Posts Tagged ‘Gap’

Bull Flags in New Areas as Market Changes Complexion

Saturday, August 11th, 2012

by Mark Hanna, Market Montage

The general market has been consolidating last Friday’s move the entire week.  Each morning we have had a gap up or down (not big ones) and then after 11 AM the market is listless.  There is no volume out there and it appears everyone with big pockets went to the Hamptons. If it were not for all the gap ups in a row Fri-Tue (can’t see it on the stockcharts.com chart) this would be a little bit more of an assuring pattern, but take those away and you have a solid bull flag forming on the S&P 500.

 

While a quiet week on the surface, sea changes are happening underneath.  This week’s strength is mostly concentrated in names that were the laggards of the past few months as we have seen the makings of a large rotation.  Note the bull flags in semis, commodities, and industrials.   (Transports, which I flagged yesterday continue to be an exception)

Meanwhile the “technical leaders” have not had quite the performance – the PDP ETF (based on intermediate term relative strength measures) is below Friday’s close.   Perhaps they need to make a “technical laggards” ETF for times like this.

 

Of course the leaders of the past few months have been the laggards in this move – namely REITs and Utilities.   (Healthcare is a mixed bag)

 

So in the big picture that is the action you want to see if you are an intermediate term bull although the reasons for it happening (central bank action) rather than economic expansion is rewriting the playbook.  In fact after I reviewed all the news out of China and Europe this week it is amazing that pro-cyclical is the leadership group since last Friday.  But this is the new market where central bank action supersedes everything.

Speaking of…gold continues to perk up.  A break over this $158-$159 level on the Gold ETF would be technically constructive.

 

Copyright (c) Market Montage

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Lucy or Charlie Brown?

Monday, July 23rd, 2012

 

Since the May swoon the market has been in a violent pattern of indecision.  While the trend has had an upward bias since early June, there has been no consistency.  In fact since breaking out of a five session sideways pattern in mid June we’ve had a consistent pattern of 5-7 up sessions followed by 5-7 down sessions.  Each time Lucy sets down the football and Charlie Brown runs up to kick it (the 5-7 day upswings), it is snatched away (the 5-7 day downswings).  Obviously an exasperating situation for all involved – save for Lucy.

The technical condition of the market seems to be improving but of course everything is only obvious in retrospect.   Wednesday’s move broke the S&P 500 over a series of descending highs AND yesterday’s move pushed the index nominally over early July highs.  Those are both positives.  Of course, as has been the case all spring/summer just as things look promising Lucy shows up and we are looking at a significant gap down in the morning.  It is a perpetual April Fool’s joke of spring/summer 2012.

If we are to have a real change in character the next handful of days will be quite important.  The last few pullbacks (5-7 days in duration) have given back about 2/3rds of the previous rally.  If we can see a less chaotic pullback – lighter in degree and duration, the bull case is strengthened.  If this was just another devious headfake, the action in the past few sessions will have been nothing but another headfake of spring/summer 2012.

It appears that Intel and IBM used up the “not so great, but at least not a disaster” air in the room earlier this week – we had more of those type of reports from the Microsofts and Google’s of the world last night but it’s not leading to the same reaction.  Also there were some negative reactions in Chipotle and Intuitive Surgical.  The dollar also has hit a first level support after a multi day pullback and oil needs some rest after a huge push so nothing too dire here unless we have a complete lack of buyers in the next few sessions.

There were a trio of economic reports yesterday – none of them came in well, but at this point one does not know if the market is rooting for worse or better news as the former brings more calls for QE. Today the economic calendar is clear so we’ll see who shows up on a summer Friday to press the case.

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Weakness Overseas on Chinese and European PMIs

Monday, April 23rd, 2012

 

I had a sense in the latter part of last week that each time we kept bouncing off S&P 1370, that this market was going to do the thing that frustrates the most number of people – that is (if we were headed lower) to gap down through that key level – where no one could position for it intraday.  [Apr 20, 2012: 1370 - Resistance Becomes Support.... for Now]  Tongue in cheek I said I could envision Joe Kernen of CNBC blaming any Monday morning weakness of the winning of “a socialist” in the first round of French elections – because that’s what Joe blames everything on.  ;)

News stories this morning are in part blaming the “uncertainty” of French elections, along with the more likely reasons, continued weakness in PMI figures in China and Europe overnight.

  • “The risk was always that the European crisis and associated weak economic activity would encourage more extreme politics. This is slowly happening and is something we need to watch going forward,” said Jim Reid, strategist at Deutsche Bank, in a note.

