About Me

Retired chief investment officer and former NYSE firm partner with 40 years experience in field as analyst / economist, portfolio manager / trader, and CIO who has superb track record with multi $billion equities and fixed income portfolios. Advanced degrees, CFA. Having done much professional writing as a young guy, I now have a cryptic style. 40 years down on and around The Street confirms: CAVEAT EMPTOR IN SPADES !!!

Sunday, August 20, 2017

Stock Market -- Aug. 1 -- Nov.1 (3)

Trump's behavior on North Korea and then over Charlottesville have significantly undermined
investor confidence both in his ability to provide sound presidential leadership and to provide
in-depth direction for key agenda items such as the budget, debt ceiling and broad tax reform.
People are correct to harbor serious doubts about the guy and with such critical agenda items just
weeks away, The Donald has little time to turn matters around. The market has sold off in recent
weeks, but players have hedged bets only mildly so far, and many may have already abandoned
progress on Trump fiscal programs while basically remaining bullish on the 6-12 month outlook.
VLE Weekly

The broad Value Line Arithmetic has broken the uptrend line in place since early 2016 and has
violated its 40 wk m/a for the first time in two years. Momentum and breadth are eroding, volatility
is on the rise, and, as shown in the bottom panel of the chart, there are early indications the
market is setting up to change direction for the intermediate term. There is price support for the
VLE just below the current level.

The market is bending lower, but it has not broken yet.

Thursday, August 17, 2017

SPX Daily -- Quickie

Long time and knowledgeable New Yorkers like myself are hardly phased anymore by Trump's
thoroughgoing egomania. But, some of us were surprised by how far he went off the rails this
Tuesday in his improvised and morally distorted press conference in the lobby of the Trump
Tower. He lost his business councils of prominent CEOs and has senior GOP elected officials
questioning his fitness to be a successful president. What was surprising was that it all happened
live and in full public view. Decent, conscientious folks (including a number of investors) have
been exhausted by the ugly melee in Charlottesville on Sat. past and its troubling aftermath,
stoked by Trump himself. The stock market took a drubbing again today as some traders started
to question how thin the ice is that they have been happily skating upon.  SPX Daily

The market has slipped into mild corrective mode with support at SPX 2400 and I am certainly
not clear on whether market players will quickly move to correct the damage or whether
more traders and investors will want to trim positions further and sit back to see if  the current
troubling political shit storm settles down. God knows, they have already given this guy the
benefit of the doubt.

Trump's competence and fitness to be president is finally coming to the fore as a factor at a time
when serious economic and financial issues are going to hit the calendar soon after Labor  Day.
Folks want to see the Trump Team's fiscal programs and hopefully intelligent outreach to the
Congress and do not want to see him consumed by bitching over Confederate statues and
symbols of a war fought over 150 years ago. Lasting damage has been done to his reputation
but his guys have to fight like hell now to get him back on the rails.


Saturday, August 12, 2017

Stock Market -- Aug. 1 -- Nov. 1 (2)

Patriotism, as they say, is the last refuge of scoundrels. And, in Messrs. Trump and Kim, we have
quite a pair. I am having trouble believing that this contretemps is more than a giant Trump
smokescreen, with North Korea a willing accomplice.Trump is falling in the polls. He fumbled
his end of the health care bill and special counsel Mueller and his group are taking a hard look at
whether serious financial crimes were committed involving Trump et al and Russians. With the
fire and fury threat, The Donald has drawn attention away from increasing political weakness.
But, since there is no guarantee this is not an exercise in reality TV fakery, but is instead a crisis,
the stock market took a jolt this week.  VLE Weekly . The Value Line Arithmetic dropped sharply
this week and is at shorter term support just under 5500. Moreover, the index is set to test its 40
week m/a and has broken the uptrend in place since the latest advance began in Feb. '16. These
are 'heads up' factors for the broad market, and we'll have to see next week whether the latest
contretemps between the US and the PRNK will fizzle and provide relief, or persist and worsen
and lead real to genuine trouble for us and the market.

Market breadth last week took its sharpest drop since prior to the 2016 election. The NYSE
A/D line could be ready to test its 13 wk. m/a and the rising trend lines from Feb.'16 and the post
election rally have been broken. Note, however, that the A/D line is still well above its 40 wk.
m/a., so a longer term test may still be a ways away.  NYAD Weekly

The bottom panel of the chart shows the VIX or volatility measure. It has been in a jagged
down trend since the autumn of 2015, but last week's bounce broke that. This represents
another 'heads up' for the market.

Well then, have we entered a more volatile and corrective interval that has characterized so
many past Aug. / Oct. periods? Too early to tell I say, especially since you have a bullshitter
like Trump as the instigator.


Saturday, August 05, 2017

Stock Market -- Aug. 1 -- Nov. 1

History shows that the period of August through the end of October can be volatile with no shortage
of price corrections and even a couple of crashes (1929, 1987) thrown in. It is a period when market
players critically assess what their year may look like and are also forced to look at the next year
more seriously. It has also been a time when the Fed tightens the reins on liquidity ahead of the
typical holidays easing interval toward year's end.  Seasoned investors know the history and are on
heightened alert. As well, it is a time to plan portfolio and rotational change for the following year.
So, you may find plenty of cautionary market commentary from fundamental and technical sources
show up in you in-box. For all I know, the market may skate smoothly right on through this period,
but I plan to showcase it weekly to avoid boredom from taking further hold.

