Feeling Confident? Just Two Charts

Tyler Durden's picture

History may not repeat but it certainly rhymes and when it comes to the animal spirits of human fear and greed, nowhere is that more evident than the 'surveys' of confidence that US citizens have undertaken for thelast 30 years. As the following two charts show, while many are exuberant at the rise in confidence of late, it is a pattern we have seen play out twice before - and both previous times - it did not end well...


via Citi FX Technicals (charts recreated via Bloomberg),

The consumer confidence chart may remain an important factor in this equation

 

Chart of consumer confidence remains amazingly cyclical

 

 

 

Very clear trend so far of lower highs and lower lows. Since the all-time high in May 2000 at 144.70 we have been in a clear downtrend

 

Data on this indicator only goes back to Feb 1967 and prior to the all-time high in 2000 the peak had been 142.30 in October 1968 (right at the start of the lost 16 year period from 1966-1982)

 

LET US BE CLEAR there is no certainty at this point that a high has been posted in this move...but there are good reasons to suspect that it may have been (or at least that we are very close to that dynamic). If the chart above is consistent then the peak may well come from either the May or the June number.

 

The top of this channel comes in at 76.30 with the May number coming in at 76.20.

 

As can be seen above there has been a very close correlation in time frame in the 1998-2000; 2005-2007 and 2011-2013 moves. That would suggest that the peak in this number would likely be somewhere around present levels and in the May-July period (June would be an exact equal timeframe, to the other two moves)

 

Why might this be important???

 

One of the things that has performed better now than the 1970’s period and the early 1990’s period is the equity market. Or has it?

 

The post housing collapse rally in the equity market did not quite regain the 1973 high before a renewed 18 month fall of 27% whereas this market did regain the high. However it took twice as long (4 years instead of 2) as well as QE 1, 2 and 3 with massive fiscal stimulus to achieve those heady heights. Is that really a better performance???

 

By February 1994 when Greenspan tightened the S&P 500 had overcome the July 1990 peak by 79%. Admittedly this was after a much shallower fall of around 10 %, but from a wealth effect perspective provided a far bigger relative new high than today.

 

In addition when we look at the chart below we cannot help be a little cautious (Albeit recognizing that this is an environment where you have to be a skeptical participant on the move to new highs)

 

 

We are getting “relative triple divergence” between consumer confidence and the equity market. As the S&P has hit a high, higher high and now 3rd higher high consumer confidence has hit a high, lower high and lower high again. This suggests a larger disconnect between the level of “feel good” at the consumer level and the elevated level of the Equity market in an economy that is about 70% consumer driven.

Charts: Bloomberg

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Yen Cross's picture

    Ohh No! There goes Tokyo...

Best Of Pute's picture

Please Obiwan Kevinhenry, you're our only hope.

YC2's picture

Go Go Godzilla !!!'

Political_Savage's picture

Hi, my name is Tyler, I'm a sell-side hypocrite. I dog you until you post something I interpret as supporting my macro-view, you know then I post you.

I'm sorry I thought I was reading Dealbreaker

Yeah you're Tyler

UP Forester's picture

Kind of like the US is sending Patriot missiles and F-16s to Jordan now.

Same thing that happened right before Operation Iraqi Freedom, complete to "military excercises"....

knukles's picture

The Iraqis wuz freed?
Golleeeeey.
W oughta be put up on Mt Rushmore with Lincoln!

SAT 800's picture

Why? Lincoln didn't free anybody.

Ghordius's picture

as an outsider/alien/foreigner I thought that Lincoln is depicted there as the president that preserved national unity

as far as I understand this is factual and has nothing to do with how you feel about the unity of the US nation

Bring the Gold's picture

I always preferred Operation Iraqi Liberation.

The acronym was short sweet and on point.

lakecity55's picture

Go to debka-dot-com.

A USMC MEU began landing to day at Aqaba.

thismarketisrigged's picture

its too funny listening to these talking heads on cnbc, bloomberg, fox business, etc, saying how they are loving this sell off and its healthy for the market. these are the same guys who were saying that we go up from here and have lots of room to run.

 

it amazes me that these people get paid to talk about the markets daily, yet they dont even understand how this is not a fucking correction. 

 

see, corrections happen in healthy markets, not markets ran up artificially. when this thing starts to come down (which maybe this is the beginning) it wont correct, it will crash, which will technically be the correction to fair value without qe, which imo will indicate depression like numbers because all bubbles will burst.

