Tuesday, May 31, 2011

The big selloff that didn't happen.....

After 3 weeks of watching and waiting for the selling to begin in earnest, it didn't.
Todays action in the S and P makes it appear that this bull market has a ways to go.

June 1, 2011
What a difference a day makes.

Monday, May 30, 2011

Some thoughts on Memorial day

"All of human unhappiness comes from one single thing: not knowing how to remain at rest in a room."
Blaise Pascal

Every one of us has a burning in our heart, that desire to make our mark on the world. For most, the needs of just surviving everyday rob us of the time and the energy to take the steps to fulfill that desire, but in our few spare moments, among friends, and maybe after a few beers, we let all who will listen know that we, in our wisdom, know what would make things better. If only someone would listen. And that that man or women who is in the position of authority does not know what we know, does not see what we see. And if they ever did know things or see things as we see them, has been corrupted and is therefore weak, or even complicit, in a conspiracy to keep us voiceless and impotent.
But, as we castigate those who promised us salvation. Those who led us to believe that THEY could save us. That THEY could make the world a better place, while we sit and watch, we lose sight of the fact that we consider them to be more powerful than any of us. And they ARE more powerful than most of us, for we gave them that power in our support for the promises they made. But, just as some of us are more powerful than others in our own small circles, yet find others who more than match our influence, and stymie our will for the changes we seek, so also do those that we have thrust in front of us find that there are others with voices. They find that there are other leaders in the world who have different outlooks, different desires, and different expectations of the future. And those desires and expectations do not always co-incide with our expectations.
And thus we, sometimes are forced to admit that even as we attempt to project our collective power. Even as we push our visions of a world that would be the model of our vision, reality intrudes.
And that reality is the need of every human for survival, and those things that ensure survival. Food, and shelter. At the individual level. It is our instinct for survival that gives us this burning in our hearts. It is our instinct for survival that keeps us from being quiet even as our bellies are full and we are comfortable in our warm houses, watching our televisions for entertainment as the cat sleeps on our lap.
So, we grumble, and we agitate, and we blame those we elected for our indignitys, real and imagined. And our leaders, knowing that they depend on us for their power and survival, do what they can to keep us content. If they can't keep us quietly content then they focus our attention on someone or something besides them. For they know that we need someone, or some thing to blame for our minor irritations.
 And again, as we all bring to bear our collective wills, we focus the power of our society. And the focus of that power is often the victim of our power.
So we destroy that which we wanted to create. Prosperity.
And quietly and without fanfare we continue our lives of quiet desperation. A seething mass of humanity engaged in a personal struggle to survive.
Happy Memorial Day,
thanks to all of those who have been the point of our collective spears.

Wednesday, May 11, 2011

Oil and the economy

When I look at commodity prices, I think of supply and demand. If demand is expected to fall, then the futures market prices in a lower price.

Some will blame these sharp moves on the recent raising of margins on the futures contracts. My view is that the margins are raised to protect the exchanges from price volatility. And in the end, the price does reflect supply and demand. So I have to assume that the oil market is pricing in oversupply, or lack of demand. Or both...

And the bond market is pricing in deflation......

And finally, a technical look at the SPY. Will old resistance give support? I am troubled by the lack of volume on the breakout of the "cup and handle", as well as the increased volume on the recent down days. If the recent trendline fails, there will be a lot of sell orders below.

Tuesday, May 3, 2011

And then I read this

Go to the Mad Hedge Fund Traders' site for this:

May 3, 2011 – Quote of the Day

May 3rd, 2011
“We are starting to see signs that the smart money, the 1% who make most of the money, are starting to get out of the market,” said Harry S. Dent of the HS Dent network.

Why I think the stock markets are weak...

Here are four reason that makes me think the stock market in the US is set for a correction. Most of them have to do with the US Dollar weakness that has been the case for the last several months. Commodities have been on a tear until recently. But for the last few weeks I have noticed what I think is distribution, ie. the big holders of commodities stocks are selling.
The first case is the US Dollar. Long steady decline. But over the last few days signs of an imminent rally???? Look at how the last two days have finished near the highs of the day. And the volume has stayed exceptionally high for the last 4 days as the price went sideways. I know, it is "bottom picking", BUT....

The second case is the continued strength in TLT, which is a fund that tracks the price of the 20 yr. US Treasury Bond. A steady uptrend for the last few weeks. This is at a time when the talk in the markets is of the Federal Reserve discontinuing the purchase of US Govt. debt, which should cause the long bond to go down in price/ up in yield. Usually a rising treasury market signals a lack of inflation. But everybody is screaming "inflation!!". So why is the long bond going up? Is that where the money, that I believe is cashing out of the stock market, is going?? Maybe... The only caution is the volume. Not impressive.
And then there is the silver market. It has been on a tear lately that can only in the short term be called a "bubble". A hard correction the last two days. Hard enough that it will probably turn into at least a several week correction.... Precious metals in decline means deflation. Deflation means declining prices for assets. Like stocks.
And along the same vein: RIO. Rio Tinto, a copper and gold producer. I see signs of distribution since about January 20.  High volume with sideways action through April 18 or so. And then the big down volume again today.....
And then today. Clorox down hard. Up since early March on low volume, and then the earning disappointment today. Clorox with an earnings disappointment. Clorox.
And here is the story:
Here is the chart of the S&P. Up for the last two years. Lower and lower volume on the advances......

Our markets have been going up on the back of a weak dollar. The rest of the world is tightening interest rates to prevent inflation. We will have to tighten to support the US Dollar at some point. The US cannot have interest rates that are LESS than the inflation rate. I think the markets are starting to price in higher interest rates and a more restrictive monetary policy. Not to mention a tighter fiscal policy that is coming from the Federal Govt., and the states are already cutting back.....All hard on the unemployment rate....
To sell the indexes now would be a case of "top picking". Not something that a trend follower should advocate. But.... the signs are there.