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Archive for the ‘Chart School’ Category

January Durable Goods Came in Better Than Expected

Courtesy of Doug Short.

The February Advance Report on January Durable Goods released today by the Census Bureau showed a bit of a bounce from the previous month. Here is the Bureau’s summary on new orders:

New orders for manufactured durable goods in January increased $6.5 billion or 2.8 percent to $236.1 billion, the U.S. Census Bureau announced today. This increase, up following two consecutive monthly decreases, followed a 3.7 percent December decrease. Excluding transportation, new orders increased 0.3 percent. Excluding defense, new orders increased 3.0 percent.

Transportation equipment, also up following two consecutive monthly decreases, led the increase, $6.0 billion or 9.1 percent to $72.1 billion. Download full PDF

The latest new orders headline number at 2.8 percent was above the estimate of 1.7 percent. This series is up 5.4 percent year-over-year (YoY). However, if we exclude transportation, “core” durable goods was up only 0.3 percent MoM. Without the volatile transportation series, the YoY core number was up 4.5 percent.

If we exclude both transportation and defense for an even more fundamental “core”, the latest number was up 0.4 percent MoM and 4.0 percent YoY.

The Core Capital Goods New Orders number (nondefense capital goods used in the production of goods or services, excluding aircraft) is another highly volatile series. It was up 0.6 percent MoM, the first rise after four consecutive months of decline, and up 4.2 percent YoY.

The first chart is an overlay of durable goods new orders and the S&P 500. We see an obvious correlation between the two, especially over the past decade, with the market, not surprisingly, as the more volatile of the two. Over the past year, the market has certainly pulled away from the durable goods reality, something we also saw in the late 1990s.

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An overlay with unemployment (inverted) also shows some correlation. We saw unemployment begin to deteriorate prior to the peak in durable goods orders that closely coincided with the onset of the Great Recession, but the unemployment recovery tended to lag the advance durable goods orders.

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Stall in Action

Courtesy of Declan.

Not a day to get excited with. It would be pointless to say too much, so here are the charts:

Action is tight, but it’s not overbought (as per the tables below), and this is reason enough to suggest bulls aren’t done yet.

You’ve now read my opinion, next read Douglas’ and Jani’s.

Seven year cycle – Shemitah study

Courtesy of Read the Ticker.

seven-year-cycle--shemitah-studyFirst a heads up, this post is allowing the reader to do their own research, make their own mind up. We at do not hold a biblical view on the markets, but each of your is free to do as they wish.

 NOTE: With this subject it is nearly impossible to get agreement between biblical scholars.

What is the biblical Shemitah Cycle:

1) Biblical reference, Hebrew calendar.
2) 7 year cycle
3) The 7th year is a year of rest (or drop of activity)
4) A more serious 7th year of rest is the 7th year at the end of seven 7 years cycle (ie the 49 year).
5) The year of rest (ie 7th year) maybe a minor, medium or major adjustment. No one knows!
6) 2015 is the 7th year of a Shemitah cycle, and also the end of 7 previous Shemitah cycles (ie the last year of 49 years or 7 Shemitah cycles inclusive). Some call this a Jubilee year.

Below is the most recent 7 year cycle. Not showing the full 7×7. But you get the idea!

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7 year

Below we have 200 years of Dow Jones Industrials (monthly line chart). Also below we have from wikipedia a list of economic crisis from 1800s. Match the crisis up with the chart and research 200 years of 7 year cycles. You will see that some dips are minor, some are medium and some a major. What the next dip will be is any one guess??

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Dow jones 200 year

List of economic crises (From Wikipedia, the free encyclopedia)

19th century

  • Panic of 1819, a U.S. recession with bank failures; culmination of U.S.’s first boom-to-bust economic cycle
  • Panic of 1825, a pervasive British recession in which many banks failed, nearly including the

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I’m on eToro

Courtesy of Declan.

I’m looking to give eToro a spin for fun. I emphasis the ‘fun’ because I will only be working with an account of a couple $100 and my positions will be small (about $20 a pop). If you wish to join me, follow this link. Financial sites regulated by small islands are not my idea of financial well being (although we won’t mention FXCM), so I will be keeping my account small and I recommend others to do likewise.  The aim is to use eToro as a call tracker with real money, even if the gross amount is tiny.

I’ll be using it to trade FX, Indices and Commodities, with some stocks (of the limited number they cover).

If you already have an eToro account, feel free to follow me.

Equity Valuations, Recessions and Stock Market Declines

Courtesy of Doug Short.

