Market note

We've had a little rally in the indexes the last couple of days and this morning the indexes are down early. So can we expect the selling to continue? Maybe. But I've noticed a couple things that may portend a coming rally.
First, look at this chart of Bank of America. It has been a large downtrend for some time. And the new lows have been on larger volume. However, lately the price has gone SIDEWAYS on increased volume. Often this is the first sign of a bottom forming. Time will tell of course. Here is that chart.

Note the volume at the bottom of the chart.

Next, is the long bond. TLT is the chart. This morning TLT is weak at the same time the stock indexes are weak. Usually TLT is strong if we can expect another selloff. Time will tell. Here are the charts for TLT and the inverse TBT.

Also of note is TBT showing new lows on lower volume, another indiction of the selling running out of steam?
As usual, time will tell. To be prudent it is necessary to wait for the market to signal a direction, and put on long positions as the rally proves itself. (Unless you are an "investor" of course.) I prefer to "trade", nimbly, as I feel that I am better able to control my risk that way.

"He who loses the least, WINS."
                             Richard Russell

gh



O'kay, I'm convinced...

I haven't been impressed with the selling volume lately. Until the last 1 1/2 hours today! I think the hope is starting to dissipate from the stock market. The energy markets have been weak for some time. They should be strong if we were to expect economic growth.

Agriculture is getting weak...

Gold and silver are getting weak....
Although they can still do anything!



But the clincher is the bond market. The Fed announced today that they will be buying more longer dated treasury debt, which has the effect of lowering long term interest rates, so it is to be expected that bond prices are high, but if the private holders of bonds expected inflation no amount of Fed buying would keep them up.
And the Fed made that comment today of "significant" risks to growth. A new word added to their report this time.

The above chart is scary in its implications for the economy.
It remains to be seen what the stock market will do in the coming weeks, but I think the time is coming soon when stock market participants will finally come to realize that the economy is not going to improve soon. I don't know why we always expect rapid results. It took us 39 years to dig this hole and we won't get out of it quickly or easily.
So, now the market can rally!!!

9-19-2011

In my trading I have been whipsawed over the last couple months. Whatever I buy goes down, and whatever I sell goes up. I suspect that I am not alone.

With that said, I am still not impressed by the selling in the indexes lately. The news has the potential to be catastrophic, but the indexes are not lower. And gold and silver are looking weak. They either are weak due to the strong dollar, or they are being liquidated to buy stocks?? Some talk of margin calls in the stock market last week and selling in gold to raise cash. Why raise cash? Isn't gold cash? What to do with cash?
I still think that this stock market will surprise. But I will continue to limit my losses wherever they occur. And will refrain from giving tips!!!!
gh

Can't be optimistic here.

The stock indexes have lost ground over the last week. I can't be optimistic and have been short for two days. A chart like the one below shows support at the trendline, but is testing that support too often, so the support will most likely be broken.

Is the sky going to fall?

 Lately the volume and the price action in the markets has not impressed me. By that I mean that the recent declines in the prices of many stocks has not been matched by the significant increase in volume that I would expect given the tenor of the news being reported on the financial channels and the doomsayer blogs. The only indication of panic is in the bond market. Long maturity U.S. Treasurys are at the same price that they were in Dec. '08. That was at the time the S&P was trading at 880. Very near the bottom of the move down. Now we have treasurys at the same price, but the stocks are much higher. If the financial world was going to collapse and take the economy with it, I would expect stock prices to be much lower. Perhaps they WILL move lower. But I can't help but think that investors in bonds will be dissappointed with the returns on the 10 Year U.S. Treasury Bond that yields less than 2%!
There has been talk of the U.S. Federal Reserve selling short maturity bills to buy long term treasury bonds and thus push the long term interest rates lower. It may be a sell on the news event. In any event I can't see how long term rates on U.S. debt will spur the housing market to an improvement since it is the lack of earning power that keeps the public from buying houses, coupled with the banks wanting more money down.
It seems that the generals are fighting the last war, again. The American public is resigned to housing prices staying depressed. And even if the price of their house went up many would sell.
The story, in my mind, must be in China. As the dollar goes down the Chinese and asia will be forced to break the peg with the USD. This will have the effect of putting more buying power in the hands of their own people. In effect they will be spending the money that their govt has been saving for them by buying up dollars and printing yuan. As the Chinese develop a demand for the things they produce, the cost of those things will rise for us in this country. We will buy less of their goods and produce more for ourselves as well as selling to them. I am sure that our trade deficit is the underlying problem in our economic woes. As a country we must earn our keep in the world if we want to survive economically. Just as a family or a company would. And what we do well is grow food. What we don't do well is grow oil! So at the same time that the dollar is going down the cost of oil is going up. That means we must cut our dependence on foreign oil. And we will. But the cost will have to rise for that to happen with any certainty. Economics is everthing. People disparage the actions of govt with good reason. And that reason is that govt. usually trys to act contrary to economic currents, which causes loss of money and failure of the policy. But we are a govt. by the people. And people want cheap energy. And cheap means we will use more. Unfortunately, this country only has cheap natural gas.
But I have digressed.
I think that the appreciation in the long bonds will be short lived. And then the money will look elsewhere. Export companies will do better in the longer term. Agriculture and basic materials. And the charts of those are holding up well.
First bonds:

 This bond chart below shows decreased momentum to the upside. Look at those indicators on the bottom of the chart. Compare them to early '09. I see a rapid loss of momentum in the daily chart. It is going straight up tho, so it is too early to be prudently short...

And the ag market:

The S&P:

It seems everyone has taken cover already. Is there anyone left to sell? Of course there will be sellers. Who are they? Who has been selling stocks? I keep hearing that the public is heavy into bonds. Is the public fighting the last war? Doom and gloom is in all of the news. Everybody knows, right?
As always, limit your risk.
gh

It still feels bullish

Despite the market decline today, the price action was not bearish in my opinion and observation. The declines were for the most part on declining volume. I did not see the panic. It may be possible that the markets decline on low volume. They did that for a few weeks back in 2002 I think it was, but I am not convinced to sell this time around.....