Chart and trendlines courtesy of Finviz.
While watching the bull market continue to make new highs, I like to do an analysis to determine what markets are under performing. I came up with two glaring non-confirmations, Emerging Markets, and the Dow Jones Transports.
EEM-Emerging Markets Index Fund
A quick scan of gains since 12/1/10 of foreign country ETF's shows surprising strength:
Italy
Spain
Austria
Netherlands
South Korea
Russia
France
Japan
Taiwan
And weakness:
India
Thailand
Turkey
Chile
Indonesia
Brazil
China
South Africa
The Dow Jones Transports are also not joining the party to new highs.
As others have pointed out, this is a Dow Theory non-confirmation, with the airlines, and truckers falling out of favor, while the rails are still doing well. The cost of fuel does explain some of the weakness in the transports, even though they do hedge their fuel costs.
Are we rotating out of the former emerging market favorites and into old Europe and Japan?
Dss, GREAT POST!!!
ReplyDeleteI think the Bernank is helping this rotation by the treasury purchase program. Certainly they can buy treasuries from anywhere they want because it's a closed auction, but I did hear somewhere that European banks were dumping treasuries for bucks.
We must keep the Euro growing stronger and the Buck growing weaker, without too much public sector debt to keep US interest payments low. And we must (effectively) tax the middle class, making oil and gas and bread more expensive and not calling it inflation because housing gets cheaper to hide the real inflation.
These politicians really have us. The sad thing is that we know it, and fail to have a plan or even a planner, to follow to get us out of this mess.
Boy, I'll tell you, once housing turns around, we'll be in one heck of a pickle. We better hope it stays depressed.
Interesting article...
ReplyDeletehttp://www.huffingtonpost.com/2011/02/03/learning-to-walk-underwater-mortgages_n_818315.html
Thanks, Rock.
ReplyDeleteA rise in the cost of oil is a hidden additional cost to most products. Housing will be deflating or not increasing in price for a long time to come. Stagnating housing prices are not talked about very much in the housing scenarios.
greg,
ReplyDeletePeople are still walking away from their mortgages. IIRC, I think that 2011 was going to be a banner year for mortgage resets.
Robber Baron Gets $2.4 million an hour while 28 million Americans are still unemployed
ReplyDelete"The robber barons of old earned their moniker by commandeering railroad, meatpacking, oil and steel monopolies. Paulson's was a different kind of theft -- but theft it was. In fact, he barely evaded prison for his role in Goldman Sachs' Abacus deal, which suckered investors into buying securities that were explicitly designed to fail. Paulson colluded with Goldman Sachs to build a synthetic collateralized debt obligation (CDO) that bet on the very worst kinds of mortgage securities. Goldman got the fees and Paulson got a billion dollars for betting against those securities. The investors, trusting GS's sales pitch, had no idea that Paulson was allowed to pick the most toxic securities to mix into the stew. As Paddy Hirsch of American Public Media's "Marketplace" points out in this entertaining video , it's like a gambler and a bookie colluding to field a horse they've groomed to lose. Eventually, GS was flushed out into the open by an angry mob of CDO investors and forced to cough up a record $550 million in penalties for "not disclosing the role of Paulson and Co. Inc. in the portfolio selection process and that Paulson's economic interests were adverse to the CDO investors."
I'm also noticing some trash stocks that I've been watching starting to underpform. I wonder if there's a rotation going on into higher quality stocks? I have no idea. Just throwing it out there.
ReplyDeleteThis comment has been removed by the author.
ReplyDelete@Denise: This country will make no progress until we stop celebrating the exploits of people like Paulson. That's the bottom line.
ReplyDeleteHo Hum!
ReplyDeletePimco's Gross on bloomberg:
"Fed is unlikely to raise interest rates for 12 months".
Video: Gross says investors should focus on Emerging markets.
Video: Maki says weather played 'significant'role in jobs data.
