ECRI Weekly Leading Indicator falls off a cliff
Well.. the market, once again, seems to ignore tremendously bad economic news in it's climb to 1150 on the S&P 500 (which many market technicians suggest will form the peak of the right shoulder of the Head & Shoulders).
Weekly Leading Indicators falling off a cliff
WLI declines 5.7% from last weeks 3.7% + graph
Yesterday we had the Philly Fed Survey coming in significantly lower ("8") than the consensus ("20").. Market shrugged it off like it was irrelevant.
And now we have confirmation from the WLI ACCELERATING IT'S DECLINE week over week.
Yet the market rallies? I don't believe it.. And neither should you. But apparently those "Computers" which are making up 80% of the total trading volume nowadays apparently have been programmed to "buy, buy, buy"..
Even AAPL made a new high today!! They have a huge clamoring for their new phone (which doesn't even have 4g infrastructure available in most areas).. It may wind up soaring over $300, but if the rest of the market's fundamentals fail to follow suit, eventually it will be dragged down by its drowning comrades clinging to it.
This is not going to end well..
So when will it end? Here's one suggestion:
Triple Doji preceded "Black Monday"
2009 Triple Doji example
Scrutinizer
Friday, June 18, 2010
Wednesday, June 16, 2010
DOW Industrials Bull Trap spotted?:
I'm really starting to like visiting Perfectstockalert. The guy who does their charts knows his stuff and he knows how to explain a very complex subject in a manner which people can understand. You'll see the link to their website (free) to the left on my links. You should sign up for their youtube link, as well as the website.. It will keep it free. And no.. I take no compensation, nor do I have personal contact with. I like what they are putting out and if that changes, I'll delink them.
Perfect Stock Alert
Tonight he discussed a possible Bull Trap on the Dow. This is a formation where the Bulls get sucked into buying the market thinking it's getting to a new high. But it's a shallow uptrend and on thin volume that fails to overcome the strength of the shorts. Until the shorts cover, there's nothing to propel the market higher.
The "trigger" that will initiate a short-covering spike up, or a fearful sell-off, is like to be the employment numbers tomorrow. Remember that we also have a quadruple options expiration (quadruple witching is what it's called) on Friday.
Here.. just watch for yourself and make your own mind up:
Bull Trap for the DOW?
They also covered the only ETF I currently hold a position in (and waiting to add to when I see a major shift in market direction).
TZA Ultra-Bear analysis
If the numbers don't come in good tomorrow and we start a sell-off, be prepared for SERIOUS UGLINESS in the markets.
I continue to look for rays of sunshine that might give me reason to be bullish, but their all being overshadowed by the BP oil spill. From my reading that's only likely to get worse, not better. And that potentially means that the entire shoreline of the gulf coast will likely be inundated with oil. Florida ALREADY has serious real estate issues, and Miami is on the brink of bankruptcy. Put waves of oil on it's beaches and coral reef and it will be years before it becomes a tourist location, or draws "snowbirds" in their retirement.
There have been nothing but an abundance of lies surrounding this blown oil well..
BP has lied through their teeth.
It was 5,000 barrels at first, and the big dog and pony show over "top kill", but what they didn't tell you was that it was gushing 60K-100K barrels per day and that the well casing was fractured deep into the sea floor. Capping this well would only cause that intense 7,000 psi torrent to tear into the bore hole and surrounding formation and pop out through fractures in the sea floor. So they have to let it spew and just try to contain and collect as much of the oil as they can.
The only hope for resolving the problem is the relief well, where they are trying to drill several boreholes to intersect the current one. Somewhere I read it's tantamount to shooting a dinner plate from 20 miles away. The technology is good, but do not count on any success anytime soon. They have another 20,000 feet to drill from what I'm reading. That's going to a Xmas gift the entire world will look forward to. But it means that oil is going to spew for another 6 months, at least (IMO).
If you're planning a trip to the Florida keys, or the Caribbean, I would suggest you do it very soon.
EDIT:
Philadelphia Fed Survey comes in SUBSTANTIALLY LOWER than consensus
The employment data was slightly worse than expected, but the real "bell ringer" was the Philly Index coming at a measly "8" instead of the consensus of "20":
Philly Index comes in a 8 instead of consensus of 20
The prior reading was 21, so this is a SIGNIFICANT DOWNWARD TREND and indicates the underlying weakness of business and manufacturing conditions now that the Government stimulus is coming to an end. Again.. we go from 21 to 8 within the space of a few months:
historical Philly Fed Survey
Recall that despite spending over 10% of our GDP on this stimulus, we managed to only obtain a 3% overall GDP gain. So that has the market wondering where GDP growth is going to come from without a new stimulus.
