Posts Tagged ‘equities market’

IS THE “DEATH CROSS” A USEFUL INDICATOR?

IS THE “DEATH CROSS” A USEFUL INDICATOR?

Skull

Courtesy of The Pragmatic Capitalist 

At the March highs we were talking about death crosses.  No, not death crosses in the S&P, but the death cross in the one equity index that has proven to be even remotely leading over the course of the last 5 years – China. Today, everyone and their mother is chattering about the death cross in the S&P 500.  Is it of any use?  Jeff Kleintop at LPL says it’s nonsense:

“While much is made of the “death cross” of the S&P 500 50-day moving average falling below the 200-day, it has actually been a buying signal during these periods in the past. A good example of this took place in 2004 when during the soft spot in the recovery the 50-day crossed below the 200-day on August 17, 2004, just as the S&P 500 had completed the low point of its soft spot pullback and embarked upon a double-digit percent gain over the next three months.”

Pierre Lapointe, a macro strategist at Brockhouse Cooper agrees:

“The death cross IS nonsense. They’re no better than a flip of a coin to predict future returns. Check out these odds: Since 1970, only 10 of the 21 occurrences actually resulted in a market pullback a month after the death cross. Three months later, the market was down only 43% of the time. With odds like this, don’t short the market. Go to a casino — you’ll have more fun.”

The S&P 500 and the U.S. equity market has not proven to be a leading indicator of much in recent years.  Many even question its discounting capabilities at all.  The moral of this story?  Don’t wait until after a 15% decline in equities to jump on some technical analysis bandwagon.  Especially one from an index that has proven to be a leading indicator of just about nothing. 


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WHY THE GOOD JOBS REPORT COULD BE BAD NEWS FOR 2010

WHY THE GOOD JOBS REPORT COULD BE BAD NEWS FOR 2010

Courtesy of The Pragmatic Capitalist

Investors are likely to be increasingly concerned about rate increases over the coming months due to the much better than expected non-farm payrolls report.  Using the last few recessions as a reference point it is likely that equity gains could become increasingly difficult to come by as the Fed is pressured to remove their accommodative stance and other programs are wound down.

Teun Draaisma at Morgan Stanley recently noted this in his “tightening checklist”.   I would expect an upgrade across the checklist.  As we expected job creation is certain to begin by Q1 and Fed language should begin to change dramatically.

 WHY THE GOOD JOBS REPORT COULD BE BAD NEWS FOR 2010

Despite higher rates coming shortly, MS expects the rally to continue in the near-term.  I can’t disagree with this outlook.  Stocks are very buoyant heading into Christmas and it’s unlikely that this report will force the Fed’s hand immediately.  Like Draaisma, I believe the rally could move higher into year-end based on this optimism, but could then begin to sputter out as 2010 becomes a year of higher rates and transition into an economy without a government crutch.  MS analysts report:

We expect the sweet spot to last a bit longer. The cyclical bull market has some further to run, in our view.  We expect 20%+ earnings growth in 2010, equity valuations are still attractive versus rates, and sentiment is not ultra-bullish yet. We prefer equities to fixed income, and we expect a further 9% upside to reach our 1200 bull case target for MSCI Europe based on the mid-cycle multiple on mid-cycle earnings of 15x 12% ROE.

Lessons from past tightening cycles. The start of tightening phases tends to lead to some indigestion and a defensive rotation in equity markets, for two quarters or more. The 1994 and 2004 episodes led to a 16% and 8% fall in MSCI Europe over eight and five months. Sector performance was defensive, but Oil and Materials outperformed, too. In the aftermath of secular bear markets tightening phases have been more severe, with equities falling on average 25% over 13 months.

Draaisma notes that it’s silly trying to jump on the back end of a 70% rally in an attempt to time the final leg up.  As we wrote earlier this week:

But Draaisma


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Phil's Favorites

Recession

 

Recession

Courtesy of 

The bad news is piling up. The recession that people are looking for may already be here.

We heard about inventory buildup at Target and Walmart last week and the stocks responded with their worst day since…1987.  Those were not isolated incidents. This week we heard the same from Kohl’s and Abercrombie, whose stock is cratering 30% on the news.

In other news, Snap just warned of an imminent slowdown.

From The WSJ :

“In a surprise announcement, Snap Inc., the ...



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Politics

The big exodus of Ukrainian refugees isn't an accident - it's part of Putin's plan to destabilize Europe

 

The big exodus of Ukrainian refugees isn’t an accident – it’s part of Putin’s plan to destabilize Europe

Ukrainians fleeing the war walk toward a train in Krakow to bring them to Berlin on March 15, 2022. Omar Marques/Getty Images

Courtesy of Mark A. Grey, University of Northern Iowa

More than 6.3 million Ukrainians have fled their country since Russia first invaded in late February 2022.

The European Union h...



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Zero Hedge

Cattle Supply And Demand Issues For 2022

Courtesy of ZeroHedge View original post here.

By FarmBureau Market Intel

Introduction

At first glance, 2022 cattle prices are higher than 2021. At $140, slaughter steer prices are 17.5% above 2021 prices, but even with higher prices, farmers and ranchers will travel a rocky road to profitability, paved with inflation and higher input costs in 2022. This Market Intel addresses the USDA’s Cattle on Feed report released on Friday, May 20, 2022, the forces driving cattle prices higher and how inflation and input costs will affect the bottom line for ca...



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ValueWalk

The Shocks Which Have Ripped Through The UK Economy During The Queen's 70 Year Reign

By Anna Peel. Originally published at ValueWalk.

