By Elliott Wave International
Can Stock Values Simply “Disappear”? Yes.
And it’s happened before, too — just think back to the 2007-2099 financial crisis
On Wednesday (Jan. 13) CNBC reported that,
“Almost $3.2 trillion has been wiped off the value of stocks around the world since the start of 2016, according to calculations by a top market analyst. U.S. stocks are now off $1.77 trillion, while overseas stocks are down $1.4 trillion.”
Stocks rallied on Thursday — but then tanked even harder on Friday, which probably made that $3.2 trillion figure even bigger.
But how can that be? Doesn’t money simply move from one asset class to another?
Our readers have asked us this question before — especially during the 2007-2009 financial crisis, when 54% of the Dow’s value got erased in just 18 months.
You may be wondering this, too. Well, here’s an answer — from Ch. 9 of Bob Prechter’s New York Times Business bestseller, Conquer the Crash:
Continue reading Can Stock Values Simply Disappear?
 Errr… the market is bearish. We (NFTRH) have been bearish and have now gotten confirmation of that stance. But we just had an NFTRH update on the major US indexes and today has not broken the headline indexes (outliers like the RUT are a different story). Long story short, I just added more SPY long. It will be a temporary thing.
Amid pervasive (media fed) fears of a stock market crash, a few positives and negatives…
- I have a large percentage of cash, as has been usual during the gold bear and the last 2 years of stock market bull.
- I have short positions against the bearish looking GS and GILD, and the Emerging Markets. [edit: though having 2nd thoughts on GILD, a company I actually like]
- I hold TLT (along with SHY) as a risk ‘off’ liquidity hedge and income payer, per NFTRH+ update.
- After some wrangling (in the midst of a 3 day stretch of extreme distraction from the market) I took the profit on JDST, which was hedging my light gold miner exposure.
- Today, while probably still getting pulled in a couple different directions, I am able to watch the market more consistently. I enjoy this immensely.
- I failed to take the profit on the SPY position bought yesterday in pre-market. It is my only long position, aside from my few quality gold stocks that I have resisted selling despite the broader sector’s array of lousy charts.
So at 5 to 1, considering that I’ve had a tough week away from the market, I can’t complain. I think that despite this, I was also able to update NFTRH subscribers at an at least acceptable level.
As for being a market report writer? It doesn’t get any better than this. Data points and probabilities are flying in all over the place.
By Jeffrey Snider of Alhambra
War on Short Selling; The Last Hope
If the PBOC was desperate last week, the catalog of words describing their likely stance this week is unbelievably short (pun intended). In the handbook of central bank operations, when conditions truly spiral out of control the first entry in that chapter says to blame speculators. Primary among them, subchapter one in the handbook, are the short sellers. If you think back to 2008, even the supposedly steady and omniscient Federal Reserve encouraged the SEC to ban short selling on bank stocks (first naked that July; then outright on September 19). As if it needs to be pointed out, it doesn’t work.
What short selling bans amount to are acts of proclaimed exhaustion; the central bank or central financial authority has no other options left and short sellers make a good and public target. Increasingly, it seems the PBOC in calling for increased “flexibility” (read: despair) the past few weeks (subscription required) has more and more focused on those speculators supposedly short selling yuan. Because of China’s dual market for currency, CNY and CNH (offshore), any distance between them supposedly opens arbitrage opportunities which can only further destabilize an already precarious position. Thus, by targeting speculation of that kind the PBOC claims to be working back toward good order.
Continue reading War on Short Selling
By Michael Ashton
Commodities were worth hating four years ago
It is amazing to reflect on the fact that the stock market last week experienced its worst 5-day span to open the year ever. I haven’t independently confirmed that; it seems incredible to me that in a hundred and whatever years we have never started with a 6% loss – but that is what is being widely reported. In any event, it has been a bad start and the market is back to the levels it last saw in August, before the inexplicable Q4 blast-off. Easy come, easy go.
Why is the market down? The harder question is the question of why it was up in the first place. Stocks have been persistently far above fair value measured by CAPE, Tobin’s Q, or any other traditional value metric. The argument that stocks were high because bond yields were low is perhaps the best explanation; this is after all part of the whole “portfolio balance channel” effect that the Fed has been trying to create with QE – raise the price of a good (bonds) and the prices of substitutes (corporate bonds, stocks) should also rise. (Left unsaid, of course, is why it is a good thing to move asset prices away from fair value. The ‘wealth effect’ is small, and zero-sum at best unless prices can permanently be moved away from fair value.)
