The Market Perspective

Materials, Shipping Make a Come Back

Monday Dec 30 2013

Henry Blodgett explains that a Crash does not require a Catalyst. 

He correctly concludes that the only thing necessary is a change in the mood of investors.

A few more reasons for concern.

Bob Prechter was a guest on Cavuto's show today. He predicted the markets were within 3% of an eventual top. He cited the surveys showing the same bullish optimsim as in 2000 and 2007. He went on to note that one group of managers was 104% invested meaning all their managed funds were in the market plus some borrowing. That he maintained would set the stage for a move under 6600 in the next two years.  Charles was hosting today and noted there were plenty of bears on Fox Business News. The other view of course I presented from a Chase Economist and Joe Lieberman, what's not to like?  We are only half way there on the upside. 

As always, John Hussman is an interesting read. Thanks to the reader forwarding this link!

If materials and shipping are picking up, does that mean gold and silver will follow?  The answer is no. 

Copper Relative to Gold

The ratio chart shows copper wildly outperforming gold. Money is coming out of the gold market and into stocks and materials on the idea of an improved economy.

Copper versus Gold

Gold is a fearful commodity. The ads on cable tv and radio say it all,the governments of the world are printing money and this will all end in catastrophe, buy gold now. But gold just sits there and looks at you as Buffet observed. Copper on the other hand is useful for making wire nad circuit boards. Here copper is breaking out over $3. The two separated in September. Money is coming out of the gold market, period. 

My read of the internals in an ordinary market would have proved valuable this past year. But with the FED injecting money here and there, traditional analysis just does not work. The number of net new highs may be dropping but the index will climb if enough money is injected into the system. So Bernanke did not create a lot of jobs just a lot of inflated stock prices. 

Stocks Soar to New Highs

Weekend Dec 29 2013

Turkey Unravels Turkey which appeared to show real promise as a secular run Islamic Nation has returned to its role as the Poor Man of Europe.

Eisenstadt sees another 8% for stocks.

A look back at 1888.

 

Turkey

 That's a 40% drop from 75. This is a good example of just how fast things can unravel in a bear market once mood turns negative.  As I recall in 2012 the Wall Street Journal Magazine had a lavish article on Turkish culture. The article went on and on about expansive real estate and how the country was a new emerging economy. Clearly that was a flawed analysis.

BRIC

Not long ago someone coined the term BRIC for Brazil, Russia, India, China. Notice the BRICS peaked in 2011. The index is getting turned back each time it tests the 200 week MA.

Shanghai

Shanghai is not far from its 2008 panic low. This is an example of my reference to 1973-74 in the USA markets. . There never was a crash per se but a persistent bear grinding ever lower.

The US, Britain, France, Japan, Canada, New Zealand, and Australia are all hitting new highs.  But clearly many of the emerging countries have turned down. Gold, silver, and bond prices are also turning down.

The big story for 2013 is certainly interest rates.

Ten Year Yields

The steep drops the last few years are QE interventions. Now that the FED has indicated it will stop buying bonds but that somehow rates will remain low will be quite a challenge. Rates have broken through all the MAs and above the downtrend line from 2006. Rates just completed a back test of the 200 week MA and moved higher again. The market not Janet Yellen is now in charge of rates. As I speculated last weekend, if rates can drop 50% in two years on intervention without intervention can we expect them to double again in the next two years?

An alert reader points out I had an incorrect count in closed end muni BTA. I have cancelled other orders for closed end muni fund, it looks like this is just a bounce as yields move higher.

New HIghs, New Lows

Internals like the net new high versus new low indicator above are improving to the point of near validating the new highs in price.

Nary a Discouraging Word

In this sector shot of various ETFs only Utilities are down. That is a reaction to increased interest rates.

NYSE versus Summation Index

The NYSE is in green, hitting new highs. The Summation Index is turning up after hitting the typical seasonal low a bit early in September. For some reason the annotation feature is not working well this weekend but one can eyeball a downtrend line from the May high. Taking out that line will be another bullish sign. AT top RSI for the Summation Index is still climbing.

