The New Bull Market

[ducati916]

From a 'news' perspective, the only news that will move markets (significantly) lower in the short term: stimulus package:

Assuming this comes through, the markets will jump higher. If it fails, we could see a pullback. The pullback would only be a pullback, it would not create a bear market.

Interest rates heading fast for that 1.2%

Banks, of course loving that:

Whereas the market's darlings, are yesterday's news.

But an impressive run nonetheless.

Just a roundup of the sectors:

Energy on fire. The problem is (not yet and quite a ways away) this is your inflation. The trouble is that the Fed. does not really control this market. OPEC does (again) after essentially destroying the US Shale industry. Will OPEC, if POO runs to $100/b step in for lower prices? I doubt it. Now its not the 1970's and significant industries (Tech) are arguably less exposed to high POO, so, potentially the inflation issue would be far less damaging in any case. COLAs are dead, gone and never coming back and they had a tremendous impact on driving inflation, so inflation 1970's style is probably never coming back either.

Monetary policy (the Fed.) does not drive 1970's style inflation either because the new money leaks primarily into financial assets, which for those with access, is a good thing. However it does create CPI inflation, which does contribute to the wealth gap. That wealth gap is now so large that it is creating (as evidenced) significant social unrest. The risk comes more from social unrest and a collapse of a number of institutions, than a hyper-inflationary scenario. On that basis, I think a stimulus package to the masses gets done. It is the uncertainty that is contributing to this really wishy-washy market currently: the bulls are wary, not bidding prices too (much) higher and the bears are just plain scared of being short and the stimulus being passed (typically) over a w/e. and being flayed on a Monday open.

Finally, Mr flippe-floppe-flye:

jog on
duc

 

[Skate]

That wealth gap is now so large that it is creating (as evidenced) significant social unrest.

All the woes of the world "nailed in one sentence".

Skate.

 

[qldfrog]

All the woes of the world "nailed in one sentence".

Skate.

I actually do not believe the wealth gap is that much larger, when the Rockefeller where rebuilding castles in the last century while 8 y old kids where working, it was bigger.
And comparing wealth of Bill Gates based on the share price and ownership percentages of company owners is a bit artificial.
I believe the real issue is that people are now aware, and have an entitlement and expectations.
The great reset will sort it out and it will be a great shock for the first world so called "poors" aka 99% to realise that outcome equality means they are going to get even poorer by sharing with the 6 billions or so other citizens of the world living on a few dollars a day...
But the wheel is turning and the reset pushing..how are we going to save ourselves?
One of the fundamental of this change is the loss of value of the fiat currencies.deflation/inflation or not initially, it will end up with a debasing of the usd euro aud

 

[ducati916]

Weekend data:

Commercials trading against gold. That last bar down is ominous, which means that they have increased their short position. The other relevant factor is that the commercials a counter-trend traders. They buy in falling markets, sell in rising. When they trade with the trend, that is not a good sign. I have gold's support points at $1600/1400 and $1200. I would expect to see $1600.

Again (although not to the same extent and in fact reducing rather than increasing) the commercials are trading with the trend in the 10yr. We see 1.2% no doubt.

Without a doubt, the market is toppy and precarious. There have been two occasions where we could have pulled back and didn't. That means that when the correction does come, it will be deeper because of it. The article (above) is interesting because it does articulate the Rothschild philosophy of buy on the sound of the guns, sell on the sound of the trumpets. The vaccine represents the trumpets and its actual arrival may trigger a wide spread of profit taking across all sectors, because there is no doubt (from few, if any body) that this is a high priced, speculative market with lots of froth.

