Asia overnight.. same old same old.. weakness but not significant weakness.. An optimist would call Asian indexes calm albeit that they, nonetheless fell. (Shanghai aside – which managed to turn positive. I wouldn’t read too much into this yet. The technicals are a disaster although well oversold now).
Its note worthy that as the cash equity markets approached their all time lows on the close yesterday evening their technical indicators were showing something slightly more optimistic.
Here below a chart of three indicators on the sp500.
1) The rsi which has spiked up following the extremes of oversold. The selling pressure is easing there fore. This could of course be a lull before the real storm. Its just one indicator.
2) The number of sp500 making new highs and or lows. The market sell off is narrowing. Less stocks are making new lows. When moves narrow this usually signifies a turning point is approaching. I would just remind that the early 2009 spike down became very narrow towards her conclusion but the move, nonetheless sustained, albeit on a narrow basis for 1000 ticks beyond the broader move.
3) The number of stocks above their 20 dma has dropped to 1 from 500. This is an extreme especially when you consider a mere 8 out of the 500 are above their 50 dma.
The market is pricing in a double dip here and a reduction of earnings and dividends. This is beyond a discount of growth. Prices are demonstrating an economic contraction. The above indicators are shreds of evidence. Probabilities only.
Its impossible to post up all the excellent stocks that have been killed through this process but when i see a fund of blue chip industrialist stocks moving down by 50% and paying a yield of nearly 5% with low debt and x2 or x3 or x4 divi cover (in an environment of money printing) I have to switch out of cash into such stocks. The fundamentals have never been clearer. Remember this phrase “the crap bounces the highest”. So im considering adding some ‘junk’ to the portfolio as purely speculative swing plays inc Citi and BAC.
Precious metal miners, very briefly. I heard an analyst saying yesterday on bloom that the miners can crash here even as their metals zoom to new highs. Miners and their metals are two separate things. The speaker was very bearish on miners. So follow the logic here. The miners earnings will zoom up for two reasons.. 1) The metals they sell are in demand. They are unhedged so their earnings will grow qoq as other cos earnings decline qoq. 2) Energy is a key input for mining. As energy declines their costs decline. Therefore from the inputs side the earnings should again soar for pm miners. I continue to add options. I am willing to risk i am wrong on this call. This issue remains hugely misunderstood in spite the nos rolling in quarter after quarter. Oil’s decline and breaking of the cyclical bull trend is hugely important to pm miners earnings. Again a point totally ignored by the main stream.
All the best
Rich
(3 votes, average: 5.00 out of 5)
Loading...