When I initiated the dshort web page in late 2005, one of my routine topics was equity valuations, initially inspired by Nobel laureate Robert Shiller’s book, Irrational Exuberance, the second edition of which was published earlier that year. I gradually expanded my focus from his cyclically adjusted price-to-earnings ratio (CAPE) to include Ed Easterling’s Crestmont P/E, Nobel laureate James Tobin’s Q Ratio and my own monthly regression analysis of the S&P 500.

About three years ago I began posting a monthly update featuring an overlay of the four. Here is a chart that shows the average of the four valuation indicators from a mean regression.

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Last week I had a fascinating conversation with Neile Wolfe, of Wells Fargo Advisors, LLC. Based on the underlying data in the chart above, Neile made some cogent observations about the historical relationships between equity valuations, recessions and market prices:

  • High valuations lead to large stock market declines during recessions.
  • During secular bull markets, modest overvaluation does not produce large stock market declines.
  • During secular bear markets, modest overvaluation still produces large stock market declines.

Here is a table that highlights some of the key points. The rows are sorted by the valuation column.

Beginning with the market peak before the epic Crash of 1929, there have been fourteen recessions as defined by the National Bureau of Economic Research (NBER). The table above lists the recessions, the recession lengths, the valuation (as documented in the chart illustration above), the peak-to-trough changes in market price and GDP. The market price is based on the S&P Composite, an academic splicing of the S&P 500, which dates from 1957 and the S&P 90 for the earlier years (more on that splice here).

I’ve included a row for our current valuation, through the end of January, to assist us in making an assessment of potential risk of a near-term recession. The valuation that preceded the Tech Bubble tops the list and was associated with a 49.1% decline in the S&P 500. The largest decline, of course, was associated with the 43-month recession that began in 1929. Note: Our current market valuation puts us between the two.

Here’s an interesting calculation not included…
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Dow and Semiconductor Index Add to Gains

Courtesy of Declan.

It was another relatively quiet day for the indices, except for two. The Dow pulled away from breakout support, although volume was lighter. Technicals are all net positive.

The other winner was the Semiconductor Index. Today’s close finished with a bullish engulfing pattern with good support at 700.

The Nasdaq continued its run to the upper 10%, 200-day MA envelope. Unlike the Dow, trading volume rose to register accumulation. The winning sequence has now climbed to ten consecutive days.

The S&P kept chugging as it added to last week’s breakout. Volume climbed to register accumulation.

For tomorrow, keep an eye on today’s lows; a loss of these would offer an aggressive short play, with a stop above the high of either today and tomorrow.

You’ve now read my opinion, next read Douglas’ and Jani’s.

RTT browsing latest..

Courtesy of Read the Ticker.

rtt-browsing-latestPlease review a collection of WWW browsing results.

Date Found: Thursday, 29 January 2015, 12:28:19 PM

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Comment: We had a spring but no Sign of strength, another example of ‘you cant make money on springs alone’ you need more evidence that demand is present. Spring, SOS, LPS, etc

Date Found: Thursday, 29 January 2015, 01:13:12 PM

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Comment: A $20 Bn pump and dump by Wallstreet, the greatest con of 2014.

Date Found: Thursday, 29 January 2015, 01:16:48 PM

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Comment: Michael Hudson “only the poor people (ak middle class) pay taxes”..

Date Found: Thursday, 29 January 2015, 05:22:54 PM

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Comment: USSR stock market, central bank price discovery.

Date Found: Thursday, 29 January 2015, 07:47:59 PM

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Comment: In it is not interest rates moving the USD, then it must be USDs returning home, or folks buying USD for US assets (hmm stocks!)

Date Found: Friday, 30 January 2015, 02:26:39 AM

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Comment: Silver vs 200 MA, first approach is normally a fade, the second or third is the break above

Date Found: Friday, 30 January 2015, 12:37:40 PM

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Comment: US Consumers spend pattern, Healthcare socialism costs folks!

Date Found: Friday, 30 January 2015, 01:33:50 PM

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Comment: In the 1940s the Fed began to normalize policy after extraordinary support (buying bonds) was extended to the markets with significant purchases of Treasuries by the Fed between 1942 and 1946 (WW2). For those looking for guideposts in the road with the Fed allowing or telegraphing when their balance…
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Upcoming Webinar: Retiring in a Low-Return Environment

Courtesy of Doug Short.

