Loading Up Up Here

Recent pushes in GOOG and AMZN is clear evidence that loading up certain stocks is a soft spot for managers needing  help to click the buy button. These two stocks in particular, as many before them, have to stretch price to accommodate all comers.   GOOG oddly does not have extreme riskvalue problems but that does not mean it could not have a 150 dollar correction.  CoverRisk data says GOOG is better than AAPL but on a pure dollar down basis GOOG will decline more than AAPL,   it is just that more owners of AAPL will be underwater than GOOG.

IBM has cleared the worst of the riskvalue issues and has the best relative outlook.

GOOG or AAPL

With one week to go, AAPL is a bit lower to unchanged on the year with GOOG up $224 per share or about 42%.  So it would seem GOOG may be more extended but it is still AAPL carrying the over value based on the algorithmic scoring data calculating the QRiskValue from 2008 to present.    

Markets Slide

Markets continue to slide as the retracement of the bull run evolves and the 2008 trading pattern takes hold.  October will be the battle ground to determine if equities accelerate towards a low correction bottom in the first quarter of 2016, or are able to stabilize within the -20% to -25% pull back zone.

Fed Basically Admits It Is Afraid To Stop

Fed action basically admits it is harder to sustain any asset value now and will need negative interest rates to keep the economy afloat. The greatest bubble in modern times may have gotten new life as Yellen cannot stop the life line to equities.  Keeping it all in the air may be difficult as there is little the Fed can do to cure a panic.  

Fed Day

Whether the markets explode higher, crashes lower, or just lays an egg in the next few hours, alternative strategist should have already banked more than enough return this year to easily handle any volatility.   Buy side investment bias is the trading opportunity gift which keeps on giving and is based on bizarre notions of market efficiency and macro trend expertise.  Successful alternative strategies execute a in probability game where positive outcomes are not dependent on a bull market or a Fed which has helped float an industry based on a faulty decision bias.

September Rate Hike and Government Shutdown

September, the month where the Fed raises interest rates and the markets get a government shutdown.
So if neither happen the markets still have to deal with trading and investment fatigue where there is more downside than upside for the first time in six years.  A 14.2% break in the S&P500 since May of this year leaves plenty of room for more down.  A minimum  20% correction is indicated by decision models.

Market Bears Still Have The Edge

Fed should raise rates this week as it will make no difference whatsoever to the world economic order.  Markets do not need anymore protection than they receive everyday from sovereigns and normal central bank interventions.  China is a fraud but what's new.  It is an overplayed card.  Markets could withstand another eight to fifteen percent break just on normal retracement action.  We still have the 2008 downside pattern intact which would lead to a terrible October.  

How Eight Stocks Are Doing YTD

	AAPL	BAC	GOOG	GS	IBM	MSFT	F	PFE
Shares	181	1118	38	103	125	431	1290	642
on20000	-29	-2418	2985	-1000	-2062	-1856	-2284	398	-6266
									-3.92%

Fools

Markets rebound as happy central bankers do what they can to remove corrections from the world financial instruments.  The world loves up and the thoughtless fools who own stock are happy again.  Life is good and down is bad.   Fools are happy and usually own stock.

Slow Death Ahead for Buy and Hold

Heard many stories today how people bought the break and made money.  Every financial adviser telling people to stay the course and think long term.

Well, it is not the hard breaks that kill the most, it is the death by a thousand cuts for the buyers.  This hard break may be the the arrow pointing to future long term direction.

Market Loses Again

No rescue from Fed speak although I am sure they are watching.  The Fed has begun the weaning whether intentional or not so the markets are running all over their ranges to find a place where it does not hurt.  Interest rates are plummeting again and here we are.  Short covering rallies are as vicious as the breaks and there is whole bunch of potential chatter overnight that could send markets sharply higher or lower.  The 2008 pattern remains and we have actually surpassed the decline from top to bottom as we have moved -14.24% against -12.5% decline in 2008 in the May 19th to August 24 time period.

