Before we begin on this week’s complaint, we need to alert our readers that we are heading into the weakest season of the investing year. September and part of October have been seen as a seasonally difficult time. We must add that only the first two weeks of October seem to have problems, by the time the costumes and gremlins appear at your door for Halloween treats, the difficulties are over. We must also alert you to the fact the “street” acts in advance of these times and we see this sort of defensive selling escalate as we work our way towards September. August can also be a difficult month especially the end of the month. These are generalities and observations of our past history and, although mostly correct, we have seen deviations of this pattern. It looks, however; as though this year will be the norm rather than the exception. Remember also we have November elections and as they approach some elation could return to the markets especially if the public feels that they will regain control of their out of control representatives in Washington.
This week’s complaint is about the way human resource departments scan candidates for possible employment. In today’s job market, electronics have replaced the humans in the HR departments that used to sit a candidate down, and review their information and resume. Today, if we include Harvard, Yale, Princeton or some other Ivy League college under education on our resume, and just to be a clown, in very small font type nursery school, it is likely that the HR department’s computer will flag the resume. Because of Ivy League credentials you will, no doubt, get a call for an interview or at the least some more questions. This non-personal way of sifting through candidates, although efficient, leaves people who have excellent qualifications and potential, out of those to be considered. Can you imagine passing up an opportunity to hire Bill Gates or Steve Jobs? Well with this method you likely would have passed on both of these individuals. This tells us that there is a mass of talented people being overlooked. It also tells us that if we dummy up a resume it is likely that we will, at the very least, score one interview. There is something to be said for personal looks and meetings with possible hires that goes way beyond this cold electronic method. There could be a nugget of gold in a pile of tin, alas, the electronic scanning computers won’t pick it up. It takes human talent and perception to find these treasures.
While we are on the subject, today’s generation of college graduates and graduate school graduates have one deficit that is unique to this generation. They are texting junkies and have very little ability to interact socially, without typing the messages back and forth. Why they have difficulty even picking up the phone and calling their friends and will resort to texting. Many would rather type a message than speak with the person. What are we doing here? What a mess… We can see junior in first grade and mom texting the teacher for the student teacher conference, or possibly texting a pal about a new outfit while the teacher is pouring her heart out on the evaluation. Okay so that is an extreme but really not that out of the realm of the possible.
So there it is, today’s generation of new employees are electronically screened and quite possibly socially inept. It is likely that they graduated from a name school but that they have lost their ability to speak with each other and must rely on IM’s and text messages to communicate. Communication is not what it used to be and had morphed in a very strange direction. We can all live in hope that communication, that is verbal communication, comes back into fashion sooner rather than later. We can just see the genetic result, no mouth and really cool fingers with which to type.
Back to the deflation/recession/mess; while you were texting something, the FOMC notified the public that we just might not be out of the woods yet. The FOMC really didn’t do much in the way of stimulating the economy… oh by the way.
As to the recession or the fact that a year after the recession was declared dead, the middle class population is no better off than it was a year ago. That said, we would venture to add that the population continues to struggle with bills and is getting more angry ever day. We see this behavior demonstrated in anger towards the electorate in Washington, and anger directed at the system which has failed to help those US citizens in need. Those who have suffered from increased taxes are furious with the system that bloats the pocket of executives and starves the employees. We are treading on very dangerous ground and there will be uproar from the people. We are sick and tired or higher taxes and greater social policies that reward those who have not paid into the system at all. The 14th amendment was written for the freed slaves not the illegal immigrants entering this country either pregnant or with the intent of becoming pregnant to anchor their chains to this country. Our ancestors came to this country legally and had to go through the system legally. Are we teaching our children to ignore the laws of the land and that illegal acts will be rewarded with social programs? Yikes, we are really morphing into something that our forefathers would have despised. You must watch this video by Prof Lovell on the Patriot Network TV, speaking to Americans about our government’s suit against Arizona, USA.
Monday: August housing market index is released at 1:00PM and Treasury Report for June of international inflows is released at 9:00AM.
Tuesday: July housing starts and building permits are released at 8:30AM, July PPI is released at 8:30AM, July capacity utilization and industrial production is released at 9:15AM and 2nd quarter e-commerce sales are released at 10:00AM.
Thursday: July leading indicators are released at 10:00AM, Philadelphia Federal Reserve Survey is released at 10:00AM and St. Louis Fed President Bullard speaks.
What a difference a week makes in the US Dollar Index. This market rallied for five out of five days taking the market above the down-trendline. Yes, it is overbought but so far, no sell-signals from any of the indicators. The 5-day moving average is at 81.989. The top of the Bollinger band is at 83.785 and the lower edge is seen at 80.117. We are below the Ichimoku clouds for the daily time-frame but above the clouds for both the weekly and the monthly time-frames. We believe that the US Dollar Index can rally further but will see some resistance at 83.64. The weekly chart for the US Dollar Index looks impressive but supports the resistance level of 83.64. We see further resistance at 84.65 and at 85.70 or so. The point and figure chart also supports these targets. Above 85.70 we should see a melt to the upside, should the US Dollar Index rally to that level.
