October 31st, 2014
Published Daily

Will Q2 Begin with a Lurch?

by Rick Ackerman on March 30, 2012 2:11 am GMT · 22 comments

You gotta give DaBoyz credit for turning stocks around yesterday, since buyers appeared to have taken the day off. Nor was there much bullish energy as the day wore on – only the nervous drum beat of short-covering ahead of the final trading day of Q1.  It was all window dressing, to be sure, and although the Dow Industrials ended the day 20 points higher, the modest gain belied the dark magic that eventually spirited the blue chip average into positive territory.  After being down as much as 93 points early in the session, the Indoos began to inch their way higher around noon.  Of course, most of the gains came during the final hour, as is so often the case. Bears apparently had second thoughts about trusting Friday to be mellow, especially a Friday coinciding with the end of a fiscal quarter.

With earnings growth apparently slowing down, will the broad averages continue to waft higher in the weeks ahead?  Perhaps. Whatever your view on the economy, keep in mind that there is no story, even weakening earnings, that cannot be spun bullishly. The optimists would interpret this as meaning companies have hit a wall on profit margins and will soon start hiring to keep up with sales. A darker view would hold that stagnant household incomes and still-falling home prices are about to smother the consumption side of growth. Yes, we too have noticed that credit card teaser rates are back down to 0.0%, sometimes with no origination fee. But the asset growth on which this seductive scam has always thrived is simply not there.

‘Time for Defense’

Meanwhile, not everyone thinks that higher stock prices are baked in the cake for Q2.  “Traders and investors should use Friday, March 30, to get defensive,” read an e-mail we received from Phil C., a market timer and friend who has had some hits and misses in the last year (as who has not?).  “Sell big winners like AAPL and IBM, or at least use defensive option strategies to take profits and establish trades to profit from corrections,” noted Phil. “The March correction in gold and silver should also end on Friday. Go long gold and silver and CEF.”  Nothing like a clear call. Our own technical work suggests that he may be onto something. Although we have no great urge to get in the way of Apple’s rampage, bellwether IBM is nearing a potentially important rally target that we’d warned subscribers about a while back. We also think a strong upturn is imminent in bullion shares. Accordingly, we have told subscribers precisely where they should “back up the truck” to aggressively buy Newmont Mining stock, for one, as well as shares in the Junior Gold Miner ETF (GDXJ). [ Click here for a free week’s access to our detailed forecasts, trading recommendations and 24/7 chat room.] As always, interesting times are apt to provide challenges as well as opportunities. Will you be ready for them as a new month, and a new quarter, begin?

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{ 22 comments }

Rich March 30, 2012 at 2:38 am

Gold targeting $1820.
DBA targeting $60, a (daily) double;

RidetheWave March 30, 2012 at 2:47 am

Thanks Rick for your technical work all this month as us bullion share holders were left grasping for straws since February 29th.

I would much rather read the black and white technical interpretation of where this crazy train may end than someone’s biased fundamental view, as most on your site would agree.

We all know that gold is money and gold competes with fed profligacy. We just don’t know why people would rather buy an ETF (GLD or SLV) purportedly backed by paper or tungsten vs. companies like SLW that pull silver out of the ground at $4 an oz giving an investor such sweet arbitrage (and a dividend to boot).

That being said the price is truth, and for us bullion share investors and intermediate swing traders (yours truly) who have been trained or experienced the idea that you buy the “hurl” and sell the “curl” on miners to win, it has not made the fall since Leap Year, day any less scary or unpleasant.

So I credit you with helping us to keep our eye on the ball with regards to GDXJ, HUI, and GDX, especially as to when this frightful fall will conclude when it seems that some days it will never end…….

A chartist in my own right, I have looked to so many sources of black and white history, and precedent to call this end….when in fact the end may be as you have seen it all along in your tout….

Ideally the end may not reach those fateful D’s….because as you have often said, if we are in good strong bull market, D’s are often not hit.

So for all of our sakes, hopefully the worst is behind us……and the bottom has passed us by.

Rick Ackerman March 30, 2012 at 7:02 pm

Thanks for the kind words, Ride. I am grateful to have traders with your level of experience sharing their wisdom and insights in the chat room and this forum.

