Monday, May 4, 2009

Morning Update/ Market Thread 5/4

Good Morning,

Remember “sell in May and go away?” Well, it’s been one heck of a run, and while there may be one more beginning of month push, I’m seeing signs that this rally is running on fumes. Many negative divergences exist and the market is still very overbought in the short and medium time frames. I see divergences in the RSI, in the Stochastics, in the A/D line, and the most telling is in the volume pattern which is clearly showing decreasing volume on rising prices.

And Friday produced another small movement on the McClelland Oscillator meaning that a large price move is likely today or tomorrow. Direction is unknown with that indicator. The odds favor a downside move but the momentum is still very positive. A move lower is very overdue, but that doesn’t mean we can’t go higher first, it’s absolutely a possibility and I don’t have a good read on short term direction as my short term indicators are mid-range and on Friday just before the close we bounced off the bottom of the latest rising channel. So, I am personally not doing anything until that channel breaks or I see a good entry at higher levels.

888 is still the high for now, if we exceed that, then 902ish is right around the top of the channel today. 912 is the next higher pivot level. We may have to run there to see it, again, I am playing it patiently here.

Lots of chatter about DOW Theory… NO, in my opinion the DOW will not make a new high of meaning until it breaks the 9,100 level – not even close.

The real action to watch, of course, is in the bond market and I will be keeping you up to date on that. This morning bonds are slightly higher but moving around a lot, not a stable environment unless you enjoy swimming in debt. As rates in the long bond rise, mortgages and other debt (credit) will as well and that WILL have an impact on the equity markets down the road, but the effect will not be immediate.

The dollar has broken its triangle to the downside. The P&F charts are still indicating bullish target for the dollar, but on my charts it looks like it could be a significant breakdown that began a couple of weeks ago but broke the bottom of the triangle last week. Stocks moving higher on a lower dollar is nothing but Zimbabwe action.

The futures are slightly higher this morning:

Warren Buffet is beginning to oink a little too loudly for my taste, personally I think we would all be better served if he just shut the hell up and stopped playing good cop/ bad cop. It’s all terrible, but his banks and insurance companies are sound as ever! What a load of self-serving crap. I can’t even stand listening to these guys anymore. I hope you are smart enough to see the interests they are really serving, it’s not yours.

And Obama is now going after offshore tax havens. That’s too bad, because it’ll mean the wealth will not want to form in any way in the United States. No, it won’t pull capital back into the U.S., it will drive it away. Yes, we need more tax revenue, but we have already “screwed the pooch” in that regard and are now in a place where garnering more tax revenue gets you less. That’s what happens when the math no longer works, and it doesn’t.

And they better stick to their phony baloney “stress test” results being released on Thursday or else… or else… the idiots in the market place might cheer and rally some more! [sarcasm, sorry] Actually, the timing of this release with the beginning of May might prove to be a turning point, I don’t know.

And then there’s the automaker moral hazard galore. Little old Fiat is trying to possibly swallow two giants? I’ll believe it when I see it. The entire thing looks like a money laundering operation sponsored by the government to me.

So, I know I tilt the news here negatively, that’s just the way I see it. If you want roses and sunshine, there’s always CNBS, and the millions of other people and networks who don’t know how to do math and spew happy self-serving marketing based nonsense at you.

Other than that, my outlook on life is as good as ever and I hope yours is too. Reality is fun, getting caught in mass-psychosis is not. I’ve been out looking at the rental home market in the area and I can tell you that there are many, many people who are just plain old CAUGHT. They are stuck in their homes, underwater, and don’t know how to extricate themselves from that position. Sad.

At any rate, I hope you have a good day, I know those who read this column are much more savvy and equipped to handle the current reality.