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Monday, June 29, 2015

PARADOX LOST

Last week the Nasdaq Composite hit a record high; the S&P 500 (SPX) nearly did - yet most Sectors - as measured by ETFs- seem to be in a downslide. Today, behind the Greek tragedy, U S markets also sold off, breaking technical Support levels ( 2080 on the SPX), as well as multi-year trendline Support. This does not bode well for the seasonally weak season - JASON- (July, Aug. Sept. Oct. Nov.).
Carl Icahn , no dummy when it comes to investing, having made over $1B on Netflix alone! calls the market "extremely overheated". Also worrisome are the technical indicators: OBV, or collective On Balance Volume and RSI or Relative Strength Index which topped out last year. Although stock Buybacks were fairly strong in Q2, even they failed to move the markets very much.

Sentiment Indicators, however, tell a different story: as shown below, newsletter Bulls increased in both wire house newsletters and Individual (AAII) surveys; CEO insider selling (legal) was way low - single digit, over buyers. Most other Indicators were quite calm and neutral considering the global situation. Stay tuned!!!

  
Date> 6/26/2015 6/19/2015
Indices: DJIA  17946 18015
  NAZ  5080 5117
SPX  2101 2109
WklyVolume (Bshs). naz/ny…. 9.2/4.7 9.2/4.8
Specul.Ratio hi=bullish 1.96 1.92
Sentiment: put/call-CBOE  61 62
VIX>50-alltmlow=8.8 14 14
Advance/Dec-NYSE.. 1262/1992 1766/1477
Weekly Net: -730 289
     Cumulative: 165416 166146
Weekly  NYSE hi/low… 312/269 237/241
New Hi's/Low's Nasdaq h/l 401/149 380/146
McClellan  Oscillator -19 0
McClellanSum .+750/-1000 -208 -199
Newsletter Inv.Intel -Bull 51.6 45.5
Surveys-Tues Bear:-5yrs 15.4 16.5
Wed. AAII  -Bull  35.6 25.4
Bear  21.7 34.3
COT:SPX w/w large/small (net)k 9k/(8k) 7k/(51k)
COT:gold  comm.hedg long-short.000 (101k) (76k)
COT:OIL comm.hedg long-short. (335k) (330k)
US$-WSJ 86.7 85.6
CEOinsider selling 9:1 24:1
off.&bd b/s.vs. 10% holder b/s 160/50 160/35
3-box rev Bullish%-  61 62
US equity -ICI Fund Flows WeekDelay (3.5B)
MMF flows Change in $B 2.7B (11.1B)
MargDebt- top (300M) monthly  507B
ETF:mthlyEqty/ Int'l/Bond-$B 1256/519/318
2-yr Tsy Yield: Inflation 0.72% n/a
TIP (ETF) Inflation 111.44 112.61

With record numbers of dollars coming out of Money Market Funds, mostly into the crowded trade of short term bonds, anyone who has a minimal knowledge of covered call options and/or an interest in hedging stock market exposure might want to check out: brentleonard.com for an alternative strategy that is low-risk as well as highly rewarding. For those of you wanting more details and actual trading results, a new book is available for $14.95 at Amazon.com: Zero (IN)Tolerance


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Monday, June 22, 2015

WISDOM OF CROWDS

In his epic book - The Wisdom of Crowds, James Suroweicki avers that masses of people will come up with the right solution to problems (as exhibited in the TV show where a "HELP" line was usually the best resource); however, in the Memoirs of Extraordinary Popular Delusions and the Madness of Crowds by Charles Mackay, he opines that crowds do exactly the wrong thing at the wrong time - an Contrary Opinion is the best tool for forecasting. So who is right?

Actually, both are! Depending on the timing. As local analyst Harry Domash recently stated at a Money Show talk: The Trend is your Friend until it Bends at the End! In other words, it is at extremes that surprises occur. The current Bull stock market, although not record-setting in lack of corrections or Bear markets, is quite long in the tooth. Per a recent Barron's headline - the SPX has gone 1350 days without even a 10% correction. Prior longer records were 2004-07 and 1990-97 - and we know how that ended up!

