The Market Perspective

Meltdown Things Look a Lot Like 1973-74

Weekend Dec 22, 2018

 

Stock prices fall seven times as fast as they rise.

This fact is being demonstrated every day.

 

 

Stock Market

 

The bull  market in stocks and energy ended October 3, 2018.  This is a top of considerable significance possible dating back to 1982. The bull market in gold resumed August 17, 2018. It is imperative to switch your outlook from bull to bear in energy and stocks

 

There are plenty of statistics on the markets so let’s provide a different perspective on what may happen. In 1972 Richard Nixon was re-elected in the greatest landslide ever. He beat a very Progressive George McGovern. Nixon demanded resignations and new applications from his cabinet resulting in turnover. The media despised him and his victory. He faced a resentful Democrat Congress. The war in Viet Nam dragged on amid protests. OPEC created an energy crisis.   The stock market hit a new high over 1,000 but quickly reversed. Soon Watergate and various scandals dominated the news. Nixon aides eventually went to prison. Does this sound familiar?

 

Now the energy crisis is on the other foot as Russia and the Saudis need higher oil prices to finance their economies. The media relentlessly attacks Trump over every imaginable sin. Protests occur around the world and here during the Cavanaugh hearing. Jim Mattis and John Kelly both resigned. Social mood is totally polarized now as then. The 1973-74 era resulted in a slow bear market taking the DJIA down from 1,000+ to 577 in two years. Now the DJIA falls hundreds of points a day, unable to rally. That period may well serve as a template for this one.

 

Energy

 

Last week I suggested a lower dollar might help oil prices. We got the lower dollar but not higher oil. So oil prices are declining on a weakened dollar, the worst of all scenarios.

 

Today Friday WTIC hovers around $45. Frankly the chart patterns are telegraphing the possibility of much lower prices ahead. Energy share prices have been decimated between the stock market and crude oil price sell off. The XES Energy Service ETF is now trading under its January 2016 low of $12.50. We have noted for months that the XES had failed to confirm the move higher to $76 oil.   Bell weather Patterson PTEN will probably trade in single digits by year-end.

 

The bear market in oil prices will not only mean lower pries for energy shares but many firms will be forced to merge be taken, or simply go out of business.

 

Again we suggest readers study the 1973-74 era as a guide for 2019.

 

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EWI Market Report

Thursday Dec 20, 2018

 

Market Minute - December, 19, 2018

By Elliott Wave International

Good afternoon and welcome to our first installment of the Elliott Wave Market Minute.

The big story of the day is in U.S. Stocks.

The Dow Jones Industrial Average topped out at 24,057 and then plummeted to a new intraday low for the year of 23,162. The index also made a new closing low at 23,323.

The S&P 500 hit a high of 2,585 and a low of 2,488, closing down 39 points at a yearly low of 2,506. The S&P's range of nearly 100 points was the biggest since February 9th. Today was also the first day that the index closed below its 7-year trendline connecting the lows of 2011 and 2016 on log scale.

Nasdaq futures topped at 6,610 and made a low of 6,301, closing at 6,352.

Today is the first day since February that the Dow and S&P made joint new intraday and closing lows.

The stock indexes topped one minute after 2:00, when the Fed announcement began. Buying was so strong that the Emini S&P futures traded briefly at 5 points above fair value, the Nasdaq futures 15 points above fair value.

774 stocks closed up while 2,105 closed down. TRIN was 1.19.

TICK today reached a low of -1,560, the most extreme negative reading since October 29.

The stock market's volatility was nothing compared to Bitcoin Cash, which was up 31% today.

Gold rallied at the market open, hitting a high of 1,262, but dropped into negative territory in the afternoon, bottoming out at 1,245 just before the close.

Silver came within 5 cents of registering a new multi-month high, but fell just short of that achievement and closed down 5 cents at 14.64.5.

Find out what is likely to happen tomorrow. Tune into tonight's Elliott Wave Short Term Update, which will be posted at 5pm Eastern.

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.

 

Five Waves Down

Wed Dec 19, 2018

We apparently got the count right in our two hour Transport chart yesterday. That suggests a Wave one of the larger thrid wave ended.

