Doom and Gloom

[manucastle]

There appears to be a lot of doom and gloom about the markets.

I have just taken a look at the LEV of DIA, SPY, MDY, IWM, QQQ and I do not see large selling by the big guys at this time. Neutral to slightly positive it seems.

Am I reading the macro tea leaves correctly ?

Trev

[Pascal]

There appears to be a lot of doom and gloom about the markets.

I have just taken a look at the LEV of DIA, SPY, MDY, IWM, QQQ and I do not see large selling by the big guys at this time. Neutral to slightly positive it seems.

Am I reading the macro tea leaves correctly ?

Trev

Yes, you are right! Funds have had much time to prepare for any possibility.
I do expect some volatility this week and more downside in preparation to a bullish Opex next week.
This is however tactical and not value oriented.

However, the key will be to correctly judge the move in interest rates and the way Japan massage their own experiment and walk their pension funds out of fear based large moves.


Pascal

[Timothy Clontz]

One of the things I've been experimenting with is the actual configuration of sectors in relation to each other. Basically I take the methodology I use to select the "best" sector and compare the ranking of sectors (per that methodology) to previous times that the market experienced that same rank.

Right now it's mildly bullish -- with a projected return for the S&P over the next year at about 7% (which is the typical return for most years anyway).

That doesn't preclude corrections, and it doesn't include reactions to Fed choices. But, barring any major manipulative changes, the market appears to be intact.

An announcement of QE officially ending or significantly reduced would change things, but until then no signs of a crash.

Tim

[roberto.giusto]

Not sure if this can be related, but with France starting to make some headlines, I am wondering if there is any significance in yesterday's volume in EWQ.

It appears in the DIVA file with a super positive divergence: could this be someone positioning for a big move? Or only some kind of block trade?

Yesterday's volume is impressive when compared to its average, but the fact that it is so clearly visible has me wondering if there's anything at all behind it...

[Pascal]

Not sure if this can be related, but with France starting to make some headlines, I am wondering if there is any significance in yesterday's volume in EWQ.

It appears in the DIVA file with a super positive divergence: could this be someone positioning for a big move? Or only some kind of block trade?

Yesterday's volume is impressive when compared to its average, but the fact that it is so clearly visible has me wondering if there's anything at all behind it...

I think that these are pre-arranged trades. Maybe because the general volume has been decreasing, the ETF manager decided to "mop-up" extra shares.


Pascal

[Riskslayer]

Hi-

Along these lines, I was wondering if anyone has noticed that the Dow Jones Credit Suisse 10 yr Inflation Breakeven Index ($DJSCIN10) Charts are showing that inflation is decreasing - in what appears to be an increasing fashion (see the attached hourly, daily, weekly & monthly charts). $DSCSIN10 is a measure of what the market's US Inflation rate expectations are for the next 10 years. I keep similar measures in a standalone .xls across 10 yr and 5 Yr inflation and they agree with this index.



18773



Now, look at charts of TLT (long term US Treasuries) for the same time frames:



18775


So, we have a situation where inflation is falling and bond prices are also falling??

Bond prices are directly related to 1) inflation expectations, and 2) creditworthiness.

So, it looks like the perceived creditworthiness of debtors across various debt instruments has been falling significantly faster than the perceived rate of deflation has been rising since at least the beginning of May 2013. See weekly charts of LQD (Intermediate Term Corp) & JNK (Hi-Yield).

Its said that bond traders are smarter than equity traders, and that bond markets lead equities on macro economic trends (e.g. look at how bonds signaled troubles prior to equity markets in the Fall of 2008).

Bond investors appear to be pricing in a greater risk of non-payment of capital, including default by debtors - including the US Govt. (Note in Q4 2008, TLT rose while LQD fell, at this time US govt bonds are also affected). I would guess that the Japan experiment has been the catalyst for bondholders to re-think creditworthiness across all debtor classes.

A trend is not made of a single week or two, but this incipient trend has been in place for 4-5 weeks, so it bears watching.

Something to ponder,

Shawn