Risk ‘ON’

By Biiwii

We declared risk ‘ON’ weeks ago and today it remains on.  That is obvious, with the ridiculously over bullish sentiment.  Further, today brings a new recovery high the Junk Bond fund (HYG), while its ratios to Treasury and Investment Grade bounce.


As usually happens, momo oriented bulls come out to play well after the turn (after all, everybody on the planet knows the US market is in breakout territory now).  The question for markets remains in whether the indexes will correct when they reach short-term breakout targets (we are tracking them in NFTRH) or proceed forward to out of control mania?

I am trading now on a stock by stock, market by market basis locking in gains and remaining flexible in the short-term.  It is just not in my makeup to be comfortable setting it and forgetting it along side the kind of bull now at play.  Risk management is never out of style.

Market Sentiment Sux

By Biiwii

Over at NFTRH we had a pretty extensive subscriber market update, going over targets, risk profiles, etc. for US stocks (and precious metals).  Here is one graph from the update and it is not pretty dear stock market bulls.

From Sentimentrader

Well, it is pretty I guess if you are a momo oriented Casino player.  But it is not pretty for risk vs. reward players.  While I understand that extreme sentiment goes hand in hand with bullish momo upside (i.e. mania), that does not change the fact that risk vs. reward sucks.

Around the Web

By Biiwii

  • Gathering thin reeds  –Jeff Saut  [biiwii comment; oh jeff, how could you own anything by putnam? oh, they’ve cleaned up their front running act?  i see.  all the same, no thank you…  not that it matters to you, but you are on notice for inclusion in this segment in the future.  putnam?  really?  every time I saw the ‘proud sponsor of the n.e. patriots’ ads this past football season, I wanted to hurl]
  • btw  –Josh Brown
  • HP Warns and Blames the Mighty Greenback  –Across the Curve  [biiwii comment: add hp to the list.  since q4 we have been on watch for the strong dollar dynamic to have some effect in corp. america.  not the end of the world, but an effect]


Biotech; Titanic Gains

By Biiwii

[edit] Nice reversal.  De-risk, de-risk, de-risk…

It was late in Q4 2014 and in accordance with our macro view and in anticipation of the coming ‘tax loss/January effect’ festivities TTNP was among several stocks I picked up.  As noted weekly in NFTRH’s portfolio notes it was a “rank chart speculation” bought at support.

Then came subscriber RK’s info that the stock was well regarded by a Biotech analyst who has had way more hits than misses (Mr. BioNap) and I thought hmmm, maybe I’ll not be so hasty to sell it as long as the chart continues to look constructive.  Well, the chart has expressed itself as hoped and now I have de-risked the position, taking 1/2 of  it off the table for a 32% gain.  I’ll watch to see how it shakes out from here.


The baby Biotech stocks and specialty Pharmas are starting to get some bids.  Old friend OMED was bought for the same general reason as TTNP, and it was partially de-risked as well.  I hold two others and while I agree with some that Biotech is getting silly, it has been one of NFTRH’s best markers on a potential bullish market blow off scenario in maintaining its robotic uptrend by a weekly chart we routinely review.  But the idea though, is to TAKE SOME PROFITS, routinely and unemotionally.

Here is what some of the smaller entities have been doing vs. the big guys (like CELG, GILD, etc.) in 2015.  This could be signaling a maturing bull market now that the speculative stuff is out performing.  DEPO is not really speculative.  It is a fundamentally solid company; but it is smaller and more speculative than the giants.

Continue reading Biotech; Titanic Gains

Bird Doo; Yellen Goes to Congress

By Biiwii

This is only the second best Fed Hawk photo I’ve ever seen.


The best one by far is the un-photoshopped Loretta Mester in all her natural hawkish glory.  Note the piercing eyes, the aerodynamic features and the focused intensity.  Also I must say, at 56 she has a youthful dynamism about her.  If she were Fed chief and told me to jump I’d ask ‘how high?’… or if she told me to print I’d ask ‘how much?’


Okay, moving on; the funny Hawk at the top is going to gulp down a mic in front of Congress and the media are all over it.  The lead article in the graphic above would actually turn your friendly blogger into a nice contrary indicator, what with his status among the majority that were bullish on the S&P 500 at the last polling by Tickersense.

Continue reading Bird Doo; Yellen Goes to Congress

Time Again for T Bonds?

By Biiwii

Well, we knew one thing; T bonds were a sell as the Optimism Indexes got as stretched to over bullish as they ever do about 3 weeks ago.  The drill was to sell bonds, which I did with extreme prejudice (I only held in the 1-7 year range) and get more bullish on stocks.

30yr T bond OPTIX from Sentimentrader

Now, it looks like bonds are settling down and while I am not taking chances on the longer end, I am back aboard with ‘cash equiv’s’ in the 1-7 year range (SHY and IEI).  Last time around this repository provided dividend income and a mark up on principle.