Doc March 30, 2012 at 2:57 am

Lookin’ 4 QE3 b4 Barry’s BD

redwilldanaher March 30, 2012 at 5:00 am

http://www.moneynews.com/Headline/fed-debt-Treasury/2012/03/28/id/434106?s=al&promo_code=E8AA-1#

Hi Rick and Co., that link of course is for everyone but especially for Gary L.

All you need to know about the foundations that Gary’s arguments are based upon. It’s complete fantasy Gary. Completely and yes it is organized to be that way. Yes Gary, there is a conspiracy.

WSJ: Fed Buying 61 Percent of US Debt

mac March 30, 2012 at 10:18 am

Looks like Iran won’t blow up now. Maybe stocks will get a oil decline boost.
Gold looks ready to break away from the manipulations of the President’s Working Group in Financial Markets. Ya, from the top illuminatti puppet’s sleaze bags. They are gold’s enemy – the “leaders” of the country!
Sinclair and Casey warn of the risks of living in America today. The idea is to think of leaving before the whip comes out….

mac March 30, 2012 at 11:15 am

http://www.reuters.com/article/2012/03/29/us-mining-summit-mcewen-gold-idUSBRE82S1CY20120329

MUST READ RE MINERS AND THERE INCOMPETENT, CHEAP, SLEAZY MANAGEMENT.
WHY NO SUBSTANTIAL DIVIDENDS FROM THEM? MCEWEN FOUNDED GOLDCORP. HE SHOULD KNOW.
GOOGLE REUTERS- MCEWEN

John Jay March 30, 2012 at 2:47 pm

Mac,
From what I have read about the major mining companies, the puzzling hedges they are always in the middle of are not bungling but planned to make money for the people calling the shots that take the other side of those crazy hedges. As usual, follow the money and cui bono explains it all.

Jill March 30, 2012 at 2:24 pm

Redwilldanaher, yes the market doubling since 2009 is based on a complete fantasy. And when it doubles again, it will continue to be based on a complete fantasy.

Money itself is an illusion and always has been. We all pretend it’s worth something that can be exchanged for real goods, and so it is. But in talking about trading here, Gary has been right for quite a while now.

mario cavolo March 30, 2012 at 2:43 pm

While I greatly respect all of the very genuine and real concerns expressed by many very intelligent people at this site, it occurs to me once again to side with the Pepsi CEO lady…. the money supply and concept of “money” will continue to expand across the world, especially now as Latin America and Asia/China/India have an incredible middle-class expansion underway. In fact, along the way, I was musing earlier today that the USD will reign supreme, more supreme than ever as the world’s defacto reserve currency. And so I’ll stick with her view that today’s 40 $T GDP will be double that in 20 years and 200 $T in 40 years. Whatever the hell prices of “stuff” will be and salaries and wages will be along the way is anybody’s guess, except to say, for the American and European lower/middle classes, the next 20 years are going to be historically tough, not a time of prosperity…rather obvious.

Cheers, Mario

gary leibowitz March 30, 2012 at 3:45 pm

I must be reading the wrong data and charts. DaBoyz had nothinhg to do with the market moves. If they did how can you explain one of the best 6 months in a very long time? As for earnings I can’t find anything that states projections are coming down. In fact they already came down last year, so expectations shouldn’t be high. As for the consumer, which most here think are on the dole, how do you explain the surge in spending over the last 2 months?

Seems bias has a stronger role in market expectation and investment decisions then does hard data. The last few months have shown a consumer that is borrowing, and spending at the fastest pace in a very long time. The recent hit on commodities also help the case for keeping price inflation in check.

Call me crazy but I must repeat my earlier observation that we are in a “perfect investment scenario”. With the EU refusing to do anything about the debt crisis, other than kick it down the road we should have a calm upward bias for the erst of the year.

I find it peculiar that most here refer to the past 3 years as if we already had total destruction but the markets refuse to understand this point. While I agree the cumulative affect on the future of this economy is bleak, that doesn’t negate what is happening today. What is happening is old habits are coming back. Spend and borrow beyond means, draw down savings, and look optimistically at the future. The multiple data points verify my statement.

