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Gold at the Turning Point
Gold and the Dollar are on the line -- Gold threatening to break down through a bull market trendline that began in 2005, the Dollar threatening to break up through a bear market trendline that began in 2002.
If the Dollar breaks out into a new bull market for the currency, it's curtains for gold bugs.
As with so many things today, this is not an entirely logical situation. Gold should be a buy. We have a negative interest rate environment -- inflation is higher than the interest rate on the highest yielding Treasury Bond -- The 30-year is yielding 4.44% ...
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Dollar Up, Interest Rates Down? | Stock Market Investing
Is the dollar rally for real? It's curious. Since the dollar broke out (vertical dotted green line) the yield on the 20-year treasury has trended down -- not what one would have expected. The middle chart is the price of the 20-year bond, the reverse price action of the yield. Bond prices have trended up.
The short-term moving average for the yield is trending down; the moving average for the bond price is moving up -- yes, that's as it should be -- but doesn't the dollar rally need rising interest rates, not falling? Something has to give.
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Beware the Short Trend | Stock Market Investing
Last week the Dollar broke to the upside. Oil broke down. Stocks rallied. Gold dropped. Call me a cynic but I don't believe any of it is a genuine change in trend. But time will tell.
In the meantime, consider how bleak the mortgage business appears -- and its consequent drag on the US economy:
That is about as ugly a chart as one can eve hope to see.
Financials don't look much better -- there is no sign yet of a leveling off from this waterfall, taking the long-term view. If there is another leg down the index will crash ...
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Pull Back or Rally | Stock Market Investing
Since July the S&P 500 Index has tried and failed to break through resistance at 1292. It reached 1291.67 today and fell back to close at 1289.19. The up trend (the solid blue line) needs to hold for our rally to continue.
The US Dollar is at a similar critical point.
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The dollar managed to squeak by the 200-day moving average (by .03) but fell short of breaking out to the upside.
The yield on the 10-year Treasury Note closed solidly above its ...
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Smart Money Wins | Stock Market Investing
Yesterday we wondered if the "smart money" sell-off in the last hour of trading yesterday would predict a down day today. Sure enough.
Stocks remain in the grip of the bear with small caps looking like the first to wriggle out of the bear's grasp.
The dollar may be about to break out. That would mean higher interest rates. Note how the 20-week moving average has started to turn up for the first time in a long time.
And interestingly enough, the utilities exchange traded fund XLU has developed a major head and shoulders formation. ...
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Smart Money Test | Stock Market Investing
Here's a test of the smart money theory -- that is, investors who are really in the know execute their trades in the final hour of the market. Prices on all the major indexes -- except the Russell 2000 -- closed sharply lower in the final hour of trading today. What happens tomorrow? Tthe employment report is released. A negative report will send stocks sharply lower. Did smart money have a clue? We'll see when the report is released on Friday.
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The Bounce This Time | Stock Market Investing
The market is making noises that some positive action is in the offing but before we get to that -- what a day we had in the exchange traded fund representing the MSCI emerging markets index (EEM).
The red box surrounding the last five trading days shows a huge daily range -- the length of the bars -- for each day's trading -- as much as a 5% price change in a single day. If that doesn't represent a war between Bulls and Bears I don't know what does.
The critical factor is that the price of EEM stays above it's old low at 41.58. But this month's action ...
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Still Waiting | Stock Market Investing
The NYSE is in danger of falling out of the downtrend price channel that began with the August 2007 low. As the chart shows, the NYSE Advance-Decline line broke the lower boundary last week, rebounded, but is once again in danger.
If the channel isn't penetrated this week, it should mean a bounce for stocks.
Our Bear Market status is evident in the trend (the red line) of new highs minus new lows on the NYSE. The NYHL needs to break above the zero line and stay theret, as it did during the March rally.
Another key indicator will be small caps, which ...
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The Bounce and Now | Stock Market Investing
We got the bounce in stock prices we were looking for, but it may be short-lived.
It was also nice to see the bearish wedge formed on the weekly chart for the commodity index, that we pointed out earlier, come through with a big down-move last week. But that move doesn't make a trend.
Looking at oil's weekly chart we can see that it has repeatedly broken its uptrend line and then promptly resumed its march to higher prices. It's too early to say what will happen next.
Unfortunately a drop in commodities is not necessarily good news for stocks. ...
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Fannie & Freddie - Flat | Stock Market Investing
Freddie Mac deflated any bounce possibilities last week. Maybe this week we'll get around to a little up action (still in a Bear Market).
Freddie Mac is now at an all-time low; below the price at which it went public in 1992. Either this is the end of the world as we know it or a great time to buy.
As far as the market-at-large is concerned, we're are at the bottom of the NYSE Advance-Decline Line's declining channel; the net new highs fell to -764 on Friday, definitely in the low end of the range.
