Long wave audio-slides-02-25-12-canaries_in_the_coal_mine
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Long wave audio-slides-02-25-12-canaries_in_the_coal_mine
- 1. This chart is from the March 2012 Market Analytics & Technical Analysis – Advanced Report February 25th, 2012 Canaries In The Coal Mine Listen to the original podcast for this slide at www.GordonTLong.com/LONGWave The content of this slide should not be considered investment advice of any sort, nor should it be used to make investment decisions. Use of this slide is considered to be your explicit acceptance of the Disclosure Statement and the Terms of Use found on the last page of this document.
- 2. This chart is from the March 2012 Market Analytics & Technical Analysis – Advanced Report February 25th, 2012 Canaries In The Coal Mine CANARIES IN THE COAL MINE SOUND PERCEPTIONS Flawed COMPLACENCY Extreme RISK & RISK PREMIUMS Extreme DIVERGENCES Glaring VOLUMES Historic Lows BREADTH 4 Generals Left MARGIN DEBT Tell Tale Signs INVESTOR & TRADER SENTIMENT Always Last In COMPARISONS Similar Patterns Listen to the original podcast for this slide at www.GordonTLong.com/LONGWave The content of this slide should not be considered investment advice of any sort, nor should it be used to make investment decisions. Use of this slide is considered to be your explicit acceptance of the Disclosure Statement and the Terms of Use found on the last page of this document.
- 3. This chart is from the March 2012 Market Analytics & Technical Analysis – Advanced Report February 25th, 2012 Canaries In The Coal Mine Listen to the original podcast for this slide at www.GordonTLong.com/LONGWave The content of this slide should not be considered investment advice of any sort, nor should it be used to make investment decisions. Use of this slide is considered to be your explicit acceptance of the Disclosure Statement and the Terms of Use found on the last page of this document.
- 4. This chart is from the March 2012 Market Analytics & Technical Analysis – Advanced Report February 25th, 2012 Canaries In The Coal Mine CONCERN 17-Feb 25-Feb Change Europe Collapsing 20 13 -7 Debt Crisis in US 17 22 5 War In Iran 15 12 -3 Political Dysfunction 12 13 1 Gasoline Prices 8 14 6 Fiscal Tightening - 2013 5 4 -1 Surprise Inflation 5 7 2 1987 Like Market Crash 4 3 -1 China - Hard Landing 2 5 3 Premature Monetary Tightening 2 1 -1 Terrorist Attack - US 1 1 0 A Debt Crisis in Japan 1 0 -1 Other 8 6 -2 Source: Business Insider.com Listen to the original podcast for this slide at www.GordonTLong.com/LONGWave The content of this slide should not be considered investment advice of any sort, nor should it be used to make investment decisions. Use of this slide is considered to be your explicit acceptance of the Disclosure Statement and the Terms of Use found on the last page of this document.
- 5. This chart is from the March 2012 Market Analytics & Technical Analysis – Advanced Report February 25th, 2012 Canaries In The Coal Mine Listen to the original podcast for this slide at www.GordonTLong.com/LONGWave The content of this slide should not be considered investment advice of any sort, nor should it be used to make investment decisions. Use of this slide is considered to be your explicit acceptance of the Disclosure Statement and the Terms of Use found on the last page of this document.
- 6. This chart is from the March 2012 Market Analytics & Technical Analysis – Advanced Report February 25th, 2012 Canaries In The Coal Mine Listen to the original podcast for this slide at www.GordonTLong.com/LONGWave The content of this slide should not be considered investment advice of any sort, nor should it be used to make investment decisions. Use of this slide is considered to be your explicit acceptance of the Disclosure Statement and the Terms of Use found on the last page of this document.
- 7. This chart is from the March 2012 Market Analytics & Technical Analysis – Advanced Report February 25th, 2012 Canaries In The Coal Mine Listen to the original podcast for this slide at www.GordonTLong.com/LONGWave The content of this slide should not be considered investment advice of any sort, nor should it be used to make investment decisions. Use of this slide is considered to be your explicit acceptance of the Disclosure Statement and the Terms of Use found on the last page of this document.