So let me ask you this. If you discard your prejudices, and look at the current world economies, what needs to happen to change the markets current direction in a decisive way? I believe it is this question and subsequent answers that should determine your future market bias.

By rehashing why we are going to crash and burn that doesn’t explain why we haven’t already done so. It also doesn’t explain why it has to happen immediately.

As for QE4,5 etc… it seems more a psychological ploy then a dire need. The current Fed Funds availability is going to go on for a long time to come simply because the EU is in crisis mode as we were 3 years ago. Not much will change from the past year.

&&&&&&


Gary, your “perfect investment scenario” lives by illusion and deception and nothing more. As you well know, bullish perceptions could turn into hysteria overnight, causing already shaky confidence to vanish in an instant. Thus, when you purport to distinguish between a supposedly felicitous “now” and a disastrous “later,” you shouldn’t kid yourself that the money you’ve got working in the stock market — or deposited in the bank — could disappear before anyone realizes what has hit them.

You evidently think that you and many bulls are smart enough, and nimble enough, to take your profits at the first sign of trouble. In probable fact, those profits will evaporate with flash-crash speed. This time, however, the crash will not be a reversible computer glitch, but a real and permanent destruction of wealth.

In the meantime, the lies that have been sustaining your “perfect investment scenario” are so thick, and so absolutely outrageous (i.e., Europe’s ridiculous patch job, for one), that the destructive epiphany could come at any moment. As such, you should be careful about impugning the wisdom of those who have chosen to remain on the sidelines. RA

Rich March 30, 2012 at 4:24 pm

Gary: no crazier than 1820 Point and Figure Target on SPX & Gold plus Big4 Long SPX.

As Jill noted above, money is an illusion, and since Hollywood and Wall Street control DC, we have lots of illusions…

Mario cavolo March 30, 2012 at 5:04 pm

I,ll jump in splitting the difference with respect to the state of the U.S. I have suggested before it is more accurate to look at that country as having justnexperienced a historically significant societal schism. I answer your question about why the spending numbers are good as I have before; because the top 40% of the population is in fact doing better than ever, relatively richer than ever, and I do mean ever. And so they are indeed out spending and at a statistical level which more makes up for the ruinous declining state of affairs for the lower 60% of the
population. I believe that sufficiently explains many of the disparate views. Somewhere around the range of 100 million Americans are facing serious systemic decline in their lifestyles, with 45 million of them already on foodstamps. For the top 40%- ah!…life is rosier than ever!…for the top 20% it is amazing, the top 5% magnificent, and the top 1% beyond obscene… That’s plenty of money to be spent.

Cheers, Mario

redwilldanaher March 30, 2012 at 5:09 pm

“Prejudices” Gary? The markets weren’t destroyed? As you noted, the so-called “public” hasn’t come back and the outflows just keep on truckin’… Now “da boyz” pray on wannabe pledges to “da boyz” fraternity. If a low-level unprosecuted criminal like Cramer can almost single-handedly manipulate the the futures and the MSM reporting apparatus to suit his needs then I’m fairly confident that the REAL “da boyz” can do practically anything they want almost whenever they want. You don’t think that they collude? Do you think that they observe the phony laws regarding trading that they help write?

This entire “thing” is essentially a Ponzi scheme but now it is really ‘roided up as per my link above.

At the base of these “great times” and “great numbers” and all the “beats” is one of the most rotten and ruinous schemes ever devised.

I think it is called “voluntary suspension of disbelief”.

BTW Mario, if you read this far down, I agree and always have. They will exhaust the Great Global Ponzi Scheme “credits” at some point in time and then this will all end…. And we all know the rest. Until then, expect them to do as they’ve always done. Nearly the exact conclusion I’ve always had and that Rick published about a year ago if memory serves.

redwilldanaher March 30, 2012 at 6:37 pm

EXACTLY RICK! A game of musical chairs and there is only 1 seat left and there are thousands of sociopaths that believe it is already theirs!

gary leibowitz March 31, 2012 at 3:39 am

The idea that you can get out or in a market “at the first sign of trouble” is exactly what you can do. In fact had you kept your money in the market AFTER the mortgage derivitive implosion you could have easily gotten out before any real damage. Here is where the market loses out against individual investors. The market does not move on a dime, and the news was already out way before the final plunge.

