Signs of the Times
Last Year:
"Economic
Optimism Growing Amongst Brokers"
~ Schawb
Survey, March 8, 2011
"State of The
Stock Market: Bullish Overall"
~ Chart Swing Trader, March 21, 2011
"Better-than-expected
data on confidence and manufacturing bolstered optimism on the economy."
~ Bloomberg, April 15, 2011
"Temperatures
Lowest For Time of Year Since 1940s"
~ CBS Chicago, April 20, 2011
This Year:
"Global
mining industry remains optimistic that the commodity boom is going to run
for years."
~ Financial Post, March 6
"The outlook
for global growth is very good for commodities...it's a good story."
~ Business Day, March 8
"The [stock] bull
market that no one believes"
~ Huff Post, March 14
Momentum and sentiment numbers are at
levels associated with previous important tops. As noted last week, insider
selling has also reached that level. We keep in mind the dramatic Outside
Reversal in so many key items on March 8. Some thought it was triggered by
Bernanke's comments on that day.
Our view has been that markets were
primed for change, and the reversal was a "heads up".
Another such dramatic reversal will
be critical.
Perspective
Stock markets have had a very good
run. But, in these times there are no long-term trends. Rallies become so
compulsive - as do the inevitable sell-offs.
From the troubles of Summer 2010, the
S&P rallied 31.7% in nine months.
From the troubles of last
August-September the gain has been 30 percent, and counting, in only five
months. Fears of October have been forgotten as the favourable
season continues. Last week, we noted that firm crude oil prices would "sustain
speculative interest in the general stock markets".
Recent interest is focusing upon
Apple, which is a phenomenon, and the banks, which is a caution. The latter
(BKX) have enjoyed a sharp rally on almost certain knowledge that the
"stress test" would be benign. It should be stressed that the test
is a computer model build on macroeconomic assumptions. For more than a
decade, Mister Market has shown little regard for such models.
The 13 percent rally in a couple of
weeks has driven the RSI to the level reached with the high at 59 last April.
That was an important high and the subsequent low was 33 in the gloom of
October.
One of the features of important tops
is that all sectors may not peak at the same time. Base metal mining stocks
(SPTMN) topped in late January and the Transports in early February. The
recent high for the Oil Patch was at the end of February.
Overall stock market atmosphere is
becoming rather heady.
Credit Markets
At the short-end, spreads stopped
narrowing a month ago, but have yet to reverse. At the long end - corporate
spreads continued to narrow.
Over in the dreadful world of
sub-prime the strong rally from October ended in Early February. The price
has declined to a narrow trading range. No break down.
The "saucering"
bottom in the twenty-year yield has resulted in a distinctive rise in rates.
In so many words, the top is in for the bond contract and the action has
rolled over. Some of the decline could be due to firm economic numbers, but
it is worth keeping in mind that the long bond has been a huge asset in play
and the play appears to have ended.
However, the municipal sector has not
been doing well. After registering an Upside Exhaustion in February, the MUB
has suffered a sharp decline. Last week, the NPI accomplished a big test of
the high set in early February. The three-day decline has been interesting.
Commodities
Once again, the street is hot on
commodities.
Base metals (GYX) enjoyed a good
rally to an RSI in early February that has ended recent rallies. The chart is
in a narrowing wedge that will likely fail and set the down trend.
Grains (GKX) are still in a modest
rise.
Crude is in a favourable
season that could run for a number of weeks.
Currencies
Last week we noted that the dollar
was still in the pattern that has led to important rallies. Rising through 80
would be an important step and the action yesterday almost made 81, but
needed a little rest. This could run into next week.
Mister Velocity Continues To Ignore The Fed
U.S. Banks
It's like calling a tin of Spam a
"Terrine of Ham".
Bob Hoye
Institutional Advisors
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Copyright
© 2003-2008 Bob Hoye
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