The Market Perspective

Dpont Be Fooled

Friday 11/15/2024

Don’t Be Fooled

Just a slight sell-off for the day

Neal Cavuto on Fox Business Thursday 11/14

Amid the euphoric last week rally, cable tv experts are dismissing the subsequent sell-off (correction they say) after the gap up. Yet, even on the advance Wednesday, more stocks were down than up. The reason is that the most widely held stocks are weighted more in the averages.

Today Friday, the bear funds SH PSQ HDGE are breaking out with buy signals ovia the parabolic stop and reverse indicator. That’s a reliable indicator created by Welles Wilder in the 1970s. Stocks had a big move up following the Kennedy 1960 and Reagan 1980 elections. The 1960 version continued in a bull phase even after his Kennedy’s demise. The Reagan rally sputtered for another year. It regains its footing once interest rates began to weaken in 1982.  This situation looks more like the Reagan experience but that is a best case scenario.

Here is why. As we have warned, Germany, EU’s strongest economy, is in meltdown both politically and economically.  The government is dissolving and VW is laying off 100,000. Britain is not much better condition and  Macron has lost his hold on France. China has had 22 months of lower prices. People are not buying goods which fall in value. The real estate vacancies will not go away.

Funny think about Mansions in the US. The Bel Air Mansion The One was once listed for $500 M. It sold at auction for $126M. A Central Park Penthouse listed for $250 M is no longer on the market.  The New York Woolworth mansion was listed for $90 M in 2011. Lately it has been rented for, gulp, $80,00 a month. Its 20,000  sf nine bedrooms are now available for $59M. While these are eye watering prices, they are all down, and that is deflation.

I have not given up on the idea that the stock and real estate markets have seen multi-year highs if not multi-decade highs.

Crude oil prices are falling.  The weaker economies cited as well as plenty of supply are part of the reason. The rest is Tump’s drill baby drill  mantra. He had pledged to bring down energy prices and it looks to be underway. Still, if that is the case, energy service shares are now sideways after a big post-election rise.

Despite the FED cut (oh really, inflation is solved?) the ten-year Treasury yield  is up from 3.6% to 4.4% since the first of October. Why is Jerome pondering another rate cut?

Look for a stock sell-off into mid-December. Interest rates may pull back before climbing again. Oil prices look weaker but Trump’s new policies may put energy service back to work again.

The Correction Gets Underway

Thursday  14/2024

The sell-off was a bit stronger today. Here is a  look at the bear QQQ fund PSQ in the main panel. The purple line is the plot of the actual QQQ. The bars are teh PSQ. One is the converse or opposite of the other which is as it should be. The blue dots are the PAR SAR indicator now at  38.25. With  three minutes to close the PSQ is 38.10. Crossing  38.25 to the upside would be a daily buy signal.  The three lines are FIB Exponential moving averages. They came together as the daily trend changed with the big post election rally. Now they ned to come together again to signal a move up in PSQ. At bottom the PMO is getting closer to a buy signal crossover, again this is a 195 minute chart or 2 bars per day. PSQ is making a saucer shaped bottom indicating buyers are creeping back into the market.

SH  the bear ETF for SPX is the same, as is Hedge HDGE again a broad based bear fund.

NYSE daily advance decline line has turned down, this market is weaker than the cable tv outlets will admit.

Here is a closer look at NDX which has powered these rallies. Sell signal is  20,810 close is 20,896.

I am pleased to say buyers jumped into RIG pushing it up 5.19% today. It registered a higher low on the pullback so that was a successful test. \Patterson gaped up the day after the election drill baby drill and has consolidated since. FIne.

Interest Rates

Why is Powell so insistent on keeping his job?  He has not done anything right including the recent rate cut which OK had Fed Funds a half point over 3 month T bills but the Ten yera note yield has continued to rise. I thought it would have corrected a bit by now and PMO is stretched to the limit. Jerome the trend in rates is up, Claiming you have whipped inflation will give you the legacy of Gerald Ford's Whip Inflation Now button. TLT is due a dead cat bounce as a long dated bond fund before the sell off in bonds resumes.

