Sunday, May 15, 2011

Market Changing Stripes ?

I've generally been pretty bullish on the market since April of '09 with only some neutral danger periods now and then giving me pause. The leader groups I follow, retail (RLX), Baltic Dry Index ($BDI) before the ship overbuild problem, tech, etc. have been indicating continued upside with only typical bull pullbacks. But now its technical behavior is giving me plenty of pause. The leader groups continue to behave well - outperforming and wanting to drag up the rest of the averages. But here is what I'm getting worried about.

If you look at what happens at major moves up and before major moves down, you see this


This was the last half of 2007 and we know what followed. Other bull runs display these divergences toward the end. This divergence trend analysis works better on broad averages than individual stocks, but it is typical behavior there as well:


Here we see Headwaters' recent behavior. Its nice climb from mid last year telegraphed its end with divergence.

What's happening now with the S&P 500 ?



Egad ! It's starting to act badly. I'm not saying a radical decline must follow, but maybe some cooling. Another tell tale marker of a turn is what the "cereals and soaps" do. When they suddenly start turning up and being a standout group, problems with economic growth are being felt by the market. This certainly was the case in late 2007, and guess what, they are becoming a conspicuous group now. Examine the charts for '07 and the current charts for HRL, UN, GIS, K, PG, KFT.

Another nagging problem is market sentiment. It's been too high, which didn't bother me when a horrific selloff was being feared back in February, but the mild 7% correction back then didn't work off much of that exuberance. But now we have these technicals turning. According to the numbers tracked by a blog that specializes in this, the Nasdaq sentiment is at a 5 year high right now. I don't know what fundamentals would be turning the market - angst over the end of QE, trying to raise interest rates with a mountain of debt that we already can't service. I don't know. But the charts have thought it all through, and they know more than I do.

And then there is the monster earthquake coming in a week or two that will split the US down the middle. A small point but I thought I'd mention it. It seems like Mother Nature is throwing a hissy fit of quakes all over the world the last few years. But are they really increasing? And is Mother Nature being helped? (click to enlarge images)

This chart shows that what has really been increasing is the people being killed by quakes - not so much the raw number of them occurring. So if the number of quakes is only rising modestly, why, since about 2003, have they suddenly become so destructive and deadly, as if they started seeking out the heavily populated areas with an evil mind of their own? Well, conspiracy theorists have long held an answer to that - HAARP. The High Frequency Active Auroral Research Program was one of those Star Wars defense plans in the Reagan years that were a big political debate issue. They were pretty much all voted down except for HAARP.

They went ahead with this and construction began in 1993. It is a joint project with the US Navy and the US Air Force, with patents based on Tesla in both high frequency and ELF technology.
The ELF part (extreme low frequency) is of particular interest to the conspiracy claims that, not only do the original patents and technical write-ups suggest this technology will be used to control weather, it will also be used in tomography to probe deep into the earth the way normal frequency transmission can not (your car radio blanks out when you go through a tunnel). The stated intent for ELF are things like mapping underground munitions, bunkered nuclear sites, etc. But many claim that HAARP is being weaponized not only for weather control, but as a tectonic weapon - inducing earthquakes.

Nicola Tesla, the "father of modern electricity" whose patents HAARP is based on, once built what was called an "earthquake machine" in his New York lab, disturbing the neighborhood and bringing the police to investigate. He once had to hammer the machine off to stop a quake he induced. This was a tiny 6 pound machine based on resonant frequencies that could be attached to a building and, with the right frequency dialed in, once induced a quake in a steel skeleton being erected, so that the steel workers at the top came scrambling down thinking an earthquake was in progress.

This was all around 1898, and the hub-bub over such a thing as an earthquake machine has gone away - until now. With the dramatic rise in mass-killer earthquakes since 2004, it's being noted that the massive antenna array buildout in HAARP's Gakona, Alaska facility, by far the most powerful of its kind, coincides closely with the rise of these killer quakes. The facility was completed in 2007. There is some correlation between strong magnetic field disturbances on HAARP's instrumentation on their website and major quakes if you survey activity in the 3 days previous to the quakes (about a 1 in 9 chance occurrence as near as I can figure). Earthquakes induce magnetic disturbances, which is why animals can sense them days in advance. But man-made looking signals, that only started showing up since about 2004, have a hoard of paranoid types blaming HAARP for inducing killer quakes with ELF resonant frequencies the way Tesla did with his crude 6 pound mechanical resonant version.

