Thursday, January 30, 2014

The Dow’s 5-year rhyme

I have to say, given the exhausted consumer and weak global demand, I was skeptical that the traders and churners could keep a sick dog hunting for 5 full years this cycle…but congrats to them are in order I guess. On the other hand, it just means world markets are back teetering in a hellish state of over-valuation for the third time in the past 15 years. The more they over-lever, the more painful the payback every time. Of course, the long-always insist the down cycles are completely random and unforeseeable, so they will never admit the symmetry in human behavior driving these cycles…
Dow's 5 year rhyme
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Art Cashin – Fed Taper & Markets Turning Hyper-Volatile / January 29, 2014
Today KWN is pleased to share an important piece from 50-year veteran Art Cashin, who is Director of Floor Operations at UBS ($650 billion under management).  Cashin discusses the Fed decision and why the markets may turn “hyper-volatile.”  This is an extremely important piece that includes a fascinating guest commentary on the turmoil taking place overseas.
By Art Cashin Director of Floor Operations at UBS 
January 29 (King World News) – “On this day (+1) in 1876, an already legendary medical professor at Edinburgh University began to address a new group of students.  He began his lecture with his usual demand for observation.  He pounded on his theme of the “vast importance of little distinctions” of the “endless significance of trifles.”  “Yeah, yeah!” thought the students (or whatever the 1870′s equivalent of a cynical “yeah, yeah” was).  Sure you’re a famous surgeon and professor but what will all this minutia get us.
He called for the first patient.  Then, according to published reports, the following happened -
A man walked in and stood for a moment.  The professor walked around him slowly, twice.  Then the professor said something like – “Army…recently discharged….probably Scots Highland regiment.  (“Aye! Sir!” came the reply).  Next – you were likely a non-commissioned officer…likely in the West Indies - perhaps Barbados.”
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Marc Faber Warns "Insiders Are Selling Like Crazy... Short US Stocks, Buy Treasuries & Gold"

Beginning by disavowing Mario Gabelli of any belief that rising stock prices help 'most' people ("Fed data suggests half the US population has seen a 40% drop in wealth since 2007"), Marc Faber discusses his increasingly imminent fears of the markets in this recent Barron's interview.
Quoting Hussman as a caveat, "The problem with bubbles is that they force one to decide whether to look like an idiot before the peak, or an idiot after the peak. There's no calling the top," Faber warns there are a lot of questions about the quality of earnings (from buybacks to unfunded pensions) but "statistics show that company insiders are selling their shares like crazy."
His first recommendation - short the Russell 2000, buy 10-year US Treasuries ("there will be no magnificent US recovery"), and miners and adds "own physical gold because the old system will implode. Those who own paper assets are doomed."  (more)

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Pitney Bowes Inc. (NYSE: PBI)

Pitney Bowes, Inc. provides software, hardware, and services to enable physical and digital communications in the United States and internationally. It also offers a suite of equipment, supplies, software, services, and solutions for managing and integrating physical and digital communication channels.
The company’s Small & Medium Business Solutions segment engages in the sale, rental, and financing of mail finishing, mail creation, and shipping equipment and software; provision of supply, support, and other professional services; and provision of payment solutions. Its Enterprise Business Solutions segment sells, supports, and offers other professional services of high-speed, production mail systems, and sorting and production print equipment; and sells support services for non-equipment-based mailing, customer relationship and communication, and location intelligence software. Pitney Bowes Inc. markets its products through its sales force, direct mailings, outbound telemarketing, independent distributors, and the Internet to various businesses, governmental, institutional, and other organizations.
To review potential trading opportunities with Pitney’s stock, please take a look at the 1-year chart of PBI (Pitney Bowes, Inc.) below with my added notations:
1-year chart of PBI (Pitney Bowes, Inc.)
From a technical perspective, there’s a whole lot going on with PBI. First, the stock has formed a definite resistance at $24 (red). After doing so, the stock broke its 6-month trend line of support. Now it appears that PBI may have formed a double top price pattern over the last 3 months.
Double tops are reversal patterns and are as simple as they sound: Rallying up to a point (T), selling off to a support, and then rallying back up again to approximately the same top (T). As with any price pattern, a confirmation of the pattern is needed. PBI would confirm its pattern by breaking below the $21 support (blue) area that has been created by the double top pattern.

The Tale of the Tape: PBI may have double topped. A long trade could be made at $21 or on a move above $24 (resistance). A short trade could be made on a support break of $21, which would confirm the double top pattern.
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General Electric (NYSE: GE) Rebound Could Make Traders 67% Profits

It hasn't been a very happy new year for the bulls so far. The broad market S&P 500 index came within a point of its all-time high before the slide began. And the blue-chip Dow Jones Industrial Average was hit hard last week, down 3.5% for the worst weekly performance in years.
Only three of the Dow 30 components show a gain in 2014, and the index is off 4% year to date. The worst Dow performer has been General Electric (NYSE: GE), which is down almost 10% for the year.
Dow vs GE Stock Chart
The risk/reward favors the bulls at these levels. A third of the Dow and a quarter of the S&P 500 companies will release earnings this week, which should help put the fundamentals in perspective.
In the past four and a half years, every pullback in GE has recovered to make new highs. And the stock has support at $25 to lean on. (more)

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