Archive for May, 2012

The Stock-Bond Disconnect

Courtesy of Doug Short.

Advisor Perspectives welcomes guest contributions. The views presented here do not necessarily represent those of Advisor Perspectives.


Think about this: Yields/rates are hitting all-time lows. In the past when yields were collapsing, stocks were going right along with them. Yields tanked in 2008 and so did stocks!

Now yields are setting new lows, but where is the S&P 500? Not that far off of its 2012 highs and only 92% above its 2009 lows.

Does that reflect relative strength?

Check out the S&P 500 chart below with the “Stock/Bond ratio” inset.

 

 

The $1 question: Are yields oversold/stocks at a low or do stocks have to fall a ton and play a game of catch up with yields?

 

(c) Kimble Charting Solutions
blog.kimblechartingsolutions.com

 

 

 

 





Moving Averages: Month-End Update

Courtesy of Doug Short.

Valid until the market close on June 29, 2012

The S&P 500 closed May with a whopping loss of 6.27% from the April close. The 10-month exponential moving average signal has switched to cash. See the specifics here.

The Ivy Portfolio

The table below shows the current 10-month simple moving average (SMA) signal for each of the five ETFs featured in The Ivy Portfolio. I’ve also included a table of 12-month SMAs for the same ETFs for this popular alternative strategy.

Backtesting Moving Averages

Monthly Close Signals Over the past few years I’ve used Excel to track the performance of various moving-average timing strategies. But now I use the backtesting tools available on the ETFReplay.com website. Anyone who is interested in market timing with ETFs should have a look at this website. Here are the two tools I most frequently use:

Background on Moving Averages

Buying and selling based on a moving average of monthly closes can be an effective strategy for managing the risk of severe loss from major bear markets. In essence, when the monthly close of the index is above the moving average value, you hold the index. When the index closes below, you move to cash. The disadvantage is that it never gets you out at the top or back in at the bottom. Also, it can produce the occasional whipsaw (short-term buy or sell signal), such as we’ve occasionally experienced over the past year.

Nevertheless, a chart of the S&P 500 monthly closes since 1995 shows that a 10- or 12-month simple moving average (SMA) strategy would have insured participation in most of the upside price movement while dramatically reducing losses.

The 10-month exponential moving average (EMA) is a slight variant on the simple moving average. This version mathematically increases the weighting of newer data in the 10-month sequence. Since 1995 it has produced fewer whipsaws than the equivalent simple moving average, although it was a month slower to signal a sell after these two market tops.

A look back at the 10- and 12-month moving averages in the Dow during the Crash of 1929 and Great Depression shows…
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ZH Evening Wrap Up 5/31/12

Courtesy of ZeroHedge. View original post here.

Submitted by CrownThomas.

 

Some Headlines From Today

- Morgan Stanley's Gorman defends handling of Facebook IPO

- Spain says it has at least until October to raise enough funds to rescue Bankia

- Newly issued Mortgage Backed Securities see record low yields

- Weekly Jobless claims come in at 383,000

- New York City Will now tell you what to drink

- Goldman Sachs says it can't cut salaries any further…

 

On a long enough timeline 

- China's Manufacturing PMI Plunges

- Your daily Biderman rant

- What does high yield credit know that stocks don't?

- Student Debt Bubble Delinquencies Surge

- I want to work at the Goldman Sachs





Guest Post: Myths and Realities of Returning to a Gold Standard

Myths and Realities of Returning to a Gold Standard

By Terry Coxon, Casey Research

The gold standard, under which any holder of paper dollars could redeem them for gold at the US Treasury, is now within the living memory of just a few million Americans, nearly all of whom would be dangerous behind the wheel. But thanks to the money printing and the federal deficits that have grown to astounding scales since 2008, and thanks also to the clashing pronouncements of Ron Paul and Ben Bernanke, the idea of a gold standard has resurfaced in the public's consciousness.

I'm happy to see the concept enjoying a revival. Reading about it in the mainstream press and hearing it mentioned on the cable news shows makes me feel a little less like a Martian. It has almost made me feel avant-garde.

