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Financial news I consider important, with my opinion, which is worth as much as you paid for it.
Please click HERE to read a synopsis of my view of the financial situation.

Tuesday, August 6, 2019

Decade old topping pattern completing

I wanted to share some thoughts on the current state of the market.  I will post later reflecting posts from 2016 to today.
All of this is just opinion, for your consideration.  No one knows exactly what next month or year holds.  I want to do my part in sharing my thoughts at this time.  The question should always be risk vs reward vs time you have in life to recover from a downturn.  Downturns can be years to get back to old highs.  (2001-1009 for example)

For interest rates, housing starts, unemployment, gold/bitcoin, and market valuations look at the chart and assess risk/reward yourself.  Consult a professional adviser.

Market Direction Indicator

First is an old indicator of the market direction, read more here.  Looking at weekly moving averages when the 20 SMA and 50 SMA cross, the market is changing direction.  Since 2008, there has been a couple of crosses that have reversed.  Even if you sell, you can buy back on reverse and not miss a significant portion of the market rise.  This helps remove the emotion from market trading and focus on a market direction indicator that historically has been pretty accurate.

The market has NOT crossed down currently.  If you stay in the market, please consider checking this indicator periodically by clicking here and respecting it.


Federal Reserve & The President


The stock market is at an all time high recently, with unemployment at a low.  But two major indicators of issues ahead was recently shared with the world.
First, President Trump was calling for the federal reserve to make major interest rate cuts as early as May.   I assert the president was informed the market outlook is very weak, and he was positioning politically that a market turn is 100% the fed and 0% political policy.  This announcement by the president is what they call in poker a TELL, he is signaling all is not well, are we listening?

The 2016-2019 rally WAS politically caused with cutting taxes to the rich, and enabling international corporations to transfer profits overseas to buy back corporate stock.  The president has claimed the market boom was Trump driven.   And this is key, for what 'easy buttons' are left for the president to pull for another leg up?  And if there is another easy button, why not press it?   I cannot think of an easy button, but then again I didn't expect in January 2016 that politicians would trigger all easy buttons left with a rising market.

Second, the Federal Reserve cut rates last week by a quarter of a point!  With the market at an all time high, the Fed is easing, why?  Again this is a tell, all is not well, are we listening?

This is very dangerous territory, when we mix private (the fed is private banking organization) with politics, historically countries currencies fail.  One can hope the structure of the US organizations can resist this political attack.

Interest Rates

Contrary to popular belief, the federal reserve cannot arbitrarily set federal bond interest rates.  We live in a world with a wide variety of global investment options.  If the Fed raises rates, it can definitely increase purchasing, with a higher rate of return.  If the fed lowers rates, US bonds must be purchased to finance rolling forward debt and 1 trillion dollar a year deficit.  If these bonds are not purchased, rates organically rise to get  buyers.   The recent fed cut in some ways is following, not leading when it comes to US Bonds rates.  If the market can support a lower rate, it is in part an indicator of higher 'safe play' purchases.

Unemployment Rate


Unemployment rate is at an all time low.  Since the fall of 2018, the rate has been influenced by unusual 'seasonal adjustments', I find this troubling.  The question is do we expect rates to go down to 3% or up to 5% as next likely level?  Generic observation seems like mass layoffs are on the rise.  Overall it can't be assessed until later this year with the data compiled.

Housing Starts

Housing starts seems to have peaked a few months back.  Chart for your consideration.  Housing starts are often a reflection of the health of the private sector.

Hedge Fund Commentary


I follow hedge fund manager John Hussman and Jim Chanos.  If you can find a reliable source of latest Jim Chanos thoughts, please post in comments!  Mr. Hussman does post his thoughts on his hedge fund web site.  Recently he gave thoughts about the market topping in post "They're Running Toward the Fire".  Its a good read, I highly recommend it.
Another great article is estimates rate of return of 60 / 30 / 10 of S&P 500 / Treasure Bonds / T-Bills predicted for next 12 years and actual returns.   Spoiler: Current outlook is 3%.
Article "How to Needlessly Produce Inflation"

Gold and Bitcoin


Recently Gold has been on the rise, I assert the new highs since 2012 is an indicator of a trend change in this resource.  While bitcoin I consider a 'collectible', it is along the same lines as Gold, a limited resource that is purchased as an alternate reserve of wealth.  It also is on the rise.
Both of these are 'fear alternate play' indicators.



Bitcoin


Market Charting


Market charting is a questionable methodology of using stock chart analysis to predict future results.  While I don't put 100% faith into this arcane art, it can have effect of influencing professional traders to follow the indicators.  This can make it self-fulfilling.  It also has benefit of zero emotion, just analyze the data.  For these reasons, it is worth considerations.

