The Market Perspective

A Good Day

Thursday April 15 2021

 

Inflation markets had a great day as you can see, banks advanced again with the expectation of more business activity and higher interest rates.

Crude oil has broken out above previous resistance and should move higher.

TLT

TLT a fund of 20 year bonds seems to have invalidate the idea there would be another move down. This certainly seems odd with crude, gold and silver and bank stocks all advancing.

One would expect bond prices to fall and yields to rise but the market goes where it wants.

Evidence of a Market Turn Mounts

Friday March 26, 2021

Evidence of a Turn Mounts

Six weeks of increases have put the

30 year fixed rate mortgage at its highest level in nine months-3.17%.

Mortgage Rates Hit 9 Month High, Washington Post

This column has been warning of turn in the 39 year bull market in bond prices (lower rates) for weeks.   This past week brought more evidence this is the correct analysis. And the stock market is beginning to notice as well.

Interest rates fell from the 12-14% level of 1981 to less than one Percent in May 2020. The thirty-year bond yield is now 2.356%, tripling its yield since then.

This is confirmed by the huge rise in commodity prices. Dr. Copper is up from 2.9 cents last October to 4 ccents per pound today. Lumber has doubled from $450 per 1,000 board feet to $900.

Crude oil has also near doubled in price but is on borrowed time. Price lifted from $35 las October to $65 but now less than $60 at 58.56. A week ago it was announced that world demand for gasoline had peaked given covid restricted travel and the move to electric vehicles. With summer driving season, or what will amount to that, upon us 87 octane is near $3.00.

A bull market in stocks is marked by an expansion of new hghs. More money lifts prices of more stocks. That indicator collapsed this past week. Two weeks ago the NYSE new highs reached 700+. This past week it fell to 146. Conversely the number of new lows exploded from 20 to 200+ in the same period. This phenomenon is known as a broadening top. The late comers, a surge in first time speculators opening new accounts, are buying from those who purchased at last March low at DJIA 18,000.

And none of this should be surprising. Congress passed a Trojan Horse Covid Bill of $1.9 Trillion which was really a bail out for poorly managed municipal pensions, all in Democrat controlled states and cities.   Now another $3 Trillion stimulus is being planned. Like Barack’s non-shovel ready bail out, this will likely be a pay off to unions and poorly run Democrat cities like Chicago, Baltimore, and NYC.

The plan is straight out of the Hugo Chavez playbook. Simply raise taxes on the ultra-rich and the hated corporations. Believing the tax will not affect them, who in the lower income levels would object? But the parable of killing the golden goose is applicable. Lon- term studies of federal revenue reveal that no matter what tax rules are passed, the take is never more than about 18% of GDP. The wealthy can and will move, and adjust income streams. They are migrating from CA and NY high tax states; the same will happen with s-called soak the rich plans, wake up Bernie.  Congress targeted oil companies believed to make excess profits in the early 1980s.   The result was not more revenue but an exodus from North American production. In Andrews at that time, both Exxon and Amoco abandoned their large modern buildings and employees. It simply made the real estate crash of 1987-86 just that much worse.

We have seen this before. It does not end well

Stocks Hesitate, Yields Rise

Monday February 22, 2021

A headline of the front page of today's WSJ

Bond Yield Surge buffets Stocks

Which is what we have been warning for weeks.  The 30 yer yield us up a smidge from Friday now  2.168%.

Andy Kessler has an interesting take on pump and dump ie Gamestock a lot like RCA in the  1920s.

Mary O Grady points out Gov Abbott's mistake of an embargo of natural gas to Mexico. She notes this will allow AMLO to oppose foreign investment and return to

the good ole days of featherbedding Pemex.

on page A 17 The Money Boom is Already Here, the authors note M2 money supply is already upt 12% this years, inflation is too much money chasing too few goods, so he stage is set for more inflation and higher rates, see the GSCI graph I posted this weekend.

The Covid Relief $1.9 T is not about Covid, see lead editorial, a grab bag of Dem earmarks. And there is Andy .PUPzzder's column on how the Obama stimulus lengthened unemployment for  43 consecutive months.

Here we go again, higher interest rates, more spending to no goood end, higher taxes and more regulations.

Comodity Prices track Long Bond Yield

Wed Feb 17, 2021

The Goldman Sachs Commodity Index is in the top panel.   The large panel is the  30 year bond yield. At bottom is the correlation between the two. It is clearly positive and the two

closely track one another Spending trillions of dollars one does not have causes this, that and an end to the decline in interest rates from  1982.  Carl Swenlin at Decision Point writes this is not a long term reversal yet but I suspect it is.

A Tide of Deflation Hit the Investing Beach Monday

Tuesday Sept  22 2020

One of my 12 steps in Conquer Accounting is to adopt a pattern of reading investment websites as well as the WSJ every day.

