The Market Perspective

Tran, Util may tell the story

Wed 12/4/2024

 

Richard Russell used to say the Transports lead. Tran and Util have been down the last four days as Indu pushes higher. I see more comments that the market is frothy and due for correction.

Stand by.

Energy Service Update

Weekend 12/1/2024

Here are weekly charts for RIG and PTEN, So far so good

RIG

PTEN

Trump is given to wild claims and observations. One is that he will cut the price of oil in half. That would be a disaster for oil companies everywhere. Cost of production is in the low 60s.

Achieving more production from Big Oil will be difficult as they are not making that much money now.

Apache has been more than cut in half, trading a t 1.6X book value

If 20 does not hold next support is 15

Bonds are in a  counter trend rally to the upside.

Gold looks to have completed an A down and B up of and ABC Correction.

Silver always lagging gold has completed an A down.

We are n a full blown mania for stocks, the HYG junk bond shows no signs of slowing, so that is the trend for the time being.

 

 

Market Looks Like a Bubble

Weekend 11/30/2024

The market is in a parabolic rise and those end only one way.

 

From Motley Fool a previous post

Most investors are likely familiar with the price-to-earnings (P/E) ratio, which divides a company's share price into its trailing-12-month earnings per share (EPS). The traditional P/E ratio can be a fine tool for quickly assessing relative value for mature stocks, but it's often lacking in the sense that it fails to factor in future growth potential and struggles during shock events.

By comparison, the S&P 500's Shiller P/E ratio, which is also commonly known as the cyclically adjusted P/E ratio, or CAPE ratio, is based on average inflation-adjusted EPS from the previous 10 years. Examining 10 years' worth of earnings data smooths out the impact of shock events and leads to apples-to-apples valuation comparisons.

As of the closing bell on Nov. 25, the S&P 500's Shiller P/E reached 38.20, which is or more less a high reading for the current bull market, and more than double the 153-year average of 17.17, when back-tested to January 1871. More importantly, this marks the third-highest Shiller P/E reading during a continuous bull market over the last 153 years.'

The only two times the stock market has been pricier than it is now was prior to the dot-com bubble bursting, which saw the S&P 500 and Nasdaq Composite respectively lose 49% and 78% of their value, and during late 2021/early 2022. The Dow, S&P 500, and Nasdaq Composite all endured bear market declines in 2022, with the Nasdaq, once again, getting hit the hardest.

And it's not just the Shiller P/E that's foreshadowing trouble for Wall Street. The valuation tool Warren Buffett once touted as "probably the best single measure of where valuations stand at any given moment," hit its highest reading ever in November.

The "Buffett Indicator," which divides the market cap of publicly traded companies (via the Wilshire 5000 Index) into gross domestic product (GDP), topped 200% for the first time ever in October and nearly reached 206% this month. The average for the Buffett indicator since 1970 is about 85%, with peaks of 144% prior to the dot-com bubble and 107% before the financial crisis.

These historically accurate indicators suggest President-Elect Trump may oversee a sizable stock market correction.

 

QQQ

Here is a classic textbook unfolding Elliott Wave via the QQQ NASD 100

1. There are a clear five waves.
2. The fifth at this point is much shorter than the first wave suggesting this has further to go.
3. RSI exceeded  70 at the top of the first wave and during the third wave, the third is the strongest wave so again textbook.
4. Alternation exists. Wave 2 was sideways, Wave 4 a much deeper correction.
5. Wave 5 registers a lower RSI than 3, it should. Again it is above Wave 3 but looks to have further to go. That makes sense I am not aware of a big downturn ever starting in December.
6. All this aligns with a late December or January top ala 1973.

I was thinking again of the  1973-4 disaster, INDU down 50% in two years. The smaller stocks were just wiped out. Many brokerages were bought or had to merge to continue to exist. DuPont and Walston (one firm by then) went down altogether and were sold piece meal to other firms. It too until 1979 but then wire house Shearson bought storied Loeb Rhoades, oh perish the thought. Back then the snooty North East firms demanded to be listed at the top of the tombstone ads. These ads recorded that IPOs had been made and listed the underwriting group. First Boston, later acquired by Credit Suisse, was always on the first line.

1973-01-01	1026.82
1973-02-01	974.04
1973-03-01	957.35
1973-04-01	944.10
1973-05-01	922.41
1973-06-01	893.90
1973-07-01	903.61
1973-08-01	883.73
1973-09-01	909.98
1973-10-01	967.62
1973-11-01	878.98
1973-12-01	824.08
1974-01-01	857.24
1974-02-01	831.34
1974-03-01	874.00
1974-04-01	847.79
1974-05-01	830.25
1974-06-01	831.43
1974-07-01	783.00
1974-08-01	729.31
1974-09-01	651.28
1974-10-01	638.63
1974-11-01	642.10
1974-12-01	596.50

The final low that 12/74 was 577.

