The Market Perspective

Mood of the Market is Changing from Bull to Bear

Wed May 8, 2019

The mood of the market is changing.

The big Wave is clearly three so the bounce today must be four and five now begins.

 

Topping Momentun Taking Hold

Wed May 8, 2019

Our weekly columns have been suggesting topping action in oil and stocks which have moved together. That is now happening.  John Murphy has noted that no stock rally has lasted more than ten years and March  9 2019 marked the ten year line. We are now two months, one sixth of a year from that date. I strongly suspect we have seen the high for the year 219.

Events do not drive the desire to invest in stocks, unconscious social mood changes do.  The mood changed March 9 2009 to bullish and the mood is now changing to bearish. In my last column I ended by asking how long before the negative political mood infected Wall Street just as it did in 1973. We are getting the answer and it is now.  The 26,600 DJIA area is now massive resistance.

Notice the symmetry of the down and then up move. But momentum via the MACD and RSIO topped in late February. Prices are just now reacting as breadth grew more and more thin, ie activity was concentrated in fewer stocks.

The same mirror image has occurred in the BP for energy stocks.

Momentum  here peaked earlier than stocks, in late January

Energy prices provide another non confirmation with  a lower high than last October.

DJIIA

After a big sell off and rebound Monday, prices fell again yesterday, that is a 1 down 2 up three down sequence, and price is coming back up in a 4th wave bounce this morning.

The Failed China talks are blamed for this but in truth Trump has been overly optimistic and then went pessimistic last weekend. If tariffs are imposed Friday, a replay of the Smoot Hawley failure will have begun.

 

Oil and Stocks Send Topping Signals

Weekend May 5 2019

Oil and Stock Prices Likely Topping

 

The Reuters/Jefferies Commodity Resource Bureau index peaked in 2008 around 460 after rising from 180 in year 2002.   By 2011 it had regained 370. The oil price collapse beginning in 2014 has now taken us back to CRB 180. The take-away here is that commodity prices have been falling for ten years.

 

Three weeks ago amid massive bullish sentiment for stocks and oil price, we suggested that one   should exercise caution in the markets. Since then stock averages have flirted with their October 2018 highs, Google’s earnings growth has slowed, crude oil has fallen from $66 to $62, and natural gas trades at $2.60.

 

Trump brags that he asked OPEC to increase production and lower prices. But we noted that price had increased 50% from its low of $42 and there was no lack of supply. We have drawn attention to the anemic performance of the Energy Service XES ETF. It peaked at $12.50, dropped below both the 50 and 125 day moving averages and is now $10.91. It never rose above the 200 day moving average of $13.10.

 

Bell weather Halliburton HAL trades at $27.75 at a mere 13.79 price earnings ratio. Patterson PTEN is trading for half its 2018 peak of $25 at $13.43. And PTEN is not making any money with a loss of $1.46 a share. Schlumberger SLB is in a two year slump falling form $77.50 to $41.27.

 

What does this mean? These are all flashing early warning signals of lower prices. The Shale ETF FRAK is confirming this prediction by falling under all three of its moving averages of 50,125, and 200 days. And the refining ETF CRAK has done the same.

 

The stock market remains a crowded trade with investors still clinging to AMZN, FB, and NFLX. Google as noted has dropped. Twitter and Yelp have attracted some money, no wonder given the high prices of the first three.

 

Seasonally the stock market tends to top after tax day April 15. Hence the phrase, after May go Away. Momentum indicators on the various indexes peaked in February. So the typical seasonal affect seems to be taking hold.

 

Yes the economy is great. There are more jobs available than unemployed individuals to fill them. Social mood in Washington remains on boil with Democrats claiming the Attorney General has lied to them. Their real worry is that he will make good in his promise to investigate the origin of the Trump dossier.    Over 20 Democrats have now officially entered the Presidential Race. Brace for more anti-Trump rhetoric.   Will that mood eventually seep into Wall Street?

