Briefly: In our opinion, speculative short positions are favored (with stop-loss at 2,085 and profit target at 1,950, S&P 500 index).

Our intraday outlook is bearish, and our short-term outlook is bearish:

Intraday (next 24 hours) outlook: bearish
Short-term (next 1-2 weeks) outlook: bearish
Medium-term (next 1-3 months) outlook: neutral
Long-term outlook (next year): bullish

The U.S. stock market indexes gained 0.2-0.4% on Wednesday, retracing their recent decline, as investors reacted to some economic data announcements. The S&P 500 index has managed to reach yet another new all-time high at the level of 2,076.28, slightly exceeding last week’s top. The nearest important level of resistance is at around 2,085-2,100. On the other hand, support level is at around 2,060-2,065, and the next level of support is at 2,050, marked by recent local low, among others. There have been no confirmed negative signals so far, however, we can see overbought conditions accompanied by negative technical divergences:

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Expectations before the opening of today’s trading session are virtually flat, with index futures currently up 0.1%. The main European stock market indexes have been mixed so far. Investors will now wait for some economic data announcements: Challenger Job Cuts report at 7:30 a.m., Initial Claims at 8:30 a.m. The S&P 500 futures contract (CFD) trades close to its record high, as it fluctuates along the level of 2,070. The nearest important level of support remains at around 2,060-2,065, as we can see on the 15-minute chart:

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The technology Nasdaq 100 futures contract (CFD) is relatively weaker, as it trades below last week’s high. The nearest important level of resistance is at around 4,330-4,350. On the other hand, support level is at 4,280-4,300, as the 15-minute chart shows:

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Concluding, the broad stock market slightly extended its long-term uptrend, as it made new record high yesterday. There have been no confirmed negative signals so far. However, we still expect a downward correction or an uptrend reversal. Therefore, we continue to maintain our speculative short position. Stop-loss is at 2,085 and potential profit target is at 1,950 (S&P 500 index). It is always important to set some exit price level in case some events cause the price to move in the unlikely direction. Having safety measures in place helps limit potential losses while letting the gains grow.

Thank you.

Do you have forebodings about the future?  I do, which is why I’ve been looking closer at the transformations technology promises to bring us. Note: be sure to read through to 3D Printing — a hint of the APM future – Money Talks Editor

First, a brief review.  I’ve previously written about the rapid pace of technological development (here and here) and Ray Kurzweil’s point that though technology is growing exponentially, we experience it linearly, and we tend to base our expectations on our linear experience.  (See his essay “The Law of Accelerating Returns” for details.)

Here’s an example. When the Human Genome Project began in 1990 he predicted the project would be completed in 15 years.  Almost no one believed him.  After a year of work, biochemists had succeeded it transcribing one ten-thousandth of the genome.  Seven years later a mere one percent had been finished.  One imagines the laughing was well underway.  But the project actually finished ahead of schedule, in 2003.

In The Singularity is Near Kurzweil explains how this happened:

Scientists are trained to be skeptical, to speak cautiously of current research goals, and to rarely speculate beyond the current generation of scientific pursuit. This may have been a satisfactory approach when a generation of science and technology lasted longer than a human generation, but it does not serve society’s interests now that a generation of scientific and technological progress comprises only a few years.

He has been amazingly accurate in his predictions, and over the years he’s turned those predictions into a fortune inventing and marketing products based on his expectations of the technologies that will be available in years ahead. “Invention is a lot like surfing,” he says, “you have to catch the wave at the right time.”

Kurzweil sees three overlapping areas where growth is increasing exponentially and which will transport us to a world formerly associated with science fiction and fantasy: genetics, nanotechnology, and robotics.  

Our atomically-precise future

In this article I want to discuss nanotechnology — a term popularized by K. Eric Drexler in his 1986 book Engines of Creation: The Coming Era of Nanotechnology (online here) — and its implications for our economic lives.  

By “nanotechnology” Drexler means “technology based on the manipulation of individual atoms and molecules to build structures to complex, atomic specifications.”  To distinguish his meaning from other, more inclusive definitions he uses the term atomically-precise manufacturing (APM).  APM will build things by rearranging atoms and using those nano-structures as building blocks for larger products.

What kinds of products?  Everything being built today by conventional means and other products that can’t be built today.

Materials are characterized by their arrangement of atoms — if we rearrange the atoms in coal a certain way we can produce a diamond.  Atomically-precise control of materials can produce patterns of atoms that are out of reach of today’s technologies.

