I wanted to post copies of many of the charts I examine on a daily basis. I found that there are just too many to post in one entry, so I’ll blast them all out over the course of the next couple of days. We’ll look at other cyclical names, dividend payers, banks, and health insurers. Simply drop by goatmug.com later this weekend. We’ll start with energy as it has been quite interesting of late. If inflation and global growth is muted, why do we still have $105 oil? Let’s jump in. (more…)
Alright, let’s examine our little friend XLU:SPY. As you’ll recall (you’ve seen this chart about 5 times in the last 3 months) that this is the relative chart where utilities are compared to the Standard and Poor’s 500 index, I use the SPY because it is a liquid etf . When the SPY is strong, the red line goes down and when the XLU is outperforming the broader market, the red line will go up. The black line in the back is the SPY. (more…)
One day does not make a correction, but certainly a couple of weeks indicates that there is a slowing of the amazing tone deafness of the SPX to the movements in bonds and the emerging markets. Here is our old friend, XLU:$SPY which highlighted that investors were over allocating dollars to the defensive utility sector relative to the SPY.
Even though the SPY continued to move to “all-time highs” XLU began to beat the performance of the market in the last several months. I am now looking for a quick snap fall here over the next week, a display of resilience that powers us up to highs, and then a brutal fall through the summer.
As you look at the chart that I posted many weeks ago, the XLU:SPY was signaling a turn way ahead of this weakness. We’ve been looking for a confirmation. The transports were battered, and perhaps have a bit more to go before reversing higher in the short term
Goatmug is an investor that cares about you and your family. Goatmug’s Blog – Financial Perspectives From The Mountain Top is a collection of thoughts on our economy and how it impacts the lives of investors and average people. While several specific investments are named in many of his posts, these articles are simply invitations for you to do your own research and reference to these securities does not constitute financial advice. Your situation is complex and unique and you should seek professional assistance with your trading and investing. Please visit Goatmug and share your comments at http://www.goatmug.blogspot.com/
BONDS ARE SIGNALING WHAT?
I'm pretty much the last guy in the world to expect an implosion in long dated treasury bonds, and this week has really been amazing to watch long bonds get smacked around.
In the past, I stated strongly that treasury bonds weren't going anywhere and in fact we'd see 30 year mortgages at sub 3% levels. I still believe that the Fed will fight and fight to keep rates low as they don't have any choice but to purchase their cocktail of MBS, and mixed treasuries, or else the whole US economy my tank (isn't that what they say every month?). This week, Tim made a great post with a very bearish call on bonds. I was bold enough to post a picture of TLT and suggested that a gentleman's bet was in order and that we'd see $130 on TLT before we see his number of $100. Could either happen? Of course, but I also suggested that Tim would get some quick confirmation and that it would reinforce that he was correct in the short term, but this would only serve to make his beat down more painful, and ultimately he'd have to hand over my dollar.
In November of 2011 I posted an update on Groupon and essentially said it was terrible as it made its IPO debut.
Ultimately I felt that Groupon (GRPN) was a strong short because its business model was easy to replicate and it really wasn't fairly valued after its IPO which vaulted it into the stratosphere. I made the argument that GRPN was simply a tech bubble fantasy that would crash back to earth.
In early November, Groupon reached a price of $30.00 a share and on the 22nd of November it was already trading at $22. In my New Year kickoff post for 2012, CONFIDENCE LOST, 13 PREDICTIONS FOR 2012, I went further as I wrapped up the article with the following quote;
"Groupon will be one firm that is out of business in the next 5 years and therefore it is clearly an equity to focus on (to short) if it can ever gain any traction and get a bounce."
Let's check back in on this great technology story and check out where it is trading and where it might be headed. Please examine the chart below;
WHERE IS IT HEADED?
I will spare you the sophisticated technical analysis on this $3.90 stock, and summarize this view on GRPN with this final thought on "Groupon still hasn't formed a bottom".
OTHER TECH NAMES
As I wrote in a recent article, I have softened on LinkedIn (LNKD), I think that is one of the few "internet firms" that has a real business and could be amazing over the very long term. The chart looks ok here too, unless it falls through $101. I love to shop using Priceline (PCLN), but that chart looks really shortable after the monster gap up last week.
The election is tomorrow and I am simply praying that God would give us the candidate that he has for us rather than the leader we are asking for. I'll give you a hint about the people of Israel, it didn't work out very well when Saul was named their king. Read 1 Samuel 8: 6-20 for more insight!
Have a great week
Goatmug is an investor that cares about you and your family. Goatmug's Blog – Financial Perspectives From The Mountain Top is a collection of thoughts on our economy and how it impacts the lives of investors and average people. While several specific investments are named in many of his posts, these articles are simply invitations for you to do your own research and reference to these securities does not constitute financial advice. Your situation is complex and unique and you should seek professional assistance with your trading and investing. Please visit Goatmug and share your comments athttp://www.goatmug.blogspot.com/
BLAME IT ON THE BOTS
Late last month I penned a posted titled, "5% Drop in the Transports Dead Ahead". Like many of the posts that I hang out there, the HFT bots must have read the headlines and conspired to make me look a bit foolish on timing as the market has been able to tread water and the transports didn't immediately lose 5% with 3 minutes of posting like it should have!
Seriously though, as soon as I posted it, I began to look at the action in the transports over longer time frames and make some notes that I wanted to share. The first point I wanted to show is that the transports are important! There is a pretty strong relationship between the transports and the stock market, and darn it, between the real economy too. While I remind myself daily that the stock market is not the economy and the other way around, in longer term time frames the economy does matter to the market. Ben Bernanke seems to think so as well, since he believes strongly that the market can drive the economy. If he didn't, he wouldn't have spent trillions increasing his balance sheet to buy treasuries and MBS to make everyone feel like the economy is better. Remember, feelings may lead to reality….he hopes.
BREAKING DOWN THE TRANSPORTS
I've been watching the transports closely since FedEx (FDX) and Norfolk Southern (NSC) both lowered earnings expectations last week. The transports chart ($TRAN) looked weak, but today's action including the big rollover into the close caused me to want to put a chart up for your examination.