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Weekend Reading: Serious Indigestion

Tyler Durden's picture




 

Submitted by Lance Roberts via STA Wealth Management,

Another week of market volatility with no ground gained. It's enough to give you indigestion. I made an assessment earlier this week in reference to the markets rally attempt stating:

"Any rally that occurs over the next few days from the current oversold condition should be used as a "sellable rally" to rebalance portfolios and related risk. (Chart updated through Thursday's close)

SP500-Technical-Analysis-080615

  • "While the market did rally over the last week as expected, it failed to rally above the current downtrend that has confined the market since mid-May.
  • The failure of the market to rise back towards new-highs, given the "oversold" condition discussed last week, continues to confirm the underlying weakness in the market.
  • While overhead resistance has kept the markets from rising in recent months, downside support at the 150 and 200-day moving averages has kept the "bullish trend" alive for now.
  • Lastly, the oversold condition that existed last week has been primarily worked off. However, the market has not returned to an overbought condition that has previously marked the end of bull rallies. The market must close above 2180 by Friday's close to reverse the current weakness.

This short-term analysis suggests, especially when combined with the ongoing deterioration of internal measures, that rallies remain useful opportunities to rebalance portfolio risk as discussed last week."

As suspected, the rally failed at the current downtrend resistance and is currently testing support at the 200-dma. Importantly, the market is NOT oversold currently which could potentially fuel further selling. 

I discussed yesteday's that more warning signs have emerged suggesting there may be more to the recent consolidation than just a pause. This weekend's reading list will delve into a variety of views on the current market action.

Is this just a simple case of indigestion or is it something more viral? 


1) US Stocks Can't Keep Shrugging Off Global Pressures by Anthony Mirhaydari via Fiscal Times

"Yet a better indication of what's happening in world markets comes from the MSCI World (ex USA) Index, which is down more than 7 percent from its high set last summer. Or the iShares MSCI Emerging Markets (EEM), which is down 19 percent from last summer's highs. Or the DB Commodities Tracking Index Fund (DBC), which is down 43 percent.

 

Something is slipping. Factory orders here have expanded on a monthly basis only twice in the last 11 months. Excluding transportation, factory orders collapsed at a 7.5 percent annual rate in July, the worst since the maw of recession in 2009. With America's manufacturing sector looking shaky, the risk is that a global stalling pulls us down, too."

 

CRB-Fwd-earnings

Read Also: Too Early To Worry About The Bear by Chris Puplava via Financial Sense

Also Read: 3 Warning Signs For Market Bulls by Lance Roberts via Streettalklive

 

2) The Wizard Of Odds For The USD by Erik Swarts via Market Anthropology

"From our perspective - and represented by the Fed's arduous task of administrating policy from ZIRP and within the trough of the long-term yield cycle, the conditions in the economy that were reflected in the markets of the 70's, 80's and 90's - are not remotely similar with today or have the potential reach and trend capacity that was fundamentally set in motion and sustained by the rise and fall in yields, from their secular icarus heights of the early 1980's.

 

Although anythings possible - and admittedly the bulls continue to hold the fort and battle for now, we feel it would behoove such lofty expectations to approach the dollar with the aforementioned long-term intermarket cycles in mind. Moreover, from a performance point-of-view, the magnitude and pace of gains over the past year is in fact rare and more representative of culminating blowoff extremes - rather than the early headwaters of a longer trend."

USD-40-Years

Read Also: The Great Tragedy by Joe Calhoun via Alhambra Partners

 

3) Things Are About To Get Bumpy  by Russ Koesterich via BlackRock

"Investors should be aware, however, that the good times may not last for long. Higher volatility should be expected given the recent evidence of slowing global growth and less benign credit conditions. This suggests to us that so-called momentum stocks, which have rallied strongly this year, could falter."

Read Also: The Stock Market Is Weaker Than It Looks by J C Parets via Business Insider

SP500-Technical-080615

 

4) The "Big Short" Opportunity May Be At Hand by Doug Kass via Kass' Corner 

"Too little attention has been placed on the continued subpar growth that's been the consistent feature of the U.S. economy since "The Generational Low" in March 2009.

 

It's worth noting that recoveries out of severe U.S. recessions like the 2007-2009 one have historically been V-shaped. But this time around, gross domestic product has only expanded at a 2.1% real annual rate from the recession's bottom – well below the historical trend line of slightly more than 3%.

 

This fact, coupled with the more-sluggish corporate-profit growth than has emanated from a weaker economy, has formed my cautious market view over the last two years. I also think this slow-growth condition has generated a dependency on aggressive monetary tactics from the Federal Reserve and the world's other central banks."

Read Also: 2015 Recession Probabilities And Bear Markets by Chris Ciovacco via Ciavocco Capital

 

5) Coming Out As A Bear by Axel Merk via Merk Investments

"Increasingly concerned about the markets, I've taken more aggressive action than in 2007, the last time I soured on the equity markets. Let me explain why and what I'm doing to try to profit from what may lie ahead.

 

I started to get concerned about the markets in 2014, when I heard of a couple of investment advisers that increased their allocation to the stock market because they were losing clients for not keeping up with the averages.

 

Earlier this year, as the market kept marching upward, I decided that buying put options on equities wouldn't give me the kind of protection I was looking for. So I liquidated most of my equity holdings. We also shut down our equity strategy for the firm.

 

Of late, I've taken it a step further, starting to build an outright short position on the market. In the long-run, this may be losing proposition, but right now, I am rather concerned about traditional asset allocation."

