Wednesday, December 29, 2010

11 Rules for Better Trading

I have published my "11 Rules for Better Trading" previously, but I thought they were so good that it was worth drawing attention to them again.  After all, it is the end of the year, and these are the kind of stories we generally see to get ourselves righted for the coming year.  

Monday, December 27, 2010

Morning News Notes: 12.27.10

The morning news notes as prepared by TL...China raises lending rate, Goldman Sachs bets on the USA for 2011, comments by hedge fund manager David Einhorn, and McKinsey Survey of executives.

Sunday, December 26, 2010

This Time Is Different

"This time is different".  It really, really is.  Trust me.  It's true.  Those famous 4 words of investing that should have you running the other way and that should be relegated to the trash bin of investing along with such phrases as "stocks climb a wall of worry" and the "stock market can stay irrational longer than you can stay solvent" are as true today as any time in the past 10 years.

Saturday, December 25, 2010

Investor Sentiment: Extremes Persist

It doesn't take a rocket scientist (or Wall Street analyst ~ a downgrade?) to figure out that investors are extremely bullish on the equity markets.  Such extremes in sentiment will usually (85% of the time) lead to better risk adjusted buying opportunities in the future.  In other words, the next best time to be a buyer of equities will be when investors are bearish not bullish as they are now.  The markets don't have to go down just because everyone is bullish, but if you are a "believer" and buyer at these levels, then you will need to identify a market top and get to the exits before the next guy to extract profits.  This is a very crowded trade and identifying the top is a tall order.

Monday, December 20, 2010

Morning News Notes: 12.20.10

The morning news notes as prepared by TL...European sovereign debt crisis, Ireland, Korean conflict, Greenspan on economy and stock market, company buy backs increasing, and Japan loves the Colonel over the holidays!!

Sunday, December 19, 2010

Investor Sentiment: Tough Being Bearish

It is tough to be bearish for the following reasons: 1) the overwhelming consensus opinion of investors, bloggers, and newsletter writers is bullish now and into 2011; 2) the perception amongst investors is that the Federal Reserve has back stopped the market; 3) there is a persistence to the tape as it marches higher on both good and bad news; and 4) it is the holiday season where thinly traded markets can be easily manipulated higher.  Yes, it is tough being bearish when everyone and everything you read is bullish, and the equity market can only go one way -- up.  Yet, here I write that I am bearish.  Why?

Thursday, December 16, 2010

TheTechnicalTake: TBT

I have been highlighting higher Treasury yields since October 15 (well before the heard), and I also mentioned on December 8 that the move higher in Treasury yields would "pick up steam".  But every price move has its limits, and the Ultra Short Lehman 20+ Year Treasury (symbol: TBT) is no different.

Morning News Notes: 12.16.10

The morning news notes as prepared by TL...housing starts, initial jobless claims, White House review of Obama's Afghan war strategy, European sovereign debt spreads, BAC and new Basel rules published.

Wednesday, December 15, 2010

Inflationary Pressures Are Persistent

On November 8, 2010, our composite indicator that looks at the trends in gold, crude oil and yields on the 10 year Treasury registered  an extreme value.  At that time, I wrote: "A strategy that combines this "fundamental" filter with the 40 week moving average has given a sell signal."  With rising Treasury yields and persistence in the trends in gold and crude oil, the composite indicator remains in the extreme zone.  This is not the time to buy equities.  For those keeping a scorecard at home and for those who are buying the bullish nonsense, the SP500 has gained about 1% over the last 5 weeks.

Tuesday, December 14, 2010

Investor Sentiment: Composite Indicator

Figure 1 is a weekly chart of the S&P500, which shows the composite sentiment indicator in the middle panel.   The indicator is constructed from the "Dumb Money", Rydex asset data, and InsiderScore total market value of insider buying and selling.  These are the set of indicators that I highlight in our weekly round up on sentiment. 9 unique data points are utilized in this indicator. 

Investor Sentiment: A Day Late

I am a day late getting the investor sentiment charts out this week.  Regardless and as expected, the "dumb money" shows lots of bulls while company insiders continue to sell at a very strong clip.  Investors don't seem too concerned - it is the end of the year and the Fed has back stopped the market.  My take, which is NOT the consensus opinion, is that complacency is prevalent, and this in and of itself represents a significant headwind. 

Morning News Notes: 12.14.10

The morning news notes as prepared by TL...small business optimism rises,  retail sales rise, Munis, tax cut package clears procedural hurdle in Congress, Roubini Global Economics on global growth in 2011, judge rules against federal health care mandate, air traffic projections, and CEO summit at the White House.

Friday, December 10, 2010

Market Musings: 12.10.10

A lot of tidbits today.

Morning News Notes: 12.10.10

The morning news notes as prepared by TL...payrolls to increase next year in US, food inflation, overhaul of tax code?, mortgage rates at highest in 6 months, PIMCO raises growth outlook, Nobel Peace Prize to Chinese dissident, and household net worth.

Thursday, December 9, 2010

Morning News Notes: 12.9.10

The morning news notes as prepared by TL...initial jobless claims, spike in Treasury yields, is China diversifying its FX reserves?, the global savings glut, and the tax plan is gaining momentum in Congress.

Wednesday, December 8, 2010

TheTechnicalTake: TLT

The move higher in long term Treasury yields, that I first started to write about on October 15, 2010, is beginning to pick up steam.  This can be seen in figure 1, a daily chart of the i-Shares Lehman 20 + year Bond Fund (symbol: TLT).  

Morning News Notes: 12.8.10

The morning news notes as prepared by TL...comments on housing by Toll Brothers' CEO, worldwide auto sales, Build America Bond Program, tax compromise runs into resistance, economists raise growth projections for 2011, Fannie Mae and Freddie Mac in discussions with Treasury and White House on mortgage principle reduction plans, and consumer credit in US.

