You know… I’m always intrigued when I see an advertisement that says something along the lines of, “We are rolling back prices to 2005 or 2003 or 2000…” I don’t know why I like that ploy, but there is something about buying anything new at the same price you would have paid for it years and years ago, that I like. I guess I am not the only person that thinks this way as that type of advertising does pop up now and then. In a way, that’s what happened on Friday when the unemployment numbers were released, but rather than be a good thing… it was stunningly bad and even harder to put into context… let me explain…
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Quote worth Quoting Again |
| “Any people that would give up liberty for a little temporary safety deserves neither liberty nor safety.”… Benjamin Franklin |
The labor force participation rate fell to 63.3%, the lowest level since 1979. The labor force participation rate is the percentage of working-age persons who are employed or unemployed and looking for a job. The unemployment rate is, therefore, defined as the total number of people looking for a job divided by the sum of the total number of people employed plus the total number of people looking for a job. If the labor force participation rate falls, the unemployment rate falls proportionately. And, of course this means that with fewer people “in the workforce”, the employment rate (Total Unemployed divided by Total People in the Workforce), goes down. With the labor force participation rate at 1979 levels, in the bizzarro world of government accounting, the unemployment rate FELL from 7.7% to 7.6%. Pretty soon, it looks like the good ‘ol FED’s dual mandate of low inflation and full employment will be achieved! If just a few more million people will ‘retire’ onto food-stamps and welfare and quit looking for a job, then the labor participation rate will drop even further. The faster the labor participation rate can drop, the lower the unemployment. What a deal… No wonder the government is spending millions of dollars on advertising to get more people onto food-stamps. The new USSA (United States Socialists of America) mantra: “Full employment achieved through government welfare!” or… “Why work when the government will give you enough to not work anymore… better to give up looking for a job!”
You would think that the market would plummet lower on the news of such anemic employment numbers… and, for a few hours on Friday, the market did ‘try’ to look at the economics of poor unemployment and the impact it will have on our economy, but late in the day, it shrugged off that clinical view. Do you wonder why? I have a theory…
It is entirely likely that the stock markets here in the US and globally as well, are being artificially propped up through the actions of Central Banks; chief among them being the US Federal Reserve. I realize that I am not alone in this hypothesis and this is not new news to you. But, in order for my ‘theory’ to work, you have to at least go along with the ‘fact’ that the markets are currently driven more by loose money policies than real economic fundamentals.
Let’s look at what happened on Friday through the prism of an artificially bullish market, created by extremely loose monetary policies, world-wide. Did anything on Friday actually change the drivers of this artificial bull market? If anything, the poor jobs numbers increased the probability that the unabashed printing of fiat money by the Fed and central banks of the world will continue. As such, nothing happened with the release of the jobs numbers that would “materially and negatively” impact the stock market. Oh, for certain, the news on Friday portends some unfavorable economic conditions, but unlike stock markets of old that rose and fell on global economic vagaries, this market rises and falls on the looseness or tightness (printing or not printing) of the US Federal Reserve. Remember… this is all predicated on the assumption that most, if not all, of the current bull market is Fed contrived… and not based on real economic conditions.
As such, I was not surprised that the market recovered on Friday. My portfolios finished in the black for the day. Indeed, the market moved the price action on some of my CP Trades down to within one penny of my stops, before moving back up. In spite of the horrific employment news, which is bad for our economy and our workforce, the news regarding the main drivers of the stock market continued to be positive.
Now What??
With all the above said, the updated Market Forecasts (see the DIA Forecast , below) have taken a decidedly more Bearish tone and one that we should heed. As you will see in the Bull/Bear Report, below, investor sentiment and the CrossOver Oscillator have both turned more Bearish. If the Market Forecaster, Investor Sentiment and the Oscillator are all moving in a Bearish direction, taking some profits off the table might make some sense.
The S&P 500 is moderately Bullish, but shows a dip could occur in the next few weeks. The Russell 2000 continues to show a strong Bear trend over the next 90 days. But, the NASDAQ is bucking the trend; not showing a let up in the current Bull market until late May.
All but the NASDAQ have been getting weaker for the past 4-5 weeks. As such, I’d like to see a pull-back where I can buy into the dip before I put a lot more money to work. I am launching the Sabinal One Portfolio this week for my money management clients, but I will be looking more for some inverse ETF plays than straight-up Bullish equity plays… at least early on this week.
The Bull/Bear and Oscillator Report…
Each week, our computer programs compile the total number of equities in our database (over 6,000) that are issuing new “Alerts” for this coming week. The Alerts can be any one of the following:
- BUY – This means the status of the equity last week was “OUT” and this week, the weekending closing price moved high enough above my 10-week, time-shifted, moving average to trigger a “BUY”. Click Here for this week’s STRONG BUYS, or Click Here for this week’s BUYS.
- OUT – This means the equity stopped out by triggering a long-position stop-loss where the equity was sold, or it triggered a short-position stop-loss where the short position was covered.
- SHORT – This means the status of the equity last week was “OUT” and this week, the weekending closing price moved low enough below my 10-week, time-shifted, moving average to trigger a “SELL SHORT”. Click Here for this week’s STRONG SELLS, or Click Here for this week’s SELLS.
A running total of these new conditions (BUY, OUT, SHORT) is kept on a weekly and monthly basis. We have found that an analysis of these data provide a reasonably consistent view of short term (upcoming week) and longer-term (next few weeks) of the market, as follows:
- First of all, the ratio of new Short Sell Signals (red line in the Turner CrossOver Oscillator, below) is an excellent indicator of overbought or oversold conditions. Oversold means the market will have a tendency to move from a downward trend to an upward trend.