The puzzle is gold. The yield, 1.2% is really nothing in the face of CPI inflation (which we know the market is indifferent to). And if commodities are breaking out on the back of a weak dollar, driving PPI inflation, which looks plausible 2yrs +/- down the road, then gold should be stronger. At least consolidating at the $1800 level. Maybe it still does. If it falls, $1600, $1400, $1200, what is the message and how will the cryptos play out?

jog on
duc

 

[qldfrog]

Realy interesting time Duc.
When you take a step back and look at the AVERAGE P/E you have in your post, absolutely crazy even with low inflation, etc etc and i understand these pretty well: right now, i would be ready to do a go cash all,wait 3 months and start again but even cash or bonds are not safe.
As i am not unique, based on risk aversion, some want to get the few extra % and go higher fangs,etc while other go gold crypto or just keep their finger on the sell all trigger button.
Even more that before, we are in a time where whiplashes can be expected sudden jump or crash at the sheer vague notion of a pretext

 

[qldfrog]

Let this not spoil your weekends ?

 

[Smurf1976]

Realy interesting time Duc.
When you take a step back and look at the AVERAGE P/E you have in your post, absolutely crazy even with low inflation, etc etc and i understand these pretty well: right now, i would be ready to do a go cash all,wait 3 months and start again but even cash or bonds are not safe.

Tops usually take longer to arrive than rational logic says they ought to. My thinking:

20th January = new US President sworn into office. Politics aside, that ends any uncertainty surrounding that assuming it goes smoothly.

March - April = seasonal effects on COVID become more favourable to the northern hemisphere countries.

Add in the COVID vaccine rolling out on significant scale and presumably being seen to work.

Combined that sounds like a recipe for peak euphoria but we're not quite there yet in my view, there's still a bit further to go.

 

[ducati916]

I would definitely agree that 'tops' take time to form, even the C19 'top' in Jan/Feb took time to form. It was only really the depth and speed of the sell-off that really caught people out.

Given that this is true, it should be easy to spot a top forming, even where there is a high level of speculation in the market that dulls some of the more traditional indicators.

Here is an ECG of the market:

You want to see it essentially on your zero line. Zero line = nothing to see here. Interestingly, in Jan.2020, is when the real warning of what was about to hit came. The bounce, was sitting on the zero line, which makes sense if you know the inputs. Now this is not a tool for picking the exact highs or lows, it is more about signalling something is amiss in the market. You then look at other metrics to figure out more specific timing. This is also an EOD data chart, which is fine as it signals (really) early in most cases (but not all).

This next chart is not mine, but it is interesting:

The theory espoused is that now that the trend line has been broken to the upside, the market is at risk of topping. Below is better. Now that is kinda contrary to more traditional methods, but given that on a fundamental basis we are bubblelicious and with a fundamental change approaching with the rollout of the vaccines, it kinda makes sense.

And a weekend missive from Mr flippe-floppe-flye:

jog on
duc

 

[Smurf1976]

Here is an ECG of the market:

Very interested to understand more about that chart if you're willing to explain?

As in how that line is calculated. What's the input? It's a chart of ???

Perhaps it's obvious but it's gone over my head as to the detail.......

 

[qldfrog]

Great post ?

 

[qldfrog]

Very interested to understand more about that chart if you're willing to explain?

As in how that line is calculated. What's the input? It's a chart of ???

Perhaps it's obvious but it's gone over my head as to the detail.......

If i can help
NYSE Percent of Stocks Above 50 Day Moving Average $NYA50R
Divided by
nyad
Ny decline advance issue
See https://www.google.com/amp/s/seekingalpha.com/amp/article/4124142-nyad-challenging-myth

Mr Duc is very much into these kinds of A/B indicator charts which obviously based on the components can put things in perspective

The other chart on the graph is just the stock market spx

 

[ducati916]

Very interested to understand more about that chart if you're willing to explain?

As in how that line is calculated. What's the input? It's a chart of ???

Perhaps it's obvious but it's gone over my head as to the detail.......

