Profit Gobble (NIB,DBC)

Profit Gobble (NIB,DBC)   A farmer friend of mine says he wouldn’t be in any other business.  He raises beef cattle, chickens (for eggs) and has a small herd of dairy goats, and he’s convinced that it’s an enterprise that can’t fail, regardless the economic forecast, if things are managed properly.   And we’d agree, though we might quibble with his product line.   In the end, though, it’s true; there’s no escaping that we all have to eat.  Some are willing to survive on junk, of course, while others are a little more discerning.  But when it comes down to how your last dollar is spent, food is where it’s at.   Apparently farmer-boy has a point.   Our Four Gs investment strategy long ago recognized the need to put eggs in the investment basket.  Diversify if you want – and better you should! – just be darn sure that you got some genuine eggs in there! And it’s with precisely that in mind that we turn to the food sector for today’s trade.   We start as follows –   Commodities are experiencing an upturn. And it’s not just oil that’s rising, friends, though energy gets the bulk…

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Wrap It Up and Ship Her Away! (IYT,AAPL,DIA,XLP,DBC)

Wrap It Up and Ship Her Away! (IYT,AAPL,DIA,XLP,DBC) We’re going to open today with an indicator that gets far too much attention, but that still has much to offer if taken in proper perspective. It’s the VIX Index, the Chicago Board’s measure of implied volatility in S&P 500 options, sometimes called the market’s ‘fear gauge’. Those with a simplistic view of the VIX claim that when it’s low – watch out! – the market is about to take a spill. These folk see the complacency behind low volatility in options as an inevitable contrarian sign that the market is about to explode. And there’s truth to the notion that low volatility is eventually replaced by high volatility. The opposite is also true. Periods of high volatility lead directly to periods of low volatility. On a long term chart, it looks like this – But it’s also clear from the chart that volatility can remain excessively low for extended periods of time, rendering the “VIX at historic lows!” crowd all but irrelevant. A New Take We were been pioneers in the formulation and application of a related indicator that we termed ‘volatility compression’. It’s a marker that has served us well…

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Stoking the Commodities (DBC)

Stoking the Commodities (DBC) Last fall, we suggested that by year end America would either be engaged in military hostilities of some sort with North Korea or would come away embarrassed, chastened and looking every part the fool. It didn’t happen, of course, because a back channel for negotiations was eventually set up, and North Korea is now openly suggesting it would give up its nuclear program under the right conditions. Is it a victory for the bombastic ones in the administration, who threatened and cajoled and all the while turned up the temperature on North Korea? Time will tell. It’s hard to say at this point who was bluffing, who was buying time, and who’s truly ready to follow through. What’s important to us, however, is that amid all the blather of war and the tit for tat twitter spat, the market shot heavenward in unprecedented fashion. And then… Following that, it was the so-called “trade war” with China that captured everyone’s interest. Again, the threats ensued, followed by an incremental ping-pong imposition of tariffs and levies amid growing concern that the world economy would be devastated and a new shooting war might even begin. Yet here, too, it…

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The Bigger Picture (SPY,FNV,DIA,UUP,DBC)

The Bigger Picture (SPY,FNV,DIA,UUP,DBC)   For some time now, we’ve been kicking up a big to-do about how the current market has lost all sense of the fundamental and is being driven exclusively by sentiment and cash flows.   And there’s no gainsaying that as we approach the final innings of history’s greatest ever bull market, we’ll see ever more money making chase after equities as they swerve higher and lower, as volatility ratchets up like Norse stretch rack and indecision in the bond market creates powerful cash surges between equities and fixed income.   That said, we want to reassure you that we still believe the major indexes’ best days lie ahead – but it won’t be nearly as smooth a ride getting there as we’ve seen over the last year. We’re going to take a look at several discrete items now to acquaint you with our market thesis going forward.  But before we do, let’s first summarize the broad forces now at play in the system.   Push and Pull   The foremost driver of today’s capital markets remains the massive liquidity infusion of the last decade courtesy global central banks.  This single factor has set the underpinnings…

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Let’s Talk Dollars (UUP,DBC,DIA)

Let’s Talk Dollars (UUP,DBC,DIA)   We’ll open today with a look at the dollar and a few comments that the White House has been making in relation thereto.   And we start like this –   Steve Mnuchin, the President’s Treasury Secretary was in Davos this week to laugh at the world’s poor and confabulate over how to keep things humming without too much acting out on the part of the hoi polloi.   And in the midst of it all he offered the following on the sinking American dollar – And that immediately sent the buck-sellers directly into action.  The Dollar Index tanked, adding shame to the already existing scorn, and creating a picture that looked like this – We’re going to take a minute now to unpack the above dollar chart before we get back to the White House and Dr. Mnuchin and examine where things are headed for the markets in the weeks ahead.   We begin with the oversold RSI read that occurred last week (in green).  After a steep decline and a break of long term support at 91 (in red), the dollar bounced slightly but has declined to deeper lows since then – likely…

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Wonderful World of Mid-Caps (MTD,IWR,DBC,XLE)

