The Market Perspective

Mergers Happen at Market Tops

Monday June 10, 2019

 

United Tech and Raytheon merger

Cengage and McGraw Hill merger

Renault and FIAT Chrysler do not,, typical French refusal to do anything with anybody

Mexico and US agree on immigration

that is three big deals in a short period

Socionomics  - inclusionary at a top

Weaker Economy Focus on June 14

Weekend June 8,2019

The WSJ lead editorial this weekend suggests Trump pay attention to the jobs report, there are numerous examples of a weaker economy also highlighted on the WSJ Editorial TV report today. It is time to do something with tariffs and declare victory not endless ware with no outcome.

Transports and Russell not confirming move up in Industrials

e need to see the Transports blue and Russell moving up with the Industrials red, it is not happening

Crude oil

Crude oil is over sold, finding some support here in the low  50s, look for a rally back to the MAs, decline to resume in July.

Gold

Too much too fast, look looks like a pullback to test the break out at  1310.

TLT Bonds

Looks like a parabolic blow off to the upsiide.  The guest on WSJ Editorial report is looking for to FED rate cuts this year. The bond market has delivered that and more already.  Look for a pullback here in price.

Bottom Line

 

Look for a top in stocks June 14.Industrials move up not supported by other indexes. Bonds topping now.  Gold needs a pullback, it is the only commodity making new  highs.

Oil Bounces at $51

Weekend June 8 2019

Oil Prices Fall, Stocks in Counter Trend Rally

 

The US remains on track to impose tariffs on Mexico next week.

 

WSJ Today

 

Mexican tariffs will only raise the cost of Mexican made products d (hold the guacamole) for Americans. Across the pond Theresa May exits 21 Downing Street but that won’t make fixing Brexit any easier. Rather than accepting the Mueller report and getting something done, Nancy Pelosi is now trying to convince her impeach crowd to convict Trump after he leaves office, ie, lock HIM up. Centrist Democrats who won in districts Trump carried (a couple dozen) are and should be worried. France nixes the Fiat-Chrysler deal with Renault, a merger of second tier companies if ever there was one.   This does speak to the weakness of the entire European economy.   Russia disagrees with the Saudis on ways to boost the sagging oil price. China tech stocks hit a bear 20% sell off measured by the CHiNext Pprice Index. Oil prices have dropped from $66 to the low $50s, another 20% swoon. After raising interest rates weeks ago, the FED debates lowering them. The EU is pressed to lower their rates which are already negative. All of this reflects our theme that social mood turns negative world-wide.

 

Regular readers are aware of our warning that weakness in the XES Energy Service ETF was broadcasting a warning signal. Crude has dropped more than 20% and is trading below the four moving averages I track. Expect a counter trend rise here before the down turn resumes in July. The XES and XLE are so oversold, they too look ready to bounce higher. Having abandoned coal-fired plants, Australia, an exporter of LNG, is now short of supply itself. Lacking a proper pipeline infrastructure, companies are threatening to leave the island unless reliable energy can be provided. Perhaps this will take up some slack for Texas exporters facing Chinese tariffs on LNG.

 

We have serious divergences in the stock market. Yes the DJIA has rallied one thousand points in the last week. It has not been joined by the Russell 2000 or Dow Transport indices. Both are trading below all four of my moving averages.

 

Gold has gotten ahead of itself in an 80 point rally. I look for a pullback from 1,348 before that rally resumes.

 

Movie audiences turn to horror and crime films when economies decline. Quiet Place was followed by The Dead Don’t Die and now M. Horror films  are returning big profits on small budgets. The Highwaymen is released by Netflix; a take on Bonnie and Clyde from the lawmen’s perspective. Our first and last paragraphs indicate just how quickly social mood is turning negative.

 

Stock TrendsTurning Down

Weekend June 12019

NYSE Daily

 

NYSE (2,000 stocks) turns daily and weekly trends down. Potential counter trend rally up into June 14.

And then much lower prices into the fall.

Parabolic rally bonds

 

Parabolic rally in bonds unsustainable - topping next two weeks.

U S dollar and bitcoin set for tops helping gold

Oil

Oil is headed for51 and then the last lows at 42-44.

