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Dr. John Faessel
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Dr. John L. Faessel is a seasoned and respected Wall Street professional with industry-wide recognition for expertise in market strategy and analysis. He is widely recognized for his insights in public companies. For over 20-years Dr. Faessel’s ON THE MARKET reports have been widely distributed... More
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  • Perspective on "Messes"

    10-22-2010

     

    Dr. John Faessel                 

    ON THE MARKET

    Commentary and Insights

    Dr.Faessel@onthemar.com                       

     

    Quote of the day

    “The fate of the world economy is now totally dependent on the growth of the US economy, which is dependant on the stock market, whose growth is dependent on about 50 stocks, half of which have NEVER REPORTED ANY EARNINGS.”

    ~ Paul Volker ~

    Former Chairman of the US Federal Reserve

     Made that statement in the summer of 1999 when the Nasdaq was at 2500, later to top at 5132.

     

    PERSPECTIVE:

    Anybody out there remember the stock market bubble of all bubbles? And the subsequent crash, or did we forget about it already? And that mess?

     

    Recall that in October 1998 the Nasdaq traded at 1357.

    In March 2000 it topped and traded at 5132.

    That’s up 3,775 points over an 18 months period, or up 278%.

    The Index was inflating at 210 points or about 15.4% a month.

     

    Even worse;

    The Semiconductor Index (SOX) went up 748% or 41% a month during the same period. That’s 10% a week or 2% a day.

     

    The NYSE and NASDAQ had lost $9.3 trillion in market-cap at the lows of October 2002.

     

    The Market (bubble) peaked on (Dow Jones average) January 14, 2000 and the Nasdaq on March 10, 2000.

     

    President George Bush took office on January 10th 2001. THE NASDAQ WAS AT 2450.  Today the Nasdaq is at 2,459.67; still less than half of what it was in 2000.

     

    Now! Think of the trillions from the appreciation in market cap during the late 90s. Now, think of the taxes and capital gains that came to the US Treasury because of the bubble mania. It was all “funny” money in a way. But the gains were real money and taxes were paid on it and it was the source of the oft referenced $200 billion surplus when Bush took office. Oh - how wonderful it was for the administration and how "its" pointed to today (by our inept media) as such a characterization of the cool, studied, calculated and brilliant results of the wondrous policies of the administration that was in there at the time; Bill Clinton was President as I recollect. Hokum!

     

    So, talk about Obama inheriting a big mess, now wait just a minute.

     

    Think about what the Bush administration inherited? Once again; the bubbles collapse ripped $9.3 trillion out of the stock market alone, not counting the disaster that hit home sales and real-estate in general. Maybe, not as much as the real-estate bubble that blew in 2008 and 2009, but it was still the biggest stock market hit since the stock market collapse of October 1929. Anybody out there remember Intel (NASDAQ:INTC) at $75? Or the 1000+ dot com companies that went bankrupt? 

     

    Also, there was a little recession caused by this tremendous collapse. And, there was also that little item of 9/11 that seems to be forgotten, or maybe it's just too horrible to recollect by the media? And then the wars; Afghanistan / Iraq. And terrorist acts out the ying over many years before that, including the bombing of the World Trade Center the first time and the market hit that occurred then? And the 17 UN resolutions that included military action against Iraq the second time?

     

    My quintessential remembrance of the time was the day when Qualcomm, (NASDAQ:QCOM) was upgraded with a price target of $1000 - and the stock went up 60 points in a day? Today (QCOM) is $43.98.  It was Walter P. Piecyk, analyst from Paine Webber who in what must have been a fit off of a Krispy Kream sugar rush said, “I’ll raise you a 100 points and put a 1000 target on (QCOM).” Even off that preposterous call the Internets bubble stocks and the market over the next three-months went higher, and higher and higher. Until they reached the sky. Then the slow reversal to near oblivion. 

