About Me

Retired chief investment officer and former NYSE firm partner with 40 years experience in field as analyst / economist, portfolio manager / trader, and CIO who has superb track record with multi $billion equities and fixed income portfolios. Advanced degrees, CFA. Having done much professional writing as a young guy, I now have a cryptic style. 40 years down on and around The Street confirms: CAVEAT EMPTOR IN SPADES !!!

Saturday, July 22, 2017

SPX -- Weekly

The SPX is overbought for the intermediate term, is getting overextended for the intermediate, and
fully valued on the more liberal valuation measures. The weekly cyclical indicator composites did
better last week but have been running flat for most of 2017. Outside of all that, the market is still
trending higher as players use the slow growth, low inflation, and expanding private sector liquidity
environment to coax the SPX higher. Market psychology remains formidably positive even though
there is a strong consensus that the market could easily correct by 10% at some point through mid
2018. With momentum measures on high, extended planes, you need to monitor the situation
diligently.   SPX Weekly

Thursday, July 20, 2017

Financial System Liquidity

The end of the Fed's QE programs did hamper the economy and the stock market for a while, but
the view here was always that if private sector funding responded positively, the economy and the
market would be OK. Strangely, the US is now moving on quite a different plane. There is clearly
sufficient liquidity to fund economic expansion and rising capital markets. The surprise has been
the steady rise in private sector liquidity preference. Historically, as an economic expansion
matures, the basic money supply adjusted for inflation tends to flatten out and occasionally go
negative as consumers and businesses run higher spending budgets. But here we are with real M-1
up nearly 7% y/y on miniscule short rates. In a like manner, my short term credit supply / demand
pressure gauge would now be running strongly positive as banks hustled to meet rising loan
demand from business. Not this time out. The gauge now sits at a -5.4, which is more indicative
of recession or the initial stage of an economic recovery. With folks more interested in holding on
to their money, one outcome is that there is now a built-in tendency for the economy to grow rather
slowly and for inflation to remain subdued. There are unusual circumstances, too. Business
inventories are continuing to run on the high side, and the Trump /GOP threat to repeal ACA and
replace it with a stingier health plan has up to 50 million consumers worried about losing coverage
or paying higher premiums. This dumb, drawn out saga is leading people to defer spending and
build liquid kitties instead.

This strong contra-move in favor of liquidity preference by the private sector provides funds to
support the markets at present, but if it continues, it will eventually imperil the economy or keep it
running at stall speed.

Investor confidence is high, but it would be nice to see stronger business and consumer confidence.




Monday, July 17, 2017

SPX -- Daily

Primary market trends remain intact on the daily SPX chart. breadth is moving along positively.
Volume is light, but that could be mostly seasonal. Momentum measures are positive, but they
have been deteriorating progressively. The weekly cyclical fundamental indicators have been
flat since early 2017, suggesting the economy will lose positive momentum out ahead. Retail
sales have already been softening and some key monthly sales and earnings measures have been
slowing. However, Ms. Yellen is now spinning the same story in a dovish fashion -- moderating
inflation -- and the Street likes this as it suggests credit tightening will proceed more slowly. My
e-mail continues to gradually accumulate caution signals from seasoned and successful strategy
people. Pressure from centers of prominence outside the Beltway are telling the Trump team
and the GOP to get moving  on stimulus programs, but Senate leader McConnell, a naysaying
'Miss Grundy' type, is trundling along slowly as he follows his own muse. SPX Daily

The chart shows the market has been bending but not breaking for months now and has been
playing hob with the 25day m/a, sending out mechanical sell signals on breaks that have whip-
sawed bearish traders.
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I am basically done with the SPX and macro-style trades above 2450 and would have to see
the MACD (bottom channel of the chart) skitter down to -40 or so before I would consider a
long side trade. Even then, I would only use a small amount of capital. The market owes none
of us a blessed thing, and, for my part I am just thankful the world did not head into full fledged
economic depression in 2008.

