Wednesday, August 17, 2016

Trifecta Is A Gambling Term

On Thursday of last week, three market components, the Dow, Nasdaq and the S&P all hit new highs on the same day. The shills called it the "Trifecta!" Dear reader, trifecta is a gambling term pertaining to the track where you call the finish of the top three horses in a race or the winner of the first three races during the day. It gets done, but rarely and that is another reason why the tautology in gambling is the house always wins. In terminology of the market it is this, "the purpose of the market is to take the most amount of money from the most amount of people in the shortest amount of time."
The market is displaying a gambling mania and I don't see it ending well, especially with September looming on the horizon.
However, the market is known to look six months in advance and with the latest price action, the bulls could be on to something. Then again, if that is so much more BS, caution is in order. Let us glimpse a few segments of the market for a clearer picture and filter out the noise.
Corporate debt
is within a whisker of the high it reached in 2007 before the crash at $51 trillion, and still climbing. Ironic thing, defaults have also surged 50% from last year. The leader in defaults has been the oil and gas industry. A few weeks ago I predicted the present bounce in oil. I see it ending after Labor Day and yet, the oil rig count has gone up for the seventh week in a row. A test of the lows could happen as well as a test of the financial durability of companies in the oil and gas business. I see more defaults. Combining debt and low oil prices, they are not building blocks for a higher market.
Poor, Middle and Upper Class
Everyone shops, but according to their means. Here is the latest from where our society shops.
The poor and middle class go to Walmart. If the economy is doing so well as Hillary and President Obama says, how come Walmart is down 32%?
If the wealthy are out spending their big bucks, how come Macy's is closing 100 stores? How can the shills explain the stock is down 29%?
My findings cover our entertainment dollars too. If content is everything, how come Viacom is down 77%? Ouch! Folks, don't say it is the conflict for control because a number that big says a lot more than who gets the biggest pay check.
everyone knows the malls are in trouble and with Sears and Macy's closing stores, the outlook isn't rosy as the bulls claim with the market hitting new highs. Look at Staples! It is generally in small shopping centers or stand alone buildings. The stock is down 81%. Double ouch!!
Before you dig, plow or get a permit, you need to know that you have equipment. Caterpillar is the industry leader. How can you explain the stock is down 49%? BHP just had its worst quarter, ever.
This quick survey of our economy tells you more truth than the price action of the market. Maybe the market has to lure you in to get the most amount of money in the shortest amount of time? I can't answer that because I am not a master trader.
Meanwhile, the Bulls like Yellen, yell to look to the future GDP and not the lackluster present GDP numbers. The Bulls scream to look to the future of corporate earnings rather than the fact that earnings have declined for five straight quarters in a row. They pound out that every dip is a buying opportunity to which I now will take a closer look because there is some truth within the market if you know where to look.
to me is one of the most important aspects the market tells you.  When the NASDAQ hit its high, it did it with trading of 1,490 billion shares on the up day. However, when Nasdaq declined on the 27th of June, it fell with 3,9 billion shares on the down day. It is telling you that the up day is distribution because on the down days, they are all trying to get out.
You can see this same point in the small caps. The IWM was up with 12 million shares and down with 19 million shares.
The strength and conviction in the market is on the downside and that is where I see the market going.