[5:55pm ET Saturday]
A week ago, despite a strong market on Friday, the only clear winner on the week had been Utilities (XLU) and because the S&P 500 had dropped -0.7% and the NASDAQ -1.2%, traders were worried. But, after reviewing the broad market, I finished up the Week In Review, as follows: “This week I have to conclude that I’m neutral. Bond yields, crude oil prices, currency markets and international equity markets really haven’t pushed me in one direction or the other. Our risk models point to a benign environment and equity trading volumes are still down.”
For many reasons, this would have been a good week to have been on vacation; but then you would have missed the fun.
If you had been actively trading and bearish, your world would have flipped upside down. Your safe-haven plays (Utilities XLU and Consumer Staples XLP) basically dropped from first to last in sector performance and those previously ugly sectors (Financials XLF, Consumer Discretionary XLY and Industrials XLI) became the front-runners.
The Bulls are smiling -- for now and at least until they have recovered their losses over the past four weeks and YTD. Besides, on Friday, there was a spark of life in the Technology sector, which gained about the same as front-runners XLY and XLI, although nothing could touch the Financials on Friday.
After finishing the last week in July in first place, the bankers went on holiday. If this were a series of horse races, XLF ran 9, 10, 9 and 8 out of 10 in August, and looked to be headed for the glue factory. But heading into September, back from taking it easy, the bankers showed winning colors.
Unfortunately, that race is over and now we punters have to prepare for the next one. It’s always a tough call knowing the bookies have their own horse listed as the new betting favorite. Do you really trust the bookie?
As I always say at this point; let’s look at what happened this week in capital markets, including the macro-economic, foreign and domestic equities, bonds, commodities, currencies and precious metals. You have to get your head around all of it before you can make a trading plan.
Let’s get into the details.
Global Economics Review
Weekly International Economic Report from Econoday.
Summary: “Equities ended the week on a positive note, reinforced by the better than expected U.S. employment report. Traders appear to have banished August pessimism and now, with the new month, have found their optimism once again. All indexes followed here were up for the day on Friday and for the week as well… In a week paced with major economic news, investors were highly selective in deciding which reports would drive market sentiment. Better than expected growth in Australia and Switzerland added to optimism. Purchasing managers’ surveys in China and the U.S. were better than expected and U.S. consumer confidence picked up. Data in Europe softened but still indicated growth. Investors preferred to focus on the positive.”
Here are the key US economic reports from last week’s calendar.
US Personal Income and Outlays for July. After release of the data on 8/31/2010 8:30:00 AM ET, Econoday reported, “The consumer made a comeback in July-in both income and spending. Personal income in July posted a 0.2% gain, following no change in June. The July figure was a little lower than the consensus expectation for a 0.3% rise. More importantly, the wages & salaries component rebounded 0.3% after slipping 0.1% in June. This component would have been even stronger had it not been for a dip in government payrolls from laying off temporary Census workers. Private industry wages and salaries gained 0.5% in July, following a 0.1% dip in June… The Fed is depending on the consumer to counter a faltering housing sector and Bernanke & Company got its wish at least for July. Overall personal consumption increased 0.4% in July, following a flat number in June. The latest beat the market forecast for a 0.3% gain. By components, durables jumped 0.9%, nondurables rose 0.3%, and services gained 0.4%… Who would have thought that an uptick in inflation would be good? Given the deflation mongering in some sectors, a 0.2% rise in the headline PCE price index for July looks good, following two months of down 0.1%. The core rate edged up 0.1% after a flat reading in June. The median forecast for the core had called for a 0.1% uptick… Year on year, personal income growth for July came in at up 3.0%, advancing from up 2.4% in June. PCEs growth improved to 3.4% in July, compared to 3.2% in June. Year-ago headline PCE inflation firmed to 1.5% from 1.4% in June. Year-ago core PCE inflation is unchanged at 1.4%… This report is not stellar but it is welcome news that the consumer sector bounced back and should help support overall economic growth.”
US Conference Board Confidence Survey for August. After release of the data on 8/31/2010 10:00:00 AM ET, Econoday reported, “Consumer confidence is weak reflecting an increasingly negative assessment of the jobs market. The Conference Board's index did rise 2-1/2 points from July but August's 53.5 level is still down almost 10 points from May (July revised six tenths higher to 51.0). More say jobs are hard to get, at 45.7% of the sample's initial 3,000 respondents vs. July's 45.1% for the worst reading since February. Again, direction is a special concern as pessimism has increased over the past two months. Confidence in future income improved slightly but remains very depressed with more seeing a decrease, at 16.1%, than an increase at 10.6%. Buying plans for homes are bleak with only two% seeing a home purchase on the horizon… Last week's consumer sentiment index showed deterioration in the last two weeks of the month which, together with this not-so-upbeat report, will raise doubts whether consumers will do their share to help hold the economy up from a double dip. Today's report points to a third straight month of contraction for Friday's payroll data.”