Germany is of particular concern as the wheelhouse of European manufacturing.

  • Business activity across the 17-nation euro zone contracted at a faster-than-expected pace in April, according to the preliminary purchasing managers’ index, or PMI, readings released Monday by data firm Markit.
  • Manufacturing PMI fell to 46.0, the lowest in 34 months, from 47.7 in March, defying economists’ expectations for a rise to 48.1. A reading of less than 50 indicates a contraction in activity.
  • Services PMI fell to a five-month low at 47.9 from 49.2 in March versus forecasts for a reading of 49.3.
  • The composite PMI also fell to a five-month low at 47.4 from 49.1 in March. Economists had forecast a rise to 49.3. “The flash PMI signaled a faster rate of economic contraction in the euro zone during April, extending what appears to be a double-dip recession into a third consecutive quarter,” said Chris Williamson, chief economist at Markit.
  • Preliminary German PMI Manufacturing decreased to 46.3 points in April, from 48.4 points in March.

 

China stabilized (bounced a tad), albeit at contractionary levels:

  • China’s manufacturing activity contracted further in April, although the sector improved from levels seen in March, a preliminary reading from HSBC showed Monday. HSBC’s so-called “flash” Purchasing Managers’ Index rose to 49.1 in April, compared with a final reading of 48.3 in March.  The flash PMI is based on responses from 85% to 90% of those surveyed in a given month.

 

If this break of S&P 1370 holds going into 9:30 AM EST, last week’s lows of 1365 and then lows of the previous week of 1357 are key levels that traders will eye.  A close and hold below 1370 will have intermediate term levels of 1340 (March lows) on the radar.  If you are playing at home the “bear flag” I keep mentioning seems to be fulfilling.  Keep in mind Apple is at the 50 day moving average and perhaps buyers (and gamblers who love to pile in ahead of earnings) will help keep it up, which would help NASDAQ – and thus lend a hand to the market as a whole.  We’ll see.

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Dr. Copper, the Economics Ph.D.

Wednesday, April 18th, 2012

It is often stated that copper is the metal with a Ph.D. in economics, and the data for the most part bears this out.

Figure 1 is a monthly chart of copper (cash data) with NBER dated recessions noted by the indicator in the lower panel.  With the indicator in the down position, the US economy is in recession; when the indicator is up, the US economy is expanding.  As can be appreciated, copper does better during economic expansions.  The metal typically peaks during recessions before heading into a down trend (see vertical gray bars).

Figure 1. Copper v. NBER recessions/ monthly

Presently, copper is under performing the broader market, and as we can see from the weekly chart (see figure 2, cash data), copper gap below its 40 week moving average last week, and it is making a lower high.  The weakness in copper should be respected, but there is more to the story.

Figure 2. Copper/ weekly

The next graph (figure 3) is a weekly chart of copper (cash data).  In the lower panel, is the “Bullish Consensus” data  for copper from MarketVane.  According to the MarketVane website, “the Bullish Consensus measures the futures market sentiment each day by following the trading recommendations of leading Commodity Trading Advisors.”  Many investors view the MarketVane data (and sentiment data in general) as helpful in identifying market turning points.  For the most part, this is true as we have seen many times how too many investors on one side of a trade often leads to a strong reaction in the opposite direction.  But sentient data also has other uses that few rarely speak of, and this has to do with trend following.  In essence, as prices of an asset rise so does the degree of bullishness, and as prices fall, investors become more bearish.  So what good is following investor sentiment if it just tracks price?  My research shows that investor sentiment leads price by about a week or two, so investor sentiment is a good tool at identifying changes in a trend that do not occur at the extremes.  Let me give some examples.

Figure 3. Copper v. MarketVane Bullish Consensus/ weekly

Figure 4 shows how investor sentiment leads price.  Once again, this is a weekly chart of copper (cash data) with the Bullish Consensus for copper in the lower panel.  The black dots represent swing pivot points.  Now if we look at the current Bullish Consensus value and compare this value to past swing pivot points, we can make the statement that a close below three swing pivot points is bearish.  As you can see, this was the the case in 2006 and in 2008.  (This also happens to be the case across time and other asset classes.)  When the Bullish Consensus value closed below 3 prior swing pivot points, copper dropped rather precipitously.  (As an aside, I am drawing upon my research with pivot points, and I have previously presented similar findings in a SP500 trend following strategy; click HERE to go to that article.)  So a close below 3 pivot points is generally bearish, and since sentiment tracks price and as sentiment often precedes price in time, this is an ominous sign.

