Pre-market – Tuesday 1-21-2014
"The just price is the price established by the 'common estimation' [17] of buyers and sellers."
Saint Thomas Aquinas
1225 -1274
Dr. John L. Faessel
ON THE MARKET
Commentary and Insights
Quotes of the day
"To ensure that no person or group would amass too much power, the founders established a government in which the powers to create, implement, and adjudicate laws were separated. Each branch of government is balanced by powers in the other two coequal branches."
~ President Barack Obama ~
&
"Where Congress isn't acting, I'll act on my own to put opportunity within reach for anyone who's willing to work for it."
~ President Barack Obama ~
&
"The first thing a man will do for his ideals is lie."
~ J.A. Schumpeter ~
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MARKET
On Friday stocks sold off a bit on higher and above average volume in an options expiration - importantly it was another distribution day. For the week, volume rose in the S&P 500 (SPX). 'Price' has not yet taken out the recent new highs in the (SPX) established on New Year's Eve and 'overboughtness' remains in neutral with the McClellan Oscillator in Neutral at plus 50. Indexes remain extended with 'price' still about 30% above the 200-day moving average. Lots of support lies at the breakout pivot at 1812 / 1813 a zone that held up a week ago Monday when the (SPX) ticked 1815.
The Advance / Decline line is tipping over indicating that participation is beginning to decline. The long term trend and short term trend are up. Some Bullish sentiment models are now at or near decade highs in bullishness. Net, net it's looks to me like the market is topping…
And Earnings?
According to analyst estimates compiled by Bloomberg Earnings:
The full S&P 500 will climb 9.7% in 2014, almost twice the rate of 2013. Profit growth will come as sales increase 3.8%, up from the 2.2% last year, and the economy expands 2.6%, faster than last year's 1.7% - forecasts show. Link here
The forecast for 2014 as-reported earnings was $106 in late December. Now it's $119.70 – up 13% from the previous forecast just two weeks ago and up 20% versus the 2013 estimate of $99.42.
But check this re forecasts
John Mauldin is saying …
"That sentiment, rather than fundamentals, may be the dominant force driving the markets higher."
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"In many ways, faith in the Federal Reserve today is roughly equivalent to faith in the words dot com in 1999."
"The S&P 500 Index returned 32% excluding dividends from January 1, 2012, through January 17, 2014. Over that time frame, real earnings grew by less than 8%... … while the trailing 12-month price-to-earnings multiple has expanded by nearly 30%, from 12.8x to 17.3x."
"That means most of the recent gains in US equity markets have been driven by multiple expansion, in spite of sluggish real earnings growth. The disproportionate amount of gains attributable to multiple expansion versus gains attributable to earnings is a clear sign that sentiment, rather than fundamentals, may be the dominant force driving the markets higher."
"Not only does today's Shiller P/E of 25.4x suggest a seriously overvalued market, but the rapid multiple expansion of the last few years, coupled with sluggish earnings growth, suggests that this market is also seriously overbought. Today's markets are just slightly less expensive than the 27x level seen at the October 2007 market peak and are only modestly below the levels seen before the stock market crash in 1929. Although we are nowhere near the all-time "stupid" peak of 43x reached in March 2000, a powerful narrative drove the markets to clearly unsustainable levels then, and a powerful narrative is driving markets today. In many ways, faith in the Federal Reserve today is roughly equivalent to faith in the words dot com in 1999."
Trust in Government
Faith in governments fell to 44% from 48% percent in 2013, according to the 2014 Trust Barometer survey published by Edelman, a public-relations firm. Trust in business held steady at about 58% percent, bringing its lead over government to the widest in the 14 years the poll has been taken. Confidence in government in the U.S. plummeted 16 points to 37%.
Crude oil Production Jumps in 2013
Domestic crude oil production rose 15% in 2013. It is projected to rise 13% this year, well ahead of recovering demand growth, to 8.5 million barrels per day.
The Looming Insurance Company Bailout
Obamacare is projected by the Congressional Budget Office to funnel $1,071,000,000,000.00 (that's $1.071 trillion) over the next decade (2014 to 2023) from American taxpayers, through Washington, to health insurance companies.
The USA slides further into Subjection
For the seventh year in a row, the U.S. has slipped on the Heritage Foundation's Index of Economic Freedom as well -- falling out of the top 10 (to number 12) for the first time. The Index bases its ranking system on several factors, including government spending and property rights. Our scores regarding business freedom, monetary freedom, labor freedom and fiscal freedom are all headed south. Interestingly, the global average score of 60.3 was the highest (best) in the 20-year history of the Index.
