by Phil Davis - August 20th, 2014 7:52 am
Fed Minutes Today (2pm).
That gives the bullish pundits another chance to read the tea leaves and promise MORE FREE MONEY to those who are silly enough not to be fully invested in stocks. As you can see from Dave Fry's SPY chart, only 56.7M shares were transacted yesterday and nearly half of those people were selling.
Perhaps 10% more buys than sells is 5.7M shares at $198.28 means it cost just $1.1Bn to move the $60Tn markets up 0.5% ($300Bn) – now that's leverage! With a lack of participation, those few buyers can really shove the markets around. Also, as Dave noted:
Hobson owned a livery stable and he rotated his horses to different stalls. He offered customers the choice of taking the horse in the first stable or none at all. Henry Ford also offered a variation of Hobson’s Choice since customers could buy a car in any color they liked, as long as it was black. The stock market offers many choices but only stocks are effective as bonds offer no yield while Fed policies have forced investors to stocks or nothing else.
This is basically the issue for investors in financial markets, buy stocks or nothing else. Farmland is admittedly in a bubble as Iowa farmland now goes for $8,500 per acre. If you can buy it right, some residential real estate offers a decent rental yield. Then there is the weird world of collectibles where you really need to know what you’re doing and have adequate cash.
So stock markets remain in play at least for most institutions. We’ve seen heavy volume sell-offs meaning most retail investors continue to loathe and leave markets. It remains a market for
by Option Review - August 19th, 2014 3:58 pm
by Phil Davis - August 19th, 2014 8:06 am
You've gotta love those trend lines.
Chart people sure love them and we love chart peopel because they are SOOOOOOOO predictable and predictable behavior is behavior we can bet on and that makes us happy. Today we'll be seeing the 50-day moving averages on the Dow, the NYSE and the Russell all tested at the same time – what happens next will tell us a lot about this rally.
As I pointed out to our Members in our Live Chat Room this morning, though we may be past our bounce levels and though we are now challenging the 50 dmas, we still have 3 of 5 of our Must Hold levels red on the Big Chart – that's not too impressive. Consider what a 50-day moving average is. It means that, over the last 50 days, half the time the index has been above the line and half the time it's been below – so how impressive should it be to see the index back in the middle?
Nonetheless, Chart People believe it's some mystical symbol that gives them a rally signal and half the time they are right – so the religion of TA continues to prosper! As you can see from Dave Fry's SPY chart from yesterday, 75% of yesterday's gain came on no volume as we gapped up in the Futures and the rest of the day's trading was one of the lightest of the year.
The reason I like Dave is because he's one of the only TA people who actually pay attention to volume and this volume is total BS. Still, it's enough to stampede the retail suckers back in and God bless them because they throw money at us to sell them the things we liked when they were out of favor.
In May and June, for example, we compiled a Buy List for our Members, which had 29 trades we liked for the rest of 2014. Here's a few that we are done with already:
by Phil Davis - August 18th, 2014 8:11 am
From Ferguson to Fallujah, America has spent the weekend kicking ass and taking names with the National Guard rushing in to put down the 99% in Missouri while in Mosul, we're bombing the Middle East's 99% off the dams and picking off the stragglers with high-tech drones – F*ck Yeah!
That, combined with what we can politely call a non-escalation of tensions in the Ukraine has sent the price of oil tumbling by 0.75 this morning, good for $750 per contract from our Friday short (and now we're long at $94 on /CLV4 for October) - F*ck Yeah! Index futures were up slightly in Asia but gathered steam in Europe and markets there are coming out of lunch up over 1% – even as the cease-fire in Gaza is about to end.
Meanwhile, over in Hong Kong, we got a powerful lesson in numbers as the 1.3Bn population of China is able to overwhelm that Island's 7M people (0.5% of China's population) at will and that will was exercised this weekend as China staged "Pro-Beijing" rallies that protested the "Occupy Central" rallies the bottom 99% of Hong Kong had been staging. Can anti-democracy rallies be far behind?
The anti-Occupy Central campaign's focus on the impact of civil disobedience has appealed to the pragmatism of many Hong Kong people. While many support democracy, they also just want to live their lives and go to work unimpeded. "We can't be optimistic at all—the pro-Beijing camp will control the entire list of candidates," said Joseph Cheng, a political-science professor and convener of the Alliance for True Democracy, a coalition of democratic parties supporting Occupy Central.
