Macy’s Outside SPY

Another interesting chart. Ponders the question of “elasticity of demand” and how that impacts an “Aspirational Retailer” and can that be a leading indicator of broader economic swings.

In this case, I’m looking at M Macy’s for the last decade. How did it move, compared to SPY and other tickers, during the rise / bubble, during the collapse, and in the recovery to date?

Macy's M vs selected tickers 10 year weekly

Macy’s M vs selected tickers 10 year weekly

The most “interesting bit” here is just how far “outside” the S&P 500 Macy’s ranges in good times vs bad times. It pretty much “calls the ball” on bubble and bust. Notice that it has “lower highs” before the SPY rolls over (2007 1/2 or so).

The copper ETF doesn’t begin until part way into the chart. But it still has enough history to show that copper is a lagging indicator / ticker on the drop, but looks to start a recovery a bit early. (not much though) At the time the Russel 2000 RUT reaches it’s prior highs in mid 2011 copper flats out and dips just a little.

Notice that on this long time scale, simply being “in” stocks when MACD is above the zero line and being “out” when it is below is a very simply and accurate timing indicator. Also notice that “exit on the 60 week or 300 day Simple Moving Average” is a reasonably accurate indicator (modulo the brief ‘dips’), but the ‘reentry’ needs to be closer to the faster 20 week (100 day) SMA line. (5 day trading weeks…) Looking at 2007 1/2, the RUT has “lower highs” a bit before the SPY does. So watching RUT lets you exit a bit more accurately. It also “runs up” a lot faster, so watch for it to separate “upside” on recovery calls.

It is also pretty clear that US Bonds TLT look overpriced (due to The Fed driving interest rates ‘crazy low’) while the Swiss Franc FXF has had a very nice preservation of value. The Yen rose nicely too, through most of it, until the end when the Bank Of Japan and Soros decided to knock it down. (A nice example of how Central Banks can screw up a nice currency and preservation of wealth strategy… never ever ever trust a central bank…)

It is hard to see on this graph, but during the “drop”, both currencies and bonds have a spike up as folks “run for cover” and do a “risk off” strategy.

This one shows it better. A 5 year chart, so everything is starting at the same “zero” just at the left edge.

US Stocks vs Currencies  5 year weekly 16 Feb 2013

US Stocks vs Currencies 5 year weekly 16 Feb 2013

SPY  -  S&P 500 US Benchmark
TLT  -  Long duration US Bond fund
RUT  -  Russel 2000 small cap ETF
QQQQ -  Nasdaq 100 Tech companies (heavy on AAPL Apple)
JJC  -  Copper ETF
FXY  -  Japanese Yen ETF
FXE  -  Euro ETF
FXF  -  Swiss Franc ETF
M    -  Macy's (middle-upper retail)

The Yen was big in the “Carry trade” due to being near zero interest during the crash. You can see it spike up as folks shorting stocks stuck their cash in Yen. Watch the “carry trade” currency during crashes. Bonds spike up too. Both peak just a bit before the exact stock bottom. So you can use that to “call the bottom” a bit more precisely. (Folks have to exit the bonds and “carry trade” cash to buy the stocks at the bottom, so they have to show a sell down before the bottom in the thing being bought gets made.)

Interesting too is that both Copper and Macy’s have a parallel “higher lows” a bit before the broader market of SPY and RUT.

In Conclusion

So these very long term charts are saying “stay in stocks” as MACD is above zero and tickers have not rolled over (yet). That’s on the years type of time scale. For tactical positioning (that is, trading inside a year) one moves to a faster daily chart. But for now, the bias stays “Be in stocks and out of bonds” but keep an eye on it. M is flat topping with highs about the same in the last couple and with copper not looking real strong.

Here are a couple of “live charts” just so folks can see what happens as things change over time. The first one, being weekly tick marks, will only change by one tick and take a week to do it, too.

10 Year Weekly Live chart of M Macy's vs assorted tickers

10 Year Weekly Live chart of M Macy’s vs assorted tickers

A 2 year daily chart of the same tickers:

Macy's M vs selected tickers 2 year daily trading chart

Macy’s M vs selected tickers 2 year daily trading chart

The “buy point” are those dips of RSI and where MACD has a flat just before a crossover from red on top to blue on top (when DMI is red on top). That is for “buy the dip in established up trend”. In established down trends, the rules are different… With RSI up near the top of it’s ‘wobble range’ and with MACD still ‘blue on top’ we are likely “near but not yet at” a roll over into a “dip”. So time to start edging for the door, but not a rush out. (So things like ‘stop loss orders’ where if you get sold out, you don’t care… or even buying puts as volatility is ‘way low’ right now so premium is low).

