Read Scott here on iBankCoin and also at http://www.createcapital.com/
Joined Jan 19, 2010
717 Blog Posts

Technicians are Frustrated!!!

I love this article. It shows how you MUST adapt to the changing market conditions. As I’ve been saying, throw away everything you know or think you know. In this case, free money overwhelms everything.


WSJ BLOG: Technicians Frustrated: Stocks Surge Despite ‘Sell’ Signals


(This story has been posted on The Wall Street Journal Online’s Market Beat blog at http://blogs.wsj.com/marketbeat.)


By Tomi Kilgore
Technical analysts face a conundrum.
A laundry list of widely followed chart signals are screaming “sell.” But lately, whenever stocks pull back, investors are waiting, telling their brokers “buy.”
That’s making the stock market rally a frustrating experience for many technicians. They believe what their charts are telling them, but the market isn’t cooperating.
“This is an unwarranted, unhealthy and thoroughly frustrating uptrend,” said Tom McClellan, editor of The McClellan Market Report. “But it is an uptrend.”
Mr. Ross said investors should keep in mind that a rise in the S&P 500 doesn’t necessarily prove the bearish case wrong. Considering how many intra- and inter-market signals suggesting a top is near, he maintains conviction in his methodology. “I’d have to be wrong on a whole bunch of things before I’d believe I was wrong on stocks,” he said.
And yet, the S&P 500 surged 1.2% to an all-time high of 1587.73 Wednesday, busting out of the narrow 1.5% range the index had been stuck in over the last month.
Helping fund the gains, TrimTabs Investment Research said the U.S. equity mutual funds and exchange traded funds it tracks have taken in $60 billion in new money so far this year, which is already the highest in any full year since 2004.
The question for technicians is, does the study of the behavior of European and emerging markets, commodities and cyclical and non-cyclical sectors even matter, when money is pouring into the stock market?
Technicians maintain that the answer is “yes,” because over the longer term, it matters more where the money is going than how much is coming into the market.
Robert Sluymer, technical analyst at RBC Capital Markets, said many of his mutual fund and pension fund clients, who seek to outperform the broader market, are more interested in knowing what’s outperforming and what’s underperforming than what the S&P 500 is doing.
“I’m pretty agnostic on the market in general,” Mr. Sluymer said. “My job is to identify what is leading the market, and what isn’t.”
He recognizes that the overall trend of the S&P 500 may still be up, but he continues to point out to clients the “significant shifts in leadership underneath the index” that might normally be construed as warning of a near-term pullback.
For example, Mr. Sluymer noted the industrial sector had peaked relative to the S&P 500 in late February, and has been trending lower ever since.
That’s what makes the current rally so difficult for technicians to follow.
“The bets that are working here…are not the type of bets, or trades, I’d be wanting to make at this point,” Auerbach Grayson’s Mr. Ross said. “That’s the conundrum.”

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Deja Deja Vu Vu

I just have some “glass half empty” thoughts today. Remember, I believe nothing and nobody. Everyone lies to keep markets higher at any and all cost.


“Bitcoin?” Relegated to the “Trillion Dollar Coin” junk heap. Any other stupid ideas? I’m sure there will be. There always is.

North Korea? They have nothing to lose and they will attack something with real bullets. Someone will call it “Transitory or Isolated”. Probably Bernanke.

Cyprus? They need two days of American POMO. Confiscating money from passive accounts will be widespread in Europe soon. That’s why all the capital is here in the good old U.S of A.

China? Don’t worry about them. They know not to deflate the bubble all the way. BTW–their equity markets “suck”.

Japan? What does a trillion Yen equal in Dollars? Does it matter?

Walmart? Nobody wants to work there, nor do anything else for minimum wage. The only jobs available are either minimum wage that nobody wants or highly specialized that few are qualified for.

Housing? Its recovery is a sham. Every mortgage is still sold to FNMA, etc. Stabilization perhaps. And its ancilliary stocks are wildly overvalued.

Healthcare, Utilities and other defensives? The wimp way to equity exposure. But what the wimps don’t know is that that they are also wildly overpriced.

Small Cap stocks? They have been the speculative leadership and they are now seeing a good deal of profit taking. It is deserved and overdue.

Industrials and metals? Nobody needs them because there is no industrial growth. Someone knows this is fact.

Transportation stocks? Just a function of mega-trend-following “investment”. They will all disappoint, like FDX, but it won’t matter to their stocks.


Look, it is April and your 401k money is due. Like every year previous since 2009, new money must pay the yearly high. The only difference is that this year we have free money every day with no end in sight. Expect a fade, as there are negative technical signs everywhere. Would a 30-50 point SPX pullback scare anyone? I doubt it. The Costanza market remains alive and well.

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Whistling Past Pandora’s Grave…

Screw the depositors? What a fantastic way to grab some passive capital! It is the opening of Pandora’s Box. But that is just the tip of the iceberg.

This “Cyprus thing” is just a teeny tiny little bailout. Europe is a giant mess, again and their economies are “death”. But the ECB will buy all Sovereign debt issuance so they can continue to fund their profligate spending.

Our markets? They don’t care about anything except free money. Sure, we can ruminate about fundamentals, but who really cares? Everyone knows the score. Anyone spouting on about anything other than $85 billion per month is just fooling with you.

All new money coming in for retirement account must buy stocks at record highs. Then maybe they’ll be a correction or maybe we’ll just move sideways. But down markets are not in the cards until one year before Obama is no longer President. And it has nothing to do with Bernanke because whoever comes next will be even more Dovish. And a bigger liar.