In short, while China did promise to give Hong Kong the right to vote – they never said they wouldn't stuff the ballot boxes or put up candidates that were nothing more than two different flavors of the same puppets. "If we are buying fruit, don't give us three rotten oranges to choose from," one of the activists said. Oh wait, that might have been our own election coverage – it's so hard to keep these totalitarian regimes straight…
by Sabrient - August 18th, 2014 1:45 am
Courtesy of Sabrient Systems and Gradient Analytics
As many investors enjoy the final weeks of summer, some optimistic bulls seem to be positioning themselves well ahead of Labor Day in anticipation of a fall rally. Indeed, last week’s action was impressive. After only a mere 4% correction, investors continued to brush off the disturbing violence both at home and abroad, and they took the minor pullback as their next buying opportunity. But was that really all the pullback we’re going to get this year? I doubt it. But I also believe that nothing short of a major Black Swan event can send this market into a deep correction.
In this weekly update, I give my view of the current market environment, offer a technical analysis of the S&P 500 chart, review our weekly fundamentals-based SectorCast rankings of the ten U.S. business sectors, and then offer up some actionable trading ideas, including a sector rotation strategy using ETFs and an enhanced version using top-ranked stocks from the top-ranked sectors.
Looking at the ten U.S. business sectors, Technology, Utilities, and Healthcare each had a good week last week and are still the leaders year-to-date, while Energy fell back a tad. Notably, Basic Materials continues to show new life and is pulling away from the pack at the lower end of the performance scale — Industrial, Financial, Consumer Goods/Staples, Consumer Services/Discretionary, and Telecommunications.
U.S. Treasuries continue to enjoy strong demand, even while the Fed continues to taper its bond buying activity. The 10-year yield fell even further last week, closing Friday at 2.34%, and the 30-year last checked in at 3.13%. Again, the strength in Treasuries is reflecting global investors seeking the relative safety of the U.S., given all the global turmoil, as well as an expectation that the Fed likely will not raise interest rates any time soon. Low rates entice business to borrow for expansion, hiring, and stock buybacks, and they support higher equity valuation multiples when low bond yields (and a low discount rate) are compared with future earnings in equities discounted back to a present value.
The CBOE Market Volatility Index (VIX), a.k.a. fear gauge, closed Friday at 13.15. During the recent market pullback, VIX had spiked above 17, but soon fell back to as low as 12 on Friday morning during the early continuation of the market rebound.…
by ilene - August 17th, 2014 3:17 pm
The difference between genius and stupidity is that genius has its limits.
– Albert Einstein
Genius is a rising stock market.
– John Kenneth Galbraith
Any plan conceived in moderation must fail when circumstances are set in extremes.
– Prince Metternich
I'm forever blowing bubbles, Pretty bubbles in the air
They fly so high, nearly reach the sky, Then like my dreams they fade and die
Fortune's always hiding, I've looked everywhere
I'm forever blowing bubbles, Pretty bubbles in the air
You can almost feel it in the air. The froth and foam on markets of all shapes and sizes all over the world. It’s exhilarating, and the pundits who populate the media outlets are bubbling over. There’s nothing like a rising market to lift our moods. Unless of course, as Prof. Kindleberger famously cautioned (see below), we are not participating in that rising market. Then we feel like losers. But what if the rising market is … a bubble? Are we smart enough to ride it high and then bail out before it bursts? Research says we all think that we are, yet we rarely demonstrate the actual ability.
My friend Grant Williams thinks the biggest bubble around is in complacency. I agree that is a large one, but I think even larger bubbles, still building, are those of government debt and government promises. When these latter two burst, and probably simultaneously, that will mark the true bottom for this cycle now pushing 90 years old.
So, this week we'll think about bubbles. Specifically, we'll have a look at part of the chapter on bubbles from Code Red, my latest book, coauthored with Jonathan Tepper, which we launched late last year. I was putting this chapter together about this time last year while in Montana, and so in a lazy August it is good to remind ourselves of the problems that will face us when everyone returns to their desks in a few weeks. And note, this is not the whole