Dow Jones Rail Index
In the last few weeks we've looked at the S&P 500, the Amex Oil Index, the Truckers and now the Rails. I'm showing these indices because they are all exhibiting a very peculiar distribution or lack of buying throughout this rally. Most significant are oil and the transportation. There is very little precedence for this. It has historically been a sign of a blow off with fewer and fewer bidders.
Below is a chart of the Dow Rail Index. The S&P itself hasn't really made any significant and sustained movement. Instead it has remained in a band of trendless chop over the last four months. Yet, the rails have rocketed higher. Their move over the last few months has been at an annual rate of between 150-200%. It was an easy trade but it surely isn't sustainable. What it is indicative of is Frankenstein finance's quantitative traders pushing mindlessly higher as long as earnings appear supportive.
What is most unusual about this rail rally is three fold. One, absolutely no buying pressure, two, a rising 5 wave wedge, and three a parabolic breakout of the wedge. As you can see in the chart below, prices accelerated numerous times with steeper trendlines over the last one third of the wedge. This coincides with the tremendous speculation we are seeing in the markets. Speculation that hit a level only seen once in the last eight years. That was in October of 2007. It's not a bit of coincidence that market speculation has coincided with some surveys being wildly bullish. We know what happened subsequent to October of 2007. This time the speculation is concentrated in fewer and fewer sectors meaning the speculators are losing their mojo. And participation. Now, speculation is mainly oil, a subset of oil stocks, steel, agriculture and rails. Ask yourself a question. Do these sectors represent a vibrant economy? High oil prices? High agriculture prices? The biggest user of steel in the U.S., autos, is teetering on a depression.
Is this market behavior any different than when technology kept rising in late 1999 and 2000 while other sectors hit a wall? The pumpers were out in force then and they are out in force now. Is there any conflict of interest when Goldman Sachs issues a price target of $150-200 for oil while they have become beneficiaries of its rise by captive trading and services to hedge funds trading in oil? Is this really different than the Cisco, Amazon or Sun pumps by people benefiting by drawing in more and more money in the technology bubble? Is Wall Street using the media to build as much of a frenzy as possible to ram commodities higher. At the expense of your wallet?
It's never different this time. It's the same old pig. The only thing that changes is the lipstick. And the lies perpetrated to make the pig's lipstick look more appealing.
Below is a chart of the Dow Rail Index. The S&P itself hasn't really made any significant and sustained movement. Instead it has remained in a band of trendless chop over the last four months. Yet, the rails have rocketed higher. Their move over the last few months has been at an annual rate of between 150-200%. It was an easy trade but it surely isn't sustainable. What it is indicative of is Frankenstein finance's quantitative traders pushing mindlessly higher as long as earnings appear supportive.
What is most unusual about this rail rally is three fold. One, absolutely no buying pressure, two, a rising 5 wave wedge, and three a parabolic breakout of the wedge. As you can see in the chart below, prices accelerated numerous times with steeper trendlines over the last one third of the wedge. This coincides with the tremendous speculation we are seeing in the markets. Speculation that hit a level only seen once in the last eight years. That was in October of 2007. It's not a bit of coincidence that market speculation has coincided with some surveys being wildly bullish. We know what happened subsequent to October of 2007. This time the speculation is concentrated in fewer and fewer sectors meaning the speculators are losing their mojo. And participation. Now, speculation is mainly oil, a subset of oil stocks, steel, agriculture and rails. Ask yourself a question. Do these sectors represent a vibrant economy? High oil prices? High agriculture prices? The biggest user of steel in the U.S., autos, is teetering on a depression.
Is this market behavior any different than when technology kept rising in late 1999 and 2000 while other sectors hit a wall? The pumpers were out in force then and they are out in force now. Is there any conflict of interest when Goldman Sachs issues a price target of $150-200 for oil while they have become beneficiaries of its rise by captive trading and services to hedge funds trading in oil? Is this really different than the Cisco, Amazon or Sun pumps by people benefiting by drawing in more and more money in the technology bubble? Is Wall Street using the media to build as much of a frenzy as possible to ram commodities higher. At the expense of your wallet?
It's never different this time. It's the same old pig. The only thing that changes is the lipstick. And the lies perpetrated to make the pig's lipstick look more appealing.
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