I have been watching with no small amount of interest, the amazing confluences of current events (e.g., the upcoming election cycle, the liberal propaganda machine (aka, the mainstream news media), the BBE (“Big Bernanke Experiment” and the on-again-off-again QE3-like developments), the silliness of dumping 3 days of oil onto the market from our strategic petroleum reserve (to be used only in the case of a national emergency… like getting Obama reelected), the off-again-on-again Greek default and resulting global (mostly Europe) financial meltdown contagion, the impending all-is-lost-if-we-don’t-raise-the-debt-ceiling fiasco in Washington, the worry over retirement funds owning too much Greek debt, the housing depression, the (surprise… surprise) unexpected uptick in inflation, the Fed’s downgrade of forecast GDP and the nicely surprising profitability of many companies… ) in juxtaposition to the following chart:
As you can see, our time-cycle forecast indicates all of the aforementioned doom-and-gloom will resolve into happy-days-are-here-again by July 15. Is this really possible??
There are three critical components to a time-cycle forecast: (1) The Turns (bottoms/tops), (2) The Trends (upward or downward projections), and, (3) The Amplitude (how high and how low). Of these three components, Amplitude is the least predictive.
So, when I look at the chart above (along with many other of our global market forecasts), I am most interested in the downward trend between now and July 15… the bottoming of the market in mid-July… and the “V-Shaped” recovery into September. I find it interesting that the forecast indicates the market ‘could’ drop another 6.7% before experiencing a nearly 20% recovery, but as I mentioned… amplitude is the least predictive. So, we may not see the market drop another 6.7% and we may not see a 20% recovery… but, a bottom in mid-July is not beyond the realm of belief.
What Happens If…
Is it unreasonable to believe that the Conservatives and Liberals in Washington can work out a last minute deal that does not kick the can down the road and does not push us into another recession and actually does something good for our country’s burgeoning debt? I realize that there are at least two or three idiots in Congress (sarcasm meter is pegged) who couldn’t make a non-politically-based, non-self-serving, patriotic, common-sense decision if their life depended on it… but maybe they’ll go home for the summer and let the non-elites, honest brokers of our future, make the tough but critically important decisions.
Is it unreasonable to believe that the Greek debt problem is more of mole-hill than a mountain when it comes to financial Armageddon… or more likely… is it unreasonable to believe that the Greek problem (too many people living in a unionized nanny state having given up their freedom based on self-reliance… no… that can’t be the issue… and it can’t be where America is headed…no, I’m sure that is not the case) can be assuaged by just declaring Greece as another ‘too-big-to-fail’ situation and continue to bail them out… especially since our illustrious President has said the US will back-stop the IMF which is back-stopping Greece. I can certainly see a scenario where we throw our good money after a bad situation. After all, the goal of a socialistic state is to make everyone equally miserable. I can see a situation where the Greek problem is suddenly “under control” by July 15.
I can see earnings reports coming in after the close of the second quarter that are “above expectations”. This could easily turn around a dour and worrisome market into an optimistic and hopeful market.
With a mid-term Presidential election in the offing, I don’t’ believe it is beyond the scope of possibility that the Fed could ‘magically’ derive another round of faux Quantitative Easing and print a trillion or two more of your money to pour into the market to help keep the bubbles intact and stretching ever so larger… at least until after the 2012 election.
So, even though I happen to believe that this country and the rest of the world are now solidly in the ‘kick-the-can-down-the-road-while-whistling-past-the-grave-yard’ mentality, which will almost surely end up very, very badly for those who refuse to recognize the reality that you cannot borrow your way into prosperity… I am afraid that reality is still some months away. Maybe I am even hopeful that it is still some months away.
The global economy works best when it is permitted to function in a free, unfettered and un-manipulated market. When we made that first step into the ‘too-big-to-fail sinkhole’, we set a course with only one ultimate destination… bankruptcy. A reset will occur at some point. Success can ONLY be measured when compared to failure. When you remove failure, there can be no success. This is true in our school systems; our government and our capitalistic way of life. Remove the fear of failure and you remove the fear of risk. Remove the fear of risk and failure is a foregone conclusion… it will happen… it is only a matter of when.
So, with the above said, let’s look at my Bull/Bear Report and the Turner Oscillator…
What the Technicals Tell Us…
Investor Sentiment Forecast
The Turner Investor Sentiment 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.
|The Turner CrossOver Oscillator provides an indication of the over-bought or over-sold condition of the market. The red line (New Short Sell Index) 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 Index) 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 Index 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 Index from moving lower to moving higher. Market corrections become much more likely the Composite Index crosses the Short Sell Index from above the Short Sell Index to below the Short Sell Index. The market is represented by the green shaded area.|
The Bull-to-Bear ratio remains Bearish but appears to be moderating, with a ratio of a little less than 2-to-1 in favor of the Bears. This results in a Bull-to-Bear Rating of [ – 5 ], the maximum Bearish indicator. The Turner CrossOver Oscillator Composite of Signals (black) line is well below zero and on a trend that ‘could’ move lower. It is now moving into over-sold territory. The Short Sell (red) line continues to trend higher, which is also signaling the market is potentially in an over-sold condition. Covering short positions and/or keeping stops tight is the play.
This Week’s Strategy…
- I am starting the week completely flat (100% cash), but plan to move about 30% into the market with a short bias for the DJIA and the S&P 500.
- Energy plays look weak for the next 4 to 5 weeks, so I plan to short this sector, as well.
- Tech, on the other hand, looks surprisingly strong, but with the time-cycle forecast so weak for the broader markets, I will take a wait-and-see attitude for any new Technology plays.
- I’m still not ready to start buying gold, but I am getting close… maybe next week.
- Silver also looks to be at least another week or two away
Have a great week in the market!