 

Seasonal Action Sets in

Weekend May5 2019

Stocks typically peak after tax day April 15 ans snooze through the summer. While Larry Kudlow claims the stock market is soaring in fact it has just returned to its Oct  2018 high.

The third wave is the strongest and indeed PMO peaked with the third wave.  Fifth waves are weaker and that is reflected in the meandering PMO now.

 

This looks like a set up for a high this week say May 9 and then a correction.  That may  offer a much better entry level than we have now.

Larry Kudow and Trump are both screaming for lower rates.But a look at the chart sine the low of July  2016 suggests that we are on a normal recovery from what was surely the 34 Fib low in rates.  The high in rates recorded in  1982 stretched an exact 34 years to  2016. The better idea is that the ten year yield is finishing a fourth wave down and will next see a fifth wave up to new highs in rates. Trump as a real estate developer of course wants zero interest rates.

Apache

The failure at the 200 day MA on APA supports my idea in the weekly column that oil prices have peaked.

APA is now priced below all its MAs.

CRB Index 12 year History

 

CRB has been falling for ten years since the  140 high in oil in  2008.  I may have been way over optimistic about gold given the above picture.

Bottom Line

Expect a topping in stocks following an apparent top in energy.  Till now they have both been moving up from the December low.

US stocks are acting much better than the rest of the world. Can this be sustained?

Social Mood

Yesterday General Jack Keane on WSJ Editorial Report suggested intercepting oil from Venezuela to Cuba on the high seas. That would certainly test Putin's support for Both countries. Such action on the high seas in International Waters is usually seen as an act of war. Maduro shows no signs of leaving and the Cubans and now Russians are really supporting him.  This is the spot to watch.

Kim defiant in North Korea

China pressing South China Sea

England can't fix Brexit, Macron unpopular in France, and German economy slowing

e Market Perspective bases its information on techniques and sources that have been found to be reliable in the past, and The Market Perspective tries to base opinions on sound judgment and research, however, we do not guarantee that future results will match past performance and no guarantee can be made that advice will be profitable. The Market Perspective accepts no money for stock recommendations and is purely motivated by its own research in recommending any stocks. Put another way, the responsibility for decisions made from information contained in this letter lies solely with the individuals making those decisions. The editor and persons affiliated with The Market Perspective may at times have positions in securities mentioned. Nothing contained herein represents an offer to buy or sell securities. The Market Perspective encourages investors to be diversified, and to maintain sell stops and risk control over their valuable investment capital. No guarantee can be made to the accuracy of text or predictions.

 

 

 

 

Seasonal Weakness Setting In for Stocks, A Low in Gold?

Tuesday April 29, 2019

 A few items jumped off the pages of the WSJ to me today

 

Google drops 8% in one day in slower sales

Tesla frequently runs out of money now it is running out of time,  the established auto makers are already producing electric vehicles that work and have dealership with mechanics and parts, something Tesla has never offered, TSLA has already dropped $60 B in capitalization, really interesting graph on page B1 today

Boeing still reeling from  7374 problems

Measles cases continue to rise

Gerry Seib - Impeachment Trap for Dems, I agree page A 4

Price swings jolt energy  investors

GLD

The last two rallies failed to develop into anything but I am more hopeful about this one occuring at the 125 day level. MACD is slowly turning up.  121 was support in  January and we had a slight over throw down right here.

GLD 2 Hour

This chart needs some follow through to the upside.

XAU

XAU broke above 71 back in January. If old resistance becomes new support as it should a stand right here at the 200 day MA would be encouraging. So far so good.

A Short Term Top in Oil, Potential Bottom in Gold

Weekend April 28, 2019

Several interesting events occurred as this past week ended.

US stock indexes made new highs.

World stock indexes did not.

Crude Oil suffered a big reversal amid lower earnings from oil companies, and no lack of supply. See our weekly newspaper column .

The Dollar moved to a new high. But gold and the XAU seem to be finding support and rallied near $20.

XAU

The XAU looks to have bottomed around the 71 level. THis suggests a rally into the end of May.