In his 2013 book Radical Abundance: How a Revolution in Nanotechnology Will Change Civilization, Drexler tells us that

Atomic precision starts with small-molecule feedstocks, atomically precise by nature and often available at a low cost per kilogram. A sequence of atomically precise processing steps then enables precise control of the structure of materials and components, yielding products with performance improved by factors that can range from ten to over one million.  [my emphasis]

APM will change industrial production beyond recognition or replace it outright.  

Traditional manufacturing builds in a “top down” fashion, taking a chunk of material and removing chunks of it – for example, by grinding, or by dissolving with acids – until the final product part is achieved. The goal of nanotechnology is to instead build in a “bottom-up” fashion, starting with individual molecules and bringing them together to form product parts in which every atom is in a precise, designed location.  [Foresight Institute]

APM-based technologies will [from Drexler, Radical Abundance]:

• Slash resource consumption and toxic emissions
• Provide the infrastructure for low-cost solar energy and a carbon-neutral economy
• Produce better products at far lower cost than today
• Collapse long specialized supply chains to a few steps of local production
• Transform daily life, labor, and the structure of society on Earth, just as the agricultural, industrial, and information revolutions have done 

Drexler likens APM to digital technology transferred to the material world, in which microblocks are combined much like ink droplets to form endless, intricate patterns.

A better analogy than ink droplets, however, would be blocks of the sort found in high-end Lego sets, which include not only blocks in different shapes and colors, but also blocks that provide intricate, functional parts such as motors, gear trains, sensors, and computers.

When advanced APM arrives within the next decade you’ll have a box on your desk that will allow you to do with atoms what you presently do with bits and pixels.  At roughly the same price.  But without worrying about atoms, just as you don’t concern yourself with bits and pixels.  On a larger scale, advanced APM will mean, for example,

replacing an enormous automobile factory and all of its multi-million dollar equipment with a garage-sized facility that can assemble cars from inexpensive, microscopic parts, with production times measured in minutes. 

The technologies that can make these visions real are emerging—under many names, behind the scenes, with a long road still ahead, yet moving surprisingly fast.

The need for engineering

As with the stunning nature of Kurzweil’s predictions for the decades ahead (which you really ought to check out), it’s difficult to imagine the economic world as we know it being turned upside down because we’re slipping past the knee of an exponential curve.  Yet APM is not waiting for some scientific breakthrough to make it a real possibility.  The road ahead “has no gaps, no chasms to cross,” Drexler says.

What is missing from APM research?  Better engineering; specifically, “AP molecular systems engineering.”

No matter how research-intensive a project may be, work coordinated around concrete engineering objectives will eventually be required to produce concrete engineering results. . . . 

The semiconductor industry provides a model for coordinating research to advance the technology of an entire field. What’s more, the achievements of semiconductor engineers give us a sense of the potential scale of results, for it was their work that brought us nanoscale digital information systems and today’s Information Revolution.

Roadmapping has been the key to the success of the semiconductor industry.  

In 2007, under the auspices of the Waitt Family Foundation, researchers in nanotechnology finally produced a guiding document for their field: Productive Nanosystems: A Technology Roadmap.  The Executive Summary tells us that: 

It is uncontroversial that expanding the scope of atomic precision will dramatically improve high-performance technologies of all kinds, from medicine, sensors, and displays to materials and solar power. Holding to Moore’s law demands it, probably in the next 15 years or less. [My emphasis]

Assuming the document is up-to-date, APM should be here by or before 2022.  Mark your calendars.

3D Printing — a hint of the APM future

The nascent technology of 3D printing is a stepping stone between traditional manufacturing methods and APM.  Drexler contrasts 3D with traditional processes:

Some traditional methods make a shape all at once using a costly, specialized tool, like a mold to shape plastic, a die to stamp steel, or an optical mask in semiconductor lithography. Other traditional methods carve shapes by removing small bits of material using general-purpose equipment like lathes, drills, and milling machines. 

3D printing, by contrast, makes shapes by adding small bits of material using general-purpose machines guided by digital data files. 3D printing can make shapes beyond the reach of casting or carving.

One 3D printer is a kit you assemble yourself called the RepRap.  With a RepRap 3D printer, you can “print” the parts that make up a RepRap and assemble them yourself.  According to the video at the RepRap website, the RepRap project aims to put a factory in every home — a factory that can make more factories.  RepRap has a slogan, “wealth without money.” 

