I'm Just Sayin' - Saudi Style

The Tadawul All Share index in Saudi Arabia, courtesy of Bloomberg. What do they know about the March 11 Day of Rage that we seem to be ignoring here?

What is it with airlines?

I've decided I've already said enough about the US Scare luggage fiasco and only add that they refunded the luggage fees after sending our bags to the wrong airport.

This week, I booked my son on Spirit Airlines. Yes, I vowed never to fly them again and as a family that still holds. But this time, the numbers were compelling and no part of the journey would be through LaGuardia Scare Port.The main terminal is a nightmare.

Wednesday morning - fare from Ft Lauderdale to Orlando - $49 each way. Then add the bag fees, carry on fees and seat reservation fees and it actually made sense to pay 60 bucks to join their $9 fare club. I waited.

Wednesday afternoon - fare going dropped to $39. Fare returning dropped to $11.  Eleven dollars to fly. Since my son would only have a backpack, considered a personal item, for a few days at Disney, and he was flying alone to meet friends there he did not need to pre-reserve a seat. His total round trip was 79 bucks with taxes and fees included.

How do they make money on that? The bus cost more. I still say short airlines whenever the charts say to do it.

Barrons followup

As is usually the case, after I submitted the column to editing yesterday the market reversed course. However, unlike the last few times this happened, there were technical reasons for the sell off in the first place.  I outlined them in the column and in Quick Takes Pro already.

Do y'all find it interesting that gold and oil stocks are up out of the gate despite reversals in their commodities?

Brent vs. WTI

I'd love it if a reader can tell me what this means. Before the last oil run up the spread widened but this time it is insane.

Funky Fertilizer, Kooky Kopper and Slidin' Soybeans

OK, you caught me lapsing into pop culture again. If you were alive back then, the title is a tribute to Kool Aid competitor Funny Face - a drink mix from the 60s and 70s with rhyming names and a healthy image that actually caused cancer.  Goofy Grape and Lefty Lemon were made with cyclamates. They changed the names of Chinese Cherry and Injun Orange - as they should - in a hurry.

Let's bring this back to the purpose of this post as a follow up to the earlier tease. Today's Barron's Online column was inspired as early as last week when fertilizer stocks were acting funky. It did not make sense to me that during a global food crisis fertilizer and seed stocks were stumbling. Then Friday hit and several were clocked. Remember that the Dow was up 76 or so points that day.

In researching the column, it became clear that commodities were not acting very bubbly at all. I won't bore you by rehashing the list that scored bearish reversals, went limit down or simply stopped rallying before the weekend. But the list is fairly broad.

No, gold and silver where moving higher already. So were coffee and cocoa. Meats were still OK but grains had stalled and even rubber was not bouncing back (sorry, had to take it).

Copper, as a metal, was also doing well but copper stocks clearly had other ideas. The charts in today's column could not be any clearer and now that the deadline has past I had time to look deeper into base metals. Titanium Metals (TIE) is far from a bull trend. Same for a few uranium stocks with big dog Cameco (CCJ) sporting a serious RSI divergence.

For those of you who do not get the paid Barron's Online (I was moved from free to behind the pay site a week ago), Southern Copper (SCCO) has confirmed a head-and-shoulders top.

What's going on? The chain of events from Libya pushed up oil which pushed down the economic outlook meaning less demand for commodities. I am not so sure how all of the sudden food prices should take a hickey (corn and wheat were limit down today) because demand for something to eat does not depend on oil - or does it? Energy is needed to grow and harvest the stuff. But wait - higher oil should mean higher prices for your box of Cap'n Crunch, not lower.

Bubble-heads, maybe your were right. Corn was the last market to correct and all of them did look a little frothy. But you won't find and corn and wheat puts in my portfolio. Funny how one of three DJ industry groups to rise today was food products. I guess they can still pass along the price increase on a can of Spam.

Commodities teaser

Today's Barron's Online column was conceived over the weekend before today's stock market decline. Please read it when it comes out at roughly 4:30 NYT and then come back here for additional thoughts later tonight. Barron's gets first dibs.