Long Luggers

Today's action was just what the long lugging, long term, reckless investor deserves.  I cannot tell you how many individuals owning stock either on their own advice or by listening to their financial advisor are guilty of planning a long term just hold and rotate long stock portfolio where years of hiding get crushed in a single quarter.  This passive approach is a from a world view sadly dependent on all being sweet,and where one believes they can continue to win by picking door number one.  That math doesn't work.   Wise up.  

AAPL has had a lousy spell here.  They have all the money in the world but so what.  They have skilled competitors and the law of substitution is starting to catch up.   Love me forever in trading and investing ends up looking awful on the P&L.      

  

Downward

The 2008 scenario continues on the pattern data set.  Market is running deep discounts currently which are a bit rich for Jackson Hole information unknowns for next week.  Liquidation however is the key today so any bid will do.   Market has had a tremendous run over the last 7 years and this correction is still a mild one.   Twenty thousand invested on the last trading day of 2014 in each one of these stocks gets you this as of 14:30 central today.

AAPL BAC GOOG GS IBM MSFT F PFE Shares 181 1118 38 103 125 431 1290 642 on20000 -806 -1856 3423 -517 -1372 -1300 -2052 1612 -2868 -1.79%

Deflation Leg Down or Fed Saves The World

Jobs numbers were in line with expectations and increased the chance of a September rate hike .

So if deflation accelerates, it will be the ugliest and cruelest of worlds.  Equity prices, certainly are the last liquid dog standing, would be vulnerable as the big dogs will be getting out.

The 2008 pattern remains intact though with less volatility .  Seven years ago we were over 10% off of our May highs and today we are around 2% off of them.  In 2008, the market began its next leg down into the second week of August and slowly sank through September and then fell apart.

If the worst of deflation can be avoided and a 4% to 5% top to bottom correction is all the S&P500 can manage, then the Fed will have saved the world.   Any equities bloat created by  zero interest rates policies will be absorbed even in a slowly climbing rate environment because equities will have provided real returns in a debt deleveraging world.

Despite the particular evils of inflation, it was always the middle classes way to participate in wealth creation.  Deleveraging deflationary economies provided few opportunities to the middle and their major asset real estate becomes unsalable.

FOMC Raises Rates Watch

The Goog rally of last week looked like it might shield the rest of the market by forcing more than a short covering rally, but the markets still seem to have that fatigue factor mentioned on an earlier post.  On the pattern side, there is action much like that of 2008 where the market topped in  May and slid until March of 2009.  

Fed could raise rates in September but might be put off by a sharp selloff in equities since the world central bank's actions have to date been used as a function of equity price protection.  Equity prices are putting in some discount in front of Wednesday's FOMC announcement just in case Yellen decides now is as good a time as any to raise rates.  Selling could last through Monday's trade before the Fed watch begins.  Commodity prices are also in a raise cash sell off pattern as prices continue nervous liquidation.  

EU Central Bank will Fail on Collecting Anything in the End

The Greece deal outlined on Sunday will never lead to repayment to the banks and unfortunately at some point the weaker links in the EU will have the same economic failure as the Greeks.  The EU will shrink to a small collective with the fallen members making their way as outsiders. The Euro was a currency created as a pipeline for the EU central bank to originate loans to members on one hand and to more easily make claims on assets on the other.  Economic dramas will continue to erode the EU in what was basically a flawed idea based on a concept that a common currency would magically be able to hold together so many uneven nations.  

As for Greek leadership, they are really bad at playing the decision game.  If the Germans would not modify their rigid position then Greece had no choice but the default and play out the hard end. They can only take solace in that the game they are playing has few winners.

Market Fatigue

U.S. indexes may be too tired to take out the May highs.  Then if so, any rallies are just pauses before the next break and the the 2008 decline pattern is still intact. Back then the markets continually provided opportunities to sell as the bulls refused to die.  Eventually the battle lines became a rout however as it all descended into year end lows.