ICan
Rock is right. If/When housing ever did start going up again, THAT's when the inflation situaiton would get VERY real and quite scary. Until then, they swap out decreasing prices for houses and other things we don't really need (to buy) for increasing prices in the things we do need. Not a great trade for the middle or lower classes, if you ask me.
ReplyDelete36K jobs added in January? That's atrocious in the middle of a so-called "recovery". QE3, 4, 5, 6, 7 coming to a town near all of us. I'm just waiting for that exogenous event or events that puts a stop to it but it's clear they won't stop until something stops them.
ReplyDeleteAnd the headline is that "weather" is to blame. Of course it is...
ReplyDeleteTLT about to bust through 89. That didn't take long.
ReplyDeleteAnd then there's the case of the "missing workers" (or people). Where did they go? Did they just vanish?
ReplyDeletehttp://www.huffingtonpost.com/2011/02/04/missing-workers-44-millio_n_818314.html
Inflation has never really gone away, especially in the big ticket items like health care, college tuition, real estate taxes. Who cares when my food costs go up as a percentage of my budget compared to the huge percentage changes in the other categories. Have cell phone or cable bills ever gone down?
ReplyDeleteNew lows!.
ReplyDeleteMorning all! -19 is all we're getting from that shitty jobs data?
ReplyDeleteManny,
ReplyDeleteThey are waiting for their social security to kick in.
My self employed health insurance has gone up 25% on average every year.
ReplyDelete(sulks in bitterness at the TICK)
ReplyDelete@Denise: What a sad situation for a lot of people. The thing is, if my circumstances (and to some degree, luck) were just a bit different, I could easily be in this situation now or some day. Do those people that ARE working and aren't desperate not see this?
ReplyDeleteAnd many are going to be waiting a long time for a social security. I have a good friend who's 50 and was making $200K a year during the bubble days and now makes pennies on the dollar in comparison. That's a big bridge to gap until social security. This is a slow motion train wreck. No other way of putting it.
More QE Thor. Bad news is good news for the stock market, as is "good" news. Don't you see that yet?
ReplyDeleteMy short continues to shine. Keeping an eye on the chart. Wanted to add to it but didn't want to put too many eggs in one basket.
ReplyDelete@emmy,
ReplyDeleteFeel sorry for you re your short covering few days ago.
ICan
We have a long way to go to taking out yesterday's lows. The sell off so far is quite muted.
ReplyDeleteTicks are weak so far.
And the SS & Medicare Sheeple slash and burn campaign continues after WE the Sheeple bail out there very bad actors who caused it. It would be a riveting story if we were't involved..."Trust us, austerity for you (not ME though) is for the good of country. Here's a U.S. flag lapel for you in return for your sacrifice (patting said Sheeple on the head)."
ReplyDeletehttp://www.nakedcapitalism.com/2011/02/pete-peterson-using-college-courses-as-trojan-horse-for-anti-social-security-medicare-propaganda.html
@Denise: Does this now even qualify as a "sell off"? If so, wow, how things have changed. LOL.
ReplyDeleteManny,
ReplyDeleteHey! Dow is off 18! That qualifies as a sell off these days. :-)
@Denise: So a "correction" would be what? Down 50?
ReplyDeleteManny,
ReplyDeleteWhich is why I predict that the Republicans will lose big in 2012. Too many boomers can see the writing on the wall.
Correction would be a close below yesterday's low. Then up, up, and away!
ReplyDeleteWe will see if this afternoon brings more weakness but as long as we consolidate above yesterday's lows more upside can not be discounted.
"Entitlement programs". Give me a break. The biggest such program is the one still going on over on Wall Street. Can the Sheeple in the Tea Party not see that? When are we all going to stop celebrating the very people who are robbing us blind and gutting our country?
ReplyDeleteDenise - How do you mean? (I agree with you fyi)
ReplyDeleteI agree, Denise. They'll eventually see it, however slowly it may happen. By then the damage could be done though.
ReplyDeleteThe over owned Gold is going down, but silver and copper are not.
ReplyDeleteCopper at new highs.
