Poised to Roll Over

By: Bob Hoye | Wed, Feb 8, 2012
Print Email

The following is part of Pivotal Events that was published for our subscribers February 2, 2012.


 

Signs of the Times:

"Take Federal bailout money, watch your company's stock fall 90%, become a Co-Chair of Davos"

~ Bloomberg, January 20

The headline was referring to Citigroup CEO Vikram Pandit.

"Junk-bond trading volumes are rebounding to the highest levels in 11 months - optimism."

~ Bloomberg, January 27

"Societe General SA and Credit Agricole SA were among French banks to have their credit grades cut by Standard & Poors."

~ Bloomberg, January 24

"The IMF cut its forecast for the global economy as Europe slips into recession."

~ Bloomberg, January 24


 

Stock Markets

The best January for the stock markets in years has restored their popularity. Bullish comments include low P/Es and attractive dividend yields as well as favourable comparisons to bond yields. Not to overlook outstanding earnings gains.

In our dispassionate approach this is considerably different to conditions in early October. Choppy action, but rising until around January was possible and couple of weeks ago we thought it could continue into February.

The February 24th ChartWorks "Complacency Abounds Oh-Oh!" outlined the probability of a top within the next four weeks.

The surge out of mid-December has been exciting enough to register some cautionary alerts and last week we were looking for some "key" technical excesses. The S&P has since reached 73.3 on the daily RSI and this compares to 70 reached with the high of 1370 at the end of April. That was on the speculative surge that out proprietary Forecaster expected to complete in that fateful April.

Stock markets are poised to roll over. If so, the latest rally is a test of the April high which we considered the cyclical best of the first bull market out of the crash.


Credit Markets

The demand for risk continues with favourable action in corporate and municipal bond markets. Yields for the Italian ten-year keep going lower and after registering scary headlines last week even the Portuguese bonds are declining in yield.

Sub-prime mortgage bonds have rallied in price from 38 in October to 51.6 - that's up a little more than half a point from last week.

Money market stuff such as the Ted-Spread started to narrow at the end of December.

To Ross's "Complacency Abounds" in stock market volatility we would add that it is abounding in the credit markets as well.

Fortunately, we may have an exit indicator.

The action in municipals (MUB) has been good enough to register an Upside Exhaustion. The price could roll over within a couple of weeks and the change could be part of a general reversal in risk products. This will likely show up in the reversal in the stock market VIX.

Long-dated treasuries are working on a big top. Within this the final rally has been likely to occur as the excitement in stocks and commodities fades.

This has taken the bond future from the 140 level to the 145 level. The high was 146 in December.


Currencies

Ross targeted the decline in the US dollar index to around 78.8 and so far it has bounced off this level a number of times. With this, the Canadian made it up to 103 (briefly). It is now vulnerable to a decline in commodities.

 


Link to February 3, 2012 'Bob and Phil Show' on TalkDigitalNetwork.com: http://talkdigitalnetwork.com/2012/02/jobs-boom-stocks-pop

 


 

Bob Hoye

Author: Bob Hoye

Bob Hoye
Institutional Advisors

Bob Hoye

The opinions in this report are solely those of the author. The information herein was obtained from various sources; however we do not guarantee its accuracy or completeness. This research report is prepared for general circulation and is circulated for general information only. It does not have regard to the specific investment objectives, financial situation and the particular needs of any specific person who may receive this report. Investors should seek financial advice regarding the appropriateness of investing in any securities or investment strategies discussed or recommended in this report and should understand that statements regarding future prospects may not be realized. Investors should note that income from such securities, if any, may fluctuate and that each security's price or value may rise or fall. Accordingly, investors may receive back less than originally invested. Past performance is not necessarily a guide to future performance.

Neither the information nor any opinion expressed constitutes an offer to buy or sell any securities or options or futures contracts. Foreign currency rates of exchange may adversely affect the value, price or income of any security or related investment mentioned in this report. In addition, investors in securities such as ADRs, whose values are influenced by the currency of the underlying security, effectively assume currency risk.

Moreover, from time to time, members of the Institutional Advisors team may be long or short positions discussed in our publications.

Copyright © 2003-2014 Bob Hoye

All Images, XHTML Renderings, and Source Code Copyright © Safehaven.com

SEARCH





TRUE MONEY SUPPLY

Source: The Contrarian Take http://blogs.forbes.com/michaelpollaro/
austrian-money-supply/