Author Archives: NLO Team

Review: Texas Pacific Land

Posted on March 21, 2020 | Leave a comment

On January 30, 2019, we said the following:

“The rebound has been exceptional but requires one last step in the process of confirming that the trend is actually up.  In order for the trend to be CONFIRMED as up, the price of TPL needs to retest the $409 level and hold.  Without holding at the $409 level, TPL would be expected to test the ascending $290.66 target, at minimum.”

Since January 30, 2019, Texas Pacific Land has had the following activity:

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We’ve updated the Speed Resistance Lines because the peak in the price increased from our prior level at $871.99 to $901.04.  Unsurprisingly, TPL has achieved our lowest downside target after bouncing at the $410 level.

Now our concern is how far below the $300 level that TPL might go.  We seem to be in the early stages of the current market decline so we’ll have to update the downside risk as we go.

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Posted in Edson Gould, SRL, TPL

GE: Is the Party Over?

Posted on March 21, 2020 | Leave a comment

Review:

  • On January 21 2018, when General Electric (GE) was trading around $16, we said, “the speed at which the current decline is taking place indicates that sentiment will push the stock to the $5.27 price and the elimination from the Dow Jones Industrial Average is eminent.”
  • On December 12, 2018, General Electric (GE) achieved a closing low of $6.45, 22% above our estimated downside target.
  • On January 1, 2019, when General Electric was trading around $7.25, we said, “…now is the time to consider the upside resistance targets.  The above chart lays bare the expectations for an upside move.” We also said, “The year 2019 could be forgiving to GE…” This was 12.40% above the December 12, 2018 low.
  • On December 31, 2019, the closing price of General Electric stood at $11.16.

Update

Before the full year of 2020 was under way, General Electric had managed to give back all ofthe  2019 gains.  The era of forgiving has been quickly forgotten.

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Now that General Electric sits on the cusp of the 2018 low, the questions becomes, can the stock recover and retest the 2020 peak?  We don’t think so for two primary reasons.

  1. Declining below the $19.82 upside resistance target.
  2. The potential for a recession for the next 6 months.

The fact that the price could rise as expected and the falter at the very resistance target that was highlighted near the 2018 low suggests that there are powerful forces at work.

The reality is that a recession is on the way.  the depth and length is the only unknown.  However, we have always maintained that if General Electric couldn’t do well during a booming economy then what should be expected during a recession?

We advise caution as the market seems bound and determined to expose failings and frauds which will result in collateral damage to companies like General Electric.

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Posted in GE, General Electric

TBTF: Too Boeing To Fail

Posted on March 21, 2020 | Leave a comment

Advocates for the bailout of Boeing (BA) are citing the “black swan” event of COVID-19 as the reason the company has reached the tipping point of failure.  These same people are saying that, in spite of Boeing:

  1. distributing defective merchandise
  2. that resulted in loss of life
  3. then lied about knowingly distributing a defective product

The company is too big to fail because the cascade of job losses throughout the entire U.S. economy would be catastrophic.

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We’d argue that demise of Boeing began near the February 20, 2018 period.  We don’t know why it occurred at that time, However, the stock had run out of upside momentum and vacillated between the $356.66 price since that time.

The most recent decline is the culmination of the collective wisdom of the markets which decided after March 4, 2019 that the fate of the company had been determined.

As with the bank and auto bailouts of 2008, the belief is that there doesn’t exist the capacity of the largest and most broadly developed economy in the world to absorb the loss of such a big company.  Thanks to the bailout to come, we will continue to never know.

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Posted in AIG, BA, GE

SPDR Gold Shares Downside Targets

Posted on March 21, 2020 | 2 comments

Below are the downside targets for the SPDR Gold Shares (GLD).

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  • $124.16 (intermediate target)
  • $106.27 (mid-range target)
  • $52.60 (extreme target)

The $124.16 level is not an “official” downside level as it is only an intermediate point on the way to the actual level of $106.27.  As we’ve seen in the past, the extreme downside target is always the concern.  For GLD the extreme downside target is $52.60.

Top three stocks, commodities, or indexes that achieved our downside targets by year:

2020

2019

2018

2017

2016

How do we use Speed Resistance Lines? Once a target is achieved we assess the possibility of investment.  If the target is not achieved we move on to the next stock. 

There are approximately 15% to 20% of the SRLs  that we’ve run that haven’t come to fruition, yet.  However, in this current market decline, many that weren’t fulfilled are now getting completed.

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Posted in Edson Gould, GLD, Speed Resistance Lines, SRL

Update: Tesla Inc. Targets

Posted on March 19, 2020 | Leave a comment

When Tesla (TSLA) was trading at $734.70, we said the following:

“Parabolic increases rarely go unchecked.  This typically means that a decline to the conservative downside target is the norm, at minimum.  However, Tesla has had a history of defying the “norm” when it comes to price change.”