 NYSE versus Crude Oil

The NYSE closed the year at a new high. Crude Oil was tracking stocks but fell from Sept to December.

Now I suspect crude oil via USO is a better bet than stocks.EEP, OKS, and TCP, all pipelines have moved up joining crude oil higher. These pay generous dividends as well.

So with the DOW up 10,000 points, what's a timid investor to do?  Has anyone noticed that commodities and shippers are stirring/

Commodity Tracking Index

Shazam!  Notice the two big updays in this index on a supposedly quiet day in the markets, and low volume days to boot.

XME

XME has soared 33%  from its lows of the summer. And shippers are heading up.

Shippers, Baltic Shipping Index, FREE, DRYS

FREE has fallen from $229 to $2.50, with the Baltic Shipping Index taking off both FREE and DRYS are surely good buys here. This looks like the overall stock market in December 1974 at DOW 577. In case you think that is an exaggeration, let's step back for the longer view. Mind you DRYS has already doublee from $2.

Here are the same three on a monthly chart  back eleven years. The big gains in the Baltic were of course at the END of the move as it soared from 4000 to 10,000. I don't know that FREE is going back to 229 or that DRYS is headed for 125 but even a fraction of those gains from here would be nice.

As always investigate first. At real market bottoms, participants often go bankrupt. Here is an article suggesting this will happen to Genco.

I have positions in USO, FREE, and DRYS.

GDX

GDX would have to take out 21.52 on the SAR indicator. And the 13 day MA would need to cross the 34 day which has not happened.

The Bottom  Line

This is starting to look like Fall 2007 and into 2008. Then commodities soared with oil going to $145. Stocks topped first with commodities joining the party later, then as now.This suggests to me that we are sowly re playing the 2008 scenario. As prices rise for commodities, more are shipped. Whether that represents a stronger economy I don't know but up is up.

I am favoring positions in crude oil, pipelines, and shippers. Gold and silver are still indecisive. Stocks are no doubt headed higher, see the RSI indicator on the Summation chart.

Social Mood

That's it for the Arab Spring, it turns out to be the Arab Disaster.

Wall Street Journal Magazine cdlaims it has been named the Hottest Style Magazine of the Year. I assume that means it topped even Town and Country for over the top, one percenter advertisements for all sort of expensive jewelry, cars, watches, and clothing. This is in keeping with mood necessary for a 10,000 point advance in the DOW.

The New Civil War - I Stand with Phil garnered its goal of 250,000 signatures. A & E relents, allowing Phil back on the show. This is truly a perfect example of The New Civil War.  The South has risent to defeat a Hollywood edict, amazing.

 The VW bus ends its half century plus run in a Brazilian factory. A counter culture icon featured in Arlo Guthri's Alice's Restaurant, it was the first mini van. However VW never capitalized on its potential with an engine actually large enough to keep up with traffic or air conditioning or an automatic transmission. It would be Chrysler that would perfect the formula with a front not rear drive mini van that easily fit in the garage.

Thanks for reading The Market Perspective

[email protected]

 

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.

 

 

 

 

December 26

Christmas Eve Dec 24 2013

Business Insider Reviews Wolf of Wall Street They conclude

- the victims get virtually no coverage

-the lifestyle of drugs and debauchery is glamorized

-nothing is said about the mob connections

Well Martin Scorcese ain't Walt Disney.  But a racous celebration of duping the pbulic debuting amid new all time highs for the market is probably representative of the expansive mood we have once again.

One of the delights of writing this blog is hearing from readers. An alert reader sends this factoid.

Investors Intel this week Bulls 59.6, Bears 14.10.  Highest ever spread and it’s already been extreme for several months which is very unusual.  Hard to believe new bull markets start when everybody is already “in the pool”  Feels like dot com level craziness to me but maybe it’s “different this time”….