     

    Observe in the charts (below) the stupendous collapse that occurred when the bubble blew; then note the hit was taken in 2007, 2008 and 2009;

     

    Long-term charts                                      

    Intel (INTC)  $19.76                                                           

    Semiconductor Index (SOX)  $349

      Nasdaq  2,459.67                                                                      

     

    DOW 11,146.57

     

     

    Hello! Talk about a mess…

     

     

     

     

     

     

     



    Disclosure: no position
    Oct 22 9:17 AM | Link | Comment!
  • MARKET - a Hiccup

    10-20-2010

     

    Dr. John L. Faessel

    ON THE MARKET

    Commentary and Insights

    Dr.Faessel@onthemar.com

     

     

    Quote of the day

    “Fannie Mae (FNM) and Freddie Mac (FRE) did what they were instructed by Congress to do."

    ~ Warren Buffett ~

        ~~~~

    Distribution day

     

    US Dollar jump

    China rate hike

    Bank of America (NYSE:BAC) bundling tribulations

     

    Yesterday the stock market got hit by above average and a big increase in selling on the back of currency fluctuations and Bank of America's (BAC) woes concerning buying back multi-billions of dollars worth of contaminated mortgages. What first set this off was Treasury Secretary Tim Geithner’s quip about a strong Dollar. The US Dollar in the last five months has shed 10% of its value. While not an actual currency intervention, Geithner’s statement was enough to cause the crowded trade short position to cover "some". In no way does this change the "sell the dollar" dynamic in my mind. Now add, (BAC)'s mortgage woes inherited from its acquisition of Countrywide Credit and its portfolio of stink bomb mortgages. Obviously, this is another dream come true for the attorneys who are likely to descend on banking sector like a thirsty Count Dracula. Yesterday the Bank Index (BKX) slid 1.2%. Bank of America (BAC) was off 1.61%. From a technical standpoint the important Bank Index (BKX) has not participated in the market's recent advance. In fact since early March it has exhibited a series of lower highs, while keeping its support lows intact. Seems to me, that this mortgage mess is “in” the market already. Clearly, it would be nice to see the bank sector participate, but holding its lows is a good thing. Of key importance regarding the banks is that the Preferred stocks of the big banks are at near recovery 2008 highs. In no way do they signal anything like the wretchedness of a couple of years ago.

     

    Slash back to the currency tweak by Geithner; back in the 90s it was common for then Treasury Secretary Robert Rubin to fiddle with the currencies. That was an era of currency interventions that went on all over the planet; Asian contagion etc... In any event "the beat goes on" and yesterday's pullback I believe will be an opportunity, in an neutral overbought / oversold market where sentiment remains "iffy" and the global and US economic outlook stinks to buy cheap stocks.

     

    Short term resistance is at S&P 500 (SPX) 1172.The next major price (and trendline) resistance at the (SPX) top of 1174. The recovery high (and what will be most important resistance) is at (SPX) 1219.80 was visited on April 23rd.

     

    The former major resistance and now support in the (SPX) is at 1150. Short term price and trendline support in the (SPX) is 1160. More robust price support is at 1139 then 1124 and 1110. The deepest support lows are the July lows at 1011. 200-day moving average support in the (SPX) is 1120.

     

    Key indicators and metrics:

     

    ·              Yesterday’s McClellan Oscillator in neutral at minus 86

    ·              The Treasury 10-year 2.48%

    ·              3-month $ LIBOR at 0.288

    ·              CBOE Put / Call Volume Ratio – 0.92 –

    ·               (Last Friday’s p/c ratio 0.71 was the lowest since April 26)

    ·              (VIX) – 20.63

    ·              Euro – 1.3866

    ·              Copper - 3.77

     

    For my list of my UPDATED Best Ideas for 2010 please send an e-mail request to: Dr.Faessel@onthemar.com

     



    Disclosure: no position
    Tags: BAC, Bank Index
    Oct 20 9:32 AM | Link | Comment!
  • MARKET - USA on sale!

    10-18-2010

     

    Dr. John L. Faessel

    ON THE MARKET

    Commentary and Insights

    Dr.Faessel@onthemar.com

     

     

    Quote of the day

    “Democracy and socialism have nothing in common but one word, equality. But notice the difference: while democracy seeks equality in liberty, socialism seeks equality in restraint and servitude.”
    ~ Alexis de Tocqueville ~

        ~~~~

     

    USA on sale!

