The Market Perspective

The Bear Market Arrives Full Force

Weekend August 28, 2015

Watch Tom McClellan explain the fourth wave we are now in and when to expect the next downturn

Richard Russell warns of bear market in stocks

Steve Hochberg at the SF Money Show - EWI called a top last October As it turned out that was the beginning of a topping pattern with the Transports topping first last November and the Dow Industrials last in July 

Eric Hadik saw this coming months ago

A mutual fund will have you long all the time.  Vogel heads up Vanguard, or he did. Of course the fund wants you long all the time.l But clearly buying at the important lows of 2002, 2009 and where ever we bottom next time  will be much easier mentally than watching your stocks lose half their value. Not many investors can stomach that. This is particularly true for what the FED has now forced many retirees into. With CD rates at zilch, investors have used REITs Utilities, divided paying stocks for income. but in the 1973-74 melt down REITs were unmercifully hamnered. The worst thing now would be to buy into the reassurance that you are a long term investor only to panic once 30% of your retirement fund has vanished and then sell out. 

Tom McClellan's report has been re done and is a much easier read than a few years back. Russell tends to be a generalist but at age 91-2 has finally added some others to carry on the report. EWI tends to be early but the latest I have seen from Steve is spot on correct. Eric at Inside is hard to read with his unique cycle system but has been incredibly accurate. 

If you decide to subscribe to any of these let them know I sent you. Our point is that these are some of the top timers in the country and they are all calling this a bear market. 

Be sure to check out the article on page B1 of the weekend WSJ, $1 Billion Week for Black Swan Fund. this fund is associated with Black Swan author Nassim Taleb. The fund seeks to profit from extreme events.

The Wildest Week in Years..failed to squelch the belief US markets remain the best places to put money.

Swings Don't Shake Investors, Page A1 Weekend WSJ

Well that is true if your alternative is Russia, Brazil, china, or various emerging markets. But the probable entry into a bear market will seriously test the 'I am a long term investor' resolve

Stocks

Okay here is why I believe the market has turned. 

NYSE Weekly 

This is the first major channel breakdown since the recovery began March 2009. RSI dropped as in 2011 as has MACD.We allowed Friday that if the market recovers on a weekly basis above Dow 17,050 we are wrong and another re test of the previous highs will likely occur. 

NYSE Advance Decline Weekly 

We show two years to emphasize the first breakdown in this indicator since the March 2009 lows. 

We have stated many times that if you only had one indicator to use this would be the one. Yes it is possible for this to recover, we will just have a to monitor the market.

 Dow Jones Composite Wave Count

We stay big picture here. We won't go into more detail of the five waves in the Wave 4 shown but now there are a couple of alternatives. Either Wave 4 is complete in which we head down or this is an A of an ABC with another down up sequence to follow. All we can do is monitor to see what happens. 

REIT Party Ends

This well known REIT fund may reach back up to try out the upper boundary of the descending trend channel, the MAC looks like it. But the top for REITs was recorded back in January. 

JUNK

As we transition to a look at bonds, JUNK funds have been wildly popular as a source of 'investment income.' With bond ratings falling and interest rates rising, JNK topped in early June, quickly returning to its previous October low. Since the cross over in June it has stayed under its 34 day EMA. The plunge wot 36 was no doubt  the third wave for JNK.Wave five which follows will no doubt take out the 36 support level. 

How to Play a Bear Market

DOG

I was long this fund the last couple of weeks and made some money. I sold my positions, Positions should be accumulated on the days the DOW is up. Note the near perfect inverse relation ship with the Dow at the top.

DXD is supposed to move faster but pretty much mirrored the results of DOG.

SOX Looking for an economic forecast, here it is!

Yes so far it is a correction but  the next two months will tell the tale. Markets fall seven times as fast as they rise.

Direction of Interest Rates

Dow Utilities

Notice Dow Utilities finished the week down 4.26%!  Look two charts back at REITs,what are these interest rate sensitive markets telling us? My guess is that rates are about to explode. And explode they will percent wise from such lows. 

Ten Year Yields

While the FED dithers, the market has made the decision for them. Rates are headed up As noted weeks ago, the move from 2.3 to 3.3% is a 50% increase in rates!And note the quick reversal the last three days of the week. 

China

The wheels are coming off the Chinese Juggernaut taking all the emerging Pacific Tigers with it. 