ReplyDeleteTLT just busted through 89. 88.96
ReplyDeleteThor,
ReplyDeleteMany of the un and under employed (not counted in the unemployment numbers) are boomers, and especially those older who are close to retirement. (what retirement?)
Any attempts to cut or gut SS and Medicare benefits will be met with fury as so many have lost not only their jobs, but there savings and homes.
And there are lots and lots of boomers in that category. Many in my family will only have SS as they have little or no savings and their very modest homes.
there = their
ReplyDeleteBB yesterday said - inflation in Ems not his problem. Let them eat cake!. "Ems have all the tools to manage excess demand" -
ReplyDeleteWSJ: Bernanke denies that FED is stoking inflation.
Who will suffer more if Ems stopped hot money flows? What would happen to large multinational revenue?
ICan
Mannwich (10:43)- This is kind of what I am looking at on housing.
ReplyDeleteSince the early 2000's it became easier and easier for people who had no business buying a house to get one. I do not have the exact numbers in front of me, but traditionally something like 55% of Americans owned their homes, but by 2007 it was pushed up to almost 60%
That means there are a whole lot of people owning houses that should not be, which of course helped push the price of houses up and forced people who would traditionally buy modest homes into bigger houses.
If you do not have an income you can (should not be able to)buy a house, with so many people under or unemployed they can not afford the houses they live in, and I have read articles where multi-generational houses are catching on.
Add on top of that home builders who keep cranking out houses that are sitting vacant and we have a glut of houses that people are walking away from an over supply of new houses that builders are hoping to sell and shrinking supply of willing buyers and a new(ish) trend of having more people in a house.
So my take on this is, that until the job market comes back housing will stay down.
And realistically it will be years before we see any real job growth, so if inflation is bases off of house prices, we will not get any. But if inflation is based off of food and stuff we need, there will be plenty of that.
Mangy Mutt
@I Can: BB didn't see the housing bubble (or likely the dot.com bubble) or that's what he said in public, and said "subprime would be contained", so why does he have any credibility on anything anymore?
ReplyDeleteDenise - It is nice to see you weathered the storm.
ReplyDeleteI hope you are feeling better today.
Mutt
Good points, Mutt. I really wish we hadn't bought now. At the time we bought largely because we thought we wanted to settle in somewhere and raise a family. Not that this appears it's not going to happen, I value our freedom to get up and move at any notice far more than being anchored to this house.
ReplyDeleteFrom Zero Hedge:
ReplyDeleteBrent Plunges On Rumor Mubarak To Resign, Takes Entire Commodity Complex With It
"The latest rumor rocking the commodity space is that Hank "M.A.D" Mubarak will resign. We are not sure where this rumor has originated from but it is wreaking havoc on the oil complex, and by sympathy, on all commodities, and risk assets as well. That is coincided with the end of a POMO that had a 4 S/A ratio only confirms the weakness in stocks. On the other hand, the snapback rally once this wave of optimism dies down could be vicious. Keep an eye on Reuters for confirmation of any Mubarak news."
@Mutt,
ReplyDeleteThanks. Feeling much better today.
Oil still going down fast.
ReplyDeleteManny,
ReplyDeleteHuge volumes in the TLT.
Question is, are we going lower than last time? If so, how much? Watching the chart a bit to get some clues. What do you think, Denise?
ReplyDeleteIt's gone down now literally 6 straight months.
ReplyDeleteYves skewers the Times' Floyd Norris, and rightfully so, if you ask me:
ReplyDeletehttp://www.nakedcapitalism.com/2011/02/floyd-norris-makes-bizarre-comparison-to-1983-to-put-smiley-face-on-job-outlook.html
CR weighs in as well:
http://www.calculatedriskblog.com/2011/02/norris-from-1983-hope-for-jobs-in-2011.html
@Mutt
ReplyDeleteYou forgot one thing.
We no longer build log cabins that fall apart in 15 years. The houses we build now last hundreds of years.
So there's no volume shrinkage.
