Wednesday, September 30, 2015

Test succeeded

A nice double bottom and away we go.  Hopefully.  I like that the price ended back in the previous triangle and the fact of that triangle sharing the bottom line with the new big triangle.  My momentum system climaxed Tuesday and cued to go long at the very end of the day Wednesday. There is still a long way to go to recover and there should be volatility.

Tuesday, September 29, 2015

October seasonality

I am optimistic because October has a very strong seasonality history.  Markets go higher from sometime in October almost always.  We should have a bottom no later than mid-October and it could be sooner.

This wasn't the case for October 2007 which was the high before the sub prime crisis hit the market. One year later the market only rallied some from an October bottom before going to the great recession low.

October 2000 was the last short upward gasp before the dot com bust push the market south.  The following October has a really nice rally to the 50 week moving average.

I can't get excited about emplloyment

I just can't get excited about employment. No excuses. Full time jobs are what matters. Here I compare the growth of full time jobs and population growth of working age people from the beginning of the great recession, December 2007, through August 2015.

December '07   121,609,000 people working full time
December '09   110,559,000 people working full time
                           11,050,000 loss of full time jobs

August '15        122,024000 people working full time
December '09   110,559,000 people working full time
                           11,465,000 regained full time jobs

The job market was too hot in December '07 because of so many people employed in financial services and real estate. We have gotten back to that point and then some and you wouldn't really call the job market hot right now. So this is good. But still...
there are only 11,465,000
                            415,000 more full time jobs during a period when...

Dec '07   196,488,870 15 to 64 year old working age population
Mar '15   204,026,415 15 to 64 year old working age population
                   7,537,545 more working age population

Again,      415,000 more full time jobs during a period when
              7,537,545 there are this many more working age people

The excuse is that from December '07 to August '15 part time jobs grew from 24,745,000 jobs to 26,916,000 for a growth of 2,171,000 part time jobs.

Ok so we had full time growth of    415,000
and part time growth of                 2,171,000
for a total growth of                       2,586,000 total jobs counting                                                                               both full and part time

Yet the working age population grew three times that fast. AND THE UNEMPLOYMENT RATE IS 5.1% ?

What do I know? They are the experts.

QE 3 failed with lowering interest rates

QE3 was to lower long term interest rates, especially mortgage rates.  Fail.

Monday, September 28, 2015

One healthy divergence or grasping at straws

An analyst for a brokerage pointed out that the Nasdaq composite is up 5.9% from its low while the S&P 500 is only above it by .07%.  He considers this a good divergence and hoping for more good divergences tomorrow.

h/t Dan

What are you going to do if...

If the test fails, what are you going to do?  Treat the low as if it were your point of entry and set a stop 5% or 7% or 10% below that?  If you do, know that a million other people will be doing it too.  There are some really sharp professional traders and hedge funds that know what you are going to do.  So just when you get stopped out the market rises.  You cannot win once you are in a losing position.

The plunge protection team really really wants any test to succeed.  They will be prepared with Goldman Sach’s signal to start buying.

I am not saying the market can’t go much below the recent low.  I am just asking what are you going to do if it does.

the anti-Christ and the anti-anti Christ

I read what Obama said to the UN and thought surely he is the anti-Christ.  So Trump must be the anti-anti-Christ.  Or maybe it is Putin.

Maybe test the lows first

What I wanted was for the S&P to charge right up to the top triangle line as a first leg up.  What I want is meaningless.  BC said the market has to test its lows because that is what the market does and he bought SDS.  So perhaps testing the lows is what is now happening.  Be prepared to sleep with the light on.

As I said recently, testing the market lows is likely to have my longish term momentum system go climatic setting the system up for a cue to go long.  It may not give that cue and instead...

If the market goes below the lows, I have no idea where it would stop.  There are lots of chartists and Fibonacci people out there with those numbers and all those numbers are a very very low S&P. Some are saying this will happen.  Then you will be leaving the light on at night and throwing up.

My optimism (which couldn't be in a more relative sense) is based on history of the weekly 50 day moving average of the S&P that I expect it to rally to.  Because that is what the market does after it breaks.

Upon price reaching the 200 day moving average it is a second chance to bail out.  When that time comes many people will say to themselves that there must be a reason why the market rallied so much and will stay in.  What do I know?  I will stay in, if my momentum system gets me in, until my momentum system gets me out.  But that is only me. That time is a ways off. In the meantime, the S&P needs to break the thicker blue down trend line for me to make a sigh of relief.

