The Market Perspective

A Market of Great Expectations

Friday Aug 30, 2024

A Market of Great Expectations

Nvidia NVDA is now a three trillion dollar company. It quarterly revenue of $32.5 billion was above expectations. Its gross margin of 75$ bests all but one competitor. The stock slipped 6% Thursday on this report.

Heard on the Street today Wall Street Journal

As the Down Industrials achieves all-time record highs, expectations are matching those new heights. Let’s take a look at some examples.

Dollar General DG shares dropped 32% Thursday on a lower outlook for the years. Their shoppers typically earn less than $35K. Inflation has squeezed their ability to buy. And Walmart is taking some share as well. Dollar Tree shares fell 10% on the negative outlooks for Dollar General.

High end sandal maker Birkenstock quarterly revenue grew 19% to  $628 M. Not good enough apparently, the stock dropped 16% Thursday.

Campbell Soup has acquired pasta sauce maker Rao. That helped increase revenue 11%.  The stock price dropped 2%.

In a bull market all news is bullish. This is not the case as a market matures and investors just can’t be satisfied.

GAP shares closed up 9% on improved turnaround efforts. Profits were $206 M compared to $117M for the same period a year ago.

Best Buy shares jumped 14% though comparable sales were off 20.3%. the retailer got high marks for re-inventing itself amid the brick and mortar versus on-line battle. But sales are down for 11 straight quarters. Market share may be slipping.

In the big picture the Industrials are out-performing due to the lack of tech shares. Today Friday it stands at 41,372.  Momentum indicators are about maxed out. And we are on the cusp of the start of fall seasonal weakness for stocks. Major lows, as well as crashes, tend to happen in October.

The SPX is marking a high which is lower than mid-July.  Both Industrials and SPX look to be a week or so from rolling over.

The tech heavy NASD 100 NDX has issued a daily sell signal based on the Parabolic Stop and Reverse system. Tech lead on the way up and is doing so on the way down.  None of the Magnificent Seven tech stocks are at new highs.

Crude oil is off $1.95 to $73.96. The trend is no longer up.  Support is just above $70. My outlook for the energy sector has turned negative.

Disclosure, I sold most of my gold and silver ETFs this week.  Gold looks to be flattening around $2,514.  December silver cannot vault through $30. Lower prices for both appear likely.

Stock Market Success

Thursday Aug 29, 2024

Elliott Wave Take on Stock Market Success

NDX Flashes a Sell Signal

Wed Aug 28 2024

Stockcharts is not cooperating, but PARSAR shows a sell signal on just just NDX  the daily chart but the weekly chart.. This is a prelude to the annual but much more this time sell off into October. PSQ the vbear fund for the QQQ is rallying, time to buy.

PSQ

SH

HDGE

Gold and Silver Consolidate

Wed Aug 28, 2024

Gold and silver have had a good run and I suspect longer term much more lies ahead. I sold the gold and silver ETFs I had profits in today.

We are nearing the seasonal weakness in the stock market and may be doing the same for metals. I do not have buy signals on the daily charts of bear stock market funds. But they all seem to be bottoming out on the 120 minute charts. Recall that the great crashes have happened in October, 1929, 1987, start of 2007 was in the fall and lasted to March 2009. The technical low was October  2008 when as Joe Granville put it, it took a foot and a half to list all the new lows in the WSJ, now that is a low.

 

Here is San Antonio there are plans to build over 2,500 hotel rooms in the next few years. The same thing happened here in  San Antonio in  1929. The first skyscraper Tower Life opened that summer along with the largest theater in Texas, the Majestic seating over  2,000.Tower Life was visioned as the first of a much larger  office and apartment complex, a first for downtown. In the ensuing Depression those plans were cancelled.

 

Citadel plans a luxurious office building in Miami, having left Chicago. These are all socionomic signs of a social mood high where new large projects take shape featuring a 'what could go wrong' attitude.

Aug 25 2024 Update

8/25/2024

Crude Oil appears to have double bottomed. It matched the early August low around $72 Thursday and closed up at $74.83 Friday. wil it reach the previous high of $80 in mid August or erteace all  the way to the July hihg at  $84.  The move lifted Halliburton from $30.50 to $31.76. Transocean RIG reversed up5$ at $4.97.

