The Market Perspective

Eisenstadt = S & P 2100 by Sept

Thursday March 13 2014

The former research chief at Value Line is bullish. THis would be in line with a true parabolic finish to the five year bull run.

Various Rallies Peak, Dollar Bottoming?

Monday March 10 2014

“Any year in which the S&P 500 jumps 32 per cent and the Nasdaq 40 per cent while corporate earnings barely increase should be a cause for concern, not for further exuberance,” Mr Klarman wrote.

 

“On almost any metric, the US equity market is historically quite expensive. A sceptic would have to be blind not to see bubbles inflating in junk bond issuance, credit quality, and yields, not to mention the nosebleed stock market valuations of fashionable companies like Netflix and Tesla Motors,” he wrote. The Baupost Group declined to comment.

Seth Klaman, aupost Group

The Boston-based investor was recently ranked as the fourth-best performing hedge fund manager of all time for generating $21.5bn in returns over its history, coming behind George Soros, Ray Dalio and John Paulson. 

Seven Signs A Market Top is Near  This is a good article, I am not sure I agree that Emerging Markets are dead but all his other points are worthwhile. The NASD may go all the way to 5,000 to equal March 200 berfore this is done. 

Ramki sees $295 Target for TSLA

ark Hulbert Looks at the Longer Term This article makes the case for the 18 year period of boom and bust in which the markets manage to crest at or near or now even slightly above previous highs only to fall back again. 

Bollinger Bands Narrow SPX, Suggesting a Change in Direction

AS seen in January, a narrowing of the bands often leads to a change in direction. This may be a set up for that to happen next. MACD is still climbing but starting to flatten out in the bottom panel. 

If Stocks might be Topping, what is the Dollar doing?

Just the opposite is the answer. The Dollar may be setting up for a move to the upside. 

GDX Consolidating

Not surprisingly GDX Miners is now consolidating the gains since its break out January 2. 

 

DRYS Shipping

DRYS and Free are holding their uptrends. This start stop frustrate pattern is typical of a slow launch after such  a drubbing the last two years. 

Potential Short Term Cycle?

Tops usually come around tax time which is another month off. There are all sorts of possibilities and calling short term is always risky but for the time being this looks like a short term top confirmed by a dollar making a bottom. 

EEM

Let' swatch to see if EEM can make a higher low on what may be a sell off. The author of seven signs things EEM is hopeless, we shall see, I have no position at this point. 

Rates Rise, Commodities Jump, Dollar Sags

Wednesday March 5, 2014

Marketwatch features this article that we only have buy signals, upside break out confirmed.

Not so fast. While the market popped back this week  poo pooing Putin and the Ukraine as being importnat, we are overbought by any standard. I suspect we will have a short term top this week, and then another January type pullback. 

CHarles Hugh Smith suggests we have reached peak Wall Street Influence.

 

Here is a site that combines social media psychology and socionomics.

A bit of Russian Crimean history.

 

The internals are strong but over bought. None of these tops led toa big pullback but who does not like buying lower.  

NASD AD Volume

Peaks in the RSI and the NASD Advance Decline have led to short term pullbacks, look at January for example. We registered a similar peak this past week. While markets appear on track for another high by May, the Action on Friday's close suggests some short term profit taking. 

Hourly NASD 

Short term calls are always dicey but with the MACD lower, it suggests we could have another pull backl before heading higher. The index is quite a ways ahead of the MA ribbons. 

NDX on Bollinger Bands

The bands are beginning to widen, this at least suggests more volatility in the near term. 

TLT Bonds

It looks like TLT had a rebound after its fall from 120+. That rebound probably ended this past week. Recall that the FED merely hinted at tapering which means buying fewer bonds. TLT collapsed from 0120 to 100. The FED then said, well on second thought, which generated a re bound rally to 109. WE now have two failures to get through that area. As we have said, no doubt Janet Yellen thinks she is in control of rates.. She is a player not THE player. The market will make that decision. 

TLT Bonds Weekly Chart

 

The move down from 126 to 100 is a 20% move. That is huge!  The bounce failed to quite reach the 38.2% re tracement level. That speaks to the weakness of the re bound. The big surprise of this year is liable to  be that rates will move up much faster than most think. The FED can meet all it wants but the market will make this determination. 

Ten Year Note  Yield Weekly

INdeed, the ten year yield doubled from 1.4% to 3.0% in a mere 13 months. It has consolidated sideways since. Note the srong move up this last week at far right. Higher rates are coming. Watch the green rectangle for a break out to the upside, then a test of the break out. 