At that time, February 5, 2020, we provided the following downside targets:

  • $507.09 (conservative target)
  • $401.39 (mid-range target)
  • $295.69 (extreme target)

Seventeen days after our downside price targets, the price of TSLA increased as high as $917.42 on a closing basis.  The increase in price marginally affected the downside targets for TSLA.  So far, Tesla has achieved two of the three downside targets and looks to easily achieve the last target (extreme downside target).

Below are the updated downside targets for Tesla Inc. (TSLA).

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  • $517.21 (conservative target)
  • $411.51 (mid-range target)
  • $305.81 (extreme target)

Pendulums swing from one extreme to another.  We’ll watch to see if the extreme to the upside is matched on the downside.

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Posted in Speed Resistance Lines, SRL, TSLA

Gold Market Review: March 2020

Posted on March 17, 2020 | Leave a comment

In our last Gold Stock Indicator, published October 28, 2018, we offered up $1,755.41 as the extreme upside resistance level for gold.  When the same level is drawn to the most recent price, we find that gold has struggled at the $1,755.41  resistance line.

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It is one thing to struggle but it is an entirely different situation to collapse below the last remaining upside resistance level.  Ordinarily, the price action above the descending $1,755.41 line would have assured us of a rise to the previous peak.  Now, with the latest collapse, the price of gold is slated to bounce at the descending $1,615.82 level.  That descending line is the equivalent of the $1,343.75 price.

Looking at the Philadelphia Gold and Silver Mining Stock Index (XAU) leads us believe that the $1,343.75 level in gold, although a very extreme level on the downside, could be a realistic target.

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Notice that the XAU index could not exceed the upside resistance target of 166.09 AND the prior peak set in August 2016.  That is a significant hurdle that should have been breached on the upside.  Instead, the failure puts emphasis on the downside target.

The XAU index stands to re-test the 133.80 level which is the equivalent of 52.00. It should be noted that the XAU is the leading indicator for the direction that the price of gold should go.  If you didn’t notice the rise in gold stocks from the late-2015 low then you shouldn’t notice it now.

The latest upside action of double digit percentage increases is a warning of more downside risk rather than a resurgence to the 2010 peak at 228.76 (our April 2011 call that the XAU would decline -66% [it lost -83%] found here).

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Posted in gold bugs, XAU

NYT Recession/Depression Index

Posted on March 15, 2020 | Leave a comment

Below is the monthly New York Times Recession/Depression Index from January 2000 to mid-March 2020.

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We think the corner has turned on the New York Times Recession/Depression Index.  This means that we think that the U.S. economy is about to enter a recessionary period as designated by the National Bureau of Economic Research (NBER).

What about the Federal Reserve’s recent implementation of an emergency rate reduction to zero percent and QE?  What about the president’s actions in declaring a national emergency?  This may reverse the trend from the November 2017 low.

We’ll gladly take in any new information that can reverse or change the index numbers going forward.

Visit our December 30, 2018 explanation of this index (found here) which goes back to 1851.

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Posted in NYT Recession/Depression Index

DJIA Yield Profile: 1948-2043

Posted on March 11, 2020 | Leave a comment

In a July 1999 issue of Investment Quality Trends published by Geraldine Weiss, it was observed that a dynamic shift in the history of the Dow Jones Industrial Average may have been in the process.  Weiss said the following:

“For more than 100 years, the benchmarks of value for the Dow Jones Industrial Average have been 3.0% at Overvalue and 6.0% at Undervalue.  Now, the venerable D.J.I.A. has climbed so extremely high, it’s dividend yield has dropped to 1.5%…the lowest in history.  The situation intrigues us and causes us to wonder if the Dow is establishing a new profile of value between dividend yield extremes of 1.5% at Overvalued (where stocks should be sold) and 3.0% at the former Overvalued level (where stocks can be bought).  Throughout history, there has been a 100% differential between the high and low dividend yields at historical extremes.  The D.J.I.A. now is 100% above its historic benchmark of Overvalue.

“If in fact the profile of value has changed from the Dow Jones Industrial Average (time will tell), then it is reasonable to assume that some blue chip stocks which also have climbed far beyond their historic levels of Overvalue, may be experiencing a similar fundamental change in their profiles of value.  We saw the other side of the coin in 1982, when interest rates rose to unprecedented levels and some interest rate sensitive stocks established extremes of high yield at Undervalue. (Weiss, Geraldine.  Should Some Overvalued Stocks Be Re-Evaluated? Investment Quality Trends. Mid-July 1999. page 12.).”

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1983-2010

Our updated dividend yield profile for the Dow Jones Industrial Average since Weiss’ 1999 observation is below:

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We’ve included the old high yield of 6% and old low yield of 3% with the new 1.50% overvalued level for contrast.

