May 19, 2013
Weekly Market Outlook
By Keith Schneider
This bull market is relentless; dig it unless you want the shaft. It has totally destroyed short sellers and confounded many players including those that follow seasonal trends, overbought /oversold indicators, Elliot Wave Theory and especially those perma- bears based on political ideology. The market has not corrected for more three days in a row, the longest stretch of this statistic since 1900. This is not to say the above disciplines are not worthy, but price action rules. As Keynes observed, markets can stay irrational longer than one can stay solvent.
The facts are in and there are several developments supporting the markets. A budget surplus (yes, I said surplus!) this month, improving housing market, jobless claims at their lowest levels since the financial meltdown and interest rates still at virtually zero make US Equities look cheap.
Looking further out, advanced energy extraction invented here makes US energy Independence a virtual certainty within 10 years. The risk premium on Crude prices which is generally considered to be $20-$30 a barrel, could virtually disappear once we are weaned off our daily fix of imported oil. Reducing our military expenditures in the Middle East and support of regimes that currently control OPEC would be another dividend of energy independence, helping to reduce deficits.
Other development worth noting is that C02 levels hit their highest in 3 million years this week. Since Global Temperature and CO2 levels are tightly linked, keeping a pulse on green technology with an improving economy is now timely. Tesla Motors which jumped from the mid $30 to over $90 a share in a few short weeks is a perfect example of the perils of shorting. It’s not easy to make back a triple digit loss. Not only did TESLA report actual earnings, it is going to repay government loans back early, also demonstrating even the government is capable of making a smart bet. Stubborn short sellers were taken to cleaners and some may have sustained career ending damage. The combination of the long term need for clean energy and a well-run company in the space is not something to bet against. Another company in the clean energy space is FSLR (First Solar), which virtually doubled in a few days of trading. FSLR ran in the shorts moving from $26 to $40 in a just a few hours of trading. It peaked at $300 before the meltdown in 2008 and is currently trading at $50.
Gold got clocked this week continuing it slide, not a big surprise considering the melt up in stocks. More Gold species are on the endangered list, but Gold Bugs are not extinct as the diehards can point to monthly charts and show that a 50% correction is around $1000 per ounce, about $300 or so from Fridays close.
Check put this week’s video for our macro view on the state of the markets...
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