Upcoming Complimentary APViewpoint Events

Presenters: Wade Pfau, David Blanchett, Michael Finke

Tuesday, February 24, 2015 – 4:15 p.m. EST

Most research on optimal retirement income strategies is based on long-term historical averages. David Blanchett, Michael Finke and Wade Pfau will show how using returns better calibrated to current financial asset values (rather than historical averages) leads to a much more conservative estimate of safe-withdrawal rates for retirees. In this webinar, the presenters will:

  • demonstrate that safe-withdrawal rates today are much lower when using a forward-looking model;
  • discuss how to use today’s bond yields and the cyclically-adjusted price/earnings (CAPE) ratio as metrics to forecast future equity and fixed-income returns;
  • offer approaches for determining the optimal withdrawal rate; and
  • explore topics such as longevity risk, relative U.S. versus foreign market returns and different methods for estimating future potential market returns.

Advisors will be able to improve the quality of investment advice and recommendations by gaining exposure to different perspectives on what returns may look like in the future. Time will be reserved at the end for live Q&A, and Wade, David and Michael will be available to continue the discussion of this topic on APViewpoint.

The CFP Board has accepted this program for 1 hour of CE credit towards the CFP® certification. In addition, IMCA has accepted this program for 1 hour of CE credit towards the CIMA®, CIMC® and CPWA® certifications. If you provide the required information during the registration process and stay for the entire session we can report your attendance to these organizations.


Wade Pfau
The American College & inStream Solutions

Wade Pfau is a professor of retirement income in the new Ph.D. program for financial and retirement planning at The American College in Bryn Mawr, PA, and is the chief financial planning scientist for inStream Solutions. He is a frequent author on topics related to financial planning and writes a monthly article for Advisor Perspectives. He has received awards for his contributions from The Journal of Financial Planning and the Retirement Income Industry Association and is a frequent speaker at national conventions.

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Consumer Confidence Declined in February

Courtesy of Doug Short.

The Latest Conference Board Consumer Confidence Index was released this morning based on data collected through February 12. The headline number of 96.4 was a decline from the revised January final reading of 103.8, an upward revision from 102.9. Today’s number was below the forecast of 99.6.

Here is an excerpt from the Conference Board press release.

According to Lynn Franco, Director of Economic Indicators at The Conference Board: “After a large gain in January, consumer confidence retreated in February, but still remains at pre-recession levels (September 2007, Index, 99.5). Consumers’ assessment of current conditions remained positive, but short-term expectations declined. While the number of consumers expecting conditions to deteriorate was virtually unchanged, fewer consumers expect conditions to improve, prompting a less upbeat outlook. Despite this month’s decline, consumers remain confident that the economy will continue to expand at the current pace in the months ahead.”

Consumers’ appraisal of current conditions was moderately less favorable in February than in January. Those saying business conditions are “good” decreased from 28.2 percent to 26.0 percent, however those claiming business conditions are “bad” decreased from 17.3 percent to 17.0 percent. Consumers were also somewhat less positive in their assessment of the job market, with the proportion stating jobs are “plentiful” decreasing slightly from 20.7 percent to 20.5 percent, and those claiming jobs are “hard to get” increasing from 24.6 percent to 26.2 percent.

Consumers’ optimism about the short-term outlook was considerably less positive in February. Those expecting business conditions to improve over the next six months decreased from 18.9 percent to 16.1 percent, while those expecting business conditions to worsen increased from 8.2 percent to 8.7 percent.

Consumers’ outlook for the labor market was also less optimistic. Those anticipating more jobs in the months ahead decreased from 17.3 percent to 13.4 percent. However, those anticipating fewer jobs declined from 14.8 percent to 14.3 percent. The proportion of consumers expecting growth in their incomes declined from 19.5 percent to 15.1 percent. The proportion expecting a decrease rose from 10.8 percent to 12.0 percent.

Putting the Latest Number in Context

Let’s take a step back and put Lynn Franco’s interpretation in a larger perspective. The table here shows…
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Richmond Fed Manufacturing Composite: Activity Slowed in February

Courtesy of Doug Short.

As a resident of the Fifth District, this is a regional manufacturing index I pay close attention to. The Fifth District includes Virginia, Maryland, the Carolinas, the District of Columbia and most of West Virginia. The Federal Reserve Bank of Richmond is the region’s connection to the nation’s Central Bank.

The complete data series behind the latest Richmond Fed manufacturing report (available here) dates from November 1993. The chart below illustrates the 21st century behavior of the diffusion index that summarizes the individual components.

