Market Commentary

We are in the dog-days of summer.  Perhaps it is a good time to travel, just so you are not tempted to watch the news.

Biggest Negative Fund Flow Out of U.S. Stocks Since During the Crisis.

Money is flowing out of equity markets into the bond market.  According to the NYTimes, investors withdrew a staggering $33.12 billion from domestic stock market mutual funds so far this year.

In the chart, below, the red bars represent fund flows for U.S. equity mutual funds, and the gray bars represent fund flows for bond mutual fund.  The data for this chart is based on the fund flow data of long term mutual funds tracked by the Investment Company Institute.

Likewise, according to Rasmussen research, consumer & investor confidence has fallen to a 2010 low.

The Consumer Metrics Institute's Growth Index.

It's easy to get distracted by other data, but (for the most part) price is the primary indicator to use when analyzing a stock chart. Of course, it's still useful to try and get an early indicator of how a well-followed metric may perform.

The chart below shows three different data points. The S&P 500 index, GDP, and the Consumer Metrics Institute's Growth Index.  Historically, the Growth Index has given an early indication of what GDP and the stock market are likely to do soon after. So, its recent decline might be an early indicator of continued weakness.

This is something that bears watching.  If you're interested, here's a link from dshort.com that covers this topic in more detail.

As more people worry that our economy is not changing as hoped; some things are changing … technology and legislation.

How Does Technology Change the Investment Landscape?

Duncan Niederauer, NYSE Euronext CEO, sat down with Maria Bartiromo at the "Techonomy Conference" in Lake Tahoe to talk about technological advancements and what they mean for the future of trading.

 

My guess is that we are going to see a whole new round of cries for regulation of financial technology.

Here is an Explanation of How Laws Are Made.

For the past two years, Financial Reform has been in the news.  Here is is a link to a discussion of what it can accomplish. Now that the Dodd-Frank Bill has become law, I thought it might be helpful to show the path it had to take?  Here is an informative infographic put together by  Mike Wirth that lays out how a Bill becomes a Law.  Click the image to see a larger version.

Business Posts Moving the Markets that I Found Interesting This Week:

There is a solution to everything.  Of course, some solutions are better than others.

The government's latest snapshot of the job market was bleak, with 14.6 million Americans still searching for work.  The disappointment is not limited to July; the report also included unfavorable revisions to data released in previous months.  It is becoming clear that the existing policy mix is not appropriate for the task at hand.

Even though we've heard bad news, the market has continued to hold up well. And that is a decidedly bullish sign.  There are also a number of positive signs of market strength (like strong breadth, increased corporate spending, and lots of capital on the sidelines ready to be deployed).

Market Commentary:  Let's Look Under the Covers.

The charts show a few challenges ahead, however.  First, the S&P 500 Index is sitting at a resistance zone in a rising wedge pattern.  From a technical analysis perspective, that pattern is often bearish (or the place traders look for a reversal).

Bulls are looking for a sustained move above the 1140 level to make them comfortable.

Second, the Dollar looks like it might be at a support level. Will it reverse here?  These two markets often move counter to each other.  So, having the Dollar at "support" while the S&P 500 Index is at "resistance" might increase the odds of a market turn here.

Just something to keep your eye on.

Finally, this is from late May; but it is making the rounds again … and I thought it was worth sharing.

Steve Wynn Is Not a Shy Man With Few Opinions.

In this video, Steve Wynn (a casino resort/real-estate developer who has been credited with spearheading the dramatic resurgence and expansion of the Las Vegas Strip) calls out the White House and talks about the Fall of America. Interesting perspective from a billionaire.

 

There is a solution to everything.  Of course, some solutions are better than others.

The government's latest snapshot of the job market was bleak, with 14.6 million Americans still searching for work.  The disappointment is not limited to July; the report also included unfavorable revisions to data released in previous months.  It is becoming clear that the existing policy mix is not appropriate for the task at hand.

Even though we've heard bad news, the market has continued to hold up well. And that is a decidedly bullish sign.  There are also a number of positive signs of market strength (like strong breadth, increased corporate spending, and lots of capital on the sidelines ready to be deployed).

Market Commentary:  Let's Look Under the Covers.

The charts show a few challenges ahead, however.  First, the S&P 500 Index is sitting at a resistance zone in a rising wedge pattern.  From a technical analysis perspective, that pattern is often bearish (or the place traders look for a reversal).

Bulls are looking for a sustained move above the 1140 level to make them comfortable.

Second, the Dollar looks like it might be at a support level. Will it reverse here?  These two markets often move counter to each other.  So, having the Dollar at "support" while the S&P 500 Index is at "resistance" might increase the odds of a market turn here.

Just something to keep your eye on.

Finally, this is from late May; but it is making the rounds again … and I thought it was worth sharing.

Steve Wynn Is Not a Shy Man With Few Opinions.

In this video, Steve Wynn (a casino resort/real-estate developer who has been credited with spearheading the dramatic resurgence and expansion of the Las Vegas Strip) calls out the White House and talks about the Fall of America. Interesting perspective from a billionaire.

 

On the surface, July was a good month in the markets.  It sparked my curiosity about what insiders are doing.  Do their actions show that they see a sustained recovery coming?

Insider Buying Has Dried Up Since May.