Tuesday, December 7, 2010

Morning News Notes: 12.7.10

The morning news notes as prepared by TL...Bush era tax breaks to be extended, hiring picks up around the globe, Greece, Ireland, European Commission covers up a report, and more on White House/ GOP tax plan.

Rising Yields Are Both Good and Bad for Equities

Rising long term Treasury yields can be viewed as a sign that the economic recovery is taking hold.  That is one interpretation.  Another is that rising yields will serve to pressure equities and choke off any rally that may develop.  I believe the latter scenario will eventually predominate as there is a limit to how high equity prices can rise in these liquidity fueled rallies.

Monday, December 6, 2010

Morning News Notes: 12.6.10

The morning news notes as prepared by TL...Obama's deficit commission, Economist magazine on the Euro, Bernanke on "60 Minutes", more on Friday's ugly employment report, hiring in the retail industry is changing, regulators see growing putback risk, and the popularity of Presidents over the past 50 years.

An Investment Thesis for December...Not!

Here is an investment thesis for you: "Pro's performance worries will drive stocks" according to Jeff Saut, chief investment strategist at Raymond James.

Sunday, December 5, 2010

Investor Sentiment: This Is Not The Consensus Opinion

Several weeks ago I watched a video where Maria Bartiromo of CNBC interviewed Gary Shilling of A. Gary Shilling and Company.  Bartiromo was soliciting Shilling about his opinion on the housing market, and as you can imagine, Shilling was less than sanguine, and in fact, he was calling for further declines in prices.  Shilling was clearly at odds with other analysts, and Bartiromo asked (and I paraphrase): "You realize your opinion is at odds with all the other analysts out there?".  Shilling's response (and I paraphrase again): "What good is an opinion if it is just consensus?" 

Friday, December 3, 2010

Morning News Notes: 12.3.10

The morning news notes as prepared by TL...non farm payrolls, monetary policy shift by China, S&P put Greece on negative watch, Bernanke to appear on 60 Minutes this Sunday, and the President's deficit commission.

Thursday, December 2, 2010

Still About the Dollar

While the S&P500 goes on to test the recent highs, let's make no mistake about it that the last 2 days of positive price action have been predicated on a falling Dollar.  Of course, this set of circumstances is no different than the dynamic that has occurred since the March, 2009 lows: that the Dollar and S&P500 have been negatively correlated.  A falling Dollar is good for equities and a rising Dollar is a headwind.  Ok, nothing new here.

Morning News Notes: 12.2.10

The morning news notes as prepared by TL...initial jobless claims, Obama's deficit commission, Obama administration and off short drilling, the European Financial Stability Facility, leading indicators of global manufacturing improving, ISM v. GDP v. Payrolls ( a nice graph), and Fed officials urge Congress to stimulate the economy.

Wednesday, December 1, 2010

Market Musings: 12.1.10

There is no question that we all would like to see a strong stock market.  In theory, a higher market should be reflective of a better economic outlook, and if the economy is prospering, then, as a whole, society should benefit.  Unfortunately, the current market is not reflective of a strong economy and more likely reflects the wishes of policy makers who see a higher market as a sign of prosperity.

Morning News Notes: 12.1.10

The morning news notes as prepared by TL...ADP employment, Federal Reserve to identify recipients of $3.3 trillion in aid provided during financial crisis, Eurozone sovereign debt, the deficit commission, state spending picking up, US farm income, US housing prices,  and President Obama and Republicans to compromise on taxes.

Monday, November 29, 2010

Once Again the Smart Money Isn't So Smart

This past week the S&P100 options (i.e., the OEX put call ratio) hit an extreme in that the number of puts exceeded the number of calls by a wide margin.  The OEX put call ratio is thought to represent the large money or smart money, and with puts exceeding calls, this is being interpreted by some as a sell signal.  After all, why would the "smart money" be looking for protection? 

Morning News Notes: 11.29.10

The morning news notes as prepared by TL...South Korea, Ireland, Germany faces tough choice as Spain wobbles, initial jobless claims from last week, Black Friday, Bush tax cuts, White House deficit reduction commission, inflation in emerging markets, and Fed to become more hawkish in 2011.

Saturday, November 27, 2010

Investor Sentiment: Smells Like A Top

It was only 2 weeks ago that the "dumb money" indicator and Rydex market timers were bullish to an extreme degree and company insiders were selling shares at a clip that had not been seen in 4 years.  In most instances, these are bearish signals.  The exception would be the scenario where too many bulls actually leads to a bull market.  This is what happened in 1995, 1998/ 1999, 2003 and 2009.  Will this scenario be repeated in 2010?  It is seeming less and less likely, and if this is the case, then it is worth repeating what I have stated for 3 weeks in a row: "If the market hasn't topped out already, it should do so within a couple of percent of the recent highs.  Rallies should be sold and stops tightened up.  The market is prone to sudden sell offs.  There will be better risk adjusted opportunities to buy in the future."

Monday, November 22, 2010

Morning News Notes: 11.22.10

The morning news notes as prepared by TL...10 year Treasury yields, QE2 criticism, WSJ looks at Japan's experience with QE, Gallup's Job Creation Index, and the Irish bailout.

Saturday, November 20, 2010

Investor Sentiment: Happy Thanksgiving

It is hard to envision how any one data point will matter in this holiday shortened week.  Nonetheless, looking beyond next week, I will repeat what I stated last week: "If the market hasn't topped out already, it should do so within a couple of percent of the recent highs.  Rallies should be sold and stops tightened up.  The market is prone to sudden sell offs.  There will be better risk adjusted opportunities to buy in the future."

Friday, November 19, 2010

Morning News Notes: 11.19.10

The morning news notes as prepared by TL...Ireland, MBA: delinquencies as a % of total loans, escalation of the war in Afghanistan, and Bernanke's speach.

