The Market Perspective

Sell !

Sunday Feb 12, 2012

 

If We Were Perfect We Would Start a Religion.

Richard Ostberg, duPont Glore Forgan Class of 72-2

Internal Indicators hit new highs this week. It is clear we should have sold when the PAR SAR flashed a sell signal on our CEF and GDXJ positions but we made good profits. And should everything fall apart on Monday or later in what has to be a correctiion coming, we can watch from the sidelines waiting for the market to come to us. 

NASD Weekly Summation Index

for some reason my annotation tools are not working but one can readily see a wave one up from the August low, then a wave two down to the Dec low and then a wave three peaking this week. And so we sold, This would be our Chart of the Week, what else is there to say?  Interanl indicators and QQQ hitting new highs. 

The failure of TLT and the Dollar to follow VIX down suggests that we have begun a fourth wave correction. That is hard to see on the QQQ at top but quite obvious on the NYSI weekly. I believe Elliott Waves are easier to spot and more reliable on the indicators than on the price quit frankly. 

Dow Diamonds

 

Long time tech guru Bob Farrell at Merrill Lynch had ten rules One had to do with reversion to the mean. Note that DIA is about ten points over the 200 day MA. Near the Oct low it was ten points under the 200 day MA. It was oversold in Oct and overbought now, as the talking heads on CNBC of course all recommended buying this past week. Note how Chakin Money Flow increased and the maximum inflow of money came at the worst time to buy!

Oh well otherwise who would read the Market Perspective....

Crude Oil The Master Market

Robert Frost observed that Fog sneaks in on little cat feet. I would add that it leaves the harbor the same way. 

This is the USO Oil fund meant to duplicate the price of oil. Price has fallen below the 50 day MA. Now at bottom note that the money via the Chakin Money Flow is exiting as well, and in pretty impressive amounts. At top note the US Dollar has been climbing and after a correction turned up at week end.

Now couple the technical with two fundamental observatinons from the WSJ Weekend Edition.

Page B 4 China Commodity Imports Decline

Page B 18 Clearbrook crude oil plummets to $70 from $95, and that happened in the past week!  Clearbrook Minn represents the huge supply of oil coming from North Dakota. Well yes, there is supposedly no way to get that oil to the refineries on the Gulf Coast.

But as Alan Abelson observed decades ago, oil is pretty slippery stuff. It can pop up in the darnedest places. So let's go back to this same date, Feb 12, in 2008. What was happening then? 

Same chart, 2008

Note the similarity, the Dollar at top dipped a couple of times before really taking off in 2008. 

IN 2011-12 well the dollar has dipped a couple of times and oil peaked and

 

well it is not a perfect comparison but this is a good reason to bank our profits and see how this all plays out. NOte that USO lost over 75% of its value in a few months in 2008. The last failure of the kiss of the 200 day MA was truly The Kiss of the Spider Woman. Black Spider that is. 

We have written hundreds if not thousands of words describing the pent up negative mood emotions around the world. The same potential via Lehman that existed in 2008 lurks in Euro default, student loan default, Russian protests,  USA state financial failures, you name it. And so you say, well Dennis don't get so taken with yourself, you do go on. Yes I do but how is this next piece for truly weird, and I ran across it in the San Antonio paper no less, yep, Abe Lincoln as a Vampire Hunter...

Socionomics

No doubt some of you think I am just going on about socionomics, and how social mood shapes our perceptions. Well hw about, yes, Abraham Lincoln, Vampire Hunter?

As Dave Barry says, I can't mae this stuff up...

There is a good column in today's Express News about how the view of Lincoln changes with the times. It is apparently not on the internet so no link.

The 1940s and 50s saw Lincoln as a traditional post war hero. That puts him right there with Ike as the one who won the War. that is to be expected. 

By the 60s and 70s he was a counter culture figure in We Can Build You. Then he was a cyborg struggling to live in a world cominated by rapacious capitalism, really.

Speilberg will have a film viewing him through the prism of political genius. 

But with vampires on the loose in bookstores and theaters and tv, go figure, now presumably he is armed with a hammer and wooden stake....

Hey no kidding, this movie has a $70 M budget,

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 ands 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 charts.

 

 

 

A Turkey Day Rally Ahead?

Saturday November 19, 2011

Overall

The Positives

The market hit two extremes of negative sentiment and over sold condition Aug 8 and Oct 3.

The seasonal trend the last three years argues for a low prior to Thanksgiving and then a rally. 

VIX and TLT remain quite high reflecting a high state of fear and defensive position. 

The Negatives

Various indices are breaking down. 

The weekly  summation index has run into resistance. 

The stock market topped in Fall 2007. Overseas markets topped at this same time November 2010 as we have reported. 

Did we overstay our welcome at the party?

One more thing. The markets are alive with various Exchange Traded Funds. These funds allow sector investment throughout the day in just about anything you can imagine from precious metals to oil to financial institutions. Many of these ETFs use futures and or options to set up a 'synthetic' trade.  In the update Friday afternoon we posted a comment from an introducing firm that had shut its doors. 

