Before each of the really ugly bear markets of the past 30 years, there has been an important signal from housing data well ahead of time. We do not have such a signal now, and so that portends more upside in the months ahead for stock prices.
In fact, the past 3 months have seen a pretty substantial upsurge, especially in the Northeast and South regions of the USA as tracked by the Census Department. That takes the seasonally adjusted annual rate of new home sales to its highest level since February 2008. Generally speaking, seeing this home sales data make higher highs has been good news for the long-term path of stock prices. It is when the two diverge that problems start to develop.
I researched this gentleman and I love what he is all about, philosophically and in the way he views life as it relates to his vocation in the markets. i.e. it’s not just some MSM b/s. He is to be taken seriously IMO, in his knowledge of the markets but even more, as a respectable human (something lacking in this sphere, again IMO).
So here is the Fed’s idiotic Dot Plot that we are all supposed to be transfixed by.
The stock market took a hit, bounced and now by my eye anyway, is not at all cut and dry. Sentiment became toxic to the over bullish side a couple of weeks ago. Then the market dropped and bounced. This should not be an end to the downturn given the former sentiment profile that has not been nearly fixed yet.
But the leadership items we follow (esp. Biotech, Small Caps and Banks) are stable to good and then there are the AAII Individual Investors having been spooked, which is short-term positive (though the longer-term trend is over bullish and so, not healthy).
There’s lots more to the picture that can’t make it into a simple post. But it is best to check assumptions at the door and let’s all just be prepared for what is on the other side. It’s not so much the FOMC I am concerned about as my fellow market participants. That’s why I have remained in a comfortable position and recommended the same in NFTRH. It’s the ‘no strong leans’ market at the moment.
Depending on how it is manipulated, presented or interpreted, a set of data can be used to validate almost any theory or conclusion. For example, as I explained HERE, by changing the starting assumption the intraday London gold price data can be used to ‘prove’ either long-term suppression of the gold price or long-term elevation of the gold price. For another example, as I showed HERE, by cherry-picking the timescale of the data it is possible to demonstrate a relationship (in this case a relationship between the gold price and the US federal-debt/GDP ratio) that wouldn’t be apparent if a different timescale were chosen. I’ll now discuss a new example that was part of a 12th March article at Marketwatch.com.
I agree with the gist of the above-linked Marketwatch article, which is that the US stock market is stretched to the upside in a big way. However, the chart used in the article to make this point is a great example of data mining. Here is the chart.
The Real Relationship Between Dollar and Stock Market
March 11, 2015
If you think that you know the one true relationship between the stock market and the value of the dollar, you are wrong. Or perhaps I should say more charitably that you are going to find yourself wrong about half of the time.
Now it is the bulls’ turn to prove something. In disclosure, aside from two small gold miners I took a try on into the close I am only long one thing, India and short one thing, S&P 500. The rest is as NFTRH had been advising going into Friday’s kickoff, heavy cash and short-term Treasury equivalents.  plus a couple other things, Thing 1 and Thing 2 that I decided to hold on to. Thing 2 is so small as to be irrelevant. Thing 1 is a Canadian listed gold stock I decided not to take profit on, and instead ride to a paper loss; ah the pleasures of commitment]
I have no real horse in the race other than a non-leveraged short against SPY. With that disclaimer to my stance, it is now a burden upon stock market bulls to prove their case because this market got perversely over bullish and was ripe for a real kick in the pants. The technicals are now breaking down to add to the sentiment case.
So it’s as simple as perma-bulls (the ‘its’ a new secular bull market’ crowd) mustering up some bravado to back up their resolute bullish view. Come guys ‘n girls, buy ‘em up! Get on CNBC and talk in your usual conventional tones and discuss conventional strategies as if this is a conventional market.
Pay no attention to my favorite chart showing a policy-driven wealth effect vehicle utterly dependent upon a certain kind of interest rate policy and unconventional bond-based market manipulation tools.
How long before the next insecure Jawbone hits the mic to firm up the bulls’ backbones?
Don’t interpret this as a bravado fueled chest thumping post. A measured target on a monthly chart can be plotted by a Chimp with a calculator. That said, here is a chart of SPY created shortly after it made the big break to all time highs. Doink… it would be cool if this is the top, but it’s just one down week and the market needed a correction badly. So no reading more into it than that.
I have been seeing the markets as well as I ever have (which is far away from perfectly) coming out of 2014 and into 2015. For some reason charts are working. By that I am talking mostly about daily charts and in many cases daily stock charts.
It may have something to do with the droves of dumb money that have been piling in and forcing individual stocks to act in a more linear fashion (ex: Google paints a nice short-term pattern, tests and finds support and expresses the pattern bullishly as hoped), maybe wresting some of the action away from those erratic black boxes. Dumb money would force that linear action upon downside action as well, as they puke back out.
Patterns have been playing out as expected and beneath the surface I have a weird feeling that some heavy hand has backed off the markets or that the shear noise created by too many algos and too many jawbones has itself been drowned out in favor of more traditional market action. Again, this could be a sign that the public came in big with the latest extreme over bullish sentiment.
I am heavy in cash (per recent NFTRH), short a little (per an admittedly timid NFTRH+ SPY update yesterday) and thoroughly going to enjoy this. Patience, as always, will work well.
Adjusting Barry Ritholtz for inflation and hypocrisy–IKN[biiwii comment: a short, sweet and perfect little post exposing b/s in a corner of the internet i don’t normally expect to find it. but then again, it’s everywhere isn’t it? i am sure in all my years of writing you’ve even found some of it here… and @ IKN and well, everywhere]
What Top Fund Managers Really Think About Gold–Casey Research[biiwii comment: speaking of bullshit, i’ll go a little IKN on you and present the winner of the b/s olympics, this hilariously titled piece from jeff clark. jim rickards helped bail out ltcm, wrote books and is a smart guy who i sincerely respect. but a top fund manager? really? now the rest of them… a “wealth coach”, a part newsletter writer/part fund manager and then old pal chris martenson, a “futurist who specializes in energy depletion”… please. it’s another gold article attempting to make sense of things that seemingly don’t make sense, and that is the answer… it doesn’t make sense but it is what it is. got that jeff? i just wrote a post that wondered if the gold promoters were extinct or maybe just tuned out. they’re not extinct, so hopefully they are well tuned out. i’d better move on before i get hung up on this one and piss myself off]