Market Musings: 11.19.10

We are all familiar with the market adage that "hope is not a strategy".  However, let's acknowledge that it is the expectation that "things" will be better in the future or the hope that today's economic data points will lead to better times are what drives prices higher.  So to invest in the markets you got to have some belief or hope that you have it right.

Thursday, November 18, 2010

Morning News Notes: 11.18.10

The morning news notes as prepared by TL...Ireland, China, South Korea, "rally in junk is over", and muni bonds.

Wednesday, November 17, 2010

TheTechnicalTake: Copper

Copper, the metal with the Ph.D. in economics, remains in a range and has failed to break down giving hope to equity bulls everywhere.

Morning News Notes: 11.17.10

The morning news notes as prepared by TL...a fund to bailout those in foreclosure?, Irish debt crisis, the Fed's defense of QE2, banks return capital, deficit panel to publish findings, US budget deficit, and muni's see largest 1 day sell off since 2008.

Tuesday, November 16, 2010

Morning News Notes: 11.16.10

The morning news notes as prepared by TL...retail sales for October, banks and foreclosure, California pushing muni bonds, is a weaker Dollar good for business?, Fed's dual mandate under attack, and Treasury30 year yields highest since May.

Monday, November 15, 2010

The Will Robinson Signal

With investors extremely bullish and company insiders extremely bearish and with the indicator constructed from the trends in gold, crude oil and yields on the 10 year Treasury flashing extremes, I am once again reminded of the robot from the hit 1960's TV show, "Lost In Space".  When the boyish Will Robinson was in peril, the robot would fling his arms up and down and announce in robot voice: "Danger,Will Robinson, danger!"  Historically, these set of market conditions should not be ignored.  If the market hasn't topped out already, it should do so within a couple of percent of the recent highs.  Rallies should be sold and stops tightened up.  The market is prone to sudden sell offs.  There will be better risk adjusted opportunities to buy in the future.

Morning News Notes: 11.15.10

The morning news notes as prepared by TL....comments from Gary Shilling, comments from Richmond Fed president Lacker, comments from James Grant on the gold standard, the benefits of open trade outweigh the costs, US home buyers can borrow more cheaply than the government, "anti - QE2" trade, muni - debt markets, QE3 anyone?, Greenspan on "Meet The Press", cigarettes, global warming and currency wars.

Saturday, November 13, 2010

Investor Sentiment: Bear Signal

The "dumb money" and the Rydex investor are extremely bullish.  Company insiders are selling to an extreme degree.  In aggregate, this is a bear signal.

Friday, November 12, 2010

Rydex Market Timers: Are You the Smart Money or Dumb Money?

This is the Rydex Report from November 9, 2010, which was sent to subscribers of our Premium Content service on Monday night.  The data has not changed all week.

Market Musings

There are two dynamics going on in this market.  Call it force versus force.  It is the overbought, over bullish and over valued market that should rollover versus the buyer of last resort, the Federal Reserve.  And there can only be one winner. 

Thursday, November 11, 2010

Hold On A Second!

It was only a week ago that I was looking at the Dollar and saying: "The inability of the Dollar to bounce when are investors are extremely bearish suggests that oversold has become more oversold.  This is the definition of a strong down trend."  This week, prices have reversed rather dramatically, and in all likelihood, the Dollar will end the week with the down trend reversed and the intermediate term trend looking up.

Morning News Notes: 11.11.10

The morning news notes as prepared by TL....why the gold standard wouldn't work, Greenspan oped, G20 summit, comments by Morgan Stanley's Stephen Roach, Deutsche Bank CEO likes QE2, and Ireland's and Portugal's sovereign debt crisis.

The Smart Money: Maybe Not So Smart

If you were paying attention, you would have noticed that this past week's sentiment update did not contain the "Smart Money" indicator.  This wasn't an oversight on my part but a purposeful omission.  With NYSE data difficult to obtain, the "smart money" is now solely constructed from the S&P100 Options (i.e., the OEX put call ratio).  S&P100 options are thought to represent the large money trader.  As it is constructed now (i.e., only SP100 put call data), this indicator has had little value since the 2000 bull market top.  In essence, the "smart money" isn't so smart, and we find that this is just a good bull market indicator.

Wednesday, November 10, 2010

Morning News Notes: 11.10.10

The morning news notes as prepared by TL....USA gets downgraded by the Chinese, gold continues is post QE2 climb, international back lash to QE2, US homeowners cannot take advantage of low rates, new risks for "munis", Fed to grant approval to banks to give dividends, inflation/ food worries, G20 summit, and NFIB small business optimism index.

Monday, November 8, 2010

Inflationary Pressures Heating Up

Although the Federal Reserve would like us to believe that inflation remains low, the markets say otherwise.  As of Friday, our composite indicator that looks at the trends in gold, crude oil and yields on the 10 year Treasury is at an extreme value.  See figure 1 a weekly chart of the S&P500.  

Morning News Notes: 11.8.10

The morning news notes as prepared by TL....October employment report and private payroll formation, Fed's Warsh expresses skepticism over QE2, and Obama in Asia.

Investor Sentiment: Closing in on Extremes in Bullishness

For the week ending November 5th, we find that the "dumb money" is extremely bullish, that insiders are increasing their selling, and that the Rydex market timers are nearing extremes in bullishness.  We are closing in on extremes in bullishness which should be a bearish signal.

Friday, November 5, 2010

Morning News Notes: 11.5.10

The morning news notes as prepared by TL....unemployment report, backlash against QE2, MCHP earnings report, Europe jumps back to the top of the list of tail risks, and the Fed to allow healthy banks to increase their dividend.

Wahhhh! We Need Sugar!

This headline was taken from MarketWatch this morning.

Thursday, November 4, 2010

Morning News Notes: 11.4.10

The morning news notes as prepared by TL....QE2, mortgage refinancing applications, higher bonuses for Wall Street, Bernanke's OpEd in the Washington Post, IMF chief says world economy to grow at 3-4% in 2011, and China repeats that US Dollar printing is a big risk.

