Weekend June 25, 2016
Of Two Minds Sees Lots of Bubbles
Stocks
Dow Transports
The Monday thru Thursday rally shook out the shorts, and then no doubt stop sells kicked in on Friday. Most indices were down all day long, the Transports being typical.
One can see a last half hour buy but so what.
NASD
NASD
The 4% drop has already taken the NASD to the May support level. I doubt that will hold.
Stocks Over 50 Day Moving Average
Here is is much more obvious that the market topped April 9, the last ten week count for top of market. And it is obvious now that we are headed back to the 50 level as the ten week cycle bottoms out this week.
Google is already back to its February lows, will this level hold?
Bonds
Okay here is the really big picture. The red black bars are the yield on the t 30 Year Treasury. the scale is on the right of the chart, regrettably the
MA descriptions cover the start at top left, but that was around 15%. If you could make 14-15% in bonds or CDs, who wanted to own stocks? The green line is the SPX. As rates fell everyone bought more and more stock. Now a fibonacci 34 years later, we have the opposite of where we started, high stocks and near no return from bonds. It seems logical to expect a top in stocks and a return to normal interest rates sometime in the near future.
Goldman Sachs Commodity Index
The symmetry of this chart is easy to spot. Prices advanced form 1999 into 2009. Since then prices have fallen right back to where they started.
This re enforces my belief that the low in oil prices has been seen at the $27 level in February. Add to that the fact that energy stock prices fell very little compared to other stock prices on Friday. and note that GSCI is turning to the upside. Also note that the MACD at bottom is slowly turning up. And note RSI at top has made its lowest low on the entire chart.
My conclusion is that stocks are topping, bond yields are bottoming, and commodity prices are bottoming along with bond yields. That all makes sense from the stand point of inter market relationships.
British Pound
Now that is an outside reversal day! I do believe this may be the most extreme example I ever have witnessed.
But I also believe the selling is overdone. The fact that the PIGS now use the Euro, obscures what would be the extreme weakness of their own currencies if in fact they had one to show.
Italian Stock, Or If You think Britain had it rough Friday
In his week end column in the WSJ, Holman Jenkins points out that Italy and Spain were hit much harder than Britain. Here the Italian EWI dropped 14.95% on Friday. Spain was down 16.29%, Portugal down 7%, and Greece down 13.42%. The markets are looking ahead, seeing that the responsible countries are running out of patience with the PIGS. Are the last countries in the EU really going to be willing to bail out the PIGS? The markets are saying no way.
FTSE
In contrast to the 14% drop in Italy, in fact the FTSE dropped a mere 3.15%.
Germany was down 6.82% and France dropped 8.04%.
Looks to me like Britain was smart to make the exit first. There will be fewer and fewer big economies capable of savings the Club Med
Group. This was never going to work.The EU was an economics monetary unit without the benefit of being a unified political unit.
Recall the US Confederation of States did not work either. Without the political clout to make the PIGS toe the line, bring budgets in line with percent GDP caps, this was bound to fail.
Who is really in trouble here?
Floserve FLS
The 42 area appears to be first support for FLS.
Gold
Gold made it through its 200 week MA which is significant. The message here is that many world currencies are in serious trouble. The markets are moving back to the one currency that cannot be printed from trees.
The Bottom Line
Britain was less hurt than France or Germany who fell less than the PIGS. PIGS repent now or lose your soul!
Markets have two days to mull this over, look for a bottom in US stocks this next week.
Commodities are on the rise as is the US Buck
Socionomics
See our essays in the last two posts.
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 and 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