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.
Thursday, October 28, 2010
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
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
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
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
Wednesday, October 20, 2010
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.
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
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
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
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
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).
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
Tuesday, October 12, 2010
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.
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 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
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
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.
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
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.
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
Monday, October 4, 2010
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
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.
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.