Capitalogix

The Market Rally Seems Longer Than It Really Has Been

Is This Market Rally Too Overbought to Trust?

While the optimists, pessimists and realists argue about whether the rally has gone too far (or is 'fake' because of government intervention) ... opportunistic traders have enjoyed the ride.

So how far and long has this rally really come?  Despite all the worrying, objects in the rear-view mirror may be closer than they seem.

The graphic (below) from Chart of the Day, puts over a century of market rallies in context.

As the Dow Jones Industrial Average flirts with post-financial crisis rally highs (and the 13,000 level), it may seem as if the current market rally has grown long-in-the-tooth ...

Nonetheless, history says rallies can go much longer and higher than this.

To provide some perspective to the current Dow Jones market rally that began back in early October 2011, all major market rallies of the last 111 years are plotted on this chart. Each dot represents a major stock market rally as measured by the Dow.

 

 As the chart above illustrates, the Dow has begun a major rally 28 times over the past 111 years which equates to an average of one rally every four years.

Also, most major rallies (78%) resulted in a gain of between 30% and 150% (29.8% to 150.5% to be exact) and lasted between 200 and 800 trading days (9.5 months to 3.2 years) -- highlighted in this chart with a light blue shaded box.

As it stands right now, the current Dow rally (hollow blue dot labeled you are here) would be classified as well below average in both duration and magnitude.

Interesting.

Related articles

• SPX Update: Why This Rally Is One for the History Books (minyanville.com)
• The Rally Is Going Into Overdrive Right Now (businessinsider.com)

A Quick Look at the Where the S&P 500 Sits

Sometimes reading a chart is simple. 

Here is the obvious question: Will the the S&P 500 Index be able to stay above its 2008 to 2012 resistance line (marked by red arrow on this weekly chart)?

 

 

The recent highs (at 1370) are directly overhead.  A move above that would be decidedly bullish.

 

Nonetheless, the recent rally is extended and happened on low volume. 

Bears will note that there are many negative divergences, too.  

However, the key indicator is the price action ... and it has been un-relentingly higher (despite many logical reasons for it not to have happened).

Related Articles

• Some Divergence Here (by Springheel Jack) (slopeofhope.com)
• SPX Update: Do-or-Die Week for the Big Picture Wave Counts (minyanville.com)
• Keeping an Eye on NYSI and S&P 500 Index (slopeofhope.com)

Why Did the Clint Eastwood "It's Halftime America" Ad Cause Such a Stir?

Did you see the Clint Eastwood "It's Halftime America" video that ran during halftime of the Super Bowl?

It starts with Clint Eastwood's voice and an image  of a lone man casting a big shadow as he walks down a darkened football stadium corridor.

 

"It's halftime ... Both teams are in their locker room discussing what they can do to win this game in the second half. It's halftime in America, too."

 

 

 
Well, it got noticed ... and it's causing a controversy in some circles.

So much so that SNL made fun of the issue in this spoof.

 

 

 

"I don't care if Obama runs the ball, or Romney throws a touchdown, or Ron Paul kicks a field goal with his tiny little chicken legs," Hader-as-Eastwood warns. "I tell you right now, though, I ain't puttin' Santorum in the game. He can stand on the sideline doin' cheers in his little sweater vest."

 

Sometimes it seems that we become so focused on pointing fingers and finding fault that we forget our real purpose.

To paraphrase Freud, sometimes an ad is just an ad. 

And in this case, it could simply be an inspiring ad paid for by Chrysler (perhaps to say " we faced some hard times, but showed resiliancy and resolve ... and the best is yet to come.")

On a related note, check-out Bob Buford's book, Halftime: Moving from Success to SignificanceHalftime: Moving from Success to Significance. It is about making the second half of your life better than the first.

Buford reminds that in order to have a better second half, you must first figure-out what you
want.

In Halftime, Buford focuses on 'transition'---the time when, he says, a person moves beyond the first half of the game of life. It's a time of revitalization and for catching a new vision for living the second half, the half where life can be lived at its most rewarding. Halftime doesn't have to be a time of crisis. It can be a catalyst for purpose, impact, and growth. It can be about setting a new course away from mere success to true significance---and something better.

This message applies to the market and our economy as well.  What if we are half-way there?  What do you really want?  Where are you committed to go?  What adjustments are needed?  What do you want to do more of? What do you want to do less of?  What do you need to start doing?

It's half-time, and the best is yet to come.

 

Related articles

• Clint Eastwood: I am not 'politically affiliated with Mr Obama' (thegrio.com)
• 'Halftime in America': Clint Eastwood Hates Car Company Bailouts, but Loves Car Company Commercials (minyanville.com)
• A Better "Halftime In America" Commercial (zerohedge.com)

Some Links to Browse This Weekend

I don't know about you, but the Euro thing doesn't seem "done" to me ...