Today's Tuesday issue is a great example. Let's get started

On the back page fellow socionomist Peter Atwater is quoted commenting on the GM Nikola deal

at extremes in sentiment even th4 adults in the room capitulate and want to join the kids. Nikola was recently valued at more than Ford. As Peter notes this is typical top of the market behavior. The article cites Enron, Worldcom, Madoff and the disastrous Time AOL deal, later the largest write off in history to that time.

A front page article has short seller Hindenburg accusing Nikola of making exaggerated claims about its technology. The CEO has resigned. Nikola has lost a third of its value since the report came out and dropped 19% Monday

Even Jeff Katzenberg is having trouble signing clients for Quibi, yet another streaming service in a crowded field.

My investment weblog https://professorelam.typepad.com/markets/

spent the summer warning of decreasing breadth in the stock markets Today is the autumn equinox, often a time of shift in markets.

The DJIA was down over 900 points intra day Monday. Gold dropped $51 by day end. Silver dropped 10% on the day. Crude oil dropped 4.3%. Energy and Energy Service shares were hammered.

A judge in Michigan rules that ballots postmarked Nov 2 can be counted up to 14 days later. So expect Michigan to not report election night. See the mess coming with mail in ballots?

Daniel Planko claims the free market can deliver free college. He compares Higher Ed to the brokerage business in 1999 when a trade cost $200. .Today trades are near free. Brokerages found other ways to make money. But it is hard to see how the existing college system can do that, certainly not with the high fixed cost it carries today. I have warned Higher Ed could go the way of the whaling industry from 1848-1858.

Another article w Your Company Health Plan Isn't Safe in a Biden Presidency, Kamala wants 100% govt take over, yikes.

Cruise Lines want to sail again but the CDC says the crowded conditions are a hotbed for transmission. Carnival wants to sell 18 ships, to who I wonder?

An interview with hoteliers in the SA paper Sunday suggests to me we are not grasping all the economic effects of this pandemic. Hotel occupancy is about 30%, 60% is break even. Property taxes are still at 100%, no discount for low occupancy. And airlines, hotels and restaurants are all linked. Throw in cruise lines and those are whole industries on the verge of BK.

Harley Davidson gets a new female CEO from the Food Industry. She will have a steep learning curve to the powersports industry. I would guess HD has topped out in terms of market share.

check out Deflation.com.

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OIl Drops Five Straight Days, A Bottom in SIght?

1/14/2020 Tuesday

The headlines look terrible for oil prices, so are we closing in on a bottom?

USO an ETF for oil can be tracked intra-day on stockcharts

240 min chart USO

Okay this is but a  .66% move up but this is about where I expected some support. Note the bap in early Dec at far left, we might have to fill that yet. But time to start looking for a low.

Natural Gas

Okay it is only .23% up but amid these terrible headlines, this is the sort of thing to watch.

Iron Ore CLF

 

CLF advanced 3.95% today right off its trend line.

Tanger Outlet Mall SKT

 

One can hardly find a parking spot on the weekend, SKT pays a 9% dividend, an everyone hates brick and mortar retail.

SKT Weekly

 

The moving averages have not turned up yet but are converging. It may take another dip or two.

Nustar NS

Bill Greehey bought $15 M of NS stock recently at the $28 level.  It dipped after he bought but is rising wel.

William E. (Bill) Greehey. Bill Greehey is Chairman of the Board of NuStar Energy L.P., and NuStar GP Holdings, LLC, both of which are based in San Antonio, Texas. NuStar Energy is a publicly traded master limited partnership that is one of the largest independent liquids terminal and pipeline operators in the nation.

now

The weekly chart shows why Bill is interested in NS breaking the $28 level.

I remain bullish energy. The trend in the USD has turned down on the daily chart. This will be suportive of higher energy and iron ore prices.

Thanks for reading the Market Perspective.

 

Commodities Finally Attempt Break out,Bond Yield Rise, Copper Price Firms

Weekend Dec 7 2019

 

I believed oil prices would bottom this fall, and it appears the process started with a low last August.

Now commodity prices in general appear to be breaking out

GSCI

I drew the parabola a few weeks back, one can see at the arrow it is challenging the neckline of the inverse H & S parttern

I expect a break out. We will show other charts that seem to confirm  this idea.

After a negative news release, Apache fell from 23 to 19. It jumped 7.6% Friday to 19.99. Could that last bit of bad news have formed the bottom?

XLE Energy ETF

This triangle should break out to the upside, nice 19% move up Firday.

XES is up  6% for the week.

 

As Richard Russell used to say, weekly charts are more important than daily. Here XES had a great week, and the PMO  has crossed to the upside.

Energy service has been the laggard so this is very encouraging. PTEN jumped 9.66% this week. Time to buy.

