In financial services land there is an intense fascination with charts and diagrams. Personally, I have never been a big proponent of littering written works of art with colors and shapes. A scatter diagram fleshing out one's late-evening regression analysis? Yawn, who cares? But again, social media continues to be captivated by the wonders of pictures, which I am guilty of promoting as well.
So let me bring you into this realm of lunacy, where daily chart-gathering in support of a bull or bearish view on an individual stock or the entire market has become the new norm. Forget about Cyprus for a brief second, please.
The market has told the investment community that because of the verbal and technical support offered by Fed Chairman Ben Bernanke and European Central Bank President Mario Draghi, it can rebound after knee-jerk reactions to events that are nowhere near the scope of 1.) Bear Stearns summer 2007, 2.) Lehman Brothers September 2008 and 3.) the heights of the European Union debt crisis from 2010, 2011 and 2012.
The fun-to-look-at "research" offered here includes a few of the forward indicators I enjoy studying on any given day. Some are more relevant on certain days, of course. As you run through these charts, consider how they square with the teensy shift in market sentiment since Friday snapped the Dow rally run.
Platinum vs. S&P 500
Double-top on a good global economic bellwether in platinum? Hmm.
Aluminum Prices and Alcoa Shout Out
Here is a nifty chart depicting aluminum prices front-running copper prices in going down the drain. Stephen Roach says bull, bull, bull on China. Mr. Market is screaming, "Grab a clue and show its powers respect." By the way, Alcoa (AA) shares have shed 3.17% since Jan. 31, and earnings approaching shortly.
Where Is the Copper Surge?
This basically speaks for itself.
Stainless Steel Appliances Not Moving?
I have been a hardcore bull on Whirlpool (WHR). Also last week, I mentioned a short-term positive stance on homebuilders (Toll Brothers (TOL) specifically), given still strong housing market dynamics and Treasury yield circumstances. However, stainless steel prices are another tidbit of information that throws cold water on the uber-bullish mindset.
Something a Little Funky?
Is the market's resilience this week a false positive? Two ingredients in the rally were the support from the Dow Transports and Russell 2000. Now, the Russell 2000 has turned a touch lower, while the Dow Transports seem stuck in the mud. Seeing this in the face of relatively solid U.S. macro data tells me that valuations are stretched.
- TRAN: Dow Transports
- RTY: Russell 2000
- SPY: S&P 500
Last week I said to trim some profitable positions, but the two charts that toss a monkey wrench into that idea are the Baltic Dry Index and S&P Airline Index. Nonetheless, the exercise today was to illustrate real reasons to de-risk the portfolio outside of a situation in Cyprus that is impossible to follow and fully comprehend unless you are trading the market tick by tick.
A Friendly Reminder
If you swoop in and buy lululemon athletica (LULU), you do so at your own peril (ditto Tiffany (TIF)). Those analysts reiterating absurdly bullish ratings (including a strong buy and $100 price target at one firm) are only trying to save face on an issue that should not have been surprising. Why? These quality problems on lululemon products have been increasing in number, according reliable apparel blogs. Moreover, the company issued a borderline quarterly earnings warning a couple weeks back that should have been the point to haul butt if you have not done so already.