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5 Things To Ponder: Shades Of Risk

Tyler Durden's picture




 

Submitted by Lance Roberts via STA Wealth Management,

Is it just me? Last week while on vacation, the markets surged back to all-time highs as the Greek and China problems were solved. Unfortunately, as I left white, sandy beaches and clear ocean waters behind me to return to reality - so did the markets. Either it is purely coincidental or I should head back to Mexico. Personally, I am hoping for the latter.

As I discussed earlier this week (chart updated through Thursday's close):

"While the prices did manage to break out of the downtrend that has contained the market since mid-May, so far that rally has failed to attain new highs. Furthermore, the previous oversold condition that acted as the "fuel" for the recent rally has been exhausted with the markets are now back to an extreme overbought condition. This suggests that there is likely very little upside currently and that investors should consider using this opportunity to engage in prudent portfolio management practices such as taking profits, reducing laggards, and rebalancing allocations."

SP500-MarketUpdate-072315

That advice has played out well as the markets have continued to deteriorate, along with a vast majority of internal measures. The question is now, and is the subject of this weekend's reading list, is the correction over? Or, is this just the beginning of something bigger?


1) The Thinnest New High In Stock Market History? by Dana Lyons via Dana Lyon's Tumbler

"When we posted yesterday's piece on the stock market's weak internals (If Beauty's On The Inside, This Market Wins The Ugly Contest), we weren't sure if things could get any worse – and by how much – with the major averages still able to hold near 52-week highs. Well, the answers were 'yes' and 'a lot'."

SP500-Adv-Issues

Read Also: What Do 1987, 2003, 2009 And 2015 Have In Common by Chris Ciovacco via Ciovacco Capital

 

2) Doubling Down On A Summer Correction by Michael Gayed via MarketWatch

"This is not about opinion, and this is not a call. The odds simply favor some kind of heightened volatility, and volatility tends to coincide with corrections in stocks. Much like in July 2011 when stocks rallied and all seemed well before the Summer Crash of 2011 took place, so too a similar pattern and complacency is under way.

 

Perhaps this is precisely how it needs to happen — suck everyone in, and then refresh the fear when it seems like all is well, and when no one expects it."

Read Also: What's The Biggest Risk To Investors by Ben Carlson via A Wealth Of Common Sense

 

3) The Nasdaq Is Flashing A Dot-Com Era Signal by Anthony Mirhaydari via The Fiscal Times

"But beneath the surface, the situation is more vulnerable than it seems: By one measure, the Nasdaq is getting ahead of itself in a way not seen since just days before the dot-com bubble burst.

On the Nasdaq 100, this was only the second time that the index was up 1 percent or more to a new 52-week high amid net declining issues. The other day was March 23, 2000, just days after the dot-com bubble peaked."

Read Also: The Market Doesn't Care About Your Opinions by Joe Calhoun via Alhambra Partners

Read Also: The Most Boring Stock Market In Decades by Michael Driscoll via WSJ MoneyBeat

 

4) Magical Thinking Divorces Markets From Reality by James Grant via Financial Times

"The modern financial animal is wont to assume that he or she lives in an age of science. Just peruse the economic research that the great central banks produce. Even the titles of the papers are incomprehensible. Surely, the wit of man and woman has conquered the mysteries of money.

 

So much for appearances. The truth is we live in an age of pseudoscience. The central banks' forecasting models have failed to predict the future. Quantitative easing and zero per cent interest rates — policy centrepieces of the post-2008 era — have failed to restore what we used to call prosperity."

Read Also: Market Deterioration & Full Cycle Investing by Dr. John Hussman via Hussman Funds

 

5) China's Record Dumping Of US Treasuries by Tyler Durden via ZeroHedge

"The cumulative reserve depletion between Q3 2014 and Q2 2015 is $160bn after adjusting for currency changes. At the same time, a current account surplus in Q2 combined with a drawdown in reserves suggests that capital outflows from China continued for the fifth straight quarter. Assuming a current account surplus in Q2 of around $92bn, i.e. $16bn higher than in Q1 due to higher merchandise trade surplus, we estimate that around $142bn of capital left China in Q2, similar to the previous quarter.

