I’d started this posting on the 3rd. Now it’s the 10th. Time flies sometimes… I’d intended to get it up then, but “things happen”.
In terms of the market, not much has really changed in the intervening week.
FWIW, back in October I’d said:
https://chiefio.wordpress.com/2015/10/09/difficult-market-timing-and-charts/
But, to me, it looks like that has run as far as it can. The drug no longer gives the high and we are shooting up just to feel normal for a while.
[…]
So that’s my view of things. Dismal, I know. But IMHO more time to hunker down in a ‘risk off’ mode than play ‘risk on’ when things are blowing up and melting down at the same time and The Fed will not be spiking the punch bowl.
In September I’d made the rather strong statement:
https://chiefio.wordpress.com/2015/09/02/the-markets-china-and-charts/
So that’s our context. “Topping” on the decadal time scale. Bear / falling on the annual scale.
Even as early as last August I’d said:
https://chiefio.wordpress.com/2015/08/20/stock-market-drops-a-lot-now-down-for-the-year/
All the indicators clearly saying “time to be out” with red on top in DMI / ADX and MACD Neither ADX nor DMI- inflected yet, so more to come. MACD well below the zero line and no crossover there yet, either (blue over red when the down tends toward ending).
[…]
I also expect we won’t see any Fed tightening any time soon. They are kind of stuck between collapsing the property bubble they have just reflated and crashing an already wobbly stock market and killing a barely happening general economy struggle to neutral (hard to call what we have ‘recovery’ or ‘growth’ when it is more like “well, we didn’t die!” yet…)All in all “not good”. But wealth can be preserved in “risk off” assets and potentially in shorts and options covered positions.
For short terms, use a 10 day chart and trade fast. With the kinds of drops we are having, there will be some rebound up days. That’s a good time to sell over-held long positions and a good time to buy downside protection. Once the longer term trend is clearer then longer term trades and investments can be on deck.
So it isn’t exactly like I didn’t holler about it already.
I’ll put a new chart up down at the bottom, but for now, here’s the bit I’d done on the 3rd:
From Jan 3rd
Well, it’s a new year, and all the Talking Heads will be busy pontificating. Sadly, one of my favorites will no longer be with us.
Wayne Rogers
Wayne Rogers was “Trapper John” on MASH, and went on to a career in finance with appearances on Cashin’ In. His direct no-nonsense calling of bias in other’s positions will be missed. Stickler for facts over preference and a direct understanding that “what you want” must never cloud “what you see” and “what will happen”.
https://radio.foxnews.com/2016/01/01/mash-star-wayne-rogers-dead-at-age-of-82/
Sad news for fans of the television show ‘M*A*S*H.’
FOX’s Rich Denison explains:
Wayne Rogers, who played Trapper John McIntyre for three seasons of ‘M*A*S*H’ died Thursday in L.A. of complications from pneumonia. He was 82.
After leaving the hit TV series, Rogers had a recurring role on ‘Murder She Wrote,’ and later became a successful money manager and investor, he was a regular panelist on “FOX News’ “Cashin’ In.”
Rich Denison, FOX News.
He would sometimes have little to say while others argued some irrelevancy, then step in with a simple ~’Thats wrong and you know it’… and then pony up the facts to back it up.
Charts
The general ‘trend’ is a continuation of the ‘wobbling down’ we have had for a while now. Some time back I’d said the run up was over, this pattern continues in that way. At this point it is pretty clear that we’re headed into more than just a quick sharp ‘correction’.
Now back to Jan 10th and a new chart
RUT Russel 2000 vs a Mix of other ETFs and Index funds from 8 Jan 2016
This is a 2 year daily chart. I think you know how to read the indicators by now. If not, holler and I’ll interpret in comments.
Things continue to fall apart. Money is to be made on the short side of things, but I usually don’t trade shorts, just use them as hedges and I’m pretty much hedged out already. One of my weaknesses, I don’t like trading the short side even though there is more money faster there.
