The Market Perspective

Gold Update

Monday April 30, 2012

Jesse has an interesting chart on gold here.  Please click and take a look. This analyst is projecting a the next wave to sport a parabolic pattern. That makes sense. Gold has been in a sort of stealth bull market now for over ten years. Gold bugs and such have been interested but not the public in general.

It made news when the Texas Teacher Retirement System tbought GLD.

Tom McClellan has an interesting cycle projection in this chart for gold, suggesting the cycle low is nearby.

THe Hulbert Gold Newsletter Sentiment Index HGNSI is registering the lowest sentiment reading since 

March, 2009.

As Hulbert notes in the article this is precisely the  kind of sentiment environment in which powerful rallies are borne. 

We are currently recommending accumulating positions in Central Fund CEF. 

Three Peaks and a Dome

Monday April 30, 2012

Ed Carlson now has both a DVD and his Book of the Year 

George Lindsay and th eArt of Technical Analysis available at  Seattle Technical Advisors.

Ed is doing for Lindsay what Bob Prechter did for R N Elliott. Which is to say Ed is getting the word out on a previously overlooked technician. 

 Ed Carlson, the foremost authority on the work of George Lindsay, explains how to recognize and trade the 3PDh model. Carlson partitions the model into its individual elements which can then be examined to understand both their basic principles, as well as any variations. 

The Big Picture, Crude Oil Bull Market Continues

Sunday April 29, 2012

Our big picture view is this. 

The stock market is subject to an eighteen year business cycle. These cycles alternate between bull, up, and bear, corrective and sideways. These have played out as follows.

Bull

1911-1929

1948-1966

1982-2000

Bear

1930-1948

1966-1982

2000-2018 Projected

The bear phases are marked by three big downturns, this phase has experienced two of those downturns thus far. A third should be expected. 

There are numerous blogs and websites that attempt to analyze Elliott Waves from the big picture to intra day. We believe that the internals, how many stocks are advancing and declining is a better signal. This is particularly true as so much volume is generated from mutual and hedge funds which tend to follow a handful of large cap stocks.This herding characteristic tends to cause final spikes in the overall indexes as more and more money crowds into fewer stocks, the run up in Apple, Chipolte Mexican Cafe, LULU and such are good  recent examples. 

We have noted that pulling back and using Wilder's Parabolic Stop and Reverse analysis can generate a pretty good Elliott notion of what is happening, here is the big picture from March 2009.

SPX Monthly

Using a monthly chart a pretty clear five wave pattern emerges. This is born out by the highs and lows of the full stochastic indicator at bottom. The problem is that Wave One is the longest here and it should be Wave Three, but we will leave that to the Elliotticians to figure out. What is clear is that the market is nearing previous highs. 

SPX Daily

 

Here is a suggestion  for how the move up from the Aug-October lows may be playing out. This suggests Wave 3 has ended and the market is in a Wave 4 correction now. Is it over, I don't think so.

SPX Hourly

The hourly chart suggests that the market has completed an A and B of Wave 4. This means a C follows to finish Wave 4. That would knock out the ones who went long on the move back up in Apple if in fact the market returns to 1345 or lower. 

That would suggest a May low followed by a final Wave 5 high above the current 1400 level. 

Is that realistic, well here is the picture for the 12 of the current 18 year cycle.

SPX Monthly

The time periods exhibit Fibonacci numbers and three years were up last month in March. 

Bullish Percent

Note that despite all the hype on CNBC, this indicator made a lower high Friday. That would be in keeping with the idea that this was a Wave B in a Wave 4 sequence. Note we have lower lows ans lower highs here since the April high. Now go back and look at the hourly chart and note how the MACD is overdone. 

Natural Gas

Jason Zweig has a an article on nat gas on page B 1 of this weekend's WSJ. He notes that the traditional ten to one price of oil over nat gas has skewed to fifty to one. A transition to this cheaper fuel is underway. He also notes that investors could get scorched in the meantime. And that is what happened with our suggestion regarding SJT and HGT. Nat gas had a short covering rally this past week. But so far this is not enough to reverse the downtrend. 