IF the thesis of this posing is correct, that M line ought to make a “lower high” at just about the peak time for SPY. That ought to be the “last call” for exit… “Ought” being the operative term. The market doesn’t repeat, but it rhymes…

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About E.M.Smith

A technical managerial sort interested in things from Stonehenge to computer science. My present "hot buttons' are the mythology of Climate Change and ancient metrology; but things change...
This entry was posted in Economics, Trading, and Money and tagged , , . Bookmark the permalink.

14 Responses to Macy’s Outside SPY

  1. adrianvance says:

    You will note that everything begins to turn down in the summer and fall of 2008 when it becomes clear that Obama will be President. The decline accelerates all the way to the day of the inauguration and then soon turns up! Why? Bernanke started printing money and forcing to the retail banks who would no longer lend money to people, but could put it into equities markets. The upturn is all hot air! And, this balloon will pop, as they all do.

    Come see us at The Two Minute Conservative at http://adrianvance.blogspot.com and when you speak fine ladies will swoon and liberal gentlemen will weep.

  2. DirkH says:

    In 2007, NASDAQ 100 peaked and fell, anticipating the bursting of the bubble – just like Macy’s. I had my money in NAS100 certs so I sold out. Then, I started buying through the crisis. There was talk already in 2007 of unsustainable consumption in USA, at that time, ftd was still worth reading and had some warnings (Financial times Deutschland; they later became rather useless and collapsed in 2012.)

    What finally broke the back of the US economy in 2008 might have been the oil price. It shot up a 120% from 2007 to 2008.

    At the moment, or since the trough of the crisis, WTI has risen nearly synchronously with the NAS 100. Notice that NAS100 stands at 150% of pre crisis level.

    I’m looking at a chart since 2006, NAS 100 and WTI start at 100%.
    In 2008: WTI 220% – crisis hits.
    NAS 100 and WTI fall to 50% and then rise over 5 years to now 150%.
    S&P 500 is only at 120% pre crisis level. So WTI is more expensive now with regard to the S&P.
    I don’t know if you can get this chart in the US:

    http://bit.ly/Xh1OAE

  3. E.M.Smith says:

    @DirkH:

    If you look at the top chart, Nasdaq drops more or less in sync with RUT and SPY, but a ways after M has clearly started dropping. That’s sort of the point of the posting. M seems to give a couple of months advance notice… Like folks stop buying high end clothes and such before the troubles show up in other places…

    M has already had two “lower highs” while QQQQ is still on “highest high”…

    The chart works for me. Looks like a nice charting service, too. ( I’ve been looking for a place to make charts in Euro terms… (Sometimes constantly correcting out the $US is a pain…)

    Yes, there was an oil spike. Oddly, gasoline prices now are not much different than they were during that spike… just now the refiners are raking it in instead of the guys selling crude… Well over $4 in California. That certainly did cramp things some, but it wasn’t THE cause. I think there were several… but what I remember of then, there was a lot of speculation in commodities going on and folks were running ot gold and oil to avoid dropping stocks.

    @AdrianVance:

    Most retail banks don’t hold much in the way of stocks. Only the “investment banks” do that, and they are now largely gone. So not a lot of The Bernanke Money doing into stocks directly from banks. Though the banks do give money on margin to folks who do the buying… So the bank puts cash or US Treasuries in the vault as “reserves” then makes a loan to Mr. Fat Wallet who uses it to buy stocks. So borrow at 1/2% to 1% and buy stocks with a 2% to 4% dividend…

    Same net effect, but there is an intermediary… at least for most banks, other than Goldman…

    And yes, the ‘term of art’ is “Asset Inflation”. The fear was deflation of housing values, so they “fix” it with easy money to stimulate “Asset Inflation”. Basic monetary theory as taught in most college Econ classes. ( I had it …)

    One can argue over the wisdom of it… but it does work. The real problem starts with the initial bubble that then causes the deflationary risk, and then the after effect problem is the inflation of all the non-assets that happens and effective pay cut to all working people…

    Personally, I’d rather they just didn’t screw around with attempting to do the “go fast – no stop” on the money supply. It just screws things up longer term. Like trying to balance your consumption of Speed that has ever increasing dependency and tolerance with Barbiturates that do the same and thinking you stay dead-flat-normal and alert all day every day…

  4. adolfogiurfa says:

    @E.M.: So the bank puts cash or US Treasuries in the vault as “reserves” then makes a loan to Mr. Fat Wallet who uses it to buy stocks. So borrow at 1/2% to 1% and buy stocks with a 2% to 4% dividend…
    That phenomenon could be describe as “suction” to take money out of working people´s pockets.

  5. DirkH says:

    Re the current trampling of Gold:
    I accidentally found a half-false report that blames Soros because he sold half of his Gold. Now, even the writer could have noticed that he’s writing BS; as he mentions himself that Soros only said that he sold half of his Gold in the 4th quarter – meaning; not in this week… so much for creative writing and its relationship with logical thinking (not much).

