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2014: The Year TINA Goes AWOL?
December 27, 2013 09:12 AM
JEFF COOPER'S TECHNICAL OUTLOOK
Ooh it's a funny game
Don't believe that it's all the same
-Holiday (Bee Gees)
If 2013 was the year of 'take that bubble and shove it', 2014 may be the year TINA goes AWOL.
TINA is 'there is no alternative' -- as in there is no alternative other than stocks.
Lately, I've been hearing this expression parroted more and more frequently by strategists grasping for an explanation of the market's runaway action.
A bull's grasp should always exceed his reach?
Bernanke and company have forced investors to drink from a fire hydrant by squashing rates.
However, 10-year yields tagged the 3% threshold yesterday.
Rising rates could compete with stocks in 2014. The more rates rise, the more viable their competition for stocks, especially with stocks in a near-vertical pitch.
At some point, the ever-widening jaws between a declining bond market (the bond market declines concurrent with rising rates) and a rising stock market will resolve.
The wider the jaws become, the danger is they will snap shut, all at once -- like a gator taking the limbs of longs who linger.
I think the more stretched and the wider this jaw becomes, the greater the likelihood of a crash.
Sentiment seems ripe as 2013 is set to go down in the record books as the year the fear bubble popped.
Right now there seems to be extraordinary complacency about the rise in yields whereas the idea of 3% on the 10-year caused the market to shudder 6 months ago.
The current prevailing perception seems to be that rates rising is a good thing as it's a sign that the economy is getting stronger and that on a historical basis, 3% is not high.
That may be true, but it is the direction and velocity that underpin the issue.
To quote Richard Russell, "the United States is now paying an increasing amount of dollars to carry its debts, but get this -- the United States is now actually borrowing to pay the interest on its debt.
Who at this point wants to buy large amounts of US debt? Nobody, so the Federal Reserve is buying our own debt with money it creates out of thin air. Thus, the finances of the US are operating like a drunken sailor on a never-ending binge."
The problem is two-fold:
We have an entitlement bubble and as a country, we consume much more than we produce, creating a debt problem.
Debt doesn't matter until it matters.
Higher rates will cost the US many billions more to carry our debt, and could lead to a moment of reckoning.
A Point & Figure chart of
Shares Barclays 20+ Yr Treas.Bond ETF
) shows a breakdown followed by what looks like a Bear Flag.
If TLT declines to hit the 100 box, the P&F projection targets way down to 80. If TLT goes to 80, it will be a shock in terms of higher interest rates, especially if it happens quickly.
Importantly, TLT is currently trading below the rising trendline. If surprises happen in the direction of the trend, there could be an abrupt decline in TLT toward 80 in 2014.
At the same time, the US dollar is perched just above 80. The dollar will be in a vulnerable position on its P&F chart if it tags the 78 box.
"China, which is holding over a trillion dollars worth of US debt, is watching the situation with fearful and blood-shot eyes."
I can't help but wonder if the Chinese could use this as an excuse to join hands with Saudi Arabia in creating an alternative to the Petro dollar, and/or as a possible reprisal over the US backstopping Japan in the dispute over the Senkaku Islands.
The Saudis are unhappy with the administration on several fronts, including Iran.
The Chinese continue to hoard their gold reserves.
Apparently, the Chinese believe there is a gold story.
Just yesterday, China gave Japan a 'severe reprimand' over Japanese PM Abe's war shrine visit.
2014 sets up as an historic year.
It is 43 years since Nixon took us off the gold standard, with 43 being a corner number on the Square of 9 and tying to the first week of February.
Early January is the 41st anniversary of the false record high in 1973 followed by a 50% bear market decline in two years.
41 ties to the first week of March.
Click to enlarge
(Editor's Note: if you are interested in purchasing a physical square of 9 wheel, which includes a personal consultation from Jeff Cooper, please email us at
The first week of March will be the important 60-month anniversary of the 2009 low.
Remember, the advance from the 2002 low to the 2007 peak was 60 months.
So there are three important vibrations clustering early in each month of the first quarter of 2014. The
(INDEXSP:.INX) has chewed through yet another set of levels/squares at 1823-1833.
Does knifing through these levels indicate,
as offered earlier this month
, that the index is going to shoot the moon to 1920-1929?
I didn't think this could play out, but Hoofy is doing his dance in the end zone here. Recently, I mentioned that there would be few market makers willing to challenge the bull going into the bell for 2013. They will give it its due and save their powder rather than throw logs on the fire.
This leaves a lot of blue sky for them to put the pedal to the metal on their chosen darlings.
) is a good example of a glamour jam job.