 

2015-08-04-yellen-bear

Read Also: Short Seller Who Called Financial Crisis See Calamity Ahead  by Michael Newberg via CNBC


Other Interesting Reads

The Revenue Recession by Charlie Bilello via Pension Partners

Fed Policy Keeps Introducing Distortions by Dr. John Hussman via Hussman Funds

The Fed Is Cornered by Guy Hasselmann via ZeroHedge

A Compendium Of Awesome Observations by Meb Faber via Meb Faber Research


"These are the cards we've been dealt. We can't trade the market we want, we have to trade the market we have." - J C Parets

Have a great weekend.

 

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Fri, 08/07/2015 - 16:38 | 6402419 SickDollar
Fri, 08/07/2015 - 16:38 | 6402420 LawsofPhysics
LawsofPhysics's picture

Central banks are in full control.  Yes, the market will go down, but shorting will not be allowed to be profitable.  Glad I left the last time we broke 18k on the Dow.  Getting excitied about all the real assets going on sale.

Fri, 08/07/2015 - 17:05 | 6402482 Fahque Imuhnutjahb
Fahque Imuhnutjahb's picture

exactly-----https://youtu.be/eaJJClb_gXc?t=8m42s

but the game is not over, at least domestically.

Fri, 08/07/2015 - 19:03 | 6402798 ZH FNG
ZH FNG's picture

Catherine Austin Fitts interview by Greg Hunter. Catherine is a great guest and I listen to everything Greg does... but he really went off the rails when he started talking about the Iran deal

https://youtu.be/eaJJClb_gXc?t=19m37s

"...have you read the Bible?"

Yikes.

 

 

Fri, 08/07/2015 - 16:41 | 6402425 atthelake
atthelake's picture

Read the book, easy and short and see the movie, "The Road".

Fri, 08/07/2015 - 16:59 | 6402468 dark pools of soros
dark pools of soros's picture

that guy writes like dogshit...  maybe the movie turned it into something he meant to say

 

 

Fri, 08/07/2015 - 16:57 | 6402463 Consuelo
Consuelo's picture

 

"Too Early To Worry About The Bear by Chris Puplava via Financial Sense"

 

Financial Sense, 'sensed' it was $$$much better for $$$Fees (Ooops - I meant, their client base...), to jump on the S&P locomotive some years back, rather than talk straight 'sense' about what this 'Bull' market is really all about, but I guess they gotta put $bread on the table too...  I have a rather perverse 'wish' that these Finanical Services Industry wonks really get their head-handed to them by express route of a market cascade that sends their gullible client base straight to the bread line...

Nice thoughts, huh?   You know what? F-ck 'em.   Let it all F'ing $$$burn...   And their little dogs too. 

Fri, 08/07/2015 - 17:16 | 6402512 negative rates
negative rates's picture

Hey i'm scared, aint you boys scared?

Fri, 08/07/2015 - 18:38 | 6402730 trulz4lulz
trulz4lulz's picture

"There is no painless backdoor.", he says. i would bet to wager Obombya knows of a few tricks to relieve the pain of backdoor entrances.

 

Fri, 08/07/2015 - 19:01 | 6402786 homebody
homebody's picture

Four years ago a bear attacked us at our door - I had the forsight to reach for my gun and was therefore saved - since then I was also aware of the other bear and have been preping ever since.

Fri, 08/07/2015 - 17:03 | 6402474 Hitlery_4_Dictator
Hitlery_4_Dictator's picture

the road was too optimistic IMHO ...read the "299 days" series

Fri, 08/07/2015 - 17:03 | 6402479 CheapBastard
CheapBastard's picture
Families not fully convinced wing flap is from missing Malaysia plane

 

 

http://www.msn.com/en-us/news/world/families-not-fully-convinced-wing-fl...

Fri, 08/07/2015 - 19:55 | 6402967 smacker
smacker's picture

MSN page not loading properly. hhmmm.

I think there's a fair chance the wing flap "is" from MH370. The question is: how did it get there .....and isn't the location it was found sooooo deep and sooooo close to Diego Garcia.

Fri, 08/07/2015 - 17:07 | 6402491 buzzsaw99
buzzsaw99's picture

doug kass, the big short, lulz

I'm Dougie! I'm Dougie! :cries like little girl: [/dr. evil]

Fri, 08/07/2015 - 17:12 | 6402503 CheapBastard
CheapBastard's picture
EPA confirms Colorado mine spill contains heavy metals

 

http://www.msn.com/en-us/news/us/epa-confirms-colorado-mine-spill-contai...

Fri, 08/07/2015 - 17:39 | 6402549 tarabel
tarabel's picture

 

 

The Rio de Las Animas (River of Lost Souls) runs down along the east side of a vast mining district in the San Juans. It's not like its ever safe to drink, no matter what color the water is. Always important to establish a baseline before getting worked up about things, especially about electrical impulses that MSN sends to its readers' knees. Fabulous scenery down there, but bring your own water supply, always. 

Fri, 08/07/2015 - 18:31 | 6402696 sunny
sunny's picture

I presume folks have noticed the death cross in DJ Composites, right?  This is not a bullish signal.  ;-)

Fri, 08/07/2015 - 19:28 | 6402859 nakki
nakki's picture

"The market must close above 2180 by Friday's close to reverse the current weakness." 

Missed it by that much. That would have been quite the rally. 

 

Sat, 08/08/2015 - 00:00 | 6403743 HardlyZero
HardlyZero's picture

Right time to just get SRTY.

IRA, 401K.

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