Figure 4. Copper/ weekly

Now let’s move our chart forward in time and look at the past 2 years.  See figure 5.  At point #1, the Bullish Consensus value closed below 3 swing pivot points.  Rather than sell off, this marked the low point for copper before it reversed strongly higher.  8 weeks later, Federal Reserve Chairman Bernanke mentioned QE2 at his speech at Jackson Hole.  At point #2, this breakdown nearly marked the high point for copper back in April, 2011.  Point #3 was the break down back in September, 2011.  Rather than lead to a break down in price, this also marked a bottom.  This also happened to coincide with the Federal Reserve’s Operation Twist and with the European Central Bank’s LTRO.  Lastly, turn your attention to the “?????”.  The Bullish Consensus has closed below 3 swing pivot points.  While this normally would be interpreted bearishly, one could easily speculate, based upon the recent past, that central bank intervention is imminent.

Figure 5. Copper/ weekly

So what have we learned from Dr. Copper today?

One.  Copper generally peaks during recessions.

Two.  Copper is currently putting in a lower high and is trading below its 40 week moving average; copper peaked over 1 year ago.

Three.  Investor sentiment not only tracks price but it often precedes it by a couple of weeks.  The current price structure for the Bullish Consensus is bearish.

Four.  Recent bearish patterns in the price structure of the Bullish Consensus have been bullish owing to central bank intervention.  In essence, central banks have prevented a recession from unfolding.

Five.  It should noted that each central bank intervention has provided less and less benefit to the markets.  When looking at copper, we see that Operation Twist did not produce gains that were seen during QE2.  It’s as though the markets have become resistant to the effects of monetary stimulation.

Lastly and most importantly.  What’s next for copper and the markets?  The breakdown in the price structure of the Bullish Consensus for copper strongly suggests lower prices for copper, which in all likelihood implies a recession.  Central bankers have been timely in their implementation of recent quantitative easing, and we could easily make the case that their interventions have thwarted the onset of a recession on more than one occasion.  Copper will need to reverse from the current levels and investors will need to embrace that risk.  This will be heralded by a reversal in the Bullish Consensus.  Will central bankers be able to save the day again?

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Potential Bear Flag Forming

Tuesday, April 17th, 2012

 

This morning futures are up for (insert reason here).  The story of the day is a German investor confidence report but if that’s the main cause, it was a market that wanted to find an excuse to go up.  Futures took a U-turn overnight from down about 5 to up about 5 and have added to that gain as the morning progressed.  That’s a fortunate development for the bulls as the situation looked quite dire with the break of 1370 in the overnight session.  Recall late last week I said the area between 1370ish to 1390ish is a “white noise” area and not much stock can be taken of what happens in that area.

Pulling back a bit, yesterday’s action was among the most tricky of the year.  The market gapped up – and then immediately gave back all those gains within the opening half an hour.  That usually leads to a very bad day.  Instead the market moped around, and only the NASDAQ was hit.  While the DJIA actually was up quite strongly.  And S&P 500 flattish.  A strange divergence indeed.   The NASDAQ has been the leader of the pack in 2012 and hence it sure needed to ‘catch up’ (in this case down) to the rest of the major indexes – yesterday was one step towards that goal.

The market “generals” began getting hit in earnest last Friday and that continued yesterday – headlined by Apple’s 4% drop.  The “teflon” stock is now down 5 sessions in a row, and might actually be short term oversold if you can believe it.  But let me call your attention to the bottom of the graph – see that heavy volume?  That is quite ominous to me.  It speaks of distribution.

Priceline looks very similar in that the drops are on substantial volume versus the pops up of late.  This smells of the big boys selling.

Notwithstanding the morning’s gap up, we might be building what is called a “bear flag” on the indexes.

Technically speaking, a bear flag is a sharp, strong volume decline, several days of sideways to higher price action on weaker volume followed by a second, sharp decline to new lows on strong volume.

We saw that initial drop, on volume, over the past 2 weeks.  We now could be in the “several days of sideways to higher price action on weaker volume” stage.  Note again the volume bars at the bottom of the chart.  On those 2 up days last week volume lagged versus the down days.  If the bear flag is to play out it could pose an interesting situation towards the end of this week to early next.

