The Market Perspective

Pullback

Thursday Jan 13 2022

UNG  pulled back to fill the gap created yesserday

this may be a wave two in the developing patter, not uncommon to fill the gap and re test the trend.

cold weather still predicted for this weekend in parts of US, hold on.

NASD above 50 day MA

continue to deteriorate, we put the actual index above this indicator

240 minute chart

is the bloom finally off tech ?

Amazon on top for comparison

Watch Bob Prechter's Stocktop speech for Free

Thursday Jan 13, 2021

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Bob shows numerous charts demonstrating just how extreme optimism is towards a permanent bull market.

One to watch

Even More Bets on $100 Oil

call options volume skyrockets on $100 oil

The Topping Process is Underway

weekend Jan 8 2022.

FANG index

Facebook Apple Netflix Google

We have five waves up complete from

the covid low of  2020. Other

MEME stocks are falling fast consider AMC the movie chain

Zillow no one loses money in real estate

Dow Theory Non Confirmation

The INDU and TRAN  confirmed each other at the high in November. Since then the Transports have NOT confirmed the new high in the Industrials.

NASD 100 NDX the hottest tech stocks

NDX also topped in November and has sold off at a rapid rate since.

CFOs and Insiders sell record amounts of stock

Corporate insiders are traditionally viewed as the  ' smart Money'

they are selling big time

https://www.cnbc.com/2021/12/01/ceos-and-insiders-sell-a-record-69-billion-of-their-stock.html

Long Bond 30 Year

The fourth wave correction lasted from the low  last April all the way into December. Finally the fifth wave is underway. This should take bond prices to a new low beneath the  April low.

TBF is the inverse, the April high was 158.50 so TBF should exceed that by the time the fifth wave is done.

friday Jan 7 2022

Where We Go from Here

 

The yield on the Ten Year Treasury Note rose for the fourth day in a row.

Energy, Banks Offer the Few Bright Spots, WSJ Today

The author of that column went on to attempt to link the Omicron virus with FED Policy, I suppose because everyone is writing about the virus again.   In my Market perspective weblog I commented that the market was not waiting on Jerome to take action next March, rates are already rising. I noted one analyst thought the Ten Year Yield would end at 2.5%. That is quite conservative as the yield is already 1.778% and as noted, continuing to rise.

Team Biden has it backwards. Inflation is not rising due to increased meat prices. Rather meat prices are following the highest rise in inflation in forty years.

And no wonder as the FED has injected some three trillion dollars to ‘stimulate’ the economy.   The result was a year over year increase in money supply of a whopping 39%, yikes. In the 1970s, Milton Friedman tied inflation to money supply. Too much money chasing too few goods raised prices, bingo, we are back to 1972 all over again.

TBF is an ETF betting on falling bond prices which move opposite interest rates.   TBF has moved from $15.50 to $18.36 in the last month!

Another columnist suggests that OPEC will keep a lid on oil prices by increasing production . West Texas Intermediate is already $79.46.   Brent is $81.94. We will shortly have a test of its November high at $86. Recently half of all the options traded were bets that oil would h it $00 in 2022. For now the trend in price is up. The trend is your friend.

The great bull stock market of the last forty years kicked off in 1982 – 84. Paul Volker raised Fed Funds to 20% finally killing off the OPEC induced 1970s inflation. Money began trickling into stocks with high dividend yields. Back then Exxon was paying a 10% dividend.   We are now at the end of the 40 year trend of lower interest rates. This will be the big news of 2022.

Energy trusts are soaring in value. Prudhoe Bay BPT jumped from $3.50 to $4.75 since early December. And some like Nustar NS are paying 9% dividends.

Tech stock prices are falling. This year is not likely to be a replay of 2021.   Eventually higher rates will end the 40 year bull market. Be prepared.

Roy Orbison - It's Over

Wed Jan 5 222

Orbvison sings It's Over

 

This sudden and in the mainstream press unexpected reversal is what we have expected for months. But a 233 year bull market does not give up easily.

We have pointed out that breadth has been declining since February.

 

Oops, turning down

so much for the NASD rally

this indicator hit a much lower high today and then reversed, this is how bear markets begin. More to follow. note that this comes as Biden records new lows in ratings, jsut as Nixon did in  1973

Earth to Jerome Powell, You are not in Charge, the Market is in Charge

Tuesday Jan 4, 2022

Jerome Powell FED Chair actually thinks he sets interest rates. Well then explain to Jerome that the ten-year note rate increased yesterday and today without asking  his permission.

Ten Year Yield

Note the gap up today, rates are soaring from all time lows. Bond prices move inversely or opposite yields so there is the note performance.

A Backstone analyst today suggested the ten year yield would go to 2.75 in  2022 and the FED would have four increases, assuming a quarter point each.

I'd say that is a very conservative forecast considering the yield just went from 1.3 to  1.65 in one month!

Ten Year Note

IN two days the market erased a few weeks of price advance. The reasons are not the meat prices cited by Biden, rather the meat prices are advancing due to

huge increase in money supply

huge purchases of debt by the FED which cause number one above to expand

huge injection of money by Dem Congress which we did not need

jump in prices of oil due to excessive regulation and war on energy industry

TBF Bear Bond fund betting on lower bond prices

As you can see this duplicates the first chart of the rise in rates.

What it the long term potential profit in TBF, look at TBF back to inception when the ten year rate was around  4%

At that point the price was  $50 or three times today's price. And the better news is that rates rise faster than they fall, again see daily chart above.

Here is another long term hold, GSG the Goldman Commodity Index Trust on the NYSE

NUstar is on fire and pays a great dividend

 

 

Negative Mood

Weekend Jan 2 2021

Negative Mood in Amsterdam

This is not a city ordinarily given to violence.

 

Looking Ahead

Weekend Jan 2 2021

Weekend Jan 2 2021

Inflation means earnings are expressed in smalller dollars which buy less. So growth stocks do not do as well in such an environment.

Here is the NYSE FANG index

of the popular tech stoccks. Okay I guess the trend is still up but the MAs appear t be converging.  That portrends a change in trend. AMZN in particular is in bad shape.

AMZN

This looks like distribution of stock to the late comers. Those seeking to sell propping up the price until they are done.

the Advance Decline line has come alive again. This is the best argument for a rally into January with a second high later in February or March.

%NASD stocks above their 50 day Moving Average

the internals of the NASD are weak with only 31% of all stocks above their 50 day MA. But PMO increased and RSI is at least back to midpoint. Again this suggests a rally but perhaps the final and last rally given the inflation numbers we have.

S   & P

70% versus 90% earlier this year, again less breadth

Now let's put the actual spx index on

As breadth in the main panel has decreased the actual index is hitting a new high buoyed by the weighting of a few stocks like APPLE which is hitting new highs.

Apple

WOW, are there still any more buyers out there?

GSG Goldman Commodity Fund

If commodity prices back off  a bit, looks like that is the case, chances for a short term stock rally iimprove.

Oil is  a big component of GSG so no wonder it looks the same

Let's see how the markets open tomorrow after two slow weeks of holiday trading

Ready for that EV Yet?

Joe Biden’s Electric Car Mania

 

Each Toyota Prius engine uses 33lbs (15kg) of lanthanum and 2lbs (1 kg) of neodymium. Two other rare earth elements, terbium and dysprosium, are also added to the alloy to preserve neodymium’s magnetic properties at high temperatures.

Mining.com

President Joe Biden’s EPA is obsessed with electric vehicles, are you? Our open today details the necessity of rare earth metals in the hybrid Prius engine. All electric vehicles EVs are even more demanding. Now, guess what country controls 85% of the world’s rare earth metals? Yep that would be China our newest competitor for world domination.

Trump’s EPA scaled back MPG requirements to 40 MPG by 2026. Biden’s EPA has increased the requirement to a fleet-wide 555 PMG by 2026. This is a 35% increase from the current 40 MPG standard.

I am not sure a 55 MPG requirement would be met if we all started riding 150 cc (9 cubic inches) scooters. For an auto maker, this means that by 2026 EV sales must increase from less than 3% of current total to 17%, a more than 5x jump. And lithium prices , the component of the battery, have increased 240% this year.

There are many problems the EV crowd ignores. Charging is best done at a slow rate, as in over night . Fast charge your camera battery in fifteen minutes and ptouch it, ouch, it’s hot which decreases its life. And charging is far less effective in cold weather. Electric cars are more expensive than EVs. And power is not free, some plant has to generate that power. If our power grid cannot stand four inches of snow last February, how will it respond to massive demands for electricity over night.

The $7,500 tax credit evaporates once a car maker sells 200,000 EVs. As an EV is more expensive than an internal combustion engine, where is the incentive to spend the extra cash? Given the lack of clean nuclear plants, the increase in output from natural gas and yes coal fired plants will probably result in no savings in overall emissions.

Gasoline prices have increased $1 per gallon this past year. Pipeline denials, slow go on drilling permits, and regulation overkill are the reasons. And with Team Biden begging the Saudis to increase their output of oil, our energy independence is at risk again. It is not hard to imagine China using the price of rare earth metals as its bargaining chip in the South China Sea.

This is bad policy getting worse by the week. All of us who remember 1970s gasoline lines are, well, shivering at the thought, once again.