Stocks & Equities
The Dow just made another post-financial crisis rally high. To provide some further perspective to the current Dow rally, all major market rallies of the last 112 years are plotted on today’s chart. Each dot represents a major stock market rally as measured by the Dow with the majority of rallies referred to by a label which states the year in which the rally began. For today’s chart, a rally is being defined as an advance that follows a 30% decline (i.e. a major bear market). As today’s chart illustrates, the Dow has begun a major rally 13 times over the past 112 years which equates to an average of one rally every 8.6 years. It is also interesting to note that the duration and magnitude of each rally correlated fairly well with the linear regression line (gray upward sloping line). As it stands right now, the current Dow rally that began in March 2009 (blue dot labeled you are here) would be classified as well below average in both duration and magnitude. However, when compared to the most recent post-major bear market rally (i.e. the rally that began in 2002), the current rally has already surpassed it in magnitude and required less time to do so.
Notes:
Where’s the Dow headed? The answer may surprise you. Find out right now with the exclusive & Barron’s recommended charts of Chart of the Day Plus.
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“Markets are constantly in a state of uncertainty and flux and money is made by discounting the obvious and betting on the unexpected” – George Soros
As we enter 2013, I’m writing to summarize what happened in the markets last year, my outlook for 2013 and how we are positioning our portfolios to manage risk and preserve capital.
2012 saw a continuation of the volatility that’s characterized the markets since the global financial crisis, which will be marking its fifth anniversary in September. At the same time, the Emerging, European and the U.S. markets finished the year with gains above 10%, despite concerns about Europe’s finances and worries that the US would fall off the “fiscal cliff” and go back into recession. And while Canada was up by 4%, it lagged the U.S. for the third straight year.
The call for this week: The indices, in the short-term, are entirely out of internal energy and over-bought. To me, that counsels for caution despite the half-hearted Dow Theory buy signal generated by last Friday’s new reaction closing high by the Industrials, which confirmed the D-J Transports sprint to new all-time “highs” last week. Whatever happens in the near-term, there is nothing to suggest the path of least resistance is not higher over the intermediate and longer-term. Therefore, I would accumulate favored stocks, as well as the indices, on any ensuing pullbacks.
Produced by McIver Wealth Management Consulting Group
Neil McIver, CM, McIver Wealth Management.
Are T-Bond futures breaking down? It’s important that we get it right, since, if they are and market forces are about to lay bare the biggest financial shell game in history, we want to be watching from the sidelines when the inevitable panic erupts. From a technical standpoint, the key number to watch is 143^29, a “Hidden Pivot” derived from our proprietary runes. If this support were to fail we would infer that the selloff had significantly further to go, presumably to at least 141^09, before bulls would have a chance of reversing the tide. By then, however, it could be too late to calm the herd. Interest rates on the long bond would be up by about 25 basis points, to around 3.25 percent, and although that would still be shy of the 3.50 peak recorded last spring, it could suffice to unsettle equity markets and squash a a delicate uptick in real estate that has relied on massive infusions of credit created out of thin air by the Federal Reserve. At the very least, it would give pause to share buyers who have so far gotten 2013 off to a rousing start.
To be sure, T-Bonds have pulled out of tail spins before. Early in 2011, they reversed a nasty decline that had threatened to derail the banking system’s recovery from the Great Financial Crash. And they did so again later that year, saving the day for a mortgage market that might easily have relapsed. This time, however, although T-Bond futures are not in a steep decline, weakness has persisted since summer. Because of this, the markets are in poor shape to withstand whatever shenanigans Obama and the Democrats attempt to pull in lifting the debt ceiling. In fact, the carelessness with which the subject is being debated on Capitol Hill could itself be the catalyst that finally causes T-bonds to “revolt” as buyers other than the Fed itself desert the Treasury’s auctions. We should all want to be long gold and silver when that day finally arrives, as it inevitably must.
Whatever happens, we’ll be watching the charts closely when the March T-Bond contract comes down to 143^29, an occurrence that we would rate as all but certain over the next 2-3 weeks. A breach of that “hidden” support by more than two or three ticks — or still worse, a close beneath it — would be warning of worse to come. Click here for a no-risk trial subscription toRick’s Picks that will give you access to our analysis in real time, as well as to a 24/7 chat room that draws experienced traders from around the world.
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