About Me

Retired chief investment officer and former NYSE firm partner with 50 plus 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 !!!

Wednesday, November 30, 2016

SPX-- Monthly

Back on 10/2, the monthly MACD indicator for the SPX had just experienced a positive cross
and because I trust the indicator, I suggested the market could be poised to rise in the months
ahead. I suggested in the title that we could be entering a 'brave new world' because of how
expensive the market is and how hyper extended it is on the very long term, post WW 2 SPX
chart. The implication then was that a fresh uptrend could be starting for the current cyclical
bull market. Well, the market has gone on to new highs in the interim, but, of all things, the
positive cross for the MACD indicator is in virtual stall mode as price momentum has not been
strong enough to push it strongly higher.  SPX Monthly

So, we can give the indicator credit for the recent rally, but I think it is fair to say the jury is
out on sustainable positive price action going forward. You can if you want claim that the
market is on the overbought side currently and when it settles back, more positive action will
ensue and vindicate the monthly MACD. Could be, but I am in no hurry.

Monday, November 28, 2016

SPX Daily -- Overbought Short Term

The cyclical bull market continues despite the recent but doggy two years. The market has
rallied recently to a possible major breakout point, but in doing so has moved up to a short
term overbought position of consequence.  SPX Daily

As with the other rallies we have seen this year, the early phase has taken the SPX up to an
extended position relative to a newly drawn trend line and thus leaves the market with
plenty of room to consolidate or correct in the near term without a clear violation of trend.
Naturally, the chart hardly precludes the market from going higher in the near term, but it
does suggest the train may not entirely clear the station without leaving another entry point
that may be more pleasing to those inclined to add more to long positions.

Holding the Trump bandwagon aside, fundamental cyclical directionals support more gradual
progress, and monthly economic data appear to have firmed although on-the-ground
performance still lags the directional indicators. Investors and traders are also keenly aware
that history favors the Nov. - May period as seasonally positive. As well, the doggy action
in the market since the highs of 2014 is likely whetting some appetites for a strong, positive

The Trump buffs are excited about his proposals to cut taxes sharply, establish sizable
upgrades to infrastructure, and allow companies to repatriate foreign held liquid assets.
They have rejected the idea that the negative Trump ideas of new demands on trading
partners, disruptive pursuit of illegal immigrants and a rebuff on climate change will even
see the light of day. These rather selective menu picks may be just right, but other critical
issues are still being ignored such as an economy already near full employment, and budget
deficits that may prove only slightly stimulative if they drain private and public savings as
they are financed.

The next three months will also bring an eye opening experience of the periodic three alarm
dumpster fires that Trump creates as he goes along. We New Yorkers have known him for
nearly 40 years and we can only guess at the chaos he can promote on a world stage.

Friday, November 25, 2016

Stock Market Profile -- Weekly

Cyclical directional indicators are tracking positive. Excess financial system liquidity is positive
but shrinking owing to faster economic growth and inflation. With the Fed having frozen Its part
of liquidity since late 2014, I favor trading the market and only going long on deep oversolds.
Business profits are beginning to recover but remain under peak 2014 levels.

The market rose to a new high this week. It is modestly overbought. Watch to see if the MACD
can stage a positive reversal. Note that uptrends now in place have not been tested by any pullback.
The market is a tad over 5% above the highs of 2014. The advance to new highs in 2016 counts
as a flimsy bull episode in my view and awaits more robust positive confirmation.
SPX Weekly

The market is clearly overvalued on the various measures I use. Fair value presently lies in a range of
SPX 1990 - 2050.  Currently, the SPX is trading about 9% over the mid-point of the fair value range.
The premium primarily reflects the fact that market players have yet to trim the p/e ratio as they
should when the inflation % accelerates. Folks are now smitten with the presumed economic benefits
of a Trump presidency and the evidence at hand that balanced fund managers and hedgies are
reducing bond exposure in favor of equities.

Bullish sentiment is elevated among advisory services, but is fairly neutral among players who
are actually trading the market via options.

Sunday, November 20, 2016

Long Treasury -- At Deep Oversold

In a Jun. 20 post, it was argued that the long Treasury price was "steaming toward an overbought."
And it got there, registering a major intermediate term overbought. Now, there is a flip side, with
the TLT long Treasury ETF having just sold down to a deep intermediate term oversold.
TLT Weekly

Bond price directional fundamentals began turning negative in early 2016. The deterioration has
been mild but persistent. Absent has been the strong production growth and heavier resource
utilization that puts hefty upward pressure on inflation and galvanizes the Fed into tougher
restrictive action. With only nominal cyclical pressure, bond players ignored the warning signs
and bid Treasuries sharply higher into early Jul., ending  the run with what appears as a blow-off.
The market has trended down since, and has recently tumbled as bond traders have come to
believe that Trump's election will involve heavy fiscal stimulus that will accelerate real economic
growth as well as inflation, and will also result in a large increase in deficit federal financing,
with the Fed to follow by pushing short rates higher.

