Signs Of The Times

“Housing Market On Course For ‘Soft Landing'”

                                                             Financial Post (Toronto), August 14

“London home values fell 5.9 percent from the previous month to an average 552,783 pounds, the biggest drop since December 2007.”

                                                            Bloomberg, August 18

“Pimco Scoops Up Quality Junk Cast Off In High-Yield Fund Exodus”

                                                           Bloomberg. August 19

“U.S. Funds Flock to Canada’s Energy”

                                                          Financial Post, August 19

*****

Perspective

Impressive dynamics going on out there!

Which involves going from oversold to overbought during the summer.

More specifically:

Junk bonds registered a Weekly Springboard Buy as well as a Sequential Buy at the first of August.

Also early in the month, the same registered on the S&P.

Sharp rallies have followed, sharp enough to set up the opposite patterns. An Inverted Spring Board is in and the action is working on a Sequential Sell.

That is for both Junk and the S&P.

Consequences could be profound.

Credit Markets

We have the distinction of living in an Age of Bubbles and their failures.

In 1980 it was commodities, wages, the CPI and the precious metals. Then the action shifted to inflation in financial assets which included the blow out in Tokyo on 1989 and the Tech Bubble in March 2000.

That crash set up the 2007 Bubble, which with outstanding action in residential real estate was a “Classic” bubble such as ended in 1929 or 1720.

The 2007 financial mania included the biggest bubble in the real price of base metals in a hundred years of data.

What hadn’t been bubbled?

Lower-grade bonds.

As we have been outlining the bubble has been magnificent.

Since the panic ended in 2009, junk has returned 150 percent which compares to the return of 90 percent from the S&P.

The default rate which had soared to 15 percent in 2009 has plunged to only 1.5 percent on the June report.

One would think that this is about as good as it can get.

How long can it stay?

The surge in JNK into late June reached the most overbought (RSI 81) on a chart back to 2008.

The plunge into late July ended with a Springboard Buy and the Sequential Buy.

The rebound was robust enough to set the opposite reading with a Inverted Springboard and is working on a Sequential Sell.

The high was 41.81 and the low was 40.06. So far, the rebound has made it to 41.35. Technical patterns suggest it may not get much further. There is resistance at this level.

Taking out the 40 level will mark a reversal that will rank with the forces that reversed all of the great bubbles listed above.

Stock Markets

The most recent “event” for the stock market was the Springboard Buy and Sequential Buy registered earlier in the month. Usually these occur in an uptrend, as did the one in October. But the latest could be part of the ending action.

Part of this would be the test of the highs.

This week the surge drove the NDX to a new high as the levels reached by the DJIA and SPX are below the July highs.

The test can include the other senior indexes eking out fresh highs.

One key now seems to be that the rise has been bold enough to register an Inverted Springboard. The other is that another Sequential Sell is building.

Completion of the latter would negate the “Buy” of earlier in the month.

On the bigger picture, sentiment and momentum numbers that only occur with a cyclical peak in the stock market have been accomplished.

Such excesses were noted in 2007 and in 2000.

Bullish Sentiment has swung from a low of 29% to 46% on Thursday’s report. This could get a little higher to become an alert.

It is worth reviewing Ross’s work on the STOXX, which in setting its high in June led the S&P. The chart follows and the key was a Combination Sequential Sell. A near-term Sequential Buy was clocked early in the month.

At each cyclical peak the trigger was the change in credit and currency markets.

Commodities

As noted above, the return from junk-bonds has been 150% since the panic ended in March 2009. The return from the S&P has been in the order of 90%.

On the way up the classic bubble that completed in 2007 Wall Street was advising institutions to build up to a 6% weighting in commodities. The Fed was finally and fully recognized as the agent of inflation.

The niceties of diplomacy would avoid calculating the returns from the CRB’s peak at 474 in 2008.

To keep with the method, the return from the CRB’s low at 200 in 2009 to the recent 288 amounts to only 44%.

This is in the face of the most reckless central bank “inflation” in history.

The instruction remains that the public decides which sectors it will play in and which sectors it won’t.

Lately it has been in lower-grade bonds and without that bid the Fed’s desperation to inflate currency/credit would not have been as successful.

There is a popular notion that all of that reckless policy will at some time drive commodities to the moon.

Not likely, because when the greatest bond bubble in history fails most asset prices will fail as well.

Despite legions of Latter-Day Malthusians, agricultural prices continue to decline. The GKX set a cyclical peak at 570 in April 2011 and new lows were set at 316 at the first of July. On the Weekly RSI, this generated the most oversold reading on a chart back to 1996.

