The Market Perspective

Massive Money Inflow Not Movingi Stocks Higher

Weekend Feb 19 2023

Divergence occurs at tops and bottoms. The dovergence is an obvious failure to follow through At a bottom this might mean more money outflow, selling but indexes do not go lower we have the opposite.  Money flow is stronger than ever, over a billion a day net buying shown in chaikini Money Flow CMF. but RSI and MACD remains in downtrends in fact if MACD is in any trend at all 

As noted in my  Friday newspaper article, the DJIA has been rangeboundd and has not exceeded the Dec high despite all the money inflow. This portends a sell off of large degree.

the bear fund HEDGE has sold off as it should and not appears to be searching for a bottom.

 

Interest rates

 

FED Chair Powell appears clue less on interest rates. He claimed in  2020 rates would stay low and  inflation would not exceed 2%. He was wrong on both coounts, do't expect an epiphany from him any time soon.

two Year Yield took off from fall 2021 and has soared from near zero to near 5%. That remains stubbornly higher than the 10 year

yield.

 

ten year yield

 

TBF a bear bond fund which rises as bond prices fall, It is consolidating and about to take off, about could mean a week or two but it is already advancing.

MY conclusion is that stock and bond prices are peaking and about to roll over. My closed end municipal bonds have returned to about where we entered, time to exit.

the coming sell off in stocks along with bonds will 'surprise' the experts in Washington.

egative mood is on the rise.   french President Macron proposes just raising the retirement age two years and  millions protest. †his is the problem with years of granting socialist wishes you can't put the genie back in the bottle.

More than a million people have joined a day of protests and strikes, according to France's interior ministry, against plans to push back the age of retirement from 62 to 64. Some 80,000 protesters took to the streets of Paris, with demonstrations in 200 more French cities.

 

EWI on Real Estate

Friday Feb 17 2023

 

 

How This Pattern from the Prior Housing Bust is Repeating
Here's when homes will likely sell for once-in-a-lifetime bargains

By Elliott Wave International

Just like the gold "in them thar hills" motivated people from all walks of life to become miners way back when, real estate booms have motivated people from far and wide to become agents.

In both cases, easy riches seemed to be there for the taking.

But easy riches can be hard to get sometimes, as this New York Times headline indicates:

As Housing Market Cools, Far Fewer Become Agents

You might think that was from the past few months. No, the date of the headline's publication was Sept. 7, 2007.

This next one is recent -- a New York Post headline from Jan. 31 of this year:

Real estate agents vanish en masse as market slows -- even in once red-hot Miami

So, agents are closing shop again -- just like 15 or 16 years ago -- before the worst of the prior housing bust.

The question is: Will this latest weakness in the property market turn out to be as severe as the last time?

No one knows for sure, of course, but Elliott Wave International's analysis strongly suggests that real estate agents, homeowners, would-be buyers and would-be sellers might want to prepare for a worst-case scenario.

As Robert Prechter noted in his book, Last Chance to Conquer the Crash:

At the bottom, buy the home, office building or business facility of your dreams for ten cents or less per dollar of its peak value.

Remember, financial changes can happen quickly and dramatically.

That was the case with the 2007-2009 financial crisis. And, as indicated, changes are already underway in real estate again. This chart and commentary from our February Elliott Wave Financial Forecast, a monthly publication which covers major U.S. financial markets, provide more insight:

The monthly chart of existing home prices shows that the June-to-November decline brought the first break of the 12-month moving average since the first quarter of 2020. This is not unusual; the chart shows a seasonal tendency for prices to decline in the second half of the year. What is highly unusual, however, is the seasonal decline's refusal to break below the 12-month average in 2020 and 2021. The sharp decline in sales, the five wave rise from the 1960s in home prices and the ability for prices to stay above the 12-month average for two straight years suggest that the current move below the 12-month average is no ordinary decline.

The bottom line is that it's best to prepare now for swift changes ahead -- not only in housing, but in financial markets and the economy generally.

Begin your preparation by starting to read Last Chance to Conquer the Crash now -- 100% free.

Find out how to get instant access to Robert Prechter’s “must-read” wealth protection guide by following this link now.

This article was syndicated by Elliott Wave International and was originally published under the headline How This Pattern from the Prior Housing Bust is Repeating. 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.

 

Interest Rates Bottom

Friday Feb 147, 2023

 

Interest Rates Hit Bottom

Yes, the headlines report inflation, price increases are lower the last few months. Problem is, the bond market does not believe it.

