SPX 60 minute chart is wedging up to 1660/1665 area resistance. RSI resistance is above around 50.
S&P 500 60 min.
And the advancers vs. decliners does not seem inspiring.
Advance/Decline
If it gets above 1665 I’ll have to reevaluate.
You might say change is at hand. The Dear (Monetary) Leader spoke from on high yesterday and apparently something he uttered in response to a question served as a trigger to what needed to be; some bearish signs in alignment with a deplorably over bullish sentiment profile. The one that is an exact mirror opposite of 1 year ago when a bullish kickoff ensued.
Smart-Dumb money sentiment today
One road map is silver, as we reviewed the other day via Eric Swarts’ blog post.
Silver daily – 2011 blow off
S&P 500 daily – current
Now the stock market is not silver; but then, what is? Maybe crude oil circa 2007? Yet the SPX has obviously been the bubble bid recipient this time around. Yesterday’s reversal was the first crack and it will be interesting to see how this unfolds going forward.
We are in the time window for a turn. The only thing I’ll consider holding is [quality] precious metals stocks (bought off the big reversal on Monday) and even there, I am nowhere near ready to call them anything more than a trade just yet.
Beyond a potentially strong correction, the question of the cyclical bull market’s termination should be left for later because even an interim style correction should clean out the pipes of this over loved pig. There is a valid time window to next March in which the bull could extend pending the nature of a much needed correction around now.
I read a piece this morning by Josh Brown, the Reformed Broker, in which he destroys the 1999 comparison for the stock market. He makes some excellent points about why the stock market is not only not over valued compared to 1999, but is actually a bargain. You should read it because we should all be considerate of rational views.
I also read The Fed is NOT Printing Money by Jesse’s Cafe’, which offers a view into a money creation process that is more geared toward the gaming of the financial markets through intermediary banks than it is the normal inflation of old. I mean seriously, I do not call Ben Bernanke an evil genius for nothing; it seems that he and his associates have taken monetary policy to the Nth degree and figured out how to paint inflation as non-inflationary. Our hero.
The point is that I think Josh Brown is 100% right. There is no mania in stocks. In fact, stocks’ worst offense right now is that they are strenuously over bought and sponsored by ‘dumb money’ aggregates that are equal and opposite to one year ago, when the same dumb money was exactly as bearish as it is bullish today. As he notes, the mainstream public may no longer be interested in the markets, but whoever that dumb money is, they proved a good indicator on an imminent bull phase last May. Again, we present the proof compliments of Sentimentrader.com:
Smart-Dumb money sentiment 1 year ago
Smart-Dumb money sentiment today
I have absolutely no problem being bullish on the stock market because it is made up of companies both bad and good; very good. After Memorial Day, my wife will re-start her career at a currently non-public technology company about which we are very excited. Its technology began as the founder’s MIT thesis and is now rolling out into major markets and outlets. One brilliant kid, an idea, a market and voila.
I totally believe in human progress and what great companies like Microsoft, Intel and later Google and Apple have brought us. I believe in the software systems that are making the burdensome healthcare system more manageable and great companies the world over that fill a need, improve lives and win out in the markets of public opinion and financial transaction.
But the point I think the Reformed Broker is missing is what underpins the market of stocks in these corporations. Looking at the stock market as a stand-alone, I tend to agree with his viewpoint. But when policy makers are woven into the fabric of the market to this degree, they must be factored. Questions must be asked like “why on earth, with this excellent and healthy stock market and sufficiently functioning economy are they continuing to repress interest rates by buying $85 billion in bonds per month?”
Aren’t those bonds debt? Where did that debt come from? Does bloated debt not imply that the economy in which the stock market’s components ply their trade is a leveraged thing, as opposed to an organically thriving thing? Why can’t we just let the debt float on the open market and let it get resolved by the market if things are so good beneath the surface?
I think you know the answers to those questions. That is the main point of bears questioning the stock market’s fundamentals. Not the old PE Ratio canard. We are now in the post-PE world. What matters is policy because it is policy that has created the seemingly healthy stock market. So which side are you on; the side that sees the stock market and the stock market only, or the side that sees the stock market within the context of the universe in which it exists?
Biiwii.com, Notes From the Rabbit Hole, Twitter, Free eLetter
What are the chances that if the pig in the top panel corrects the POS in the bottom panel might rally? Now, will the pig correct?
S&P 500 & HUI, daily
You have the stage today, so step up and call the stock market what it is. Look, they are trying to bull the thing again simply because some bad economic data implies that you people are a bunch hot air bags looking to keep asset bubbles inflated.
Step the hell up and put a lid on that. You, Bernanke, get some balls and step up too. This is your FrankenMarket come home to be fed. It thinks it will be fed by your Fed in an open ended way. You must show the market who is boss you, you… you autocratic, bureaucratic policy making wonk you.
The market is rallying on bad news, feasting on what is bad for America. This is your FrankenMarket dear leaders. Have some balls. You too, Janet.
We have a bunch of economic data on tap for the market to get emotional over. Jerk to the left, jerk to the right; as if any one period’s data is anything other than a reason to game a market running on pure momentum.
And then we have Huey, Dooey, Louie and even a couple more popping out to dump even more signals on the market as we go full frontal Jawbone today:
“In addition, five Fed officials will be speaking on Thursday. From Milan, we’ll hear from Philadelphia Fed President Charles Plosser — his second speech in Europe this week — and Boston Fed President Eric Rosengren, who is a voting Federal Open Market Committee member. Dallas Fed President Richard Fisher, Fed. Gov. Sarah Bloom Raskin and San Francisco Fed President John Williams are also on tap to deliver speeches.”
It should be interesting if nothing else. Beyond any one day’s knee jerking, there is this to consider (graphics courtesy of Sentimentrader.com):
Smart Money vs. Dumb Money (current)
The ‘smart vs. dumb money’ structure is exactly opposite to what it was one year ago when we used this picture in support of a bullish stance:
Smart Money vs. Dumb Money (1 year ago)
And people just love stocks over bonds, almost as if there is a Great Rotation taking place or something. Ha ha ha…
Stocks to Bonds ratio
The bulls are right and those that have been bulls for a year have been right for a year; both of them. In full disclosure, I was bullish as appropriate last spring and summer and then proceeded to not nearly maximize that fact. That’s show biz.
Now I am bearish. I hope to maximize that stance. There is a case for higher stock prices later in 2013 or early 2014. But for now, this pig is over loved just as it was over hated a year ago.
Another leader index is nearing its upside target. The question is, will these things blow right through? The US has the duel fuel of a relatively okay economy and a strong currency, which theoretically gives the inflators more ammo. But how long do they keep inflating in the face of a soaring stock market before the whole thing begins to look silly to even the most casual observers?
TRAN daily