We really need a close over 2.40 to start turning things around. That is not impossible but it has not happened yet. 

And now for our Thanks Ben Bernanke Moment -  The trillions of dollars of stimulus pumped into world economies are evident in the price of crude oil and gasoline. This is a repeat of 2008. Then oil finally peaked at $145, wrecking various economies, and the markets collapsed. 

The Energy Service Sector should be leading the price of crude oil, but it is the other way around. XES is lagging crude oil even with the stock market up strongly since October 2011. The XES may start playing catch up but this lag suggests that investors in service companies are anticipating problems. 

Crude Oil

The trend here is definitely up. We have been adding a mid way 125 day MA, note how WTIC has stayed above the green 125 day line. Will 2008 repeat, will the stimulus money stimulate the evil speculators to do the same thing again?  Note that each pullback registers a higher low, a bull market. 

The black line is crude oil, and this is four years ago in 2008. The price is about the same about 112 then and 104 now. Actualy now the price is in stronger position than it was then vis a vis the MAs. sMy conclusion is the crude oil is on track to record higher prices. 

Dow Transports are lagging Dow Industrials for this same reason, it costs too much to ship. 

Central Fund is still at a 2.6% premium to Net Asset Value. If stocks sell off as anticipated, CEF may fall to parity with its NAV. We are accumulating positions in CEF. 

Here is more evidence of Bernanke's meddling in the US as well as the underperformance of other economies around the world. 

First to last or top to bottom that is

USA, Brazil, India, Shanghai edging out France

The important thing to note here is the increasing divergence. The USA is powering ahead with less and less participation from other markets. How long since you heard anyone discuss the BRIC moniker?

Europe is literally falling apart wtih job prospects in Italy, Spain and Portugal dismal, France looking into the socialist abyss and may decide to speed up its decline if the Socialist candidate wins.  Even Rahm Emanuel admits Illinois is in trouble with unfunded pension liabilities. Caterpilar did not locate its newest plant in home state Ilinois. 

Bottom Line

We expect a final pullback in stock prices to say Mid May. Then a rally to new highs should follow. The bull market in oil needs to be closely watched the parallel to 2008 is clear. A pullback in gold and silver should be a buying opportunity in CEF.

Thanks for reading The Market Perspective

[email protected]

 

 

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.

 

 

Indicators turn with Apple Rebound

Thursday April 26, 2012

In the last 40 days the volume of trading in Apple has equalled its entire outstanding stock. Now that's a mania.

The rally yesterday was enough to begin turing the internal indicators. 

We wondered if the Summation Index would turn above its previous low, it appears that it will. 

The strength of Wednesday, mostly on AAPL earnings, was such that a trip back above 1400 looks likely How much more the rally has in it will depend on the weekly update after Friday trading. 

The Bullish Percent indcators for all the major indexes are turning up. 

After the big day yesterday averages are just slightly off this morning. 

Socionomics

Eighteen year periods of stagnation are littered with the careers of failed politicians. The last era took down LBJ, Nixon, Ford, and then Carter. Today Mish reports that the Sarkozy is likely to be defeated May 6. Elsewhere there are border and trade disputes. Even the well run Netherlands fell apart this week. The public is resentful of unkept promises, austerity not prosperity is breaking out all over. 

I suspect that Northern Europe, the more financially responsible parent. will split from the socialist free spending party till you drop Club Med countries, and France. France seems determined to vote and spend by borrowing themselves into prosperity. Recent articles in the Economist and the WSJ dbout the success of that approach. 

Here, six term senators Orrin Hatch and Richard Lugar have Republican challengers in their own party primary. Utah's Bennett was ousted two years ago in similar fashion. 

Throw the bums out is a typical sentimen during such times.

Jim Rogers

Thursday April 26, 2012

Jim Rogers on the economy and investing.

He is long gold and silver, so are we recommending CEF.

