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It is becoming clearer by the week that the rally that was ignited last August on the heels of QE2 is running out of gas. If prices did move higher, it is possible that this could be construed as bullish as it does take bulls to make a bull market. But being so late in the rally, it would seem that any potential gains would be just crumbs to the gains that have already been made. Furthermore, without a sell off to move investors and cash to the sidelines, it is hard to see a rally of any significance developing. Call me a non-believer, but the market really needs to sell off and investors need to turn bearish (i.e., bull signal) before any real umph returns to this market.
Monday, May 23, 2011
Tuesday, May 17, 2011
Please Pardon the Mess and Inconvenience.
I am in the process of upgrading this website/ blog to a fresher look and feel, so my attention has been turned to these efforts. Blog posts will be limited while the new site is under construction. Hopefully, this will be complete by next week. Please pardon the mess and inconvenience.
Monday, May 16, 2011
Morning News Notes: 5.16.11
The morning news notes as prepared by TL...debt ceiling hit, IMF head caught in scandal, a "technical" default may not be so bad, FOMC minutes out on Wednesday, and White House to accelerate domestic oil production.
Saturday, May 14, 2011
Investor Sentiment: The Market Lacks Umph!!
It is becoming clearer by the week that the rally that was ignited last August on the heels of QE2 is running out of gas. If prices did move higher, it is possible that this could be construed as bullish as it does take bulls to make a bull market. But being so late in the rally, it would seem that any potential gains would be just crumbs to the gains that have already been made. Furthermore, without a sell off to move investors and cash to the sidelines, it is hard to see a rally of any significance developing. Call me a non-believer, but the market really needs to sell off and investors need to turn bearish (i.e., bull signal) before any real umph returns to this market.
Friday, May 13, 2011
USO Update
It appears that the Google Blogger site had some difficulties in the last 24 hours. The two articles that I wrote on the United States Oil Fund (symbol: USO) yesterday have disappeared into the heavens. Well not quite...I found them out there....somewhere ....and they may be accessed by clicking on the links below.
Wednesday, May 11, 2011
Morning News Notes: 5.11.11
The morning news notes as prepared by TL...speculation that Qadaffi is dead, Gallup poll on Republican Presidential hopefuls, and gas prices are not falling.
Tuesday, May 10, 2011
Morning News Notes: 5.10.11
The morning news notes as prepared by TL...the debt ceiling, CME crude margins hiked, Libya and small business optimism.
Monday, May 9, 2011
Morning News Notes: 5.9.11
The morning news notes as prepared by TL...SP500 v. Dollar Index, Bahrain, Muni's -- crisis averted?, Germany and Greece.
Sunday, May 8, 2011
Investor Sentiment: The Devil is in the Details
While the main indicators barely budged week over the week, components used to construct these indicators are starting to head towards extremes.
Friday, May 6, 2011
Oil = Ughhh!
Yesterday's bout of selling in the oil patch was rather unpleasant and quite unexpected. About 3 months worth of gains were wiped out in a single day. Uggh.
Morning News Notes: 5.6.11
The morning news notes as prepared by TL...change in private payrolls, US debt ceiling, Goldman on oil, and commodities take a hit.
Thursday, May 5, 2011
I Hope You Were Not One of Those Buying
Monday's market action saw some of the strongest buying amongst the Rydex market timers in over 10 years. Oops!
Morning News Notes: 5.5.11
The morning news notes as prepared by TL...deficit reduction talks begin, OPEC to take action to get oil under $100?, US considering corporate tax repatriation holiday, Greece and giant asteroid heading towards earth!
Wednesday, May 4, 2011
Morning News Notes: 5.4.11
The morning news notes as prepared by TL...the Shanghei Composite continues its slide, Mexico's Central Bank buys gold, prominent hedge funds selling gold, Boehner on the debt ceiling, and Portugal.
Tuesday, May 3, 2011
The Question Investors Should Be Pondering
It looks like we are back to that risk on - risk off market. Risk assets, like equities and commodities, are down while bonds are trading slightly higher today. While this is really nothing new, the question investors should be asking themselves if today's action is a prelude to a more significant turning point. In other words, will bonds catch a bid while riskier assets take a breather.
Investor Sentiment: Shorts Giving Up?