The Technical Take: UUP

Figure 1 is a weekly chart of the PowerShares DB US Dollar Bull (symbol: UUP).  The indicator in the lower panel measures investor sentiment towards the US Dollar, and this data comes from MarketVane.

Wednesday, November 3, 2010

Now Back To Our Regularly Scheduled Programming

Ok, the elections are over.  QE2 is in the books.  The roadmap that I wrote about 2 weeks is coming together the way I saw it back then -- higher yields are in our future. 

Morning News Notes: 11.3.10

The morning news notes as prepared by TL....ADP payroll, election results, Goldman Sachs: efforts to help economy will likely spur Dollar weakness, FOMC rate decision today, Dubai World, "Doubts Cloud Gold's Bright Future", inflation adjusted price of gold, and home ownership rate since 1965.

Monday, November 1, 2010

Investor Sentiment: November 1, 2010

Figure 1 is a weekly chart of the S&P500, which shows the composite sentiment indicator in the middle panel.   The indicator is constructed from the "Dumb Money" and "Smart Money" indicators, Rydex asset data, and InsiderScore total market value of insider buying and selling.  These are the set of indicators that I highlight in our weekly round up on sentiment. 11 unique data points are utilized in this indicator. 

Morning News Notes: 11.1.10

The morning news notes as prepared by TL....QE2, hedge funds are at their most bullish since April 2010, Treasury with $20 billion AIG gain, recent terrorist activities, rich nations face increased debt burden, Merkel on Ireland, Portugal, and Spain....Ted Sorensen dies.

Ooops! A Mis- Fire (Correction!)

Our indicator that is constructed from the trends in crude oil, gold, and yields on the 10 year Treasury did NOT make it into the extreme zone last week.  This was due to some end of the week weakness in crude oil and Treasury yields.  Therefore, the strategy that combines the 40 week moving average with this filter did NOT yield a sell signal.  The indicator is shown below.

Thursday, October 28, 2010

Yields Are Rising, Equities to Face Headwinds

Several weeks ago, I outlined my road map for the next couple of weeks, and this centered around rising Treasury yields.  So far this "call" is looking good as yields on the long bond are starting to show some life after 4 months of being crushed.  Rising yields at the long end of the curve just may be a response to QE2 and the perceived inflationary effects or it just may be the result of a smaller than expected asset purchase program.  In any case, we have rising yields and strong trends in crude oil and gold, and it is this combination of factors that is likely to act as a head wind for equities.

Morning News Notes: 10.28.10

The morning news notes as prepared by TL....initial jobless claims, Americans worry about making their mortgage payments, more QE2, Bank of Japan, European markets, 1 in 5 voters have yet to make a firm commitment for Tuesday's election, and unemployment rate in Germany.

Tuesday, October 26, 2010

Market Musings

The markets are on hold until November 3 when the Fed will announce its intentions of asset purchases to assist the flailing economic recovery.  While we all know this will happen, the extent of the program - how much and for how long - is unknown.  Whether this grand experiment works to stimulate the economy or just "goose" asset prices is another big question mark.  Of course, all this tinkering would seem to increase risks in the eventuality that this program is a failure.  In other words, what happens next if the economy continues to muddle through despite a $2 trillion stimulus?  

Monday, October 25, 2010

Morning News Notes: 10.25.10

The morning news notes as prepared by TL....recent trends in Xmas spending, G20 and currency devaluations, QE2 and size of asset purchases, White House deficit commission report due in 2 weeks, and economic update from JPM. 

Saturday, October 23, 2010

Investor Sentiment: Lots of Bulls

I always like to say that it takes "bulls to make a bull market".  These are the kinds of market conditions that would best characterize the strong bull runs that started in 1995, 1998, 2003 and 2009.  In each of these time periods, the sentiment indicators became bullish very quickly off the bottom and stayed that way for months on end.  As we end this week, higher prices have brought out the bulls as expected, and for the second week in a row, the "dumb money" indicator shows too many bulls.  Surprisingly, the "smart money" indicator is also bullish at this juncture.  There are lots of bulls and it is reasonable to wonder the following: are we entering a period where bullish sentiment will remain strongly bullish while the markets continue to move higher?

Thursday, October 21, 2010

Morning News Notes: 10.21.10

The morning news notes as prepared by TL....initial jobless claims, economic data out of China, Fed Beige Book, and Geithner comments on the Dollar.

Wednesday, October 20, 2010

Morning News Notes: 10.20.10

The morning news notes as prepared by TL....TARP generates 8.2% return for Treasury, US housing starts, Republicans widen lead according to WSJ/ NBC poll, industrial profits slowing, White House investigating mortgages, BAC and China's rate hike.

Higher Long Term Yields?

In our "roadmap for the next couple of weeks", I stated that the market dynamics appear to be changing.  I sense that yesterday's price action is beginning to confirm for investors what I have been seeing on the charts for about a week now.

Monday, October 18, 2010

Morning News Notes: 10.18.10

The morning news notes as prepared by TL....Bernanke sets focus on inflation, Dollar v. Euro, bond investors look to upcoming election for guidance, and is the US the new Japan?

Sunday, October 17, 2010

TL's Q4, 2010 Outlook

As always, I am very pleased to present the work of TL, the analyst behind the very concise yet thorough "Morning News Notes" that we post most mornings to this blog.  In this piece, TL presents his Q4, 2010 outlook for the equity markets.

Saturday, October 16, 2010

Investor Sentiment: What Hasn't Been Decided

The "dumb money" has become extremely bullish, and this is what one would expect when prices rise.  However, it is within the current extremes of bullish sentiment where the ascent of prices is likely to slow down.  I think this is a given over the next couple of weeks.  What hasn't been decided is whether this current move over the last 8 weeks - from the bottom of the range to the top - will develop into a full fledged trend move.  This will be characterized by the market continuing to rise despite the overbought and over bullish conditions.  The market is at or nearing that juncture where overbought becomes more overbought, and it is within such extremes of bullish sentiment where new bull markets are launched.

