The Market Perspective

Dollar Up, Energy Down, Bonds Pull Back A bit

Thursday Feb 26, 2015

Our comments in the newspaper column published last Sunday are really coming true. The energy markets fell again today. 

Bullish Percent Energy Stocks

I suspect this bullish percent chart has marked the end of the counter trend rally in oil and oil stocks. 

The Price of Crude

Notice two things

We never got a crossover of the 13 EMA above the 34 day EMA. 

And notice that the 13 EMA is now starting to fall again on the big 4.13% drop in energy prices. I suspect the move down to the 2008 lows has begun. Why, well see the next chart!

US Dollar

One would have thought the US Dollar would have undergone a significant downward correction after its big run from the low 80s. That was not the case. It merely underwent a sideways correction. Now it is breaking out of this sideways move. This took commodity prices, specifically oil, down today. Oil is priced in US Dollars. 

XES Energy Service

 

Notice how much the XES chart mimics the oil chart. Here again we never got decisive break over the 34 day EMA and now price is turning down again. 

CRB Index

Notice how the CRB index failed at the shortest MA. And now MACD at bottom is rolling over. 

Yesterday Art Cashin remarked to Bob Pisani that he only gave a rate increase this year a chance of 50%, and doubted that. With inflation on the wane I suspect Art is quite right. 

Audit the FED?

Thursday Feb 26 2015

Janet Yellen does not want the FED audited, that in itself should set off alarm bells but as usual the media is in sleep mode. I thought our readers would find this interesting.

 

"Audit the Fed"? We've Already Done That (Well, Kind of)
Our conclusion: The Fed is not in control of the economy -- here's why

By Elliott Wave International

If there's one thing the Federal Reserve Board of the United States is not known for, it's assertive language. After all the obfuscation and verbal sidestepping, Fed speak is usually as easy to comprehend as Marlon Brando's Godfather character Don "Mumbles" Corleone. 

But on February 24, Fed chairwoman Janet Yellen was 100% candid in expressing her disapproval of the controversial bill known as "Audit the Fed" -- legislation that would open the central bank up to full government regulation and scrutiny: 

"I want to be completely clear.

I strongly oppose 'Audit the Fed'"

No - Confusion - There!

But, whatever side of the bill you stand on -- nay or yay -- for us, the prospect of pulling back the curtain on the most elusive quasi-government body seemingly besides the C.I.A. is irrelevant. Because we at Elliott Wave International have long since conducted our own "audit" of the Fed -- and the results are like nothing you've ever heard before from the mainstream pundits.

The purpose of our "audit" was simple: Determine, once and for all, if the most powerful monetary institution on the planet does, in fact, have the power to control the U.S. economy or marketplace.

We published our findings in a 30-plus page eBook titled "Understanding the Fed," a compilation of excerpts from the selected works of EWI president Robert Prechter -- including his 2002 best-seller Conquer the Crash and several past Elliott Wave Theorist publications. This riveting report articulates in no uncertain terms that the two main tools in the Fed's arsenal -- interest rate policy and money creation -- will be, and always have been, futile against the forces of deflation.

These two passages from the "Understanding the Fed" eBook set this radical claim in motion (excerpted from Chapter 13 of Conquer the Crash):

"The problems that the Fed faces are due to the fact that the world is not so much awash with money as it is awash with credit... For the Fed, the mass of credit that it has nursed into the world is like having raised King Kong from boyhood as a pet. He might behave, but only if you can figure out what he wants to keep him satisfied.

"Conventional economists excuse and praise this [Federal Reserve] system under the erroneous belief that expanding money and credit promotes economic growth, which is terribly false. It appears to do so for a while, but in the long run, the swollen mass of debt collapses of its own weight, which is deflation, and destroys the economy."

In the decade since Conquer the Crash first brought these assertions to light, the Fed has only lived up to its limitations.