The larger issue from this viewpoint is a lot of “go to” stocks are breaking down.  Yesterday’s gains were in consumer staples (hide out stocks) and a lot of areas that have shown weakness the past few weeks.  A lot of broken charts were the ones that led the charge yesterday.  So the benign index action hid a lot of weakening charts.  Hence, for those looking to enter or add to new positions the choices are thinning or differing.  And the high growth names are the ones withering away.  In the end we can stare at the indexes all we want but the market is made up of individual stocks, and many of those charts that were holding up even as the market went sideways in latter March are now signaling sell or at best caution.

Of course we should always look at the opposite view and a bullish take on this would be “we are getting a long needed rotation into new groups”.  My issue with that is those groups are mostly defensive.

The next few days will be tricky because some of the high octane stocks are now short term oversold after being taken to the shed the past week and are due for at least a short term bounce – and we have some key earning reports.  Tomorrow we have IBM’s earnings report which is to the DJIA what Apple is to NASDAQ, since the DJIA is price weighted and IBM is a $200 stock.  So the DJIA is going to effectively be “IBM” on Wednesday.

Anyhow if we are in a bear flag this week is going to be the most dangerous stage of the larger correction since this is where people will let the guard down and say “well I guess that was it”.   If however that *WAS* it, and a new leg up is starting (i.e. correction over) then ignore this post. :)

 

Copyright © Market Montage

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The Dating Game: Michael Pettis Challenges The Economist to a Bet on China

Friday, March 30th, 2012

The Economist says “China’s GDP, measured in nominal dollars, will be the world’s largest by 2018″. Michael Pettis at China Financial Markets disagrees and says I would like to make a bet with The Economist.

I recently read in The Guardian an article by enthusiastic orientalist Martin Jacques in which he says that The Economist has just predicted that China’s GDP, measured in nominal dollars, will be the world’s largest by 2018. Earlier estimates, he says had China becoming the largest economy in the world by 2027.

I have always been a little skeptical about the 2027 claim … given how much we would have to assume about the sustainability of Chinese growth, about the likelihood of current GDP numbers not having been vastly inflated by an over-investment boom, and about the unstable range of political outcomes. It seemed to me to be a prediction about as valuable as the world-beating predictions about the USSR in the 1960s or Japan in the 1980s.

Still, this 2018 prediction deserves I think more than a little questioning — it requires that nominal Chinese GDP growth in dollars outpace nominal US GDP growth by 12% a year.

So I am wondering whether we could set up a friendly bet — not for too large stakes. I would like to bet that by the end of 2018 China will not be the largest economy in the world.

If I win, perhaps The Economist could invite a very cool underground Chinese band of my choice to perform at their next big conference, whereas if I lose I could buy four-year subscriptions (student rates, please) to a group of Peking University freshmen. Everybody would end up feeling pretty pleased with themselves no matter who wins, right? So?

The Dating Game

Inquiring minds are looking at an interactive chart on The Economist in an article called The Dating Game.

AMERICA’S GDP is still roughly twice as big as China’s (using market exchange rates). To predict when the gap might be closed, The Economist has updated its interactive chart below with the latest GDP numbers. This allows you to plug in your own assumptions about real GDP growth in China and America, inflation rates and the yuan’s exchange rate against the dollar. Over the past ten years, real GDP growth averaged 10.5% a year in China and 1.6% in America; inflation (as measured by the GDP deflator) averaged 4.3% and 2.2% respectively. Since Beijing scrapped its dollar peg in 2005, the yuan has risen by an annual average of just over 4%. Our best guess for the next decade is that annual GDP growth averages 7.75% in China and 2.5% in America, inflation rates average 4% and 1.5%, and the yuan appreciates by 3% a year. Plug in these numbers and China will overtake America in 2018. Alternatively, if China’s real growth rate slows to an average of only 5%, then (leaving the other assumptions unchanged) it would not become number one until 2021. What do you think?

Snapshot of The Economist Baseline Assumptions

The interactive graph is too large for my blog, but the above screen snapshot shows The Economist baseline assumptions. To play around with the numbers, click on the above link.

I share a viewpoint with Pettis that The Economist is way too generous in their estimate of real GDP growth for China.

Pettis thinks China will average 3% growth and I already posted I found that number reasonable. As far as Yuan appreciation is concerned, I am not at all convinced the Yuan is undervalued at all, yet I plugged in a nominal 2% annual appreciation.

Assuming a “Real GDP growth” of 3% and Inflation at 4% yields a chart that looks like this.

Snapshot of Mish Baseline Assumptions

Even still, I wonder if the year 2030 is still far too optimistic from the standpoint of China.

I strongly believe peak oil and energy consumption is going to put a serious damper on Chinese growth, and that is on top a necessary and very painful shift away from an entirely unsustainable growth model based on exports, housing, and fixed investment.