Oil USO continues to slide. Next up from the bottom JJC is trying to make a flat bottom, but looks to have failed. EEM Emerging Markets and EZU the EU continue down while GLD, Gold, has had a slight run up this week or so on horrid geopolitical news in an overall down drift of months (years?) duration. RUT and SPY S&P 500 continue too fall apart in a rush downward in a strengthening trend. TLT bonds are wobbly-flat when they ought to be rising more in a stock market fall ( due to the overhanging threat of ongoing Fed Rate Hikes that kill bond values for existing bonds) while QQQQ the Nasdaq 100 (heavily weighted to Apple, Google, and the other major players) has decided to leave the flat-to-rising club and join the flat-to-falling club.
Overall, it is still a mess. Still not seeing any investment worth the name.
With the present geopolitical context and with the Idiots On Parade at the White House and in the Pretenders To The White House, not seeing much hope for a rescue either. Stir in a Congress that can’t find their brains OR their balls with both hands and there is little to engender hope.
Maybe North Korea can put a nuke on their sub, run it up the Potomac, and end the pain and misery… Or perhaps a river near the UN in NYC or EU in Belgium would do better. Frankly, with the rank stupidity by the train load coming from government globally, just about anywhere might be an improvement… (All said in strongest political satire, with sarcasm and NOT as an actual suggestion of violence. It really wouldn’t do any good so why waste a perfectly good nuke…)
How about a longer term view, using the SPY proxy for The Market?
SPY 10 Yr Weekly 8 Jan 2016
SMA lines gone flat into an inversion. Price below that. MACD below zero AND with “red on top”. DMI- (red) on top and with clear trend strength (ADX over 20). All the indicators in place to say this is a confirmed bear market now and bear market rules apply. Rallies will be fast and short and hard to make gains (returning to the SMA stack from below, then falling again). Best trades are to short at the top of those rallies until the bear market is indicated as over. If you are still “long” stocks, protective measures ought to pay off best (sell covered calls at the SMA stack and buy put options then too). No “long trend trades” only “short trend trades” or long “counter trend day trades” on short fast rally days. Those kinds of rules.
Me? I’m happy too sit in cash and have a nice hot chocolate while waiting “for that day”… when it is time to ‘pull the trigger’.
Musings from the Chiefio 
Desperate stuff. From my perspective here in Western Australia the Chinese have stopped buying our iron ore, more people are leaving than coming and we have just experienced a major fire. The currency is collapsing. But on the positive side there is this: reality348.wordpress.com that describes the mechanism behind change in the weather and the climate…just in case your’e interested.
Pretty much more (or mostly less) of the same.
Everywhere you look indicators are pointing downward and flashing red warning lights. Hard to be upbeat in that sort of environment.
http://davidstockmanscontracorner.com/newsflash-from-the-december-jobs-report-the-us-economy-is-dead-in-the-water/
http://davidstockmanscontracorner.com/china-burned-through-120-billion-in-fx-reserves-in-december-devaluation-crisis-straight-ahead/
http://davidstockmanscontracorner.com/update-from-mom-and-pops-basement-42-of-millennials-have-resorted-to-pawnshops-and-payday-lenders/
Just a couple weeks ago, I changed the fund my work 401k uses. I looked at all the historical performance data for the available funds and picked the only one which gained value in 2008-2009. Almost all the others lost 30%-40% during that time period with a few good performers only losing 20+%
It is a cash based fund intended to preserve value for older investors, which seemed like the prudent move at this time. Like everyone else just waiting for the other shoe to drop and the tail spin to begin. I don’t have the sophisticated understanding of the markets you do but my gut instinct is that everyone is whistling through the grave yard and pretending to have an upbeat out look while they quietly sell out their positions to rubes who have no clue and buy the latest hot tip on the TV shows and financial chatter.
