Guy Can’t Stop Shuttin’ Up! (XLK,FAS)

Guy Can’t Stop Shuttin’ Up! (XLK,FAS)   Look around you, and you’ll see – it’s clear – the more that people talk, the bigger trouble they get into.   Is there any doubt?   Consider your own experience.  If you’ve been breathing for more than a few decades on this water-orb, your own life probably provides ample testimony to the fact that you should have just shut up.  You never would have gotten into that mess with your wife/boss/brother/ son/employee/bartender/etc. had you just kept your mouth closed.  Not that there isn’t a time for speaking your mind.  But that’s not the way things usually play out.   When we’re hot, and we want to let that good-for-nothing gut-sucker know it – it’s always the wrong time.  The key to avoiding these sorts of life-changing outbursts is to just zip it and wait.  There will always be an opportunity to explain the issue in a clearheaded, cool manner, and in a way that genuinely gets to the heart of the matter and convinces the lazy booger-boy he was wrong.  But without any heat.   And that’s the way we should always go about things.   It’s certainly the only way to…

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Volume Precedes Price (PIR,XLK,KBE)

Volume Precedes Price (PIR,XLK,KBE)   It’s axiomatic among market technicians that volume is the key ingredient behind price changes.  On the one hand, it’s a purely economic equation, the greater the demand for an item, the higher it’s price will move, given a static supply.  Conversely, when demand dries up, prices should be expected to fall, or stop rising, at least, as the catalyst for their advancing in the first place has now been removed.   But does that always translate in the world of equity trading?  And how can the volume action on a stock or sector, or in the overall market, help us to make better trading decisions? Glad to have you.   A number of people have attempted to probe the matter, and in the most fundamental sense, traders should be aware of potential tops and bottoms every time they see a genuine swell in trading activity.   Accumulation and Distribution   Two terms that define the technician’s understanding of volume are ‘accumulation’ and ‘distribution’.   When the so-called smart money is loading up on a stock at the bottom of a downtrend, the term ‘accumulation’ is attached to it.  And conversely, when the bigshots are selling…

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Run for your life! Inflation! INFLATION! (VOX,XLK,SPY)

We’ve discussed it numerous times over the last five years, and it finally appears to be coming to pass. We’re referring, of course, to the ongoing efforts of the U.S. central bank (and others, most notably the European, Chinese, and Japanese CBs) along with our Treasury Department to coordinate a financial reality whereby inflation puts her evil stepsister, deflation, into a merciless choke hold.   And to that end, we’ve seen all manner of ZIRPs and JERKs and QEs (not to mention out-and-out buying of stocks and bonds), all orchestrated to get banks to start lending and Joe Q. Public to start spending.   Why?   Because it cannot be that the economy is left alone to work out its own misallocations in a natural way.   No, no.   We economic jeanyuses know better, particularly if we have advanced degrees and have written indecipherable papers on just how that inflationary intervention has to proceed.   Because if we stick our fingers in the pie in just the right way, and stir it up just so, and extract from it precisely X quantity of jam and lard, all the while smearing the crust with the stem cells of a recently…

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Running Numbers (XLK,IYH,GS,FCX,FAS,C,TLT,HYG,AXP,V,RSX)

We’ve got so many trades come due, there’s little time for anything else!   Let’s get right to it.   First, we’ll take a look at a trade we launched over a year ago, on the 12th of November, 2015, in a letter called The Sachs of a McMorAno.   There, we urged you to dump the commodities and move hard and bullish on the financials, using two stock bigshots to play the trade, Freeport McMoRan (NYSE:FCX) and Goldman Sachs (NYSE:GS).   The trade recommended you purchase the January 2017 FCX 10 PUT for $3.00 and sell the GS January 2017 GS 150 PUT for $4.95.  Total credit on the trade was a fat $1.95.   And now?   Wow!   First of all, we closed out the FCX PUT on the 10th of December, 2015 for a dandy $4.12 and recommended you “leave your GS PUT to rot.”   And so it did.   On the third Friday of January, 2017, the GS PUT took the chloroform, expiring worthless, and giving us a very large $6.07 on absolutely no initial investment.  We’d like to thank the academy, the directorate, the foundation and the makers of Turtle Wax for all…