Echoing a theme I highlighted in the weekly look at investor sentiment, here is an article from MarketWatch on David Einhorn, head of hedge fund firm Greenlight Capital. It seems as though Greenlight Capital closed a significant number of short positions in quarter 1 not so much because of fundamental reasons but because the market only goes up.
Monday, May 2, 2011
The Bullish Case for Equities
Our indicator constructed from the trends in the CRB Index, gold, and yields on the 10 year Treasury has not been in the extreme zone for 8 weeks now , and within the context of a trend following strategy that I have detailed here, here, and here, the SP500 should have a positive bias. In essence, with prices on the SP500 above its 40 week moving average and our indicator not in the extreme zone, prices should move higher. The trend remains up and inflation pressures are neutral. This is the bullish case for equities.
Sunday, May 1, 2011
Investor Sentiment: Why Bet Against the Market When It Only Goes Up?
Why bet against the market when it only goes up? After almost 2 years of a seemingly relentless upwards move with only one real buying opportunity, market participants have clearly become accustomed to the notion that the market never goes down. This is a sign of true complacency. I am not calling for a market top or the start of a bear market -- there are too many "Johnny come lately's" willing to buy at the sign of any weakness --but let's be clear: investors are becoming comfortable with the market. The dips are becoming shallower and I suspect the peaks (or time at new highs) won't last as long as well. While it is always important to buy low and sell high, I believe this will really be important going forward as the margin for error increases as sentiment becomes exceedingly bullish. This requires patience and discipline, which are characteristics few investors and traders demonstrate. I can easily be constructive on exposure to the equity market, but in the absence of a sell off, it is hard to see adding exposure.
Thursday, April 28, 2011
The Dollar Falls Out of Bed
In my last look at the Dollar Index, I stated: "The trend is still down, and the technicals would suggest that we will be visiting the all time lows last seen in 2008 at some point in the near future. At that point, I surmise things will start to get interesting."
Wednesday, April 27, 2011
Is This One of These Life As We Know It Would Not Exist Moments?
As I wrote several weeks ago, be on the look out for those "life as we know it would not exist" moments especially since QE2 is winding down and the debt ceiling needs to be raised. And lo and behold, here it comes as we can see in this letter from the Treasury Borrowing Advisory Committee to the Treasury Secretary Timothy Geithner.
Long Term Treasury Yields Going Lower
I have spent a lot of time over the past month discerning the direction of Treasury yields. So with only a few hours ahead of the Fed meeting that will decide the fate of the free world, why not put my head on the chopping block and make the call? The technical and fundamental data supports a move higher in long term US Treasury bonds.
Morning News Notes: 4..11
The morning news notes as prepared by TL...consumer confidence v. price of crude oil, Gallup survey on employment, Shanghai market continues to decline, the White House warns Congress if they fail to act on debt ceiling, and Gallup poll on Obama v. Ryan deficit plans.
Tuesday, April 26, 2011
It Is One and the Same
Figure 1 is a monthly chart comparing Netflix (symbol: NFLX) in blue with the i-Shares Silver Trust (symbol: SLV) in red.
Morning News Notes: 4.26.11
The morning news notes as prepared by TL...the debt ceiling, public pensions on the chopping block?, inflation ticking up in China, and the Eurozone budget deficit.
Monday, April 25, 2011
Morning News Notes: 4.25.11
The morning news notes as prepared by TL...Americans are pessimistic about economy, the Dollar Index sinks, the debt ceiling fight, Syria, and US Treasuries and China.
Saturday, April 23, 2011
Investor Sentiment: Waiting On the Fed
The sentiment indicators are not particularly revealing, but then again price on the SP500 really hasn't gone anywhere either for the past 3 months. Maybe investors are waiting to see how much longer the Fed plans to keep the monetary spigots turned on full blast. I guess we will have our answer this week. Insiders are neutral, and the "dumb money" indicator is neutral as well. Higher prices are likely to bring more bulls into the ring, and paradoxically to the normal contrarian point of view, this would likely be bullish for prices as it does take bulls to make a bull market. Higher prices will lead to increasing bullishness until it doesn't. These kinds of moves are generally seen in the late stages of a bull market, and they can be fast and exciting as they are fueled by short covering. But until that happens, well there isn't that much to do. All eyes and ears will be on the Fed.