I suspect we’ll be at Dow 15k by April’s option expiration. Continue to enjoy it while you can.


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1999-2000 Redux

Back in the heady days of 1999, when the Biz-media was occasionally truthful & transparent,  I used to be invited on TV to talk about current market events. One of my favorite places to go was the old Bloomberg building on Park Avenue because they had the best snacks.

One day in late 1999 I made an appearance when the Nasdaq was up multitudinous points. It was the greatest Bull market in history yet it went against every fundamental and technical indicator and analysis conceived of to that date.

Being the young hotshot that I was, my analysis was simple; “Set aside everything you think you know and ‘date’ almost any Internet-frenzy technology stock you are able to afford. Date them because they are fun and satisfying and wildly profitable. But don’t, under any circumstances, marry them. Any of them. Because one day reality will matter.”

The market conditions went against everything I knew, yet I was forced to participate in order to make money for clients, keep up with performance and stay relevant. It was the epitome of adapting to the changing market condition and it worked for a period of time.

But right after that interview I made my way to the snack bar to take a few things with me back to the office, and who came sprinting up? Bloomberg himself. Realize this was way before he was His Honor, the Mayor.

He didn’t look at me, just began furiously dishing some fresh fruit into his plate and muttering just loud enough for me to hear; “Those fuckers think they are doing something, accomplishing something. Those fucking assholes think they are creating value. Then he raised his voice and said THEY AREN’T CREATING SHIT! THEY ARE GONNA DESTROY THE MARKETS! Then he spun his heels and walked away.

He was, of course, absolutely correct.

Today the situation is similar. Not exactly alike, but similar. Back then the markets had innovation in both technology and Wall Street coming together to bring about a significant increase in value. It was carried very far, until it broke, spectacularly.

Now the market is powering higher without a pause. But there is no value being created as far as I can see. There is simply a giant plan to pump as many dollars, Euros, Yen, etc. into public markets as possible in order to cover up the reality of overwhelming debt and deflation. Throw good money after bad in order to make the bad money good.

Policy-makers three-pronged goals are; 1. to keep asset prices levitated in order to propagate the “Wealth Effect that will encourage spending and hiring 2. To fund the governments Treasury issuance to cover deficit spending and 3. To help banks liquefy by buying their non-performing assets and investments. We are now in year four of this plan and most of it is working. This has been the most successful government program since the Marshall Plan right after we won WWII.

Knowing the policy and plan and thinking that it is, “The Royal Scam”, as I’ve been known to call it, doesn’t mean that I’m bearish or I’ve missed it. Many have adapted to the changing market condition even though it is a patently manipulated one. I don’t know how or when it will end but as you know, the policy is clear, free money goes a long way to fixing almost all financial problems.

There is no value being created except for shareholders and the government. And as the Fed Chairman says, it is all just transitory. Just like in the past.

I beg you to “get it while you can” and enjoy the fun and festivities. I won’t even begin to speculate on when and how it breaks. But reality eventually wins.




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What If…

There are many people, smart people even, that say the markets multi-year bullish phase is caused by many things other than the FED printing billions of dollars each month to buy some form of debt or another.

My favorite is an article that says the market are up 130% because earnings are up 130% during these few years. Over 80% of the gains in earnings come from the giant TBTF banks as they utilize every trick in the book to show profits. Some of the accounting tricks are truly hysterical. Also, a large portion of the gain in earnings come from the money that Apple has made.

There are even folks who say that the FED is not really printing and buying assets, they are doing some other form of magic that leaves high velocity money in a narrow range. Bullshit. My disclaimer is that I am do not have a PHD in economics.

If the FED Quantitative Easing is a “grand experiment” then I have another experiment to propose within this “grand experiment”.

Let the FED cease QE. Tell Investors that it is over and that the economy is strong enough to stand on its own. You can leave ZIRP, just stop the endless free POMO money every day.

What do YOU think would happen? My guess is that we would drop a quick thousand points and recover most of it quickly, producing a lovely double top. Then Dow 10k.

Your thoughts are welcome and appreciated!

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Big Change Coming…

Did I get your attention? Good, because I lied. After listening to Bernanke today it is clear that there will be no change in policy, as long as he is Chairman.

Governments must fund their deficit spending and TBTF banks must not lose money. These are the primary tenets of the “Bernanke Policy”.

In order to accomplish that the Fed must own the entire non liquid mortgage market. That means all new mortgages and all old mortgage paper. At 100 cents on the dollar. And when I say all, I mean all. But forget about that old news for a second.

The endless printing of money is something that the general public knows nothing of. You speak about it and people’s eyes glaze over. Its like talking about currencies to the public.

I was once taping an episode of Bulls & Bears and someone started taking about the Dollar vs. some other currency and its implications. The taping had to stop because the topic is a “channel changer”. Realize that stopping a taping was hardly ever done unless there was a technical difficulty or a real fuck up.

Like the time I used the exclamatory, “Jesus Christ” when describing some market action. That was about the biggest no-no. You can only talk about the man, not use his name in any other way. One of the Commandments I was told.

So, the market indices are pushing new highs, Europe is falling apart again, China is off the gas pedal and we have an economy that live off the lies of government releases. Though markets sold off quickly with the latest Italy scare, and there is widespread technical Distribution, the pump will not end. Not now and not until there is a new Chairman of the Fed or a new President of the United States.

This economy is set up entirely for the investor class. As Ben said, “the rich get richer, bitch. You don’t like it, go screw”



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