 ...
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Emerging Markets - Uh Oh | Stock Market Investing
Vanguard's emerging markets exchange traded fund VWO broke the neckline of a head and shoulders pattern today, making emerging markets the next victim of the Bear Market. The iShares emerging markets ETF, EEM is 1.6% away from breaking the neckline of its similar pattern. Here's the picture for VWO:
If the pattern holds -- if price doesn't cross back above the neckline at 44.46 -- then the minimum price objective is 31.08, down -28.27% from today's close.
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Stocks Up Oil down | Stock Market Investing
We got the bounce we were looking for today -- the exchange traded fund tracking the small cap Russell 2000, IWM, was up 3.72% while the ETF tracking oil, USO, was down 4.38%. It's not enough to make a trend, but it will make for an interesting Wednesday.
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Waiting to Bounce | Stock Market Investing
The Bear Market drags on, and down, but there are a few things to keep an eye on.
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Commodities Are Over-Extended | Stock Market Investing
Commodities in general and oil in particular seemed ready for a fall.
Negative divergences have appeared in the Reuters-CRB Commodity Index (CCI) -- price has reached a higher high than in March while momentum oscillators are at lower highs (weekly basis). And as the chart below shows, a bearish wedge pattern has developed. Although the wedge points up, the probability of a downward breakout is high.
A similar wedge appears in the exchange traded fund tracking oil, USO and momentum for oil has also stalled.
 ...
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Tragedy or a Bounce
On the last day of June, markets are poised to move much lower or bounce.
As this chart shows, the S&P 500 is at a critical point -- a 38% retracement of gains from the 2003-2007 bull market. The next stop, a 50% retracement, is another 100 points down.
A bounce from this point, on the other hand, just might give us a double bottom pattern and that would be bullish. We'll need to see a break-out in New Highs for that to happen (lower chart).
Of course the financial sector exchange traded fund XLF has crashed through its 62% retracement ...
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Bubble Masters & Secular Change | US Economy
We're mired not just in the Bear Market that our corporate Bubble Masters have dumped us in. We're facing a secular change in how our economy functions, a change that will determine how we live over the next several decades. Two factors, already evident, will control our future: (Due to technical difficulties, please click Newsletter to read more.)
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A Sick Market | Stock Market Investing
The top graph shows the NYSE Advance-Decline Line -- the number of stocks advancing in price minus those declining. The bottom graph shows the NYSE High-Low Index -- the number of new highs in price recorded on the New York Stock Exchange minus the number of new lows. Note the zero line in the lower graph. Both indicators tell the same story: The market has been sick since July 2007.
When the High-Low index breaks out above its moving average, the advance decline line also moves up and, while I don't show the exchange price chart, trust me on this one, ...
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Stocks Down Bonds Up | Stock Market Investing
There is gloom and doom in the stock market, perhaps best exemplified by a chart from Smith Barney that shows an ominous similarity to the Dow Jones Industrial Average in 1938 to its position in 2008.
And if we look at the NYSE New Highs minus New Lows index, we can see a serious red flag waving: The long-term moving average, which has not been above the zero line since last November, and has now crossed below its short-term moving average. The last six times this happened, falling stock prices followed. The chart is here.
And the darling of the Bull Market ...
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All Time High for CCI | Stock Market Investing
Commodities rallied to a new all-time high as measured by the Reuters-CRB Index (CCI) last week while international stocks fell sharply -- the Emerging Markets ETF (EEM) fell -2.41% and the developed markets ETF (EFA) fell -2.53%.
The major domestic indexes were mixed: S&P 500 was down slightly (-0.05%) while the Dow Jones Industrial Average was up 0.80% and the Nasadaq 100 was down -1.22% and the small cap Russell 2000 index was down -0.91%.
What's significant is that the US share of world market cap in stocks is now just below 30% -- it was 45% at the start of 2004, according to Bespoke Investment Group. All the charts are in Charts. ...
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Another Bottom | Stock Market Investing
Commodities rallied last week, the stock market gyrated and then headed south, leaving us with only one question -- will small caps will follow suit?
For the S&P 500, the head and shoulders pattern I originally posted still controls. A visit once again to the 1270 range would not be unexpected. Note the declining number of new highs in the lower chart.
Comparing the big caps to the small on a shorter time frame chart (60 minutes) presents quite a different picture:
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June Turns Sour | Stock Market Investing
The happy ending in May has turned rapidly sour in June. Short-term charts show some negative patterns for both the S&P 500 and the Dow Jones Industrials and for Emerging Markets (EEM). Small caps, however, continue to inch up, battling to cross, and stay over, their long-term moving average.
So the Bear still rules.
