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

Crude Oil Model Remains Bullish

As we approach the end of the month, our crude oil model remains bullish. 

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

When I last looked at long term Treasury Bonds (click here and here), I stated the following:  

"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.

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.