Getting Carried Away (SPY,IEF,PFE)

Getting Carried Away (SPY,IEF,PFE)   There’s a concept in statistics that’s regularly applied to markets called ‘mean reversion’.  It’s a rather simple idea, that anytime numbers get too far stretched from their long-term historical norms – either too high or too low – they eventually snap back.   And it has proven itself long enough to be relied upon by market analysts for at least a half century.  Simply put – a market is in danger of a whiplash reversal when it strays too far from its mean.  Forewarned is forearmed. The only problem with the concept is that no one can know what any security’s ultimate breaking point is.   That is, how long will buyers continue accumulating in the face of what’s obviously a clownsuit of a market with a diamond studded price tag?   Good question.   And how long will they continue to sell after it’s clear to all that stocks are available for mere pennies on the dollar?   And the truth is no one knows.   Human psychology is the intangible here.  The ability of an otherwise rational individual to be swept up with the prospect of becoming filthy rotten rich overnight is not…

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WAR! All the Latest Bellicosity and Bombast! (SPY,C,FB,DIA,IYT)

WAR! All the Latest Bellicosity and Bombast! (SPY,C,FB,DIA,IYT)   North Korea, friends.  It’s all about North Korea.   What do we mean?   Well, in the first place, you can expect that the news cycle is about to be dominated by that nuclear-tipped maniac, Kim Jong Un and his merry band of scribblers for the next couple of months, as the move toward a full scale erasure of the wicked Northern Kingdom is hatched, plotted and executed.   Already we see signs that, at the very least, the stage is being set for a negotiating turn of the screw the likes of which haven’t been seen since Bold Boy Arnold threatened the entire stickball crew behind P.S. 113 in Brooklyn back in 1931. Anyhow, we note several new developments in the last few days that we believe will provide the backdrop for a temporary top in the markets and subsequent short-term decline.  They’re connected to North Korea, and they’re as follows –   First, the New York Times is reporting on drills to evacuate American citizens from South Korea in the event of a peninsular war.  These are drills that have taken place in the past, to be sure, but…

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Things We Like. And Things We Don’t (QQQ,AAPL,PIR,SPY,DIA,AOBC)

Things We Like.  And Things We Don’t (QQQ,AAPL,PIR,SPY,DIA,AOBC)   Ed. Note – the devastation in Florida and across the southwest warrants a word of hope and encouragement for all those who experienced the wrath of Irma … Hang tough, friends.  And be good to each other.   Our thoughts are with you.   There are currently a number of discordant trends in the market that are worthy of our scrutiny, and that we believe point to precisely where we’re positioned in this longest and most powerful of all bull markets.   We hope that a firm understanding of that position will also reveal to us an appropriate trade for the week, as unlikely as it may appear as we begin.   So…   We start with a look at the dollar, in the midst of one of its worst declines in recent history, a bearish move that began on New Year’s Day and has spiraled lower by 12.5% as of this writing.   Here’s the buck – It doesn’t look good.   The dollar’s struggle seems to grind on despite the threat of higher interest rates, despite the rally in both the stock and bond markets, and despite the jawboning of…

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Le Plus Que Ca Change… (HD,SPY)

Le Plus Que Ca Change… (HD,SPY)   Bull and bear markets can be defined in a great many ways, but the simplest and most direct (and correct) definition is, naturally, our own: And there you have it.   Not much more need be said.   With what appears to be a war looming in the Far East with North Korea (and maybe China), in the Middle East with Syria (and maybe Russia), at home in Berkeley for safe space, on airplanes that don’t have enough space, and quite possibly in outer space for new tourist destination space, there’s every reason to believe that a bear market is coming.   What the…!?   It’s all rather dire, and yet the market shrugs it off, one editorial at a time, one bombing run and explosion at a time, one inflammatory, knife-wielding, Facebook live-stream crime at a time.   And the rates they keep a’rising.   But no one cares.   Or, rather, the market doesn’t.   In what should be understood as the quintessential wall of worry, today’s headlines offer the ideal backdrop for Wall Street to play the buyer.   And so it’s doing.   Despite the news, a look at…

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ReVEnGe! (TLT,SPY)

There’s not a whole lot in this world that gives you the yummy-tum as watching an enemy go down.   Slowly.   When the come-uppance is cold and unexpected, when it comes after a significant wait, and is delivered gently, it’s as tasty as it comes.   So we read and always believed to be true, but it wasn’t until we tasted the sweet sauce of the swallows returning to Capistrano that we understood the bone rattling truth of the vengeance concept. We’re referring, of course, to the weekend story of the swindler from Boston who tried one trick too many, was too clever by half, and fell into a trap laid for him by a rival group of hucksters.  Not only did he lose everything he owned (including a fair chunk that he stole from yours truly!), he also lost both his hands and family in the bargain.   Apparently, the Mrs. and his twin sons were in on the sting.   And he goes to jail, too.   Lash by bloody lash…   As to the market, it now looks like both gravity and the bond market are about to take their revenge on the investment world: the…

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What Tuesday Wrought (SPY,XRT)

