Weekend May 11, 2014
Thursday we noted the occurrence of a three year cycle with tops in May of 2008, 2011, and perhaps once again at this time.
Ratio Chart, the NASD versus the Dow Industrial
When the ratio chart above drops, the NASD is under performing the large caps in the Dow. For the last year, May 2013 - May 2014, the NASD out performed the Dow, that is the message of the advancing ratio.
SPX
The S & P never quite or has not quite made that 2000 level. Both it and the Dow at 16,600 have hit a seasonal resistance. The MAs are still clearly in up trends.
Al this suggests that topping takes place in stages. The higher risk on NASD is turning down as money moves defensively to the larger caps.
TESLA
TSLA returns to its 200 day MA. Elon Musk is touted as the latest wonder boy. He shoots rockets to the space station, builds $100 K electric cars, and now is shopping for the a spot to locate the largest lithium battery plant on the Mother Earth. His plant would dwarf anything else currently in existence.
So is Musk the automotive Bill Gates or the ghost of John DeLorean? Beats me. San Antonio is one of the spots he is considering. As a Green Advocate, the local government owned CPS offers a solar farm to generate electricity for his proposed plant. The media darling Mayor Castro wants the plant. But this is quite a different proposition than the Toyota Pickup Plant. That was a proven technology. And it closed with in three months of opening in 2008. Today it is humming along producing the giant Tundra pickup, helped with the addition of the Tacoma brought from the closed Fremont plant in the wake of the GM bankruptcy.
Currencies
The big story of the week is the giant outside reversal day for the Euro. At the same time the U
S Dollar shown in green shto up. Does anyone remember the Euro Crisis, the Club Med countries that could not stay within their prescribed budgets to keep in the Euro Zone? Did anything ever change in that scenario?
A strong dollar is likely to dminish the strength of stocks in the US. With Europe unable or unwilling to do anything about the Russian adventure in the Ukraine, the world stopped betting on the Euro currency.
Read about uncertainty in the Ukraine
The Euro Zone, Germany and France
France in purple now notably trails the much stronger German model in black and red. Germany hits new highs. France is mired in 2008 levels. With Germany and France amounting to half of the European economy this is important.
Bonds
Despite FED tapering bonds have enjoyed a 50% recovery. The correction stopped right at the 200 week MA.
Goldman is betting on a 3.25% long bond yield by year end. The move in bonds is defensive, but will rates finally go higher.
Rush - 35% of Peterbuilt Sales in the US
Rush Enterprises is a major provider of truck services and sales in the US. 3 M and Rush announced a potential game changer. 3M is developing a resin tank that is 30% lighter than existing tanks and holds 10% more fuel. Ryder and Quantum are also working on CNG storage systems.
I am thinking this is explaining the drop in oil prices while natural gas remains fairly strong. Large trucks are switching fuel systems. With more efficient autos driven fewer miles, the demand for gasoline refined from oil will and is decreasing.
The Bottom Line
Stocks are registering a seasonal warning here. Bonds remain strong. The Dollar recovers against the Euro. The move to natural gas as the new fuel continues.
Social Mood
Ayaan Hirsi Aliwon't be receiving an honorary degree from Brandeis. Condi Ric won't be speaking at Rutgers Commencement. Nancy Pelosi will be speaking at Berkeley.
The lines are drawn and the left is winning on campus. Ali's rejection is interesting coming as it does simultaneous with the kidnapping of girls in Nigeria.
All of this is an example of what we have written about for sometime. Negative social mood will finally overwhelm the markets. This is happening in the Ukraine but amazingly the left, all agog with a war on women by Republicans, leaves Ali twisting without an audience.
With the election six months out, expect more divisive action, the Republicans kick off Benghazi hearings in the near future.
In our New Civil War, Toyota moves from California to Texas. Actually this makes a good deal of sense as manufacturing moves to Mexico. And Texas is in the Central Time Zone with the DFW airport affording world wide transportation access. But the drain from California continues.
Thanks for reading The Market Perspective
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