Still, there is little evidence that the end is nigh - record margin interest - much higher than the above two periods- could result in a cascading drop, similar to the 1987 "Portfolio Insurance" calamity, where selling begat more selling. Most other Sentiment Indicators are still quite average; and the AAII (Individual Investor) Bulls have dropped below 30% for almost two months- recently 20% and 25%. No complacency here, especially with all the global troubles pending. The Retail investor has been conspicuously absent during this rally from March 2009, with the exception of Index ETFs.

The Nasdaq continues to make new highs, although the Volume dropped last week in relation to the NYSE - the Naz being the more speculative vehicle - possibly due to Triple Witching of expiring options. The NYSE Volume Friday was more than the previous two days combined!!! The McClellan Summation Index - cumulative reading of the Oscillators - continued to be negative - a rara avis, and a Bullish sign historically. Finally, money is flowing out of both MMFunds and Equity mutual funds - where is it going? We should know more next week when the monthly numbers from ICI come out (see below):

Date> 6/19/2015 6/12/2015
Indices: DJIA  18015 17898
  NAZ  5117 5051
SPX  2109 2094
WklyVolume (Bshs). naz/ny…. 9.2/4.8 8.2/3.6
Specul.Ratio hi=bullish 1.92 2.28
Sentiment: put/call-CBOE  62 58
VIX>50-alltmlow=8.8 14 13.8
Advance/Dec-NYSE.. 1766/1477 1442/1801
Weekly Net: 289 -359
     Cumulative: 166146 165857
Weekly  NYSE hi/low… 237/241 212/292
New Hi's/Low's Nasdaq h/l 380/146 307/120
McClellan  Oscillator 0 -25
McClellanSum .+750/-1000 -199 -150
Newsletter Inv.Intel -Bull 45.5 47.4
Surveys-Tues Bear:-5yrs 16.5 16.5
Wed. AAII  -Bull  25.4 20.0
Bear  34.3 32.6
COT:SPX w/w large/small (net)k 7k/(51k) 6k/(28k)
COT:gold  comm.hedg long-short.000 (76k) (79k)
COT:OIL comm.hedg long-short. (330k) (325k)
US$-WSJ 85.6 86.3
CEOinsider selling 24:1 18:1
off.&bd b/s.vs. 10% holder b/s 160/35 160/50
3-box rev Bullish%-  62 61
US equity -ICI Fund Flows WeekDelay (3.9B)
MMF flows Change in $B (11.1B) (7.7B)
MargDebt- top (300M) monthly  507B APR.:
ETF:mthlyEqty/ Int'l/Bond-$B 1256/519/318 APR.:
2-yr Tsy Yield: Inflation 0.73%
TIP (ETF) Inflation 112.61 111.67

With record numbers of dollars coming out of Money Market Funds, mostly into the crowded trade of short term bonds, anyone who has a minimal knowledge of covered call options and/or an interest in hedging stock market exposure might want to check out: brentleonard.com for an alternative strategy that is low-risk as well as highly rewarding. For those of you wanting more details and actual trading results, a new book is available for $14.95 at Amazon.com: Zero (IN)Tolerance


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Monday, June 15, 2015

DEGREES OF SEPARATION

According to the American Enterprise Inst., 100 years ago only 3% of High School graduates went on to higher education; 50 years ( my era, thanks to an athletic scholarship) it was 25%. Currently, thanks (??) to Uncle Sugar, it is 2/3 of the grads. Unfortunately - per BLS- less than 40% of current jobs need a college degree.

Another surprising stat, thanks to this week's Barron's, despite Income Inequality, U.S. households are now at record levels of prosperity -thanks to recovering stocks and housing prices - this stat from the Fed's Flow of Funds, who arranged the above. Although people who work and have pensions, stock options, 401ks, etc. are benefiting from the stock market rise (tripling since 2009), only 10% of stockholders (think CEOs of startups) own 80% of the stocks. And 15% of mortgage-holders are still under water.