In every single bear market drop, except perhaps the 1987 one, there were early warning signs, both fundamental and technical. Please look at when the “news” broke out and when the market reacted. There is always a delay long enough for you to exit. If you know of one where this is not so, please post it so I can verify your claim.

The second part of your claim, that this is all an illusion, if true works both ways. Therefore according to your logic you should never invest as a bull or bear since there is no real basis for it. I think it is an oversimplified answer that just doesn’t hold true. You use a technical method. If it all is an illusion than your method should be an illusion also. If everything is manipulated and based on somone pulling the strings you should not be playing their fixed game.

If earnings keep rising, even in a known “fixed” universe, than it is perfectly logical to invest. Its like playing Monopoly. You read the rules before hand and play by them, regardless if you think it is fair or not. The current rules are simple. Earnings and outpacing earnings expectations will usually be enough for you to make money. How can earnings be manipulated? Is AAPL lying when they state their earnings?

You make the world out to be some kind of shell game where it is impossible to win. How many times has the market reacted irrationally? In almost every single instance the market was proven correct. The debt implosion 3 years ago did create havoc and did cause companies to lose money. The 3 year catch up was also proven correct since today earnings and jobs are coming back, and earnings P/E ratio is not out of “normal” range. Just because “you” can see the final end result doesn’t negate the 3 years of very good earnings. Not being a psychic it makes no sense to decide that the end is here. It might take one month or five year but there are clear definable signs, both fundamental and technical.

Sorry I don’t buy into your world. Was the 70’s a manipulated market where it made so many violent moves up and down it was almost impossible to make money. There were people that consistently made money. You have to Know The Rules you are playing by and follow the unemotional numbers.

Take out emotions and bias, and just follow your best investment method and I can guarantee you would do better than anticipating the “end result”.

According to your logic the great run up over these last 3 years was an illusion. You are confusing emotional expectations with an unemotional market. You expect the market to react as we do? Since most of the money is in funds the managers of these funds treat it as a job, trying to figure out which sector will do best. They rarely take out money into cash. They don’t sit at their computer worrying as if it was their money.

In fact I will let you know when or if I get out of the market before the big plunge. A working experiment. I will even give you my reasons, based on technical and fundamental views.

&&&&&&&

Gary, as many have pointed out here, the market is rising not because of improved earnings, but because there is a flood tide of virtual dollars with nowhere else to go. The bullish action recently in the bank stocks perfectly illustrates investors’ extreme irrationality and the madness of crowds. They are merely pretending the banks are getting healthy while ignoring the little fact that a voodoo-empowered central bank has been warehousing trillions of dollars’ worth of their bad paper.

Regarding the stock market, we have in fact not been on the sidelines. Rather, we continue to trade stocks in a variety of sectors cautiously. The record shows that we have done so very successfully using both bullish and bearish strategies.

As for the “early warning signs” that you insist will get you and others out in time, you are playing with fire. I would bet — am betting — that this time, no rats will escape the ship: not Buffett, not Soros, not your savvy next-door neighbor. No one. The May 2010 Flash Crash was our warning. We are not in Kansas any more. RA

Mark Uzick March 30, 2012 at 4:37 pm

Gary: I find it peculiar that most here refer to the past 3 years as if we already had total destruction but the markets refuse to understand this point. While I agree the cumulative affect on the future of this economy is bleak, that doesn’t negate what is happening today.

Then why do you pretend to have a different opinion? You agree that the future is bleak, which implies that “what is happening today” is a bubble that will burst; it’s only a question of when it will happen. (Who’s negating that?)

I’ll volunteer one negating argument: Isn’t it possible that a levitating stock market reflects a scramble to unload anything denominated in worthless currency and to invest the proceeds in anything that might retain some tangible value in spite of a bleak economic future?

BTW: You write well (better than I do), but please stop using “then” for “than” in most of your comments – thanks.

gary leibowitz March 30, 2012 at 5:44 pm

Bad habit using “then”. I suppose I am still thinking in the past tense. Always confused the two. If I don’t
hear the difference in my head I don’t challenge what I write down.

