Category Archives: Sentiment-Psychology

The Bear Market Everyone Saw Coming

By Biiwii

The title lets you know where this article is going.  For such a routine correction in the US stock market, the Psych/Sentiment backdrop has gotten way out of whack.  Do some analysis on Rydex Bull/Bear fund allocations among investors and you will find a historic knee jerk reaction into bear funds over bull funds (by those who still use Rydex funds).

Go do a Google Trends search on ‘stock market crash’ or ‘bear market’ and you get the following results, showing a big rise in interest among the public.

Market sentiment: stock market crash

Market sentiment: bear market

Continue reading The Bear Market Everyone Saw Coming

Man, That’s Cheesy…

By Biiwii

[edit] I actually agree with Sinclair’s views on monetary sociopaths.  Beyond that and certain dogma that rings true, it’s too much information the likes of which has frightened people into what have been incorrect positions for years.

After the now-famous WSJ post, it seemed as if a bottom had just been called in gold…

Let’s Be Honest About Gold: It’s a Pet Rock

It seemed that the elements were in place for a contrarian rally if not bull market bottom.  Along with negative gold items routinely appearing in the financial media and a Commitment of Traders structure that had become very bullish, gold sentiment was bleak by indicators we track in NFTRH.

My how a 6% rally with an accompanying stock market down spike have changed things…

sinclair, gold sentiment still not ready
Click for the video @ YouTube

Here is the article associated with the video, sent to me yesterday…

Plunge Protection Team Losing Control of Markets -Jim Sinclair

I won’t even go into Sinclair and his ‘same old, same old’ spiel, trotted out the minute the stock market cracked.  Let’s just focus on one micro element of a case that implies gold bug sentiment is not yet where it needs to be for a real bullish stance.  From the article’s comments section…

Steve (website visitor):  “I used to believe in the rampant manipulation of the gold markets until i got proper information and grew up. If Gold is always manipulated to the downside, why buy it?”

Greg Hunter (website host):  “Steve you grew up to be an idiot. I got “proper information” from Dr Paul Craig Roberts* who laid out an analytical case for gold manipulation.”

It’s concerning if you are a gold bug, because the bear has apparently not dug deep enough into all the bunkers to devour the most ardent holdouts.

  • Above we have “Dr Paul Craig Roberts”.  From NFTRH 355 (very coincidentally I was reminded of this by a subscriber this morning):

Have you noticed that the bear and/or gold communities tend to make sure they call John Hussman “Doctor Hussman”, Jim Willie “Doctor Willie”, Robert McHugh “Doctor McHugh”, Chris Martenson “Doctor Martenson” and any other Ph.D. writing about markets “Doctor”, while conveniently forgetting to label the likes of “Doctor Bernanke” as such (“Helicopter Ben”)?

I don’t know about you, but when I am reading articles and I see a writer labeling someone with whom he or she agrees (and with whom they want you to agree) “Doctor” in order to convince the reader of the material’s seriousness or worthiness I think “man, that’s cheesy”.

S&P Enters Correction!

By Biiwii

Hey guys, the S&P entered a correction the moment it broke down from the nose of the Diamond and the pinch between the MA’s 50 and 200.  But here’s Reuters by way of Fidelity to clue us in that S&P entered a correction today.

Wall Street tumbles again as S&P enters correction (complete with classic stock photo of stressed out trader).

trader
Sad trader from Reuters/Fidelity

“NEW YORK (Reuters) – U.S. stocks ended more than 3 percent lower on Monday, their fifth straight drop, in an unusually volatile session that confirmed the S&P 500 was formally in a correction.”

I don’t know about you guys, but I’ll take the informal kind of correction and prepare accordingly.  It started when SPX dropped out of the red dot for the 2nd time and was confirmed when 2050, a whopping 157 points ago, was lost.