Although it is nice to live in a country with a Benevolent Gov't ( Congress looking out for you {r Vote} ), it seems whenever they put their thumb on the Free Market Scale, bad things happen - Soc. Sec., Medicare, Housing Bubbles, (Stock Markets?), College Loans, ad nauseam. I even wonder about San Francisco's enticements to tech companies causing housing and rents to skyrocket (where do the busboys and teachers live?). The average studio apartment rents now for over $3,000/month.

The Stock market continues to be in  a Zombie trance, albeit wild daily swings, going nowhere (up less than 1% for the year. As seen in the table below, Volume is not that strong - usually from High Freq. traders the first and last hour of the day.  What stands out, however, is the Bull/Bear ratio of the AAII (Individual) inverting to a 20/32 ratio - bullish for stocks. Also notable, the McClellan Summation Index ( collecting advancing versus declining stocks) sank through the zero line. "Bears" watching for the near future. Finally, commodities smart money are still quite short.

Here are last week's numbers:


Date> 6/12/2015 6/5/2015
Indices: DJIA  17898 17849
  NAZ  5051 5068
SPX  2094 2092
WklyVolume (Bshs). naz/ny…. 8.2/3.6 9.0/3.6
Specul.Ratio hi=bullish 2.28 2.5
Sentiment: put/call-CBOE  58 59
VIX>50-alltmlow=8.8 13.8 14.2
Advance/Dec-NYSE.. 1442/1801 1329/1911
Weekly Net: -359 -582
     Cumulative: 165857 166215
Weekly  NYSE hi/low… 212/292 189/228
New Hi's/Low's Nasdaq h/l 307/120 300/140
McClellan  Oscillator -25 -39
McClellanSum .+750/-1000 -150 31
Newsletter Inv.Intel -Bull 47.4 51.5
Surveys-Tues Bear:-5yrs 16.5 15.8
Wed. AAII  -Bull  20.0 27.3
Bear  32.6 24.6
COT:SPX w/w large/small (net)k 6k/(28k) 8k/(16k)
COT:gold  comm.hedg long-short.000 (79k) (108k)
COT:OIL comm.hedg long-short. (325k) (340k)
US$-WSJ 86.3 87.5
CEOinsider selling 18:1 37:1
off.&bd b/s.vs. 10% holder b/s 160/50 .160/40
3-box rev Bullish%-  61 63
US equity -ICI Fund Flows WeekDelay (4.2B)
MMF flows Change in $B (7.7B) 3.1B
MargDebt- top (300M) monthly  APR.: 507B
ETF:mthlyEqty/ Int'l/Bond-$B APR.: 1256/519/318
2-yr Tsy Yield: Inflation 0.73% 0.72%
TIP (ETF) Inflation 111.67 111.4

With record numbers of dollars coming out of Money Market Funds, mostly into the crowded trade of short term bonds, anyone who has a minimal knowledge of covered call options and/or an interest in hedging stock market exposure might want to check out: brentleonard.com for an alternative strategy that is low-risk as well as highly rewarding. For those of you wanting more details and actual trading results, a new book is available for $14.95 at Amazon.com: Zero (IN)Tolerance


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Monday, June 8, 2015

TECHNICALITIES

As mentioned previously most of my stock market analysis is done with Technical Analysis, while still using Fundamental for longer term, Observable yet not Actionable, results. Recently Barron's stated that analysts' estimates of stock earnings missed by 35%; the employment numbers last week missed by 25%. How does this help one make money or, better yet, keep from using it.

Today's market action decline, as expected, bounced up off the S&P 500 level of 2080, where there seems to be quite a bit of Support - i.e., where previous Buyers came in and Sellers stopped selling. After 3 weeks of declines, both in Price and Breadth ( Advances vs. Declines), this week should be closely watched.

The advent of technology has been a boon to Technical Analysis in that it allows megadata to be analyzed as never before - add to that (again as reported in Barron's) HFTs (high frequency traders, or electronics) are moving more and more in "herds", which is what Sentiment and Contrary Opinion is all about. The Trend is your Friend 'til it Bends at the End!

