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November 03, 2014 – Weekend Market Comment

November 03, 2014 – The Dow Jones Industrial Average and the S&P 500 hit record highs on Friday. However, disappointing manufacturing data out of the euro zone on Monday helped push U.S. stock index futures lower on the day. Japanese authorities surprised everyone on Friday by increasing their already aggressive bond purchases (QE) by a third. In addition, it will expand those purchases to include stocks and real estate investments. The Japanese pension fund also announced that it will increase its allocation to domestic and foreign stocks. That gave a huge boost to global stocks. The most dramatic effect was seen in Japan. Chart 1 shows the Japanese yen tumbling to the lowest level in seven years. At the same time, the Nikkei Index surged nearly 5% to the highest level in seven years. We've pointed out many times before that the falling yen since the end of 2012 has been the main driving force behind Japanese stock gains. That was certainly the case again this week. The monthly bars in Chart 2 show the Nikkei also climbing above a major resistance line drawn over its 1996, 2000, 2007 highs. That upside breakout suggests that Japanese stocks may finally be emerging from their role as one of the world's weakest stock markets. Since the start of 2013, the Nikkei has risen 57% versus a 28% gain in the Vanguard All World Stock Index (and a 41% gain in the S&P 500). Japan is trying to emerge from nearly two decades of deflation. The latest Japanese inflation figure of 1% is only half of the target rate of 2%. It still has a ways to go.

It is like a global war of the economic stimuls plans as everone wants to buy their own paper to prevent deflation. Not a great sign, but it does make market go up, so as good traders, we ride along. This begs teh question of what happens if they stop...

The burst higher on Friday came to you as no surprise because recently we had a green arrow and we are all now net long. Of course the Bull bear lines are still in an up trend.

Nasdaq Summation says the party is stiull on for tech companies

Things look better on the big board too

VIX tells us the pros are not afraid anymore:

Well now this has got to make you think that perhaps we came to far to fast, look how many S&P 500 are back above their 50 day moving average. Come on things can be that great for EVERYONE. Hmmm could/should sanp back again . . .

OBV is lagging too, the red line must keep up with the price action. If this does not catch up this week the bull may be out of breath . . .

The Agressive Defensive graph says... be long but play the safe plays . . .Just as well I am in dividend indexs this week. Watch the first line (slow stoc) and play conservative when red is over black.

Bond vs stocks say this is an extreem run to equities, might be time to move into some treasuries. As the red line drops stocks are in favour but right now this is often where the turn happens.

Yah I love a the green arrow graph too . . . but wow are we ever up to the top of the range! Don´t panic but a snap back does look possible.

Well that was a profitable run, and yes it is over done, but we don`t trade we anticipate and we wait for the turn, but feel free to put some trailing stops in, this could be a short ride! Not a great time to put new money to work.

Funny Buinsess
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From the Buisess center in the magnificent Hotel Atlantico in the Gran Via of Madrid Spain, here is wishing you the best of good buys!

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