Mr Frog is quite correct: S&P stocks above their 50 day moving average/advancing issues. Both (obviously) are looking at market breadth. A strong market has advances in both so that they stay in balance. This is the zero line (one cancels out t'other). A market that favours one or t'other, is a market out of balance. Something is not quite right. Now that doesn't mean that something will immediately happen (although sometimes it does) it just means that you need to look more closely at other metrics and primarily be PREPARED for something. You may lighten up, taking some profits, you may rebalance into defensives, you may hedge or you may just instead of looking at the market once a week, look everyday.

jog on
duc

 

[ducati916]

Hmmmm,

So (excepting cryptos) we have a bit of a run to safety (perceived). Anything more than a 1 day deal?

Vol. is picking up. This has been threatening for about 2 weeks now and nothing has eventuated yet. Is today the day? Your choices are: (a) watch and do nothing (the bull trend is intact until trend line is broken) or (b) act early and hedge a portion of exposure. The last couple of weeks I have hedged and been wrong. I will hedge 50%. I hate giving back profits, this is (hedging) simply a cost of doing business.

The market:

Still (potentially) has room to run to the upside, but, we have had a pretty good run and vol. has been crushed.

When all is lost, there is always 1 constant:

jog on
duc

 

[qldfrog]

Hmmmm,

View attachment 116017View attachment 116018View attachment 116019View attachment 116022

So (excepting cryptos) we have a bit of a run to safety (perceived). Anything more than a 1 day deal?

View attachment 116020

Vol. is picking up. This has been threatening for about 2 weeks now and nothing has eventuated yet. Is today the day? Your choices are: (a) watch and do nothing (the bull trend is intact until trend line is broken) or (b) act early and hedge a portion of exposure. The last couple of weeks I have hedged and been wrong. I will hedge 50%. I hate giving back profits, this is (hedging) simply a cost of doing business.

The market:

View attachment 116021

Still (potentially) has room to run to the upside, but, we have had a pretty good run and vol. has been crushed.

When all is lost, there is always 1 constant:

View attachment 116016

jog on
duc

Thanks, and by now BTC is at -2%.first thing i checked this morning after looking at the usual down day.
Is BTC becoming an edge on market fall or not ?
This is a long term game and so far unsure as to what the answer will be.gold silver up as expected.
I seem to detect a change in silver over a while back, decade? Silver had a dual role, a bit of safehaven but also had an industrial side so you could have silver up with market up, i have a feeling this has lessened.
So a bit unsure on BTC and silver as edge. Mr Duc might have a more informed view.
May i ask: when you edge 50%,do you actually add edge onto unchanged portfolio or do you sell a 3x bull and buy a 3xbear etf instead.
what is your edging mecanism?
Only if it is not a trade secret

 

[ducati916]

Thanks, and by now BTC is at -2%.first thing i checked this morning after looking at the usual down day.
Is BTC becoming an edge on market fall or not ?
This is a long term game and so far unsure as to what the answer will be.gold silver up as expected.
I seem to detect a change in silver over a while back, decade? Silver had a dual role, a bit of safehaven but also had an industrial side so you could have silver up with market up, i have a feeling this has lessened.
So a bit unsure on BTC and silver as edge. Mr Duc might have a more informed view.
May i ask: when you edge 50%,do you actually add edge onto unchanged portfolio or do you sell a 3x bull and buy a 3xbear etf instead.
what is your edging mecanism?
Only if it is not a trade secret

Monsieur Frog, j'achète simplement des Put sur l'indice.

The majority are still buying CALLS, so premiums are reasonable. I don't fanny about trying to be too cute with various ETFs (unless 1 of them really drops far more than the index), if necessary I just buy more than might otherwise be required. The big advantage is that your losses (if you don't sell them) are capped and your longs (after some underperformance) just carry on their merry way. If you close them out, then a cheap way to hedge the common.

And we are twitching:

Usually (assuming it drops a bit further) there is some lead time. Not shown, the VIX has also turned higher (close) and looks a little ominous, as if there is some bad news ready to break over the next day or two. Market is super twitchy...when it moves higher, just fractions of a percent, not inspiring a lot of confidence.

jog on
duc

 

[qldfrog]

Monsieur Frog, j'achète simplement des Put sur l'indice.