Despite my enjoyment of the revival, I've noticed that the idea seldom is presented as a clear and definite proposal or as an invitation to revisit an institution that worked well in the past. Too often, it shows up as little more than a slogan or a taunt aimed at central bankers or as just a political fashion statement. So let's take a closer look at what it really means. It's not that complicated.

What Isn't at Stake

The abolition of the gold standard has been the source of considerable mischief, but it hasn't been the source of all mischief.

I've heard the lack of a gold standard indicted as part of a government scheme to force the public to use paper money. It isn't.

The legal-tender laws are usually part of the story, but the story doesn't hold up. Declaring irredeemable paper dollars to be legal tender merely defines what a creditor may be forced to accept in satisfaction of a debt that is denominated in dollars. Operating under that regime is entirely voluntary; if you don't like it, you can avoid it by declining to accept anyone's IOU or other promise denominated in dollars. Despite the legal-tender laws that define what is a (paper) dollar, you are free to buy and sell and enter into contracts without using dollars.

The legal-tender laws amount to no more than the government's claim that it owns "dollar" as a trademark that it can apply to pieces of paper or to anything else it decides to – just as General Motors…
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U.S. Labels ALL Young Men In Battle Zones As “Militants” … And American Soil Is Now Considered a Battle Zone

Courtesy of ZeroHedge. View original post here.

Submitted by George Washington.

Preface: If this is too intense for you, look at this instead.

Glenn Greenwald has two must-read posts on the reason that virtually everyone the U.S. kills is called a “militant” or “suspected militant”.

He wrote Monday:

glenn headlines 460x307 U.S. Labels ALL Young Men In Battle Zones As Militants ... And American Soil Is Now Considered a Battle Zone

 

Virtually every time the U.S. fires a missile from a drone and ends the lives of Muslims, American media outlets dutifully trumpet in headlines that the dead were ”militants” – even though those media outlets literally do not have the slightest idea of who was actually killed. They simply cite always-unnamed “officials” claiming that the dead were “militants.” It’s the most obvious and inexcusable form of rank propaganda: media outlets continuously propagating a vital claim without having the slightest idea if it’s true.

 

This practice continues even though key Obama officials have been caught lying, a term used advisedly, about how many civilians they’re killing. I’ve written and said many times before that in American media discourse, the definition of “militant” is any human being whose life is extinguished when an American missile or bomb detonates (that term was even used when Anwar Awlaki’s 16-year-old American son, Abdulrahman, was killed by a U.S. drone in Yemen two weeks after a drone killed his father, even though nobody claims the teenager was anything but completely innocent: “Another U.S. Drone Strike Kills Militants in Yemen”).

 

This morning, the New York Times has a very lengthy and detailed article about President Obama’s counter-Terrorism policies based on interviews with “three dozen of his current and former advisers.” I’m writing separately about the numerous revelations contained in that article, but want specifically to highlight this one vital passage about how the Obama administration determines who is a “militant.” The article explains that Obama’s rhetorical emphasis on avoiding civilian deaths “did not significantly change” the drone program, because Obama himself simply expanded the definition of a “militant” to ensure that it includes virtually everyone killed by his drone strikes. Just read this remarkable passage:

 

Mr. Obama embraced a disputed method for counting civilian casualties that did little to box him in. It in effect counts all military-age males in a


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China PMI Plunges Most In 28 Months, Reverts To HSBC’s Reality

Courtesy of ZeroHedge. View original post here.

Submitted by Tyler Durden.

Color us not stunned at all. China’s Manufacturing PMI finally reverted to the reality that HSBC’s Manufacturing PMI has been arguing for and fell for the first time in six months. The drop is the largest since February 2010. While still above 50 (though the lowest level of expansion in five months), or 50.4 technically, down from 53.4, and missing expectations of 52.0, it seems another engine of global growth just sputtered finally – as the real impact of a European depression and fiscally challenged US hit home.

And as a reminder, here is why unless “Europe is fixed” and quite soon, the situation will first get worse before it gets much worse:





Market Recap & Facebook Finally Turns Bullish Thanks to Late Day Rally

Courtesy of Blain.

Intraday swings were sporadic once again today. Both the S&P 500 and NASDAQ found support at even marks (1300 and 2800, respectively). Despite the doji close though, the rising channel broke to the downside for the NASDAQ.