Implications of Cheap Nat Gas

Wed April 25, 2012

Here is an interesting article on the implications of cheap, available natural gas. Note the graphs showing teh decline in foreign imports. As the author says, ex oil, what do we care about the mid East. 

And this suggests there is a much better chance that deflation has yet to run its course. We have noted that the nat gas to crude oil ratio is at an extreme. These trends suggest the price of oil will be coming down. 

Simple as A B C

Tuesday April 24, 2012

One reader points out that our A B C  interpretation is correct, thanks for ointing that out, Monday confirms he is correct. And now we have a spate of bad news

Sarkozy is the first French leader to not be re nonominated on the first balot since the 1950s

WMT is embroiled in Foreign Corrupt Practices Act allegations

Commodity prices are turning down across the board with WTIC and XME lower

The SPX breaks down

The breakdown in the rally from October is now evident. Our original thesis in Aprl is playing out. A 1300 target is realistic. We have been adding a mid MA of 125 days, between the 50 and 200. The area between the 125 adn 200 seems realistic for a low over the next few weeks. 

HDGE

The mirror image is the fund that directly shorts stocks HDGE. It broke out yesterday a pullback today woudl be a buying opportunity. 

Commentators never understand the relationship of oil prices to the economy. Oil prices are positively correlated to stock prices, higher prices mean the economy demands and can afford energy. Lower prices mean otherwise. So all who wished for lower pump prices get their wish, happy now Bil O Reiley?

WTIC

Notice the resistance at 102, up until early February. We exited stocks then and so stocks and oil went higher for two months. The drop below 50 in RSI at top is signalling weakness here, lower prices ahead. A drop below the 125 day MA at 10.86 will denote further weakness as it takes out the previous resistance level. 

Metals and Mining

How weak is the real economic recovery, pretty weak. Come to think of it, one of our better students is an electrical contractor. He remarked yesterday that he has noticed lay offs and slow down at Home Depot. Here the XME failed at its NOVEMBER high, while the rest of the market has been rallying. Note the big drop at far right in yesterday's market. This confirms the breakdown in the energy sector. At bottom we posted the bullish percent index, and of course it too has broken its uptrend line. 

The Dollar and Euro dance sideways both crossing up and down ofer their recent mid pattern trendlines. 

Bottom line, the market is headed to our original target area of SPX 1300. 

CEF

We began accumulating CEF a couple of dollars higher and have had lower and lower orders in. The drop yesterday seems to negate the idea that a higher right shoulder is forming. CEF is at a 2.6% premium to its Net Asset Value.  It may well go to parity as it did at the end of December. We look for lower prices here which should set up a good buy. 

Nat gas futures were up 3.86% yesterday as near everything else cratered. I wondered this weekend if the lower prices for Westport and the drop to 1.94 in futures would be enough bad news to find some buying. Well yes in the futures market, yes for HGT but no for SJT that dropped a dollar. Well, as we noted ti took gold four years to bottom around year 2000. We have positions in HGT and SJT. 

The jump in price yesterday apparently center on the snowstorm causing energy demand to jump for the time being. 

Thanks for reading The Market Perspective. 

Monday Monday

Monday April 23, 2012 5:42 AM CST

Well back to the A B C theory, the DOW is already dow over 100 points. We had mentioned Apple's meteoric rise as this article sums it up, paraboic rises end in collapse.I mentioned Apple falling to the low 500s, this article makes that case as well. If that happens the A B C corrective theory will be the right call. 

The price indexes have lagged the internals. The internals peaked in February but price held up unti early April. Now price is falling  in a complex corrective wave.

We exited stocks positions in early February. Despite our ambivalence about how this correction would play out we have not recommnded going long stocks since our February exit. Whe kept positions in HDGE and TVIX.

Sunday - will Mr. Market make up His Mind?

Sunday April 22, 2012

70% of the Time Markets don't go anywhere

Market Axiom

Welcome to 70% of the time. We could spend a lot of time here but the long and the short of it is this.

