REPUBLISHING 2014 FORECAST UNTOUCHED WEEKLY DIA SPDR DOW 30 ETF
The market is still going along the general path of the forecast so far in the first quarter. The market held the key support level that I labeled as the green box. And the market is peaking at the general area where I have expected resistance. Technically, the forecast is going well. Fundamentally, not much has changed.
Overall, the market is overcoming the negative news headlines from around the world. Corporations are simply profitable enough with the highest profit margins in history, but they are leveraging their collective balance sheet and buying back stock, which will inhibit economic growth long into the future. The recent tax rate hikes generally will keep a lid on any upside progress this year while at the same time money continues to "asset allocate" out of bonds and into risk assets. Real estate is benefitting from the flow of funds out of stocks and from the artificially low interest rates provided by the Fed's machinations.
From what I have heard through the grape vine, people are using their margin accounts to buy real estate so that means the market is truly vulnerable on any price shock because there aren't as many stock certificates to sell by margin departments to reduce margin balances in the face of a market slide. So, the highest margin balances in history right now are what has me most concerned and gives me the expectation of lower prices for stocks going into year-end.
The low level of Gold and Silver is an opportunity to buy, in my opinion. Gold and silver and commodities have been suffering from a variety of news in their bear market. The stock market is suffering from high energy prices also which will keep a lid on prices with a 3-6 month lag.
To summarize:
Bullish: Asset allocation out of bonds to stocks. Stocks still the only game in town. High profit margins at corporations. Stock buybacks (and Mergers & Acquisitions) are all supportive of prices.
Bearish: High valuations leaves little room for error. Earnings are not spectacular. The economy is flat. High margin balances. Corporations leveraging and not investing in real assets. Low VIX signals complacency. The Fed easing off the money machine throttle.
This is a good time to sell calls against the market for the balance of the year. Yes, low VIX and high prices are good times to sell calls (in the money) to take advantage of sideways to lower prices for the balance of the year.
Regards,
Tim 4/4/14 10:29AM EST
Overall, the market is overcoming the negative news headlines from around the world. Corporations are simply profitable enough with the highest profit margins in history, but they are leveraging their collective balance sheet and buying back stock, which will inhibit economic growth long into the future. The recent tax rate hikes generally will keep a lid on any upside progress this year while at the same time money continues to "asset allocate" out of bonds and into risk assets. Real estate is benefitting from the flow of funds out of stocks and from the artificially low interest rates provided by the Fed's machinations.
From what I have heard through the grape vine, people are using their margin accounts to buy real estate so that means the market is truly vulnerable on any price shock because there aren't as many stock certificates to sell by margin departments to reduce margin balances in the face of a market slide. So, the highest margin balances in history right now are what has me most concerned and gives me the expectation of lower prices for stocks going into year-end.
The low level of Gold and Silver is an opportunity to buy, in my opinion. Gold and silver and commodities have been suffering from a variety of news in their bear market. The stock market is suffering from high energy prices also which will keep a lid on prices with a 3-6 month lag.
To summarize:
Bullish: Asset allocation out of bonds to stocks. Stocks still the only game in town. High profit margins at corporations. Stock buybacks (and Mergers & Acquisitions) are all supportive of prices.
Bearish: High valuations leaves little room for error. Earnings are not spectacular. The economy is flat. High margin balances. Corporations leveraging and not investing in real assets. Low VIX signals complacency. The Fed easing off the money machine throttle.
This is a good time to sell calls against the market for the balance of the year. Yes, low VIX and high prices are good times to sell calls (in the money) to take advantage of sideways to lower prices for the balance of the year.
Regards,
Tim 4/4/14 10:29AM EST
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