Friday, April 22, 2011
Treasury Yields and Quantitative Easing
Good friend TL provides us with his analysis of the effect QE has had on Treasury yields. Click on the link below.
Thursday, April 21, 2011
Crude Oil: Update
It has been over 3 months since I identified the potential for a "very strong move" in crude oil. Absurdly low interest rates and geopolitical unrest are the likely culprits, and the last time I looked, these issues remain with us. In addition, the technicals, which we will review in this article, remain very constructive.
Morning News Notes: 4.21.11
The morning news notes as prepared by TL...initial jobless claims, GE earnings, FITB earnings, S&P's negative US outlook, Spanish debt auction, and Libyan oil sales.
Tuesday, April 19, 2011
A Shared Sacrifice That I Can Understand
Last week in the President's speech on fiscal policy, he alluded to a shared sacrifice. You know, something that we must all give up because we all understand you don't get something for nothing. The President's vision: "To meet our fiscal challenge, we will need to make reforms. We will all need to make sacrifices. But we do not have to sacrifice the America we believe in. And as long as I’m President, we won’t." Unfortunately, only some are sacrificing under the President's plan, and it sounds more like a transfer of wealth from those who have to those who don't.
Morning News Notes: 4.19.11
The morning news notes as prepared by TL...Obama's approval rating and S&P's outlook on USA.
Monday, April 18, 2011
Morning News Notes: 4.18.11
The morning news notes as prepared by TL...S&P revises its outlook on the US, Greece, Geithner and debt ceiling make the Sunday news rounds, Fed to signal end of QE2, the budget and Ryan proposal, and OPEC.
Sunday, April 17, 2011
Why I BackTest and the TLT
It is no secret that I like to back test every market observation that I have. I might not show all the data in these columns because most readers probably aren't interested in the details, but it would be rare for me to make a statement or a trade for that matter that wasn't grounded in the data. I have been doing it this way for over 10 years - observing, writing code, and testing.
Saturday, April 16, 2011
Investor Sentiment: The Bulls Love This Market
The number of bulls continue to increase as the "dumb money" indicator approaches extreme levels. I am not sure what these investors are seeing, but we do know that higher prices will bring out the bullish instincts. Putting our own emotions aside and looking at the data, extremes in bullish sentiment this late in a bullish run are better sold (i.e., lighten up on long exposure) than bought.
Thursday, April 14, 2011
Comments from 4.5.11 Rydex Report
Figure 1 shows the comments from the April 5, 2011 Rydex Report for subscribers to our Premium Content.
Wednesday, April 13, 2011
The Dollar Index: The Down Trend is Intact
In my last look at the Dollar Index, I pointed out that the Dollar doesn't seem relevant anymore, and as long as the down trend was under control, then all seem to be ok. The trend is still down, and the technicals would suggest that we will be visiting the all time lows last seen in 2008 at some point in the near future. At that point, I surmise things will start to get interesting.
Morning News Notes: 4.13.11
The morning news notes as prepared by TL...more tightening for China?, debt ceiling and end of QE2 to dominate the news, Obama's deficit reduction speech today, equities underperforming in Asia, and "Society at a Glance 2011".
Tuesday, April 12, 2011
Life As We Know It Would Not Exist
Call it the politics of “life as we know it would not exist”. You know, when there is a big crisis in this country, our politicians state that if we don’t act now – this very minute – “life as we know it would not exist”. They don’t really say this but they clearly intimate such notions. It is the politics of fear. If we don’t act now, there will be grave consequences and “life as we know it would not exist”.
Morning News Notes: 4.12.11
The morning news notes as prepared by TL...Japan, 3 things that are weighing on crude oil, Obama to make major address on Wednesday on deficit, Friday's budget pact isn't set in stone yet, and Alcoa's earnings.
Monday, April 11, 2011
Inflationary Headwinds Increasing
Our indicator constructed from the trends in the CRB Index, gold, and yields on the 10 year Treasury is not extreme but it did rise last week suggesting that inflationary headwinds are increasing for equities. Another push higher in gold or possibly in Treasury yields would send this indicator into extreme territory.
TLT: Less Constructive
It was only 10 days ago that I was constructive on i - Shares Lehman 20 plus Year Treasury Fund (symbol: TLT). However, the technical picture has deteriorated, and the intermarket bond model is starting to weaken. A full fledged breakdown has yet to occur, but the recent breakout is looking more like a fake out. And this should be concerning.
