#MarketTiming – more downside to be done…

As I said the last post, this market is a bit confounding…

Yesterday expected the market to go down and when it didn’t I quoted Trader Vic Sperandeo’s notion that when the market doesn’t do what’s expected it does the opposite twice as much.  Based on my three daily signals being on buys for today I expected the market to go up and it did at first, off the open, and then it did way more than the “twice as much” to the downside. As a result, stopped out of the daily longs early (see tweet in post below).

Great day for the bears.  Is this a sea change?  Could be.  Been a long time since this bull pulled back to oversold and didn’t quite come roaring out of there.  Instead, it had one quick bounce and then began to trudge.  Today took care of the trudge in most stocks and ETFs and wiped out most of the bounce besides.

So what now?  Again, some possible confounding… The market is not quite oversold despite today’s plunge – the stocks are in middle ground with 25 on buys and 25 on sells (not the 40 or more on sells that signals the beginning of a bottom) — so it may have more to go.

Tomorrow is an options expiration so one suspects we will see choppy with not much either up or down to be the order of the day.  And that choppiness, if it comes, could be a prelude to a bounce into the close tomorrow or next week, and it could as easily be a digestion of today’s drop before continuing down hard next week.

It is as if the market has noticed how unstable the American government is, but then it’s been unstable for a lot of the points to the upside.  Like I said, confounding.

What has not been so confounding is the fact long-term breadth has been going down for 12 trading days.  Eventually, as it continues, that takes its toll.  So as of now regardless of chop, regardless of bounces, that still is the context and it continues to be bearish.

SWING TRADING SIGNALS:

PRICE: SEll. (Day 1).
SHORT-TERM BREADTH: SEll. (Day 1).
VOLATILITY: Sell, (Day 1).

CONTEXT:

LONG-TERM BREADTH: Sell (Day 12).
CNN MONEY’S FEAR AND GREED INDEX: (19, extreme fear).
NIFTY-50 STOCK LIST: 25 Buys; 3 Overbought, 8 Oversold, 2 new buy today, 14 new sells.

#Stocks – if one wants to bottom fish…

The sector to bottom fish for the long term isn’t coal, isn’t oil, isn’t fossil fuel in general, it is solar and other renewables.

No matter how much the Trump administration is going to want to pay off his blow-hard coal supporters this is still an industry with one foot in the grave and the other slipping in its own dust.

I can hear some coal boys braying but, but, but BTU (Peabody Energy, the “biggest coal company in the world”) was up 22% today to $13. Yeah.  And it may go higher short term but there is a 15-to-1 reverse split in there so it’s not out of penny stock territory and Mr. Peabody biggest-coal-company-in-the-world is also in bankruptcy.  And a lot of these last of the coal stocks are up a lot hoping for Trump but the future is the future and they don’t have much of one with coal plants still shutting down domestically and internationally the rest of the world going on with the Paris climate-change accord no matter what the U.S. does.

Coal, once a necessary evil, remains an evil investment in the death of the planet.

So here we are once again on the cusp of tomorrow and beyond.

There will be volatility but if one can stand it, there will be rewards in renewable energy in the fullness of time. And today’s pop in the sector might be the start of something big given that’s it come on bad news for the sector in general.

(right click on the charts for a larger view)

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$XLF – Deja vu all over again

Not to make too much of this but…

(Reuters) – Wells Fargo & Co, the biggest U.S. residential mortgage lender and a major lender to the energy industry, reported a slight dip in quarterly profit on Friday as it set aside more money to cover bad loans to oil and gas companies.

Walls Fargo – whose latest balance sheet showed it had replaced Citigroup Inc as the third-largest U.S. bank – managed to increase revenue from mortgage banking for the first time in three quarters in the three months ended Dec. 31.

But its exposure to energy loans meant provisions for credit losses jumped by about $346 million from a year earlier to $831 million. Of the increase, about $159 million was mainly for oil and gas loans.

In the fourth quarter alone, the bank’s wholesale division set aside $90 million more for bad loans than in the third quarter, primarily for loans to energy companies.