Sunday, July 09, 2017

Gold Price

On a global basis, indicators began to signal faster economic growth and an acceleration of
inflation in early 2016. In anticipation, there was a major speculative run-up in the gold price
from a depressed $1050 .oz up to $1375 into Aug. last year. Economic indicator data have lost
the strong upward surge seen over much of 2016, sensitive materials prices have leveled off here
in 2017, and inflation thrust measures have lost substantial upward momentum despite modest
improvement in capacity utilization. Moreover, new business order rates have been on the rise
while final sales have continued relatively sluggish, thus signaling the possibility of another
involuntary build-up of inventories. Without the anticipated follow through on balanced, faster
growth, the inflation acceleration story has faltered, and even with the recent continued weak-
ness in the USD, this year's rally in gold has faltered.  Gold Weekly 

You can probably add the failure of the Trump / GOP to advance its tax reduction / reform and
infrastructure investment programs to the gold price negative column as well. In short, gold
players have found fault with the late cycle 'reflation' story and gold has dropped near an inter-
mediate support zone of $1200 oz. As well, without evidence of higher and sustainable inflation,
gold traders have not been able to surmount the  $1300 level except for brief periods in recent
years.

Since I am a strongly growth oriented guy who thinks gold can help out portfolio returns
during periods of faster cyclical inflation, this has been a frustrating period amidst some false
starts. Since I also view the USD as technically oversold I am content to let the gold price
go ahead and challenge the $1200 level for now.

Tuesday, July 04, 2017

US -- 50 year Health Care Racket And Still Counting

I live in the semi-boondocks and have been bitten around 30 times by deer ticks over the years.
My luck failed to hold in recent weeks, and I contracted Lyme Disease. I am recovering OK
because we caught it very early. I received the bill for the diagnosis yesterday from the local
medical group. The retail charge (before Medicare) for a 20 second look at the bulls eye rash
emblazoned on my chest to confirm the call was $973.00. There you go!

US Dollar

The argument here for the past 6-7 years is that the dollar should rise over the long term because
trade fundamentals will run in the US's favor and dollar outflows through the trade window will
slacken. I have envisioned a slow process of USD recovery with the Buck  settling in at 100
by 2020. On fundamental grounds, I see it as reasonable now in the 92 - 93 area. USD Weekly

The dollar has been retreating from a very heavy overbought position reached at year's end 2016
and continues in a clear downtrend, heading for intermediate term support at a little below the
94 level. The fun part here is that with the negative sentiment intact, it is reaching one of the
deeper oversold positions it has attained in recent years. Trading the $ is has not been my cup of
tea, but it should be enjoyable to see if there is a rally in the USD before too long.

Sunday, July 02, 2017

SPX-- Weekly

 The post- election rally in the SPX to new highs has had a close call or two but has retained its
footing. Breadth and volume have remained OK, but price momentum both for the SPX and
issues seen individually is waning. As July wears on the SPX  will have to maintain weekly
closes above 2400 to keep the rally intact. A break of trend from the 2/16 base would require
stronger corrective action, so if the SPX falls short of 2400 on the weekly closes, it need not
be fatal. My weekly cyclical economic fundamental indicators are breaking a bit weaker and
this suggests the upthrusts in these data sets which provided major support to the market since
early 2016 may have ended. However, to date, the flattening of forward looking economic data
in evidence over much on this year has not undermined the SPX, so we'll have to see whether a
breaks of trend in theses data composites threatens investor confidence. SPX Weekly

Friday, June 23, 2017

SPX -- Weekly

The SPX is still running OK positive, but the broader market, featuring breadth and unweighted
price indices like the Value Line Arithmetric ($VLE), are lagging and falling behind on trend
momentum. At this stage, there is a growing preference for the larger cap. more liquid names.
My weekly cyclical fundamental economic indicators have been on the flat side since late Jan.
and suggest a loss of positive economic momentum out ahead. Unweighted market measures are
performing more in line with the economic data weeklies as the SPX rolls on. I have argued in
recent weeks that the SPX had a reasonable shot at rising above 2400, but I have run out of short
run insights to support a continued advance and see no compelling reason for the SPX to move
above the recent high of 2450. Weekly SPX

The bottom panel of the chart shows the relative strength of the Value Line to the SPX. As can be
seen, the SPX can easily outpace the VLE for the intermediate term, but a market led by a broad
array of mid - cap. and smaller cap. favorites is healthier and more sustainable.

Of note here is that the Senate is set to take up the nasty health care bill this week. If the Senate
leadership can horse trade its way to passage of the bill, it might boost the spirits of investors
who are still considering the large tax cuts for the wealthy in the bill as a set-up and lead-in
to the tax reform proposal.