31 Ağustos 2010 Salı
COIL NEGATED
The strong move above $1240 pretty much negated the coil and eliminated any doubt that Aug. 24th was in fact the cycle low. Gold is now on day 5 of the current daily cycle with potentially 10-15 days before the next significant short term top.
S&P Tests 1040 Level Again
The market has been both lower and higher already in early trading, as a few economic releases swayed early trading. The CaseShiller Home Price Index for June rose to 148.0 from 146.5. That was a slight improvement, but most of the housing slowdown that has been talked about began in July, so this report will likely be taken with a grain of salt until we see how July fared.
The Chicago PMI for August hit 56.7, which is below the 57.0 that was expected. This likely weighed on stocks early on. But the consumer confidence report surprisingly rose to 53.5 from an expected reading of 50.0. This was a bright spot, and stocks rallied after the number was reported.
The dollar is lower today, as are oil prices (down near $74), while gold is higher near $1245.
Asian markets were lower overnight, led down by Japan which is still struggling with the Yen trading near 15-year highs, which hurts their export-driven economy.
The 10-year yield is back down to 2.50, after briefly spiking to 2.65% last Friday; and the volatility index (VIX) is still above its 50-day average at 26.51.
Trading comment: The market once again tested that SPX 1040 support level this morning, and so far it has held. Friday's rally was very solid, with excellent volume and good breadth. But this type of follow-thru action is not inspiring. Technically, as long as Friday's lows are not broken, the nascent rally attempt is still considered valid, and we still could get a follow-thru day. But if 1040 is broken, it could open up the gates to further technical selling.
First, this is August and trading volumes have been very light. Yesterday was one of the lightest days of trading all year. So its not surprising to see the market get whipsawed. Second, the price action can often be frustrating as long as the major averages are trading below their 50-day and 200-day moving averages.
The market remains in a tough technical picture, with lots of overhead resistance. But we remain oversold, and bearish sentiment is already very high. This combination makes me think the downside should be relatively limited at this juncture, while another rally could spark additional short-covering.
The Chicago PMI for August hit 56.7, which is below the 57.0 that was expected. This likely weighed on stocks early on. But the consumer confidence report surprisingly rose to 53.5 from an expected reading of 50.0. This was a bright spot, and stocks rallied after the number was reported.
The dollar is lower today, as are oil prices (down near $74), while gold is higher near $1245.
Asian markets were lower overnight, led down by Japan which is still struggling with the Yen trading near 15-year highs, which hurts their export-driven economy.
The 10-year yield is back down to 2.50, after briefly spiking to 2.65% last Friday; and the volatility index (VIX) is still above its 50-day average at 26.51.
Trading comment: The market once again tested that SPX 1040 support level this morning, and so far it has held. Friday's rally was very solid, with excellent volume and good breadth. But this type of follow-thru action is not inspiring. Technically, as long as Friday's lows are not broken, the nascent rally attempt is still considered valid, and we still could get a follow-thru day. But if 1040 is broken, it could open up the gates to further technical selling.
First, this is August and trading volumes have been very light. Yesterday was one of the lightest days of trading all year. So its not surprising to see the market get whipsawed. Second, the price action can often be frustrating as long as the major averages are trading below their 50-day and 200-day moving averages.
The market remains in a tough technical picture, with lots of overhead resistance. But we remain oversold, and bearish sentiment is already very high. This combination makes me think the downside should be relatively limited at this juncture, while another rally could spark additional short-covering.
COILS & THROWBACKS
We have a potential coil forming on the gold chart. As I've mentioned before about 70% of the time the initial thrust out of a coil tends to be a false move soon followed by a more powerful and durable move in the opposite direction. If that holds true then it would be preferable for gold to break out of the coil to the downside.
Today will be the 24th day of this daily cycle. The cycle can last up to 30 days and not be out of the ordinary, so it is possible that the daily cycle didn't bottom on Aug. 24th. I was expecting a push to $1240 before a pullback. We were a bit short of that target on Aug. 18th, but have now tagged it.
If the stock market continues to drop into the Friday jobs number we could see gold drop into another corrective move this week.
Last week silver broke out of a triangle consolidation. It's not unusual to see a throwback to test the upper trend line.
If gold does have another move down into the latter part of the timing band we can probably expect silver to drop back down to at least the $18.70ish level and test the triangle breakout.
There are also two gaps on the GLD and SLV chart that are begging to be filled before continuing higher.
Today will be the 24th day of this daily cycle. The cycle can last up to 30 days and not be out of the ordinary, so it is possible that the daily cycle didn't bottom on Aug. 24th. I was expecting a push to $1240 before a pullback. We were a bit short of that target on Aug. 18th, but have now tagged it.
If the stock market continues to drop into the Friday jobs number we could see gold drop into another corrective move this week.
Last week silver broke out of a triangle consolidation. It's not unusual to see a throwback to test the upper trend line.
If gold does have another move down into the latter part of the timing band we can probably expect silver to drop back down to at least the $18.70ish level and test the triangle breakout.
There are also two gaps on the GLD and SLV chart that are begging to be filled before continuing higher.
If the coil breaks down watch gold for a swing low this week as a sign of the bottom.
28 Ağustos 2010 Cumartesi
950? NOT YET I'M AFRAID.
The better than expected GDP numbers threw a slight monkey wrench in the trading plan (for you traders out there). I was expecting a gap down open that would break through the 1040 pivot. The plan was to buy into that gap with a stop under the morning intraday low. The market did break slightly below 1040 (1039.70) so in theory if one was quick they could have jumped in right there. I doubt anyone was that quick, so I suspect almost no one caught the exact low. Perfect timing isn’t critical though if this is a daily cycle bottom, as we should have at least 2 to 3 weeks of upside ahead of us. I’m assuming the market doesn’t drop back down to test the lows on next Fridays jobs report.
I really doubt it will. I think the jobs report has probably lost its ability to move the market at this point. Until we start to roll over into the next recession we are probably going to continue to see mildly positive jobs numbers for now. When we start seeing 200,000 and 300,000 jobs being lost again then we can look for the monthly jobs report to start affecting the stock market. Until then I think it’s not going to have much effect on stocks. With that in mind I really doubt the market will be coming back down next week in order to bottom on the employment data.
Now before everyone gets all excited let me point out that today was in fact an outside day and as such we don’t officially have a swing low yet. We can’t have a daily cycle bottom until the market forms a swing low. That being said, today was a 90% up volume day. That is a panic buying day and this late in a daily cycle that usually means smart money has recognized a bottom and is rushing to get back in the market.
I realize almost everyone is now convinced the bull is dead and we’ve started back down in the next leg of the secular bear market. Now maybe we have and maybe we haven’t. I’m reserving judgment until I see the last two of my bear market signs come to pass. Namely the 200 day moving average has to turn down and we must get a Dow theory sell signal (BOTH the industrials and transports must close below the July lows). Neither one of those things has happened yet. Until they do we are in no man’s land. As a matter of fact, according to strict Dow Theory the primary trend is assumed to still be in force until a sell signal is given. Since we obviously don’t have that, and aren’t really even very close to it yet, I’m going to abide by the rules and assume the cyclical bull is still alive.
Next I’m going to point out we don’t even have a confirmed down trend yet. So far the market is still making higher highs and higher lows. That is the definition of an uptrend. In order to reverse that the market would have to break below the July low or it will have to bounce out of this daily cycle bottom, stall out, and then move back below Friday’s low (I’m taking some liberties here and assuming Friday did in fact mark the cycle bottom.)
Now let me show you what no one is seeing. And when no one sees it that makes it all the more likely to play out. Of course we do still have the inverse head and shoulders pattern in play. That one actually has been spotted by a few hopeful bulls, but it’s certainly not mainstream yet like the regular head and shoulders top was and still is.
The real pattern, and one I put a lot more faith in than a head and shoulders top or bottom is the 1-2-3 reversal that is in play.
Notice how the initial rally into the August top broke the down trend line. That was #1. Now we are in the process of #2 testing the lows. As long as today’s bottom holds that test is going to be successful. The final piece in the puzzle is a move above the August highs. If that occurs we will have a confirmed trend reversal and the April highs will then be in jeopardy of being surpassed. I know that seems impossible at this point but I would point out that everyone assumed we were back in a bear market in mid `04 also. The market had been making lower highs and lower lows since March. Needless to say everyone was a bit surprised when the Fed cranked up the printing presses into the elections and the market broke out to new highs. I forget, what is happening this year? Oh that’s right, mid-term elections. Hmm…
There is also a yearly and 3 year cycle low coming due in the dollar (more on that in the dollar section of the report). Suffice it to say there will be plenty of liquidity the next several months.
More in the weekend report for subscribers...
I really doubt it will. I think the jobs report has probably lost its ability to move the market at this point. Until we start to roll over into the next recession we are probably going to continue to see mildly positive jobs numbers for now. When we start seeing 200,000 and 300,000 jobs being lost again then we can look for the monthly jobs report to start affecting the stock market. Until then I think it’s not going to have much effect on stocks. With that in mind I really doubt the market will be coming back down next week in order to bottom on the employment data.
Now before everyone gets all excited let me point out that today was in fact an outside day and as such we don’t officially have a swing low yet. We can’t have a daily cycle bottom until the market forms a swing low. That being said, today was a 90% up volume day. That is a panic buying day and this late in a daily cycle that usually means smart money has recognized a bottom and is rushing to get back in the market.
I realize almost everyone is now convinced the bull is dead and we’ve started back down in the next leg of the secular bear market. Now maybe we have and maybe we haven’t. I’m reserving judgment until I see the last two of my bear market signs come to pass. Namely the 200 day moving average has to turn down and we must get a Dow theory sell signal (BOTH the industrials and transports must close below the July lows). Neither one of those things has happened yet. Until they do we are in no man’s land. As a matter of fact, according to strict Dow Theory the primary trend is assumed to still be in force until a sell signal is given. Since we obviously don’t have that, and aren’t really even very close to it yet, I’m going to abide by the rules and assume the cyclical bull is still alive.