Insider buying and selling behavior offers a unique insight on the prospects of a company, industry, economic sector, or even the stock market in general. By definition, Insiders have a deep knowledge and understanding of the company, exclusive information on the company's performance and prospects … and if they are risking their own money on the stock, you might expect that they have good reasons, especially when several insiders buy or sell at the same time.

Well, since May, Insiders have certainly changed their buying habits. Here is a chart from Insidercow showing how bearish insiders are right now.

Another sign I've been watching has been the performance of China.

China's Shanghai Index Has Some Room to Move.

China's Shanghai Index has been in a downtrend for a while. It has under-performed most of the major world markets recently. However, in early July it bounced nicely off the downtrend channel. At this point, it is sitting right at the resistance zone. A sustained move above the 2700 level will likely give the index plenty of room to rally. On the other hand, a failure at this level could send a signal to other world markets.

This next chart shows a weekly view of gold. This is a market that I don't pay close attention to, normally. Nonetheless, its chart caught my eye this weekend.

Decision Time for Gold.

The price of Gold is sitting at the bottom of the up-channel.  So, this where you'd expect to see buying come in from those expecting the up-trend to continue in Gold.  The chart speaks for itself.

We'll see what happens.  Hope you have a good week.

On the surface, July was a good month in the markets.  It sparked my curiosity about what insiders are doing.  Do their actions show that they see a sustained recovery coming?

Insider Buying Has Dried Up Since May.

Insider buying and selling behavior offers a unique insight on the prospects of a company, industry, economic sector, or even the stock market in general. By definition, Insiders have a deep knowledge and understanding of the company, exclusive information on the company's performance and prospects … and if they are risking their own money on the stock, you might expect that they have good reasons, especially when several insiders buy or sell at the same time.

Well, since May, Insiders have certainly changed their buying habits. Here is a chart from Insidercow showing how bearish insiders are right now.

Another sign I've been watching has been the performance of China.

China's Shanghai Index Has Some Room to Move.

China's Shanghai Index has been in a downtrend for a while. It has under-performed most of the major world markets recently. However, in early July it bounced nicely off the downtrend channel. At this point, it is sitting right at the resistance zone. A sustained move above the 2700 level will likely give the index plenty of room to rally. On the other hand, a failure at this level could send a signal to other world markets.

This next chart shows a weekly view of gold. This is a market that I don't pay close attention to, normally. Nonetheless, its chart caught my eye this weekend.

Decision Time for Gold.

The price of Gold is sitting at the bottom of the up-channel.  So, this where you'd expect to see buying come in from those expecting the up-trend to continue in Gold.  The chart speaks for itself.

We'll see what happens.  Hope you have a good week.

It was a strong week for the markets.  Normally, to get a sense of what's happening, I focus on the U.S. equity markets.  This week, however, I thought it made sense to start with a look at emerging markets around the world.  These markets are often referred to as BRICs.

Emerging Markets Lead Stock Rally.

At this point, foreign stocks are leading the U.S. stock market higher. Here is a chart showing that Emerging Market iShares recently broke above its June high.  Moreover, after breaking above the down-trend since April, it successfully re-tested that line (from above) and bounced higher. From a technical analysis perspective, those are bullish signs.

 

Here in America, it is earnings season, and companies have been reporting better news than most expected.  The economic news hasn't been stellar; but the markets have held up well.  This chart shows the S&P 500 Index at the top of hotly contested resistance level.

Many would take a sustained move above the 1120 level as a strong bullish sign.

With that said, business expansion is dragging and slowing the economic recovery, and it
seems everyone is searching for reasons.

Debt Overhang.

In his new paper, Federal Reserve Bank of Cleveland researcher Filippo Occhino says a contributing factor may be something called debt overhang. Simply put, when companies have too much debt it discourages them and their investors from taking on projects because the debt consumes any profits the investors might make, even in situations when the investment raises equity in the company.

Watch the Debt Overhang Video from the Cleveland Fed.

It was a strong week for the markets.  Normally, to get a sense of what's happening, I focus on the U.S. equity markets.  This week, however, I thought it made sense to start with a look at emerging markets around the world.  These markets are often referred to as BRICs.

Emerging Markets Lead Stock Rally.

At this point, foreign stocks are leading the U.S. stock market higher. Here is a chart showing that Emerging Market iShares recently broke above its June high.  Moreover, after breaking above the down-trend since April, it successfully re-tested that line (from above) and bounced higher. From a technical analysis perspective, those are bullish signs.

 

Here in America, it is earnings season, and companies have been reporting better news than most expected.  The economic news hasn't been stellar; but the markets have held up well.  This chart shows the S&P 500 Index at the top of hotly contested resistance level.

Many would take a sustained move above the 1120 level as a strong bullish sign.

With that said, business expansion is dragging and slowing the economic recovery, and it
seems everyone is searching for reasons.

Debt Overhang.

In his new paper, Federal Reserve Bank of Cleveland researcher Filippo Occhino says a contributing factor may be something called debt overhang. Simply put, when companies have too much debt it discourages them and their investors from taking on projects because the debt consumes any profits the investors might make, even in situations when the investment raises equity in the company.

Watch the Debt Overhang Video from the Cleveland Fed.