Wednesday, July 25, 2012

Richard Russell: Bear Market to Last Another 15 Years to 2027

from KingWorldNews:

Today the Godfather of newsletter writers, Richard Russell, shocked King World News with this remarkable and extremely dire prediction: “The primary bear market — the leveraging and inflation and lying and cheating and shenanigans lasted from 1945 to 2007, about 62 years. My guess is that it will require maybe one-third of that time or roughly 20 years to clean out the economic stupidity and nonsense of those 62 years. That could take this bear market out to the year 2027.”

“Twenty years would be a long time for a bear market, even a secular bear market. Therefore, you should know that I do not expect the market to head straight down for 20 long years. Actually, in the coming 20 years I expect to see a number of short cyclical bull and bear markets (much like the 1956 to 1974 period), and I expect to see many periods of boring trading ranges — all occurring within the overall pattern of a secular bear market.

Richard Russell continues @

Investor Sentiment: 3 Basic Tenets to a Market Top

by Guy Lerner, The Tech­ni­cal Take

When it comes to mar­ket sen­ti­ment there are 3 basic tenets that sug­gest to me that the cur­rent mar­ket dynam­ics will lead to a mar­ket top as opposed to a launch­ing pad for the next bull mar­ket. First, investor sen­ti­ment at the recent lows (7 weeks ago) was not extreme. There­fore, the sub­se­quent rally was expected to be weak as the “rub­ber­band was not stretched to tight”. Sec­ond, when con­sid­er­ing the price cycle, which is the path prices take from low to high and back to low again, every sell sig­nal should be fol­lowed by a buy sig­nal. Our mod­els have had their sell sig­nal (April 20, 2012), but we have not had a proper buy sig­nal yet. Third, con­sec­u­tive sell sig­nals (with­out inter­ven­ing buy sig­nals) are a sign of a mar­ket top. This obser­va­tion is con­sis­tent on both a daily and weekly time frames, and it is con­sis­tent with the kind of price action we are cur­rently seeing.

When we put this alto­gether, it is dif­fi­cult to see sub­stan­tially higher prices with­out investors becom­ing more bear­ish. The best way to see increas­ing bear­ish­ness is to have lower prices. Lower prices will cer­tainly bring the Fed­eral Reserve into action. As a vari­ant to these obser­va­tions, I think the Fed­eral Reserve has been lay­ing the ground work over the past cou­ple of months based upon the unem­ploy­ment sit­u­a­tion, and this may prompt action prior to a stock mar­ket fall. In fact, the only thing that can cir­cum­vent the price cycle is QE3. The ques­tion becomes: will we get Fed inter­ven­tion before equity prices fall or after.

The “Dumb Money” indi­ca­tor (see fig­ure 1) looks for extremes in the data from 4 dif­fer­ent groups of investors who his­tor­i­cally have been wrong on the mar­ket: 1) Investors Intel­li­gence; 2) Mar­ket­Vane; 3) Amer­i­can Asso­ci­a­tion of Indi­vid­ual Investors; and 4) the put call ratio. This indi­ca­tor is neutral.

Fig­ure 1. “Dumb Money”/ weekly

Fig­ure 2 is a weekly chart of the SP500 with the Insid­er­Score “entire mar­ket” value in the lower panel. From the Insid­er­Score weekly report: “Market-wide insider sen­ti­ment was Neu­tral last week as insider trad­ing activ­ity hit a sea­sonal low-point. In fact, the num­ber of unique non-10b5-1 plan buy­ers and sell­ers was the second-lowest in our 445-week (dat­ing back to Jan­u­ary 1, 2004) track­ing period, bested only by the third week of April this year. Activ­ity will begin to pick-up late this week/early next week and trans­ac­tional vol­ume will increase sig­nif­i­cantly as insid­ers at the first-round of earn­ings reporters are free to buy/sell again. “

Fig­ure 2. Insid­er­Score “Entire Mar­ket” value/ weekly

Fig­ure 3 is a weekly chart of the SP500. The indi­ca­tor in the lower panel mea­sures all the assets in the Rydex bull­ish ori­ented equity funds divided by the sum of assets in the bull­ish ori­ented equity funds plus the assets in the bear­ish ori­ented equity funds. When the indi­ca­tor is green, the value is low and there is fear in the mar­ket; this is where mar­ket bot­toms are forged. When the indi­ca­tor is red, there is com­pla­cency in the mar­ket. There are too many bulls and this is when mar­ket advances stall. Cur­rently, the value of the indi­ca­tor is 67.52%. Val­ues less than 50% are asso­ci­ated with mar­ket bot­toms. Val­ues greater than 58% are asso­ci­ated with mar­ket tops. It should be noted that the mar­ket topped out in 2011 with this indi­ca­tor between 70% and 71%.

Fig­ure 3. Rydex Total Bull v. Total Bear/ weekly

Fed Plans Dollar Devaluation, New Evidence; Why Now? / By Dominique de Kevelioc de Bailleul / once in a while posts a bombshell. The latest, This Is The Government: Your Legal Right To Redeem Your Money Market Account Has Been Denied – The Sequel, proves once again that Trends JournalFounder Gerald Celente should top investors’ Google News alerts for his latest outlook and commentary.