Next I’m going to point out we don’t even have a confirmed down trend yet. So far the market is still making higher highs and higher lows. That is the definition of an uptrend. In order to reverse that the market would have to break below the July low or it will have to bounce out of this daily cycle bottom, stall out, and then move back below Friday’s low (I’m taking some liberties here and assuming Friday did in fact mark the cycle bottom.)
Now let me show you what no one is seeing. And when no one sees it that makes it all the more likely to play out. Of course we do still have the inverse head and shoulders pattern in play. That one actually has been spotted by a few hopeful bulls, but it’s certainly not mainstream yet like the regular head and shoulders top was and still is.
The real pattern, and one I put a lot more faith in than a head and shoulders top or bottom is the 1-2-3 reversal that is in play.
Notice how the initial rally into the August top broke the down trend line. That was #1. Now we are in the process of #2 testing the lows. As long as today’s bottom holds that test is going to be successful. The final piece in the puzzle is a move above the August highs. If that occurs we will have a confirmed trend reversal and the April highs will then be in jeopardy of being surpassed. I know that seems impossible at this point but I would point out that everyone assumed we were back in a bear market in mid `04 also. The market had been making lower highs and lower lows since March. Needless to say everyone was a bit surprised when the Fed cranked up the printing presses into the elections and the market broke out to new highs. I forget, what is happening this year? Oh that’s right, mid-term elections. Hmm…
There is also a yearly and 3 year cycle low coming due in the dollar (more on that in the dollar section of the report). Suffice it to say there will be plenty of liquidity the next several months.
More in the weekend report for subscribers...
27 Ağustos 2010 Cuma
John Boehner’s Pro-Growth Message
It’s a bit too early for House Republican leader John Boehner to measure the drapes and pick out new wallpaper. But the Intrade pay-to-play prediction markets are now showing a 76 percent chance of a GOP House takeover in November, along with a 60 percent probability that Republicans will capture at least seven new Senate seats. So Boehner’s lengthy broadside attack on Obamanomics at the City Club of Cleveland this week takes on special meaning. Headlines following the speech were all about Boehner’s call for the resignation of Obama policy generals Larry Summers and Timothy Geithner. But the more substantive question is this: What might a newly ascendant congressional Republican majority actually stand for?
Republican leaders are expected to publish a governing agenda next month, probably an updated version of the bold and successful Newt Gingrich/Dick Armey “Contract with America” of 1994. John Boehner is a key alumnus of that effort. But folks around the country are waiting to see if congressional Republicans will make a strong and aggressive case for a true economic-growth and jobs agenda now, in 2010.
The stock market, for example, has known for months that the GOP will capture the House. But investors are not yet confident that the GOP will focus on GDP, instead of mere ambiguous generalities, trying to be all things to all people. Indeed, if the Republicans borrow heavily from the tea-party “Contract from America” — and its call for constitutional limits to government, tough spending restraint, free-market reforms, and supply-side tax policies — stocks could mount a mighty rally in the weeks ahead.
Well, Mr. Boehner’s speech was a very promising beginning to all this.
Near the top he said, “Right now, America’s employers are afraid to invest in an economy stalled by ‘stimulus’ spending and hamstrung by uncertainty. The prospect of higher taxes, stricter rules, and more regulations has employers sitting on their hands.”
His first proposal to break that uncertainty? Boehner said, “President Obama should announce he will not carry out his plan to impose job-killing tax hikes on families and small businesses.” In other words, extend all the Bush tax cuts. To this end, Boehner quoted former President John F. Kennedy: “An economy constrained by high tax rates will never produce enough revenue to balance the budget, just as it will never create enough jobs.”
And Boehner was just getting started.
He called for an Obama pledge to veto any lame-duck congressional actions that would damage the economy, including the union card-check bill and a national cap-and-trade energy tax.
He called for the repeal of Obamacare’s job-killing 1099 mandate that would require small-business paperwork to show any purchases of more than $600.
He slammed Obamacare in general, noting the creation of more than 160 boards, bureaucracies, programs, and commissions, and the 3,833 pages of new regulations already in place.
He called for an aggressive spending-reduction package that would rollback non-defense discretionary expenditures to 2008 levels, before the stimulus plan was put in place.
He said he wants to end TARP and all TARP bailouts.
He bemoaned the fact that no one in the White House has any business experience, chiding Obama by saying, “We’ve tried 19 months of government-as-community-organizer. It hasn’t worked. Our fresh start needs to begin now.”
He called for a freeze on federal pay and hiring. He noted that, on average, federal employees now make more than double what private-sector workers take in.
He cited Wisconsin congressman Paul Ryan’s plan for $1.3 trillion in specific spending cuts. He called for strict budget caps. And he argued for pro-growth tax reform that would get rid of “the undergrowth of deductions, credits, and special carve-outs in order to bring simplicity and certainty, instead of transfer payments to the favored few.”
And he spotlighted the fiscal restraint of governors Bob McConnell of Virginia and Chris Christie of New Jersey, elected Republican officials who balanced their budgets by throttling spending instead of raising taxes.
All this is good. Very good.
Instead of playing it safe, it looks like Republicans intend to be aggressive in changing the statist, government-planning, socialist-lite agenda of President Obama, Majority Leader Harry Reid, and House Speaker Nancy Pelosi. It sounds like the new Republican party intends to end the ongoing war against private-capital investment, entrepreneurial rewards, free-market incentives, and private business that is plaguing the economy and sapping the strength of the recovery.
In a little over two months, the election will take place. In a little over four months, the 2003 tax cuts will expire. And in just a few weeks, congressional Republicans will presumably put more meat on the bones of their new platform. John Boehner’s Cleveland speech was a very encouraging beginning. Now let’s see if the Republican’s next step will truly provide some much needed optimism to the economy and body politic.
Market Shrugs Off Lowered Guidance From Intel
The market was higher right after the open, after Q2 GDP was revised down to 1.6%, which was still higher than the 1.4% many were expecting. Additionally, personal consumption for Q2 was actually revised higher to 2.0% from 1.6%.
So the GDP report gave a boost to the market, but then Bernanke's comments from a symposium in Jackson Hole were released and the market gave back all of its early gains. I'm not sure what people were looking for, as I think the message from the Fed Chairman has been fairly consistent. Maybe its another case of expectations being too high.
The other news item that pushed the market lower was updated guidance from Intel (INTC). Intel said it expects revenue for Q3 to come in a range of $10.8 - $11.2 billion, which is below Street forecasts for $11.5 billion right now.
But after the brief swoon lower this morning, bears look like they are having difficulty gaining traction, and as of this post the market is rallying again back into positive territory. If the bears can't regain any traction into the close today, I think we could see additional short covering boost the market.
Energy and materials stocks are leading the early action, while tech is lagging.
Asian markets were mostly higher overnight; the dollar is higher today while the euro is lower; oil prices are down to $73.20, and gold prices are roughly flat near $1237.
The 10-year yield is nicely higher to 2.58%. I want to see yields move a bit higher, just to take the fear of deflation off the table. And the VIX is down -2.8% today to 26.61, which is still above its 50-day average.
Trading comment: The S&P 500 once again held that 1040 level that I mentioned the other day. So for now this looks like solid support, and hopefully we can build on today's early gains. The market is still oversold, and sentiment is very bearish. Those are the normal ingredients one usually see before a relief rally in the market.
I took more of my hedges off yesterday, and added to a couple of long positions. While the market could still have another move lower in the always feared Sept.-Oct. timeframe, I think we should get a short-term bounce first.
So the GDP report gave a boost to the market, but then Bernanke's comments from a symposium in Jackson Hole were released and the market gave back all of its early gains. I'm not sure what people were looking for, as I think the message from the Fed Chairman has been fairly consistent. Maybe its another case of expectations being too high.
The other news item that pushed the market lower was updated guidance from Intel (INTC). Intel said it expects revenue for Q3 to come in a range of $10.8 - $11.2 billion, which is below Street forecasts for $11.5 billion right now.
But after the brief swoon lower this morning, bears look like they are having difficulty gaining traction, and as of this post the market is rallying again back into positive territory. If the bears can't regain any traction into the close today, I think we could see additional short covering boost the market.
Energy and materials stocks are leading the early action, while tech is lagging.
Asian markets were mostly higher overnight; the dollar is higher today while the euro is lower; oil prices are down to $73.20, and gold prices are roughly flat near $1237.
The 10-year yield is nicely higher to 2.58%. I want to see yields move a bit higher, just to take the fear of deflation off the table. And the VIX is down -2.8% today to 26.61, which is still above its 50-day average.
Trading comment: The S&P 500 once again held that 1040 level that I mentioned the other day. So for now this looks like solid support, and hopefully we can build on today's early gains. The market is still oversold, and sentiment is very bearish. Those are the normal ingredients one usually see before a relief rally in the market.
I took more of my hedges off yesterday, and added to a couple of long positions. While the market could still have another move lower in the always feared Sept.-Oct. timeframe, I think we should get a short-term bounce first.
26 Ağustos 2010 Perşembe
Investor Sentiment Reaching Bearish Extremes Again
Below is a graph from my colleague Helene Meisler at TheStreet.com which shows this week's Investor's Intelligence poll.
As you can see, if you add up the number of bears in the survey plus those looking for a "correction", you can see that we are back to levels that have marked trading bottoms in the past.
Given that the market is oversold again, I think we could be at a juncture where we again see a nice bounce. I am selling off some of my hedges, and looking to add to long positions in anticipation of any relief rally.
As you can see, if you add up the number of bears in the survey plus those looking for a "correction", you can see that we are back to levels that have marked trading bottoms in the past.