Here is what actually happened.  SPX chose ‘down’ from its moving average decision point.  This had been the most likely direction given momentum, leadership and participation that had been fading long before hand, although it also seemed pretty obvious.  I mean, you and I both saw it, right?  SPX then broke support #1, turning into resistance #2.  SPX then broke support #2, turning into resistance #1.

s&p 500

And now here we are.  The bull market is intact and the test is at hand.  What the market has going for it is Mr. Frumpy Trader up there, and a lot of bear market calls coming out.

So everybody’s got the bear memo, the Margin man has probably made a good amount of his collections and nothing is resolved.  Not unless the market loses the October lows.

Bond Safety?

By Biiwii

[edit]  Upon re-reading, it’s another of those posts I sometimes receive critiques about.  Few conclusions and no clear direction.  Maybe that is just the point though.

@ Fidelity…

Equity outflows at 15-week high as investors seek bond safety

And there they go, conventional lemmings jumping from the frying pan, into the fire, soon to realize the fire is way too hot, and heading for that cliff over there.

(B)ut (i)t i(s) (w)hat (i)t (i)s and (N)otes (F)rom (T)he (R)abbit (H)ole are so named because we are all about anti-convention, as global markets have not been comfortably conventional since the late 1990’s, I think.  This most recent cycle has existed to put all of us malcontents, cranks and alarmists back in a box under the bed, if not into the dustbin of history.

Well today, conventional sheep are flocking to conventional positions.  “Bond safety” is what they run to when they are afraid of stocks.  Of course, with gold now showing strength, the promoters over there are retooling their former “China/India demand” and “employment growth will spur inflation, which will drive people to gold” pitches to something more appropriate for the times, when global economic contraction comes to the fore and deflation is front page news.

Imagine that, investors flocking to bonds while DEFLATION! is all up in the headlines.  Reminds me of Q4 2008, just before the next INFLATION.

This market is now officially fun again after the post-October drudgery that last month forced me to admit that my trading sucks and that I needed to take a time out and sit on my hands (as the market’s swings became too frequent and too contracted).

Do you see?  Investors are seeking safety in bonds.  Media are managing a global stock crash.  Bull trend followers’ heads are spinning (‘Am I still a brave, resolute, trend following stock bull?  Should I keep posting as such or is my inner fear barometer stronger than my resolve?’) and oh yes, the precious metals are bouncing while commodities continue to tank.

There are only a few entities who have called this environment.  One is an influence of mine, Bob Hoye (decisively, but on what some might find an inconveniently long time frame).  Another is NFTRH (less decisively, but on a very tight time frame).  This is a market that is going to put all the carnival barkers (including gold touts) in their rightful places because now changes are happening and it will not be so simple as ‘stocks are tanking, buy bonds!’ and obviously, the whole ‘economy brings inflation, buy gold!’ promo.

Tops are spinning on the table and it all makes perfect sense.  And I am not even a stock market bear.  I just do not buy or hold tops.  I look forward to a real bull market in the gold sector, but there is yet work to do folks.  The US market’s big trend is still up and gold’s is still down.  Not saying change is not in the offing, just saying trends have not yet changed.

With respect to gold, this summer’s event is so much more in line with fundamentals that matter than last summer’s Ukraine→Russia→Ebola pitch that was nothing more than promotion.  But there remain some rocks beneath the surface.

As to the article linked above, this certainly does put Martin Armstrong front and center, with his ‘final flight to the safety of the government bond bubble’ analysis…

LONDON (Reuters) – Equity outflows hit a 15-week high of $8.3 billion in the past week, with fears of a China-driven global economic crisis pushing investors towards safe-haven money-market funds and Treasuries, Bank of America Merrill Lynch said on Friday.

I have not really known what to make of Marty and his computer, but this is 100% in line with his forecast.

I just love a market where things are in motion.  Robo market was a dead thing, momentum waning and hopes fading.  Now resolution is to the downside.  From this point, it is now time to throw out the easy analysis and be prepared for the counter-cyclical environment we have expected upon completion of the post-2008 economic recovery (and all that paper and all those digits behind it).

