Labor Day Weekend august 31 2013
We have been writing about a low in multiple markets this fall, the fundamentals are confirming the technicals to give us just that.
Stock Market
Retail giant Wal Mart peaked earlier this year. Now all the exponential MAs have broken down for the first time this year in the Retail SPDR.
Housing
Housing has turned down. At bottom we show that copper peaked earlier this year and has also fallen. This is how a market begins to top, sector by sector. Retail of course reflects the real basic economy. With 47 million on food stamps, is this really surprising?
150 Day Indicator
The multi-year uptrend here is breaking down. The symmetry is notable. It appears to be complete and now breaking to the downside. RSI shows a lower high, that is a divergence of significance.
Summation Index
The NYSE summation index is nearing the same level that saw significant bottoms the last couple of years. But coupled with the bullish Percent chart above this may take longer to play out. Many are saying the market has topped. That is probably a process that has begun with retail and housing. Other sectors such as banks are holding up.
Bond Yields
The last time the yield got over the MAs, the FED began another round of bond buying forcing yields down. This time does look different. Note how the fastest MAs, shortest time span, have begun turning up. Notice that bond and stockprices are falling together, bonds are not a safe haven.
Municipal Bonds
Millions of investors have tucked their money into municipal bonds seeking higher yields. A break through the 200 week MA at 100.68 would be the next significant signal. The biggest surprise is likely to be just how fast bond yields rise an municipal bond prices break down.
REITs
The 220 level is hte one to watch. Note the reversal in the RSI at top. REITs were a huge casualty of the 1973-74 bear market. Like MUB above, investor's have poured life savings into REITs thinking them to be a safe harbor. REITs fell short of their 2007-08 high, another divergence.
US Dollar
The Dollar finished the week up .85%. The correction off the recent high at 85 looks to be ending.
Dow Jones Commodity Prices
Price levels have been falling all year. The recent bounce coincides with the pullback in the dollar. Look back to the second chart to remind how copper has fallen all year, now housing weakens.
DUST and Gold
Highly volatile DUST moves opposite of gold. I purchased 200 shares of DUST Friday.
Elliott Wave Count
The gold bug crowd is counting the low in July a THE LOW. As they have been wrong all the way down, I
suspect they are wrong again. The HUI ratio chart to gold is still falling. This is an update on our gold chart from August 17. The large waves are in red, the smaller in blue. If this is right Wave Four concluded this past week and a final wave Five down lies ahead. $1,000 anyone?
Crude Oil
With August ending we can update the monthly chart. It sure looks bullish to me. Price has tested the 50 and 87 day MAs and bounced higher. Notice how the last three weeks have curved to the upside. The bottom panel is the slope of the price line above. It is subtle but slope is moving up ever so slightly, That tells us the price change may be advancing in a more rapid fashion. The decision to do nothing until Congress reconvenes, and then is likely to vote no, is the signal for more tension not less in Syria. Expect more bold moves there pushing oil prices higher.
Bottom Line
Stocks are rolling over towards the seasonal low due in October.
Treasury bond yields have pulled back from a huge 50% run up. Municipals and REITs have begun to roll over to the downside in price.
Tensions in the mid East are supportive to higher oil prices. The Dollar firms.
Socionomics
When social mood is most negative, war is the result. Consider the fundamental events now aligning.
The Weekend WSJ ran multiple articles describing American allies wanting a show of force to dissuade the Kim Jongs of the world from doing what they please. No wonder, Kim had an ex girl friend executed by firing squad earilier this week.Be sure to read Daniel Johnson's column page A 11 in the weekend WSJ. For the first time since 1782, the British Parliament rejected a request from the Prime Minister regarding an intervention, back then it was the British defeat at Yorktown. Now there is a landmark social mood change! Recall that one of the President's first acts was to rewturn the Oval Office bust of Churchill to England. Actions havesonsequences. This 231 year interval is close to a FIB 233 years for significance.
Bush actually raised a coalition and a UN vote on Iraq. Today the only 'coalition consists of the US and France.
But the President took the opposite course from his own Secretary of State Saturday. John Kerry called for strong intervention Friday. The President then changed his mind and will wait for a House and Senate vote when they return Sept 9. The move is not designed to dislodge Assad and has been well telegraphed in advance. What will the Saudis and Israel think?
Markets abhor uncertainty. Come to think of it, we have a bull market in uncertainty even between the President and his own chosen Secretary of State.
We have been discussing a rise in negative mood for years on this site. It is here now. Our parallel with 1973-74 has been spot on politically. The financial markets are beginning to break down now in the same fasion as then, even to higher oil prices. 1973-74 saw a
50% decline in stock prices
an increase in interest rates
a continued increase in oil and gasoline prices
political discontent with a President
tragic end to the Viet Nam which Congress would not support even though Gerald Ford begged for help
If Congress votes against even a minor retaliation on Syria, the parallel wil really be coming together.
Thanks for reading The Market Perspective
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