First, from 2003 to 2007, the central bank attempted to remove the froth from the bubbling housing market and cool the overheated credit sector via 17 interest rate HIKES -- from a half-century low of 1% to 5.25%. Yet, in 2007-2009, the top blew off both sectors anyway.

Hoping to finesse the economy into a "soft" landing, the Fed then adopted the opposite tactic: Slashing rates 10 times between 2007 and 2008 to a record low of 0%, and from 2009 to 2012, embarking on the largest inflationary campaign in history via three rounds -- $4.5 Trillion -- of quantitative easing (QE).

Yet, again, all of these measures failed to prevent:

• The worst financial meltdown since the Great Depression
• A full-blown bear market in oil and commodity prices, which stand at a 6- and 12-year low respectively
• A stalled housing and jobs market
• An inflation rate that has been running below the Fed's 2% target for nearly three years

And, as our updated chart of "Total Credit Market Debt as a Percentage of GDP" below shows, the deflationary scenario outlined in Conquer the Crash -- when "the swollen mass of debt collapses of its own weight" -- is also coming to pass:

Whatever action Congress decides to take regarding "Audit the Fed," the fact remains: One of the most comprehensive and objective inventories of the Fed's actual economy-saving abilities is not on Capitol Hill. It's right here, in EWI's 30-plus page "Understanding the Fed" eBook.

The best part is, the entire report from start to mind-blowing finish is available to all Club EWI members, 100% free.

So, what are you waiting for? Join our Club EWI community today (350,000 members strong!) and start reading the full, free eBook immediately -- or at your leisure.

---

This article was syndicated by Elliott Wave International and was originally published under the headline "Audit the Fed"? We've Already Done That (Well, Kind of). EWI is the world's largest market forecasting firm. Its staff of full-time analysts led by Chartered Market Technician Robert Prechter provides 24-hour-a-day market analysis to institutional and private investors around the world.

State of the Global Markets

Thursday Feb 26 2015

I have enjoyed reading EWI's Global Market Perspective. Here is a link to download  their State of the Global Markets Report.

While their call for a top last October has not yet come to pass, there is considerable reason to be cautious as the government has certainly massaged numerous statistics to make the markets appear more inviting than they really are. As Of Two Minds reports, how can we have such low unemployment numbers with 48 million on food stamps?

 

http://www.elliottwave.com/r.asp?rcn=affem&acn=11tmp&url/club/State-of-the-Global-Markets-LG.aspx

Oil has Not Bottomed Yet

Weekend Feb 22, 2015

The Bottom Line on Oil Prices

 

At the Five a Minute University, we teach you all you will remember five years after you get out of college. Economics?  Supply, demand, hat’s it.

Father Guido Sarducci on the Five Minute University

And that is where we are today in the oil markets. Supply continues to add to existing inventory.  As a result prices fell this past week. But the key to long term analysis is to examine what the market is telling us, not what  the nervous media reported yesterday

Technical analysis is the process of examining price movements using statistical techniques. When I began studying such markets n the 1980s, I used a weekly paper chart service. Today personal computers and graphing software allow instant analysis right down to minute-by-minute movements. So let’s first look at just what the charts are telling us.

A simple predictive technique is the use of two moving averages. In this case a thirteen and thirty-four bar exponential moving average EMA can be over laid on the oil price. A crossover of the shorter thirteen-week EMA can prove to be of predictive value.  (Don’t worry about what an exponential moving average is, think black box that will help us and besides, that’s my job.)

The thirteen-week EMA crossed the thirty-four week to the downside on July 10, 2014. Regular readers are aware that our column grew increasingly concerned warning of much lower prices since last August.  July 10 ended with the shorter EMA at 101.76 and the longer 34-week at 102.71. The last half of July prices attempted to surmount the moving averages. But by month end it was all over, the counter attack failed and oil closed the month at $99.50. It has been downhill ever since.

This sort of analysis cuts through the white noise of what passes for news. At the time there were still plenty of headlines that workers could not find enough housing in the Shale Boom areas. But the die was cast.

