Tuesday, April 30, 2013

The In Your Face Move

This is from Tuesday's Quick Takes Pro newsletter in the "Today's Lesson" section. Enjoy!

The chart of Qualcomm really illustrates what has been becoming a bit too common in this market. False moves, fake-outs and a "whichever way the wind blows" culture is driving old school chartists crazy. Exceptions are now the rule and we wonder if technical analysis would have even gotten off the ground it if were invented today.

For those wondering about the captions, we try to keep the swearing to a minimum. Look what happened this month - a trend break that lasted more than just a day, a strong rally to prove it was false, and then a total collapse to be sure everyone lost money.

What we have is a broken trend and now a broken support. We have observed that the market does finally give proper signals after this sort of shake-and-bake, for lack of a better term.

As for the CeeLo Green reference, that is the cleaned up radio version of the f-bomb.

Monday, April 22, 2013

Sign of a Top

We all know that despite educators' and hand holders' best efforts, the little guy is always the last to the party. When the public starts to bite on Wall Street hype you know it is getting very close to time to sell everything and hide in a bunker (or spider hole of you are a deposed Middle Eastern dictator).

This is why the magazine cover indicator works. When editors believe the public is sufficiently hungry for a certain type of information they put it on their covers to spark sales. You don't see covers touting stocks at the end of bear market because nobody wants to touch them with a 39 1/2 foot pole. Of course, that is exactly the time to cozy up to Mr. Grinch.

Here is the transcript, accurate to my own stenographic abilities, of a John Hancock Financial Services commercial I saw on a financial news show this morning.It showed several couples in different JH offices talking to their respective advisors.

Couple 1 - "We felt better holding on to our money"
Couple 2 - "But waiting? We shouldn't wait any more."
Couple 3- "So here we are. We need to invest again."
Couple 1 again - "We just need to find the right thing to do."

Break out the pic-i-nic baskets, the bears are comin' to town.

Wednesday, April 17, 2013

Free Market Will Soon Have Enough

From this morning's Quick Takes Pro newsletter. The answer to a letter to the editor.

Your worries over the market's dysfunction are echoed everywhere. However, the market may be manipulated by the Fed and gamed by the algos (algorithmic trading) and taken off line in dark pools but sooner or later the free market will come back and purge itself of this nonsense. We have already seen how QE is getting less effective and shorter-lived. Inflation must come back by definition and indeed we are seeing it rise under the radar. True, commodities are falling hard but sooner or later debt is going to crush us.

Australia has already made a move to trade with China without having to convert to US dollars first. We know the Middle East has already floated the idea of selling oil in euros or even their own currency. Money and business will eventually move to where it is most productive and the flight from high tax and regulation states to low tax/reg states is clear. Sooner or later (we like that phrase) it will start to leave the US altogether.

But for now, the only thing that has worked is following the trend and taking a blind leap of faith that the trend - which is still up on the S&P 500 - will always be intact. Of course, we know that cannot be true. But it is true until it isn't.

As a technical analyst, seeing cherished indicators fail all the time is frustrating. Watching pattern breakouts/breakdown fail all the time is worse. Only the trend followers are happy these days and only in they chose the stocks that look different from the others. For example, look at UTX in the Dow vs. XOM. One was a steady climber. The other formed patterns and was completely frustrating. And then look at HPQ, which was a steady climber - until it wasn't.

There is no shame in taking it easy, cutting back trading and lowering risk. As for the question of who is selling gold stocks at five-year lows, blame the trend followers. However, sooner or later (there we go again) value investors will find them. Technical traders will spot extreme bearish sentiment and oversold conditions.

QE will end one day. And when it does, look out below. Interest rates will soar and gold will take off. The disconnect between stocks and the fundamentals can stay in place longer than we can remain solvent (who said that?) but it will return one day. The longer it takes, the worse the snap back will be.

Monday, April 15, 2013


The events in Boston today were a reminder that the world is not the same as it was when I was a naive numbskull in college. And as a suburban New Yorker, this attack, of course, instantly takes me back to that sunny Tuesday 12 years ago. This time it was not me in the vicinity but my son, in college, a mere five blocks down the road from the marathon's finish line. He walked by that area countless times over his still unfinished school career just like I walked through the concourse under the twin towers countless times in my work career.

He is fine but he, and his school, is shaken.

It was easy to forget that gold plunged, stocks tumbled and bonds rallied hard. It was gratifying to see a Facebook post saying NY was with Boston - an arch, archrival in sports. We are.

