The Market Perspective

Stocks Recover, Fears of Bear Market Recede

Thursday Nov 8, 2018

Stocks had a big reversal the last three days.

With the Dems controlling the House the market is probably suggesting there will be enough gridlock that little will change the next two year.

The WSJ reminded readers today that two years ago they predicted Trump's erratic ways would lose the House in 2018 and let Dems regain control in 2020.  Unless he widens his base among independents that looks to be the case, but that is two years off.

The media is just now noticing oil prices have fallen for eight days in a row. This suggests an oversold condition that could bring a sharp rally as shorts are forced to buy back and cover positions.

The market bounced here in June at 13.00 for USO.

WTIC

 

WTIC has made a lower low which suggests this market is in trouble. The situation reminds me of 2014. Then as now prices were high, triple digit and then peaked in May 2014 at 107. In similar fashion priced peaked at  76 and are now at61.67. There is no shortage of supply and gasoline and heating oil fall as well.  Share prices have fallen and we could see some sharp rallies there but PMO and MACD indicators have not quite bottomed for most yet. But the sharp reversal means this might be a good time to begin accumulating now. I would not do so expecting a long term resumption of increasing oil prices. I have noted  on this weblog and in the weekly newspaper column that XES the energy service ETF was failing to confirm higher prices. That non confirmation has now come true. In the same wasy the Transports need to confirm the Industrials, XES needs to confirm XLE with both moving to new highs. That did not happen.

 

Here is the non onfirmation and then collapse

 

Crude Oil Tops Out

Tuesday Nov 6, 2018

 

It appears the rally from February 2016 in crude oil has ended with five waves up on the weekly chart.

 

We have noted that since the oil and stock market lows of February  2016, both markets have moved together. Interestingly both oil and stocks topped on October  3. Now one month's drop has erased all the gains going back to early April. This may well be telling us what to expect in the stock market.

 

Unleaded Gasoline

Gasoline topped in May and is already back to the February low.  The commentators on television and in the media always have it backwards. As oil and gasoline prices rise they complain. But this is the evidence of a strong economy that can afford higher oil and gasoline. Drops in these markets like 2008 usually for tell a slowdown in economic growth.

XLE Energy ETF

 

XLE collapsed along with the stock market and is bouncing off Feb-April support But the real test lies ahead with a re test of the 200 day moving average.  I suspect that will fail suggesting even lower prices.

The media has been worrying that a lack of Iranian oil might lead to higher prices. Instead just the opposite has

 

Market Predicting A GOP Victory?

Monday  Nov 5 2018

 

 

Our most important indicator has turned up a bit, is this indicative of the election outcome?

 

FANG Stock Update and Social Mood Comment

Weekend November 4, 2018

Global Social Media

Social media had been selling off well before Oct 3 change in markets.

Social Mood

We have reported on numerous over the top expensive autos which express expansive social mood at DJIA 25,000. Now

Aston Martin will offer 25 new James Bond DB 5s for $3.5 M each.  Aston is also planning its multi-billion IPO given

the success Ferrari RACE has had. The car is not street legal but is surely a collectible.

And of course this is a celebration of the 1964-66 market high at dJIA 1,000.

 

 

 

 

 

 

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 B1 Thursday WSJ Investment Bankers offering College Grads $300,000

It's Crazy says one banker.

No it is an outward expression of unbounded positive mood towards the markets. This will be especially telling if Wiley Coyote market has already run off the cliff.  Such offers are out of touch with reality. Like the energy sector, brokerage and banking are always expanding at the top and contracting at the bottom.

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Social Mood is unremembered - One of the five tenets of social mood.

The Thursday Nov 1 WSJ Headline is

October's Wild Ride Jolts Investors

Yet there is a clear two year cycle of stocks losing ground the last few Octobers, and the big crashes of 1929 and 1987 and  2008 all happened in October

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Trump blames the FED for raising  interest rates but the market does that.  Another Thursday Headline

From Coke to Clorox Inflation Hits Home

The bond market sees this coming, Central Bank excess the last few years, too many low interest bonds issued will have prices moving up.

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Friday economic reports were all stunning, wage increases, job increases, yet Dems don't seem to want it, as the WSJ notes low taxes and less regulation work a lot better than income re distribution

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More troops at the border to repel the invasion from Central America.

The Weekend WSJ reports New Breed of Gangs Chokes Latin America

Not content to smuggle drugs, the gangs of Central America are extorting tribute from locals. This has torn apart the countries. It is hard to see any real solution

but the solution will not be moving the populations here if Trump retains power.