And, of course, we have BP's CEO on the hotseat today and I expect some very hard questioning about exactly how much oil is spewing forth, and the market will extrapolate the future economic and ecological damage that will result.
For now BP will remain a going concern, but I suspect that within a year or two, BP will no longer exist in it's current form. It will be acquired, or declare bankruptcy and it's assets sold off.
Scrutinizer
I'm really starting to like visiting Perfectstockalert. The guy who does their charts knows his stuff and he knows how to explain a very complex subject in a manner which people can understand. You'll see the link to their website (free) to the left on my links. You should sign up for their youtube link, as well as the website.. It will keep it free. And no.. I take no compensation, nor do I have personal contact with. I like what they are putting out and if that changes, I'll delink them.
Perfect Stock Alert
Tonight he discussed a possible Bull Trap on the Dow. This is a formation where the Bulls get sucked into buying the market thinking it's getting to a new high. But it's a shallow uptrend and on thin volume that fails to overcome the strength of the shorts. Until the shorts cover, there's nothing to propel the market higher.
The "trigger" that will initiate a short-covering spike up, or a fearful sell-off, is like to be the employment numbers tomorrow. Remember that we also have a quadruple options expiration (quadruple witching is what it's called) on Friday.
Here.. just watch for yourself and make your own mind up:
Bull Trap for the DOW?
They also covered the only ETF I currently hold a position in (and waiting to add to when I see a major shift in market direction).
TZA Ultra-Bear analysis
If the numbers don't come in good tomorrow and we start a sell-off, be prepared for SERIOUS UGLINESS in the markets.
I continue to look for rays of sunshine that might give me reason to be bullish, but their all being overshadowed by the BP oil spill. From my reading that's only likely to get worse, not better. And that potentially means that the entire shoreline of the gulf coast will likely be inundated with oil. Florida ALREADY has serious real estate issues, and Miami is on the brink of bankruptcy. Put waves of oil on it's beaches and coral reef and it will be years before it becomes a tourist location, or draws "snowbirds" in their retirement.
There have been nothing but an abundance of lies surrounding this blown oil well..
BP has lied through their teeth.
It was 5,000 barrels at first, and the big dog and pony show over "top kill", but what they didn't tell you was that it was gushing 60K-100K barrels per day and that the well casing was fractured deep into the sea floor. Capping this well would only cause that intense 7,000 psi torrent to tear into the bore hole and surrounding formation and pop out through fractures in the sea floor. So they have to let it spew and just try to contain and collect as much of the oil as they can.
The only hope for resolving the problem is the relief well, where they are trying to drill several boreholes to intersect the current one. Somewhere I read it's tantamount to shooting a dinner plate from 20 miles away. The technology is good, but do not count on any success anytime soon. They have another 20,000 feet to drill from what I'm reading. That's going to a Xmas gift the entire world will look forward to. But it means that oil is going to spew for another 6 months, at least (IMO).
If you're planning a trip to the Florida keys, or the Caribbean, I would suggest you do it very soon.
EDIT:
Philadelphia Fed Survey comes in SUBSTANTIALLY LOWER than consensus
The employment data was slightly worse than expected, but the real "bell ringer" was the Philly Index coming at a measly "8" instead of the consensus of "20":
Philly Index comes in a 8 instead of consensus of 20
The prior reading was 21, so this is a SIGNIFICANT DOWNWARD TREND and indicates the underlying weakness of business and manufacturing conditions now that the Government stimulus is coming to an end. Again.. we go from 21 to 8 within the space of a few months:
historical Philly Fed Survey
Recall that despite spending over 10% of our GDP on this stimulus, we managed to only obtain a 3% overall GDP gain. So that has the market wondering where GDP growth is going to come from without a new stimulus.
And, of course, we have BP's CEO on the hotseat today and I expect some very hard questioning about exactly how much oil is spewing forth, and the market will extrapolate the future economic and ecological damage that will result.
For now BP will remain a going concern, but I suspect that within a year or two, BP will no longer exist in it's current form. It will be acquired, or declare bankruptcy and it's assets sold off.
Scrutinizer
Monday, June 14, 2010
Bearish Case con't
Better to continue this in a separate post.
