Utilities Leading Market Higher

Guest Post by Tom McClellan

DJ Utilities and DJ Industrials
January 23, 2015

The news out of the European Central Bank on Jan. 22 helped to lift the major averages higher.  The DJIA and SP500 have not yet made it back up to the level of their December 2014 highs, but the Dow Jones Utility Average has already pushed to a higher high.  That promises more upside movement for the rest of the market.

It is not surprising that utilities stocks tend to move up and down in sympathy with all of the rest of the stocks.  They are subject to many of the same forces of liquidity, and returns chasing.  In spite of that general tendency, we do see differences in behavior sometimes, and those differences are worth paying attention to.

If the DJIA makes a higher high but the DJU makes a lower high, that sort of divergence usually leads to a selloff for the broader market.  It is as if the utilities stocks can act as a canary in the coal mine, sniffing out liquidity problems ahead of time.

That is not the situation we are seeing now, though.  With the DJU already up to a higher high, and leading the industrials higher, we are at least several days away from possibly having a bearish divergence, and that would only come into play after the DJIA has made a higher high.  And this strength is to be expected now, as we are in a period of strong seasonality at the end of January, and we are also in the 3rd year of a presidential term which is nearly always bullish.  In other words, the market is supposed to be going up now, and the DJU is confirming that a rally is what should be coming for the DJIA.

Money, Commodities, Balls and How Much Deflation is Enough?

Guest Post by Michael Ashton

Money: How Much Deflation is Enough?

Once again, we see that the cure for all of the world’s ills is quantitative easing. Since there is apparently no downside to QE, it is a shame that we didn’t figure this out earlier. The S&P could have been at 200,000, rather than just 2,000, if only governments and central banks had figured out a century ago that running large deficits, combined with having a central bank purchase large amounts of that debt in the open market, was the key to rallying assets without limit.

That paragraph is obviously tongue-in-cheek, but on a narrow time-scale it really looks like it is true. The Fed pursued quantitative easing with no yet-obvious downside, and stocks blasted off to heights rarely seen before; the Bank of Japan’s QE has added 94% to the Nikkei in the slightly more than two years since Abe was elected; and today’s announcement by the ECB of a full-scale QE program boosted share values by 1-2% from Europe to the United States.

Continue reading Money, Commodities, Balls and How Much Deflation is Enough?

Debt and Deflation: 3 Financial Forecasts

Guest Post by Elliott Wave International

Debt and Deflation: Three Financial Forecasts

There’s more to deflation than falling prices

Editor’s note: You’ll find the text version of the story below the video. Join Elliott Wave International’s free State of the U.S. Markets online conference to get prepared for the major moves in U.S. stocks, commodities, gold, USD and more for 2015 and beyond. Register now and get instant access to a free video presentation from market legend Robert Prechter and regular email updates with insights from our most recent publications and presentations from our key analysts.

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Inflation ruled from 1933 to 2008.

Yet in the just-published Elliott Wave Theorist, Bob Prechter’s headline says, “Deflation is Starting to Win.”

Take a look at this chart from The Telegraph:

Continue reading Debt and Deflation: 3 Financial Forecasts

Pivotal Events

Guest Post by Bob Hoye

pivotal.events
Click for full PDF report

 

Around the Web

  • Gold… and a Ramble  –NFTRH [biiwii comment: he’s bitching and moaning again about the misperceptions game surrounding the monetary value relic]
  • Bracing for Stagnation  –Raghuram Rajan  [biiwii comment: errr… one of my heroes. thx for the link, Hammer]

 

Swiss Jeez

Guest Post by Michael Ashton

The focus over the last few days has clearly been central bank follies. In just the last week:

  1. The Swiss National Bank (SNB) abruptly stopped trying to hold down the Swiss Franc from rising against the Euro; the currency immediately rose 20% against the continental currency (see chart, source Bloomberg). More on this below.

chfeur

Continue reading Swiss Jeez

Are Buyouts Checking Out?

Guest Post by Elliott Wave International

Are Buyouts Checking Out?

Two more key measures of optimism suddenly betray a diminishing appetite for stocks

By Elliott Wave International

Editor’s note: With permission, this article was adapted from the January 2015 issue of The Elliott Wave Financial Forecast. For one week only, EWI is throwing open the doors to its big-picture U.S. outlook. Follow this link to read a lot more of their latest analysis, 100% free, by joining the State of the U.S. Markets Conference.

_____

NYSE margin debt was $457 billion in November, still down from its February 2014 peak of $465.7 billion.

Continue reading Are Buyouts Checking Out?

Around the Web

  • Stocks Rise as on China Growth, ECB Bets as Dollar Rises  –Bloomberg  [biiwii comment: surprised? anyone? the theme is up and down chop, i.e. swings, that will eventually lead to resumption of or negation of trend.  oh, and the media are busy manufacturing reasons as usual]
  • Martin  –Josh Brown  [biiwii comment: 3 simple quotes; read them]

 

How Money Vanishes

Guest Post by Steve Saville

Changes in asset prices or any other prices do not cause changes in money supply, although many of the people who comment on the financial markets and economics believe otherwise. We were recently reminded of this mistaken belief when reading an analysis of oil’s large price decline that included the assertion that hundreds of billions of dollars had been eliminated from the economy as a result of this price change.

Continue reading How Money Vanishes

A Solemn Pause

Guest Post by James Howard Kunstler

E vents are moving faster than brains now. Isn’t it marvelous that gasoline at the pump is a buck cheaper than it was a year ago? A lot of short-sighted idiots are celebrating, unaware that the low oil price is destroying the capacity to deliver future oil at any price. The shale oil wells in North Dakota and Texas, the Tar Sand operations of Alberta, and the deep-water rigs here and abroad just don’t pencil-out economically at $45-a-barrel. So the shale oil wells that are up-and-running will produce for a year and there will be no new ones drilled when they peter out — which is at least 50 percent the first year and all gone after four years.

Continue reading A Solemn Pause

Bottom Line Thoughts on the Gold Sector

Improving Macro Backdrop

In light of a shifting global macro backdrop that we can finally sink our teeth into with respect to a bullish orientation on the gold stock sector, I thought it might be a good idea to publicly post some bottom line thoughts from this week’s NFTRH report.

The report went into great detail to explain why more fundamentals that matter are starting to come in line, after the chart below refused to make a signal against our big picture view of global economic contraction, which has been the biggest key for the counter-cyclical gold mining sector.

During the worst of the gold sector cyclical bear market we used Gold vs. Commodities to gauge a higher low to the 2011 low, which despite perceptions of the time, kept our longest-term macro view intact (as noted to subscribers several times, if Au-CCI had broken down we’d have had to admit that the view had failed, no if’s and’s or but’s).

The moving averages have triggered, a higher low has been made and the long-term thesis is being confirmed.

au.cci

Hence, a bullish stance on quality gold mining operations (a unique counter-cyclical sector) has finally come about and the relevance of this chart of HUI vs. the S&P 500 now means more than simply one market crashing in terms of the other.  It means RISK vs. REWARD is on the side of the counter-cyclical gold mining industry vs. the cyclical broad US stock market.

Continue reading Bottom Line Thoughts on the Gold Sector