On the continuous front month chart for West Texas Intermediate Crude the low was  $44.31 on January 30. In four weeks by February 3, 2015 it managed to hit $54.34.   That is a whopping 22.6% rally. That sort of reversal only comes from short sellers buying back to cover their bets. In other words, those who sold oil successfully betting on lower prices bought or covered their positions.

Now, we could go on and on quoting the over supply situation. But the bottom line is this. There will be no evidence the price of oil has bottomed until we reverse the action of July 10, 2014. In short, the 13-week EMA needs to cross over the 34 week EMA to the upside. As I write Friday morning February 20 before the markets open, the 13-week is $50.88 and the longer 34-week is $51.63.  Our shorter term EMA needs a 75-cent boost, and more to generate a ‘buy signal.’

Okay, that may be more than readers wanted to know but this cuts through all the clutter of the following reports.

• Oil inventories grew by 7.7 million barrels last week
• Oil futures at one point dropped 5% Thursday
• Aramco demands a 20% price cut from energy service majors
• Oil inventories are the highest on record since records began in August, 1982
• The rig count has dropped to the lowest level since August, 2011
• Shale wells deplete very fast
• Energy service firms have now laid off some 40,000 workers
• And blah blah blah blah blah

 

While all of these bullet points are true, particularly the last one, none of this fundamental news is of any assistance in evaluating when the market might turn up.

Technical analysis is all about the actual market, rather than the news about the market. With such tools we have a non-biased analytic method independent of the hand wringing and nay saying that dominates what passes for news.

I thought the US Dollar would have turned down by now. But its two EMAs are 94.33 versus the longer 93.36.  These are the two bookends of the equation. Until the EMAS turn up on oil and down on the US Dollar, we are trending sideways in both markets. The oil price  needs a break to the upside  and to the downside in the dollar for the downtrend in oil to reverse.  And that’s the real bottom line. 

13/34 Tells the Story

Weekend Feb 21, 2015

Architect billings, Lumber flash warnings on economy

Of Two Minds Comments on the Empire of Lies

This Weekend we employ the 13 and  34 week Exponential Moving Averages which show this is a simpler game than one might think, it is following the rules that is difficult. 

DIA

Dow Diamonds have been in a nsolid uptrend since the last crossover, 13 moving over the 34, in 2011. this is still the case. OBV at bottom is positive. Onward and upward. We have referenced several gurus attempting to call a top to this but really, until the 13 week EMA crosses the  34 week to the bottom the trend is up, period. 

TLT

Bond have been on a tear since generating a buy signal last February. Let's move in for a closer look as I don't think this is over yet. 

TLT Daily

The rule is that old highs become new support. That is happening here. I like an entry in this market probably this next week.  Yes the 13 crossed the 34 to the downside, I had bought back around 118 and sold Friday taking a profit. But the sale should have been at a much higher level, We will make sure that does not happen again. 

US Dollar

If this were a  1950s sic fi movie we wold call it

The Thing that Wouldn't Die. Still MACD is flattening and the news from Europe is appropriately horrible so a top in the Dollar still awaits. 

Crude Oil $WTIC

Gee look at the distance between the  13/34 weekly EMAs, there is a lot of work to be done before this market stabliizes. 

Daily Crude Oil

I sold my USO and XES Friday for a small profit in toto. Here is where the EMAs really pay off. Notice we still do not have a cross over on the daily EMA. And the MACD has done about all it can. This cold fall apart any time. Will the Dollar correct and save oil?  Until it does we still do not have a good buy signal. 

My weekly newspaper column will be posted in this space tomorrow as it runs in the Sunday papers. I go into detail on this 13/34 analysis. Both are Fib numbers and produce reliable results. 

Google

If the market is going higher, it will be hard to do so without some of these high flier tech stocks. GOOGL 

has spent the last year correcting from its run up to 600. The 13 week EMA is below the 34 but has turned up. If there is any one stock to watch for clues, this is probably the one. 