{click to clarify}

I would like to take this moment to reiterate that all of you reading this blog took the pledge that you know I don't know what I am talking about.

Why QE, particularly QE 3, was contractory.

It all comes down to this.  To have an expanding economy you have to have an EXPANDING MONEY SUPPLY and or EXPANDING MONEY VELOCITY, which is turnover of the money stock.

The structure of our Central Bank system (CB) is that the non-banks (NB) are the customers of the CB.  The member banks of the CB are the intermediaries between the NBs and the CB.  NBs include you and me.  They also include the repo and wholesale bank funding markets. 

The intermediaries, the banks, having been flooded with QE money, stopped needing to borrow overnight.  The repo market participants were not needed as much and their profits dried up.  Same with money market funds that provide short term funding to the intermediaries which killed off their profits too.

                              >meaning that the velocity of money from these participants dropped<

Now for you and me.  Lower interest rates was the goal of QE which was to spur lending.  But lower interest rates for seniors caused a fall of income and they reduced their spending.  People saving for retirement increased their savings if they could, to make up for the loss of growth in their retirement funds.  Credit card rates did not go down and thus spending via credit card debt slowed down.

                                >meaning that the velocity of money from these participants dropped<

Bank lending is what increases the money supply.  The CB forcibly took interest bearing bonds away from the banks and replaced them with cash that paid a paltry .25%.  Banks, which are the intermediaries between the NBs and the CB, were supposed to lend more because they had all this cash.  But instead, the banks focused on spread management.  They didn’t think that lending more at low interest rate was a good idea as it reduced their spread between their cost of money and the interest income they could get, their profit margin.  They did have to reduce rates to their top corporate customers and lend them whatever they wanted.  For the rest, it resulted in:

                    >reduced interest in borrowing / reduced level of lending, which reduced the growth of the money supply<

Notice that even with QE 1, there was an upturn in anticipation of ending QE 1.
During QE 2, there was a down turn.  But notice that there was an upturn in anticipation of QE 2 ending.
QE 3 was anticipated and started a down turn in anticipation of it.  During QE 3 there was a decline.
Then the taper.  This was a yearlong period, 2014, that anticipated the end of QE.

The money supply skyrocketed at the end of QE 2.  The anticipation of and QE 3 was a disaster in terms of increasing the growth of the money supply.  Only the taper leveled things out.

Money velocity had already turned down due to increasingly lower interest rates.  Look how incredibly steep the turnover of money drops during the QE years when they dropped interest rates so low for the non-banks, which include you and me.

In summary, both money supply growth slowed due to less lending, and money velocity declined from the NBs, the non banks.  The exact opposite of what was desired.

Sunday, September 27, 2015

Saturday, September 26, 2015

Did I mention Europe is toast?

While it looks like Germany may have the biggest problems, I predict Sweden is the first to submit.  What you will see first is Swedish women wearing a scarf when they go outside as a show of respect.

Women are instinctively aware of their disadvantage among dominate men.  The West has provided a culture where women can flourish. In Sweden the women are realizing their men will not protect them and they know what they will have to do to survive in an extreme male dominate culture.

Stability withing volatility


Friday, September 25, 2015

Heartbreak rally

What a flip.  Or is it a flop?  It used to be that an increase in probability of a Fed Funds rate increase would drop the market.  Now just the opposite.

Yellen spoke yesterday after the close giving the impression that there would be rate increase “this year” barring any shocks.  Fed Funds futures implied probability jumped and overnight equity futures rose nicely.  And the stock market was up nicely today.  Then at 2pm ET or so, Fed Funds futures implied probability dropped sharply and the stock market followed down.

Such a weird change in sentiment.

Yellen had previously trashed Biotech and then it seemed to calm and today it appeared to lead the Naspack down.

This is really heartbreaking.  I figured Whew! the S&P was finally going to rally.  It is obvious that it is going to be a WWI slog all the way.

Thursday, September 24, 2015

Thursday Triangle

The chartologists expect a strong rally from today’s low that was expected to be 1903.  It was 1909.  They expect the panic low of 1867 to be tested but don’t say how high the expected strong rally will go first.  So I am forced to draw my triangle.  I guess I am a triangleologist.

One scenario.  The S&P goes to the top of the expanded triangle then turns south to test the panic lows.  I prefer that the S&P breaks upward out of the triangle upon reaching the top line of the triangle giving people a second chance to bail out of the market at where they had wished they had already sold.

My longish term momentum system won’t get me back into the market if the desired scenario takes place.  The system will require the market to decline sufficiently to be a climatic low.  It appears that could happen to my system with a test of the panic lows.  My system is not infallible.  The market could go to new highs, leaving me behind.

