Pre-market - Monday 11-19-2012
Dr. John L. Faessel
ON THE MARKET
Commentary and Insights
Quote of the Day
"The more corrupt the state, the more numerous the laws."
Patterns remain in major down channels since the top tick in late September.
The Dow has lost 1073 points. The S&P 500 (SPX) is off 115 points and the NDX has given up 344 points.
The McClellan Oscillator is OVERSOLD at Minus 167 on Thursday it was OVERSOLD at 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
On Friday the stock market put in a hammer candle reversal (hammering in a low?) at the end of a long down trend (has the last seller sold?) Importantly the move was on increasing and well above average volume.
It's highly likely we get a short term bounce from the deeply oversold condition.
Israel / Gaza flashpoint:
At least 422 rockets from Gaza have been fired into Israel since Wednesday. Israel's Prime Minister Benjamin Netanyahu has stated that they are ready to 'significantly expand' their Gaza offensive against the rocket attacks. Netanyahu issued a stern warning to Hamas, declaring that the Israeli army was prepared to significantly widen its offensive as Hamas launched a fresh rocket attack on Tel Aviv. Since Israel withdrew from the Gaza Strip in 2005, terrorists have fired more than 8000 rockets into Israel. In 2011 630 rockets from Gaza hit Israeli towns.
The S&P 500 (SPX) closed Monday at 1359 (It was 1380 last week and 1414 the week before that)
The 50-day moving average resistance is at (SPX) 1429
Short term price resistance is (SPX) 1388 then at 1403 and then 1434
The 200-day moving average resistance is at (SPX) 1382
Then price resistance at the top tick in September @ 1474 / 1470
Short term Price support 1351 and better at Friday's 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 are moving modestly lower;
· Greek 10-year yields are up one% from last week at 16.89% - down from a high of 24.41%
· Italy 10-year (gross) bond yield - 4.86% off cycle highs of 7.29%.
· Spanish 10-year (generic) bond yield - 5.85%. Three months ago yields ticked cycle highs of 7.41%.
My running list of global nightmares... or if you like; "The Wall of Worry"
Israel / Gaza chaos on the way to a ground incursion
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.
Hurricane Sandy damage slowing the economy in the Northeast and the Mid-Atlantic
And the following Storm slowed recovery
An Obama Care tidal wave of taxes and regulations
The USA is closing in on the Fiscal Cliff.
Obama considering a new tax on carbon emissions
German Economic slowdown
Corporate earnings growth is slowing.
A major swoon going on in technology stocks (and earnings) is underway.
China slowdown accelerating.
Japan debt at 220% GDP.
China / Japan still nose to nose over some Japanese islands (oil there.)
EuroLand is in a deepening recession.
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.
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.
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
Plus you name it…
Friday's key indicators and metrics:
Cycle highs or lows are in red
· McClellan Oscillator is OVERSOLD at Minus 167
· Lumber (NASDAQ:CME) - 325.5
· CBOE Put / Call Volume Ratio - 0.92
· Natural Gas (Globex) - 3.79
· 3-month $ LIBOR - 0.311
· VIX - 16.41
· US Dollar Index - 81.310
· Silver (COMEX) - 32.37
· Aussie Dollar - 1.0309
· Canadian Dollar - 0.9976
· Euro - 1.2730
· Gold (COMEX) - $1714.7
· Copper - 3.4515
· Crude oil (NYMEX) - $86.67
· Brent Crude - $110.79
· The Treasury 10-year yield - 1.73%
· The 30-year Treasury - 2.917%
· Swiss Franc - 1.0540
· Japanese Yen - 12314
This week's Bullish Investor Sentiment.
Overall Bullishness finally is ebbing after the big market retreat last week. Prior week's bullish sentiment was holing up as the stock market backed off gradually. Now 'it's' beginning to show real Alarm.
(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 plummeted to 28.8% from 38.5% 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) fell to 57% from 62%. It was at Cycle highs of 69% eight-weeks ago.
· Consensus Index BULLISH fell to 52% from 57%. 3-weeks ago it was 60%. It ticked Cycle highs @ 73% just over two months ago
· The AAII Investor Survey of BEARISHNESS jumped a chunk to 48.8% from 39.9%. On August 4th 2011 it posted cycle highs of 49.9% in Bearishness.
The Citigroup "Panic / Euphoria" Model slid a bit to 0.07% from last week's 0.02. That's well off from cycle highs of plus 0.33 Eleven-weeks 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 posted a 66.6 - Cycle lows of 64.7 were established 15-weeks ago. One-year ago it was 68.9.
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.