Friday, October 15, 2010

A Roadmap For the Next Couple of Weeks

I have been following the action in long bonds, and noting that it hasn't been good as support levels and trend channels have broken down.  This can be seen in figure 1, a daily chart of the i-Shares Lehman 20 + year Bond Fund (symbol: TLT).

Morning News Notes: 10.15.10

The morning news notes as prepared by TL....earnings season, the President' s approval ratings, who will replace Lawrence Summers?, QE2 backlash is building, and effect of too loose monetary policy.

Wednesday, October 13, 2010

Morning News Notes: 10.13.10

The morning news notes as prepared by TL....FOMC September statement, Warren Buffett on the Euro, and Treasury spreads.

Tuesday, October 12, 2010

A Lot Of Disconnects

I was at the gym yesterday, and the TV sets in the locker room were turned to CNBC.  Folks were dressing, shaving and showering.  However, no one was paying attention to the blather on the tube.

Morning News Notes: 10.12.10

The morning news notes as prepared by TL....foreclosures, QE2, Fed's Balance Sheet, comments by the Fed Vice Chairman Yellen, and domestic farm economy bounces back.

Sunday, October 10, 2010

Investor Sentiment: Neutral Redux

Investor sentiment is neutral across the slate of indicators for the second week running.  While the trend remains up, the best - most accelerated - gains are likely behind us.  Higher prices will bring out more bulls, which will be a bearish signal.

Friday, October 8, 2010

Morning News Notes: 10.8.10

The morning news notes as prepared by TL....payrolls, AA earnings, more QE2, White House to make overtures to business once elections over, Larry Summers call for more infrastructure spending, and FDIC and bank failures.

Thursday, October 7, 2010

Dollar At Support, Bounce Likely

Figure 1 is a weekly chart of the PowerShares DB US Dollar Bull ETF (symbol: UUP).


Figure 1 is a daily chart of the S&P Depository Receipts ETF (symbol: SPY) in the upper panel versus the PowerShares DB US Dollar Bear ETF (symbol: UDN) in the lower panel. 

Morning News Notes: 10.7.10

The morning news notes as prepared by TL....initial jobless claims, investors take the short term approach, Gallup unemployment poll, top Wall Street CEO's meet with regulators, Greenspan on the recovery, and private payrolls data.

Wednesday, October 6, 2010

Persistence of the Trend: 10 year Treasury Yields

Figure 1 is a weekly chart of the yield on the 10 year Treasury bond.  The down trend persists, and this is confirmed by several technical studies.

Long Term View: S&P500

This is a long term technical view of the S&P500.

Morning News Notes: 10.6.10

The morning news notes as prepared by TL....ADP report, Moody's raises the outlook for Turkey, Taliban in talks with Afghanistan's leaders, Buffett on stocks v. bonds, and Martin Felstein on the housing market.

Tuesday, October 5, 2010

Morning News Notes: 10.5.10

The morning news notes as prepared by TL....U.S. lawmakers on China's currency, Goldman on US Treasuries, George Soros on stimulus, airlines, and Google TV.

Monday, October 4, 2010

Investor Sentiment: Neutral

For the past week, investor sentiment has turned neutral.  The short covering portion of this rally is over, and stocks will need to advance on their own merit.  With resistance looming overhead and stocks having advanced too far, too fast and on too little sponsorship, it seems reasonable that a pull back or consolidation is in order before any advance can be contemplated.

Friday, October 1, 2010

Update On Two Trading Models

This is an update on two trading models that I follow.  Both have provided "buy signals" for the S&P500 within the last couple of weeks.

Morning News Notes: 10.1.10

The morning news notes as prepared by TL....US Q2 2010 GDP, Hillary Clinton v. President Obama?, update on last year's stimulus, active managers not faring well in this whippy market, and interest payments fall for consumers. 

Thursday, September 30, 2010

Morning News Notes: 9.30.10

The morning news notes as prepared by TL....Paris on red alert, China's PMI, is the US looking like Japan?, Nikkei falls 2%, US Postal Service is broke, a graph from the Conference Board showing Jobs Plentiful minus Jobs Hard to Get v. Unemployment Rate, and households continue to deleverage. 

Wednesday, September 29, 2010

Morning News Notes: 9.29.10

The morning news notes as prepared by TL....President Jimmy Carter hospitalized, Americans don't trust the media, American Truckers Association truck tonnage index, North Korea, large cap stocks favored by Roubini, ECB 3 month auction, and hedge funds increasing short positions in Chinese financials and material companies.

Tuesday, September 28, 2010

Morning News Notes: 9.28.10

The morning news notes as prepared by TL....China and Russia in energy collaboration, IATA, leading indicators for Eurozone point to slowdown, Ken Fisher with comments on investing in the next decade, the argument against structural unemployment, trade wars, Rohm Emanuel, the value of Facebook, and RIMM.

An Obvious and Important Divergence

As you know, equities have been on a tear in September, and in this market environment, we also know most assets are highly correlated and tend to move together.  At times, it seems like there are only two trades.  There is the "risk on" trade as represented by equities and commodities, and there is the "risk off" trade when bonds outperform.  This is nothing new and something that has been present for a long while.

Monday, September 27, 2010

Morning News Notes: 9.27.10

The morning news notes as prepared by TL....silver hits 30 year high, Greenspan on budget deficits v. tax cuts, Roubini on likelihood of double dip, this week's economic highlight: Friday's ISM report, IPO's, CSCO and fiscal policy, universal currency debasement, and new home sales.

Investor Sentiment: Split Decision

In aggregate, investor sentiment is neutral.  However, when looking at the data in greater detail, we note that company insiders are neutral while the "smart money" is bullish and that the "dumb money" is neutral while the Rydex market timers are bearish (i.e., bull signal).  Similar data on opposite ends of the investing spectrum yields a somewhat confusing yet neutral reading.

