By Bob Hoye
The following is part of Pivotal Events that was published for our subscribers November 21, 2013.
“The Fed Should be Seeking Redemption”
Signs Of The Times
“Fitch Ratings has downgraded the credit worthiness of Chicago’s bond debt
because of its public pension problems.” – Yahoo, November 11
I spy a leading market indicator that is turning back up again as the small caps broke down in similar fashion as last spring before leading the most manic phase to date of the now nearly 1 year old rally leg.
IWM-SPY ratio from NFTRH 264
We used this situation as a warning not to get too caught up in any bearishness as the ratio may simply have been reloading the speculative juices.
We have been working a theme lately about the mania going on in US stocks (some valuations are not overly manic but policy sure is) and also the one going on in the mirror (a fun house mirror at that) in the ugly precious metals sector.
We are in a time of utter reverence for great and powerful Oz-like people doing not so great things to the rates of interest that would be paid to savers and prudent people (Zero Interest Rate Policy or ZIRP), and doing wonderful things for leverage (substance) users, speculators and asset owners (MBS and long-term T bond buying).
NFTRH subscriber RK sent me a request to have a look at the chart of ENTA on Nov. 4. Here is my note back to him along with the chart…
“Buy around 19. Stop around 18. Sound good?”
It dropped into the support zone around 19 within a day or two and I bought. Here is the chart today (new format), the day on which I’ve booked my 25% profit.
This was one of the X’d out symbols from yesterday’s NFTRH promo post. It’s not highly liquid and I felt I’d be selling shortly, so I did not want it shown publicly for obvious reasons.
The Bank Index has led the S&P 500 since the Fiscal Cliff drama a year ago. Remember that long ago theater that the market used as a sentiment nadir that launched the current rally leg? Remember how the financial world was ending, yet again?
With the Fed on the job, lending free funny munny to the banks via ZIRP, the fear has been thoroughly transformed to today’s current manic speculation. This will blow out one day and when it does, it will be Silver circa spring 2011… or the Nasdaq 100 circa 2000.
BKX-SPX ratio, from NFTRH 266
But for now, an important leader ratio has held support and looks like it wants to turn back up. Above is the weekly view of BKX-SPX.
#266 had this going on for the first few pages and then proceeded to refine a solid view of the financial markets.
Talking My Book
While awaiting important turning points in the markets it makes no sense to deny current realities. We get it; the Fed is inflating, manipulating and promoting greater moral hazards down the road. NFTRH has done its share of illustrating reasons why what is happening is unsustainable and most likely, very unhealthy.