I follow a market chartist called "The Technical Indicator".  If this is of interest to you, I highly recommend a subscription.   Some of their language in their newsletter is pretty out there, but they do seem to be consistent with chart analysis.

Recently, their indicator has flipped to down for the next year.  The 1-2 year indicator has yet to flip down.



Tuesday, January 8, 2019

Long Term Trading signal 2019

I posted about a long term investor trading signal in 2015 and in 2008.
This post will add current view and refresh on my take on these types of signals.

The signal I have been using is the S&P 500 index Weekly SMA (Simple Moving Average).
This trendline takes the weekly stock market value and averages it over a duration, in this case I use 50 week and 20 week moving averages.

If the 50 week goes higher than the 20 week, this is an indicator of a market trend change down, if the 20 goes above the 50 week, this is an indicator of market trend change up.

Another popular indicator is daily SMA 200,50.  Work on same principal but uses daily instead of weekly moving averages.

These indicators are important to help people try to remove the emotional attachment of their positions to a neutral indicator.   Also there is a herd mentality effect.  Professional traders are aware of these indicators are used and it can become self-fulfilling.

All indicators are not predictions, simply a datapoint to respectfully consider your disposition.
For a more indepth review, please see the original video I watched to learn about this.

Below are weekly and daily SMA for your viewing.
Click these links for current weekly and daily charts.








Sunday, October 21, 2018

Kicking the can on inflation

I recently wrote about rising interest rates ahead, with unpredictable results on world currencies.
People may start to run to variety of wealth preservation schemes as the USD valuation starts to come under assault.   One of those stops will be precious metals / hard assets but this won't last.
The final end game has to be a new paradigm as technology has broken everything else in the wealth storage game.  Some sort of crypto type thing will be the answer, in my 2011 post "Ideal form of Money - Power to the People."


The question is however, why will there be inflation?  We are producing more than ever, at a lower cost, and people simply do not have the disposable income they did 40 years ago.

So if we are under-employed, with lower disposable income, inflation should be impossible!

One of the slight of hands in economic classes is they use 1 word to describe an effect (inflation) and simplify the root cause as one thing.

What we have seen the last 20 years is a variety of efforts to kick the can in rising costs on natural resources.  If we took on renewable energies aggressively, what I am about to describe would be much less of an issue.  However, USA thinks pressing on with solid fuels is the answer, and we will have to learn the hard way.

I wrote previously about peak oil, and how it was real.......until fracking emerged as acceptable.  Fracking did in fact kick that can, NICELY!   But the long term low-cost viability on fracking over a decade is much worse than traditional oil drilling.  The net means we will run through the 'cheap and plentiful' fracking sites quickly.  Once we exhaust the can-kicking option fracking will enable oil to get more expensive per barrel.

More expensive oil will force all costs to rise, and some cost (like shipping) could really accelerate those costs.  But fear not! Before fracking we dreamed up Ethanol as a way to kick the can!  What this gimmick did is set a floor for ALL FOOD must cost MORE than the profit of selling Ethanol as a fuel source.   Which means when oil prices rise, we will plant more Corn to make Ethanol, which will cause other crops to become more expensive as they must be equally profitable as Ethanol!

Unfortunately, in 2018 we are about to unleash yet another reason to force food prices to soar.  Marijuana is threatening to become legal.  Once it does, USA farmers will have yet another crop that maybe more profitable than food, Marijuana.   So food prices must be equal to profit of Ethanol and Marijuana.

Technology is advancing with vertical farming, but that in itself is more expensive than farming.  The good news is it will help put a ceiling (but lagged) on food prices.

Americans will see accelerated costs in food, energy, debt payments (interest rates), and falling house equity.
If only we could have seen this coming back in 2008 financial crisis, the world could have avoided these energy shell games.
Time to get this party started!




Heart of finance just had its first scare in 30 years

I wrote a few times back in January 2009 that the REAL crisis is not the stock market, but risk to Bond interest rates.  Then I wrote post in 2010 "Bonds, Cost of borrowing the heart of all finance" calling out when US 30 year bonds interest rates go above 30 year downtrend, we will enter a new world not since the 1970's, a rising cost to borrow.

Well, we finally broke this recently, as graph below shows:


Our economic model is based on debt, and for 30 years businesses and people could borrow and expect LOWER payments 2, 10, 20 years later.  In 2018, this expectation has shifted to higher rates for decades ahead.

I expect in the year ahead a new world financial crisis to start to emerge, as the debt based society can no longer 'roll debt forward' with lower costs.   I also expect FINALLY the Precious metal sector to get a boost, now that bitcoin has taken it on the chin.   I do expect however when precious metals soar, when they break, the action for rest of my life will be in the cryptocurrencies.   I do think precious metals have one more act in them before being retired from the global economy as nothing more than expensive rocks.