In Singapore, you can not freehold. That means the government owns your house and you lease it from them for 99 years. After that time, the government can decide to retire your house and squash it, or they may resell it back to your family. At their pleasure.
We have no way to get rid of the stunning places we built 150 years ago. I actually bid on one in alameda CA a few years ago--it was 150 years old, and stunning. I would of course have remodeled, new windows kitchen and baths, but everything else was just fine.
So we need a whole lot of new families (that are working) to buy new houses, so we can continue to use our old ones.
The problem is not too many new houses, but too few new families.
Manny,
ReplyDeleteIt looks like it could go back to the April lows of 87.35. Unless there is a huge break in the stock market, I would expect it to go there, at least.
No flight to quality yet at all, 30y just broke down out of a huge consolidation. 10y is at the bottom of that consolidation rectangle. I'll see if I can post a chart.
30 year bond
ReplyDelete10 year note
Well, it looks like it's almost time to short my favorite short, X, again.
ReplyDeleteA doauble top at about 61.41, and it looks like a (barely) lower low, so if when it runs back up and turns around at 60 or so, I'm going short. Also it's relagive strength compared to the S&P is -2%, so if the S&P decides to hover where it is right now for a few days, I should make some money on X.
I also started a little short in APOL this evening. It hung out at it's lower high, 42.60 too long. I'll hold it to see if it goes below 41, and if not, I won't add. But the psychological factor says these edu stocks should fall because not many employers believe in the credibility of their degrees, and fundamentally, their customers are defaulting on their payments.
Bingo Rock. You nailed it. Hard for new families to form when job prospects are so bad though. A chicken or egg thing here.
ReplyDeleteAnd new families buying new houses need to buy stuff to fill those homes. That's what would probably create more jobs. Not this fake garbage on Wall Street.
ReplyDelete@Mannwich:
ReplyDeleteSomehow, I think it's tied in to the false valuations of the Twitters and Facebooks.
A company';s valuation can create the appearance of wealth. But true wealth only comes from productivity funded by capital. The advertising dollars funding the twitters and facebooks can dry up faster than a rainstorm in Death Valley, and don't cause the numbers of direct labor hires to happen that a normal company needs.
Because the values of these companies are so volatile, that may be why GS withdrew their offering in the USA.
But bottom line, a billion dollar company should employ a whole lot of direct labor, but the Twitters and Facebooks employ a small fraction of the workforce they should.
Rock - Thanks, I did not even concider the fact that houses last forever.
ReplyDeleteWe got lucky when we moved, we sold our old house, below existing market prices (about 10%), but I wanted it sold. We hold the contract and the people are paying us 7.5% intrest.
The house was built in 1940's and is well built, so except of updates it should last another 40+ years.
But with the current housing market the value of the house has dropped below what we sold it for.
Anyway, the fact that todays houses last so long is another piece of the puzzle.
Mutt
Rock - who cares if Twitter does not employ people. It's TWITTER man, so it is worth every penny.
ReplyDeleteEvery time I heard the word Twitter, I think of Bambi - He was in the woods with Thumper and the boy skunk starts playing with the girl skunk and Bambi asks why he wants to play with her, and the owl tells him "Because he's Twitterpated"
Mutt
@Mutt:
ReplyDeleteDon't let mark hear you say that stuff.....
The Reality and Perception of Emerging markets - Just illustrated by Egypt. Those who were saying people should move to where the jobs are.
ReplyDeleteAre we in 21st century? One step forward, two back.
The paper shredders are probably going full speed at the ministry of informaton(LOL). Mubarak probably more worried about whether he'll be prosecuted for alleged crimes against his own people.
ICan
@Mutt
ReplyDeleteWow, you got a hgreat deal going! Your liquidity is down a little, but your yeild is terrific, and the liquidity will come back someday, you'll see.
And when they're 5 minutes late with a payment, you could FORECLOSE!!!!!
And sell it again!!!!!
And how they want their posters or statues all over the country. From Saddam to Mubarak to the pharohs. Same old story being played.