Friday, September 24, 2010

Morning News Notes: 9.24.10

The morning news notes as prepared by TL....stock pickers suffer in current market environment, ORCL, BAC. JP Morgan raises target on crude oil, NFLX, and comments by Paul Volcker.

Nice Video On Gold

I heard this fascinating analysis this morning on the radio why gold should continue higher.  CNBC interviewed Aaron Regent, Barrick Gold president and CEO.  Barrick Gold (symbol: ABX) is the world's largest gold producer.  While not meant for market timing, there is some good common sense insight for what may be ahead for the yellow metal.

Thursday, September 23, 2010

Morning News Notes: 9.23.10

The morning news notes (afternoon version) as prepared by TL....initial jobless claims, Elizabeth Warren on fair play, US banks, IPO markets not strong, SP500 technical update from JP Morgan, TARP expense forecast, Forbes: 400 richest Americans, and Chinese Premier comments on rising Yuan.

Dollar Devaluation: Pushing On A String?

Through the ups and downs of the stock market over the last 3 months, there has been one constant: the Dollar Index has gone down.  This is surprising as the Dollar has barely managed a bounce following a very strong up move from November, 2009 to June, 2010.  Even its safe haven status in times of market turbulence is now in question as traders have moved on to the Swiss Franc or Japanese Yen.

Wednesday, September 22, 2010

Morning News Notes: 9.22.10

The morning news notes as prepared by TL....yesterday's FOMC statement, Geithner comments on Basel 3, Lawrence Summers to leave his post, recession isn't over for Wal-Mart shoppers, and the supplemental nutrition assistance program.

Tuesday, September 21, 2010

FOMC Statement: Side by Side

Some more great work by good friend TL on the changes to today's FOMC statement.

The Stock Market As A Voting Machine

I am not sure I would ascribe the market's recent frenzy of buying activity to anything more than short covering.  Yesterday's "breakout" seem to get the bulls all lathered up, but when I hear the words "breakout" it is like fingernails on a chalkboard.  There is little significance to a "breakout" and context (i.e., bull market v. bear market) really does matter. 

Morning News Notes: 9.21.10

The morning news notes as prepared by TL....US has emerged from recession, the Tea Party, economy and jobs are number 1 issues, bond auctions in Ireland, Spain and Greece, business/ consumer confidence ratio, outlook for air transport industry, and China's manufacturing prospects.

Monday, September 20, 2010

Morning News Notes: 9.20.10

The morning news notes as prepared by TL....University of Michigan consumer sentiment, 1 in 7 Americans lived in poverty in 2009, global trade disputes on the rise, PIMCO's El-Erian on the Fed and European bank bailouts, stock buybacks increase, gold still below its inflation adjusted high, and Americans disapprove of Congress.

Sunday, September 19, 2010

Investor Sentiment: Onus On The Bulls

Three weeks ago investor sentiment was very bearish and this was a bull signal.  As expected, stocks advanced rather handsomely.  Of course, this was on anemic volume, and of course, all news was good news and of course, stocks only proceeded in one direction ---up!  No doubt such price action is the hallmark of short covering.  While this is how most rallies get started anyway, at some point stocks will need to gain on their own merit.  We are at that point.  With the sentiment indicators turning neutral, stocks will no longer have short covering to propel them higher.  This puts the onus on the bulls - it is time to put up.

Friday, September 17, 2010

This Is A Great Rant

This is a great rant/video from Bernie Marcus founder of Home Depot and head of the Marcus Foundation.

Morning News Notes: 9.17.10

The morning news notes as prepared by TL....Gallup unemployment poll, Basel capital rules, HPQ, Obama reaches out to Wall Street, and spot Gold.

Thursday, September 16, 2010

Morning News Notes: 9.16.10

The morning news notes as prepared by TL....principles for economic survival an OpEd in WSJ, Byron Wein's market comment, M & A activity and the stock market, the state of state pension plans, collapse of Lehman Brothers, and US Treasury to pressure China to appreciate currency.

Wednesday, September 15, 2010

Investor Sentiment: Where Is The Value?

In part 1 of this series, I put forth the notion that extreme data points, like investor sentiment, don't always result in a reversion to the mean, but may in fact represent the start of a new trend.  Today, I will tear apart the sentiment indicators even more putting their value into question.

Morning News Notes: 9.15.10

The morning news notes as prepared by TL....Japan sells Yen, CSCO to issue dividend, entitlement spending, Obama's job approval, and signs of emigration from Greece due to weak economy.

Tuesday, September 14, 2010

Morning News Notes: 9.14.10

The morning news notes as prepared by TL....August retail sales, MSFT, more women than man receive PhD's, Cuba, oil drilling, Euro Area economy to slow in 2011,  USA's superpower status and the deficit, and arms sales to Saudi Arabia.

Investor Sentiment: Composite Indicator

Several weeks ago we had perfect alignment of our sentiment indicators, and since that time, the bounce has come, but it has come on lackluster volume.  Of note, in the past 5 years, there have been only two other times when all the sentiment indicators have lined like two weeks ago, and this was in July, 2006 and the March, 2009 bottom.

Monday, September 13, 2010

Morning News Notes: 9.13.10

The morning news notes as prepared by TL.... Basel Committee on Banking Supervision, faster manufacturing growth in China, Boehner on tax cuts, Pimco's view of Treasury yields, recovery in Europe lags the US, Geithner interview in WSJ, US job outlook, and survey of economists by WSJ.

Sunday, September 12, 2010

Investor Sentiment: Expected Bounce, But....

Last week's perfect alignment of the sentiment indicators has led to the expected bounce, but buying conviction remains a big question as volume was the lowest total for any week since Christmas, 2009.

Friday, September 10, 2010

Some Simple TA: TLT

I have been bullish for some time on long term US Treasury bonds, and despite the recent pullback, I remain so.