Its move here at the end of the year is analogous to a Late Day Breakout on a stock at new highs on a Friday in the summer when no one is going to get in the way.
As my Dad used to say, "Stocks don't move, they are moved."
So does the strength in the SPX past 1833 mean it's on a trajectory into the 5-year anniversary of the low in March and/or to 1929 (price)?
The short answer is I think we will have to wait to see what early January brings.
I have received a couple of emails asking whether the markets moving through numerous square-outs means that Gann Methodology doesn't work in the face of the Fed.
Gann Methods have called most of the major turns since and including the March 2009 low, both highs and lows, but none of these have called THE top.
The important thing to remember is that all major highs and lows are square-outs but that not all square-outs are major highs or lows.
Price is the final arbiter. It is the market by its own action that will determine and confirm the significance of a time/price harmonic.
That said, as offered in this space a few months ago, cycles indicate that further strength past SPX 1833ish and January could see a few more years of advance.
To reiterate my thoughts at that time, the next two years should be dramatically up or down.
So, we should be mindful of a the early action in 2014.
Remember that early January is also straight across and opposite the price of the 2007 peak.
As you know, November was ideal time-wise for an important high to be found.
There were two turning points due in early November and late November.
The SPX declined from late October into early November followed a high in late November which led to a solid 50-point SPX selloff to another test of its 50 dma in mid-December.
The bigger-picture pattern from 1972-1973, shown a month ago, is tracking for a top.
This called for a decline into mid-December and a final high in January.
iShares Russell 2000 Index ETF
left a signal reversal bar, a Gilligan sell signal. This is a gap up to a new 60-day high followed by a close at/near session lows.
Is this one small step for Boo and one large step for the technical bear case?
Perhaps. Not all reversal bars are created equal.
Thursday's reversal in IWM came following the third tag of the upper rail of a channel defining the action since the October low. Note the pullback to the 50 dma on the prior two occasions a Gilligan appeared at the upper rail.
Every top starts with a small step and needs to be taken within context of the bigger picture.
That said, let's turn back the clock and take a look at a few
Russell 2000 RUT
charts shown over the second half of 2013 which pointed to the upper 1100s.
The first RUT is a daily from the beginning of December where we suggested that the RUT should pull back to its 50 dma.
This played out quickly into December 11 prior to Bernanke's Japanese PM Abe lookalike contest where rates were promised to stay low as far as the eye could see.
The next two RUT big-picture charts all identify the level from 1150 to 1190 as a level where risk should be taken down.
Another few days like yesterday and TWTR will be up 100% this month. As someone said yesterday, TWTR isn't a stock as much as it's a cult.
TWTR was born out of a nearly-defunct startup in 2006 and was ridiculed by many early on as a silly fad dominated by people talking about what they had for breakfast.
But never underestimate the attraction of everyone wanting to be on stage and getting their 15 Warhol Minutes. Never underestimate cult of celebrity and the desire of celebrities to exploit and mine fame.
It seems like the perfect marriage of the "I, me, mine" culture and the need for immediacy.
I mean, what can you say when the three most-followed TWTR accounts belong to a trio of pop stars: Katy Perry, Justin Bieber, and Lady Gaga.
You want culture? You can't handle culture.
It looks like a textbook example of the Rule of Alternation: As offered when TWTR came public, I wonder how many investors would be waiting for TWTR to do a Facebook plant before venturing into the stock.
I can't help but wonder if TWTR bent over backwards in an effort to avoid an FB IPO debacle, and in so doing left beaucoup dollars on the table.
That said, harkening back to its IPO, there were numerous calls that the Twitter's public stock valuation wasn't just rich by historic standards, but that it was also pricy compared to those of
). Twitter raised the price of its offering twice to $26 making the 70 million share offering one of the largest tch IPO's in a decade.
At 78 it will be up three times from its November 7 IPO pricing.
At 78 TWTR will double its 39 low.
Yesterday, TWTR traded up to 74.73.
The end of December ties to 76/77 on the Square of 9 Chart. It will be interesting to see how TWTR closes 2013.
Every market move has its 'badge', its darling that crystallizes speculative sentiment where aversion to risk seems to be on holiday. It will be interesting to see how TWTR and the market reflect confidence come the new year.
It will be interesting to see investors will believe there is no alternative to TWTR and stocks in general in 2014.
Editor's Note: This article is a free edition of
Jeff Cooper's Daily Market Report
. For a two-week FREE trial of his daily commentary and nightly day and swing trading picks,
No positions in stocks mentioned.
SQUARE OF 9
THE YEAR TINA GOES AWOL
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