- 8. This chart is from the March 2012 Market Analytics & Technical Analysis – Advanced Report February 25th, 2012 Canaries In The Coal Mine Listen to the original podcast for this slide at www.GordonTLong.com/LONGWave The content of this slide should not be considered investment advice of any sort, nor should it be used to make investment decisions. Use of this slide is considered to be your explicit acceptance of the Disclosure Statement and the Terms of Use found on the last page of this document.
- 9. This chart is from the March 2012 Market Analytics & Technical Analysis – Advanced Report February 25th, 2012 Canaries In The Coal Mine Listen to the original podcast for this slide at www.GordonTLong.com/LONGWave The content of this slide should not be considered investment advice of any sort, nor should it be used to make investment decisions. Use of this slide is considered to be your explicit acceptance of the Disclosure Statement and the Terms of Use found on the last page of this document.
- 10. This chart is from the March 2012 Market Analytics & Technical Analysis – Advanced Report February 25th, 2012 Canaries In The Coal Mine Listen to the original podcast for this slide at www.GordonTLong.com/LONGWave The content of this slide should not be considered investment advice of any sort, nor should it be used to make investment decisions. Use of this slide is considered to be your explicit acceptance of the Disclosure Statement and the Terms of Use found on the last page of this document.
- 11. This chart is from the March 2012 Market Analytics & Technical Analysis – Advanced Report February 25th, 2012 Canaries In The Coal Mine Listen to the original podcast for this slide at www.GordonTLong.com/LONGWave The content of this slide should not be considered investment advice of any sort, nor should it be used to make investment decisions. Use of this slide is considered to be your explicit acceptance of the Disclosure Statement and the Terms of Use found on the last page of this document.
- 12. This chart is from the March 2012 Market Analytics & Technical Analysis – Advanced Report February 25th, 2012 Canaries In The Coal Mine Listen to the original podcast for this slide at www.GordonTLong.com/LONGWave The content of this slide should not be considered investment advice of any sort, nor should it be used to make investment decisions. Use of this slide is considered to be your explicit acceptance of the Disclosure Statement and the Terms of Use found on the last page of this document.
- 13. This chart is from the March 2012 Market Analytics & Technical Analysis – Advanced Report February 25th, 2012 Canaries In The Coal Mine Listen to the original podcast for this slide at www.GordonTLong.com/LONGWave The content of this slide should not be considered investment advice of any sort, nor should it be used to make investment decisions. Use of this slide is considered to be your explicit acceptance of the Disclosure Statement and the Terms of Use found on the last page of this document.
- 14. This chart is from the March 2012 Market Analytics & Technical Analysis – Advanced Report February 25th, 2012 Canaries In The Coal Mine Listen to the original podcast for this slide at www.GordonTLong.com/LONGWave The content of this slide should not be considered investment advice of any sort, nor should it be used to make investment decisions. Use of this slide is considered to be your explicit acceptance of the Disclosure Statement and the Terms of Use found on the last page of this document.
- 15. This chart is from the March 2012 Market Analytics & Technical Analysis – Advanced Report February 25th, 2012 Canaries In The Coal Mine Listen to the original podcast for this slide at www.GordonTLong.com/LONGWave The content of this slide should not be considered investment advice of any sort, nor should it be used to make investment decisions. Use of this slide is considered to be your explicit acceptance of the Disclosure Statement and the Terms of Use found on the last page of this document.
- 16. This chart is from the March 2012 Market Analytics & Technical Analysis – Advanced Report February 25th, 2012 Canaries In The Coal Mine Listen to the original podcast for this slide at www.GordonTLong.com/LONGWave The content of this slide should not be considered investment advice of any sort, nor should it be used to make investment decisions. Use of this slide is considered to be your explicit acceptance of the Disclosure Statement and the Terms of Use found on the last page of this document.