In another Bear market, the Dollar appears ready to rally -- the US Dollar Index closed at 73.49 today. A breakout is signaled with a ...
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The 4% Solution | Financial Planning
Several of the comments to my article, Risk of Ruin, in addition to those posted here, focused on my "mistake" in using a flat dollar amount rather than a 4% withdrawal rate and one even faulted me for increasing the withdrawal rate by a 4% rate of inflation.
As if the purpose of the withdrawal was to preserve capital rather than to provide food, shelter and clothing in an inflationary environment.
My theory was simple. I figured $10,000 plus a Social Security benefit was the minimum that would keep a person alive, though perhaps not enjoying it ...
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Positive Shifts in Primary Trend | Stock Market Investing
May was a big month in the stock market, though most people haven't noticed.
Bearish sentiment reigns. The market has seen below average volume (volume is the weapon of the Bulls); high levels of short interest (expecting lower prices); high levels of Bearish sentiment, and, low levels of consumer confidence. Not to mention recession, deficits, etc., etc.
On the other hand, low volume in a Bear Market is bullish and short interest, sentiment and consumer confidence are contrary indicators.
In fact, there are many positive signs. Consider the Primary Trend -- the position of the monthly (closing) price to the 10-month moving average. ...
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Risk of Ruin | Retirement Investing
The concept of risk of ruin is important to more than poker players. Anyone in or nearing retirement ought to understand this important concept. And it's easy to do. Simply read my new article on Risk of Ruin at Investopedia, a Forbes Media Company.
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Happy Days for Now | Stock Market Investing
Commodities are down. Stocks are up. Happy days are here again.
Well, maybe. Bespoke Investment Group reported today that short Interest in the major brokerage firms, which has an historical average of 2.31%, has hit 7.16%, about 2 percentage points higher than in mid-March. Can this be the crowd that is missing the turn? Short interest is normally thought to be a contrary indicator.
It's particularly significant because brokerage firms tend to lead the market. Something to keep an eye on.
For now, the story is the declining price of commodities ...
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Not All Small Caps | Stock Market Investing
In yesterday's post I pointed out the rally in the Russell 2000 small cap stock index. While the index was down slightly for most of the day, it rallied at the close on good volume. Here's the picture at 30-minute intervals for the exchange traded fund IWM which tracks the Russell 2000. Note the nice uptick in volume as the price rallied.
On the other hand, not all small cap stocks are powering forward, relative to large caps. Yesterday I compared the Russell 2000 to the Russell 1000 to show the favorable break-out in ...
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Small Caps Are Outperforming | Stock Market Investing
Small cap stocks lead the stock market out of a recession. It appears to be happening now. The Russell 2000 turned bullish on point-and-figure charts today and as the chart below shows, it has begun to outperform relative to large caps. In the top graph, the last time the small caps had better relative strength than the large was in 2006. In the second graph you can see higher lows for the Russell 2000 (RUT) and lower lowers for the Russell 1000 (RUI). This doesn't mean the Bear Market is over, but it is a positive sign.
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Tough Sailing | Stock Market Investing
Last week gave us an ominous short-term indicator in the S&P 500 -- an outside bar with a greater range -- 67 points, from a high of 1440 to a low of 1373 -- than that of the preceding three weeks. That means more sellers than buyers and that's not good for prices. Unfortunately, the long-term indicator -- the slope of the 50-week moving average -- is also negative.
Even the Energy Sector, here represented by the exchanged-traded fund XLE, showed signs of weakness. Here you can see XLE closed ...
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The Dow Down | Stock Market Investing
Yesterday the Dow Jones Industrial Average closed down for a lower low this month and today's action did not heal that wound. The DJIA has now broke its uptrend, both on a daily and weekly chart basis. Will the other indexes follow suit? Tomorrow may tell.
Note the brief breakout above the neckline of the Head and Shoulders pattern appears now to have been a 'whipsaw.' Friday's close will confirm.
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The Rally's Over - Now What? | Stock Market Investing
The next few days will confirm whether recent stock market action was just a Bear Market rally or the beginning of something new. Right now it looks like the former.
While the NYSE Advance-Decline line is not a perfect gauge, because so many non-operating company stocks trade on it, it has not lost its usefulness, especially over long periods of time.
Applying two moving averages -- 4-week and 26-week -- we can see that the trend remains negative: both the short and long MAs are below the zero line with the shorter crossing below the longer average today. This does not bode well.
 ...
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Complacency Is Back | Stock Market Investing
Rising stock prices are feeding a remarkable level of complacency in the market despite ominous signs of greater inflation ahead. Historically, inflation has not been good for stock prices.
First the complacency. The put/call ratio has dropped precipitously (heavy blue line, top graph) as the S&P 500 Index has risen since the March lows. This indicates investors believe stock prices will rise in the future and is a contrary indicator. The good news is that the upward trend that began in October has been broken. But as the many peaks in the graph demonstrate, reversals are inevitable. A low in the put/call ratio would seem to be a risky ...