Another similarity now and then was the Presidential election. This time Harris managed to eek out 226 helectoral votes.

But look at the map. Seven totally Dem controlled states got her those votes, OR WA CA IL NY VA, and okay MA.

In 1972 Nixon took victory 520 to  17 as the Dems did not control those seven states. Republicans were Governors of California, an impossibility now.

Okay understanding that Trump stunned the liberal press, just as Nixon's come back in  1968 ha done the same. Note, he had lost the Presidential race in  1960 to Kennedy and then lost the CA Governor race in 1962 saying you, the press, won't have Nixon to kick around anymore.

The similarities of Trump and Nixon

Two unlikely comebacks by each of them

Both were hated by the mainstream press

Both inherited a stock market at new all time highs, just as Herbert Hoover did in 1929.

Another similarity, Hoover won 444 to 87 over Al Smith.

Hoover was creamed in 1932, 472 to 59.

Nixon had the hated Viet Nam war. Trump inherits two wars in the Mid East and Ukraine, not as big an issue now as then.

Nixon was continually investigated over the Watergate break in just as Trump was law fared in no less than four jurisdictions. Trump appears to have dodged his legal problems for now.

Trump's pick for AG died quickly. Defense and National Security don't look much better. Robert Kennedy, hard to say.

Even now the polarization continues with CA and CO Governors vowing to  oppose all things Trump.

My point being things can change quickly.  I don't think the stock collapse was Hoover's fault but the voters rejected him one election later with about the same lopsided result but opposite the next time.

Social mood can change on a dime and is unremembered.

__________________

A further thought, what could go wrong?

 

How about invade Mexico.

The US tried before during WW I with General Pershing, we lost.

• Carranza rejected the proposal of a military alliance with Germany, made via the Zimmermann Telegram, and he was at the same time able to prevent a permanent military invasion from the U.S., which wanted to take control of Tehuantepec Isthmus and Tampico oil fields.^[2][3][12] Mexico was producing 55 million barrels of petroleum by 1917.^[13] Carranza gave the order to destroy and set fire to the oil fields in case of a U.S. invasion.^[12][14]
• Carranza's troops confronted and defeated John J. Pershing in the Battle of Carrizal. General Pershing was furious at this result and asked for permission to attack the Carrancista garrison at Chihuahua. President Wilson, fearing that such an attack would provoke a full-scale war with Mexico, refused. The Battle of Carrizal marked the effective end of the Punitive Expedition.

 

 

 

 

 

 

12 Days of Elliott Wave

Friday 11/29/2024

 

Click here for 12 days of Elliott, another resource revealed each day

A Motley fool Warning

11/28/2024

Motley Fool wrns that the CAPE indicator and Buffet indicator are at all time highs.

That suggests what I have been discussing, a serious correction. Then of course they recommend buying three stocks, I did not click there as I am sure it requires a subscription.

Be sure to read about both indicators.

From Motley Fool a previous post

Most investors are likely familiar with the price-to-earnings (P/E) ratio, which divides a company's share price into its trailing-12-month earnings per share (EPS). The traditional P/E ratio can be a fine tool for quickly assessing relative value for mature stocks, but it's often lacking in the sense that it fails to factor in future growth potential and struggles during shock events.

By comparison, the S&P 500's Shiller P/E ratio, which is also commonly known as the cyclically adjusted P/E ratio, or CAPE ratio, is based on average inflation-adjusted EPS from the previous 10 years. Examining 10 years' worth of earnings data smooths out the impact of shock events and leads to apples-to-apples valuation comparisons.

As of the closing bell on Nov. 25, the S&P 500's Shiller P/E reached 38.20, which is or more less a high reading for the current bull market, and more than double the 153-year average of 17.17, when back-tested to January 1871. More importantly, this marks the third-highest Shiller P/E reading during a continuous bull market over the last 153 years.'

The only two times the stock market has been pricier than it is now was prior to the dot-com bubble bursting, which saw the S&P 500 and Nasdaq Composite respectively lose 49% and 78% of their value, and during late 2021/early 2022. The Dow, S&P 500, and Nasdaq Composite all endured bear market declines in 2022, with the Nasdaq, once again, getting hit the hardest.