This is in fact a record over the last 25-30 years. These numbers are higher than prior to the 1987 or 2000 or  2007 market tops. 

This rally has crushed all the non believers myself included. Every single analyst who attempted to call a top has been proven incorrect. But the fact remains that the internals of the market have deteriorated since April May. 

John Murphy at stockcharts  is now maintaining we are in a new secular bull market. If that is true, the 18 year long cycle has been repealed which I seriously doubt. The bull market such as is is began in March 2009, not April 2013.  As Bob Prechter points out in his latest letter, sentiment was 98% bearish on the index quoted above on March 9, 2009. AS we noted in a previous post, now 10,000 DOW points later, everyone is wildly bullish. 

The media is once again fawning over the FED as well as the first ever female FED Chair. See the next post for some thoughts on social mood and the FED.

 

We are told the economy is improving which supports the idea of a new bull market in stocks. Better check out this unemployment table from shadowtats.com.

Shadowstats has used the original methods the government has now discarded to calculate the real rate of unemployment. If one thinks about the recipients of AFDC, subsidized housing, Food Stamps, now 47 million, free cellphones, the college grads living back at home, the trillion dollar college loan debt, this is not unreasonable. 

NYSE Advance Decline

 If you had to choose one indicator for being in or out of the market, the NYSE Advance Decline line is as good as it gets. That is the main panel. Below it is the NYSE Summation Index. It peaked in April May of this year and hs been headed down since, just breaking its 34 month MA again this month. Apparently as long as it stays above the green support line the market can continue its upward pace. This chart bears watching, don't you think?

NDX

My comments are on the chart but from the bottom panel

Slope or linear regression has turned up again, it looks to be parabolic

The NDX is nearly twice its 200 week moving average. Money is made buying below not above the long term MAs. 

It appears the NDX is in an extended fifth wave, when sentiment runs out no one can say. 

AT top the summation index has soared and pulled back again. 

Now let's use the same indicators for the entire period since 2000.

NDX 

Remember that socionomics tells us maximum mood occurs at the end of a move. This was apparent in the 3000 point rise the last year of the 1982-2000 bull market in tech. It had taken 17 years to go from near nothing to 1250. But investors more than tripled 3.8X that level in the last year of the mania. 

Well here we are again. This time I used Rate of Change, similar to slope, at bottom. Notice it is increasing, each move up in the NDX is taking less time ,therefore the rate of change is increasing. This reflects the increased interest in the public which is just this past year pouring into the market.  

At this juncture in the long term 18 year cycle dating from March 2000, it may be the best method of prediction is to simply update the s NYSE A/D chart and the NDX chart above. Whent hey turn down, the party has ended. 

RAX, A Picture of How the Party Ends

As an echo of the dot.coms, notice that RAX doubled from 40 to  80 in the last half of 2012. It then fell  just as quickly. Now the MAs are bending over, the 50 has taken out the 87 and 125. The ribbon of MAs lets us see what is really happening. RAX may be able to hold over support at 33 while the overall tech market finishes its move to a final high. But breaking 33 will likely take RAX much lower. 

Prechter on Yellen

Janet Yellen Is Close to Making History in Two Ways
Psychology appears near a major turn

By Elliott Wave International

Janet Yellen just moved closer to her place in history when the Senate Banking Committee approved her nomination to lead the Federal Reserve. The full Senate is expected to confirm. If so, she will be the first chairwoman in the central bank's 100 year history.

But when her term concludes, gender may be secondary to the narrative about her time at the helm. The larger focus could be that Yellen was at the helm of economic disaster.

Here's what Robert Prechter said in the October Elliott Wave Theorist:

Economists and journalists are taking Janet Yellen's approaching stint as Chairman of the Fed at face value and opining what she will bring about for the economy. Our socionomic point of view prompts a different tack and makes us ask what social mood will bring about for her.

