The Market Perspective

COP Follow Up

Monday Nov 30 2015

 

Hedge Funds increase COP exposure

I recommended COP this weekend.

Stock Market Up Into Mid Dec

Weekend Nov 28 2015

Here is our all you need to know chart on the stock market. It is headed up and will be until it reverses, simple as that. 

Bottom Fishing the Energy Sector

Weekend 11/28

The Gift by Emerson  I have reprinted this 1844 essay on my ProfessorElam blog the last few years before Black Friday. Or as Waldo put it in 1844

But it is a cold, lifeless business when you go to the shops to buy me something, which does not represent your life and talent, but a goldsmith’s. This is fit for kings, and rich men who represent kings, and a false state of property, to make presents of gold and silver stuffs, as a kind of symbolical sin-offering, or payment of black-mail.

Markets are little changed from last weekend with the shortened trading days and light volume of the holiday . As we suspected markets were mostly up into the Holiday. 

Our theme for this week end issue is

“Be Fearful When Others Are Greedy and Greedy When Others Are Fearful”

Warren Buffet

I will post my weekly newspaper column tomorrow. My conclusion is that the divergence between the stronger energy and service stocks versus the  still weak oil and gasoline prices, suggests the market thinks the worst is behind us or most in the business have now slimmed down to handle the what ever happens. I have not prepared an exhaustive research of al these companies but will mention them in the hopes many of you will aid in this undertaking. I recall reading a Jim Dines letter years ago when IT stocks were getting started. He suggested buying equal dollar amounts of various start ups, on the theory that the great success of a couple would pay off big time for the entire bet. I think that is where the energy sector is now. 

Iron ore pellets and crude oil have real economic value. They are currently out of favor with companies trading at book or below book value. 

I am suggesting that whatever risk money one feels comfortable risking, pooling that money among several beaten down issues is likely to pay off over the next couple of years. 

Warning  Most of the sectors discussed here are still in downtrends. This is not meant as advice but a suggestion to begin expecting some sort of low in the near future. 

Pipelines

This sector is in trouble.   There is too much supply of both liquid and gas products so there is less need to move them. Surely the best play is AMLP which is a mutual fund of master limited partnerships in the pipeline business. 

It appears 60% of the holdings are spread across these ten firms. Sure some dividends could be cut but this diversification should allow for that even if the yield fell to six percent that's not bad in a zero yield world. Note the current dividend is 8.64%. Yes a 26 P/E is rich which is why, see below, one needs to dollar average over the next few months on purchases. 

AMLP Monthly 

I have no idea where THE LOW will be for AMLP. But given this entire history it appears we are getting close the previous lows. And at least the CCI at bottom is improving a bit. 

AMLP Weekly 

Sure AMLP could fall another couple of bucks but it looks like some support is building at the $12 level. 

ZMLP is another ETF of MLPs and currently is paying over 12%

Wrong Strategy - put all your money down at one price for any of these suggestions. 

Right Strategy - Dollar Average over the next few months into various sectors now trading at multi-year lows while collecting generous dividends for waiting. 

Dollar averaging means that one buys the same dollar amount of a security at timed intervals. If the price goes up one buys less. If the prices goes down, one buys more. And this is the right strategy when there is still no evidence of a definite bottom But by that time I am betting the prices for all these issues will be much higher. 

Iron Ore

Cliff Natural Resources 

China's steel production cut back hurts iron ore miners.  AS with US Natural Gas, supply has overwhelmed demand. We will wait in this one as well as other iron ore miners but it bears watching. Mesabi Trust obtains its earnings from CLF. There will be no dividend to MSB for November 2015.

Trust fixes a record date of October 30th, the Trustees are unable to consider the declaration of a distribution using anticipated royalty revenues earned during the quarter ended September 30, 2015. Accordingly, no distribution will be paid in November 2015. 

