Best of the Week
Most Popular
1. Gold vs Cash in a Financial Crisis - Richard_Mills
2.Current Stock Market Rally Similarities To 1999 - Chris_Vermeulen
3.America See You On The Dark Side Of The Moon - Part2 - James_Quinn
4.Stock Market Trend Forecast Outlook for 2020 - Nadeem_Walayat
5.Who Said Stock Market Traders and Investor are Emotional Right Now? - Chris_Vermeulen
6.Gold Upswing and Lessons from Gold Tops - P_Radomski_CFA
7.Economic Tribulation is Coming, and Here is Why - Michael_Pento
8.What to Expect in Our Next Recession/Depression? - Raymond_Matison
9.The Fed Celebrates While Americans Drown in Financial Despair - John_Mauldin
10.Hi-yo Silver Away! - Richard_Mills
Last 7 days
Predictive Modeling Suggests US Stock Markets 12% Over Valued - 27th May 20
Why Stocks Bear Market Rallies Are So Tricky - 27th May 20
Precious Metals Hit Resistance - 27th May 20
Crude Oil Cuts Get Another Saudi Boost as Oil Demand Begins to Show Signs of Life - 27th May 20
Where the Markets are heading after COVID-19? - 27th May 20
Silver Springboards Higher – What’s Next? - 26th May 20
Stock Market Key Resistance Breakout Is Where the Rubber Meets the Road - 26th May 20
5 Ways To Amp Up Your CFD Trading Today - 26th May 20
The Anatomy of a Gold Stock Bull Market - 26th May 20
Stock Market Critical Price Level Could Soon Prompt A Big Move - 25th May 20
Will Powell Decouple Gold from the Stock Market? - 25th May 20
How Muslims Celebrated EID in Lockdown Britain 2020 - UK - 25th May 20
Stock Market Topping Behavior - 24th May 20
Fed Action Accelerates Boom-Bust Cycle; Not A Virus Crisis - 23rd May 20
Gold Silver Miners and Stocks (after a quick drop) Ready to Explode - 23rd May 20
3 Ways to Prepare Financially for Retirement - 23rd May 20
4 Essential Car Trade-In Tips To Get The Best Value - 23rd May 20
Budgie Heaven at Bird Land - 23rd May 20
China’s ‘Two Sessions’ herald Rebound of Economy - 22nd May 20
Signs Of Long Term Devaluation US Real Estate - 22nd May 20
Reading the Tea Leaves of Gold’s Upcoming Move - 22nd May 20
Gold, Silver, Mining Stocks Teeter On The Brink Of A Breakout - 21st May 20
Another Bank Bailout Under Cover of a Virus - 21st May 20
Do No Credit Check Loans Online Instant Approval Options Actually Exist? - 21st May 20
An Eye-Opening Perspective: Emerging Markets and Epidemics - 21st May 20
US Housing Market Covid-19 Crisis - 21st May 20
The Coronavirus Just Hit the “Fast-Forward” Button on These Three Industries - 21st May 20
AMD Zen 3 Ryzen 9 4950x Intel Destroying 24 core 48 thread Processor? - 21st May 20
Dow Stock Market Trend Analysis and Forecast - 20th May 20
The Credit Markets Gave Their Nod to the S&P 500 Upswing - 20th May 20
Where to get proper HGH treatment in USA - 20th May 20
Silver Is Ensured A Prosperous 2020 Thanks To The Fed - 20th May 20
It’s Not Only Palladium That You Better Listen To - 20th May 20
DJIA Stock Market Technical Trend Analysis - 19th May 20
US Real Estate Showing Signs Of Covid19 Collateral Damage - 19th May 20
Gold Stocks Fundamental Indicators - 19th May 20
Why This Wave is Usually a Market Downturn's Most Wicked - 19th May 20
Gold Mining Stocks Flip from Losses to 5x Leveraged Gains! - 19th May 20
Silver Price Begins To Accelerate Higher Faster Than Gold - 19th May 20
Gold Will Soar Soon; World Now Faces 'Monetary Armageddon' - 19th May 20
Gold Mining Stocks Fundamentals - 18th May 20
Why the Largest Cyberattack in History Will Happen Within Six Months - 18th May 20
New AMD Ryzen 4900x and 4950x Zen3 4th Gen Processors Clock Speed and Cores Specs - 18th May 20
Learn How to Play the Violin, Kids Activities and Learning During Lockdown - 18th May 20
The Great Economy Reopening Gamble - 17th May 20
Powell Sends a Message With Love for Gold - 17th May 20
An Economic Renaissance Emerges – Stock Market Look Out Below - 17th May 20
Learn more about the UK Casino Self-exclusion - 17th May 20
Will Stocks Lead the Way Lower for Gold Miners? - 15th May 20
Are Small-Cap Stocks (Russell 2k) Headed For A Double Dip? - 15th May 20
Coronavirus Will Wipe Out These Three Industries for Good - 15th May 20
Gold and Silver: As We Go from Deflation to Hyperinflation - 15th May 20

Market Oracle FREE Newsletter

Coronavirus-stocks-bear-market-2020-analysis

Stock Market S&P 1,880 or Bust Again – China’s Melting Away!