Given that the market is oversold again, I think we could be at a juncture where we again see a nice bounce. I am selling off some of my hedges, and looking to add to long positions in anticipation of any relief rally.
Nice Drop In Jobless Claims
The market is slightly higher in early trading after a solid jobless claims report, and some positive action out of Europe.
Initial jobless claims for last week came in at 473,000, which is below expectations and also down 31,000 week-over-week. Continuing claims were also lower, another good sign. This is positive for the employment picture, and weakens the double-dip case many are making right now.
Asian markets were mixed overnight, while Europe is higher this morning after a strong debt offering in Ireland. This came despite the news that Ireland had its sovereign credit rating downgraded.
The news in Europe has boosted the euro at the expense of the dollar. Oil prices are higher to $73.25, while gold is flattish near $1237.
Among sector ETFs, materials and industrials are leading, while consumer staples and healthcare are lagging. Financials are holding up well also.
The 10-year yield is a touch higher to 2.54%; and the volatility index is flat near 26.70.
Trading comment: The S&P held support yesterday at 1040 and bounced nicely from there to close positive on the day. I mentioned that the market was oversold and likely due for a bounce. Today, the AAII investor sentiment survey confirmed that bearish sentiment has risen sharply of late, which also supports the case for a further bounce in the market. I have a chart to post on sentiment, which I will put up later.
Looking for stocks that have held up the best during this correction is a good strategy. A few that I am watching that have shown nice relative strength include: SXCI, CMG, FFIV, VMW, ANDE, NFLX, and APKT.
long ANDE, FFIV, VMW
Initial jobless claims for last week came in at 473,000, which is below expectations and also down 31,000 week-over-week. Continuing claims were also lower, another good sign. This is positive for the employment picture, and weakens the double-dip case many are making right now.
Asian markets were mixed overnight, while Europe is higher this morning after a strong debt offering in Ireland. This came despite the news that Ireland had its sovereign credit rating downgraded.
The news in Europe has boosted the euro at the expense of the dollar. Oil prices are higher to $73.25, while gold is flattish near $1237.
Among sector ETFs, materials and industrials are leading, while consumer staples and healthcare are lagging. Financials are holding up well also.
The 10-year yield is a touch higher to 2.54%; and the volatility index is flat near 26.70.
Trading comment: The S&P held support yesterday at 1040 and bounced nicely from there to close positive on the day. I mentioned that the market was oversold and likely due for a bounce. Today, the AAII investor sentiment survey confirmed that bearish sentiment has risen sharply of late, which also supports the case for a further bounce in the market. I have a chart to post on sentiment, which I will put up later.
Looking for stocks that have held up the best during this correction is a good strategy. A few that I am watching that have shown nice relative strength include: SXCI, CMG, FFIV, VMW, ANDE, NFLX, and APKT.
long ANDE, FFIV, VMW
25 Ağustos 2010 Çarşamba
Back In The Saddle
I am back from my visit of taking my kids to see their grandparents in Cleveland. It sure does seem that the market always falls out of bed when I am away from my desk. Of course, these days you can access your systems from anywhere, but it's just not the same thing.
That said, last week I left off by saying that the markets rally looked tepid, and I wanted to remain cautious. That stance certainly seems warranted in hindsight. And the data this morning is doing little to inspire bullishness at the moment.
In economic news, durable goods for July were much weaker than expected at +0.3%, when a rise of +3.0% was expected. Participants are also ignoring that last month's data was revised higher. There was also another weak housing report, with new home sales for July falling -12.4%, weaker than expected.
There was also news that Ireland's sovereign debt rating was reduced by S&P to AA- from AA. This has the credit default swaps for Western Europe trading higher, but interestingly the reaction in the Irish stock market has been totally muted, implying that this move was already anticipated.
The dollar is moving higher, as the flight to safety trades looks back on. Gold is also higher, near $1237, and Treasuries are higher also. The latter is pushing bond yields down to 2.47%, the lowest levels since March 2009.
Asian markets were lower overnight; and the volatility index (VIX) is 3.3% higher so far, rising to 28.37 after bouncing above its 50-day average yesterday.
Trading comment: The market is once again extremely oversold, and likely due for a bounce. But again, until some of this technical resistance is broken, I think most bounces will be short-term in nature. The S&P 500 is currently trying to hold the 1040 level, where it found some support in May and June.
Prior to my mini-vacation, I had been saying that the action in the market warranted caution. I still feel that way, but obviously the market has already moved lower and we need to be flexible. As such, I will be looking to sell some of our hedges that we had put in place, and add to stocks that have come back down to attractive levels.
That said, last week I left off by saying that the markets rally looked tepid, and I wanted to remain cautious. That stance certainly seems warranted in hindsight. And the data this morning is doing little to inspire bullishness at the moment.
In economic news, durable goods for July were much weaker than expected at +0.3%, when a rise of +3.0% was expected. Participants are also ignoring that last month's data was revised higher. There was also another weak housing report, with new home sales for July falling -12.4%, weaker than expected.
There was also news that Ireland's sovereign debt rating was reduced by S&P to AA- from AA. This has the credit default swaps for Western Europe trading higher, but interestingly the reaction in the Irish stock market has been totally muted, implying that this move was already anticipated.
The dollar is moving higher, as the flight to safety trades looks back on. Gold is also higher, near $1237, and Treasuries are higher also. The latter is pushing bond yields down to 2.47%, the lowest levels since March 2009.
Asian markets were lower overnight; and the volatility index (VIX) is 3.3% higher so far, rising to 28.37 after bouncing above its 50-day average yesterday.
Trading comment: The market is once again extremely oversold, and likely due for a bounce. But again, until some of this technical resistance is broken, I think most bounces will be short-term in nature. The S&P 500 is currently trying to hold the 1040 level, where it found some support in May and June.
Prior to my mini-vacation, I had been saying that the action in the market warranted caution. I still feel that way, but obviously the market has already moved lower and we need to be flexible. As such, I will be looking to sell some of our hedges that we had put in place, and add to stocks that have come back down to attractive levels.
24 Ağustos 2010 Salı
DANGEROUS TIMES FOR THE BEARS
In February I warned the bears that the market was just putting in a profit taking correction and that we would see another leg up in the bull. They didn't listen.
In late June I warned that the daily and intermediate cycle were deep in the timing band for a bottom and overzealous bears risked getting caught in a powerful rally. They didn't listen again and they got caught in an 11% rally.
In July I warned the gold bears that this correction was just a normal intermediate cycle pullback. One that happens like clockwork every 5 to 6 months. Again they didn't listen. Gold proceeded to rally 15 out of the next 17 days.
So here we go again. The stock market is now on day 37 (average length 35 -45 days) of it's daily cycle. Sentiment is again at bearish extremes.
Again just like in February, June and July all we hear are technical reasons for why the market has to go down. Folks I'm going to warn you again. Cycles and sentiment work, and they are much more powerful movers of markets than technical chart patterns.
Cycles and sentiment are now warning that a bottom is fast approaching. On top of that institutional traders began to accumulate stock today (large buying on weakness data).
As soon as the dollar rolls over, and it will roll over into its yearly cycle low, it is going to put tremendous upwards pressure on virtually all assets (with maybe the exception of bonds).
There are another two signs that a bottom is approaching. First off we have another Bollinger band crash trade in play.
As you can see this has acted as strong support and resistance in bull and bear markets. If the cyclical bull is still alive then the market shouldn't drop more than marginally below this level.
This late in the daily cycle I expect this will be the case.
This will be the fourth time I've warned bears to beware of an impending cycle bottom. They ignored the warning three times to their chagrin.
Are they going to make it 4 for 4?
Bears would be wise to cover shorts as soon as a swing low forms. Of course if Bernanke happens to mention the Q word shorts risk getting caught in a huge gap up.
Like I said, dangerous times for the bears.
In late June I warned that the daily and intermediate cycle were deep in the timing band for a bottom and overzealous bears risked getting caught in a powerful rally. They didn't listen again and they got caught in an 11% rally.
In July I warned the gold bears that this correction was just a normal intermediate cycle pullback. One that happens like clockwork every 5 to 6 months. Again they didn't listen. Gold proceeded to rally 15 out of the next 17 days.
So here we go again. The stock market is now on day 37 (average length 35 -45 days) of it's daily cycle. Sentiment is again at bearish extremes.
Again just like in February, June and July all we hear are technical reasons for why the market has to go down. Folks I'm going to warn you again. Cycles and sentiment work, and they are much more powerful movers of markets than technical chart patterns.
Cycles and sentiment are now warning that a bottom is fast approaching. On top of that institutional traders began to accumulate stock today (large buying on weakness data).
As soon as the dollar rolls over, and it will roll over into its yearly cycle low, it is going to put tremendous upwards pressure on virtually all assets (with maybe the exception of bonds).
There are another two signs that a bottom is approaching. First off we have another Bollinger band crash trade in play.
I've noted before that these panic selling days often occur either very near or at cycle bottoms.
Also the market dipped down to and bounced off of the 75 week moving average.
As you can see this has acted as strong support and resistance in bull and bear markets. If the cyclical bull is still alive then the market shouldn't drop more than marginally below this level.
This late in the daily cycle I expect this will be the case.
This will be the fourth time I've warned bears to beware of an impending cycle bottom. They ignored the warning three times to their chagrin.
Are they going to make it 4 for 4?
Bears would be wise to cover shorts as soon as a swing low forms. Of course if Bernanke happens to mention the Q word shorts risk getting caught in a huge gap up.
Like I said, dangerous times for the bears.
Why Is the Paris-Based OECD Pushing Obama's Big-Government Agenda With Your Tax Dollars?
Here's the latest must-see mini-documentary from my old friend Dan Mitchell.
