Friday March 12, 2021

New Highs All Around

So the conclusion which we can draw from all of this evidence is that a new high in the Advance -Decline Line offers the market some immunity from the normal sorts of bear markets,

Tom McClellan on the bull market

Evidence of a frothy high priced market abound, more that in a bit. But for now, we see a pullback next week to leading to another high this May – June.

Lots of liquidity means there is money to power stocks higher. And an injection of $1.9 trillion will certainly provide some liquidity.   Do you suppose anyone voting for the stimulus package actually knows how big a trillion is?

For the record, a trillion is one million, million. It is the number ten raised to the 12^th power.   And Congress has voted not just one but one point nine trillion, nearly twice that amount. . I wonder if your grand kids will appreciate re-paying such largesse.

This past month has seen some rotation. The tech heavy NASD index topped February 16 at 13,995. It bottomed a week ago around 12,400 and bounced to 13,400. I suspect we will see more selling next week.

Tesla was added to the S & P 500 December 21. It topped a month later around 900. It then fell to 550 and then bounced to 675.  Funny I do not hear anyone discussing this on the cable business channels.   That is a top to bottom loss of 38% in one month. This will eventually happen to many stocks but not quite yet.

Here are some frothy examples. The WSJ asks, Is Florida Too Hot to Handle? Immigrants are exiting high tax states like New York for Florida. Tom Cruise has re-listed his Telluride home at $39.5 M. It was on the market seven years ago for $59 M, what a deal! Houston Developer Gerald Hines 17,000 sf ‘home’ is available for $34.5 M. It is adjacent to the River Oaks Country Club, so no worries about the riff raff next door.

Initial Public Offerings IPO are hot. Snowflake came at $120 in September and is now $323.04.   Snowflake is a cloud-based data warehousing company. At least it has a business plan. Special Purposes Acquisition Companies SPAC have raised $38 billion already in 2021. An SPAC is simply a corporate shell with no plan. SPACs raise money promising it will be put to good use.   Last year SPACs raised $83 B, an average of $335 M for 248 listings.

Cathie Woods manages five ETFs for ARK Investments. Of the 165 stocks in the funds, 85 recorded losses in their last fiscal year. The ETFs are off 14% from their February highs. Fittingly one ETF is named The Next Generation Fund.

I expect oil prices to continue higher into May-June as well.

Troll the internet for a Spuds McKenzie poster. Spuds is the perfect Party Animal Mascot for a market experiencing a social mood high.

Tuesday March 9 2021

The Italian Mathematician Fibonacci first discovered the fibonacci number sequence.

Markets move in Elliott Wave fashion.  Market turns often occur at Fibonacci Numbers.

In the sequence numbers are added resulting in this sequence. Once underway the prior number is  .618 of the following number.

1 2 3 5 8 13 21 34 55

We noted yesterday was a perfect  21 years out form the dot.com high of March 8, 2000 . so

2021 – 21 = 2000 High

2021 – 1 = 2000 Low

2021 – 13 = 2008 High Low

2021 -  34 = 1987 High Low

2021 – 55 = 1966 High

1982 + 5 = 1987

1982 + 8 = 1990 Gulf War

1982 + 21 = 2003 Low

1966 + 8= 1974 Low

1966 + 34 =2000 High

Point being this is another clue that a top may well be forming now at a significant Fib Number Event.

This is too many occurrences to just be random.

Monday March 8, 2021

Andy Kessler is one of the newer columns for the WSJ appearing on Monday along with the wonderful Mary O Grady.

He has a tech and securities background. A few weeks ago at DJIA 30,000 he was warning of a top. Today he recounts

past downturns. His conclusion is worth reading and printing and posting on the frigerator door

Monday March 8 WSJ Andy Kessler

How do these bull bashes end? When the last skeptical buyer finally sees the light and buys into the dream that every car will be electric, that crypto replaces gold and banks, that we overindulge on vertically farmed “plant-based steaks” while streaming “Bridgerton” Season 5 before we hop on an air taxi for our flight to Mars. Those last skeptics (maybe already) convince themselves there’s no longer any downside. And then boom, it’s over.

Bull markets need fuel. When the marginal buyer is done, there are no more greater fools to buy in, no matter how well companies actually perform. The dream is priced in, and firms can only meet, not beat, expectations.

For those lulled by today’s bull market, remember that you own a piece of paper. Low-yielding U.S. Treasury bills and bonds are safe because they are backed by the U.S. government, by cash flow of tax dollars and by the country’s assets (think land, not Fort Knox). Stocks are backed by expectations of future earnings, but if you overpay during periods of high expectations (like today), then your downside is huge. Crypto is backed simply by the faith of those who proclaim it is a store of value. Even art and exotic cars and silly NFT tokens are backed only by faith the wealthy will overpay for uniqueness. Faith becomes scarce when the selling starts.