 

EEM

After two years of a distributive top, EEM fell out of bed. Car makers, having just built lavish plants to satisfy Chinese demand, are already cutting back.

Energy

Energy Service XES

Energy Services zoomed as crude recorded a fifth wave low at $37.75 this past week. The oil market is one wave ahead of stocks and so it bottomed first.  

Exxon

 

84-88 seems a likely target for Exxon Mobil. 

Gold

Central Fund

Central Fund has moved from a -10% discount to Net Asset Value to a -8%. The rally continues. 

 The Bottom Line on Markets

With a fourth wave ending stocks should either trace out an A B C continuation of this fourth wave before finally falling to new lows or head down from here.  A weekly close over  17,050 on the Dow negates this scenario.

Bond yields appear headed higher. This idea is reinforced by falling REIT and Utility stock prices.

Gold needs a higher close to keep going, silver fell and diid not move up with gold. Gold stocks look higher.

Oil apparently hit a fifth wave low and is now rebounding in what should be an A B C affair along. Energy  and energy service stocks rebounded strongly this week. 

 

 

Socionomics

Houston Sheriff Labels Shooting an Assassination - Negative Mood on display

The One Percent, Ellen worth $190 M

Pop Trends Price Culture Robert Folsom reflects on The Last Picture Show, Clockwork Orange, and the French Connection from 1971

 

 

 

 

[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.

 

 

Biggest Rally Since 2011, MLPs at a bottom?

Wed Aug 26 2015 after market close

I got out with some winnings as the market soared today. It is always tough to know what to do in the middle of  a meltdown. 

But one thing is for sure. Amid all the negative news, the market turned on a dime and rallied. This is proof that social mood is in fact generated internally or endogenously. If external events made thumbed, we would not have had a stunning rally today but we did. Why, the mood changed this morning. What a dramatic change from Monday.

Biggest Rally Since 2011

We will have to wait and see how this plays out. 

Short term the Dow Industrials rose about the downtrend line on the two hour chart so expect more upside. This does not negate lower lows in September.

 

in the meantime the MLPs are making a big comeback, attractive yields

Stock                Yield

AMLP                    7.54%

BP                        7.2%

COP                        6.5%

COP is 7% over book, BP is at  88% of book value

CVX                        5.6%,  85% of book value

NS        Nustar        8.9%

HEP                        7.3%

Conoco Phillips

I listed several Master Limited Partnerships and oil companies with their respective yields above. 

COP and several of the other firms above have returned to their 2011 low levels. At these yields this is attractive. I gotta buy some tomorrow. Note the low in the3 full stochastic at top and the CCI at bottom. 

Yes I have been bearish but 

we allowed that if the Oct 2014 low holds the market has another leg up, this may be the case.

Fear the Walking Dead Mirrors the Mood

Tuesday August 25, 2015

I made this comment over the weekend to a the Director of the Socionomic Institute

from the tv review section in the sunday paper regarding Fear the 

Walking Dead

 

Unlike Rick and his crew, the folks we will meet on Fear are not seasoned survivors. They are a diverse group witnessing the implosion of society at its breaking point.

 

Wow, if all of us had tried to concoct a scenario correct for the mood right now we could not do better than that

Five years after the debut of Walking Dead Fear is billed as 

 

the beginning of what will eventually become the zombie apocalypse

 

I would say the timing is perfect spot on for the series

 Sure enough it set a cable series premiere record Sunday with 10.1 million viewers.

Socionomic Explanation

We are in an 18 year period of economic stagnation. Negative mood is a feature of such an era. Today's choices in entertainment trend to all sorts of monsters from zombies to vampires. The producers of this series have timed it perfectly to coincide with a top in the stock market, positive mood now shifting to negative. We may well see a return of a stock market apocalypse with prices collapsing 50% in the next year. If so this series will mirror the mood of the public. 

For Tuesday Expect a Bounce

Tuesday August 25, 2015 Pre market open

China's banks quietly close the door on withdrawing deposits.

Weekly Dow Industrials

20% drops in corrections or starts of bear markets are not uncommon. 18,000 x 80% = 14,400.

that would wipe out the gains from the start of 2013 through Augusts 2015. Already the gains from the start of 2014 are gone. Most of those gains in retrospect were simply companies borrowing at low interest rates to buy back shares boosting earnings per share and the mania over a handful of high tech companies like Priceline, hello dot.com all over again. 

