The Market Perspective

Are Energy Shares Bottoming?

Weekend June 17, 2017

See my newspaper column posted yesterday.  I suspect energy prices will bottom and shares rebound over the next three months or so. But are we seeing some signs of that now?

Bullish Percent

 

At bottom the PMO, a Decision Point indicator much like MACD, is rising. In the main panel the downtrend line has now turned at least sideways.  As noted in the newspaper column, price is once again testing the year long $45 support.

Weekly Bullish Percent or what happened in February 2016

I placed MACD behind the price chart, This makes fore a busy graph but it also makes another thing cleara. MACD peaked along with PMO way back in April 2016. The

bullish percent has been correcting for over a year! Now PMO in the lower panel looks to be bottoming as does MACD. And the actual BP indicator is making a slightly higher low than in February 2016.   The MACD histogram is also rising.  All this is encouraging as a first sign of bottoming. And note this is a weekly chart.

Weekly XLE Energy ETF

The same thing is apparent here. In the main panel MACD looks to be turning sideways.  The histogram is turning up. AT bottom is PMO trying to bottom at the zero line?  It looks that way to me.  At top OBV appears to be turning up. It seems reasonable to expect that the big oil producers will attract some buying as the media still wrings hands over the glut of oil and low prices.

XES Energy Service

All indicators will not turn at the same time. And so Energy Service is clearly in a weaker position. MACD and PMO are both still falling.The histogram is not moving up. Price over shot the 17level to 15.86. Here is substituted on balance volume at top, no interest in the market to buy XES. So that indicator needs to pick up.XES has lost a third of its value this year. That is a pretty good correction.

Apache -  the new kid on the block indicator

Apache is not exactly a new kid,it was formed in 1954. but in Permian Basin and West Texas importance, its big find in the formerly oil barren Davis Mountains brands APA as a serious player.  I like this chart. Price has fallen $20 to 47350 support area. MACD and PMO have not turned up but again look to be bottoming.  APA was up $1.74 yesterday moving counter trend to the energy doom and gloom.   This is why I picked APA as an early warning indicator.  APA pays a 2% dividend which at least beats bank rates.

 

BP was up .76 yesterday and is paying a 6.81% dividend.

 

Social Mood Fractures

Friday June 16, 2017

Social Mood Fractures

Trump is a complex, if dangerously mad, man.

The authors propose that his mental illness is affecting the nation’s mental health as well.

From the forthcoming book, The Dangerous Case of Donald Trump

Kathy Griffin’s display of Trump’s dismembered head last week prompted First Lady Melania Trump to literally wonder about Ms. Griffin’s mental health.

Friday, June 16, 2017, 7:00 AM CST

So there you have it. Each political camp has reason to believe or has concluded that the other is mentally ill.  

Here is why this is important, way beyond mere name-calling or conclusions and insinuations about mental stability. Social mood generates social actions. Happy people are optimistic about the future and express this by attending happy themed entertainment such as La La Land. Unhappy people tend to seek out entertainment that mirrors their mood.   The Exorcist, billed as the most horrific movie ever made, was wildling successful during the bear market of 1973-74.

On my weblog, The Market Perspective, I have warned of disintegrating social mood for some time. The excerpt from Kathleen Parker’s column today in the column lead is a good example. Scanning newspapers today reveals a host of negatively themed mood events.

Here in San Antonio the current Mayor and six of ten city councilmen were given the boot, and voted out of office.

Representative Steve Scalise and three others were shot during a baseball practice.

In response Paul Ryan and Nancy Pelosi condemned the event and promptly adjourned for the day. This very lack of action is, of course, precisely what propelled Trump into office, did Congress not notice that?

Arrest warrants for twelve of Turkey’s President Erdogan’s thugs who attacked protestors in Washington, DC have been issued. The negative mood was that Erdogan thought he could get away with it, and in fact did.

With elections scheduled next year in both Mexico and the US, time is running out for re-negotiating NAFTA.   The failure to do so casts a negative pall over negotiations that would begin in 2019.

After six years of promises, the Republicans have not passed a single large legislative act.   Health care, tax reform, trade, military are all still awaiting action.