Sentiment Indicators show no reason to panic yet, with the VIX up slightly, but the AAII Bull/Bear surveys close to even; small S&P futures traders are still net short, while large ones are long. The Indicator - Bullish % - a measure of stocks on a Buy signal, is high, but not at extremes yet; looking back at my data from 2000, this is one of the better ones to look at for tops and bottoms.

Here are the numbers:
Date> 6/5/2015 5/29/2015
Indices: DJIA  17849 18010
  NAZ  5068 5070
SPX  2092 2107
WklyVolume (Bshs). naz/ny…. 9.0/3.6 7.2/3.4
Specul.Ratio hi=bullish 2.5 2.12
Sentiment: put/call-CBOE  59 64
VIX>50-alltmlow=8.8 14.2 13.8
Advance/Dec-NYSE.. 1329/1911 965/2259
Weekly Net: -582 -1294
     Cumulative: 166215 166797
Weekly  NYSE hi/low… 189/228 148/132
New Hi's/Low's Nasdaq h/l 300/140 190/142
McClellan  Oscillator -39 -34
McClellanSum .+750/-1000 31 175
Newsletter Inv.Intel -Bull 51.5 48.5
Surveys-Tues Bear:-5yrs 15.8 14.9
Wed. AAII  -Bull  27.3 27.0
Bear  24.6 25.1
COT:SPX w/w large/small (net)k 8k/(16k) 8k/(16k)
COT:gold  comm.hedg long-short.000 (108k) (110k)
COT:OIL comm.hedg long-short. (340k) (345k)
US$-WSJ 87.5 87.3
CEOinsider selling 37:1 27:1
off.&bd b/s.vs. 10% holder b/s .160/40 .160/20
3-box rev Bullish%-  63 64
US equity -ICI Fund Flows WeekDelay (2.9B)
MMF flows Change in $B 3.1B 4.6B
MargDebt- top (300M) monthly  507B
ETF:mthlyEqty/ Int'l/Bond-$B 1256/519/318
2-yr Tsy Yield: Inflation 0.72% 0.61%
TIP (ETF) Inflation 111.4 113.21




 

With record numbers of dollars coming out of Money Market Funds, mostly into the crowded trade of short term bonds, anyone who has a minimal knowledge of covered call options and/or an interest in hedging stock market exposure might want to check out: brentleonard.com for an alternative strategy that is low-risk as well as highly rewarding. For those of you wanting more details and actual trading results, a new book is available for $14.95 at Amazon.com: Zero (IN)Tolerance


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Friday, June 5, 2015

Torpedo Ahead

Another disappointing security was just sold, minimizing the loss with dividends and ITM calls: Century Tel (CTL).
Bought 200 shares at 40.54, and gave up today with huge Insider Selling (Form 4), despite B rating by Schwab and 5 star by S&P !! Sold at 32.28 ($1669 loss) ameliorated by $700 div'ds and calls sold, for a loss of $975. Better than just owning the stock and watching it drop.
Once again DITM not only enhances return, but minimizes losses.
Current positions include VZ, CVX, INTc, GM, GG, UVV, VNR (partially called away).

With record numbers of dollars coming out of Money Market Funds, mostly into the crowded trade of short term bonds, anyone who has a minimal knowledge of covered call options and/or an interest in hedging stock market exposure might want to check out: brentleonard.com for an alternative strategy that is low-risk as well as highly rewarding. For those of you wanting more details and actual trading results, a new book is available for $14.95 at Amazon.com: Zero (IN)Tolerance


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Monday, June 1, 2015

GETTING SENTIMENTAL (NOT FUNDAMENTAL)

Twenty years ago I got my CMT designation (Chartered Market Technician) from the Market Technician's Ass'n, comparable to a Master's - three levels over three years, including a thesis which was on Sentiment, or Contrary Opinion, sometimes viewed as the fourth leg of the Technical Analysis stool of Price, Volume over Time. Since then I have written a blog on the Indicators I feel are most meaningful as to market direction, short and long term. Important to remember is that change of direction occurs when a majority of Indicators reach EXTREME; the "crowd is usually right during the trend!

For new readers I wanted to explain the matrix below and how to use these.

