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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
  • ON THE MARKET - US Dollar Breaks Support  0 comments
    Feb 4, 2013 9:29 AM

    Pre-market - Monday 2-4-2013

    "The most important single central fact about a free market is that no exchange takes place unless both parties benefit."

    Milton Friedman

    Dr. John L. Faessel

    ON THE MARKET

    Commentary and Insights

    Quotes of the day

    "We (USA) are not looking at default here, but at years of accelerating inflation, which basically robs investors and labor of their real wages and earnings. We are looking at a currency (US Dollar) that almost certainly will depreciate relative to other, stronger currencies in developing countries that have lower levels of debt and higher growth potential."

    ~ Bill Gross ~

    Mr. Gross manages over $1 trillion for PIMCO.

    &

    "In short, tax increases appear to have a very large, sustained, and highly significant negative impact on output."

    ~ Christina D. Romer ~

    President Obama's first Chair of his Council of Economic Advisers

    quit? fired? Really…

    &

    US Dollar Breaks Support - And Exhibits an Operable Head and Shoulder Picture

    Stock Market Surges - BUY THINGS!

    US Dollar Index

    BULLISH SENTIMENT RUNNING HOT *

    'Price' is now at the TOP of All major market channels

    Market Charts Hyper Extended but the McClellan Remains in Neutral

    The McClellan Oscillator remains in neutral at plus 43. The Stochastics - slow K (89.82) and fast (97.53) indicates an overbought market suggesting a possible retreat. General picture looks hyper extended. Bullish sentiment is steaming - but with the McClellan in neutral 'it' suggests more room to edge higher. As a pullback from the hyper-extended picture fires, a back-and-fill break looks to be the play out both short / medium term - ie buy the retreat….

    Two key items to keep in recall;

    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.

    S&P 500 (SPX) profits are set to exceed $1 trillion in 2013, nearly 30% higher than when the index last hit a high in 2007. Even if PE multiples don't expand, the (SPX) is on pace to hit a record. See Bloomberg http://goo.gl/LbQDr

    Major Concern for 2013 and on:

    If GDP growth continues to retreat and the consumer / market recognizes that our fiscal situation is unfixable ie Japan & EuroLand, the bond market could break. Yields cannot stay this low and a technical break looks to be in the cards as already seen in the US Dollar and developing in the Bond markets yield charts.

    Labor Report Reality Check - Hello - 8.5 Million Americans Have Left the Labor Force in Obama's First Term

    So there are currently 8.5 million more Americans not in the labor force than just four years ago. Federal debt is approaching 200% of GDP, worst recovery from a recession in history, 47 million on food stamps, 1 in 6 live in poverty, 49% pay no Federal tax.... Black, Hispanic, female and youth unemployment is way up.

    Negatives:

    Student-loan defaults could amount to a $1 trillion. The student debt exceed both auto loans and credit-card debt. Link John Maudlin here

    The Obama administration's decision on the Keystone XL oil pipeline will not be made until at least June, a U.S. official said, which would delay the project for months and frustrate backers of Canada's oil sands. (Reuters)

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

    MUST READ - From Bill Gross's Monthly PIMCO letter:

    (1) Position for eventual inflation: the end stage of a supernova credit explosion is likely to produce more inflation than growth, and more chances of inflation as opposed to deflation. In bonds, buy inflation protection via TIPS; shorten maturities and durations; don't fight central banks - anticipate them by buying what they buy first; look as well for offshore sovereign bonds with positive real interest rates (Mexico, Italy, Brazil, for example).

    (2) Get used to slower real growth: QEs and zero-based interest rates have negative consequences. Move money to currencies and asset markets in countries with less debt and less hyperbolic credit systems. Australia, Brazil, Mexico and Canada are candidates.

    (3) Invest in global equities with stable cash flows that should provide historically lower but relatively attractive returns.

    (4) Transition from financial to real assets if possible at the margin: buy something you can sink your teeth into - gold, other commodities, anything that can't be reproduced as fast as credit. Think of PIMCO in this transition. We hope to be "Your Global Investment Authority." We have a product menu to assist.

    (5) Be cognizant of property rights and confiscatory policies in all governments.

    http://www.pimco.com/EN/Insights/Pages/Credit-Supernova.aspx

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

    Last week the S&P 500 (SPX) Index of U.S. stocks surged to new highs adding another 0.68% to the prior week's continuing breakout

    The S&P 500 (SPX) closed Friday at 1513.14. Last Friday it was 1502.56.

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

    Short term price support is at 1510.8

    Hourly channel support is at 1484

    Then deep channel and trend line support of 1394.

    November retreat lows / and Price support is at 1343.

    The 50-day moving average support is at 1445

    The 200-day moving average support is at 1399

    ~~~~~~~~

    Greek, Spanish and Italian short and long-term bond yields moved higher last week off their recent lows;

    · Greek 10-year yields have slipped to 10.53% - down from a high of 24.41%

    · Italy 10-year (gross) bond yield - 4.37% off cycle highs of 7.29%.

    · Spanish 10-year (generic) bond yield - 5.28% 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 43

    · US Dollar Index - 79.135

    · Japanese Yen - 1.0785

    · Euro - 1.3665

    · Swiss Franc - 1.1023

    · 3-month $ LIBOR - 0.311

    · VIX - 12.90

    · Aussie Dollar - 1.0377

    · Lumber (CME) - 362.7

    · CBOE Put / Call Volume Ratio - 0.90

    · Natural Gas (Globex) - 3.301

    · Canadian Dollar - 1.0020

    · Silver (COMEX) - 31.985

    · Gold (COMEX) - $1670.6

    · Copper - 3.7845

    · Crude oil (NYMEX) - $97.77

    · Brent Crude - $113.18

    · The Treasury 10-year yield - 2.01%

    · The 30-year Treasury - 3.21%

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

    * This week's Investor Sentiment.

    The Bullishness / Bearishness complex is continuing to post extremely Bullish reads suggesting DANGER and a high possibility of a market retreat. Three months ago during the EURO Crisis & fiscal cliff overall sentiment was indicating high distress; a bullish signal.

    (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 48% from 52.3% 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) posted a multi-year high of 69% well past the highest bullish % levels of January 2010 and April 2010 - both intermediate market tops. In October 2007 it topped at 70% bullish.

    · Consensus Index BULLISH rose to 70% from 64% the prior period. It posted Cycle highs @ 73% about four-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 stayed at 24.3%. Five-weeks ago it was 36.2%. On August 4th 2011 it posted cycle highs of 49.9% in Bearishness.

    The Citigroup "Panic / Euphoria" Model rose to plus 38 from plus 0.21. At the end of June 2011 it ticked cycle lows of minus 0.31 in the Panic mode. The model is still registering in the Neutral zone.

    The BARRON's Confidence Index is 68.7 -. One-year ago it was 66.9.

    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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