GOLD

 

Since the sell signal in 2013 there has not been a reliable clear cut buy signal in gold, period, despite all the William Devane ads  on Glenn Beck. 

Silver 

Silver, ditto, same thing Indeed, notice that a buy signal has never been generated since. 

The Bottom Line

Stocks  jumped to new highs Friday, expect a spike up this week. 

Bonds are probably at support getting ready for another up move. 

Crude oil, gold, and silver remain in downtrends. 

The Returns of Tesla

Monday Feb 16, 2015

At the conference last week I was asked about my presentation. Here was my elevator pitch.

Why does Tesla sell for $215 a share with no earnings, a future that depends on a  yet to be invented battery, and no dealer network

When Ford which sells millions of cars and trucks and makes money sells for one tenth that

This is contrary to what one  learns in finance class

This article from Bloomberg explains that it is in fact social mood gone insane. Read this passage, one is not buying for financial return but emotional return. 

For anyone who feels depressed about living in the post-space shuttle era, buying a Tesla or even just a share in Tesla can feel like claiming a small piece of the Space Age. Like space travel itself, buying a Tesla or a share of the company isn’t something you do because you expect it to return some specific return but because it appeals to some deep human need for adventure. Which is fine, for anyone with enough financial bandwidth to be able to enjoy an adventurous investment. Just be prepared for more rational investors to call you, well, crazy.

 

The Final Low in Rates? Is the Bond Rally Ending!

Weekend February  14, 2015

I got back in the whacky securities business in about 1982. I was reading Ian Cavity's Deliberations at the time. He thought rates would stay high but looking at his graphs, I  concluded the high was in on rates. Rates would be coming down as would the price of oil. Thus began the 33 year bond rally. Has it ended? Consider the situation. 

• Many European bonds now are at negative rates of return
• Yellen has announced rates will rise starting June
• Deflation is everywhere
• Very short term rates have been rising
• Long term thirty year rates just violently reversed to the upside-rates have fallen for seven trading days in a row
• Long term municipals sport a clear five waves up

Thirty Year Yields

The nomenclature at top left obscures the start of this chart but yes yields fell from about 14-15% to the recent 2.2% low. 

Franklin Fed Tax Free

This is classic textbook Elliott Wave. 

• Wave One starts at a definite low, under the MAs.
• Wave two and four alternate with two being a sharper down and up, but a successful test of the 200 bar MA each time
• Wave Three is the largest wave

there is no way of knowing if this is THE END at least not yet. 

Closed End Munis

This closed end fund from Blackrock exhibits the same pattern as Franklin. At bottom a lower MACD is typical of a fifth wave finish. In the top panel, on balance volume hits a new high as investors seek yield. They always do when rates bottom. 

JUNK JNK

A junk bond is really just a common stock in drag sporting a yield. Thawed count is not as clear but if the price falls short of the previous high and reverses the high is likely in. 

Investors are jumping back into junk bonds.  After pulling $16 B to last year about $5 B has gone in this year. This also reflects the ups and downs of the European market where several countries are in junk territory like Greece. 

TBF the reverse of TLT

TBF began shortly after the worst of the crisis in March of 2009 so I think the wave count here  is valid. 

Ten Year Note Price

The ten year note may have topped already in 2013. It looks like the counter turned rally just failed.  

CRB

 

Commodity prices are about as low as at the bottom of the financial crisis. Is deflation finally hitting lows?  if that is the case, could all the money Central Banks flooded the world with, could that money harken some inflation later? Is that what the bond market is telling us?

Dr.Copper

The trend has not reversed, this is a  CRB component. 

XLE

Bingo we have a cross over in the XLE energy ETF, note the nice move up Friday. I don't know that THE low is in  I am thinking a third wave low was seen with a fifth to follow but then I thought theistic market had topped as well, so what do I know. 

FXC Canadian Dollar

I am long FXC. Myth inking is that we will have an oil move up which means currencies of commodity exporting countries will rally. Okay it is slow bu tit is happening. 

