Bull market's final act

Despite other signs of economic stalling, a small payroll beat sets the stage for one final upswing. Yet, there are also some attractive uptrend breakouts underway.

By Anthony Mirhaydari May 3, 2013 12:07PM

Red Arrow Pointing Upward © Fotosearch Fotosearch Getty ImagesThe reality distortion field continues. On Friday, the Dow Jones Industrial Average ($INDU) surged above 15,000 for the first time on a small beat for the April payroll report (+165k jobs vs. +153k expected), while factory orders and the services ISM all disappointed and remain on a downward trajectory. Services sector activity is now at its lowest level since July 2012, while new factory orders are dropping at a pre-recession pace.

 

Investors, it seems, still can't be bothered with bad news -- be it deepening signs of economic stalling or deteriorating corporate profit margins. All that matters is that the cheap money from central banks is flowing. The party won't end until inflation gets out of control or the data become so bad that the ineffectiveness of extreme monetary policy easing on the real economy becomes too obvious to ignore.

 

But we're not there yet. And that means it's time to prepare for one last upward surge in key areas of the market that had been beaten down over the last few months, including industrial commodities, emerging market stocks and steelmakers.

 

 

First, it's worth reviewing Friday's data. Headlines are screaming that stocks are rising on a jobs "surge" -- but you'd be hard pressed to see it in the chart above.

 

 

Yet, the drop in factory orders is patently clear as shown above.

 

 

As is the slowdown in the ISM non-manufacturing activity index.

 

So, long-term I remain extremely skeptical of this uptrend. This is late bull market/stock bubble behavior as fundamentals are ignored, investors take more and more risk, margin debt expands and available investor cash reserves dwindle.

 

 

Yet, there are also some very attractive uptrend breakouts underway. Look at the way steelmakers, which had lost 20% of their value since peaking in January, have snapped above their multi-month downtrend channel. Same story with copper futures. Same story with emerging market stocks, especially resource sensitive areas like Russia and Australia.

 

 

In response, I'm adding the Market Vectors Russia (RSX), the iShares South Africa (EZA), AKSteel (AKS) and Mechel Steel (MTL) to my Edge Letter Sample Portfolio. I'm also closing out my short side exposure and adding a few other positions as well, including Market Vectors Brazil Small Cap (BRF).

 

Again, my negative long-term outlook hasn't changed. This will all end very badly, especially for older investors who are being encouraged to take too much risk in this environment. But tactically, I can't ignore the new moves underway in these key cyclical groups.

 

Disclosure: Anthony has recommended RSX, EZA, AKS, MTL, and BRF to his clients.

 

Check out Anthony's new investment newsletter, the Edge, and his money management service, Mirhaydari Capital Management. A two-week free trial has been extended to MSN Money readers. Click the link above to sign up. Mirhaydari can be contacted at anthony@edgeletter.c​​​​​​​​​om and followed on Twitter at @EdgeLetter. You can view his current stock picks here. Feel free to comment below.

161Comments
May 3, 2013 1:45PM
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Anthony has been writing about an impending sell off since the beginning of December 2012!  If you had listened to him back then, you'd have missed nearly 15% in gains!
May 3, 2013 1:29PM
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All I know is that I've lost a bunch of money on short ETFs, party due to Anthony's enthusiasm for a major correction.  It reminds me of the old quote: "The market can stay irrational far longer than you can stay solvent"
May 3, 2013 1:24PM
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If you say something long enough it's bound to come true at some point.
May 3, 2013 1:31PM
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I wish this was your last article Anthony!!!!!  Go back to the hole you crawled out of and stay there!!!!!!!!!  And I'm sure I'm not the only one that thinks that!!!!!!!!
May 3, 2013 1:29PM
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Please, MSNBC, please FIRE Miryahdari, or is it that MSNBC does not have the guts??!!

This idiot just last week "predicted" a crash of horrific proportions within a few days, backed by his usual, useless "charts".

I just wish I could have gone on a career like this guy. 6 figure salary, and the job description?? .. just keep saying something day after day.