We have been split between the idea that EITHER this week would be a sideways correction, see our Monday and Tuesday posts. 

OR

The market would unfold in our original A  B C corrective wave idea, originally expressed around the first of April and updated this past Wednesday.

Okay so which is it?  How about both?

Our instincts from Tuesday appear to be correct so far, that the market may have had some sort of bottom this week. Here is the Europe Asia Far East chart update, shown earlier this week.

So far it is holding up. We have a series of higher lows for MACD in the bottom panel. 

And there is a confluence of the uptrend line in pink, and the 125 and 200 day MAs this past week. 

And the price managed to hold up. 

The Internal lows occurred April 9-11. 

Daily High Low

One can see the low spike April 9-11 in the index and the MACD turning up at the bottom. But before you start placing orders, recall the name of this blog is The Market Perspective, so here is a perspective on where we really are in terms of the market being a great buy.  Now look at the same indicator with a nine month history 

Daily High Low

The internal low was last October when we recommended buying The high was February when we exited, and now, well, the market appears to be struggling to regain a final high. Would that be in May or June?  Could be, we are sticking by our idea that the Facebook IPO will be as good as it gets. Is the market a great buy here, NO. And the reason is this very chart, there is just not that much left for upside potential. Fifth waves do not have the breadth and participation of third waves. While I am not showing a wave count here, the chart suggests lagging momentum. 

Weekly Summation Index

Like an episode of 24, will Jack Bauer escape the clutches of the falling Summation Index?  Will it hold above that prior low in December, it's just about there again. Actually that would make the most sense. 

As we said at the start of the week, most analysts seem to be looking for lower prices but if the Summation Index holds above the December low, we would guess the market edges higher here. 

Central Fund

The reverse head and shoulders pattern in CEF continues. Price has bounced along at 21.5 for the last couple of months. At bottom the money flow indicator shows the selling drying up. We are long this stock which owns gold and silver in Canadian vaults. 

The Euro

If gold and the stock market are going to move up, the Euro needs to move up and the Dollar needs to move down, is that about to happen, could be. Let's look.

After staring at this chart for a few minutes, I noticed the up and downtrends and drew in the pink lines. One can make the case that the Euro has found support at 130.5, and that it has a series of higher lows. Friday the Euro broke strong to the upside. Taking out the downtrend line at 133 would be a positive. The dollar is in green and it is dropping. 

Now this is why charts work better than news. The news from Europe continues to be terrible, apparently there are no jobs for anyone in Spain or Greece, one wag suggested Facebook might just buy Portugal which could be come the newest Apple App. But, the Euro looks up to me.

Natural Gas

CHK has been the subject of several negative reports. The CEO has a deal to participate 2.5% in the wells drilled and has borrowed over a billion dollars to do so, the company just got around to mentioning it. I have attended several lectures on compliance and governance post SARBOX. The lawyers at these seminars make it clear that organizations should have a written policy, an informed audit committee not involved in day to day management, the leader sets the tone at the top, etc.   The Board has to be AWOL to think this is okay. CHK  has lost half its value since the August 2011 high falling from 34 to 18. 

Westport

Westport has lost 36% of its value in the last two months. Click for the link to their website. The firm is a leader in converting  engines to natural gas fuel. Warren Buffet is an investor. Now if WPRT could just make some money, they don't. But gee that seems to be the case for all these great alternative energy ideas, right? At any rate it has corrected 50% of the rise from the last February low. and is back to its uptrend line. I checked their locator map for CG refueling. Amazingly it does not show any stations along I 35 from Laredo to Austin. 

We are not recommending it.Nat gas futures made a new low at 1.93 this past week. 

That is a target price Ramki had on his website for natural gas. 

SJT was acctusally up two days in a row.

So does all that mean anything?  We shall see. There is plenty of negative news for the leading exploration company, a leading developer, two royalty trusts and new lows in price. Is that negative enough for a bottom? 