BCM ceases operations

Note the author is quite upset with the Obama Administration. A counter party failure is what occurred with MF Global, and what caused Greenspan to be fearful of Long Term Capital Management in 1998. If the other side cannot fulfill its obligation, we have a failure. Here clients cannot access their money, and the administration is doing nothing about it. This is serious. In answer to an e mail yes we would put all ETFs at 'in danger' for counter party risk. That was the cause of the 2008n meltdown. The geniuses at Lehman borrowed short term via commercial paper to leverage long term in sub prime mortgages. When the mortgages did not pay, they failed to pay on the commercial paper and the whole system locked up. 

 

NYSE Advance Decline Line 2007

The NYSE A/D line peaked i the summer of 2007. We used the SPX at top since most are more familiar with the numbers for it than the NYSE. The SPX double topped. Its fall was slower as it is volume weighted and the A/D line is not. 

NYSE A/D line now

Regular readers recall that this indicator has had a steady uptrend since the March 2009 lows. We have long held that a change in direction here would be telling and probably result in a market turn. This time the A/D line double topped. The index at top has made a lower high. To be fair the moving averages have not turned down. We have had sideways action since June.

Daily NYSE Summation Index

The weekly summation index NYSI which we often cite has not turned down. The daily however clearly as and we how it above. This means we have seen the best of the recovery rally for now. 

Hourly Dow

I suspect the hourly chart generated a low here that was a re test of the resistance at 11,600-11,700. We should see the expected rally this next week. Note the low position of MACD at far right. 

 

The sensitive semiconductor SOX index dropped this week as well weakening the NASD 100 and its trading partner the QQQ. 

The Dashboard VIX TLT SPX

VIX a measure of put buying a defensive activity is up in the middle panel.

At bottom TLT the bond fund is up, another defensive measure.

At top the SPX is down, the usual result of the first two actions.  But you are always backstopped by, as they say on the tv ads, diversifying into gold and silver right, not quite.

Gold and Silver

Gold is the red gold line and silver is the black line. One can see the correlation. 

One can also see the high in late summer, a lower high in November and now both are lower again, as the saying goes, its all one market AOM. So what is oil doing?

OIl and Patterson Energy Service PTEN

Until the October low, PTEN closely tracked the price of oil. I noticed on the rebound though that PTEN was substantially underperforming the oil price. What did the market know about PTEN?  Well something notice that PTEN rolled over at a lower high this week than its September peak. At bottom the MACD has peaked on oil. 

So

the NYSE  Advance Decline line double topped

the Daily Summation Index rolled over

the DOW, NASD 100, Russell 2000 are all rolling over, the smaller stocks look worse than the big caps

Gold and Silver are in decline

Oil prices are not confirmed by the Energy Service Sector

The financial XLF and Broker XBD have fallen under both their 50 and 200 day moving averages. 

On the other hand the weekly charts as we have noted are in contrast to the over bought nature of the daily charts. Weekly charts appear to be bottoming. 

Our conclusion is that we will continue to expect the same sort of rally we had the last three years. It is unlikely the market will fall apart with VIX and TLT at elevated levels. But the overall look is that of late 2007. The internals are getting weaker. The banks and brokers are weakest of all, here is our last chart, even White House Insiders are having a terrible year. Buffet's options on GS are now below his strike price. 

GS

Socionomics

1960 was a banner year for the US. Jack Kennedy would be elected President, the recession of 1958 was behind us, and yes GE had introduced color television. Sunday Night was the big night for television. The Wonderful World of Disney led off the evening. This promoted Disney Everything and featured entertainment for the whole family. Tinkerbelle, Davy Crockett, Jiminy Crickett warns Pinnochio of danger, you get the idea. 

Since GE owned NBC and since they really wanted everyone to buy a color tv, GE had NBC produce a show just to showcase what color tv could do for your entertainment level. Younger readers cannot appreciate just how poor the color was what with vacuum tubes and all but...

Bonanza played from 1959 to 1973.  An alternate title might have been How the West Never Was. Filmed  near Lake Tahoe, it was  and is a beautiful setting. Think Father Knows Best or better yet, My Three Sons  on Horseback And though everything was green on the Ponderosa, it never rained, the characters never had  spot of mud on their immaculate outfits. 

This is what happens in a positive cycle of social mood. That was the case form 1948 to 1966 and those Sunday evenings were the epitome of positive social mood, look at the expressions on Hoss, Ben, and Little Joe at right. 

 

 

 

 

 

 

 

Fast forward to our present 18 year cycle of negative mood. I actually rejected the photos of blood and gore to find this one to contrast with the family portrait of the Cartwrights above.

Now  on Suncday evening AMC features, the best line up they can come up with, and is it ever in tune withe the mood.  Notice the difference in the photos? Yep meet The Walking Dead. I honestly have not watched the series but in the interest of socionomics will do so. 

After this hour of family fun and frolic, AMC follows with We're Not Bonanza otherwise known as Hell on Wheels. The hero's wife was raped and murdered and he's out for revenge, when not pontificating over all the violence. Did I mention he owned slaves?  Interestingly the lead freed slave Bohanon bonds with has my last name as his first name, Elam. 

 

 

Our point here is to contrast the mood of the two eras. If you're wondering why the Super Committee cannot agree on an outcome....well compare the photos above, the mood has changed. 

 

 

Thanks for reading TMP

 

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 charts.