Because the March 2009 low fell short of the 6% dividend yield on the Dow Jones Industrial Average, many market analysts were not willing to accept the fact that the market would turn to the upside.  They waited and waited with the view that the rebound was a Fed induced rise rather than a fundamentals and values based increase.  Those same analyst were forces to wait out the most hated bull market in history, claiming a crash was coming for over 10 years.

1983-2043 Continue reading →

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Posted in DJIA, Geraldine Weiss, IQTrends, Yield Profile

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Cisco Systems Inc. 10-Year Targets

Posted on March 7, 2020 | Leave a comment

Below are the valuation targets for Cisco Systems (CSCO) for the next 10 years. Continue reading →

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Posted in 10-year Targets, Altimeter, CSCO

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Boeing Co. 10-Year Targets

Posted on March 7, 2020 | Leave a comment

Below are the dividend yield ranges for Boeing Co. (BA) from overvalued to undervalued from 1977 to 1995:

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Below is the dividend yield range of overvalued to undervalued from 1995 to 2020:

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There is a good chance that BA will decline to the undervalued level, after having fallen below the fair value level with conviction.

Below are the target ranges for Boeing Company assuming a 3.50% dividend growth rate based on the precedent set from 1977 to 2018 and projected to 2030. Continue reading →

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Posted in 10-year Targets, BA

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Watch Lists v. Indexes: Week 10

Posted on March 7, 2020 | Leave a comment

On January 6, 2020, we published our U.S. Dividend Watch List.  On that list we broke out the data based on a ranking by fundamentals.  Of the stocks that we highlighted, two categories that we liked are the top three low yield stocks and the top five high P/E stocks. 

The performance of both groups are shown in contrast to the Dow Jones Industrial Average and S&P 500  from the close of January 3, 2020 to the close of March 6, 2020.

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Counter trend movement can be seen by the Top 3 and Top 5 lists, relative to the indexes.  The only question is how long can this exceptional movement last?

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Posted in Performance Review

DJIA in Review: Week 10

Posted on March 7, 2020 | Leave a comment

Below is the year-to-date (YTD) performance of various major indexes and from December 31, 2019 to March 6, 2020.

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The following is the breakdown of the Dogs of the Dow (found here) in week ten, compared to other fundamental ratios. Continue reading →

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Posted in DJIA in Review, Dogs of the Dow

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Interest Rate Monitor: March 2020

Posted on March 5, 2020 | Leave a comment

Review

  • On January 23, 2019, we provided our first downside targets for interest rates.  At the time, we had the 3-month treasury slated for a potential downside (in the extreme) of 0.83% from the level of 2.45%.
  • On April 23, 2019, with the 3-month Treasury at 2.45%, we said the following: “If the current run of stability in rates is anything like the period of 2015 to 2016, we should see a sharp drop in rates as was seen in the period from September 12, 2016 to September 22, 2016.  At that time, the 3-month treasury dropped from 0.37% to 0.18%, a decline of -51%.”
  • On December 6, 2019, with the 3-month Treasury at 1.53%, we said: “If the November 1, 2019 low, at 1.52%, is broken then we can reasonably expect at least another decline to the 1.30% level and maybe more before another rate cut by the Federal Reserve.”
  • On March 3, 2020, when the 3-month Treasury sat at 0.95%, the Fed decided to do an “emergency cut” in interest rates.
  • On March 4, 2020, the 3-month Treasury sits at 0.72%.

Update

Slow and steady is the pace of our analysis.  So far, we’re on track.  The chart below says it all.

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Posted in Interest Rate Monitor

Acceleron Downside Targets

Posted on March 3, 2020 | Leave a comment

Below are the downside targets for Acceleron Pharma Inc. (XLRN).

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  • $65.39 (conservative target)
  • $48.58 (mid-range target)
  • $31.77 (extreme target)

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Posted in Acceleron, Speed Resistance Lines, SRL, XLRN

Dow Theory: March 1, 2020

Posted on March 1, 2020 | Leave a comment

In our last Dow Theory assessment on October 4, 2019, we said the following:

“…[the] two indexes [DJIA & DJTA] as exhibiting bearish reversal patterns from the prior trend.  The bear market continues until the dashed red and blue lines are exceeded to the upside.”

It didn’t feel like it but we were in a bear market at least since October 2019.  How do we know?  While the Dow Jones Industrial Average (DJIA) was moving to new highs, the Dow Jones Transportation Average was unable to exceed the prior peak set at 11,570.84 on September 14, 2018.

Below are the downside targets for the DJIA & DJTA based on Dow’s Theory. Continue reading →

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Posted in Dow Industrials, Dow Jones Transportation Average, Dow Theory

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