Stock-Markets / Stock Markets 2014 Apr 29, 2014 - 12:34 PM GMT

By: PhilStockWorld

Stock-Markets

What total BS this market is.

NDX fell all the way to 3,480 yesterday but finished the day at 3,556, recovering 76 points (2%) in two hours. Hey, a few more days of gains at that rate and we'll be well over the 1999 highs – GO MARKETS!!!


Of course, as you can see from this chart (many more like this over at our Chart School), it's going to take a lot more than a little 2% stick-save to stop that nasty "Head and Shoulders" pattern from hitting the dreaded "knees and toes" range.

On the bright side, there was decent volume on yesterday's reversal, but that was only compared to the incredibly low volume of the previous run-ups. SPY volume was 135M, the biggest day since 4/15 by 30%+. If we do get follow-through to the upside today, we do need to take it seriously. As you can see from our Big Chart, the Nasdaq and the Russell are still in serious trouble:

The Russell was only saved by the 200 dma at 1,112 yesterday and fell all the way down to test our 10% line at 1,100, where we barely held up in February. This is what's keeping us from adjusting our 5% levels higher, the RUT keeps threatening to add a red box and the Dow simply cannot get over of it's 5% line (though it has avoided failing the Must Hold line, so far).

As you can see from this WSJ chart, the Russell 2000 is trading at a fairly ridiculous 36 times trailing earnings – even with the recent sell-off. Going forward, they project to be at 20 times earnings but I'm not seeing any actual evidence that profits will be rising 44% this year, are you? That's what it takes to change a 36 p/e into a 20 p/e but PLEASE – don't confuse traders with facts, right?

The 20-year average for the Russell, including the runaway valuations of 1999 and 2007, is 16.9 so 36 is more than double the average valuation. Small cap stocks (under $1Bn in valuation) aren't even benefiting from the Fed's Free Money Party the way the S&P 500 are and, in fact, they are being put at a competitive disadvantage in most markets.

The only thing Small Caps really have going for them is that the Mega-Caps have been snapping them up, especially in the Energy and Biotech sectors and it's that consolidation trend, much like in 2007, that is driving us to new highs – despite the relatively poor economic performance in the background.

How long can the madness last? Until the music stops and the Fed stops giving interest-free Trillions to their Bankster buddies who, in turn, push for M&A deals with low-cost financing and find many willing partners in the Mega Caps – as they are not able to grow their business internally in a stagnant economy.

In order to protect their phony-baloney jobs (harrumph!), large-cap CEOs are buying their own stock and the stock of their competitors – whatever they can get with the oceans of cash that are sloshing around for the top 0.01% to dip into at will.

The madness may not last much longer in China, where almost all of the Provinces failed to meet their growth targets for Q1, even after scaling back their projections. 30 of 31 (97%) reported missing goals with Heilongjiang, for example, only growing 4.1% vs an 8.5% objective. Premier Li Keqiang risks the nation sliding into a deeper slowdown as the government cracks down on overcapacity in the steel industry, wrestles with shadow banking risks and rolls out economic restructuring measures.

Six provinces missed their goals by more than 3 percentage points. In Hebei, where the government is cutting steel capacity, growth was 4.2 percent, compared with a target of 8 percent. The province surrounding Beijing is the country’s biggest steelmaker, accounting for about a quarter of national output last year, and its cities are shrouded in smog.

In Shanxi, a region hit by slumping coal prices and mine closures, an expansion of 5.5 percent compared with a full-year target of 9 percent. Heilongjiang, Hebei and Shanxi are “all provinces which suffer relatively severe overcapacity,” said Ding Shuang, senior China economist at Citigroup Inc. in Hong Kong.

In short, China is missing their GDP targets, their manufacturing activity is slowing and they are shutting down steel production because there's a massive glut, as well as a glut of copper in warehouses. We learned in 2007 to ignore China's problems at our own risk – or did we?

Let's be careful out there.

- Phil

Click here for a free trial to Stock World Weekly.

www.philstockworld.com

Philip R. Davis is a founder of Phil's Stock World (www.philstockworld.com), a stock and options trading site that teaches the art of options trading to newcomers and devises advanced strategies for expert traders. Mr. Davis is a serial entrepreneur, having founded software company Accu-Title, a real estate title insurance software solution, and is also the President of the Delphi Consulting Corp., an M&A consulting firm that helps large and small companies obtain funding and close deals. He was also the founder of Accu-Search, a property data corporation that was sold to DataTrace in 2004 and Personality Plus, a precursor to eHarmony.com. Phil was a former editor of a UMass/Amherst humor magazine and it shows in his writing -- which is filled with colorful commentary along with very specific ideas on stock option purchases (Phil rarely holds actual stocks). Visit: Phil's Stock World (www.philstockworld.com)

© 2014 Copyright  PhilStockWorld - All Rights Reserved Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.

PhilStockWorld Archive

© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules