$XLF – Deja vu all over again

Not to make too much of this but…

(Reuters) – Wells Fargo & Co, the biggest U.S. residential mortgage lender and a major lender to the energy industry, reported a slight dip in quarterly profit on Friday as it set aside more money to cover bad loans to oil and gas companies.

Walls Fargo – whose latest balance sheet showed it had replaced Citigroup Inc as the third-largest U.S. bank – managed to increase revenue from mortgage banking for the first time in three quarters in the three months ended Dec. 31.

But its exposure to energy loans meant provisions for credit losses jumped by about $346 million from a year earlier to $831 million. Of the increase, about $159 million was mainly for oil and gas loans.

In the fourth quarter alone, the bank’s wholesale division set aside $90 million more for bad loans than in the third quarter, primarily for loans to energy companies.

And it has been reported the bank has as much as $17 billion in outstanding loans to energy companies.  Wells Fargo is already admitting bad loans to energy but what about the rest of the big banks? Given the tumble in energy and its various companies (especially frackers) one has to wonder how much the sector is running on credit from the major banks (one suspects a lot), and how many of those loans are in jeopardy of default.

For the “deja vu all over again” (as Yogi would put it) see charts below:

Back in 2007, prior to the free fall of the financial sector into the crisis of 2008, the housing sector (ITB), so important in bank lending, was falling apart for a full five months while the financial sector continued to make new highs, until both sectors crashed in lockstep.

(right click on chart for a larger image)

housing_20072016-01-15_1750

This time around the energy sector (XLE) has been falling for 10 months while stocks in the banking sector continued to make new highs.   Both sectors are now both in sync…and going down…

How far?  No telling, but there is some historical precedent for sector divergences such as these.

(right click on chart for a larger image)

Energy_2016_2016-01-15_1750

 

 

 

$COMPQ – 8 days down, enough already!

The Nasdaq composite closed lower again today for the eighth consecutive day, and a total of 470 points to the downside.  The last time I had a setup like this the Nasdaq bounced nearly 200 points up the next day.

That was the August bottom.

So here we are again in a veritable market free-fall and the notion of “enough already” is screaming ENOUGH ALREADY!

Eight days in a row has only happened on the Nasdaq composite four times in the past 20 years previous to today. There is no ninth day down.  The NDX and QQQs have both had  a time of nine straight declines and one instance of 10 days down in a row.  So, of course another day or even two to the downside could happen but the odds are shifting to the upside.

These are the kind of sell-offs that make for big bounces and sometimes lead to longer-term rallies.  We may not get the rally just yet but I’m looking for at least 100 points up on the Nasdaq and will play it with the 3x-leveraged ETF, TQQQ, with NQ futures and with QQQ calls.

The 10-minute chart below shows a rather steady and orderly decline with a little pop up on today’s close.  If that pop can hold or at least not take out today’s low, believe there will be stair steps up for the rest of the week.

If not, there are always stops, a must.

(right click on image for a larger view)

EIGHT_DAYS_2016-01-11_1403

 

 

 

$COMPQ – chop, chop, finally plop!

December’s Nasdaq composite ($COMPQ $COMPX) closed lower than November on higher volume.

In the past that was as simple and elegant a longer-term sell signal for the general market as there was (see red vertical lines on the chart below).

In the past two years, however, it gave way to chopping up and down with alternating buy signals (closing higher on higher monthly volume, the green lines on the chart below)…it seemed almost monthly.  Not quite sure, but I suspect that was because of the Fed Reserve QE efforts in the market making it hard to get any traditional bull-market correction against cheap credit constantly infusing the market (also suspect we may be paying dearly for that Fed manipulation now).

But it appears the simplicity and elegance of the sell is back, and compelling.  If so, the market’s general indexes  (DOW. SPX, NDX, RUT) are going down until further notice, a bear-market trading and investing environment of “sell the bounces” (one is coming up soon) instead of the bull-market dictum to “buy the dips.”

P.S. I first learned the value of this from a poster named “SemiBizz” on Traders-Talk.Com. when he ended up calling the top prior to the 2008 bear market (see the blue oval in the middle of the chart).  He deserves all the credit for his contribution to that most difficult of market tasks — calling tops.

(right click on the chart for a larger image)

NASDAQ_PLOP

$AAPL analysts – the wrong advice and still getting paid for it

This, again, is what I love about Wall-Street Stock analysts.  They are so often more wrong than right that one wonders why they are getting paid anything to do what they do.

Take Apple Computer (AAPL) as the latest example.  Note the chart below from Finviz documenting recommendations for the last quarter – all except one being on the buy side with price targets ranging from a new high ground around 130 to as high as 179.  And only one downgrade in the bunch.  One.

AAPL closed today at 97.  All these analysts’ “Buys”, “Overweights” and “Reiterateds” came before now, higher up.

I suppose these guys have all sorts of fundamental reasons why AAPL should go up.  The company has tons of cash, many fine products, avoids  a lot of taxes, had a reputation for industry-disruptive innovations.

But the thing about fundamentals is, in the end, none of them matter if the price of the stock no longer agrees with them.

When everyone who loves AAPL, and buys its story, already owns it, one wonders if the analysts ever wonder who are they going to be able to sell it to;  when a company achieves a market cap north of $500 billion (let alone the $700 billion Apple bought for itself), one wonders is any of these analysts might wonder if history repeats – with the exception of Exxon-Mobil – every company reaching that lofty number has eventually had its stock cut in half.

A lot of these mistakes could be cured, or at least alleviated, by adding market timing to their analysis but I’d bet they would join the rest of the Wall-Street chorus harping that no one can time the market. No one. Fact is, it is they who can’t time the market.  One glance at a stock chart would not have hinted the stock was going down, it would have flat out said it was going down.

But since they keep getting paid despite being consistently wrong for whatever reasons, why should it matter to them?

Well…hard to believe, but maybe one day these guys’ clients might take note.

By the way none of this should be construed as investment advice.  As a solitary trader when I’m right only the market pays me, and when I’m wrong it takes it back.

P.S. AAPL is going to be a buy soon…for a bounce to $106 or so, maybe $111, but longer-term…mentioned above something about being cut in half so enough said.

(right click the image for a larger view)

AAPL_ANALYSSIS2016-01-08_1148