And if you look in the WSJ today, it took 25 columns to list the new lows That is truly over sold. Again I am not expecting much rebound with

Christmas and New Year falling on Tuesdays.

Oil prices collapsed which is surely signalling a lack of demand and economic slow down not to mention plenty of supply. As 48-49 did not hold

expect still lower prices ahead.

Update Transport Wave Count

Tuesday Dec 18, 2018

I was incorrect inthinking wave one of three would be so short. It now appears the entire drop from Dec 1 has been Wave One of what should be a larger Wave three to the downside.

 

The decline in the PMO which is now flattening out also supports this view.

Any Santa Claus rally will take place this week and during the holiddays,with shortened trading don't expect much to the upside.

Note the DJIA collapsed its three hundred point advance intra day today

 

 

Well thtat didn't take long

Tuesday Dec 148, 2018

This morning I suggested if oil broke 50 it was probably headed to 40

and that would be a sign of a very very weak economy

Tale about a great forecast, OUCH for all my friends in the oil patch.

in the 4th Q reports I guess we will find out if shale producers can make money below 50 bucks.

 

and worse the S & P has already turned negative  after failing to hold up this morning

Gee after two 500 point drops back to back not even one day of rally.

2019 is not going to be a fun year.

Well Finally, Social Mood Goes Positive on Gold and Silver

Tuesday Dec 18, 2018

The XAU had a solid up move yesterday suggesting the hesitation an stubborn refusal to advance is being left behind.

See article on gold on back page of today's WSJ. It concludes gold was the best performer of the quarter.  Gee amazing how social mood changes so quickly,

Mood switched off stocks Oct 3 and onto gold Dec 17.

The next two weeks will be slow trading and that may offer the best way to pick up some shares at lower prices.

CDE and HL are still dirt cheap but both moved nicely yesterday. I suggest entering a ladder of lower and lower orders for both on a GTC basis.

Crude oil fell below $50 and is down over a buck again this morning. This suggests two thing to me

One, it is probably headed for the low 40s.

Two, this is indicative of a slowly economy world wide. Yes there is plenty of supply but less demand.

 

Gold Silver Ratio at Extreme: Stocks Drop Again

Monday Dec 17, 2018

This weekend I urged readers to familiarize themselves with the Bear Market of  1973 -74.  Today's 390+ point drop in the DJIA after Friday's 490+ drop certainly makes the case for that.

And finally the XAU appears to be breaking out. CDE changed its CEO and jumped 14% troday. Hecla HL also jumped.

The gold silver ratio is at an historic extreme.

 

This is as extreme as the price relationship gets for bold versus silver. Notice the big spike in 2011, this suggests the potential for big gains in silver. I suggest HL and CDE.

XAU

 

XAU is recording a nice 2.3% bounce to the upside in contrast to the stock market today.

 

UUP US Dollar

PMO is turned negative on UUP in mid November and is still negative.

UUP Two Hour

 

PMO declines on the two hour chart while price climbs. Friday may have been a final island reversal but we cannot know yet. This is a classic Wiley Coyote set up where Wiley literally runs off the cliff chasing the Roadrunner, when his momentum finally slows, price drops in a hurry. I suspect the price action today is anticipating that.

 

CDE

UP 15.45% in one day, the race is on!

Nice move in GLD

New Highs New Lows

Weekend Dec 16, 2018

I counted and in the weekend WSJ Friday recorded 10.5 columns of new lows and a .5 column of new highs. 

This would normally suggest a very oversold condition and a bottom.As Joe Granville observed in Oct 2008,whenittakes a foot and a half to print the new low list in the WSJthat's a low!

The problem is that prices are still falling while new lows are expanding 

We have not hit the extremes of late 2015 yet.  NYSE New Lows

 

 

 

NASD New Lows

 

Investors not Waiting for the News to Exit the Market

Weekend Dec 16, 2018

One might want to review the events of the  1973-74 bear market.

https://en.wikipedia.org/wiki/1973%E2%80%9374_stock_market_crash

http://jasonzweig.com/learning-from-the-bear-market-of-1973-1974/

Nixon had beat McGovern 520-17 electoral votes. McGovern only carried MA and Washington  DC.  The press was furious. Does this sound familiar?

