Monday, January 31, 2011

The Story Behind the Story

This headline from the Wall Street Journal only begins to scratch the surface of what is really go on in Egypt: "Egyptian Unrest has Repercussions in Global Economy."

Morning News Notes: 1.31.11

The morning news notes as prepared by TL...4th quarter GDP, Egypt, and China to become the world's most popular tourist destination in 7 years.

Sunday, January 30, 2011

Consumer Metrics Institute: 4th Quarter GDP

This is a very nice explanation of GDP and what goes into its calculation from the Consumer Metrics Institute.  I thought it was worth the read.

Saturday, January 29, 2011

Investor Sentiment: This Time Will Not Be Different

It was touch and go this week, but in the end and as suspected in last week's comments, the "this time is different" scenario will not play out.  Prices are expected to head lower as the bullish extremes in sentiment unwind.  This should NOT be a bull market top leading to a bear market.  Bear markets come about when "buying the dip" fails.  In other words, this overbought, over bullish market should correct providing a better risk adjusted buying opportunity in the future.  Failure of a bounce to materialize at that point is a harbinger of a bear market.  I expect to see a correction leading to a better risk adjusted buying  opportunity, and this buying opportunity usually coincides with investors turning too bearish (i.e., bull signal).  We are a ways from that point, but we will get there!!

Friday, January 28, 2011

After a Couple of Days Off

I have had to take a couple of days off and away from the markets this week to care for my elderly and aging parents.  I am sure this is a common occurrence, and one that is not unique to me.  An aging population is probably the single most important demographic that I can think of that will affect this country for the next two decades.  

Tuesday, January 25, 2011

Morning News Notes: 1.25.11

The morning news notes as prepared by TL...Moscow bombing, ECB to raise rates to combat inflation, UK GDP contracts, WalMart targeting Dollar Stores, Obama and State of the Union tonite, and IMF raises global forecast.

Monday, January 24, 2011

Inflationary Pressures Are Subsiding

As this headline from the Wall Street Journal shows, inflation pressures are just beginning to be recognized by investors.

Morning News Notes: 1.24.11

The morning news notes as prepared by TL...firms expecting to hire, Fed to adopt an inflation target?, Fed optimistic on economy, and revolution in Egypt?

Sunday, January 23, 2011

What A Difference A Week Makes

Two weeks ago, the extremes in sentiment did little to deter investors from chasing prices higher.  This is the "this time is different" scenario where prices move higher despite the increasing number of bulls.  At the start of last week, this scenario seem highly likely, and for the bears, it was best to get out of the way of such an advance.  But over the past week, the "this time is different" seems less likely to play out, and an intermediate term market top is likely to be upon us.  Oh, what a difference a week makes.  

Friday, January 21, 2011

New Highs -New Lows Not Keeping Pace

Now I know this stuff doesn't matter until it does and I know all those trend followers out there who "just follow price" ignore this kind of thing, but the differential of NYSE new highs minus new lows has not only failed to keep pace with price but it is now breaking down.  

Morning News Notes: 1.21.11

The morning news notes as prepared by TL...existing home sales, ECB warns on inflation, and GE.

Thursday, January 20, 2011

Morning News Notes: 1.20.11

The morning news notes as prepared by TL...initial jobless claims, President Hu Jintao's visit, GDP in China, Goldman earnings, Spain, and US housing starts.

Wednesday, January 19, 2011

Key Resistance Points

The ETF's that represent the major indices are approaching key resistance levels.  While technicals and fundamentals barely matter anymore, the markets have come a long way in a short period of time.  With momentum waning, resistance may actually do what it normally does - slow this advance.  Now that would be a novel idea!

Tuesday, January 18, 2011

Crude Oil: Potential for Very Strong Move

Whether it is due to increasing demand (unlikely) or too much money chasing too few assets (likely), crude oil is on a launching pad that could lead to a 50% plus gain.

Morning News Notes: 1.18.11

The morning news notes as prepared by TL...Americans feelings about buying a house (Gallup poll), discretionary spending was soft in December, AAPL, Wall St. pushes back against Dodd- Frank, PIMCO cuts US Treasury holdings, and Eurozone finance ministers meet on Monday and Tuesday.

Sunday, January 16, 2011

Investor Sentiment: Extremes Don't Matter, This Time is Different

Until proven otherwise, extremes in the sentiment indicators don't matter as "this time is different".  I never really believe that "this time is different", but that's what I have labeled those instances where prices lifted strongly despite the bullish extremes in sentiment.  The current rally has taken on a quality reminiscent of 1995, 1998/ 99, 2003 and 2009.  In these instances, it took bulls to make a bull market.  