Gold Silver

Gold and silver are in longer term sell offs or corrections in a larger bull market. As fast as gold sold off I suggested the original target of  2600 was too high and we hit 2586 just today. This will take the shape of an A B C with wave A now looking for a bottom, then B up and a final C down. Silver the same from  35 to  30.66 today.

See the previous post on China's deflation. Europe is hurting with the German meltdown, Britain not much better.  Biden concluded China, Xi, was too weak to invade Taiwan, that is exactly why Xi would invade, to take attention away from his failures. Stay alert.

China Prices in Steady Decline

Thursday 11/14/2024

The new highs in the US market make it hard to see what could go wrong. Here EWI shows 22 months of deflation decline in China. Add to that Germany's problems, VW shrinks, the government craters. This week a former British Prime Minister noted that Britain has its problems as well and Europe needs a rescue. Read below.

 

Deflation in China: Impossible to Ignore
Producer Price Index registers 22 straight months of decline

By Elliott Wave International

Deflation's grip on the world's second largest economy is getting tighter.

As Bloomberg noted on Sept. 9:

China's Deflationary Spiral Is Now Entering Dangerous New Stage

The demand for goods has been weakening. Wages are stagnant. And, in addition to declining property prices, corporate profits are down. Inventories at Chinese manufacturers swell.

China's central bank has unveiled a host of stimulus measures, but Chinese consumers have failed to respond.

As Elliott Wave International's October Global Market Perspective says:

No matter how low rates go, consumers refuse to buy "stuff" that is losing value.

China's Producer Price Index just registered it's 22nd straight month of decline.

This chart from EWI's October Global Market Perspective shows another broad measure of price change:

The GDP deflator is the difference between China's nominal and real GDP growth. By this measure, China entered deflation a year and a half ago. Deflation is already deeply ingrained in the Chinese economy.

China is not the only major global economy experiencing woes. The October Global Market Perspective also discusses "the swiftness of Germany's economic breakdown."

Get free access to highlights of EWI's Global Markets coverage. Just follow this link and select the Global Markets Highlights Issue..

This article was syndicated by Elliott Wave International and was originally published under the headline Deflation in China: Impossible to Ignore. 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.

 

23 Story NYC Building Sells for 97% Discount

Thursday August 1, 2024

While everyone is worried about inflation what about deflation?

I spotted this story of how a building worth $232 M in 2006 just sold for $8.5 M.

The auction for 135 West 50th opened earlier this week with a starting bid of $7.5 million. On Wednesday, with seconds left and only a single bid of $8.5 million, a gray box that read “reserve not met,” referring to the seller’s minimum price, suddenly turned green and changed to “reserve met” after that price was lowered. According to Ten-X, the reserve price is generally set at around three times the starting price.

As the clock ticked down to zero, the auction was extended — three times — for a total of 10 minutes and 30 seconds. The auction finally ended with a sale price that was about 2.5% of what the sellers had paid for it.

Or consider what has happened to once popular shoe seller, NIKE

No the Bank Crisis is Not Over

Wed May 3 2023

 

With every assurance from Jamie Dimon and Janet Yellen that the fix is in, the KRE drops further already down 33% in three months.

 

The top candidate for the next bailout is here

 

Yes this is a Beverly Hills bank with branches all over the southern half of the Peoples Republic of California. It is now trading for less than its original public offering price.

Here is the big picture, notice how KRE is already closing in on the covid low. And this index is just over a year into its own bear market., note weekly chart.

 

Cullen Frost is the best regional bank I know of, it is down 37% in the same period.

CFR is testing its 200 week moving average a break of this level will bring much lower prices.

In fact it closed under the  200 week MA today.

 

 

How any big banks are there to rescue failing smaller banks?