According to Dan:
U.S. taxpayers finance nearly 25% of the budget for the Paris-based Organization for Economic Cooperation and Development (OECD), an international bureaucracy that routinely advocates for more government - including more taxes and spending in the United States. In just the past couple of years, the OECD has used American tax dollars to advocate Obamacare-type health policies, push for failed Keynesian stimulus spending, promote Al Gore-style carbon taxes, and urge the enactment of a value-added tax. This CF&P Foundation video advocated in order to reduce wasteful spending and protect America's free market system, American subsidies for this Paris-based bureaucracy should be eliminated.
According to Dan:
U.S. taxpayers finance nearly 25% of the budget for the Paris-based Organization for Economic Cooperation and Development (OECD), an international bureaucracy that routinely advocates for more government - including more taxes and spending in the United States. In just the past couple of years, the OECD has used American tax dollars to advocate Obamacare-type health policies, push for failed Keynesian stimulus spending, promote Al Gore-style carbon taxes, and urge the enactment of a value-added tax. This CF&P Foundation video advocated in order to reduce wasteful spending and protect America's free market system, American subsidies for this Paris-based bureaucracy should be eliminated.
21 Ağustos 2010 Cumartesi
WEEKEND REPORT
I'm going to make the weekend report available to everyone one more time this week along with the discounted yearly subscription offer.
I suspect quite a few traders and investors were unable to buy the dip last month as gold put in the intermediate cycle low. These intermediate cycle lows only come around about every 20-25 weeks and are the single best buying opportunities one gets to enter or add to positions in a secular bull market. If you miss it you will have to wait another 5 to 6 months for the next one ... or you will have to chase.
Gold is now due for a pullback into a smaller daily cycle low soon (it may have started on Friday). This will be the next best buying opportunity one will get to enter or add to positions in this bull market.
If I didn't convince you last month to get on board the bull I'm going to try one more time this week.
Here is the link to the premium home page. I've unlocked the link to this weekend's report.
If you would like to take advantage of the discounted yearly subscription offer click here and follow the Paypal link.
Current subscribers can add one year to their subscription at the discounted rate as long as they didn't already do so last month.
I suspect quite a few traders and investors were unable to buy the dip last month as gold put in the intermediate cycle low. These intermediate cycle lows only come around about every 20-25 weeks and are the single best buying opportunities one gets to enter or add to positions in a secular bull market. If you miss it you will have to wait another 5 to 6 months for the next one ... or you will have to chase.
Gold is now due for a pullback into a smaller daily cycle low soon (it may have started on Friday). This will be the next best buying opportunity one will get to enter or add to positions in this bull market.
If I didn't convince you last month to get on board the bull I'm going to try one more time this week.
Here is the link to the premium home page. I've unlocked the link to this weekend's report.
If you would like to take advantage of the discounted yearly subscription offer click here and follow the Paypal link.
Current subscribers can add one year to their subscription at the discounted rate as long as they didn't already do so last month.
20 Ağustos 2010 Cuma
Barney Frank Comes Home to the Facts
Can you teach an old dog new tricks? In politics, the answer is usually no. Most elected officials cling to their ideological biases, despite the real-world facts that disprove their theories time and again. Most have no common sense, and most never acknowledge that they were wrong.But one huge exception to this rule is Democrat Barney Frank, chairman of the House Financial Services Committee.
For years, Frank was a staunch supporter of Fannie Mae and Freddie Mac, the giant government housing agencies that played such an enormous role in the financial meltdown that thrust the economy into the Great Recession. But in a recent CNBC interview, Frank told me that he was ready to say goodbye to Fannie and Freddie.
“I hope by next year we’ll have abolished Fannie and Freddie,” he said. Remarkable. And he went on to say that “it was a great mistake to push lower-income people into housing they couldn’t afford and couldn’t really handle once they had it.” He then added, “I had been too sanguine about Fannie and Freddie.”
When I asked Frank about a long-term phase-out plan that would shrink Fannie and Freddie portfolios and mortgage-purchase limits, and merge the agencies into the Federal Housing Administration (FHA) for a separate low-income program that would get government out of middle-income housing subsidies, he replied: “Larry, that, I think, is exactly what we should be doing.”
Frank also said that any federal housing guarantees should be transparently priced and put on budget. But he added that the private sector must be encouraged to re-enter housing finance just as the government gradually withdraws from it.
Some would say Frank’s mea culpa is politically motivated in advance of an election where bailout nation and big government are public enemies number one and two. Of course, poll after poll shows that the $150 billion Fan-Fred bailout, which the Congressional Budget Office estimates could rise to $400 billion, is detested by voters and taxpayers everywhere.
In fact, these failed government agencies are in such bad shape that they can’t even pay Uncle Sam the dividends owed under the conservatorship deal reached two years ago. That’s right. In order to pay a $1.8 billion dividend on Treasury department stock, Fan and Fred had to borrow $1.5 billion from — you guessed it — the Treasury.
Then there’s this head-scratching detail: In an absolutely outrageous move last Christmas Eve, President Obama signed off on $42 million in bonuses for the top twelve Fannie and Freddie executives, including $6 million apiece for the two CEOs. (Hat tip to attorney Stephen B. Meister.)
Voters are on to all this. So politics may indeed be motivating Barney Frank’s turnaround. But I’m going to credit him with more than that.
I think Chairman Frank watched these government behemoths descend into hell and then witnessed the financial catastrophe that ensued. And I think he has come to realize that the whole system of federal affordable-housing mandates that was central to the real-estate collapse — including the mandates on Fannie and Freddie and the myriad bad decisions made by private banks and other lenders in response to the government’s overreach — simply needs to be abolished.
Noteworthy is the fact that Treasury Secretary Tim Geithner has come to a similar conclusion. Geithner told a recent Washington conference on the future of housing finance that the system needs fundamental change. He said, “We will not support a return to the system where private gains are subsidized by taxpayer losses.”
Of course, the withdrawal of housing markets from government programs, and the onset of a reinvigorated private sector for providing mortgages, must be done gradually over a period of years. But it is possible that the federal mortgage madness is coming to an end.
We will have to see if Congress really does say good-bye to Fan and Fred, as Republicans like Jeb Hensarling are advocating. Equally important, we will have to see if the federal affordable-housing mandates created by Congress and implemented by HUD and banking regulators are similarly repealed.
And then we will have to see if reformed federally guaranteed housing insurance includes larger down-payments, stricter underwriting standards, and greater reliance on private capital markets, lenders, and insurers. In other words, we need to see if housing will be restored to a market-based system and removed from the government-backed system that has proved so disastrous.
The broader lesson here is that government planning doesn’t work. And if left to their own devices, market processes will work. I don’t know if President Obama gets this. But my hat goes off to a man who does, Chairman Barney Frank.
19 Ağustos 2010 Perşembe
CLOSE ENOUGH?
Gold is now due for a corrective move. Its rallied 15 out of the last 17 days and is now moving into the timing band for a cycle low. My best guess was that gold might make it to around $1240 before that corrective move began. Today was pretty close.
If stocks have one more leg down before the final daily cycle bottom then a move down by gold at the same time does make for a tidy little theory.
More in the nightly updates.
On CNBC's Kudlow Report Tonight
Tonight at 7pm ET on CNBC:IS "RECOVERY SUMMER" SLIPPING AWAY INTO A DOUBLE-DIP RECESSION?
WHAT NEEDS TO BE DONE TO BRING THE ECONOMY BACK?
- Robert Reich, Fmr. Labor Secretary; "Aftershock: The Next Economy and America's Future" author; CNBC Contributor; Univ. of CA., Berkeley Prof.
- Steve Moore, Sr. Economics Writer for WSJ Editorial Board; "Return to Prosperity" co-author; Founder & Fmr. President of the Club for Growth
TECH AFTER THE BELL: DELL, HP & INTEL
-CNBC’s Jon Fortt reports.
WHAT EXACTLY IS AN INVESTOR TO DO THESE DAYS?
- David Kelly, JP Morgan Funds Chief Market Strategist
- Joe Battipaglia, Stifel Nicolaus Market Strategist -
U.S HOUSING MOOD DETERIORATION
CNBC’S Diana Olick reports.
SEC SUES NEW JERSEY FOR PENSION FRAUD
- Harvey Pitt, Kalorama Partners, CEO & Founder; Former SEC Chairman
- Steve Malanga, Manhattan Institute Sr. Fellow; City Journal Contributing Editor
NOVEMBER REGIME CHANGE?
GOP Connecticut Senate candidate Linda McMahon will be aboard.
Please join us. The Kudlow Report. 7pm ET. CNBC.
18 Ağustos 2010 Çarşamba
WAITING ON THE DOLLAR AND OIL
A while back (I can't remember when, and I'm too lazy to find and link to it) I mentioned that the daily cycle in oil runs about 50-70 days.
The energy sector is one thing weighing on the stock market right now. Oil needs to turn the corner and join stocks in a new uptrend. As soon as oil puts in the cycle bottom it should provide a big boost to the general stock market.
Ultimately this is going to lead to a currency crisis either late this year or early next as the dollar works its way down into the three year cycle low. But I'm confident unintended consequences are the last thing on the Fed's mind at this point. As is invariably the case politicians are only interested in the short term, which is a big reason why we have such huge long term problems right now.
I think we need to see the dollar break back below 82 in order to push the S&P through the 1100 resistance level.
Once we do that then its just a question of when the dollar breaks through long term support at 80. When it does it will fulfill my last two requirements and signal that the 3 year cycle decline now has its hooks in the dollar.
The other signal besides a break of 80 is a left translated intermediate cycle. A break to lower lows anytime in the next 9 weeks will meet that qualification.
If the dollar happens to do that in the next week or two it will form an extreme left translated cycle. And those tend to turn out extremely bad.
The energy sector is one thing weighing on the stock market right now. Oil needs to turn the corner and join stocks in a new uptrend. As soon as oil puts in the cycle bottom it should provide a big boost to the general stock market.
Today's intra-day reversal comes right in the middle of the timing band for a cycle low. If we get a swing low tomorrow there's a good chance the energy markets may be ready to join the party.