Dow Two Hour

 

In pre market trading the Dow is at 16,263 up about 550 points. That sounds dramatic until you put it on the chart, see blue circle. That simply puts the market back at last Friday's close. And it will allow the MACD at bottom to recover. this could go on for a day or two. 

From the intra day low at  15,400 a 1,000 point rally would take us to 16,400. Again sounds impressive, we had some 1,000 point rallies in the 2008 meltdown but in the context of what is happening it is a normal re tracement. 

Up Close 30 minute chart

Perhaps the market will move 'sideways' in a 15,800 - 16,600 range for a couple of days to work off some of the over sold condition. This looks reasonable on a closer inspection of this 30 minute chart.

 

Overall we remain focused on lower prices into the end of September.

China Biggest One Day Fall in Eight Years

Monday August 24, 2015

China falls 8.5% Monday.  Shanghai is down 38% since June 12.

This quote perfectly frames the social mood.

"It feels like the end of the world," said Pan Chong, a social media specialist. He said he invested 50,000 yuan ($7,900) in April, made 40 percent and then saw the market wipe out those gains.

"The so-called correction will finally become a long-term bear market," said Pan, 25. "So I'm considering selling all my shares as soon as possible."

The Central Government did all it could to stimulate their markets to new highs. Then as the decline set in they tried prohibiting insiders from selling shares. This of course never works. 

European Stocks drop 2-3%.

Barrons is a comedy of contrasting thought this weekend. Shall Ren and Randall Forsyth note that Kazakhstan devalued its the tenge (who knew that name?) 22% last week. Check out the Denial phase of a bear market on page 20 where Andrew Bary says this is a swoon not a crash . He goes on to say emerging markets may be some of the best values!  Well the emerging markets around China are going to be crushed in the recession that surely is falling across China now. Other articles suggest US Steel an Royal Caribbean have great upside potential.

From the WSJ Energy Journal

China

China’s surprise move to devalue the yuan two weeks ago—which could make its exports more competitive—and a string of weak data signal the economy may be weaker than expected, despite a campaign to boost growth including interest rate cuts and measures to boost lending. “It will be interesting to see what happens overnight.

If there aren’t major moves [from the government], we could be seeing further declines tomorrow,” said Angus Nicholson, market analyst at IG.

In another sign of weakness in China’s economy that could hit oil demand, China’s foreign-car factories, once among the world’s busiest, are starting to slack off, reports Rose Yu.

The global automakers have already announced a slowdown in sales there as the economy cools. Though the auto makers expect the market to grow over the long term, the production curb suggests the easy boom times are over.

Oil

The price of oil plunged on Monday amid a broad commodities selloff, as sharp declines in Chinese equities and concerns about global economic growth prompted investors to sell crude down to its lowest levels in over six years.

The global oil benchmark, Brent crude, fell 2.6% to trade at $44.26 a barrel on London’s ICE Futures exchange. This is the first time Brent has traded below $45 a barrel in six years, and it is now trading about 56% lower than its high of $103.19 a barrel reached in August last year.

Oversupply remains the overarching factor weighing down global crude prices, with record oil production from key producers like Saudi Arabia and expectations of higher Iranian oil exports following its recent nuclear deal.

U.S. oil prices are being dragged lower as its shale-oil producers remain surprisingly resilient in the face of the falling market. The latest U.S. oil rig-count rose by two to 674, according to oil consulting firm Baker Hughes.  Read our latest market report at wsj.com.

As noted in our update this weekend, social mood is decidedly negative. Police use water cannon in Lebanon on  You Stink protestors, kidnapping soar in southern Iraq, and chemical weapons use is on the rise in Syria. ISIS destroyed another historic temple this weekend. Come to think of it, crime is on the rise in NYC as well. NYC was ground zero for the 1973-74 financial meltdown with its dysfunctions, among which were, come to think of it, strikes by garbage workers. 

Stagnation

Weekend Aug 23 2015

Yes 2000-2018 is an era of stagnation. Ch Smith Explains.  Just as the prior 18 years from 1982-2000 was expansion.

Fear the Walking Dead

Weekend August 23 2015

from the tv review section in the sunday paper regarding Fear the 

Walking Dead

 

Unlike Rick and his crew, the folks we will meet on Fear are not seasoned survivors. They are a diverse group witnessing the implosion of society at its breaking point.