 

CIti has wave one down, two up and now is starting number three down. It is doubtful Janet will have enough credit to induce the big four banks to continue to rescue the ones she and her cronies have failed to  regulate. '

I apologized for being too bullish on crude oil. It is reaching our first objective of 66 in a hurry.

after a fabulous rally and making more money that God ccording to Joe Biden, even XOM is falling

 

While everyone has worried about inflation the root cause of all recessions depressions is that the collateral for loans fails.

Commercial real estate is the first casualty this time. The drop in crude oil prices is forecasting a lack of demand this is the freight recession J B Hunt is describing.

REITs Here is that same one down two up we see in bank stocks

A few shares of this real estate bear fund might be a good idea.

This is he opposite pattern of banks and real estate, just where we need to be.

HDGE is  bear fund, the black line is SPX notice HDGE is the opposite this is where we want to be in HDGE

We have been telling you this is a bear market since early 2022.  We have three of the four largest bank failures in two months, as usual the government is lying to eveyrone that the crisis is past indeed it is just beginning.

 

Take action, do not delay, the correction from last October is ending, the next wave down is beginning.

 

 

Layoffs

Thursday Jan 19, 2023

Satya Nadella flies to Davos in a private jet. Looks Maria Bartiromo in thee eye and announces a  10,000 person lay off.

Do you suppose he cut his salary?

Goldman also announcing lay offs.

Retail sales biggest drop in December of  2022.

Deflating Various Asset Classes

Weekend Sept 24 2022

check out Deflation.com. As noted all asset classes declined this week.

https://deflation.com/

Our weekly column posted yesterday noted that the prices of near all investments declined this week. Let's take a look.

Stocks

Industrials took out the 200 week moving average and that is significant. the fall this year has erased all the gains from late 2020.

Transports

Transports have done  the same. And that constitutes another Dow Theory sell signal as the Transports and Industrials have both fallen to new lows.

In booth cases the 50 week MA is about to or has crossed teh  87 week MA, another sell signal.

Fed Ex

The FEd Ex CEO is on record predicting a world wide recession. If his company stock price is an indicator he is correct.

NYSE Advance Decline Line

the NYSE A/D line is the most reliable indicator. It topped along with the major indexes in late 2021. It set a new low this week falling beneath ALL its MAs.

Proxy Stocks

AMZN

the June low took out 45% of the December value.Now a another wave down has begun which will take prices much lower, look at how high MACD is. and just now turning down.

FB

Changing the name form FB to META did not stem the decline, now off 64%.

Bonds

  Ten Year Note Yield

 

This has more than doubled from  1.6 to 3.8% just this year. Mortgage rates are now over  6%. So no surprised luxury home sales are off 28 %. As noted in the WSJ already buyers have stopped paying over the ask price without an inspection.

2  Year Yield

Two year is yielding 4.2% while the ten year is at 3.69%, an inverted yield curve. This inversion has I believe preceedded all recessions going back to WW II. 

BLE closed end Municipal Bond Fund

Last Wednesday I wondered if this could return to its covid panic low, and it looks like it just might do that.

BLE closed at a new low Friday. that

That move takes  out the May low so no real support till 8.5. Notice PMO had a bump up and is now turning down.

This will be quite remarkable. It has already lost one third of its value. At 8.5 it will be worth 56%  of its last November high. I wonder how many retirees have all their money in such funds? Or in REITs?

Real Estate

That is a 27% hit from the November high. Note that stocks indexes and just about everything else peaked Nov-Jan 2022.

Gold

William DeVane is currently starring in cable tv ads for gold and silver.  the story is that gold is a defense against inflation deflation or any other flation politicians can dream up. But that is not the case.

Shares of gold mining companies are not doing any better.

ASA has dropped 43% just since May.

Crude Oil

A 450 drop since March. While this has lowered gasoline prices. like FED EX it is warning of a global slow down with less demand for petroleum products.