Another requirement for rising stocks, in my opinion, is a falling dollar. Bernanke probably realizes by now he isn't going to be able to print prosperity (I've said all along that simply printing money won't heal the economy or create jobs). However I don't expect that to deter him from further debasement of the dollar. He knows that asset inflation is the next best thing, and I have no doubt he will do everything in his power to keep asset markets inflated.
Ultimately this is going to lead to a currency crisis either late this year or early next as the dollar works its way down into the three year cycle low. But I'm confident unintended consequences are the last thing on the Fed's mind at this point. As is invariably the case politicians are only interested in the short term, which is a big reason why we have such huge long term problems right now.
I think we need to see the dollar break back below 82 in order to push the S&P through the 1100 resistance level.
Once we do that then its just a question of when the dollar breaks through long term support at 80. When it does it will fulfill my last two requirements and signal that the 3 year cycle decline now has its hooks in the dollar.
The other signal besides a break of 80 is a left translated intermediate cycle. A break to lower lows anytime in the next 9 weeks will meet that qualification.
If the dollar happens to do that in the next week or two it will form an extreme left translated cycle. And those tend to turn out extremely bad.
My Interview with Barney Frank on Fannie & Freddie
The estimable Barney Frank, Democratic chairman of the House Financial Services Committee, told me on last night's Kudlow Report that he opposes any more government housing stimulus. He also said he favors putting an end to Fannie and Freddie, as soon as the market can bear it. I say bravo.
Our conversation begins at the 1:48 mark.
Our conversation begins at the 1:48 mark.
Slogging Through The Summer Doldrums
The market rallied nicely yesterday, but volume was again quite low. That's how it often is in August, as traders and portfolio managers get their summer vacations in prior to September, when things kick into high gear again.
Target (TGT) and Deere (DE) both reported earnings this morning, and both earnings reports were good. But TGT stock is higher while DE is lower. Of course, DE has had a much bigger rally, so this is likely just profit taking. I hope that DE pulls back more, as I view it as an attractive play on the ag cycle.
The dollar is firm in early trade, which could be weighing on commodities. Gold prices are lower to $1218 and oil prices are down again to $74.40. With all the talk about Iran, hurricanes, etc., one would think that oil would be trading better.
Among the sector ETFs, financials are firm (+0.35%), while energy is lagging (-1.46%).
Asia was mixed overnight, with Japan higher but China lower; the 10-year yield is down a bit to 2.61%; and the VIX is up to 24.37.
Trading comment: Yesterday's rally was nice, but again it doesn't really change the intermediate-term picture yet. I would still need to see the S&P rally over its 200-day (currently at 1116) to change my near-term cautiousness. The market is still bouncing from its oversold condition, but if it can't get through some of this overhead resistance, another move lower is probable.
Target (TGT) and Deere (DE) both reported earnings this morning, and both earnings reports were good. But TGT stock is higher while DE is lower. Of course, DE has had a much bigger rally, so this is likely just profit taking. I hope that DE pulls back more, as I view it as an attractive play on the ag cycle.
The dollar is firm in early trade, which could be weighing on commodities. Gold prices are lower to $1218 and oil prices are down again to $74.40. With all the talk about Iran, hurricanes, etc., one would think that oil would be trading better.
Among the sector ETFs, financials are firm (+0.35%), while energy is lagging (-1.46%).
Asia was mixed overnight, with Japan higher but China lower; the 10-year yield is down a bit to 2.61%; and the VIX is up to 24.37.
Trading comment: Yesterday's rally was nice, but again it doesn't really change the intermediate-term picture yet. I would still need to see the S&P rally over its 200-day (currently at 1116) to change my near-term cautiousness. The market is still bouncing from its oversold condition, but if it can't get through some of this overhead resistance, another move lower is probable.
TOO LATE TO CHASE
Today will mark the 15th day of the current daily cycle in gold. Gold has been up 13 out of the last 15 days. It's getting overbought.
Usually the daily cycle runs about 20 -25 days. At this point it is probably too late to chase the move.
There are also a couple of gaps on the GLD chart that need to be filled. The first one is filling today. I expect both will get filled at some point during the coming cycle correction.
If you already have a position then just hang on. If you still need to add I would advise waiting till we see the dip down into the cycle low.
Whatever you do don't short. Remember in bull markets the surprises come on the upside. I think the recent 3 week move has demonstrated that, probably painfully so to anyone who fell victim to the technical chart pattern and shorted the break of the May pivot.
Usually the daily cycle runs about 20 -25 days. At this point it is probably too late to chase the move.
There are also a couple of gaps on the GLD chart that need to be filled. The first one is filling today. I expect both will get filled at some point during the coming cycle correction.
If you already have a position then just hang on. If you still need to add I would advise waiting till we see the dip down into the cycle low.
Whatever you do don't short. Remember in bull markets the surprises come on the upside. I think the recent 3 week move has demonstrated that, probably painfully so to anyone who fell victim to the technical chart pattern and shorted the break of the May pivot.
17 Ağustos 2010 Salı
Potash (POT) Finally Gets Long Rumored Bid. But Rejects It
The market is nicely higher in early trading. There have been a handful of solid earnings reports in the retail space, including Wal-Mart (WMT), Home Depot), and Urban Outfitters (URBN), and those stocks are higher.
But the big news is in the ag space, namely fertilizer company Potash (POT). It has long been rumored that someone like BHP Billiton (BHP) would make an offer for POT, but it has never happened for one reason or another. Lo and behold, this morning POT is up +25% to $140 after receiving an unsolicited bid for $39 billion from BHP. But the best news may be that POT management rejected the offer, saying it substantially undervalues the company. Looks like things are heating up in the ag space.
Asian markets were mixed overnight, while Europe is nicely higher this morning. The euro is also higher for a second day at the expense of the dollar. Commodities are mixed with gold flat near $1224 and oil prices higher near $76.
Among the sector ETFs, materials are leading the way (+2.23%) followed by industrials (+1.40%); consumer staples (+0.45%) are lagging, but all sectors are in positive territory.
The 10-year yield is bouncing from yesterday's new lows, up 5 bps to 2.62%; and the volatility index (VIX) is down -5%, back below the 25 level to 24.78.
Trading comment: Nice bounce this morning, but it doesn't really change the overhead resistance equation. Yesterday I said I expected a bounce to relieve the oversold condition of the market. But at this point I am not expecting more than an oversold bounce. I could be wrong, so I'll take it one day at a time, but I want to stay defensive until proven wrong. Remember, opportunities are easier made up than losses.
long POT
But the big news is in the ag space, namely fertilizer company Potash (POT). It has long been rumored that someone like BHP Billiton (BHP) would make an offer for POT, but it has never happened for one reason or another. Lo and behold, this morning POT is up +25% to $140 after receiving an unsolicited bid for $39 billion from BHP. But the best news may be that POT management rejected the offer, saying it substantially undervalues the company. Looks like things are heating up in the ag space.
Asian markets were mixed overnight, while Europe is nicely higher this morning. The euro is also higher for a second day at the expense of the dollar. Commodities are mixed with gold flat near $1224 and oil prices higher near $76.
Among the sector ETFs, materials are leading the way (+2.23%) followed by industrials (+1.40%); consumer staples (+0.45%) are lagging, but all sectors are in positive territory.
The 10-year yield is bouncing from yesterday's new lows, up 5 bps to 2.62%; and the volatility index (VIX) is down -5%, back below the 25 level to 24.78.
Trading comment: Nice bounce this morning, but it doesn't really change the overhead resistance equation. Yesterday I said I expected a bounce to relieve the oversold condition of the market. But at this point I am not expecting more than an oversold bounce. I could be wrong, so I'll take it one day at a time, but I want to stay defensive until proven wrong. Remember, opportunities are easier made up than losses.
long POT
S&P, SILVER AND THE DOLLAR
Unless something happens in the next couple of hours the S&P is going to form a swing low this morning. That is a prerequisite but not a guarantee of a daily cycle bottom.
Last week I called attention to the volatility coils forming in the S&P and silver. About 70% of the time the initial thrust out of a coil ends up being a false move that is quickly reversed by a more powerful and durable move in the opposite direction.
We are seeing that play out right now in silver. As of this morning silver has completely reversed the initial break and is now in the process of breaking through the $18.50 resistance level.
Usually new highs in the AD line will act to drag the market higher. As you can see in the chart this is exactly what happened after the February intermediate correction.
I wouldn't rule out a move to new highs during this next daily cycle. Remember we are coming off one of the most depressed sentiment levels in the last 10 years. That kind of extreme sentiment can be a powerful base for a big push higher.
Finally I'm watching the dollar closely. Since I don't think stocks can sustain any significant rally in the face of a rising dollar we will have to see the dollar quickly break down. To do so now would not only indicate an extreme left translated daily cycle but also a left translated and failed intermediate cycle.
If you remember the last two requirements I'm looking for to determine if the 3 year cycle decline has it's hooks in the dollar is a move below 80 and a left translated and failed (drops below prior cycle low) intermediate cycle.
If the dollar breaks down here we are going to have confirmation that Bernanke is running the QE presses again and I think we will then be on our way into what will probably be the first of several currency crisis for the US dollar.
Last week I called attention to the volatility coils forming in the S&P and silver. About 70% of the time the initial thrust out of a coil ends up being a false move that is quickly reversed by a more powerful and durable move in the opposite direction.
We are seeing that play out right now in silver. As of this morning silver has completely reversed the initial break and is now in the process of breaking through the $18.50 resistance level.
With the formation of the swing low this morning in the S&P the odds are starting to look favorable that we are now putting in the daily cycle low in stocks. If the coil pattern plays out here like it is in silver, and like the historical stats would suggest (and I think it probably will) then we should see a powerful surge out of this bottom.
The fact that the advance/decline line has already made new highs is a big plus for the bulls.