 

 

Here are some of the posts that caught my eye. Hope you find something interesting.

Lighter Links:

• How Will You Use Your Leap Second? (NYTimes)
• Big Data: Why All the Fuss? (InformationWeek)
• Kurzweil On Prediction Accuracy: Adjusting to Change & Neuroscience. (Wired)
• NASA's 'Impossibly Beautiful' Photo of Earth. An Ultra High-Def Update. (TheWeek)
• Dallas Opera Will Simulcast Its Performance at Cowboys Stadium. The fat-lady really is singing. (WFAA)

 

Trading Links:

• How to Play the Five Big 'What-Ifs' Affecting the Markets. (WSJ)
• How Long Can the Stock Market Forget About the Pain? (NYTimes)
• Spotting Winners Is Not Always Rational. (FT)
• Why 2012 Will Be the Year of the Entrepreneur. (Moneyland)
• Will Collecting State Taxes Slow Amazon Down? (Barrons)

Ten Links for Your Weekend Reading

A sprinkling of dark humor ...

 

 

 

Here are some of the posts that caught my eye. Hope you find something interesting.

Lighter Links:

• Short-Term Thinking Is Often Our Biggest Problem: 3 Ways To Fight It Now. (FastCo)
• China’s Push to Put Astronaut on the Moon. (FT.com)
• There’s an Ape for That: Orangutans Use iPad to Communicate. (TheDaily)
• Take Two & Call Me In the Morning: Discovery of an Exercise Pill? (TechReview)
• Guys vs. Cartoon: It's not for knowledge that we went to college ... (Video)

 

Trading Links:

• Why is the Economy Doing So Well ... And Can It Continue? (Inc)
• Forecasting Toolkit Challenged by the ‘New Abnormal’. (FT)
• Update on Global Food Commodities. (Stratfor)
• The Visible Hand: Is State Capitalism a Viable Alternative to Free Markets? (Economist)
• What You Can Learn From Mitt's Tax Return. (WSJ)

More Ways to Visualize Big Numbers, Like a Trillion

Back in the 1960s, Illinois Senator Everett Dirksen famously quipped, "A billion here, a billion there -- pretty soon, you're talking real money."

To get a sense of how Trillions currently are discussed in Congress, watch this.

How quaint ... Recently, Trillion has become the new billion; especially when we're talking about government debt, government budget, and the budget deficit.

So, let's put a "Trillion" in better context.

What follows are a few creative ways to look at the U.S. government budget and what's happening to our national debt.

1. The U.S. Government Budget Compared to an American Household


This has been making the rounds.  I saw several copies on social media sites, and it puts things in a format most of us can understand easily.

 

 

 

I'm not sure of its source, but you can also see a version of it in this video showing CNBC correspondent, Rick Santelli, explaining the government budget and the budget deficit.

2. U.S. Government Debt Illustrated in Pictures

The national debt clock continues ticking.

Here is what the $15 trillion U.S. debt looks like when it is piled up in stacks of $100 bills.

Do you see the the tiny-in-comparison tractor trailer?  Squint, and you can see the barely visible human in front of it.

 

 Well, that put things in perspective.

 

So does this video.

 

 

 

You don't need the national debt clock to get a sense how big the deficit is becoming, or how hard it is to start reducing it meaningfully.

3. Or If You Just Like Simple Math...

The circumference of the earth is 24,738 miles.

If laid $15 trillion one-dollar bills end-to-end, it would be 1,444,000,000 miles long ... Enough to circle the earth's equator 58,390.5 times.

If you were to drive around the earth in your car 58,390.5 times at an average speed of 70 mph non-stop, it would take you 2,385 years to finish.

Click here for some other facts about "a trillion" ... or here too.

So What Does it All Mean?

These are some big numbers. But as Nicholas Vardy points out, the focus on U.S. debt ignores once crucial factor -- the value of the balance sheet or accumulated wealth of the United States. That figure probably stands between $150 trillion and $200 trillion. That amount is 10- to 13-times the size of the current U.S. government debt.

In other words, the U.S. is not going to the poor-house anytime soon.  But the trends are sobering, nonetheless.

Related Articles

• 34 Shocking Facts About US Debt (lewrockwell.com)
• Biggest Holders of US Government Debt - Yahoo! Finance (opsudwinger.wordpress.com)
• It's Not What You Owe, It's Who You Owe (reason.com)

Here Are Some Interesting Links for Your Sunday Reading

While traveling last week, I logged on to Facebook and found this gem from a friend.

Between What I think, What I want to say, What I think I said, What I have really said, What you want to hear, What you think you hear, What you really hear, What you want to understand, and Understanding, there are 9 ways to be misunderstood.

Well said; but still not sure I understand ...

 

 

Here are some of the posts that caught my eye. Hope you find something interesting.