Wonderful World of Mid-Caps (MTD,IWR,DBC,XLE)   Well, we’ve waited… and waited… and waited….   We’re patient people, after all.  So it doesn’t kill us to bide our time.   But we have to admit that it’s getting a little ridiculous.   As of the latest data, the NASDAQ market has set an all-time record number of new highs in a calendar year at 63.   Have a look – The last time we got a reading this high was back in 1980.   That’s almost 40 years.   But not only have we seen relentless buying on the part of investors over the year; we also have a situation of persistent calm during the entire rise!   That’s right – no choppy waters, no heaving tides.   Just this – Try to comprehend this: we’ve now gone a whopping 43 days without so much as a half percent pullback!   And that, too, is a wonder.   And it makes us wonder… If perhaps our patience and all this calm is actually foreshadowing a wild, fiery frenzy of a downdraft that almost inevitably follows such tepid weather.   Could it be…? ________________________________   If you’ve been following our commentary for…

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Financial Two-Timer (FAS,DBC,OSX)

Financial Two-Timer (FAS,DBC,OSX)   You won’t see this talked about too much anywhere else, but we feel it’s worthy of your attention.   On Tuesday afternoon, Transportation stocks logged new, all-time record highs, with the Dow Jones Transportation Average reaching 9795 intraday.  Yesterday it tacked on a further gain.   As we’ve pointed out numerous times, we’re not whistling Dixie when we say this is news.  There’s no question about it.   For as Dow Theory tells us, when the averages are rising in tandem to new highs, we have what’s termed a ‘bullish confirmation’.  There have been six such instances of that this year, and as the chart below shows, that’s exactly what Tuesday’s action again achieved.   Have a look – This is the last six months of the two bellwether indexes charted against each other.   The Industrials have been making successive new highs all year, never going more than a few weeks without triggering the confetti.  The Transports’ celebrations, by contrast, have been less regular.  Their last major high was registered in mid-July, and after some steep losses thereafter, they only managed this week to pull ahead of their former championship mark.   But a win…

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Financial Drone Strike! (NOC,DBC,JCP,LOW,SLV,UUP)

There’s been a great deal of press lately regarding a handful of tech companies and the outsized role they’ve played in goosing the market averages.   And, indeed, it’s the case that Amazon, Alphabet (Google), Microsoft, Facebook and Apple have all been climbing recently, and contributed in great measure to the success of the NASDAQ, not to mention the S&P 500 in the last fortnight.   But a look at breadth figures for the rest of the big caps shows that the big five are not alone; nearly all the index components have been pulling their weight. The percentage of S&P stocks trading above their 50 day moving averages, a rudimentary indicator of bullishness, climbed from 40% to nearly 60% in the last two weeks, as the market bumped up a solid 3%.   That’s as clear a sign as any that the market is not a mere five cylinder engine.  One hundred and sixty big-name, big-cap stocks also turned sharply higher in that period.   Negativity in the Noise   Be that as it may, the biggest five U.S. stocks have been a great bet a) since New Year’s, b) since the election, and c) going back a full…

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Trump Builds Spectacular Wall… of Worry (DBC,QQQ)

Trump Builds Spectacular Wall… of Worry (DBC,QQQ)   You gotta hand it to the guy.   With all his extreme plans and revolutionary positions and bombing raids and war on the media and threats of more; with all the brouhaha he’s created among fellow Republicans in Congress and the apparent fallout with his closest advisors and even his core constituency; with the game of chicken he’s apparently decided to play with the Spending Bill, with Obamacare and North Korea and Russia and Paul Ryan…   With all that…   One would think that everyone and his sister would be fleeing Dodge on the first coach out – and taking their investments with them!   But no.   All the hullabaloo has managed only to goose the markets in a way absolutely no one expected half a year ago, leading to one of the most prolific climbs in stock market history, and certainly the best jump in any post-election period this country has known. Was it always the plan to sow confusion and unpredictability in order to stimulate the markets?   Not likely.  But it’s happened all the same, and our feeling is that there’s a whole lot more to come:…

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Junk Skew Calling! (HYG,DBC,STT,TROW)

Junk Skew Calling! (HYG,DBC,STT,TROW)   There’s a great deal to discuss on the macro/monetary level, but we’re going to divert our attention today to the other end of the spectrum and examine a few, key technical minutiae before offering you a trade.   So let’s begin with this.   There’s an old adage on Wall Street that states, quite simply, ‘the trend is your friend.’ That’s right.  Those who’ve played this game the longest will tell you that it’s all rather simple.  In a bull market, money is made by remaining long.  In a bear market, by staying short.   But there are numerous corollaries to what appears to be so axiomatic simple, including 1) correctly identifying the trend, both intermediate- and long-term, 2) staying on board through ‘noisy’ periods and short term pullbacks, and 3) knowing when and how to play more substantial reversals.   All of these issues are further predicated on your having a system of indicators in place that allow you to adequately identify all of the above so that you’re not caught off guard.  It also means you have a reliable safety net to support you if there’s a SNAFU in your system.   If…

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