Klein Market Summary-August 12th, 2013

Klein Market Summary

August 12th, 2013

Current Market Facts:

Technical Status

 Confirmed Rally – Beginning Week 6

Other Observations

Market has paused again as leaders surge

Distribution levels are rising

Earnings have continued to drive leaders higher

Feel of the Market

Fed tapering fears are back in focus

Important Levels on Key Indices:



Last Close






Nasdaq 100




S&P 500








Market Interpretation:

The indices stalled at rally highs on Monday, but only corrected less than 2% overall.  While Distribution has increased somewhat, it is not yet a threat to the rally.  Furthermore, the action of leaders continues to suggest a continued rally.  If the markets correct more deeply with a pick up in Distribution, then the indices would need to be closely evaluated for a possible change of trend.  However, at present there are no signs that the rally is in danger.

Leading stocks often take a year or two to complete major moves.  So stocks like NFLX, TSLA, and LNKD might suggest that we are in the midst of a major move for the broader market.

Joel’s Take:

Because the method that we use to invest requires both qualitative and quantitative analyses, market interpretation is inherently colored by our own individual biases.  For example, even in a strong rally, it can be difficult to be Bullish if you are not profiting in the markets.  One solution is to find out if those around you are profiting, or to determine if you could have been profiting if you made one or two key decisions differently.

Since the middle of 2011, I have seen that the markets have increasingly responded to the Fed’s quantitative easing, and have floundered when those programs ceased.  While these programs do not directly target the stock market, higher stock markets are an expected outcome of these easing programs.

I have been of the opinion that since 2009, the Fed’s primary objective has been to prevent real estate deflation at all costs.  Using Japanese deflation in the 1990’s as an example, the Fed has no effective tools to control deflation, once it begins.  So by causing inflation to combat the over supply in housing, the Fed is aware that they will inflate many other asset classes, especially commodities and stocks.

We haven’t seen inflation run rampant, despite the enormous increase in liquidity, because large U.S. banks are not redeploying capital.  Even so, looking inside CPI data does reveal a few strong inflationary undercurrents.  Moreover, if and when banks do begin to deploy their reserves in the form of loans, inflation might be expected to expand at a rate that could be difficult for the Fed to control.  Even so, the Federal Reserve has powerful tools to reduce inflation, as seen at the end of 1970’s.

Earnings notes:

The past few weeks have seen top-shelf leaders respond positively to earnings.  Additionally, IPO’s in the past month have had amazing moves, in many cases.  Many of these stocks could set up in coming months.  Other stocks are poised to emerge from proper bases.

  • The Klein Market Summary is a professional interpretation of the general stock market conditions that is updated on a weekly basis.  Joel T. Klein is the portfolio manager of the investment partnership Blue Diamond Capital, LP. He writes the summary using select technical and fundamental data.  The Klein Market Summary is not intended to provide investment advice of any kind, and is only provided for the entertainment of the reader.  It is typically updated Monday morning, weekly.  Please e-mail info@kleinasset.com, if you are interested in receiving this free weekly update.
  • Past performance is not a guarantee of future results.  Due to market volatility, a fund’s performance may fluctuate.  Current performance may be less than previous results.  An investment a hedge fund when redeemed, may be worth more or less than the original cost.  Information above is not a replacement for the Fund’s prospectus.  This webpage does not constitute any kind of offer or solicitation.  Additional information on investment objectives and policies is in the Fund’s prospectus.  Ask your representative for a prospectus.



About kleinmarketforum

Klein Asset Management, LLC, formed in 2003, serves individual investors via a directional growth stock approach. When the market is in an uptrend, the firm seeks to exploit investment opportunities. When the trend is down or neutral, assets are protected. Klein Asset Management undertakes major market research projects. In many cases, these result in improved investment methods, which ultimately improve performance.

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