Now pattern recognition has its place in trading and certainly many from HFT to more passive minds have attempted to deliver returns based on mining the approach.  But is usually disappoints.  Big data's snooping approach in the area has been a big dud so far but the tweaking will undoubtedly continue.  

So Greece and China may just represent a part of a story of fatigue.  The former tired of lifting bad paper and the latter exhausted from central planning.

Greece, China, and EU

Markets banging around as Greece and surprisingly to a lesser degree, China, make all equities holders a bit uneasy.  China using all the tricks they tried in the US at the time of the crash of 1929.  Galbraith's book "Great Crash 1929" is great reading and illustrates the absurdity of orchestrated efforts by brokerage.  You can bet these same folks were talking about stopping the declines by raising pools of funds and at the same time selling theirs through someone else.

Greece has a bit of a different significance.  It represents the ability of banking in Europe to keep in place a system where the top has no risk and everyone else has to step out.  Greece should play the banks and look for relief through hard talk regarding the weak link now being created by bank hardliners.  Shine a light on the next stumble and its devastating potential to the EU.  They will pay to shut you up.

If Zero Becomes Prohibitive Favorite

Trend confirming models, (confirming the UP), rolled over in March and April.  Greece is the possible event action which becomes the weak link revealing some of the structural price soft spots created by central banks interventions. Chasing greater returns works until the price action is negative enough to establish cash, (zero return), as a prohibitive favorite.

Central Banks Buy Indexes To Support World Markets

Sovereign buy programs supporting market today as they apply the short squeeze to all those to challenge central bank authority.  Index futures are the easiest target as central banks support the indexes and to soften the impact for the other leg of the trade which is to be the raising of U.S. interest rates.    It is all positive on prices as long as the buying continues because the rest of usual buyside pools are empty.

Greece Markets

Markets waiting for Greece to be 'enabled' again, after all it is no different from the Fed bailing out an entire generation at the top under the guise it is best for everyone.   Bernanke and Yellen some how see their efforts as courageous acts saving the economy but they are really nothing more than supports for a broken system which not surprisingly provides excessive relief to the privileged.  Risk has been identified as any negative deviation from a positive equity curve.  Such power given central bankers who have achieved great career success by simply showing up everyday without ever taking any risks.  Risk voyeurs.

The landscape is rapidly changing for all human inhabitants.  Totally connected all the time is bringing forth specialized skills and minimized opportunities.  Markets have long gone from open outcry to electronic trading, except for some options markets which may confirm to many that those markets are useless.  Traders now circle the action online at various speeds but there are only two speeds really; hyper speed and everything else. Trading shops 'Quanting Up' to build competitive strategy teams which end up resembling bad sports clubs marked by occasional wins but primarily mediocre performances.

CNBC is proof, because who else would watch it, that there are enough online trading participants using badly canned trading and analytics platforms who enjoy listening to folks bark like a carnies using information bias which have to be used only as a daily fade.  

   

More Than A Correction

Markets trying to fight off recent sell-off.  This has been the first time this year where stock indexes are selling off with trend indicators turning to a negative bias hinting at more than a correction but the beginning of a major move downward.   AAPL one of the first to indicate negative trend warning.


Last Friday's CoverRisk.com data.

AAPL Trend Indicator/ Down

Call Veracity YTD

23

Call Veracity Run 2008 – Present

113

Event Price

57

Weekly Close

128.65

AAPL YTD

18

Run Performance 2008 – Present

100

Range Momentum

Stocks and indexes so far this afternoon reversing the downside action of yesterday.  Much of the trade has been like this with momentum nerds continuing to dominate daytime action.  Greek troubles will play with prices but it is hard to get the bulls into a corner.