 Dow Diamonds

Call it Risk on or what you will, higher prices ahead for he Dow as bond prices sink. 

The Bottom Line

Stock move higher in a seasonal patter from their low in October.

Bond prices sink, is it just is on or are bonds telling us the deflationary era is coming to a close. 

Oil looks higher as well as energy and energy service lagging last. 

The Canadian and Aussie Dollars are stirring looking for a  bottom. 

Social Mood

In fifth waves,  society shows an embrace of nostalgia, a retro look back. This was in evidence on my trip this past weekend to a conference in Vegas. Here is a sampling of the shows. 

Not one but two Beatles Tribute shows, the one I attended was just outstanding at the Saxe theater

https://vtheaterboxoffice.com/las-vegas-shows.cfm?showid=10003

Tribute to the Million Dollar Quartet of Elvis, Jerry Lee, Johnny Cash, Carl Perkins

Bob Anderson does Frank Sinatra

http://www.venetian.com/entertainment/shows/frank.html

The Rat Pack is Back, what could be more Vegas than those four

 http://www.ratpackisback.com

Donny and Marie

 http://www.caesars.com/flamingo-las-vegas/shows/donny-and-marie.html?utm_source=google&utm_medium=ppc&utm_term=donny%2520and%2520marie%2520at%2520the%2520flamingo&utm_content=General&utm_campaign=LAV_FLVVis.DonnyMarie_Exact%257CINC%257CBrand%257CENT%257CFLV

Donny and Marie alternate with Olivia Newton John

http://www.caesars.com/flamingo-las-vegas/shows/olivia_newton-john#.VODE3UL_Dt4

Legends at the Flamingo - this rotates among various stars of the past, my show included Michael Jackson, Katy Perry, Steve Tyler (who I cold not place), Celine Dione, and of course, Elvis

http://www.ticketcounter.com/las-vegas-shows/legends-in-concert/?utm_source=google&utm_medium=cpc&utm_term=legends+at+the+flamingo&utm_campaign=google_cpc&mm_campaign=Legends+In+Concert+-+US%2FCanada&mkwid=sOh2hrL8P%7Cdc&pcrid=41987457044&gclid=Cj0KEQiApIGnBRCFx-idn7-E2Y8BEiQAc6fQbJU9sNai9MhI_dmMn_KRY-tDbqWCZoSa7qAGkzJbI9QaAr3w8P8HAQ

Truly there is nothing new under the sun

ennislelam@gmail.com

 

 

 

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.

 

 

 

 

Let the Market Come to Us

hursday Feb 12 2015

The markets are slowly coming to our positions.  Typed is taking forever to post a chart so I will just comment.

Canadian Dollar FXC Two Hour

We had a nice 1.2% bounce to the upside today. The US Dollar is stretched and oil is attempting a rally. 

US Dollar UDN Two Hour

This bear fund for he US Dollar was up  1.07% today.  So the two are moving in the right direction.

Neither has experienced a crossover by the 13 bar MA over the 34 bar on the two hour chart but I think patience will be rewarded. The media completely gave up on an oil rally two days ago. 

XES Energy Service Daily

This has had a crossover of the MAs, it is currently pulling back testing support after CCI ran to 200, it is now -100 on the two hour chart.

TLT 20 yr bond fund

The WSJ described the six day decline as horrendous or something like that. It fell below the 34 day MA but the 13 day has not crossed to the downside yet on the daily chart. The truth is that it is testing the 50 day simple MA at 128.94. The close today was  129.52. Since everyone thinks the FED will raise rates everyone thinks the long yields will have to rise. In my recent post I wondered if we had just seen the final low in bond yield and a high in bond prices from 1982. I am now expecting at least a bounce here. We will exit longs on any serious reversal and look for higher yields.

I have long positions in the above securities. 

SPY

Closing at 208.92 it is still below its previous high. 