Lighter Links:

• Scott Belsky on How to Avoid Idea Plateaus. (BrainPickings)
• Ten 100-Year Predictions That Came True. (BBC)
• The Next Great Motivational Speaker. This kid was a hoot. (Video)
• Did Iran Really Send the U.S. a Toy Model of the Captured Drone? (Slatest)
• Top 1% of Mobile Users Use Half of World’s Wireless Bandwidth. (NYTimes)

 

Trading Links:

• At Davos World Economic Forum, Fear of Global Contagion Dominates. (HPost)
• Why Economic Growth Is Not Imperative. (BigThink)
• Stratfor's Annual Forecast 2012. (Stratfor)
• China Outshines US as the Top IPO Venue. (FinancialTimes)
• Emerging Markets Represent the Future for HFTs. (AdvancedTrading)
• Mohamed El-Erian: Investing in a 'Fat Tail' World - WSJ.com. By pushing interest rates to very low levels, central banks are pushing investors out the risk spectrum. (WSJ)

Some Interesting Links for Your Weekend Reading

Big News: The Twinkie is Dead.

 

 

 

The Mayans may have been right; the world might be ending.

Here are some of the posts that caught my eye. Hope you find something interesting.

Lighter Links:

• HBR's Most Popular Blog Posts of 2011. via Harvard Business Review (Blogs)
• Dogs Can Read Our Intent. (MedicalNewsToday)
• 13 Ways to Get in Shape with Digital Fitness Tools. (Mashable)
• Technology Waves and the Hypernet. (Roger McNamee & Mike Maples)
• Amazon Takes Supercomputing To The Cloud. You may not need to use the 42nd fastest supercomputer on Earth, but if you want to, you can for just $1,279 per hour. (CNet)

 

Trading Links:

• 10 Investment Lessons from 2011. (TheStreet)
• Why Is Wall Street So Bullish After Such a Weak Year? (CNBC)
• CEO Confidence Index Bounces Back. (Vistage)
• Iran's Real Weapon Of Mass Destruction Is Oil Prices. (Forbes)
• Did You See that the Green Bay Packers Launched a Stock Offering? (Yahoo)

How Much Faith Do You Put in "As Goes January, So Goes the Year"?

Does a market rally in January imply anything for the rest of the trading year?  "As goes January, so goes the year." This particular phenomenon is what is referred to as the January Barometer.

Is it true?  I don't know ... but it is fun to examine.

Many reputable services report the January Barometer's recent-history success rate at around 75%; so it is at least worth noting.

I was going through some past research and found this chart from Chart of the Day from 2009.  It illustrates that the S&P 500 has performed much better (on average) during the months following a January gain.  The chart is a few years old, but recent years have followed this trend as well.

John Murphy has a slightly different perspective; he says that what the market does during the first week of the new year often gives a clue about direction for the remainder of the year.

Murphy cites the Stock Trader's Almanac, "S&P gains during January's first five trading days preceded full-year gains 86% of the time". The predictive ability of the month of January is nearly as impressive. "The January Barometer predicts the year's course with a .741 batting average. 12 of the last 14 post-election years followed January's direction" (Almanac).

While the January barometer has a good record of prediction, Carl Swenlin still puts it in the "for what it's worth" column because, while it is interesting to note, it might simply be coincidental.  Likewise, Business Insider questioned the significance of this indicator in a note called "Don't Be Fooled By All Of The So-Called Market Wisdom".

Nevertheless, we had a good start to that first week of January here in 2012 - and it has continued.  Let's hope it keeps up.

Related articles

• As the First Week Goes for the Market, So Goes the Year? Not Necessarily. (minyanville.com)
• Stocks and Election Years -- What's the Connection? (fool.com)

What Kind of Year Are You Expecting? Beware the Siren Song of Simple Stories.

Imagine that a couple has arrived here from another planet, and it is your responsibility to explain the rules of life to these hypothetical aliens.

Like you, they are facing a new year.

Would you tell them to let the news broadcasters, newspaper columnists and the economists determine what kind of a year they would have? Is that what you would tell them?

Or would you explain that they have freedom of thought; that they can think and make whatever plans they choose. Their coming year can be very productive, if that is what they would like it to be and if they are prepared to do what is required to reach their chosen objective.

Admittedly, this is rather ridiculous, as we both know you are not going to be instructing any aliens. But, it is a thought that will get you focused on the positive polarity.

We are facing a new year and we do have freedom of thought. You and I can plan to enjoy tremendous results this year. However, with all the negative energy swirling around the business community, it becomes more important than ever to make those plans. Without such plans you will, most certainly, be swept into the "I can't because ..." syndrome, and you don't want that to happen.

Beware of Stories!

On a related note, here's an interesting TedTalk.

Economist Tyler Cowen loves a good story. But he asks us to step away from thinking of our lives -- and our messy, irrational world -- in terms of simple narrative.

 

 

 

The Moral: Pay Attention to What Is Really Happening and Respond intelligently.