    BUT the journo gives a factoid that is much more relevant:
    During the last week many exchanges in Asia were closed – and Asian countries are eager Gold buyers. China closed the whole week due to the New Year festivities.

    Chinese astrologers forecast stock market drops in the mid of the year. But as the Year Of The Snake stands for wealth, afterwards prices will rise again.

    Sounds like what my model says. So they must be right. Smart guys.
    German sources:
    About Soros

    http://www.bild.de/geld/wirtschaft/george-soros/soros-schickt-goldpreis-auf-talfahrt-28555756.bild.html

    About the astrologers and the closure of the exchanges

    http://www.godmode-trader.de/nachricht/Chinesisches-Neujahrsfest-Asiens-Boersen-bleiben-geschlossen,a3026486.html

  6. DirkH says:

    adolfogiurfa says:
    17 February 2013 at 2:59 pm
    “That phenomenon could be describe as “suction” to take money out of working people´s pockets.”

    Adolfo, buying stocks on credit is a risky business, as the amount of credit you get depends on the valuation of your portfolio which serves as collateral. When stocks drop, the value of the collateral reduces and the bank will give you a margin call, requesting you to provide more collateral within a day. If you can’t, they’ll automatically sell the necessary amount of your collateralized stocks.

    This can lead to accelerating downward spirals. And such a spiral requires that many Mr. fat Wallets have already leveraged themselves up via the stock credit.

    At the moment we are at levels of leveraging last seen before the BFC. So the precondition for the downward spiral is met. What’s still lacking is the spark for the tinderbox to blow up.

  7. adrianvance says:

    It is my understanding the Treasury forced $30 billion on Bank of America and pulled similar stunts on other such retail banks who refuse to lend it to individuals given the weak economy.

    Who is “Mr. Fat Wallet? And, how does he do business directly with the Federal Treasury?

  8. DirkH says:

    Adrian, everyone gets credit on their portfolio. I can get 1 Euro credit for 2 Euro’s worth of stock as collateral at my bank. Didn’t check the interest rate. Haven’t leveraged myself up by now – for the aforementioned risks.

    It’s the bank that deals with the treasury – buying bonds – and with the central bank – exchanging the bonds for freshly printed Euros or USD’s. The bank serves as a middleman to obscure the fact that states print themselves money. They lend out the money they get this way to people like me if I want to (only if I have collateral, in this case, stocks or other assets)

  9. adrianvance says:

    That is what I am saying: The US Treasury only deals with banks. Under Glass-Steagal retail banks, the kind we deal with, could not put money into the equities markets as that practice was the root cause of The Great Depression. Now they can and where they get the money for 0.2% they do not have to make much to get a profit, but they are inflating Wall Street with baseless money which means large inflation is coming as that money leaks out of equities.

    I wonder who “Mr. Fat Wallet” is because I see no way he could exist without owning a bank and trading from within that institution. How many such people exist two? Three? 20?

  10. DirkH says:

    Well I sure hope that when the Mr. Fat Wallets get out of equities they’ll inflate the Gold price. That’s where I’m lurking.

  11. adolfogiurfa says:

    Bubble use to burst….buddy!, Just watch them burst out!

  12. E.M.Smith says:

    @DirkH: “There is always a ‘story’. -E.M.Smith”

    The advantage of timing via charts over timing via ‘story’ is that the ‘story’ du jour is always late and often wrong. The chart directly reflects market participant actions as they are done, even if you never hear “The Story”…

    So that’s why I like listening to the stories, and sometimes have my own stories; but wait for the chart to tell me what the “Sum Of All Stories” is actually doing…

    Bottom line: Gold is going down, stay out of gold until it starts going up. (Trailing “buy if touched” order is cheaper than “buy and hope and drop and hope and buy more and hope more and drop more and hope more and…Oh, it went up 1/10 of what it went down! Oh Boy! – and hope…)

    @Adrian Vance:

    While anyone can ‘do business directly with the Treasury’ (via bond buying – they have a retail window), what I said was NOT that “Mr. Fat Wallet” got his money directly.

    ” So the bank puts cash or US Treasuries in the vault as “reserves” then makes a loan to Mr. Fat Wallet who uses it to buy stocks.”

    UST to Bank to Mr. FW.

    As to who “he” is: Just about anyone trading over a few $Million. Soros just made one $Billion on a ‘long Japanese stocks short yen’ in the last quarter, and he will have done that with margin money from his broker or banker… as one example.

    I have a (mostly empty :-( at this time) Margin Account, so when I buy stocks in that account, I am borrowing “bank money” too.

    If YOU would like to open a US Treasury account, there are several kinds (not just savings bonds) listed here: http://www.savingsbonds.gov/

    ANYONE can buy US Treasuries directly from the government (if they have enough money).