Usually new highs in the AD line will act to drag the market higher. As you can see in the chart this is exactly what happened after the February intermediate correction.
I wouldn't rule out a move to new highs during this next daily cycle. Remember we are coming off one of the most depressed sentiment levels in the last 10 years. That kind of extreme sentiment can be a powerful base for a big push higher.
Finally I'm watching the dollar closely. Since I don't think stocks can sustain any significant rally in the face of a rising dollar we will have to see the dollar quickly break down. To do so now would not only indicate an extreme left translated daily cycle but also a left translated and failed intermediate cycle.
If you remember the last two requirements I'm looking for to determine if the 3 year cycle decline has it's hooks in the dollar is a move below 80 and a left translated and failed (drops below prior cycle low) intermediate cycle.
If the dollar breaks down here we are going to have confirmation that Bernanke is running the QE presses again and I think we will then be on our way into what will probably be the first of several currency crisis for the US dollar.
Lessons of the Summer Swoon
The economy is suffering from something like a summer swoon. In the words of business columnist Jimmy Pethokoukis, the recovery summer has gone bust. We all know this from the sloppy statistics coming in for jobs, retail sales, and most recently manufacturing. But market-based indicators are telling the same story.
Let’s start with the Treasury bond market. Yields have fallen to 2.6 percent today from 4.1 percent last April. Decomposing this Treasury rally shows that real yields have dropped 79 basis points, which is a signal of lower economic expectations.
Meanwhile, inflation break-even TIPS (Treasury inflation-protected securities) have fallen 64 basis points, showing that price expectations also have dropped. The consumer price index is only rising 1 percent over the past year. And long-term inflation fears have fallen all the way to 1.7 percent. It’s not deflation. It’s disinflation.
The corporate-bond market shows a similar decline of economic-growth and profits expectations. Credit-risk spreads are widening. The spread between investment-grade corporate bonds and risk-free Treasuries have widened 62 basis points, while higher-yielding junk-bond spreads have increased 138 basis points.
Now, all these bond-market indicators don’t tell us a whole lot about the future. But they are corroborating the summer slump in the present. Lower inflation is a good thing, but lower growth is not.
And here’s another hitch in the story. Using the break-even TIPS, the Federal Reserve’s zero target rate is really minus-1.7 percent, which is the same sort of negative real interest rate we had in the early and mid-2000s. This is undoubtedly why Kansas City Fed president Thomas Hoenig is worried about a new boom-bust cycle.
Hoenig calls the Fed’s latest decision to maintain the zero-interest-rate target a “dangerous gamble.” Those are strong words of criticism leveled at Ben Bernanke and the other Fed bigwigs. Hoenig says the financial emergency is over and predicts a modest economic recovery that requires small increases in the Fed’s target rate — still accommodative, but slightly less so.
Hoeing also echoes the fears of Stanford economist and former Treasury official John Taylor, who argues that the Fed is keeping its target rate too low for too long, just as it did between 2002 and 2005.
Are we doomed to repeat the boom-bust cycle? Very few people agree with Hoenig and Taylor. But one market that does is gold. While bond rates have been declining this summer, gold has jumped $100, and it is hovering near its all-time nominal high. That’s food for thought.
And let me repeat my own mantra: The Fed can produce new money, but it cannot produce new jobs. Fiscal policy — and its threat of overtaxing, over-regulating, and overspending — is what’s ailing the economy. And that threat is reverberating through stock and bond markets. (The stock market, by the way, is still about 11 percent below its late-April peak.)
So the long-run message of the gold rally may be this: The Fed may print too much money, but taxes and regulations may hold back the production of goods and services. And if too much money chasing too few goods is inflationary, then lower taxes and regulations to encourage more goods would promote stronger prosperity and domestic price stability.
Free-market supply-side father Robert Mundell argued for lower tax rates and stable money. Is anyone listening?
Let’s start with the Treasury bond market. Yields have fallen to 2.6 percent today from 4.1 percent last April. Decomposing this Treasury rally shows that real yields have dropped 79 basis points, which is a signal of lower economic expectations.
Meanwhile, inflation break-even TIPS (Treasury inflation-protected securities) have fallen 64 basis points, showing that price expectations also have dropped. The consumer price index is only rising 1 percent over the past year. And long-term inflation fears have fallen all the way to 1.7 percent. It’s not deflation. It’s disinflation.
The corporate-bond market shows a similar decline of economic-growth and profits expectations. Credit-risk spreads are widening. The spread between investment-grade corporate bonds and risk-free Treasuries have widened 62 basis points, while higher-yielding junk-bond spreads have increased 138 basis points.
Now, all these bond-market indicators don’t tell us a whole lot about the future. But they are corroborating the summer slump in the present. Lower inflation is a good thing, but lower growth is not.
And here’s another hitch in the story. Using the break-even TIPS, the Federal Reserve’s zero target rate is really minus-1.7 percent, which is the same sort of negative real interest rate we had in the early and mid-2000s. This is undoubtedly why Kansas City Fed president Thomas Hoenig is worried about a new boom-bust cycle.
Hoenig calls the Fed’s latest decision to maintain the zero-interest-rate target a “dangerous gamble.” Those are strong words of criticism leveled at Ben Bernanke and the other Fed bigwigs. Hoenig says the financial emergency is over and predicts a modest economic recovery that requires small increases in the Fed’s target rate — still accommodative, but slightly less so.
Hoeing also echoes the fears of Stanford economist and former Treasury official John Taylor, who argues that the Fed is keeping its target rate too low for too long, just as it did between 2002 and 2005.
Are we doomed to repeat the boom-bust cycle? Very few people agree with Hoenig and Taylor. But one market that does is gold. While bond rates have been declining this summer, gold has jumped $100, and it is hovering near its all-time nominal high. That’s food for thought.
And let me repeat my own mantra: The Fed can produce new money, but it cannot produce new jobs. Fiscal policy — and its threat of overtaxing, over-regulating, and overspending — is what’s ailing the economy. And that threat is reverberating through stock and bond markets. (The stock market, by the way, is still about 11 percent below its late-April peak.)
So the long-run message of the gold rally may be this: The Fed may print too much money, but taxes and regulations may hold back the production of goods and services. And if too much money chasing too few goods is inflationary, then lower taxes and regulations to encourage more goods would promote stronger prosperity and domestic price stability.
Free-market supply-side father Robert Mundell argued for lower tax rates and stable money. Is anyone listening?
16 Ağustos 2010 Pazartesi
Monday Morning Musings
The market opened on a down note this morning, but it attempting to bounce as of this writing.
There hasn't been much in the way of market moving headlines so far today. The Empire Manufacturing index was a little light at 7.1 ( vs. 7.5 consensus), but that is up from last month's reading of 5.1.
Buyers seems to be rushing into Treasuries and gold for the most part. Gold prices are up near $1223, while the rise in bond prices have pushed yields down to an astounding 2.59%. I have held off adding to my inverse bond etf (TBT), but at this level of yields I think it is very attractive again.
The euro is bouncing after last week's selloff, which is coming at the expense of the dollar. Oil prices are down a bit to $75.
Asian markets were mixed overnight, with China bouncing +2.1%. And the volatility index (VIX) is slightly lower at 26.0.
Trading comment: The S&P 500 continues to hover below its 50-day and 200-day moving averages. That, in and of itself, warrants caution. But shorter-term, the market is once again oversold after last week's selloff and likely to bounce. I want to remain defensive when the market is trading below these key moving averages, so I will be looking to use any strength to exit marginal positions, and probably add to some hedges to protect portfolios against a further pullback in the market.
long TBT
There hasn't been much in the way of market moving headlines so far today. The Empire Manufacturing index was a little light at 7.1 ( vs. 7.5 consensus), but that is up from last month's reading of 5.1.
Buyers seems to be rushing into Treasuries and gold for the most part. Gold prices are up near $1223, while the rise in bond prices have pushed yields down to an astounding 2.59%. I have held off adding to my inverse bond etf (TBT), but at this level of yields I think it is very attractive again.
The euro is bouncing after last week's selloff, which is coming at the expense of the dollar. Oil prices are down a bit to $75.
Asian markets were mixed overnight, with China bouncing +2.1%. And the volatility index (VIX) is slightly lower at 26.0.
Trading comment: The S&P 500 continues to hover below its 50-day and 200-day moving averages. That, in and of itself, warrants caution. But shorter-term, the market is once again oversold after last week's selloff and likely to bounce. I want to remain defensive when the market is trading below these key moving averages, so I will be looking to use any strength to exit marginal positions, and probably add to some hedges to protect portfolios against a further pullback in the market.
long TBT
SAME MISTAKE AGAIN?
In June I warned the bears that it was dangerous to remain short as the stock market was in jeopardy of putting in a major intermediate cycle low. Most, not understanding cycle theory, didn't listen. The result they got caught in a 11% rally.
Three weeks ago I warned the gold bears that an intermediate cycle low was coming due. Again the bears chose to concentrate on technicals instead of focusing on cycle timing and sentiment. The result? Strike two for the technical traders.
I think strike three is coming. I've warned again that the market is now in the timing band for another cycle low. That doesn't mean it has to bottom today or tomorrow. What it does mean is that the deeper we get into the timing band the the greater the odds become for a bottom followed by a strong rally.
As a matter of fact if the market can add a few more down days it will form a much better right shoulder in the inverse head & shoulders pattern.
Three weeks ago I warned the gold bears that an intermediate cycle low was coming due. Again the bears chose to concentrate on technicals instead of focusing on cycle timing and sentiment. The result? Strike two for the technical traders.
I think strike three is coming. I've warned again that the market is now in the timing band for another cycle low. That doesn't mean it has to bottom today or tomorrow. What it does mean is that the deeper we get into the timing band the the greater the odds become for a bottom followed by a strong rally.