First, the major Indices - Dow 30, Nasdaq or Over The Counter, and S&P 500 (SPX) levels, week over week.
Nasdaq to NYSE (New York Stock Exchange) Volume indicates the level of speculation- high OTC.
The CBOE (Chicago Board of Options Exchange) put/call ratio measures how afraid traders are of the immediate future - buying put options to hedge or speculate on a downturn - this is one of the better short term signs, as they are usually wrong- i.e., high put/calls are Bullish.

The VIX, or Volatility Index is more intermediate term and coincident, rather than leading - at current low levels (12 or 13) it could foretell an imminent drop in the market - VIX calls can be used as a hedge, as they rise in downturns.

Advance/Declines are Breadth Indicators, showing investors' confidence in stocks - they have been negative most recent weeks.

Two market survey letter - the Intelligent Investor, put out by wire houses on broker advice, and AAII, or Independent Investors polled by postcard weekly, are also contrary Bull/Bear signals. High Bulls on either, especially AAII, are dangerous short term.

COT or Commitment of Traders is a record of trades done on various commodities, with commercials hedging being the "Smart Money". Various records of Insider Trading - CEOs, 10% holders, etc. have been boringly stable recently and of no apparent use. Fund flows are also of interest, but not actionable. Margin Debt is at record levels (with low interest rates) but are coincident.

Here are last weeks numbers:
Date> 5/29/2015 5/22/2015
Indices: DJIA  18010 18232
  NAZ  5070 5089
SPX  2107 2126
WklyVolume (Bshs). naz/ny…. 7.2/3.4 8.3/3.4
Specul.Ratio hi=bullish 2.12 2.44
Sentiment: put/call-CBOE  64 64
VIX>50-alltmlow=8.8 13.8 12.1
Advance/Dec-NYSE.. 965/2259 1496/1731
Weekly Net: -1294 -235
     Cumulative: 166797 168091
Weekly  NYSE hi/low… 148/132 265/110
New Hi's/Low's Nasdaq h/l 190/142 300/152
McClellan  Oscillator -34 -8
McClellanSum .+750/-1000 175 274
Newsletter Inv.Intel -Bull 48.5 50.6
Surveys-Tues Bear:-5yrs 14.9 15.8
Wed. AAII  -Bull  27.0 25.2
Bear  25.1 25.0
COT:SPX w/w large/small (net)k 8k/(16k)
COT:gold  comm.hedg long-short.000 (110k) (133k)
COT:OIL comm.hedg long-short. (345k) (350k)
US$-WSJ 87.3 86.3
CEOinsider selling 27:1 36:1
off.&bd b/s.vs. 10% holder b/s .160/20 .160/50
3-box rev Bullish%-  64 64
US equity -ICI Fund Flows WeekDelay (5.4B)
MMF flows Change in $B 4.6B 20.6B
MargDebt- top (300M) monthly  507B
ETF:mthlyEqty/ Int'l/Bond-$B 1256/519/318
2-yr Tsy Yield: Inflation 0.61% 0.62%
TIP (ETF) Inflation 113.21 112.93
 

With record numbers of dollars coming out of Money Market Funds, mostly into the crowded trade of short term bonds, anyone who has a minimal knowledge of covered call options and/or an interest in hedging stock market exposure might want to check out: brentleonard.com for an alternative strategy that is low-risk as well as highly rewarding. For those of you wanting more details and actual trading results, a new book is available for $14.95 at Amazon.com: Zero (IN)Tolerance


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Wednesday, May 27, 2015

QUITE CONTRARY

Contrary to what I posted earlier this month (Contrarian that I am!), after visiting with family and friends over the past two weeks in Redding and So. Lake Tahoe, I find that some extended family members ( possibly back east) would like to hear what I have to offer in the way of Investment Finance info I dig up each week and report on my blog - Mktsentiment.blogspot.com , after over ten years of doing so.

I don't pretend to know or forecast what the market will do short term - no one can do that, just as with the weather or Economy. Contrary to these last two predictions which are impossible to envision long term, short term markets are harder (less profitable) to trade, unless you are a highly trained trader or HFT (high frequency trader- computer).