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Stocks Hold Off Bad News | Stock Market Investing
Despite oil at another all-time high and the second month of declining retail sales, stocks closed mixed, with the major indexes basically unchanged. When investors shrug off bad news, that's bullish.
But expect a pullback in stocks anyway.
The Volatility Index (VIX) is at its lowest level since the last October's high in stock prices. And the Put/Call ratio, at .79, is the lowest it's been since a .82 reading last October. These contrary indicators will not remain benign forever. A reversal is in the cards.
The strength of the pullback will tell us whether ...
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Will the Yen Spoil the Party? | Stock Market Investing
I've commented a number of times in the past that there is a perfect negative correlation between the strength of the Japanese Yen and the US stock market. When the price of the Yen falls, US stock indexes rise and vice versa.
The Yen topped out in March as our stock market hit its low for this year (so far). Since then, the Yen has declined and the US market has roared ahead -- up some 11% from the low. Not too shabby. But is the Yen now ready to resume it's upward trend?
In the chart below, the vertical lines indicate the change of direction -- red dotted lines mark the beginning of a rise in the exchange traded fund that tracks the Japanese ...
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Short-term Indicators Are Positive | Stock Market Investing
The past week's rally closed out the week showing signs that it may be more than a bull rally in a Bear Market. Numerous indicators are all positive for the short term, and after all, the long term is just the short-term repeated.
But as I've said before, expect a pullback -- the market moves steady by jerks. The depth of the pullback will reveal whether this is a genuine change in trend from negative to neutral or positive or if it is only a "bull trap," that brief rally in a Bear Market that catches investors buying in to a short-term move too late.
For those following the Primary Trend, we are right on the cusp -- the slope of the 10-month moving ...
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Are Happy Days Here Again? | Stock Market Investing
Today may have been the pivotal rally in changing our trend from bearish to bullish. The Nasdaq 100 closed above its 200-day moving average and the S&P 500 Index closed above 1400, though still shy of its long-term moving average. A strong showing Friday will help clarify whether we're seeing an actual change in trend or just a rally within a Bear Market.
A striking factor in this week's action has been the decline in "hard assets" versus "financial assets" such as stocks.
It's always worth waiting to see if a Head and Shoulders pattern works out -- as it ...
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Just a Bear Market Rally? | Stock Market Investing
Daily market action has shifted into neutral, with the Federal Reserve Open Market Committee meeting tomorrow, and its official announcement due on Wednesday. At this point, odds seem to favor an end to the current Bear Market rally that began after the market low on March 17 and another leg down in the current Bear Market.
In recent posts, I've noted that the Volatility, or fear, Index (ticker VIX) has broken an uptrend on a weekly basis. That's bullish for stock prices. Unfortunately, we haven't seen a lower low in the VIX, as this chart ...
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Gold Is on the Edge | Gold Investing
The gold bullion exchange traded fund GLD has twice broken the support line formed by the apex of the triangle pattern from which it broke out decisively in February. Since then GLD has been tracing out a head and shoulders pattern. Today brought the price right to the neckline (red circle). A decisive close below the neckline confirms the pattern and gives us a price target of $72.92.
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And it may be more than just the precious metals. The Goldman Sachs Industrial Metals Prices index is treading water just at ...
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Junk Bond Rally | Stock Market Investing
April has been a pretty good month for junk bonds given the fact that we're in the midst of a financial-system-shaking credit crisis and a recession to boot.
One of the junk bond mutual funds that has correlated very nicely with stocks over the years is the Smith Barney High Income fund (SHIAX), which is up 2.5% since the first of the month and up 4% since March 17.
Two exchange traded funds have done much better -- the DLJ High Yield Bond Fund (DHY) up 14% and the Blackrock Corporate High Yield Fund (COY) up 13.6%. The price of each ...
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A Bear Rally or a New Trend? | Stock Market Investing
Last week was the first really bullish week we've had since the end of January when the NYSE composite closed the week at 9277.58. Friday's closed bested that mark with a close at 9310.24.
The percentage of stocks above their 200-day moving average has risen 80% in the last four weeks while the percentage of stocks showing a bullish point-and-figure pattern has rise 63.5% and closed Friday right at the 50-week moving average. The chart is posted in Newsletters. Check the chart in the March 14 post for comparison.
Another bullish indication is the clear break in the Volatility, or "fear," ...
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Inflation-Deflation | Economy
This week has seen a number of positive signs in the stock market. Friday's action may be decisive. We'll report those results over the weekend.
