Category Archive: 6b.) Acting Man

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Trade War Game On!

2018-04-09

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2018-04-09

Ancient Chinese
“Things sure are getting exciting again, ain’t they?” The remark was made by a colleague on Tuesday morning, as we stepped off the elevator to grab a cup of coffee.

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Short Term Market Signals

2018-04-01

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2018-04-01

SPX Daily, RUT Daily and SPX-RUT Ratio, Dec 2016 - Mar 2018
We reviewed the daily charts after yesterday’s close and noticed that the Russell 2000 Index, the NYA and transportation stocks all exhibited relative strength (the same holds actually for the DJIA), particularly vs. the FANG/NDX group. This is happening just as the SPX is battling with an extremely important trendline. As we pointed out before, relative strength in the RUT in particular served as a short term reversal signal ever since the...

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GBEB Death Watch

2018-03-31

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2018-03-31

DJIA and NDX Daily, May - Nov 1987
As our friend Dimitri Speck noted in his recent update, the chart pattern of the SPX continues to follow famous crash antecedents quite closely, but obviously not precisely. In particular, the decisive trendline break was rejected for the moment. If the market were to follow the 1987 analog with precision, it would already have crashed this week.

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Trendline Broken: Similarities to 1929, 1987 and the Nikkei in 1990 Continue

2018-03-30

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2018-03-30

S&P 500 Large Cap Index, Apr 2015 - Mar 2018
In an article published in these pages in early March, I have discussed the similarities between the current chart pattern in the S&P 500 Index compared to the patterns that formed ahead of the crashes of 1929 and 1987, as well as the crash-like plunge in the Nikkei 225 Index in 1990. The following five similarities were decisive features of these crash patterns.

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Slaves to Government Debt Paper

2018-03-29

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2018-03-29

The Road to Serfdom
Picture, if you will, a group of slaves owned by a cruel man. Most of them are content, but one says to the others, “I will defy the Master”. While his statement would superficially appear to yearn towards freedom, it does not. It betrays that this slave, just like the others, thinks of the man who beats them as their “Master” (note the capital M). This slave does not seek freedom, but merely a small gesture of disloyalty.

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What Fed Chair Powell Forgot to Mention

2018-03-26

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2018-03-26

Jerome Powell
What are the chances of Federal Reserve Chairman Jerome Powell being wrong? The chances he’ll be wrong on the economy’s growth prospects, the direction of the federal funds rate, and inflation itself? Our guess is his chances of being wrong are quite high.

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US Stock Market – How Bad Can It Get?

2018-03-25

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2018-03-25

Robert Taylor and Deborah Kerr
In view of the fact that the stock market action has gotten a bit out of hand again this week, we are providing a brief update of charts we have discussed in these pages over the past few weeks (see e.g. “The Flight to Fantasy”). We are doing this mainly because the probability that a low probability event will actually happen has increased somewhat in recent days.

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Incrementum’s New Cryptocurrency Research Report

2018-03-23

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2018-03-23

BTC Hourly, 16 - 23 March 2018
As we noted on occasion of the release of the first Incrementum Crypto Research Report, the report would become a regular feature. Our friends at Incrementum have just recently released the second edition, which you can download further below (if you missed the first report, see Cryptonite 2; scroll to the end of the article for the download link).

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US Stock Market – The Flight to Fantasy

2018-03-22

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2018-03-22

US S&P 500 Large Cap Index, NDX Daily and NYA Daily, Mar 2017 - 2018
The chart formation built in the course of the early February sell-off and subsequent rebound continues to look ominous, so we are closely watching the proceedings. There are now numerous new divergences in place that clearly represent a major warning signal for the stock market. For example, here is a chart comparing the SPX to the NDX (Nasdaq 100 Index) and the broad-based NYA (NYSE Composite Index).

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Despondency in Silver-Land

2018-03-16

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2018-03-16

Silver Daily, Oct 2016 - Mar 2018
Over the past several years we have seen a few amazing moves in futures positioning in a number of commodities, such as e.g. in crude oil, where the by far largest speculative long positions in history have been amassed. Over the past year it was silver’s turn. In April 2017, large speculators had built up a record net long position of more than 103,000 contracts in silver futures with the metal trading at $18.30.