Charles Calomiris at the Columbia Business School notes that “Dodd-Frank has been a trifecta of failure. It has not achieved its objectives but has imposed enormous costs on banks and the economy.” Again Congressional progress on reform is not in sight.

Two hundred Democrats have sued President alleging his business dealings are a conflict with his Presidency. This is the route of legal harassment that eventually drove Sarah Palin from the Alaska Governor’s Office.

Kroger shares fell 19% yesterday on slower sales. Nine percent of Macy’s customers account for 46% of sales. Both statistics reflect the big shift in retailing and closing of hundreds of stores vacating shopping centers.

The New York Public Theater is staging a play based on the assassination of Julius Caesar but with Trump in the part of the Emperor. In contrast to most stage acts, the death is vividly portrayed in bloody fashion. Do not expect a cancellation of the ‘performance’ in the wake of the political shooting this past week.

And yes tech stocks that have driven the rally this year have begun selling off.

Social mood is not a crystal ball but this same sort of negativity gravitated to markets in 1973, 2000, and 2008. It bears watching.

Oil prices bottomed in February 2016 around $25. Prices then rose moving back and forth across a support line at $45. I count at least five successful tests of that level since May 2016.That level is being tested once again. Crude WTIC closed at $44.45 yesterday. Energy share prices have sagged across the board. The first sign of a turn will be when the shares of the strongest players begin climbing, amid low oil prices. This would be Chevron-Texaco, Conoco-Phillips, BP, and ExxonMobil.  BP may have reversed its down-trend. The others are at least moving sideways and have popped to the upside the last few days.

The percent of energy stocks in bullish formation has fallen to 15-17%. This is the same level of the first pullback off the February 2016 bottom occurring March 2016. The next few trading days and weeks will reveal whether the $45 level has held or if we have more downside before a bottom is recorded.

Follow Dennis at http://www.the marketperspective.com

How Social Mood Forms Market Lows

Thursday June 15, 2017

Well, I've been down so Goddamn long
That it looks like up to me
Well, I've been down so very damn long
That it looks like up to me
Yeah, why don't one you people
C'mon and set me free

The Doors, Down so Long

There are common characteristics of the social mood at market lows. 

The first is massive negative media suggesting the trend absolutely cannot reverse.

Front page WSJ today, Oil Glut Exposes OPEC's d Limits

Page B1 Slow Divide Slows Aramaco's IPO

Statistics are cited that an over supply of whatever, stocks, bonds, oil, natural gas, is so great that prices may indeed go to zero, seriously that headline appeared

when natural gas traded at $1.90 a few years back

The same thing happened in February 20116 as oil touched $25, and then magically reversed.

And to the most interesting article today is page B 13,

The Oil Outlook is Now so Bleak It May Ben An Opportunity

Spencer Jakab observes

Things look bleak, but oil bulls nursing losses should take solace in the fact that the consensus view in this market is usually wrong

WTIC Daily

Here is a  head and shoulders view of the current market. It is right where it reversed the last four times. But will that happen again or will it fail. OBV at top suggests lots of bets on the downside..

Weekly WTIC

This weekly uptrend has held since last April. If price breaks this trend, prices are liable to drop into the 30s again.

Monthly WTIC

The slow moving monthly chart shows just how important the next two weeks will be. RSI at bottom is at zero, it needs to turn up here.

At top MACD is turning over to the downside. It too needs to hold and move up.

I don't see much encouraging in the monthly chart other than the fact that price is near, $10-15. previous lows, where it quickly reversed.

I would guess $40 is about break even for many world producers, if not $45 were we are now.

 

 

Tech Stocks Reverse at Highs, Energy Sentiment Sags

Weekend June 10, 2017

Headlines and comments in the Weekend WSJ

Oil Investors' Early Faith In a Rally Begins to Wane

Sentiment is now to the point where it seems like many are ready to give up

Scott Harold, Analyst RBC Capital Markets, Weekend WSJ

Other Headlines

 

Tech Stocks Suddenly Get Slammed

Money Managers view the NASD Comp as the world's most crowded trade

++++++++++++++++++

An article  noted that if FANG were one company it would be trading at over 30 times earnings.