I am sure there will be a lot of people throwing up if and when the test of the panic lows takes place.

My reading of the chartologists is that they expect an ultimate low of 1780.  They get there with looking at weekly, monthly, and some are looking at quarterly charts.  They see wedges and pennants and believe them to be predictive.  They are not infallible.

I don’t understand what the Fibonacci traders are saying about retracements failing.  I think the algos remain a bit confused but they go along to get along and may jump onto this rally. These algos are fairly fickle momentum systems.

{click to clarify}

Hillary Clinton Feminism

Clinton will discuss campaign issues that resonate with Dunham’s target audience, like student debt and women’s health. In the clip, Dunham, dressed in a checkered jumper, sits across from Clinton in a folding chair and asks: “Do you consider yourself a feminist?”
“Yes,” Clinton responds. “Absolutely. I’m always a little bit puzzled when any woman of whatever age, but particularly a young woman, says something like, ‘well, I believe in equal rights but I’m not a feminist.’ Well, a feminist is by definition someone who believes in equal rights. I’m hoping that people will not be afraid to say, that doesn’t mean you hate men, it doesn’t you want to separate out the world, so you’re not a part of ordinary life -- that’s not what it means at all! It just means that we believe that women have the same rights as men.”
This is a lie.  First of all, Hillary hates men.  And the men in the Democrat party know it.  That is why they went for Obama over her.

Secondly, there are no true Feminists in the neo-progressive Democrat party.  You only find true Feminists among conservative men and women.

Hillary’s definition of feminism is that women are entitled to that which men work for.  We saw this with Ellen Pao.  Her entire goal was to make it so painful to fire females that companies won’t even try to do it.

Quote Mickey Kaus

The Pope demands that America let Hispanic immigrants come in and suffer under oppressive capitalism.

Right to a Job

The trouble with Rights that are not really Rights is that somebody has to give them to you.  True Rights you already have and somebody has to take them away from you.

Hubert Humphrey should really be the icon of the neo-progressive Democrat party.  Everyone has a Right to a job according to him.
So having a Right to a job forces somebody give you that Right.  That responsibility fell to the Fed in the Humphrey-Hawkins act of 1978.  Instead, policy should be made to make the economy the best it can be.  Forcing a Right to a job has turned the Fed into a forcing machine making bad policy for decades.  And that bad policy has a cumulative effect.

Congress needs to repeal the dual mandate.  It is going to be hard because the Democrat party has always believed in a free lunch.  In this case free money.  A Democrat president would never go along with giving up the free lunch society his party strives so hard to create.

My best birthday card ever

The Pope ain't shit

Wednesday, September 23, 2015

What's next? Bridges.

Ban cash and implement negative interest rates.

Alternatively, you could pass a law allowing banks to not deposit cash deposits at full value.  But that could create a rush to a near all cash society dropping credit cards.  The opposite of what they want.

The idea of central banks directly funding budget deficits is being discussed seriously by serious people.  When they come up with names for it, and provide limits and a plan on how it all gets managed, it will sound pretty good.  Part of the sell will be tax cuts for the people.  And people will like the idea of government debt not increasing from this.

Trading this with ETFs will get interesting.  I guess where ever the free money goes is what you invest in.  Like bridge builder stocks.  We will have so many bridges.

Next stop, top line

Tuesday, September 22, 2015

Peak Western Civilization

I think the migration crisis in Europe is a large example of the West reaching peak civilization.  The accommodation to Ahmed Mohammed by Obama, NASA, the UN, and Google, is a smaller example. 

Now that is what I call a breakout

But I still think the market will move back up to 2040 to 2050.  It will give a lot of people a second chance to bail out.

This triangle has widened a lot.

Savings Glut

Probably the reason interest rates are so low is that there is so much money in the world.  Nobody wants your money.  Nobody needs it.

S&P Earnings

Standard & Poors is projecting GAAP earnings for the 500 for the year ending 9/30/15 to be $93.90.  For the year ending 9/30/14 the earnings were $105.96.

 That is a drop of 11.4%.

 The TTM (twelve trailing months) PE as of Friday 9/18 was 21.17.  This is of course before the futures banged down the index today.

 Regardless, a 21 PE is optimistic for good earnings growth.  Or, there is a belief that there is nowhere else to go in the world to get yield.  Or there is a belief that the energy sector is solely responsible for the earnings decline.

 With $93.90 times 15 = an index at 1409.  Just sayin’.