As for Inflation-Deflation, the debate rages on and contraryinvestor points out that you can take either side and still win the argument. There is a great deal of inflation, notably what we are importing:
The impact of most of these rising prices -- energy and food -- is actually deflationary. US consumers, faced with rising prices for staples will have fewer discretionary ...
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Which Way Is the Wind Blowing | Stock Market Investing
Has the Bear Market wind shifted to neutral? While Friday's drop in the market was a disappointing conclusion to last week, there are signs that, within six months, this market may be turned around.
Consider the percentage of stocks in the S&P 500 above their 200-day moving average. Back at the end of the last Bear Market, the momentum indicator MACD gave a positive signal in October, but the market thrashed around until April -- six months from the first positive momentum signal.
This week, we have the first sign, after a long decline in the MACD, that momentum has turned positive. That's the good news. The bad news is it may take six ...
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Just A Bear Market Rally? | Stock Market Investing
Last week we looked at the New York Stock Exchange Composite -- which includes many non-operating companies, such as exchange traded and closed-end funds -- and the use of breadth indicators to judge the direction of the market. The peak in breadth occurred early in 2007 while the peak in price occurred in October. It is typical for breadth to peak six to nine months before price.
The chart clearly showed how dangerous the market was at the peak in price: our two breadth indicators were both below their long-term moving averages.
Where do we stand today? One of the those indicators, the percentage of stocks showing a bullish pattern on point-and-figure ...
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Ben & the Transports | Economy
Times are strange. With fuel prices spiraling out of control the transportation sector launched itself from a very pretty flag pattern, snapping out of a downtrend that began last July. So as Federal Reserve Chairman Ben Bernanke testified that a recession was "possible," a sector that typically leads the economy says otherwise. This break-out in the Dow Transportation Average will be a definite positive if it can cross above 5000 -- just 28 points away -- and maintain 5000 as a support level.
Another positive sign, as yet unconfirmed, is the bullish wedge pattern ...
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Commodities & Deflation | Economy
The Reuters-CRB Index of commodities dropped drastically the week before last, recovered above its 50-day moving average, and then closed today just below that support line. Gold's behavior has been the same.
The last time commodity index closed broke the 50-day moving average it also broke the long-term 200-day moving average. That was the prelude to the enormous run-up in prices that peaked roughly two weeks ago. Is the pull-back now setting the stage for another massive up-leg?
It would appear to depend on how successful the more speculative investors in the crow believe the Federal Reserve will be in pumping the economy back up into a growth mode. ...
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Control Your Optimism | Stock Market Investing
Over the short run, the market is unpredictable. Over the long run, it is predictable. Why? Because the market is made up of people and people are predictable. Not over the short run - in the next few minutes, a person is unpredictable – he or she may do any number of things, sit down, stand up, walk around, make a phone call, check email, laugh, cry, smile, scowl, eat something, go to the bathroom. For the most part, you can’t tell by just looking at a person what they’ll do next. Just like the market. Short term market charts can't predict what will happen next with any certainty.
But over the long run people are predictable. ...
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Shanghai down 50% | Stock Market Investing
China had the hot stock market and now it's on the rocks. The Shanghai Stock Exchange Composite Index has given up 50% of its gain since the mid-2006 low at 1000. The S&P 500 Index is still holding out above the 38% give-back level.
While both moving averages for the Shanghai exchange have rolled over, the 20-day has not yet cross below the 50-day, as it has for the S&P 500. Which may only mean that the S&P is farther along toward recovery.
What happens this evening in China may have an impact on US markets tomorrow.
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Pros & Cons for a Rally | Stock Market Investing
Investors appear to be on the cusp. Momentum has shifted to the positive side but volume remains tentative. Where exactly does the S&P 500 Index stand? Read on.
Momentum, the top chart, began falling at the market peak in October and fell steadily into this month, when a reversal occurred for both the 45-day rate of change and its 20-day moving average. That's a positive. A on the chart.
The 50-day moving average is well below the 200-day moving average, a sign that we're in bearish territory; however, the spread between the two is quite wide and that may indicate a reversal is in the cards. It doesn't mean an end to the down ...
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A Bear Rally | Stock Market Investing
1350 was the magic number for the S&P 500 Index to quit its bearish ways according to some market commentators -- it closed today at 1349.88. Is that good enough to shift the market from down to neutral?
If you believe price follows volume, today's action was not enough. Volume was less than half that of the down days of March 14 & 17, when the market hit a new low. In fact, all the high-volume days have been down days. Not exactly bullish. Charts for this article are posted here.
Looking at the percentage of S&P 500 stocks trading above their 200-day moving average we see a nice ...
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Two Big Bounces | Stock Market Investing
We can't say the worst is over, but the past week has seen support for the S&P 500 Index hold at 1276 -- the point at which 38% of the total gain from 2003 to last October's peak is lost.