Tech stocks such as AAPL, cash giant machines, with overpriced stocks to accommodate all who wish to enter,  have event price spreads nearing one and half times value.  There is not enough money in the system to pay off all the longs and some will have to eat at cheaper prices.  If you paid, or better, lent AAPL 110 at the beginning of  the year, you our now looking at 19.5% return and a 370% return since Jan of 2008.  Cheerleaders waving the AAPL flag forecast much higher prices but always have that upward stare.

Economic growth remains dull but Fed is determined to raise rates unless they can find another excuse to keep assets juiced.  

A CoverRisk.com  indicator for determining downside potential has reached the strongest level since May of 2008.  In fact it was seven years ago on May 19th, 2008 that the SP500 reached the highest price it would hit for the rest of the year.  While the indicator simply measures  the spread between various upside scales, it has only been this high on one other occasion which was proceeding the break in 2008.

The Four Quarters of the Apoclypse

Data from CoverRisk.com

Market Test Ahead

Markets have been a bit more volatile in the last couple weeks.  Today's job numbers was taken badly and may indicate some Monday downside.  The trend is still favoring rewarding the bulls with a better chance than even the market will see higher prices.  However, there is a test on the downside yet to come with the SP500 spot testing 2000.  A broad failure there would be the end of the secular bull trend of the last six years.   An offense strategy right now would be to dump stock positions in the coming days and wait till there is some recovery in interest rates since the current sell off in the bond market is an indication there could be a large hole below the waterline.  Interest rates should be going up to meet the Fed tightening and they are doing just the opposite.  Gradually higher rates would ultimately bring new stock market highs.

Improving Your Chances of Never Have A Losing Year

If you are a manager and your strategy has ever had a losing year, why would anyone ever give you any money?  If you are a private investor and your general overall retirement fund of which you have power over has ever lost money, you need to find someone else to manage your affairs.    If you are an active trader, professional,  then you probably should never have a losing month.

If you are an strategist manager, rule number one is never have a losing year.   Sounds tough because even the great brand name investors have had not only down years but really bad down years.  Remember however, guys like Buffett, while value investing for the long term, they are really brand name savers.  If you are willing to hold a stock over a long period of time, up year and down year, then you don't understand risk and do not care if you an alternative upside opportunity even exists.   You are thus committed to "hoping" as the vast majority of stock holders are and inevitability reliant on massive intervention from central banks to make you good because the reality in today's world is that buy and hold investing is a fallacy.   From AAPL on down, ultimately you are going to have that really bad year. 

It has taken zero interest rates for seven years to support your stock portfolio.  Over the same time there has been almost no real growth in the economy, fewer employed, and an absolute fear of it all falling apart in we cannot revive our once dreaded enemy, inflation.  What's worst, the investing industry has now created the ETF trap where seas of predominately passive investment vehicles have been created to primarily capture the sales transaction for their hosts while offering little in the way of investment opportunity or protection. 

What's one to do?   Hold stocks for a short time horizon regardless of the tax implication. If you are worried about the taxes and not about losing years then you will never get it anyway.

Find great index managers providing absolute return strategies without ever having a losing year.
Find managers that have strong compound returns and can tell you what $20,000 would have done after a year or five years, and not based on some VAMI metric. 



More to come.

Least Risk Stocks of the Q8

February had a volatile trader's beginning but has ended as quiet as any action has been over the last seven years.  Valuations for stocks are stretched and the bulls just keep on explaining the upside as a series of fundamental equations.  The Fed is about to start raising rates and only an equities break of 15% or more in Q2 will stop it.  Top dogs such as AAPL remain over valued but continue to see little in the way of pressure as the hedge fund industry wants to accumulate on each pull back.  That of coarse could be bad news for AAPL as the hedge community struggles to break out of an almost perpetual under performance cycle against nearly every benchmark.  

In CoverRisk's Q8,  MSFT has the worst overall price risk rating with PFE the highest in the least risk category.  Last years least risk stalwart, GS, has entered the bad zone with BAC and F finishing the dark side.  AAPL, GOOG, and IBM are in the least risk zone with PFE as of today's action.

