THOUGHTS AND IMPRESSIONS FROM THE MARKET TECHNICIANS WEEKEND MEETING -- JOHN BOLLINGER GETS MTA AWARD
WHAT TOP TECHNICIANS ARE THINKING ... The Market Technicians Associations annual seminar held this past weekend in New York gave me a great opportunity to get a glimpse of what some of the top technical analysts are thinking right now. I was relieved that they were also a little puzzled by the recent upturn and what it means. There was a lot of talk about the staying power of the current rally and the sector rotations that were caused by the downturn in energy prices. I participated in a panel with several other chartists and and was able to hold discussions with several others. What follows is some of the impressions I came away with.
THE CYCLICAL BULL MARKET IS OLD BUT NOT DEAD ... Their was a strong consensus that the cyclical bull market that started a couple of years ago was just about over. The ability of the major market indexes to bounce off their 200-day moving averages (and then exceed 50-day lines) has, however, prolonged the life of the cyclical bull. But probably not for long. Some analysts took the view that the market has probably entered a trading range that could last into the summer. The market averages could approach (and maybe even exceed) their 2005 highs -- but not by much. By late summer (or early fall) things could start to get worse again. There was discussion among some Elliott Wavers about what the current bounce means. One view is that the current bounce is part of a normal topping pattern. Another is that the market still needs one more move to new highs to complete the cyclical bull. [I'll revisit that subject on another day]. There was a lot of discussion about the positive sector rotations I've been writing about. There was an almost unanimous view that markets don't normally complete an entire rotation cycle in such a short period of time. Hence, a general suspicion that the positive sector rotations of the last month are the start of a major upturn. The key is energy. Most seemed to believe that oil was just in a downside correction and that it would turn up again. That would eventually hurt stocks.
SECULAR BULL VS. SECULAR BEAR ... Most agreed that stocks are still in a secular bear market, which will limit the size of bull market rallies. At the same time, commodities are in a secular bull market. This trend could continue through the balance of the decade. There also seemed to be a consensus that the dollar rally probably won't last that long. When it does peak again, that's probably when commodities will turn up again. That could coincide with more stock selling. There was some talk that the dollar rally could end (and commodities could turn up again) later in the year if the Fed stops raising short-term rates. There was the usual puzzlement about what's keeping long-term rates so low. Asian central buying was listed as a usual suspect.
WILL CHINA BURST HOUSING BUBBLE ?... The housing market remains strong thanks to historically low U.S. interest rates. That latest housing boom began in 2000 when the stock market peaked the U.S. rates fell to the lowest level in fifty years. The fact that long-term rates have stayed so low has prolonged the housing boom. That's where China comes in. China buys a huge amount of U.S. debt to keep its currency pegged to the dollar. That's helping to keep rates down. What happens if the Chinese bow to global pressure to revalue the yuan? One side-effect could be higher U.S. interest rates, which would endanger the housing sector. Higher rates would be caused by less Chinese buying of U.S. debt and a rise in imported goods inflation. There are some analysts who believe that the market has another major downleg coming which could match the 2000-2002 drop. One scenario that could cause that dire forecast to materialize would, in my view, be a collapse in the housing market (due to rising rates) at a time that the stock market and economy were already starting to weaken.
JOHN BOLLINGER RECEIVES MTA AWARD ... I had the honor of presenting the MTA Annual Award to John Bollinger for his creative work in the field of technical analysis. JB was the original TV technical analyst on the old Financial News Network (FNN) which was eventually merged into CNBC. [I was later hired at CNBC mainly to compete with his technical segments]. He is also the inventor of Bollinger Bands which is one of the most popular technical tools in use today. The award is well deserved.
