The Market Perspective

Markets Still Headed Up But Divergences Emerge

Weekend July 29 2023

Market moves end amid extreme mood and the a/d line shows exactly that

The actual NYSE index is at bottom, it bottomed last Oct followed by the A/D line. If this is Wave 2 we should not reach the extreme of the top back in  20212 but it might!

We have already had SVB and Signature Bank collapse, now check out the article on page B 1 of the weekend WSJ. Country Garden dollar bonds are trading at  20-40 cents on the dollar for maturities  2024 and 2025. That is an expectation of default.

Check out the mortgage crisis in England.  If widespread defaults occur the contagion will spread through the banking system.

advance Decline Volume goes literally vertical

This is how manias end, the FOMO causes all to jump in thinking this is a new bull market but everyone is already in, that is the problem, no one else is left to buy!  Notice PMO has gone flat at bottom

Hedge is forming a saucer shaped bottom, the precursor to a reversal. Notice the fastest moving average 8 days is moving up

2 hour chart

 

 

Oil Hits $80

Friday July 28 2023

UFOs Oil & stocks Hit New Highs

Navy pilots report UFO sightings.

Mitch McConnell and Diane Feinstein are having senior moments.

Hot streak of thirteen up session in the Dow ends yesterday.

Horror movies from Disney and others.

And no rubber stamp for Hunter, Judge suggests he get a job.

Barbie and Oppenheimer are big box office.

No lack of news this week, let’s take a look.

Dow Transports made their high at  18,000 November 20212.  The index reversed falling to 12,000 last fall.  Now the index has gone parabolic zooming to 16,588. Taking out 18,000 (all numbers rounded) and a matching high in the Industrials would be a Dow Theory buy signal.   The Industrials chart has much the same look.  The Industrials briefly hit  37,000 Fall 2021 and now have run back to  35,469.   And today Friday the  Industrials have regained most of the Thursday afternoon loss. 

The FED raised the overnight rate another quarter point, the market seems  not to care. But the yield curve remains inverted.  Translation, the two-year interest rate is still higher than the ten-year rate.  Two-year rate is 4.9% while the ten-year is 100 basis points lower at 3.9%.  A market axiom is that an inverted yield curve precedes a recession. Yet stores are returning to strip malls, UP and Fed Ex are busy, but the cost of lunch has gone to nine bucks for a burger, drink, and fries.  Casual dining prices have moved from ten dollars to about fifteen.

Our call a month back for a rally in oil prices was spot on correct.  Oil prices have risen from $70 level to $80.  Expectations are for higher prices as the hot weather has created more demand for energy to power air conditioners.

Disney’s Haunted Mansion seems to suffer from too much digital the last half hour.  The mood seems more right for Barbie and Mission Impossible Dead Reckoning. 

With senior politicians McConnell and Feinstein wilting under the lights, Elon Mush calls for a constitutional amendment. Musk did not specify what it would do but speculation would be an age limit for Congress. The constitution vision was that the citizen legislator would go home, Truman and Ike did, but since then, not so much.

USed EV car prices drop 30%

Friday July  21 2023

click here for down 30%

Market Mania Continues

Thursday July 20 2023

Stock Market  Mania Continues

Thursday July 20, 2023

Retail investors are as euphoric as in late 2021 The put call ratio and VIX Volatility Index were both low.  By January 2022 all three major market indexes had peaked. The S  & P lost  19% in  2022.

Investors Feel Bold Again, Wall St Journal today

Consumer sentiment in the University of Michigan survey jumped to 72.6 this month from 64.4 in June.   Recall that maximum mood occurs at the end of a move either up or down. That sentiment indicator is maximum mood.  Market bottoms are marked by fear and perfectly good stocks are bid down in value.  The only fear at this point is the Fear of Missing Out FOMO. This is why bets on calls (market up) are running  2.5 times bets on puts (market down).

Mania for bitcoin is back. Bitcoin miner Riot Platforms (gotta love that name) is up 458% this year. Artificial intelligence lending platform Upstart Holdings (another great name) is up 342%.

Carvana has narrowly avoided a cash crunch. It is exchanging existing bonds for new which will defer payments. And hey, why not issue $350 M in new stock shares while they can?  One might think deferring bond payments and interest would be a sign of weakness (it is).  But Carvana  shares are up 1,077% (not a typo).  CVNA traded at less than $10 in May.  Today it is about $55. This is a typical parabolic rise seen at market tops.

Inflation has eased but not to the FED’s 2% level. Expect another quarter point hike this next week.

Not mentioned on front pages are the potential negatives tucked away on page nine of major papers.  China’s economy is cooling. One in five young Chinese are jobless. The real estate sector cools.

Ford cut the price of its EV Pickup the Lightning, by $10,000.  Ford has held the number one best seller spot with its F 150 pick-up for years.  Notice the best-selling car is a pick-up.  Ford does not want to lose that valuable source of income.  There is now a 92 day supply of EVs on dealer lots. That is a long time for unsold cars. The EV mania has really existed among Washington Beltway politicians, not the public. The public seems to prefer 4 wd four door pickups with a foot print about the size of a New York City efficiency apartment.

The head of MI6, British Intelligence, sees little prospect of Russian regaining the upper hand.  This will not play well in the Kremlin.

Crude oil is trading at  $75.91, holding its $5 recent gain. I am still bullish on oil.

Robert Prechter

7/18/2023

 

Robert Prechter Interview for the Ages: Quick Takes on Big Financial Trends
'That's not even the craziest indicator on this chart. Look at the bottom graph.'

By Elliott Wave International

Robert Prechter's June 23 interview with GoldSeek.com, which is under 15 minutes, covers a variety of financial topics.

They include stocks with an emphasis on the technology sector (including artificial intelligence), bitcoin, gold and silver, corporate bonds and the prospects for deflation.