Another Airline Rant Coming

Since I am heading off to the NY Traders Expo in the morning, I'll do the full rant another time. But now I am so tempted to short yet another airline stock for the company behind it. USAir, aka US Scare, is now worse than Spirit.  If only stocks really reflected fundamentals because this airline is by far the most horrific. I really do not understand how any of them make money as the travel experience has deteriorated significantly. And I have yet to be given a hernia exam by TSA.

Let's just say they had mechanical difficulties - which happens - but my well traveled brother in law asked "was it USAir? They ALWAYS have mechanical difficulties"

The killer was rerouting my son to Ft Lauderdale instead of  Miami. OK, we can deal. Its not that far and there was a cheap shuttle. He arrives at the gate and they took his boarding pass and ripped it up. You are going to Miami in three more hours.

We already confirmed Ft. Lauderdale with the airline. They said he could try standby but his bags were already going to Miami.  He boarded the flight to Miami. The bags went to Ft Lauderdale.

"You were right, sir" they said to my 18-year old son. "You were supposed to be on the Ft Lauderdale flight. Can we get you an alcoholic beverage?"  Psssst - still a drinking minor in NY and Fla.

BTW - there was never any mention of how he was supposed to get from Ft Lauderdale to Miami and the USAir rep said he did not have nor could not find the phone number for USAir in Ft Lauderdale.

In other words, you're on your own, sonny.

Travel Tip - Book Southwest or Jetblue to Ft Lauderdale. Then take the "Go Airport Shuttle" right at baggage claim to Miami for $30. Same price as a cab from Miami airport. South Beach, here I come!

Benchmarket Interest Rates

In the old Quick Takes format, here is why I think the 10-year is going to 4% in no time on its way to a real breakout.

When piigs fly?

And any fool knows
a dog needs a home,
a shelter
from pigs on the wing.
- Pigs on the Wing (part 2), Pink Floyd

"When pigs fly" is an idioms used to indicate that something is highly unlikely ever to happen, or that it will never happen. This phrase is thought to come from an old Scottish proverb (source: omniglot.com). Either the messiah is pulling into the station with Godot or Satan just beat the Russian hockey team at home because the stock markets of the PIIGS countries are indeed flying.

• Portugal - closing in on its October high, which is close to its April 2010 high
• Italy - closing in on its April 2010 high.
• Ireland - the laggard but still slogging higher after emerging from a four-month base.
• Greece - currently in  bull flag after emerging from a base
• Spain - arguably just broke out above resistance from July and October and on its way to its April 2010 peak

Solar Flare

I posted a link on the Facebook page (might still be in the scroll on the right side of this blog) that a giant solar flare and CME (coronal mass ejection) occurred today (with another hat tip to Ed Carlson for posting it in a chat room I follow).

From spaceweather.com: Geomagnetic storms are possible when the CME arrives 36 to 48 hours hence.

No disputing the science on that one as well as the possibility for problems in communications, satellites and other events that are normally well-protected by the Earth's magnetic field. The problem comes when we start to wonder what happens to the financial markets.

From the grasping at straws department, I suppose disruptions in communications makes people want to sell. But check out the last major solar event on the Dow:

Does not look like much. Volume was nothing, too. Is there a lag? Who knows?


There's a Fed study showing a link between flares and stocks: http://nowandfutures.com/d3/GeomagneticStormsAndTheStockMarket(AtlantaFed)wp0305b.pdf (posted by Mike Carr in that same chat room).

Followed by Tom McClellan: But as with a lot of things that are interesting, it is really hard to find a way to make money from noticing this relationship.

What we do know is that the stock market is drunk on Ben Bernanke's liquidity trough. That is a long-time without any correction of any meaning.

What I really want to do about the solar activity is hop on a plane to Northern Norway and see the Aurora.  That is on my personal bucket list.

And for you 2012 end of the world Mayan Nostradamists, here is a link to soothe your chicken little soul:
http://2012endofworldpredictions.com/solar-flares-and-how-they-will-create-modern-society-to-collapse/

Time to chuck it all and move to the Caribbean? Pass the Kool-aid margaritas!

Why Stocks Do Not Equal the Economy

This morning, I re-posted an article in the NY Times (link is in the Facebook scroll to the right on this page) talking about the proposed takeover of the New York Stock Exchange by the Deutsche Börse (German Stock Exchange). The author made a point which we already knew - that a healthy stock market doesn’t mean a healthy economy.