Wednesday, September 8, 2010

Investor Sentiment: New Thinking For An Old Tool

I have spent a fair amount of time in these blog writings on deciphering where and how investors are positioned with their capital.  We have the "dumb money" and the "smart money" and all sorts of flavors in between, and if we could avoid being the "dumb money" and understand what the "smart money" is really doing, my investing world would be a whole lot better.  Unfortunately, the market is never really that easy or simplistic.

Morning News Notes: 9.8.10

The morning news notes as prepared by TL.... Bank Basel capital standards, Obama launching a slew of new initiatives, Chicago Mayor Daley not to seek re-election, homebuilders, and overnight global equity performance. 

Tuesday, September 7, 2010

Morning News Notes: 9.7.10

The morning news notes as prepared by TL....Roubini on unemployment, Larry Summers goes to China, European banks under pressure today, Obama pushing hard for a new stimulus, 13% of US population receiving food stamps, and charts on the 10 year Treasury yield.

Monday, September 6, 2010

Investor Sentiment: Perfect Alignment

Last week's bullish signal is this week's perfect four as all four sentiment indicators are issuing buy signals.  Essentially, the "smart money" is buying while the "dumb money" is bearish.

Friday, September 3, 2010

Bearish Investor Sentiment Isn't Always a Bullish Signal

Over the past couple of weeks, investors have turned decidedly bearish and as I pointed out in recent articles (click here and here), this is a bullish signal.  This was the place to buy, but I have questioned the sustainability of any rally beyond a couple of weeks because the longer term data suggests a market in the topping process.  This analysis could change down the road, but for now that is how I see it.

Morning News Notes: 9.3.10

The morning news notes as prepared by TL....non farm payrolls, explosion in the Gulf, Kabul bank, Obama administration floating ideas to "fix" the economy, costs of BP oil spill, and ECB's Trichet hawkish tone.

Thursday, September 2, 2010

Rydex Report for 8.30.10

This report was sent to subscribers of the Premium Content service on Sunday night.  While the makings of a short term bottom are present, the sustainability of any upside move in equities remains the big question.  A tradeable rally for those who are nimble?  Yes.  A big liftoff?  Not likely.

Morning News Notes: 9.2.10

The morning news notes as prepared by TL....initial jobless claims, freight shipments for August, China's PMI, US industrial production, and countries with unsustainable debt.

Tuesday, August 31, 2010

What's The Message?

Market analysis doesn't need to be too complicated to be good, and probably simpler is better.  Heck, we have just spent the past 12 months listening to every analyst, commentator and pundit under the sun tell us why this market is the buy of the century, and when I look at the numbers, I note the S&P500 is up only 3.68% over the past 52 weeks.  That's a lot of verbage for so little beef.  If you have been holding the S&P500 for 52 weeks, you have made 3.68% on your money.  That's a fact, not an opinion.

Morning News Notes: 8.31.10

The morning news notes as prepared by TL....Republicans lead by 51% to 41% among registered voters, Obama's advisers to examine more options to create jobs, Euro as a reserve currency, German unemployment drops for 14 straight months, corporate profits to slow in 3rd quarter, extended unemployment benefits and the unemployment rate, and income and spending data.

Monday, August 30, 2010

Morning News Notes: 8.30.10

The morning news notes as prepared by TL....Bernanke's speech from Jackson Hole, ECB's Trichet, White House proposes more fixes for housing, Obama's approval rating, Roubini on the economy, Google to launch Facebook competitor, BP/Gulf, tax cuts and analyst ratings.

Sunday, August 29, 2010

Investor Sentiment: Bull Signal

As expected, the "dumb money" has turned bearish on the markets, and this is a bullish signal.

Friday, August 27, 2010

Morning News Notes: 8.27.10

The morning news notes as prepared by TL....German economy is a bright spot, SEC promises more action against financial industry, 23% of all mortgages are underwater, AAII sentiment, napping on the job, and Bernanke speach.

Thursday, August 26, 2010

This Is Bearish Price Action: XLF

Figure 1 is a weekly chart of the S&P Select SPDR Financial Fund (symbol: XLF).  The red and black dots are on the price chart are key pivot points, which represent areas of buying (support) and selling (resistance).

The Technical Take: Shanghai Composite

I last looked at the Shanghai Composite Index in May, 2010.  (Click here and here.)  My interest in the Chinese market is the possibility that it is a leading indicator for the US indices.  Back in May with the Shanghai Composite off its highs by 17%, I stated "that US equity bulls should be concerned that the Chinese market has been diverging from the US indices.  After all, the Shanghai Composite led the US markets off the bottom back in late 2008 and early 2009."  So once again let's look at the technicals for this important market.

Morning News Notes: 8.26.10

The morning news notes as prepared by TL....initial jobless claims, Japan buys foreign bonds, money supply is growing, the bond bubble, sales of new homes declined in July, and economists cut their GDP forecast.

Tuesday, August 24, 2010

A Bond Bubble? Not Likely!

My thoughts on the bond bubble can be summarized in two words: "not likely".  When commentators have to tell you it is a bubble, it isn't a bubble.  Or to put this in another context, name me one market top in the last 10 years where the commentators on CNBC where not imploring their audience to buy at the top.  If anything, the commentators have this aura of incredulousness.  "How dare bonds head higher and stocks head lower.  Doesn't everyone know how undervalued equities are?"   When CNBC throws in the towel and when they utter those famous words - "is it to late to buy now?" - then we can consider the possibility of a bond bubble.

Morning News Notes: 8.24.10

The "Morning News Notes" as prepared by TL...the egg recall, AIG, mortgages + White House = government guarantees, the YEN, consumer debt, US Equity technicals, Zandi on the housing market, California struggles to pay its bills, and drilling.