These new concerns could all turn out to be true, but if so, their realization will take considerable
time and may not be strongly evident until 2018 at the earliest. In the interim, questions are bound
to arise about whether the Trumpistas can pull their fiscal program off and whether other initiatives
from The Donald on trade and immigration may work as growth deterrents. This leaves the question
open whether the current stampede out of bonds will overdo it by enough of a margin to produce
an eventual counter-trend rally in a heavily oversold market.

Near term, TLT is moving toward a respectable support level down around 115.

Whatever, bond players might do well to begin to try and factor a volatility premium into
their pricing models to account for an apparent reduction in primary dealer market making
capability as a result of post 2008 financial system regulation.

Friday, November 18, 2016

SPX -- Weekly

The stock market has tracked my forward looking weekly cyclical fundamental indicator very well
this year. This index has flattened out since Sep. and is in line with the recent toppy action in the
market. Interestingly the economy and corporate profits have seriously under performed the
indicator so that the market has been running well ahead of on-the-ground fundamentals. The latest
rally primarily reflects players buying well on the come in expectation of a Trump / GOP Congress
fiscal stimulus plan presumably to be unveiled early in 2017.

The Fed continues to hint that short rates will be raised soon. A classical cyclical case for a rate
increase is not yet in place, and the Fed has also taken to hinting that rates may be raised to keep
markets from getting too effervescent. With inflation already accelerating and a Trump fiscal
goose to the economy now widely anticipated, the bond market is folding its tents and has shifted
some funds into equities from fixed incomes. With bond yields trending sharply higher near term,
it will be interesting to see if the Fed feels compelled to raise the Fed Funds rate in Dec.

So far, stock players have yet pause to see if there are further assurances from the Trump camp
on stimulus and, if the Congress is willing to go along with the large deficit financing that will
be entailed. GOP conservatives like the tax cut proposals but are indifferent to the infrastructure
plans while the Dems are thumbs down on tax cuts for the wealthy, but like the spending plans.

Equities players will have to watch all this carefully because the industrial side of the economy,
where most of the earnings leverage is, continues to perform poorly. Not only that, but wage
pressure is starting to run well ahead of pricing power, which crimps profit margins. As well,
what if stimulus programs are dinky?

Pauses and / or corrective action in the Trump rally should come as no surprise until matters
are further ironed out.

For the current uptrend in the SPX to be of substance, the market needs to take out the previous
highs of the past summer in a convincing fashion or else the SPX will face a possibly troublesome
'secondary top.'  SPX Weekly

It is not easy from a technical perspective to have high hopes for the current rally as it comes off
a rather shallow oversold.

Monday, November 14, 2016

Gold Price

The argument here early in the year was that there was a mild cyclical case in support of gold. The
rally that ensued became outrageous and took gold up to a huge overbought and record setting
long side speculative interest by the summer. The metal was fueled by a fast rising oil price, Brexit
and uncertainty concerning the US election. The oil price has weakened since, Brexit has quieted
down as an issue and players have voted for equities over gold since the US election. Looking out
into next year and with the reasonable assumption the US will see fiscally stimulative fiscal policies,
there is still a mildly cyclical positive case for the gold price to rise. Short term, gold may remain
hostage to a seasonally weak oil price and possible US dollar volatility (See third panel of chart up
next)  Gold Price -- Daily

Gold has swung from a big time overbought to a moderate oversold and sits atop a $1200 - 1225
support zone. Since the knife is still falling, and given gold's natural volatility, only heroes will be
stepping up now. More settled players may wait to see if the oil exporters can reach a production
curtailment agreement that is not set ridiculously high before year's end when another painful
seasonal down leg in the oil price is in store. As well, hedge funds like gold as a haven to park
money when the stock market takes a hit. Since there could be slips between cup and lip for
the current equities story, do not turn your back on gold.

Thursday, November 10, 2016

The Stock Market As Best As I Can Figure

Back on 10/27, I opined that since the classical conditions for a bear market had not been met, it
was likely premature to write the obituary for the current cyclical bull. The uptrend that was in
place since Feb. of this year was clearly broken by the recent Aug. / Oct. corrective action. and
one could argue that this last leg up through Aug. was the third and final one. But I thought it fair
to wait on that call because it was not underwritten by a clear negative fundamental picture.

The market is now in a seasonally strong period that could last through early spring 2017. Profits
appear to be turning up, and both candidates for the presidency did have fiscal stimulative
measures on their agendas for 2017. Trump's was far larger in scope and with the GOP set to
take the White House plus both sides of the Congress, market players have become re - energized
and have rallied the market strongly from a moderately oversold condition. The SPX bounced up
from its 200 day m/a and awaits further confirmation from a positive reversal of the 25 day m/a.
SPX Daily

We do not know the fate of Trump's stimulus proposals but investors seem willing to bet that
sizable pieces of his tax cut and spending programs will pass, thus buttressing the economy and
profits through next year and into 2018. Sharp upturns in longer dated Treasuries also suggest
fixed income traders agree as they are beginning to factor in higher inflation from faster growth
and increased utilization of capital resources. The roughed out projections for next year also
signal that the Fed is likely to raise short rates to keep inflation in trim. With a larger Treasury
calendar in prospect along with stronger business pricing power, there may also be some rotation
underway from bonds into stocks.

