Wednesday, June 30, 2010

What's Next? The Obvious Take

The "fat pitch" that was looking good has fizzled into a stinky, foul ball. In all likelihood, we are looking at a bear market.

Morning News Notes: 6/30/2010

The "Morning News Notes" as prepared by TL...S&P/ Case - Shiller 20 City Composite Index, leading indicator in China, financial reform, ECB 3 month tender, European bank stress tests, and double dip debate.

Monday, June 28, 2010

Investor Sentiment: The Story Continues

When we last looked at investor sentiment, I had noted that bearish sentiment (i.e., bull signal) had given way to a more neutral reading. In essence, equities would need to rise on their own merit, and with the fundamental storm clouds gathering - i.e., talk of a double dip recession is escalating -it is not clear to me what the drivers for higher prices will be. Nonetheless, the market's inability to stage a rally at this juncture here is important as failed signals carry significance. The current signal has not failed yet, but I have defined what a failed signal would look like. Last week's price action, which appears to be consistent with the fundamental picture, tested that failure point.

Morning News Notes: 6/28/2010

The "Morning News Notes" as prepared by TL...Senator Byrd dies, financial reform, Gallup Poll on President Obama's decision to remove General McChrystal, G20, new mortgage rules, corporate cash levels at near record levels, and Fed money printing and M2 money supply.

Thursday, June 24, 2010

Bonds Look Attractive

There are two trades in this market: the risk trade and the non-risk trade. The risk trade is in equities and all the other assets, like commodities, real estate and emerging markets, that have become highly correlated to equities. The non-risk trade is in bonds. This works when equities don't. With the bounce in equities sputtering (but not having rolled over yet), Treasury bonds are looking attractive.

Morning News Notes: 6/24/2010

The "Morning News Notes" as prepared by TL...initial jobless claims, new single family homes, General Petraeus, and Germany.

Wednesday, June 23, 2010

Re- Defining Our Stops

For several weeks now, I have argued that extremes in bearish sentiment are a "fat pitch". Why? Because market gains can be rather dynamic if the market reverses. The other factor that has made this a "fat pitch" environment has been the ability to define our risk. If the market did not reverse higher while investor sentiment was bearish (i.e., bull signal), then it was likely meaningful suggesting significant down side risk.

Morning News Notes: 6/23/2010

The "Morning News Notes" as prepared by TL...offshore drilling, General McChrystal, Hungary, consumer spending, FOMC, new home sales, and China.

Tuesday, June 22, 2010

Morning News Notes: 6/22/2010

The "Morning News Notes" as prepared by TL...existing home sales, US and deficit spending, deep water drilling, financial reform, Budget Director Orszag stepping down, China and the Yuan, and European financial institutions.

Monday, June 21, 2010

Buy Signal: Trend Following Strategy

Our trend following strategy that utilizes the 40 week moving average and a filter constructed from the trends in gold, crude oil, and yields on the 10 year Treasury has given a buy signal.

Sunday, June 20, 2010

Investor Sentiment: Equities Need To Rise On Own Merit

The major equity indices have forged a bottom over the past two weeks as the cycle of greed and fear plays out. As expected, investor sentiment has turned neutral. Consequently, short covering is unlikely to be the fuel that propels prices higher, and with the fundamental outlook questionable, it is reasonable to wonder what the fundamental driver will be that propels prices higher. In essence, equity prices will need to rise on their own merit.

Thursday, June 17, 2010

Rydex Market Timers: Still Useful

I have attached a recent report from our Premium Content service that utilizes the Rydex asset data.

Market Observations

Some observations in words and pictures on the equity markets.

Tuesday, June 15, 2010

Euro Strength = Equity Strength

When I listen to financial commentators, I sometimes get the impression that the floundering US economic recovery has nothing to do with the issues facing this country (i.e., unemployment, deficits, lack of leadership, etc.). Rather, these commentators are quick to lay the blame on Europe as if the sovereign default risks in that part of the world are the only threat to our economic recovery. If the problems in Europe just go away, everything in the US will be fine. I doubt it is that simple, but then again people like to craft simple explanations to explain this complex beast known as the market. So if we can extrapolate, a rising Euro must mean only thing: a strong Europe. A strong Europe must be good for the US economy because if it wasn't for "them", we would have that economic recovery by now. And an economic recovery that is back on track can only mean one thing: buy stocks. While a cynical view, this is what is working now.