Sunday, April 10, 2011
Investor Sentiment: Is It Time to Bet the Farm?
Investors continue to do what they do best: react to price changes. Prices are up over the last 3 weeks and as expected, investors have become increasingly bullish. Is it time to join the party and bet the farm? Some investors seem to think so. While it does take bulls to make a bull market, there is no indication at this point that this scenario will unfold. For now, investor sentiment is neutral and not worthy of betting the farm.
Monday, April 4, 2011
Thursday, March 31, 2011
TLT: Still Constructive
When we last looked at long term Treasury bonds, it was on March 16, 2011, and I stated that "the technical and fundamental picture are both positive for higher bond prices." The fundamental bond model that I have developed is based upon intermarket data, and this model is still constructive on bonds although there has been a wobble or two this week. The technical picture is weak as well as prices have faltered but not broken our key levels. This article will be a review of the technical picture.
Morning News Notes: 3.31.11
The morning news notes as prepared by TL...initial jobless claims, Treasury sees $24B profit from bailouts, Fed debate on exit strategy heats up, deal close to avoid government shutdown, NY Fed rejects AIG offer, Eurozone inflation on the rise, Japan's PMI post quake, and "the Governator".
Wednesday, March 30, 2011
Morning News Notes: 3.30.11
The morning news notes as prepared by TL...ATA truck tonnage, Obama to make energy speech today, the budget, Chinese economists blast Dollar dominance, Greenspan op-ed in FT, risk managers worry about the Dollar, and Libya.
Tuesday, March 29, 2011
Morning News Notes: 3.29.11
The morning news notes as prepared by TL...Obama's Libya address, Saudi Arabia's plans to increase rigs, Osama Bin Laden, the muni market in a deep freeze, the debt ceiling, and mortgage risk retention.
Monday, March 28, 2011
Morning News Notes: 3.28.11
The morning news notes as prepared by TL...Libya, Bahrain, crude oil, US Government shutdown, Germany, and debt ceiling.
The Will Robinson Signal: What's Next?
The Will Robinson signal is when excessive bullish sentiment occurs at a time of rising inflationary pressures as measured by our composite indicator that assesses the trends in the CRB Index, gold, and yields on the 10 year Treasury. The signal gets it name from the robot (whose name was B-9) on the TV program "Lost In Space", who use to flail his arms and yell "Danger, danger, Will Robinson" when he sensed the young lad was in trouble. Typically, the Will Robinson signal means danger for the stock market.
Sunday, March 27, 2011
Investor Sentiment: Not Compelling
Although equities were up nicely week over week, investors are not in a mood to chase prices higher. Investor sentiment is neutral, and to me, this suggests that there is nothing very compelling regarding the current market environment.
Friday, March 25, 2011
Morning News Notes: 3.25.11
The morning news notes as prepared by TL...GDP, NATO takes command, Libyan cease fire?, US Dollar, Larry Fink bullish on equities, FOMC meetings to be handled differently in 2011, the debt ceiling, and Chinese banks.
Thursday, March 24, 2011
Morning News Notes: 3.24.11
The morning news notes as prepared by TL...the deficit is a severe threat, Portugal, Utah backs gold as currency, Treasury on repatriation of international profits, California budget mess, social networking start ups and venture capital, German elections, China and monetary policy, and Libya.
Wednesday, March 23, 2011
Natural Gas: I Will Take a Flyer
Is natural gas putting in a bottom? Technically, it appears so. Fundamentally, supply is great, but natural gas may be gaining more traction as an alternative fuel source as oil is over a $100 a barrel and as nuclear is put under the microscope due to the events in Japan.
Buying The Dip: Good Idea, Fraught With Consequences
Our indicator constructed from the trends in the CRB Index, gold, and yields on the 10 year Treasury has come off of the extreme readings seen several weeks ago, and within the context of a trend following strategy that I have detailed here, here, and here, this represents a buy signal for the SP500. In essence, with prices on the SP500 above its 40 week moving average and our indicator not in the extreme zone, prices should move higher. In other words, this is a good time to be "buying the dip"; however, this strategy is not without risks.