Friday, January 14, 2011

Market Musings: Stay in Your Comfort Zone

I have presented a lot of data and studies over the past couple of weeks suggesting that the equity market could go this way or that way.  I can make the bullish case for "this time being different" or I can make the bearish case for an intermediate term top.  It isn't a matter of data mining, but just how the models and strategies are coming together.

Morning News Notes: 1.14.11

The morning news notes as prepared by TL...inflation is cropping up, muni debt problems, US credit rating, and 2011 GDP forecasts.

Thursday, January 13, 2011

The Technical Take: PGM

Figure 1 is a weekly chart of the i-Path DJ AIG Platinum ETN (symbol: PGM).

Wednesday, January 12, 2011

It is Nice to Know

It is nice to know that others are reading and referencing my work. 

Tuesday, January 11, 2011

Morning News Notes: 1.11.11

The morning news notes as prepared by TL...Gallup economic confidence index, claims show US employment has further to fall, Goldman Sachs to release a 63 page report today on its business, and happiness and GDP - is there a relationship?

Monday, January 10, 2011

Making a Case for This Time is Different

I am often asked "when will we know that this time is different?"  My answer is that we won't likely know until after the fact, but I can characterize what those words mean. 

Morning News Notes: 1.10.11

The morning news notes as prepared by TL...Portugal, Arizona, tax cuts kick in, Fed Chairman Greenspan defends his record, Greenspan on the budget deficit, IMF on the USA, GE CEO Immelt on economy, and unemployment rate declines for wrong reasons.

Sunday, January 9, 2011

Investor Sentiment: Extremus Maximus

When it comes to investor enthusiasm for this market, there is only one thing I can say: even the extremes have become extreme.  This is an high wire act -without a safety net - that I have chosen not to play.  The rare exception to too many bulls is that "it takes bulls to make a bull market", and under such conditions, the markets just continue higher despite the wildly bullish sentiment readings.  Think 1995, 1998/99, 2003 and 2009 when the extreme bullish sentiment readings didn't see the market correct but just continue higher.  Even if this is the scenario that is developing, investor sentiment is at a level of bullishness -extremus maximus - where a pullback in price is usually seen.

Friday, January 7, 2011

More Extremes In The Rydex Asset Data

I have highlighted the extremes in market sentiment over the past couple of weeks, yet the market keeps on ticking higher -although the price action has been very erratic and the breadth of the advance has been very narrow.  I still contend that there will be better risk adjusted opportunities for buying equities in the future or at the very least, there are better places to put your money.  So presenting the Rydex data is somewhat redundant, but these are an interesting group of charts.

Morning News Notes: 1.7.11

The morning news notes as prepared by TL...non farm payrolls and which European sovereign is next?

Thursday, January 6, 2011

Morning News Notes: 1.6.11

The morning news notes as prepared by TL...initial jobless claims, "Beijing pursues European Charm Offensive", and Bill Gross's monthly missive.

Wednesday, January 5, 2011

Market Musings: Oh, The Horror!!!

I love these headlines from MarketWatch when the market is expected to be down at the open.

Monday, January 3, 2011

We're Off!!!

As we start the new year, it is well worth repeating what I wrote on October 15, 2010: "In essence, higher yields are in the immediate future, and this should have negative ramifications for equities and commodities.  Trends in gold, crude oil, and yields on the 10 year Treasury are rising and this in aggregate will put pressure on equities."  Equities have continued to perform better than I would have thought considering the rising trends in Treasury yields, gold and crude oil.  As we start the year off, it is the same old same old.  If equities rise, then Treasury yields and crude oil will do so as well, and if I had a preference, this is where I would put my money.  Think of it as a tax on higher equity prices that eventually will result in an equity sell off.

Morning News Notes: 1.3.11

The morning news notes as prepared by TL...Gallup Poll shows Americans more optimistic about 2011, balance sheets improving, Goldman Sachs invests in Facebook, copper at highs, unrest in Europe, and small caps v. large caps.

Saturday, January 1, 2011

Investor Sentiment: How To Interpret?

As most market followers are aware, investors are overly enthusiastic regarding the prospects for equities in the coming year.  Extremes in investor sentiment are being touted by some as a bearish sign that is a precursor to market correction.  On the other hand, those of a bullish persuasion tend to rationalize this important data point by nervously resorting to such sayings as "stocks climb a wall of worry" or "markets can stay irrational longer than you can stay solvent" or the "trend is your friend".  So are the bulls or the bears right?