The February update shows the manufacturing composite at 0, down from 6 last month. Numbers above zero indicate expanding activity. Today’s composite number was well below the forecast of 7.

Because of the highly volatile nature of this index, I like to include a 3-month moving average, now at 4.3, to facilitate the identification of trends.

Here is a snapshot of the complete Richmond Fed Manufacturing Composite series.

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Here is the latest Richmond Fed manufacturing overview.

Fifth District manufacturing activity slowed in February, according to the most recent survey by the Federal Reserve Bank of Richmond. Shipments and the volume of new orders flattened, while the backlog of orders declined. Hiring in the sector was weak and the average workweek shrank, although wage growth advanced modestly. Despite the soft current conditions, producers were upbeat about future business opportunities. Expectations were for solid increases in shipments and new orders in the six month s ahead, with greater capacity utilization. In addition, manufacturers looked for a build-up in backlogged orders and minimal vendor lead-times.

Compared to January’s outlook, producers expected slower employment growth and less growth in the average work week. Although wage growth expectations remained solid in February, the outlook was less robust than a month earlier.

Prices of raw materia ls a nd finished goods were little changed in February. Looking ahead, manufacturers expected slower price growth over the next six months than they had a month ago.

Here is a somewhat closer look at the index since the turn of the century.

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Zero Hedge

The Stage Is Set For The Syrian Invasion

Courtesy of ZeroHedge. View original post here.

Submitted by Tyler Durden.

One week ago, when reporting on the latest bizarre plan presented by the Pentagon, namely providing Syrian rebels (but only the moderate ones, not the jihadists like al Nusra, or, well, ISIS) with B-1B Bomber air support in their attacks on ISIS, when we wrote that this "means in the coming weeks and months look forward to a surge in false flag "attacks" blamed on the Assad regime, aiming to give Obama validation to expand the "War against ISIS" to include Syria's regime as well."

We didn't have long to wait: in an entirely unsourced Time article written today by Aryn Baker, the Middle East Bureau ...

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Phil's Favorites

When do we decide that Europe must restructure much of its debt?

When do we decide that Europe must restructure much of its debt? Courtesy of Michael Pettis 

It is hard to watch the Greek drama unfold without a sense of foreboding. If it is possible for the Greek economy partially to revive in spite of its tremendous debt burden, with a lot of hard work and even more good luck we can posit scenarios that don’t involve a painful social and political breakdown, but I am pretty convinced that the Greek balance sheet itself makes growth all but impossible for many more years.

The history is, to me pretty convincing. Countries with this level of debt and this level of uncertainty associated with the resolution of the debt are never able too grow out of t...

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Chart School

Second Day of Quiet Action

Courtesy of Declan.

The S&P lost a little, the Nasdaq gained a little, but there was no change in the larger picture.  The S&P registered a distribution day, of sorts: volume climbed, but as the index finished with a doji it doesn't really qualify as a heavy sell off day. The selling volume was enough to generate a 'sell' trigger in On-Balance-Volume too, but the whipsaw risk is high.

The Nasdaq did the opposite. It added nearly 0,5% on higher volume accumulation. It's brushing the 10% envelope relative to the 200-day MA, which is not a particularly strong sell signal, but a warning sign for a possible slow down in the advance.


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All About Trends

Mid-Day Update

Reminder: David is available to chat with Members, comments are found below each post.

Click here for the full report.

To learn more, sign up for David's free newsletter and receive the free report from All About Trends - "How To Outperform 90% Of Wall Street With Just $500 A Week." Tell David PSW sent you. - Ilene...

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Market Shadows

Kimble Charts: Coal

Kimble Charts: Coal

By Ilene 

Chris Kimble's chart for KOL shows a recently beaten down ETF struggling to pull itself up from the ashes. As the chart shows, KOL has recently drifted down to levels not seen since the financial crisis of 2008-9.

Bouncing or recovering with energy in general, coal prices appear to have stabilized in the short-term. Reflecting coal prices, KOL has traded between $13.45 and $19.75 during the past year. Bouncing from lows, KOL traded around 2% higher yesterday from $14.26 to $14.48 on high volume. It traded another 3.6% higher in after hours to $15, possibly related to ...

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Swing trading portfolio - week of February 23rd, 2015

Reminder: OpTrader is available to chat with Members, comments are found below each post.


This post is for all our live virtual trade ideas and daily comments. Please click on "comments" below to follow our live discussion. All of our current  trades are listed in the spreadsheet below, with entry price (1/2 in and All in), and exit prices (1/3 out, 2/3 out, and All out).

