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 !!!

Wednesday, September 21, 2016

SPX -- Daily

With a sharp, short time duration sell off early in the month followed by a fast double bottom
just above the SPX 2125 level, the market is attempting to rally off a moderate price momentum
oversold condition. A rise in short rates has been pushed further out in time, so stocks and bonds
have some breathing room to the upside. If you are long the stock market, next you will want to
see if any further progress is sufficient to reverse the downtrends in SPX RSI and MACD.
SPX Daily

Monetary Policy

Despite intimations from Fedspeak that an increase in short term interest rates is in the pipeline,
recent economic data through mid - Sep. turned weak and left the Fed having to again postpone
further tightening of policy. This being a national election year, the incumbent party wants to
show economic data at its best right before the vote, so a snap back in Sep. data to be released
next month cannot be ruled out. If that is not feasible and weakness continues through the
month, the GOP could win the presidency and trigger off a wide range of interesting discussions
about the economy after election day.

Be that as it may, the classic case for tightening monetary policy further is not in place, and we
have to wait and see whether incoming economic data released next month improves. If such is   
the case, then after election day the Fed will have a freer hand with policy.

Sunday, September 18, 2016

Long Treasury Price (TLT)

Back on Jun. 20, I argued that the long Treasury price was steaming along up to a major overbought.
With long Treas. yields still near all-time lows, prices are still near highs. Years out and looking back,
these price levels will very well likely be in the top tier of the long term range. Positive sentiment is
still fairly strong, so it could be a stretch to say that the latest run up in TLT from the spring until
recently was a blow off top.  TLT

The recent volatility in the bond market appears to be fueled more by expectation than short term
on-the-ground fundamentals. Whatever the Fed does this week with short rates, Fedspeak wants
to keep the issue of eventually raising short rates in the headlines. Players may also be looking
toward 2017 when a slow economy may lead a new president to push for significant fiscal stimulus.
This election year has introduced the political elites to the fact that the silent, primarily white,
majority is angry, vocal and demanding. These folks are leaning in hard on people and programs
which might make their economic lot better and more secure. This all could translate into
incremental deficit financing at the federal level starting next year. Infrastructure repair and
development programs coupled with tax relief and other stimulative measures, if large enough in
scope, could foster somewhat faster real growth, stronger inflation and a larger Treasury bond
calendar. In such an environment, the Fed would support higher higher rates and further upward
pressure on bond yields would ensue.

Now, the hard truth is that the bond market is not comfortable looking out even this far, but with
nearly everyone suspecting that yields are at or near all-time lows, and armed with the additional
knowledge that so many folks are pressing for better and more financially secure times, it is not
unrealistic to think that bond players are looking out past the ends of their noses.

If so, the bond market could be tougher to 'read' than usual in the short run and there could also
be more volatility as a result.

Friday, September 16, 2016

SPX -- Weekly

The SPX has weakened recently, but is still holding an uptrend from this Feb. based on weekly and
daily closing prices. An intermediate term overbought condition is being relieved and the break in
the MACD pattern should be source of concern, although whipsaws do happen. The market is
still supported by a rising 40 wk. m/a, but note the loss of positive momentum. The volatility index
(VIX, bottom panel) is trending up but is not at a threatening level by long term standards.
SPX Weekly

Conflicting Fedspeak has whipped the market around. The FOMC meets shortly and Their trial
balloons suggest the market would not take kindly to a rate hike, especially with weakness in
recent key economic data such as the readings for the PMI's and retails sales. The fundamental
case for hiking rates does not exist, but the Fed faces push back nonetheless.

Trump's reminder that he plans to remove Janet Yellen from the chairmanship of the Fed if he is
elected does not seem of great concern to the market right now, but the type of cavalier criticisms
of Yellen he has offered would sow uncertainty and confusion in the markets if he becomes
president and plays this type of game.