Performance Chart, Techs versus Energy

The Energy ETFs are at bottom, all above them are the high flying tech stocks. Not surprising we had a sell off in tech Friday.

NASD 100 versus Transports

The Friday collapse in the Tech Heavy NASD 100 is the big red bar at the far right.

The black line is the Transports which have not joined in a new high with the NASD 100 or the DJIA.

 

The Russell 2000 joined the bull party Friday with a new high given that it contains many bank stocks. Treasury prices fell giving impetus to the idea that interest rates

will increase helping bank earnings.

Netflix versus Apache, using Apache as a proxy for energy shares

Apache is the red black bars while NFLX is the solid black line. They have been going in exact opposite directions since last December APA rallied Friday off a potential double bottom But it did that in late March and then failed again.  Really we need a close over the last high at 54 to suggest a real trend reversal.

Energy Bullish Percent

So what does a fund manager do if he exited tech stocks Friday, look for a beaten down sector ready for a bounce perhaps?

Let's watch to see if that happens in Tech versus Energy.

Refiners

Holly HFC

HFC had a nice jump Friday and is paying  a 5.49% dividend.

PBF is paying 5.79% and also had a nice upward move.

I was taken by the energy sentiment quote  listed earlier, everyone is ready to give up.That is exactly what we are looking for.  But my sense is that we have have a counce here and then a another low this fall.

 The Bottom Line

The Tech sell off Friday suggests correction time may have finally arrived.

James Flanagan at Gann Global notes that we have now moved into the top timing of the 60 year stock market cycle. That could be anywhere between now and August this summer.

Energy might be the recipient of some money looking to go to work.

Gold is a bit better than silver, silver looks to be rolling over.

Social Mood

More Headlines

Don't Bet Your Money on Britain's Broken Politics, Page B1

After Upset, UK Leader Seeks Ally to Retain Power

The lead editorial in the Weekend WSJ makes the British Tories sound a lot like US Republicans.

Tories want to shed the right wing ideology of Thatcher.  Mrs. May embraced ideas like a cap on household energy prices, rallied against business, and delivered speeches about the good government can do.

The throw the bums out mentality that caused BREXIT is alive and well. This should have been obvious to the new PM. Guess not.

Here in San Antonio we had a municipal election this weekend.

Three years ago the up and coming 'star' of the Democrat party was Mayor-Julian Castro. He is one of twin brothers, the other is now a Congressman from SA.  Julian left to become Obama's Housing Director. In the meantime the liberal SA Express News became the Castro fan club. The paper featured lush profiles extolling just how wonderful he was-at everything. His accomplishment actually consisted of raising the sales tax a quarter of a point to finance pre K(read free child care and government indoctrination) and a bond issue to expand the convention center. A squabble ensued over who would be the next mayor.  A black female council member, Ivy Taylor got the nod by promising to only be an interim Mayor. Castro left between elections and she promised not to run for re election. That compromise won the day.

Oh, understand that this is a City Manager Council Government, the Mayor should just be a place holder figure head. But with Henry Cisneros as a former Mayor and then the enwspaper becoming the Castro Fan Club, the job somehow became more important.   Did I tell you we have the highest paid City Manger in the State?

But Ivy liked the job so much, she abandoned her original promise and ran a hard fought race against prominent Texas Democrat Leticia van Putte. Taylor won.

Now understand this is a divided city, north being affluent and white, east being black,and the south being less affluent Hispanic. So the Democrat Party Chair, an Hispanic firebrand, Ivy Taylor, and Ron Nierenberg, a northside Jewish candidate are in race along with some also rans. Taylor fails to get 45%.

In the run off this weekend, Nierenberg won with a ten percent margin.  Ron received the endorsement of former Mayor Castro. Amazingly van Putte and Taylor mended fences with her former foe endorsing Taylor.  As best I can tell today, at least five of the nine or ten council seats were replaced with new members.

So San Antonio went from Hispanic Male to Black Female to Jewish Mayor in two cycles and replaced a a majority of the Council.

And this is in a City that works with a AAA Bond Rating!  Social mood fluctuates, is unremembered, and subject to violent turn on a dime changes.

