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Is The Market Consolidating Or Topping?

Tyler Durden's picture




 

Submitted by Lance Roberts of STA Wealth Management,

 

 

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Mon, 05/12/2014 - 13:40 | 4751398 Yen Cross
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   Earnings aren't doing any better! Look at Capex, Top line revenue, and buybacks for your so called better earnings.

Mon, 05/12/2014 - 13:47 | 4751423 DoChenRollingBearing
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Agreed, Yen!  But, Jim Rickards sez that as long as they keep printing, stocks will go up.  

This may indeed work, until it no longer does.

Mon, 05/12/2014 - 13:49 | 4751428 Yen Cross
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   I don't doubt that DoChen. But it sure as hell isn't from earnings. Apparently the person that junked me missed this chart.

  http://i.imgur.com/Enfx8Ul.png

Mon, 05/12/2014 - 13:54 | 4751445 kliguy38
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they will continue to print until the price of essentials break the back of the average peep....until then the market CAN and probably will continue its trend

Mon, 05/12/2014 - 14:00 | 4751468 dontgoforit
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kliguy38 - you're right on.  And I do believe our backs are bending a bit already.  As we know, backs will only bend so far and then, 'snap!' and it's done.  Very hard to put 'em back together again - takes a long time and a lot of physical therapy. 

Mon, 05/12/2014 - 14:07 | 4751489 eclectic syncretist
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Didn't you guys hear about the taper?  That's why we've been topping here.....distribution.  Old money going into old (Dow) stocks and out of tech.  Tech is dead.  QE is winding down come hell or high water so they can push back the inevitable collapse of the dollar as long as possible.  It might take a few more months but this bull is losing it's legs.

Mon, 05/12/2014 - 14:08 | 4751493 max2205
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Sorry to mention this but it'll rip till the fed doesn't want it to.

 

I can tell you this seems to be constructed so that the next crash or correction never gets below 1700 or so.   Buy for the long term

Mon, 05/12/2014 - 15:01 | 4751732 aVileRat
aVileRat's picture

Yeah,

Hate to be debbie downer but unless you are a biotech or gogo tech stock, the median sector cash flow multiple is around 5 to 7x vs. the S&P 12.7x. On average the SPX industrial sectors have a 8 to 9x mulitple, so for your generalist mutual fund, there is enough solid ROAC not priced in and since they still are at break even to 2009, those generalists will continue to push higher.

Heavily skewed bull run since 2010. Bear case for reduced capex and margin compression is very much in effect in retail, but in industrial sectors such as oil, transport and related facility industries the capex + ROEC story is still intact. Market priced in 5% growth in energy alone, 1Q14 showed on average 15% growth rates (ex-Exxon, which has Imperial Oil issues). Metal consolidation will likely lead to the kickoff in the metals run. Those CapEx ramps will be the life raft for the macro-generalists and federal policy makers who must hang their hat on anything green shoot. So the short term trend, in an election year, where they do NOT want the economy to be a republican speaking point signals to "bullish" breakout.

India's new election rally and the natural gas price restructuring could offset the slowdown in China.

Goldman is likely correct that the 2015 ECB lines will not be opened until they have due reason to push the French and Spanish/Italians for common tax structures (which will piss off some very rich dudes). Until then, notice on Friday the Fed made reverse-Repo's a perma fixture of the fed window. Tyler1 has done plenty of work on this and their critical importance on providing quality collateral to the overnight and 5-day liquidity facilities in the past 2 years.

If that word soup is too much for you: just look at the historical trend in post-May election years. In fact I suspect if "they" exist, everything matters in keeping the recovery story alive until October.

Overbot RSI tends to work in multiple expansion rallies, but discounts earnings or cash flow growth. So while the RSI would have made you cash as a forward signal in shorting the 2009 run, it breaks down in late market rallies where the generalist overlays do not evenly deflate all sector rallies when yields bear-curve.

