Massive China margin…will end the same way it always ends!


A Closer Look At The Dow Transports

Required Reading Of The Day

Key Trade Vote Fails in House, Deals Blow to Obama – Fox Business

Security-Clearance Data Likely Stolen In Agency Breach – WSJ

Why the FOMC’s Meeting Next Week May Be a Dud – Fox Business

High-Tech Solar Projects Fail to Deliver – WSJ

CalPERS ‘Slightly Overweight’ Stocks – Fox Business

Car Dealers Aim to Curb Online Rivals – WSJ


Less than thrilled!

Even with Wednesday’s pop back to the upside, we are less than thrilled.  The problem remains simple. While the major indices are just off highs, there remains too many names and too many sectors in their own private bear phases. Before all the central bank interference, we would be yelling and screaming that this continues to be late stage action. But with apparently an unlimited supply of conjured up money, nothing is off the table. We really do believe markets were headed for a correction of consequence in October, only to be staved off by another round of QE from Europe and Japan and topped off with major easing out of China.

On top of the price divergences, we continue to see a ton of other late stage action. The list includes:

Massive number of IPOs. As the numbers get bigger, the bar gets lowered to where the biggest percentage of IPOs lose money. You already know about all the “no sales” Biotech IPOs.

Massive number of secondaries with some companies doing 2-3 in a short period of time. All this adds to supply on the market.

Record numbers on margin. Margin is the market’s best friend in a bull market but  when markets ultimately turn, it is the market’s worst enemy.

Mergers, mergers and more mergers…and a ton of rumored mergers.

Assinine, assiten and asseleven valuations on private equity stuff. We heard a VC dude say not to worry. WORRY! Especially if they all go IPO.

Speculation! Have you seen Chinese names go up 40-fold in the past year? We have.

That all said. We remain in the bull camp on the few areas that continue to lead the market…namely the whole financial complex including banks, regional banks, S&Ls, lenders and a few other financial areas. We have said forever that bear markets do not happen when financials lead. With the market leadership so narrow, they had better continue to lead.

Important levels to watch:

DOW 17730 and more importantly, 17579.

S&P 2067 and more importantly 2039.

NASDAQ 4974, 4888 and more importantly 4825.