The term decouple is often used on Wall Street to explain something that is difficult to wrap your arms around. In late 2007/early 2008 we were told the emerging markets would decouple from the mortgage mess based in the United States. In the video below, we explore:
After you click play, use the button in the lower-right corner of the video player to view in full-screen mode. Hit Esc to exit full-screen mode.
To reach another trend exhaustion signal today on the daily chart of the S&P 500, we need a close greater than or equal to 1,296.82, which is the January 12 high. As we said last week, we would prefer to see the market close higher in the very short-term.
Some excerpts from a CNBC article on decoupling:
The story goes that the market is "decoupling," "“ that is, shaking off euro-land panic and instead focusing on the nascent U.S. economic recovery. In this scenario, stocks and the dollar can glide higher together while American investors remain blissfully unaware of the debt storm abroad.
Just don't try selling it to Bob Janjuah, the flame-throwing co-head of global macro research at Nomura Securities, who believes decoupling is a myth that will be exposed sooner rather than later.
"Yet again, and certainly for the third year in a row, we are being told that the U.S. is over the worst and that a sustainable recovery is here," Janjuah told clients. "We are expected to believe another "?decoupling' fairytale, only this time around neither Asia/EM (emerging markets) nor the Eurozone really matter to the U.S. economy."
Inaction by leaders both in Europe and the U.S. to attack dual debt crises will hit investors later in the year, he said. In particular, he attacks the "neo-communist experiment in the West that relies on more debt and printing money in order to maintain the status quo."
As we noted in a December video, the levels of debt around the globe have reached unsustainable levels, which will most likely put pressure on global economic growth. Despite numerous problems in Europe, investors seem to be hopping on the decoupling bandwagon. The ratio of bullish sentiment to bearish sentiment prompted Jason Haver to pen Two-Year Study of Investor Sentiment Points to a Top; some excerpts:
The latest American Association of Individual Investors (AAII) sentiment survey numbers were released yesterday, and amazingly, were virtually unchanged from the week prior. For the second week in a row, bearish investors remain at 17%, still near decade-long lows. This struck me as a rare situation, so I decided to investigate further.
I set out to uncover how the market reacted when there were two or more consecutive weeks of bearish investor percentages this low, using bears below 19% as the control figure (thus allowing for roughly 20% standard deviation in the data figures). After combing through 562 weeks of AAII data by hand, I discovered that since the 2000 market peak, there have only been 12 other occurrences of this scenario. Interestingly, the current back-to-back reading of less than 19% bearish is the first occurrence we’ve seen in almost six years. So indeed, this is a rare set up.
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Copyright © 2010 Ciovacco Capital Management, LLC. All Rights Reserved. Chris Ciovacco is the Chief Investment Officer for Ciovacco Capital Management, LLC (CCM). .Terms of Use. This article contains the current opinions of the author but not necessarily those of CCM. The opinions are subject to change without notice. This article is distributed for informational purposes only and should not be considered as investment advice or a recommendation of any particular security, strategy or investment product. The charts and comments are not recommendations to buy or sell any security. Market sectors and related ETFs are selected based on his opinion as to their importance in providing the viewer a comprehensive summary of market conditions for the featured period. Chart annotations are not predictive of any future market action rather they only demonstrate the opinion of the author as to a range of possibilities going forward. All material presented herein is believed to be reliable but we cannot attest to its accuracy. The information contained herein (including historical prices or values) has been obtained from sources that Ciovacco Capital Management (CCM) considers to be reliable; however, CCM makes no representation as to, or accepts any responsibility or liability for, the accuracy or completeness of the information contained herein or any decision made or action taken by you or any third party in reliance upon the data. Some results are derived using historical estimations from available data. Investment recommendations may change and readers are urged to check with tax and investment advisors before making any investment decisions. Opinions expressed in these reports may change without prior notice. This memorandum is based on information available to the public. No representation is made that it is accurate or complete. This memorandum is not an offer to buy or sell or a solicitation of an offer to buy or sell the securities mentioned. The investments discussed in this report may be unsuitable for investors depending on their specific investment objectives and financial position. Past performance is not necessarily a guide to future performance. The price or value of the investments to which this report relates, either directly or indirectly, may fall or rise against the interest of investors. All prices and yields contained in this report are subject to change without notice. This information is based on hypothetical assumptions and is intended for illustrative purposes only. PAST PERFORMANCE DOES NOT GUARANTEE FUTURE RESULTS. CCM would like to thank StockCharts.com for helping Short Takes create great looking charts Short Takes is proudly powered by WordPress . Entries (RSS)
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Copyright © 2010 Ciovacco Capital Management, LLC. All Rights Reserved. Chris Ciovacco is the Chief Investment Officer for Ciovacco Capital Management, LLC (CCM). .Terms of Use. This article contains the current opinions of the author but not necessarily those of CCM. The opinions are subject to change without notice. This article is distributed for informational purposes only and should not be considered as investment advice or a recommendation of any particular security, strategy or investment product. The charts and comments are not recommendations to buy or sell any security. Market sectors and related ETFs are selected based on his opinion as to their importance in providing the viewer a comprehensive summary of market conditions for the featured period. Chart annotations are not predictive of any future market action rather they only demonstrate the opinion of the author as to a range of possibilities going forward. All material presented herein is believed to be reliable but we cannot attest to its accuracy. The information contained herein (including historical prices or values) has been obtained from sources that Ciovacco Capital Management (CCM) considers to be reliable; however, CCM makes no representation as to, or accepts any responsibility or liability for, the accuracy or completeness of the information contained herein or any decision made or action taken by you or any third party in reliance upon the data. Some results are derived using historical estimations from available data. Investment recommendations may change and readers are urged to check with tax and investment advisors before making any investment decisions. Opinions expressed in these reports may change without prior notice. This memorandum is based on information available to the public. No representation is made that it is accurate or complete. This memorandum is not an offer to buy or sell or a solicitation of an offer to buy or sell the securities mentioned. The investments discussed in this report may be unsuitable for investors depending on their specific investment objectives and financial position. Past performance is not necessarily a guide to future performance. The price or value of the investments to which this report relates, either directly or indirectly, may fall or rise against the interest of investors. All prices and yields contained in this report are subject to change without notice. This information is based on hypothetical assumptions and is intended for illustrative purposes only. PAST PERFORMANCE DOES NOT GUARANTEE FUTURE RESULTS. CCM would like to thank StockCharts.com for helping Short Takes create great looking charts Short Takes is proudly powered by WordPress . Entries (RSS)
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