5 CHARTS SHOWING WHY A SYMMETRICAL MARKET IS A HEALTHY MARKET
The following charts demonstrate how symmetrical this market remains. A symmetrical market is generally a healthy market. It is only when symmetry begins to break down and chaotic price movement becomes the norm that significant reversals take place. click chart to...
THIS SENTIMENT INDICATOR IS A BEAR’S WORST NIGHTMARE
History rhymes and so do bull markets. The 90s bull offers the astute investor a grab-bag of tidily wrapped treats for the taking. The treats come in the form of snippets of information that hint to us what to expect from a technology led bull market that is doubted, lambasted and scoffed at for most of the way up. With this in mind, I present quite possibly the only sentiment indicator that should be in the toolbox of an investor: The put/call ratio. What you see below is a moving average only version of the put/call going back nearly 20 years. You will immediately notice that we have not even started to dent the skeptic sentiment that marks important tops for secular bull markets. Instead put buyers remain resilient in their conviction that every 5% pullback will turn into a 25% pullback. A bear market will emerge. The skeptics will fly high above the city merrily cheering as the optimists are herded back into their lives of perpetual peasantry. The chart below flys in the face of this type of thinking while telling us exactly why the pullbacks are so short lived. In three words: Too many bears. click chart to enlarge...
5 CHARTS THAT WILL HAVE YOU SAILING THROUGH THE DREADFUL LEMON SKY IN THE WEEKS AHEAD
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HERE IS THE SUPPORT LEVEL THAT MATTERS MOST FOR THE MARKET GOING FORWARD
In my continuing lust for a market that has become increasingly plague ridden according to popular perception, I would like to present the following chart showing a key level of support that the market responded to in a dignified manner during today's trading. This dignified response to such an important area of support is yet another clue, in addition to recent small-cap outperformance, that the undercurrent of the market is bullish in its intent. Not many people can see it in the midst of the noise. But that is what bottoms are made of. In the chart below, I reference this article from exactly one year ago today titled "The Resistance Level That Matters The Most For The Bullish Case Going Forward." The resistance level of exactly a year ago is the support level of present day. The market is a poet. click chart to...
HERE IS WHY THE S&P HITS NEW HIGHS BY YEAR END
You know the market has hurt investors when the analysis becomes a plethora of "maybes," "coulds," and "should bes." The days of putting yourself out there for all to see has been replaced with putting yourself out there to make sure you aren't humiliated by being wrong. I don't believe in such timidity in analysis. With that said, I will offer the following proclamation: The markets will end 2014 at new highs after making a low in October. I base this on two pieces of analysis that nobody is talking about: 1. The 200 day moving average being broken for the first time in something like 500 trading days. This is a record. It's a tremendous record, in fact. The record should end this week as the S&P is an inch away from breaking the 200 day MA to the downside. First, let's talk about what the record signifies. The fact that persistence on the bid for the markets has been so relentless to not allow the S&P a decent pullback for nearly 500 days is NOT bearish. It is a testament to the strength of this bull market. Strength that will not subside from the first "real" pullback of this bull market. That bid will return with the force of a million bearded dwarfs into the seasonally favorable period of November-December. Let's look at past data dating back to 1990 with respect to previous "record" runs above the 200 day MA: A. The second longest run after the present one was from 1995-1996. The break of the 200 day MA took place in July. Just a couple months later the S&P was 10% higher. A couple years later it was close to 100% higher. B. The 3rd and 4th longest runs took place in the 50s and 60s. Too far back to have any relevance. However, the fifth longest run took place from Oct 92-Mar 94. After the S&P 500 broke its 200 day MA in March 1994 it declined by roughly 5%. That was the low...for the decade. C. The 7th longest run took place from Aug 96 - Oct 97. The break of the 200 day MA was a one day event here. 6 months later the S&P was higher by 30%. 2. Speaking of 1994, there is an interesting correlation occurring in the Russell with respect to that year. See chart below: click chart to enlarge There are other reasons, as well. Such as leadership, earnings, interest rates, the Dollar, oil prices, valuations etc. But I want to keep this focused. Those speaking of...