Nixon took the US off the gold standard, devalued the dollar, and endured the first oil embargo by OPEC.

A special counsel  was appointed to investigate Nixon's taping of conversations in his office.Nixon finally fired him. Does this sound familiar?

 

https://en.wikipedia.org/w/index.php?search=Archibald+Cox&title=Special:Search&profile=advanced&fulltext=1&advancedSearch-current={"namespaces"%3A[0]}&ns0=1&searchToken=1tmku9zcmt4ccbc6776x3qwpb

The stock market reached  1,000 DJIA for the first time in 1966. It did so again during the 1972 election It then turned down but never had a daily crash.

The Viet Nam war dragged on with no end in sight as the Afghan War does today. 

Again does this sound familiar?

I am suggesting we have the perfect set up for a social mod repeat of that era.  The Democrats have taken the House and promise endless investigations.   Trump sees the world in terms of winners and losers.The surprise may be that realizing he cannot win again, he chooses not to run. Nixon had to resign from office or face a real impeachment. And the I word is in the news again, not much chance of success, but again lots of negative news. 

Energy

XOP Spider

With PMO headed down I would guess XOP is headed back to its 2016 low of 22.  Between the double whammy of 76-50 oil prices and now a general market sell off, energy sector has been hard hit. But I have warned the XES has forecast this with its incredibly weak performance. 

WTIC

 

Can oil hold a price of $50?  PMO is stil falling so frankly holding looks like the less likely alternative. 

Transports

Transports took out the February low this year with the weak performance this wee. The small cap Russell 2000 and the Retail Spider did the same and this is the height of Christmas shopping Season.

There is usually a Santa Claus rally in late December. that appears unlikely now.  The stock market tends to lead the economy by six to nine months. This may well be forecasting a recession.  No stock rally has ever lasted as long as this one for ten years. Given the negative social mood world wide, see Paris, that seems more likely. 

The dollar remains strong. Gold has advanced but this week should reveal if gold  continues its climb.

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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 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 predictions.

 

 

 

Wall Street Has a Breadth Problem

Friday Dec 14 2018

Wall Street Has a Breadth Problem

 

There are a multitude of technical and fundamental indicators regarding the stock market.   Here are two which are easy to understand and cut through the clutter of the focus on FANG, Boeing, and Apple.

 

One t indicator would be the list of new highs and new lows printed daily in the Wall Street Journal. While the talking heads on CNBC have been more positive on the early December reversal, the new highs to lows indicator is flashing the real story.

 

The indicator is just what it seems. It lists those stocks making either new highs or new lows for the year. The ratios for the last three days starting Tuesday are lows to highs 8 to 2, 9 to 1, and 9 to 1. So the new low list is nine times that of the new highs. How can that be when stock indexes have recently seemingly turned up?

 

The answer is that most indexes weight some stocks more than others.   A big drop in Boeing for example can account for a big drop in say the DJIA.

 

Another simple indicator is the relative position of the exponential 50 day moving average EMA to the 200 day. A buy signal occurs when the shorter rises above the longer. A sell signal occurs when the shorter 50 falls below the longer 200. Such a sell signal just occurred for the S & P 500, the Dow Transports, and the Russell 2000 small cap stocks.

 

Worse, the Russell and the Transports both hit new lows Thursday.   As I write this Friday morning, the DJIA has dropped another 200 points. I had thought we would have more of an upward correction but it is not happening yet.   The crash of 2008-09 is a distant memory to most ‘long term investors.’ But the new high new low indicator is flashing warnings that the selling should probably be done now rather than later.

 

 

Last week I was skeptical that OPEC (Saudi) and Russia would cut productions 1.2 MBD. And sure enough, OPEC increased its output in November. Today the story is that OPEC will simply ship less oil to the USA.   It is difficult to imagine two countries with nothing to sell but oil, will cut production.

 

Crude oil needs a close over $54.77 to turn its trend up and is trading below that level now.

 

Meanwhile negative mood towards politicians continues around the world. British PM Theresa May survived a no confidence vote, the French riot in the streets, and India’s PM Modi may get the boot in elections this spring.