Friday, September 09, 2016

SPX -- Daily

For the past month or so the argument embedded in my equity market posts has been that the market
was overbought. Since more voices were added to 'Fedspeak' in favor of raising short rates this week,
corrective action in the stock market was taken today. Louder 'Fedspeak' has cast a chill since the
most recent reports of economic activity have shown a softening with sudden, across the board
weakness in PMI new orders data reported. The new Fed concern is that continuation of super low
short rates may contribute to capital markets instability. So, the Fed may be about to create some of
the feared instability off its own bat! Whatever, the markets were taken by surprise, with the SPX
dropping sharply.  SPX Daily

In one fell swoop, the SPX has entered mildly oversold territory on a short run basis. With the
sudden advent of trader crankiness, all the profit takers may not have unloaded yet. Of interest
is that the uptrend line from the Feb. low is at about 2110 and a break below that line of support
could trigger more concerns in the market.
My strategy with stocks has been only to go long on deep oversolds such as occurred last autumn
and earlier this year. Viewed longer term, the market is once again hyper-extended and overvalued.

There is another personally troubling aspect about the market as well. Stocks are attractive when
the market is priced to return 10% (including dividends) annually over the long term. With a
slow economic growth environment, best I can figure is that stocks are priced to provide only a
6% long term return which presents an an unsatisfactory picture for risk capital.

Wednesday, September 07, 2016

Gold Price

Back on Jul.10, I argued that the gold price was overbought on an intermediate term basis and
that speculative long side interest in the futures market had reached record levels. Gold did
sell off in uneven fashion through the end of Aug., but has recovered sharply and partially this
month as traders view further Fed tightening and prospects for a another  bounce in the dollar
as now on hold.  $Gold

Gold has been choppy over the past two months, but has managed to hold its uptrend since early
this year. The chart shows that $1375 is the new resistance level. The market has lost only a
portion of its overbought status and speculative long side interest remains zealous although it has
eased somewhat. The cyclical case for gold remains but wanly positive. In the meantime, traders
are focused on the Fed and the short term outlook for the US dollar. Tough to make a call here.

Here is a link to the Jul. 10 post: Gold, Silver Overbought

Sunday, September 04, 2016

Stock Market

Market Breadth
In terms of advance / decline. the market has enjoyed a very strong positive move since the winter.
However, breadth has moved into an overbought position currently when measured in terms of RSI
and against its 40 wk. m/a.  $NYAD Weekly - Cumulative

Notice that in recent years, when breadth RSI gets into overbought territory, as it is currently, both
breadth and  prices tend eventually to get choppy and show some vulnerability (RSI is the third
panel on the chart). Note as well the commanding premium the a/d line now has over its 40 wk. m/a.,
and the commanding slope of the a/d line itself. The trajectory of the a/d line has carried long enough
to be bullish for the intermediate term. It signals a strong impulse, but is now quite extended. The
MACD measure, which has nicely underscored the market's advance since Feb. is also now tending
to flatten.

Selling Pressure
A rising TRIN measure signals the volume of declining stocks exceeds that of advances. By this
indicator, the market is coming off an intermediate term overbought, but the trend of the TRIN
indicator has not as yer reversed to show development of  a weakening market.  $TRIN

As always, remember that an overbought market reserves the right to get even more so.

Sunday, August 28, 2016

Oil Price

I have kept it very simple on playing the oil market this year and have stuck religiously with the long
term seasonal pattern. There was a terrific long side trade in the market during winter - spring
this year. I have backed off since, and skipped the market when West Texas crude dropped as
expected down to $40 bl. in early Aug., which is normally a choppy month. Traders know that
from a seasonal perspective, the oil price tends to have a strong positive run in Sep. and have
been positioning for it during Aug. Traders also know that the oil price tends to weaken seasonally
from Oct. through the following Jan. and some are advising clients to begin shorting the market
in late Sep. as oil demand drops after the northern hemisphere driving season winds down. Fancy stuff. 
WTIC Weekly

The chart shows resistance now at $50 and the market must clear this hurdle to rise to $60,which
would be the next substantial hurdle. The market also must clear $50 to confirm that the uptrend
that started in early 2016 remains intact.

The concerning factor here is that bullish money down sentiment in the futures market has risen
again toward near record levels. It strikes me as odd that speculative interest in oil should be so
strong and have recovered so quickly after the price blowout in 2015. Running with the large
speculators  on the long side when they are going hot and heavy has not been a wise
practice. For my part, I'll skip the long side seasonal trade in Sep. and see what the lay of the
land is later in the autumn.  Finviz Oil future