More on the technical analysis of the current market:
DOW will go down 2000+ points
The technician in this video provides a COMPELLING logic to his prediction using the Relative Strength Indicator (RSI) and the divergence we're seeing in the markets. To be frank, he definitely "clicked the light" on in my head with that. Do not ignore what he's saying because it's predictable, and can be confirmed by using previous incidences of the occurrence.
Now.. Here are 50 incredible facts that seem to support the Bearish case:
50 incredible facts about the US economy
50 stats in a slide show
Scrutinizer
Better to continue this in a separate post.
More on the technical analysis of the current market:
DOW will go down 2000+ points
The technician in this video provides a COMPELLING logic to his prediction using the Relative Strength Indicator (RSI) and the divergence we're seeing in the markets. To be frank, he definitely "clicked the light" on in my head with that. Do not ignore what he's saying because it's predictable, and can be confirmed by using previous incidences of the occurrence.
Now.. Here are 50 incredible facts that seem to support the Bearish case:
50 incredible facts about the US economy
50 stats in a slide show
Scrutinizer
Sunday, June 13, 2010
Go to Cash, Go directly to Cash.. Do not pass Wall Street.. do not collect $200 dividends from BP!!:
Very interesting article tying in the health of Asian banks to Euro Crisis:
Asia Doom
Scrutinizer
Very interesting article tying in the health of Asian banks to Euro Crisis:
Asia Doom
Scrutinizer
ON THE LAUNCH PAD? OR ON THE EDGE OF THE ABYSS?
It's been extremely difficult to asses the direction of the equity markets. If most of my readers are like myself, they've been torn between "going long", going to cash, or "going short" (either directly shorting, or as I've been toying with, via Ultra-Bear ETFs). It's been extremely difficult to do more than day trade these ETFs as the crosswinds of the market have whipsawed investors).
There are very reasonable cases to be made on both the bearish and bullish side, although I find the bearish case more convincing. So I thought I might review the arguments of both in this post, consolidating and/or reviewing some of the thoughts I've focused on previous posts.
The Bullish Case
The most cogent argument that the Bulls can make is that this market is extremely oversold. Normally this is an effective indicator since it follows the old Baron Von Rothschild adage "Buy when there is blood in the streets".
As I posted earlier, the Arms Index, created by Richard Arms is an indicator of "max panic", where selling outpaces buying, indicating a "flushing" of the marketplace and transfer of shares from weak hands into stronger ones. The index registered the 4th highest level in 70 years, according to Arms:
ARMs Index at 4th highest level in 70 years.
We're seeing negativity everywhere in the markets... We've had the Flash Crash of May 6th (which remains insufficiently explained, IMO) which dropped the DOW 1000 points within 10 minutes. Prominent market analysts are urging their readers to sell stocks, we have the problems in Europe, war drums beating in Korea and the Mid-East, the BP oil catastrophe, and some would suggest the sky is falling. To a contrarian investor, this represents "max fear" and therefore, max opportunity to get in at a market low.
Furthermore, we have Investor's Business Daily, and a number of major investment analysts, including Abby Joseph Cohen of Goldman Sachs, now declaring the market correction is over and a new bull market is beginning:
Dusting off Abby
IBD calls end to correction.
Another argument the bulls use is that US corporations are flush with cash and apparently ready to spend it:
Corporations ready to spend record cash holdings
So what would they spend it on? Productivity enhancing technology, new machinery, communications upgrades, including computers. The question is whether this spending, when it occurs, would lead to an increase in employment. Increasing productivity normally means there is less of a need for hiring workers.
There's also the currency argument. The Euro had been previously threatening to seek parity with the USD. That would greatly impact the competitiveness of US corporations against Europeans exports. It would also likely play havoc with currency swaps. So having the Euro transit back above the 1.20 mark is a positive sign the Bulls are lashing their hopes to.
And finally, there's the technical argument that the S&P 500 has held it's 200 Month MA at approximately 1040. A violation of that level would have likely confirmed this correction was actually a resumption of the 2008 bear market, with new lows to be seen in the future:
SPX monthly chart
In sum.. the Bulls are arguing that the negativity is so great that it's lost all sense of perspective and that creates opportunity to move the markets higher.
That's about the best I can make of the Bullish case at this time.. If there's more, I'll update with an "Edit" comment, so be sure and check in from time to time.
The Bearish Case
Lordie.. where do we begin?
Well.. here's a chart that I found very interesting. It was pointed out to me by another TA analyst on the TZA Yahoo thread:
SPX Weekly chart with 100 Week MA
If one changes the period to "all data" instead of 10 years, it will be clearly seen that there have been VERY FEW INSTANCES where the SPX violated the 100 Week MA without a major decline occurring thereafter. We saw this in 2001 and again in 2008, the first times since the SPX went "parabolic" in 1994, that the 100 Week MA was substantially violated. And each violation has resulted in "lower lows" being seen in the SPX, the last low being seen in March, 2009.
