The Market Perspective

Wed April 30, 2014

 My Facebook play was stopped out, here is why. As Marc Faber noteson Marketwatch this morning, it is too late to buy stocks but we may be too early to short as well, welcome to summer. 

This morning I posted Hedge versus QQQ . Hedge is bottoming, while QQQ is toping. But Typepad is having difficulty and the post did not get printed. My point was that it is too soon to buy Hedge and too late to expect to be on the long side of QQQ and make money. QQQ is exhibiting a head and shoulders pattern that may take until later in May to break down. 

 

Slowly the Market Turns

Wed April 30, 2014

 My Facebook play was stopped out, here is why. As Marc Faber noteson Marketwatch this morning, it is too late to buy stocks but we may be too early to short as well, welcome to summer. 

 

Hedge

 

 

Hedge is a traded fund that actuallys shorts individual stocks. This is quite different thatn taking a short futures position that must be 'renewed' on a monthly basis. The result for that strategy can be the exact opposite of what one intended. 

This daily chart suggests that HDGE is attempting to find a bottom. The MAs are moving closer together, but none have really turned up yet, much less crossed. One could make a converse case for QQQ, let's do that. 

QQQ

Here is the same time frame and MAs but for QQQ, the opposite go long strategy. 

I did not label it but one can clearly see a head and shoulders pattern taking shape here. As with HDGE the MAs are flatening but none have turned down much less crossed. There is an old saying that 70% of the time markets do nothing. Last year they rose, this year they frustrate. 

Social Mood was certainly on display with an NBA owner getting everything but a tar and feather job on the way out of town. While his remarks were offensive, they were remarks. What is amazing is that Magic Johnson the pruported would be owner of the Clippers, had to leave the game due to his frequenting of so many strange partners that he finally came down with AIDS. Elsewhere NBA players have been the 

 

Tuesday April 29, 2014

On Friday, Bloomberg reported that in the first quarter, more than 5,000 mergers or acquisitions were struck across all industries globally for a total of $660 billion, a post-financial-crisis high.  The Financial Times noted recently that global M&A is at about $1.2 trillion year to date, the highest pace since 2007 and up 42% year over year.

Bull markets are inclusionary. Deals always take place at high prices, never at bargain panic lows. 

Fracking What Could Go Wrong?

Monday April 28, 2014

A couple has been awarded $3 M for contaminated ground water from tracking.

There are clear analogies to this case. For years the cigarette companies successfully beat back similar cases claiming health loss or death from smoking. Once the plaintiffs finally won a verdict, it was all downhill for the tobacco companies. The same thing happened with asbestos finally forcing Johns Manville into bankruptcy. 

This may be the first, pardon the pun, fracture in the fracking story. 

Markets Topping Out ?

Weekend April  27, 2014

 Last Weekend we noted the markets were getting more defensive. This week is likely the last week that might be up, even then if a rally happens it is likely it will result in lower highs across many indexes. 

 

Biotech

From its blow off top, the biotech index has declined some 600 points. MACD is headed down, and this is a weekly chart. 

Amazon - the Leader of the Internet Pack - Daily

Amazon  trades at a 514.97  p/e after losing  a fourth of its value this year. 

On page B 14 of the Weekend WSJ Amazon the Never Ending Story notes that yes sales wre up 23% but the stock fell a whopping 9% Friday on continued capital expenditures.  This is a daily chart but demonstrates how fast AMZN is falling. 

Amazon has a fabulous service product, I use them all the time. But the inability to turn this into a profitable company with reasonable returns has investors running out the door. 

Texas Instruments

The next sentence perfectly sums up the summer months ahead.

TXN could lose one third of its value and then just test the 200 week MA. 

NDX NASD 100

This chart really looks awful.

CCH has spent the year in decline.

The uptrend from October has been broken and backtests of that line have failed. 

The MAs have flattened. 

One can see a head and shoulders pattern with a neckline about 3490. A weekly close under that will likely turn this index downfor the summer, at least. 

TLT bonds versus NDX

Our call to go long bonds was correct. Bonds turned up relative to stocks in January, made ahigher low in March, and are off again.  The 50 day MA has crossed two of the MAs showing good strength. 

 Oil via USO Outperforming Stocks

One can argue oil is still consolidating versus stocks.But the MAs are moving up. This looks like a prepartion for a big break out to the upside ala 2008 or at leat an outperformance of stocks by oil. 