There are several different geopolitical takes on who may be doing this and why, but they agree on the people involved being heavily into the occult. I am not an expert on occult numerology, but a basic tenet is that there are what they call the "master numbers" - they are 11, 22, and 33- and they believe strongly in planning major events around these numbers.

The conspiracy nut jobs aren't the only ones leery of HAARP. Exonews recently had a story "European Parliament Issues Warnings On HAARP". The European leaders wanted to have more information on what they were doing with this research, concerned about its impact on weather and other things. This parliament action was taken in 1998, the article rehashes their concerns today.

The US Geological Survey's site usgs.gov has a long list of what they call "Historic Earthquakes" basically meaning the most destructive ones. If you refine this list to just the big killers - those with over 20,000 dead, you wind up with a list of five - all five occurring in 2004 and later. Of those five, three occurred on either the 11th or 12th. You can easily figure the math probability of that happening by random chance, 1 in 25.

Added to these happenings not likely by chance is what is happening with the weather lately. Supposedly the bread and butter of HAARP, other than incinerating incoming missiles, is weather control. Radar watchers claim they can spot unusual weather events days in advance by watching for "HAARP rings". These are near perfect, unnatural looking circles; and a huge rash of them popped up clustered in the New Madrid fault system in late April. I was stopped in my tracks the other day when I saw a CNN weather map showing the total rainfall amounts the past month or so. The very high amounts formed a near perfect map of the fault system. The map below shows flood warning counties as of May 6 with the insert showing the damage zones for the New Madrid:









The two satellite photos show the fault zone a year ago (top) and on this May 6 (bottom). Why has it rained so much over just the fault zone? I didn't think there should be any connection between rain and quakes until I checked. If they dam rivers, they often get small quakes. But probably the main attraction for the alleged disaster makers with all the focused rain is soil liquefaction. When the soil is wet, earthquake damage is vastly increased. Shaking wet soil causes it to go mushy. This quake feature happens a lot, but Japan and others lately have suffered severe bouts of it.

I've seen Agri science studies for rice-growing in eastern Arkansas where they gauged optimal "soak time" for the soil in this area of the fault (to get surface applied fertilizer entrained). They found it to be "at least 3 weeks". That suggests maybe an optimal liquefaction window of late May or early June. Conspiracy theorists point out that FEMA has a history of running drills for disasters just ahead of when they actually happen - when they are at the height of readiness. The idea is ever more dependence on the federal government with each disaster. They impose laws to deal with them, but don't take them back once the disaster is over. NLE 2011 is a massive FEMA exercise for a major New Madrid quake scheduled for May 16-21, about the same time frame for maximum liquefaction damage (and at a 22 number - May 22).

How much weight an investor should give to this quake threat depends on how much tin foil you wear in your hat I suppose (these guys claim a lot of things that don't happen). But I've gotten a lot more defensive with my portfolio strategy for a variety of reasons - very high cash. If you want a stock that typically benefits from the increasing earthquake disasters, whether by plot or by nature, take a look at Taylor Devices TAYD. This very small company in New York makes the products that allow buildings to absorb ground movement with little damage - basically gigantic shock absorbers. They routinely retrofit large buildings with these things easily and economically. I don't see what's so easy about cutting off a building at its foundation, jacking it up, and bolting on these things - but they do it all the time! And they have been doing a good business with it:


It's not grossly undervalued, or heavily insider owned (only 6%) but a stable, successful business. Quake protection is all they do, and they are about the only ones who live or die by this one product line. ITT and Kayden are the only publicly traded competition listed by Yahoo Finance, and with them this product is a small side line. TAYD tends to jump instantly in response to major, destructive quakes:


But, of course, if a major quake destruction would hurt the market enough, TAYD might initially react more like it did in late '08 (down like everything). If the New Madrid were to become more active, it would suddenly place a huge area of buildings in the midwest, that were built with little thought about earthquakes, into the market for some quake retrofitting.

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