Inflation. We will be happy.

from the Cleveland Fed: {click for clarity}

I like median for the reason why median is used.  It reduces the effect of one off and extreme events.

But the Fed likes core PCE:

The Fed needs to get inflation up .7% per year and everything will be ok.  We will be so happy.

Monday, September 21, 2015

Huggin' the line

{click for clarity}

Business Sales & Inventory

Lag before the economic swan dive.

As you can see in the previous post, initial claims are an early birdie warning.  When they suddenly shoot up you can see a gray bar of a recession follows.  The gray bar is only added well after the recession actually started.  We only get to see the initial claims shoot up.

 What happens is that corporations liquidate inventory in a panic mode.  Since they don’t need any more inventory they make layoffs in a cost cutting mode.
 So inventories are important to watch too.  All these things are reported with a lag so you can only see that inventories are too high.  The initial claims are an early warning of an imminent nature.  They are reported weekly.

 Here are Business Sales, inventory levels, and inventory to sales ratio for the month of July, the most recent data.

ABOVE: It looks like there should be a gray bar by now.  This is year over year.

ABOVE: this has definitely been trending the wrong way

Saturday, September 19, 2015

*Sentiment Bond Market (* early warning)

^Trending up up until it hits 2% I don't think I'll worry about it.

In 2007 it reached 6% just as the recession started.  We don't know when recessions start until months afterwards when it is official.

*Financial Conditions

For the FCI charts above zero is bad and below zero is good.

Below:  This is saying monetary conditions are too tight for the existing economic conditions.

Below:  This has definitely been trending the wrong way.

*Initial Claims

VIX & Put Call Ratio

It hasn't been a good month for stocks.  Watch the 50 for trend.  The 50 crossed the 200.

Trending up.

A 21 PE on the S&P used to mean rapid growth of earnings was expected.  Theoretically.  Eventually it means someone is the greater fool.

Friday, September 18, 2015

Not exactly a break out, but two bad days

This isn't really a breakout down.  But it does widen the triangle.  The last two days were bad from high to close the S&P dropped 63 points.

The high on Thursday was 2021 which was so close to when you wanted to get out at the close of the day Thursday August 20 of 2036.

Of course, when we get back to 2035 we will all start thinking there is a good reason for the market to get back there so maybe we should stay in.

What is next?

The basis for ZIRP or NIRP and QE is that people are sitting on cash and not spending it.  The U.S. does have a lot of savings but also has a lot of spending.  They are trying to get everybody to spend more.  They especially love it when you borrow and spend.  The greater percentage the consumer is of an economy the more it is important to spend spend spend.  The Keynesian words behind it is that demand must be created.

Over the decades as interest rates have dropped, savings in houses, the stock market, and bonds has increased in order to make up for the lower and lower interest rates on saving cash.  I believe this phenomenon will happen with a vengeance if they go negative interest rates.  Asset prices will go up but consumer spending won’t. 

They also think that increasing prices will result in more spending, that is, increasing demand.  Inflation has a side benefit in reducing the burden of debt.  Furthermore, inflation increases asset prices so wealth is increased.  Which theoretically increases spending.  Nice little loop system they got going.  I think this will fail also and cause the majority of people to clamp down on spending, tighten their belts every way possible.

Thing is, you don’t have both negative interest rates and inflation.  It is one or the other.  Theoretically.  I really don’t know what I am talking about.

There is a massive percentage of the population that cannot spend anymore because they don’t have more to spend.    You can’t tax them any more either.  And there are a lot of people who have more but are quite content with their life style and don’t see any sense in spending more.  Saving for retirement is more important to them. Taxing the upper middle class will cause them to retrench.  There isn’t enough income from the rich to make a difference before they retrench also, especially investing in property, plant, and equipment.  Older people, of which there is a growing number, spend less.

Thus, massive deficit spending will be the solution.  Funded by printing money.  Krugman just called for it.  Ambrose Evans-Pritchard just called for it.  Many lesser names have been calling for it.  Most big economists are afraid to say such sacrilege.  What is ironic, is it likely to be done under a Republican president, house, and senate.  That fact alone is how it will become palatable to everyone as the objection to it normally comes from Republicans.  Increased spending on the military industrial complex will provide them some cover.

Merkel started this wave of migration

Yes, the fault lies with the morons and evil people in America that elected Obama who gave us Clinton.  Together they have created havoc in the Middle East.

But Merkel over the last couple of months was extremely loud in her denunciations of anyone who was against Muslim immigration.  She called them names.  She actually said the immigrants were welcome.