Long Term Ten Year Yields

Several things are noteworthy about this long term chart. The fall in rates was not able to overcome the FED determination to lower rates, and so that inverse Head and Shoulders in 2009 failed at the neckline. Now however, for the first time since 2007, yields have moved above all MAs. 

For the first time in years the 25 week MA  line has crossed all the MAs to the upside. Janet Yellen, are you noticing this?  RSI has moved to the 50% line.  This is more evidence that the low in rates for many years may now well be in. 

Franklin Fed Tax Free

In the two decades of falling interest rates from 1984 to 2000, this is an old friend. I sold may retirees on this fund. They saw their money grow in terms of the NAV and the checks kept coming every month. Now the tide is reversing. The A B C rebound is clear on this chart. Notice the under to over bought RSI at top. And notice that it turned down hard on friday. Higher rates ahead. 

So how does one play this, glad you asked. 

TBF

TBF is playing out a long term inverse head and shoulders formation. It is backtesting three, count 'em long term moving averages.  Yes this area needs to hold. Then TBF needs to advance and take out 34. At that point there won'b be much resistance until the 42 area. 

US Dollar

The dollar did bounce Friday on the weaker stock close or rather the other way round. Stocks closed weaker on a dollar bounce. But the trend looks down here. A weekly close under the October 79.25 low will signal a much lower dollar. Could all the spending be catching up wth the Dollar, and goosing some commodity prices like oil and gold and silver and palladium?

The next chart is a bit hard to see but illustrates that TBF tracks the ten year yield.

The solid black line is TBF, the inverse ten year note. Since yields move oposite note prices, the TBF is a near prefect proxy for  increasing yields. 

Palladium

Palladium and gold both peaked in late summer 21011. PALL quickly corrected and has consolidated ever since. Gold took until lat 2013 to complete a correction. Now  gold picks up in the top chart and PALL had a big week, see far right!  Auto sales, Palladium is unsed in catalytic converters no doubt helps as well.but still a big spike. The years and years of money printing by the FED is starting to come home to roost. 

In case you missed it Friday, here is Mike Gayad's article on Emerging Markets. Now let's look at the EEM chart. 

 

Now it is no accident we placed this after the palladium chart above, do you see any similarities?  You sure do!  EEM has recorded a series of higher lows. Itis laggin palladium. But as Gayad suggests in his article, surely the emergin markets with commodity based structures will move back to front burner status. EEM, PALL, Gold have all corrected since 2011. EEM is lagging but PALL and Gold are already moving. 

EEM Daily Chart

 \EEM has begun its move up. Friday was weak for stocks bu this bears watching. Connect the dots -

too much FED money, commodities rally the last two months, EEM perks up, the US Dollar weakens. 

Baltic Shipping Index, Dry Ships, Free Ships

'

We are just getting a cross over of the 13/34 EMA for the Baltic. The shipping line DRYS and FREE are following suit.Now let's look at the long term potential of a trade  like this. 

DRY Ships

MInd boggling eh?  Could this happen again. I have no idea but it is shaping up nicely Why not buy 2,000 shares of FREE and DRYS just in case?

Long Term HUI Gold Miners

 

HUI Miners Index has enjoyed three big moves since the gold bottom in 2001. Could another be starting now?  See DRY FREE above, you tell me!

CRB Index

Commodities were beaten down with a vengeance last year. The initial launch from such a drubbing delivers a huge percentage gain. This is how the reversal in stocks began in 1984, as well as the rally in bonds. They both lept from historic over sold conditions when most had given up on a rally ever happening. And so it goes with social mood. 

Crude OIl versus the US Dollar

Crude oil is in the main chart, the US Dollar at top and a near perfect inverse correlation at bottom. Now all we need is for the dollar to continue its drop and oil to take out 110. 

The Bottom Line

Stock continue their move up in the fifth year. Internals are not confirming the move but what else is new. Sixty five billion a month trumps internals.

Bonds have likely complete a rebound. Interest rates are moving up. TBF is a way to play this move. 

Emerging markets tend to be commodity exports. The correction from the top in 2011 in Gold CRB, EEM is likely ended. Years of cheap money printing are now resulting in higher prices. The Commodity economies are likely to follow. 

As that happens the shipping industry is likely coming back to life. We own FREE and DRYS. 

