The Market Perspective

McClellan Oscillator

Dec 25 2020

The oscillator made a lower high in November and has dropped since.

NYSE

MYSE is similar but the PMO is peaking now

 

This continues to suggest some sort of downturn lies ahead, perhaps as soon as the Inauguration.

Put Call Ratio

Puts are a hedge against a decline.  A low put call ratio indicates a total lack of fear.  A high ratio indicates masssive fear.

The current low in the ratio reflects the confidence in the new highs in the market.  Contrast this with the mood at DJIA 18,000 in late March, then the put call ratio soared.

Near no one thinks the markets may be topping  out but that is clearly the message of the McClellan Osc and Summation Index.

Summation Update

Dec 24 2020

 

NASD

NYA

Notice as mentioned the NYSE is bending over faster than the NASD the latter has been powered by FANG

NYSE

this is the weekly reverse of the middle graph. Here I put the NYSE in the large graph anad the summation index at bottom. The idea is as you can see, the NYSE topped a week ago. This week it registers lower, so the topping process has begun verified by the summation index.

 

Tuesday Dec 22 2020

Global Tipping Point: "Good" Debt Vs. "Bad" Debt (Which is Winning?) All major U.S. economic depressions were "set off" by this single factor By Elliott Wave International Isn't all debt "bad"? Well, in a word, no. Broadly speaking, there are two types of debt. One of them actually adds value to the economy if handled in the right way, so you might call this a "good" form of debt. However, there's another type of debt (or credit) which hurts the economy. A classic quote from an Elliott Wave Theorist provides insight: Self-liquidating credit is credit that is paid back, with interest, in a moderately short time from production. Production facilitated by the loan generates the financial return that makes repayment possible. It adds value to the economy. Non-self-liquidating credit is not tied to production and tends to stay in the system. When financial institutions lend for consumer purchases such as cars, boats or homes, or for speculations such as the purchase of stock certificates, no production effort is tied to the loan. Interest payments on such loans stress some other source of income. ... Such lending is almost always counter-productive; it adds costs to the economy, not value. With that in mind, the December Global Market Perspective, a monthly Elliott Wave International publication which provides in-depth coverage of 50-plus worldwide financial markets, mentions "non-self-liquidating" debt as it shows this chart and says: Total global debt has risen dramatically this year and [is expected] to exceed an eye-watering $277 trillion by the end of 2020, [which] will equate to around 365% of global Gross Domestic Product, up from 320% at the end of 2019. [The] increase in private sector debt is not healthy, self-liquidating debt which, for example, would come from borrowing to invest in a new factory, the debt being paid off via the increased production. No, this is unhealthy, non-self-liquidating debt which is being added and the same is true for U.S. households' binge on mortgage debt. It's important to know about this big surge of non-self-liquidating debt in the global financial system because it strongly suggests that the eventual deflation of this debt will be devastating. You see, bank credit expert Hamilton Bolton conducted a study of major depressions in the U.S. and said (Conquer the Crash, 2002): All were set off by a deflation of excess credit. ... Deflation of non-self-liquidating credit usually produces the greater slumps. And, considering the size of the current debt bubble, the next "slump" may be one for the history books. Let's return to Conquer the Crash: The ability of the financial system to sustain increasing levels of credit rests upon a vibrant economy. At some point, a rising debt level requires so much energy to sustain -- in terms of meeting interest payments, monitoring credit ratings, chasing delinquent borrowers and writing off bad loans -- that it slows overall economic performance. A high-debt situation becomes unsustainable when the rate of economic growth falls beneath the prevailing rate of interest on money owed and creditors refuse to underwrite the interest payments with more credit. When the burden becomes too great for the economy to support and the trend reverses, reductions in lending, borrowing, investing, producing and spending cause debtors to earn less money with which to pay off their debts, so defaults rise. Default and fear of default prompt creditors to reduce lending further. The resulting cascade of debt liquidation is a deflationary crash. As we wrap up 2020 and head into 2021, you are encouraged to prepare for a global "financial earthquake" that may very well rival the 2007-2009 financial crisis. Get the actionable insights that you and your family need to know from Elliott Wave International's special free report: What You Need to Know Now About Protecting Yourself from Deflation. This article was syndicated by Elliott Wave International and was originally published under the headline Global Tipping Point: "Good" Debt Vs. "Bad" Debt (Which is Winning?). 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.