Now you do not get points for just showing up and following the trend.  Now you find out if that which you hold true actually is.

Market Sentiment Getting Too Bearish

By Biiwii

Well, bearish sentiment is getting stoked up but good.  There will be a bounce or rally at some point.  This summer’s bearish media and investor sentiment have tipped toward out of whack with the US market’s price action.  Foremost in this regard was Sentimentrader‘s AIM model, which we reviewed as over bearish last weekend in NFTRH 356.

When prices stop declining and the rally comes from whatever bottom is ahead it could be a strong one, much like how the precious metals have bounced hard out of a hugely over bearish sentiment backdrop, as anticipated and expected.

I have already added a couple bull items against two US market short positions (added a short on a leveraged NDX bull fund to an existing SPY short).  These are items I bought for my own reasons and that I think have good potential should the market not fall apart.  If it appears we are going to get the type of sentiment wash out that happened in October a good post-summer, post-September trade could shape up.

NFTRH 356 noted the Housing sector before this week’s hype got the trend followers all over it, blowing a would-be entry point.  There is a pullback ‘buy’ target, which I now am not so sure will be hit.  But if yields go a certain way* in this deflationary swoosh, it could be a ‘buy’ if it pulls back enough.  There should be plenty of other items coming on sale as well.

For now though, just as price ruled in favor of the bull case despite waning momentum all these months, price rules for the bear case despite improving sentiment profiles.

*  Once again in the interest of full disclosure, just yesterday I speculated about a rise in long-term interest rates in an NFTRH update.  Ehhh… wrong, at least for now.  At some point the ‘inflation trade’ is going to bounce big.

Opinion

By Biiwii

Right here at 8:30 AM US Eastern time, in the midst of a precious metals bounce that we (NFTRH) projected due to sentiment, price/volume dynamics (in less fancy terms, the market puke in mid-July) and especially the bullish CoT alignments for gold and silver, I state to you that there is still something unhealthy going on in the gold sector from a psychological standpoint.

This does not even include some still negative macro fundamentals that have not pivoted yet to join the improving sector fundamentals.  This is pure sentiment.  We have no way of knowing for sure whether or not a new bull market is starting right now and that is why we projected it to be a bounce, until all fundamental and technical ducks line up and start quacking.  Speaking of quacks…

Continue reading Opinion

Peak Oil? Peak Stocks?

By Biiwii

Are Stocks the Next Oil (or Uranium, Copper, Silver)?

See:  Oil collapse couldn’t come at a worse time for industry

See:  2007, when everyone was convinced of ‘Peak Oil’ and there were websites named ‘Peak Oil’, ‘Oil Drum’, etc. constantly reinforcing the mania.

I remember being away on business one day in 2007, with nothing better to do in my hotel room than watch the congressional debates about ‘peak oil’ and what to do about the evil speculators that were driving prices up.  I enjoy watching a good mania as much as the next guy.  I realized that what we were seeing was ‘Peak Hysteria’ with respect to this phenomenon.  I thought, ‘Yup, Prechter’s right’.

See:  This hilarious video someone made about those who promoted the pitch to the public.  Some of these people have re-tooled their scripts for a deflationary world today and others keep fighting the good fight I guess, or are living in a hole somewhere.  Joe Kernan actually did a great job with the mania’s star promoter.  “I’m the expert you guys, not you…”  –T Boone Pickens (ha ha ha).

Moving on, what do the charts below say about the stock market? The oil mania was a manifestation of inflation.  Inflation is willfully deployed against what is a structural global deflation that is always in play and trying to exert pressure.  The charts below show where the inflation went on this cycle.