ReplyDeleteICan
Ozymandias - a poem by Shelley.
ReplyDeletehttp://en.wikipedia.org/wiki/ozymandias
Read it in grade 12 english class.
ICan
Excellent post Denise.
ReplyDelete@Manny
"...When are we all going to stop celebrating the very people who are robbing us blind and gutting our country?"
Ah...the beauty of mainstream media brainwashing would have made Joseph Goebbels really proud.
Dan
Great poetic reference, ICan! Bravo!
ReplyDeleteBeach ball. Again.
ReplyDeleteIndeed Dastro (sadly).
ReplyDelete@Rock - 12:50 p.m: EXCELLENT point. I hadn't thought of it that way until now. Very interesting too. That's why I come to this blog! Good stuff. Pretty elemental when you think about it in that way.
ReplyDeleteChinese market opens Monday. We'll know which way they and the WallStreet big boys want to take this market?
ReplyDeleteUntil then - who know?
@Dastro,
Is this what you had in mind? Good call. Where to from here?
ICan
I just watched a vignette on Bloomberg, sorry I don't remember the company, but they were a network equipment provider. They said that a rollout of 4G will make network equipment providers revenues go up.
ReplyDeleteI looked into CSCO, and a friend of mine works for the company, in a management position. Looking at the chart, it seems a target of 24 is a possibility.
I went long on the 20th, added Feb 1, and again today. It seems to be in a nice channel, and the 3LB says it's trending up.
I just thought I'd mention it, I'm looking for 20% from here.
From Ft.com
ReplyDelete"Investors pull $7bn from emerging funds".
Treasury yields reach eight month high.
Wall St. looks for direction after mixed data.
@Rock,
Tech. may be the place to be as you highlighted the other day.
ICan
Today We Are All Egyptians
ReplyDelete"Inside Tahrir Square on Thursday, I met a carpenter named Mahmood whose left arm was in a sling, whose leg was in a cast and whose head was being bandaged in a small field hospital set up by the democracy movement. This was the seventh time in 24 hours that he had needed medical treatment for injuries suffered at the hands of government-backed mobs. But as soon as Mahmood was bandaged, he tottered off once again to the front lines."
There still is no fear in this market. No fear of war in the ME, higher energy prices, unemployment, high debt levels, or inflation.
ReplyDeleteIt obviously looks like we are going to break out on the upside after four days of consolidating gains.
Ride the bull.
ReplyDeleteI can't believe this is going to end well though based on what we've seen the last 20 years or so.
ReplyDeleteI-Can
ReplyDeleteI still keep the view that I posted in early September.
My concern about corrections has to do with my common sense telling me that this has to correct in a decent manner but nothing yet with the excemption of mid November.
One chance to correct was 25 or 26 I guess, don't remember exactly the day.
Another opportunity in my view could have been Jan 29- Feb 3 that I extendeded it till today but didn't make anything noticeable.
Well yes the Egipt scare appeared the 28 but marketwise the 29th was the end not the start of a correction.
Exactly the same that happened with my Nov 15 or 16 view.The corrections ended at the point when they should start so the window get shutted.
Will see what happen next week maybe some fall Monday but I have to check more carefully to see if something big appears.
Something that got my attention is Feb 13 which is Sunday with stronger chances to bring a drop.So the previous Friday and next Monday to that Feb 13 should bring more impulsiveness in case a correction will ensue, otherwise just churning up longer than seemed possible.
Dan
Meant shut
ReplyDelete@Dan,
ReplyDeleteThanks for the response.
ICan
No problem
ReplyDeleteMan what a day
ReplyDeleteThor,
ReplyDeleteI figured you must have been busy today. Just another day of buying.
Indeed - first quarter is by far our busiest time of the year, everyone with their damn new years resolutions!
ReplyDelete@ Dan
ReplyDeleteBro, your dates are on point, but I'm not sure what vehicle you are counting... looks like Dow to me, but thats just what I trade.