Other Thoughts

With health care, tax reform, airline modernization, cut fraud and waste and a host of other issues, and with the Republicans in control of all three branches,

why is it that we have time to listen to James Comey? Comey has been a consistent problem for Bush, Clinton, and now Trump.

 

[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 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.

 

 

 

 

 

 

Our Fears Realized, Oil Drops 5% in One Day

Thursday June 8, 2017

Tom McClellan begins to grasp socionomics

And he notes the low recorded 6/24/13  this supports our idea of a sell off into the end of the month

 Our most recent newspaper columns have been concerned about a potential oil price drop. We cited dangerous support levels for both crude oil and the price of Apache and the XES.

The structure of USO having to re buy futures every month makes it unreliable for longer term analysis.Now it is nearing the low set when oil touched $25 in February, 2016. But oil is about $20 above that level now. No one knows how far oil could fall this time but one thing is for sure, it is falling.

Recall that social mood drives speculation in oil prices. And one can endlessly speculate via ETFs, futures, and options. So oil prices swing far lower and higher than supply demand would dictate.

The chart import feature is not working for some reason.

On the daily chart prices have dropped below the neckline at 45 four times since last September.  Each time price over threw the line and then recovered.  While the daily chart is over sold,  each day more negative news no doubt spurs more downward speculation.

On the weekly chart we have four higher lows.But again things need to improve quickly. I rather suspect we will see confusion and energy price chaos until a final low in Sept/Oct.

Valero is bouncing off its 200 day Moving Average.

 

 

 

17 Year Cycle

Monday June 5, 2017

This weekend I mentioned it had been 51 years since Lenny Bruce died. Kathy Griffin's implosion last week reminded me of Bruce's end.

51 years is a composite of three 17 year cycles. 3 x 17 = 51.

1966 was a high for the DJIA just as 2017 is a high now.

17 years after 1966, the DJIA was just at the end of its long 1966-1982 bear market. Regan had been elected and in office but the market still took two years

to get going.

And this week we have The Cosby Show as Drudge put it. This is the biggest celebrity trial since OJ. fitting the higher DJIA Cosby is a much better known figure

whose career spanned decades on stage and tv.

Amazing, isn't it?

Energy Update, Two to Watch

Monday June 5, 2017 / 11:00 AM CST

I wrote about a potential bottom in energy this weekend.  Here are two to add to your watch list.

EEP

 

 

Potential double bottom here, volume is low as the day is not even half over yet. Current dividend yield is 8.47%. Dividend was recently cut but still high.

PBF Current Dividend 6%

EEP and PBF are both pipeline companies, not producers or service business.

AMLP

The dividend has been falling for AMLP but the current .215 quarterly works out to 7.2% annual.

We will continue to monitor the BPENER and USO Charts for signs of bottoming action.

 

 

Energy Stocks Still Falling, Setting Up Eventual Buy, Divergence in Industrials and other Indexes

Weekend June 4, 2017

Let's look at Energy first.

Bullish Percent Energy

 

 

This chart is sourced from Greg Schnell at stockcharts.com  The point is that the bullish percent is nearing a buy zone, see previous arrows at bottom.  But that bottom is likely several weeks ahead.

BPENER Ten Year

 

This is a monthly chart going back ten years. Remember monthly charts move slowly!  But the chart as  marked by past blue arrows at similar junctures, is setting up a buy signal.

 

Weekly BPENER

Looks like these weekly extremes occur about once a year. We are getting closer to the February 2016 extreme low.

We will update this looking for a great entry opportunity.

Stock indexes not making a new high.

Dow Transports, Major Market Index, Russell 2000

New Highs

Industrials, SPX, NASD 100- wow!

Declining Breadth

A new high in the SPX but declining participation in the percent of stocks hitting new highs.

This should set the stage for a correction in stocks which we have been expecting. More updates to follow.

Social Mood

We have written the last few years bout an expected surge in negative mood. It is here now.  This link takes one to Kathy Griffin's  idea of humor displaying the severed head of the President of the USA.

http://www.tmz.com/2017/05/30/kathy-griffin-beheads-donald-trump-photo-tyler-shields/

Decorum precludes display of such on this blog.