The S&P 500 hit 1273.37 last Monday and 1276.60 yesterday before powering back up to 1330.74 today. The projection from the (weekly) head and shoulders pattern was 1276.23. The 38% give-back level was 1276.95. Really, uncanny.
For those who have faith in Fibonacci numbers, it's a confidence builder. The rest of us just want to see that 38% support level hold -- because the next stop is a 50% give-back of all the gains earned from the spring ...
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Another 1998? | Stock Market Investing
Today's paper reported that the chief market strategist at A. G. Edwards & Sons Inc. , Alfred Goldman, has "seen a bottom" in the market, to which he quickly added, "It's probably not 'the' bottom . . . it would be presumptuous to call 'the' bottom."
So what was the headline to this declaration of 'a' bottom if not 'the' bottom? "Some see recovery coming." Bound to be right, sooner or later. Right now, we can only look at the preponderance of evidence, which is all negative -- and that's the kind of news that goes into making a bottom in prices.
Back at the end of February, the Dow Jones Industrial Average and the S&P ...
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Sick Sectors | Stock Market Investing
The health care sector, (the SPDR ETF, ticker XLV) normally thought of as a defensive holding in down markets, was dragged into the emergency room today, down more than 3% for the week.
And the other supposed stalwart sector, consumer staples (SPDR ETF, ticker XLP), is looking sick as well. It's price at the close of the week was 26.96, below both the 20-week moving average, which has a distinct downward slope, and the 50-week MA, which is flattening out; neither a good sign.
In fact, as far as sectors go, Energy (SPDR ETF, ticker XLE) is the only one that is holding up, as defined by the price being above its ...
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Breadth Still Stinks | Stock Market Investing
A bounce was exTuespected on Tuesday, given the deeply oversold condition of the market, but the Federal Reserve added some unexpected punch with its promised $200 billion injection of liquidity.
Still, despite the big rally that got the bullish emotions pumping, we have a long way to go to turn this market around.
In fact, Tuesday's rally looked anemic on the S&P 500 Index compared to the rally following the low on January 22. On January 25 the index jumped up to 1395. The S&P closed Wednesday at 1308. The picture is here.
And market breadth continues to look bad. ...
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Yipee! Another Bottom | Stock Market Investing
A "double bottom" is now in place. The question: Will it hold?
Friday's close established new lows for all the major indexes:
- 11893 for the Dow Jones Industrial Average (old low was 11971)
- 1293 for the S&P 500 (1310)
- 1707 for the Nasdaq 100 (1795)
- 2212 for the Nasdaq Composite (2292)
It's uncanny that the Nasdaq 100 closed at 1707. As I noted in my March 4 post, "Smart Money Is Buying," late-day buying kept the index from falling below 1707, the low for that day. Perhaps 1707 really is a bottom. Time will tell.
Now that the news media ...
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Oil & Technology | Stock Market Investing
There are still too many bulls in the market for a bottom. The intriguing question is this: Will Technology and Oil return to their historical relationship or are we in a brave new world?
Of course like everyone else I believe in Peak Oil. And maybe this time it's truly different. But looking at the behavior of oil (WTIC, Oil, light crude) and Technology (QQQQ, Nasdaq 100) we can see an inverse relationship has been the general rule in the past. When oil rallies, technology falls and vice versa.
This was true in the summer of 2005 when oil rose dramatically (to more than $65 a barrel!) and the Q's fell. Again in the summer of 2006, ...
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Fear of Missing Out | Commodities
In my book, Joy of Stock Market Investing -- yes, readers who followed my advice even now can be feeling joy -- I discuss the fear of missing out. Those who didn't invest in oil or other commodities must surely be feeling high anxiety having missed out on the huge run-up in commodity prices.
Is there still time to jump in? History would make a person cautious. Or is this a brave new world?
On the one hand, commodity prices pushed ever upward today. On the other hand, commodities have reached a level where, under more normal circumstances, we might expect a reversal.
Oil and ...
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Smart Money Is Buying | Nasdaq 100 Index
Does the "smart money" think that 1707 is the "bottom" for the Nasdaq 100 Index? Sure looked that way today. The Index opened today at 1724.09 and fell by early afternoon to 1707.42. What followed was a rally all the way to 1743.70.
There is a theory on Wall Street that the "smart money" trades late in the day and the "dumb money" trades early in the day. If that's the case, the dumb guys were selling early and the smart guys were buying late. A picture of the day's action is here.
But while today's late-session buying seemed bullish, the long-term ...
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The Yen Whammy | Stock Market Investing
The Yen-whammy hit US markets last week: From it's close on Monday 2/25 to the closing price Monday 3/3, the Yen was up 4.6%. The S&P 500 Index was down -2.9% (closing basis).