I would have to agree. The feel good bubble of the Holidays is over and things have hit a brickwall out here on Main Street. To the good, people have been improving their personal debt positions over the last year. If Wall Street thinks Main Street will bail them out again, I DOUBT IT! The depression is now beginning for them…pg
Shanghai down another 5%:
http://bigcharts.marketwatch.com/advchart/frames/frames.asp?symb=shanghai&insttype=&time=9&freq=1
Looks like China is the one hitting the brickwall.
The big problem with having taken dominance of manufactures is that folks can make their old manufactures “do” for a lot longer than expected and they can “do without” if need be. So in a “business cycle” downturn, the whole sector can dry up for a year or two. Not good if you have an economy planned around that not happening.
This might be interesting, as recent comments on some web sites suggest Obama is going to pitch how good his policies have been for the economy, in his Last State of the Union address, just before it noses over into a death spiral. ( I usually refer to it as the State of the Onion address in homage to the satire web site, as almost nothing in those addresses has any firm footing in reality)
http://www.forbes.com/sites/stevemoore/2016/01/05/obamas-economic-record-dismal/
It would be kind of funny in a karma pay back sort of way for the administration and his party to take full credit for the strength of the countries economy just before a major down turn.
Not that I want to see the pain and suffering that will come from what is almost certainly inevitable pull back and deflation of bubbles in our economy.
The biggest bubble relates to the purchasing power of the $US. There are one hell of a lot of IOUs sitting out there. All forms of borrowing have limits.
Australian market is sliding badly because of China and downturn in commodities. The (Federal) government has been waffling about fixing the budget deficit for over 2 years, but opposed by Labor, Greens and wackos grouping in the Senate. The States want more money – a previous treasurer’s famous comment “never stand between a state premier and a bucket of money” – but don’t want to spend it wisely, so plans to “redress the fiscal imbalance” (code for more money for states) are in disarray. That part of the public paying taxes are sceptical, and expect tax increases, the other half think they will get more.
It is a “perfect storm”. All parties over-spending, all now facing less future revenue, all facing demands by public payroll employees for higher wages, and no-one can see past their nose – they all think that the good times will continue. It is obvious that the papering over of the GFC by flooding the market with ‘money’ to boost activity, helped by China’s huge spending has come to an end. 7 years wasted and worse to come for maybe 10 years. Batten down the hatches and try to ride it out.
Spare a thought for Europe, you in the USA might have Obama, but he will be gone soon, whereas Europe has Merkel and the effects of her rule will take generations to undo.
Another warning bell is ringing.
http://www.bloomberg.com/news/articles/2016-01-11/bank-of-america-rail-traffic-is-saying-something-worrying-about-the-u-s-economy
@Larry:
I need to look at Baltic Dry too…
That article implies coal and oil are the problem… it ignores that those tell you production levels…
Folks just are not buying (can not buy?). Personally, I’m buying food, paying the house payment, and that’s about it. I have enough stuff and I’m in the “getting rid of” business more than getting more stuff.
@Erl:
A lot of global debt was taken on in $ US and that is crushing folks with the strong dollar.
Venezuela may collapse. Lousy sour heavy crude (about $25/bbl!) coupled with very high debt, inefficient expensive production (nationalized… so “majors” not going to help them…), and political unrest. The whole country is at risk.
It isn’t the only one…
@Graeme No.3:
Australia will have a time of troubles, being tied to China and commodities demand. Best of luck to you and my relatives down under… (Grandad’s brother and his kids, among others…)
Maybe it will turn Australia back from some of the more socialist leanings…
This will help —
http://www.telegraph.co.uk/finance/oilprices/12094394/Oil-price-could-fall-to-10-a-barrel-warn-investment-bank-bears.html
Big investment banks now talking loudly about $10 oil sounds like a big short being piggy backed on OPEC moves to drive out competition…pg
In the “what could possibly go wrong?” department:
http://www.telegraph.co.uk/finance/financetopics/davos/12108569/World-faces-wave-of-epic-debt-defaults-fears-central-bank-veteran.html
Bunch of depressing stuff in recent market news.