Everyone seems to wonder how we can get a roaring bull market while unemployment remains high and the housing market stinks. How corporations can be making money while nobody here seems to be able to work for them or buy their wares.

Of course, it is a little exaggeration but think about where they are selling. How much profit originates overseas? No, Joe's Hamburgers is not cleaning up but the multi-national McDonalds seems to be. IBM is not at new highs because they are selling PCs to you and your pals.

Here is another quote from the article - Innovative American companies like Apple and Google may be worth hundreds of billions of dollars, but most of them don’t ... employ many Americans.

The stock market has become a robot world where computers trade with computers and analyses based on tracking where the public is putting their money are quite ineffective. If you want to day trade, good luck to you as it is your little brain and maybe a newsletter up against Watson, IBM's gigunda supercomputer.

Investing is not dead but it has to take a different form. Taking charge of your "investments" as eSignal and Ameritrade like to advertise is garbage. What they sell is trading. Investing, a la Peter Lynch by walking around your neighborhood to see where the long lines out the door are is no more.

As a technical analyst, this is a hard pill to swallow (not the walking around but the analyses). There is still time left for us to make some money but it won't be by the same methods we used 10 years ago. Trend following seems like it should have a bigger place in the arsenal and moving average crossovers and that ilk less.

Fortunately, other markets are not quite as polluted as stocks and technical analysis still works great. In forex it is especially great. Perhaps things normailze when the Fed backs down and lets the free market work again.

Or perhaps it is the natural ebb and flow in the life of an institution (stocks) that is seeing its phasing out. The great NYSE is going to be made in Germany and guess what, they did not want it for commoditized stock trading that is going electronic anyway. Derivatives are where its at. You can call them weapons of financial mass destruction, if you like just like Warren Buffett did.

As the article said, the stock market is supposed to provide liquidity for business. If it is reduced to a dance among trading machines and the IPO market dries up than what is it really for?

Road to Nowhere part two

Much like Nixon’s self-delusion of the 1970s, it gives our leaders a gimmick to help them ignore reality and make believe they’re actually doing something useful. They keep telling you to focus your mind on the “core inflation rate,” excluding food and energy. If you do, they insist, the inflation magically disappears. - MoneyandMarkets.com

Kevin Phillips, a political and economic commentator for more than three decades and onetime Nixon strategist, reports that President Richard Nixon asked his Federal Reserve chairman, Arthur Burns, to concoct a new inflation number that would be split off from traditional headline CPI, dubbed “core” inflation—and thus make inflation look less threatening. - EconomicPolicyJournal.com

Manipulated numbers notwithstanding, high inflation would outlast the Nixon years, and by the end of the 1970s, futzing with the figures that measure it had become common. Prices of everything from used cars to children's clothing were given the heave in order to make the numbers look better. As control of the White House shifted from Republicans to Democrats and back, both parties needed to avoid giving the impression that inflation was actually worse than it had been when the other guys were in power. - Newsweek

The references go on and on from the Huffington Post to Sean Hannity and every nut and mainstreamer in between - except Krugman, of course. 

Road to Nowhere

Well we know where we're goin'
But we don't know where we've been
And we know what we're knowin'
But we can't say what we've seen
And we're not little children
And we know what we want
And the future is certain
Give us time to work it out
- Road to Nowhere, Talking Heads (1985)

Actually, I think this lyrics should be the opposite when it comes to current government policy. We don't know where we are going (although we say we do) and we do know where we've been (we're just ignoring it).

That's as political as I want to get in this blog. Ben Bernanke glossed over the very obvious and very incendiary reality of rising food prices in his speech yesterday. How many times do we have to debunk the concept of "core inflation?"   It's like ignoring breathing and heartbeat to declare someone is alive when they're clearly dead but otherwise intact.

To loyal readers of Barron's "Getting Technical" column

This might get lost in the shuffle as it will be posted at the bottom of my Barron's Online column:

Starting Thursday, Feb. 10th, this column will be available to subscribers only. If you aren't already a subscriber please consider becoming one. Thank you.