Oh, it’s Biiwii… he’s a perma bear!  Well maybe, I sure do not think the stock market is sustainable and I sure do think it is getting the same treatment as Oil circa 2007, Uranium 2007, Copper 2010, Silver 2011, etc.  But I am more than willing to call it ready to bounce or even not yet ready to end its bull market, if only an interim correction ends up being the most probable view.  But tuning out all that casino patron stuff, what does this big picture monthly chart say to you?

spx.mo

What does this chart say to you?

spx.irx

I keep hammering this chart in particular not because the Fed should do something or should not do something with respect to ending ZIRP.  I hammer it because whether it was the Fed’s intention or not, a large and conspicuous distortion has manifested.  Period.  Here is what NFTRH 355 had to say about it…

“Pardon me if I hit you over the head too often with the following chart.  But we have just wrapped up a couple of weeks that saw the Fed receive congratulations again for doing nothing (FOMC) and speak out of both sides of its mouth (Lockhart and Powell).  We also saw another okay Payrolls report come and go.

Of course, with commodities crashed and inflation expectations well contained, must the Fed actually do anything?  One might imagine that they also look at some representation of this chart and think ‘golly, that’s one hell of a distortion built into this market’.

I can’t think of many other reasons why a rate hike would even be on the table.  They’ve seemingly got it all; a booming stock market, no inflation and no need for stern monetary policy.  I believe that the Fed is as aware as we are that there is an imbalance of epic proportion out there somewhere.  Will they try to repair the imbalance now, after 6 years?

The chart is the chart and while I cannot speak in details (since I don’t know them), I can see what historical imbalance looks like.  Either the market’s laws have been repealed or something is going to seek equilibrium one day.  If the former, well, how does it feel operating in a remotely guided market?  Risky, if you ask me.  If the latter, the risk in finding equilibrium is almost unfathomable.  This is not meant as hyperbole, it is a chart.”

Back to real time.  We have noted (as the chart above shows) that in normal times the stock market goes up as the Fed Funds rate is increased, until one day it breaks and the Fed steps on the gas (drops the Funds rate) in response.  The market could follow the rate up again on this cycle, but the distortion has severed ties with the historical comp of the last 2 cycles and that is the concern.  Oh and the Fed has not even tapped the break yet.  The stock market is in uncharted waters.

[edit]  So we noted the Hammer (bullish reversal) candles on Friday, and as if by magic in flies Stanley Fischer for a little micro management and a bullish reversal (bounce).  It is sort of a low grade Bullard per the chart above.  We also note that these jawbone parties are not real and that the S&P 500 is going to break one way or the other soon… Hammer Time Foretells Bounce Time; Now What?

“FrankenMarket”

By Biiwii

“…this is a Frankenmarket of their own creation…”

Ha ha ha, good one Chris.  I see my phrase resonated well in 2004.

Anyway, Chris Martenson can talk like nobody’s business.  I cannot verbally express myself the way he does.  Not nearly, not publicly.  He once woke me up with a late night phone call going on with the energy of a true believer, and I’m like ‘wow this guy is driven and on a mission’.  Me paraphrased:  ‘Ya ya ya Chris, things are bad and I think it’s great you are going to [oof, I am still listening as I post and I just heard “deflationary impulse”, another Biiwii-ism, although to be fair I’ve heard that one around elsewhere over the years.  At least I have not heard ‘Inflation onDemand’© or the ‘Continuum’© going around the internet] try to tell the world about it… hey, what time is it, anyway?’

Doctor Martenson came from the same group of alarmists that I came from early in the Greenspan Inflation around 2002-2004.  It is one thing to be alarmist (we were proven correct in 2007-2009, but my preferred tack was to play these macro swings driven by out of control policy.  First off, secure true monetary value (hint hint) and second, get rid of personal, and in my case business, debt.  Then go forth and speculate (this included bullish stock market positions in 2003-2007).

Where I disagree with certain types of gold bugs and alarmists is that you do not live your ideology or even your deepest held beliefs on a daily basis; not in the financial markets you don’t.  You continually remain vigilent as to negative potentials and you go forth and you enjoy life as best you can in sometimes insane circumstances.  But you do not scare the shit out of people in the here and now, because most of those people receiving the information are going to make emotional moves in real time and then… the macro crawls along ever so slowly to where it is going.

