The Market Perspective

Is History Repeating from 1929-1932?

Monday March 30, 2020

So far the rapid sell off in the DJIA resembles

1929-1932, 1937-1942, 1946-1949, 1987-1990

In each instance there was a very sharp initial sell off, then a significant rally, and then a longer bear market ensued.

1929-1932

Initially the DJIA dropped from 290 to 200, a 50% loss. Then it regained almost to the  300 level by the following spring.

But over the next two years it would erase 90% of the top 1929 level ending at a mere 42.

the following chart shows the re bound and then decline a bit better.

Here the bounce back on a linear scale is clear followed  by the real bear market.

Transports

10 955 - 6500 = 4 455 a decline of 40%.

The PMO looks to be topping after the three day rally and then sell off Friday.So the downtrend will probably resume. The DJIA

29 568 - intraday 18 213 =  11 355 or  38% on the extreme intra day high to low

 

 

Ten Famous Bear Market Ralliles

Weekend March 29, 2020

Cable tv was touting the three day rally this past week. Such events are typical in bear markets. In a previous post we note that some 'pros' were even saying the DJIA had exited bear territory. Such remarks indicate a real lack of historic understanding.

Here is an article recounting those big rallies all in bear markets.

https://seekingalpha.com/article/4334532-bad-company-history-of-10-biggest-daily-percentage-rallies-is-bearish-for-investors

Four Waves Complete

Weekend March 28 2020

The sell off Friday afternoon suggests traders went home short the market.  The fifth wave will unfold in force this next week..

NASD -same pattern

Yes You Can Lose Your Life Savings Following Bad Advice

Friday March 27 2020

I got this today from Zack's Investment  Research

Now here is an excerpt from

this so called Pro

And the Dow, after becoming the fastest bear market in history (it officially went from a bull to a bear (-20%) in just 19 days), just became the fastest bull market in history (+20% in 3 days from its lowest close on Monday). And in total, the bear market in the Dow lasted only 11 days.

Now, I don't want to get too far ahead because the S&P and the Nasdaq have not yet exited bear market territory.

The S&P is 'only' up 17.55% from its lowest close on Monday. And the Nasdaq is 'only' up 13.66% from its lowest close.

So both of those indexes still have more to go to officially shake the label of bear market.

But they are off to a great start.

And soon, when the worst of this is over, the economy and stock market are expected to skyrocket as pent-up economic demand is unleashed.

____________________

 

This is sheer nonsense.  The DJIA did not its bear market after 19 days.  And please understand the meaning of statistical arithmetic.

After the market falls 50%, one needs a double to get back where it was.  That is not likely to happen soon.

Understanding the Elliott Wave Principle will not only allow you to hold on to your savings, it will allow you an unbiased view of how mass social psychology plays out in the markets as well as in politics et al. 

See my previous post about Norwegian Cruise Lines.

The Market Records a Wave Up

Friday March 27, 2020

The market recorded either a Wave 2 or 4 three day rally.   Incredibly Charles Payne on Fox Business was recommending a newbie relative buy, yes Norwegian Cruise Lines. I say incredibly because Charles used to be in the investment community before becoming a tv star. It could be years before a Cruise line records a profit.

 

Remember a bear market records sharp iimpressive rallies, most of which fail. And this one promptly did. Charles even commented, they don't want to miss out as they missed the March 9 2009 low. Well the equivalent to that low is a long way off.

 

And of course NCLH is down 22% just today!

Notice how price moved down to Feb 10, then sideways, then a big move down to march 20 and then finally a brief countertrend rally. This is the wave principle unfolding before your eyes. NCLH will noow take out its prior low.

 

Oil Prices Pressured

 

 

Oil Prices Still Pressured

8 26 AM CST Friday March 27 2020

 

Never let a crisis go to waste.

Rahm Emanuael, Former Chicago Mayor

Oil prices have fallen again this morning to $21.73 down almost a dollar from yesterday. And no wonder. The energy industry is reeling from lack of demand and too much supply. And the supply situation is only getting worse.

Echoing Rahm’s sentiment, the Saudis are planning on expanding oil production by 2.5 million barrels a day in April. Russia is still refusing to cut output. This is a continuing push to stamp out US Shale production.

The Texas Railroad Commission is considering limiting production in the state. But at a time when companies are pressed for cash, that will only continue the pressure the industry is enduring.

The Democrats in Congress responded in kind packing jet engine emissions and $25 M for the Kennedy Center into the $2 trillion stimulus package. The really bad news is that future attempts to throttle this kind of waste back will result in shouts that the Republicans are engaging in ‘cruel’ (latest word for Rs) cuts to consumers.

The $600 per week added to the unemployment package will result in some making more than if they were working. That occurred during the 2008 recession and was a reason the recovery we so slow.