RepRap and other 3D printer user communities stir memories of the Homebrew Computer Club that launched the PC revolution in the mid-Seventies.  The Club spawned many pioneers in the microcomputer industry, including the two Steves.  The MITS Altair 8800 was one of the first kit computers, comparable to the RepRap today.  Unlike Altair, RepRap can self-replicate.

Conclusion

There are downsides to every technology.  As with clubs and axes once used to obtain food and shelter, APM technologies can be weaponized.  The good news is that APM, like information technologies, has a strong decentralizing and price deflationary component.  In this sense it works in favor of individuals and free markets, and against the Keynesian states we live under.  The APM revolution has the potential to dramatically empower people, as we’re seeing with the information revolution today. 

Though there are many questions one could raise about APM, I have one in particular that I invite any APM researcher to address: If APM continues to develop into a Kurzweil future, will someone someday be able to “print” gold and other precious metals?  

And further: The whole of economics is based on scarcity.  APM won’t eliminate scarcity, but it could surely relegate it to a position of less importance since common feedstocks will replace scarce resources.  What does a world with scant scarcity look like?

We are encouraged by psychologists to live in the present, in the here-and-now.  The here-and-now has many dimensions, one of which is the legacy of innumerable statists.  I look forward to a “present” when their legacy is found only in history books.  Technology will help get us there.

On the heels of continued volatility in the gold market, the Godfather of newsletter writers, 90-year old Richard Russell, put out a quick note on the fierce trading action in both gold and oil.  The 60-year market veteran also included his thoughts on how this will impact the Fed’s key decision-making policy.

….read it all HERE

“At some point though – in any market – you reach a capitulation point. Panic selling gets so intense that everyone who wants to sell already has.” Setting “the stage for massive (and potentially very profitable) reversals”- Mike Larson

Energy, Rates and the End of Panic Selling?

Sometimes, I write about market fundamentals. Sometimes, I write about the economy. But sometimes, you can convey a heck of a lot more information from just one or two charts. And when it comes to energy and interest rates, boy is that ever true right now!

Look, you know by now that OPEC didn’t cut production at last week’s meeting in Vienna. That helped pull the rug out from under crude oil prices, sending U.S. oil futures to just under $64. We haven’t seen prices that cheap since mid-2009 – right after the Great Recession!

You probably know that interest rates have generally been heading lower in 2014, too. Not because of economic weakness or policy here, mind you. The U.S. economy just notched the strongest six months of growth since 2003, while the U.S. Federal Reserve just ended its QE money-printing program.

But that hasn’t mattered as much as it normally would because Europe, China and Japan are all struggling and printing money like mad. Those massive waves of money aren’t staying bottled up at home or helping their domestic economies – they’re washing up on our shores and boosting U.S. stocks, bonds and the dollar.

At some point though – in any market – you reach a capitulation point. Panic selling gets so intense that everyone who wants to sell already has.

When selling does dry up like that, it sets the stage for massive (and potentially very profitable) reversals … the kind you only see every few years!

With that in mind, I want you to look at the following two charts. The first shows the yield on the 10-year Treasury Note, while the second shows the Energy Select Sector SPDR Fund (XLE):

What do I see? I see large, panic-driven, waterfall declines. Those declines sent the 10-year yield down to 1.87 percent from around 2.65 percent, and the price of the XLE down to less than $78 from just over $101.

Then they both culminated in massive, spike lows in mid-October. A sharp rally ensued, followed by a “re-test” of the lows in the past couple of days. On those re-tests, we saw lighter volume, less selling, and higher lows in price.

My colleagues Mark Najarian and Mandeep Rai discussed the fundamental forces impacting oil yesterday. But even if you didn’t know one whit about the fundamentals of oil or interest rates, the technical action here is very encouraging.

It suggests we are, in fact, washed out. We may have gotten to a point where both interest rates and energy stocks have priced in all the potential negative news, setting the stage for one of those very sharp reversals I mentioned earlier.

So if you’ve been biding your time, looking for an entry point in either of these markets, pay close attention. It may just be about time to pounce! Everything from inverse ETFs that rise in price when interest rates climb to select, energy stocks or Master Limited Partnerships focused on the domestic energy renaissance would be my favorite vehicles.

After a remarkable day of trading in the gold and silver markets, today the man who made one of the greatest market calls in history told King World News that the wild trading action in gold and silver has stunned market participants, and a historic buy signal has just taken place.  Below is the incredible interview…read it all HERE