 

 

Mon, 05/12/2014 - 15:28 | 4751865 GernB
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Earnings cannot continue to improve without topline growth. What the establishment wants is irrelevent unless they have the power to make it happen. They have expanded the money supply to an extent never seen in human history and at some point they will hit a wall where they cannot do enough to keep the markets up and the market will reassert itself. Easing has not been able to keep interest rates down; signs that central banks are loosing control of interest rates and with them the market. History releats itself, until it doesnt.

Mon, 05/12/2014 - 16:50 | 4752232 aVileRat
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I do not disagree GernB that the general "sustainable" rate of M3 is impossible, however we are talking near term trendology based on RSI and top down vs. understanding what the SPX and individual subsectors were and are performing at. If we are looking at consumer discretionary; auto, clothing, beverages, retail food then yes: you are correct.

You mention that "they" can not keep up market rates, ok fair enough. I have never argued against this, and speculative money is propping up momentum stocks and sectors (ie Biotech 40x P/CF, Social/Tech 89x P/CF) yet the general sectors which do not operate on speculative cash plugs and loans on average have seen multiples grow by 35 to 50% earning growth, with less than 3x multiplier expansion in 12 months. So where is the beef if this is a fully inflated bull ? Until those sectors which do not require inflationary money to prop up their capex programs falter, I'm reluctant to call the top.

Mon, 05/12/2014 - 18:43 | 4752569 GernB
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I'd agree. This is not "the" top. Rotation out of momentum stocks is normal. Manager will find a new set of "favorite" momentum names. IMHO people are still too cautious, sentiment has not yet gotten to extremes, and I think we'd have to see a reversal of tapering along with rising interest rates before faith is lost in the idea that stocks can only go up if the fed has your back. That is not happening in the near term. That's not to say this couldn't be a short term top and we see a selloff before a rally to new highs.

Mon, 05/12/2014 - 14:37 | 4751606 rosiescenario
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Weimar stock market might be a good example of this.

Mon, 05/12/2014 - 13:41 | 4751402 Rogue Economist
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Peak Credit has been breached!

RE

Mon, 05/12/2014 - 13:42 | 4751405 Jayda1850
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My guess is it's going the Zimbabwe and Venezuelan route. Up, up  and away as the country becomes poorer and poorer.

Mon, 05/12/2014 - 14:01 | 4751471 dontgoforit
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Well, he said he wanted to "fundamentally change amerika!"  Methinks he's too successful.

Mon, 05/12/2014 - 13:42 | 4751408 kahunabear
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Good to hear a runaway bull market isn't in the cards, ha.

Mon, 05/12/2014 - 13:44 | 4751411 Dr. Engali
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One word...... Rigged.

 

That is all.

Mon, 05/12/2014 - 13:45 | 4751415 q99x2
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You just BTFD and don't worry about it.

 

Mon, 05/12/2014 - 13:45 | 4751416 Osmium
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Markets don't top anymore.  It must be consolidation.

Mon, 05/12/2014 - 13:46 | 4751417 ...out of space
...out of space's picture

consolidating for another mounth, until the fed start a taper taper

Mon, 05/12/2014 - 13:47 | 4751420 Charles The Ham...
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This isnt what CNBC wants us to know. That must mean my reading level is above 5th grade.

Mon, 05/12/2014 - 13:48 | 4751422 fonzannoon
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I have to agree that it is hard to have a runaway bull market within a runaway bull market.

Mon, 05/12/2014 - 13:51 | 4751436 Dr. Engali
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"Stock prices have reached what looks like a permanently high plateau."

~Irving Fisher

Mon, 05/12/2014 - 13:54 | 4751444 NDXTrader
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Are people rioting over runaway inflation? Are there still printing presses (or Control-P)? No and yes? Then I'm voting for consolidation

Mon, 05/12/2014 - 13:56 | 4751456 Unknown Poster
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Without easy money, it doesn't look good. The Taper Risk Is In Stocks Not Bonds

Mon, 05/12/2014 - 13:58 | 4751463 ebworthen
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The "Market" will continue to suckle off the teat of the public treasury while choking the middle class to death.