But good growing conditions continue and prices remain depressed, which seems to be easing the overbought.

Base metals also did well on our “Rotation” theme of December. The GYX did not start its rally until March. Remember Chinese liquidity problems.

The rally started at 321 and made it to 376 in mid-July when it declined to support at 360. With some vigour, the test of the high is underway.

On the bigger picture, the rise in the real price of base metals was by far the greatest in over a hundred years. It also stayed up for a long time prompting a huge increase in capacity.

It could take a long time to correct the excesses.

Crude oil’s “Rotation” rally took the price from 91.24 in January to 107.68 in June. It became as overbought (Daily) as it was oversold.

The decline has overwhelmed old seasonal charts and the price is down to 94.26. This has been somewhat oversold for a month.

With the Neo-Soviet aggression in Eastern Ukraine we noted that if crude’s price was to collapse it would deprive Moscow of much-needed dollar reserves. Reagan worked with  the Saudis to assist that decline in crude from around 35 to around 10. It helped collapse the first Soviet experiment.

Cotton also set a cyclical peak in 2011. The high was 219 and the low of 62 set at the first of the month extended the bear. But, as with the grains it is very oversold. This could be eased with a modest rally or just burned off over time.

Most commodities are vulnerable to the rising dollar and the prospect of a liquidity crisis.

Precious Metals

Today’s trade is interesting. Gold and the dollar down on the same day.

But then stocks and junk bonds are up, illustrating the opposing action.

And our case has been that the cyclical bull market for stocks and lower grade bonds is completing as the cyclical bear for precious metals is also completing.

As we have been noting; this is a process.

In this pattern gold in real terms would set an important low. Our Gold/Commodities Index set its low in June and has reversed trend.

The next extension of the trend would enhance the warning.

A similar reversal was accomplished in May 2007 and it anticipated the most sensational financial collapse since the 1930s. Credit spreads and the yield curve reversed in the following month.

With this the S%P set an important high at 1576 in July, corrected to 1370 in August and made the ultimate high at 1576 in October.

This time around, the S&P set the initial high at 1991 in July, corrected to 1904 and as of today has made a new high.

What has been missing?

The curve has not reversed and spread widening has been modest.

Credit markets seem so constrained and manipulated that the façade is close to cracking. With that lower-grade yields would explode.

Now we will look at the gold/silver ratio as an indicator.

In order to signal the onset of financial concerns, the gold/silver ratio needed to rise through 67. It reached 66.9 on Monday and has retreated to 65.8.

This is part of the resumption of the old party and the deferral of the pending party in the gold sector.

As noted last week, our Gold/Commodities Index needed to rise above 3.90 to extend the trend. This would be the warning.

The ideal time to accumulate gold stocks could be in the fall.

BOB HOYE, INSTITUTIONAL ADVISORS

E-MAIL bhoye.institutionaladvisors@telus.net

WEBSITE: www.institutionaladvisors.com

Stock Trading Alert: Negative Expectations Following Short-Term Consolidation

Briefly: In our opinion, speculative short positions are favored (with stop-loss at 2,030, and a profit target at 1,900, 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 main U.S. stock market indexes were virtually flat on Wednesday, as investors hesitated following recent rally. The S&P 500 index remains close to its all-time high of 2,005.04, trading along the level of 2,000. The nearest important resistance level is at around 2,000-2,005. On the other hand, the level of support is at 1,980-1,990, marked by some of the recent local lows. There have been no confirmed negative signals so far. However, we can see negative divergences, accompanied by some technical overbought conditions:

Click Chart for Larger Image

Expectations before the opening of today’s session are negative, with index futures currently down 0.3%. The European stock market indexes have lost 0.4-0.8% so far. Investors will now wait for some economic data announcements: Initial Claims, GDP – Second Estimate at 8:30 a.m., Pending Home Sales at 10:00 a.m. The U.S. GDP figure will be closely watched as markets are expecting a confirmation of an economic rebound. The S&P 500 futures contract (CFD) is in a descending intraday channel, as it trades below the level of 2,000. The resistance level is at around 2,000, and the nearest important level of support is at 1,980-1,985, among others, as we can see on the 15-minute chart:

Click Chart for Larger Image

The technology Nasdaq 100 futures contract (CFD) is in an intraday downtrend, as it trades below the level of 4,080. The resistance level remains at 4,080-4,100, and the nearest important level of support is at around 4,050-4,060, as the 15-minute chart shows:

Click Chart for Larger Image

Concluding, the broad stock market remains close to its all-time high. There have been no confirmed uptrend reversal signals so far. However, we can see some negative technical divergences. We remain cautiously pessimistic, expecting a downward correction. Therefore, we continue to maintain our speculative short position (entry point at 2,000.5 – S&P 500 index). The stop-loss is at 2,030, and potential profit target at the level of 1,900 (S&P 500 index).