The chart linked to above shows that rapid rises in RSI are often followed by market pullbacks,
and the combination of Trump stimulative measures, should they eventuate, along with probable
Fed tightening may well be a recipe for increased market volatility in the months ahead.

As well, there  could be a substantial timing issue involved regarding Trump stimulus programs.
If he is interested in re - election, fast enactment of tax relief and higher spending issues could
produce an overheating economy before 2020, and leave Trump in a tougher political situation
at that time.

Finally, the US is experiencing social tensions that are running just below the boiling point.
These acute social misgivings should eventually recede, but political miscues in the early
going of the Trump presidency could create further fracturing of of the public's mood that
might affect business and investor confidence.

Wednesday, November 09, 2016

The Trump We Know....

It's a little disconcerting to realize that The Donald won the Presidency, but was booed when he
showed up in NYC at PS 59 to vote and that he was creamed by NY voters. We are sending him
off to Wash. DC to be enjoyed by all, having failed to keep him to ourselves. So what can you all
expect? Well, right now he is fashioning himself for the office, trying on different guises to see
which one best suits the seemingly limitless ego. Should he play the hard nosed 'America First'
right wing populist, or now that he has captured the office, perhaps he will pose as the firm but
beneficent uniter, pulling those from left and right of center in grand schemes to regain our lost
glory? Or, perhaps he will be a bored protaginist who lets VP Pence and others do all the heavy

Figure that whatever, he does not live in your world. You live in his. And figure that the world
is about to become an admittedly very large subsidiary of Trump Inc. A subsidiary who he hopes
he can nurture into a cash cow that can sustain his company and "brand" for posterity. Through it
all, he will do some good and neat things and he will do some very wacky and irresponsible things.
And, remember that even if you live in Podunkistan he will touch your life.

It falls primarily to the US to try and contain and control this guy and it may be necessary for
you, if you are a foreigner, to help out on occasion. Keep in mind also that if you are part of
the shifting and jostling herd that challenges him, hits him as they say, he will hit back hard.

In my years on this earth, I have been genuinely intrigued by few leaders because of their
compelling humanity. They would be Jack and Bobby Kennedy, Dr. King and Barack Obama.
The Donald is more of a case study in egomania and not an engaging person and leader.
I plan to be a mere pale shadow in Trumpworld, and to keep my head down and my

Wish you all the best.....

Monday, November 07, 2016

SPX -- Daily

The FBI took Hillary off the hook yesterday, and market players showed they were worried about
The Donald via today's rally which suggested Hillary could gain enough momentum to win
Tuesday. Zippy stuff. Now the stock market did correct over the Aug. - Oct. seasonal 'jitters'
period and traders know we are moving into a seasonally strong interval which can last into the
early spring of the succeeding year. So, not only did players affirm hope for a Hillary victory,
they may be using the market's oversold position to get a jump on positive seasonals.

The bounce in the SPX came off the 200 day m/a and was strong enough to wipe out the Trump
dump that had gathered. Well, this all could work out just dandy, but Hillary needs to pocket the
win, and then The Donald and the Trumpkins have to behave and accept the verdict if it supports
that 'awful woman'. The bitterness and rancor of this campaign probably even exceeds the ugliness
some of us old timers saw during the twilight of the Truman presidency, 1950 - 52. Most folks here
think the very hard feelings will continue for some time and  require now vanished statesmanship
to reappear to get a  government in failure mode back on the rails again.

Prudence is a vice in a bull market but a week's worth of intense vigilance may not be fatal.

SPX Daily

Tuesday, November 01, 2016

SPX -- Daily

Finally, a frisson of fear that The Donald could actually win this thing, or at least create chaotic
post election uncertainty. And, of course, it's Fed policy decision week. So, there was strain in
the market today, and short term 'double bottom" support at 2125 was violated, leaving the market
in corrective mode.  SPX Daily

The chart indicators show a down trending market and an approaching oversold. However,
on a price momentum basis, the SPX is at a very shallow oversold and could fall another 5%
in the very short run before it gets hefty.

The economy has gradually firmed in recent months, thus giving the Fed a little more cover  if
it would like to raise the FFR% another notch. Current indicator benchmark standards are not
up to post WW 2 standards, but are headed, albeit slowly, in that direction.

Trump? The guy is an egomaniac and a demagogue and scares many bright, worldly people.
If he is starting to surge in the closing days of this abysmal election, there could well be
preemptive defensive action that I would not care to guess beyond saying that gold could
have a bounce.