Looking at tomorrow, a fresh employment report is on the docket which could very well effect the market. For a closer look at what to expect head over to the Daily Ticker.

On the plus side, Facebook (FB) finally found a legitimate bottom at the $27 level (intraday low today was $26.83). Once support was established early afternoon the stock just took off around 2:30 PM EST and did not stop until the close, adding about 10% in less than two hours. Being a bullish engulfment accompanied by heavy volume, this signals atleast a short term bottom and gives the stock something to move up from. Here is a look at Facebook’s intraday price action from my TD Ameritrade thinkorswim account (daily chart further down),

As usual there will be no recap tomorrow (Friday). Updated market analysis is below. Have a fantastic weekend!

And to wrap up tonight’s post here is a look at sector performance for the month of May from StockCharts.com. As we can see here Finance was the worst performer while Utilities held up strong despite the tough market.





Belligerent Bears Batter BNI’s ‘Buffett-Black-Swan’ Bet

Courtesy of ZeroHedge. View original post here.

Submitted by Tyler Durden.

Was it just a week ago that we suggested buying Burlington Northern CDS (credit protection) as the cheapest Black-Swan bet against Buffett and Bernanke’s ebullience? The answer is yes. And from the start of May the cost of protection has doubled from around 15bps to just over 30bps – quite a surge as it seems more than a few funds thought this a worthwhile trade to tuck in the back pocket at a minimal carry cost. At 32bps mid (31/34), it remains cheap still from a carry perspective and while we are approaching the initial profit target, the reason for buying this low cost, long vol trade is the huge convexity upside should things go a little more pear-shaped for the Octogenarian-of-Omaha – or more specifically for the US equities in general. We do note that if this keeps pushing past our other profit-targets then some should be covered since counterparty risk will rapidly become an issue (unless the Fed officially becomes a CCP).

 

Chart: Bloomberg





Will June Look Like May? (SPY, DIA, QQQ, IWM, TLT)

Courtesy of John Nyaradi.

sell in mayMay was downright ugly and June could bring more gloom to world stock markets and exchange traded funds

Today marked the end of May and this year’s performance certainly validated the “sell in May and go away” mantra that we oftentimes hear in the popular press.

Until May, major  U.S. indexes had put in a half year winning streak  but that all ended today with the Dow Jones Industrial Average (NYSEARCA:DIA) dropping 0.2% to finish out the month with a 6.2% loss.  The S&P 500 (NYSEARCA:SPY) suffered a similar fate with a monthly decline of 6.3% and the Nasdaq (NYSEARCA:QQQ) gave up 0.4% today to tally a monthly loss of 7.2%. The Russell 2000 (NYSEARCA:IWM) index of small cap stocks joined in the not so happy party by dropping 8.1% for the month.

The month’s losses were driven by chaos in Greece and Spain and fear over a financial demise of the Euro and Eurozone economies and an ongoing slew of economic reports that point to slowing economies in the United States, Europe and China.

Today’s reports were mostly gloomy, as well, as private payrolls reports from ADP came in below expectations, weekly  jobless claims rose, 1Q GDP estimate was revised downward to 1.9% from the most recent 2.2% and Chicago PMI for May declined to 52.7 from last month’s 56.2%.  Anything above 50 in this reports indicates expansion but clearly the numbers are decelerating as we move into the summer months.

Of course, worries over Europe were a big driver of global markets this month as policy makers struggled with Spain’s banking crisis and the Greek elections rapidly approach on June 17th.  Both of these situations have the potential to be both Euro-negative and stock market negative as we move into June.

Global indexes were also slammed in May as worries mounted, with Spain’s IBEX leading the way south with a decline of 13%, the German DAX dropping 7.3%, Hong Kong off 12% and the Nikkei dropping 10% for the month.

But, as always, there were winners and losers and in the winning column we find U.S. Treasuries, iShares 20+ Year Treasury Bond Fund (NYSEARCA:TLT) +9.6% for the month and Vanguard Extended Duration ETF (NYSEARCA:EDV) logging + 15.01% for May.