We also indicate our stop, which is most of the time the "5 day moving average". All trades, unless indicated, are front-month ATM options. 

Please feel free to participate in the discussion and ask any questions you might have about this virtual portfolio, by clicking on the "comments" link right below.

To learn more about the swing trading virtual portfolio (strategy, performance, FAQ, etc.), please click here ...

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Sector Detector: Sector rankings stay neutral with few bullish catalysts on horizon

Reminder: Sabrient is available to chat with Members, comments are found below each post.

Courtesy of Sabrient Systems and Gradient Analytics

Stocks are hitting new highs across the board, even though earnings reports have been somewhat disappointing. Actually, to be more precise, Q4 results have been pretty good, but it is forward guidance that has been cautious and/or cloudy as sales into overseas markets are expected to suffer due to strength in the US dollar. Healthcare and Telecom have put in the best results overall, while of course Energy has been the weakling. Still, overall year-over-year earnings growth for the S&P 500 during 2015 is expected to be about +8%.

In this weekly update, I give my view of the current market environment, offer a technical analysis of the S&P 500 cha...

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Digital Currencies

MyCoin Exchange Disappears with Up To $387 Million, Reports Claim

Follow up from yesterday's Just the latest Bitcoin scam.

Hong Kong's MyCoin Disappears With Up To $387 Million, Reports Claim By  

Reports are emerging from Hong Kong that local bitcoin exchange MyCoin has shut its doors, taking with it possibly as much as HK$3bn ($386.9m) in investor funds.

If true, the supposed losses are a staggering amount, although this estimate is based on the company's own earlier claims that it served 3,000 clients who had invested HK$1m ($129,000) each.


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2015 - Biotech Fever

Reminder: Pharmboy is available to chat with Members, comments are found below each post.

PSW Members - well, what a year for biotechs!   The Biotech Index (IBB) is up a whopping 40%, beating the S&P hands down!  The healthcare sector has had a number of high flying IPOs, and beat the Tech Sector in total nubmer of IPOs in the past 12 months.  What could go wrong?

Phil has given his Secret Santa Inflation Hedges for 2015, and since I have been trying to keep my head above water between work, PSW, and baseball with my is time that something is put together for PSW on biotechs in 2015.

Cancer and fibrosis remain two of the hottest areas for VC backed biotechs to invest their monies.  A number of companies have gone IPO which have drugs/technologies that fight cancer, includin...

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Stock World Weekly

Stock World Weekly

Newsletter writers are available to chat with Members regarding topics presented in SWW, comments are found below each post.

Here's this week's Stock World Weekly.

Click here and sign in with your user name and password. 



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Option Review

SPX Call Spread Eyes Fresh Record Highs By Year End

Stocks got off to a rocky start on the first trading day in December, with the S&P 500 Index slipping just below 2050 on Monday. Based on one large bullish SPX options trade executed on Wednesday, however, such price action is not likely to break the trend of strong gains observed in the benchmark index since mid-October. It looks like one options market participant purchased 25,000 of the 31Dec’14 2105/2115 call spreads at a net premium of $2.70 each. The trade cost $6.75mm to put on, and represents the maximum potential loss on the position should the 2105 calls expire worthless at the end of December. The call spread could reap profits of as much as $7.30 per spread, or $18.25mm, in the event that the SPX ends the year above 2115. The index would need to rally 2.0% over the current level...

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Help One Of Our Own PSW Members

"Hello PSW Members –

This is a non-trading topic, but I wanted to post it during trading hours so as many eyes can see it as possible.  Feel free to contact me directly at with any questions.

Last fall there was some discussion on the PSW board regarding setting up a YouCaring donation page for a PSW member, Shadowfax. Since then, we have been looking into ways to help get him additional medical services and to pay down his medical debts.  After following those leads, we are ready to move ahead with the YouCaring site. (Link is posted below.)  Any help you can give will be greatly appreciated; not only to help aid in his medical bill debt, but to also show what a great community this group is.

Thank you for you time!

FeedTheBull - Top Stock market and Finance Sites

About Phil:

Philip R. Davis is a founder Phil's Stock World, a stock and options trading site that teaches the art of options trading to newcomers and devises advanced strategies for expert traders...

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About Ilene:

Ilene is editor and affiliate program coordinator for PSW. She manages the site market shadows, archives, more. Contact Ilene to learn about our affiliate and content sharing programs.

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