The Market Perspective

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thursday June 12, 2014

As Dan Henninger says in his column today, this is an amazing site for information. HIs column today is rather significant. 

 

http://www.understandingwar.org

Frankly I suspect that other than the military that has been to the MIddle East, most Americans simply cannot relate to such a place. Women clothed head to toe, limbs chopped off for various offenses, no real economy, women cannot drive cars, in the minds of most Americans can there really be places named Tadkistan and Uzbekistan, surely not in 2014, do real people live there?  Can anyone here really imagine gun fights at the local mall, that never stop, kidnappings that go unsolved and unavenged, well imagine it. 

That sort of naivety allows the White House to ignore the events there. We have maintained that eventually this would look a lot more like 1973-74, the fall of  President and US Prestige, all that got a big jump start this week with the fall of Mosul. 

The markets will always go where they want, and a parabolic move has no conscience, we shall see how this one ends. 

A Thirty Year Bull Market is Ending

Wednesday June 11,2014

Evidence continues to mount tht hte thirty year bull market in bonds is ending. Bond prices have advanced and yields have fallen from double digit to as low as 2.5% on the thirty year bond. We hve been showing evidence of this across many markets. 

An inverse fund which moves oposite bond priced, the TBF, is shownat top. 

The Utility Index had its final run to the end of April and then a back off and a lower high, now it falls rapidly. 

USB is the symbol for the thirty year bond nd TLT is a fund of 20 yer government bonds. TLT and USB topped a few months ago. Each appears to be comleting a counter trrend move part way back to the highs, NOW. 

We cannot emphasize how important this is. Long term positions in TBF are warranted. 

Summer Arrives

Tuesday June 10, 2014

Stocks and bonds could duke it out all summer. We need some lower closes to say there is some sort of top for now. And for now that is all there is to say.

 

Back to 1973-74

Monday June 9, 2014

Regular readers are aware of my long standing 1973-74 analogy. This article makes that case in terms of labor participation rate.

The heavy decline in union membership such as SEIU is experiencing no doubt drives many low skilled workers in the the 'safety net' of disability, AFDC, subsidized housing, EIC, etc. But whatever, there are fewer workers supporting the rest. 

Bonds The Bigger Story

Monday June 9, 2014

Optimisim continuies to run rampant for stocks, see page C1 Clear Skies for US Shares

The bigger story may be for bonds, see the op ed  page A 15, It's Time to Raise Interest Rates

Blackrock has been runnign Ads, The Bull Market in Bonds May be Over, page A7

Thirty Year Bond

Okay what do you see in the above chart?  I follow with a suggestion

 

This may or may not be the correct label for the decline but 

Bond are trying out the 200 day MA and having difficulty

RSI at top is bending over

The ribbon of MAs is clearly undergoing change

Five Year Yield

After a huge run up and a year of consolidation, the five year yield is knocking onthe 1.8 resistance, this is a 3x from its lows. Of course the most dramatic change will be in the initial lift off. But here notice three of the shorter MAs are already moving up. 

TBF a Bet on Higher Rates

TBF needs to take out 33 to affirm the move is underway. But it appears to be tracing out support at 28. 

Monthly Thirty Year Yield    

 I re entered this whacky business in 1983-4 as yields were beginning to drop. Notice yields were double digit back then. This monthly chart has  lot of work to do to reverse the downtrend. But the daily and weekly shorter term yields suggest that is underway. 

NASD 100 Divergence

Weekend June 8, 2014

The Advance Decline Volume Line did not confirm the move to new highs in the NASD 100, at top. 

NASD A/D Line

It is the same for the NASD A/D Line itself, it is possible it will play catch up but we shall see. 

While the entire gang at stockcharts is simply agog at all the new highs, and CNBC is once again cheerleading like it was NASD 5000 in Year 2000, these are contrary indicators. Granted the FED, don't fight the FED as Marty Zweig warned, continues to pump money into the market. We shall see this week. 

Interest Rates on the Rise

Wednesday June 4, 2014

30 Year Rates

As I have remarked, there are many other sites which claim to be expert in Elliott Wave Counts. 

However, evidence continues to mount that the 30 yera bull market in bonds is ending July August of 2012 saw the thirty year yield collapse all the way to 2.5%. It rallied to 4%, a 60% increase in 18 month.s Rates then corrected right to our 125 week MA line. Now rates are bouncing off that line. If the count is correct, rates might be embarked on a third wave higher. This could likely take 30 year rates over 5% by the end of that move. Note,  this rally began in the summer of 19682, 30 years ago, and really got going in the summer of 1984. Back then, hard to believe, these rates were over 12%. 

Five Year Rates

The five year rate more than doubled from .8 to 1.7 in the same time frame. From such tiny levels it is not surprising rates would increase sharply. 

Utilities

As Bonds hit a Wave Two low, Utilities posted perhaps a final high with investors scrambling for yield.

TBF A Bet on Higher Yields

TBF an ionvesrse fund to bond prices, has registered a series of higher lows. A return to the 4.8% thirty yield recorded in early 2011 would take T BF back to $46. 

It Ain't Over Yet

Weekend June 12 2013

A must read  C H Smith on the Housing Recovery This is also clear in the WSJ Mansion section on Fridays, we are back to pre 2008 real estate speculation

Don't Fight the Fed

Dr.l Marty Zweig

Apparently the FED,the big banks and funds are collaborating to keep the market up lest the FED be accused of runing things with tapering. 

Dow Industrials

 

Momentus seems to be slowing but all the big cap indexes, the SP, the Dow, the NYSE are all still up.  The MACD and Rate of Change are both falling. The Dow eeked out a new high.

Transports

 

With both the Industrials and Transports closing up for the week we have a Dow Theory Buy Signal. But over2,000 points aobve th e 200 week MA is hardly a buy signal by that standard. And th last few weeks suggest a sort of parabolic kick up.  Finally we are at the season after May go Away point. A month from now the second quarter ends with whatever window dressing the managers desire. 

SOX

 

Semi conductors continue on a tear.

 Bonds

One of the best bets so far this year has been TLT. After falling from 128 to 100, it has sprinted half way back, and shows no signs of letting up. Why are bond and stock prices both rising?  There have been articles specualting that US rates are perhaps higher than other country rates. But the real reason may be FED intervention/manipulation of the housing market, see the C H Smith article at the start of this post. 

TLT Monthly

And the real aswer may be that the ZIRP Zero Interest Rate Policy continues to support a bull move in bonds. The monthly chart is updated with June 1, and we can see TLT tested the shortest monthly MA and now the MACD appears poised to take off again. As Smith suggests this will go on until we run out of buyers of inflated properties. No doubt investors hungry for yield have pumped funds into REITs which also feeds this mania. 

the New Civil War

University of Ottawa students plead poverty protesting tuition hikes.

The number of Phds granted tends to track the stock market. The reason is that expansive social mood supports public ideas like education. Take a look at the remarkable correlation. 

Bill O'Reiley came down hard on the lack of Presidential Leadership. Incredibly so did the NY Times and the Washington Post, the two liberal staples of the country. No I am not bashing the President, just pointing out that our analogy to 1973 is spot on as Nixon's popularity sagged. 

 

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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.