Nustar NS

We mentioned Chair Greehey bought $15 M worth of NS.  It is challenging  its 200 week MA. I expect it will vaut that in the next couple of weeks.  Again, bullish for energy sector.

Energy Trusts

 

Prudhoe Bay  Trust         BPT        +6.88%

Canadian  Natural Res    CNQ        +4..64%

Encana                        ECA            +3%

Kimbell Royalty            KRP            +..69% but had risen all week

You get the idea, positive results

Alerican AMLP did not really join the party up  .52%, the precent increases above are in price.

Investors are buying copper and stocks while selling bonds and gold.  This is bullish for some retailers, we like Tanger Outlet Mall SKT sporting a far 9.23% dividend yield

The outlet mall Tanger operates in San Marcos, TX is one of the five largest tourist attractions in the state.  After years of sell off with the concerns of on line shopping, this looks favorable

5 16 PM CST

More to follow tomorrow

Looks like energy  is shaping up really well for the New Year

 

 

 

 

 

 

Markets at Important Juncture

Weekend January 12, 2019

 

Stocks have re traced 50% of the entire fall from Oct 3.  Has this been a vigorous counter trend rally or is it safe to go long again?

This next week wil likely tell the tale.

Hedge Fund A Bear Fund

The two hour chart fell with the 2,000 point rally from December 24. It has returned to a slight up trend line.

NYSE

NYSE completed an A B C rally to the  38% level. PMO at bottom could top here.

Russell 2000

The Russell index of small stocks has rallied right to its 50 day MA.Many of he indexes look like this.

Bullish Percent  150 day MA

 

This indicator could repeat its failure at the end of November by not crossing the downtrend line. is it is we have lower highs and lower lows.

 

MNYSE Advance Decline

 

Our most reliable indicator has rallied in classic bear market fashion but could very wellfail at this downtrend line.

A Preference for Bonds Over Stocks?

 

The last two weeks of stock rally pulled this ratio chart down.But the MAs are all moving up. For now investors are liking bonds over stocks.

Gold

An article in the WSJ headlines Gold is Headed for $1,300!  Nothing like that was being said at $1,180 in August.The indicators suggest other wisse. A re test of teh 200 day MA at 1254 looks likely  Gold is overdone short term.  This should set up a nice point to buy in the next month or so.

 

Silver

 

Maximum mood occurs at the end of a move, note the recent sharp rise as the public rushes to buy at the top.

Silver is likewise overdone short term. a re test of the break out at 15.00 could occur here with a buying set up.

DZZ is a short gold fund and might be worth buying some shares here.

More posting later.

 

 

Okay Despite all the Headlines, the Markets are back to Last Thursday

Thursday Dec 27, 2018

 

The two hour chart does look like this is the start of a  relief rally  after the Nov Dec decline.

 

PMO at bottom and On Balance Volume at top both appear to have bottomed and are turning up.

At the same time GLD has rallied and looks very toppy short term to me.

And the US Dollar strengthened so gold is pulling back a bit on that as well.

Silver took off yesterday, did anyone notice?

Silver has apparently finally made a bottom while gold rose to a new high.

I have illustrated the extreme number of new lows in the last few posts even suggesting a look at the new lows in the WSJ was a great indicator.

New highs versus new lows finally made a bottom  Wednesday. Social Mood switched and the market rallied.

NYSE Advance Decline Daily

MACD and RSI have reached extremes to generate a low and probable reversal.

Among the economy ETFs I would suggest XLF Financials and XRT Retail, both have been beaten up.

And now that the FAANG stocks have been beaten down, how about SOCL global social Media ETF?

Bottom Line

I suspect we are still in bear markets for stocks and energy.  The extreme over sold condition should generate a counter trend rally in equities and energy in to mid January. But frankly that is about all I am expecting. This same period should see silver finally holding above its 14-15 level so it can join gold in a rally for  2019. Wheaton WPM and Kirkland Lake KL both had intra day reversals at  new high price area yesterday also suggesting some correction ahead in the mining stocks.

Energy I suspect is just bouncing off a lower level.  Don't get too optimistic that the worst is over for energy.

The big rally of  1,000 points got the 30 minute charts over bought, DJIA down 400 in pre market this Thursday morning so let things cool a bit and watch 30 minute and hour charts for best entry.

Dollar Completing Five Waves

Wed Nov 14 2018

 

Gold and oil are bottoming as the US Dollar completes a fifth wave of five to make a top. Sure enough the media are agog over the strong dollar but that makes a market top.

 

This is a textbook five wave pattern.

 

Gold is taking longer to bottom than I thought but it is happening. This should be a pullback before a more spirited advance begins, watch the chart of UUP.

 

Ratio chart of gold to the US Dollar via UUP

 

This chart falls when the USD is out performing gold. It rises when gold outperforms the USD. One can see the bottom was recorded in August.  The ratio is making a higher low now.

Patience.