Breaking out!

Major indices have either edged above breakout levels or are about to from 11 week trading ranges. If successful and all evidence so far looks good, do not argue.

Remember, if the S&P 500 breaks out, that represents 500 names. If the NASDAQ 100 breaks out, that represents 100 names and so on.

As we have told you for ages, anything is possible. Breakouts do fail but breakouts for indices out of constructive patterns usually do not. And with other countries announcing negative interest rates and the printing of money to buy those bonds even though rates are negative, the easy money just gets easier. We still don’t understand why this is being done.

Just one more note in that oil prices are going to open above the first stairstep off the lows.

Weekend report is next.

Knicks are a horror show and now Carmelo is sitting for rest of the year. Way to go Phil Jackson!


And closer!

What do you know? Sweden’s Riksbank is now delving into the negative interest rates world and also announcing their own printing of money to…you guessed it…buy bonds. The question is why would anyone buy their own bonds that have negative yields? Simple. They are following the template of Bernanke and the rest thinking it will help. But all this does is inflate the bubble even more.

But enjoy the bubble. Embrace it…as now it looks like major indices will open at the tips of recent highs. As you know, a breakout above the 11 week trading range should not be fought with. We had all kinds of other thoughts this morning but they pale in comparison to more easy money and a market hopefully ready to move out.

Getting closer!

Major averages are now on the verge of going topside. We never jump the gun but with yesterday’s action, we are getting closer. There is nothing bad about a move above the range…as long as the move holds. Aren’t we geniuses?

The important part of yesterday’s action was the SEMIS. As you know, they are vital to our work along with the FINANCIALS. These areas simply have been great leaders of the market, both up and down. The SEMIS ramped well yesterday as they also now set up for potentially higher prices.

There is still a very short list of new highs but many names looking like the major indices. A break above for the indices should show many new names breaking out. Stay tuned!


They still cannot sell the indices down!

Just a short note this morning:

Despite the 50-50 market. Despite the many areas that are not working. Despite not having a bear market since the big flood of 42. Despite nary a good correction…despite all of this, major indices continue to be range-bound. There is an old motto…if they can’t sell them off, they are eventually going higher. As always, we will let the market decide but so far, support levels get tested and support levels hold. A couple of good days will take major indices out of the range. A couple of bad days will do the opposite. That’s how tight the range is.

This morning, indices are again in gap city as Greece this and Greece that. Just keep in mind, nothing has changed with central banks. Rates continue to be at 0% and in some places are negative. The printing of trillions continues and since the lows, the over-the-top, never-been-seen, easy monetary policy has been the best friend of markets.

Still in that nauseating trading rage but a couple of important changes!

Support held Monday morning at the lower end of the trading range leading to another jack to the upper end of the trading range. The swiftness tells you how paper thin the trading is…both ways. But we think the market hit a near term high at resistance on Friday…which probably leads to some more pulling in here. Yippee. Simply put, a break out of this range by the major indices, either up or down, will have consequences. To the upside…good…to the downside…bad. Duh!

Underneath the surface, it remains a 50-50 market where half the market is blah while half the market works…thus the reason for the trading range. But…seeing a few things changing you need to be aware of.

While bonds remain in a long-term bull market, the recent high looks to us as a good short-intermediate term high. Bonds have been on a tear.

Off the move in bonds, we think the interest-rate sensitive areas of utilities and reits have also put in short-intermediate term tops as many names are breaking below support areas.

While gold and gold stocks have had a good relative bid, we think the short term has turned down. We will now watch to see where support comes in.

Watch housing stocks as a few look poised to break out of long trading ranges. This group has been dormant for a while.

While our thoughts of a rally in oil-related issues came to fruition, we think they are close to petering out as they have come into resistance areas.

To put it mildly, trading ranges are your friend and your enemy at the same time. They are your friend because the time allows bases to form over a longer period of time in order to potentially break out. They are your enemy if you are impatient as the markets bounce around giving nothing but headaches.

