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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
  • ON THE MARKET: Three (3) Consecutive Back-To-Back-Back Narrow Range Postings In McClellan Hints Of A Big Move In The Offing…  0 comments
    Dec 11, 2012 8:08 AM

    Pre-market - Tuesday 12-11-2012

    Dr. John L. Faessel

    ON THE MARKET

    Commentary and Insights

    Quotes of the day

    "It would be thought a hard government that should tax its people one tenth part."

    ~ Benjamin Franklin ~

    &

    "Do not blame Caesar, blame the people of Rome who have so enthusiastically acclaimed and adored him and rejoiced in their loss of freedom and danced in his path and given him triumphal processions. Blame the people who hail him when he speaks in the Forum of the new wonderful good society which shall now be Rome's, interpreted to mean more money, more ease, more security, and more living fatly at the expense of the industrious."

    ~ Cicero ~

    106-43 BC

    Yikes - A First > Three (3) consecutive back-to-back-back narrow range postings in McClellan hints of a big move in the offing…

    Market:

    Yesterday's (Monday) McClellan Oscillator (favorite overbought / oversold indictor) was a neutral plus 69 and Friday's neutral plus 67 and Thursday's neutral plus 67 registered a that was one (2) ticks below Thursday's plus and neutral 66 postings meet the requirements of a Narrow Range configuration that in McClellan Oscillator lore has historically foretold big market moves of 2% to 3 % in a few days. Three (3) consecutive back-to-back-back narrow range postings in McClellan are very rare… In fact, I can't ever recall one… Usually this "big move" occurs within a few days and most often in the direction of the recent short-term trend; in this case it would be up - but this time as the market has came off its dead-cat bounce and Bollinger band picture indicates 'price' is near the top and the short and longer term stochastics are above 80 plus the Williams %R is toppy too - I think the chances are for a retreat…

    We've had a nice dead cat bounce off the OVERSOLD low on Thursday, November 15th when the McClellan Oscillator reached an OVERSOLD low of MINUS 283. I've repeatedly said over the last few weeks - "I remain bearish - and don't think we will get a decent bounce till the McClellan gets well oversold - likely in the' high' MINUS 200's of past MINUS 300. Three weeks ago Friday the stock market put in a hammer candle reversal (hammering in a low?) at the end of a long down trend and the move was on increasing and well above average volume. I said that - "It's highly likely we get a short term bounce from the deeply oversold condition."

    Market drivers:

    Germany's Bundesbank, has cut its growth forecast for next year, saying the country's economy might be entering a recession.

    Industrial output fell a steeper-than-expected 2.6% in October.

    Mario Draghi, European Central Bank president cut his forecast for Eurozone growth.

    ~~~~~~~~~

    Notable:

    The median net worth of American households has dropped to a 43-year low as the lower and middle classes appear poorer and less stable than they have been since 1969. According to a recent study by New York University economics professor Edward N. Wolff, median net worth is at the decades-low figure of $57,000 (in 2010 dollars).

    * 1 out of 2 college grads - about 1.5 million, or about 53.6 percent, of bachelor's degree holders age 25 or younger - were unemployed or underemployed in 2011.
    * For high school grads (age 17-20), the unemployment rate was 31.1 percent from April 2011-March 2012; underemployment was 54 percent.
    * For young college grads (age 21-24), unemployment was 9.4 percent last year, while underemployment was 19.1 percent.

    * More college graduates are getting low-level jobs, period. U.S. bachelor's degree holders are more likely to wait tables, tend bar or become food-service helpers than to be employed as engineers, physicists, chemists or mathematicians combined - 100,000 versus 90,000.
    * According to new U.S. government projections, only three of the 30 occupations with the largest projected number of job openings in the next eight years will require a bachelor's degree or higher. Most job openings by 2020 will be in low-wage professions like retail sales, fast food and truck driving.

    When you have a half an hour to kill ck this excellent video of John Mauldin on the fiscal mess and income investing >> click here now.

    ~~~~~~~~~~~~~~

    The S&P 500 (SPX) closed Yesterday (Monday) at 1418

    Month old Declining tops resistance at 1421

    Short term price resistance is last Mondays high of 1420 / 1423 / 1433

    More formidable price resistance at the top ticks in September @ 1474 / 1470

    ~~~~~~~

    Support off the lower trend line is at 1416

    Support at the 50-day moving average - now pointed down - also at (SPX) 1416

    Decent hourly support is at 1410

    The 200-day moving average support - pointed up - at (SPX) 1386

    Decent Daily Price support also at 1386

    Trendline support off the October low is at 1370

    And better yet at "Friday 3-week's ago low of 1343

    Longer out term price support is at 1325 /1320/1313/ 1309

    Stronger 'Price' support in the (SPX) is at the June 4th lows of 1266 and will be the battleground zone if the market tests its lows.

    ~~~~~~~~

    Greek, Spanish and Italian short and long-term bond yields continue to move lower;

    · Greek 10-year yields are up one% from last week at 13.10% - down from a high of 24.41%

    · Italy 10-year (gross) bond yield - 4.74% off cycle highs of 7.29%.

    · Spanish 10-year (generic) bond yield - 5.46%. Three months ago yields ticked cycle highs of 7.41%.

    ---------------------------------------

    Notable:

    73% of the new civilian jobs created in the United States over the last five months are in government, according to official data published by the Bureau of Labor Statistics.