NDX NASD 100 rallied from the early August sell-off at 17,500 to 19,750. The last three days has seen a consolidation at that level. Dow Industrials has nearly match its previous high at  41,250 closing at 41,75.  Magnificent Seven are very much a mixed bag with Apple and META FB doing the best.

 

Momentum measured by  PMO has turned up for SLV the  bullion  ETF. It is at resistance of $2720.  illver itself is at teh same $30 resistance area. $32 was seen in early to mid July, then $26.50 and now $29.82. If silver can finally overcome $30, that would be the new support. Sprott Silver Trust is back to $10.15 and that is resistance fo  PSLV.  Sprott silver gold CEF is trading at a  4.3% discount to the actual bullion it holds. That is a far better deal than one will ever get from a coin or bullion dealer.

TLT the ETF of 20 year bonds advanced on rumors of a FED cut and has now settled below itw early /August high.  Remember we stil have an inverted yield curve for the last two years. We are heading into annual season al weakenss for stocks. Be cautious. three month T Bills are off their lows of 4.925% closing at 5%. Momentum is bottoming, this looks like a classic buy the rumore, the FED may cut, and sell the news, the FED probably will cut.

 

 

Stocks Metals Correct, Oil Searches for Support

Thursday Aug 22, 2024

Stocks Correct, Oil Seeking  Support

Thursday August 22, 2024

Crude oil has not heard my bullish forecast. It returned to the bottom of the trading range of  $72-82 which has prevailed for several months.  Today gasoline, Brent, and West Texas Intermediate managed an up day. As said, this occurred at or near previous bottoms. Gasoline made a low dating back to January around $2.20 (futures not pump). But it did rebound from Wednesday’s sell-off. Brent and West Texas Intermediate WTIC pretty well matched their August 5^th low.  Stocks sold off today and that took near all energy shares a bit lower. However, I suspect crude oil is seeking support.  Officially we need some crossovers to the upside on momentum indicators to confirm a bottom.

Gold and silver corrected today. Gold dropped $26.70.  I suspect the market is testing the breakout over $2,500,an historical first. I expect that re-test of $2,500 to hold. Silver basis October fell 59 cents to $29.08. While gold vaulted $2,50, silver was turned back once again at $30. This trade requires patience but should eventually pay off in a big way.

The NASD 10 NDX has had a very nice run form that Monday low of 17,500 to almost 20,000. It traded won to 19, 491 today.  Dow Industrials bounced further than NDX or SPX nearing the previous high at 41,250. And it only dropped .43% versus 1.68% for the NDX. Likewise, SPX was down.89 %. Industrials and SPX are not as tech heavy as the NDX, so their decline was less.

The economy is not near as strong as the Democrats claim. July unemployment rose to 4.3.%.  The unemployment rate has risen more than a half percent in the last year. Academic studies back to the 1950s reveal that this has always resulted in a recession. A recession is two lower quarters of Gross Domestic Product output.

The yield curve remains inverted. The three-month T Bill is 5% while the ten-year note is 3.8%. This has been the case for the last two years.  This is another indicator which has in the past always led to a recession.

Caution is warranted.  Stocks are at or near all -time highs. The unemployment stats and interest rates are flashing warning signs. In this election year, the Labor Department now admits the US added 8148,000 fewer jobs than reported earlier this year.  That is monkeying with statistics at a high level and casts doubt on most anything the government reports into the election.  Five percent guaranteed Treasury Bills are attractive.

Finally Silver Outpaces Gold

Monday  Aug 19, 2024

Silver has lagged gold the entire rally. Today it closed up 59 cents while gold only advanced $4. In fact silver was up thirty cents onthe open this morning when gold was down ten bucks.

This suggests silver is FINALLY playing catch up to gold. SLV the two meaasures for PMO have crossed to the upside giving a positive buy signal. Sprott Silver Trust PSLV did the same but just barely but that counts, a nice 1.72% advance for both.  At a mere ten bucks I really like PSLV.

The miners have also finally caught up. Coeur CDE has a  buy signal  or will tomorow, as well as Hecla HL  a huge move today up 6.75%.

 

NDX and SPX are up eight days in a row.  THe Magnificent Seven are all expensive, however AIQ is the ETF for them and has just flashed a buy signal However, risk is high this late in  August, September is seasonally a topping month.