Since that time the SPX has risen roughly 83% until it fell below the 100 Week MA during the Feb correction for two weeks, and then violated it again in the days after the May 6th "Flash Crash", where it's remained for the past 3 weeks.
When I first saw this chart, it struck me as rather important and it seems to confirm the comments I made about Monthly Parabolic SARs "flipping" downward:
SPX Monthly SAR flips downward
As Carl Swenlin of DecisionPoint.com states, "Technical Analysis is a windsock, not a crystal ball." Therefore, one has to be willing to change with the prevailing winds and not seek to fight them.
When one is applying Technical Analysis to the market, it's always wise to find confirmations that support one's theories, not only technical, but fundamental.
SPX Gallery View
On the short term, there is an indication the SPX will rally this week (looking at the PPO on the daily chart indicator a reversal to the upside). However, the weekly remains decidedly bearish and the PnF chart still indicates a target of 925.
Now.. this is an interesting PnF chart. It reflects that the "Bullish Percent for the S&P 500" has reached a trend line that signals "Bear Confirmed":
DOW Bear confirmed on May 7th, 2010:
Bullish Percent DOW (INDU)
S&P 500 Bear confirmed on June 9th, 2010:
Bullish Percent SPX
Nasdaq Bear Confirmed:
Bullish Percent Nasdaq
Bullish Percent Index explained
And now.. we have Barron's telling us to "Call a Bear a Bear":
Call a bear a bear?
And this is a DEFINITE read for those making the Bearish case:
"Wall Street seems to have no concept at all that every bit of growth we've observed over the past year can be traced to government deficit spending, with zero private sector expansion when those deficits are factored out. As I noted last week, if one removes the impact of deficit spending, "the economy has recovered to the point where the year-over-year growth rate since early 2009 now matches the worst performance of any of the 50 years preceding the recent downturn." In effect, Wall Street's is seeing "legs" where the economy is in fact walking on nothing but crutches.
Similarly, it is apalling that Ben Bernanke can say with a straight face that many of the "investments" made by the Fed have been repaid "and some have even made a profit," without immediately noting that the two primary sources of these repayments have been, directly or indirectly, the U.S. Treasury, and savers who are receiving near-zero interest on bank deposit instruments.
If we fail to recognize that the "good news" reported over the past year is due not to a recovery in intrinsic economic activity, but instead to massive government intervention, we risk being blindsided as those synthetic effects gradually erode.
On that point, it is notable that the Economic Cycle Research Institute (ECRI) reported Friday that its Weekly Leading Index has slumped to the lowest level in 44 weeks, and has now gone to a negative reading."
Born on Third Base
More later....
Scrutinizer
It's been extremely difficult to asses the direction of the equity markets. If most of my readers are like myself, they've been torn between "going long", going to cash, or "going short" (either directly shorting, or as I've been toying with, via Ultra-Bear ETFs). It's been extremely difficult to do more than day trade these ETFs as the crosswinds of the market have whipsawed investors).
There are very reasonable cases to be made on both the bearish and bullish side, although I find the bearish case more convincing. So I thought I might review the arguments of both in this post, consolidating and/or reviewing some of the thoughts I've focused on previous posts.
The Bullish Case
The most cogent argument that the Bulls can make is that this market is extremely oversold. Normally this is an effective indicator since it follows the old Baron Von Rothschild adage "Buy when there is blood in the streets".
As I posted earlier, the Arms Index, created by Richard Arms is an indicator of "max panic", where selling outpaces buying, indicating a "flushing" of the marketplace and transfer of shares from weak hands into stronger ones. The index registered the 4th highest level in 70 years, according to Arms:
ARMs Index at 4th highest level in 70 years.
We're seeing negativity everywhere in the markets... We've had the Flash Crash of May 6th (which remains insufficiently explained, IMO) which dropped the DOW 1000 points within 10 minutes. Prominent market analysts are urging their readers to sell stocks, we have the problems in Europe, war drums beating in Korea and the Mid-East, the BP oil catastrophe, and some would suggest the sky is falling. To a contrarian investor, this represents "max fear" and therefore, max opportunity to get in at a market low.
