Weekend Oct 24, 2015
It's all about creating new business models.
Friday's post, yesterday, highlighted the 2000-2002 market decline.
Both the PAR SAR on the SPX in the main panel and the CCI at bottom illustrate just what has happened since August 24. The market gets completely over sold, in August there were finally near no stocks over their 50 day MA. Then an incredibly strong rally takes hold relieving the over sold condition. No doubt many assume a bull market is starting all over again. But new highs do not happen.
A broadening top occurred in Year 2000, if the analogy works, that is where we are now. But the rally is rather thin with leadership concentrated in the Blue chips.
The majority like John Murphy have concluded this was a typical October with a big sell off followed by a sharp rally. Yes but the year is not over yet.
NYSE A/D Weekly
This is the most reliable indicator we have. The WeeklyMA crossed to the downside for the first time since 2011. The market is now having a re test of the previous high. We will watch the MAs closely. It may be that the 13 week will only weakly challenge the 34 but the market will let us know.
Bullish Percent
The market is recovering on a bullish percent basis to challenge the 50% level. Old tops become new resistance so they say. This is another key metric to watch.
Dow versus Value Line
We appropriately put the Dow in Blue, the Value Line is in red black bars. The point is that the VL seems to have run into its former high and resistance while the Dow is still climbing. This is a blue chip rally.
Transports
The Transports are the leader in most market turns. It was the first index to top last November and then begin declining. Notice the weekly 13 EMA is a still below the 34. We drew the resistance line in from last year. Again this is a metric to watch.
Tech Stock Performance
AMZN is in light blue, taking off now that it has finally made some money. But techs are really helping the recovery which his thin. Investors liked Apple's earnings jumping the stock 3.1%. Apple is in lots of indexes and helped them all.
The picture in bonds is still not clear, waiting for more clarity.
Crude Oil
Clarity however is present in the oil market. Crude closed under the 50 day MA along with money flow at top and the MACD at bottom. The WSJ article today reports nothing but red ink ahead in earnings reports. We await a bottom in the next few months.
AMLP
Notice how the 13 EMA did not cross the 34. Now all indicators are down on the Master Limited Partnerships. Once oil finally bottoms, this may be an attractive sector with good yields.
HUI
The HUI failed to break through the 13 week EMA in May but is poised to try again. Gold was down Friday but the miners all moved up nicely. This will be a matter of fits and starts to overcome the resistance all the way down from the 2011 top.
The Bottom Line
Stocks have staged a terrific rally from the August 24 and October lows. We are still of the view that this is typical of what we will experience for the next couple of years, see the 2000-2002 graph. The breadth is thinning indicating this is a big tech and large cap rally without the smaller stocks. The bull is not giving up easily.
Crude oil has turned down into our final low expected this year end or early 2016.
Gold may take until 2016 to really get going.
Social Mood
To McClellan tracks Police Officer Deaths
Carson tops Trump for the first time. Dan Menninger on WSJ Editorial Report suggested Trump has hit his ceiling while Carson has not. The WSJ group is thinking support for the non politicians will fade.
We are just 3.5 months out from the Iowa Caucus. This is the least contested modern Democrat Primary. In contrast it is the most contested Republican primary with an ethnic array of different ages and even genders. That will make it interesting to watch.
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.
|
Comments