Thank you.

Despite the lackluster dog days of summer trading in the financial markets — nearly every single market on the board is now reaching critical inflection points.

I told my Real Wealth Report subscribers all about it in my latest issue — including my specific recommendations on how to seize this moment in time.

In today’s column, I will tell you what I am seeing — plus I’ll give you a road map to help you see for yourself where the fireworks are likely to begin in each of the major markets.

But before I do, let’s take a look at the major underlying fundamental forces at work.

I’m not going to bore you with all the details, nor am I going to address the stuff of corporate earnings, balance sheets, economic stats, etc.

For in the end, traditional types of analysis don’t matter all that much today.

What matters the most today is the psyche of the financial markets and the forces they are truly responding to, each market in its own way.

I see two major fundamental forces at work impacting all markets:

First and foremost is the ramping up of the war cycles that I have been warning you about for over two years.

They are based on scientific studies of both domestic and international war data extracted from the annals of Raymond Wheeler’s studies on war and subjected to rigorous fact-finding.Make no mistake about it: The cycles of war that I have studied — starting in my college years over 38 years ago — are real.

They are as concrete as the seasons of the year, and they tell you, in no uncertain terms, when society is likely to be most predisposed to conflict, both domestically and internationally.

The fact is that the war cycles are now ramping up all the way into the year 2020, and with an intensity that even I underestimated.

From Russia and Eastern Europe … to Nigeria … to Iraq and Syria … Jordan … Israel and Gaza.

From the Islamic State in Iraq and Syria (ISIS) killing thousands, beheading an American journalist, and threatening many more …

To China, brazenly occupying the South China Sea, the Senkaku and Spratly Islands, hunting down oil and gas resources, ignoring territorial rights of others, ready to wage war if need be …

To Ferguson, which is merely the beginning of civil unrest in our own country.

In Monday’s column, Martin told you how it is affecting families he personally knows in riskier parts of the world.

So imagine how geopolitical turmoil could be affecting large pension funds in other countries, funds with hundreds of billions of dollars.

Or large hedge funds whose managers are now adopting new trading styles — some even avoiding the commodity markets entirely, opting instead for venture capital investment in safer shores, like the U.S.

And if all that’s happening across the oceans isn’t bad enough, the war cycles won’t stop there …

Second, the draconian war-like measures that inept Western world leaders tend to implement every time their government’s balance sheets become bankrupt.

I’m talking about how leaders in Europe and the United States wage war against their own citizens.

How they hunt down the rich and raise a battle cry for class warfare … which later backfires by widening the gap between the rich and poor, often driving the rich out of town, along with their companies and jobs.

How they target the average citizen, by camouflaging hidden tax increases (such as Obamacare and the proposed myRA retirement plan) …

And how they brazenly implement actual wealth transfers from you to government coffers, such as Europe has done in the Cyprus haircut, forcing all bank depositors to pay when banks fail …

Or how they openly endorse the IMF’s recent 10 percent wealth surtax on every citizen, already in the works in Europe … and also actively considered behind closed doors in Washington.

Then there’s all that spying going on, all that trampling of basic rights to liberty, privacy and other basic freedoms.

It’s all part and parcel of how bankrupt empires fade away into the sunset, and we will be no different.

The ultimate end may be far away. But all of this is already beginning to have an astounding impact on financial markets.

The dollar for example, has now surged to its highest levels in almost a year, defying the pundits’ call for its immediate demise.

Or crude oil, its bear market about to end any day now, as it prepares for a major move higher.

Agricultural commodities, in a severe slump, but one which will end soon, leading to new bull markets in the prices of wheat, corn, soybeans.

Then there are the precious metals, where so many investors have given up hope: Yet despite the soaring dollar, gold, silver, platinum and palladium remain poised to soar in the weeks, months and years ahead.

Finally, consider the U.S. equity markets: The resilience you see in the stock market is for real, a sign of exactly what I’ve been warning you about …

That rising domestic and civil unrest and international conflict throughout the world is extremely bullish long-term for the U.S. equity markets.

Right now, my best advice is to watch my weekly system support and resistance levels, which I outline for you below, along with some short commentary.