Lastly, our two cents on Brian Williams! There is little doubt in most eyes that this man played with the truth…and maybe that is being too nice. But to us, the bigger problem remains what we have been telling you for a very long time. That is the utter corruption of the national mainstream media as they pick and choose winners and losers based on ideology by mis-reporting, under-reporting and not reporting whenever it suits their cause. We can give you a laundry list of all this nonsense but gather you know the list by now. There is no longer holding people in power accountable…that’s unless they do not like you. That’s when the attack dogs come out with teeth gnashing. When you are liked, you get away with anything.


A lot to digest this week as underneath the surface, a lot of jello moving on the plate…and it is not in a good way.

While the major indices are at or near recent highs:

The small caps continue to woefully underperform. This theme has been going on for months.

Bearish action can be found in:


Toppy action can be found in BIOTECH and SEMICONDUCTORS. These two areas have led…so they will be important to watch. There is potentially a classic double top in the SEMIS. This is a pattern that shows up AFTER a big move in where a high is made, a drop takes it down…and a secondary high is hit at or near the first high.

While the major indices at or near recent highs, amazingly, new yearly lows outnumber yearly highs.

Our proprietary survey of stocks in good shape versus bad shape continues to woefully lag major indices.

We would like to add a few other things to ponder.

The bond market looks to have topped as yields are now heading north. This move topped out the REITS badly in the past week and probably the UTILITIES. This should be watched as the Fed has had its way with rates by printing trillions. To her credit, Yellen has been rolling it back…with more to come this week. The question is whether she will blink if we get a decent correction and just start printing again.

Sentiment remains a joke…meaning no bears. As we have stated numerous times, the numbers we follow are at multi-decade lows. One has to go all the way back to 1987 to find them…not kidding.

Do not get us wrong. There is still plenty working. In fact, big FINANCIALS have been starting to move out of range. As short rates stay down and long rates move up, margins expand…thus the reason for this move higher. We shall see if it lasts. On top of FINANCIALS… AIRLINES,CHEMICALS,HEALTHCARE,HOTELS/TRAVEL,INVESTMENT BANKS,RAILROADS,RETAIL and TRUCKING continue to act well.

We just believe the market may have been churning in the past week or so. Churning usually changes a trend. One good down day will start sending the major indices back down to the 50 day average where there will be a big test. That said, one good day could take us out of range for another leg up but with a lot of warts. We suspect it is the former.


We will have a bigger report over the weekend but had a couple of thoughts today.

The market trades tight in here. There is a case for churning in where the market trades with no progress…leading to a change of near-term direction. There is also a case for this being the pause that refreshes before higher prices. Instead of being in one camp or the other, we take the stance of NEXT MOVE WINS. We suspect the next move will happen soon enough as volatility has contracted. So get ready! More over the weekend.


Let’s just add Tuesday’s action to the “ice is getting thinner” category.

We have outlined for you how many names, how many sectors and how many countries are getting in trouble. Under the weight of all this, eventually, the popular indices follow suit.  Remember, we have not had a 10% correction in more than 2 years. 10% corrections are a normal part of market business. They serve an important purpose. They wipe off the smiles of the bulls…they clear the decks for higher prices and for a hard working stock operator, they enable one to decipher the potential leaders for the next move higher. This is done by consistently gauging the relative strength in the market of those companies that have the strongest earnings and revenue growth. Our biggest issue is the boom and bust cycles created by the fed leading to larger than normal moves up…and of course, larger than normal moves down. Remember, the two times the Fed stopped printing money over the past few years, the market went down 17% and 21% respectively. After the 21%, Mr. Bubble went “all in” with his gargantuan $85 billion each month. Let’s hope any move down is contained as finally, an adult is running the Fed and rolling back the maniacal money printing. Small caps are close to 10% already. A 10% correction in the DOW would take you down to approximately 15,300 Dow and S&P 1800. Again, we are not saying this is going to occur. We are saying it is waaaaaaay overdue and have to be on alert as the market’s internals continue to head south.

On the other end, we must take notice as to how strong China is right now. A quick glance at the FXI or the HANG SENG index will show this. Again, we are always on the lookout for relative strength but be rest assured, if our markets suffer more damage, the rest will follow to a certain extent. As usual, day by day!