I share Pettis’ view regarding “inflated GDP numbers, an over-investment boom, and the unstable range of political outcomes” adding my own energy concerns and yuan valuation concerns on top of it all.

Thoughts on Chinese Growth

I find the arguments by Pettis, the ECRI, and Chanos compelling. Add to that the restraint of peak oil coupled with potential political instability and the proper conclusion is that long-term Chinese growth of 7.5% is Fantasyland material.

Mike “Mish” Shedlock
http://globaleconomicanalysis.blogspot.com

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Lazlo Birinyi – Uber Bull Calls for S&P 1700 this Year

Tuesday, March 6th, 2012

Looks like we are going to see the market’s first significant gap down of the year this morning – no specific reason, it is just “due”. There have been any number of bears who have been turned to the bull camp in the past 2-3 weeks, but one guy consistently bullish has been well known pundit Laszlo Birinyi, who came out with a S&P 1700 call yesterday on CNBC. It would be easy to say “hey that was an obvious ‘call the top’ moment” but there have been any number of similar signals (Roubini bullish, uber bullish Barron cover, etc) over the last month which have led to only more pain for bears. Either way it’s always good to see the ‘other side’ of the argument so below is the video:

  • Well-known stock commentator Laszlo Birinyi sees more than a rising stock market. The market bull told CNBC Monday he sees signs of a U.S. economy that may be doing far better than others expect. “This year the bet is GDP of 2 percent to 2.5 percent,” he said. “When I look at the market I see stocks like Cummins and Salesforce.com, Microsoft, General Motors up 20, 30 and 40 percent. That makes me question, maybe the market’s saying something about a good economy. “I just wonder if we’re prepared for a 3 percent to 4 percent GDP? If it does [reach that level] I think we can again have a mirror of 1995 where the market surprised everybody on the upside.”
  • The head of Birinyi Associates, who has long stressed picking strong individual stocks that can resist market volatility, last week released a robust forecast for a Standard & Poor’s 500 spiking to 1,700 this year, up over 20 percent. He based the forecast on market patterns showing this year’s rally is remarkably similar to what happened in 1995, when expectations were low for both stocks and bonds.
  • “What happened was just the opposite. Interest rates went down, the market went up 35 percent” and had the best year in 50 years, Birinyi told CNBC. “As I’ve often said, the negative case is always more articulate, it’s always more rational, more reasonable because we see it,” Birinyi said. “The market is looking ahead, and I contend what stocks are telling us is a possibility, and I think a fairly good possibility, that something positive is going to develop [and] perhaps we’re underestimating the economy. Don’t disregard the possibility of something good happening.”

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Mega Caps: Where the Profits Are

Thursday, February 16th, 2012

As I recently pointed out, despite mega caps’ recent outperformance, the stocks remain cheap on both a relative and absolute basis.

Now, here’s more evidence to add to the case for mega caps. As I write in my new Market Update piece, the current discount on mega-cap stocks is particularly hard to justify given that these large companies continue to be extremely profitable despite today’s tepid economic environment.

In fact, as the chart below nicely shows, the return on equity (ROE) for the S&P 100 index is slightly below 29%, the highest level since 2000 and well above the long-term average of 23%.

Source: Bloomberg, 1/31/2012

 

What’s more, as of the end of January, the largest companies were on average 20% more profitable than the broader US equity market. While large companies are typically more profitable, the current gap in profitability is particularly large and suggests that mega-cap valuations look even more compelling when you adjust for ROE. (potential iShares solutions: OEF, IOO, IDV and HDV).

Source: Bloomberg

Past performance does not guarantee future results.

Disclosure: Author is long IOO.

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Sticky to the Upside

Tuesday, February 7th, 2012

The resilience of the market to the upside remains quite remarkable.  Despite poor breadth yesterday and abysmal volume, they were able to push the index up to near unchanged late in the day despite morning weakness.  We have an obvious gap up on Friday’s job data to fill – it looked like it would happen in short order yesterday morning but to no avail.   While it is obvious this market could use some form of rest, it appears it’s going to happen when as many people as possible have been lulled into a trance of buying every dip.  At this time we’re seeing a stair step up rally on the S&P 500 and sit at resistance levels at or near the highs of 2011.