Monday, August 23, 2010

Morning News Notes: 8.23.10

The "Morning News Notes" as prepared by TL...why CEO's aren't hiring, excess cash at companies, Gallup poll on automotive companies, former chief economist at IMF on low interest rates, Wall St. job cuts, small investors flee stocks, US housing, Doug Kass is bullish, Obama to give speech on Iraq, and the political outlook for November.

Sunday, August 22, 2010

Investor Sentiment: Heading In The Right Direction

Insiders are buying, and the "dumb money" indicator is neutral but nearly becoming more bearish (i.e., bull signal). Another week of downside pressure will likely set up another buying opportunity in the near future as lower prices will bring out the bears. How sustainable will this buying opportunity be is the only question. In recent months, bearish extremes in investor sentiment have led to quick rallies (1-2 weeks) on lackluster volume that have been prone to fail. In other words, the markets aren't going anywhere fast, and the risk of failure is mounting.

Friday, August 20, 2010

Utility Sector: Divergence Between Smart and Dumb Money

The Utility Sector is thought to be a safe haven in the time of market duress. There is no question that the market is under pressure, but I would be very careful about betting on the assumption (dogma?) that safety will be found in the Utility Sector. Currently, it should be noted that utility company insiders are net sellers of their shares to an extreme degree. This is the "smart money". On the other hand, utilizing the Rydex asset data, these market timers (who we might call the "dumb money" because of their propensity to get it wrong) are betting to an extreme degree on higher prices in the Utility Sector. I ask: in such a weak market, why would I bet against the "smart money" and on the "dumb money"?

Morning News Notes: 8.20.10

The "Morning News Notes" as prepared by boom in mergers, the SLOOS report, US workers and their salaries, NYC unemployment rate falls, record number of people "tap" retirement accounts, BP, Philly Fed Index, social security, and chances of a double dip.

Thursday, August 19, 2010

Morning News Notes: 8.19.10

The "Morning News Notes" as prepared by TL...initial jobless claims, SEC sues NJ, technical update on SP500 from JP Morgan, housing, US banks, mortgage refinancing increases last week, GLD, and the decoupling of stock prices and bond yields.

Wednesday, August 18, 2010

If This Were A Stock....

See figure 1 a weekly price chart. The 40 week moving average (i.e, red line) is heading higher, and prices are trading above key pivot points, which are areas of support (buying) and resistance (selling). In essence, this is a "beautiful" chart with lots of momentum (i.e., note the breakout gaps). If this were a stock, the analysts and pundits would be all over the "breakout" ---blah, blah, blah.

Morning News Notes: 8.18.10

The "Morning News Notes" as prepared by TL...American households pare their debt, Renminbi depreciation, Bill Gross on mortgages, oil drilling in the Gulf, Jeremy Siegel on the "Great American Bond Bubble", Fed's senior loan officer survey, and Obama administration to lax travel to Cuba.

Tuesday, August 17, 2010

Morning News Notes: 8.17.10

The "Morning News Notes" as prepared by TL...candidate preferences in 2010 elections, new rules to protect mortgage buyers, loosening of lending at big banks, Obama bans on deep water drilling, Mark Mobius on global recovery, China's leading economic index, Euroland, and corn.

Investor Sentiment: Composite Look

Figure 1 is a composite look at investor sentiment as of week end. The indicator is constructed from the "Dumb Money" and "Smart Money" indicators, Rydex asset data, and InsiderScore total market value of insider buying and selling shown in the weekly round up on sentiment. 11 unique data points are utilized.

Monday, August 16, 2010

Morning News Notes: 8.16.10

The "Morning News Notes" as prepared by TL...stimulus spending, China GDP, US economic growth, PIMCO and US Treasuries, credit scores surge, Greenspan on the economy, Thomas Hoenig of the Kansas City Fed expands upon his dissenting vote and General Petraeus on the strategy in Afghanistan.

Thursday, July 29, 2010

On Holiday!

I am on vacation!

And I will be back on August 15.

Thanks for checking in....

Wednesday, July 28, 2010

Morning News Notes: 7/28/2010

The "Morning News Notes" as prepared by TL...US Treasury auction today, Shanghai Stock Exchange, action by Moody's on banks, US debt, Gulf oil, IMF sees signs of slowing in global economy, and gold tumbles.

Tuesday, July 27, 2010

Gold Technicals

This will be a comprehensive review of gold technicals utilizing the SPDR Gold Trust (symbol: GLD).

Morning News Notes: 7/27/2010

The "Morning News Notes" as prepared by TL...BP, rules to govern global banking system, CDS pricing of Euro banks, stimulus debate heats up, state tax collections, home supply to increase, US Treasury yields, and US banks.

Monday, July 26, 2010

Morning News Notes: 7/26/2010

The "Morning News Notes" as prepared by TL...classified documents and the Afghan war, European Bank stress tests, confidence in US Banks, Federal budget deficit, Bush tax cuts, PIMCO moves into equities, GS, gold, and BP.

Sunday, July 25, 2010

Investor Sentiment: I Am a Squirrel

Glenn Holderreed of Quacera Capital Management and the QPM Radar sent me an email the other day describing the market:

"Charting this market is similar to tracking the moves of a squirrel crossing a busy street. Quickly moving to the middle, no better turn back, no, no, I can make it across, oh no I better go back, shucks I can make it across. Sometimes they make it, but many get flattened. I think there are a few flattened in this market."

Saturday, July 24, 2010

Taking A Stance

This is the bullish argument as put together by good friend TL. It is an excellent review of the bullish and bearish arguments facing investors today. Our analyst comes down on the side of the bulls as he finds monetary policy, valuations, and sentiment favorable. Thanks TL!

Friday, July 23, 2010

Market Vectors Gold Miners ETF: Forming A Top

Figure 1 is a weekly chart of the Market Vectors Gold Miners ETF (symbol: GDX). The pink and black dots represent key pivot points or areas of support (buying) and resistance (selling). There are two bearish signs that point to GDX forming a market top.