Weekend Sept 30, 2017
After a big percentage rally from August 21, the energy sector may trend sideways to work off a daily over bought condition.
Important players like the XES are now exhibiting a reverse head and shoulders patter with resistance at 16.5.
XES
I believe the entire energy sector is headed higher. XES here is just about over bought and the PMO may well head sideways for a while. That is okay, I want to own more of the service sector.
XOP has broken above its resistance line, looks like it will pull back and test this break out area at 33.5. Again that is fine as it allows us to accumulate in anticipation of further rally. The XLE has rallied further but trades at twice the price.
FRAK
FRAK looks a lot like XES, I like both of them accumulating during a consolidation with limit orders below the market looks like the way to go here.
Enbridge Energy Partners EEP
EEP has made a higher low than February 2016. It is paying and can pay a 9% (okay 8.89%) dividend. And it traded at 24 earlier this year.
We have a great dividend from a 10,000 employee company that operates liquid pipelines in the USA. Sure it will take a while to regain the previous price but one will be making 9% while you wait. Note the PMO weekly is turning up at bottom.
The dollar is beginning to rally which could also impact oil.
Stocks in terms of gold
I made a presentation at the Fullbright Symposium here in San Antonio yesterday. I prepared a chart showing the Dow Industrials priced in gold. The reason was to demonstrate that the ten year process of converging US GAAP accounting regulations and world IFRS all fell apart at the dead low for this indicator in 2011. The SEC Final Report rejecting the idea appeared in the summer of 2012. At 127 pages we can surmise the rejections actually happened much earlier than summer 2012 given the time it would take for a government to complete 127 pages of excuses.
DJIA in Gold Monthly
In the main panel, notice that the ratio failed at the 200 month moving average in 2008. That issued in the final collapse that fall.
Now price has returned to that same 17.5 level. The 200 month MA is bending down, at least the other two are rising. We could see a convergence in a few months. But this is a potential resistance spot. We expect gold will decline into this December, if that is right and stocks just stay put the ratio will rise.
Daily Chart of DJIA in Gold
The MAs are converging which is usually a prelude to a change in direction. This year the ratio chart has trended sideways. Let's put this on the radar screen.
We look for a low in gold and silver this December.
Interest Rates Five Year Yield
Interest rates are not waiting for a cue from Janet, note how the 5 year yield took off at the end of its correction.
Silver Miners
Hecla HL is in decline in the main panel as is Coeur CDE below it as is PMO for HL. Patience should allow for a good entry in December.
See Social Mood comment.
The horror movie IT has now already grossed $500 Million making it the top horror hit of all time.
This is particularly disturbing as we know horror movies resonate with negative social mood which is usually bearish.
The modern horror movie was born during the Depression with Dracula, Frankenstein, and the Wolf Man. More of the same occurred in the 1973-74 meltdown with The Exorcist, the top grossing horror movie of that day. The low budget big grossing Blair Witch Project appeared in 1999
prior to the March 2000 DJIA peak. The Dark Knight grossed $500 M in 2008 while the DJIA was already in decline. So there is ample reason to be alert for a market shift.
Another terror incident occurred last night in Canada again using a vehicle as a weapon. Health Secy Price ducks out just before Trump dumps him, gee who would want that job.
Kim Strassel had a great column Friday wondering why no one was talking to the three who are really in charge, McCain, Paul, and Susan Collins. If those three stay negative to anything that actually might pass, Schumer will be a happy guy.
So plenty of negative mood in Washington DC.and in the NFL and on the movie screen....
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Social Mood
NFL is not much different from the student loan debacle or the sub prime debacle in2008
Manias evolve from borrowed money, leverage, and the belief that some object, tulips, dot.coms, sub prime mortgages, have taken on a special aura of inelasticity, and the value cannot go down
NFL teams play in heavily leveraged and subsidized stadiums. They only play a dozen games a season plus the play offs. Merchandise is priced way above any sort of market price, like $75 for a team jersey or $35 for a hat. Tickets run to hundreds of dollars and parking at the Cowboy Stadium in Dallas costs $75. Meanwhile a minor league baseball ticket is dirt cheap.
Those lofty levels mean that the break even point is pretty darned high, and probably could not be met without the tens of millions from television,no tv no, way this can support itself, the salaries, et al
Already cable tv is offering refunds to those that paid to see the games but now not want to. What do the cities do if this goes on long enough hat the revenue is not there for bond payments? Sure they still own the stadium but if fans don’t show like student loans, there is no collateral, what do you do with an empty stadium or one below break even. That is precisely what happened to the ‘Astro Dome in Houston when Astros baseball team did not win enough games to attract even 10,000 to a game, that would not pay for the air conditioning
I received this e mail from a friend this week. Herding anyone?
National boycott of the NFL for Sunday November 12th, Veterans Day Weekend. Boycott all football telecast, all fans, all ticket holders, stay away from attending any games, let them play to empty stadiums. Pass this post along to all your friends and family.
Could it happen, nah, we all know how valuable tulips, dot.coms and sub prime mortgages are, right? I suspect it would not take much to quickly reach break even if merchandise sales slow and fans don’t buy the game options on cable.