 

Recovering hand surgery onr hand typing

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.

dennislelam@gmail.com

 

 

Welcome to the Stealth Bear Market

Wed May 29, 2019

Welcome to the Stealth Bear Market

 

Wednesday May 29, 2019, this column is usually written on Friday mornings

Hand surgery this Thursday will preclude blog posts for the a couple of weeks.

 

The 1973-74 bear market never crashed by declining a double-digit percentage in one day. Instead prices just drifted down for two years from 1,051 to 577 in two years.

Dennis on the 1973-74 bear market

 

All our warnings in this space the last few weeks and months are coming true. The market is not advancing but has been in distribution since the first DJIA high of 26,600 in January 2018. The yield curve has inverted with the ten-year note paying less interest than a three month T Bill. Since 1974 this indicator has successfully predicted every recession. Stocks are down for the fifth week in a row. As noted here, various energy service shares are already trading at or near the March 2009 low. Our prediction that the negative social mood (political) would eventually transit to Wall Street is also coming true.

 

The Dow Transports and Russell 2000 Small Cap indexes are market leaders. Both have turned their daily trends down. Transports have collapsed ten percent form the mid April high. The Russell 2000 has had a similar fate; the trend is now down. It is not too soon to speculate a return to the late December lows in both these indexes. The technology XLK is also falling out of bed.

 

Investors have rallied defensive sectors like Utilities and REITs. But Utilities fell yesterday as did REITs. The same is true for he Consumer Staples ETF XLP down over 2% the last two days.

 

The DJIA ended at 25,126 down 221. That is enough to suggest after a modest move back, the down trend is likely to resume. Crude oil has dropped $1.74 to $57.40. The problems are excess supply coupled with the fear of world economic slow down over trade wars. Trump is not going to budge China. China has now contracted for control of the Greek port of Piraeus and now is angling to control Israel’s Haifa. What is the Israeli PM thinking?

 

Recall our warning that the China Belt and Road (transportation) Asian Infrastructure Investment Bank (finance) and thrust into the South China Sea reflects a long term winning strategy-for China.

 

The XLE Energy ETF is already half-way back to its December low.   The XES Energy Service ETF is a mere 80 cents above that same low. Energy is leading the entire stock market lower.

Expect volatility but overall energy prices and stocks look to be trending lower into the fall.

 

Energy Service Has Been Falling for Years

May 27 Memorial Day Weekend

Ratio Chart XES to SPX

The energy service sector has been falling relative to the overall market SPX  since the oil price collapse of  2014.

A look Back at 2007, Then and Now

Memorial Day Weekend May 26

The NYSE index has made a higher high but the PMO has not. In fact PMO is turning negative with black below red line.

The blue arrows show the same peak at an overbought RSI. The red arrows show a bounce at the 50 ;evel now just as we had then.

Short term we have a double top with a lower high.

DJIA Industrials

the same sort of cautionary signals are evident here. This at least suggests the need for consolidation if not more correction.

Monthly charts move slowly but this may be a clue for a Fall Low.  Ten years out from the March 200 low, we now have a new double top high so a follow up low seems logical.

See my list of negatives in the previous post.

Stocks Congest, Oil Falters, Weekly Oil Turning Down, Fed Ex UPS flashing negative

Memorial Day Weekend May 25, 22019

See our previous post about a three year low in the Purchasing Manager index

In today's Weekend WSJ

• Brexit Strife Forces May Departure
• FAA Broadens Boeing Probe
• Tesla down  42% this year, closes under $2000
• Factory Orders point to slow down
• Deming New Mexico Strains to Handle Migrants
• Dissenter Stops Disaster Aid Bill
• War Spreads to Iran's Adversaries
• US China Rift clouds Japan's Economic Outlook
• Franchises are in Union Crosshairs
• China Tech Champion or Serial Theif
• Wall Street Isn't Buying What Silicon Valley is Selling
• Dow Declines for 5th Week
• Oil and Copper Prices Decline

And here in San Antonio the Governor of the State has the FAA investigating the SA City Council kicking Chik Fil A out for not serving on Sunday, Governor says this violates Chik's religious grounds, Council dislikes opposition to gay marriage, do we have enough rules here?

Point being, taken together this is all reflective of growing  negative mood. And mood drives the markets.