Bonds are at or near record lows with the 10 year U.S. Treasury
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“The End Game: 2012 And 2013 Will Usher In The End” – The Scariest Presentation Ever?

Courtesy of ZeroHedge. View original post here.

Submitted by Tyler Durden.

If Raoul Pal was some doomsday spouting windbag, writing in all caps, arbitrarily pasting together disparate charts to create 200 page slideshows, it would be easy to ignore him. He isn’t. The founder of Global Macro Investor “previously co-managed the GLG Global Macro Fund in London for GLG Partners, one of the largest hedge fund groups in the world. Raoul came to GLG from Goldman Sachs where he co-managed the hedge fund sales business in Equities and Equity Derivatives in Europe… Raoul Pal retired from managing client money in 2004 at the age of 36 and now lives on the Valencian coast of Spain, from where he writes.” It is his writing we are concerned about, and specifically his latest presentation, which is, for lack of a better word, the most disturbing and scary forecast of the future of the world we have ever seen….

And we see a lot of those.

Consider this:

  • We are here…

  • We don’t know exactly what is to come, but we can all join the very few dots from where we are now, to the collapse of the first major bank…
  • With very limited room for government bailouts, we can very easily join the next dots from the first bank closure to the collapse of the whole European banking system, and then to the bankruptcy of the governments themselves.
  • There are almost no brakes in the system to stop this, and almost no one realises the seriousness of the situation.
  • The problem is not Government debt per se. The real problem is that the $70 trillion in G10 debt is the collateral for $700 trillion in derivatives…
  • Yes, that equates to 1200% of Global GDP and it rests on very, very weak foundations
  • From an EU crisis, we only have to join one dot for a UK crisis of equal magnitude.
  • And then do you think Japan and China would not be next?
  • And then do you think the US would survive unscathed?
  • That is the end of the fractional reserve banking system and of fiat money.
  • It is the big RESET.

It continues:

  • Bonds will be stuck at 1% in the US, Germany, UK and Japan (for this phase).
  • The whole bond market will be


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Zero Hedge

Explosion Hits Russia's Largest Virus Lab Which Houses Plague, Smallpox, Ebola And Other Deadly Viruses

Courtesy of ZeroHedge View original post here.

A sudden explosion at a Siberian virus research center on Monday reportedly left the facility engulfed in flames, according to several Russian news outlets. 

Firefighters and other emergency personnel were dispatched to the "Vector Institute" located several miles from Novosibirsk - an emergency which was upgraded "from an ordinary emergency to a major incident," a...



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Phil's Favorites

The future of work will still include plenty of jobs

 

The future of work will still include plenty of jobs

Even though the future is unknown, Canada’s employment rate has risen steadily from 53 per cent in 1946 to more than 61 per cent today. (Shutterstock)

Courtesy of Wayne Simpson, University of Manitoba

There is now widespread anxiety over the future of work, often accompanied by calls for a basic income to protect those displaced by automation and other technological changes.

As a labour economis...



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Lee's Free Thinking

Is The Drone Strike a Black Swan?

Courtesy of Lee Adler

Pundits are calling yesterday’s drone strke a “black swan.” Can a drone strike on a Saudi oil facility, be a “black swan.”

According to Investopedia:

A black swan is an unpredictable event that is beyond what is normally expected of a situation and has potentially severe consequences. Black swan events are characterized by their extreme rarity, their severe impact, and the practice of explaining widespread failure to predict them as simple folly in hindsight.

I seriously doubt that no one expected or could have predicted a drone strike on a Saudi oil facility.

Call Me A B...

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Insider Scoop

New Relic Cuts 2020 Sales Guidance, Announces Changes In Management

Courtesy of Benzinga

New Relic (NYSE: NEWR) has reaffirmed its second-quarter guidance and cut its sales guidance for fiscal year 2020 from $600 million-$607 million to $586 million-$593 million.

The company’s chief technology officer, Jim Gochee, and chief revenue officer, Erica Schultz, have resigned. New Relic also named board member Michael Christenson as its chief operating officer. Christenson joins from his ...



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The Technical Traders

Metals are following downside sell off prediction before the next rally

Courtesy of Technical Traders

It is absolutely amazing how the precious metals markets have followed our October 2018 predictions almost like clockwork.  Our call for an April 21~24 momentum base below $1300 followed by an extensive rally to levels above $1550 has been playing out almost like we scripted these future price moves.