 

This brings the cumulative capital outflow over the past five quarters to $520bn. Again, we approximate capital flow from the change in FX reserves minus the current account balance for each previous quarter to arrive at this estimate (Figure 2)."

china-capital-outflow

Read Also: Investors Can't See Through Market Froth by John Plender via FT


Other Interesting Reads

Oil Warning: Crash Could Be Worst In 45 Years by Tom Randall via Bloomberg

The Buffett Ratio Is Bearish by Ed Yardeni via Dr. Ed's Blog

A Warning Signal For Growth Investors by Cam Hui via Humble Student Of The Market

Are Stocks Overvalued? A Survey Of Equity Valuation Models by Chris Brightman via Research Affilliates


"It wan't raining when Noah built the ark." - Howard Ruff

Have a great weekend.

 

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Fri, 07/24/2015 - 16:31 | 6350531 Tin Hat Salesman
Tin Hat Salesman's picture

lots of lines

Fri, 07/24/2015 - 16:43 | 6350564 MsCreant
MsCreant's picture

Quick, call the hookers and snort them. 

Fri, 07/24/2015 - 17:16 | 6350675 Four chan
Four chan's picture

what is the biggest risk to debtors? int rate increases. who are the biggest debtors? the us government, consumers, big business. what could go wrong? no counter party risk looks pretty good right now to me, and its on sale = no brainer.

Fri, 07/24/2015 - 18:18 | 6350944 THE 4th Quadrant
THE 4th Quadrant's picture

Oooh, Oooh, Oooh, I wanna be a market player but I don't want any risk!

Fuck you asshole!

Fri, 07/24/2015 - 17:26 | 6350713 New_Meat
New_Meat's picture

... er ... I'm so confused ;-)

Fri, 07/24/2015 - 16:34 | 6350533 Dr. Engali
Dr. Engali's picture

No worries, next week everything will be "fixed" and will be reaching new highs.

Fri, 07/24/2015 - 16:36 | 6350546 Sages wife
Sages wife's picture

Hey, I thought you went to the bar. Don't rain on our "doom woodie".

Fri, 07/24/2015 - 16:37 | 6350548 KnuckleDragger-X
KnuckleDragger-X's picture

Yep, at least if the financial drug dealers can get a giant load of hopium on the street.......

Fri, 07/24/2015 - 16:40 | 6350556 vq1
vq1's picture

never thought id look forward to a monday. 

Fri, 07/24/2015 - 16:44 | 6350559 MsCreant
MsCreant's picture

Financial warfare with trading bots. So exciting and futuristic! No real people get harmed at all, right? 

Managed economy, attacking and under attack. Hack, hack, hack. Trade fictions, Ponzi stories, shifting HFT strange attractors drawing in black swans to come home and roost while canaries die in their caves. 

Never mind weather control and playing the HAARP. This marching market harmonic convergence bridges disaster and waves us goodbye as we sit and ride the storm.

Hope that made sense.

Fri, 07/24/2015 - 17:17 | 6350678 Four chan
Four chan's picture

lol talk about battle bots!

Fri, 07/24/2015 - 17:28 | 6350718 New_Meat
New_Meat's picture

"Hope that made sense."

I heard today that Art Bell is back with a fancy internet show, gotta' find the details.  That'll 'splain it to me.

Fri, 07/24/2015 - 16:59 | 6350615 CarpetShag
CarpetShag's picture

1. Blah blah blah
2. whimsical reflections
3. Pimped-up charts
4. Studiously avoid saying anything tangible
5. Go to 1

Fri, 07/24/2015 - 17:01 | 6350622 homebody
homebody's picture

So many storm clouds.  Does not seem to matter which way I turn, I still can't cover my ass.

Time to close the bunker door soon.

Fri, 07/24/2015 - 17:30 | 6350727 New_Meat
New_Meat's picture

head on a swivel

Fri, 07/24/2015 - 17:08 | 6350646 no1ninja
no1ninja's picture

NEW FED Leak:

 

"Housewife buys stocks, Billionaires hate her."  

Fri, 07/24/2015 - 17:44 | 6350794 shankster
shankster's picture

"Electric companies fear her"

Fri, 07/24/2015 - 17:42 | 6350789 shankster
Fri, 07/24/2015 - 18:44 | 6351019 VW Nerd
VW Nerd's picture

Please note also that 52 week lows swamp 52 week highs by over 10-1 on the NYSE yet the market is less than 2% from it's all time high.  This indicates we have a few "favored" stocks driving the markets.  Thinking heavily weighted stocks like APPLE, NETFLIX, AMAZON and major banks.  I observed this same phenonenon in the months leading up to the 07/08 collapse.

Fri, 07/24/2015 - 21:20 | 6351470 bid the soldier...
bid the soldiers shoot's picture

This can end badly in so many ways.

Don't knock yourself out trying figure what it's gonna be.

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