You can look below to learn how to listen to the entire interview for free.

But, first, let me share with you just one of the interview topics, and that's the stock-market sentiment which was on display leading up to the January 2022 top in the blue-chip indexes.

Relatedly, in the GoldSeek interview, Robert said:

Sentiment indicators... can tell you the extent to which [people] are extremely optimistic or pessimistic. Well, 2021 was a year like no other. Finally, in December 2021, I put out an issue called "A Stock Market Top for the Ages."

Here's one of the sentiment charts that the December 2021 Elliott Wave Theorist showed along with the commentary (The Elliott Wave Theorist is a monthly publication which covers major financial and cultural trends):

The middle graph is the ratio between the amount of money that Rydex investors have put into bullish funds versus bearish funds. Look toward the left, and you'll see the words "normal range."

[Fifteen] years ago, the ratio was around 1:1 or 2:1... In general there was a bit more money in bull funds than in bear.

Investors have been going crazy in the last five years. On November 19, the ratio reached 62:1...

That's not even the craziest indicator on this chart. Look at the bottom graph, which depicts the ratio of leveraged bullish funds versus leveraged bearish funds. It shows that there is 82 times as much money in the leveraged bullish funds as there is in the leveraged bearish funds.

So, it wasn't surprising that the Dow Industrials and the S&P 500 index topped early in the very next month.

Getting back to the GoldSeek interview, learn how you can access it for free by following the link.

This article was syndicated by Elliott Wave International and was originally published under the headline Robert Prechter Interview for the Ages: Quick Takes on Big Financial Trends. 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.

 

CFR & NFLX Proxy Stocks

Tuesday July 18 2023

 

From its high around 160 x .618 = 98.8 CFR found support at the FIB .618 level.

It has now re traced to its support level of  last year at this time around 110-115  That is resistance.  MACD is much weaker which is what we would expect  in a second wave.

The 50 week MA is bending down The next big move will likely be when the three MAs begin to converge.

 

NFLX lost  71% of its value in the first wave down from Nov 2021 to May 2022. As NFLX is one of the seven leaders driving the NASD, this may well be a portent of what to expect in the next wave down. 450 is 64% of  700 close enough for a FIB expectation.

 

NASD a/d

This chart show you that the rally now is not nearly what it was in February, a major turn in the markets is at hand

More than Tulipmania

Monday July 17 2023

.click here for interview

Perspective on the Markets

Weekend July 15, 2023

We view charts in terms of American Dollars, but there are other measures. Here are some other ways of looking at the market

INDU in Dollars

One can see momentum is waning as the upward trend is flattening.

INDU in term of th CRB commodity prices

This chart shows that prices of things are outweighing the prices of stocks, yep that is the inflation you have been experiencing. and notice that from  1999 to  2012 this chart made no progress.

INDU in terms of GOLD

Gold has been gaining on stock prices simc the  March 2000 peak. No wonder as Congress and the FED inflate the money supply by printing and spending dollars.

INDU in terms of Silver

Silver  is more of an industrial metal but this chart conveys the same thing.

Seven stocks have dominated the up move this year, all in the tech sector. A WSJ weekend article suggests more stocks are joining the party, true as more investors pile in and on but looks like the party has ended.

INDU this year

Reality check, the IINDU  has gone nowhere this year. all the action is in the seven tech stocks.

What Me Worry?

Investors are less worried at a lower high in the spx than they were at the previous high in late  2021.  The lower the volatility index the more complacent investors have become which is what one would expect at a market top.

 

Crude Prices Climb

7/14/23

 

Crude Prices are Up

Higher rather than lower oil prices  are expected by this fall.

This column last week

We did not have to wait till the leaves turn. Crude prices jumped as soon as I completed writing last Friday morning.

August WTI crude oil Thursday closed up +1.14 (+1.50%) to  $75.77, and Aug RBOB gasoline closed up +1.16 (+0.43%).

Crude oil and gasoline prices Thursday added to this week's gains, with crude posting a 2-1/2 month nearest-futures high and gasoline posting a 3-week high.  The action by Libya to halt production at its Sharara oil field, its second-largest, due to protesters pushed prices higher.  Also, a selloff in the dollar index (DXY00) Thursday to a 15-month low is bullish for energy prices.  

Russia has now surpassed Saudi Arabia as the world’s largest oil producer.  Saudi cut its production a million barrels per day MBD to stabilize price. Russia as been heavily discounting its prices to finance its war in Ukraine.

Oil demand world-wide is expected to grow by 2.2 MBD this year.  That brings world demand to 102.1 MBD.  Demand is expected to continue into next year by another 1.1 MBD. But since when could anyone guess oil prices a year in advance.

I remain bullish on oil prices and expect further increases.

Stock Market

A put is a bet on lower prices. A call is a bet on higher prices. The put call ratio is a measure of bullish or bearish attitude. The lower the ratio the more bullish investors have become. That ratio just hit its lowest level since the market top of  December 2021.  Investors (gamblers) are buying  2.5 calls for every put. One might think rational investors would do the opposite, increase their insurance against a market decline at highs by buying more puts. But social mood not rational thinking drives markets.  The rebound has lasted longer than I expected but this put call indicator is yet another warning of an impending top.

Social Mood

Tom Cruise Top Gun Maverick earned $700 million last summer just in the US and Canada. Looks like he is on track to do that again with the seventh version named Mission Impossible Dead Reckoning Part One.  No doubt Part Two next summer will do nicely as well.  Demand for Taylor Swift tickets in Paris and Lyons, France crashed Ticket Masters computers.  Where will she put all that money?  The newest Aston Martin DB 12 is priced at $250,000 and demand appears healthy.  No wonder the markets are still headed up.