Sunday, May 19, 2013

PREDICTION:Stock Market Correction Starts...L&C

Down? What?!? Are you out of your mind? The stock market has hit new highs in the Dow, S&P 500 and the Transports with new records on a daily occurrence. What experience do you have to justify such a statement?
Experience is the name so many people give to their mistakes.- Oscar Wilde
I will lay out some of the indicators that I use and then, some like the first response, the reasons why I could be wrong or very early in my call.
What I See
*The first thing that strikes me is the financial media misleading the public about this and past earning seasons. For instance, one really important company for technology is Applied Materials Inc.(AMAT). It not only reflects the health of technology companies, but also consumer electronics. The media gushed over the Pro-Forma earnings of .17cents a share last week, which beat the street estimate by .03cents. Oh, really? If you look at their company statement, the bottom line was an .11cents loss. This is not the only company which misleads by the phony Pro-Forma recipe and the financial media does this type of reporting with every signal company.  You either made money or you didn't. Pro-Forma should be outlawed along with other accounting tricks which are lying about the strength of a company and the economy as a whole. You cannot have excuses of one time charges like someone slipped on a banana peel and sued because it is what it is. Maybe, just maybe, investors will see this one time charge happening more than once and realize what a sloppy company this is and why would I put my money behind it.
*In Europe it was reported that car sales rose for the first time since 2011. Oh, really? The fact that car sales have shrunk every quarter since 2011 does not get mentioned and what happened is a low number beat another low number. This is the reality. Europe's economy has been contracting with .02 negative for the past quarter. In addition, each quarter adds a new country to the list that are in recession. Let me digress for one moment. If your neighbor loses their job, it is a recession. If you lose your job, then, it becomes a depression. Enough with euphemism for our economic situation. It is another example of misleading information, if you can really call it information. By the way Europe's second biggest economy, France, joins eight other nations that are suffering. The leader, Germany is also seeing a shrinking economy, but this is an election year and I'm sure there will be many spins about the strength of Europe's number one economic powerhouse.
*New York regional manufacturing shrunk 1.2% for the past month.
*Philadelphia region also declined in manufacturing.
*The nation as a whole had a decline of .05% for the past month.
*In the stock market loan margin amounts grew to $380billion which is only one billion off the record just before the crash in 2007.
*79% of reporting companies have given a warning on future revenues.
*Lastly, commodities started this rally and now, they are the first ones to breakdown. Oil is still high at $96 per barrel, but a long way down from its high of $147 a barrel. Gold is down from $1900 per ounce to now $1347 per ounce and the dollar has broken out in value to 84.35. Keep in mind the market hates a strong dollar and the decouple will happen again. At present both the market and the dollar are hitting new highs.
Contrary Indicators
a report by US Trust that analyses the Fed's policy to the economy says the experiment has helped heal and normalize the economy. Oh, really? Since when is an experiment considered normal? They are manipulating. They have driven down the savings on interest rates below inflation, however if you look closer you will see that rates are rising from 1.69% to 1.95% last week on ten year treasury notes.
*In Japan which saw its exchange explode over 15,000 last week adds with this tidbit. A girl rock group called Machikado Keiki sings about how high the market will rise.
*Barron's magazine had a bull bouncing on a pogo stick indicating the market to bounce higher.
*My favorite, the Super Bowl indicator. When an original NFL team wins the Super Bowl, the market rises that year. If a AFL team wins the Super Bowl, the market declines that year. Baltimore won and they are an expansion AFL team.
Why I'm Wrong
*There is a lot of money still on the sidelines.
*Don't fight the Fed with its easy money policy.
*Dow Theory is in place with both the Dow and Transports making new highs.
*The continuing strength in the housing sector. (I didn't mention this in my above indicators, but PMI will add one percent to new home purchases which I see stalling and then, dropping).
Companies are doing a legal technique to make their bottom line appear better than it is by buying back their stock. Too many companies use this system which I see as a negative because they are not investing in future product(R&D)or placing money in their pension funds to fulfill obligations to their workers.
Some people say that the Baltimore Ravens are really an NFL team called the Baltimore Colts which I believe are in Indiana. More misleading info.
Your Decision
I rest my case. I just want to say one more thing. Because I went on record with this call does not mean that the market will sink 200 points on Monday or any day next week. My ego is not that big or the effects of this blog. In fact there is a crazy stat that says the market has risen using average on Tuesday for over 177 straight times, but as I see it, the weekly totals will level, and then, fall to which the sequester will add to weekly unemployment even if it is only a one day furlough.
Liars and Crooks:This week the IRS scandal and the attack on the embassy in Libya were and will continue to be in the news. I have nothing against finding the truth in all things which in this case is more political of Republicans versus Democrats. I like to see Tom Cruse talk about the truth, especially with earnings season in the stock market and my all-time number one, End the Fed!