- We have also found that the total number of Short Sell Signals compared to the total number of Buy Signals is a reasonably good indicator of investor sentiment. The more Short Sell Signals, the more bearish the sentiment. The more Buy Signals, the more bullish the sentiment. This investor sentiment analysis is generally more valid for the upcoming week.
- The Composite (black) line is produced by subtracting the total number of Buy Signals from the total number of Short Sell Signals. Charting this total over time and observing how the red line crosses the black line, often provides an excellent early warning of a market correction.
These data elements, along with charting the trend of the S&P 500 provide the basis for the brief forecast provided in these weekly Reports. It is important to understand that this analysis is based solely on a technical analysis and anecdotally-derived historical observations of these data. I write the weekly forecast based on my observation of the data and the Oscillator chart. Time-cycle data are NOT explicitly included in this analysis.
| The investor sentiment Bull-to-Bear ratio has clearly moved into Bearish territory with 4 times as many Bear indications to Bull indications.
The black line (Composite of Signals) is now trending lower; a somewhat Bearish trend indication. The time-cycle market forecasts have become quite a bit more Bearish this week. Only one of the four major market forecasts is strongly Bullish. Despite the likely continuation of QEthe market is showing signs that a 6% correction could be in the offing. Risk continues to be elevated that the market will pull back. The prudent trader would be looking to keep stops tighter than normal or just take profits and wait this one out. Taking a hard shorting strategy seems too risky for most, but may be worth a look for high-risk money and very short-term trades. |
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Turner Bull/Bear Forecast
The Turner Bull/Bear Forecast™ provides a one-week directional forecast on the market, with [-5] being the most Bearish and a [+5] being the most Bullish. This is predicated on the ratio of number of new Buy Signals to the number of new Short Sell Signals for the previous week. The assumption is investors are becoming more Bullish the more lopsided the ratio becomes in favor of new Buy Signals; and the converse is true; the more lopsided the ratio becomes in favor of new Short Sell Signals, the more Bearish investor sentiment. |
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The Turner CrossOver Oscillator™ provides an indication of the over-bought or over-sold condition of the market. The red line (New Short Sell Signals) shows a technical direction and strength (or lack thereof) of investors to push stock prices lower, triggering new Short Sell Signals. The higher the Short Sell Signals line, the more Bearish the market. The black line (Composite of both Short Sell and Long Buy Signals) is the combined impact of both the new Short Sell Signals and the new Buy Signals and is an indication of the degree of oversold or overbought condition of the market. Buying opportunities exist when the Composite of Signals line is moving higher. The higher this line moves, the more Bullish the market. Market bottoms are represented by a change in direction of the Composite of Signals line from moving lower to moving higher. Market corrections become much more likely when the Composite of Signals line crosses the Short Sell Signals line from below the Short Sell Signals line to above the Short Sell Signals line. The market is represented by the green shaded area. |
On the Road this Week…
After a short trip to Florida to visit with one of my business partners early this coming week, I will be flying up to Chicago on Wednesday for an event at the thinkorswim office and also at the CBOE. First of all, I will be hosting the thinkorswim Wednesday chat at about 3:15 pm Central, on Wednesday. This is always a lively group of rather intense traders. Then, on Thursday, I will be conducting a Webinar in conjunction with the Chicago Board Options Exchange (CBOE) right after market close.
I hope you can tune into one or both of these events.
SIGN UP FOR THE ADVANCED WEALTH BUILDING SYMPOSIUM…
This coming May 14, 15 and maybe 16, CycleProphet and Sabinal Capital Investments, in conjunction with the Las Vegas Money Show, will be hosting our first annual “Advanced Wealth Building Symposium” in Caesars Palace.
We are planning several sessions including a CycleProphet Users Meeting, Portfolio Management Sessions, CycleProphet Training Sessions, Sabinal Client Sessions, Advanced Forecast Trading Sessions, Women-Only Portfolio Management Sessions, and much, much more. Most of the education sessions will be between 30 minutes to 45 minutes in length. The User/Client Meetings will focus on how we can do more for our subscribers and clients, with lots of interaction and feedback with our Users.
We are still working on the specific daily agenda and we are trying to finalize the 16th’s room availability. I hope to have a full agenda for you within the next week or two and will be emailing it to you. I hope you can come to the event. It will be well worth your time… I promise you that!
Closing Thoughts…
We continue to get incredible results from our back-testing of the blind trades made by following Equity Forecaster. The results are impressive to say the least, with some of the 10-year tests generating returns of over 12,000 percent! We are refining the nuances of the testing, which become a part of my trading methodology when those nuances result in better long-term returns.
I have developed a series of “Equity Pairs” that have exceptionally strong back-test results where the back-tester holds long positions in either the primary equity or that equity’s inverse ETF, depending on the type of forecast: Bullish or Bearish. This way, I never have to actually short an equity, but merely move over to an inverse ETF that is highly inversely correlated to the equity. I can take advantage of Bear trends in an equity by holding long positions in that equity’s related inverse ETF. And, before you ask, I am not releasing my ‘Equity Pairs’ as that is information reserved for my Sabinal clients… but, there is nothing to keep you from developing your own set of equities and the inverse ETF that most fits the Bear trends of the primary equity.
I will be, however, holding a class in our upcoming “Advanced Wealth Building Symposium” in Las Vegas in May. The decision on recording the sessions has not been made yet… a lot has to do with the technology available to us at the event. But, for those who cannot attend the Symposium (which is free, by the way), we will do our best to record the sessions and post them on the CycleProphet website.
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