The Market Perspective

Not to the top yet

 

 

Market Drop

Monday Nov 30 2020

9 38 AM CST

Our message this past weekend was either or. Either we had a break out Dow Theory buy signal or we had completed five waves up, finally, and a move down should begin this week.  I am writing at the end of the first hour of trading and the DJIA just ticked down past  400 points negative.  All our proxy stocks are down

CFR  -1.57

DIV- .24

NS -.38

XOM -1.40

Our Treasury short TBF is up two cents

It may be that finally the Elliott Wave Pattern completed.

 

Please be sure to read Andy Kessler's column in the WSJ today. He notes the DJIA hits round numbers

1,00 in 1966

10,000 1999

30,000 now and then goes into hibernation for  ten years

Recall that social mood is unremembered, everyone seems to have forgotten the February peak and resulting  11,000  point drop.  Kessler points out Apple provided 2,500 points of the  12,000 point advance from the March Low. We have hammered on the point that the FANG and Tesla stocks have drive much of this rally.

We will update after market close today..

 

 

 

Five Up?

Weekend Nov 28

If the market has not completed five waves, it is surely close. PMO peaked with wave three and is lower at wave five which is how it should be.

Topping or More New Highs Ahead?

Weekend Nov 28 2020

David Keller thinks we are topping

 

See my write up posted Friday morning.

I titled it either or, in that one can read all sorts of bullish comments on stockcharts.com, after a  12,000 point advance.

John Murphy and Tom Bowley at stockcharts are bullish. Kavid Keller CMT atr stockcharts thinks

The way market tops often play out begins with us seeing an extreme bullish sentiment reading. Check. Then we would often see some negative signals, perhaps a bearish divergence, that would suggest weaker breadth as the market moves higher. Nothing yet on that note. Finally, price itself would turn lower to validate all of the above.  Bull markets die on euphoria. By any measure I'm seeing right now, we are there.

I leafed thru th eWeekend WSJ and  the headlines are not the best.  The US Dolllar has boosted foreign stocks. Mall shoppers are scant.   Another headline notes the bulls fuel the decline in the volatility index.

Let's take a look at that indicator.

the pink line is the S & P.  THE HI LO bars represent the volatility index VIX. We now have a higher high in the S & P than the February peak. The PMO has not turned up yet but could.  The same situation now lead to the  big sell off from February to March, yet most are over looking this obvious parallel.

Bullish Percent looks toppy here as well.

 

S & P made a new high but bullish percent did not,in fact we have a series of lower highs.That is a divergence.

Israel appears to have killed an Iranian nuclear scientist, Xi cracks down further, record  Covid cases, India GDP shrinking, East Europe running out of doctors, Malasayia infections  surge,  Class of  2020 looks for work.

 

On the brighter side Dan Neil tests the new Aston Martin DBX, had Bond's wife survived in Her Majesty's Secret Service,  they could have traded the DB 5 for yes an SUV.   5,000 copies available per year at

$200 K.   That is a fitting statement for a 12,000 point run in a bull market.

Liberals are cheering Yellen's appointment to Treasury, this is the job she should have turned down.

Biden plans to spend big and AOC and  Bernie bigger, but rates are rising. Big spending  schemes atop rising rates are a formula for trouble.

TBF rises with rates, again I suspect TBF is a long  term hold.

After lagging all year, energy was the stand out performer in November.

 

Proxy Stocks

Nustar Pipelines

this looks like a break out.

SKT Tanger Outlet mall - same

Daily CFR is getting over bought short term

it is possible banks and beaten down energy may outperform the tech stocks in weeks to come.

 

 

 

 

 

 

 

Either Or

Thanksgiving Day

Nov 26 2020

An Either Or Situation

"Bull markets are born on pessimism, grow on skepticism, mature on optimism and die on euphoria." –

Sir John Templeton

 

The markets have defied gravity and made new highs this past week. Last week we allowed that the markets were issuing a Dow Theory Buy Signal as the Transports and Industrials both hit new highs. In Charles Dow Theory of 1896 this meant one index confirmed the new high in the other.

 

And there is more. The Small Capitalization index Russell 2000 and S & P Mid Cap made new highs. New highs in the smaller stocks is usually bullish. And the small cap indexes are rising faster than the larger industrial indexes.

 

Hospitality stocks including airlines, hotels, casinos, and cruise lines have been battered this year. Even those are defiantly breaking out.

 

Energy has lagged all groups but is the best performer of November. Crude oil, West Texas intermediate, broke out above my resistance line at $45 closing at $45.71 Wednesday.   Energy ETF XLE has gapped up multiple times in November from $28 to $40. Even left for dead Energy Service XES has done the same closing at $43.17.

 

Banks stocks are all up on an expected better economy and higher interest rates. So, there is nothing to worry about, right?

 

Not so fast.   The markets have shrugged off the Elliot Wave completion patters, edging ever higher. But other measures suggest we are at that last gasp of enthusiasm ala October 1987 or March 2000.

The National Association of Active Investment Manager Exposure Index records weekly equity allocation. It now stands at 106%. This means funds are borrowing to buy more equity, witness the Fear of Missing Out FOMO.

The last time we hit those highs just before the September peak this year and in December 2017 before the January 2018 peak.