 

Aside from that quick head fake a week ago Monday and Tuesday, the major indexes have not even breached their 10 day moving averages.  A quick glance of the 20 day moving average a week ago Monday led to a orderly bounce – this shows a high level of strength.  While a host of secondary indicators are at extreme overbought levels, that has been the case on and off for weeks.  It will eventually matter but when is a good question.  In the near term, filling that gap from Friday and/or returning to touch the 10 day moving average would be potential downside targets.  But one would assume dip buyers, in Pavlovian fashion, will be waiting there.  For a sustained move downward we’d need to see a breach of the 20 day moving average at minimum, which is down at 1312.00; that sort of action would be the first change in character in the market during 2012.   That is roughly 2.2% lower from here – but until we see this actually happen, one has to ‘go with the flow’.

If the market simply goes down to that 10 day moving average (roughly 1325) and/or meanders sideways over the next 3-5 sessions, it remains in ‘teflon’ mode and poised for an attack on those highs of 2011.

As for the NASDAQ it’s essentially the same condition, although that index has already breached last summer’s highs, and is even more overbought than the S&P 500.

All in all, we are in a game of chicken here…

 

Disclosure Notice

Any securities mentioned on this page are not held by the author in his personal portfolio. Securities mentioned may or may not be held by the author in the mutual fund he manages, the Paladin Long Short Fund (PALFX). For a list of the aforementioned fund’s holdings at the end of the prior quarter, visit the Paladin Funds website at http://www.paladinfunds.com/holdings/blog

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Double Top Breakout on this Morning’s Gap Up

Tuesday, January 17th, 2012

As we mentioned Friday, it’s not so much the news but the reaction to the news that was important to take note of.  Markets shook off bad news quite easily, and we are seeing the celebration of that translated in this morning’s gap up.  Thus far 2012 has been an interesting year at the index level.  Aside from 1 session (Friday’s) we’ve only seen completely flat opens – with very little volatility all session – or gap ups (this morning’s will be the third).  Gap up, flat, flat, flat flat, gap up, flat flat flat, etc.   And one session all year that differed from that pattern.  Interesting.

While almost the entire rally has been contained to 3 sectors, we have to look at the indexes and respect the movement.  As we exited 2011, it was a coin flip in terms of the next move – there was no clear set of signals at the time.  However, over the past few weeks we see there has been a break to the upside, and some intermediate term indicators are flashing far more positive.  This morning’s gap will take the S&P 500 over November highs creating a ‘double top breakout’.  Further we can see an inverse head and shoulder that has resolved to the upside with the action of the past 4-6 sessions.  This is generally quite positive.

We can see the next major resistance area is not until 2011 highs of 1350ish, which is about 4% higher from where the index should open.

Now with that said, the move since Dec 19th has been relentless in nature with only two sessions of any real selling – and even those two were very modest by second half 2011 standards.  Thus the move this morning will certainly have those who are missing it anxious and throwing in the towel and wanting to chase.  Generally when the last holdouts want to buy the market you are most prone to shorter term corrections, so these holdouts should begin converting soon.  But with the intermediate term market structure changing to a more positive tone, any of the nearer term (and necessary) corrections would be seen as buying opportunities, rather than “run to exit” calls, by those who read this market in a technical way.

What does this have to do with the real economy?  Not much at all – indeed there are some very real concerns growing.  (Adding to that is more news of slowdown in the “official” GDP numbers out of China – but as we now know, slowdowns are good because they mean more intervention)  And the market is not the economy… and even less so in an era of near constant intervention by governments and central banks.  As outlined last week, if we do get a new round of quantitative easing, this part of the rally will be the “those in the know get in” part.  And as long time readers know from many stories posted in latter 2011, “those in the know” is a broadening group.. which certain circles can now pay for for access.

This week we enter the heart of earnings season – Thursday being the most interesting day.  Certainly sometime here in the next 2 weeks we shall see someone of note blow up, and we have to see how a now increasingly extended market absorbs that.  If the answer is “well” it puts another feather in the cap of a potential multi month move to the upside ahead.   Keep in mind a Fed meeting comes the  week after this and market expectations for even more ‘assistance’ on Bernanke’s behalf grow.  Of course, no one asks what is so fundamentally wrong that this economy needs constant and ever growing assistance … as long as it gooses asset values (even if temporarily), that’s all that matters to the speculator class.

 

Disclosure Notice

Any securities mentioned on this page are not held by the author in his personal portfolio. Securities mentioned may or may not be held by the author in the mutual fund he manages, the Paladin Long Short Fund (PALFX). For a list of the aforementioned fund’s holdings at the end of the prior quarter, visit the Paladin Funds website at http://www.paladinfunds.com/holdings/blog

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