Saturday, June 13, 2015

These diverging trends point to a market correction, says UBS

A UBS analyst joins a chorus of technical experts who see the U.S. stock market in the process of hitting a top and expect a major correction this summer.
Michael Riesner, head equity technical analyst at UBS, in a note to investors presents a number of charts to support his ‘toppish’ warnings.
The S&P 500 is about 1% below its all-time high set last month, but what’s worrying Riesner is what he describes as “intact and growing divergences on macro and inter-market levels.”  (more)

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Juniors Show Relative Strength as Precious Metals Weaken

Despite three consecutive weeks of losses precious metals have failed to mount much of a rally. Gold closed last week above $1170 and may close this week below $1180. Meanwhile, Silver has struggled to mount any rebound and appears to have lost $16 as the week comes to a close. While the risk of a final breakdown is growing, one positive we see is the relative strength in the riskiest parts of the mining sector.
GDX tracks the senior miners (including royalty companies now) while GDXJ tracks what we would term “the largest juniors.” When the sector is performing well, we’d expect GDXJ to outperform and when the sector is performing poorly, we’d expect GDXJ to underperform. (more)

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Was WASDE Report Bullish or Bearish Soybeans?

When I went over the June 10th WASDE report for soybeans, two sentences pretty much said it all. It is bearish.

“Soybean ending stocks for 2014/15 are projected at 330 million bushels, down 20 million from last month. Ending stocks for 2015/16 are reduced 25 million bushels to 475 million.”

There was a drop, but it is insignificant especially looking at world stocks, but for the US soybeans all it suggests is the weakness for old crop will be less than new crop. What happens for new crop? Bad news.  It is a 145 million bushel increase; a 44% increase. It is also assuming exports will be an additional 10 million bushels for old crop due to what has happened up to May. Even with the reductions, ending stocks are more than adequate even with the strong crush. Great, there is a strong crush, but what happens with all the meal? In Thursday’s USDA export report not once were there sales of soybeans and meal to China. Japan took about a half of a regular sized shipment of soybeans. (more)
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Get Ready to Profit From the Short Side

It looks like the stock market is entering a correction phase...
With the breakdown in the high-yield bond market, the sharp recent increase in the 10-year Treasury yield, and the record high level of New York Stock Exchange (NYSE) margin debt, the stage is set for a significant correction.
We haven't seen a 10%-or-greater pullback in the broad stock market since November 2011. So we're certainly overdue for one now. And I think the action we're seeing this week is the beginning of that sort of move...
Take a look at this updated chart of the S&P 500...
As of Tuesday's close, the S&P 500 was trading only about 2.4% below the all-time high it made last month. So many folks might argue that it's premature to talk about the market entering a correction phase.  (more)
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The World’s Worst Investment Bubble Will Burst Soon

In China, all the signs are there, but not many investors see them
by Howard Gold
Market Watch

Investment bubbles always look so obvious in hindsight. But when you’re in the middle of one, it’s hard to fight the crowd, even if that little voice in your head tells you to run for the hills.
Why? Bubbles produce compelling narratives that give people reasons to believe. The Internet is changing everything. Housing prices never go down. Tulips are the most precious commodity on God’s green Earth, etc.
Now the same thing is happening again in China, a market that has had one huge bubble burst only recently. The Shanghai Composite index briefly topped 6,000 in October 2007 only to plummet to just above 1,700, a sickening 70% plunge in only 12 months.
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Housing Sector Challenges in the US, Canada, and Denmark

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