XAU Two Hour

The MAs turn up on the two hour chart confirmed by the PMO at bottom.  And both gold and the US Dollar turned up at the same time. Is gold re emerging as a currency?

There are several gold funds like ASA, PHYS, USERX that could be entered at this level.   JNUG is a 3x bet on GDXJ.

Crude Oil Weekly

This appears to be an outside weekly reversal to the down side. 66+ has been the upside resistance. The market briefly topped taht level Monday only to give that and more back by the end of the week. Recall that oil and stocks have moved together. Crude oil may be topping prior to the seasonal high in stocks due May 9.

% Stocks above  150 Day MA

Here is the reverse of December 24. This makes a double top at the current level of stock prices.

Bottom Line

There is likely a top forming in crude oil followed by a top in US stock indexes. World indexes are trailing the US.

The US Dollar remains strong. Gold is bottoming along with gold mining funds.  Silver like gold is completing a fourth wave down. It needs a close over 15.20 to turn its trend up.

Social Mood

Drudgereport has a link to a story on the 36 public executions held in Saudi Arabia this past week. Teen boys aged 16 and 17 were beheaded.  King Salman has a ways to go convincing the world of the 'new' Saudi Arabia.

With twenty Democrat candidates declared for President, it is a crowded field. And the only issue seems to be oust Donald Trump.  Pelosi is denying it is the Dem Socialist Party but Bernie and AOC get more followers and publicity.

Herman Cain and Oliver North were both out this week, Herman as a FED candidate and North as the President of NRA.  North, with only on term as NRA President took on multi decade Wayne La Pierre showing a disregard for going against a long time entrenched figure.  It seemed foolish to me for North to become embroiled in such a controversial organization. And sure enough he showed a lack of caution reflecting how he came to be known during Iran Contra. Ollie you should have stayed a at Fox.

England can't figure out Brexit, Macron has half the popularity of Trump, Kim is visiting Putin, and Melania is on the couch all by herself. Perhaps this photo sums up the current Social Mood.

All alone on her 49th Birthday.

he Market Perspective bases its information on techniques and sources that have been found to be reliable in the past, and The Market Perspective tries to base opinions on sound judgment and research, however, we do not guarantee that future results will match past performance and no guarantee can be made that advice will be profitable. The Market Perspective accepts no money for stock recommendations and is purely motivated by its own research in recommending any stocks. Put another way, the responsibility for decisions made from information contained in this letter lies solely with the individuals making those decisions. The editor and persons affiliated with The Market Perspective may at times have positions in securities mentioned. Nothing contained herein represents an offer to buy or sell securities. The Market Perspective encourages investors to be diversified, and to maintain sell stops and risk control over their valuable investment capital. No guarantee can be made to the accuracy of text or predictions.

 

 

GDP Rises 3.2% Q1 2019

Friday April 26, 2019

GDP Rises 3.2%, Markets Still at Resistance

 

JOINT BASE ANDREWS, Md. (Reuters) - U.S. President Donald Trump said on Friday he called the Organization of the Petroleum Exporting Countries and told the cartel to lower oil prices.

"Gasoline prices are coming down. I called up OPEC, I said you've got to bring them down. You've got to bring them down," Trump told reporters.

Yahoo Finance this Friday

I nominate this quote as the official start of the Political Silly Season, the Race to Election Day November 2020.

I thought the Democrats had that award in the bag but clearly the Donald was not to be outdone.

The belief that a personal action can control the price of oil (or anything else) on a world-wide basis is the very opiate of politicians. They want us to believe they can perform magic. If this were true, oil prices would not dramatically swing from $42 to $66 and back to $62. But they instead do just that. Expect more wild promises from both sides over the next 18 months.

As we have noted here so often, social mood towards speculating on oil prices as well as pricing oil as an economic commodity determines price.

