Posts Tagged ‘contrarian indicator’

Time for a Dollar Bounce

Time for a Dollar Bounce

Courtesy of Mish

The time for a dollar bounce is at hand. One reason I make that statement is the single best contrarian indicator on the US dollar has spoken.

Please consider Dollar Rout by Peter Schiff, July 15, 2010.

Peter Schiff has proven to be a huge contrarian indicator on commodities, on China, on foreign investments, and on the US dollar. I suspect this video will be no different.

In the video, Schiff makes a case that it was impossible to see these bounces coming. I disagree and have called for several of them.

Political Alignment vs. Investment Decisions

Politically I align with Peter Schiff. The financial sector bailouts were obscene, as are all of the stimulus efforts. There will be hell to pay for both.

However, investment-wise I cannot and do not agree with Schiff. His hyperinflationary rants are simply unfounded. The reason he cannot see the forest for the trees is he fails to consider the role of credit in a fiat-based credit world.

Credit dwarfs money supply. Much of that credit cannot and will not be paid back. Schiff got that part correct, in spades, predicting as many others did a collapse in housing. His mistake was in assuming the dollar would crash with it.

Think about that for a second. If the dollar crashed to zero, the number of dollars it would take to buy a house would be infinite. There has never been a hyperinflation in history where home prices crashed and barring some war-zone anomaly, I doubt it ever happens.

If hyperinflation was in the cards, the correct response would be to buy as much real estate as possible given real estate only requires 5% down. That amount of margin is hard to come by in any other play except derivatives.

Are we "Trending Towards Deflation" or in It?

For a recap on the inflation-deflation debate, please see Are we "Trending Towards Deflation" or in It?

One of us took into consideration the role of credit, one of us didn’t.

Technical Euro Bounce 

The reason for the recent bounce in the Euro is without a doubt a pledge by European governments to adhere to various austerity measures. Another reason is purely technical.

The Euro plunged nonstop, nearly straight down from 1.50 to 1.18. For currencies that is an enormous move in a short period…
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Time Magazine’s Kiss of Death: “You!”

Time Magazine’s Kiss of Death: "You!"

Courtesy of Mish

Bernanke is probably pleased to be name Time Magazine Person of the Year 2009.

The story of the year was a weak economy that could have been much, much weaker. How the mild-mannered man who runs the Federal Reserve prevented an economic catastrophe.

Professor Bernanke of Princeton was a leading scholar of the Great Depression. He knew how the passive Fed of the 1930s helped create the calamity — through its stubborn refusal to expand the money supply and its tragic lack of imagination and experimentation. Chairman Bernanke of Washington was determined not to be the Fed chairman who presided over Depression 2.0.

So when turbulence in U.S. housing markets metastasized into the worst global financial crisis in more than 75 years, he conjured up trillions of new dollars and blasted them into the economy; engineered massive public rescues of failing private companies; ratcheted down interest rates to zero; lent to mutual funds, hedge funds, foreign banks, investment banks, manufacturers, insurers and other borrowers who had never dreamed of receiving Fed cash; jump-started stalled credit markets in everything from car loans to corporate paper; revolutionized housing finance with a breathtaking shopping spree for mortgage bonds; blew up the Fed’s balance sheet to three times its previous size; and generally transformed the staid arena of central banking into a stage for desperate improvisation.

He didn’t just reshape U.S. monetary policy; he led an effort to save the world economy.

Time Magazine Nonsense

Time Magazine is wrong of course. Bernanke did not save the world. Moreover Bernanke is a poor student of the great depression. He understands neither the cause nor the cure of depressions. It is equally clear Time Magazine doesn’t either.

One does not cure a depression by throwing more money at it it, when the cause was the runup of money supply and credit in the first place.

In Praise Of Time

Bernanke is no doubt pleased to be on the cover, and I am pleased he is there as well. Bernanke is a fitting choice in a long line of fitting choices at Time.

I openly praise Time Magazine as a useful contrarian indicator.

That Bernanke is on the cover of Time Magazine means one thing "Bernanke’s Time Is Limited" He is on his way out. And that is good


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Bullishness at a Contrarian Extreme

Bullishness at a Contrarian Extreme

Courtesy of Michael Panzner at Financial Armageddon

As a long-time student of the markets, I’ve learned that traditional "fundamentals" don’t always tell the full story. For me, at least, it’s also important — essential, actually — to take technical, sentiment, and macro factors into account when trying to figure out which way prices are headed.

That doesn’t mean I always get it right. In fact, I’ve had more than my fair share of bad calls, especially when it comes to the shorter-term outlook. Regardless, I’ve found that my odds tend to improve when the aforementioned elements are all pointing in the same direction.

With that in mind, the following chart (courtesy of Elliott Wave International) and remarks by Tim Knight, from a post at his Slope of Hope blog (another long-time favorite of mine), entitled "Some Insights from EW," suggest that bullishness has reached a contrarian extreme:

The [following] chart shows the perverse relationship sentiment has with stocks. In early March, when stocks were a ridiculous bargain and multi-thousand percentage gains were just waiting to be plucked, the sentiment reading was an unheard-of 2% bulls.

Now, however, with stocks at (in my opinion) insanely-overpriced levels, and with all those multi-thousand percent gains already part of financial history, people are ga-ga about stocks.

Sentiment


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THE 2 BIGGEST RISKS TO THE BULL MARKET

THE 2 BIGGEST RISKS TO THE BULL MARKET

Courtesy of The Pragmatic Capitalist

This is a re-post from an article we wrote for TheStreet.com:

The rally off the March 8th lows has been nothing but spectacular.   In hindsight, it’s clear that investors overreacted to the downside, but as stocks surge more than 50% it’s time to begin pondering whether the current rally is a bit ahead of itself.  Contrary to my bottom call on March 8th when I said it was time to invest in risky assets (a full history of my 2008/9 calls can be found here including our 2008 crash call and March 8 buy call), now is the time to put on your risk management cap on as a number of various threats begin to pop up across the market.    I recently turned near-term bearish on stocks due to 2 primary reasons: sentiment & seasonality.

1)  Sentiment – As I often say, psychology drives markets.  After months of skepticism regarding the rally we are finally beginning to see an overwhelming amount of bullishness.  This is a screaming contrarian indicator.  The latest consumer confidence readings showed a marked jump to 54.1 and bullish sentiment among fund managers has soared to its highest level since 2003:

The latest Merrill Lynch fund managers survey shows an extraordinary jump in optimistic sentiment.   The survey makes up the current psychology of 204 portfolio managers running over $550B in assets.  The report shows a 63% jump in sentiment since July and the highest reading since November of 2003.

After months of short squeezes and failed market declines this optimistic sentiment has begun to eat into one of the fuels of this rally: short sellers.  Recent short sales data shows the lowest readings since the market tanked in early February.  As we lose the short sellers we lose an important driver of higher prices.

BESPOKE THE 2 BIGGEST RISKS TO THE BULL MARKET

Perhaps most important has been the enormous shift in analyst estimates.  After turning bearish in early June, I reversed the position in early July for one reason – earnings.  My analysis led me to believe that estimates were far too low primarily due to the fact that analysts were not accounting for cost cuts.  The estimates have been outrageously low, but now as the consensus begins to believe in a full blown recovery the


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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

Free eBook - "My Top Strategies for 2017"

 

 

Here's a free ebook for you to check out! 

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.

Some other great content in this free eBook includes:

 

·       How 2017 Will Affect Oil, the US Dollar and the European Union

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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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