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Monday Dec 21 2020

 

the market traded down 450 DJIA points this morning pre market. A huge rally followed taking the DJIA back to barely positive

 

but not a new high

Interestingly for once the market may be planning  2021 during the  Holidays,  a first

 

Unusual move in the markets over Holiday

Monday Dec 21 220 7 20 AM CST Pre Market Open

Readers are aware I have been on the fence.  On the one hand we may be finally putting in an important top. On the other hand, a big market reversal is usually not the case during Christmas and NY holidays.

Well the markets have their own mind. and today.  the DJIA is down  469 points, S & P and other indexes down as well as are markets around the world. Oil has dropped $2. Gold is down  $9.

 

A lower close today raises the stakes that the top is in. See our update this weekend.

this is the winter solstice, shortest day of the year, it is true that dates figures in market reversals.  Jupiter and Saturn will be close this evening, first time in  800 years. Do such events affect market participants?

Weekly Summation Index

Weekend Dec 19 2020

 

NASD

 

Tesla Nudges Averages Higher

Weekend Dec 19 2020

If this is not terminal it is close in terms of Elliott.

The move up from the March low has traced out five waves.

Sixty Minute Scale for Wave 5

Trust me this traces out five waves. Notice the MAs are converging something which typically happens before a trend change.

thirty minute chart

 

Stuart Varney continues to gush about new highs in the various indexes. This is true for the NASD but not so much for the DJIA. It has poked over 30,300 three times this month. That last spike up is the inclusion of the highest cap stock ever, Texla, in the big indexes.

If the market does not take out the previous highs and make a new high, the case builds for a top.  That would be perfect given the Friday inclusion of what is one of the most over valued stocks ever, TSLA, in the S & P.

NASD 100 30 Minute

This close up of the NASD  100 will also give us some clues as to whether the top is in. Note at bottom PMO is turning down

despite the new high in the index. This is typical of ending fifth waves, the momentum is just not there

The Bond Market

 

I am pretty sure Janet Yellen is not one of our readers. I advised that she would regret taking the Treasury Secretary job.  Everyone from the FED Chair down is certain rates will remain low and that by golly if they try anything, the power of the FED will snap them back where they belong.  A sober look at the chart of bond prices tells a different story. Bond prices are falling. The MAs are turning down.  The reason is the fear of default across numerous industries rather than the fear of inflation.

Thirty Year Yield

The yield chart is the inverse of the price chart above.  Moving   from  1.2 ot 1.7% in just four months is a huge change. This is what happens at market turns from absolute bottoms. That is a  41% increase.

Thirty Minute Yield Chart

Notice the huge move up in November frfom  1.52 to 1.75.  The market has been filling that gap and testing suport at 1.55 since.

Again the MAs are  converging. a weekly close over 1.75 will have the bear market in bond prices further confirmed.

 

 

Meet the Energy Secretary

Friday Dec 18, 2020

Meet Your New Energy Secretary

Solyndra received more than half-a-billion dollars from taxpayers through the Obama administration’s massive stimulus bill in 2009 and filed for bankruptcy in 2011. On Friday, The Wall Street Journal’s editorial board wrote about another failure from the Obama era, this one costing taxpayers as much as $510 million. The company, Tonopah Solar Energy, operated the Crescent Dunes solar plant in Nevada, which received $737 million in guaranteed loans during the Obama administration. Tonopah was granted a Chapter 11 bankruptcy plan in early December.

Daily Wire 12/14/20

President Elect Joe Biden plans to nominate former Michigan Governor Jennifer Granholm as his Energy Secretary. Your reliable reporter dug into her background and files this report. She graduated from University of California at Berkeley (Harvard West) with a BA in political science and French. (You were expecting chemical engineering?) she received a law degree from that West Texas favorite, Harvard, in 1987. She worked in the Michael Dukakis Presidential 1988 campaign. She became Attorney General of Michigan. 1988. She served as Governor of Michigan from 2003 – 2011.   Her popularity droped to 32% by Deccember 2007 after a series of tax increases.

