The Market Perspective

Laying out a Bond Strategy

Weekend Dec 30, 2023

As previously mentioned here, bond prices peaked and interest rates bottomed March 202. This was the end of  a thirty nine year cycle beginning in  1981.

I Here is a chart back to  198, the final low is dramatically show as well as the reversal in March 202.

Here is the entire cycle from 1942-1981-2020. Chart courtesy EWI.

I believe a new 39 cycle leading to higher rates has begun. the idea that the FED will lower rates 4 times in 20204 may be correct but the FED will  regret doing it. Kevn Hassett former Chair Economic Addvisers has said we will have a repeat of the 1970s. That means ever higher interest rates and inflation. While the media thiinks a  7& mortgage rate is high in fact it is the historic norm. In 19881 mortage rates were 14%.

I am proposing a program of shifting back and forth from bull to bear using TLT and TBF. 

  HEr are bullish bond prices as from Oct 27 to now in TLT.

IN late Oct we have a  crossover of PMO at bottom confirmed by the PAR SAR, the blue dots.

Now RSI at top is bending over, PMO at bottom is topping . PAR SAR has not given a sell signal but things are over bought enough to justify buying some TBF, which I did Thursday Friday.

TBF advances in  price as rates rise and bond prices fall.

TBF is showing a saucer type bottom and here PMO is bottoming, RSI at top is rising,  but PAR SAR hs yet to generate a buy signal.

This should be a fairly low risk way to  make money when stock markets are at their highest level ever.

Learn about PAR SAR by clicking here

 Learn about RSI by clicking here

 Learn about  price momentum oscillator by clicking here

New Petro Currencies

New Petro-Currencies

OK how much attention have you been paying to geopolitical events, here goes-

Which of these represents the biggest challenge to US   ability to affect world events.

1. Climate Change (Joh Kerry’s pick)
2. Lack of US production of computer chips
3. Political polarization of Congress/Senate, especially caucuses which can prevent an overall outcome
4. None of the above

Not sure, okay here is a clue. Why did the US intervene in the Iraq invasion of Kuwait?

The correct answer is D, none of the above. The reason is that 20% of the world oil that is bought and sold is no longer in US dollars.  The answer to the Kuwait question is not exactly jobs as then George H. Bush put it, instead preserving the US Dollar as the world reserve currency.

20% of the world oil bought and sold is now conducted  in currencies other than the US Dollar. We invaded Kuwait to stop Saddam Hussein from taking that oil supply and conducting trade in Euros which is what he wanted to do. We always suggest reading this column completely but once you do, in Wikipedia consult Bretton Woods Agreement and Asian Infrastructure Investment Bank.  Seriously if you  live in the Permian Basin this is  an economics degree in itself.

The Allied Powers gathered in Bretton Woods New Jersey in 1944. The reason. Was to agree on a new world reserve currency. Two World Wars had exhausted the British Pound in that regard. The US Dollar became the new coin of the realm. This mean world transactions would be in dollars. And this meant that once Richard Nixon took the US off the god reserve August 15, 2021 we had a fiat money system, the Dollar is worth what we say because we say so.

His idea does not sit well with the new Axis, Iran, Russia, and China, as well as a few others.  India and the UAE, India and China have agreed to oil deals in their respective currencies. The poppy-cock notion of Modern Monetary Theory is that we can print all the money we want which only works as long as the US Dollar is the reserve currency. If other countries say nyet, we have to exchange Dollars for their currency and there is a very real limit to that.

it is becoming a petri dish for a new geopolitical trend — endless tests of America’s will and credibility by its adversaries and their proxies.

 

Defense Secretary Lloyd Austin warned the Houthis last week to cease attacking shipping in the Red Sea. The result is the above comment as the Houthis unleased rockets, drones, you name it onshipping and the US Navy. The world has read the timber of Team Biden and finds  nothing to fear.  As mentioned last week, it is amazing oil is still around $75. That may be the new floor price.

For much more information

 consult www.themarketperspective.com

Stock and Bond Update

Weekend Dec 24 24 2023

 

For some reason charts are not loading but here is bottom line. I am using the daily parabolic sotp and reverse indicator

SPX has not crossed to the down side bullish case still intact

HDGE a bear fund is nowhere near crossing to the upside, athat would be a trend change to bear market  in stocks

 

Looks like this extends to at least mid January

 TLT a fund of  20 yer bonds is still very much in bull mode, we stil target ten yr treasury at  3.5%, now at  3.9%

TBF a bear bond fund, has not indicated  buy signal, ie a switch to  bonds declining in price and yields rising

 

Crude Prices Rise

Thursday Dec 21, 2023

Crude Oil Prices on the Rise

While the trend cannot be said to have reversed there are positive signs of Exxon Mobil and Chevron trying to  put in a bottom.  The same can be said for Conoco Phillips and Apache.

This column last week

West Texas Intermediate spent a couple of days below $70 last week. It has now recovered to $73.54. This takes it to the top of a trend channel but not quite to the break out point.  Team Biden still refuses to pick up the phone to Tulsa and Midland. He could  suggest it would be a good time to become energy independent again.

Instead he worked a prisoner exchange deal with Venezuela. Maduro is returning ‘Fat Leonard’ aka Leonard Francis involved in a US Navy corruption scheme.  After going out of his way to announce he would make Prince Salman of Saudi Arabia a pariah, Biden has begged for lower prices. Instead the Saudis and Russia cut production. But there is more.

The Shia branch of Islam constitutes 10-15% of the Muslim world. The Houthi in Yemen, Hezbollah in Lebanon are Shia as well as their proxy sponsor Iran.   Sunnis represent some 85% of the Islam world. These groups include Syria, Hamas in Gaza, and Saudi Arabia.

