Pre-market – Monday 1-6-2014
"The just price is the price established by the 'common estimation' [17] of buyers and sellers."
Saint Thomas Aquinas
1225 -1274
Dr. John L. Faessel
ON THE MARKET
Commentary and Insights
Quotes of the day
"Euphoria will always periodically produce extended bull markets that feed off herd behavior [and herd thinking], followed by rapid fear-induced deflation of the consequent bubbles."
&
"The Federal Reserve Board's highly sophisticated forecasting system did not foresee a recession until the crisis hit. Nor did the model developed by the prestigious International Monetary Fund." (5)
&
"It was not apparent in the early 2000s, as many commentators retroactively assume that subprime securities were headed toward being the toxic asset they turned out to be." (9)
~ Alan Greenspan ~
Quotes are from his new book:
The Map and the Territory: Risk, Human Nature, and the Future of Forecasting
***
MARKET
The Market backed off it recent new highs established on New Year's eve but plenty of 'breakout support' lies at 1813. The long term trend and short term trend are up. We have backed off some recent 'minor' overboughtness. (McClellan Oscillator that ticked a plus 171 on Dec 24th) Friday's McC posting was a plus 91. We are still in the thick of the seasonal strength / Santa Rally so from a broad overview it all looks bullish and 'rosy'.
However… such is the case a tops and for me this stock market picture is extended, bullish sentiment is boiling with some models* (VIX) included at multiyear and decadelows, the advance / decline line if backing off (a la 1999 -2000) - i.e. participation is beginning to wane; price is 33% above the 200-day moving average i.e. that's hyper extended. And there's a mega debt catastrophe brewing that has me beyond edgy and the country's leadership is – well there isn't any…. In a world that is coming unglued. Yea I know it's a wall of worry, but at some point a foxhole makes sense – and wear a helmet.
To the sky and beyond
Alert:
Multiyear and Cycle highs in Bullish Sentiment
1.Notable super low 0.6 CBOE Put / Call Volume posting of 12/24/2013 was the lowest registration since December 2007 of 0.59. The 12/23/2013 post of 0.61 was also the lowest since December2007.
2.Last week the Citigroup "Panic / Euphoria" Model rose to decade highs @ plus 0.60 in the Euphoria Zone. That's up from last week's 0.52. In early 2000 it ticked its all-time high at plus 0.72. At the end of June, 2011 it ticked cycle lows of minus0.31 in the Panic mode.
One for the Bulls
According to analyst estimates compiled by Bloomberg Earnings:
The full S&P 500 will climb 9.7 percent in 2014, almost twice the rate of 2013,. Profit growth will come as sales increase 3.8 percent, up from the 2.2 percent last year, and the economy expands 2.6 percent, faster than last year's 1.7 percent, forecasts show. Link here
Notable Selling by Major Players
1.In the latest filing for Warren Buffett's holding company Berkshire Hathaway, (BRK-A) Buffett has been drastically reducing his exposure to stocks that depend on consumer purchasing habits. Berkshire sold roughly 19 million shares of Johnson & Johnson, (JNJ) and reduced his overall stake in "consumer product stocks" by 21%. Berkshire Hathaway also sold its entire stake in California-based computer parts supplier Intel.(INTC)
2.George Soros recently sold nearly all of his bank stocks, including shares of JPMorgan Chase (JPM), Citigroup (C) and Goldman Sachs (GS). Between the three banks, Soros sold more than a million shares.
3.John Paulson, who made a fortune betting on the subprime mortgage meltdown, is clearing out of U.S. stocks. During the second quarter of the year, Paulson's hedge fund, Paulson & Co., dumped 14 million shares of JPMorgan Chase (JPM). The fund also dumped its entire position in discount retailer Family Dollar (FDO) and consumer-goods maker Sara Lee.
Quick Video of Note
House of mirrors market distorts value: James Grant – Link here
S&P 500
The S&P 500 (SPX) closed Friday at 1831.37 - the prior Friday it was 1841.40
Price resistance is at the top tick of 1849 registered on Tuesday 12/31/2013.
