Weekend Sept 21 2013
Mark Hulbert says the easy money may be behind us. Funny I did not realize this was easy.
Michael Gayed on the Fed's dilemma. He suggests FED is running out of options, I agree.
Ultra High dividends from any source are usually a sign of impending trouble. The authors of this article believe these double digit yields are a great opportunity.
As per usual the hapless Republicans are about to snatch defeat from victor with their attempts to stifle Obamacare. The WSJ Editorial Report today on television reports the Republicans have no reliable end game and may step back from once again shutting down the govt. All of which points to an upcoming low around October 1.
The Rate of Change indicator overlays the price chart. It is rolling over to a Oct 1-4 low. That would coincide with press specualtion on a government shut down. The 186 point drop Friday kicked off this correction. A final high in November is projected.
November is five years from the 2008 low and a Fibonacci number so expect tops in stocks and a potential bottom in gold around $1,000.
SPY versus Bullish Percent
Both SPY and the bullish percent indicator are rolling over to an early October low.
Too Much FED Talk
The REIT chart shows the initial reaction to tapering. By September 1 Utilities, REITs, and municipal bonds had all been hit hard. Larry Summers who was for raising rates hastily withdrew his name. All of this occurred during economic week when the President was declaring his policies a job well done. So no surprise he needed a rabbit out of the hat to perk things up. Then Kohn and Yellen were back in the race, both Bernanke syncophants, read $85 B till you drop. The big move up on Wednesday then led to a bit of a crash the next two days. By Friday all were wondering just how long the FED can keep the tap open. 90 to 74 is an 18% drop in about three months.
AEP and a Municipal Bond Fund
We overlaid the MUB municipal fund in black with American Electric Power one of the Dow Utility Stocks. Notice how much these charts look like the REIT chart previously.
US Dollar
The Dollar took a hit on the talk of higher rates. MAs are rolling over. But I am not giving up on a longer term higer dollar. This smacks of the FED trying to push the dollar lower.
Fibonacci Relationships
Here are some Fib realtionships. I did not break this down to exact days but the general pattern of
1 2 3 5 8 13 is evident. This adds to the idea as does the peaking MACD at bottom that we are close to soem sort of top. the A B C formation from the 2008 low is corrective.
Long Term Crude Oil
Edwin Drake discovered oil with the first sucessful drilling operation in Titusville, Pa. AS you can see the price of oil shot up and then collapsed as more wells were drilled and oil discovered. What caught my eye though as the action since the first embargo in 1972. I got this chart from WTRG and so cannot label it But
Wave 1 $15-70 by 1981
Wave 2 $70 - $15 by 1999
Wave 3 $15 - $95 by 2008
Wave 4 $95 - $58 by 2009
Which means Wave 5 is now underway and shold take out the previous high of $ 95 in 2010 dollars.
COP
Our call on Conoco Phillips as a way to play increased oil prices was correct.
GSB Globalscape
GSB sold off to 1.35 on a million dollar write off in an investment. The stock then rallied into the release of earnign in August. It has now pulled back in a correction and apepars ready to assault the previous high.
On a day when the Dow was down 186, GSB rallied 4.13%, how many stocks did that?
GSB is a maker of internet secutiry software to allow secure transmission of data on the internet. I have a position in GSB. Eventually I suspect it will be a buy out candidate as security issues become more important.
Gold
Central Fund is trading at a whopping -8.3% discount to Net Asset Value. I have stated we would not have a rally in gold until CEF returned to a premium.
Once the stock market finally rolls over this is what it will look like. At each low the gold bugs declare THE LOW IS IN, but it isn't. You can subscribe to GLD on Seeking Alpha and read teh anuguish in their headline articles.
Bottom Line
We expect a stock market sell off into October 1 adn then the high for the year in November.
The market still reflects epectations of rising rates in municipal bonds, REITs, and Utilities. T Bonds are probabably in a normal pullback correction after their big run.
Crude oil looks higher. The Dollar got knocked down for the time being.
Social Mood
The rise in consumer discretionary SLY shown earlier speaks to more economic confidence. But firms are hiring more temps to avoid Obama care. Obama's economic approval is a negative 11.5%.
The arrangement in Syria has gone from Assad must go to Assad demanding $1 billion to remove the weapons he claims he never had. This would be a great plot if Mel Brooks decided to do a diplomatic comedy movie. As it is, Assad and Putin make a laughing stock of the American team.
With the US pulling back we have murders in a mall in Kenya. The situation in Afghan, Iraq, and Syria is simply WORSENING
Washington DC is dysfunctional and politically grid locked. It is hard to see how all this negative mood is going to support the bull market John Murphy claims we are in. I think rather this is just a throw over of money looking for a home in a low interest rate environment. This moment looks a lot more like the start of Jimmy Carter than the start of Ronald Reagan.
We continue to expect a November top in stocks and a low in gold in about that same time fram.
Thanks for reading The Market Perspective
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