Oil Service XES

XES reached the top of its uptrend channel. It might pull back to the lower uptrend line. It has done this each time the RSI has been this overbought. 

The Single Best Indicator NYSE Advance Decline Line

So far no signs of slowing but it is also the highest aove the 200 week MA that it has been since the crash of 2008. But with the single best indicator stil headed up the fireworks may not have ended. 

Caution Takes Center Stage - Utilities and REITs

As investors have moved out of biotech, semis, and internet stocks. more conservative plays like Utilities and REITs have gained favor. 

After May Go Away

I had been looking for a final top the first weekend of May. Unless stocks can Friday's big down day, things are looking very toppy here. We have ben writing about this for some time and now that time is here. 

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.

 

 

 

Markets Take a Breather, Higher Prices Shortly Ahead

Friday April 25, 2014

CH Smith on where the US really is

Quick Update for Wed Morning

Wed April  23, 2014

I got ahead of myself buying the calls back, should have waited for the two hour chart to subside.I am guessing we have a minor pullback into friday which sets the stage for a final move up into early May. 

Here are some socionomic confirmations of our five year anniversary top in the market. 

Today's WSJ

Page  c1 REcord Sale for Junk Bonds

French Bacle Frim st to Raise $11.6 Billion, another milestone

Five years ago no one would touch a junk bond, now they are in big deamnd, indeed Numeridcable Group has added another two billion euros to the offering demand is so strong

C4 Netrflix is back and raising prices. A few years ago the stock was hammmered for thisn now investors buy more realizing the subscribers will pay, a positive social moment

D4 Ferrari Challenge

IF selected, a group of four drivers will be able to purchase (hey we will let you!) a Ferrari 458 Challenge race car. Coaching, conditioning, drier practice, etc to the Rolex GT Series

Ferari Lake Forrest

Another sign of having arrived is having nothing better to do than race expensive cars, boats, airplanes, and so Lake Forrest rises to the occasion.  Check out their inventory here.

In the 1920s - 30s there were also ways to isplay wealth. J Boats were 100+ foot boats simply bulit for racing. I believe these were the source of the famous comment, Where are the Customer Boats?

Speaking of Js, howabout the Duesenberg Model J, supercharged in the fateful year of 1932. It is surely ironic that the Duesie was supercharged juast about the time the Depression was at its worst. Indeed Auburn Cord Duesenberg was not able to survive the financial crush. 

But then as now, there were ways to display wealth. I notice one J Boat was named Park Avenue, how appropriate. .....

Markets Head for a May Top

Tuesday April 22 2014

Markets are apparently done with the short term correction. We expect the typical seasonal May high. It looks like that may record several new highs among large stock indexes.

FB

I purchased FB a few days back and wrote the May 62.5 call options for a premium of 3.3. I bought them back on the move up today. The MACD is suggesting FB wants to move much higher. 

Other Trendy Stocks

TSLA, SBUX

 

TSLA has yet to make a profit but is the darling of the  Green Set. It looks to have finished its correction. 

SBUX Starbucks at top also has the look of finishing a correction. 

PCLN, AMZN

Price line in the main panel is still in an uptrend and finishng a correction. 

Amazon at top may well be doing the same, it sports a triple digit price earnings ratio.

QQQ, Apple

the action of these large stocks  is powering the QQQs to the upside, Apple at top may have also completed a correction. 

How much is left in this?  Not a great deal I suspect but the MACD makes an argument that this could power to new highs surprising many. 

Note the MACD in alll four graphs is turning up. 

XLE

XLE Energy ETF looks to be ahed of itself. MACD is up and the price is way above the MAs. 

Market Goes Defensive

Weekend April 20 2014

Page B 5 in the Weekend WSJ discusses whether the markets are in bubble territory. The conclusion is no. But there it is apparent that the NASD topped this past month and that the markets are gettig more defensive. Energy moves front and center which is usually the final stage of a market run up.

Utilities made a new high, the Energy ETF and XES the Energy Serivces hit new highs, and bonds via TLT moved up. I was expecting a pullback in bonds if stocks advanced which they did Thursday  but not much pull back yet in bonds. 

Dow Industrials

The high in the Dow was registered December 31 2013. The next month will determine if the markets make one more high. As noted in the column three components were changed in September. The DOW has had nine changes since its top in March  2000. Nothing like manipulation to keep things going along with a $4 Trillion Balance Sheet from the FED.