Under the original written royalty agreement between Northshore and Mesabi Trust, the quarterly royalty reports, and related quarterly royalty payments, for shipments of iron ore products payable to Mesabi Trust are due on the 30th day of the month following each calendar quarter end. Cliffs, on behalf of Northshore, historically has provided Mesabi Trust with Northshore’s quarterly royalty reports prior to the 15th day of the month following each calendar quarter end.

My point is that should take MSB to the eventual low in short order. Then we watch and wait. 

Energy Trusts

This looks like the best Energy Trust of the Bunch   Notice the dividend is about half the EPS. 

Mesa Royalty Trust

 

Both MTR and MVO look alike on weekly charts. 

Daily MVO

 

That looks like the start of some base building.

Many  of the other energy trusts have that train wreck sort of look to them. 

Here is my partial list from stock charts. As you can see all but MOV fell on Friday. 

Readers may want to print this list or create one in your charting program to start following some of these issues. 

USO What about a pure play on oil itself?

 

This chart puts, well, what I am talking about in a market perspective.  USO is trading well below the 2009 crash low. 

USO Daily

All the MAs are still falling we do not have a single cross over, so don't bet the farm yet. Notice how the 50 day MA in blue  failed right at the 87 day in purple. Still we have a slightly higher low, so far than at the August low.   Again dollar averaging is the way to go. And at least so far one is buying at a nine year low. 

The Natural Gas Sector looks so awful I am having a hard time just coming to grips with how far the charts have fallen. 

 

Social Mood

If the 2016 election comes down to Hillary Clinton versus Donald Trump, my advice to the younger generation would be to try to find some other country to live in. Australia or New Zealand might be a good place to start looking.
Read more at http://jewishworldreview.com/cols/sowell111815.php3#j4vDmKj2getR1ZOa.99

 

Pop Trends Price Culture

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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.

 

 

 

 

 

 

Divergence in the Oil Market, Transports Strengthen

Weekend Nov 21, 2015

Of Two Minds on Higher Education Smith makes the same point I frequently make to my students. We are in a transition period away from degrees. He suggests degrees be awarded as a result of knowledge demonstrated on an impartial exam. This is precisely what an independent accreditation is such as CPA, CMA, CIA. 

It's Year 2000 Dot.com High inSF Real Estate

Now every one has an iPhone

Energy

We have a divergence in energy. While oil prices have worked lower, the prices of energy and service shares have climbed higher.Apparently stock buyers think the industry has weathered or is prepared for lower prices. 

Crude versus Weatherford

WFT is the black line, Crude oi is the Red Black bars via the USO ETF. Notice the nice upward trajectory of WFT. It comes down to the uptrend line tests and then moves up again. 

So are there some bargains to be had in the sector.

 

MVO Oil Trust has no debt and pays a 12.86% dividend. It is trading at 25% of its year ago high.

MVO stats look good but I am not sure about MV Partners LLC

 

Various energy trusts are on our screen. We suggest positions in Flow Serve FLS. This company has been lumped in with the energy service sector but it has a much broader client base. 

 

Conoco Phillips

COP will not likely lower the dividend

The dividend is 5.49% and COP has no Mid East oil fields.

Stocks

Dow Transports

 

John Murphy is getting more positive on the Transports beginning to rally. But notice this is the one year anniversary of the Transport High in Nov 2014. with light trading during the Holiday Week coming up we may need to wait until the first week of December for clarity here.

Major Market Index

MMI looks to be completing a five wave move up from the August 24 low.

Seasonally we are in one of the best times of the year. But with the forty year cycle looming, I suspect this time it will be different.  

I am having virus problems on my mac so here is the summary.

Stocks should rally into Thanksgiving holidays, topping the first two weeks of December. 

Bonds have yet to bottom in price. 

Energy sector shows a big divergence with oil prices lower but stock prices firming.He message here is that a bottom is closer than most think. This is re enforced by so many article in full capitulation mode sighing that low prices will be here for at least another year. 