The ten-year Treasury note yield is the most quoted in the press.  It bottoed intra-day  February 2 at  3.33% .  Today two weeks later it has risen to 3.9%.   The two-year yield fell to 4.2% and now has risen to 4.6% in the same frame. This means the yield curve remains inverted. Short rates are higher than long rates showing concern over rate increases. This has preceded a recession in every instance since the end of WW II.

The Big Picture on Rates

We will have more to say on this in future columns. But here is the real worry.  Interest rates ended their 39-year decline form 1981 March, 2020.   The new 39-year cycle (increasing rates) has begun and there nothing any President or the FED can do about that cycle.

Congress has been on a blow-out spending binge. Total admitted national debt is around $30 trillion and the annual Federal Budget now exceeds the Gross Domestic Product. The last time that happened was the end of WW II. The determination to end the war with massive spending is understandable, the situation today is not.

Point is, massive spending is occurring as rates are increasing  This will cost an ever increasing larger part of the budge just to service the debt. Already reports are surfacing suggesting at what point higher interest rates will take the lion’s share of expenditures leaving less and less for defense and entitlements.   This is not an if but a when future event.

Markets

Stocks remain range bound with the DJIA trading between 33,600 and 34,200. Markets need to break out above that high with a weekly close.   That requires a 700 point DJIA rally from here.  

Crude oil has traded between $72 and $82. The Permian Basin is literally the production engine keeping supply adequate to meet demand. Otherwise, oil prices would be much, much higher. In fact the anti-oil regulations of Team Biden have lifted prices to this level.  Gasoline futures are suggesting higher prices for the entire energy complex, already back to the January high or $2.70. and the moving averages are coming together. This is always a precursor to a change in direction. Couple that with the rise in interest rates already cited. Sound like inflation is just taking a needed corrective rest, higher prices and interest rates lie ahead.

 

Elliott Wave Analysis of COSTCO

Wed Feb 15 2023

Here is an EW analysis oof what to expect for COSTCO.

A Dip and More Rally

Tuesday Feb 14 2023

 

We may have a dip due to a news event today or tomorrow but looks like stock and bond prices hold up into mid March

 

fibonacci number

https://www.youtube.com/watch?v=SjSHVDfXHQ4

Stock and Bond Prices Topping

Weekend Feb 12 2023

Bond Prices topped in March 2020. the fell into Oct 2023. Stock prices topped between Nov 2022 and Jan 2023 and bottomed last June-October.

Both have rallied in a large second counter trend wave 2 up.  I cannot tell if this is a correction in bonds with another high ahead or the recent high was it.

DJIA topped Dec 13 2022 and has been waiting for the NASD to finally top. That may have happened this past week.

In any event the downtrends are more likely to resume that the uptrend is to continue.

Gold and Inflation

Friday Feb 10 2023

 

Gold and Inflation: Here's a Market Myth
"If you believe in Gold as a consumer price inflation hedge then..."

By Elliott Wave International

Back in the days of the Roman Empire, an ounce of gold could buy a Roman a well-made toga, belt and finely crafted sandals.

In modern day Rome, lo and behold, a businessman can become sharply dressed via the value of that same ounce of gold.

So, yes, gold has maintained its store of value over the centuries.

However, in the relative short term -- which can last years -- gold may not be the inflation hedge that gold bugs believe it to be.

In a moment, I'll show you how this relates to what's going on with gold and inflation now. However, let's first get insights from a chart and commentary from our February 2022 Global Market Perspective, which published when inflation was really getting going (The monthly Global Market Perspective is an Elliott Wave International publication which covers 50-plus global financial markets):

The chart shows the U.S. dollar price of Gold versus the annualized rate-of-change in the U.S. Consumer Price Index (CPI). If you believe in Gold as a consumer price inflation hedge then, as the CPI is accelerating, the Gold price should be advancing. The green shaded areas show that there have been five occasions since 1980 when the opposite was true, the last year being a good example. On the other side, the Gold-Inflation myth would allude to the price of Gold declining as CPI was decelerating. The grey shaded areas show five occasions since 1970 when this was not the case, 2007 to 2010 being a prime example.

Fast forward to today and we have these headlines:

• US inflation eases grip on economy, falling for a 6th month (AP News, Jan. 23)
• Inflation in U.S. could turn negative by midyear, says [this] billionaire investor ... (MarketWatch, Jan. 28)

What's happened to the price of gold? It's steadily climbed in the face of easing inflation. Of course, this is just the opposite of what was occurring around this time last year. In both cases, the price of gold went in the opposite direction from what many would expect.