Gasoline

Lower gasoline prices won't stave off the unhappiness with a bearish stock market and what it is doing to  401Ks in the mid term elections.

Currencies

British Pound

 

 

Metals Collapse

Thursday Sept 15 2022

In a bear market all news is bearish

Now stocks, bonds and metal prices are all collapsing, oh did I mention oil prices as well?

My friends at EWI SI have a website

https://deflation.com/

 

While many are worried about inflation, as noted above, the  price of financial instruments is collapsing.

The worst of all worlds will be collapsing stocks bonds oil while food prices soar

/silver and gold are now working out but may see a final burst up in the next three days, I am done with silver and gold

 

ln the News

Tuesday July 12 2022

GAP replaces its CEO - efforts to revive Old Navy failed, that CEO lasted two years

Bed Bath and Beyond failed by  substituting no name brands for well known brands, going concern looms

Under Armour CEO out after two years

Kohl's  activist shareholder wanted to sell the company, to who I wonder, and of course talks collapsed, maybe they could merge with J C Penny kinda like Burroughs and Sperry UNIVAC to form Unisys, anyone heard of them lately?

 

Speaking of CEO turnover, Boris Johnson out as British PM

Has anyone noticed Boris and Donald both have unusual hair dews?

Crowds storm Presidential palace in Sri Lanka

PGA faces DOJ inquiry, even golf is not safe in this environment.

Oh great, one in six suicide hotline calls is not answered, swell, call waiting for suicide watch

Musk suggests Biden and Trump sail into the sunset and let younger candidates give this a try

 

taken together all of this suggests negative mood on the rise from the difficulty of putting retail Humpty Dumpty back together again to throw the political bums out....

 

 

Signs of a Weakening Economy

Friday July 8, 2022

Signs of a Weakening Economy

This year the prices of tin, copper, lead, aluminum, and zinc, have declined between 33.1% and 12%. The message is less demand for industrial metals which suggests a weakening economy.

WSJ today Recession Fear Sinks Copper to 2 Year Low

The stock market rises amid positive social mood. Individuals set aside any fear of risk preferring the thrill of the FOMO, the Fear of Missing Out. This column warned that all the major indexes topped between November 2021 and January 2022.

A scan of the headlines shows the move to negative mood world wide.

Crypto Market Tumult Shows Lack of Investor Protection

New York City Employees Fear Returning to Work

26,300 NYC small businesses close permanently

British PM Boris Johnson resigns (negative mood politically results in a throw the bums out mentality, Team Biden take note)

Investment firms fall back on buzzwords to explain how they never saw the sell-off coming. It’s a perfect storm it’s a black swan event (rare and unpredictable), we’re not bankrupt, the new climate, no karma in a bubble. The reality is better summed up by Nassim Taleb, author of the Black Swan. You have to be a moron to think these are rare, unpredictable events.

 

As noted in our column in mid June, the bullish percent of energy stocks collapsed from 95% to 5% in the first half of that month. Now crude oil has traded below $100 with a bounce back the last two days to $105. But backwardation exists in the oil futures market. This means distant future oil prices are trading for less than current prices.   Usually the more distant months are higher due to storage costs. So in the near term expect crude oil prices to descend to the level of future prices. November 2023 crude oil is trading at $80. So a move to $85 in the spot market is reasonable. That will lower gasoline prices. But like sagging metal prices it also suggests a weaker world economy.

Stock prices have at best staged a fractal Wave Two weak rally from the June 21 low . The SPX managed 3,740 to 3,901. This moves the index right up to the down-trend line. January high to June low, SPX and DJIA are down about 22% this year while the tech heavy NASD has already lost 34%.

Worse most self directed 401K plans have rules preventing one from frequently switching from long to cash or short. That is a formula for long term loss in a period like this.

Over the next two years only one strategy will work, and it is not buy and hold. We suggest using this short bounce to exit positions. Otherwise baby boomers’ retirement will be ‘aback to work.’

https://professorelam.typepad.com/markets/

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