As a matter of fact if the market can add a few more down days it will form a much better right shoulder in the inverse head & shoulders pattern.
I'm afraid the technicals are going to suck in the bears again right as the market puts in a bottom.
If we had seen a large selling on strength day I would be a lot more confident this is the beginning of something more significant. Absent that I think we have to assume that we are just seeing the normal move down into a daily cycle low that occurs like clockwork about every 30-40 days.
On Friday we started to see the McClellan oscillator begin to compress.
Often these compressions are followed by a large move in stocks. As we move deeper and deeper into the timing band for the cycle low the odds are going to increase that the move when it comes will be higher forming the right shoulder of the H&S pattern.
The prudent thing to do is either wait in cash for the cycle to bottom or cover shorts on the first swing low.
Longer term it would be much safer to wait for the Dow Theory sell signal before getting aggressively short, especially absent a large selling on strength day or days.
Ask yourself, do you really want to make the same mistake three times in a row? Selling into a bottom is a tough way to make money...even in a bear market.
14 Ağustos 2010 Cumartesi
Weekly Wrap
Here is the weekly recap from Briefing.com:
Additional signs that the strength of the global recovery is waning sparked selling pressure, resulting in sharp losses for the major indices.
The S&P 500 declined four consecutive sessions, with the bulk of this week's loss occurring on Wednesday (-2.8%). Losses were broad-based and trading volume was light, with the NYSE not surpassing 1 million daily shares for the 20th consecutive session.
Nine of the 10 sectors declined, with tech (-5.6%), industrials (-5.0%) and financials (-4.9%) coming under the most selling pressure. Defensive-oriented sectors outperformed on a relative basis, with the telecom gaining 0.6%. Risk aversion was also seen in the relative underperformance of smallcap shares, with the Russell 2000 tumbling 6.3%.
The FOMC meeting Tuesday marked one of the major events of the week. The Fed held rates unchanged at 0.00% to 0.25%, as expected, and also announced plans to use proceeds from its more than $1 tln holdings in agency MBS and debt to buy longer term Treasuries. The news was not unexpected after last week The Wall Street Journal reported that the Fed would be considering the action. But it is a clear sign that Fed is concerned about the economic recovery effort. The news helped drive the 10-year note yield down to 2.64%, marking the lowest level since April 2009.
In corporate news, Hewlett-Packard (HPQ) dropped 12.5% for the week after company reported that its CEO was stepping down due a violation of HP's standards of conduct related to expense reports. At the same time, the company reported upside preliminary third quarter EPS of $1.08 versus the $1.07 Thomson Reuters consensus and raised its Fiscal year 2010 EPS forecast. A total of 18 S&P 500 companies reported earnings as second quarter earnings reporting season enters its final stretch. Of those that reported, 13 topped EPS estimates.
Cisco (CSCO) reported quarterly results that were slightly ahead of estimates. But the company's outlook stoked fears of a slowdown, with the CEO saying customers were sending "mixed signals", sending shares down 11% for the week.
Walt Disney (DIS) posted a strong quarter, benefiting from advertising sales at ESPN. The company reported a 16.4% y/y rise in revenue to $10.0 bln, topping the $9.4 consensus. Earnings per share came in at $0.67, easily topping the $0.58 consensus. Despite the beat, shares fell 4.0% for the week.A handful of retailers reported quarterly results. JCPenney (JCP), Kohl's (KSS) and Macy's (M) reported better-than-expected EPS, while Nordstrom (JWN) posted in-line results. Only Macy's stock managed to post a gain for the week, up 3.9%.
In economic news, overseas data that supported the notion of a slowdown in the global recovery weighed on U.S. stocks. China reported weaker-than-expected retail sales and the Bank of England lowered its economic outlook.
Back in the U.S., weekly new unemployment claims rose to a six month high of 484,000, which was worse than the Breifing.com consensus of 465,000. Initial claims have remained between 450,000 and 500,000 since the middle of November 2009.
Retail sales rose 0.4% in July, slightly below the Briefing.com consensus of 0.5%. Almost all of the gain can be attributed to increased demand for gasoline and motor vehicles. Core sales -- which excludes sales from auto dealers, gasoline stations, and building materials and supply stores -- declined 0.1%. As a result, Briefing.com economist Jeff Rosen reduced his third quarter GDP forecast to 0.7% from 1.0%.
On a related note, the trade deficit expanded by a greater-than-expected amount which will negatively impact the second estimate to Q2 GDP.
Earnings report season continues to wind down in the upcoming week, but there are some potentially market-moving names slated to report. Dell (DELL), Lowe's (LOW), Home Depot (HD), Wal-Mart (WMT), Deere (DE) and Target (TGT) are among the 14 S&P 500 companies confirmed to report on Briefing.com's economic calendar.
Additional signs that the strength of the global recovery is waning sparked selling pressure, resulting in sharp losses for the major indices.
The S&P 500 declined four consecutive sessions, with the bulk of this week's loss occurring on Wednesday (-2.8%). Losses were broad-based and trading volume was light, with the NYSE not surpassing 1 million daily shares for the 20th consecutive session.
Nine of the 10 sectors declined, with tech (-5.6%), industrials (-5.0%) and financials (-4.9%) coming under the most selling pressure. Defensive-oriented sectors outperformed on a relative basis, with the telecom gaining 0.6%. Risk aversion was also seen in the relative underperformance of smallcap shares, with the Russell 2000 tumbling 6.3%.
The FOMC meeting Tuesday marked one of the major events of the week. The Fed held rates unchanged at 0.00% to 0.25%, as expected, and also announced plans to use proceeds from its more than $1 tln holdings in agency MBS and debt to buy longer term Treasuries. The news was not unexpected after last week The Wall Street Journal reported that the Fed would be considering the action. But it is a clear sign that Fed is concerned about the economic recovery effort. The news helped drive the 10-year note yield down to 2.64%, marking the lowest level since April 2009.
In corporate news, Hewlett-Packard (HPQ) dropped 12.5% for the week after company reported that its CEO was stepping down due a violation of HP's standards of conduct related to expense reports. At the same time, the company reported upside preliminary third quarter EPS of $1.08 versus the $1.07 Thomson Reuters consensus and raised its Fiscal year 2010 EPS forecast. A total of 18 S&P 500 companies reported earnings as second quarter earnings reporting season enters its final stretch. Of those that reported, 13 topped EPS estimates.
Cisco (CSCO) reported quarterly results that were slightly ahead of estimates. But the company's outlook stoked fears of a slowdown, with the CEO saying customers were sending "mixed signals", sending shares down 11% for the week.
Walt Disney (DIS) posted a strong quarter, benefiting from advertising sales at ESPN. The company reported a 16.4% y/y rise in revenue to $10.0 bln, topping the $9.4 consensus. Earnings per share came in at $0.67, easily topping the $0.58 consensus. Despite the beat, shares fell 4.0% for the week.A handful of retailers reported quarterly results. JCPenney (JCP), Kohl's (KSS) and Macy's (M) reported better-than-expected EPS, while Nordstrom (JWN) posted in-line results. Only Macy's stock managed to post a gain for the week, up 3.9%.
In economic news, overseas data that supported the notion of a slowdown in the global recovery weighed on U.S. stocks. China reported weaker-than-expected retail sales and the Bank of England lowered its economic outlook.
Back in the U.S., weekly new unemployment claims rose to a six month high of 484,000, which was worse than the Breifing.com consensus of 465,000. Initial claims have remained between 450,000 and 500,000 since the middle of November 2009.
Retail sales rose 0.4% in July, slightly below the Briefing.com consensus of 0.5%. Almost all of the gain can be attributed to increased demand for gasoline and motor vehicles. Core sales -- which excludes sales from auto dealers, gasoline stations, and building materials and supply stores -- declined 0.1%. As a result, Briefing.com economist Jeff Rosen reduced his third quarter GDP forecast to 0.7% from 1.0%.
On a related note, the trade deficit expanded by a greater-than-expected amount which will negatively impact the second estimate to Q2 GDP.
Earnings report season continues to wind down in the upcoming week, but there are some potentially market-moving names slated to report. Dell (DELL), Lowe's (LOW), Home Depot (HD), Wal-Mart (WMT), Deere (DE) and Target (TGT) are among the 14 S&P 500 companies confirmed to report on Briefing.com's economic calendar.
13 Ağustos 2010 Cuma
On CNBC's Kudlow Report Tonight
Tonight at 7pm ET on CNBC:WILL A GOP MID-TERM SWEEP RESCUE THE STOCK MARKET?
- Larry Sabato, Director, University of Virginia Center for Politics
- David Wasserman, The Cook Political Report House Editor
plus…
- Greg Valliere, Chief Political Strategist; Potomac Research Group CNBC Contributor
- Andy Busch, BMO Capital Markets; CNBC Contributor
IRANIAN NUKES & $200 OIL
- John Kilduff, CNBC Contributor; Again Capital
- Frank Gaffney, Center for Security Policy President; Former Asst Secy of Defense for International Security Policy Under Reagan
TO RAISE OR NOT TO RAISE RATES:
FED'S HOENIG: GET OFF ZERO RATES! FED NEEDS TO RAISE RATES, END 0% RATE POLICY
- Ron Insana, CNBC Contributor; "How to Make a Fortune from the Biggest Bailout in U.S. History" Author
- Michael Pento, Chief Economist; senior economist at Euro Pacific Capital
MARKETS: WHAT'S AN INVESTOR TO DO?
- Joe Battipaglia, Stifel Nicolaus Market Strategist
- Warren Meyers, CNBC Market Analyst; Walter J. Dowd CEO
FANNIE/FREDDIE SUMMIT PREVIEW
CNBC’s Diana Olick reports.
Please join us. The Kudlow Report. 7pm ET. CNBC.