The 28th was THE day to get something going trend change wise... BUT, because of what you so keenly noted... it marked the end, not the beginning of a correction. Another bear trap. Likely not the last.
All of my cycle dates off the Nov 2008 and Mar 2009 lows have been lows thus far. Thus, I assumed the 28th, which came as a big "hit" cycle wise for my work, would be a low as well.
There may be some kind of inversion going on though... but the force behind this continuation only enforces my view that the next low is one to buy, not to sell.
When I say "next low" in this case, I am referring to a real low, not a midcycle low like the ones we experienced in nov, and january.
I-Man will stick to the March 6/9th window for a topping point, (Talk about cycle inversion... how cool would a March high on the March low anniversary date be?) And look for some kind of wicked low in June.
A low that scares the piss out of the bulls, and has the bears doubling up for more... I believe that buying that low will be an epic trade.
However, it probably wont let anyone ride for free. Even the buy and die, hardcore, mutual fund-ers may get scared out of this one, especially the ones who just made the round trip.
Just ideas I got brewin...
Have you dug into the Gann stuff I sent you yet by chance?
What's up I?
ReplyDeleteWhen I'm working on the past DJIA and S&P 500 most of the time because I like continuity so I check something 108 years ago and watch it now.
But from 1980 onwards I use basically S&P 500 as a broad measure of the "national market" instead the Dow.
Russell 3000 or Wilshire 5000 only if I need a broader view but not often really.
I need something that represents the total without going overboard.
Yes that happens a lot.Several lows starting in 2009 and the first in Jan 2010 I discovered exactly the same drivers in 4 cases (3 after the fact) and the last one was May 6 so the flash crash didn't get me but the drop wasn't substantial enough to end the correction May 6.It wasn't too logic.
Well that day I learned that the market can complete the countertrend drop (making it a substancial one) and start the recovery before the end of the day, just in 20 minutes.
But my brain couldn't grasp that because never happened like that before.I wasn't able to imagine that scenario in advance.
Of course everybody got so traumatized that took 4 months and around 5% lower to end all that.
So the past give me the map but it doesn't repeat itself literally.Watching the chart today looks like it was the start not the end of the drop.
Maybe the next 4 months were just a fractal extension of that day.
So yes it's still difficult to determine start and end of a countertrend because the forces that move it don't appear in a simetrical way, all toghether the day that starts dropping and then all toghether again the day it ends.
Either one or the other appears in a stealth way most of the time that's why I'm allways looking for the drop.
It doesn't have anything to do with the main trend that continues unmolested the challenge are the countertrends until they become decisive and can reverse the main one.
That main trend is what I mentioned in Sep 2nd or 3rd 2010.to me last till Apr-May not being challenged seriously.
I don't mean that has to keep going up everyday 4 more months.I still don't know how is going to play but till April or May it couldn't be a dramatic challenge.
Could stop going up in a few weeks and then go up and down but not before Apr-May a new main trend is going to be born.
Of course in my silly use of an irrational methodology, so don't take it like God told me that only G W Bush have that kind of heavenly talks. :)
No I didn't read it, is a whole book!.
I c'mon don't be lazy you can do it, when you go fishing take the damn book and then explain to us what your ideas are.
I' a guy keenly aware of e=m.c2 as a destination.I try to develop a method where the lesser elements the better for my "final equation" don't make me put more.Lol.
Take care man.
Dan
Meant
ReplyDelete...it wasn't too logical
Meant
ReplyDeleteI'm a guy keenly aware... blah blah
All that talk on CNN and MSNBC about the Egyptian government crack down on foreign journalists as an imminent sign that something "ominous" or "Tianamen Square like" was about to happen. Al the while, Al Jazeera is just reporting what they're actually seeing, which is peaceful protests and no more fighting. This reminded me of why I no longer watch the MSM. Does that make me a terrorist? No, a Neo Socialist Terrorist!
ReplyDeleteThor,
ReplyDeleteNot to mention your pseudo communist leanings.