The NYSE index is right up against its previous high. More of this rally and they will both break to new high ground. The Seasonal Force is with them. 

 

Another Lower High in the NYSE

Weekend Feb 7, 2015

Of Two Minds Suggests Working Comfortably in Retirement, probably a better idea than betting SPY  goes up for another five years

http://www.oftwominds.com/blogjan15/retirement1-15.html

Stocks mark another lower high on the NYSE.

The daily CCI is overbought and the NYSE turned down a bit as it marked a lower high. 

About the best that can be said is that this has been inconclusive since the November high. Just as the markets look to break down, in classic saturday morning serial fashion, they turn up.   A couple of the services we follow had Friday as a very conclusive indicator day. I am guessing this was a high and the market turns lower.

TLT Bonds

TLT has corrected from a very over bought condition. The does not reverse the uptrend which is way over the MAs. I own a small position and had thought bonds wold advance in to June. But the thirty year bond has made a new high and reversed. 

Thirty Year Bond

 

that is quite a move and now the correction sets in. 

Thirty Year Bond Yield

On this daily thirty year yield chart rates are moving up but I don't know that we can say they have definitely reversed direction. 

Monthly Yield Chart

Was that it?  did we just witness the end of the bond rally that began in 1982?  It took yields from 12-14% all the way down to 2.5%!  Is the bond market anticipating the end of deflation by beginning to hike rates on its own? that is certainly a significant move on  a monthly chart. 

Been Down so Long Down Looks Up to Me

Richard Farina

It could be that we have become so sensitized to low rates that we just assume they only continue down. Maybe not. Year 2015-1982 is 333 years which is really close to a Fib 34 years, time for a reversal?

Two Hour Chart for  USO

Newspaper headlines declared the oil rally dead as oil dropped $5 from the high around $55. But on this two hour chart one can see that was just a test of the 34 bar EMA, and a 50% re tracement. 

Canadian Dollar

After the initial move up the Canadian Dollar is consolidating around the MAs. I suspect its move up has begun. 

USO Oil ETF

Oil seems to be picking itself up off the mat as well. 

The strength here also bolsters my belief the FXC will be moving up. 

Bottom Line

Stocks should roll over here. Bonds may have nit a final high in price and low in yield.

Oil and energy and energy service stocks should begin a rally. I am guessing 65-70 on oil.

I am off to an academic conference in Las Vegas which is frankly not my favorite spot. I return Tuesday. I picked up an Amazon Fire 7" HD today. If there is internet I can comment, if not nothing till Wednesday. 

dennislelam@gmail.com

 

 

 

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.

 

Oil Rallies,Stocks Likely to do the Same

Thursday Feb 5 2015 after market close    

I wrote my weekly newspaper column this morning. This morning the headlines were declaring the oil rally kaput. I disagreed noting the jump from  44 to 54 and back to 49 was simply a 50%b re tracement or a Wave Two though I omitted that techie observation from the column. 

And thinking things over it is not logical that oil would rally and general stocks would fall. 

USO

This looks like a Wave One to 20.25 and then a Wave two to 18.25. A larger third wave should be unfolding now. 

FXC

In the same time frame, the Canadian Dollar ETF is slightly outperforming crude oil, but as I thought they are moving together. I own some of both. 

Australian Dollar

 

This is not an inexpensive ETF but it is just now making the turn. 

SPY

After a month of consolidation SPY is breaking to the upside. Now it is obvious that the move down in October was just the typical October low. Everything is obvious in retro spect. 

FCX

Freeport McMoran is a well managed company completely out of favor, Buying is picking up. 

NASD summation index

The NASI suggests we might be starting quite a rally here. Notice how oversold RSI is even after the rally this week. 

 

This week I bought XES, FXC the Canadian ETF, USO, UDN, all are up today but then I added some HDGE as well, whoops. 

It looks like one can get aggressive on adding energy and energy services. I am particularly bullish on Canadian and Australian dollars.