And it's not just the Shiller P/E that's foreshadowing trouble for Wall Street. The valuation tool Warren Buffett once touted as "probably the best single measure of where valuations stand at any given moment," hit its highest reading ever in November.

The "Buffett Indicator," which divides the market cap of publicly traded companies (via the Wilshire 5000 Index) into gross domestic product (GDP), topped 200% for the first time ever in October and nearly reached 206% this month. The average for the Buffett indicator since 1970 is about 85%, with peaks of 144% prior to the dot-com bubble and 107% before the financial crisis.

These historically accurate indicators suggest President-Elect Trump may oversee a sizable stock market correction.

Basic Lesson in Elliott Wave

Thursday 11/28/2024

Click here for lesson

Market Internals

11/27/20224

Stock Indexes Record New Highs

The major stock market indexes made new highs on Monday. Today, Wednesday 11/27, those same indexes are selling off.  The Industrials have made a new high, the SPX has recorded a double top, and the NDX NASD 100 is making a lower high. Seasonally the markets are usually up the days before and after Thanksgiving but not this time.

The so called Magnificent Seven do not look like a good buy which explains why the NDX is down today.  The number of stocks above their 200 day moving averages on the SPX is down from the high set in October. This is very important. Yes, the overall SPX is up. That is because there are some stocks which are weighted more than the others in the index and they skew the index itself.  The breadth of the market is not nearly what the index itself indicates.

The reality of Trump’s impending tariffs, the collapse of Chinese real estate, and weakness in Europe, especially Germany, has yet to be reflected in our markets. Other than Trump loyalists I do not find any economists enthused for his tariff threats. Recall the disastrous Smoot-Hawley tariffs signed 6/17/1930 happened at the rebound of the stock market that spring. It then fell from around 250 to  44 by July 8, 1932.  The tariff disaster would not be solved until the General Agreement on Tariffs and Trade GATT was signed in 1947.

The biggest thing in the Permian Basin is the stock action of Texas Pacific Land which has tripled this year. It has been acquiring land in the Basin.  This has led to increased oil production. With no debt, the stock price has risen.

The rise in West Texas Intermediate did not last. January 2024 futures have fallen back to $658.23.  The contract touched $71.97  a week ago.

However our recommendation of Patterson PTEN and Transocean RIG. RIG hit  $4.50 today. PTEN spiked to $8.70 and has pulled back to $8.47. In slow pre-holiday trading this is not unusual.

Last week we noted the ten year note rate rose form 3.6% to 4.5% since the Fed rate cut. It is now falling a bit in a counter-trend move. As rates bottomed in March 2020, I expect  very long term rise in rates over the next 39 years.  Trump has appointed Kevin Hassett as director of the White House Economic Council which is a very good thing. He is not a tariff enthusiast. Hassett was his top economist in his first term.

Check out my weblog www.themarketperspective.com for updates.

Markets Push to New Highs

11/25/2024

The markets SPX INDU NDX appear to be in a small third wave, the strongest of the five to the upside. Expect that to last all week ave for he holiday. Energy service hold its own amid a two dollar sell off in oil.  Bond prices were over sold and bounced back today. See Andy Kessler's column today in the WSJ. He notes tat stocks are up but bond prices have been down since the FED cut.  I would add this is similar to 1987 when bond prices fell from March to Oct as stock prices rose higher. It all corrected in  a one day selling frenzy, will history repeat?

Markets Rally

Weekend 11/24/2024

Weekend WSJ The art market is bakc up, no wonder it it following the stock market See page B1

Duct taped banana sells for $6.2 M six times the asking price

I give up trying to call a top in this market but the banana is another example of an over heated market

Page  B10 Things are tough in Europe

Bosche to shed 5,500 jobx

Ford cuts 4,000

VW faces a strike closing 3 Plants

Michelin laying off workers

Swedish battery maker Northvolt files for bankruptcy

_____________

Markets tend to be up the day before and after Thanksgiving. Momentum indicators like MACD and PMO are suggesting that will happen for INDU SPX NDX.

Here are the weekly charts of Patterson PTEN and Transocean RIG. Both look to be bottoming and the PMO is turning up.

 

The two leaders are Halliburton an SLB, Here is HAL already showing a cross over of the PMO and a big up week

XES is the ETF for energy service including both HAL and SLB. I am showing all these graphs to demonstrate that this is an across the board rally in energy service. I suggest orders at and under the market in ten percent increments.

 

 

 

Thousands Lose Life Savings

Weekend11/23/2024

https://www.yahoo.com/finance/news/no-money-thousands-americans-see-223556135.html