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

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

On Holiday!

On holiday!  I will return next week.