- 17. This chart is from the March 2012 Market Analytics & Technical Analysis – Advanced Report February 25th, 2012 Canaries In The Coal Mine Listen to the original podcast for this slide at www.GordonTLong.com/LONGWave The content of this slide should not be considered investment advice of any sort, nor should it be used to make investment decisions. Use of this slide is considered to be your explicit acceptance of the Disclosure Statement and the Terms of Use found on the last page of this document.
- 18. This chart is from the March 2012 Market Analytics & Technical Analysis – Advanced Report February 25th, 2012 Canaries In The Coal Mine Listen to the original podcast for this slide at www.GordonTLong.com/LONGWave The content of this slide should not be considered investment advice of any sort, nor should it be used to make investment decisions. Use of this slide is considered to be your explicit acceptance of the Disclosure Statement and the Terms of Use found on the last page of this document.
- 19. This chart is from the March 2012 Market Analytics & Technical Analysis – Advanced Report February 25th, 2012 Canaries In The Coal Mine Listen to the original podcast for this slide at www.GordonTLong.com/LONGWave The content of this slide should not be considered investment advice of any sort, nor should it be used to make investment decisions. Use of this slide is considered to be your explicit acceptance of the Disclosure Statement and the Terms of Use found on the last page of this document.
- 20. This chart is from the March 2012 Market Analytics & Technical Analysis – Advanced Report February 25th, 2012 Canaries In The Coal Mine Listen to the original podcast for this slide at www.GordonTLong.com/LONGWave The content of this slide should not be considered investment advice of any sort, nor should it be used to make investment decisions. Use of this slide is considered to be your explicit acceptance of the Disclosure Statement and the Terms of Use found on the last page of this document.
- 21. This chart is from the March 2012 Market Analytics & Technical Analysis – Advanced Report February 25th, 2012 Canaries In The Coal Mine Listen to the original podcast for this slide at www.GordonTLong.com/LONGWave The content of this slide should not be considered investment advice of any sort, nor should it be used to make investment decisions. Use of this slide is considered to be your explicit acceptance of the Disclosure Statement and the Terms of Use found on the last page of this document.
- 22. This chart is from the March 2012 Market Analytics & Technical Analysis – Advanced Report February 25th, 2012 Canaries In The Coal Mine Listen to the original podcast for this slide at www.GordonTLong.com/LONGWave The content of this slide should not be considered investment advice of any sort, nor should it be used to make investment decisions. Use of this slide is considered to be your explicit acceptance of the Disclosure Statement and the Terms of Use found on the last page of this document.
- 23. This chart is from the March 2012 Market Analytics & Technical Analysis – Advanced Report February 25th, 2012 Canaries In The Coal Mine Listen to the original podcast for this slide at www.GordonTLong.com/LONGWave The content of this slide should not be considered investment advice of any sort, nor should it be used to make investment decisions. Use of this slide is considered to be your explicit acceptance of the Disclosure Statement and the Terms of Use found on the last page of this document.
- 24. This chart is from the March 2012 Market Analytics & Technical Analysis – Advanced Report February 25th, 2012 Canaries In The Coal Mine DISCLOSURE STATEMENT AND TERMS OF USE THE CONTENT OF THIS SLIDE PRESENTATION AND ITS ACCOMPANYING RECORDED AUDIO DISCUSSION ARE INTENDED FOR EDUCATIONAL PURPOSES ONLY. This slide presentation and its accompanying recorded audio discussion are not a solicitation to trade or invest, and any analysis is the opinion of the author and is not to be used or relied upon as investment advice. Trading and investing can involve substantial risk of loss. Past performance is no guarantee of future returns/results. Commentary is only the opinions of the authors and should not to be used for investment decisions. You must carefully examine the risks associated with investing of any sort and whether investment programs are suitable for you. You should never invest or consider investments without a complete set of disclosure documents, and should consider the risks prior to investing. This slide presentation and its accompanying recorded audio discussion are not in any way a substitution for disclosure. Suitability of investing decisions rests solely with the investor. Your acknowledgement of this Disclosure and Term of Use Statement is a condition of access to it. Furthermore, any investments you may make are your sole responsibility. THERE IS RISK OF LOSS IN TRADING AND INVESTING OF ANY KIND. PAST PERFORMANCE IS NOT INDICATIVE OF FUTURE RESULTS. Listen to the original podcast for this slide at www.GordonTLong.com/LONGWave The content of this slide should not be considered investment advice of any sort, nor should it be used to make investment decisions. Use of this slide is considered to be your explicit acceptance of the Disclosure Statement and the Terms of Use found on the last page of this document.