And it has been reported the bank has as much as $17 billion in outstanding loans to energy companies.  Wells Fargo is already admitting bad loans to energy but what about the rest of the big banks? Given the tumble in energy and its various companies (especially frackers) one has to wonder how much the sector is running on credit from the major banks (one suspects a lot), and how many of those loans are in jeopardy of default.

For the “deja vu all over again” (as Yogi would put it) see charts below:

Back in 2007, prior to the free fall of the financial sector into the crisis of 2008, the housing sector (ITB), so important in bank lending, was falling apart for a full five months while the financial sector continued to make new highs, until both sectors crashed in lockstep.

(right click on chart for a larger image)

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This time around the energy sector (XLE) has been falling for 10 months while stocks in the banking sector continued to make new highs.   Both sectors are now both in sync…and going down…

How far?  No telling, but there is some historical precedent for sector divergences such as these.

(right click on chart for a larger image)

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#EnergyStocks – when an entire sector fails to follow through…

Well, to state the obvious, a lack of follow through ain’t bullish…

After virtually giving buy signals across the board yesterday (see ERX post below), the energy sector virtually got hit with more waves of selling today.  Given that energy was a leading sector on the market’s rebound from the September lows, there is a big chance the entire market has more downside ahead.

Of those stocks in the sector I follow, the weakest remain: BHI, BP, RIG, SLB, XOM, EOG, NBR, and NOV.  To my mind these are all shorting candidates but it must be noted that the general market is oversold and could push them up again like yesterday.

A bet on the short side here is a bet that both the market and the sector will continue to be bearish.

(click on image for a larger view)

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#Nifty50StockList – eleven new buys today

Big market rally day from deeply oversold.

SPY up 1.54%, QQQ up1.35%.

My Nifty50 Stock list shifted with today’s rally from 42 stocks on sells signals, 26 oversold, to eleven new buys making the total buys 19 with none as yet overbought.

New buy signals came on $HFC, $DO, $WFT, $FSLR, $TAN (the solar energy ETF), $ITCI, $CNQ, $APC $MSFT, $JKS and $NFLX.  On the selected charts below the signals are marked for today’s close but for the purposes of this blog these are all buys on tomorrow’s open with appropriate protective stops (no one should follow any of these suggestions any time without doing one’s own due diligence.)

(click on the charts for a larger image)

NEW_BUYS

 

Breathe easier — coal’s dead-end road…

Finally President Obama has come right out and said it — coal has got to go.

For all of its history, at best a necessary evil, the coal industry was been poisoning the planet, killing mountains and streams, enslaving whole regions of people in West Virginia, Kentucky, Ohio, Pennsylvania and now in the Powder River Basin in Wyoming and Montana, and with  a wanton disregard for mine safety and health, even killing its own employees.

Even now in the waning years of coal-powered electrical generation, the financial calculations of the damage to public health by the industry exceed the market cap of many of the coal companies themselves.

With the advancement of renewable clean energy technologies in wind and solar and thermal (and probably in the end in safer nuclear), it is time for clean renewable energy to take over the future.

The President’s announced plan, as the New York Times has just now editorialized with President Obama’s Tough, Achievable Climate Plan, continues the trend that has been going on now for some time as fracking for cleaner natural gas, as well as environmental regulations, have taken a devastating toll on the coal companies stocks. It is getting to the point now that the industry’s constant blat that coal is cheaper (even if it kills you) is not going to play anymore against the better cleaner sources of energy.

These last couple of years, companies like Peabody Energy (BTU) and Cloud Peak Energy (CLD) have made a desperate attempt to advance coal exports to China and India by proposing to build shipping terminals on the West Coast but they have been met by a solid wall of environmentalist saying no way and those efforts seem doomed (although the companies are still burning maybe the last of their cash to try to overcome their fierce opposition). And on a visit to China not so long ago, President Obama reached an agreement with the Chinese to curb coal imports there.

It’s getting so coal finally has no where to turn.

And the stocks show it (see the panel below). These stocks not only have little to no chance for investment growth, they are in fact risks to all shareholder equity as more and more of them, like Patriot Coal and James River Coal and Walter Energy, go bankrupt.