Basically, they are putting me and a few others back behind the pay wall where we used to be.  I'll still be publishing this blog, the Facebook page and Twitter (most all that overlaps) but the column will be exclusive to Barron's Online.

Thanks to everyone for your support over the years.

Quickie follow up on Commodities

Late last month, I presented several weekly charts of commodities here and called it Food Inflation. This is just to follow up on those charts:

• corn -  still rising and not overbought
• wheat - still rising and not overbought. Has significantly topped last summer's Russia-induced spike up
• livestock - COW ETF broke out from and has now tested a long-term trading range
• rice - has finally joined the others withe a long-term resistance breakout

not in that report were:

• cotton - parabolic rally to multi year highs but no sign of a top just yet
• sugar - scored a 30-year high but then formed a bearish weekly reversal. Short-term trend broken, too.

Getting the drift? Yes, let's keep "volatile" food and energy prices out of the inflation picture and keep printing all the bucks we need.

AOL buys Huff-Po

Readers know I lapse into the sarcastic quite a bit. Here is an excerpt from this morning's edition of Quick Takes Pro (Extra snark alert - Why have you not taken a free trial yet? It's free, hence the name, free trial).

Apparently there was a football game yesterday? ☺ Is there a new indicator based on the performance of the National Anthem singer? So disappointing.

We start the week with some merger news from a long-dead brand - AOL. It looks as if this is one more media company (think newspapers) that is trying to be relevant again and they are now buying the Huffington Post. Let's see if this is not new, new Coke (double use of "new" intended). After all, they bought Time Warner back in the day only to spin itself back out just a few years ago as a brand holding back the T-W jewel. Will the ubiquitous "you've got mail" now play with the thick accent of the former Ms. Arianna Stassinopoulos?

OK, back to work.

Irish Eyes?

Are they smiling or drunk on liquidity?

Look at this chart:

That is a breakout! Not to mention a golden cross is just about in place.

This follows breakouts in several of its PIIGSy pals. Crisis over!

Who wants to by a bridge?

Transports AND Commodities

I've been writing a lot in my column that the transportation sector is not helping the stock market. In fact, it is falling as the broad market rallies and that should have Dow Theorists up in arms.

Here is Paccar (the former PACific CAR and Foundry), a maker of trucks and aftermarket parts. For some reason, I thought it also made railroad cars but what do I know as a technical analyst?

It bonked after a pretty good earnings report but a forecast that rising commodities prices hurt 2011 margins. This chart action is not exactly an endorsement of the recovery.

Further, here are some recent headlines:
Dec 30 - Paccar Appears Poised for Serious Earnings Expansion
Feb 1 - PACCAR Announces Improved Fourth Quarter Revenues and Net Profit
Feb 2 - PACCAR is a manufacturing company that reported positive quarterly earnings. On average, analysts expect shares to rise between 12% to 17%.

Transports and transportation "makers" do not pass the smell test.

Whoopee! Stocks are up!

What's going on?
- Marvin Gaye

The wave is spreading across the middle east. It started in North Africa with Tunisia, spread to Eqypt. Then it detoured to Yemen and now it is in Jordan. While Jordan's dissolution of the government seems to preemptive, the others are seeing the result of rising food prices and low opportunity.

But look a bit further to the north and lo and behold four of the five PIIGS stock markets are in rally mode. This just after we saw that CDS (credit default swap) premiums are back to crisis levels.

Gold is not really caving in as many have predicted and oil is back in gear after a false trend breakdown. Fear, right? So why is the dollar falling again?

What's going on indeed! These are times that make it oh so interesting to be an analyst. Do I drink the kool aid or look at technical divergences and breakdowns? Do I jump in on any dip or look at the dearth of good buying opportunities and plethora of short sale candidates? Or should I just stay at home with my thesaurus and wait for the next killer snow storm to hit?

Health care is under serious fire but the ISM is up.  Pfizer had flat numbers, dropped 2% in the premarket and is now up 3.2% intraday (yes a 5.2% swing.

And did I mention - the IEF treasury ETF is just broke its rising wedge to the downside.

This little snipped from Charles Payne sums it up:

President Bingu wa Mutharika of Malawi has passed a set of new laws that make some everyday things a crime - including passing gas.

"I fart in your general direction"
- Monty Python