For gold: Basing, building a new bull market. Importantly, the bullish forces for gold will gain complete control once the yellow metal closes above $1,406.80 on a weekly closing basis. But at no time must gold close below $1,259.90 — or the bear may suddenly return.

For silver: Same. Basing for a new bull market. Major resistance: $22.24. Major support: $19.20.

For mining shares, in general, per the ARCA Gold Bugs Index (HUI): Preparing for their next legs up. Major resistance: 252.43. Major support: 202.16.

Crude Oil: Current weakness putting the finishing touches on a major bottom formation. Major resistance: $104.35. Major support: $92.35.

Natural Gas: Same as crude oil, but extremely bullish long-term, with the potential to quadruple over the next three years. Major resistance: $4.1650. Major support: $3.58 to $3.72.

U.S. Dollar, basis the U.S. Dollar Index, nearest futures (DXU4): Just like the 1930s, the U.S. dollar is starting to show very resilient strength, due largely to frightened capital fleeing from other parts of the world, especially Europe. Major resistance: 82.330. Major support: 79.055.

U.S. Broad Equity Markets: The danger of a correction is still there. But, long-term, the U.S. equity markets are headed much higher. Via the broad-based S&P 500, major resistance is at 2,032.00. Major support: 1,889.50.

And remember, you can let me know what you think about precious metals, governments targeting their citizens, or anything else right here.

Best wishes, and stay safe …

Larry

The post A Road Map for the Markets … appeared first on Money and Markets – Financial Advice | Financial Investment Newsletter.

What Not to Look For

Perspectives for the week ending August 26, 2014

In this week’s issue:

• Weekly Commentary
• Strategy of the Week
• Stocks That Meet The Featured Strategy

In This Week’s Issue:

– Live Trading Daily Webcast
– September Webinar – The Tools of Stockscores.com
– Stockscores’ Market Minutes Video – Buy the Dips, Sell the Rips
– Stockscores Trader Training – What Not to Look For
– Stock Features of the Week – The Turnaround

Live Trading Webcast
The Stockscores Live Trading webcast series will start up again in September. Watch Tyler’s trading screen with his current open positions and receive live trade alerts when he makes a day or swing trade. Send an email to tylerb@stockscores.com with Live Trading in the subject line to be put on the list to receive information, pricing and registration details (email details will be sent out later this week. This service is limited to 40 participants).

September’s Free Webinar – The Tools of Stockscores.com
During this webinar, Stockscores.com founder Tyler Bollhorn will show you the tools of Stockscores and how your portfolio can benefit from their use. Even veteran users of the site are likely to discover things that they never knew about what you can do with Stockscores.com. This is a free webinar. Register at:

https://attendee.gotowebinar.com/register/327138055163086593

Stockscores Market Minutes Video
Don’t chase stocks when they rip higher, wait for the pullback dip to buy. Learn more in this week’s video:

http://youtu.be/ycXpmwH8WnE

What Not To Look For
As investors, our natural inclination is to seek out stocks that have good qualities. We look for reasons to buy the stocks we are considering and often forget to look for the negatives. Since there are thousands of stocks to consider and almost all of them can have some reason for buying them, it may be better to reverse how we approach the analysis of stocks. Looking for reasons not to buy a stock will emphasize a higher standard for the stocks you do buy and will help to improve your overall market performance.

Here is a list of common reasons I use to throw a stock out of consideration:

Too Much Volatility
Volatility is uncertainty. Virtually every good chart pattern that I use to find winners demonstrates a break out from low volatility. The narrower the range before the breakout, the more important the breakout becomes. If the stock’s price is moving all over the place before it makes a break through resistance then there is a much greater chance that the breakout is false and will likely fall back. Ignore stocks that have a lot of price volatility before the break out.

Not Enough Reward for the Risk
A stock can go two ways, up or down, after you buy it. If the upside potential is not enough to justify the downside risk, then you should ignore the opportunity. I like stocks to have at least double the upside potential for the downside risk. That way, you don’t have to be right even half of the time to make money, provided you are disciplined of course.

Lack of Optimism
Fundamentals do not matter. It is the perception of Fundamentals that matter. If investors are not showing some optimism about a company’s prospects then it is likely that they are not paying any attention to the company’s fundamentals. Look for rising bottoms on the chart as an indication that investors are optimistic, if there aren’t any, leave the stock alone.