The "Market" is a fucking LIE!

The "Market" is anything but.

The "Market" is a propaganda tool.

The "Market" will do whatever the FED and the Banks want it to do.

Mon, 05/12/2014 - 13:59 | 4751465 Sticky Wicket
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OT: Look how Reuters is framing the economy.

"Rising U.S. economy could help Democrats stave off election loss"

http://www.reuters.com/article/2014/05/12/us-usa-campaign-congress-analy...

This propaganda comes out weeks after Carville said not to use the term 'Recovery' at all while campaigning. Note that this article is not in the Opinion section

Mon, 05/12/2014 - 14:01 | 4751474 Duke Dog
Duke Dog's picture

What a complete fucking total waste of time.

Mon, 05/12/2014 - 14:06 | 4751481 toros
toros's picture

At these levels it takes ~$8B to raise the S&P 1 point.  Printers are running @ ~$ 1B/day for the whole market.  Where's the rest of the money coming from?  Insiders? GLWT

Mon, 05/12/2014 - 14:05 | 4751482 wmbz
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Perhaps the markets are getting a little frothy, just blow the froth off, drink up and party on!

Mon, 05/12/2014 - 14:07 | 4751486 Pareto
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DJIA hits 20,000 before it hits 10,000, and the SnP 2500 before 700.  Especially and as long as they keep talking inflation doesn't exist.  As long as the $USD is the cleanest dirty shirt - market will continue to "consolidatingly" (new word) rise.  Nothing else really matters.  Especially fundamentals.

Mon, 05/12/2014 - 14:14 | 4751520 Market Rage
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Hopefully there's a fakeout over SPX 1900 and a hard reversal.  At this point it looks like 1900 is in the bag.  Never would have believed it though.

Mon, 05/12/2014 - 14:18 | 4751521 eclectic syncretist
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at the rate that volume is declining as the market rises the banksters can't make money going up from here.  They need the volume of a down panic.  and they'll probably get it.  Sad to see so many good people here still tying themselves to the train tracks.  good time to get safe for a while until the taper mess resolves.

Mon, 05/12/2014 - 14:18 | 4751528 Obama_4_Dictator
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The FED better damn well hope it's not topping.....better make another sacraifice to the printing God's Yellin.....

Mon, 05/12/2014 - 14:19 | 4751538 eclectic syncretist
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Why?  The banks make money on the way down.  They need a scapegoat though, and I'm not seeing it yet.

Mon, 05/12/2014 - 14:17 | 4751529 pragmatic hobo
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pattern have been for sometime to dump on high-volume and pump on low volume ... hardly looks like a top ... i'm waiting for chinese stimulus announcement or eu announcement of qe for a final blow-off top.

Mon, 05/12/2014 - 14:21 | 4751540 MFL8240
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This is not a market, it is a goddamn circus!

Mon, 05/12/2014 - 14:32 | 4751588 CHX
CHX's picture

True that, but is the circus going higher, or coming down from where it is?

Mon, 05/12/2014 - 14:23 | 4751552 GrinandBearit
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Using TA in a rigged market.

 

Futile.

Mon, 05/12/2014 - 14:45 | 4751648 buzzsaw99
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yeah, funny. could just consolidate in the same range for the next ten years. it's called rigging.

Mon, 05/12/2014 - 14:23 | 4751555 orangegeek
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Really cool tech analysis - compelling arguments.

 

We are heading higher for institutions to squeeze the shorts.

 

The institutions are squeezing the shorts because the have too much inventory and retailers aren't buying.

 

PS: Yes I saw that BOA chart that showed retailers are all in - I call bullshit.  It's BOA and the like that are all in - that's why they have to short squeeze - and there is less to squeeze each time they do it.