A Wave Two Rebound in stocks

Weekend Aug 18, 2024

The Industrials topped a few days after the SPX and NDX but the pattern in all three is the same.  Here is the picure 195 min, 2 bars per day.

The move up has been short and relentless up every day since. PMO is well below its July high but does not have to reach the same peak. Seasonally stocks often top in August.

NDX NASD 100 Topped July 11 and did not make a double top as the DJIA did. It ahs progressed further via RSI and PMO momentum indicators.

The job or a Wave Two up is to convince the investors the bull market is still alive and well, in that regard the NDX is succeeding, cable TV business is agog over the rally.  It ahs not equaled

the July high in any of the three indexes.

SPX topped a bit after NDX, it is heavier than DJIA on tech and that is no doubt the reason for differing top dates. For some reason the chart is not posting this has been a persistent problem but the pattern is the same. Best guess is that this rally contnues but Wave Two should really not over lap the July highs.

We  are at a very dangerous point to be long stocks but of course that is hardly the investing attitude. This could turn any time. The economic plans of both candidates are terrible. Harris votes for price controls which failed Nixon and every autocrat who tried it, see Maduro in Venezuela. Trump wants large tariffs on imports. This is protectionism at its worst. It gives consumers high prices on imports and lets Americans off the hook on quality as their is no foreign competition. Point being neither looks good going forward and polarization is worse than 2020.

Bonds

The 3 month bill is the vertical bars, the purple lione is the ten year not yield. Well this is not posting but both yields have fallen, bills to 5.07% and notes to 4.98%. The yield curve is still inverted with short rates way above longer rates. This has gone on longer than at any time past and every time this combination predicted at least a recession. In 1929 it was worse than that.

It may be that rather than higher rates ahead, the FED at  5.5% overnight has to cut. Let the stock market decline, oh nortice unemployment claims are up, another canary aomething  is wrong. It may be that rates tumble again as the FED tried, vainly, rescue the economy with low rates, but who will be borrowing?

 

 

 

Yen Carry Trade Meltdown

Friday Aug 16, 2024

hTom McClellan explains the Monday meltdown Aug 5

Stocks Regain Momentum

Thursday Aug 15, 2024

Stocks Regain Momentum

Thursday after market close, Aug 15, 2024

Last week we noted the breadth drop in the NASD stocks. During the big Monday sell-off, the number of NASD stocks over their 50 day moving average had dropped to a mere 27%. Well cancel that memo.  The big gap on the chart caused by the sell-off was filled this past two weeks. The number now stands at 43% and jumped, gapping up today.  The SPX did likewise and now 66% of the 500 stocks  are over their 50 day moving average.

We mentioned that late August tends to be positive for stocks.  That seasonality is living up to its legend. In 207 stocks rose during August and into September. Finally stocks succumbed to selling in October. During the next two years the NASD lost 75% of its value.  For now, the trend is our friend and it is up.

Google / Alphabet is the only one of the Magnificent Seven tech stocks not participating in this rally. Apple and Amazon are showing strong performances. The momentum indicators are about to kick in which will drive prices higher.  The Industrials’ previous high was around 41,250. Today it closed at  40,295. Taking  out the previous high looks quite likely now.

Gold has been in a sideways trading range since April. It hs been bounded by $2,300 and nearly $2,500. Today it closed up $13 to $2,455, mid-way of today’s range. Gold and silver are still trading at a discount  to the gold price on the Sprott fund site.  The high for silver today is $28.58 with a close near that at $28.41.  That too is bullish.  Understand that the US is spending one trillion dollars every 100 days. The US is borrowing that money. Congress is spending money it does not have. The dollar is fiat currency, it is worth something because the Government says so. This is not the case for gold and silver which are real money. I define real money as the kind politicians cannot print from trees. Eventually the discount on gold and silver will turn to t premium and the rush for metals will be on.

Crude oil closed up $13. today.  Our bell weather Apache APA has also closed the gap from two weeks ago.  Here momentum looks to be turning up as well.  Transocean RIG rose 3.5% today and still trades at a heavy discount to book value, about 60%.

So the outlook for stocks, metals, and oil is solid for trhe next few weeks.