Friday August 16, 12013
Tom McClellan has an interesting take on how Apple looks a lot like MSFT in 1999. This is a must read. He ends by comparing with the tech darling of the 1920s, RCA. Now Icahn, who wrecked TWA and would wreck Dell if he had succeeded, and Soros are announcing buys of Apple. This is not a bull but more likely a bear sign as mcClellan explains.
I received this cryptic message from one of our most alert readers of TMP
BINGO I am looking for a temporary bottom today, with a secondary top scheduled for August 22-23 with major lows on Sept 9th and Oct 8th; before we reach a bottom in early November
I would agree. We are now short term oversold, and the markets are up in overseas. I have been warning of a top and on the last low even remarked, ry this if you must, my point being with each reach upward the danger of that being a final top increases. Over the last year we have shared numerous predictions of a top by other writers. Having all been proved wrong, this has encouraged the public to once again pile in. Remember maximum social mood occurs at the end of a move. We are seeing just that now.
SPX
Here is a five wave weekly count. Notice the index is a dizzying 350 points over the 162 week MA. As Bob Farrell observed things revert to the mean.
Momentum peaked at the top of the third wave increasing the probability this is the right wave count.
18 Year Sentiment Extremes
One of our themes here is that we are in an 18 year period of economic stagnation much like 1966-1984. The action of the price index versus the Bollinger Bands nicely shows what happens in such a period. In a normal period the price action will move from one side of the band to the other. But here, notice the emotion is so strong that it is either power on, market moving up, or power off, everyone if bailing out. Price is now further above the MAs than it was in 2000 or 2007-2008. All of this suggest as I have recently written, extreme caution. Monthly charts are slow to change but even this monthly chart shows all the textbook examples of a price extreme.
Bonds
The FED managed to generate a massive top in bond prices and low in yields. Bond prices are now collapsing from those levels. 95-100 looks to be some sort of temporary support. But remember in a recession, the worry is the return of your money rather than the return on your money, as Will Rogers put it. Some categories like sub prime or below investment grade may just keep falling.
Here in San Antonio well managed Frost Bank just bought Western National Bank WNB in Odessa, TX, the heart of the Permian Basin oil boom. I am wondering how many equipment loans are on the books of WNB. When the oil price collapsed in 1986, banks with equipment loans on trucks, rigs, you name it, went broke as there was no work for the equipment. And so no one could make the loan payments. My point here is that it is typical to see mergers, inclusionism, at market tops. Buying an oil based bank when oil price adjusted is near its 1980 and 2008 extremes is quite an exhibit of positive social mood, the kind we see at market tops.
Rather than betting on the short term moves, the far better idea would be to wait through the next two months. Prices are likely to revert to various levesl of MAs. Remember we have had six Hindenburg omens, at a minimum this suggests massive volatility. Better to watch from the sidelines.
The preponderance of evidence suggest this is a poor time to be long the market. This appears to be the making of the third top since March 2000. If so the negative sentiment we have explained in our weekend updates will likely drive the markets back to 2008 low levels. How long that will take remains to be seen.
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