The Market Perspective

VIX Quietly Increasing

Monday June 1 2020

11 55 AM CST

The VIX increases during a stock market sell off. Is it my imagination or is the VIX forming a saucer shaped bottom here?

PMO at bottom has done the same.  RSI at top is beginning to stay above the  50 % level.  All of this adds to the idea that a top of some significance is forming.

A Quiet first Day of the Week Open

Monday June 1 2020 11 00 AM CST

The creator of the TRIN index, Richard Arms, gave importance to first and last hour of trading. I don't know if first day of week matters.

First day May 17 was up 900 pints. First day May 26 was up 600 points.  So far today we are up 56 points.

VIX versus SPX

The VIX is an index of fear, it rises when the SPX sells off. The correlation here is completely negative. If the bulls were right the ratio chart would have returned to its Feb 12 level. It has not. VIX is elevated and has stayed that way for most of May. We may have to wait until the MAs come closer together for some sort of reversal.  It is now June 1 summer in my book, and things are never clear trading wise in the summer, too may traders away.

but the fact remains VIX is higher than on Feb 12.

Weekend May 31 2020

Weekend Sunday May 31 2020

Stocks seasonally to after tax day April 15. This is the last day of May, was this the top of Wave 2?

At bottom PMO is not as strong perhaps as in early May that would validate the idea that a fifth wave is ending.

My Friday post was concerned by the late Friday rally erasing a 250 point drop in the DJIA so we may have one more lunge up this week.

 

I have wondered what would happen fundamentally to validate the completion of Wave 2 up?  We now have our answer with negative mood on full boil. Consider this scene in otherwise peaceful San Antonio Saturday this weekend.

It is said that nothing divides a town like a railroad track or a river. We have highway 90 east west as well as the San Antonio River downtown  and some RR tracks.  Local left wing politicians keep the fires  lit by telling thousands of residents they live in poverty.  One couple attending the 'rally above' arrived in a Toyota Sequoia SUV, the Japanese equivalent of a Chevy Tahoe, hardly poverty status. Various left wing  groups have now declared that having a home, or apartment, for free of course, is a basic human right. Again, this is not to be political but imagine what will be said by the time the Nov elections arrive.

 

Socionomics is not a crystal ball. But this past week with mood collapsing down around the world and this country. we are surely closer to a  top of market re-bound.

Crude Oil

Crude oil has followed the stock market.It bottomed a month later and each has had a rally bringing PMO and  RSI to toppy levels.   This needs a pullback to the 50 bar MA at  25 or so to work off this over bought situation.

Silver

How did I miss this?  Silver has had a terrific collapse and then recovery. I have no idea what this means and no plans to participate. But like crude and stocks it is over bought now.

Dr. Copper

Copper is often cited as the bedrock of the economy as it is used in construction electric and high tech. Again same pattern as stocks, gold, silver, iron ore, etc.

Yes I will be up early to see the pre-market trade around the world

Evidence mounts, yes I know i have been wrong recently, that a top is near.

The Virus and the Crash

Weekend May 30 2020

 

Think Coronavirus Caused the Crash? These Two Charts Beg to Differ

By Elliott Wave International

Just about everyone thinks the coronavirus pandemic slammed global stock prices in February and March. Entire countries shut down; businesses closed up shop; unemployment soared. People stopped spending money beyond the essentials, so conventional wisdom would indeed expect stocks to slide as a result. Yet consider the below chart of the Shanghai Composite, China's primary stock index.

Far from prompting a new bear market, the chart shows that the novel coronavirus appeared in Wuhan after a dozen-plus years of net decline in Chinese stock prices. Did the bear market instead prompt the pandemic?

Before we answer, let's look at one more chart. The below chart shows the Dow Jones Industrial Average plotted against the daily number of new U.S. COVID-19 cases reported to the Centers for Disease and Prevention. The CDC's case count is a function of disease prevalence, testing capacity and social awareness of the virus.

The Dow peaked on February 12 and began a precipitous fall, finishing the month down some 14% from its high. Yet the number of new daily COVID-19 cases essentially rounded to zero until March 3 when it hit double digits for the first time. Six days later the new daily case count reached triple digits for the first time; a week later new daily cases exceeded a thousand. By then, the Dow was already down more than 29% from its high. These data indicate that the fall in the Dow preceded the acceleration in confirmed new COVID-19 cases in the U.S., not the other way around.