“You don’t own your money unless you have it in your possession.
—Gerald Celente Nov. 2011 (following MF Global’s sudden bankruptcy, Oct. 31)

And to put some official sanction to an already corrupt banking system, the safest of safe assets, cash, will shockingly turn out to be not safe after all when the big reset nears. In fact, cash, too, will be confiscated through, maybe, another Obama Executive Order, more un-prosecuted fraud and consolidation to benefit JP Morgan, or just an old-fashion overnight currency devaluation, which is usual and customary—and is, presently, the odds on favorite after all attempts by the Fed to jury-rig the banking system fails.

As the following excerpts of the NY Fed proposal to Bernanke and Co. reveals, plans for coping with a banking crisis in the U.S. via some form of dollar devaluation are underway, including capital controls to stem a bank run—of course. Therefore, it’s necessary to make changes to Money Market Rule 2a-7.

Title: The Minimum Balance At Risk: A Proposal to Mitigate the Systemic Risks Posed by Money Market Funds

. . . This paper proposes another approach to mitigating the vulnerability of MMFs to runs by introducing a “minimum balance at risk” (MBR) that could provide a disincentive to run from a troubled money fund. The MBR would be a small fraction (for example, 5 percent) of each shareholder’s recent balances that could be redeemed only with a delay. The delay would ensure that redeeming investors remain partially invested in the fund long enough (we suggest 30 days) to share in any imminent portfolio losses or costs of their redemptions. However, as long as an investor’s balance exceeds her MBR, the rule would have no effect on her transactions, and no portion of any redemption would be delayed if her remaining shares exceed her minimum balance. [her? Politically-correct thieves.]


EQT Corporation (NYSE: EQT)

EQT Corporation, together with its subsidiaries, operates as an integrated energy company in the United States. It operates in three segments: EQT Production, EQT Midstream, and Distribution. The EQT Production segment engages in the exploration, development, and production of natural gas, natural gas liquids, and crude oil in the Appalachian Basin. The EQT Midstream segment provides gathering, processing, transmission, and storage services to the independent third parties in the Appalachian Basin. This segment has approximately 10,450 miles of gathering lines. The Distribution segment distributes and sells natural gas to residential, commercial, and industrial customers in southwestern Pennsylvania, West Virginia, and eastern Kentucky. This segment serves approximately 276,500 customers consisting of 257,700 residential, and 18,800 commercial and industrial customers.

Please take a look at the 1-year chart of EQT (EQT Corporation) below with my added notations:

Over the last (5) months, EQT always seems to find support or resistance on or at the increments of $5. First, notice the $55 support (black) that, prior to last week, was previous resistance. Next, you can see the common level of $50 (blue) and the lower level of support at $45 (red). The nice thing about EQT is that it shows you how to trade it no matter what direction the market moves.

The Tale of the Tape: EQT finds the levels of $5 important. If the stock pulls back to the $55 support you could enter a long play. If it breaks below $55, you could enter a short play. In that case, you could then buy EQT if it comes down to $50. Etc., etc., etc!

Rickards: Gold to $7000

Rickards: Gold to $7000

Investment banker and Wall Street insider James Rickards says the Libor rate rigging scandal “is the greatest fraud and greatest potential liability in history.” He thinks rate rigging banks could be on the hook for “$2.5 trillion,” and “The potential damages could destroy the banking system.” Join Greg Hunter of as he goes One-on-One with James Rickards.

from usawatchdog:

Jay Taylor: Turning Hard Times Into Good Times

Part 2
7/24/2012: A Capitalism for the People. Gold for the People

Turning Into PIIGS: Why France’s Debt Crisis Could Doom the EU / By Bill Bonner /

Paris, France – From one ragged country to another. We are on a tour of Europe’s unraveling economies. Ireland…Spain…and now France.

Spain was in the news again yesterday. Its borrowing rate rose to 7.5%…a level that everyone says in “unsustainable.” We haven’t done the math ourselves, but we will take their word for it.

Policy makers in Madrid were rattled. Naturally, they took no responsibility for the mess. Instead, they blamed…short sellers! Yes, and banned short selling for 3 months.

That ought to do it, right? Everybody knows markets go down because people sell. So make selling illegal. Problem solved!

Now our travels have brought us back to France. At the heart of Europe…and at the heart of the alliance with Germany and the whole European Union project, if France can’t keep itself together…the whole EU is doomed.


Chart of the Day - Toll Brothers (TOL)

The "Chart of the Day" is Toll Brothers (TOL), which showed up on Monday's Barchart "52-Week High" list. Toll Brothers on Monday posted a new 5-1/2 year high of $31.19 and closed up 1.04%. TrendSpotter has been long since June 28 at $28.39. In recent news on the stock, Goldman on Monday upgraded homebuilders to Attractive from Neutral, saying that the homebuilder group is at the beginning of a long-term positive trend and that housing starts will be boosted by rising housing prices. Toll Brothers, with a market cap of $5 billion, designs, builds, markets and arranges financing for single-family detached and attached homes in middle and high income residential communities in thirteen states and five regions around the country.