    Again: ANYONE with a big pile of money in a margin account is “Mr. Fat Wallet”. From Bill Gates to Warren Buffet to Vanguard Funds to Annenberg Foundation to Ford Foundation to Mark Cuban to….

    If I buy $2000 of GE stock in my margin account, I am automatically extended credit on that value. If I start with $5000 in the account, I can buy $10,000 of “marginable securities”. That second $5000 comes from the bank (that is behind the margin loan through the broker)

    Margin rates and margin percentages change over time, and often directly with The Fed mandates. The bank has nearly zero incentive to buy stocks itself, since then it is at risk of loss. Much more profitable to loan money to folks who buy stocks. IFF they lose on their bets, you ‘make a margin call’ and suck in all of THEIR money. IFF they win on their bets, you make more loans to them and collect more premium…. “Win win” (for the bank, anyway…)

    Thanks to the repeal of Glass-Steagall, essentially all “Investment Banks” either went bankrupt or converted to “regular banks”. The stupid thing was to create two classes of banks (“Investment” and “Retail”) with the ability to do business in each others markets, but where one of them was backed by The Fed and the other was not. So “Investment Banks” can not go to The Fed discount window. That is why Bear Stearns and Lehman went out of business. They could not get a loan from The Fed as they were not “retail banks”. The Fed bank money does not flow to them. Yet Citi and BofA could (and unfortunately were even forced to take loans even if they did not want them… as The Fed wanted to hide who was really distressed…)

    NO bank goes directly to the Treasury to get loans on collateral. That happens at The Fed Discount Window.

    In summary: Anyone, including banks can buy US Treasury securities directly from The US Treasury. The US Treasury sells huge chunks of bonds to The Federal Reserve Bank. “Retail Banks” can present collateral to The Federal Reserve Bank and get cash at the “discount window’. “Investment Banks” can not and are not subject to The Federal Reserve Bank rules. (But are largely now gone, as even GS has converted their charter). So Retail Banks work indirectly through The Fed.

    Confusing? To quote Microsoft when talking about a bug I found in their software: “This behavior is by design.”…

    Who? How many? Ignoring institutions and companies that hold most of the money there is a list of the biggest ones (over $Billion):

    https://en.wikipedia.org/wiki/List_of_countries_by_the_number_of_US_dollar_billionaires

    I use “Mr. Fat Wallet” as shorthand for “the collective actions of that mob”… What they do matters. What you do, and what “the story” says, does not matter. The chart reflects the collective action.

    @Adolfo:

    It is unlikely that there will be some giant “burst” now. We just had a major bubble busting in 2008 and it is usually several decades between such. Minimum of about a single decade. We can have stocks roll down, but unlikely to be a big bubble bursting size, just a normal ‘downturn’.

    The worst reasonable scenario would be a ‘double dip’ downturn with 2008 as the major event, then a ‘reprise’ as the global economy falters. Even that would be unlikely to reach 2008 bottom levels. (Not enough money in bubble assets at the moment).

    So looking for a giant catastrophe is unlikely to be a profitable strategy.

    Simpering along with sporadic panic / dips is more likely, then an overlay of inflation induced asset rise (in keeping with inflation) but in real terms just being an extension of ‘sideways with wobble and dip’.

    Basically, IMHO, the big play / potential bubble right now is in currencies; not stocks.

  13. adolfogiurfa says:

    @E.M.:potential bubble right now is in currencies; not stocks.….That would be enough! :-)
    A 10 cents Dollar and a 15 cents Pound and…no Euro anymore?
    That´s enough to justify our daily popcorn!

  14. DirkH says:

    E.M.Smith says:
    18 February 2013 at 6:37 pm
    “@DirkH: “There is always a ‘story’. -E.M.Smith””

    Oh, I know. I’ve been talking to and listening to Goldbugs for years now; I also follow the traditional channels; I even read Krugman. Well Krugman for the laughs. I know our capability to rationalize our decisions; that’s why I operate by numbers. Numbers make news, not the other way round. Which bit of news is the correct one is decided after the fact by the journalists – who write a fairytale after everything has happened. Similar to reinterpretation of historic figures. History is written by the victors.

    “The advantage of timing via charts over timing via ‘story’ is that the ‘story’ du jour is always late and often wrong.”

    Yes.
    “Bottom line: Gold is going down, stay out of gold until it starts going up.”

    Too late, I’m in.

    “So looking for a giant catastrophe is unlikely to be a profitable strategy. ”

    I think the global money printing – lead by the US (or China – as long as they continue to peg the Yuan to the USD they have to print with the same speed) – might lead to Italian Lira style inflation. Italy devalued constantly and gradually over 3 decades til they got the Euro.

    One year you would travel there and pay 800 Lira for a Cappucino, the next year 1000.

    It never really became a hyperinflation as in doubling of prices per week.

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