May 3, 2013 1:28PM
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Thanks Anthony and all the feeble minded lemmings that follow you. It looks like I took your money again when you had to cover today. Glad to do it. Those who pray for America to fail are lower than toads.
May 3, 2013 1:23PM
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Someday this guy will finally be right along with all the other doom and gloomers, then they'll miss then next bull market as they wait for their perfect utopia.
May 3, 2013 1:38PM
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This guy is a total idiot and has lost more money for those who follow his advice then anyone else in the " experts " field. As Jack Bogle said: " Nobody knows anything when it comes to the stock market."  How does this moron keep a job when he is always wrong. Oh yeah, he works for MSNBC.
May 3, 2013 1:37PM
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What is this, you have been calling for the end of the world for at least a year and a half.

Do people actually pay you. If everyone reacted when you first cried " WOLF ",there would be more poor souls wringing their hands than there are fish in the sea.

Some day you will be right, the law of averages says so , but in the mean time I suggest you are hurting more people than you are helping.
May 3, 2013 12:58PM
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<<...one final upswing ...>> - I wonder what the evidence behind this assertion is...
May 3, 2013 1:45PM
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Once again, if Financial Blogger were an elective position,
Anthony would have been voted out long ago.

I think he is finished...

May 3, 2013 1:35PM
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you been sayin it and sayin it and sayin it! keep it up you will get it right at some point!
May 3, 2013 1:49PM
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You just can't stand prosperity can you, Have you ever been correct with your " chicken little " comments, I guess eventually you be right if you keep predicting the bear market is coming. After all you so called experts have properly predicted the last  108 recessions out f 3 ???
May 3, 2013 2:22PM
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Another great article. Charts, charts , and more charts. Charts don't seem like they are working for ya. I think you have to get a different angle on things or something.
May 3, 2013 2:03PM
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tI am here to learn and profit.

I wonder should I do just the opposite of what Anthony said?

The stock market has its ups and downs. Sometimes  (possibly a lot of times) it does not follow the market analyst's prediction.

 

I certainly don't think this is the "LAST" up swing of the market and I hope when Anthony talks,  he needs to use common sense (and not bias view) to show people the right way to invest. Please don't ry to scare people or the other way around.

 

Just the fact, OK?

 

A stock market student

May 3, 2013 2:00PM
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Bull market according to the brokerage industry and Wall Street when in essence it's a "bend over Ben" market. All mirrors no guts. Raise rates back to 3% and watch this bull market BS die. It's called justice. Not until these scumbag CEO's start hiring and paying good wages will we have a true BULL MARKET. And that ain't going to happen. It's because America is a full fledged hypocritical self absorbed whore house. Where as it's all about me, me, me, and my wallet. Screw everyone else. 
May 3, 2013 2:01PM
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KEEP POSTING THE SAME ARTICLE,  EVENTUALLY YOU WILL HAVE HIT THE NAIL ON THE HEAD.
May 3, 2013 1:46PM
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Exxon up to $89.99, Conoco up to $61.79.  You gotta love today!

 

 

May 3, 2013 1:46PM
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Oh, by the way, he's a bear, but "tactically" he's a bull.  Just another day trader?
May 3, 2013 3:04PM
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It's looking more and more like Europe is going to be the one to start the chain reaction.  But that may not happen for awhile - the ECB still has some wiggle room to cut rates even further.

This is an epic wave we're on, and you can ride it for all it's worth, just keep adjusting those stop-loss points.  Most set theirs at 10-15%, so if you trigger at 5%, you shouldn't have any problem getting out in time.  There's also nothing wrong with starting the move out of equities here - DCA can be used just as effectively to sell as to buy.

This wild exuberance is fun to watch, but make no mistake, this is the exact same scenario we saw in the tech bubble and the housing bubble.  Remember the smart ones in the 90s that sold Earthlink or AOL or Gateway and made a killing while everyone called them crazy for selling?  Remember the people who sold their homes at the height of the market a few years ago?  Do you want to be one of those people, or are you like a degenerate gambler, who just can resist one more spin of the wheel?  Remember, Vegas has a vested interest in you sticking around and playing as long as possible.  So does Wall Street.  Tread carefully, my friends.  The only money that counts is what's in your pockets when you walk out the door.

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