...Social mood is a powerful regulator of public perception. Consider this contrast: Nixon lied to protect his buddies, and his career and reputation were ruined. Clinton lied to a grand jury and the nation to protect his own hide, but he makes six figures a speech. What made the difference? The answer is that social mood was deeply into a negative trend in August 1974, when Nixon finally resigned and entered retirement in disgrace; whereas it was soaring in a positive trend in 1999, when Clinton survived impeachment and went on to become perceived as an elder statesman. The stock market had been falling for over eight years in Nixon's case, and it had been rising for over eleven years in Clinton's case. This is why society condemned Nixon but forgave Clinton.

The coming negative trend in social mood will cause Yellen to fail at her job. When bond investors become more cautious -- as they will in a negative-mood trend -- the image of central-bank potency will begin to dissolve. That will neuter the Fed's presumed jawboning power. As for its ability to force inflation, the bond market, not the Fed, is ultimately in charge of interest rates. Investors' demands for higher rates will negate the Fed's inflationary activity. As rates on Treasury bonds move up, the values of existing bonds will fall, lowering the total value of money+credit, thus neutering the Fed's inflationary policy. Finally, when bond buyers begin demanding 4%, then 6%, then 10%, then 20% interest for assuming the risk of owning a Treasury obligation, both the government and the Fed will face ruin. ...

Indeed, 10-year Treasury note yields stand near a two-month high.

Moreover, bond yield spreads have widened:

The difference between the yields on two- and 10-year notes widened to 2.54 percentage points, the most since August 2011 as investors demand more to own longer-term securities ... A report showed producer prices fell last month, suggesting inflation is tamed. The Treasury sold $13 billion of 10-year inflation-protected securities at the highest yield since July 2011.

-- Bloomberg, Nov. 21

Worried bond investors may well demand even higher yields down the road.

Bond yields skyrocketed during the Great Depression; the October Theorist also said that the Yellen era will likely have a parallel with former Fed chair Eugene Meyer, who presided over the central bank during the Great Depression.

For a limited time, you can read Robert Prechter's 6-page report to prepare for what EWI sees ahead. In this report you'll learn why the risk of deflation is mounting and how you can see it coming in the prices of gold, gas, real estate, crude oil and other markets. See below for full details.

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What Do the Prices of Gold, Gas, Real Estate and Crude Oil Tell Us About the Economy? Read this new FREE report from Robert Prechter Robert Prechter of Elliott Wave International gives you a clear sense of what really drives the markets and the U.S. economy. In this FREE report, you will read about real estate, crude oil, gold, and other markets (with the support of 16 charts!) to see why these markets point to deflation rather than inflation - exactly the opposite of what the Fed wants. But never mind what the Fed wants: What you want and what you will get is a new perspective on the financial markets to help you invest prudently. Download your FREE report by Robert Prechter now - for a limited time >>

This article was syndicated by Elliott Wave International and was originally published under the headline Janet Yellen Is Close to Making History in Two Ways. EWI is the world's largest market forecasting firm. Its staff of full-time analysts led by Chartered Market Technician Robert Prechter provides 24-hour-a-day market analysis to institutional and private investors around the world.

Dow Theory Buy Signal or Throw Over?

Weekend December 20, 2013

 As always Charles Hugh Smith is an interesting read. This five year cycle fits nicely with my belief that we are in an 18 year cycle of stagnation as 1930-1948 and  1966-1982/4. We are due for one more big down move before this cycle ends. 

Extreme sentiments brings us extreme market conditions. Recall that the stock market hit its first third wave low in November 2008. That was followed by a fourth wave into December and then a final fifth wave low March 9 2009. This looks to be the same way but in the other direction. Every time anyone attempts to call a high, and we have been guilty lately, the market sprints ahead again. This is in defiance of the weakening internals. NOtably the NYSE Index has not made a new high. 

Here is the Dow Theory Buy Signal

Transports in purple and the Industrials in the bar chart hit new highs. Yes it is a long way above the 200 
MA where it started last October. This suggests price action may be a throw over of the existing channel. 