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Stock and Bond Markets – The Augustine of Hippo Plea

2018-03-13

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2018-03-13

Hippo Magic
Most fund managers are in an unenviable situation nowadays (particularly if they have a long only mandate). On the one hand, they would love to get an opportunity to buy assets at reasonable prices. On the other hand, should asset prices actually return to levels that could be remotely termed “reasonable”, they would be saddled with staggering losses from their existing exposure. Or more precisely: their investors would be saddled with staggering...

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US Equities – Mixed Signals Battling it Out

2018-03-10

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2018-03-10

S&P 500 New High Lows Percent, Feb 2015 - Apr 2018
Readers may recall that we looked at various market internals after the sudden sell-offs in August 2015 and January 2016 in order to find out if any of them had provided clear advance warning. One that did so was the SPX new highs/new lows percent index (HLP). Below is the latest update of this indicator.

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US Stock Market: Conspicuous Similarities with 1929, 1987 and Japan in 1990

2018-03-07

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2018-03-07

S&P 500 Large Cap Index, Apr 2015 - Mar 2018
There are good reasons to suspect that the bull market in US equities has been stretched to the limit. These include inter alia: high fundamental valuation levels, as e.g. illustrated by the Shiller P/E ratio (a.k.a. “CAPE”/ cyclically adjusted P/E); rising interest rates; and the maturity of the advance. Near the end of a bull market cycle there is always the question of when a decline will begin, and above all, how large will it be.

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Purchasing Power Parity or Nominal Exchange Rates?

2018-03-03

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2018-03-03

Big Mac Index
“An alternative exchange rate – the purchasing power parity (PPP) conversion factor – is preferred because it reflects differences in price levels for both tradable and non-tradable goods and services and therefore provides a more meaningful comparison of real output.” – the World Bank

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Socialism and Capital Consumption

2018-03-02

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2018-03-02

A Soviet Propaganda Poster
We have been promising to get back to the topic of capital destruction, which we put on hiatus for the last several weeks to make our case that the interest rate remains in a falling trend. Today, we have a different way of looking at capital destruction.

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Haunted by Ghosts of the Old Eastern Bloc

2018-02-27

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2018-02-27

Powell Takes Yellens Office
Jerome Powell, the new Chairman of the Federal Reserve, just completed his third week on the job. He’s hardly had enough time to learn how to operate the office coffee maker, let alone the all-in-one printer. He still doesn’t know what roach coach menu items induce a heinous gut bomb.

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Update on the Modified Davis Method

2018-02-26

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2018-02-26

Nasdaq
Frank Roellinger has updated us with respect to the signals given by his Modified Ned Davis Method (MDM) in the course of the recent market correction. The MDM is a purely technical trading system designed for position-trading the Russell 2000 index, both long and short (for details and additional color see The Modified Davis Method and Reader Question on the Modified Ned Davis Method).

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Market Efficiency? The Euro is Looking Forward to the Weekend!

2018-02-25

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2018-02-25

Room
As I have shown in previous issues of Seasonal Insights, various financial instruments are demonstrating peculiar behavior in the course of the week: the S&P 500 Index is typically strong on Tuesdays, Gold on Fridays and Bitcoin on Tuesdays (similar to the S&P 500 Index). Several readers have inquired whether currencies exhibit such patterns as well. Are these extremely large markets also home to such statistical anomalies, or is market efficiency...

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Strange Economic Data

2018-02-24

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2018-02-24

US Gross Output, Sep 2012 - Jan 2018
Contrary to the situation in 2014-2015, economic indicators are currently far from signaling an imminent recession. We frequently discussed growing weakness in the manufacturing sector in 2015 (which is the largest sector of the economy in terms of gross output) – but even then, we always stressed that no clear recession signal was in sight yet. US gross output (GO) growth year-on-year, and industrial production (IP) – note that GO continues to be...

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US Equities – Retracement Levels and Market Psychology

2018-02-23

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2018-02-23

Trading Activity and Retail Focused Brokerages is Skyrocketing, 2003 - 2017
Following the recent market swoon, we were interested to see how far the rebound would go. Fibonacci retracement levels are a tried and true technical tool for estimating likely targets – and they can actually provide information beyond that as well. Here is the S&P 500 Index with the most important Fibonacci retracement levels of the recent decline shown. So far, the SPX has made it back to the 61.8% retracement level intraday, and has weakened a...

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