Monday, March 21, 2011
Dollar Index: Under Control and Moving Along as Expected
The Dollar doesn't seem relevant anymore. Recent geopolitical events combined with extremes in bearishness and "oversoldness" could hardly get a rise out of the greenback. Last week would have been the ideal set up to reverse its down trend, but lo and behold, nothing. The trend remains down.
Morning News Notes: 3.21.11
The morning news notes as prepared by TL...Social Security, taxes, ATT acquires T-Mobile, Berkshire looking for more acquisitions, Egypt, Bahrain, Japan, and Libya.
Sunday, March 20, 2011
Investor Sentiment: Leading Price Lower
Extremes in investor sentiment were seen over 2 months ago while the high in prices was seen 5 weeks ago. Often times, indicators of investor sentiment precede moves in the markets. After all, the markets represent the collective opinions of its participants. At present, investors are viewing the markets unfavorably, but their opinions are by no means extreme. In the absence of bearish extremes in sentiment, I would expect equities to remain under selling pressure.
Friday, March 18, 2011
Morning News Notes: 3.18.11
The morning news notes as prepared by TL...Libya and the no fly zone and air attacks, G7 finance ministers intervene in FX market, China raises reserve requirement ratio, Bahrain and bank stress tests.
Thursday, March 17, 2011
Market Musings: Time for More QE?
We have heard it all before. The market is going up because of QE2. The Fed has got your back. And yes, from early November to mid- February that is all the market did -- it went up. But a funny thing happened along the way -- just when investors got comfortable with the idea of a sure thing -- somebody or something pulled the rug out from underneath them. And oh my goodness, the SP500 is down a whopping 5% from its highs. Ruin!!
Morning News Notes: 3.17.11
The morning news notes as prepared by TL...US initial jobless claims, Libya and a no fly zone, Japan, and Yen strength.
Wednesday, March 16, 2011
Morning News Notes: 3.16.11
The morning news notes as prepared by TL...Japan and more Japan, Bahrain, the Fed and QE2 and affect of Treasury bonds, government spending extended, NFLX, and Living Social.
Long Term Treasury Bonds: Very Positive Backdrop
"While the bottom for TLT (or top for TBT and yields) appears to be in, it is not clear whether this will lead to a sustainable move that would cause price to break the down sloping trend line seen in figure 2. My hesitation in making the call is my (yet to be presented) intermarket bond model. This model is still bearish on bonds, but it is not unusual for it to lag the technicals at this point. If the model turns bullish on bonds while the technical set up is developing, then I will have greater confidence in the sustainability of this price move."
At the end of last week, the inter market bond model has turned bullish on bonds. The fundamental and technical picture are now supporting a higher move in bond prices.
Tuesday, March 15, 2011
I Guess These Kids Got the Message
Here is another amusing headline with picture from this morning's MarketWatch.
Monday, March 14, 2011
Inflationary Headwinds Diminishing
The composite indicator constructed from the trends in the CRB Index, gold and yields on the 10 year Treasury is no longer extreme. As prices on the SP500 are above the 40 week moving average, this would be a buy signal as per our strategy that combines this filter with the 40 week moving average.
Sunday, March 13, 2011
Investor Sentiment: Neutral
Investor sentiment is neutral. As expected, bullish enthusiasm has been on the wane as prices have pulled back over the past 2 weeks. The bulls hope that this is the pause that refreshes, and the bears (if there are any out there) hope that the highs have been seen. From a sentiment perspective there is little edge to the data. Such short term pullbacks may bring in buyers, but this is not the set up that would lead to sustainable or accelerated gains.
Friday, March 11, 2011
Morning News Notes: 3.11.11
The morning news notes as prepared by TL...Japan's earthquake, Saudi Arabia's day of planned protests, Chinese inflation, OPEC's monthly report, and two bond titans weigh in on US Treasuries.
Thursday, March 10, 2011
Tops Take Time To Form
During the week of February 10th, 2011, I was on vacation. Normally, vacation means vacation although I will monitor the markets. I try not to do any writing on the blog, and the subscribers to the Premium Content service know this. However, during that week the Rydex market timers became the most bullish they had ever been - not only since this rally started but since the data began in 2000. Interrupting my vacation, I sent a "special report" to the subscribers of our Premium Content service, and I present those comments below.