It is easy to wonder why all of this happens. It is easy to look over your shoulder for the next event. But that is not what we do here. We go about our business. We hoist a bird at the perpetrators. And we figure a way to make things better.  It was my honor and pleasure to drive right over the Throgs Neck bridge in New York City the very day of the 10th anniversary of 9/11. I knew the police had made sure it would be alright. And it was.

Like many, I now question why I continue to run with the rats instead of enjoying each day.

Friday, April 5, 2013

Free Market Rules

“This is a punch to the gut. This is not a good number. And I think now you’re going to interestingly start seeing a lot of discussion about maybe the sequester’s a bigger deal than people thought it was.” — Austan Goolsbee, former chairman of President Barack Obama’s Council of Economic Advisers, in an interview on CNBC.

First of all, this guy with the funny name is a tool. I have been listening him defend his former boss for many months and he makes my skin crawl with his blind devotion and kool-aid drunken mindset. It should come as no surprise that the economic numbers will eventually start to reflect reality and not just the cooked books and hidden problems hidden by gobs of free money puked out by the Fed.This is structural, not a short-term effect of the sequester, which itself was insignificant bull$&!^.

Forget the talk about hurting job creators. I can see the left's argument that tax breaks do not necessarily create jobs because rich people may not invest in business but in themselves. That is their right, by the way.

Tax breaks for the rich may not help the economy but because money will flow to its most profitable uses,  it may indeed hurt it. Capital will be used in its most efficient way unless the government mandates it do something else - which by definition will be less efficient and less productive. 

Rich people are mobile, and so is their money.  Just ask former Californians who fled for lower tax, lower regulation states. Rich people also have the luxury of saying "F#*! it, I don't need this headache anymore and I am going to shut down my business."

So, Mr. Goolsbee, your punch in the gut was self-inflicted. Unintended consequences. What always happens when the government gets involved in the name of fairness.

Now before you start flinging your poo at me, I am not an anarchist. There is a need for regulation and laws and I also want it live in a country where there is a safety net to help those who truly need help. But the way to help the majority is to let the free market crank up its engine and raise everyone up. If the rich get richer, so be it. As long as those in the lower levels of the economic strata get richer then we all win. Does it hurt me if my neighbor makes a gazillion dollars? As long as he does not control the government then we both win.

Guess who won under TARP and QE? Not you and me. It was the so-called fat-cat bankers that the President hates so much. Interest rates are not low due to the Fed. They are low because the economy blows and there is no demand for money.

Ask yourself, other than refinancing your mortgage at a lower rate, what has QE done for you? If you answered that it made your 401K go up, then you win. It has not helped the economy as the jobs report proves. But if you think that it your 401K will stay up when the Fed stops printing money then you lose.

There are needs for laws to protect my person, my property and my borders. There are needs to restrict business if it impacts people and yes, the environment, in a negative way. But telling me to wear a seat belt in my own car should be between me, my family and my insurance company. Yes, Nanny Mike, I understand your admirable desire to help people attain good health and the economic benefits of not having to care for people who bring it on themselves. But there has to be an element of personal responsibility here. If I choose to be fat, so be it. That is between me, my family and my insurance company.

And for those who do not have health insurance, I don't have that answer. Obamacare aint' it. Admirable yes but don't forget the unintended consequences of less doctors, more wait times and despite the kool-aid, higher prices.  Did someone say economics 101? Less service, more demand, higher prices.

You want higher wages? So do I. But when Mr. Dumpka (yeah, I said it. He makes a quarter million in salary, by the way) demands higher wages he effectively reduces available jobs. You can force me to pay my workers more but you cannot stop me from cutting back on the number of workers I hire.

I am very happy to see the free market making its presence known again in the form of lousy data. It will eventually force we stupid humans to to what we should have done in the first place, let the market work. When enough pensions are busted due to bankruptcy and the ranks of the government assistance programs swell so much that there is not enough to go around then people will demand a return to what got us to be the richest nation on Earth in the first place. Hint, it was not the government.

Tuesday, April 2, 2013

Still Alive

Help I'm alive
My heart keeps beating like a hammer
- Metric, Help I'm Alive (2008)

Sorry for being so inactive but I was away last week and honestly it is easier to send quick updates out on three social media platforms at one time using HootSuite. If there is something requiring a longer treatment or I need to rant about something I will send out notices on social media with links back here.

Thanks for reading this blog and thanks for understanding.

- mk