 

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Echoing Alan Hall's findings that negative mood leads to public health problems, page A 18 Thursday  notes Venezuela's Health Crisis Jumps Border. Now disease spreads to Brazil and Colombia.

 

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Rich Lowry in a National Review column notes Nancy Pelosi claimed it was ridiculous to blame Dems for the Republican baseball game shooting. But now they claim Trump is behind some of the latest shooting. There will be no civility  for the next two years no matter how the elections go Tuesday.

 

 

 

Stocks Run Into Resistance on Bounce. Int Rates move Up

Weekend Nov 3

I regret thru no fault of mine by typepad's that this site was down during all the rapid activity. We will catch all of you up this weekend.

Stocks

Stocks have rebounded but think about what is happening. To bet the market is going down one way back when had to borrow the stock and sell it.When the lower price was reached, the stock had to be re bought and delivered back to the original owner. Thus short sellers had to buy back. These days one can sell futures, buy puts, or buy a bear position ETF to do that,  But in taking profits on the short position, one has to exit which mean buying back some stock one way or another. Hence we get a bounce back rally.

 

Two Hour DJIA

100 of the 109 point drop Friday was due to Apple. Apple announced lower earnings over the upcoming Christmas season.

the three arrows at top show the three moving averages breaking down thru the 200 bar MA, not good. At bottom PMO looks toppy already.

The right facing arrow shows price not breaking to the upside.  This is far more revealing than the daily chart showing PMO bottoming.

A rebound Wave A will usually not exceed the previous 4th wave and indeed it did not.

Look for lower action Monday Tuesday.

Transports

 

Here is the same picture in the Transports.  Wave A re bound is falling short of the previous 4th Wave.

NYSE Advance Decline

Notice the same format exists on our most reliable indicator the NYSE Advance Decline line. And note it is about to roll over in the bottom panel.

The Big Five Wave Picture

 

this is what you will not hear from the financial planners, talking heads on CNBC, and the mutual fund companies. Over ten years the market has completed five waves up and is now reversing direction.  Stocks fall seven times as fast as they advance.   Expect Trump to blame  the FED but that will not be the case. John Murphy and Carl Swenlin are in the bear camp.

Bonds

 The drop from the head to the neckline targets  95 on the downside for TLT.

The danger in the bond market is immense. We have reached the same  2.5% long bond yield seen in 1949, 1949-1981 = 1981 - 2016,  32 years on one side and 34 on the other.

Inflation  is rearing its head but the real danger will be the possibility of default.

Meredith Whitney was merely early on her municipal bond breakdown call.  Chicago and Illinois are the leading pension zombies followed by many others. The firefighers in AAA San Antonio

have a ridiculous measure on the ballot to keep their gold plated plans, thanks Henry Cisneros.

 TBF

 

Emerging Market Europe Africa Far East EFA

 

ON the two hour chart EFA looks like DJIA and TRANS in the US, this is is a world wide event!

Gold an d the US Dollar are both advancing.

HUI Gold Bug Index of Gold Miners

HUI and XAU did exactly what they needed to do, bounced at support this past week.  Note the convergence of the moving average lines, a prelude to a change in trend.

Silver

Her

 

Here is another market doing what needs to be done, bouncing up at support. We need a weekly close over $15.

Gold and silver  are showing strength as currencies like Argentina, Brazil, and Mexico collapse or pull back.

 

dennislelam@gmail.com

The 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.

 

 

 

Not Out of the Woods Yet

Wednesday Oct 31 2018

Yesterday's rally was impressive but it did not really reverse what has happened since Oct 3

 

Compare this action with last February through April.  The indicator recovered only to plunge again in April. The MAs are still falling. And the election is next Tuesday.

Bad news South of the Border

Mexico Collapses 7.5% in one day, Peso is 20 to the Dollar

The problem with all countries south of the Rio Grande is the lack of rule of law. The incoming President cancelled the $3 Billion airport.

If the airport contract is not valid, what about the new oil shale contracts as well.

Markets reacted negatively.

I see more articles suggesting the growth spurt from tax and regulation cuts is slowing and has probably peaked.

That seems to be the message of world markets.Merkel is out in Germany. Britain can't Brexit.  Macron's popularity in France seems to have cooled.