Notas do Editor
- Goldman's client survey 'Wall of Worry' and David Kostin's additional factors miss the bigger point. Though I agree with the items they have identified below, and the fact that it will no doubt therefore be something else .... that something else is EARNINGS. I expect earnings to disappoint in 2012 and to start showing weakness with the upcoming Q1 earnings conference calls. 2012 earnings are already being taken down now to allow them to beat estimates later.
- SURVEY BY BUSINESS INSIDER
- SocGen has put out a big special report titled: "QE3 delayed, but still likely". Their high level overview of where things stand right now looks like this: QE3 has been delayed by the recent bout of good news from the US economy: SG is now in line with the consensus, expecting the launch in Q2 (24-25 April FOMC meeting). As the $400bn Operation Twist program is still boosting demand for long-dated US Treasuries, we believe the Fed will be concentrating its expected $600bn QE3 on buying mortgage products to provide support to the underlying property market. While policy loosening can but be good for all financial assets, the market impact should be less strong than during QE1 or QE2, as the surprise effect has disappeared. QE1 and QE2 were launched at a time when the US Economic Surprise Indicator (ESI) was very low. This time, the ESI has moved back up to an all-time high, indicating that the consensus on the economy may have become too optimistic and thus possibly putting risk assets in danger in the near future. This point about the Economic Surprise Index being elevated at the moment is key to their forecast that there's a good chance the stock market is going to tank between now and that late April meeting when they expect more QE.
- As you can see, going back a way, there's a decent, repetitive pattern between the S&P's 3 month performance, and at least their own economic surprise indicator. Hence: The market is due to fall. All that being said, what's been impressive has been the resilience of surprises. Here's Citi's surprise index (via Bloomberg). This chart goes back 5 years, and what's notable is the resilience of the latest peak. Each time it seems due for a good, hard, mean reversion, it re-elevates; a sign that the economic forecasters continue to not believe in the strength of the economy.This analysis suggests two things. The market is likely to react very badly to any unexpected surprise and nay further moves by the Fed or Central Bankers is likely to be received as a "Sell on the News" event. The market has been rising on "Buy the Rumors" and "Expectations". Whether the market waits till the April 24-25th FOMC Meeting is questionable.
- The charts of Lance Roberts of Street Talk Live.com, are always thoughtful, detailed and tell the story with few words needed. The media and analyst community were convinced early on in 2007, even though we did protest heavily, that the economy would experience a "Goldilocks scenario" and the economy would "muddle through." As the market declined, and one indication after another showed that the coming crisis would be far worse than people imagined, investors remained complacent until the "Oh $#@!" moment occurred. Unfortunately, by that time it was far too late. The same thing occurred in 2009 as the Fed intervened with quantitative easing and then again in 2010 with Q.E. 2. Each time, as the volatility index retraced back to levels of complacency, the seeds were sown for the next "Oh $#@!" moment.
