Thursday, September 27, 2012

Print Baby Print!

In the midnight hour, she cried more, more, more
With a rebel yell, she cried more, more, more
In the midnight hour, babe, more, more, more
With a rebel yell, more, more, more, more, more, more
(Rebel Yell, Billy Idol 1983)

That's right, folks, the good people in the People's Republic of China are stepping up to deliver more free money!  That's right, although not confirmed, it looks like number 2 is in the mix again. Keep in mind numbers 1, 3 and 4 have done their part. For you dismal science types, that would be the USA, Japan and the Eurozone.

On our social media, I posted this: Doing the same things over and over and expecting different results (referring to the Fed's announcement of QE4 - that's right four - scheduled for December.).

I am sure most of you recognize this as Einstein's definition of insanity. In a Krugman-esque way, all of these central bankers must think they should have done a massive, huger, collosifical stimulus of maybe 2 gazillion dollars, not the puny billions here and billions there. Could it be they do not understand that what they did cannot work? Must be. Otherwise they are stupid or liars. Far be it from me to call these people such names because they are where they are and I am writing a silly blog.

So they do not understand that they are doing more of what won't work.

Is it any wonder that gold hit an all-time high against the euro and Swissie today?

Monday, September 24, 2012

September Seasonal

Most market followers know or at least have heard that September is the worst month of the year. It is the only one with a net negative return over the decades and when there is an October surprise (that means crash) the pain really started in September.

There is another little seasonal pattern this time of year but it is not nailed down to the calender. Well, actually it is - the lunar calendar, not the solar calendar we are all used to using. Before getting into it, let me digress a bit about the lunar calendar.

Chris Carolan, publisher of the Spiral Calendar advisory, wrote a 1998 Dow Award winning paper called "Autumn Panics" and as the c-word above suggests, it is about autumn stock market smashes. I am going from memory on this one but this time of year is the seventh month of the calendar and that is where a good deal of these panics occur. That means sometimes it is in September and sometimes it is in October.

Guess what month it is right now?

Let's be clear that not all month 7s are panics. In fact, most are not. But it is a delicious tidbit of technicals, isn't it?

Back to the topic of this post. While the September seasonal is not living up to its reputation thanks in no small way to Ben and Mario, the seasonal that does seem to be working so far is based on the Jewish Holidays. Sell Rosh Hashana and buy Yom Kippur. Or, in English for 2012, sell Friday Sept 21 close and buy Wednesday Sept 26 close (it may be Sept 27 open but that is not the point of this story - you are free to get the details elsewhere). The idea was that many investors square up positions to avoid distraction during prayer and after the holiday they return to work.

Check this chart from this morning's Quick Takes Pro newsletter.

This was printed before the open Monday but so far, so good with the seasonal trade. No, its not like buying Apple or shorting Facebook but a little reliable profit is an very underestimated luxury.

Friday, September 21, 2012

Black Hole

Here is an excerpt from this morning's Quick Takes Pro report.

...we'll drift with the market like a jellyfish on the ocean current. A little zig or zag from time to time but essentially not fighting the currents....

....Should we mix metaphors? Who likes astrophysics?

Even a black hole has a limit on how many stars and planets it can gobble up until it pukes them back out.

Apply that to the market.
Apply that to the Fed.

Wednesday, September 19, 2012


I used to write something in this blog every market day. Sometimes it was a chart. Sometimes the ravings of a madman. But there was always something going on and something interesting to write.

Not so much anymore. Earnings, economic reports, interest rates don't matter. The only thing that matters is whether or not Ben will print. Well, the Bankin' Brothers (Barnanke and Draghi) have shot their loads. They are all in forever at this point and there is nothing left. Well, unless they buy car loans and abandoned storage lockers.

Today, Japan joined the printing party. China threw in their unnecessary infrastructure plan earlier this month. Come on, Bulgaria, Botswana and Burma (they all start with "B"). Join the Bankin' Buddies and buy some junk paper. What could possibly go wrong?

So I was looking around my data machine for anything that might be half interesting. I saw the Baltic Dry Index chart back at 2008 crisis lows. That's interesting, right? Well, not really as the path of this index has had nothing to do with stocks and bonds for years.
Or is it? Maybe the rally off 2008 was the optimism of recovery and after it broke down in 2010 it tells us that the global economy is tanking (pun intended). It sure would make the stock market's disconnect look positively delusional.

I then checked out another oddball - LIBOR.

