Oil of Olay and the markets

In my opinion, Janice Yellen might make an excellent Oil of Olay model. While I am not so sure about her skin complexion, I am sure that she “keeps them guessing” when it comes to the Fed’s date to actually, really and genuinely tighten. But for real, this time…

oil-of-olay

The market liked yesterdays rate decision. Or should I say, the market liked the lack of decision – again. The market cheered the Fed’s no-do plan – obviously thinking it was the wise thing to do. Never mind that the Fed doesn’t always make the right moves – as illustrated by the Fed orchestrated real estate and stock bubbles of  early 2000’s. We know how that ended in 2008. Now the Fed has orchestrated a “new and improved” bubble in stocks and real estate.

 

Every bubble has a name:

  • The American Growth bubble of the 1920’s
  • The Nifty Fifty bubble of the 1970’s
  • The Dot Com bubble of the 1990’s
  • The Sub-prime & Oil bubble of the early 2000’s
  • Now, it’s the “NOA” (No Other Alternative) bubble. Markets rise because there is No Other Alternative (i.e. no safe investments paying a reasonable rate of return). This is thin ground for a bull market to continue. Markets need to rise on a strengthening economy and rising corporate profitability. Despite my belief in the long termed secular bull market, I am wary of the intermediate termed outlook.

 

Who knows when it will end? But, like the last Fed orchestrated bubble, when it ends, it aint gonna be pretty.  Don’t get me wrong. As noted above–I am a long term secular bull – but I am wary of the mid-termed (1 year or so) outlook. For the time being, we can only look at the neartermed trends. I don’t know when this bubble will pop. So lets play along with Janice and see if we can’t make some money along the way.

 

Yesterday’s action brought the S&P500 to the top of its  prior near termed trading range. 2170-ish may present a bit of technical resistance in the near term. 2130 continues to be support.  The bullish hooks on the daily chart’s momentum indicators show a near termed rally from an oversold level may have legs, despite the resistance at 2170. Moneyflow (top and bottom panes) is weakening –which is a bit strange.

sp-nearterm

The weekly chart shows intermediate termed momentum indicator deterioration, suggesting we may see more volatility – after a near termed rally – before markets begin a true bullish trend.

sp

 

MoneyShow Recap

moneyshow-1

For those who missed it, I was at the MoneyShow last weekend. I’ll recap some of the highlights from my presentation over the coming blogs.

11 Comments

  • better load up that shopping list for stocks now. Likely not to be any big correction

    Reply
    • Yes- for now.
      That is my main point here–ya can’t fight the Fed. Lets play along with Janice for now and enjoy the ride. But–as we’ve seen in past bubbles–valuations get higher and higher, people keep buying stocks despite it all. Then … kaboom!

      Reply
  • Hi Keith

    I have to disagree with you, I don’t think she would be a good Oil of Olay model. We need to get her on the Red Bull team, it might perk her up.

    I still believe there will be a correction by mid November, there seems to be quite a lot of comments with graphs discussing some/many stocks being over valued. I may take more money off the table if the market keeps being fed with “dumb” money.

    Do you think interest sensitive stocks will be impacted more severely when the rates do increase?

    Are you “shopping” for value or growth stocks?

    These blogs are very informative, I thought your YouTube video trial was a great idea, they are more work but very effective of effective.

    Daryn

    Reply
    • Thanks Daryn
      Yes, when (that word “when” is the big word of the day!) rates rise, interest sensitive stocks will get clobbered. But…when???
      Re- shopping candidates: We buy stocks with good charts and then look for growth catalysts within an environment of reasonable value. In the world of fundamental analysts–we are “Growth at a Fair Value” types –but again, technical trends first, then we check the fundamentals. No sense buying a good company with a poor chart. So we look at good charts, create a list, evaluate fundamentals, and choose the best of those two worlds. I described this system in my book Sideways.

      Reply
  • While I don’t trade often, I like to watch trend lines first, support and resistance second and then look to the indicators for confirmation. The S&P 500 has a 6 month trend line upward that was only broken for three days in June but hasn’t yet been violated. There is strong support at 2120 with less strong resistance at 2190. The indicators are sort of neutral. As a longer term investor, I also like to see the 17 week MA above the 40, which it has been since April 18th.

    I’m repeating some of what you said but for my money, I wouldn’t sell till prices break decidedly below the short term trend line. Even then (?). Strange atypical year, what.

    Reply
  • Hi Keith,

    In the September 23 article you posted on Twitter today, you mention AltaGas. I’d love to know *any* hint on why you like that one relative to Tourmaline (TOU) or PeyTo (PEY). Although they are not gas utilities, they are also natural gas plays, and their charts look better to me. Is it a risk/reward thing (ALA has lagged). Or is it because of the much higher dividend?

    Thanks!

    Reply
    • We don’t own ALA yet, but do have it on our buy list. Recall that our view is always a combined view of technical’s and fundamentals/ so we take the best combination. Craig does the fundamental side–he felt the leverage to gas (given their debt) was good if gas does in fact take off. It works the other way if gas goes down, so lets say its got “torque” but risk if the view on gas is wrong.
      Nothing wrong with the TOU chart–very good profile. PEY is coming into resistance.

      Reply
  • This is a highly manipulated market. The daily liquidity reports I receive have comments like “it is going to be expensive for the Fed to keep the market up today” or even the technicals say sell but with amount of money coming in today don’t. I suspect a little short term weakness in oil (and therefore market) because money flow is negative with a couple of up days. If oil reaches your upside target perhaps the NYSE will reach its all time highs. Would it not be easy to prop the market up by propping up the price of oil? Such a percentage move would put the SPX at 2250 reaching a trend line across the tops.
    Like yourself I have an interest in politics and no respect for the ignorant man-child. I differ in that I zero respect for his predecessor as well. Recent email hack of Colin Powell reveal Harper’s attendance at the Bohemian Grove. This is a place well-known for it sexual deviance and highly probable child sacrifice. Any one attending places like that is highly black-mail able. He negotiated the still secret TPP. This is not likely a trade agreement but an arrangement that will transfer our sovereignty to the global corporations.
    The media skewed polls poll more democrats to create an illusion that Clinton is a competitive candidate. Trump is filling stadiums with his rallies. Clinton at times is only drawing a couple hundred people. Will the deep state manipulate the markets to create a outcome favorable to themselves? Only time will tell.
    Sincerely
    Bear

    Reply
    • You don’t differ in your opinion of Trudeau Sr.
      My only comment is that at least his father had been full time employed in the real world prior to becoming PM, and was certainly a brighter person than his son. But then again, that’s not a very high bar..

      Reply
  • “STOCK MARKETS ARE IN FOR A ROUGH SUMMER (MAY 6-OCTOBER 27).”

    1-“STOCK MARKET: PRICED FOR PERFECTION WHEN PERFECTION DOES NOT EXIST.”
    2-“CURRENT BULL MARKET IS EXTENDED”.
    3-“STOCK MARKET IS STRETCHED ON THE UPSIDE”.
    4-“CORPORATE EARNINGS STARTING TO FADE”.
    5-“NOT MUCH HELP FROM CENTRAL BANKS”.
    6-“DIMINISHING RETURNS TO THE FEDERAL RESERVE JAWBONING INCREASING INTEREST RATES”.
    7-“TECHNICALLY, THE S&P 500 IS SOUND BUT IT IS STRETCHED TO THE UPSIDE”.

    EXCERPTS FROM: “THACKRAY SEASONAL TRADE”, 12/04/2016

    Reply

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