Bullish Percent versus SPX Index

The bullish percent of stocks over their 200 day moving average is  the red black line. The histogram in gray is the SPX index. The price index continues to climb  higher with fewer stocks participating in making new highs. This  historically is a negative divergence. But it has yet to take hold. With multiple indexes hitting new highs, this bull roars on. 

Oneck Partners OKS

 

I have positions in OKS, TCP, and EEP. All look to be positioned for an advance from here. OKS is paying 5.4%.  This continues to look like a safe investment area as opposed to AMZN with its triple digit P/E. The  2.98% move Friday coming off a higher low suggests a move up from here. 

Bonds

The green 125 month MA has held yields in check, so far. Watch the 4.3% area for the next test. 

Chart School  The Difference Between Daily and Weekly Charts for Perspective

Daily Closed End Muni Fund

Regular readers will recall that I began looking at closed end munis this summer, yields were up and prices down. With govt bond yields rising it may be that this sector anticipated that and is now poised for a bounce. The daily chart looks promsing. Let's step back and look at the weeky.

Weekly BTA

Stepping back for a weekly perspective illustrates   the improvement in the chart condition. The big up moves clearly stand out among the black arrows, much longer than the red. A challenge of the 34 week MA is setting up. 

Now let's step back again for an even longer, big picture look. 

Now a clear Elliott Pattern emerges, this appears to be a fourth wave pullback. And it has re traced 50-61.8% of trhe up move from the Wave Two low, which is just about textbook perfect. 

BTA is yielding 7.5%, and tax free to boot.   IF we are right about stocks being over done, a reflex rally in munis and REITs is a reasonable expectation. 

Our chart school maxim is that weekly charts trump daily for the big picture. 

REITs

The blue 50 day MA needs to turn up and pass through the 125 for some confirmation here. But a bottom seems to be forming. 

USO, Energy

USO is the ETF for crude oil. Crossing the two MAs is a buy signal. I will be adding this position as well. XES no shown is way up but also probably headed higher.

XAU to Gold

This ratio chart of the XAU to GOLD is the lowest in over a decade. It is amazing that it has taken out the 2008-9 panic low, but it has. There is no sign of support yet. I am holding puts on GDX and have shares in DZZ, speaking of which....

DZZ

While gold bugs continue to call for a low at every opportunity and are doing so again this past week, do you see any support until 800?  I sure don't. This makes DZZ a low risk play with no expiration date. A return to $800 gold would make this a five X trade. On this monthly chart notice DZZ is just now cresting above all three MAs. 

Daily DZZ

Clearly September was the last ideal entry. Now with gold knocking on its panic low from July one might ask why buy now?  I suspect the move from 1200 to 1425 was a fourth wave, the gold bugs thought that was a new bull market as well. A truly smashing fifth wave may lie ahead. 

Gold Big Picture

Look closely and you will notice

Black MACD just crossed Red MACD to downside

125 MA has now joined 50 week MA sloping to the downside. 

RSI turned back right at the 50% line which would have turned this bullish, it emphatically did not do that. Now RSI has resumed its downtrend. 

We conclude a much lower gold price lie ahead.

Silver

Same time frame, same indicators but substituting silver for gold. Silver is further into its bear market with lower MAs. MACD crossovers to downside and RSI is the same, lower prices ahead. 

Dollar Bullish Ascending Wedge

At top the Candian Dollar has turned bearish. In the main panel the US Dollar is tracing out a bullish ascending triangle pattern. It has not broken decisively either way yet but the moment of truth continues to approach. My bet is that  it breaks to the upside. 

 

Bottom Line

Multiple stock indexes have not succumbed to the divergent action of the internals. HIgher prices should be confirmed by broader participation. This is not what we are seeing. Participation in terms of net new highs and bullish percentages has been shrinking since May. With a potential throw over now occurring, extreme caution is warranted. 