Intermediate price resistance is at 1838 / 39
The 50-day moving average support is 1792
Short term 'Price' support is at 1827
The a bit further out 1825 / 1818 / 1806/ 1792
The 200-day moving average support is at 1682
The top trend line of the channel that goes back 2009 to at (SPX) 1784 - 'that' previous resistance was breached on October 22nd.
Channel and trend line support of (November 2012) is at 1746
Then deep channel and trend line support of (October 2011) is at 1632
Then the deepest channel and trend line support of (March 2009) is at 1410
* This Week's Investor Sentiment
The Bullishness / Bearishness complex overview is 'high' but mixed with one notable exception that's hitting decade highs in Bullishness.
(High BULLISH readings in the Investor Sentiment Readings usually are signs of Market tops; low ones, market bottoms.)
The Citigroup "Panic / Euphoria" Model rose to decade highs @ plus 0.60 in the Euphoria Zone. That's up from last week's 0.52. In early 2000 it ticked its all-time high at plus 0.72. At the end of June, 2011 it ticked cycle lows of minus0.31 in the Panic mode.
The American Association of Individual Investors [AAII]Investor Sentiment Survey of BULLISHNESS slid to 43.1% from last week's 55.1% that was the highest post in 10-months. It posted cycle lows of 22.2% on 7/23/2012 the lowest percentile since August 2010. Long-Term Average: Bullish: 39.0%
The American Association of Individual Investors [AAII] Investor Survey of BEARISHNESS rose to 29.3% from last week's 18.5%.
13- weeks ago it registered the lowest read since 1/12/2012 at 17.6%. Cycle highs of Bearishness of 54.5% were posted 19-weeks ago. Long-Term Average: Bearish: 30.5%
Consensus Index of BULLISH sentiment is at 75%, that's down from last week's 765 and from the cycle and multi-year highs of 78% established 5-weeks ago. The new cycle highs in Bullishness of 78% topped the top of 77% Bullish posted on 10/11/2007.
The Market Vane (Market Letter Survey) duplicated last week's posting of 67%. In October 2007 it topped at 70% bullish.
The BARRON's Confidence Index slid a couple of fractions to 74.00 from 74.2 the prior week, one-year ago it was 68.7
| The Confidence index (High-grade index divided by intermediate-grade index; decline in latter vs. former generally indicates rising confidence, pointing to higher stocks.) |
Friday's key indicators and metrics
Cycle highs or lows are in red
·McClellan Oscillator in Neutral at plus 91
·3-month $ LIBOR was 2.3985%.Lows were in November 2013 at 0.23660%
·CBOE Put / Call Volume Ratio – 0.9
·VIX – 13.76 – on 12/26/2013 it ticked 11.69 near 5-year lows of 11.05 on 3/4/13
·Natural Gas (Globex) – 4.304 a week ago Tuesday it ticked 3-year highs at 4.530
·Swiss Franc – 1.1060- The prior Friday it ticked, two year highs at 1.1373
·US Dollar Index – 80.96 – 18-month low 'support' lies just below 79.00
·Euro – 1.3598 the prior Friday it ticked two year highs at1.380
·Japanese Yen – 0.9558 – on Thursday it posted new 5-year lows at 0.9475
·Canadian Dollar – 0.9402 – just off last week's post of 3½ year lows
·Aussie Dollar –0.8933
·Crude oil (NYMEX) 95.44 – Support lows are at 92.00
·Brent crude 107.80
·Copper – 3.3815 – a week ago Wednesday it ticked three-year highs of 3.44
·Gold (COMEX) – 1225.2 – On Wednesday it ticked new 'recent' lows at 1181 and looks to test the lows of late May and if that support gives way 1100 looks doable
·The Treasury 5-year yield – 1.69%
·The Treasury 10-year yield – 2.9950 - cycle highs were the prior week at 3.01%
·The 30-year Treasury – 3.92% - the cycle highs of 3.93% were put in the prior week, and also ticked on August 22nd 2013.
·Silver (COMEX) – 20.128
·Platinum 1414.2
·Palladium 731.20
·Lumber (CME) – 360.70
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