Gold and silver are waiting until 2016 to bottom. Commodities are held captive by the Dollar, not the big article on the Dollar in the WSJ this weekend, typical of what happens at market tops. 

Social Mood

Pop Trends Price Cultue

The latest thinking is that Russia, France, England and the US will not become a force to out ISIS. The Western Powers want Assad out and Russia wants him in. All of which plays to the advantage of ISIS. The attack in Mali following the attack in Paris is evidence of world wide negative mood. The President attacks Republicans on the other side of the world in Malaysia. Harry Reid promises an immigration bill will not come to a vote in the Senate. 

Meanwhile the London real estate market cools. Retail slows in the US. 

 

 

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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.

 

 

 

 

 

 

Happy Holidays

Thursday Nov 19, 2015

Stocks look to be up  into the Holiday next week. 

Crude finally traded briefly below $40 Wednesday setting the stage for an eventual challenge of $37.75 the previous low.  Energy shares though continue to show divergence with the oil price, they are not at prior lows. 

Oil and gold are both pressured by the higher dollar. 

 

Volume Surges on Move up

Tuesday Nov 17 2015

That tall vertical volume bar at far right is the largest since the decline began Nov 4. As noted yesterday, holidays are generally favorable for markets. And the market is up again in pre opening trading this morning. This is going to be a real challenge as the forty year old bull fights to hold on. 

DOG Dow Inverse Fund

DOG looks to be headed right back to where it started in the low 22s, or lower!

I am sensing a move up into the Thanksgiving holiday before any new decline can begin. 

March 2016 Crude Oil

After declining eight days in a row, March 2016 crude jumped over a dollar yesterday.  Just eyeballing this is the same pattern that prevailed in August, October and now November. The oil market often jumps after a violent incident such as Paris last Friday.  The talk is that the flow of oil might be interrupted. But that never happens. The reason is that whoever is in control of  a Mid East Oil field needs the money. And so the flow of oil continues.  For now the trend remains down. 

Stocks Crowd Traditional T Day Rally

Monday Nov 16 2015

Stocks traditionally rally around three day holidays, and T Day qualifies Thursday Saturday Sunday

I suggested this weekend that stocks could quickly reverse in a fourth wave, that is how I labeled this chart. But a reversal will need to come quickly. Markets typically rally into holiday weekends. I am thinking this will happen spoiling the bears day. The larger sell off will have to wait until well after T Day holidays. 

Related articles

Sharing 'Cabaret' with the Muck

Stocks Crowd Traditional T Day Rally

Monday Nov 16 2015

Stocks traditionally rally around three day holidays, and T Day qualifies Thursday Saturday Sunday

I suggested this weekend that stocks could quickly reverse in a fourth wave, that is how I labeled this chart. But a reversal will need to come quickly. Markets typically rally into holiday weekends. I am thinking this will happen spoiling the bears day. The larger sell off will have to wait until well after T Day holidays. 

Stocks Higher, Rally Incredibly Narrow

Monday Nov 16 2015

In the 1970s it was the Nifty Fifty, now it's the Fab Five. Goldman reports Google, Microsoft, Facebook, Amazon and GE kept the market barely positive this year. Otherwise it would be down 2.2%

In our weekend update we suggested the market was ending a third wave down on the 2 hour chart. As Wave Two on that chart was sideways, we suggested there could be a strong rally, bingo as I write a 1:14 CST, the dow is up 188. 

Stock Rally Complete, Oil Weakens

Weekend Nov 14, 2015

Social Mood Goes All Out Negative in Paris  French President declares this is WAR

Humans draw meaning from production not consumption

Of Two Minds Identifies the Real Cost of Labor  This is why I became a college professor after seeing the trend in the oilfield in the 1980-1999 time frame. The risk of having an employee outstrips the probability of gain

Oil Drops 8% for the Week

Tom McClellan looks at copper priced in Japanese Yen.