Percent of Stocks above MA

On the weekly chart PMO is toppy, not a great spot to initiate a new position.  Stocks did not turn down below  25,200 Friday so expect more congestion.

NYSE Daily  Advance Decline

The advance decline line flattens and the MAs draw closer together

Momentum via MACD and RSI has weakened.

Weekly

Here MACCD is toppy. The chart looks a lot like last Sept Oct, toppy.

Transports

Transports made a lower high and are now under all four MAs, PMO is negative, not good.

Russell 2000

Russell 2000 barely got over its  200 day MA and is now falling, PNMO also going negative.

I don't see any reason to be long the major indexes. Utilities and REITs are hitting  new highs in defensive position but I don't see buying them at new highs either.

DUG Short Oil and Gas

Dug is flashing a buy signal, this is a bear fund for oil and gas shares.

HAL

A re test of the  2009 low is not out of the question for the 2nd largest sesrvice firm. And the price of oil now is higher than at the previous 2016 low.

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.

dennislelam@gmail.com

Mfg Activity Slows

Friday May 24, 2019

Manufacturing activity is collapsing, and “worse may be to come,” said Chris Williamson, IHS Markit’s Chief Business Economist.

Williamson’s grim statement came on Thursday, in response to the latest IHS Markit Flash U.S. PMI report, which showed business activity growth plunged to a three-year low in May.

“Growth of business activity slowed sharply in May, as trade war worries and increased uncertainty dealt a further blow to order book growth and business confidence,” Williamson said.

Specifically, the composite output index dropped to a 36-month low of 50.9 from 53.0 in April. Any reading above 50 signals growth, which means the index is very close to signaling an outright contraction in activity.

Amid the ugly data, “inflows of new business showed the smallest rise seen this side of the global financial crisis,” he added.

WTIC Cracks $60

Friday May 24, 2019

WTIC Cracks $60 to the Downside

 

Thursday US oil futures tanked 5.7%, the biggest percentage loss of the year. The DJIA recouped some of its losses in the final hour after falling 451 points earlier. Chip-makers have been hard hit.

 

Wall Street Journal Friday, markets hit As Trade Tow Escalates

 

We have warned for months in this column that the weakness in the Energy Service XES was flashing danger signals for oil prices. XES is already trading under its 2009 low of $12.50. And our prediction that the Trade War would not be easy to win is certainly coming true. China is surely watching the pain of soybean farmers, bicycle sales, and the 25% tariff on LNG shipments. Dorian LNG dropped 16.48% on Thursday. As previously noted, this will negatively impact the billion dollar investments in LNG export terminals along the Gulf Coast of Texas. Couple that with the Democrat call for impeachment. Indeed I suspect China, if not Canada and Mexico, as well, have decided to wait it out till the 2020 election before committing to anything.

 

Trump gets his wish for cheaper energy. Unleaded gasoline futures dropped 3.89% to $1.89. That and the drop in oil prices reflect inventory builds and the culmination of the 50% rally from $42 to $66 since December.   The world is settling in for a protracted trade war.   US Companies are not necessarily coming back to the US. Instead they are moving out of tariff bound China to other locales like Viet Nam or Mexico.

 

The big drop in stock prices yesterday suggests a short term low. IIf the DJIA does not fall under 25,222 today (now 25,490 and up over 100 points this morning) congestion will probably continue for another week or two.

 

 

 

 

 

 

 

Negative mood is quickly spreading to markets world wide. Prime Minister May looks to get ousted over Brexit woes. The German economy continues to slow. It is doubtful sanctions will oust regimes in Venezuela or Iran. India just re-elected Modi in on bright capitalistic move.

 

Instead of telling fellow Democrats to read the Mueller report, get over it, and accomplish something, Pelosi went for a compromise. Don’t impeach just insult. But that won’t satisfy the hard left. And if it comes to pass, the not so left Democrats may have to vote on impeachment. That will make for s tough sell to independents as a Republican Senate won’t confirm. Republicans need only to regain 18 seats to re-take the House. And now Trump has drooped infrastructure unless the Democrats back off. Expect conflict and impasse to continue.

 

Overall look for low stock and energy prices into Fall 2019.