 

whoever is confident in this economy, i would love to have what they are smoking.

maskone909's picture

Good point! Seems like msm is desperate to have people hold their positions. "Its ok, its healthy, buy the dip"

knukles's picture

"Nobody saw this coming!  We had Nobel Prize winning economist Paul Krugman and bank analyst extroidinaire Dick Bove on just last week they said ..........."

SAT 800's picture

But did they have Peter Schiff on last week? Well, seriously; sort of, confidence is always very high when a bubble bursts; it's kind of part of the definition of what a bubble is; and then we get all the "who could have seen this coming? BS".

imbtween's picture

they get paid for their real skill: the ability to react instantly to any act or action in a suitable fashion. Soothe when it goes down, cheerlead when it goes up. Everybody feels great! Unless you're one of those goldbugs, then shame on you.

Jump The Shark's picture

Every time I read this "check out the chart" bullshit I can only think of the countless times the Fed has fucked up this collapse. I don't want anyone to suffer but I would like a collapse so we can get to some resolve soon. At least before football season.

DeadFred's picture

Rip-your-face-off time starts with summer practice. The main season will be "I can't believe it keeps dropping", ending with a "I'm too broke to go to the Super Bowl" bottom. IMHO

SAT 800's picture

LOL. well, I wouldn't complain, I hope you're right.

Yen Cross's picture

    The JGB (2-7) market is melting down. I took the loss on 1/2 of my trade. I hedged the gbp/ against it. (2 days ago)

Best Of Pute's picture

YES this is what takes that bitch down IMHO. That Kuroda speech on sustainable 3% yields was from another dimension.

fonzannoon's picture

Yen where are the yields?

If the bonds blow up it's game over.

 

disabledvet's picture

And on the other side of that trade is "the entire country of Japan" and who knows who else. you in it to win it?

Yen Cross's picture

  Fonz. Yields have compressed. Now they're going super-nova. 

   Kito asked a great question earlier.pertaining to your question.  I was long usd/jpy and T/P for 43 pips.

  I opened a nwe trade @ .74 , and let 1/2 the trade stop out. ( I never lie)   I had a hedge from Sunday, GBP/JPY. 

fonzannoon's picture

You are one of the few around here that put out there for everyone to see. Never doubted you.

As far as Kito asking a great question on the other hand...I'd have to see that to believe it. Can you point me in that direction?

Nevermind, found it. Great comment

"Central banks are losing control, and it has very little to do with Fed. tapering. I'm not sure if you're familiar with past BoJ (currency)interventions, and how they worked out ? The possibility of Japan blowing up is very real."

Yen Cross's picture

  kito

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yen, do you see your namesake hyperinflating? can they print to the point there is no longer any confidence in the yen? its very hard to see that happening........

Wed, 06/05/2013 - 17:09 | 3627609 Yen Cross
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     Kito, that was a great question. I'm looking at the DXY/AJX charts as we speak. I'm seeing the beginnings, of a complete yen breakdown.

     It appears that the usd is actually starting to strengthen against the yen in a 'risk off' trade profile. To answer your question, yes & yes.

     Central banks are losing control, and it has very little to do with Fed. tapering. I'm not sure if you're familiar with past BoJ (currency)interventions, and how they worked out ? The possibility of Japan blowing up is very real.

Wed, 06/05/2013 - 17:32 | 3627677 kito Vote up!

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is there a "no confidence"number for the yen when, if breached, there is no turning back--certain destruction is priced in???

Wed, 06/05/2013 - 17:50 | 3627729 Yen Cross
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   Kito I would say>  97.03 and (just below) the 61.8% retrace of (103.724- 92.561) is probably a heavily guarded area.

   I'm actually long usd/jpy with a 'trailing stop'. If it blows up, I'll take a minimal hit if it stops out. If it retraces I'll make a nice profit.

SAT 800's picture

"I took the loss on half my trade" why? what makes probabilities different for the second half. I realize that "professionals' have been feeding you this shit for twenty years, but just sit back and think about it; if the probabilities are not in your favour; none of your money belongs there; because there's someplace else it belongs where the probabilities are more in your favor; logic.

lolmao500's picture

In other news... the game is about to begin...

http://edition.cnn.com/2013/06/05/world/meast/syria-russia-shipments/

Pentagon official: Russian warships may be carrying weapons to Syria

CNN has learned that U.S. intelligence agencies have identified three Russian amphibious warships in the eastern Mediterranean that are believed to be carrying weapons shipments that might be used to resupply the Syrian regime, according to a Pentagon official.