The bull rally that began in July 2006 is clearly shown on the chart of the Japanese Yen -- right where the Yen's 20-week moving average falls below the 50-week moving average. The true peak of our market rally in July 2007 came at the low point of the Yen's value. The second, speculative peak occurred after the Yen's 20-week moving average had crossed over the 50-week, signaling a rally in the Yen. On October 9, the party was ...
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TIPS-a-Poppin' | Stock Market Investing
Treasury Inflation Protected Securities (TIPS) scored big, along with Gold today, and the stock market's hoped-for rally fizzled heading in to month-end.
The ETF iShares Lehman TIPS bond fund tiptoed out of a triangle pattern yesterday, closing at 107.99 and then popped up today, closing at 109.42. It's high this year is 110.5. Back at the beginning of 2007 TIPS traded at 98. The look seriously overbought right now, but fear trumps greed every time and there is plenty of fear about inflation.
Gold closed at 961, up 11.7% year-to-date. Gold miner's shares have also broken to the upside. Pushing the surge in gold and oil was the collapse of the ...
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United States Gasoline Fund | Stock Market Investing
Paying more at the pump may mean profits in the investment account, and vice versa.
A new ETF, United States Gasoline Fund, LP, ticker UGA, has been registered with the Securities Exchange Commission with an effective date of last Friday. It will trade on the American Stock Exchange.
It joins the United States Oil Fund (ticker USO) as a commodity pool Exchange Traded Fund, allowing investors to speculate on the price of the commodity. Since the first of the year, 2007, USO is up 55.5% compared to the S&P SPDR ETF, SPY, which is down -0.45% (through Monday's close)
The fund will seek to match the price changes of the futures contract on ...
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This Week in Stocks | Stock Market Investing
Market indicators remained mixed last week. Emerging Markets remains the strongest of the broad indexes. Energy remains strongest of the domestic sectors.
The Dow Jones Industrial Average inched up 0.27%, the S&P 500 Index 0.23% and the Nasdaq Composite fell -0.79%. Meanwhile, the Emerging Markets ETF (EEM) rose 2.07% while the foreign stock ETF for developed nations rose 1.54%. No doubt pundits will continue to argue about the existence of the "decoupling" of the rest of the world's economies from the U.S.
Sentiment, as measured by the AAII survey, remains indeterminate, with the most recent reading 33.2% Bullish and 44.7% Bearish. ...
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Misery Index Up | Interest Rates
The Misery Index -- the unemployment rate plus the inflation rate -- is headed up and so are long bond rates. This is not good news for the holders of adjustable rate mortgages facing interest rate resets this spring. And while interest rates are likely to rise going forward, they trail the current inflation rate, and that is not good news for income investors right now.
It was remarkable that earlier this month Australia's central bank pushed its current interest rate up to 7%. The bank cited rising inflation. It's not alone in the Pacific. Other inflation-wary central banks include China at 7.47%, India, 7.75%, and New Zealand, 8.25%.
...
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Bulls Alive | Stock Market Investing
With markets stabilizing last week -- the Dow Jones Industrial Average was up 1.36%, the S&P 500 Index was up 1.40% and the Nasdaq Composite inched up 0.74% week over week -- Bullish sentiment rose as well. Details of what we may expect are here. Here's the American Association of Independent Investors survey results and the S&P 500.
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Charts and the Bottom | Stock Market Investing
Charts are fascinating because different people can draw such different opinions when looking at the same chart. One of my favorite quotes about charts goes like this -- every ship at the bottom of the sea had plenty of charts on board.
So it isn't surprising that when we look at a chart we can see more than one story in it. For example, this chart of the S&P 500 Index conveys both good and bad news.
First, the good news. The old point of resistance -- the high in May 2006 -- serves as support now -- the horizontal line drawn at 1323.19. We broke ...
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Is the Worst Over? | Stock Market Investing
Is the worst of our Bear Market over? We had a positive divergence in market breadth last week. The details are in this week's newsletter update.
If the market has bottomed it means we did not accomplish the kind of real deep-cleaning that would have been necessary to give us a good foundation for a long-term bull market. We will still be in a trader's market, compliments of the Federal Reserve's aggressive rate cutting.
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Wither Capitalism | American Economy
Whither American capitalism as Barack Obama's momentum begins looking like manifest destiny?
Obama has thrown down the gauntlet of "social darwinism" against the present Republican administration -- those are fighting words not too far afield from "class warfare," which Republicans have used to their advantage during the Bush years. Obama is unafraid. Maybe he's read the results of a recent Harris poll that found Americans overwhelmingly do not trust American big business.
Specifically, respondents who thought the following were "generally honest and trustworthy":
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Strictly for Speculators | Stock Market Investing
January 22nd was the low, so far, in this Bear Market:
| DJ Industrials | 11971 | | S&P 500 | 1310 | | Nasdaq 100 | 1795 | | Nasdaq Comp | 2292 | Russell 2000
| ...