My question wasn’t really answered. You explained why people invest in the market but not why all of a sudden they shouldn’t. I am not asking why the market is where it is. I am asking what will “change” to force them out. The catalyst for market change. Do you suppose it will be the falling dollar? Debt crisis hitting a wall? Commodity prices continuing higher?

What I am getting at is to place “your” priority for going against the current market. Once that is set than use it to determine when to take action. Me, I set my conditions, that being earnings growth, debt crisis, food and gas inflation going forward.

I am an expert at staying bearish and “anticipating” a major market change even as time goes against my assumptions. I have hit almost every major market crash with large option gains only to squander those gains by continuing my bearish bet even as the market reverses in a strong fashion.

I believe Warren Buffett’s greatest strength is to be clinical about his investments; crunching his numbers to determine his investment position. He made a ton of money in the very difficult yo-yo 70’s.

redwilldanaher March 30, 2012 at 6:33 pm

Gary, I don’t object to you playing the market on the long side and using all the fake numbers that they provide to you in which to do it but please don’t speed by the fact that it is an illusion fueled by frauds of many kinds. Compare Buffet and the ’70’s to now if you wish but the criminals of today make the ’70’s TPTB sleaze look like pikers IMO. Entirely different ballgame IMO but after all that’s only one opinion.

Mark Uzick March 30, 2012 at 6:46 pm

I think you misunderstood me; I was saying that the people you accuse of negating the bull market are actually on your side in thinking that it’s a bubble; they’re simply afraid to time the bubble, where you’re not afraid of the risk.

I propose that the bull market is for real; (In nominal terms.) that it reflects the psychological “debasement” of fiat currency. (Fiat cannot really be debased, as it has no intrinsic value to begin with.) That’s not to say that the market won’t crash at some point, but that in the larger scheme, if the fed can actually stick to its plan to allow the banks and the treasury to escape bankruptcy through dollar debasement, we may be in the mother of all bull markets, in nominal terms, while in a bear market in real terms.

roger erickson March 30, 2012 at 8:25 pm

Sure fiat has intrinsic value. It is backed by public initiative – which certainly has value. Ask any country we’ve ever been at war with.
The following still holds:

…“Why is state money better than gold?”
Because the highest return is always the return-on-coordination.

Scaling up ability to explore large-group options requires 1) scalable large-group agility,
2) and scalable large-group intelligence,
3) and coherent alignment to emerging options.

Same reasons no species or armies are resource constrained. The bigger constraint is always organizational ability.

That means that only state-money denominations are agile enough to keep up with the kinetic demands of uncontrollable public initiative.

Commodity-money was thoroughly tested, and was found inadequate. It’s valuation has to be constantly re-scaled, simply because populations & their options scale faster than the magnitude of any commodity store.

If that’s the case, just simplify and cut the commodity out of the re-scaling loop that links organizational ability to group outcomes.

Ask yourself if the USMC, or the USA, will ever be constrained by a given commodity store, be it whale-oil, gold, or anything else. There’s always a way to scale up further, and it always involves another layer of indirection.

Mark Uzick March 31, 2012 at 6:25 am

It would be considerate of you to make the case for your proposition in plain English; as written, your arguments are too vague.

Anyway: You seem to be saying that with sufficient coordinated raw power people will either take our money in payment or we’ll just “shove it down their throats”.

There are two ways that have been used to implement your thuggish strategy:

1. The petrodollar; but if this really worked, then the dollar price for oil wouldn’t be allowed to fluctuate to any great degree. If it did work, then it would undermine your argument against commodity money, as we would then be on the “stolen oil standard”.

2. Price controls; but this form of socialistic despotism is a proven failure that results only in shortages and, ultimately, in economic devastation.

Commodity-money was thoroughly tested, and was found inadequate. It’s valuation has to be constantly re-scaled, simply because populations & their options scale faster than the magnitude of any commodity store.

Socialistic commodity money (commodity backed fiat money) is the only money that has been tested; and as all things that are monopolized or over regulated by fiat, it is not able to adapt to change or price signals quickly enough to work effectively or efficiently, yet it’s still far superior to the worthless, unbacked form of fiat money.

Money, to work properly and effectively, must have real value and be allowed to compete with all forms of money in a free marketplace, regulated only by the competitive dynamics of the market and the legal consequences of fraud.

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