Morning News Notes: 3.10.11
The morning news notes as prepared by TL...TARP as a profit center?, Spain downgraded, deficit reduction, Wisconsin, PIMCO on US Treasuries, China trade for February falls short, and Blockbuster (movie rentals).
Wednesday, March 9, 2011
Morning News Notes: 3.9.11
The morning news notes as prepared by TL...muni bond market in a deep freeze, Saudi Arabian bond markets, Saudi Arabia's "day of rage", aid to Bahrain and Oman, OPEC, Libya, upcoming Eurozone debt summit, and Greek unemployment.
Tuesday, March 8, 2011
The Dollar Index: Getting Very Specific on the Technicals
In the article, "The Dollar Index: High Risk of Unraveling", I presented a purely price based model that suggested that there is about a 33% chance of a significant downside move in the Dollar Index over the next 26 weeks. However, a reader correctly noted that investor sentiment towards the Dollar Index is very bearish, and the reader wanted to know if this figures into the analysis and why wouldn't I be bullish if everyone else is bearish. Here are my thoughts.
Morning News Notes: 3.8.11
The morning news notes as prepared by TL...Qadaffi to surrender?, Persian Gulf stock markets to take a page out of the Fed's playbook, and China.
Monday, March 7, 2011
The Dollar Index: High Risk of Unraveling
I am sure that you are aware that the Dollar Index can't get a bid. This isn't news but a fact. The Dollar Index is in a down trend, and the question to ponder is: how low can it go? Looking at the price patterns, I believe the Dollar is at significant risk of unraveling.
Morning News Notes: 3.7.11
The morning news notes as prepared by TL... SP500 has doubled from 3.6.09, Wisconsin, head of Singapore's SWF is bullish on America, OPEC, Libya, Saudi Arabia, US farmers fear flooding this Spring due to record snow falls, and the 2011 oil shock.
Sunday, March 6, 2011
Investor Sentiment: No Change
Bullish extremes in investor sentiment continue to persist, and company insiders remain lukewarm regarding their own company's shares. I believe last week's variant analysis continues to be correct as waning (but still extreme) bullish sentiment shows that investors are less enthusiastic about the market's prospects. In other words, we have seen the extremes in sentiment which means the market is rolling over forming an intermediate term top
Friday, March 4, 2011
Morning News Notes: 3.4.11
The morning news notes as prepared by TL... non farm payrolls, core v. headline inflation, number of Americans on foodstamps, crude oil, and Saudi Arabia.
Thursday, March 3, 2011
Morning News Notes: 3.3.11
The morning news notes as prepared by TL..initial jobless claims, effect of rising oil on airline profits, federal government remains open for business, Governor Brown of California working to close deficit of state budget, deep water drilling, Saudi Arabia, ATA truck tonnage index, and muni-bonds.
Wednesday, March 2, 2011
Tuesday, March 1, 2011
Still A Headwind
Strong and rising trends in CRB Index, gold, and yields on the 10 year Treasury persist, and collectively, this represents a headwind for equities.
Morning News Notes: 3.1.11
The morning news notes as prepared by TL... SP500 up 3.2% for February, economic data from China and India comes in strong, muni bonds, who is holding Treasurys?, and Libya.
Follow Up: Crude Oil Strategy
This article is a follow up to our crude oil strategy. I first wrote about this quantitative model back on January 18, 2011.
Sunday, February 27, 2011
Investor Sentiment: An Alternative Interpretation
I have often contended that there are two ways to interpret sentiment data. The first is as a contrarian. Figure out when too many investors are on one side of a trade and bet the other way. This is the "traditional" way most interpret this kind of data. The second method of interpretation is based upon the fact that investor sentiment will track the movements of price. So as prices move higher, we would expect bulls to increase; as prices move lower, we would see investors express their bearishness. It is the rare situation (believe it or not) where investor sentiment and price actually deviate. To read more on variant uses of sentiment click here and here.
Friday, February 25, 2011
TheTechnicalTake: TLT
It is my belief that we have seen the high in long term Treasury yields at least for a while, and I expressed this opinion in yesterday's article on Treasury yields. Today, I thought it would be instructive to look at the bullish technical patterns developing in the i - Shares Lehman 20 plus Year Treasury Fund (symbol: TLT).