View attachment 116036

The majority are still buying CALLS, so premiums are reasonable. I don't fanny about trying to be too cute with various ETFs (unless 1 of them really drops far more than the index), if necessary I just buy more than might otherwise be required. The big advantage is that your losses (if you don't sell them) are capped and your longs (after some underperformance) just carry on their merry way. If you close them out, then a cheap way to hedge the common.

And we are twitching:

View attachment 116035

Usually (assuming it drops a bit further) there is some lead time. Not shown, the VIX has also turned higher (close) and looks a little ominous, as if there is some bad news ready to break over the next day or two. Market is super twitchy...when it moves higher, just fractions of a percent, not inspiring a lot of confidence.

jog on
duc

Merci Monsieur Le Duc?

 

[peter2]

Gomez loved to lose when day trading, but he rarely did and sooked when he won.
A little french from 'Morticia and he'd be quickly distracted.

 

[ducati916]

The action in stocks is a holding pattern. They are waiting to see what eventuates in (I believe primarily) the dollar and bond markets.

The dollar (as against the Euro) has halted for the moment, but looks set to continue its fall lower. This will (if it continues lower) drive the inflationary trade, PPI, that does matter to the market.

As a result, bond vol. is picking up: once again, due to vol. being absolutely crushed from the last dip, I don't really have a definitive trend line and so it's a bit of a guessing game.

The movement back to bonds (falling yields) is counter-intuitive if (as we are) postulating (a) PPI inflation due to a (i) rising commodity prices due to a falling dollar.

The bond vol. however is confirmed by price movements against current trends in the commodity markets:

Risk on, Oil/Copper in the red. Risk off: Gold/Silver in the green.

BTC....meh:

Overall, there is no clear message. There would seem to be simply a slightly more defensive posture which is seen simply in ultra-defensives (bonds & gold) as inflation if/when it arrives, is a long way off.

The stimulus package (posited at $900B) is having issues passing the Senate and Trump seemingly has lost interest. Now stocks are very interested in when and how much. This would explain a rotation back to Treasuries and gold, with an expectation of a bad outcome being priced in.

Meantime:

jog on
duc

 

[ducati916]

There are a number of new IPOs coming to market. IPOs (when there are lots) can often signal short term tops and in 2000, major tops:

Gold looks set to resume its downtrend after that little bounce. Treasuries are again adding yield. The question will ultimately become: will the Fed cap yields? If so where? If that becomes the reality and let's pick an arbitrary figure of 2% for the 10yr...what happens? What I think happens is that the dollar sells off hard, which, should then be bullish for gold and or BTC.

In 1933, FDR defaulted on the dollar. In 1971 Nixon defaulted on the dollar and inbetween in 1944 at Bretton Woods, the framework was created for the 1971 default. Now, the default cannot be as blatant as the previous two, but freezing the yield if inflation kicks off is essentially a default.

Inflationary forces are gathering, but they are really weak. The current greater risk by some magnitude is a deflation: a mass of bankruptcies of corporate debt, due to losses. The Fed. would backstop it, at least the major corporations who wield some political power, but this would be a strange mix of deflation and followed rapidly by a counter-inflation netting out to what?

There is an argument that BTC becomes the anchor to the myriad other digital currencies as gold was to the fiats. That is an argument I can accept. The problem for me and this is obviously an age thing...I could not trust the internet with kinda the end of the world holding, especially when you are relying on the internet for paper wealth of shares accessed by computer (albeit nominally by your broker) which you hope adds some accountability, I would need the actual physical as a hedge.

BTC seemingly correlates with gold, at least until more recently when we had a bit of a divergence. I would expect that gap to close. We are essentially dealing with the same psychology. BTC is also in the news:

Stocks as I speak are looking toppy. I increased my hedge early this morning.

The reason?

jog on
duc

 

[ducati916]

So on the close, vol. ramped up and the market fell.

So we'll see if the trend line contains the rise in vol.

Mr flippe-floppe-flye:

jog on
duc