Now that the $1550 level has been reached, we are expecting a rotation to levels that may reach just below the $1490~1500 level before attempting to set up another momentum base/bottom formation.  And just like clockwork, Gold has followed our predictions and price is falling as we expected. Just look at our October 2018 chart where we forecasted the price of gold...



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Chart School

Crude Oil Cycle Bottom aligns with Saudi Oil Attack

Courtesy of Read the Ticker

Do the cycles know? Funny how cycle lows attract the need for higher prices, no matter what the news is!

These are the questions before markets on on Monday 16th Aug 2019:

1) A much higher oil price in quick time can not be tolerated by the consumer, as it gives birth to much higher inflation and a tax on the average Joe disposable income. This is recessionary pressure.

2) With (1) above the real issue will be the higher interest rate and US dollar effect on the SP500 near all time highs.

3) A moderately higher oil price is likely to be absorbed and be bullish as it creates income for struggling energy companies and the inflation shock may be muted. 

We shall see. 

...

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Kimble Charting Solutions

Bond Yields Due For Rally After Declining More Than 1987 Stock Crash

Courtesy of Chris Kimble

U.S. Treasury Bond Yields – 2, 5, 10, 30 Year Durations

The past year has seen treasury bond yields decline sharply, yet in an orderly fashion.

This has spurred recession concerns for much of 2019. Needless to say, it’s a confusing time for investors.

In today’s chart of the day, we look at a longer-term view of the 2, 5, 10, and 30-year treasury bond yields.

Short to long term bond yields are all testing 7 to 10-year support levels as momentum is at the lowest levels in a decade.

A yield rally is likely due across the board after a recent decline that was bigger than the stock crash in 1987!

If yields fail to ral...



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Digital Currencies

China Crypto Miners Wiped Out By Flood; Bitcoin Hash Rate Hits ATHs

Courtesy of ZeroHedge View original post here.

Last week, a devastating rainstorm in China's Sichuan province triggered mudslides, forcing local hydropower plants and cryptocurrency miners to halt operations, reported CoinDesk.

Torrential rains flooded some parts of Sichuan's mountainous Aba prefecture last Monday, with mudslides seen across 17 counties in the area, according to local government posts on Weibo. 

One of the worst-hit areas was Wenchuan county, ...



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Biotech

The Big Pharma Takeover of Medical Cannabis

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

 

The Big Pharma Takeover of Medical Cannabis

Courtesy of  , Visual Capitalist

The Big Pharma Takeover of Medical Cannabis

As evidence of cannabis’ many benefits mounts, so does the interest from the global pharmaceutical industry, known as Big Pharma. The entrance of such behemoths will radically transform the cannabis industry—once heavily stigmatized, it is now a potentially game-changing source of growth for countless co...



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Mapping The Market

How IPOs Are Priced

Via Jean Luc 

Funny but probably true:

...

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Members' Corner

Despacito - How to Make Money the Old-Fashioned Way - SLOWLY!

Are you ready to retire?  

For most people, the purpose of investing is to build up enough wealth to allow you to retire.  In general, that's usually enough money to reliably generate a year's worth of your average income, each year into your retirement so that that, plus you Social Security, should be enough to pay your bills without having to draw down on your principle.

Unfortunately, as the last decade has shown us, we can't count on bonds to pay us more than 3% and the average return from the stock market over the past 20 years has been erratic - to say the least - with 4 negative years (2000, 2001, 2002 and 2008) and 14 positives, though mostly in the 10% range on the positives.  A string of losses like we had from 2000-02 could easily wipe out a decades worth of gains.

Still, the stock market has been better over the last 10 (7%) an...



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Promotions

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Phil has a chapter in a newly-released eBook that we think you’ll enjoy.

In My Top Strategies for 2017, Phil's chapter is Secret Santa’s Inflation Hedges for 2017.

This chapter isn’t about risk or leverage. Phil present a few smart, practical ideas you can use as a hedge against inflation as well as hedging strategies designed to assist you in staying ahead of the markets.

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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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