File Under: Our Stinking Foreign Policy
Iran's Foreign Minister Mohammad Javad Zarif laid a wreath at the grave of assassinated Hezbollah military commander" Imad Mughniyeh, a mass-murdering terrorist who killed hundreds of Americans, within hours of inking an agreement with the US and members of the P5+1. Obviously this sends a very negative, and unmistakable signal about Iran's true intentions. Most straightforwardly, it threatens to heighten criticism that the Obama administration is walking on eggshells to avoid offending Iran, while the Iranians are indulging in anti-American extremism at the highest levels.
Mughniyeh, the leader of Iran's global terror network, in fact began his career as the mastermind of the deadly 1983 attacks on the U.S. embassy and Marine barracks in Beirut, killing more Americans than any terrorist except Osama Bin Laden. He subsequently engineered the hijacking of TWA Flight 847, as well as the kidnapping, torture and murder of Americans in Lebanon throughout the 1980s, including the CIA's Beirut station chief William Buckley, who was eventually slaughtered after 15 months of being horrifically tortured on film by Mughniyeh and Iran's terrorist army, Hezbollah.
S&P 500
The S&P 500 (SPX) closed Friday at 1838.70 off from the prior Friday it was 1842.37
Significant price resistance is at the top tick of 1850 registered on Wednesday 1/15/2013. Intermediate price resistance is at 1845
Lots of support at breakout point is at 1812
The 50-day moving average support is 1807
Short term 'Price' support is at 1823
The a bit further out 1815
The 200-day moving average support is at 1695
The top trend line of the channel that goes back 2009 to at (SPX) 1789 - previous resistance was breached on October 22nd.
Channel and trend line support of (November 2012) is at 1759
Then deep channel and trend line support of (October 2011) is at 1630
Then the deepest channel and trend line support of (March 2009) is at 1417
* This Week's Investor Sentiment
The Bullishness / Bearishness complex overview is still 'sky high 'with multiple models near decade highs in Bullishness. Danger lurks …
(High BULLISH readings in the Investor Sentiment Readings usually are signs of Market tops; low ones, market bottoms.)
The Citigroup "Panic / Euphoria" Model slipped a few ticks to plus 0.63 from the decade new highs to a plus 0.66 in the Euphoria Zone the prior week.In early 2000 it ticked its all-time high at plus 0.72. At the end of June, 2011 it ticked cycle lows of minus0.31 in the Panic mode.
The American Association of Individual Investors [AAII]Investor Sentiment Survey of BULLISHNESS sagged to 39.0% from last week's 43.6%. Four-weeks ago it ticked a 55.1% the highest post in 11-months. It posted cycle lows of 22.2% on 7/23/2012 the lowest percentile since August 2010. Long-Term Average: Bullish: 39.0%
The American Association of Individual Investors [AAII] Investor Survey of BEARISHNESS slid to 21.5 % from last week's 25.0% .
15-weeks ago it registered the lowest read since 1/12/2012 at 17.6%. Cycle highs of Bearishness of 54.5% were posted 19-weeks ago. Long-Term Average: Bearish: 30.5%
Consensus Index of BULLISH sentiment is at 73%, that's down from last week's 74% and from the cycle and multi-year highs of 78% established 7-weeks ago. The new cycle highs in Bullishness of 78% topped the top of 77% Bullish posted on 10/11/2007.
The Market Vane (Market Letter Survey) rose a tick to 66% from the prior last week's posting of 65%. In October 2007 it topped at 70% bullish.
The Investor's Intelligence Index three weeks ago Monday was at 81%. That's the highest level since January of 1987. The Investor's Intelligence Index is a combination/comparison of that survey's bullish and bearish percentage scores. The bullish percentage is at 59%, which is the highest level since September of 2008. The bearish percentage now stands at 14%, which is the lowest reading since early 1987.
The Hulbert Financial Newsletter Sentiment Index for all stocks three weeks ago Monday was at 82%... the highest reading in at least 15 years.
Friday's key indicators and metrics
Cycle highs or lows are in red
·McClellan Oscillator in Neutral at plus 50
·3-month $ LIBOR was 2.3710%.November 2013 lows were 0.23660%
·CBOE Put / Call Volume Ratio – 0.71
·VIX – 12.44
·Natural Gas (Globex) – 4.326
·Swiss Franc – 1.0979
·US Dollar Index – 81.36
·Euro – 1.3529
·Japanese Yen – 0.9589
·Canadian Dollar – 0.9102 –posts 4½ year lows
·Aussie Dollar –0.8737 – 3½ year lows
·Crude oil (NYMEX) 9437
·Brent crude 106.33
·Copper – 3.3445
·Gold (COMEX) – 1251.9
·The Treasury 5-year yield – 1.63%
·The Treasury 10-year yield – 2.82 - cycle highs were 3-weeks ago at 3.01%
·The 30-year Treasury – 3.75% - the cycle highs of 3.93% were 3-weeks ago
·Silver (COMEX) – 20.304
·Platinum 1454.1
·Palladium 748.55
·Lumber (CME) – 369.80
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