Bad News For A Commodities Breakout

After more than two years and a half of downtrend, many analysts and pundits were calling the end to the cyclical commodities down wave this year. Since many of its components, in particular gold and agricultural, were already breaking out to the upside, I tended to agree with that analysis. Though, this week FOMC meeting shifted my view on what to expect in the next few months for commodities and inflation. Why? Wednesday press conference...

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Dow Theory Remains In Buy Mode

The most well known 'mechanical' system in the world of technical analysis is still in buy mode since December of 2011. The Dow theory, formulated from a series of Wall Street Journal editorials authored by Charles H. Dow, is the grandaddy of all technical market studies.  Although it is frequently criticized for being "too late", it is known by name to nearly everyone who has had any association with the stock market, and respected by most....

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Chinese Economy Sluggish But Hard Landing Risk Contained

Chinese monetary trends are stable and consistent with continued subdued economic expansion. Real narrow money works best as a leading indicator for most economies followed here but in China’s case the broader M2 measure has performed equally well in recent years. Six-month real M2 expansion was stable in February and close to its average over the last two years – see first chart. The six-month change in real narrow money M1 had turned negative...

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A Warning On Junk Loans

Record margin debt is not the only dangerous sign of the overly leveraged and speculative atmosphere the Fed has encouraged.  Now the head of the world’s largest distressed debt fund, Howard Marks of Oaktree Capital, is warning of the dangers as retail investors gobble up distressed debt. Oaktree’s Marks Urges Caution as Money Flows into Junk Loans Here is a pretty scary line… “You can’t go on strike and refuse to buy the securities you’re...

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RBA Hints Cash Rate May Not Fall Further From Here

The Reserve Bank of Australia provided one of the strongest hints that the cash rate may not go further down from here, saying it remains unclear if a shortfall in demand can be made up quickly through monetary policy action. The hint was delivered by Governor Glenn Stevens in his opening statement to the House of Representative Standing Committee on Economics in Sydney and later while answering their questions. Stevens said monetary policy...

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Real Earnings Of Private Employees Rose In February

Real average hourly earnings, or the unit purchasing power of the employed, is one of the most reliable indicator of consumer spending which in turn is strongly correlated to the stock market.  I like following this indicator on a monthly basis to get a sense of what is coming next and where we stand in the current business cycle. Today data is showing a strong expansion that is boding well for consumer sentiment in the next few...

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Draghi Boosts Euro, Rebuffs Disinflation

Another euro-positive ECB presser highlights the reasons for lower inflation, with the implication that low prices are of temporary nature. The conference re-affirms the ECB is in no hurry to use up its eroding interest rate armory to tackle disinflation risks without first considering unsterilising its money market operations. The chart below reminds that the last time extreme lows in Eurozone inflation were accompanied by multi-year highs in...

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Money Managers Aren’t Paid to Forecast; They’re Paid to Adapt

It seems we can’t go a week without someone predicting the end of the world and stirring up everyone’s fears of a market meltdown. These apocalyptic warnings are becoming routine and the sad thing is that it does cause the squeamish individual investor to run for the hills and liquidate their investment portfolio. Just look at the market calls for a crash over the last few years: Dow Could Crash to 3,000 in 2013 — Harry Dent (09/12/2011) Dow...

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Short Interest Surges To New High

Incredibly, the recent short interest data showed the total cumulative short interest on SPX components surged 4% to it’s highest point since mid-2012. We keep hearing how there are signs of ‘froth’ and everyone is bullish.  I don’t totally agree, but there are some warnings signs – sure.  Yet, when I see the shorts continue to pile on, I find that very bullish. Let’s get one thing straight, those shorts very well could just be...

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