The United States has been tracking the ships since they left Russian ports several days ago. U.S. satellites were able to see some indications of containers being loaded onto the ships. Although it's not confirmed, it's believed the ships may be carrying some components of the controversial Russian S-300 air defense missile system and other weapons for the regime.

knukles's picture

Note to all fucktards and dickwads....

Military amphibious ships generally do carry weapons....

For the Love of Christ, please.....

lakecity55's picture

I agree, but it is to their advantage to try and disguise the shipments. The system uses mobile vehicles, so they could possible drive them off, but it would make more sense to use a proper cargo ship or that huge aircraft they were leasing to us (for MRAPS) to deliver the system. I used to see that plane 2X/week. (Antonov 124 and Antonov 225).

Urban Redneck's picture

... and Russian naval vessels are often equipped with S-300F-series missiles, ready to fire, no buyer training or assembly needed (but a less desirable option since there wouldn't be a foreign buyer paying for the expended munitions).

... sort of like US naval vessels w/ Patriot missiles (and Israeli or Turkish customers).

DeadFred's picture

Anybody know the aproximate transit time for three hypothetical amphibious warships? Just curious, I'm sure it's not important. LOL

lolmao500's picture

Well they are already in the eastern mediterranean... so in a day they could be there... if they are not already.

CDNX fan's picture

Some mutt on CNBS today asked "Where is the euphoria? I don't see no euphoria! We need euphoria before a top is in!" Well the Citibank Panic/Euphoria Model last Saturday morning is firmly in the EUPHORIA range so what fucking planet is this clown from?

http://online.barrons.com/public/page/9_0210-investorsentimentreadings.html

These Wall Street shills are complete idiots.

knukles's picture

These fuckers doth protesteth too much, methinks
    -apologies to Bill Shakespeare

They sure are taking pains defending this solid bull market aren't they?

El Viejo's picture

I hear Bill is making fishing equipment these days.

SAT 800's picture

I don't understand why, a.) anybody watches these shows, (I don't have a television connection), and b.) why they express surprise or upset at the nonsense they spout. They are simply employees of the system. They're cheerleaders, that's their job. You expected what? somekind of analysis? that would not serve their owners interests; somebody pays them every two weeks, you know, and they don't plan on them doing anything but cheerleading. that's not that complicated.

Yen Cross's picture

  The comodity currencies have an unorthodox bid under them. I'm steering clear of aud. I like the (gbp) ponzi trade.

thismarketisrigged's picture

i really hope my fellow zerohedgers are not dumb enough to buy this dip.

 

this is the end. we may have a bit of green days here and there, but i think we are 11,000 dow by september and 1400 on s&p by then and that wont even be the bottom.

 

 

FreeMktFisherMN's picture

I saw a 30 year DJIA chart and if one draws the channel, it looks like 16k would hit the resistance line. So there might be one last thrust here as perhaps underperforming portfolio mgrs. look to get in on the dip, but that could be the blow off top. 

But yes, the top could have been that key reversal few weeks ago, and either way upside very limited for these stocks that have been levitated on hopium fumes.

JJ McApe's picture

Five years of ever increasing regulations and taxes, endless programs to encourage
dependency, Obamacare, Gestapo IRS actions and the FED Balloon is bursting.
You can only keep a hot air balloon in the air so long. Thanks Ben and O.

g'kar's picture

And Obamacare hasn't even fully kicked in yet.

SAT 800's picture

That;s right; and well worth remembering.

apberusdisvet's picture

 

In 2008, I thought the end game was close.  It didn't happen

 

In 2010, I was preparing for the end, cashed out, bought PMs; nothing changed.

 

In 2012, I finally realized that the extend and pretend game might go on forever.

 

In 2013, however, the dots are finally lined up to be connected. It may not be a very Merry Christmas this year.

 

 

mammoth mo's picture

Been chasing the end almost as long as you - down 90%,

Crash Overide's picture

de·cou·ple?

tr.v. de·cou·pledde·cou·plingde·cou·ples
1. Electronics To reduce or eliminate the coupling of (one circuit or part to another). 2. Physics To decrease or eliminate airborne shock waves from (an explosion) by having it take place underground. 3. To separate or detach *cough*
FieldingMellish's picture

4. De people whats moved in next door.