4 CHARTS THAT WILL RESCUE YOU FROM THE JAWS OF MEDIOCRITY IN THE WEEK AHEAD
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CURRENT STATE OF THE MARKETS: THE OLD MAN IN THE HARDWARE STORE
This market of ours will instantly compromise your standing among peers should you remain bearish for more than a week. You are made to seem like that old man at the hardware store telling kids to stay away from his inventory of porcelain toilets and urinals. Aged, decrepit, behind the times. As discussed in my August client letter, despite the new highs in the primary indices, the setups in individual stocks across the board is perhaps as unfavorable as any point during this bull run that started in 2009. You are essentially taking one unit of risk for three-quarters of a unit reward in most situations. Getting 1 to 1 has become rare. It used to be that finding risk/reward opportunities that offered up 1 unit of risk for 3 units of reward was somewhat commonplace. The signs of an aging bull market. Don't get me wrong, aging doesn't mean anywhere near ending. It just means that it is no longer young and glowing in nature. In the following charts I will demonstrate why I have taken the stance of the old man in the hardware store, raising my voice at the first opportunity, warning of the dangers of using garden tools without eye protection. In order to save face, I will end by unfastening my overalls and reviewing my two favorite growth names. Let's begin by looking at the Nasdaq Composite, which I will unabashedly admit to having believed, just a month ago, would be much lower than where it is actually trading at the moment. This conundrum offers us new reason to be cautious as discussed below: click chart to enlarge Next we look at the S&P, which is just hanging around an important technical point that could cause it some grief in the near term: And now the Dow. Another floater: Let's now turn our attention to two simple reasons to be optimistic. My favorite growth names, in the form of FB and TSLA. By no means should an investor expect both of these to make them an abundance of capital over the next few months. They could very well be prone to a pullback, which would be perfectly fine. However, if you are a believer in this bull market over the long-term, as I am, then these are the names that you want to be concentrated in. FB and TSLA lead the pack. Innovative, growth oriented, trail-blazers of Silicon Valley that are equal parts fundamental and technical prowess. Let's...
HERE’S THE ONLY CHART THAT MATTERS FOR THE REST OF THE WEEK
Instead of taking readers down a vast black hole of metaphorical market misery, taking into account vast sets of data that arrive at a semi-cogent conclusion, I have decided to present one chart to aide in gauging the market for the rest of the week. The market of 2014 has been a devilish brand of mischievous behavior that has led to some extremely narrow results. By narrow I mean that new highs are being accompanied by fewer eager participants, in the form of common stock, who are ready to embrace the highs as would be widely expected. Instead of traditional market leaders such as the SOX or the Russell, the markets have fallen in lust with large cap technology that has enabled the NDX to become a hero of sorts to those pursuing the bullish thesis. While the NDX is a perfectly acceptable market leader, there is something to be said about order in the markets. When the order of leadership changes, typically market participants are either being A) completely and totally hoodwinked into accepting a rally that is fraudulent in nature OR B) the market is shifting into a different phase that participants are rarely prepared for, with shifting leadership and expanded ranges for indicators that do not like to remain predictable for too long a time. Often times what can clue us into whether we are being A) hoodwinked or B) asked to change our expectations for what is normal leadership and ranges is to follow the simplest path by looking at the most obvious thing. In the current case the most obvious average that can provide with the greatest clues is not the SOX, Russell, Nasdaq or Transports, it is arguably the most widely followed popular average of all: S&P 500. Following today's bullish symphony of price appreciation the S&P is sitting right on the key trajectory that it plunged through on July 31st. This is the same trajectory was born at the 2009 lows. Needless to say, it matters...a lot. How we close this week in relation to this trajectory tells us everything about what to expect going forward for the markets. Additionally, while tech is at a new high with the Nasdaq, I would be hesitant to have a seat at the bull table until the S&P 500 confirms. This becomes especially true as the SOX and Russell 2000 are lagging substantially. Without further ado, I present the S&P 500 with notes: click chart to...
4 CHARTS THAT WILL MAKE YOU COMFORTABLE WITH CHAOS FOR THE WEEK AHEAD
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6 CHARTS DEMONSTRATING INVESTOR PERSUASION AND DISSUASION FOR THE WEEKS AHEAD
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