I expect USD valuation is where it will get strange, as our global economy has always judged health of fiat currency against other fiat currencies.    If I am right about interest rates, and fiat currencies are the main value store for next 30 years, then I would expect USD to keep rising and rates must rise to 'break the fever" of USD trading higher, like Volcker DOUBLED US interest rates overnight in March 1980 from 10% to 20%, producing the extreme graphs above and below.

Imagine today, with so many Americans citizens and companies rolling forward debt dependant on the kindness of 30 years of lower rates experiencing such a spike in rates!
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I am making NO predictions except one, what the world knows as the 'right and wrong' things to do in the financial markets since 1982 is out the window.   Companies that have been stable for decades may wake up in deep trouble in the year or two ahead.   While we can have issues sooner, I expect this party to get start really cooking in the year 2020, USA next presidential election.

In the near term, I am watching a 2 year and a long term indicator for the world markets to enter a bear market.   Things look like a double top and we are about to hear the Bear roar.  But until the charting has confirmation, act with caution for a Bull or a Bear.  The 2 year indicator will mature October 31st, so clarity should come in late 2018.

See NEW related post on inflation.

Good luck!
Keep eye on GDX, GDXJ, and new markets such as 'Alternative Crop' stocks!

Monday, September 17, 2018

Market Rumblings

Below is a snippet from the weekend report of " https://www.technicalindicatorindex.com/ "
Consider a subscription for yourself.

Here is what they had to say.

The Bottom Line from Today’s Market Action: Something is up. Something big is coming. We cannot be sure precisely when or what, but there are warnings from the technical indicators and patterns from the market this weekend that tell us the stock market is in an extremely dangerous place. Caution is warranted. 

We look for the Plunge Protection Team to be active at this time. Whether they succeed or not is to be determined. Stocks were flat Friday, September 14th. The stock market generated its 11th Hindenburg Omen observation Friday for the official H.O. from August, and has now triggered 9 H.O. observations in consecutive days. This has not happened in the past 40 years we have tracked Hindenburg Omens. This tells us the market is in an extreme unhealthy condition, is fragile, and could plunge given a trigger event. 

This does not mean a plunge is coming for certain, however every stock market crash (declines greater than 15 percent) over the past 40 years have been preceded by a Hindenburg Omen. There are large and growing Bearish divergences evident this weekend between the major U.S. stock averages and their 10 day average Advance/Decline Line Indicators, their Demand Power measures, and there is a Bearish divergence between the S&P 500 and our intermediate term Secondary Trend Indicator. 

Rising Bearish Wedge patterns are completing in the major averages. Downside price targets suggest a plunge will follow. We show charts for all of these patterns in this report. 

Friday, September 7, 2018

Bear Market waking up

I put a panic alert out in March, then went positive in May.

Today unemployment numbers was released.  The headline shows 'steady as it goes', about same as past, 200K positive job growth.  But like most things, the details is in the 'fake news'.  The unemployment shows over 2 million people dropped out of the labor force for this report.  The assertion is 2 million people retired or gave up looking for work since the last unemployment report.  Considering currently we have only 58% of the population 'employable', we lost 1.5% of the work force this period.   The recorded job loss was 1.46 million jobs.  When you have 2 million drop out of the work force, we have a NET positive job growth.

If you believe above is fake news please stop reading.  If there is pause for concern, read on.

Being generous and using seasonally adjusted numbers this is the WORST report since January of 1999 , with 423,000 jobs lost.

Combine this with the trade wars starting, and the indicators I follow show a potential market trend change below.

I am putting on the caution warning for the markets, with unconfirmed price action for this being the next new recession starting.

I cut my investments by 40% today.

What makes me very concerned is interest rates are still VERY low, and with corporate tax cuts corporations pulled their cash from over-seas in record amounts with executives dumping shares.  If there is a downturn in the market, I have a hard time seeing what is the easy stimulus plan.




Wednesday, May 16, 2018

Positive outlook

Back in January, the trend indicator went negative first time in a while.  The indicators have been flip flopping ever since.  On May 11th, all trend indicators are pointing up!   The next expected challenge to this trend  is in August-September, about then the 1 year indicator anniversary is up, and closing in on the 2 year trend indicator.

It is possible to change sooner, if we do, that will be called a failed cycle, and it will be much more dramatic than January if that was to occur.  Swing back here in August for an update, or sooner if we have a failed cycle.
I may not be diligent on updating when this trend changes, so consider subscribing to the service yourself.  

Good Luck!