Caterpillar heavy equipment has had 37 straight months of dropping sales.
http://www.zerohedge.com/news/2016-01-27/manufacturing-depression-enters-uncharted-territory-caterpillar-retail-sales-have-ne
And earnings reports have not been very impressive either.
http://www.marketwatch.com/story/earnings-take-a-dark-turn-as-profit-warnings-sales-misses-mount-2016-01-27
This may be a very interesting year.
Appears IMF and world bank is moving to bail out oil producing countries who are in trouble due to low oil revenues.
http://www.ft.com/intl/cms/s/0/9759f42a-c51b-11e5-b3b1-7b2481276e45.html#axzz3yVXwCZuq
Drat Financial Times is being a pain.
Opening paragraph for above link.
Stock market wealth is not real money until you sell your shares.
http://www.forbes.com/sites/katevinton/2016/01/28/jeff-bezos-loses-6-billion-as-amazon-shares-drop-after-hours/
And yet another leading indicator that signals the wheels are grinding to a halt.
http://davidstockmanscontracorner.com/watch-the-wafers-the-global-semi-conductor-demand-has-collapsed/
And a bit more good news on the world economy.
On China —- http://www.zerohedge.com/news/2016-01-30/chinese-banker-explains-why-there-no-way-out
On Japan — http://www.zerohedge.com/news/2016-01-30/pandoras-box-open-db-warns-japan-may-have-started-silent-bank-run
@Larry; you missed the most important one of the bunch:
http://www.zerohedge.com/news/2016-01-20/george-soros-europe-verge-collapse
Soros, The Darth Vader of Europe speaks!…pg
Many years ago I read a paper on how very low or minus interest rates would collapse an economy.
The banks would be full of money that could or would not be lent out because there was no return on risk, not enough return on loan service costs. The economy starved as liquidity dried up. It would appear that the world has been stuck in such a position for the last 8 years. The governments and their corporate friends have been blessed with cheap money to play with, while Main Street has been starved and unable to create real wealth or receive returns for their savings. Money is being chased around for small, short term paper gains without real long term investment in wealth creation. Add to this, a crushing burden of massive over regulation. Small wonder things are stuck in this slide down hill. If I remember correctly the great depression happened the same way and resulted in WWII as the Axis nations tried to militarily force their way out of their predicament. Instead of Germany and Japan we seem to have Russia and China following that same path.
When will they ever learn? I once told a banker that he, as a group, was the cause of economic boom and bust cycles due to their chasing of whatever worked last year and ignoring of what might work next year. In farming you should produce the crop that is in short supply and ignore the one that is being produced in excess. Bankers always back the one that is being heavily produced as that is where the cash flow is, but not the profit for the producer. He was not pleased with my observation!
The question is how do WE profit in this situation…pg
I ran across an interesting comment in an article I read a few days ago, that said the key to success in the markets and investing is to avoid big losses not making big gains. Interestingly the same principle applies to getting the best lap time on a race course. The best race car drivers avoid giving up speed in corners and strive for the best exit speed out of slow corners even if that means entering the corner slower than others but getting a better line through the corner so they can get back on the throttle earlier and accelerate hard out of the corner. The most important corner on the race course is the last corner before the longest straight. The racer who exits that corner with the highest speed will be going faster for the entire length of that longest straight than all his competitors.