Furthermore, we have Investor's Business Daily, and a number of major investment analysts, including Abby Joseph Cohen of Goldman Sachs, now declaring the market correction is over and a new bull market is beginning:
Dusting off Abby
IBD calls end to correction.
Another argument the bulls use is that US corporations are flush with cash and apparently ready to spend it:
Corporations ready to spend record cash holdings
So what would they spend it on? Productivity enhancing technology, new machinery, communications upgrades, including computers. The question is whether this spending, when it occurs, would lead to an increase in employment. Increasing productivity normally means there is less of a need for hiring workers.
There's also the currency argument. The Euro had been previously threatening to seek parity with the USD. That would greatly impact the competitiveness of US corporations against Europeans exports. It would also likely play havoc with currency swaps. So having the Euro transit back above the 1.20 mark is a positive sign the Bulls are lashing their hopes to.
And finally, there's the technical argument that the S&P 500 has held it's 200 Month MA at approximately 1040. A violation of that level would have likely confirmed this correction was actually a resumption of the 2008 bear market, with new lows to be seen in the future:
SPX monthly chart
In sum.. the Bulls are arguing that the negativity is so great that it's lost all sense of perspective and that creates opportunity to move the markets higher.
That's about the best I can make of the Bullish case at this time.. If there's more, I'll update with an "Edit" comment, so be sure and check in from time to time.
The Bearish Case
Lordie.. where do we begin?
Well.. here's a chart that I found very interesting. It was pointed out to me by another TA analyst on the TZA Yahoo thread:
SPX Weekly chart with 100 Week MA
If one changes the period to "all data" instead of 10 years, it will be clearly seen that there have been VERY FEW INSTANCES where the SPX violated the 100 Week MA without a major decline occurring thereafter. We saw this in 2001 and again in 2008, the first times since the SPX went "parabolic" in 1994, that the 100 Week MA was substantially violated. And each violation has resulted in "lower lows" being seen in the SPX, the last low being seen in March, 2009.
Since that time the SPX has risen roughly 83% until it fell below the 100 Week MA during the Feb correction for two weeks, and then violated it again in the days after the May 6th "Flash Crash", where it's remained for the past 3 weeks.
When I first saw this chart, it struck me as rather important and it seems to confirm the comments I made about Monthly Parabolic SARs "flipping" downward:
SPX Monthly SAR flips downward
As Carl Swenlin of DecisionPoint.com states, "Technical Analysis is a windsock, not a crystal ball." Therefore, one has to be willing to change with the prevailing winds and not seek to fight them.
When one is applying Technical Analysis to the market, it's always wise to find confirmations that support one's theories, not only technical, but fundamental.
SPX Gallery View
On the short term, there is an indication the SPX will rally this week (looking at the PPO on the daily chart indicator a reversal to the upside). However, the weekly remains decidedly bearish and the PnF chart still indicates a target of 925.
Now.. this is an interesting PnF chart. It reflects that the "Bullish Percent for the S&P 500" has reached a trend line that signals "Bear Confirmed":
DOW Bear confirmed on May 7th, 2010:
Bullish Percent DOW (INDU)
S&P 500 Bear confirmed on June 9th, 2010:
Bullish Percent SPX
Nasdaq Bear Confirmed:
Bullish Percent Nasdaq
Bullish Percent Index explained
And now.. we have Barron's telling us to "Call a Bear a Bear":
Call a bear a bear?
And this is a DEFINITE read for those making the Bearish case:
"Wall Street seems to have no concept at all that every bit of growth we've observed over the past year can be traced to government deficit spending, with zero private sector expansion when those deficits are factored out. As I noted last week, if one removes the impact of deficit spending, "the economy has recovered to the point where the year-over-year growth rate since early 2009 now matches the worst performance of any of the 50 years preceding the recent downturn." In effect, Wall Street's is seeing "legs" where the economy is in fact walking on nothing but crutches.
Similarly, it is apalling that Ben Bernanke can say with a straight face that many of the "investments" made by the Fed have been repaid "and some have even made a profit," without immediately noting that the two primary sources of these repayments have been, directly or indirectly, the U.S. Treasury, and savers who are receiving near-zero interest on bank deposit instruments.
If we fail to recognize that the "good news" reported over the past year is due not to a recovery in intrinsic economic activity, but instead to massive government intervention, we risk being blindsided as those synthetic effects gradually erode.
On that point, it is notable that the Economic Cycle Research Institute (ECRI) reported Friday that its Weekly Leading Index has slumped to the lowest level in 44 weeks, and has now gone to a negative reading."
Born on Third Base
More later....
Scrutinizer
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