If you do not have a map of the Mid-East hand, get one, you will be  consulting it in the near  future. Yemen lays on the east coast of the Red Sea which reaches to the Suez Canal to the north. The Houthis have been launching rockets and drones at shipping headed for Suez. This has caused Defense Secretary Lloyd Austin to warn the Houthis to cease and desist. But given Biden’s hesitant support of Ukraine, and fear of angering Russia or Hamas, who is afraid of the US?  And with a reduced Navy down from about 575 ships under Reagan to less than 300 now, well that does not send a message of strength.  The reality is that ships are n ow diverting the much longer route around Cape Town South Africa. This extends  the time f round trip  Singapore to Rotterdam from 34 to 43 days. The wonder is that oil is not already higher.

Stock prices have been on a tear and social mood as well as actual stock ownership has never been higher. After a breather Wednesday, prices are back up today. I expect new highs this month.

Interest rates have fallen from 5% on the ten-year note to about 4%. I think our target of 3.5% for that note is realistic, then rates resume higher. This will eventually be a re-play of the 1970s with rates stair stepping higher. Short rates however, three-month T bills, remain at 5% or higher.

Dennis,[email protected]

 

Stock Rally Not Ended Yet

Wed Dec 20 2023

The multi day rally in stocks corrected this afternoon.

This rally started a pullback which has further to go.  Then we see a final push up to new highs. Optimism is as high as November 2021

90% of the SPX stocks are over their  50 day moving average.

TLT Bond prices have rallied in strong fashion

  PMO and RSI are at extremes. The next move of significance will be down in TLT  price followed by a final move up to end this counter trend rally.

Crude Oil Moving Up  on  Red Sea Worries

For some reason the chart is not posting but the trend is turning up

Silver refersed trend today at least the silver stocks did, stand by for a better entry looking for $30 silver

Magnificent Seven

Monday Dec 18 2023

The S & P 500 is hardly representative of  500 companies. See the article inthe WSJ today. Those seven stocks comprise 30% of the S & P market value.

Incredibly the seven are collectively worth more than alll the stock values of UK< China, France, and Japan.  Market tops are formed this way with a concentration of money in a few stocks.

THis concentration is one for the record books.

The two and four year cycles converge next month in January. That will be a top. A sell off should follow.

 

 

A Market of Mixed Moods

Friday  Dec 15 2023

MRKET SOARS, MOOD IS MIXED

The House of Representatives cannot pass legislation or hold onto a Speaker but it’s getting good at impeaching Presidents.

Kim Strassel, Potomac Watch today’s WSJ

Negative mood is exclusionary, in politics  it is often the voters in mass saying throw the bums out. In Congress it is now the same thing. From the adoption of the Constitution, June 21, 1788 to  998, there was only one impeachment. Andrews Johnson was the subject post-Civil War and was found not guilty.  A full 210 year swould pass from  178 to 1998 when Bill Clinton was impeached. Bad idea, the Republicans did not have the votes.  But payback is inevitable. The Democrats impeached Trump (recall Nancy Pelosi screeching he will be impeached!) twice to a not guilty outcome. Now an impeachment inquiry, not the same, thing has passed the vote on Joe Biden.  The Republicans tried to impeach Homeland Security’s Alejandro Mayorkas. The motion failed 209-201.

That is three impeachments in twenty years, one inquiry, and one failure.

This political polarization is an echo of the high of 172 and subsequent sell-off of  1973-74. Just mentioning  that an all-time high is  just that.

The DJIA has made a new high as it did in 1972.  Last week we did expect prices to remain high through the month of December. The 500 point day in the DJIA was more than expected but that is social mood for you.  But the trend in mood is not favorable for the so-0called new bull market. Bull markets begin amid doubt as in 948 and 1982, This market is over the top brimming with positive mood and is 36,000 points higher than in 1982.  The open season on Ivy League Presidents is just another verse of the same song.

And now a bit of Christmas cheer. The leaders, Exxon Mobil and Chevron have been in downtrends since late September. Chevron has been trending sideways and Exxon is trying to bottom. While the trend cannot be said to have reversed there are positive signs of both trying to  put in a bottom.  The same can be said for Conoco Phillips and Apache.

Gasoline futures confirm with a big jump Thursday. From a daily low of  2.05, the close was  2.13 a penny below the daily high.  Heating oil is oversold to the downside and at least made an up move yesterday.

For now the magnificent seven tech stocks leading this rally remain strong.  Energy is trying to bottom. Interest rates have declined on the longer maturities but not on the short end.  Three month Treasury bills are still yielding 5.25% well above the ten year note at 3.935%. The Fed would do better to quiet down and let the markets speak.

The Year Ahead

12/9/2023

The stock markets should be topping now//The Dow returned to its all time high of late 2021, and SPX ad NASD did pretty much the same.

Hedge  was worth $80 at the worst of the pandemic when the SPZ dipped to 2500. If my friends at Elliott Wave are even half right we are headed at least there again.

The parabolic stop and reverse system is another Wells Wilder invention. It has tracked the up move in stocks from Oct 27 which is the down move in Hedge.  I will be monitorting SAR for Hedge and TBF. I expect  interest rates will  continue to fall to perhaps  3.5% on the ten year note.

I will be  watching closely for a reversal in both Hedge and TBF.

Banks Are an Early Warning Indicator

12/5/2023

The trouble always starts with the banks, every single bank on this list is down for the day, notice the dros are about  2% +,  I suspect the market has topped.

HEdge vx SPX

Monday Dec 4 2023

Hedge is an bear fund which advances as SPX falls and falls as SPX advances. The arrows show a nea r perfect inverse  correlation. With the SPX making another two year high

2023 -2021-2019 we need to be on the alert for a reversal in Hedge.