 

Wow, if all of us had tried to concoct a scenario correct for the mood right now we could not do better than that

Five years after the debut of Walking Dead Fear is billed as 

 

the beginning of what will eventually become the zombie apocalypse

 

I would say the timing is perfect spot on for the series

 

Stocks have worst week since October 2008

Weekend August 22, 2015

Tom McClellan calls for a big drop in to April 2016

 The Markets

All the things we have been writing about for the last year or two are now underway. One can scan the headlines on our posts the last two months, we certainly warned this was coming. 

Negative social mood literally leaps off the page of today's newspapers with protests from Venezuela to the USA to China. China's efforts to rally its markets have ended in a stunning reversal. France is entering its bear market while Brazil and Russia are all along already into theirs. 

Recall that December 1974 marked the post 1929 low in the markets at Dow 577. The Dow Transports peaked forty years later in November 2014, one month shy of the anniversary. Despite lower oil prices the Transports headed down hard, clearly something was amiss. Still the low in the Dow forty years ago has seen its forty year anniversary two generations later in an almost perfect time sequence. 

Our friends at Elliott Wave have a myriad of Fibonacci time spans that show time and price have run out, this is an important top. We have been carefully noting how one after another the market indexes have been rolling over. Once the last holdout rolled, the Dow Industrials, the dam burst this week. 

Dow Daily

Third waves are the strongest so we must be in a third wave on the daily chart. Wave labels are always a guess until the whole affair ends. But I hazarded a guess. The markets closed Friday on the dead low of the day suggesting more selling awaits Monday.. But given the decline a fourth wave correction might start this week. Still a lower fifth wave final decline lies ahead. As we discuss later, the big question is

 

Is this a fourth wave from the low of March 2009

or

is this a new down move and the entire bull market from March 2009 topped from last November to August his month?

Apple

The biggest market cap stock on the planet is Apple, now down 20% from its high just a month ago. 

It only took one month to take out the 200 day MA, it was last crossed to the upside in 2013.

NYSE Summation Index

 

The NYSE Summation index is close to the oversold condition of last October which led to a bounce. so we should not be adding short positions here but looking perhaps to take some profits early in the week. That of course presumes picking another entry will be easy, it won't in this kind of highly volatile situation. For 

Bullish Percent

 

A mere 20% of stocks are still above their 50 day MA. Again I circled the area of the previous low. So rather than look for even lower prices right now, and I mean right now, picking entry and exit points for the next month will get harder and harder. 

Weekly NYSE Advance Decline

If you wanted to follow but one indicator this wold be it. 
I checked and this indicator did drop below the 34 week EMA in August 2011 but then recovered. So here is another clue to watch in October November.

We do expect a low at or near  the end of September. 

Now John Murphy disagrees with Elliott Wave. John believes stocks just made a 

Wave Three High form the March 2009 low. In that case the October lows have to hold. EWI believes we made a significant Wave Five High ushering in a huge bear market. Let's look back at 2011.

NYSE  2011

\then as  now stocks had a big drop in August. We have suggested a correction could start this week. And it did in August 2011. The final drop fell into October and then the bull resumed. 

The NYSE This Year, so Far on Track

We only have to wait through the end of October to see which camp is correct. Frankly it is hard for me to see the bull market resuming with the backdrop of negative mood around the world, not to mention interest rates on the rise. But let us let the market reveal itself. October is the typical seasonal low. John Murphy did admit the October 2014 lows must hold for his theory to be correct. 

 We remain open to either theory but as always it is best to let the market speak for itself. We will know in ninety days. 

 

 Ten Year Yield

During the crash of 1987, I vividly recall Sue Herrera then on FNN talking about the 'Flight to Quality' which meant everyone dumped stocks for bonds or T Bills.  Not this time. Yields dropped a bit but only a bit. This is telling us to expect lower bond prices in the future.l 

Weekly Ten Year Note Yields

The markets are three years ahead of Janet Yellen on raising yields. Notice the patter of persistent higher lows in yields. the next move should unfold as a Wave 3  taking yields much higher the next few years. 

Shanghai

Paul Krugman and Tom Friedman love to extol the wonders of the Centrally Planned Chinese Economy. But the wheels are coming off. Attempts to stop the fall have included prohibitions on selling shares and everything else the Government could mandate. It has slowed the fall but clearly the index is now trying to regain the 200 day MA, It is not likely to happen. 

France

France has tried to legislate itself into not working remember the mandated 37 hour week?  The idea was that more workers would have to be hired to do more work if the work week was shortened. That of course is not working out as France falls into the same socialist mire as China. 

