrong moment.
Yes I exited the Energy Services, was that a mistake, well before you jump in tak a step back look at the Dollar.
US Dollar

At bottom crude oil has turned up, but in the main panel the Dollar has made a higher low. And it remains above the buy level for the PAR SAR.
THE DOLLAR AND CRUDE OIL WILL NOT BOTH CONTINUE TO ADVANCE. I just wanted to emphasize that point.
Notice the nice stair step up pattern to the dollar, no one on CNBC seems to notice. Could that explain the decline in GDXJ and XME? You bet it does.
I see France officially retired the Franc this week, now its Euros or nothing. The never ending Greed drama is just postponing a real fall out on what to do. The Greeks are not going to adopt an austerity program past the first loan re payment date, nor will Spain, Italy or Portugal.
Now remember it is All One Market, on one side, stocks, gold, oil on one side and the Dollar and US Govt Bonds on the other. so which is going higher, and for how long, oil or the Buck? I ran the same chart but with WTIC in the main panel, it too is on a weekly PAR SAR buy signal. So the jury is out.
GM

My call on GM also appears to ave been correct. As soon as Romney called for the government to sell its GM stake, GM shot up7.22% for th week.Readers may recall my sheer speculation that it would be in the best interest of the Obama campaign for GM to shoot back to or past it high of $40. Hmm, is David Axlerod reading The Market Perspective?
After I sold it pulled back to the MA and then took off, another example of how the quant programs funds utilize have the moving averages as their trigger. Should we get back in the GM water, probably.This is of course the psychological problem of getting out, tough to go back. I will leave this one to rreaders and their own risk preference. This is also the difficulty of trading in individual stock. The funds will claim they have some winner at quarter end, GM might be it.
San Juan Royalty Trust

And now something great to report on our strategy. We recommended SJT and HGT, two natural gas realted trusts paying nice fat dividends. Several readers e mailed pointing out obvious weakness in SJT which in fact promptly took a dive after our recommendation. But for now it appears both at attempting to put in bottoms. Confirmation comes from CHK which jumped just over 4% for the week. Nat gas futures jumped 4.7% for the week.
One reader points out the lack of natural gas fueling stations. This is true for cars not so for trucks. Most large truck stops on the interstate at least have propane re fueling now. As we have remarked many pickups in the western states have been modified to run on propane. I would not be surprised to see Congress pass a tax credit incentive for doing this for pickups and SUVs. IT is relatively easy to mount an extra LNG tank in the bed of a pickup truck. And remember the best selling car in the US is still the Ford F 150 pickup.
Socionomics
Obama's percentages peak?

http://iemweb.biz.uiowa.edu/graphs/graph_Pres12_WTA.cfm
Bob Prechter is publishing an Academic Paper showing the high correlation of a bull stock market to the winner of the White House. Not surprisingly Obama's chances have risen to a new high with the market! If the summation index, bullish percent, and Dow Theory are correct, he should be peaking for the time being right about now.
The Republicans remain a mixed bag with hundreds of delegates to be decided in by March 9.
Dennislelam@gmail.com
The Market Perspective bases its information on techniques and sources that have been found to be reliable in the past, and The Market Perspective tries to base opinions on sound judgment and research, however, we do not guarantee that future results will match past performance ands no guarantee can be made that advice will be profitable. The Market Perspective accepts no money for stock recommendations and is purely motivated by its own research in recommending any stocks. Put another way, the responsibility for decisions made from information contained in this letter lies solely with the individuals making those decisions. The editor and persons affiliated with The Market Perspective may at times have positions in securities mentioned. Nothing contained herein represents an offer to buy or sell securities. The Market Perspective encourages investors to be diversified, and to maintain sell stops and risk control over their valuable investment capital. No guarantee can be made to the accuracy of text or charts.
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