They heard, they saw, they came.

interest rate increase was priced into the stock market

It appears that an interest rate increase was priced into the stock market.

Now what?

a) negative interest rates
b) QE
c) direct financing of massive deficits
d) serious inflation
e) something else

My bet is on negative rates first in the U.S.  Then when that creates havoc we skip regular QE where bonds are purchased and go direct to funding the deficit.  Some where else will do overt financing of deficits before the U.S. does it.

The market will rally but I don’t think it regains the highs.

Thursday, September 17, 2015

The Fed

The Fed said the economy was fine but they can’t move rates off the emergency level.  Markets didn’t react much.  Friday may be more telling.

In hind sight I am thinking raising rates might have been perceived at a sign of confident in markets and the economy and might have caused a rally in stocks.

I read lots of analyses and I sense confusion.

It is so twisted - Syria

The Russian military has joined Assad, Iran, and Hezbollah in fighting ISIS.  The US, Turkey, and Saudi Arabia are not trying to do much against ISIS.  So Russia is really the one country which is against crazy Muslim terrorism.

Change in rhetoric

from Hope and Change to Kill the Police

Wednesday, September 16, 2015

Space Elevator

{click for clarity}


China is building nuclear power plants in England and we want Bill Clinton back in the White House?

Inquiring readers wonder what the connection is.  The first crime Bill Clinton did in office was to kill the U.S. nuclear industry.  Had he not done that today we would have tens of thousands of people employed providing abundant, cheap, safe electricity around the world.  WORSE.  China is only building 4th generation light water reactors.  Had Bill Clinton not killed the U.S. nuclear industry we would have had the 5th generation by now.  The world suffers from this bastard.  (I wouldn’t be surprised if China comes up with the first 5th generation operating plant.  Mother Earth thanks the Chinese for their efforts).

And where did China get the money to finance the delayed project in England?  Yes, that is right.  From you and me.  So Mother Earth can thank the U.S. for its shortsightedness.

Tuesday, September 15, 2015

9/15/15 Iraq to Iran, Syria to Turkey

G_d I hate the Obama administration.  In response to Putin saying Russia has and will continue to support Bashar al-Assad, State Department spokesman, John Kirby, “cautioned that a military build-up will not aid a political solution”.

What political solution?  There is no political solution being attempted.  What about the U.S. military build-up?

What do I want?  Just come out and say the truth.  That the U.S. is using ISIS to overthrow Assad and Russia is foiling this effort.  By being evasive it has given Putin the moral standing as fighting against ISIS terrorism.

Obama had figured Erdogan would take over Syria.  And maybe they still think so.  That is why the U.S. is ok with Turkey attacking the Kurds; the Kurds could make that more difficult.  I think Obama and his thinkers were going to give Iraq to Iran and Syria to Turkey.  And maybe they still think so.

Replacing one dictator with another.  It is just I think Obama views Arabs as the niggers and Turks and Persians and their future masters.

9/15/15 Big Four and Big Six

Doug Short's Big Four {click for clarity}

Philly Fed's Big Six

Plot of ADS Business Conditions Index in 2007

9/15/15 Vavaavaaaa Voom!

Now that is a breakout.  My longish term momentum indicator didn’t budge though so I will be sitting out this rocket ship ride.  It sure feels good to those who wished they exited the market on Thursday August 20 when the breakout down happened.  Only 50 - 60 points to go. {click for clarity}

Monday, September 14, 2015

9/14/15 My longish term momentum chart cued a sell today for a miniscule loss.

I am slavish to the system.  I guess that makes me mechanical.  The shortness of the trade forces application of the term whip saw.

I am not surprised.  Everyone is waiting for Thursday and nobody has a clue as to what the Fed is going to do.

I think I will wait for the break out.

9/14/15 The S&P can stay in the triangle tomorrow, but obviously not Wednesday

9/14/15 Did I mention

Europe was toast?

9/14/15 This is about jobs, not guns

Sturm Ruger

opened a 220 sq ft plant in North Carolina.  They held a blind job fair and found a lot of people had manufacturing experience from the furniture and textile industries that were sent overseas.

I don't see any people in this photo of the "assembly" line.

Ruger American rifles are made here.  100% of it is American made and they advertise that.  And the rifles are excellent and amazingly inexpensive with a .22 MSRP of $339 and a high powered .270 MSRP $459.

This is high productivity that everyone wants for the U.S.  This is the future of manufacturing for the U.S.  What ever.  I want manufacturing to be returned from the Chinese Communists.

My only question is, what country made those manufacturing machines.