    Re Friday's 'unemployment' report:

    The rate dropped to 7.7% because some 542,000 people left the workforce. If labor participation remained the same as it was in January 2009, headline unemployment would be 10.7%. And post-election - hmmmmm - The September and October numbers were revised down by a total of 49,000 jobs.

    The number of long-term unemployed remains at sky-high 40.1%, the same as in August. 5. Since the beginning of this year, employment growth has averaged 151,000 per month, about the same as the average monthly job gain of 153,000 in 2011. At that pace, the U.S. would not return to pre-Great Recession employment levels until after 2025....

    November jobs report,

    California Fiscal Insanity:

    In California, a state psychiatrist was paid $822,000, a highway patrol officer collected $484,000 in pay and pension benefits and 17 employees got checks of more than $200,000 for unused vacation and leave. Data compiled by Bloomberg.

    My running list of global nightmares... or if you like; "The Wall of Worry"

    The USA is closing in on the Fiscal Cliff.

    A payroll tax cut benefiting 160 million workers to expire at the end of the year.

    Tax unknowns / and new $billions in Obama care taxes -

    Unfunded pension's tsunami of $ trillions.

    Israel / Gaza not over yet as Hamas rearm

    Egypt and the Muslim Brotherhood not quite working out as the 'street' goes nuts again'

    Iran / Israel conflict could ignite any day / hour.

    Al-Qaeda terrorists are flourishing in Africa and the Middle East.

    Muslim nutcases world-wide in general are running totally amuck.

    Syria & Turkey could blowup anytime.

    China / Japan still nose to nose over some Japanese islands (oil there.)

    Hurricane Sandy damage has slowed the economy in the Northeast and the Mid-Atlantic

    And the following Storm also slowed recovery

    An Obama Care tidal wave of taxes and regulations

    Sequestration

    Obama considering a new tax on carbon emissions

    EuroLand is in a deepening recession.

    German Economic slowdown on

    Corporate earnings growth is slowing.

    A major swoon going on in technology stocks (and earnings) is underway.

    China slowdown, but perking up?

    Japan debt at 220% GDP.

    A global economic slowing is underway.

    The IMF cut global economic growth to 3.3% from 3.5%

    The risky features of global monetary easing (out of control printing) by ECB / USA Fed / Bank of Japan yet loom.

    A 2nd USA Debt Downgrade.

    French debt downgrade

    Election can go either way - More Socialism or Free Markets.

    Regulatory situation continues to deteriorate.

    Savings rates close to nothing and the middle class goes deeper in the hole daily.

    Add in here that the moral / ethical / spiritual compass of the USA is now close to only being but a memory.

    And throw in investors abandoning stock markets due to Flash Crashes, Naked shorting etc

    California citizens leaving state in droves…

    Plus you name it…

    Monday's key indicators and metrics:

    Cycle highs or lows are in red

    · McClellan Oscillator is NEUTRAL at plus 69. Fridays plus 67 - Thursday's was plus 66

    · 3-month $ LIBOR - 0.311

    · Aussie Dollar - 1.0480

    · Lumber (NASDAQ:CME) - 344.0

    · CBOE Put / Call Volume Ratio - 0.80

    · Natural Gas (Globex) - 3.460

    · VIX - 16.05

    · US Dollar Index - 80.330

    · Silver (COMEX) - 33.377

    · Canadian Dollar - 1.0128

    · Euro - 1.2939

    · Gold (COMEX) - $1714.4

    · Copper - 3.7060

    · Crude oil (NYMEX) - $85.56

    · Brent Crude - $107.95

    · The Treasury 10-year yield - 1.62%

    · The 30-year Treasury - 2.80%

    · Swiss Franc - 1.0717

    · Japanese Yen - 12146

    ~~~~~~~~~~~~~~~~~~~

    This week's Bullish Investor Sentiment.

    The Bullishness / Bearishness look was about the same as last week - relatively still Bullish came back a bit last week. A Month ago it was indicating distress.

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

    · The American Association of Individual Investors [AAII] Investor Sentiment Survey of BULLISHNESS rose to 42.2% from 40.9% the prior week. 3-weeks ago it was 35.8%. Only 4-weeks ago it was 28.8%. It posted cycle lows of 22.2% on 7/23/2012 the lowest percentile since August 2010.

    · The Market Vane (Market Letter Survey) was up a percentile to 62% from 61% the prior week. It was at Cycle highs of 69% ten-weeks ago.

    · Consensus Index BULLISH fell a tick to 46% from 47%. Three weeks ago it was 42%. Six-weeks ago it was 60%. It ticked Cycle highs @ 73% three months ago

    · The AAII Investor Survey of BEARISHNESS was at 34.6%, It was 34.4%the prior week. 3-weeks ago it was 48.8% On August 4th 2011 it posted cycle highs of 49.9% in Bearishness.

    The Citigroup "Panic / Euphoria" Model rose a bit to 0.01 from a minus 0.12 the prior week. That's well off from cycle highs of plus 0.33 three months ago. At the end of June it ticked cycle lows of minus 0.31in the Panic mode. It's still registering in the Neutral zone,

    The BARRON's Confidence Index is hanging just above multiyear support at 66.0 - Cycle lows of 64.7 were established 16-weeks ago. One-year ago it was 69.3.

    The Confidence Index is the premier measure of how the bond markets trillions (total global is around $91 trillion and USA is 39% of that) are allocated: (The bond market is twice the size of the stock market.) The Index is the High-grade bond index divided by intermediate-grade index. A decline in latter vs. former - generally indicates rising confidence, pointing to higher stocks.

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