     

    NASDAQ adds a big chunk to its breakout

     

    The Market Vane BULLISH Sentiment (Market Letter Survey) registers 19-week highs. * (Concern)

     

    General ALL CLEAR from investor SENTIMENT and the McClellan continue.

     

    Strength in Hi-Yield Bonds Bullish For Stocks

     

    YET MORE UPSIDE...

     

    There is more to go in this market advance; overviews of increasing money flow matched with bullish / bearish configurations in leading stocks continue to indicate a still bullish set-up, the escalating, but not yet excessive sentiment overview and overbought / oversoldness that remains in neutral, all time high corporate liquidity, short squeeze factors, all-time low interest rates, comparative return considerations from bonds / stocks. Add in the significant technical broad based breakout of leading averages that fired to 5-month highs including strength in the Dow Transports with “price” sailing thru the trading void set up created by the sudden downstroke that ripped off 140 S&P 500 (SPX) points in the first week of May that all the major averages are currently enjoying.

     

    Another interesting force creating this market advance is this strange concoction of a collapsing dollar, that is approaching the lows of 2009 and not too far away from me decade lows of March 2008. Corporate America with its huge cash and terrific earnings is “on sale” to foreign investors whose currencies are ticking all-time highs like the Swiss franc and the Euro that is not too far away from all time highs. Amazingly, and it makes perfect sense, US companies are investing abroad to get away from the confounding regulatory and tax backdrop. Can it be any wonder at all that gold is at all-time high and the dollar is collapsing?

     

    Short term resistance is at S&P 500 (SPX) 1103.The next major price (and trendline) resistance at the (SPX) top of 1174. The recovery high (and what will be most important resistance) is at (SPX) 1219.80 was visited on April 23rd.

     

    Short term price support in the (SPX) is 1168. Trendline support is at (SPX) 1160. More robust price support is at 1139 then 1124 and 1110. The deepest support lows are the July lows at 1011. The former major resistance and now support in the (SPX) is at 1150. 200-day moving average support in the (SPX) is 1120.

     

     

    Items of Note:

    ·        "For the first time in eight quarters, we saw growth in both equipment and service orders," Jeff Immelt CEO & Chairman General Electric (NYSE:GE).

     

    ·        Goldman Sachs (NYSE:GS) has raised its 12-month forecast for gold to $1,650 an ounce, citing expectations for further quantitative easing in the U.S. and prospects for long-term interest rates to continue falling. Thus, Goldman said it is raising its gold price forecasts to $1,400, $1,525 and $1,650 on a three-, six- and 12-month horizon. Goldman said its updated forecasts point to an average of $1,575 an ounce in 2011, which is $175 higher than previously expected.

     

    ·       Key bond market data points like the Barron's Confidence Index** and the Ted Spread*** continue with "all-clear" readings.

     

    Key indicators and metrics:

     

    ·                    Friday’s McClellan Oscillator is at a neutral minus 6

    ·                    The Treasury 10-year 2.53%

    ·                    3-month $ LIBOR at 0.289

    ·                    CBOE Put / Call Volume Ratio – 0.71 – Lowest since April 26

    ·                    (VIX) – 19.03

    ·                    Euro – ticked 1.4137 on Friday highest since January –

    ·                    Euro first hit that level in August 2007 

    ·                    Copper - 3.8165 the highest tick since June 2008

     

     

    Key WEEKLY SENTIMENT (i.e. CONTRARY INDICATOR) data points:

     

    BULLISH longer-term investor sentiment readings are mixed. In general they have been moving higher as the market has advanced but have slid back a a few percentile points from their highs of a few weeks ago except for the Market Vane (Market Letter Survey) that just posted 19-week highs. If you recall in recent reports a couple of them had moved into the “concern” mode.  All the surveys are well off their deep and “foreboding’ lows of the recent couple of months. The BULLISH sentiment tide overview is escalating.