 

Finally Blog Resumes, Stocks Settle Down for Possible Bottom

Tuesday Oct 30 2018

This weblog has been unavailable through no fault of mine. I sent typepad multiple e mails and now it is displaying again.Thanks to those who have kept checking.

Should this happen again, check my other website

 

https://www.professorelam.typepad.com

 

Okay where are we?  October 2018 lives up to the 2 year stock cycle which recorded lows in2016,2014 2012 and for darned sure 2008.

Looks like we are starting bottoming action, the Transports lead so let's take a look

 

Daily PMO despite the big rally has not turned up yet.

Two Hour Transports

 

The two hour chart is turning up from a very oversold condition. The higher low in the PMO suggests a fifth wave has been completed.

NYSE Advance Decline

but this indicator barely budged. All the End of Day indicators have not been posted at 4 32 CST PM so I will update.

I follow multiple market technicians. The Dean of that group is surely John Murphy. He is in the bear camp suggesting noting no bull market has lasted more than the ten years of this one.Others are suggesting this may be the end of the bull from  2016, 2009, 1982 and indeed 1949.

The uncivility of the Cavanaugh hearings was a disgrace. But as one who lived through the  1973-74 bear market, should the Dems take one or both houses, Watergate will look  like a Sunday School Picnic. And that won't be good for markets.Check back for updates.

 

China Sinks Further US Stocks Congesting

Weekend Oct 20, 2018

 

This important indicator has yet to turn up.

 

Transports are sinking in an Dow Theory non confirmation.

Bullish Percent S & P

 

Shanghai in a steep bear market.

Stock Congestion Ten Years In

Friday Oct 19, 2018

World Stock Exchanges Sag Along with Oil Price

On the close Thursday October 18 the New York Stock Exchange recorded nine times as many lows versus highs.

 

October is the most volatile of all trading months. Four years ago there was a sell off on an Ebola scare and then the rally resumed. There are several reasons to believe that may not be the case this time. Yes several indicators are now back to the same lows recorded last February but…..so let’s examine the buts.

The sell-off is not confined to just the US. In fact as noted last week, the US markets continued to gain as other world markets have not. How long could that last? China in particular is exhibiting serious weakness. The last high on the Shanghai Index was recorded after a parabolic run-up in 2014-2015. That high was just over 5,000. Today the Index is half that at 2,486 and still falling. China is in a serious bear market.   There are numerous articles questioning the real strength of China with its questionable accounting system, government bank loans to prop up construction, and ghost cities. The Europe Asia Far East Index EAFE peaked with the US in February at 2175 but now continues falling at 1852.

Charles Dow created his Dow Theory in 1896. He created the Industrial Index, manufacturing and sales firms, and a Transport Index, then railroads which transport the goods. The idea is that one index has to confirm the other. To validate new highs, both need to be in lock step making new highs. The problem is that the Transports have fallen well below its widely watched 200 day moving average. The Industrials are testing their 200 day support at 25,157. Worse, the defensive sectors of Utilities and Healthcare, which rally late in a bull market, are the strongest market sectors.

We are ten years in to the longest stock rally in history. We have detailed the negative social mood both in the US, see Cavanaugh and the elections, as well as around the world. Putin dispatches assassins to London and a Saudi journalist disappears. Political discord is surely the worst since Watergate and the Nixon resignation. Again should that mood spread to the markets, we may have seen the top of the ten year run.

Our prediction that precious metals are forming an important bottom appears to be correct. Gold finally jumped over resistance at1,212. Silver needs a weekly close over 15 but that will eventually happen. The reason for strength in metals may well be weaker currencies around the world. The US Dollar may be topping now.

Finally oil prices have pulled back below $70 but are still in an uptrend.

Fifth Wave now in Progress

Thursday Oct18, 2018

My earlier guess that the 4th Wave had peaked was incorrect. Here Wave 4 stretched to 25,800 causing the talking heads on CNBC to declare the correction was over.

They were clearly wrong! A top in the Price Momentum PMO suggests that now with a  327 point dowj day, the DJIA is in a fifth wave of Wave One.

Transports

 

 

Transports always lead and Transports are under the 200day MA

 

 

This is as clear as Elliott Wave ever gets. When the mood is strong, the waves are evident. Transports are below the  200 day MA and in a fifth wave.

Dow Theory holds that one index needs to confirm the other. That is not happening to the upside. Transports are always the leaders.  And they are leading the way down.

Utilities

And confirming the idea that a ten year high is in place, Utilities REITS and Health Care, all defensive sectors are holding up.