Continue reading Time Again for T Bonds?

Crude Oil Fund USO

By Biiwii

Crude Oil fund USO is tickling a lower short-term low today and that is not a good sign for the would-be bottoming process that people seem to be managing.

We noted in this week’s NFTRH report that Crude had been struggling with the MA 50 and here is USO turning down from it today.  We also noted that commodities continue to look precarious at best, with a few outliers like RE, Lithium and Uranium making bounces.

Further, a weekly chart of the USD shows what looks like a consolidation, not a correction in the making.  Given the pervasive bullishness on the USD, I have thought it would have taken a decent correction by now, with all the anti-USD stuff bouncing.  But so far, it’s not happening.


US Stock Market

The US stock market’s job this week is to make this break (Dow used as an example, as it broke upward on Friday, following the leadership indexes) to new highs stand up. What it’s got going for it is that it’s not particularly over bought and it made a weekly close above resistance. What it’s got going against it is a degenerating sentiment backdrop (toward an over bullish extreme).


If the breakouts in the Dow and other indexes holds up, the markets could be going much higher; including a long… not anticipated, but provided for… manic blow off scenario.  Watch things beneath the surface having to do with sentiment, participation, breadth and one indicator that alerted us to the bull phase weeks ago, Junk bonds and bond spreads. Thus far, they do not show a negative divergence.


NFTRH 331 Out Now

This week NFTRH moves further from the lunatic fringe and into conventional market analysis with lots of talk about relative global stock valuations, using P/E ratios and currency movements as the talking points.

We also break down the latest Semiconductor Book-to-Bill and illustrate why the precious metals are still not ready.

Also, there is a sentiment issue cropping up in US stock markets, even as indexes made big bullish signals.  A wonderfully complex and interesting market backdrop folks.  Make sure you’re on top of it.


Also, for reference here is the larger version of a graphic included in #331.  Due to formatting it was not overly clear in the report.  Click image for full size.

Data as of mid 2014


The Drowning of Innovation…

By Alhambra Investment Partners

The Drowning of Innovation as a Mathematical Inequality

Economics as a discipline has always fancied itself more of a hard science than a social science. That is why economists like to talk like physicists as if there is surety in the figures they use so publicly. It has even infected media coverage of economics, as the nomenclature about economists’ predictions has taken on an air of the definitive – reverence that is simply not matched by actual performance.

This is more than just Stanley Fischer’s assertion last year that economists have to apologize for their overly robust forecasts each and every year, or even the San Francisco Fed’s deeper look into forecasting bias off monetarism’s religious aspects, rather the calculation problems are symptoms of an entirely unrealistic appeal to precision. This is not something recent, as long ago economists, especially those like Simon Newcomb and John Stuart Mill that believed you could measure all “money”, fully expected to be able to quantify everything.

Continue reading The Drowning of Innovation…

Workforce Still Shrinks as Job Growth Rises

By Elliott Wave International

Why the Workforce Still Shrinks as Job Growth Rises

Editor’s note: This article was adapted, with permission, from the February issue of The Elliott Wave Financial Forecast, a publication of Elliott Wave International, the world’s largest market forecasting firm. All data is as of Jan. 30, 2015. Click here to read the complete version of the article, including specific near-term forecasts, 100% free.

A significant hint of economic softening is the slight decline in average hourly earnings in December. It came despite “a healthy 252,000 increase in jobs. Economists are struggling to explain the phenomenon,” says the Associated Press. “I can’t find a plausible empirical or theoretical explanation for why hourly wages would drop when for nine months we’ve been adding jobs at a robust pace,” says a perplexed economist.

Workforce is still shrinking

The chart above of the U.S. Labor Force Participation Rate presents a similar conundrum. Why is it falling when job growth is rising? The answer, we think, is the emerging force of deflation.

Notice that the peak participation rate of 67.3% came from January to March 2000, as the major stock indexes topped, after which inflation first began to falter. When stocks rallied to their 2007 top, there was a mild bounce in the rate, but the latest stock market rally failed to generate any sustained rise in the rate of work force participation. Workers appear so discouraged that the pool of available employees is back to where it was in 1978.

The opening chapter of Robert Prechter’s best-seller, Conquer the Crash, illustrates various other measures depicting a long-term economic deterioration and states, “The persistent deceleration in the U.S. economy is vitally important, because it portends a major reversal from economic expansion to economic contraction.”

As “great” as it was, the Great Recession of 2008-2009 was just a prelude.

Click here to continue reading the complete version of the article as part of a lengthy excerpt from the newest issue — including specific market forecasts, fully labeled charts and more — 100% free.

This article was syndicated by Elliott Wave International and was originally published under the headline Why the Workforce Still Shrinks as Job Growth Rises. EWI is the world’s largest market forecasting firm. Its staff of full-time analysts led by Chartered Market Technician Robert Prechter provides 24-hour-a-day market analysis to institutional and private investors around the world.