Actually like Joy Behar, Kathy is not a comedian in the Johnny Carson or Jay Leno or even Joan Rivers sense. Instead here idea of comedy is an insult at a politician she dislikes.

The reaction in mood was swift. I saw one site on Yahoo where some 19,000+ comment were posted, While I did not read but a dozen, they opposed her idea of humor.

Another CNN site sported 8,900 posts, again same thing.

This is why Trump won, and why the left just does not get it, but our point is that the country is now completely polarized

Griffin is stunned that some of her gigs have been cancelled, this all reminds me of Lenny Bruce at the end of his career.

 Bruce died in August 1966 at the top of the bull market then registering the first ever 1,000 mark.

Griffin's moment has come at DOW 21,000, a 21x multiple of the high  51 years ago.

In 2011, Griffin shed her shirt on air during the New Year Eve Show with Andersen Cooper.

https://www.youtube.com/watch?v=v-nY4Aj5JK4

This time the stunt did not turn out so well.

Meanwhile, the British PM states enough is enough after seven die and another four dozen are wounded in  last night's attack. Last evening NBC was skeptical it even happened and  a host on CNN used a four letter word to describe Trump's reaction, we need to halt immigration.

If this is what we have at DJIA, 21,000, imagine what might happen with a substantial market decline.

 

[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 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.

 

 

 

 

Analysis of a Bond Rally - Elliott Wave International

Posted Friday May 2, 2017

 

 

Can a Chart Pattern Help You Catch a Strong Bond Rally? Yes.
Plus, find out about a dangerous flaw in a "buy-and-hold" stock market strategy

By Elliott Wave International

The Elliott wave model has helped investors catch market turns for eight decades.

As Frost & Prechter's Wall Street classic book, Elliott Wave Principle, says:

The Wave Principle is the best forecasting tool in existence. [It] imparts an immense amount of knowledge about the market's position … and its probable ensuing path.

Of course, the proof is in the pudding.

Or, in this case, the bond market.

Elliott Wave International recently applied their knowledge of Elliott wave price patterns to the bond market, and the forecast they shared with their subscribers turned out to be ... well, you be the judge.

Let's start with this chart and commentary from Prechter's March 2017 Elliott Wave Theorist:

As shown in the chart above, the consolidation in bond futures prices from December through February took the shape of a triangle, a formation that typically appears in the wave four position within an impulse. So, this month's new low in bond prices is likely occurring within a fifth wave from last year's high, suggesting that a substantial rally should develop this spring.

The Elliott Wave Theorist published March 17, and its forecast for a "substantial rally" proved timely: The 30-year U.S. T-Bond price low of 145^26.0 registered on March 14, and since then, long-bond prices have indeed moved northward.

You can see this rally [entire wave labeling available to subscribers] in the 30-year U.S. T-Bond in Elliott Wave International's May 22 Short Term Update chart:

As you can see, the price rallied to a high of 155^16.0 on April 18 -- a 6% advance in a month! Recently, after a short retreat, the climb resumed.

Before concluding, let's briefly shift focus to the stock market -- specifically, the claimed average gain of 7.228% during the past 116 years that investors have allegedly been making annually.

"Buy and hold" proponents often point to that annual gain figure. Problem is, in reality, investors pocket substantially less -- and that has direct implications for your portfolio.

In fact, once you review the 3-page, eye-opening section in the March Elliott Wave Theorist, which includes 4 tables and a large graph, you'll learn just "how difficult it has been to earn any real return in the market."

Here's the good news: You can read the entire 10-page March 2017 Elliott Wave Theorist 100% FREE -- but only for a limited-time. Read below for details.

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Read this eye-opening issue now and you'll get a clear picture of what's next for stocks, bonds and oil and more to help you jump on opportunities and sidestep risk. This free issue (a $29 value) will show you Prechter's unique outlook and give you a new perspective on the markets you won't get anywhere else.

Download your FREE issue from Robert Prechter now -- for a limited time.

This article was syndicated by Elliott Wave International and was originally published under the headline . 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.