 

How to counter??  Keep your positions small.  You can also do small counter trades to short to lessen the squeeze - go long or write puts - but again do it small.

Tue, 05/13/2014 - 01:27 | 4753711 Midnight Rider
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Are all the recent charts showing Instituationals as net sellers of equities not correct?

Mon, 05/12/2014 - 14:24 | 4751558 I Write Code
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Ask me again in 30 days.

Or ask Yellen now and she'll tell ya, it can't go down so consider other options, "Watson, when you have eliminated the impossible, whatever remains, however unlikely, must be The Truth!"

Mon, 05/12/2014 - 14:47 | 4751665 buzzsaw99
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magic 8 ball says ask again later

Mon, 05/12/2014 - 14:38 | 4751613 gatorengineer
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I think repeated trotting out of the ECB easing pony is good for 5%....

Mon, 05/12/2014 - 14:38 | 4751618 Jstanley011
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Gotta love it...

Discerning which process is currently "in play" is critical for investor decision making. Unfortunately, as is always the case with investing, we will never know with certainty in advance.

What's critical for decision making is unknowable? Really? If that's true then investing -- say, via some particular "wealth management" firm for instance -- would be an irrational act. Roflmao.

Mon, 05/12/2014 - 14:42 | 4751634 Kreditanstalt
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Hello, stock "markets"!  Is anyone...there?  Hello in here...anyone at all...?

Mon, 05/12/2014 - 14:48 | 4751671 khakuda
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Let's face it, with interest rates at zero for almost 6 years and counting as bonds and equities haved ripped through records and even the most recent bubble area (real estate) has caught a bid, the action of central banks shows every intention of having the S&P be at 3,000 - 4,000 or higher within a year or two.  Remember, as Greenspan told us, they see no bubbles until long after they pop.  Big moves end vertical.

Mon, 05/12/2014 - 14:48 | 4751672 Bernoulli
Bernoulli's picture

markets bla oversold bla bla graph trading range bla percentage change graph bla correction .... index ... graph
sharp correction .... momentum graph graph graph... ratchet higher bla ... runaway bull market...

Hate to step on anyones toes here and I'm sure that a lot of work went into this article, but sorry: Does technical analysis really matter at this point? Did it ever matter? Did anybody predict the internet bubble bursting with technical analysis and trading bands? September 11th? Lehman? Fukushima? any major correction? ANYTHING?

 

 

Mon, 05/12/2014 - 15:00 | 4751727 Kreditanstalt
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Well said...how many "Hindenburg Omens", "oversolds", "buy signals", waves, violated moving averages, &c., &c., mean anything in markets that are completely and thoroughly ARTIFICIAL and MANIPULATED???

Mon, 05/12/2014 - 14:57 | 4751715 valley chick
valley chick's picture

Those were the days when fundamentals mattered.....now just BTFATH!

Mon, 05/12/2014 - 14:58 | 4751720 John Law Lives
John Law Lives's picture

Here is a story of interest:

Jury rules that Dallas billionaires Charles, Sam Wyly used offshore trusts to hide trades

Bloomberg News 
Published: 12 May 2014 12:15 PM

http://www.dallasnews.com/business/business-headlines/20140512-jury-rule...

excerpt:

"Samuel and Charles Wyly used a web of offshore trusts to illegally hide their stock holdings and evade trading limits, a federal court jury found Monday, leaving Samuel and his brother’s estate potentially liable for as much as $550 million."

Mon, 05/12/2014 - 14:59 | 4751723 The_Ungrateful_Yid
The_Ungrateful_Yid's picture

Keeping interest at zero will allow for the market to go higher. Banks will just keep purchasing hard assets. THERE IS NO MARKET, only yellen.

Tue, 05/13/2014 - 01:23 | 4753703 Midnight Rider
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The majority of the nation is not participating nor benefitting from the Fed's market ramp up. The statement is correct, but the ultimate end result is far from understood at this point.