The S&P 500 futures contract chart looks as though the index had a seven-day shelf at the recent highs. It certainly looked like a classic distribution where the index seems to have run into a brick wall or overhead supply. We can see this index returning to 1102.13. This is not a bullish statement actually, it is quite neutral. It is likely that we will continue lower after a slight venture to the upside to relieve some of the oversold levels. That said, we are concerned about all the talk of the Hindenburg Omen. That in itself is bullish for the markets. Rarely do we see something widely discussed play out. (Bob Farrell’s rule 9: “When all the experts and forecasts agree – something else is going to happen.”) We have no further than to look at the recent appearance of a death cross that didn’t lead to the downfall that was advertised. The stochastic indicator is oversold but continues to point lower, the RSI is going flat just above oversold levels, our own indicator is curling up sort of, but not issuing a buy-signal and the Thomas DeMark Expert indicator is oversold and flat-lining. The 5-day moving average is at 1097.10, which is an important level by other measures. The top of the Bollinger band is at 1140.32 and the lower edge is seen at 1060.34. We find the daily and weekly chart inside the Ichimoku Clouds, the monthly chart, below the clouds. The point and figure chart tells us that above 1125, we will likely melt to the upside but warns that below 1070, what out below! Actually, we would get really scared say below 1040 and expect a fast trip to 1025 then to 1002 followed by a trip into the nine hundreds (980’s). The chart also warns that above 1090, we will move quickly higher to the next congestion area of 1110 to 1125.
The NASDAQ closed the Friday session near its lows of the day. We are at an important level which needs to be defended if the bulls are to prevail. The stochastic indicator continues to point lower at oversold levels, the RSI is also pointing lower just having reached oversold levels, the Thomas DeMark Expert indicator is oversold but without a curl to the upside, and finally our own indicator is curling, just a little bit, to the upside but is not issuing a buy-signal. The 5-day moving average is at 1858.10. The top of the Bollinger band is at 1932.90 and the lower edge is seen at 1800.79. Although we would expect to see a relief rally in the Monday session, we continue to believe that there is more room to the downside. We frequently see Monday relief rallies because nothing bad happened over the weekend. These rallies have a limited life expectancy. We are oversold enough to mount a rally, but we are concerned that the rally will only inspire further account liquidations. The problem going forward is that money is looking for yield, the bonds don’t have it so, the stocks with high dividends are supported. That is why the telecommunications stocks have been doing well, while high tech-no dividend stocks are suffering. This naturally has an effect on the stocks and we can expect the S&P 500 to perform better than the NASDAQ or the Russell 2000. There is a reason for all this shifting around.
The NASDAQ 100 daily and the monthly charts are in the Ichimoku clouds. The weekly chart remains above the clouds. We would tread carefully in these very unforgiving markets.
The Russell 2000 rallied in the Thursday session only to fall in the Friday session closing the day near the lows. This index is of small capitalization stocks and because of this has some wild swings and higher than normal volatility. The Russell 2000 has been down three of the past five session. This index was the only index up in the Thursday session. The 5-day moving average is at 628.86. The top of the Bollinger band is at 679.62 and the lower edge is seen at 602.70. The stochastic indicator and the RSI continue to point lower albeit at oversold levels. The Thomas DeMark Expert indicator is issuing a buy signal and our own indicator is just about to do the same. The daily chart is below the Ichimoku Clouds while the weekly chart is above the clouds. The indicators for the weekly time-frame continue to be negative. The market profile chart warns that should we trade below 586.50 we will likely move quickly to the downside. The point and figure chart tells us big trouble looms below 606. On the upside, above 620 will lead us higher and back to the 640 levels.
Crude oil moved inside the Ichimoku Clouds in the Friday session. Yes, we are oversold and yes, the indicators are beginning to curl to the upside but we do not have a buy-signal. The 5-day moving average is at 78.17. The top of the Bollinger band is at 83.35 and the lower edge is seen at 74.60. We would become very concerned if this market traded below 71 or that area, give or take some change. The market profile chart warns of doom below the 71ish area. We closed at the upper lip of the Ichimoku clouds for the weekly time-frame and below the clouds for the monthly time-frame. As you go out in time, the chart looks better seemingly having an upside bias. We need to see a close above 82.97 to cause the shorts to worry. The point and figure chart tells us that should we close above 83 that we will likely see 85, 87 and 90 on the upside.
Gold printed 1216 in the Friday session just one point higher than the high of the Thursday session. The market is overbought but there are no sell-signals. The 5-day moving average is at 1204.82. The top of the Bollinger band is at 1218.82 and the lower edge is seen at 1159.91. We are inside the Ichimoku clouds for the daily time-frame and above the clouds for both the weekly and the monthly time-frame. Gold looks as though it is beginning another leg to the upside. Once gold closes above 1218.80 we will open the door to 1248.80 and eventually 1262, 1264 and new highs.