Notice both Shanghai and France have just dropped under their 200 day MA. 

Energy

The energy service XES has led the way down. Now the energy producing XLE is playing catch up but to the downside. 

International Oils

Note the recent acceleration in falling prices for BP, XOM, CVX, COP. These are also in many major indexes which hastened the sell off Friday. 

XOM Weekly

Hmm could Exxon Mobil offer a clue on where the current decline might end? The Fall of  2011 saw an important low at 62.50. Notice also that was a convergence of moving averages the usual clue that a trend is changing. the two blue arrows mark similar drops. 

Crude Oil

I labeled a similar chart Friday to show oil is now in a fifth wave down. This is also true on the daily chart os we need it be aware of a potential bottom and reversal. 

Notice how the blue 50 day MA rose right to price in July and then price collapsed right through it. That was the key that lower prices were coming. Now how low do they go?  Oil traded briefly under $40 Friday on the news that the number of drilling rigs was up in the US. We are in a fifth wave which will likely go lower but like the third wave in stocks now in force, stay alert and nimble as Art Cashin would say.  Some sort of bottom probably looms in the near future, say two to three weeks.

Central Fund

Central fund is still at a minus 10.9% discount to the net asset value. We need some work at the 50 day MA and then an assault on the 200 day. 

The Bottom Line

We have two theories from two reliable sources. Either the stock market has made a third wave or fifth wave high this year. for the Third Wave theory to hold, the last October 2014 lows must hold. We will know soon. We expect a bottom and some sort of sideways correction  or bounce in the near term.

Oil is in the same position but at a fifth wave in progress. Again we expect a low in the next few weeks. 

Interest rates are on the rise long term, Janet do you read TMP?

Gold and silver exhibit bottoming action. 

Social Mood

Pop Trend Price Culture

Headlines from the Tuesday Aug 4 WSJ

Unhappy voters Shake up Contest

An unhappy and unsettled electorate is going a lift to anti establishment candidates and caging the dynamics of the 2016 presidential contest for BOTH (emphasis added) parties. 

Bear markets exhibit a throw the bums out mentality, they are exclusionary as Bill Cosby just learned along with David Petraeus and now Hillary Clinton, Donald Trump is doing the same to Jeb Bush. Trump had 20.000 to a rally in Alabama, Bush has nothing like that to his credit. HE is not catching on with voters as the presumptive candidate. That is exactly what we would expect in a bear market. 

Dozens Arrested in Turkey Protests

Tanjin, China, Protests over Blasted Homes

Venezuela Protests Government

Argentina Protests

Estonia Ramps up Military

We could go on and on but you get the idea, negative social mood is world wide!  This seems much more like a prelude to a world wide recession not just a fourth wave pullback 

 

the time is ripe for change and change is in the wind.

 

[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.

 

 

Oil PricesDrop to Fresh Lows

Weekend Sunday August 21, 2015

I wrote this column early Thursday Morning before the two day sell off. I note the three stages of a bear market being Denial, Acceptance, and Capitulation. ON page A5 we find a classic statement of Denial from Alan Sinai at Decision Economics. 

He is bullish on stocks in the medium and long term as he expects continuing economic expansion world wide b ut he is waving a yellow flag of caution for the short term. 

Compare that nonsense with the comment buried on page B5

those worries have been evident for months. It has been flashing in everything from weak gross domestic product growth to stagnant wages, tumbling profit and sales growth tho consumer spending to say nothing of multiyear commodity sell off and China's slow boil contraction. 

Yeah no kidding. 

Oil Prices Drop to Fresh Lows

Canada’s high-cost oil-sands producers are struggling as oil prices sink to fresh six-year lows, and even the most efficient drillers are losing money on every barrel they produce at current prices.

Wall Street Journal 8/20/2015

As discussed in this space the last few weeks, oil has now taken out the previous March  low of $42.41 closing Wednesday at $40.94.  Today we provide a ‘road map’ of what to expect in the unfolding bear market for crude oil and the early unfolding of the bear move in world-wide stock markets.

Bull markets move up while bear markets move down.   Prices fall seven times as fast in bear markets as they rise in bull markets.  Accountant Ralph Nelson  Elliott described markets as moving in three steps interrupted by two corrective steps. We can identify the mood of the three down steps or waves as Denial, Acceptance, and finally Capitulation.