The Dow registered a low on March 23, yet daily new COVID-19 cases continued to soar; on April 7, new cases peaked at 43,438. By then the Dow had already rebounded strongly, up 22% from its low. As the Dow continued higher in the following weeks, the number of new COVID-19 cases receded. These data indicate that the rise in the Dow from its March low preceded the decline in confirmed new COVID-19 cases in the U.S., not the other way around.

In summary: The market led, and the virus followed.

How can we make sense of these data? Robert Prechter's socionomic theory proposes that social mood regulates the aggregate tenor and character of social trends -- including the stock market and our collective susceptibility to epidemics. As social mood becomes more negative, society sends stock prices lower and becomes more vulnerable to epidemics. As social mood becomes more positive, society sends stock prices higher and becomes less vulnerable to epidemics.

Because society's mood changes are swiftly reflected by the stock market, its trends tend to precede those of other mood manifestations. Thus major epidemics generally emerge or accelerate in countries after large-degree bear markets begin, a proposition which more than a century and a half of history supports.

We can also use socionomics to understand why the world was so unprepared for the coronavirus pandemic. Pundits place the blame on leaders, institutions and the absence of information. But a report from the May 2020 issue of The Socionomist goes deeper to reveal the true source of society's complacency. It also illuminates how to use the stock market to identify when further risks to our lives and livelihoods are likely to intensify. You can read the entire issue when you join ClubEWI, the world's largest Elliott wave educational community. Membership is free. Follow this link to join.

 

Late Rally Suggests Final Upside Next Week

Friday May 29 2020

I really wanted to see the market close down 300 points today. It did not.

I suspect this is where we are, dang.  This means another move up this next week.

My friends at EWI report that CCC rated bonds outperformed B bonds this past month. Now that is massive optimism.

I noted in my column that the Fountainbleu Hotel in Miami is awash in 975M in debt and asking for a pass on interest payments.

Social mood as noted in my column and the last update is on negative boil. That is not how a bull market begins.

Check back this weekend.

Nixon Had His Enemy List as Well

Friday May 29 2020

Negative mood is arriving right on schedule as I noted in my newspaper column posted earlier today.

Now Justice plans an anti trust assault on Google.  RCA in the 1920s, IBM in the 1960s, MSFT at end of Clinton administration, all of these lawsuits occurred near the end of that bull market then in force.

Yesterday Trump wanted to shut down Twitter and threatened to send Military to Minneapolis, the Governor did send  the National Guard.

Nov 3 2019

After returning from New York City, Sunday, on the South Lawn of the White House, President Donald Trump said he believed House Speaker Nancy Pelosi (D-CA) had “lost her mind.”

Trump said, “I think Nancy Pelosi has lost her mind.”

If mood is this negative now, imagine what the fall election will bring....

Transport and Small Caps Continue Their Lead

Friday May 29 202

Wave 2 has certainly filled the job of a second wave. In a down market the second wave up convinces most that things are Okay!

A tenet of social mood is that it is unremembered. No kidding, it seems already no one remembers the 11,000 point drop from Feb 12 to mar 23 in a little over 5 weeks.

at bottom notice the cross over in the PMO confirmed by the peak in OBV yesterday at top. We cannot confirm THE TOP

is in place with no more action than this but we are alert for clues.

Notice the stealth nature of this decline.In pre market trading Thursday morning, the DJIA was up  250

By the end of the day it was negative  147

I am writing at  11 34 AM Friday CST and it is down 250

250 +147+ 250 = 647 down already

I don't ave access to sentiment statistics but they seem to be more bullish now than at Feb 12, the previous high.

I will have another post after market close today Friday, thanks for reading.

Negatie mood on the Rise

Friday May 29 2020

 

Negative Mood on the Rise

More than 40 million Americans the equivalent of one worker in four have filed for unemployment benefits since the pandemic began in mid March.