NYSE Advance Decline Weekly

THere is no sign of a turn down on the most reliable tech indicator, the NYSE A/D line. 

Crude Oil, Nat Gas

Crude oil looks poised to challenge its previous highs. Despite all the negative on natural gas, it has risen from $2 and is moving up nicely. 

April Time Period

Last year Gold Crashed in this time period. 

This year a 7.2 magnitude earthquake hit Mexico City, a ferry sunk off South Korea taking over 200 lives, Russia continues its masked man take over of East Ukraine, and the stand off in Nevada ended but not before armed BLM military style officers confronted the protesters with lethal force. 

Major Garrett actually asked President Obama if Putin was mocking both the President and the US Military.  Again this fits the 1973-74 pattern of a falling regard for the sitting President. 

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.

 

 

 

Newspaper Column April 20, 2014

Markets in Transition

Poor people think about Tuesday all day Tuesday

Rich people think in terms of decades

Gail Sheehy, Pathfinders

Everything is obvious in retrospect. Everyone says they want to make a lot of money. But their focus tends to be far too short term to attain that goal. The real money is made by getting in at the bottom (buying) and riding the new trend to the top. A couple of examples make the point.

All of us who attended UT Austin in the late 1960s and early 1970s wanted to stay in Austin. How could one make the best of the situation?  Back then Austin was still a sleepy, state government centered town with little big time business activity. That was the short-term view. The long-term view was to grasp that UT Austin received two-thirds of the Permanent Fund PUF and would therefore continue to grow and prosper. Frank Erwin was already planning to put UT branches in twelve Texas Senatorial Districts, cementing UT’s claim to the PUF. And with the state legislature in shouting distance down the street from the Main Building at UT, the long term should have been obvious. Or as Ray Kroc said about the McDonald’s secret to success - location, location, location.

The smart thing to do would have been to organize a sort of private Real Estate Investment Trust. This REIT would start acquiring houses for rent  just north of 26^th street, the upper boundary then of the UT campus. Those  houses built from the  1930s – 1940s.  were reasonably cheap, well under $40,000. And the proximity to campus meant there was a perpetual demand, enrollment never faltered and a walking distance location to campus was highly prized. If the REIT had acquired just one house a year, by 1985, one would have a handsome portfolio. And once Austin got on the high tech bandwagon, the prices soared in Silicon Valley style. Gee, all that is obvious now, isn’t it?

In similar fashion, several thousand people left the Permian Basin as oil prices dipped to the  1999 decade low of $12. When everyone is exiting the market, one has a great buy signal. In retrospect there was no way oil could stay below the world cost of production. It had to rise again. It was the time to buy Basin  real estate as well as shares of  Exxon and Conoco.

You did that, right?

Well, let’s take those lessons and apply them now to the Big Casino, the stock market. The lows were clearly made March 9, 2009. Negative emotion ran so high after a collapse that few were buying, indeed most were selling right up to that transition day. This past month marked five years to the day from that low. Evidence mounts that we are now seeing a distribution of shares. Numerous articles reported a wave of small investors taking the plunge this past year, into the stock market. This accounted for the late 29% rise across the indexes in 2013. As always, extreme expressions of social mood ten to occur near the end, not the beginning, of a trend.

Let’s take a look at what the market, not the talking heads on television, ais telling us. The NASD 100 NDX topped in March 5, 2014 closing at 3727.19. These are the big over the counter market guys that represent risk-on speculative bets like Google, Amazon, and Price Line. On the same day, the NASD broader over the counter market closed at 4357.97. That is well shy of its March 2000 peak around 5,000 but way up from the 2009 low of 1250 or so. Money is transitioning from these volatile bets to more secure territory. The Standard and  Poors is higher relative to the over the counter market.

At the end of a bull cycle, commodities soar via inflationary pressure and the markets become more defensive. Despite nine changes in the components of the Dow Industrials since 1999, that index topped December 31, 20414 at 16,576.66. It has not closed higher since.

The end of a bull run sees commodities like crude oil higher as well as more defensive plays like utilities and big cap stocks. Sure enough, crude closed at 104.59 Thursday. The XLP of consumer staples posted a new high and defensive utility stocks surged. It ain’t over but the ninth inning looms this year for the bull run in stocks.

Dennis Elam teaches at Texas A & M University San Antonio and blogs at

http://www.themarketperspective.com