On Sept. 28, gold was trading at $1613.75 and has been in an overall uptrend since. The precious metal traded as high as $1949.46 on Jan. 26 (as of this writing on Jan. 30).

The bottom-line takeaway is that the widespread expected relationship between gold and inflation is not always there -- indeed, there have been several instances in the past several decades where the opposite is the case.

Know that Elliott wave analysis, which is by no means a crystal ball, can nonetheless help you anticipate gold's next big price move.

If you're unfamiliar with Elliott wave analysis, read Frost & Prechter's Elliott Wave Principle: Key to Market Behavior. Here's a quote from the book:

The Wave Principle is governed by man's social nature, and since he has such a nature, its expression generates forms. As the forms are repetitive, they have predictive value.

Learn about these "forms" for free as a Club EWI member.

That's right -- you can gain free access to the entire online version of this Wall Street classic by joining Club EWI -- the world's largest Elliott wave educational community. A Club EWI membership is also free, and members enjoy complimentary access to a wealth of Elliott wave resources on investing and trading.

Get started right away by following this link: Elliott Wave Principle: Key to Market Behavior -- get free and instant access.

This article was syndicated by Elliott Wave International and was originally published under the headline Gold and Inflation: Here's a Market Myth. 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.

 

The Appetite for Risk Returns

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The Appetite for Risk Returns

Speculation is back and the blue chips are falling behind.

WSJ today

We noted last week that the DJIA peaked December 13. It has been ‘parked’ waiting for the end of the NASD rally.   The DJIA is up 1.7% this year while the NASD has jumped a whopping 13%.

The usual suspects have done well. Amazon is up 20% from $80 to $100. Meta aka Facebook moved from $100 last October to $180 now.

ARKK an ETF of money losers has moved from $30 recently touching $45.  Note, ARKK turned down yesterday with a 3% drop and momentum is peaking. Risk taking abounds with TESLA doubling form $100 to $200 just this year.  America’s favorite stocks, Berkshire Hathaway, has moved from $260 to $320 and appears to be heading down.  Junk bond prices offer another clue with HYG running down this past week.

How bullish are traders?  The American Association of Individual Investors conducts a sentiment survey of individual investors. Optimism peaked back in October of 2021.  The indicator turned negative after that but just turned back up positive last week.  This coincides with what appears to be at or near the top of the counter-trend rally from October 2022.

Around the world, countries like Germany are re-considering their abandonment of nuclear and fossil fuels.  A light winter rescued Germany from their exit on fossil fuels. And now gas terminals are being hastily constructed.

President Biden, in a wave to Democrats in refining states, suggested the US would need fossil fuels for another ten years. This elicited a laugh from Republicans. Really Joe, are planes and ships going to be electrically powered in eleven years?

Investors who believe otherwise have been well rewarded.  Valero bottomed at $97 last October and then topped at  $160, now $132. Exxon Mobil, given up for dead during Covid, soared from $80 last July to $114 today.

Our take is that markets are peaking now.  A new Permanent Horror Museum is being constructed off the Las Vegas Strip by Universal, the studio which brought us the original Frankenstein. In bear markets people pay to be scared ala the Exorcist of 1973.

One-fourth of the stocks in the Russell 2000 cannot pay to service their debt. This means they must borrow even more money.  Warning signs abound.  The US total debt is now over $30 trillion, more than the annual GDP.   Biden states he will not negotiate anything on raising the debt ceiling. The ten-year note yield has bottomed around 3.4% and is already 3.7%. Rising interest rates will take a larger and larger part of the US government total expenditures.  A return to normal mortgage rates or 8% will create a ‘sudden’ crisis Team Biden will claim that no one could have expected. That day of reckoning is coming. You read it here this week.

Dare to Bare at Market Rebound

Tuesday Feb 7 2023

Every day Yahoo.com features another 'acress or singer' in a barely there outfit, Sorts Illustrated 'swimsuit' models have been a favorite.

Today we have someone named Indgrid Andress (undress?) posing and being interviewed at the Grammys.

Can anyone imagine  Patsy Cline, Loretta Lynne, Dolly Parton or even Reba McIntire in such a get up? Fashion gets frisky at market peaks and the one just now occurring in the NASD

is signified by this dare to be bare trend. She has been nominated four times, I examined the list of winners and did not see her name.  thirty five years ago such outfits were common with rock and rap singers, now the trend has  moved to so called country.