Follow your dreams, so long as it's not your dream to time a market top

May 28, 2015

Purgatory

Market players continue to frantically buy dips.  We've seen this story before though prior to last week's weak rally.  ~2040 in the S&P 500 is still such a key level

Even with yesterday's exciting rally, breadth continues to thin.  And that's fine, there is plenty of stock action yet.  It's very possible for the indices to rally hard if we get over the key fib level.  


With Shanghai's 6% loss, maybe the US relative to the world will break free from the declining trend and 50D MA...or maybe not.


One thing no bear dares mention is smoothed TRIN is actually at 2 month highs.  Bulls apparently have firepower here.


With so much good out there, one chart that continues to stand out bearish is Chipotle as even the 40 week moving average is now turning lower.


I'm out for the day.  Trade 'em well!

May 27, 2015

key bounces in banks

Both Citigroup and Bank of America have successfully tested some key pivot zones.  The up-trends continue to strengthen, particularly if they can break those recent highs.




If these two can run to new hgh

May 26, 2015

Corporate Welfare

Global QE has turned the stock and bond markets into a corporate welfare program.  Junk rated borrowers only defaulted about 2% of the time in 2014.
The speculative-grade default rate, which tracks so-called junk-rated issuers, fell to 2% last year, down from 3% a year earlier, according to Moody’s.  That’s the lowest since the 1% recorded in 2007, which was a more than quarter-century low. The historical average default rate among junk-rated companies is 4.5%.
full post via WSJ

Oh by the way, since investors are gobbling up yield like it's cocaine, issuers are finding ways to protect entities and add risk to investors.  This trend is only going to get worse over time.
“Investors are freely and liberally trading a lot of covenant protection for the opportunity to be in the high-yield space” 
 more on the lack of junk bond covenants via bloomberg

How does this play out?  Who knows.  Perhaps it'll take something that will wake up the general public to these disappearing covenants.  Or possibly, the government will intervene.

Maybe companies will continue to find funding for some time with global rates so low.  If that happens, it's a recipe for worsening corporate behavior.   At some point we'll hear some amazing figures about these zombies and wonder how they amassed so much debt.

Regardless, it's something to keep an eye on over time with default rates abnormally low.


Reminder:

All ideas shown on this blog represent the authors opinion based on the data available.