Wednesday, January 1, 2014

On the Market - Iffy underpinnings dominate

Pre-market – Monday 12-16-2013

"The most important single central fact about a free market is that no exchange takes place unless both parties benefit."

~ Milton Friedman ~

Dr. John L. Faessel


Commentary and Insights

Quotes of the day

"The extent of government intervention has been so horrendous that businesses cannot basically decide what to do about the future."


"The level of uncertainty about the very long-term future is far greater than at any time I particularly remember."

~ Alan Greenspan ~




Last week the S&P 500 (SPX) / market spun back from an extended set-up to the upper trend line and support of the channel that goes back to 2009. It also closed near the 50-day moving average and support that sits 6 S&P points below. Last week's multiyear and decade highs in some models of bullish sentiment* suggested a frothy market that needed a retreat. I continue to be a believer that the market is setting up for a larger retrench soon.

Historically speaking, long periods of "no fear" in the market do not last and during these times prudence suggests taking defensive positioning. We are still in the sweet days of seasonal strength with the wind at our backs because of the Santa Claus rally – not to mention the Fed's money faucet gushing liquidity. And while the S&P futures are up 9 points this week's Congressional 'interviews' of the Fed, where the taper question loams large, could wreak havoc to a market that has dubious and highly questionable underpinnings.Because we are yet extended and above the long term channel highs we remain in La La Land technically speaking.

The McClellan Oscillator is in Neutral at minus 120 – Thursday's posting was an OVERSOLD minus 164

Charts of the Week

Recovery Only With the High Earners

Real Estate Recovery?

Consumers Can't Spend What They Don't Have

Does this look like we are in any kind of real recovery? These charts speak volumes about the health of the economy.

Notable CNBC Interview Today

Robert Benmosche, AIG (AIG) president & CEO said, ""When I go around to my fellow CEOs, people are frightened about whether you want to invest in the United States."

S&P 500

The S&P 500 (SPX) closed Friday at 1775.32. The prior Friday it was 1805.09

Price resistance is at the top tick of 1813 registered on 11/29/2013.

The 50-day moving average support is 1761

Short term 'Price' support is at 1779

The a bit further out 1762 / 1746 / 1740 / 1716 / 1646 and 1627

The 200-day moving average support is at 1664

The top trend line of the channel that goes back 2009 to at (SPX) 1784 - 'that' previous resistance was breached on October 22nd.

Channel and trend line support of (November 2012) is at 1748

Then deep channel and trend line support of (October 2011) is at 1623

Then the deepest channel and trend line support of (March 2009) is at 1402

* This Week's Investor Sentiment

The Bullishness / Bearishness complex overview is mixed, but disturbingly high with some models that posted multi-year and more than decade highs last week. The overall message is a clear danger signal.

(High BULLISH readings in the Investor Sentiment Readings usually are signs of Market tops; low ones, market bottoms.)

Consensus Index of BULLISH sentiment now at 76% from the cycle and multi-year highs of 78% of last week. These new cycle highs in Bullishness of 78% topped the top of 77% Bullish posted on 10/11/2007.

The Citigroup "Panic / Euphoria" Model eased to a plus 0.51 from the plus 0.56 that was more than decade highs in the Euphoria Zone. In early 2000 it ticked its all-time high at plus 0.72. At the end of June, 2011 it ticked cycle lows of minus0.31 in the Panic mode.

The American Association of Individual Investors [AAII]Investor Sentiment Survey of BULLISHNESS has faded to 41.3% from 47.3% of three weeks ago.

The "Bullish" survey posted recent highs of 52.3% 9-months ago. It posted cycle lows of 22.2% on 7/23/2012 the lowest percentile since August 2010. Long-Term Average: Bullish: 39.0%

The American Association of Individual Investors [AAII] Investor Survey of BEARISHNESS lost a few percentiles to 25.0 % from last week's 27.6%. Ten weeks ago it registered the lowest read since 1/12/2012 at 17.6%. Cycle highs of Bearishness of 54.5% were posted 17 weeks ago. Long-Term Average: Bearish: 30.5%

The Market Vane (Market Letter Survey) was up a tick to 66% from last week's 65% In October 2007 it topped at 70% bullish.


"The problem with ObamaCare isn't just a glitch. It's fundamental and it's taking away our freedom. At the heart of the program is the idea that the government should decide your health coverage — what you require and how much you should pay. Never mind what you want, what you need and what you can afford." Pennsylvania Senator Pat Toomey.

On the Mimimum Wage

"the centrist view is probably that minimum wages 'do,' in fact, reduce employment, but that the effects are small."

Paul Krugman - Nobel laureate - The New York Times economist

Friday's key indicators and metrics

Cycle highs or lows are in red

·McClellan Oscillator in Neutral at minus 120 – Thursday's posting was an OVERSOLD minus 164

·3-month $ LIBOR was 2.4385%.Rose again - lows were 0.23660%

·CBOE Put / Call Volume Ratio – 0.85

·VIX – 15.76

·Natural Gas (Globex) – 4.351 @ 7-month highs

·Swiss Franc – 1.1236

·US Dollar Index – 80.22

·Euro – 1.3735

·Japanese Yen – 0.9691 new 7-months lows; close to lows of 0.955 posted in May.

·Canadian Dollar – 0.9440 just off 3½ year lows

·Aussie Dollar –0.8963

·Crude oil (NYMEX) 96.60

·Brent crude 109.43

·Copper – 3.2120

·Gold (COMEX) – 1234.6 looks to test deep support lows of late May

·The Treasury 5-year yield – 1.53%

·The Treasury 10-year yield – 2.87% - cycle high was on 9/10/2013 at 2.98%

·The 30-year Treasury – 3.87% - cycle high was on August 22nd at 3.93%

·Silver (COMEX) – 19.604

·Platinum 1362.9

·Palladium 716.20

·Lumber (CME) – 365.90


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