Thursday, June 23, 2016

6/23/16 Preflight


DJIA +230 points.  SPX +1.34% to 2113.  EEM (emerging markets) +2.42%.  RSX (Russia) +3.9%.  EW (Brazil) +3.94%.  FXI (China 'H'Shares) +2.43%.

In my opinion, 'maximum pain' will be a further gap up on Friday.  One which essentially forces bystanders to buy at any price (or be forced to continue standing by).

Thursday, June 9, 2016

6/9/16 The Soros Thresher

'After a long hiatus, George Soros has returned to trading, lured by opportunities to profit from what he sees as coming economic troubles.

'Worried about the outlook for the global economy and concerned that large market shifts may be at hand, the billionaire hedge-fund founder and philanthropist recently directed a series of big, bearish investments, according to people close to the matter.

'Soros Fund Management LLC, which manages $30 billion for Soros and his family, sold stocks and bought gold and shares of gold miners, anticipating weakness in various markets. Investors often view gold as a haven during times of turmoil.'

As much as I respect Soros' earlier track record, my take here is that he's in danger of denting his family portfolio.  At age 85, it's time to stop making 'big, bearish' bets, especially given the major role that luck plays in most successful trading careers.  He may be right.  But realistically, he's probably at least as likely to be wrong.

The Soros story made headlines on several financial sites this morning, which probably contributed to the -90-point selloff in the DJIA (now well off the lows).  The market is always in the process of separating the wheat (strong hands) from the chaff.      

Wednesday, May 25, 2016

5/25/16 Corrective Lenses-> Long Live The Bull

I scan through dozens of market commentaries each day, with an emphasis on market views which differ from my own.  Occasionally I come across one which truly sparks the imagination.

Mark Hulbert (last night) casually brought up the possibility that the 2009 bull ended in May 2015, which was then followed by a correction that now stretches over a year:

'The bull is dead.  Long live the bull!'

I can almost guarantee that the article will go unnoticed by the vast majority of traders.  Moreover, the vast majority of those who actually read the article will dismiss it.  In which case there's a very good chance Hulbert is right.  In a year or two, the media will (re)discover Hulbert's prescient 'take' and grant him kudos for calling the start of the 2016 bull.  A very fitting start, in fact, to this century's version of the Roaring Twenties.

It's all well and good to back Hulbert's view, and to further leverage his take into a Roaring Twenties scenario.  But how likely is it?  After all, most of the commentators I follow are adamant that stock sales are inevitable as retiring Boomers begin mandatory (or necessary) withdrawals.  The problem with that consensus opinion?  It's inflexible and narrow-minded.

Here's a more optimistic alternative view:

(a) A few Boomers have saved enough for retirement.  The vast majority have not.
(b) The Fed (many themselves Boomers) are well aware of the above.
(c) They are also well aware that Social Security and Medicare budgets are stretched.
(d) Japan is facing a similar demographic crisis, and has taken steps toward pension reform.  Basically-> 'risk on.'
(e) I think the US follows suit.
(f) If/when (and in my opinion it will be when) Congress approves a 'risk on' approach to managing Social Security and Medicare funds, we will have another perfect market outcome.  That is to say, the market will have fooled the majority of investors.  The DJIA may well rise to 30000, eclipsing budget deficits on its way to creating record budget surpluses.  In this case, both Congress and Boomers win as well.

Sunday, May 22, 2016

5/22/16 Rock(et)ing Higher

Crowds love to party.  And it's the crowd that elects the politicians that drive the economic policies that will ultimately drive the global stock market to the kind of highs that Boomers are known for.  Impossible?  In my opinion, it's impossible they won't.

Monday, May 16, 2016

5/16/16 Circle Game

Here we go.  The latest story to cross the tape on Marketwatch:

'Wall Street Banks See a Painful Summer for Stocks Ahead'


'If you gathered a group of stock analysts in a room, odds are each analysts would have a different view on the market.

'So when analysts from three big investment banks are on the same page, it might pay to listen.

'Bank of America Merrill Lynch, Goldman Sachs and J.P. Morgan are all urging investors to rotate out of equities because they see a painful summer ahead.'

A significant number percentage of investors/traders will read the article, decide it makes sense, and dump their holdings (straight into the hands of prop traders at Bank of America Merrill Lynch, Goldman Sachs, and J.P. Morgan!).  Come October, the global stock index will probably be substantially higher, and the same analysts will recommend buying (pretty much the same shares you sold them back in May!).

It can't be that simple ;)

Thursday, May 12, 2016

5/12/16 Dilma's Done!

At least for the next six months:

Brazil’s iBovespa appears to be consolidating its recent gains (EWZ +1.2% today). 

The global market is doing its best to discourage investors, as illustrated by today’s chart of the DJIA (from +87 points at the intraday high to -86 points at the intraday low to a current print of +53):

Keep in mind that it’s impossible to rally once all investors are on board.  It’s the fund managers and/or retail investors who were left behind that ultimately drive the indexes to new highs.

Saturday, May 7, 2016

5/7/13 Killer Joe/ A Cool Simmer

No one believes in the quietly raging (let's call it simmering) 2016 bull market.  Disbelief is a powerful 'prompt,' enough to spur the DJIA to 20,000 by year end.

The driving bass line in Benny Golson's 'Killer Joe?'  Apart from the bridge, the composition is based entirely on two chords (C7 and Bb7)!  Less is more, and all that jazz.  A beautifully constructed song, one that creates complexity via layers of simple contrasts.

This is one mean market, one that's taking its time setting a bear trap.  It's also one cool market, one that slaps shorts with impunity.  'Hurt me slow, please Joe.'  That's too complicated for me!  Let's just say crowds are known neither for common sense nor rational behavior.