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Spot the Wise-Guy (KBE,XLK)

We’re going to lead off today with a bit of a quiz.   We want to see a) who can spot the investing ‘wise guy’, and b) in so doing, declare himself an investing ‘wise-guy’ himself.   So we’ll start with this –   It came to our attention yesterday that Atlanta investment powerhouse Invesco had looked into the matter of central bank equity purchases and came away with the following, stunning data.   Consider –   Compared with last year, twelve out of fourteen of the world’s largest central banks responded that they were planning to significantly INCREASE their investments in both equities and corporate debt issues in 2017, the former by as much as 80% over numbers they posted last year.  The other reserve managers surveyed declined to answer the question, which for our part indicates, at a minimum, a willingness to engage in equity purchases of some variety and scope.   Have a look here – This is plain astounding.  A decade ago it would have been unthinkable that central bankers would go all-in on such a stock buying splurge.  Today, it’s hardly debated.   A look at the following chart shows just how crazy the practice…

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Contrarian Sentiment Bullgasm (SPY,TLT,AAPL,TLT,XLK,DB)

These are our kind of headlines – It’s not often we get a splash of copy that includes the likes of the above on just a single perusal of the news galaxy, but that’s exactly what happened when we powered on yesterday.   And we’re pink-tickle drunk over it.   Why?   Simple.  The Iron Law of Investor Certitude (ILIC) makes it perfectly clear that –   The stock market is a machine that is built, maintained and finely tuned for the express purpose of separating Joe Average Investor from his life savings.   It therefore follows that if no one is invested, there’s no such separation of savings to be had.   That being the case, the market will now be forced to rise until a threshold level of average Joes are teased back into the game and can be fleeced of their hard earned cash by the machine. Hate to get nasty about it, but when the thing is a screaming buy, we just gotta scream ‘buy’.   That being said, the world is not all headlines, as you well know.  Sometimes the contrarian message is hidden in the actual article that follows.  And sometimes, as we’re about…

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Yields on the Rise Means Techs are in Play (TLT)

Before we commence with the day’s activities, there’s a profound misconception floating about the investment blogosphere regarding the relationship between stock and bond markets that we feel should be addressed. In short, it’s widely believed that a back-up in interest rates is a net negative for stocks – that stocks become less attractive to own as the rate on bonds begins to compare more favorably with the dividend yield on equities. And the argument has its logic, to be sure. But history tells a different story. And where history battles the heady winds of intellectual rigor, we stick with history. Because man is not an exclusively rational animal. Oh, my! So let’s consider a little history. To begin, let’s have a look at better than 50 years worth of data that includes both the Fed Funds Rate and the Ten Year Treasury Note along with a highlight of all those periods in which the latter was rising. Since 1962, the ten year has been in a rising trend for the majority of the time, as seen from the blue shaded areas on the chart. The market as a whole, as we know, has also climbed tremendously during that period. But…

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Dollar Fires Shake up the Market (DXY, XLI, XLK)

We’re going to start today with some comments on the dollar. Why? Because going into the weekend the dollar is looking stronger than it has in over a year. As the chart below shows, the U.S. Dollar Index (DXY), a widely accepted theoretical value assigned to buck, that’s calculated as a composite of a basket of six foreign currencies, has not seen a sustained move above all its moving averages since July of last year. Take a look – After wallowing in Nowheresville for a full annum, the buck sprang to life last month, pushing north of all its moving averages before bucking up against overhead pressure at DXY 81.5 just yesterday (green line). A look at the latest RSI readings, however, tells us that the move is likely over for the time being, as we’ve nearly reached the strongly overbought RSI 80 level, the height at which most securities stall out and encounter a bout of selling, or, at the very least, a period of sideways drift before regrouping. Our own estimation is that we’ll presently see a decline back to current support (former resistance) at the long term (411-day) moving average at roughly 81 (yellow line). We should…

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