Municipal bonds and other dividend paying assets like REITs look set to rally. 

Gold and silver are still weak bouncing off their previous lows.

Crude oil looks like it will rally last as it did in 2008. cRude oil made its high in June 2008 after stocks indexes had peaked. I doubt it will take until June for oil to peak this time. The expectation of expanded production from Mexico is great for our energy independence but will eventually weigh on prices. 

The Dollar needs a break out but looks to be heading higher. 

Socionomics

The New Civil War - We were the First in Predicting this, Now it is  Center Stage Pop Culture

Charlie Daniels calls out Piers Morgan The Duck Dynasty brew ha has taken what I term  The New Civil War to nfront page news. This is truly opposing  mood on display. My original thesis was that the Civil War Map, the Right to Work Map, and the Red and Blue voting map of the states are all the same. It is therefore fitting that the Robertsons are in Louisiana, a Southern positioned State.

Here it is clear that indeed, a shift in mood is endogenous. A & E apparently originally thought viewers would be amused at the Duck Dynasty clan, rednecks on display. But the opposite thing happened. Millions of viewers have embraced the group as a Real American Success Story. Phil and hay Robertson  are an echo  of Johnny and June Carter  Cash. I have maintained we were headed for a 1973-74 type meltdown. The start of the 1973 meltdown as the shift in opinion on Richard Nixon as well as the Viet Nam war. Nixon was soon claiming 'I am not a crook.' Now Obama has lost faith with many over his promise that 'You Can Keep Your Plan or your Doctor.'   Obama now has negative ratings for job approval, the economy, and foreign policy, as well as a credibility problem. As soon as  Podesta back in the White House, he compared Republicans to the Jonestown Massacre. I am not being political merely pointing out the negative mood on display. 

What we have here is the emergence of a mood shift away from the ruling elite. Recall that Obama is sending an openly gay group to the Russian Olympics. This is apparently a rebuff to the Russian arrest of gays. Britain, France, Germany, and the US are avoiding the opening ceremonies. Again, more negative sentiment on display. 

Given their initial reactions now neither GLAAD, nor A & E, nor the Robertsons are going to back down. 

1.6 MIllion Likes for Phil

Stand with Phil is also garnering lot so attention

This reminds me of Spiro Agnew's iudentification of the Silent Majority in the late 1960s as the 1966-1982 bear market got underway. 

We have been anticipating this shift in mood for several years in this space, now it is front and center. The stock marekt is on borrowed time measured by the socionomic mood indicator.

Thanks for reading The Market Perspective

[email protected]

 

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.

 

 

 

Social Mood - Up Close and Personal

Thursday Dec 19 2013

Social mood at the most personal level seems to be taking a turn south. Consider these seemingly random but perhaps related via socionomics events.

US Arrests India's Deputy Consul in NYC and strip searches her.

John Podesta, former Clinton adviser, was brought in to improve relations. His first act was to compare Republicans to the Jonestown suicide pact.

Obama sends gay delegation to the Sochi Olympic games.  Recently Russia has condemned and arrested its gay citizens. This is in apparent retribution for both that and harboring  Snowden. Secretary of State John Kerry warns Russia against harboring Snowden.

North Korea arrests and executes Kim Jong's Uncle.  But not of course for the monstrous crimes against his own people commited over his lifetime. 

After tryng Mubarak, his successor Morsi will be tried for espionage.

FBI Agent Robert Levinson is still jailed in Iran.

Sebellius denies ten year old girl a lung transplant even after clearance by Justice.

Bull markets are inclusive with various groups coming together. Bear markets work in opposite exclusive fashion. Long standing relations are torn asunder. Obama's return of the Churchill bust to 
England is an example.  Here is another. Duck Dynasty is the most watched cable television show ever. Now patriarch Phil Robertson has been put on hiatus after anti-gay remarks.  It will be interesting to see just how fast this relationship unravels. Just watching the show, I doubt the family will react well to9 Phil being excluded from the show. This is a perfect example of just how fast things can unravel in a bear market of social mood. Phil of course is having his right to free speech limited by the gay lobby. 