The Bottom Line

It appears the B Wave if that is where we are is not over yet. Other analysts are more negative but the bullishh percentage argues otherwise. If the summation index holds here this week, expect slightly higher stock prices. This is also born out by a potential rise in the Euro. If the Euro rises, one would expect stocks, gold, and silver to do likewise. 

Socionomics

The negative tone planned for the Presidential campaign is already heating up.

Hilary Rosen suggests Ann Romney never had a real job.

The governor of Montana notes that Romney's dad was born in Mexico in a Mormon cult that practiced polygamy.

So much for there are no red or blue states as Barack said in his first campaign. Now Republicans are extremists with a war on women and of course those in need. 

Republican Senators Hatch and Lugar brand tea partiers as liars about their records. At ages 78 and 80 they are running, again. 

No matter which side you favor, the tone is negative and will only get worse. That is typical fo an era of stagnation. Peggy Noonan notes the decline in public behavior in her WSJ column this weekend. Flash mob theft continues. 

None of these events bode well for an extended period of  higher stock prices. 

 

Thanks for reading The Market Perspective

[email protected]

 

 

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.

 

 

Friday Pre market Opening

Friday April 20, 2012

What are We Thinking Now

Originally this month, April 6 I believe and then again this past Wednesday April 18, we laid out a corrective Wave A B C scenario. 

Monday this week, April 16, we laid out a corrective sideways scenario. so which is it?

I just eyeballed al 30 some odd internal indicators. So far the internal low was April 9-11. This is in terms of numbers of new lows and highs. The summation Index for the NASD and NYSE are both still headed down. The Bullish Percent on the SPX is still headed down as is the DOW. Other indicators are wandering sideways. 

Ramki makes a case for Apple falling to 510. If that is the case, we have further to go to the downside, the fact is that Apple has had little correction thus far. 

Apple

507-510- would be about half the recent rise so that number makes some sense. 

Gold and silver will bottom before stocks, just watching the tape on CNBC yesterday I got that impression. A ratio chart of gold to stocks however does not yet support that supposition. 

So  there you have it, I promised readers we would admit mistakes ( we bought SJT and HGT too early) and if things were not clear I would say so rather than pretend I was saying something. By way of demonstration, here is  the kind of information you will not find me writing on this site.

However, when we look at another 
country in the core space, such as Finland, we note that 1) the beta versus Italian spreads is 
much smaller (0.1 vs 0.3 in France), and 2) the beta during tightening periods falls 
somewhat, as the widening is never too aggressive to start with.  

Barclays

This is the sort of thing that passes as a finance major in universities these days, the above from Barclays. Great stuff for the Economics Journal but what does that tell  you about what to do when the market opens?

Reading Assignments While We Wait on the Market to Show Its Hand

Here is an article that reflects the endless speculation about pipelines and the Brent versus WTIC price difference.

Do Jobless Claims track the stock market?

The weak economy of France made the cover of Economist magazine last week, here is another speculation on why France matters less and less.  If you were going to contract to have something built would you go to France or Poland, that's what I thought  too....actually I was not aware that there was a French politician who is not a socialist.....

The next sub prime crisis will center on student loan defaults. You heard it here first. At least with a sub prime mortgage there is something to foreclose, there is no collateral whatsoever with a student loan against a college degree. The Dot.com insanity returns. 

Socionomics

On pages A 12  the WSJ comments on the French election, see my reference above. 

On page A 13 A Clock Work Orange apprently is alive and well with bruish behavior in England. This is typical fo period of stagnation such as we are in now. Social mood goes negative. On the fromt page, Ireland colapses, again. 

Leonardo DiCaprio will play hard partying drug abusing  Jordan Belfort, the Wolf of Wall Street. Scorcese starts filming this August. If the market meltdown is well underway by 2012, this movie with a negative view of Wall Street should resonate well with the public. Given Scorcese's penchant for the darker side of life, perhaps a good title would follow his earlier effort about 1830 in NYC, this one could be

Gangs of New York, II

thanks for reading the Market Perspective.