FOMO! It’s the Fear Of Missing Out. Feeling it yet? Our oil is all the way back up to $36.33, from $26.05, since February 11. Nearly 40% in, like, 3 weeks! Why? Merely perception. The perception that oil supplies will come down, and oil demand will go up… and, somewhere the two will meet and attain unto some kind of equilibrium. But, at this very moment, the world is still awash in oil, and storage space is literally running out.
The OPEC meeting called for last month, to ostensibly freeze production at January’s record high level, hasn’t even met yet. Iran, after having sanctions lifted by Prez Obama in January, is saying that they are going to bring 1 million barrels to the market. Oil output is, even now, some 1 to 2 million barrels a day above demand. U.S. rig count is down considerably, but production cut has not been great. Price really needs to attain unto, at least, $45 is my understanding, in order to stave off the debt reaper of high-yield corporate ‘junk’ bonds set to default in the multiplied billions in this year.
Add to the above, that stocks have rallied some 10% in these past 3 weeks, and every technical overbought indicator is on full alert, and every market technician that draws lines of overhead resistance and moving averages are seeing that we are there! The there of when it should really become difficult to advance any further. The very appearance of things, in relation to these moving average lines says that this is the very earliest stage of a Bear Market. The very appearance of the volume bars involved in this rally says it has been suspect, as they have not been tall, like ‘real’ rallies have.
The one thing that I’ve been jumping up and down on is what the analysts’ consensus of forward-looking earnings estimates for all the S&P 500 has been doing. It’s still declining, and just since the end of ’15, has been steadily falling to a place where it is now off all of 8.44%! This just can’t continue! The slope of descent is beginning to slow, and my data is likely about 2 weeks old, by the time I get to see it. But still!
If I may add to that; how many people work for S&P 500 companies? Doesn’t most of America work for small businesses? A look at the same EPS line for the S&P 400 Mid-Cap Index is off 9.6%, after peaking August 3rd. The S&P 600 Small Cap Index EPS line topped out late October, and has plunged 15.3%. Finally, the Russell 2000, another small cap index saw its EPS line peak August 3rd, and it has declined since by, get this now, 22.8%!!! Is anyone else crying the sky is falling?
All the truly big volume spikes for the past 10 months are RED in color, not green. The entire market process since at least late-April of last year, has been that of topping. And all those estimate cuts have been coming on ever since. I’ve seen that price typically precedes estimates, both up and down. Those closest to the ‘action’ commence to sell before the analysts even get an idea that all is not well, and commence to cut. Prices have been falling, and estimates have been tumbling.
Every appearance to date, is that of a Bear Market rally. I suggest you not succumb to FOMO. If it’s a Bear, it will confirm here at about its own down-trending 200-day moving average, and commence another leg down. So, it’s time for this Bear to show its claws, or for the wounded Bull to get back up on all 4 hooves. We’re here, now into the first week of March, and the estimate cuts have been non-stop since the year started… they must, or only recession could be coming upon us. What’ll it be? I think we shall soon see. I’ve sold off a lot, as I would rather be safe now, rather than sorry later.
Here’s to your successful investing,
Harold F Crowell
I know. I used to write that it was always only about the safe-growth of our portfolio dividend income, but as we discovered, and I wrote about last month. We don’t have to have it anymore, and so, we do not need to have to endure the stress of a Bear Market. We can avoid all that, and not miss our retirement income goal! That’s when safety became of greater concern to us.