President Trump will cease using the phrase China Virus. China has complained of that label though the problem clearly started in their country.

With 3.28 million unemployment claims there can be no doubt we are in a ‘recession.’ Generally that is two quarters of economic contraction.

Around the world social mood trends negative with finger pointing about the cause and location of the virus and energy demand.

One can read the statistics on this slowdown just about anywhere. The only real cure is not spending $2 T Congress did not have. Rather everyone needs to go back to work in spite of government mandated shut-downs. And yes there are deaths from this coronavirus but every year about 23,000 die from some sort of flu.

I am wondering how the danger of random exposure will affect future behavior. Will the cruise, airline, hotel, restaurant, and movie industries be permanently affected? What about the already declining retail shopping malls?

It seems reasonable to expect that individuals will be more reluctant to quickly begin gathering again. And that in itself will slow the chances of a speedy recovery.

Insider buying helped spur a three day 20% rally. But prices are falling again this morning with the DJIA down about 800 points.

Be prepared for a lengthy downturn.

Tom McClellan Notes Fed is Pouring Money into the Economy

Thursday March 26, 2020

 

https://www.mcoscillator.com/learning_center/weekly_chart/qe_is_bullish_for_stocks_bearish_for_bonds/

Tom McClellan notes that the FED is pouring 125 B a day into the economy, good for  the stock market

 

Now in response, the Fed is starting QE to a degree never before contemplated. QE3 was $60 billion per month of debt purchases. This week, the Fed is doing purchases of $125 billion PER DAY!! The intent is that those purchases will be $75 billion of Treasuries, and $50 billion of MBS. PER DAY!! The Fed is shoving a firehose down the mouth of the banking system, and turning the valve up full blast.

Fox Business just declared that the stock market had exited the bear market with today's 1300 point rally.

 

I remarked that the move looked too strong for a fourth wave. Perhaps the fear mongers are all wrong.

Tomorrow Friday should be an interesting day! This thirty minute chart is topping out on the PMO at bottom. No doubt the FED injections are having some effect on stocks. But driving in San Antonio it is hard to imagine that the economic shock of closing down America is somehow solved.

Cullen Frost Reaches First Moving Average

Thursday March 26, 2020

Daily Chart Trying to Break Out as Well

The  62 level is clearly resistance and then the gap above that. At 60 CFR is trading right at book value. When it did that at 44 several years ago, it went on to top 100. This is one of the best managed banks certainly in Texas if not the nation. That is why it based here at 48-60 during March.

Early Stats on Economic Decline

Thursday March 26, 2020

Here are some statistics on just how fast the shut down has affected various industries. Already I

Restaurants

• Weekly revenue is down 48% YoY. Daily revenue levels dropped to as low as 65% YoY last Saturday, and that number continues to drop rapidly.

Grocery stores

• Driven by consumer panic, grocery stores saw their highest daily revenues for 2020 last Monday, with consumer spending up 100% YoY. Weekly revenue is up 64% YoY.

Lodging

• Weekly revenue is down 75% YoY. Daily revenue levels dropped to as low as 79% YoY last Saturday.

Arts and entertainment

• Weekly revenue is down 78% YoY. Daily revenue levels dropped to as low as 100% YoY last Tuesday.

Bars

• Revenue Saturday was down 63% YoY, and (like restaurants) with many bars closed or only open for take out, that number should continue to drop rapidly. Weekly revenue is down 39% YoY.

Retail

• As of last Saturday, local retail still hadn’t yet felt the full force of social distancing measures. Revenue Saturday was down 10% YoY, while weekly revenue up 7.5% YoY.

Firearm and Sporting Goods Stores

• Driven by consumer panic to buy guns and ammo, firearm and sporting goods stores saw their highest daily revenues for 2020 last Wednesday, with consumer spending up 204% YoY. Weekly revenue is up 161% YoY.

Transportation

• With federal and state governments encouraging citizens to remain home, weekly revenue for the transportation sector is down 87% YoY.

 

 

AFouth Wave Rally Probably Ended Today

Wed March 25, 22020

It was interesting to listen to conservative media equating the 'huge rally' in stocks to day to faith in Trump and then the pullback

'due to loss of confidence in failure to pass the stimulus bill. These were simply the fundamental events verifying the wave count.

Eliott Wave is a description of mass social psychology.  I thought the move was a bit strong for a fourth, see previous post, but viewed on the chart it was not that impressive.

 

There may be a bit more left for Wave 4, passing the worthless stimulus bill, but wave 5 will begin soon. That will take out the low of March 23 under 19,000. The final low should occur in the range we have shown several times 15,000-18,000. What will happen to the faith in our leaders the talking heads expressed today when that happens/

 

But reaching that final fifth wave low will lead to a rally probably back to the fourth wave high recorded today at 22,019.