During the financial crisis, LIBOR soared and the TED spread went with it. Banks did not want to lend to each other and this proved it. Crisis. Panic!

But look at it now. This is a daily chart so it does not show current levels in context. But why is it falling off a cliff? Are banks now the only place to be? Maybe - with all that free stimulus cash.

Beats me what LIBOR means now.

So, I will go back into my cave. Some of you may have noticed my Barron's Online columns being rather bullish over the past few weeks and thinking that the last bear has caved making the biggest sell signal ever. Have no fear. I do not expect this to last to the election. I may still be a bear but that does not mean I cannot get my clients some profits on the long side while we wait.

Thursday, September 13, 2012

Emerging Markets Break Out?

One look at post-helicopter prices in the BRIC ETF and it would be understandable to call it a breakout.
After all, this ETF closed above its Augusts high and resistance from its May gap down. Classic chart breakout, indeed. Or is it?

Things are strange in the world of QE but let's assume for a moment that classical charting still works. What's the problem?

Well, for starters, the 200-day average is still above and falling. That's officially a bear trend, friend.

Next, the trendline from the highs of last year is still above that. Was summertime action a base or a pause from boredom waiting for the next shoe (see yesterday's blog post on that). Looks like the latter and that suggests upside is limited. Emerging markets and BRICs are not leading and that is probably not a good thing for the global markets.

To quote Jon Stewart yet again, "Oh billions of dollars, is there nothing you can't do?"

Well, at least until the sugar rush wears off.

Wednesday, September 12, 2012

Soon there will be hope

Waiting.... Waiting.... Waiting.... Waiting....
Waiting for you to - come along
Waiting for you to - hear my song
Waiting for you to - come along
Waiting for you to - tell me what went wrong
This is the strangest life I've ever known.
- Waiting for the Sun (The Doors, 1968)

This is the life of an investor.

We waited for QE3 before and it ended up to be a Twist.
We waited for Super Mario Draghi to put the Germany's money where his mouth was after pledging to "do whatever it takes."
We waited for Jackson Hole.
And now we wait for QE3 again at this week's Fed meeting.

We waited for the end of summer because every day in late August is a dog day afternoon.
Then Labor Day came and went and we waited for volume to return.
We still wait to see if Europe will survive.

For most of this country, we wait to see which side of the same coin will become President. 

And for those of us who still think free, unencumbered markets still work, we are waiting for central banks to just stop it.

I think that after Thursday, there is really only one wait left - the election. How happy am I that I do not live i a  battleground state where I would have to set my DVR on "kill" to zap the barrage of negative political ads coming my way.

The Fed will be done, even if they say QE3 will not kick in for months. There will be nothing left to even attempt. And the country will not want it anyway.

I am tired of waiting but after Thursday I will shift my outlook from waiting for the next of the centipedes shoes to drop to watching as rational analysis, be it technical or otherwise, starts to make a comeback.  Hang in there, folks. This nightmare will soon be over.

Wednesday, September 5, 2012

Where is Thumbkin?

Where is retail?
Where is retail?
Here I am
Here I am
Where were you this summer?
Why are you not trading?
I'm buying bonds
Buying bonds.
- With no apologies to anyone

Well, it was either that or a bastardization of Maggie May by Rod Stewart. You know, it's late September and I really should be back at my trading desk.

Normally, the post Labor Day week releases the hounds. Pent up demand (or supply) us unleashed and things start to move again. Volume expand and away we go.

Not this year.  We are now two days into the week and nobody is still away stretching this into a two week vacation. NYSE volume is still below average and that average has been falling throughout the 2009-2012 bull market. In other words, it stinks.

Last year was the same deal. It took more than a week for things to perk up. You have to go back to 2009 to see a clear change from low volume to higher volume the day after Labor Day.

This is the age of QE. I do not blame the disruption caused by the slo-mo crash of 2008 because there is now four years of healing in place. Markets stabilize faster than that.

Note I am not talking about price. That is part of the age of QE. I am talking about the function of the market to allocate capital, reflect the mood of the public vis a vis the economy and reward those who take successful risks.

No, this is the age of QE. The public calls the market a casino. Institutions call it free money courtesy of the taxpayer. And analysts cannot call it at all. Why should they be able to do so? Forget discounted cash flows. Forget momentum and sentiment. Forget propeller head algorithms.

Nothing matters in the age of QE - except will he or won't he? Will Ben print? Will Super Mario save the Eurozone by, you guessed it, printing.