Mon, 05/12/2014 - 15:06 | 4751755 yogibear
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Keep the shorts coming in. Grabbing money from them is like taking candy from a baby. Sqeeze play.

Mon, 05/12/2014 - 15:31 | 4751883 OC Sure
OC Sure's picture

Topping.

Mon, 05/12/2014 - 15:46 | 4751955 TheRideNeverEnds
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Its was clearly consolidating and is now breaking out for the next leg higher; there is no question about that.  There is no conceivable reason for the market to decline in this post free market market and zero indication of a top or anything changing the manipulated state of things in the foreseeable future.   

 

In fact, all signs point to this being near the bottom; last year we broke out from a triple top pattern, retested old highs and confirmed generational lows as we have done several times before in history to never again come even close to those levels.   The market will more than double from here before you can even think about a top.

 

Its a foregone conclusion that we will close 2014 above 2000 in the SPX.  

Tue, 05/13/2014 - 01:18 | 4753694 Midnight Rider
Midnight Rider's picture

Foregone conclusion: An end or result regarded as inevitable.

What happened in 2011 then? Was there a 20% correction or not? If so, I guess the Fed wanted it to happen. Ergo, maybe they want another correction to happen? If there is a feeling that having the Fed drive the stock market forever higher is a forever win, win, win solution, and there are no costly negative incentives or side-effect that are being created from it, then the entire concept of a free market economy has been obliterated. Everyone should just stop working and the Fed can print every dollar everyone would ever need or want to fund permanent retirement for the entire nation. 0% unemployent as no one is looking for work, and no one counts in the stats. Full employment as the Fed has defined it. There are so many stats that are pushing the limits of historical peaks, it's hard to keep track any more. If we think we can redefine the entire spectrum of financial accounting and economic statistics to make our new reality appear viable, the I guess we will forever be stuck in the world of smoke a mirrors. Just hope that someday, somebody doesn't turn on the lights. 

Mon, 05/12/2014 - 17:22 | 4752347 michigan independant
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Is The Market Consolidating Or Topping?

yes

Mon, 05/12/2014 - 19:15 | 4752673 MeelionDollerBogus
MeelionDollerBogus's picture

Silly Rabbit, Trix are for kidz! The market is clearly consoli-topping.

Mon, 05/12/2014 - 20:50 | 4752975 akbarovich
akbarovich's picture

 "It is also worthwhile to remember that getting back to even is NOT an investment strategy."

You mean like being short S&P ever since the founding of ZeroHedge? Eh, what's a multi-year drawdown if it's all going to zero...

Mon, 05/12/2014 - 22:46 | 4753325 Bemused Observer
Bemused Observer's picture

I think looking about for a "top" is a waste of time. 'Tops' occur in a normally-functioning market, and this is NOT a normal market! It's not so much rigged as it is staged. We are watching a show that is being put on for us by TPTB.

They probably DID try to rig it at one time, but their thinking is so short-term oriented they failed to see the obvious outcome a few years down the line. Now the whole thing threatens to blow up in their faces, and they are desparately staging this happy, healthy market as a Potemkin Village of economic recovery. I DO believe they were really hoping for the return of the 'up' part of the business cycle to sweep them, and the problems, up in the general current. But it failed to arrive, and they have been propping the facades up and slapping new coats of paint on as fast as they can. Trying to make everything look normal. Even driving gold and silver down, because they know that people tend to view volatility and price jumps as a sign something is wrong. Tweaking data to alter the meaning, throwing all sorts of diversions at us to distract us and keep us arguing with each other over bullshit, the old war gambits using demonized foreign 'enemies', all of it.

None of the regular terms are applicable anymore. These folks are in survival mode, they are scared and overwhelmed. They know what a colossal cluster-fuck this whole thing is, and that there's no fixing it. They are waiting for a solution to come to them, and just trying to hold it together until it arrives.

The market won't 'top' in the traditional sense. It will reach a maximum price when the efforts to keep it up fail.

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