For young people just starting out, as well as retirees who do not need their 401Ks/IRAs for emergencies ( passing them on to heirs) IMO the stock market is the place to be. Lately the go to investment is Index funds - either mutual funds, or ETFs (Exchange Traded Funds) which are usually mutual funds traded on an exchange, such as the New York SE. They have outperformed "managed" funds due to very low management fees.
I recently read that over 50 years, with a high fee (over 2% annually) the managed fund fees will suck up 66% of the money you invest - outrageous!

Having worked for Schwab, I can recommend their Index funds as well as Vanguard's.
Over time, stocks have outperformed all other asset classes such as Real Estate, Gold, Bonds, etc. , although as we've seen this century, all have Boom/Bust cycles.
I've mentioned in previous columns that DCA (Dollar Cost Averaging) is definitely the way to go - adding a set amount at fixed periods over time. For example, if ine had just started to invest for retirement in the Nasdaq (Over The Counter, mostly tech stocks) in 2000, they would be at the same level now - unless they had contributed (DCA) during the bottoms of 2002 and 2009. Of course, even though the Composite Index (COMPQ) has risen from 1555 to its old high of 5048, it does not have near the 100 P/E ratio back then (now @19). With $CA one can actually be Happy to see the market sell off - one can buy more shares with a fixed amount!

Enough for now - nest week I hope to explain the purpose of my blog (above) for persons who want to "time" the markets using Technical Analysis (rather than Fundamental) - using Charts that show Price Volume over Time (as well as my favorite Indicator: Sentiment, or Contrary Behavior.

Below are my favorite Sentiment Indicators which I have followed over two decades, having gotten my Market Technician designation on that topic:  

Date>

5/15/2015
5/22/2015
Indices:
DJIA
18272
18232

NAZ
5048
5089

SPX
2122
2126
WklyVolume (Bshs).
naz/ny….
8.4/3.7
8.3/3.4
Specul.Ratio hi=bullish
2.27
2.44
Sentiment:
put/call-CBOE
59
64
VIX>50-alltmlow=8.8
12.4
12.1
Advance/Dec-NYSE..
1883/1323
1496/1731
Weekly Net:

560
-235
     Cumulative:

168326
168091
Weekly
NYSE hi/low…
198/118
265/110
New Hi's/Low's
Nasdaq h/l
238/150
300/152
McClellan
Oscillator
n/a
-8
McClellanSum
.+750/-1000
n/a
274
Newsletter
Inv.Intel -Bull
47.5
50.6
Surveys-Tues
Bear:-5yrs
15.8
15.8
Wed.
AAII  -Bull
26.7
25.2

Bear
26.4
25.0
COT:SPX w/w
large/small (net)k

COT:gold  comm.hedg
long-short.000
n/a
(133k)
COT:OIL comm.hedg
long-short.
n/a
(350k)
US$-WSJ

n/a
86.3
CEOinsider
selling
n/a
36:1
off.&bd b/s.vs.
10% holder b/s

.160/50
3-box rev
Bullish%-
64
64
US equity -ICI
Fund Flows
(5.0B)
WeekDelay
MMF flows
Change in $B
(1B)
20.6B
MargDebt- top (300M)
monthly


ETF:mthlyEqty/
Int'l/Bond-$B


2-yr Tsy Yield: Inflation
n/a
0.62%
TIP (ETF)
Inflation
n/a
112.93



For those FB readers who get too much "spam" already (I had to stop FB on my cell as it ran me over on my data feed amount), they can block my weekly utterances by going to home page - click on the fourth icon to the right of Find Friends on the upper toolbar (the padlock).

With record numbers of dollars coming out of Money Market Funds, mostly into the crowded trade of short term bonds, anyone who has a minimal knowledge of covered call options and/or an interest in hedging stock market exposure might want to check out: brentleonard.com for an alternative strategy that is low-risk as well as highly rewarding. For those of you wanting more details and actual trading results, a new book is available for $14.95 at Amazon.com: Zero (IN)Tolerance


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