Weekend November 23 2013
The Country is More Divided now than at any time since the Civil War.
I have been telling readers this was building for the last few years. The disaffected have now found a Common Cause on which to focus their discontent - Obamacare. Notice that the original States of the Confederacy are rejecting Obamacare requirements. how is that for a parallel to what I call The New Civil War?
Valuations soar at market tops. The dot.com era of March 200 was truly remarkable in that companies with zero revenue got rich valuations. It is happening again. Consider this comment from our friends at the socionomics institute
Snapchat is software that lets you send photos and messages that have a self-destruct-later mechanism built in. So you can send messages secure in the knowledge that those messages won't come back to haunt you. That's all the program does. The company that makes it has yet to make any money, with zero revenue. But it's popular with the kids, which is why Facebook offered to buy the company for $3 Billion. With a B. And Snapchat rejected the offer.
Overvaluation is typical of optimism run amok. We've talked about the overvaluation of software before, but this is ridiculous.
Socionomics Institute
So we have new highs in bullish sentiment, lows in bearish caution via the VIX, valuations of companies with no revenue as though they had revenue, and massive unrest and dissatisfaction with Obamacare, the Presdient, and in particular Congress. Here are a few observations about social mood culled from the last two issues of the Wall Street Journal.
Again
In his column on investing, Jason Zweig asks not how much more you might make but how much can you stand to lose if and when the market reverses? OH that's right the FED will print money forever...Buying Stocks at Record HIghs, Will You Be Sorry?
The Us has to have a foreign policy. Well refined, well structured. You don't have it right now,. It is just complete chaos, confusion, no policy, we feel it, we sense it you know...America is shooting itself in the foot...this is making the perception that America is going down a reality
Prince Alwaleed bin Talal
Full attribution to Tom McClellan for this fine chart. Everyone who has use traditional tech analysis to suggest a top in the markets has been dead wrong. The reason is Marty Zweig's famous dictum, Don't Fight the Fed. $85 Billion per month trumps 15% bears on Investor Intelligence apparently. And so the markets grind higher.
But as the chart shows, the infusion of money from the FED holds up the stock market.
NYSE Advance Decline versus NYSE Summation Index
The red blue line is the NYSE Advance Decline line, recently making new highs. The darker line is the NYSE Summation INdex, not making new highs. So the Summation index diverges from the A/D line. To which the market says, so what? I recall one day five years ago watching CNBC broadcasting the sheer chaos on the floor of the NYSE. One floor trader remarked that you could take the charts and just toss them out the window,they meant nothing. I suspect we are now at the opposite end of that spectrum. WHat should mean something means nothing. The FED money just bullies the market higher.
This explains the inability of everyone who has tried but failed to call a top in this market, like that Eve-ready Bunny it just keeps going.
Whither Bonds
Reading FED minutes and ascribing something to them looks more and more like the ancient Roman Soothsayers reading the entrails of animals looking for clues. Bonds may advance this next week in price. Bonds have traded in a six point range the last three months.
NO clues from the Dollar
The dollar is stuck for the time being, no clues here.
Crude Oil Struggles to Regain its Ascent
Crude oil is the Master Market in terms of social mood, and speculation. And it is the only real export the Soviets , the Arabs,a nd some African nations have. The direction of the 50 and 87 day MAs is not encouraging for the bulls. This market probably holds the key to inflation or deflation. I wondered if oil could rally if the dollar rallied, At the moment neither is happening.
Gold - Once $1200 Falls as Support the Next Level is $1050
The ribbon of MAs suggests just how weak this market is. the 50 crossed theTSLA has no earnings. 200 just weeks ago. Look out below. Trader Dan Agrees
HUI to SPX Ratio Chart
If the green line is suport that means there is a 50% drop ahead in the ratio chart, whether that all comes out of gold stocks falling or SPX rising we cannot know but I expect it will be from gold shares collapsing.
Tesla
TSLA is not earning any money. But in a bull market who needs earnings, just positive social mood, eh? It may well be that the over bought stock finds support at the 200 day MA despite a few fires breaking out in the vehicles lately.
Bottom Line
The week before Thanksgiving is generally up on a seasonal basis. We are increasinly bearish on gold. The Dollar and oil are simply inconclusive here. We suggest you read the Jason Zweig column in the Weekend WSJ.
Social Mood
This is the source of the Headline for this Weekend Post. ACA has scored its highest level of unpopularity since being passed. And no matter what Distraction of the Week is presented, JFK, Immigration Reform, Nuclear Option of approving appointee, nothing quite trumps losing your health care. From a political standpoint we are at Jaunuar 1973. How long it will take for this negative mood to infect the stock market I cannot say. But betting it will remains the smarter long term wager.
Thanks for reading The Market Perspective
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