Happy 'Friday the 13th'
The market is roughly flat in early trading. If the index closed here, the S&P 500 would be down roughly -3.5% for the week. Interestingly, since the July 2 lows, the market has not been able to put in 2 consecutive up weeks or down weeks in a row. This demonstrates the push-pull that is in place right now between the bulls and bears.
The August Consumer Confidence Survey came in in-line at 69.6, which is up from last month's reading of 67.8. And advance retail sales rose slightly less than expectations at +0.4%.
Asian markets were mixed overnight. Hong Kong fell slightly after news that Q2 GDP grew 1.4% there last quarter, less than expected. China rose 1.2% overnight. There were also GDP reports in Germany and France this morning, with Germany's GDP rising 2.2% in Q2. Europe's markets were also down a bit this morning.
The dollar is trading higher again today, capping off a very solid week for the greenback. This could be weighing on commodity prices, with both gold ($1213) and oil ($75.60) prices down slightly.
The 10-year yield is lower, back down near its recent lows at 2.71%; and the volatility index (VIX) is roughly flat at 25.75.
Trading comment: The SPX is still hovering below its 50-day average. Given this week's sharp pullback, I would not be surprised to see a bounce next week. But I think that unless the market rallies back above its 200-day moving average, we are likely back into trading at the lower end of the recent trading range. As such, I am holding off on new buys right now, and will look for a better buying opportunity at lower levels.
long GLD, VXX
The August Consumer Confidence Survey came in in-line at 69.6, which is up from last month's reading of 67.8. And advance retail sales rose slightly less than expectations at +0.4%.
Asian markets were mixed overnight. Hong Kong fell slightly after news that Q2 GDP grew 1.4% there last quarter, less than expected. China rose 1.2% overnight. There were also GDP reports in Germany and France this morning, with Germany's GDP rising 2.2% in Q2. Europe's markets were also down a bit this morning.
The dollar is trading higher again today, capping off a very solid week for the greenback. This could be weighing on commodity prices, with both gold ($1213) and oil ($75.60) prices down slightly.
The 10-year yield is lower, back down near its recent lows at 2.71%; and the volatility index (VIX) is roughly flat at 25.75.
Trading comment: The SPX is still hovering below its 50-day average. Given this week's sharp pullback, I would not be surprised to see a bounce next week. But I think that unless the market rallies back above its 200-day moving average, we are likely back into trading at the lower end of the recent trading range. As such, I am holding off on new buys right now, and will look for a better buying opportunity at lower levels.
long GLD, VXX
BUY BONDS? NO THANKS
We've had quite the debate lately as to whether bonds are in a bubble or not. I actually think they were in a bubble, but the bubble has already popped.
First off know that bond cycles tend to be very long and reverse very slowly. So we aren't going to see bonds just collapse like a stock market crash and all of a sudden we have interest rates pushing 15%. That just doesn't happen in the bond market.
Know also that 25 to 30 years is about as long as a bond cycle ever lasts.
Now take a look at the following charts.
I believe the recent rally over the last few months is the initial echo rally (a bear market rally) that will top and roll over before making new highs.
Ask yourself, would you lend money at 4% for 30 years to a country that is actively trying to debase it's currency and is so deeply in debt that we will never be able to pay that debt off without even further currency debasement? Don't forget you would be buying into a market that has been in a steady uptrend for 30 years.
Of course you wouldn't.
I know there are plenty of analysts that will argue for the continuation of a 30 year bull, but then those same people expected the tech bubble to continue for eternity and these are the same analysts who had convinced themselves that there was a shortage of real estate in `05 & `06. At secular bull market tops the masses will always be able to manufacture nonsense reasons for why the bull will continue indefinitely. At secular bull market tops common sense gets thrown out the window.
Human nature never changes. I can also guarantee that the top of the gold bull will be no different. If you think bond bulls, real estate bulls or tech bulls were ridiculous I can assure you they won't hold a candle to the absolute insanity that will reign among gold bugs when the secular gold bull tops.
After taking a quick look at the long term bond chart it appears bonds have a major cycle low about every 2-2 1/2 years. They just did put in that cycle low this year.
So we have a simple cyclical sign to watch for. If bonds are unable to move to new highs during this cycle and if they move below the spring low then we will have confirmation that the secular bull market in bonds has expired.
First off know that bond cycles tend to be very long and reverse very slowly. So we aren't going to see bonds just collapse like a stock market crash and all of a sudden we have interest rates pushing 15%. That just doesn't happen in the bond market.
Know also that 25 to 30 years is about as long as a bond cycle ever lasts.
Now take a look at the following charts.
That is a 29 year bull market, complete with a final parabolic move out of the trading range on the Fed's ill fated attempt to artificially control long term rates.
I have news for you, when ever the government tells you it is going to force the market to do something you can pretty much get on the other side of that trade with virtual impunity. (Remember what happened when the SEC banned short selling in financials) Markets are just too big for anyone to change a secular trend. Any attempt to do so will just hasten what would have happened anyway.
As you can see Bernanke did just that. The Fed's attempt to control long term rates just accelerated the final move resulting in the bond market immediately reversing and now even after a year and a half interest rates are still 140 basis points above the "Bernanke bottom".
I believe the recent rally over the last few months is the initial echo rally (a bear market rally) that will top and roll over before making new highs.
Ask yourself, would you lend money at 4% for 30 years to a country that is actively trying to debase it's currency and is so deeply in debt that we will never be able to pay that debt off without even further currency debasement? Don't forget you would be buying into a market that has been in a steady uptrend for 30 years.
Of course you wouldn't.
I know there are plenty of analysts that will argue for the continuation of a 30 year bull, but then those same people expected the tech bubble to continue for eternity and these are the same analysts who had convinced themselves that there was a shortage of real estate in `05 & `06. At secular bull market tops the masses will always be able to manufacture nonsense reasons for why the bull will continue indefinitely. At secular bull market tops common sense gets thrown out the window.
Human nature never changes. I can also guarantee that the top of the gold bull will be no different. If you think bond bulls, real estate bulls or tech bulls were ridiculous I can assure you they won't hold a candle to the absolute insanity that will reign among gold bugs when the secular gold bull tops.
After taking a quick look at the long term bond chart it appears bonds have a major cycle low about every 2-2 1/2 years. They just did put in that cycle low this year.
You can see from this chart that every 2 year cycle has bottomed above the last. If this was to change it would break the pattern of higher highs and higher lows.
So we have a simple cyclical sign to watch for. If bonds are unable to move to new highs during this cycle and if they move below the spring low then we will have confirmation that the secular bull market in bonds has expired.
12 Ağustos 2010 Perşembe
Over the Rockies
We made it back to Moab from our little Colorado excursion.
(I've poached the photos from Roy's blog, since I don't have a camera)
Old Friends and Fam
Mark Sundeen took Roy and me to my brother Doug's mountain cabin in Conifer, Colorado, where we stayed a couple nights (That's when I wrote the last blog post). Then Mark took us to Louiseville, outside Boulder, where we had dinner at the house of my old friends, Tim, Sherry, and their son Daniel. My old friend Joan showed up with her 2 daughters, Charya and Maitri, and an old acquaintance, Bruce. It was good going over old times, but also kind of emotional, talking about my little Mount Evans escapade (see last blog post; Joan had been my room-mate at the time).Roy and I then went back with Joan and her kids to Thornton (suburb of Denver) and stayed with them and her husband, Sokha, for a week or so. Then Sokha took us out to Arvada to train-hop.
Snitching on Hobos
We spent the first night under a bridge, and thetrains kept stopping in the wrong direction. The next day we walked westward to where the trains went by an opulent neighborhood (which is unusual). Rainy storm clouds were gathering, but there happened to be a horse trailer for shelter right by the tracks and we camped the 2nd
night there. Again, no trains were stopping in the westward direction so we finally decided to walk out to hitch-hike. Funny, I kept thinking
in the back of my mind how things always work out when we're on the
verge of giving up, that a train would stop right as we were walking
away. Sure enough, it did! We got excited and overconfident and loud.
We hopped into an empty scrap car, but a resident of one of the McMansions spotted us, came out with his cell phone, yelling out to us from his back yard. I was feeling attached to our car so wanted to
just lay low and hope for the best, but Roy thought we should get out and
hide in the bushes. We finally did. But another train came eastwardand slowed way down, blocking our way to the westward train. That got me a bit worried we wouldn't be able to get on if we didn't do it now, so we did. Roy was still worried about cops coming, but I, Mr
Over-confident, told him we shouldn't worry so much, that I hadn't
gotten caught by cops in 10 years of train-hopping. But...duh,..the cops came, and they knew exactly what car we were hiding in, and cited us. Totally avoidable. Roy was right. So we ended up hitching out.
I later called up the court to see if I could work out community service and
avoid court. They told me they thought it would be possible, to call back in September, and I could probably write out a plea thingy.
Family and Teeth
We hitch-hiked to to my parents' in Fruita, Colorado, where we stayed almost a week. Roy and my parents got along splendidly. I think my parents fell in love with Roy.
My parents also got me hooked up with an old friend of our family's, Don Adams, a retired dentist who goes to their church, and he fixed up my teeth for free! He has been doing free dentistry for homeless people for years, as well as doing mission trips to Peru and Siberia to do free dental work. He's a quiet, gentle man, and you'd never know all that he does for people - he never talks about it. I didn't want to ask him to do my teeth, but my parents let the cat out of the bag. I feel so grateful. We had pretty much gourmet dinners every evening at my parents' - most all bargain food (3 for the price of none) from the supermarket "specialty section". The last evening there, my brother Ron, my nephews, Kyle and Wayne, with Wayne's wife, Lila, joined us for a nice dinner.
It feels good being back in Moab. We're here just in time for Ramadan. Carolyn and John and I decided to celebrate it this month.
On the philosophical side of things, because of a plethora of comments and questions from Evangelical Christians, I recently added FAQ # 32 to the website: Don't you know about grace? Aren't you trying to "work" for your salvation?
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