Oil Prices Likely to Stay Low Through 2016  This is typical of headlines when commodity markets are in fact nearing lows.This represents the third and final phase of a bear market, those three being 

Denial, Acceptance, Capitulation, in the final phase all hope is lost and the new low is assumed to be a permanent condition. 

Stocks

The combination of a PAR SAR buy signal a few days back, a move above the 34 day EMA, and the start of a turn up in On Balance Volume in the lower panel allow for a higher confidence entry into some bear funds. 

DIA Two Hour chart

The two hour chart is oversold and it appears a third wave is underway. As Wave Two was sideways, I would expect a violent move up so the bulls can assure us everything is okay. So where might it bounce, i.e. the third wave end?

Dow Daily

A logical spot for a bounce would be a test of the 50 day MA which is at 16,992, a mere 250  points, rounded from the Friday close. That could easily happen Monday or Tuesday. So short term that is what I would look for.  If that is the case we should see the inverse case in DOG, let's look. 

DOG Two Hour

This is indeed a mirror image, reversed of the SPX and DOW, this fund being based on an inverse DOW. I will be looking to buy DOG on a pullback. 

Retail

 

Retail was slammed Friday with Macy's reporting I believe a 5% drop in sales.

Macy's

Macy's has been nearly cut in half since July, sure Janet the economy is just fine…JCP  was nailed, down 14.7% Friday even with improved sales. 

\NYSE Daily Advance Decline

The Reliable NYSE Advance Decline line has decisively turned down. It peaked at just over a 61.8% re tracement of its fall from the May high. 

Bonds

I have a read several opinions on bonds but as last week, this one is a mystery to me. I do see four moving averages converging which suggests we may get some clarity after that occurs. But with the stock melt down this week we have not see that 'Sue Herrara flight to quality' as she used to put it on CNBC. 

Dollar

The dollar  broke out of a multi year sideways pattern in late 2014. Note that was also when the Dow Transports topped, the two are related!  Another sideways pattern has formed between 92 and 100. I doubt the Dollar will stay in this range nearly as long as in the 75-87 range. 

The impact is that  US Manufacturing has slowed as US made goods become more expensive overseas. Copper gold silver oil are all down when priced in dollars. And as Bob Prechter has noted, in a  world awash in debt the race to buy dollars to pay down dollar denominated debt is front and center on the charts.   Puerto Rico come to think of it is the poster child for Politicians Gone Wild with Debt, ala Argentina. 

Energy

The XLE Energy ETF at top rolls over with the price of oil in the main panel and the very weak, no real bounce since Aug 24, XES Energy Service ETF at bottom. 

 Unleaded Gasoline

Unleaded gasoline has already moved to a new low. Chevron and Exxon Mobil were among the weaker stocks Thursday each down over 2.5%. 

Nat Gas

I logged on a wh hey what a surprise, natural gas actually rallied this past week. This is perhaps the start of a  bottoming process. Bottoming is a process and will not occur simultaneously evening similar markets. Witness how weak unleaded gasoline has been versus crude oi. Admittedly there are a lot more speculative contracts in oil than unleaded gasoline.

Economists, as always, are wondering why lower oil prices have not stimulated retail sales. The answer is that the energy sector was the only bright spot in the economy. Yes tech drives Silicon Valley and Austin, Tx but just how big are those two places?  With tens of thousands of energy and service jobs vanishing every day, the weakness of the rest of the non job creating economy is now plain to see.  See JCP chart above. 

Admittedly FRAK has not made a new low so some optimism exists, CLR is the same. This bears watching. This could be the start of a significant divergence leading to a bottom in oil prices. 

I am expecting commodity lows late this year or early 2016. The Goldman Sachs Commodity Index GTX hit a new low Friday.  And with all this surplus oil in the world how can it  possibly bottom any time soon?  The answer is that the social mood will change towards oil. 