Social Mood

Social media as the marketpscy site makes clear, has changed the world. McLuhan's Global Village of instant information has arrived. While Putin has seized the moment in Crimea, Gary Kasparov as well as Charle Hugh Smith make the case that the West needs to squeeze the oligarchs. Today wealthy Russias own property around the world. Shutting down their credit cards and seizing property (sorry sir it is a matter of internal security) would put immediate pressure on Putin. Will the administration have the courage to do that, I doubt it. This lack of leadership merely festers discontent on both sides even more. 

 

Thanks for reading The Market Perspective

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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.

Emerging Markets Versus the US

Friday March 7, 2014

Michael Gayed has some very interesting comments concerning emerging markets. While he takes around the issue in this piece, his point it that emerging markets are wildly under valued compared to the potential over vaulation of the US Markets. 

Let's connect the dots. 

Gold rallies out of ultra lows for mining stocks since December.

Crude OIl tops $100, Natural Gas hits five bucks.

US Stocks take on Everyready Bunny status and keep on going.

But emerging markets are trashed. Brazil bonds yielding 10%.

We will take a longer look this weekend. But it could be that with commodity prices rising and emerging markets beat down, the emerging markets no one wants to buy now might just surprise the rest of the year. 

I suspect near no one bought the miners Dec 31 but the percentage returns since have been spectacular, they always are when one buys at a bottom. 

More to follow this weekend....Thanks for reading TMP. 

 

PS Until then, The Case for Never Retiring  Interestingly my weekly newspaper column suggests that most folks are totally unprepared to 'retire.l'  The idea of 'retirement' is only about one hundred years old, and it may have already seen its best days. The UAW is shrinking, cities are way short on funding their Defined Benefit Plans, the DBP is likely as gone as the Triceratops, and older workers keep the jobs millenials might want...

Dow Lags December High

Weekend March 1 2014

 

We have written a good deal about a potential 40 year cycle connecting 1973-74 with today. It is now apparent that the high of January 1973 is just now being celebrated with the new high in some indexes this week. Markets prefer alternation. So it may well be that the December 1974 low will see a December 2014 some 40 years later. 

 

For some bizzare reason the screen capture mode is not working, which is how I transfer the charts createdin stockcharts to typead. 

So, I guess we will use our imagination. Thnk Radio....

Stocks

The Dow Indus-trials have not bettered their December highs, despite all the CNBC et al hype about the markets going to new highs. Yes the QQQs have made a ew high. Perhaps this is an early warning sign, a lot like Apple. Recall at 0650 Apple was headed to 1,000, it was just a matter of time. And then Apple went to 400. 

The FED continues to spend $65 B a month buying bonds or just generaly inflating the money supply. So don't give up on that money finding a home in the stock markets just  yet. 

Confirming the same, the NYAD Advance Decline line soared to a new high. The Advance Decline Volue Line did the same. 

The S & P has been moving up ad down in a clear upward channel. It is once again at the upper boundary channel, srping from 1750 to 1850 + in just a month. But teh MACD daily lines are still headed up so expect more until we get a daily signal to the bottom of the channel, more upside that is. Markets did retreat from their highs Friday bouncing  up again the last hour. Facebook after its well publicized crash has completed five waves up, another Apple in the making, it helped push NDX and QQQ to new heights. 

Bonds

Sue Herrara was wondering Friday why bond yields are still so low, with stock prices soaring. I wonder as well. 

TLT a fund of 20 year government bonds popped up on Friday. It ahs risen from 101 to  108 since last August. How is this happening in the FED is buying fewer bonds?  Does the bond market know something the stock market has missed?  Closed end munis have also followed the path upwards. 

Energy

The XES has reversed its downtrend from November to February. It has soared from 39.5 to 44.5 during February. This  is no surprise with crude at 102.76. Articles are appearing that the big firms are having trouble justifying their large investments in Shale. 

Metals

Gold and silver are retracing their recent fall. 

Stocks look to be starting a sideways move with the Dow trailing the NDX, still the seasonal high lies ahead 45 days. Bonds oddly are looking stronger.   We are therefore back to the All  One Market Theory with oil upas well.

Social mood deteriorates around the world with Argentina in near riot and Venezuela in riot conditions. Putin has nothing to fear i nthe Ukraine from the US after orchestrating the handover of chemical weapons in Syria. Still the time for THE top in the US Markets does not appear to have arrived yet. We will watch the price of oil and the NASD, the latter closed down after being up Friday.