What Tuesday Wrought (SPY,XRT)   Could it be…?   Has it happened…?   Are we now entering the post-Trump corrective phase…?   And will it presage a thoroughgoing purge of the market bulls…?   Are we now at THE crossroads?  The end of the line?  The selling moment par excellence?   IS IT ALL DOWNHILL FROM HERE!?   Read on, friends… and avail yourselves of any medications you may require to see yourself through, because the next fifteen minutes of your life could be positively thermo-pneumatic!  And we take no responsibility for any seizures or crying fits, be they large or small. Let’s look at the daily chart of the S&P 500 since it offers the worst technicals of the major market averages.   And we’ll preface our discussion of the chart with just a few words of introduction.   They go as follows –   First, Tuesday’s 1.24% decline on the S&P 500 was the first 1%+ drop on that index since before the election. That’s a five month wait for a phenomenon that historically occurs on a slightly more than weekly basis!   Second, the decline on the NASDAQ and DOW Industrials brought those two indexes to rest…

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Finally! A Financial Ever-gasm! (AAPL,TLT,SPY)

Finally! A Financial Ever-gasm! (AAPL,TLT,SPY)   Is this it?   Like the long sought after Fountain of Youth, have we finally managed to create financial perfection?  A means by which wealth never dies?  A device by which it only grows and grows?  Where profits are guaranteed in a never ending advance toward greenback bliss?   Could it be that there is, indeed, a place where glad tidings and robust, good cheer flow in swaying amplitude?  Where the champagne flows, the laughter spills and the bad guys are routed regularly?  Where the Leafs finally win the Stanley Cup? Could it be?   There are many who point to signs that the Trump Rally is coming to an end, but we say to hail with that!  Mr. Trump, it could be, has provided just the right mix, a perfect elixir of Tweetery and policy that’s neither too hot nor too cold that keeps the pie baking sweet and crisp for all eternity.   Could it be?   Let’s look a little deeper. We’ll start with the sentiment numbers we always rely upon to determine if a top is in, those from the American Association of Individual Investors (AAII).  They run a weekly…

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Run for your life! Inflation! INFLATION! (VOX,XLK,SPY)

We’ve discussed it numerous times over the last five years, and it finally appears to be coming to pass. We’re referring, of course, to the ongoing efforts of the U.S. central bank (and others, most notably the European, Chinese, and Japanese CBs) along with our Treasury Department to coordinate a financial reality whereby inflation puts her evil stepsister, deflation, into a merciless choke hold.   And to that end, we’ve seen all manner of ZIRPs and JERKs and QEs (not to mention out-and-out buying of stocks and bonds), all orchestrated to get banks to start lending and Joe Q. Public to start spending.   Why?   Because it cannot be that the economy is left alone to work out its own misallocations in a natural way.   No, no.   We economic jeanyuses know better, particularly if we have advanced degrees and have written indecipherable papers on just how that inflationary intervention has to proceed.   Because if we stick our fingers in the pie in just the right way, and stir it up just so, and extract from it precisely X quantity of jam and lard, all the while smearing the crust with the stem cells of a recently…

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The Cure? A Few Mixed Metaphors and a Good Bloodletting (SPY,GLD)

Stories abound of fortunes that were lost in a moment of anger.   Whether it was at the poker tables of Vegas or at the directors meeting of a Fortune 500 company, it’s all the same.  It’s happened aplenty on the sidelines of championship athletic contests, too, where a single, vicious outburst derailed the work of years and the cooperation and sweat of dozens, if not hundreds of individuals committed to a common cause.   And you can add to that list countless marriages, innumerable hospital surgeries, crucial military battles and even the fate of whole nation-states… sunk at the hand of an improper word delivered at the wrong time that broke the morale or concentration of key players in what, until then, had been an even-keeled endeavor stewarded by cooler heads.   Anger…   Sometimes the pressure is just too great.   During those moments even the juggernauts can run aground, the heroes slash their Achilles heels and, sure enough, the ship begin to take on water.   We’re not there yet…   There’s going to be a whole lot going wrong over the next few years, to be sure, friends.  And casting about for blame will be all…

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Shall We Take a Dip? (SPY,TLT,GOOGL,TREE)

We’re at something of a crossroads in the market today, and not because the battle of bulls and bears has reached a stalemate.  Those traditional crossings are more easily navigated than our current predicament.  With them, there’s still a set of lights that keeps traffic moving in a more or less orderly fashion.   What prevails today, rather, is an intersection that has neither clearly marked lanes nor working lights.  That is to say, everyone is either confused or uncertain and gazing over his shoulder at what the next guy’s doing.   It’s not a comforting situation.  And even though analysts and strategists and plain old traders like us are looking at the data and charts for clues as to where we’re headed next (particularly over the short term), the answers provided by those metrics are still fuzzy, and the truth is, we could bandy off in just about any direction over the next thirty days, then retrace just as madly in another. And the reason for all the befuddlement?   You guessed it.   The new administration in Washington is about the least predictable we’ve seen in the last half century – if not longer.  The bottom line is…

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