Market Soapbox
After a nice respit over the weekend, doing the taxes, (oh boy!), I feel it is time to pull out the soapbox again. Today, not even falling oil and stock upgrades from the wire house firms could save the market.
Long term rising oil prices ($65 barrel by late spring), increased raw materials costs, rising interest rates and the resulting carry trade/margin squeeze are all taking their toll. The market internals (advance vs. declining volume and the number of stocks trading above 200 DMA) are beginning to show signs that CPR may be in the near future.
The DOW 30 and broader S&P500, NYSE and Wilshire 5000 are all weakening. The legs that have supported this market for the past two years are wobbly. The market is acting like Mike Tyson in his last fight, punch drunk and running on fumes. The broad based technical deterioration that started late last year is coming to fruition.
The parabolic runup is over, in bonds, energy, materials, oil and the bulk of interest rate sensitive equities (financials, MREITS, homebuilders, mortgage lenders) all have been getting beaten like a drum the past two weeks. Take a glance at the spiders, holders and a market sector carpet, the bloodletting that led off this year, is turning into a hemmorrage.
Higher interest rates and no carry trade equals little or no profit for the financials, which comprise over 40% of the S&P 500 profits. Interest rate increases will also effect many nonfinancial companies, who have derived a significant portion of their earnings from lending and other financial activities over the past two years.
Tech fundamentals look bleak with the book-to-bill ratio falling below 0.80 and tech insiders are selling their shares in record numbers. First quarter 05 reporting in mid April will be dismal for the financial and semiconductor sector.
Strong corporate earnings, which have helped corporate bond prices, are declining. Corporate profits for the S&P 500 which were up 19.7 percent last year, are expected to slow down to 10% or less this year, and that is being overly generous. The bond market has only begun its unwind, it is now entering its second stage. Depicted by a flight to quality, away from high yield junk and emerging markets, and where the worst is yet to come.
As for the real estate market, property owners who plan on staying put, are rushing to lock in a 6% fixed rate. 5% is gone, and 6% is waving goodbye. This could prop up some of the mortgage lenders through the end of summer. Property owners who want to cash in will be listing in droves, as this spring and summer will be the last chance to get out and take a profit, before the doors shut.
The market has about 9 trading days to make some headway up or at least sideways, before we see a steady drop through the end of April. And that will be our first low point of the year.
Long term rising oil prices ($65 barrel by late spring), increased raw materials costs, rising interest rates and the resulting carry trade/margin squeeze are all taking their toll. The market internals (advance vs. declining volume and the number of stocks trading above 200 DMA) are beginning to show signs that CPR may be in the near future.
The DOW 30 and broader S&P500, NYSE and Wilshire 5000 are all weakening. The legs that have supported this market for the past two years are wobbly. The market is acting like Mike Tyson in his last fight, punch drunk and running on fumes. The broad based technical deterioration that started late last year is coming to fruition.
The parabolic runup is over, in bonds, energy, materials, oil and the bulk of interest rate sensitive equities (financials, MREITS, homebuilders, mortgage lenders) all have been getting beaten like a drum the past two weeks. Take a glance at the spiders, holders and a market sector carpet, the bloodletting that led off this year, is turning into a hemmorrage.
Higher interest rates and no carry trade equals little or no profit for the financials, which comprise over 40% of the S&P 500 profits. Interest rate increases will also effect many nonfinancial companies, who have derived a significant portion of their earnings from lending and other financial activities over the past two years.
Tech fundamentals look bleak with the book-to-bill ratio falling below 0.80 and tech insiders are selling their shares in record numbers. First quarter 05 reporting in mid April will be dismal for the financial and semiconductor sector.
Strong corporate earnings, which have helped corporate bond prices, are declining. Corporate profits for the S&P 500 which were up 19.7 percent last year, are expected to slow down to 10% or less this year, and that is being overly generous. The bond market has only begun its unwind, it is now entering its second stage. Depicted by a flight to quality, away from high yield junk and emerging markets, and where the worst is yet to come.
As for the real estate market, property owners who plan on staying put, are rushing to lock in a 6% fixed rate. 5% is gone, and 6% is waving goodbye. This could prop up some of the mortgage lenders through the end of summer. Property owners who want to cash in will be listing in droves, as this spring and summer will be the last chance to get out and take a profit, before the doors shut.
The market has about 9 trading days to make some headway up or at least sideways, before we see a steady drop through the end of April. And that will be our first low point of the year.
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