Monday, June 14, 2010

Beating A Dead Horse!

This is like beating a dead horse, but I thought I would trot out our composite sentiment indicator constructed from 13 different pieces of data.

Sunday, June 13, 2010

What Happened To All Those Can't Miss Signals?

It has been 7 weeks since the S&P500 made its highs, and it has been 7 weeks since we had analysts finding every reason under the sun why this is a can't miss market? Ooops!

Saturday, June 12, 2010

Investor Sentiment: Lack Of Conviction?

Investors remain bearish, and buying into last week's weakness continues to be the right play -- so far. However, a positive outcome is far from certain especially since there is an apparent lack of conviction amongst the "smart money". Nonetheless, this is our "fat pitch" especially since we have defined our downside risk and where a failed signal might occur. Despite these concerns this is a dynamic market environment with the potential for big gains.

Friday, June 11, 2010

Morning News Notes: 6/11/2010

The "Morning News Notes" as prepared by TL...Euro and US Equities, labor and wage pressures in China, Chinese exports, Gulf oil spill, financial regulatory reform, corporate America building up cash reserves, and world economy.

Thursday, June 10, 2010

What Would Make Me Throw In The Towel?

A dynamic market environment with the potential for big gains is only half of the story. Getting into the market and protecting your capital if you are wrong is the rest of the story.

Morning News Notes: 6/10/2010

The "Morning News Notes" as prepared by TL...initial jobless claims, Gallup Poll: upper income consumer spending, Fed Beige Book, Chinese exports, GS and BP.

Silver: Likely Market Top

Figure 1 is a weekly chart of the i-Shares Silver Trust (symbol: SLV).

Wednesday, June 9, 2010

Some Technical Signposts To Help Navigate An Increasingly Hostile Market (part 2)

In this article, I will utilize some daily charts to pinpoint buy and sell points on the ETF's that represent the major indices. These pivot points can be used as road signs to help navigate this hostile market environment.

Tuesday, June 8, 2010

Some Technical Signposts To Help Navigate An Increasingly Hostile Market (part 1)

In this article, I will take a look at some of the key price levels on the major indices to help determine our future course of action.

Morning News Notes: 6/8/2010

The "Morning News Notes" as prepared by TL...US energy drilling, Gallup Poll on what is the most threatening thing to Americans, Bernanke remarks, Manpower Outlook Employment Survey, PIMCO's Crescenzi, Spain, and Cramer.

Just click on the link or the coffee mug below.

Sunday, June 6, 2010

Investor Sentiment: The Sweet Spot

As hard as it is to believe, last week's "fat pitch" is this week's "sweet spot". As expected after last week's gyrations, investor sentiment remains decidedly bearish, and this is a bullish signal as gains can be made at an accelerated pace IF the market turns around. This remains a big "IF". Yet as the data shows, the highest probability for a market turn around is in the second week of extreme bearish sentiment. We are now in that "sweet spot".

Thursday, June 3, 2010

Natural Gas

I believe natural gas is putting in a bottom, and it has the potential for an extended bullish run.

Morning News Notes: 6/3/2010

The "Morning News Notes" as prepared by TL...US housing, Korea, BP, Moody's bank review, preview of non-farm payrolls on Friday, and Gallup's Job Creation Index.

Wednesday, June 2, 2010

This Is Kind Of Sad

This is an oxymoron if I have ever seen one.

Morning News Notes: 6/2/2010

The "Morning News Notes" as prepared by TL...Japanese PM Hatoyama, BP and Gulf of Mexico oil spill, summer travel plans, and NY is broke again.

Tuesday, June 1, 2010

This Will Drive You Crazy

This article will no doubt drive crazy those investors who are always looking for that guarantee that everything in the markets is nice, neat and clear cut.