Now there are contentious political issues ahead, including raising the debt ceiling, trying to settle
on a budget and the possible introduction of tax reform legislation. Tax reform could be a plus if
tax cuts come into play, or a bust if talks do not even start in the Congress or fail when they do.
Moreover, as autumn wears on there will be Fed behavior to study and speculation about who, if
anyone, might replace Ms.Yellen as chair. Finally, the Mueller investigation of Russia / Team
Trump is moving into probable cause territory with two grand juries now open for business.

I will focus on two charts. The first is the Value Line Arithmetic price chart, an unweighted index
of over 1700 closely watched issues. Secondly, comes the NYSE cumulative advance / decline
line.

The Value Line ($VLE) is trending up but has lost substantial momentum since early in the year.
The weaker positive action reflects the potential for slower economic growth over the rest of
the year which is also reflected in weekly forward looking economic indicator data. This index
is holding its positive trend line from early 2016, but just barely.  VLE Weekly

The NYAD is in a second wave up from Feb. '16. It has lost momentum this year, but is stronger
than the VLE. This suggests investor preference for large cap stocks. The VIX is shown in the
bottom panel of this chart. It is in the low end of the historic range, and we'll see how it fares
over the Aug. / Oct. period.  NYAD Weekly


Sunday, July 30, 2017

SPX -- Monthly

The monthly SPX is overbought and hyper-extended when compared to its post WW2 price channel.
There is no price bubble as happened at the end of the past century, and the overextended nature of
the current market does not match the 'bubble echo' which occurred over 2006-7. SPX net per share
is expected to be right around the trend line plot since WW2. Viewed historically, the SPX p/e ratio
at about 18.7x is a hefty 2.5 multiples above the very long term average and directly reflects the
nominal level of short term interest rates and current historically low inflation. The Phillips
curve -- the inflation rate varies inversely to the unemployment rate -- has failed in recent years
as the economy has progressed slowly enough not to trigger off a bout of cyclical accelerating
inflation which has some punch to it. These developments have triggered off a round of  'new era'
thinking in which the economy is seen as able to progress without experiencing the sort of credit
crunch that could trigger off deep earnings and p/e multiple cuts (reversions to norm). According
to a growing group of strategists, it may not be the best of all possible market worlds, but is a
damn fine one. SPX Monthly

There are critics who maintain correctly that proclamations of a new era for stocks will ultimately
turn out to be bullshit and that this will, too. They will be proved right, but when a nastier time
will arrive and how well the market might do in the interim are $64 K questions. There are
features in play now -- the failure of the Phillips Curve and the growth of excess private sector
liquidity in the wake of an already lengthy economic expansion -- that are truly novel. The balance
that exists in both features now are underwriting the market's advance and given their novel
nature, signposts of imminent disruption will not be easy to proclaim directly. This is somewhat
of a 'thinking man's market' and curiously enough, those type of markets are usually weak and
are not making new highs. The best of luck to you!

Saturday, July 29, 2017

US Dollar

In a July 4 post, I opined that the dollar was becoming increasingly oversold as negative sentiment
mounted. From a technical perspective, the USD has now reached critical support around 93 based
on weekly closing prices. The bears appear quite confident the dollar is about to break support and
head well lower.  USD Weekly

The Fed has relaxed some about tightening policy further in view of lower inflation currently,
 but it still seems determined to move away from accomodation down the road as the
economy is still expanding. Moreover, the Fed wishes to start to shrink its balance sheet soon.
With private sector liquidity  still plentiful, this may not be a disruptive event at all in
the near term, but eventual quantitative tightening (QT) will become more of a factor as the
economy matures further. The dollar bears may also regard the sharp recent recovery of the oil
price as also in their favor even though it may eventually add inflation pressure in the US. and
strengthen Fed resolve. The capital and financial markets have been relatively immune to the
continuing Trump shit storm so far, but perhaps the dollar bears are more anxious. The US, as a
matter of fact, is  just a few short steps away from a constitutional crisis over Trump's desire to
collapse the inquiries into Russian intervention in the US election and heavy hints of financial
wrongdoing that could involve Trump business entities.

The USD is now very oversold for the intermediate term and it seems a little odd that dollar
shorts coming on now would be richly rewarded after such a sharp decline has already taken
place.

Saturday, July 22, 2017

SPX -- Weekly

The SPX is overbought for the intermediate term, is getting overextended for the intermediate, and
fully valued on the more liberal valuation measures. The weekly cyclical indicator composites did
better last week but have been running flat for most of 2017. Outside of all that, the market is still
trending higher as players use the slow growth, low inflation, and expanding private sector liquidity
environment to coax the SPX higher. Market psychology remains formidably positive even though
there is a strong consensus that the market could easily correct by 10% at some point through mid
2018. With momentum measures on high, extended planes, you need to monitor the situation
diligently.   SPX Weekly