Last week we also noted the outsize valuation of Tesla. It is up 609% this year. At market tops investors crowd into a handful of stocks (FANG) but Tesla is one for the record books. It rallied 50% in November recording a price earnings ratio of 247. The S & P P/E ratio is about 21. Such extreme sentiment measures accompany market tops.

We have been overly cautious this year. But these valuations are no time to ignore that advice.  

Enjoy the Thanksgiving Holiday and thanks for reading.

Younger readers unfamiliar with investment guru John Templeton can watch is Wall Street Week Interview in 1987 on youtube and read about his success on Wikipedia.

Markets Appear Poised to Move Higher

Monday  Nov 23 2020

We have  couple of proxy stocks  which are looking good.

DIV

 

After months of moving sideways, DIV is breaking out.  The MAs are converging which they always do before a change in direction. OBV looks good above.

 

CFR

Here is a great example that when  strong company sells off, buy it, period.

That was the case just above 60 and then  65 and boom, not 85 a 20 point move in two weeks. again MAs are coming together.

Oil prices are moving up, buy NS

 Tanger Outlet Mall SKT

Again  MAs are coming together, dividend has been suspended but shopping will resume, buy this.

Markets on Pause

Friday Nov 20 2020

Markets on Pause

 

If you had told me in March we would have a global pandemic and lock down the economy multiple times, and at the end of the year, markets would b e setting records, I would be shocked.

Tim Courtney at Exencial Wealth Advisors

Yeah, those are my sentiments as well Tim. But markets go where they want not where we think they might go.

Last week we noted that crude has held on to $40, stocks held the break out from Monday November 9, and all eyes should be on the January 5 Senate run off in Georgia.   Not much has changed since then.

The presumptive Biden Administration will take aim at all things carbon related in the energy industry. Biden dislikes pipelines. Yet the Alerian MLP has moved from $187.50 to $25.26 since the start of October. Halliburton HAL managed a stunning ove from $10.50 to $15 since early October.

Natural gas prices doubled from $1.70 in June to $3.40 at the start of November. Warmer weather has prices falling now to $2.59.

GM plans to spend some $27 billion the next few years to cement a lead in the electric car business. GM also plans to build its own batteries. The claim is that the new battery chemistry will hold twice as much energy as the current battery. That sounds like more range but no comments on charging time. An additional claim is that costs are coming down especially when fuel and maintenance of an I/C engine are factored in.   This week the UK announced a move to all electric vehicles by 2030.  So the march to all in for electric is underway. This is remarkable in that electrics are less than 2% of the current market and the battery technology is still developing.

Even Exxon -Mobil has moved from $32 to $37.40.   At this price the dividend yield is 9%; the debate continues on the viability of that dividend.

Dow Industrials and Transports registered new highs which sounds like a Dow Theory buy signal. The uncertainty of the January Georgia election will determine the Senate Majority by a mere one vote may be putting a lid on any further advance.

Should the Democrats prevail in those two races, I have no doubt Supreme Court Packing, statehood for Puerto Rico and DC, tax increases, and open borders will quickly develop. The Democrats will do all they can to establish a vote proof permanent majority. Given the arguments over the Presidential race now, Georgia is setting up to be the Controversy of 2021.

Stocks Collapse Into Close

Wed Nov 18 2020 after market close

 

Stocks started higher this morning but by the end of the day had dropped 500  points.We now have a triple top on the 30 minute chart.

 

TSLA Completes Five Waves

Wed Nov 18 2020

Tesla has been admitted to the S & P 500. One article makes a parallel with the elder Kennedy getting a stock tip from a a shoe shine boy

At that  point Kennedy realized the stock buying frenzy had peaked, ti was time to exit.  Let's look at TSLA.

This is classic textbook behavior.  TSLA appears to have completed five waves up. Wave 2 was strong to the downside. That usually indicates wave four is a sideways affair, which is exactly what happened. As the proxy stock for the last ten thousand DJIA points, TSLA finished its fifth wave in classic parabolic fashion. Its fifth is a straight up advance of  225 points in one month.

A parabola is a  formation wrought by a geometric formula.  It is a number raise to  a power as in x squared. Only a geometric formula could result in a vertical rise. An arithmetic formula would be 2x, a much more modest rise even with a higher slope, in this case 2.

TSLA market cap is 431 billion.

GM - 62 B

F - 35 B

FCAU - 30 B

The big Three total  $127 B which means TSLA alone is valued at 3.4 x the total market cap of all three. The three of course sell millions of vehicles world wide. Tesla sells about  100,000 ion one year, and that is just recently, previous volume was much lower.

This parallels the run up in the dot.com valuations as well as stock market peaks in the past.  There is no assurance of when of course those who bought last year and have a 5x gain, will decide to exit. But when that occurs, the first out the door gets his  5x gain, then it dawns on others but whoops there is no one left to buy at such high prices. And so the parabola collapses.

A tenet of socionomics is that social mood is unremembered, here is a classic example of just that. No one buying TSLA seems to remember the dot.coms or other stock market peaks.

Gaps Up, Island Reversal or New Launch?

Tuesday Nov 17 2020

9 26 AM CST

Transports and Industrials both gaped up Monday. Is this an island reversal potential or the launch of something leading to higher prices?

PMO is stretched suggesting the market will pull back before committing itself to long or short.

Transports did not register as large a gap. One could argue this is a Dow Theory signal in that both indexes made new highs confirming one another.

Update later today.