The collision of global markets and social mood

Monday, April 1, 2013

April Fools

The angry reaction to ex-Reagan budget director David Stockman's New York Times op-ed piece reminds me a little of March of 2000. That was when Robert Shiller's book Irrational Exuberance hit the shelves and promptly blew up the rally.

Stockman's comments following an especially strong quarter is making waves. Surf's up. And after viewing some charts this weekend, it looks like it may be ON for a while.

The Wilshire 5000 composite index has just completed a megaphone top identical to the S&P since 2000, complete with multi-year RSI divergence.

The Global Dow is failing below its 2011 high as other major indexes challenge or exceed all-time highs.

The weekly S&P/VIX ratio is at levels that have marked tops in 2000, 2007, 2011, 2012, and most recently, February 2013.

The 6-month US Treasury yield index may be tracing out a multi-year inverted head & shoulders pattern as it rebounds from record lows.

The CBOE equity put/call ratio is at a level that has marked each tradeable top since 2010.

The Reuters/Jefferies CRB index has been in a down trend since 2010, still down almost 20% after an 8-month bounce.

Meanwhile the Dow Jones industrials and the S&P 500 look amazing.

Getting back to Stockman for a second, the reason why one should listen to this guy is that he knows what he's talking about when he mentions the illusion of "phony money." Stockman is the guy who used illusion to great effect while in the Reagan White House.

For example, when there would be a release of housing numbers that might not be as strong as the administration wanted, he'd have Reagan appear on-camera touring new homes being constructed. As the mediocre numbers were being read, viewers saw Reagan surround by new construction. The take away was that things were getting better. Brilliant.

For my part, the markets are doing a brilliant job of going higher and higher. But I'm not complacent. This is where options perform their role the best. They allow me to participate with very low risk.

For today, I'm not listing any levels because I just want to see what the market does on this first day of the new quarter. After all . . . it's a fool's day.

Happy April Fools' Day.

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