Weekend January 25, 2014
Thre is very little advantage to being an Americahn citizen anymore. They tax you anywhere in the world ou are, they regulate you, and they certianly don't help you, at all. Washington-stop committing suicide.
I would rather deal with the vagaries of investing in Africa than in figuring out what the hell else Washington is going to do to the entrepreneur next.
Erik Prince, ex Navy SEAL, ex CIA, ex CEO of private security firm Blackwater
And that readers, is the real State of the Union.
With the President's State of the Union speech Tuesday night, I expect the FED will attempt some sort of intervention in the markets.The next employment report is February 7. A sell off into that period seems reasonable. Whether the FED can hold things together for a few more months remains to be seen. If
This is what is meant by social mood is determined exogenously. In late December the players went long. In January they abandoned ship.
As detailed here in the Friday post, world sentiment is turning negative, and fast. The markets as expected put in at least a preliminary parabolic top this week another could follow as the seasonal highs are due in April. The worst bear markets however do start in January; has the market topped? We cannot know yet but we will take a magnifying glass to the latest events.
2 Hour Chart
The market covered half the projected fall to 1740 in two days I suspect we the FED will be on the scene Monday trying to prop things up.
The Big Picture
NYSE Advance Decline
It's simple game, you throw the ball, you hit the ball, you catch the ball
Quote from the basebgall movie Bull Durham
It's a simple game, you go long when the NYSE A/D 13 weekly MA crosses the 34 weekly MA. You stay long until it reverses. It has not done so yet. I went back to 2007-2008 for clues on when the market turned down using all 30+ ionternal indicators I have. The advance decline metrics were key. The bullish percent more or less held up until the final wash out in the fall of 2008 when one should have exited months before. So we shall keep our eye on this simple indicator.
Cutting through Bill Gross and Paul Krugman White Noise, to What you Need to Know3
2007-2009
Yes this works. The red arrow indicates the exit point in late 2007 while there was still time to exit. The green arrow indicates a buy point, yes several points off the lows but this buy point has yet to be violated five years later. So we have our silver bullet to let us know when tteh weekly top has likely occurred.
When I began this blog I suggested the sort of ultimate investment letter would cost several thousand dollars a year. It would only issue buys and sells based on a weekly parabolic or MA. This would rarely issue a signal for the long term investor. But As shown above this method works, and you don't have to read all those PIMCO updates or slog thru the Krugman liberal tripe either. Just follow the graph.
Okay, how high is up, look at the NDX in 2000
Our current move looks parabolic until you compare it to the dot.com high of 2000. Now we have Drop box, a re invigorated Facebook, Google, Instagram, and of course our friends at the FED. Notice the market is not nearly as high above the MAs now as it was then, so don't count the FEDs out in their irrational exuberance to push things higher.
SPX Daily
The idea of a Plunge Protection Team emerged after the 1987 crash. The idea is that if the FED, the ten big mutual funds and five big banks all go long the limit of what they can in futures and options, they can hold sway against a market sell off, at least for a while. We pegged support at 1740 last weekend At 1790 after two days we are half way there already.
NASD Summation Index Daily
Markets are just beginning to pull back. there is little damage here thus far. But the NASI has diverged from price which made a new high.
Emerging Markets
Emerging markets from Brazil to Turkey have been tanking as we noted the last few weeks. The truth is that they hve been moving sideways the last few years.
Some analysts are claming that utilities and REITs have been counter to the sell off, not on Friday.
Utilities
Utilities continue tracing out this large triangle.
REITs
We have mentioned numerous times that REITs, 0.0.çsold sa widwo's and orphan's funds, were one of the largest casulaties of the 1973-74 bear marekt.04 This market appears to have peaked last May registering four lower highs this year.
Municipal Bonds
I posted this long term chart of muniticpal bonds a few weekends ago.I wondered if a fifth wave up lay ahead, so far that appears to be the case. Money is flowing back to bonds on stock fears.
Money Flows to Bonds on Stock Sell Off
The move into bonds began before stocks really tanked this week
Paper Gold
The move to gold was not as pronounced as bonds but gold moved up on falling stocks and lower interest rates from the bond market.
The Switch from oil to Natural Gas
Natural gas jumped on the cold weather and increased demand in the face of plenty of supply. Nat gas is cheap and clean. Even locomotives are switching to natural gas.
Energy Service
The Energy Service Sector fell along with the rest of the market. Here it falls under the 200 day MA. Notice that oil in hte lower panel topped in September. Energy Service continued up to late November then dramatically fell. Crude in the lower panel is boucning off a double bottom. So far this looks like a correction.
Ford and Toyota
AFter rmonths of favorable publicity on the recovery at Ford and Toyota, both show rounded tops adnd then a turn down for the past year. I am also seeing lots of zero percent finnance offers of 2013s.
Closed End Municipals
I have been watching closed end municipal bonds for some time. They became a buy in 2011, see green arrow at left. Then a sell signal came in mid 2013. It appears a buy signal is being generated again. With 5% tax free yields this might be a nice place to drop anchor in at least a temporary safe harbor.
Parabolic Stop and Reverse Indicator
Here are the Friday January 25 2014 PAR SAR indicators and the prices for markets. If price is below the PAR SAR, the market is on a weekly sell signal. If price is aboe PAR SAR it is still on a buy signal.
The Bottom Line
Stocks should make a stand before declining further into February. The way the market acts following this initial sell off may tell us a lot about what to expect next. Money has moved back into bonds and municipals, the latter may offer a safe haven for the time being. Natural gas is favored over oil. The Dollar is still indecisive. Gold rallied on the stock sell off.
Social Mood
Peggy Noon describes the President as The Sleepiness of a Hollow Legend. Couple that with our openning quote from Erik Prince and you have the State of the Total Union.
hanks for reading The Market Perspective
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