- "Most measures of market sentiment are back to where they were last May just when the S&P 500 was peaking. Short interest has dried up to three year lows. The VIX closed the week below 20 for the first time since last July. As Mike Santoli points out in Barron's, volume in leveraged ETF's versus bearish ones has risen to levels that in the past touched off interim market pullbacks. Credit market indicators have lagged well behind the improvement in equity performance. The S&P 500 is three standard deviation points above its 20-day moving average. Again, as Barron's points out, the ratio of the 15-day volume puts on the S&P 100 Index to bullish call volume hit 2-to-1 last week - this happened in the February 2007, February 2011 and April 2011."
- The VIX is sometimes called the "fear index". Whatever you want to call it, it's a quick way of looking at how much investors are willing to pay for downside protection in the market. Right now, complacency is high, and nobody wants to pay much for "insurance" Once again, we're getting close to what's been a floor for the index (since the crisis) and so it seems inevitable that something is going to come along and jolt everyone awake. What's funny is that it's not hard to see the risks out there: There's Greece. There's Portugal. There's Syria. There's the fact that in a few weeks, the tax cut extension is about to expire, and Congress is supposedly deadlocked on how to do it (though of course everyone's betting on a last-second save). 2012 has been a much quieter year than 2011 was from an economy standpoint. As the saying goes: Perhaps too quiet.It is only a matter of time ....NOT if! We are close to a major Intermediate to Long Term pivot.
- EQUITY RISK PREMIUMSThe equity risk premium is calculated by taking the forward earnings yield based on realized earnings (where available, estimates otherwise) less the yield on the constant maturity 10-year adjusted for the year-over-year change in the CPI Index.
- EXTREME HUNGER FOR RISKOne of our themes of 2012 so far has been the "Dash For Trash" -- the aggressive buying of the badly beaten down assets from last year, whether they be banks, junior gold miners, Italian bonds, or Egyptian stocks. All have been getting bought up like wild. What does it mean? SocGen makes an interesting observation about the surge of the high-beta names (not technically the same thing as the dash-for-trash, but close) The spread between high and low beta equities has also been very wide. When measured using deciles, we find a spread of around 15% in the US, and a remarkable 20% gap in Europe. Over the last 22 years we have only recorded such a wide spread in Europe on two other occasions – in October 2002 and in March/April 2009. This isn't necessarily bullish, however. While the strong performance of high beta names may indicate a potential bottoming out of equity markets, we have seen numerous occasions in the US where the spread has been wider than the current 15% and where the equity market continued to trend lower. Notably almost all these bear market beta rallies coincided with an interest rate cut from the Fed. Meanwhile, this is an interesting chart from Nomura, showing the decline in implied volatility (red line) vs. the a basket of "high-risk" stocks (grey line, inverted). As you can see, the grey line hasn't caught up to the red line, suggesting more strong performance for the risk basket.
- GLARING ANOMALY IN YIELDSAs I pointed out in my recent article "Why the Market Keeps on Rising", since December 2011 the US Equities have been rising due to the devaluation of the US$. It has been a near perfect overlay. What is surprising to me is that Bond prices have moved so little as they have been devalued in US$ terms. Interest rates should have fallen further? However, with the massive balance of trade deficit and the TICS report showing Russia and China selling US Treasuries it requires a higher yield and lower price to attract foreign cpital investment.
- A TIME TESTED WARNING SIGNEveryone keeps wondering when this Teflon market is finally going to crack. Here's one chart, via Doug Kass, that more and more people are paying attention to. It's the S&P 500 (red line) vs. the ratio of the Dow Transports vs. the S&P 500 (blue line). The idea among some "Dow Theorists" is that when the Transports get very weak (relatively) it's a sign that the market as a whole is doomed to fall. It is pretty stark the gap that's opened up this year. At a minimum it at least shows that some parts of the market are getting roughed up by the rise in oil prices.
- I am showing here the global economic outlook just published by the OECD. The global economy is slowing down EXCEPT for the US, as at least currently reported by "official' sources. Clearly the US is not an island and as the most recent Philly Fed report showed, the US economy is already rolling over. The DOW Transport is showing this in ADVANCE of the significant impact increased gas and energy costs will mean.
