Friday Nov 30 2012
Peggy Noonan has the best take on the fiscal cliff negotiations that I have read. I do not intend to turn this into a political blog. But, I will observe that Barack Obama is no Lyndon Johnson. Lyndon had been Senate Majority Leader when that meant something. He loved the process, working the phones, cajoling others to make a deal. As Ms. Noonan observes, the President is having lunch with the wrong guy; later today he has a campaign rally at a toy factory. He sent Tim Geithner instead. The President is simply not part of the negotiating process . And that is a fact, not an opinion. I am frankly amazed the market is flat this morning with no progress on the Fiscal Cliff.
Kim Strassel sums up the impasse here.
I am up early this morning looking over the charts. And the hard facts are
-stocks are leading gold, and that is not a good thing
-bond prices remain stubbornly high
-the dollar is lower but has not broken down in a way to really get gold and silver going to the upside
-oil struggles above 84
All this has the look of a counter trend rally rather than something larger. Yes the summation indexes look better.
Daily NYSE Summation Index
But we really do not have a full fledged kind of confirmation I would like here. This could go the other way.
McClellan Oscillator
This indicator in particular has me worried. The rebound has been swift but that is the case for rallies in bear markets. The Oscillator is about as overdone as it was at the September peak. So, is the rally for real or is this just a case of those in the market running the indexes back up so they can short from a higher level. And yes that is what happens in bear markets. Clearly the public is out of the picture which makes it that much easier to accomplish such a feat.
SPX versus Gold
This is a ratio chart of the SPX versus Gold. When the ratio is rising stocks are outperforming gold. But the problem here is that the overall chart is bearish. We have a series of lower highs and lower lows.
Eyeballing the MACD in the lower panel I would give this chart about two more days, which would be Monday, to top out. This indicator scored an island reversal the day of the election. That would be the blue box in the middle of the chart. We might get a throw over (a spike above the MAs) again but we might get a failure right at the confluence of the moving averages.
I have been clear that I have not purchased anything else, and I am edging towards selling the positions I have unless things dramatically improve. Or as one of the most famous investors of all time put it
If a speculator is correct half of the time, he is hitting a good average. Even being right 3 or 4 times out of 10 should yield a peson a fortune if he has the sense to cut his losses quickly on the venrtures where he is wrong.
Read more quotes from Bernard Baruch here
I served as a Federal Bankruptcy Trustee for several years. One goes bankrupt by ignoring Mr. Baruch's advice.
More this weekend, thanks for reading The Market Perspective.
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