Investors: Quit Screwing Around and Buy Something

Brian Hicks

Updated November 10, 2011

Last week, I put out a challenge to investors: “Quit screwing around! If you want me to believe it’s a bull market, crank the major American blue chip indexes up and over the 200-day moving average. And not just for a few hours… I want to see them close up there for a couple of days.”WD 111011 DJIA

Here’s the chart for the Dow Jones Industrial Index’s latest daily action.

And I must confess that it did hold on above the 200-day average… by a dollar or two… for a day or two… before turning tail like a scared rabbit.

Come on, guys! Are you just doing this to screw with me or what?

Not only was this rally anemic as all get-out, but the Dow is the ONLY blue chip index to make a serious pass at this critical threshold.

The S&P 100 (OEX) smacked that barrier and failed.

The Nasdaq poked its head up out of the hole and gapped down.

The S&P 500 never even came close.  

And the Dow Transports — which was freakin’ created in the first place simply to confirm or deny Dow Industrials’ trends — never even came close. It took a brief look at the 200-day average last month and failed.

Tired of Doom and Gloom

Honestly, I am just as tired of the endless doom-and-gloom scenarios as you are.

As I have mentioned more than once, I do not want a recession, depression, stag-cession, or whatever we call it this time around.

I am really trying to wrap my mind around this supposed 2020 boom that folks are starting to talk about.

But I need some help here, people — a sense that the American economy has some internal strength, that the markets are going to do more than just ride up and down on the latest rumors out of Europe.

And right now, I am still not getting it… not from the charts, not from the news, and not from the report flow, either.

Digging for Clues

Just today, I went digging again for some kind of excuse to get on the boom.

I decided to ignore all the surface stuff, like Greece, Italy and the imploding Euro for a moment, and instead plowed into the “deep numbers”: the facts and figures that don’t often show up in Wall Street Journal headlines or trip off the lips of talking heads on cable TV.

I gotta tell you, it didn’t work out so well…

Shipping Declines for the First Time Since 2009

Instead of some cool clues to the next bull rally, I found a rather worrying report out of UBM Global Trade’s PIERS unit, an outfit that tots up international cargo data for detail-obsessed econ and financial planners.

According to PIERS, the volume of shipping containers running the loop from the United States to Asia and back fell some 3.8% in Q3. And PIERS’ early reports indicate this slump continued into October. This is the first time PIERS has seen this sort of freight traffic drop-off since the last quarter of 2009.

And it doesn’t appear to be some kind of short-term fluke, either…

According to the world’s biggest shipbroker, London’s Clarkson Plc., the benchmark rate to and from U.S. West Coast ports is off 24% on the year.

This is one of those telling signs, because right about now is when all those Asian factories should be loading up American warehouses with shiny gewgaws for the critical holiday sales that account for 75% of most retailers’ annual take.

Knocking Out the Retail Prop

Let’s take a moment to parse this out.

One of the last props holding up the U.S. market in the face of all these headwinds out of Europe has been the recent round of positive retail stories.

We’ve been told repeatedly that moderate increases in Durable Goods sales was supposed to be a “sure indicator that we have turned the corner.”

The fact that most every consumer mood and comfort index is at a record low doesn’t seem to matter to the cheerleaders: “Folks are knuckling down and buying again!”

Well, I checked in with the bean counters at the Federal Reserve, and it turns out that most of the recent rise in sales was bought credit, which rose 5.8% overall.

But that increase was almost entirely long-overdue major purchases (we’re talking cars here) and is unlikely to be repeated in following months. Credit card sales for smaller items — like the sort of stuff you find in a cross-Pacific shipping container — were actually off 1% in September.

Three Sides of the Triangle

So, on the economic side, we have failing shipping and declining credit card sales, indicating a weak holiday sales season…

On the market side, we have the great herd running for shelter every time some politician in Europe makes an ass out of himself…

And technically, we see the blue chips‘ 200-day average turning into some kind of new “Iron Curtain”…

I’m trying to see the bullish argument here. But it just ain’t working out.

As things stand right now, I am inclined to call this a top — and deliver up another round of puts to my Viral Investing readers this evening, looking to turn a profit when the blue chips drop back down to the bottom of last summer’s trading range.

Good luck and good hunting,

Adam Lass
Editor, Wealth Daily

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