  • 1956 – The Suez canal crisis in 1956 led to an economic crisis and capital flight
  • 1975 – Consumer price inflation reached 24% during the oil crisis
  • 1984 – Unemployment soared to 11.9% amid miners’ strike
  • 1987  – FTSE All Share drops 22% on Black Monday
  • 2001 – Dotcom bubble burst and markets fall by more than 50% over 3 years
  • 2008 – Financial crisis hits with housing market falling 15% by February 2009
  • 2016 – The vote for Brexit sees the pound fall sharply on currency markets
  • 2000 – The pandemic sees record fall in output, with GDP falling 19.6%
  • ...


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Kimble Charting Solutions

Can Treasury Bonds (TLT) Reverse Higher From Historic Oversold Level?

Courtesy of Chris Kimble

It’s been an ugly couple of year for US Treasury Bonds. T-bond prices have dropped sharply as yields have risen.

This has been an added pressure on retirement portfolios as treasury bonds are no longer trading like a conservative asset.

Time for a bounce in T-bonds?

Today, we take a look at the long-term “monthly” chart of the 20+ Year US Treasury Bond ETF (TLT).

As you can see, 2 years ago bonds peaked and formed a historic bearish reversal pattern at the highest momentum reading ever.

...

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Chart School

Powell has a debt problem

Courtesy of Read the Ticker

The last time the US entertained debt this high (relative to GDP) was post World War 2.


The prior US high debt years were between 1936 and 1954, back then the public understood why the high debt existed (WW2) and why the public had to suffer high inflation to allow deflation of the debt to a manageable level. This question was not as political as it is today.   


Current US debt levels are the result of 'end of empire' spending, simply spending on steroids beyond one means. The FED needs inflation for the same reason as the post WW2 period to deflate away the debt.


The current political talk of 'fight inflation' will be short lived and the FED will be forced to accept higher inflation levels over the 2% (say b...

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Biotech/COVID-19

What is monkeypox? A microbiologist explains what's known about this smallpox cousin

 

What is monkeypox? A microbiologist explains what’s known about this smallpox cousin

Monkeypox causes lesions that resemble pus-filled blisters, which eventually scab over. CDC/Getty Images

Courtesy of Rodney E. Rohde, Texas State University

On May 18, 2022, Massachusetts health officials and the Centers for Disease Control ...



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Digital Currencies

Stablecoin volatility shows an urgent need for regulation to protect consumers

 

Stablecoin volatility shows an urgent need for regulation to protect consumers

Shutterstock/David Sandron

Courtesy of Matthew Shillito, University of Liverpool

Some cryptocurrencies have always been fairly volatile, with values soaring or plunging within a short space of time. So for the more cautious investor, “stablecoins” were considered the sensible place to go. As the name implies, they are designed to be a steadier and safer bet.

At the moment though, that stability is proving hard to find. The value of o...



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Promotions

Phil's Interview on Options Trading with TD Bank

TD Bank's host Bryan Rogers interviewed Phil on June 10 as part of TD's Options Education Month. If you missed the program, be sure to watch the video below. It should be required viewing for anyone trading or thinking about trading using options. 

Watch here:

TD's webinar with Phil (link) or right here at PSW

Screenshots of TD's slides illustrating Phil's examples:

 

 

&n...



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Mapping The Market

Suez Canal: Critical Waterway Comes to a Halt

 

Suez Canal: Critical Waterway Comes to a Halt

Courtesy of Marcus Lu, Visual Capitalist

The Suez Canal: A Critical Waterway Comes to a Halt

On March 23, 2021, a massive ship named Ever Given became lodged in the Suez Canal, completely blocking traffic in both directions. According to the Suez Canal Authority, the 1,312 foot long (400 m) container ship ran aground during a sandstorm that caused low visibility, impacting the ship’s navigation. The vessel is owned by Taiwanese shipping firm, Evergreen Marine.

With over 2...



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The Technical Traders

Adaptive Fibonacci Price Modeling System Suggests Market Peak May Be Near

Courtesy of Technical Traders

Our Adaptive Fibonacci Price Modeling system is suggesting a moderate price peak may be already setting up in the NASDAQ while the Dow Jones, S&P500, and Transportation Index continue to rally beyond the projected Fibonacci Price Expansion Levels.  This indicates that capital may be shifting away from the already lofty Technology sector and into Basic Materials, Financials, Energy, Consumer Staples, Utilities, as well as other sectors.

This type of a structural market shift indicates a move away from speculation and towards Blue Chip returns. It suggests traders and investors are expecting the US consumer to come back strong (or at least hold up the market at...



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Lee's Free Thinking

Texas, Florida, Arizona, Georgia - The Branch COVIDIANS Are Still Burning Down the House

 

Texas, Florida, Arizona, Georgia – The Branch COVIDIANS Are Still Burning Down the House

Courtesy of Lee Adler, WallStreetExaminer 

The numbers of new cases in some of the hardest hit COVID19 states have started to plateau, or even decline, over the past few days. A few pundits have noted it and concluded that it was a hopeful sign. 

Is it real or is something else going on? Like a restriction in the numbers of tests, or simply the inability to test enough, or are some people simply giving up on getting tested? Because as we all know from our dear leader, the less testing, the less...



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Insider Scoop

Economic Data Scheduled For Friday

Courtesy of Benzinga

  • Data on nonfarm payrolls and unemployment rate for March will be released at 8:30 a.m. ET.
  • US Services Purchasing Managers' Index for March is scheduled for release at 9:45 a.m. ET.
  • The ISM's non-manufacturing index for March will be released at 10:00 a.m. ET.
  • The Baker Hughes North American rig count report for the latest week is scheduled for release at 1:00 p.m. ET.
...

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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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