     

    (High BULLISH readings in the Investor Sentiment Readings usually are signs of Market tops; low ones, market bottoms.)

     

    ·       The Consensus Index BULLISH investor sentiment survey was at 58%. 3-weeks ago it ticked the high of the bounce up cycle at 63% BULLISH (21-week highs).  The highs in Bullish sentiment of 76% from the Consensus Index were reached in the first week of May, just prior to the huge down-leg. The prior 10-weeks were 58%, 51%, 50%, 41%, 42%, 47%, 51%, 50%, 44%, and 34%. (The low of this market retreat)

     

    ·       The Market Vane (Market Letter Survey) posted a BULLISH read of 56%. (19-week highs) The preceding 14-weeks were ― 54%, 55.9% 53%, 50%, 48%, 43%, 42%, 46%, 50%, 48%, 50%, 44%, 46% and 39%. (The low of this market retreat) The highs in 2009 were 58%. In 2007 it was above 70% BULLISH.

     

    ·       The AAII Investor Sentiment Survey BULLISH read was 47.1%. Down from last week’s 49%.The prior 10-weeks were 54%, 45%, 50.9%, 43.9%, 30.8, 20.7%, % (the low of the pullback) 30.1%, 39.8% and 30.4%. [The lows registered on March 9th 2009 were an historic low posting of 18.9% only BULLISH.]

     

    ·         The AAII Investor Survey of BEARISH sentiment ticked DOWN a few percentiles to 26.1%from last week’s 27.7 4-weeks ago it ticked the low of cycle at 25.4% (The recent down cycle started in early May. The prior 12-weeks were 31.6%, 24.3%, 31.6%, 42.2%, 49.5%, 42.5%, 30.1%, 38.2%, 33.3%, 45%, 37.8% and 57.1% the highest Bearishness of the market retreat.

     

    ** The BARRON’s Confidence Index reversed a fraction to 77.2., from last week’s read of 77.4. The low of the recent market retreat in May had the Index at 72.9 on August 29th. The Index registered new highs of the cycle on June 4th at 79. One year ago it was 68.2. The ability to hold at these relative highs suggests that the recovery chugs on.

     

    A falling confidence index reflects decreasing confidence in the market. Historically, healthy BARRON’s Confidence Index numbers are in the 80’s.

     

    The Confidence Index is the High-grade bond index divided by the Intermediate grade and is a premier measure of how the bond markets many $ trillions are allocated. The discrepancy between the yields is indicative of investor confidence. There had been a solid improvement in the spread ratio since its all-time low of 45.2 in December 2008, indicating that bond investors are growing more confident and have started opting for more speculative bonds over high-grade bonds. The recent retreat in numbers is definitely a danger alert.

     

    *** The Ted Spread a gauge of bank cash availability that’s the difference between what banks (3-month Libor) and the Treasury pay to borrow money for three months bills was at 15.42 basis points today, after reaching of 13.48 basis points, the lowest tic since April 5th.

     

    In early & mid March the Ted Spread dropped to a posting of just above 10.5. But by June 10 it ran up to 48 in the Euro / Greek panic. The Ted Spread 2008’s high (the height of the global credit crisis) of 464 points was in October 2008. It averaged 37 basis points in 2006.

     

    STOCK OF THE DAY

    Gulfport Energy Corp. (NASDAQ:GPOR) $16.37 Nasdaq Market-cap $729 million.

    Breaking out of a 6-monthconsolidation on a 480% increase in volume.

    (GPOR) engages in the exploration, development, and production of oil and gas in the Louisiana Gulf Coast and the Permian Basin in west Texas. The company also holds indirect interests in the Alberta Oil Sands in Canada plus interests in properties located in Southeast Asia, including the Phu Horm gas field in Thailand.

    Website: http://www.gulfportenergy.com

     

     

    For my list of my UPDATED Best Ideas for 2010 please send an e-mail request to: Dr.Faessel@onthemar.com

     

     

     



    Disclosure: No Position
    Tags: GS, GE, GPOR, SPY
    Oct 18 9:17 AM | Link | Comment!
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