Continue reading Up to Our Necks in It
By Joseph Calhoun of Alhambra
The probability of a bear market outcome has certainly risen over the last year
The New Year has gotten off to a rocky start and I’m sure there are a number of market prognosticators out there wishing their trusty coin had come up heads rather than tails. That’s actually not fair. I’m sure a lot of thought went into those annual market outlook pieces. That they are no better than a coin flip is not the fault of the hard working market seers. When it comes to markets, figuring out the present is hard, predicting the future impossible. There are a few indicators we can use to guide us – credit spreads, the yield curve, momentum – but none of them are infallible. And there are no indicators that are consistently useful over a short time frame. And the plethora of recent articles telling us that what happens in the first five days of the year – or the first month – predicts the full year prove nothing more than the effectiveness of torture in the field of statistics.
Luckily, being an investor does not require one to be a soothsayer. Even the Superforecasters of Phillip Tetlock’s latest book aren’t able to tell the future. What they do and what all the great investors I’ve read about do is interpret the incoming information in a probabilistic way. The future is not set in stone, pre-determined and knowable given the proper insight. At least I don’t see it that way and if Tetlock’s work proves anything it is that good forecasting is more about perspiration than inspiration. Forecasts must be adjusted as new information is added to the mosaic of the markets.
Continue reading Bull vs. Bear
By Tom McClellan
Stock Market Committed to 2008 Scenario
January 08, 2016
In a Dec. 11, 2015 Chart In Focus article, I posed the rhetorical question about whether the market was reliving its past from 2012, or from 2008. The financial panic in China seems to have settled the question for us, and the market has decided on the 2008 scenario.
I want to declare for the record that the fundamental situation now versus then is wholly different. If you look at any measure of the fundamental value or direction of the market, we are just not in the same sort of conditions now.
Continue reading The Stock Market’s 2008 Scenario
By Elliott Wave International
Making Heads or Tails of The Stock Market
We don’t have all the answers. But we do have 30-plus years of market experience on our side.
As the books were closed on 2015, the Chicago Tribune reported:
“After a dismal stock finish to 2015, your natural conclusion might be: Why did I bother?
“The Standard & Poor’s 500 finished the year down 0.73%… The DJIA suffered its worst year since the 2008 financial crisis, declining 2.2%… Only the Nasdaq ended the year up… 5.7%…
“…energy stocks as a group plunged 24%, and individually, many fell 30 or 40%. The energy plunge hurt unsuspecting retirees as master limited partnerships, or MLPs, dropped 36% — a shock since analysts previously claimed that pipelines and other infrastructure in MLPs would be immune to an energy crash. Another retiree favorite for dividends — utility funds — lost 9% in 2015, according to Morningstar.
“Bond funds weren’t comforting either. The average bond fund investing in a broad mix declined about 2% … …junk bond funds have declined 4% on average, according to Morningstar.”
Continue reading Making Heads or Tails of This Market
As posted at NFTRH.com…
SEMI Book-to-Bill Ratio Decelerates as Expected, Semis Not Under Valued
I see analysis out there discussing the Semiconductor sector as a whole as being under valued relative to other stock market sectors. This seems to be based on the fact that the SOX chart has not made nearly the catch up move that for example, the NDX has in its post 2000 recovery.
While charts can provide many helpful views to probabilities, they cannot get inside an industry and divine the importance of a sub-sector (Semi Equipment; AMAT, LRCX, etc.) within a sector as a whole. The equipment companies (which I am short) are the Canary’s Canary, with the Semi sector in general being an economic Canary in a Coal Mine.
I can see why a chartist might get excited. SOX vs. NDX has been stair stepping higher since leading the market into the August drop.
Continue reading SEMI Book-to-Bill Ratio Decelerates as Expected…
It was just one of several US stock market charts included in an NFTRH update this morning, but it is a telling one none the less. NDX floats along unbroken, while the riff raff in the lower panels are in intermediate downtrends.
We have followed the DJINET all along on its bullish path. Internets are doing the heavy lifting for the NDX these days (ref. AMZN, GOOGL NFTRH+ trades that I of course exited too soon). There are many other time frames and angles from which the market needs to be looked at in gauging the probabilities going forward, but this one is not a good one. It is a thinned out market showing players trying to hide out in fewer and fewer winners.