The MasterCharts: January 2012
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Note: Green is today (or last trading day)

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Monday, January 23, 2012

Investor Sentiment: Is This the End of the Road for the Rally? | ZeroHedge

Investor Sentiment: Is This the End of the Road for the Rally?
zerohedge.com
January 22, 2012

The "dumb money" indicator has become extremely bullish (bear signal), and this is what one would expect with rising prices. The higher prices go the more bulls that are recruited. But is it the end of the road for the rally? Not necessarily so. In 1995, 2003, 2009, and Q4 2010/Q1 2011 we saw the phenomenon that I have dubbed "it takes bulls to make a bull market". It is a market characterized by rising prices and excessive bullishness. In the case of 1995, 2003, 2009, the excessive bullishness and multi-month rally seem to be warranted as the markets were bouncing back from steep losses or a prolong period of consolidation (1995). The Q4 2010/ Q1 2011 version of this phenomenon was a QE2 induced feeding frenzy. With investors taking their cues from the Federal Reserve and European Central Bank, the current market environment resembles Q4 2010/ Q1 2011. For now, we need to respect this dynamic as we could be witnessing another melt up. The bulls have the ball in their court and are on the cusp of turning this recent price move into a multi-month barn burner.

The “Dumb Money” indicator (see figure 1) looks for extremes in the data from 4 different groups of investors who historically have been wrong on the market: 1) Investors Intelligence; 2) MarketVane; 3) American Association of Individual Investors; and 4) the put call ratio. This indicator shows extreme bullishness.

Figure 1. “Dumb Money”/ weekly

Figure 2 is a weekly chart of the SP500 with the InsiderScore “entire market” value in the lower panel. From the InsiderScore weekly report: "Insider trading volume was seasonally thin last week, the result of most insiders being locked-up and prohibited from trading until after their companies' Q4'11 earnings announcements, as well as the market holiday."

Figure 2. InsiderScore “Entire Market” value/ weekly

Figure 3 is a weekly chart of the SP500. The indicator in the lower panel measures all the assets in the Rydex bullish oriented equity funds divided by the sum of assets in the bullish oriented equity funds plus the assets in the bearish oriented equity funds. When the indicator is green, the value is low and there is fear in the market; this is where market bottoms are forged. When the indicator is red, there is complacency in the market. There are too many bulls and this is when market advances stall. Currently, the value of the indicator is 65.09%. Values less than 50% are associated with market bottoms. Values greater than 58% are associated with market tops.

Figure 3. Rydex Total Bull v. Total Bear/ weekly



Friday, January 13, 2012

Burgernomics shows Switzerland has the most overvalued currency @ECONdailycharts

The Big Mac index

Jan 12th 2012, 16:53 by The Economist online

Burgernomics shows Switzerland has the most overvalued currency

THE ECONOMIST's Big Mac index is based on the theory of purchasing-power parity: in the long run, exchange rates should adjust to equal the price of a basket of goods and services in different countries. This particular basket holds a McDonald's Big Mac, whose price around the world we compared with its American average of $4.20. According to burgernomics the Swiss franc is a meaty 62% overvalued. The exchange rate that would equalise the price of a Swiss Big Mac with an American one is SFr1.55 to the dollar; the actual exchange rate is only 0.96. The cheapest burger is found in India, costing just $1.62. Though because Big Macs are not sold in India, we take the price of a Maharaja Mac, which is made with chicken instead of beef. Nonetheless, our index suggests the rupee is 60% undercooked. The euro, which recently fell to a 16-month low against the dollar, is now trading at less than €1.30 to the greenback. The last time we served up our index in July 2011, the euro was 21% overvalued against the dollar, but it is now just 6% overvalued. Other European currencies have also weakened against the dollar since our previous index, notably the Hungarian forint and Czech koruna, which have fallen by 23% and 16% respectively. Six months ago both currencies were close to fair value, but they are now undervalued by 37% and 18%.

For the full data set see here.

 


Wednesday, January 11, 2012

Market Breakout? S&P 500’s Highest Close Since July Could Fuel More Buying

Market Breakout? S&P 500's Highest Close Since July Could Fuel More Buying - CNBC.com Article

The S&P 500 closed above its closing high hit last October, a technical breakout that could spark more buying, chart analysts and traders said. How much buying, is subject to debate.

Full Story:
http://www.cnbc.com/id/45946824

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Friday, January 06, 2012

The Chart That's Stirring Skepticism About the #Jobs Numbers


Courier jobs through the years. Click for big image.
http://s.wsj.net/public/resources/images/OB-RG876_courie_K_20120106104109.jpg

RBC
Courier jobs through the years. Click for big image.

The standard question people are asking about this morning’s strong jobs report is whether it’s nothing more than so much holiday strength, which will vanish with the turn of the calendar to cold, cold January.

The standard reply to that question has been, duh, the Bureau of Labor Statistics adjusts for that seasonality.

But there are still doubts about how well they’re doing that adjusting.

Tom Porcelli at RBC sent along this eye-catching chart which demonstrates why people might be having these doubts. It’s a chart of hiring in the sector known as “couriers and messengers,” a group that includes the elf workers that help deliver gifts to good girls and boys and coal to the naughty.

You don’t have to look too hard at the chart to see what looks an awful lot like seasonality at work — these numbers spike every December and then fade immediately.

Porcelli writes:

What we find peculiar is that the BLS once again looks to have failed to properly adjust for the seasonal hiring of holiday couriers. This series is actually seasonally adjusted yet every December over the past few years we see a surge in hiring in this space followed by a rather large unwind in January. This year in particular, a sizeable 42k jobs were added meaning we should see about the same number fall out next month. Accounting for this anomaly, today’s +212k (private sector payroll gain) loses a bit of its luster.

Cardiff Garcia at FT Alphaville has been writing for a while about the problems with adjusting economic numbers for seasonality. If we see a drop in these jobs numbers next month, that question could gain more traction.


The Chart That's Stirring Skepticism About the Jobs Numbers - MarketBeat - WSJ

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