Tag Archives: Trends
$AAPL Where Does It Head This Week
Cyprus Event — Its The End The World As We Know It
$SPY Needs A Big Push, Could It Be Bonds?
The last three trading sessions have seen the $SPY break out above $140. Just weeks ago everyone was calling for the markets to collapse, yet here we are with stocks going on their merry way higher. Eventually those calling for the markets to decline will be right, even a broken clock is right twice a day, but as I have said over and over and over and over again, the central banks will not let this house of cards collapse, at least not yet.
The SPY remains over the key $140 psychological figure. Stocks are shrugging off bad economic data thinking it will provide the FED with an excuse for more QE. Dips are being bought, oh my are we already pricing in QE4? Even my 6 year old knows QE3 is coming in September and Bonds! Oh yes Bonds! Aside from the government manipulating yields lower to "stimulate" the economy there has been a tremendous flight to bonds. It has been a double whammy of bond buying which recently sent yields to record lows.
Today the 10 year note sale had its weakest demand in over 3 years. Is this the start of a trend? Take a look at TLT, an ETF that gives a clear view of longer dated bonds, which you don't want to be holding when bonds start to sell off. (The average bond holding for TLT will mature in 27.9 years) We can already see a potential top.
TLT is up over 50% in less than 2 years and could be in the early stages of a dramatic decline. If yields start to rise, and bonds sell off, where is this money going to go? Perhaps junk bonds? How about high quality, dividend paying stocks, with strong free cash flow? How about anything that isn't bolted down to the floor of the NYSE?
Hard to believe I am a bear... right? All this government manipulation will end very, very badly. If the bond bubble bursts, stocks will rise, and we will see massive inflation down the road. QE3,4,5 will quickly become QE 15,16,17 as interest rates soar and the Treasury is crippled with enormous interest payments. But this isn't all coming over the next few months it will take some time. Right now I am focused on the short term so I can better prepare myself for the bigger picture. (If you haven't prepared for the upcoming global economic crash than you haven't been watching Doomsday Preppers, your next door neighbor already has! LMAO!)
$SPY looks ready to retrace some of its gains from earlier this week and late last week. I have highlighted each time $SPY has hit the upper trendline of the channel. It pulls back (as it did yesterday) and then tries to make another push for it and fails (as it did today).
My outlook? A pull back/consolidation to no less than $136.80, more likely $137.40, and then a resumption of this rally that will bring us to new highs for the year. There is also the chance we don't pull back and we break right out of this channel. If that happens we will see new highs for the year within a week or two. Wild!
This has nothing to do with the economy or earnings and everything to do with bonds. A rush out of bonds will give stocks their next push higher.
Markets Awaiting The ECB Before Making Their Next Move
The FED takes second fiddle to European Central Bank and its President Mario Draghi this week. Tomorrow before the markets open Draghi will let the world know whether his promise to do whatever it takes to keep the Euro zone together was nothing more than a ploy to buy Spain and Italy more time. Today the FED did exactly what mostly everyone expected them to do.... nothing. Which briefly weighed on risk, but ultimately didn't take too much wind out of the markets sails. The consensus is for more easing to come in September, assuming the economic data remains weak.
The ECB, however, is likely to announce measures to help combat their own crisis that has spread from Greece all the way to the core. This drawn out made for television drama has been going on for far too long, but don't turn the channel just yet, we are getting to the very interesting part. In order for ECB President Draghi to save the Eurozone his way, which means printing Euro's to buy the sovereign debt of Spain and Italy, he will have to do so against the wishes of the Eurozone's largest economy. The Germans are against artificially propping up Spain and Italy. Again it comes down to the same theme we've encountered many times - moral hazard. Who are the ones that will ultimately foot the bill for Draghi and the ECB's actions? All those in the Eurozone, even the countries who have their house in order, such as Germany. Bailouts and money printing do nothing but mask the underlying rot. It prolongs the inevitable.
Give the central banks around the world a round of applause. If can kicking were and Olympic event they would surely be gold medal winners.
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With Draghi and the ECB tomorrow we sit right at June 4th trendline support. Tomorrow is truly a print we go up, don't print we go down type day. We have broken that June 4th trendline before and rallied back above it, so all is not lost for the bears if Draghi disappoints. If we break support I see $SPY heading back to $136. If the printing presses get turned on we could be looking at new highs for the market before the end of next week... and then the chit will really the fan.
