Dr. John L. Faessel
ON THE MARKET
Commentary and Insights
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.
For my list of my UPDATED Best Ideas for 2010 please send an e-mail request to: Dr.Faessel@onthemar.com
Disclosure: No Position