09/21/2013 Weekend Update

[Cobra]

Institutional buying and selling action chart from stocktiming shows negative divergence on institutional accumulation and historical low selling. I think the chart is a little bearish biased. However the chart doesn't tell exactly when the pullback would happen.

[Cobra]

Smart Money hasn't increased short yet, so nothing wrong.

[Cobra]

AAII and II. I don't see anything interesting.

[Cobra]

Please don't forget our Investors Lounge forum.
viewforum.php?f=11

[DellGriffith]

My sentiment / indicators are still bullish. No chance of turning bearish this upcoming week.

I mentioned last week there was an ominous head and shoulders pattern forming on the Dow. That pattern got wrecked with the Fed announcing no taper this month, causing the Dow to hit new highs instead. Now I'm wondering if the Dow will go ahead and retest the top of the channel, which means prices go way higher.

[Al_Dente]

“Sometimes immersing yourself in the creative world of people doing amazing things can bring unexpected results”
http://zenhabits.net/pixar/
[#3: “share your riffs”]

[Al_Dente]

The Tech Bubble 1995ish-2000

The Housing Bubble 2003-2007

The FED Bubble 2009-today

All three together, this chart is daily, with a 320ma; the charts above are weekly

Conclusion: hmmmmm they all seem to be ROUGHLY +/- five year bubbles, other than that I got nothing yet, just playing with colored bubbles here….

[DellGriffith]

One key difference between the tech, housing, and "Fed" bubbles. At the end of the tech and housing bubbles, the yield curve inverted. The yield curve has yet to invert during this "Fed" bubble as you put it.

An inverted yield curve happened no more than 2 years before every single recession over the past several decades.

There is no yield curve inversion today. Not even a partial one. There hasn't been since the 2008 meltdown.

A caveat, I think you can make an argument that QE has killed the inverted yield curve rule. The Fed has gone beyond controlling interest rates and just injects the market with money directly. So, in theory, maybe just taking away QE can cause a recession, even if interest rates do not move much. Its a brave new world. Either that, or the Fed would have to completely end QE and raise interest rates on top of that before another recession can arrive, which doesn't "feel" right to me.

This bubble is unlike all others and maybe the rules have changed.

[Al_Dente]

thanks dellgriffith
I respectfully disagree: I don’t believe that “this time is different.”
A bubble is a bubble, regardless of who/what is blowing it.

Here’s the 2s 10s yield curve, currently approaching historically maximum steep levels.

Here’s the “Dynamic Yield Curve.”
Click anywhere on the S&P 500 chart to see what the yield curve looked like at that point in time.
[I’m not sure if this is only for stockcharts.com subscribers]
https://stockcharts.com/freecharts/yieldcurve.php

[Al_Dente]

Hey, what ever happened to Dick Fuld, the reviled CEO of the former Lehman Bros?
http://www.businessweek.com/articles/20 ... s-last-ceo

[DellGriffith]

Yah well the yield curve says to expect blue sky highs for as far as the eye can see.

[joegamma]

thanks dellgriffith
I respectfully disagree: I don’t believe that “this time is different.”
A bubble is a bubble, regardless of who/what is blowing it.

Here’s the 2s 10s yield curve, currently approaching historically maximum steep levels.

The attachment 921yield curve_png.png is no longer available

Here’s the “Dynamic Yield Curve.”
Click anywhere on the S&P 500 chart to see what the yield curve looked like at that point in time.
[I’m not sure if this is only for stockcharts.com subscribers]
https://stockcharts.com/freecharts/yieldcurve.php

Thanks for opening this train of thought Dell and Al: I believe it is different this time, at least what instruments we should be watching as an indication of liquidity shortage, and I don't know what they are...

Used to be that a big bank would borrow only about 1x per quarter, it was a free interest rate scalp courtesy of the fed....if they visited discount window more often, their name quality would become suspect (indicating funding problems).

With POMO, this is all irrelevant / hidden since all big banks are now effectively paid to borrow from FED weekly. Add the fact that foreigners are dumping long treasuries and the fed owns a huge portion of the long end and I think yield curve levels means very little today relative to a 1 or 2 decades ago.

The TED spread is probably not a good indicator of credit quality these days either.

Maybe we should be considering the pace at which corporates issue stock versus but it back?

It seems that big caps are more likely to buy back stocks with their liquid profits and dress up their price earnings metrics by reducing shares outstanding .
Anyone have a good view on new stock issuance or on amount of stock big caps are selling back into open market from their on treasury dept holdings? maybe that ROC might have some value...

Market technicians would suggest liquidity measures of looking at money flowing into broad index like WLSH 5k or R2K versus small big caps like SPX and Dow, or as McClellan hints at: is there enough money and sentiment to buy a whole bunch of stocks, or only a few big defensive names?

After my long winded pontification above, none of the following charts are really pertinent, but RUT to SPX may be diverging / not breaking above recent range, FWIW

and looking at price of 2yr to 10yr price is suspect because I have not crunched the method stockcharts uses to compensate for refunding and rollover of on-the-run treasury issuance

[joegamma]

and some daily look at high yield, bank loans, and s/t liquidity

multicolinearity with equity marts...

time to buy bonds?

[BullBear52x]

King green back, I posted this chart last week too. US government will do what they have to do, FED blah blah...The fact is the dollar is tanking, weak dollar people move their money over seas. it shows how EEM react of late.

Here I overlay the EEM on dollar chart.

[BullBear52x]

Chart of the day goes to AAPL

AAPL need to overcome run-away gap or down she goes to 333.33

[BullBear52x]

$BKX is not looking so fresh here, trading lower I will see it as TA break down.

XLF still have one buy coupon around 50 DMA

[stlwater]

No great revelations. I'm of the mind that we topped and my bets are on that side of things. Still short semis and underwater atm. Long gold, treasuries, miners. Short SPX. Long volatility.

Semis:

Weekly: (As we can see, lots of converging overhead resistance (just like SPX)). Pink channel is a Raff Reg. Can imagine a back-test of the breakout of the triangle (grey line) perhaps with a sideways consolidation until the green lower trend line then up/down? Or we breakout to the upside and head higher... Either way this is most definitely a great place for a short since there is a great reference for a stop. Weekly candle I concede looks like it could represent a continuation pattern (http://www.thepatternsite.com/ShootingStar2.html) but with all the overhead resistance I am skeptical we don't see at least a larger pull back.. still that candle pattern does cause some concern.

Close up: (need to see follow through to the downside for this break-down to be believable. A close below the 10DMA would do it.) Notice we are back-testing the last rising wedge again.

[stlwater]

GLD:

Back at mauve trendline... will it remain support?

long-term view: (last successful H/S reversal had the head at the weekly 200WMA... this head is in thin air which casts doubt on the pattern.. better if the head was at the long-term trend-line.. So not so sure about this but playing the possible R/S any further weakness and I stop out.

[Al_Dente]

Weak link is XLF: Another negative divergence from the banks
XLF did not make a new high on 2 Aug when SPY did
XLF did not make a new high last week when SPY did
According to the XLF/SPY relative-strength ratio on the top panel, banks haven’t been subservient like this since May-Aug last year (red boxes)

[Strong links are QQQ and IWM, and even the OEX – 100 large caps – confirmed the highs]

[stlwater]

TLT dividend adjusted

Sitting on 200WMA...