- PHILLY FEDThe Empire Manufacturing Index that we saw earlier this week, while up over all, displayed weakness in six out of the nine underlying components. Of particular note was the weakness in new orders and backlogs which doesn't bode well for future economic strength. In today's Philly Fed report we witnessed employment drop by over 10 points from 11.6 to 1.1 which is definitely a sign of concern and prices paid rise which points to profit margin compression ahead.When future expectations dive - the current index tends to follow.
- PROFIT MARGINWith profit margins already pushing peaks for this cycle, and the financial markets pricing in extended economic growth, the weakening of margins due to pricing pressures puts investors at risk. Expectations for Q4 earnings were reduced by roughly 50% going into the earnings season and the beat rate of those reduced expectations has still been extremely weak. The markets are currently advancing on hopes of a resolution in Greece but even if that is done it is likely that the re-pricing of risk in the face of weakening margins will be just as damaging.
- VOLUMESThe total lack of volume (and massive concentration of what volume there is at the close) is hardly reflective of a market that is anything other than broken and dying. Last January (2011) the average number of stocks traded on the NYSE per day was 891mm shares vs 661mm for this January (a 26% drop Y-o-Y!) and this is down an incredible 59% from January 2008.
- BREADTHIf we compare the performance of the components of the Dow at the start of 2008 to the actual Dow index performance, there is a very significant divergence of around 7% (or around 900 points). This is actually understating the difference (as it is an average) as we note that 5 of the 30 names from 2008 have lost more than 70% of their value (GM, AIG, C, BAC, and AA) since January 2008 (averaging -88% among those). Three names have risen by more than 70% (MCD, HD, and IBM - thank you Warren) as 18 of the 2008 Dow 30 names are lower (on average -36.5%) with the remaining 12 Dow 2008 names up on average 33%. What is worse is the realization of the dramatic loss in real purchasing power as Gold has risen by more than 100% since the start of January 2008 as the Fed continues to realize it can abuse the lemming-like focus on nominal returns. If it were not for CAT, HD, MCD, and IBM things would look a lot different as we note CAT is up 24% year-to-date (beaten only by the dramatic 32% gain in BofA) and is adding 27 points to the Dow today alone.
- MARGIN DEBTWhen the experts say that the stock market is a leading indicator, maybe they are referring to margin debt — seeing as this provides a bit of a pulse on the investor appetite for risk. The 12-month trend in margin debt slipped into negative terrain in December 2000 and then did it again in April 2008. Both times, heeding this trend paid dividends in the sense that they both led downturns in both economic activity and in equity market valuation. The Y-o-Y trend just slipped into negative terrain last November for the first time since 2009 —just something to consider.
- MARGIN DEBTMargin Debt fell off in early 2000 which was a precursor to a major market retrenchment into the fall of 2001. Margin Debt fell off again in early fall 2007 which was a precursor to a major market retrenchment into March 2009. We are presently experiencing Margin Debt falling off significantly. This is highly unusual and a strong precursor of "risk off' beginning to creep into the market. Notice particularly that when margin debt Y-o-Y goes negative it has historically approximated a trigger point in the equity markets.
- RETAIL – ALWAYS LAST TO THE PARTYOne of the many sayings on Wall Street -- some worth discrediting -- is that the retail investor is often, if not always, the last to the party. While we’ll leave the possible discrediting of this belief for another day, we will note that in the most recent week for which we have data, $1.92 billion flowed into domestic equity funds according to ICI. This would be the largest single week inflow to domestic equity funds in 2012 and sets up February to be the first positive month for domestic equity flows since April 2011. Given what happened shortly thereafter, we imagine many clients may be looking to this data as suggestive of a top, a belief they may or may not have shared prior to the flow data’s release.
- COMPARISONSThis chart which looks at the Consumer Staples ETF needs little explanation. From a fundamentals stand point we would expect to see the tapped out, unemployed US consumer to be a leading indicator. It may just be.