Today Dan Henninger's column in the WSJ notes that the President believes most people in the US believe the deck is stacked against them. Here is a great socionomic contrast. Reagan came in as President at the end of the 1966-1982 bear market. His positive vision of the US as a Shining City on a Hill drove he and Margaret Thatcher to work towards more freedom in various countries. Appreciation for that was on display at Reagan's funeral when many East European countries sent representatives. Now we are still in the middle of an era of economic stagnation. This President does not express a positive view of the US but sees it as a stacked deck. This is typical of the thinking that draws support in a bear market. 

The move is on for a new Constitutional Convention. As the organizers suggest this would be the one way to reign in Washington, DC. Here is what I have described as The New Civil War on display. 

 

Last weekend we noted that a US warship had to avoid a possible collision with a Chinese warship. Today on page A 14 the China Column notes 'China is demonstrating that its patient wait to assert itself on a global stage is drawing to a close. It's moment has arrived. Could distrust morph into hostility?' Recall that China has declared a Air Defense Identification Zone over a vast string of islands to its east. It wants to punch  through those islands with its own sovereignty to dominate the Pacific. This of course is precisely what Japan tried to do with its Greater East Asia Co Prosperity Sphere in WW II. This was unrealistic of course for a tiny island with no natural resources, though Britain pulled it off for a couple of centuries. China however is not short on resources or a developing Navy.

Markets transition in stages. All the above links suggest growing hostility at all fractal levels of relationships both between countries and individuals. This is further reflected in the world downturn of opinions of political leaders from France's Hollande to USA's Obama to Ukraine's President Viktor Yanukovch.  Social mood changes at fractal levels of larger, between countries, and smaller, between individuals, degree. 

All of these things are occurring at new market highs. Let the markets drop a few thousand Dow points and things are liable to be considerably more severe. 

The Uh Oh Effect

Wed Dec 18 2013

Given that our title is Perspective, we have been offering contrary perspectives from sources like Comstock Partners, John Hussman, Tom DeMark and Heard on the Street as well as our friends at Sociononomics.

Here is a description of theUh Oh Effect.

Succintly it is the tendency to ignore the obvious.

Fifteen Charts

Tuesday Dec 17 2013

Say what you will,  Bob Prechter is an interesting read. In his Sept letter he posts fifteen charts which take a long look at the big picture. We re produce with permission from Eillott Wave. Howe long it will take for all this to play out we cannot know. 

John Murphy has taken the stance that 2013 was the kick off for a new buill market. The old bear is dead and gone. This flies in the face of the long eighteen year cycle I have displayed. It also contradicts the five year bull followed by a two year bear that Charles Hugh Smith demonstrated in his piece. Murphy does allow that 2014 could be a corrective year with a great buying opportunity in the Fall of 2014. We shall see. 

I hope all of you took time to read the Heard on the Street column yesterday. 

CNBC is near frantic in its cheerleading for the rally. Turn up the voume and the positive social mood literally pours off the screen into the room. It is an interesting time in the markets for sure. 

The Santa Claus Rally Begins

Monday Dec 16 2013

We have been writing from the standpoint of a five year lens. That does not preclude a seasonal Santa Claus Rally which apparently began today. And of course there is no way of knowing what the FED. Administration, et al are doing behind the scenes. 

Tom DeMark was on CNBC today showing the same analogy we have shown you comparing past market tops with this one. Projected top is now January 14,  2014. 

More Musing on a Bubble

Monday Dec 16, 2013

Be sure to read this morning's Heard on the Street  page C6 in the WSJ - Bursting the Stock Market Bubble Bubble

The vaule of US Equities ws 234% of  annualized houselhold aftrer tax income. That level has only been surpassed during the dot.com bom and nearly twice the average since 1950.