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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 -- The Global Slump - Who Cares? The Dow Transports Are At ALL TIME HIGHS. 0 comments
    Jan 22, 2013 10:00 AM

    Pre-market - Tuesday 1-22-2013

    Dr. John L. Faessel

    ON THE MARKET

    Commentary and Insights

    Quote of the day

    "Government deficit spending to maintain consumption can be compared to flushing money down an economic toilet."

    ~ Bill Gross ~

    Dow Transports at ALL TIME Highs

    Stocks Surge - Wilshire 5000 closing in on all-time highs

    Dow Jones Industrial's and Banks Yet to Confirm

    McClellan Remains in NEUTRAL

    ViX at 12.46 indicates NO FEAR

    The Global Slump - Who cares?

    Last week the S&P 500 (SPX) Index of U.S. stocks surged to new highs adding 0.95% adding to the prior week's breakout. The technical picture remains solid as there was a broad advance across the board. Yet the McClellan Oscillator remains in neutral at plus 122 and that's a plus. The Stochastics - slow K (91.91) and fast (98.65) indicates an overbought market suggesting a possible retreat. General picture looks extended, but the McClellan in neutral suggests more room to bulge.

    In that the economically sensitive Dow Transports broke to all-time highs is of premier importance. And the Dow industrials are likewise surging. In addition, from a technical / market momentum perspective the fact that on December 31 and January 2 - 90% of stocks advanced on back-to-days back suggests that the very strong rising tide will continue to search. Usually, after back-to-back 90% up days the market has advanced an additional 6.8% within a month 83% of the time - and 12.8% three-months later 100% of the time.

    Bloomberg says it "will be hard" for stocks not to hit a new record in 2013. Profits for the S&P500 are set to exceed $1T this year, nearly ~30% higher than when the index last hit a high in 2007. Even if PE multiples don't expand, the S&P is on pace to hit a record. Bloomberg http://goo.gl/LbQDr

    More Big Pluses:

    Output of autos and light trucks rose to its highest annualized rate since July to 10.74 million.

    The much watched housing index of the National Association of Home Builders is at 47. Thus the all-important housing market that provides so many jobs will be a big lift to overall economic activity. This could help compensate for the very low GDP growth of around 2% estimated for the next few quarters.

    From Washington; perhaps a respite as the House of Representatives is expected to vote on a short-term 3-month increase to the debt ceiling Wednesday, January 23rd.

    On the Sanity front:

    There is speculation the German government has asked a couple large banks to simulate a split of their banking and IB operations.

    ~~~~~~~~~~

    Notable:

    The Italy Watch. November industrial orders fell 0.5%. This follows the 1% drop in November industrial output, reported earlier in the week. The market expected only a 0.2% decline. The Italian economy has seen the largest contraction (7%) since the crisis began within the euro zone after Greece. Per capita income is back to where it was in the mid-1990's. According to former ECB's Bini Smaghi,

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

    The S&P 500 (SPX) closed Friday at 1485.98. Last Friday it was 1472

    The October 2007 (SPX) highs and price resistance is at 1576

    Short term price support is at 1476

    Hourly channel support is at 1474

    Then at deeper support of 1398.

    November retreat lows / and Price support is at 1343.

    The 50-day moving average support is at 1422

    The 200-day moving average support is at 1394

    ~~~~~~~~

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

    · Greek 10-year yields have slipped to 10.23% - down from a high of 24.41%

    · Italy 10-year (gross) bond yield - 4.17% off cycle highs of 7.29%.

    · Spanish 10-year (generic) bond yield - 5.06% off cycle highs of 7.41%.

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

    Friday's key indicators and metrics:

    Cycle highs or lows are in red

    · McClellan Oscillator is NEUTRAL at plus 127 - Thursday's was plus and neutral 111.

    · VIX - 12.46

    · Japanese Yen - 1.111 (lowest since mid-2010)

    · 3-month $ LIBOR - 0.311

    · Aussie Dollar - 1.0465 -

    · Euro - 1.3325

    · Lumber (NASDAQ:CME) - 362.3

    · CBOE Put / Call Volume Ratio - 0.75

    · Natural Gas (Globex) - 3.566

    · US Dollar Index - 80.116

    · Swiss Franc - 1.0700

    · Canadian Dollar - 1.0063

    · Silver (COMEX) - 31.932

    · Gold (COMEX) - $1687.0

    · Copper - 3.6670

    · Crude oil (NYMEX) - $95.56

    · Brent Crude - $112.13

    · The Treasury 10-year yield - 1.84%

    · The 30-year Treasury - 3.03%

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

    This week's Bullish Investor Sentiment.

    The Bullishness / Bearishness complex remains mixed, yet still very Bullish overall. Two months ago / EURO Crisis etc overall sentiment was indicating high 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 fell to 43.9% from 46.5% the prior week. It posted cycle lows of 22.2% on 7/23/2012 the lowest percentile since August 2010.

    · The Market Vane (Market Letter Survey) stayed at 66% for the second week in a row. Three weeks ago it was 68.

    · Consensus Index BULLISH rose to 56% from 51% the prior period. Two months ago it was 60%. It posted Cycle highs @ 73% three and a half months ago

    The exclusive CONSENSUS BULLISH SENTIMENT INDEX is the premium gauge of positions and attitudes of major professional brokerage firms and advisors as interpreted and recorded by CONSENSUS, INC.

    · The AAII Investor Survey of BEARISHNESS rose a bit to 27.3% from 26.9%. Three weeks ago it was 36.2%. Five -weeks ago it was 24.8%%. On August 4th 2011 it posted cycle highs of 49.9% in Bearishness.

    The Citigroup "Panic / Euphoria" Model fell a tick to a plus 0.16. At the end of June it ticked cycle lows of minus 0.31 in the Panic mode. It's still registering in the Neutral zone.

    The BARRON's Confidence Index is 68.5 -. One-year ago it was 67.4.

    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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