No Abnormal Behavior
The stock market is efficient most of the time. That means that you can not expect to consistently beat the stock market because all available information is priced in to the stock and your success at predicting new information can only be random. To beat the market, we have to look for break downs in market efficiency. I find that the best way to do this is look for abnormal behavior in the trading of a stock because it implies that there is significant new information playing a role in the stock’s performance. I don’t consider any stock that lacks abnormal behavior in its recent trading.

Too Far Up
The higher a stock goes, the riskier it becomes. I don’t like to chase stocks higher. If I look at a 6 month chart of a stock and it has made more than two steps up, I don’t consider it. A one day run of substantial gains is not a concern; I want to ignore stocks that have been in upward trends for some time. Look for stocks that are breaking from periods of sideways trading, not up trends.

Lack of Liquidity
The more often a stock trades, the easier it is to get in and out of it. Stocks that are not actively traded tend to have wider spreads between their bids and asks and it can be difficult to move in and out of the stock. Don’t consider stocks that don’t trade every day and they should trade at least 50 times a day but more is better.

Mixed Messages
I always try to look at a stock’s chart on more than one time frame. If the message is not the same on both charts, I leave them alone. When day trading, look at the daily and intraday charts. When position trading, look at the daily and weekly charts.

Any time you think a stock has great potential, give this list a look and see if any of these factors show up. If so, it may be a good idea to move on and look for something else.

JCP is a very liquid stock that has had a good deal of controversy over the past couple of years because of activist investor Bill Ackman’s attempts to change the company. It looks like the company may now be on the road to recovery, details below.

1. JCP
JCP has broken its downward trend line and is now moving up from a rising bottom consolidation, a chart pattern set up that I call Bottom Fishing. Good chance it continues higher in the months ahead.

References

• Get the Stockscore on any of over 20,000 North American stocks.
• Background on the theories used by Stockscores.
• Strategies that can help you find new opportunities.
• Scan the market using extensive filter criteria.
• Build a portfolio of stocks and view a slide show of their charts.
• See which sectors are leading the market, and their components.

  Disclaimer
  This is not an investment advisory, and should not be used to make investment decisions. Information in Stockscores Perspectives is often opinionated and should be considered for information purposes only. No stock exchange anywhere has approved or disapproved of the information contained herein. There is no express or implied solicitation to buy or sell securities. The writers and editors of Perspectives may have positions in the stocks discussed above and may trade in the stocks mentioned. Don’t consider buying or selling any stock without conducting your own due diligence.

This is a quick, executive summary of the week’s stories, with a link to the full articles online … 

Death of the Old Guard

The world’s elite money people gathered in cozy Jackson Hole, Wyoming, to discuss monetary policy. Are they in tune with what is really happening? Mike Larson takes a look at this Old Guard of monetary policy. Click here to read all about it.

Gold Mining Shares: New Great Buying Opportunities

The last time gold mining shares were as undervalued and neglected by investors as they are now was in 2008. The index of mining stocks then soared 266 percent in just two years. Will history repeat over the next few years? Mike Burnick examines the opportunities ahead for gold and mining stocks. Click here to read more.

Retailers in Focus

Many observers have dismissed traditional retailers as being unable to compete in the near environment, where on-line sellers are dominating over the brick-and-mortar peers. The sector is drawing particular attention right now, with the companies coming off their second-quarter reporting season. Are there opportunities left in the sector? What’s the future? Don Lucek takes a look. Click here to read more.

A High-Yield Investment

Do you know what a BDC is and the investment opportunities offered by the sector? Bill Hall takes a look. Click here to read more.

A Monster Investment

Here we are again with markets that react positively to negative news, especially now when many people are fretting over the possibility of interest-rate hikes. Jon Markman looks at this and other issues, including a Monster investment. Click here to read more.

Reflections on a World Going Mad …

What a mess the world is in today. It’s more important now than ever to protect and grow your wealth. How do you do that? Larry Edelson gives you a clear road map. Click here to read more.

Mike Larson — The Week’s Hot News

Money and Markets columnist Mike Larson takes a look at key financial and political events around the globe after the market close. Here are the week’s highlights:

Making Money From Energy Requires Tearing Up the Old Playbook! Click here.

Wage Earners Get Stiffed! Millionaires Get Rich (er)! Click here.

Sick of Paying Tolls? Then Buy Energy “Toll Road” Stocks! Click here.

Long-Term “Car-gage” Loans the Road to Disaster? Click here.

Best wishes,

The Money and Markets Team

The post Gold Stocks, High Yields, Retailers and More … appeared first on Money and Markets – Financial Advice | Financial Investment Newsletter.