Morning News Notes: 2.25.11
The morning news notes as prepared by TL...Goldman Sachs on crude oil, crude margin requirements move higher, China monetary policy, the White House on the government shutdown, mortgage servicing settlement, Wisconsin and European bailout fund.
Thursday, February 24, 2011
Long Term Treasury Yields: Heading Lower
Lost in all the noise about crude oil this week and its effect on the economic recovery (i.e., the equity rally) has been the top in Treasury yields. This article will cover the technical aspects of the Ultra Short Lehman 20 plus Year Treasury Fund (symbol: TBT).
Morning News Notes: 2.24.11
The morning news notes as prepared by TL...banks and mortgages, Libya, crude oil and the economy, Saudi Arabia, and Gallup Poll on Republican presidential hopefuls.
Wednesday, February 23, 2011
The Rydex Market Timers
Two consecutive down days in the equity markets must seem like Armageddon for those whom forgot the markets can go both ways. But let's be real. Nothing has happened. A 3% down draft in two days after a 30% moonshot in the SP500 over the past 6 months is nothing, and at best, this week's events serve to remind investors that markets MAY go in both up and down directions. Risks have been rising for awhile, and it is just not because the bullish (sic: foolish) extremes in sentiment. Rising and persistent trends in the CRB Index, gold, and yields on the 10 year Treasury are significant headwinds. Crude oil had a high probability of trading higher. Something had to give, and investor sentiment is just one part of the market puzzle.
Morning News Notes: 2.23.11
The morning news notes as prepared by TL... Libya, US shutdown risk, Saudi spending boost, Saudi Arabia - risk of unrest?, Bahrain, war is inflationary, India will be world's largest economy by 2050, Portugal nears "D-Day", and 401K's rise at Fidelity.
Tuesday, February 22, 2011
Excessive Bullish Sentiment Meets Inflationary Pressures
What happens when excessive bullish sentiment meets extreme conditions from our indicator constructed from the trends in the CRB Index, gold and yields on the 10 year Treasury?
Market Musings: The Buzzword is Austerity
A quick look at the headlines over the past weekend shows that this country's fiscal crisis is being brought into greater focus. States are proposing cutbacks, and governors are telling constituents that we cannot kick the can down the road any longer. It all makes sense, and it is rhetoric that we have all heard before, and in politics, words speak louder than actions.
Morning News Notes: 2.22.11
The morning news notes as prepared by TL... Libya, crude oil, peak in 10 year Treasury yields?, Wisconsin, munis, cotton farmers, and a budget showdown looms.
Sunday, February 20, 2011
Investor Sentiment: Is Three the Charm?
As I have been alluding to over the past couple of weeks, anticipating a correction (beyond 1% from the near term highs) in the equity markets has been very brutal. This market has made road kill of a lot of analysts and indicators. With that being said, this week's sentiment update not only has the "dumb money" being bullish (as expected) but company insiders (the "smart money") have increased their selling significantly. This is the third time since November, 2010 (when the Fed started asset purchases) that these three indicators have been aligned in such a manner. Will the third time be the charm leading to a correction and a better risk adjusted buying opportunity?
Friday, February 18, 2011
This Isn't Trivial
One of the strategies that I have frequently written about for the SP500 involves the 40 week moving average and the composite indicator constructed from the trends in crude oil, gold, and yields on the 10 year Treasury. When these trends are strong and rising, the SP500 faces stiff headwinds. This is data going back to 1984 and includes the 1990's as well. In essence, using this indicator as a filter for a SP500 simple moving average strategy can increase returns by about 25% while reducing maximum draw down by 50% over buy and hold. In other words, just stay out of the market or hedge yourself when the collective trends of gold, crude oil, and yields on the 10 year Treasury are strong and rising.
Morning News Notes: 2.18.11
The morning news notes as prepared by TL... borrowing at ECB facility has been exceptionally elevated this week - the cause?, China tightens monetary policy, the US budgetary process rolls onward, the unemployment rate, and cotton has gone parabolic.
Thursday, February 17, 2011
Morning News Notes: 2.17.11
The morning news notes as prepared by TL... bank stress tests, US companies repatriating cash, municipal bonds, Middle East tensions ease, politics including spending and budget cuts, and government shutdown?
Wednesday, February 16, 2011
USO: Will The ETF Catch Up?
