Wednesday 25 December 2013

Bits and pieces for Christmas day

We are nearing year end, and with the market shut this Christmas day, it gives an opportunity to look at a few disparate things. Without question, the US capital markets have been very strong across much of 2013, and the first 3-6 months of 2014 look set to continue that trend.

The following are a selection of some things which I believe are pretty important to keep in mind.

Japan, monthly

The Nikkei is making a major play to attain a monthly close above the TWENTY year down trend/channel. It certainly doesn't have to happen this month though. Once we see the 16000s, upside looks to be an easy 17k..and then 20k, although the latter might not be until mid 2015.

BDI, monthly

We have a clear breakout, with the MACD in positive territory for the first time since autumn 2008. Upside is 3000/3500, perhaps even 4000 by late spring. The above chart has very powerful bullish implications for the shipping stocks, such as DRYS, DSX, NAT.

US, 10yr yield, monthly

A mere 6 months ago, if you'd told anyone the US 10yr yield would be near 3%, they'd probably have assumed the market would have got majorly upset, and that the sp'500 would be trading somewhere in the 1500s..if not considerably lower. Instead, we have a market that has come to realise, 3% is still historically low and that the US consumer can still manage. Upside to 3.50/75 in first half of 2014..before a move back down to maybe 2.50/25 - which should coincide with a 2-4 month equity down wave.

WTIC Oil, monthly'2, rainbow

Oil is up almost 7% this month, and looks set to break the big $100 threshold in January. The real issue is whether Oil can break..and hold above $110. Further, it will be interesting to see whether the market cares about higher oil prices, or interprets it as a result of a 'strong economy'.

Copper, monthly

Like Oil, Copper is on the rise, and looks set to gain around 5% this month. We very briefly broke below the $3 threshold in the summer, but that is now some 11% lower, and doesn't look in danger of breaking for some months.

TWTR, daily

Unquestionably, another sign of just how hysteria filled the market can still get. Twitter (TWTR) is a company that doesn't make a profit, and which the market now believes is worth $30 billion or so. #hysteria...indeed

VIX, monthly, 9yr

Anyone who is still resolutely bearish about the equity market needs to go have a long stare at the above volatility chart. We have a VIX which maxed out at 21.91 this June, which is remarkable. However, it does continue a broad trend of ever lower spike-highs. Keep in mind the 2012 high was 27, when the sp'500 was all the way down at 1266 !

As for next year, I feel very confident we will see the VIX briefly in the 30s, but the 40s...look extremely difficult. After all, just about everyone has come to accept that the Fed will keep a bid under the market for some time to come.

Trans, monthly, count/outlook

The old leader is ending the year over 2000pts higher - from 5306 to 7339, a gain of 38%...amazing! There is simply no sign of any weakness, and the only issue in my view is whether the transports can hit the 8000s, before the next intermediate multi-month down wave.

Looking ahead

The remainder of the week, and indeed year, is surely going to remain broadly bullish. We are already seeing some interesting moves in many individual stocks and sectors - the 'shippers' for example. There is simply no reason why the market will not just battle upward.

To everyone out there..wherever you are....Merry Christmas!

Next post....Thursday morning :)