Years ago I worked in a sales and service job repairing office equipment. My service area was the entire state of Wyoming and the north half of Colorado. Needless to say I spent a lot of time driving long distances. I noticed after a while that I kept seeing the same event play out. Some guy would pass me like I was standing still, then 100-150 miles later I would see the same car pass me again. I eventually figured out that although he was going much faster on the highway he was losing all he gained when he stopped for fuel. Longer fuel stops due to higher gas consumption, a little more time spent getting munchies etc. takes a Loooong time at high speed to make up. Goes back to those hated time and rate story problems in math class. It takes a lot of time at 90 mph to make up for 10 extra minutes pissing away time in a gas station, over someone who is cruising at 70 mph and works to keep the gas stops short.
Meanwhile back at the economy — so based on what I have been reading lately, wholesale inventories up, retail sales down, crash in orders for silicon semiconductor chips, huge drops in sales for both Caterpillar and Kubota heavy equipment, both truck and rail shipments down —– all those leading indicators tell me (wild guess here) that we are already in a depression but don’t know it yet. (the data that confirms recession/depression takes about 3 months to gather and process) The big boys know it but are using happy talk to keep the little guys from bailing out before they have a chance to dump their positions. The little guy will finally notice in my guess around August or September when all the layoffs and such get to be too common to write off as just bad luck. That is when I expect the market to finally roll over into capitulation and for even the little guys to start trying to get out. So to apply that avoid losses principle, then the trick would be to reduce exposure to losses early (to avoid the rush) and sacrifice a little bit of yield up front in exchange for being in a safe position when things finally start to look bad. Then once all the losses have been squeezed out of the system jump back in and ride the recovery up.
Best laid plans and all that – – – –
And, sometimes no matter how technically correct one enters a corner there is some rube waddling around screwing up your fine line.
Ask any underpowered sports car owner how they feel about the big H P guys holding them up in the corners.
@bruce
Amen!
Interesting item here on zerohedge
http://www.zerohedge.com/news/2016-01-31/comex-registered-gold-inventories-plummet-73-one-day
Does this mean we should be hearing impending doom music in the background, or just some routine elevator music ?
The markets seem to be on a real roller-coaster ride. Are they bumping along on the bottom or readying a real fall off? With the World Wide Dive for the bottom, American assets seem to be the thing of last choice.
It appears to me that income producing assets are the only game to play. Debt is cheap, if you can get it for investments as long as it can be serviced. If and when the vast amount of cash in banks and deep pockets is kicked lose these assets will jump in value first.
The rich are liquidating assets right now for cash instruments while they wait for the election shake out. The need to put that money to work will grow long before the wide spread need for it.
In times of chaos there is opportunity…pg
I suspect Sanders tie with Hillary has some folks scared too.
The specter of a Socialist POTUS will scare a lot of money into the matress…
And Hillary winning 6 coin tosses in a row on ties? Yeah, right….
It is interesting times alright.
BTW, I’m back in Orlando for a while doing the job search thing again.
Yea! he is alive and well!
Glad to know you are not stuck in some small southern town waiting for a mechanic to whittle you a new water pump or something.
Well this could completely change the rules everyone was assuming for the current oil glut who blinks first pumping war.
http://www.zerohedge.com/news/2016-02-03/shale-shock-big-leg-lower-oil-coming-after-many-shale-plays-found-have-far-lower-bre
Well I think I just added several books to my reading list. It appears books by Michael Hudson should be mandatory reading if you want to understand the modern economy.
http://davidstockmanscontracorner.com/meet-michael-hudson-an-economist-who-actually-knows-something/
@Larry; excellent article, gives a good POV on international banking concepts of managing national wealth to maximize the bankers income…pg
Yes while reading that article it suddenly dawned on me that banking as an industry is like any well adapted parasite. It draws as much blood as it can without killing its host (most of the time).
It is okay if the host occasionally goes into life threatening crisis, as long as most of the time it recovers.
@Larry, I would have to agree. When the relationship is symbiotic it may be a good thing. When it becomes parasitic and greedy, bad, even terminal. In the latest go round, after feeding on each other to the point of collapse, they forced us to give them a transfusion just to keep them alive.
As W.C. Fields said; ” You never give a sucker an even break.”