The time has come it appears to wave goodbye to the coal boys and breathe easier all over the world.

(Click on chart for a larger image)

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$AAPL – Will the “Next Big Thing” be a huge stock stumble?

First the good news.  AAPL will make scads of money no matter what.

Now the bad news.  The company, built on innovation and disruptive technology under Steve Jobs, has become a me-too company while slowly slipping on the tech fronts it once totally dominated.

When once the company revolutionized the computer market with high-end desktop computing and tablet computing, and completely transformed the music industry with the iPod and ITunes, and the personal phone world with the IPhone (it’s been calculated that people now spend and average of 46 minutes a day just checking their smartphones), the company appears now to have no more worlds to conquer, or at least worlds IT can conquer.

The “Me-Toos” include the iPhone sometimes chasing Samsung Android instead of the other way around, an Apple watch that makes so sense at all against the wristwatches of older generations and smartphones of the younger generation (what, are millennials too lazy to check the phone time and email? hardly); a TV service that is sort of Netflix-Amazon and sort of Roku-Google-Chrome and as such Apple is entering one of the most competitive business arenas in which they are already far behind; and now there is talk Apple might build an electric car to complete with Tesla (huh?) to say nothing of Toyota, GM, Mercedes, BMW and the rest of the auto world.

More bad news.  Check out this link from The Street: 7 Incredible Apple Patents Than May Hint At The Next Big Thing. That headline may sound like good news but not so.  Despite the hyperbole the “7 Incredibles” include a personal remote control, a virtual reality headset (to compete with Oculus — more “me too”),  an “IPen” (it writes), a flexible phone (thought they already manufactured that…by accident), and a couple other noodles.

This is obviously not Steve Jobs’ Apple anymore.

So what about the stock?

First off, AAPL stock has generated an unprecedented market cap of more than $700 billion when the previous record was just over $600 billion (MSFT), and only four other companies in history have exceeded $500 billion market caps (CSCO, GE, INTC, XOM) and Apple spent more than $100 billion of the company’s massive cash trove to get there. They likely will have spend more to stay so high (which, granted, they certainly can do since they have more than $200 billion in reserve and the means to make more).

But more importantly, time and history is not on the stock’s side (all of those companies that flew over a $500 billion market cap with the exception of XOM have had their stock cut in half or more eventually, and XOM has lost more than 20 percent).  That time too will come eventually to AAPL’s stock also — when a company’s stock is priced to perfection and over-owned by everyone the “next big thing” is an inevitable tumble.

So let’s consider the chart of AAPL below.  The good news — it is at the bottom and a long-time range and it can move back up within that range (MSFT went sideways for 12 years after its fall), and AAPL with all of its cash might hold high ground going sideways.  The bad news, the stock drops below 119-120 and all hell breaks loose when everyone who bought it basically this year realizes they are losing money.

The time for the tumble could be right now.

That’s it, one way or the other.

(Click on the chart for a larger image)

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$TAN – Solar ETF on the move up

$TAN – The solar energy ETF has begun again to move with CNN Money’s Fear and Greed Index.

Always a good sector to buy with any market rally, solar may be the best change to rack up a 50% gain in the next couple of months.  Longer-term, no matter now volatile, it is a growth sector and preferable in the future to investing in fossil fuel stock of any kind, particularly better than coal.

There will likely be a couple of more dips (which is worth noting) before this rise gets really going but historically it will, like the sun itself, rise again.

(Clink on chart for a larger image)

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Coal Stocks – the great short of the milennium

The media headlines Monday said the Supreme Court ruled against the EPA on mercury emissions in coal-fired electric generation, “giving the coal industry a victory.” According to the stocks, now pretty much in free fall again, the media got it wrong.

May be waving good-bye to (BTU), Peabody Energy’s share-holder equity soon.

Nine month ago I argued with somebody on Reddit who was saying BTU had plenty of liquidity and I was wrong about the company’s prospects being dire going forward.  I told him to watch the headlines. BTU, down overall from an all time high of 79 to under 2 dollars today, has more dire headlines to come.

P.S. By the way, this is all good news for the efforts to stop and reverse climate change.

(Click on image for a larger view)

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