Weekend March 16 2013
So long sad times
Go along bad times
We are rid of you at last
Howdy gay times
Cloudy gray times
You are now a thing of the past
Happy days are here again
The skies above are clear again
So let's sing a song of cheer again
Happy days are here again
Altogether shout it now
There's no one
Who can doubt it now
So let's tell the world about it now
Happy days are here again
Happy Days Are Here Again, November 1929, It Became FDR's 1932 Campaign Song
Markets Record Longest Winning Streak Since Nov 1996
As I was reading USA Today Thursday Morning one could almost feel the positive social mood jumping off the page at me.
Message to Retail Investors, It's Time to Get Back Into Stocks - Henry Blodget
Recall that this same Henry Blodget was kicked out of the Securities Industry and fined $4 Million. This was for recommending dot.com stocks while sending e mails around Merrill Lynch laughing about it. Since then Henry re invented himself as Business Insider. Merrill Lynch was sold to Bank of America one hour before Lehman went belly up, then President Thain wanted a ten million dollar bonus for doing that, now Merrill has re invented itself as Wealth Management.
TMP has been recommending avoiding buying into the biggest market top since 2007.
We suggested last weekend that nothing had changed about the European Crisis, everyone just stopped worrying about it. An alert Market Perspective Reader sends us this report suggesting austerity is not selling well in Cyprus.
Social Mood Demonstrated - The Fall and Rise of HPQ
I had my weekly coffee break with a good friend whose resume includes Retired US Army Lt Col and Phd in Psychology> He is a fellow professor at my University. He observed that even yours truly gave up on HPQ at the dead low. And so I did a bit of research and added these comments as HPQ fell below $12. Its move back up to $22.18 is a near double in less than four months. What happened here is that once all the sellers were out, the buyers jumped in. Once the stock moved over 20%, computer programs kicked in among momentum players sending the stock even higher.
HPQ
Note the switch from red arrows, panic sell mode, to green arrrows following the switch in On Balance Volume in the lower panel. A 20% move from the low at 11.17 would be 13.40. Note that after a pullback at teh 20% level the stock took off, after the 50% level things really got going.
HPQ
The money is made buying at the time of maximum negative social mood just before the switch happens. Then buyers pile in via computer programs looking for something that has moved 20% but is well off its previous highs. We show these three graphs to suggest that this same pattern may lie ahead for GDXJ and other picks which have been simialrly beaten down. Surely the sellers are out of the way. And as Steve Kaplan points out, the momentum players buy beaten down stocks that have experienced a 20% jump but are still well below their previous highs.
SPX
As SPX has climbed higher, some buying has begun in GDXJ. The SPX is in a fifth wave but things are probably not done yet. The following NYSE Advance Decline chart really puts the numerous articles about whether you should buy the stock market now in sobering prespective, the answer of course is no.
NYSE A/D Volume
The blue line tracks the advance from October 2011. I changed teh color of that line dating from the last November 2012 low, the Fiscal Cliff matter. Notice the slope of the line has dramatically increased. This is what one would expect in the final month stages of a topping market, the action in volume and price has gone parabolic. Notice it shot right through the previous resistance of early 2011, again in keeping with the what me worry everyone needs to own stocks now attitude prevailing five years after the bottom. Notice this indicator hung around for six months or more in early 2011, finally collapsing in the seasonally weak Summer of 2011.
Currencies -US Dollar Tops, Canadian Rallies Pulling Commodity Prices Along With It
The Canadian Dollar is in gree, GDXJ is at the bottom, the US Dollar is the Main Panel. It appears the Bond Buying by the FED finally caused the US dollar to peak. This should be the start of the spring rally for GDXJ, COPX, XME, etc.
An alert reader notes that the traders'commitements for the loonie are the most bullish in six years, this is precisely what causes a reversal of social mood at a market extreme!!
Canadian FXC and Australian FXA Dollars
One could park American dollar based funds in either FXA or FXC for the next few months. While this migh only offer a few dollar increase in the fund price, four bucks in say FXC made in two months equates to 4% x 6 two month p0eriods in one year = 24% annualized, and there should be relatively low risk in the trade at this point. CAUTION Both FXC and FXA are now quite overdone on the two hour chart, buy orders should be placed successively BELOW current prices.
Energy Complex
Houston We Have Lift Off - in the entire energy complex. Crude Oil is in line with GDXJ and the rising Canadian and Australian Dollars.
USO
I don't think oil will return to its $145 level of 2008 but the last high at $110 looks realistic for a target. One way to play that is USO shown above. It tracks crude oil shown in the previous charts very well. MACD is curling up, and USO has broken two MAs. It is only $2.50 above its November low. Crude oil appears to be ahead of gold and silver.
SIL
Silver miners remain heavily out of favor. But SIL is making a higher low, while GDXJ is making a lower low on its chart. notice the dramatic move down and then up in 2012. Even after the SAR PAR gave a buy asignal in 2012, SIL returned lower to test that signal. Eyeballing the chart it appears that a SAR PAR signal is still weeks away for SIL so the chance for lower prices in the mean time is a real possibility.
Silver The Metal Itself
Despite all the hysteria in the media, silver appears to be registering a third higher low since the beginning of 2012. And once it reversed in early 2012 and then September 2012, the action is impressive. On Balance Volume has returned to its June 2012 ;pw which preceded a move up by a couple of months.
COPX XME REMX
Here are other out of favor plays which look ot be attracting some interest.
The Bottom Line
The reversal in the US Dollar appears to be drawing money to investments that will increase in value due to a falling Dollar. The previously detested metals and mining sector, crude oil, and other commodity plays are attracting interest. It appears that one could park money in FXC and FXA for a few months at relatively low risk for a good annualized return. Various stock market indicators are increasing their rate of change as happens in the final stages of a bull market.
Socionomics
Our friends at the Socionomics Institute point out that reading Women's Wear Daily can tell you as much about the market as anything. So we turned to Instyle Magazine's website and clicked on What's Right
Now, how handy! We mentioned ruffles last weekend and sure enough, bold is the word. We noted the Bold Spring Colors in an update last weekend. Notice the repeat of the word BOLD in this update at Instyle. Read the inscription and you get a sense of confidence, the sort of confidence that causes CNBC to feature 'analysts' suggesting one buy at the five year high for the stock market.
The Money Magazine site actually offers a useful
dashboard indicator at left, we agree.
Thanks for reading The Market Perspective
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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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