Unchain Unchanged

The year has given both bulls and bears reason to hope given the volatile crossing back and forth over this year's unchanged line.  The 10 year at first continued its bull move but now has recovered as rates have risen slightly after two encouraging job reports. 

It is easy to be suspicious of any continued bull trend given the age of the stock rally. Just like all of last year, indicators from CoverRisk.com again show up as the trend, though there have been some sell side indications.

AAPL still remains the most overvalued stock but has consistently remained in the CoverRisk metric of least risk.  Yes, a stock can be over valued and have least risk bias based on day to day metrics.  However, when AAPL finally turns, it will go down and catch its tail, right now a 40% decline.  No stock ever escapes, just a matter of when.  Why won't matter but will probably be inaccurate. 

IBM Reported To Take Drastic Action

Well the stock defenders at IBM hope they have found a better way than stock buy backs to impact their stock; fire 26% of your workforce right now.  The stock has declined to a near fatal level that if continued would have confirmed a major bear downtrend according to CoverRisk.com data.  This action certainly seems a bit spooky and not what the job growth forecasters might have in mind, but we now live in the world of rapid scramble job elimination fostered by the Tech world.  Maybe great for stock prices, but bad if you want to eat.   

ECB Caves In On Stimulus

Takes a promise of one trillion euros from ECB to get SP500 index up and into positive territory for the year. Over valued stocks such as AAPL and critically ill ones such as IBM have struggled this year with share buy backs being their only friend.  Central bank subsidies are now the greatest generator of stock returns as a world wide broken economic systems need constant life support to delay economic downturn.   

IBM Confriming Death Dive For Other Stocks?

IBM again slaughtered.  Share buy backs will reappear to try to stem the over the cliff potential.  The implication for other stocks in the world where game decisions strategies play the most important part in determining stock price value, little to do with fundamentals,  is huge.  APPL, probably the most over valued stock in the world has a Qriskvalue of around 60.  Now players are not easily budged and it is still ranked according to CoverRisk.com on the lower end of risk scale based on current scoring, but that can change in one day. 

Stocks Down On Zero As A Future

Selling is appearing on a regular basis as oil prices and other suspects play on world deflationary fears.  Central Bank's support of asset prices are now battling bearish trading scenarios where the results of prolonged periods of zero rates may have only produced a pump and dump end game as the Fed's zero may come to mean the return target of many assets.   In a job eliminating Amazonian world dominating not only shop keepers but large traditional high paying trickle downers, the dark clouds of low growth are forming.  This is not just about oil it is about how economic interventions did so much for so few and has left it out of the pockets of almost everyone else. 

IBM Meltdown

IBM, despite massive stock buy backs by the company, continues to trend down trading below the CoverRisk price trend established in 2007 and 2008.  Moves lower from here would be a contagion to all stocks.

Wealth Management of Manglement

One of the most bearish charts out there is an advertizement from Personal Capital showing they now manage over one billion dollars in client funds.  An almost exponential leap in participation has them all giddy but the story is really about the set up that has been taking place for all those willing to manage their own wealth with ETF products.  Scary down may emerge despite the Fed and Treasury arsenal and then all will be exposed to the ugly side of personal wealth management. 

CoverRisk.com: The Passive Risk Boat Is Loaded

An article by MarketWatch, Vanguard sets record funds inflow,  shows the lazy habits of investors when it comes to choosing how to handle risk.  Traditional mutual funds such a Vanguard and the growing number of ETF wealth management sites have enlisted public participation into the vast ocean of passive waters.  Channeling these products while denouncing the active managers, the risk world has been made simple.    However, active managers are like lawyers, everyone hates them until you need one.   Once that sinking feeling hits the passive community and benchmarks plunge the race will be into the lifeboats and out of the water.