Indeed the weekly continuation chart for crude oil is quite clear now as how this has unfolded. Oil peaked at just over $110 in the Fall of 2013.  Since then the pattern is clear. 

Wave One – Price fell from $110 in 2013 to $95 in early 2014

Wave Two  -  Price rebounded to a lower high of $107 by summer 2014

Wave Three -  Price collapsed from $107 to the $42.41 cited above

Wave Four – Price rebounded 50% to $61; we suggested that would be the line in the sand  that oil would not cross

Wave Five – Now underway has already given back the $20 rise and is likely headed much lower

No one in the industry was worried in the Denial Phase of Wave One. In fact on the rebound, most ‘experts’ were looking for oil to take out the previous $110 high.   Indeed building in the Eagle Ford and Permian Basin was still proceeding at a frantic pace during this denial phase. We noted a fifty story building was planned for Midland, TX, just as First National Bank had expanded its building  in 1979.  As always we were assured that ‘this time it’s different.’

When price did not exceed $110, party was over,.  As prices fell we moved to the Acceptance Phase.  Then headlines like ‘Producers can Still be Profitable at $60’ began to appear.   That might be true but only if such producers are debt free.   As price dropped supply continued unabated.

The bounce from $42 to $61 convinced even the CEO of Valero to declare that ‘prices would percolate up to $80. ‘  Wrong again!   Indeed this is the typical mood of a fourth wave which causes most to believe the worst has been seen.

The purpose of a bear market is to wipe out the over optimistic excess of the previous bull markets. This is now occurring.  Hercules Offshore HERO added rigs during the boom of 2010 and borrowed to do so.   Sandridge Energy SD  borrowed to buy into the Mississippi Lime Shale Play.  Now both firms have been downgraded to extreme junk, Hercules has filed for bankruptcy and SD will likely follow.  

The 2008 low of $35 oil  is nearby. We suggested last week that if the same percentage moves hold prices could easily take out that level. The Energy Service XES index registered a new low at $20. That makes a return to the 2008 low of $12 likely.

Shares of large producers of course have held up much better, so far. But just yesterday Exxon Mobil XOM, Conoco Phillips COP, and Chevron CVX all fell  leading  the stock market lower.

But the nonsense continues.  Just today Jim Cramer at CNBC declared that low oil prices are just great. It means interest rates will likely stay low he says.  Well Jim, show me one stock market in the world that has gone up since oil prices have gone down!

We began this year in the space predicting a deflationary wave would collapse various markets.   Shanghai has collapsed from 5200 to 3600.  France, Germany,  and Hong Kong,   are all falling. Brazil and Russia have collapsed as well.

The stock market bear is following his oil bear cousin. The Dow Industrials, Composite 65,  and Transports are all under their 200 day moving averages.  As with oil in 2013-2014,  the major media is ignoring these important clues.    But there is no need for our readers to do so. 

Th Downturn Accelerates

Friday Morning pre market open August 21, 2015

Now that all the indexes have turned down, the acceleration is under way. Think of a roller coaster finally  going over the top,  the plunge begins. 

Markets exhibits fractals or larger and smaller moves. Let's look a the daily versus weekly charts to see what I mean.

Daily Dow

Here is the classic sign of a rounded top, fading RSI at top and same thing for MACD at bottom. The MAs converged as the chart price took a new direction, a common occurrence when the trend changes. 

At the daily level of trend the markets have turned DOWN.  Notice the market closed on the low for the day. 

Weekly Dow

But the point is that the weekly chart of the Dow is still in an uptrend. This explains the money managers that are still long the market from an entry level years ago. Certainly the October lows at 16,000 now become a realistic near term target. 

If we parallel the 2000-2002 decline this will be a difficult affair with many up and down swings before the final low is registered. 

On the other hand just scanning the WSJ  yesterday I was struck by the massive negative mood world wide, and indeed world stock markets are also dealing with Russia and Brazil leading the plunge down. 

Exxon Mobil

 

I will post the weekly newspaper column Sunday. In it we note that while Energy Service XES has had a big fall already, the XLE energy producers are still hold outs. The last two days action however is beginning to change that picture. Now even XOM formerly the largest company in the world, is being hit hard. 

XOM Weekly

This looks like XOM is setting up for a severe plunge. When the low finally hits it will be a great buy. 

Note the crossover of the 50 week MA, the first crossover in several years.