I last looked at crude oil -- specifically West Texas Intermediate -- several weeks ago, and the technical set up was pointing to a strong price move and sustainable trend over the next year. That set up remains in play although prices are hovering near the 200 day moving average. In essence, the technical set up appears to be failing, but we won't know this until the end of the month. With lower prices of WTI, the risk on this trade has been reduced significantly. In other words, buying now at these levels is low risk. But we just don't want to buy indiscriminately, so here is the short term technical set up that needs to play out on the road to higher prices.
Morning News Notes: 2.16.11
The morning news notes as prepared by TL...Citigroup on global economy, JPMorgan on emerging markets, China's appetite for US Treasuries on the wane, capital spending increasing, demand for gold in China, Middle East unrest, will the government shut down?, municipal bonds, farm prices surge, and Fed's Fisher on unwinding current easy monetary policy.
GLD: Making A Bottom
The SPDR Gold Trust (symbol: GLD) is making an intermediate bottom making support and stop loss levels easily identifiable.
Monday, February 14, 2011
Morning News Notes: 2.14.11
The morning news notes as prepared by TL...Egypt, US trade deficit widens, Americans perception of which country is the world's economic engine, Obama's budget, and the debt ceiling.
Sunday, February 13, 2011
Investor Sentiment: Very Brutal
As expected, the bullish extremes in investor sentiment persist. Company insiders continue to unload shares at a high rate. As I have brought forth over the past couple of months, these data points (and those of most analysts) have not mattered as the major indices keep marching higher. It has been very brutal if you are anticipating a correction. It has been brutal if you are short, and it has been brutally hard to sit on your hands and do nothing while you wait for an entry point that is more than 1% below the recent highs. At this point, divining when a meaningful correction will happen is only guess.
Monday, February 7, 2011
Sunday, February 6, 2011
Investor Sentiment: The Superman Market
"Faster than a speeding bullet! More powerful than a locomotive! Able to leap tall buildings at a single bound!"
"Look! Up in the sky!"
"It's a bird!"
"It's a plane!"
"It's Superman!"
Friday, February 4, 2011
TheTechnicalTake: TBT
I would describe the current price action in the equity market as meaningless. It doesn't impart any information to me as the dip is always bought albeit on persistently shorter and shorter time frames. On the other hand, long term Treasury yields are on the rise and breaking out from their current trading range. Rising yields will be a headwind for equities, and are likely a sign of inflation worries.
Thursday, February 3, 2011
TheTechnicalTake: EEM and IYT
Lately, I hate to bring up any data point or indicator that is contrary to the market moving higher because nothing (and I mean nothing) has made a damn bit of difference to the constant and persistent march of the major equity indices moving upward over the past 4 months. Breadth divergences. Don't work anymore. Sentiment. Who cares? Inflationary headwinds. We don't have inflation. You get the picture. But being the hard headed soul that I am, I thought I would try again.
Market Musings: A Virtuous Cycle
On the surface it seems like a great idea. The Federal Reserve jump starts the economy through asset purchases, and all is ok because inflation is under control. The stock market goes up and the official inflation numbers remain tame although everything we touch and need to function and subsist day to day goes up in price. What a great thing. What a great country we live in. And most importantly, why didn't we think of this before?
Morning News Notes: 2.3.11
The morning news notes as prepared by TL...initial jobless claims, Egypt, US credit rating, and investors position for US default.
Wednesday, February 2, 2011
The Dollar Index: How Low Can You Go?
When looking at the Dollar Index, I am reminded of the song the "Cha Cha Slide"when the performer says, "How low can you go?" There is no question investors believe that the Dollar is going down and that equities are only going up all courtesy of Federal Reserve Chairman Bernanke and his QE 2 policy. Yesterday's rally in equities and concurrent drop in the Dollar served to remind me of the fact that currency devaluation and increasing liquidity remain the drivers for equities. It has been that way since 2007, and why should it stop now? For the record, the Dollar Index was down a hefty 0.86% yesterday while stocks enjoyed a strong trend day.
Morning News Notes: 2.2.11
The morning news notes as prepared by TL...ADP employment, Fed passes China as largest holder of Treasuries, the Fed remains dovish and is thinking about QE3, energy tops sector returns for January, Egypt, and Yemen.
Tuesday, February 1, 2011
Morning News Notes: 2.1.11
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