The bankers and the Government that is supposed to protect us, collude against us in their greed. When Bankers become the government there is little hope of recovery, revolution is always the result. Civilization ends. Whether in a bang or a whimper, a collapse happens.
When government as well as banking become too big to fail, they must be broken up or they Will fail and take us down as well.
The question of course is how do we save the good and limit the bad. 250 years ago they came up with some good ideas to limit government but left things somewhat unfinished and GEBs have undone much of those limits. The concept was good but needs repair and upgrade to save it as well as ourselves…pg
Perhaps it has begun:
http://www.foxnews.com/us/2016/02/05/some-oklahoma-schools-display-signs-warning-staffers-could-be-armed.html?intcmp=hpbt4
Maybe they are trying to get a soft reset right now or at least control a panic sell off:
http://www.cnbc.com/2016/02/05/citi-world-economy-trapped-in-death-spiral.html
From twitter: at 10:12 mountain daylight time.
CNN Breaking News @cnnbrk 14m14 minutes ago
President Obama to deliver statement on the economy from the White House at about 12:30 p.m. ET. http://cnn.it/go
Now how often does the President make an out of the blue announcement on the economy on the Friday before the super bowl??
I feel much better now that all that smoke has been blown up my A- – –
Obama was taking credit for lower oil prices and first time since the Recession when unemployment has dropped below 5% (as if that is even remotely accurate — just talk to the coal miners, heavy equipment builders, oil drilling and servicing crews etc. who used to work on the idled oil rigs). Meanwhile he did not disappoint and asserted that the bad economic mood in the country on main street is due to Republicans talking down the economy instead of giving him proper credit for his masterful repeal of economic laws and the booming economy which is just ahead.
Hmmmmm —
http://www.bloomberg.com/news/articles/2016-02-05/chicago-stock-exchange-says-it-s-selling-to-chinese-led-group
summary of current world market conditions and risks
http://www.telegraph.co.uk/finance/economics/12138466/when-is-the-next-financial-crash-coming-oil-prices-markets-recession.html
@Larry, This Chinese stampede to acquire American assets is a demonstration of how desperate they are to get their wealth out of that country before it is lost. In every case that I have seen in the last 60 years, this is the mark of the end of the Boom and not a mark of their expansion. If China is such a wonderful place to invest in they would put their money to work in.
Meanwhile it is beginning to appear to me that Gold and Silver may be beginning their rise in value as the investment of last resort. Not sure what Smith’s charts indicate…pg
Exactly the same thing happened with the Japanese, remember when they were buying everything in site and then ended up selling most of it when their market collapsed?
It is also part of the globalization process where corporations no long feel any primary responsibility to the country that they were founded in, and have become supranational creatures who just graze where the grass is greener. It has been going on since the late 1980’s.
http://articles.latimes.com/1987-08-03/local/me-390_1_foreign-investment
Is it time to stick a fork in it?
Now the last men standing are going down, this should be the onset of a major correction if this item is correct.
http://www.zerohedge.com/news/2016-02-09/last-pillar-standing-breaks-theyre-taking-out-generals
Hmmm – this just showed up on twitter — these are year over year numbers:
David InglesVerified account
@DavidInglesTV
#BREAKING China January trade data out (in Yuan terms) Exports unexpectedly fell 6.6% (est +3.6%) Imports collapsed 14.4% (estimate -3.6%)
Yup, China is getting grim.
Financial update post soon, but for now I looked at GLD and SLV that are bottoming, but not yet confirmed bottomed. Long tern positioning could start to average in, but I’m more interested in the swing trade on confirmed bottom (price crosses bottom weave SMA stack and touches from above, but fails to cross below).
The basic problem is that the whole world is looking to the US consumer to bail them out with buying or taxes and we are tapped out with no wage gains and brutal debt burdens in the economy. Just not going to happen with demographics shifted from household formation to retirement cash out…