ON THE MARKET - The trend ‘remains’ your friend - But…

Pre-market – Monday 10-21-2013

"The most important single central fact about a free market is that no exchange takes place unless both parties benefit."

~ Milton Friedman ~

Dr. John L. Faessel

ON THE MARKET

Commentary and Insights

Quote of the day

"The government was set to protect man from criminals – and the Constitution was written to protect man from the government."

~ Ayn Rand ~

~

"Increasing America's debt weakens us domestically and internationally," "Leadership means that the buck stops here. Instead, Washington is shifting the burden of bad choices today onto the backs of our children and grandchildren. America has a debt problem and a failure of leadership. America deserves better."

~ Obama ~

2006

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The trend 'remains' your friend - But…

Price in the S&P 500 (SPX) is right on the top trendline (resistance) of the channel that goes back to 2009.

The McClellan Oscillator is overbought at plus 192

Sentiment beginning to simmer*

MARKET

Stock market indexes remain in strong uptrends and remain constructive. Price in

most indexes is pegged right at the resistance of is right on the top trendline of the channel that goes back to 2009. Also we're overbought and sentiment is near the boil point. The Dow Jones Industrial Average and the Bank Index (BKX) are lagging and in both cases the 50 – day moving averages have turned perceptibly down. Best case I'd expect some back and fill as the Fed has back burnered the "taper" rhetoric.

Earnings growth on the wane

Earnings growth in the S&P 500 is expected to be 2.1% for Q3, down from an estimate of 4.5% at the beginning of October and 8.5% in July. Expectations for earnings growth in the upcoming Q4 are now at a sky high 10.3%, though they are expected to decrease.

The forward S&P 500 (SPX) price-to-earnings ratio is 14.6, near its highest in 4 years and slightly under the long-term mean of 14.9. The P/E multiple has risen throughout the year as earnings growth has remained stagnant, and forecasts are likely to fall in coming months. Without improved growth, that P/E will start to look expensive. The market is priced to perfection and the market could be topping.

Weekly S&P 500

The S&P 500 (SPX) closed Friday at 1744.50 - the prior Friday it was 1703.20

The 50-day moving average support is 1680.51

Short term 'Price' support is at 1742. Then at 1735

The a bit further out 1646 and 1627

The 200-day moving average support is at 1609.34

Channel and trend line support of (November 2012) is at 1675

Then deep channel and trend line support of (October 2011) is at 1580.

Then the deepest channel and trend line support of (March 2009) is at 1389

Important item to remember re the new Homeland Security nomination

"We cannot continue to rely only on our military in order to achieve the national security objectives that we've set. We've gotta (sic) have a civilian national security force that's just as powerful, just as strong, just as well funded [as the United States military]"

~ Barack Obama ~ 2008 - Link here at the 16:44 minute mark

Study: Wind Power Costs Taxpayers Billions of Dollars

According to Texas Tech University Professor Dr. Michael Giberson for the Institute for Energy Research, "wind energy costs taxpayers $12 billion per year and shows wind power costs $109 per megawatt hour, nearly double government estimates of just $72 per megawatt hour. The study also shows wind power doesn't decrease the cost of electricity as environmental groups and government advocates claim, but instead shifts costs onto taxpayers. In addition, wind energy subsidies allow those who start wind projects to easily game the system."Link for the 26 page new study.

* This Week's Investor Sentiment

In general the Bullishness / Bearishness complex overview is now in low euphoria range

(High BULLISH readings in the Investor Sentiment Readings usually are signs of Market tops; low ones, market bottoms.)

The American Association of Individual Investors [AAII]Investor Sentiment Survey of BULLISHNESS rose to 46.3 from 41% the prior week.

The "Bullish" survey posted recent highs of 52.3% 8-months ago. It posted cycle lows of 22.2% on 7/23/2012 the lowest percentile since August 2010. Long-Term Average: Bullish: 39.0%

The American Association of Individual Investors [AAII] Investor Survey of BEARISHNESS sagged to 24.9 from 33.6% the prior week. 14-weeks ago it posted its lowest read since 1/12/2012 when it slipped to 18.3%. Cycle highs of Bearishness of 54.5% were posted 13 weeks ago. Long-Term Average: Bearish: 30.5%

Consensus Index BULLISH was up a tick to 48% from last week's 47%. New Cycle highs in Bullishness of 77% were posted 4-months ago matching the top tick of 77% on 10/11/2007.

The Market Vane (Market Letter Survey) rose a few % points to 60% from 57%the prior week. In October 2007 it topped at 70% bullish.

The Citigroup "Panic / Euphoria" Model remains in neutral at 22% from 0.25 the prior week. Cycle Highs (and Euphoria zone) of plus 0.49 occurred in February and that posting was the highest since May 2008. At the end of June, 2011 it ticked cycle lows of minus0.31 in the Panic mode.

The BARRON's Confidence Index is 73.2 from 73.6 the prior week, one-year ago it was 68.9.

The Confidence Index is the premier measure of how the bond markets trillions (total global is around $93 trillion and USA is about 39% of that) are allocated: (The bond market is twice the size of the stock market.) The Index is the High-grade bond index divided by intermediate-grade index. A decline in latter vs. former - generally indicates rising confidence, pointing to higher stocks.

Friday's key indicators and metrics:

Cycle highs or lows are in red

·McClellan Oscillator is OVERBOUGHT at plus 192

·US Dollar Index – 79.73 – Interday it ticked cycle and 8-month lows at 79.55

·3-month $ LIBOR hangs at new lows of 0.24885% - the lowest since 11/4/2004

·CBOE Put / Call Volume Ratio – 0.69 - lowest since September 9th of 0.65

·VIX – 13.04 - the cycle high was on June 20th at 21.32

·Aussie Dollar –0.9631- 5.5 month highs

·Natural Gas (Globex) – 3.764

·Copper – 3.2990

·Gold (COMEX) – 1314.6

·Crude oil (NYMEX) 100.81– cycle and 2-year highs at 110.53 were ticked in August

·Brent crude 109.94

·The Treasury 10-year yield – 2.59% - cycle high was on 9/10/2013 at 2.98%

·The 30-year Treasury – 3.65% - cycle high was on August 22nd at 3.93%

·Canadian Dollar – 0.9700

·Silver (COMEX) – 21.913

·Japanese Yen – 1.0221

·Swiss Franc – 1.087

·Euro – 1.3681

·Platinum 1437.8

·Palladium 740.65

·Lumber (CME) – 353.50

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