Financial Sense Blog

Imagine you are on the Titanic, and the ship is sinking after sideswiping an iceberg. Does it matter if you need a haircut? Should you be worrying about your investments? Under life-and-death circumstances, only life seems to matter.

While the Dow Jones Industrial Average reached a new rally high in June the Dow Jones Transportation Average did not, with many technicians pointing out the non-confirmation (shown below). Today’s article looks at why the transports have been lagging and whether or not their recent weakness relative to the industrials will continue.

What are we barreling toward?” asks Peggy Noonan in her latest book. “A difficult time, I think,” she says. Has this famous Washington speech-writer become a pessimist? Is she referring to economic hard times? No. She is referring to a future attack on the United States. She therefore writes: “We know we live in an age of weapons of broad and immediate destruction, that they can be deployed against civilian populations by any group with the will, money, and mad focus to do it.”

In April, China announced that it purchased 454 metric tons of gold over the past six years.

Back in April a piece was penned that looked at how oversold the market was on a statistical basis (“Possible vs. Probable”). The basis for the article was to look at the percent deviation of the S&P 500 from its 200 day moving average (200d MA) and how many standard deviations it was below the mean, comparing the current experience to prior bear market sell offs.

The “less bad” economy that started on a technical bounce in March continues to find support from decelerating and up-ticking economic indicators such as consumer confidence, ISM manufacturing and non-manufacturing, new jobless claims, and durable goods. The most important of these is consumer confidence and the follow-through we need to see in retail sales (demand).

To understand who we are, historical references are useful. To know how a people will come through a crisis, look to those traits of character possessed by nations that have snatched victory from the jaws of defeat. How did they survive their ordeal? What lessons can we draw from their story? In August of 216 B.C. a catastrophe occurred in Italy.

We know already that market timing is a fractured and much tortured topic. Most traders and investors have at some time or other dedicated large chunks of their resources to the search for that almost mythical creature the markets’ clock.

We all have hopes and dreams. And then there is reality, which demands our attention and our respect. America has been living in a dream world for almost twenty years, somehow managing to evade reality – social, economic and international. The process of economic unraveling is our pecuniary punishment for evading reality. Destructive war has been, and will be again, our national punishment.

There once lived a race of men classified by modern scientists as Homo sapiens neanderthalensis – otherwise known as Neanderthals. The bones of this prehistoric race have been found in Europe and Asia. It is believed they died out between 30,000 and 24,000 years ago. They used stone tools, probably knew how to make fire, and they were far stronger than modern humans.