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Is There Something Amiss?

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Five days ago, I asked if the market was ripe to roll over. It has broken down a little, but nothing earth shattering.  There are enough international policy reasons for a small sell off.  We digested Russia deciding to use it’s military to impose its will on a sovereign state, and the missing airline due to what looks like terrorism.

^SPX data by YCharts

I think there may be a longer term trend building. I am not sure, and certainly anyone that has been bearish since 2009 has gotten crushed. I have been alternatively negative and positive, probably more negative so that is why I have a lot of caution in thinking the market might go south.

Here are some disparate data points that might total up to be trying to tell us something.

1. Professor Ed Lazear wrote a nice analysis of the unemployment numbers in today’s WSJ. He says, “a key statistic for understanding the labor market is the length of the average workweek. Small changes in the average workweek imply large changes in total hours worked. The average workweek in the U.S. has fallen to 34.2 hours in February from 34.5 hours in September 2013, according to the Bureau of Labor Statistics. That decline, coupled with mediocre job creation, implies that the total hours of employment have decreased over the period”.

2.  Copper is sometimes a canary in a coal mine. While not dropping like a rock, it’s falling in price lately.

Copper LME Settlement Price data by YCharts

3. Startup valuations. Fred Wilson and Howard Lindzon both have written about them.  Marc Andreessen has tweeted about them.  Are they frothy or not?  The Facebook purchase of WhatsApp for $19B has everyone in a little bit of a tizzy.  The Valley still remembers the crash of 2000, so anytime valuations get pushed up they fret.  It’s not clear if valuations are indeed crazy across the board.  If they are frothy, the cheap money policy and the change in risk it engenders is finally working its way into the community.  If they aren’t frothy, then we have nothing to worry about.  Anecdotally, I saw a healthcare firm file for an IPO with a $3B valuation and a $13M top revenue line.

4.  The boys at Tastytrade.   They say, “By the way, there’s nothing wrong with a little pop in volatility while giving the shorts a taste of the sweet stuff. Don’t let Dracula smell blood because that’s when markets get ugly. In fact, we made a strong case last week that we heard the bell ring. Assuming that it wasn’t my bloodhound, Chili, I hope everyone that’s still waiting for Guffman, Superman or 2000 in the S&Ps never gets filled. We need a sharp dose of reality or, like we to say on tastytrade, we need to “scare the children”.”.  They have been building an option position that will make money in a down market.

5.  It’s an election year.  As we progress to November, more and more uncertainty will creep into the market.  Never good for the short run.

Weak US Presidents are never a harbinger of positive stock markets.  We have a weak President.  At the same time, we also have a very accommodating Federal Reserve bank.  Anyone can lose a lot of money deciding to go head to head with the Fed.

What do you think?

The post Is There Something Amiss? appeared first on Points and Figures.


Source: http://pointsandfigures.com/2014/03/17/something-amiss/


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