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A Rally to Sell| Stock Market Investing
It's nice to be right, well, almost, at least for a day, well, especially after one has been forced to travel with the flu bug as intimate companion. So I will be brief: in my January 25 update I set a target for the Fed rate cut rally of 1397 - 1438 for the S&P 500 Index. From that Friday's close at 1330.61 to the following Friday, Feb. 1 the index closed at 1395.42, up 4.8%. I missed it by 2 points (0.14%) but clearly a lot of people had the same idea I had -- that now was not the time to be greedy. Here is what last Friday and today looked like in 5 minute increments:
 ...
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Will the Fed Feed Another Bubble? | Fed Funds Rate Cut
A Fed Funds Rate cut to 3% on Tuesday may not lead to a further rally in bonds; and the impact on stocks is uncertain. On the other hand, it may inflate stocks as one more (final?) asset bubble.
Looking back to the last time the 30-year US Treasury Bond was at such high prices, depicted in the top chart below, we can see it was just prior to the Fed cutting its rate to 1% in June, 2003. And that high price followed a sustained 18 months of Fed Rate cutting. The first sub-2% rate was set at the end of 2001 and rates never rose above 2% for all of 2002 and the first half ...
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Settling In | Stock Market Investing
Thursday evening some market observers issued short-term "buy" signals -- buy on the open Friday. The market was mixed but a rally may indeed be in the cards for this week. But will it lift us out of this correction and save us from a Bear Market? Probably not.
The percentage of stocks above their 200-day moving average continues to decline on all the major indexes. Sentiment and other market internals seem to be calling for longer-term weakness. Details are in this week's newsletter.
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Waiting to Test the Low | Stock Market Investing
The market's sick and so am I -- but I only have the flu. The market -- who knows? The perma-Bears are calling for another Great Depression or something, and, eventually, they may be right. But in the meantime, we must occupy ourselves (as well as try to make a little money).
The market's recent rally only heightens concern over the inevitable "testing of the low" -- in the following chart of the Dow Jones Industrial Average you can buy (symbol DIA), we see the bounce just above the previous March 2007 low (that is, we lost just about 100% of 2007's gain from the low).
 ...
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Good News Is No News |Stock Market Investing
Despite the upbeat news coming out of Wall Street today, we are on the cusp of a major bear market.
First, the "news," which was a rally in financial stocks with "conventional wisdom" being trotted out that financials lead the market and a rally in financials means this correction is bottoming out. The data crunchers at Bespoke Investment Group point out otherwise. Of the last 12 rallies (up 10%) in the S&P 500, the financials led the market once, were coincident seven times and lagged the market the remaining four times, once by as many as 87 days in 1990, a recession year, by coincidence.
A look at the long-term chart for the S&P ...
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Too Many Bulls | Stock Market Investing
The fact that the top 20 performing Exchange Traded Funds last week were all inverse funds -- moving up in price as the price of stocks falls -- has shaken all the Bulls out of the market. This week's Primary Trend newsletter compares market sentiment in 1990 to current sentiment. Until Bullish sentiment drops by another 10 percentage points, look for stock prices to keep falling.
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Setting a Record | Stock Market Investing
This January, so far, marks the steepest declines in the market since 1970 -- 38 years!
After Thursday's rout, the Dow was down -6.78%, the S&P 500 -7.87% and the Nasdaq -10.07% since the first trading day of the year.
Looking at month-end returns since 1970, the S&P 500 and Nasdaq, have already surpassed the next steepest decline for the month: -6.89% for the S&P 500 and -8.58% for the Nasdaq, both in 1990.
Coincidentally, 1990 was our last "real" recession year. Looking at January, 2000: The Dow was -4.85%, the S&P 500 -5.10% and the Nasdaq down -3.17%.
For the Dow Jones Industrial Average, ...
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Slavery and SIVs | Credit Market Meltdown
Will the disruption in our credit market leave us as shell-shocked as a society which has just lost a war?
I'm not alone in wondering if our loose-money policy is pushing us to a Weimar-style hyper-inflation. But this thought, I'm sure, is unique: Are the structured credit products (SIVs, CDSs, CMOs, etc., etc.,) that have dominated, and disrupted, our credit market the equivalent to slaves in the antebellum South?
Let me hurry to explain. Slaves were an enormous store of value and crucial to the credit market in the South. At the start of the Civil War, the market value of slaves was greater than all the machinery and equipment in the North. ...
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A Decisive Week | Stock Market Investing
Uncertainty is the watchword for the coming week. Three of the five major indexes are riding support levels which if broken could signal still lower prices ahead. | |