She returned to Berkeley to teach law in 2011. And then, with no more qualification than being a clean energy advocate, she was named to the Berkeley Energy and climate Institute (tag line We Hate Big Oil) and became a project sscientist at the Lawrence Berkeley national Laboratory.  She later served on the Board of Dow Chemical.

The amazing thing is just how many ‘additional environmental posts’ that exist. /former Mayor Pete Buttigieg will be Transportation Secretary (experience?). Former EPA chief Gina McCarthy will be ‘leader of domestic climate efforts.’ McCarthy will be the domestic counterpart to John Kerry (who served in Viet Nam) as international special climate envoy.   Do you suppose there will be any jealousy over such similar positions?

This quote from AOC is all West Texans need to know. “I’m over the moon right now,” seeing impetus for her impossibly expensive Green New Deal.

Again much of this will hinge on the outcome of the two Senate seats in Georgia.

The stock market is hitting new highs. The summation index (see https://professorelam.typepad.com/markets/) is topping but has not turned down. This suggests the market may hold up past Inauguration in late January.  Crude oil prices have almost made it to $50. But I don’t have much hope for crude prices once the climate change team starts moving fast as the headlines put it.

Summation Update

Thursday Dec 17 2020

NASD

NYSE

Again the NYSE is ahead of the NASD, this is why the markets are just grinding along bracketed either side of DJIA 30,00.

Still looking like it holds up into January, at least

Options Volume Hits New High

Wed Dec 16 2020

Should You Prepare Your Portfolio for 'The Roaring 2020s'?
After all, market valuation measures such as PE have reached an extreme

By Elliott Wave International

Well, the answer posed by the question in the title is a resounding "yes!" -- according to the British financial magazine, MoneyWeek.

The cover of the Dec. 4 issue of the magazine is titled "The Roaring 2020s, Prepare Your Portfolio for a Boom." An image of Janet Yellen is front and center. Of course, she's the former Federal Reserve chair and the reported pick for Treasury Secretary in a new administration. She's dressed in a 1920s party outfit and looks very festive.

Yet, stock market valuations are different when you compare the start of the 1920s with the 2020s in the U.S. Here’s a quote from the December Elliott Wave Financial Forecast, a monthly publication which provides analysis of major U.S. financial markets:

As the bull market began in August 1921, the S&P 500 price-to-earnings ratio was 14. In September 1926, three years before the 1929 peak, the market's p/e ratio was 10.72, even more subdued than in 1921. By the time that September 1929 arrived, the market's p/e ratio had jumped to 20.17. At the February high this year, the S&P 500's p/e ratio was 25.43. By December 1, it was an even higher 36.67. Other market valuation measures are just as extreme.

Even so, the extreme optimism conveyed on the MoneyWeek cover is also reflected in a recent survey of market strategists. Here's a quote from a Dec. 8 CNBC article:

A majority of analysts surveyed by CNBC expect [an] 8%-22% upside for the S&P 500 in 2021.

There are other signs of extreme bullish sentiment.

Here's just one of them as we return to the December Elliott Wave Financial Forecast with this chart and commentary:

The option markets offer further evidence of intense speculation. The 8-day CBOE equity put/call ratio declined to .40 on Wednesday, the most extreme level of call buying to put buying in over 20 years. The last time the 8-day p/c ratio was lower was July 18, 2000, at the top of the initial rebound in the NASDAQ's bear market from March 2000 to October 2002.

Sentiment measures are just one way to take the market's temperature. Another, more immediate way to look directly at the patterns of investor psychology is reflected in price charts.

That's what our December Elliott Wave Financial Forecast does for you: Namely, it describes how current sentiment measures align with the stock market's Elliott wave pattern.

So you get a complete, and immediate market snapshot -- and a clear idea as to what's likely next.

This analysis will help you ascertain whether stocks are near the start of a bull market (like the early 1920s) or much further down the road.

Get the Elliott wave insights you need to know by joining our free 5-day event End-of-Year Market View “From 30,000 Feet.”

Each day through December 18, you get an excerpt from our 10-page December 2020 Elliott Wave Financial Forecast. By Friday, you will get the entire issue at no charge.