New York Times Today

For new readers, I have underestimated the time and distance of this rally since March 23 The Transports and Small Cap Index were down all day Thursday with the DJIA finally dropping from up 250 pre-open to negative 147 on the close. The DJIA is down about 180 this morning, a total drop of near 600.   If the rally has ended we would expect to see an expansion of negative social mood. Indeed mood has gone from simmer to full negative boil the last few days. Consider these events.

The Federal Government reliably sues the most successful company of the bull market near the top. It was RCA in 1929, IBM in 1966, MSFT in 1998, and now Trump is ‘fed up’ with Social Media. He would close Twitter (and presumably his 80 million followers) if he could. He took time out from that fight to criticize the Mayor of Minneapolis.   Elsewhere-

China’s Luckin Coffee evaporates its $12 B IPO valuation to near -zero. Monthly home sales are down 34% form a year ago. National Guard called out to calm riots in Minneapolis amid a tragic death caused by police. China Tightens Its Grip on Hong Kong, Pompeo declares HK no longer autonomous from China. Bejing Vows to Shore up Economy, no target set. China picks a Border Fight with India. Spanish workers protest closing of Nissan auto plant.

Depend on Wall Street to add to the financial chaos with another whacky derivative. This time its called single asset single borrower bonds.   The Fountainbleau in Miami Beach is already asking for interest rate relief. There are $120 B of these problematic bonds floating around.

Crude oil has risen with the stock market, now at $33. Apparently there was more storage space than was first thought. Daily momentum measures have topped out across a variety of asset classes including energy.   Chevron has outperformed Exxon in he rebound. CVX is already starting to trend down.

Markets tend to top seasonally in May and that month is ending now. Evidence mounts that a top is at hand with momentum peaking and negative mood on the rise. Follow our updates at https://professorelam.typepad.com/markets/

 

Transports actually down for the day, can that happen, really?

Thursday May 28 2020

Clift Scene at end of posse chase

Butch

Kid next time I say let's go somewhere like Bolivia

Let's go somewhere like Bolivia

Sundance

Yeah, came the reply,, next time!

 

Next time I say let's take a counter trend position remind me to go long an equal amount on the market as a hedge.

Yes I have said this before but, May is typically a topping month and there is not much left of May. And the intraday charts are looking toppy, I would not go long here

On balance volume is topping in north panel

Price has had two gaps and now a sideways pattern selling off into the close, recall the Transports and small caps lead

PMO looks ready to roll over

SP 600 small Caps

Hmm off 2.37%, same toppy indicators

NASD New Highs

RSI has already peaked, PMO toppy, actual number looks to have peaked

MYSE Advance Decline

RSI looks to have topped  and actual indicator is bending over

Percent bullish over  150 day

RSI toppy,  indicator in vertical position,PMO peaked a month ago

 

DJIA sold off to  -147 right into the close down from being up about 180 today.

SPX 10 Minute

This reverses the entire day action,amazing how social mood turns on a dime, yesterday those same stocks were up  60 spx points!

Speaking of social mood, Trump is signing an exec order lifting some sort of protection on social media in his fight with Twitter,see WSJ Editorial today.

As the markets top this is a great socionomic moment, Trump versus Twitter which was his preferred media.

ttps://www.newsweek.com/trumps-executive-order-accuses-social-media-companies-profiting-partnering-chinese-government-1507179

"Twitter has now shown that everything we have been saying about them (and their other compatriots) is correct. Big action to follow!" Trump tweeted Wednesday.

Karl Rove's column today in the WSJ lists all the mistakes Biden made in his radio interview.  This guy can never be let on stage with Trump and the Dems know it.

Trump declares war on Twitter

DeBlasio declares war on shop keepers in NYC.

Dem Governors keep Churches closed

I mean this is a perfect example of how negative mood will move markets, the other way.

 

 

 

SPX 3,000

Wed May 27, 2020

An alert reader suggested SPX 3,000 might be the first level to encounter selling.  The NASD is actually down this morning.

 

These levels reach an extended rally. Too early to call but we are watching closely.

NASD

RSI and PMO  have been declining.  Social mood towards the market is over the top. All the bulls are even more bullish.

Yet reading about the re open, I see articles mentioning the necessity of borrowing money.  Debt caused the problem. And is the problem  It is doubtful small business will borrow its way out of the problem. I see one of the Cruise Lines issued junk bonds with a  12 % coupon. Good luck with  that.