Gold

Looks like gold will bottom before crude oil. 

XAU  Giving the entire rise from 2001 back

XAU is trading at  20% of its 2011 high. It has returned to where it began in 2000-2001. 

Silver and CDE

Silver in the main panel has returned to its long term 200 month MA. 
This is probably the support level it needs to find a bottom. In the lower panel is Coeur E Alene, a silver miner in Idaho. It  is even lower than it traded in 2001! And of course is totally out of favor. This is how bottoms are made. 

CDE and Pan American Silver

The previous chart begs for more detail on CDE and here it is with PAAS in the bottom panel. 

Freeport McMoran FCX

FCX is making a third higher low on the very long term char. FCX is one of the better managed minion companies.  FCX is trading for .9 % of book value, has a healthy 1.69 current ratio, and pays a 1.88% dividend.  This is classic Warren Buffet analysis and shows some real value. 

In similar fashion Central Fund CEF is trading at a -10.9% discount to its net asset value. 

CEF

As with Silver, this is the first return to the long term MA by CEF since its launch in 2001. 

By the way, have you seen any of those ads where  William Devane  is pitching for Rosalind Capital lately?  As the prices have fallen apparently Rosalind has decided to wait for a better opportunity to advertise.   Since 2011 gold and silver have been anything but an insurance policy for an IRA. 

Stock            Price to Book

FCX                    .91

HL                        .5

CDE                       .49

ABX                    .9

HMY                    .14 not a misprint HMY is trading for 61 cents with 24 cents per share cash

NEM                    .79

Do not buy any single issue without thorough analysis for suitability. 

 

The Bottom Line

Stock indexes are turning down. A short term over sold condition could start a very short term rally this week. That would be an opportunity to go long bear funds.

Bonds are unclear.

The crude oil complex has further to go on the downside. We are seeing some divergence  in that some Eagle Ford stocks have not dropped further even in the face of a general market decline.

Gold/silver and miners should be making a low in the near future. Sentiment is terribly negative, miners are all trading below book value, and CEF has returned to its 200 month moving average. The situation is much like 2001. And recall the comment in The Intelligent Investor in the WSJ recently that gold is just a pet rock. 

Social Mood

Academic protests are back, a socionomic echo of the late 1960s and 1970s. Many Viet Nam Protestors are now college professors in the political science (code talk for Democrat talking points), sociology, and other humanities departments. Black Lives Matter even showed up at relatively tame University or Texas at San Antonio this past week. The resignation of the UM President will certainly embolden their efforts.

 

Perhaps the zenith of the social unrest movement was the interruption of the 1968 Democrat Convention by the chicago Seven.  In a celebrate trial, the group turned the tables on Judge Julius Hoffman. The group managed to turn all of Hoffman's attempts to quell their behavior in court to their advantage. On appeal all convictions were over turned. Tom Hayden even managed to marry Jane Fonda. The final irony however was that the group delayed the National Democrat Convention acceptance speech until well after midnight. They group wanted to stop the Vietnam War. Instead the vision of total chaos helped Richard Nixon win the Presidency, the last thing the group could have wanted. As always, be careful what you wish for. 

Creed  is the seventh in the Rocky series. The original debuted two years after  the bottom of the bear market in December 1974 at Dow 577.  There was an interesting interview with Stallone in the WSJ either Thursday or Friday. Did you know he has authored 20 movie scripts in clouding all the Rocky movies until this one. In Creed, Stallone plays the trainer for Apollo Creed's son. 

Consider how markets alternate

1974

Gasoline shortage, prices spike to highest level ever, result is stagnant economy

Republican President out of favor

Stock Market Low

2015

Gasoline falls to lowest level in years  but the result is again a stagnant economy

Democrat President out of favor

Stock Market High

Interesting how opposite events can have the same effect on the economy.

Pop Trends Price Culture

 

[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.