That is why I tune these things down, despite the obvious intelligence of the speaker.  It’s all psychology my friends.  I put the Armstrong input I get in the same category.  These are the financial markets, not some war of ideology.

This interview came my way via LinkedIn.

[edit]  I have not listened to Chris in a long time.  How long has he been talking about deflation?  I thought the big focus had been on inflation.  The contrarian in me is curious.

Armstrong Phenomenon

By Biiwii

I call it a phenomenon because not since being bombarded with Jim Sinclair-isms last decade have I taken in so much input centering around one man and his unique view.  Not since ole’ Jim has this input been so unquestioningly in line with the view of the guru producing it.

Usually I use the word guru in a negative light, meaning something closer to charlatan or promoter than anything positive.  But with Martin Armstrong I don’t feel that way.  Indeed, the main thing that makes me uncomfortable is not his theses (from what I gather from my email contacts).  It is that he seems to have come from the very place he scorns, the gold “community”.  I seem to remember him being held up by Sinclair many a time as a bullish gold forecaster.  I have heard from several people who have pretty much converted to Team Armstrong from Team Sinclair (CIGA anyone?).  :-)

Continue reading Armstrong Phenomenon

MSM Working Gold Hard

By Biiwii

MSM mainly reflect back to us the ‘news’, what is or has happened.  MSM, especially MSfM, never give the straight scoop ahead of time when it is actionable.  Anyway, gold is down big this morning (partially recovered) and it’s pig pile time in the financial media.

This screen shot is taken from the Live Gold & Silver page of the much improved Live Charting menu above.  Very nice tools there now for all markets (more may be added).

gold

For its part, here is MarketWatch chiming in to help investors realize that gold could keep on crashing.

This is what could keep gold crashing

Clearly, the precious metal hasn’t been helped by Friday’s news that China isn’t holding as much gold as originally thought and by signs the Fed will go ahead with an interest-rate hike. But ponder this question from WSJ’s Jason Zweig, posed in a commentary as gold settled at five-year lows Friday (and kept falling Monday): “So why, even as Greece has defaulted, the euro has sunk against the dollar, and the Chinese stock market has stumbled, has gold been sitting there like a pet rock?”

This Zweig thing seems to be everywhere.  Viral.  Some guy putting out a contrary indicator media piece years after it would have been useful and it is viral?  Well, in the opening segment in this week’s report we addressed this before moving on to the analysis.

Let’s Talk About Gold

“From a contrarian’s perspective, this is the kind of stuff that is going to help empty the still over-bullish side of the boat (after it capsizes) and temporarily break the gold obsession that is hard wired into so many people (it’s just a pet rock, after all). Here we have to remember that when the MSM trumpets, it is selling headlines. Who buys the headlines? The public. Who is always wrong at important turning points? The public.”

Check out the whole segment linked above.

Hey, Did You Know…?

Psst… hey, did you know that US stocks snapped a win streak on violent Greek protests?  Hmmm, well did ya?

That’s what MarketWatch’s front page headline is declaring after the close.

How about this alternate headline?

US stocks snap win streak on slightly over bought, post-hype recovery momentum; market experts say it is a normal process for a slightly over bought market

Doesn’t have quite the same panache, does it?

The article also features Janet Yellen’s mug and this…

“Yellen seems very committed to raising rates and is doing everything she can to lessen the blow,” said Randy Frederick, managing director of trading and derivatives at the Schwab Center for Financial Research, in a telephone interview.

This age of transparency (i.e. Jawbones on parade) is a boon for the mainstream media, who eat up everything they utter and feed it out there as if it is news.  Just last week some Jawbone was talking rates into 2016.  The volatility that ensues does nobody any good other than the MSM, as it chases market sentiment around on a daily basis.

Meanwhile, Intel beats and Netflix sky’s on earnings.  Too funny.  But wait, there’s still those violent Greek protests to deal with.  Ha ha ha…

[edit]  Oh and INTC’s beat does nothing to hurt our boring headline from yesterday, does it?

Semiconductor Leadership; Intact