Crude oil finally topped $66 earlier this week. The media credited Trump’s squeeze on Iranian oil. But hey three days later Trump claims to have lowered prices. Indeed today oil is trading for $62.57, down 4% just today. The more likely reason is that

• WTIC is up 50% from $42 to $66 since late December, 2018.
• Momentum indicators are in the way overbought zone
• There is no shortage of supply

This drop whacked the Energy ETF XLE which had just topped its 200-day Moving average, down 1.76% today. XES Energy Service ETF never got close to its 200 day MA. This has been a continued source of concern to me as noted in many columns.

The GDP was up 3.2% for 1Q 2019. This is good news but has not moved the stock markets any further. Three weeks ago we urged caution in this space, noting markets had returned to their October 3 highs where they promptly reversed, falling 4,000 DJA points.

We have also had our eye on the precious metals markets We suggested this week would tell if gold managed to start forming a bottom. And here at the end of the week, gold has reversed from its Tuesday low at $1,270 to $1,289. This week someone bought 200,000 puts on UUP, the dollar ETF. A put is a bet the Dollar will fall enough by the third Friday of June to make this a profitable trade. The rise in gold and silver may be confirming an over bought US Dollar.

Bearish Bets on the Buck

Thursday April  25 2019

Trade Alert via the WSJ reports someone bought 200,000 puts on the Dollar ETF UUP yesterday.  That explains the jump in gold $5 which happened yesterday.

No follow through in gold prices today.  Stocks have hit the same levels where they peaked last Oct 2.  And we have the usual seasonal high due in early May.

So  here we are.

Crude Oil Attacks Resistance

Monday April 22, 2019

 

Crude oil is up $1.68 Monday morning or over 2%. This may be a first indication of an attack on the $66 resistance level.

Gold did not hold on to the early $5 gain but it up 50 cents at 11 02 AM CST.  XAU is trading at  72 down 88 cents. XAU needs to find a bottom this week if the rally is to continue.

 

April 19

Friday April 19, 2019

The Recurring Case of April 19, 19

 

We suggested caution regarding the markets in this column two weeks ago.   Some ETF stock indexes have made new highs. While there are many optimistic expectations given the low unemployment numbers, stock market action looks a lot like September 2018. That led to the October 3 top and a 4,000 DJIA drop. That is not a prediction but again a caution. The charts suggest this as a real possibility.

 

Crude oil has yet to break above $66 measured by West Texas Intermediate. Gold should be making a 13.5 month low now. Several technicians are forecasting lower prices for gold, next week will tell the story.

 

The date of April 19 has a remarkable coincidence marking aggressive human acts.   Consider these events which occurred on that date.

 

• Start of American Revolutionary War
• Start of American Civil War
• Start of Spanish-American War
• Bay of Pigs Failure in Cuba
• End of Viet Nam War

 

 

 

And the date is living up to its reputation again. Consider these events this week.

 

• Release of Mueller Report, rather than accept it, Democrats now say it is up to Congress to ‘continue the investigation.
• Notre Dam Cathedral burns
• Tucson, AZ declares state of emergency unable to handle influx of illegals
• North Korea fires short range missile

 

 

America abandoned the gold standard April 19, 1933. So it was no coincidence that China picked April 19, 2016 to announce its own Shanghai Gold Fix.   China is now the largest producer and consumer of gold.

 

This is part of a much larger pattern of aggressive Chinese behavior. This of course is being ignored while our Congress works on the important things like demanding Trump’s tax returns.

 

China has adopted an aggressive Made in China 2025 plan for economic expansion. And there are at least three other initiatives at work.

 

First is the New Silk Road construction Project. This is a revival of the original 207 BCE Silk Road during the Han Dynasty. It will link China to East Africa, West Asia, and already Europe.   China already controls 10% of European water ports.

Next is the Asia Infrastructure Investment Bank. This is clearly a challenge to the World Bank and the International Bank for Reconstruction and Development begun at Bretton Woods in 1944. Significantly the US is not a member but most Asian nations are members with much of Europe on board.

 

Finally there is the construction on the Spratly Islands in the South China sea.

 

While American politicians cannot see beyond the 2020 elections, China has a long range plan which is clear to see, if only the USA would take a look.