US ISM Manufacturing Index for August. After release of the data on 9/01/2010 at 10:00 AM ET, Econoday reported, “Lagging factors gave what is a bit of a deceptive boost to the ISM's manufacturing index masking a further slowing in the key leading index of new orders. The PMI came in at a stronger-than-expected 56.3 for a sizable eight tenths gain from July. The reading is well over 50 to signal month-to-month growth and in the comparison with July, to signal growth at an accelerating rate. But this growth is in general business activity: production, employment, inventories. These three factors all accelerated in August with a special note on inventories where the gain may reflect in part an unwanted build… New orders slowed but just a bit, down four tenths to 53.1 for its lowest reading since the manufacturing recovery began in the second quarter of last year. Unfilled orders also slowed, down three points to 51.5 and its weakest reading since December. The slowing in order build is certain to limit future improvement in business activity… Still today's report is solid and includes strength in both exports and imports and an increase in prices paid that reflects demand for inputs. Though the slowing in orders is a concern, stocks are rising on this report.”
US Construction Spending for July. After release of the report on 9/01/2010 at 10:00 AM ET, Econoday reported, “The construction sector returned to a downturn in July and in June. Construction outlays fell 1.0%, following a revised 0.8% drop in June. The latest figure came in worse than expected compared to the market forecast for a 0.6% drop. June original was estimated to be a 0.1% rise… The recent plunge in home sales and decrease in starts has carried over to construction spending. The dip in July was led by a 2.6% drop in private residential outlays, following a 2.0% decline the prior month. Public construction also fell-by 1.2% after a 0.6% gain in June. In contrast, the private nonresidential component rose 0.8%, following a string of declines… On a year-ago basis, overall construction outlays slipped to minus 10.7% in July from down minus 10.4% in June… At the release, markets paid more attention to an unexpected rise in the ISM manufacturing index. On the ISM news, stocks popped, rates firmed, oil rose noticeably, and the dollar gained.”
US Jobless Claims for Week Ending Aug 28. After release of the data on 9/02/2010 at 8:30:00 AM ET, Econoday reported, “Initial jobless claims may be edging down, at least they have the past couple of weeks. Initial claims for the August 28 week came in at 472,000 compared with a revised 478,000 in the prior week and the 2010 peak of 504,000 the week before that. The four-week average fell 2,500 to 485,500 yet is still about 25,000 higher than a month ago, which is not a positive indication for tomorrow's employment report… Continuing claims fell 23,000 to 4.456 million in data for the August 21 week. Here the four-week average, at 4.485 million and down more than 100,000 from a month ago, probably offers a positive indication for tomorrow's report. Note that a decline in continuing claims reflects both hiring but unfortunately also reflects the expiration of benefits. The unemployment rate for insured employees is unchanged at 3.5%… There are no special factors in today's report, a report that probably won't affect expectations for tomorrow's data. The job sector is flat at best, a description that likewise fits consumer spirits and consumer spending.”
US Productivity and Costs for 2Q2010. After release of the data on 9/02/2010 8:30:00 AM ET, Econoday reported, “Due to the slowdown in output and businesses already having cut labor costs to the bone, productivity fell notably in the second quarter. Nonfarm business productivity declined an annualized 1.8% in the second quarter after a 3.9% advance in the prior quarter. The market had forecast a 1.9% dip in productivity. Unit labor costs rebounded an annualized 1.1% in the second quarter, following a drop of 4.6% in the first quarter. The median forecast was for a 1.2% boost in labor costs… The drop in productivity reflected in part a slower 1.6 gain in nonfarm business output after a 5.0% jump in the first quarter. Also, hours worked jumped to a 3.5% pace from 1.1% in the first quarter… Year-on-year, productivity was up 3.7% in the second quarter-down from 6.3% in the previous quarter. Year-ago unit labor slipped to an annualized minus 2.8% from minus 2.9% in the first quarter… While the latest productivity report is not as favorable for profits as the recent string of gains, the good news is that companies may have pressure to start hiring. Any notable and apparently sustainable boost in company demand should result in additions to payrolls. Economic uncertainty, of course, will dampen hiring enthusiasm… Today's numbers are close to expectations. At the same time, initial jobless claims barely missed analysts' median forecast. Markets are little changed on the release.”
US Factory Orders for July. After release of the data on 9/02/2010 10:00:00 AM ET, Econoday reported, “Yesterday's increase in the ISM's manufacturing composite for August, which gave a big lift to the stock market, masked cracks in order data. Similar cracks appear in today's factory order data for July. New orders edged only 0.1% higher following a 0.6% decline in June (revised from minus 1.2%) and an unrevised 1.8% decline in May. The data are being skewed slightly lower by non-durables, a group exposed to swings in commodity prices. Yet the durables sector isn't all that hot either showing a 0.4% gain in July (revised from plus 0.3%) following a small decline in June and a not-so-small 0.7% decline in May… Unfilled orders also show weakness, down 0.1% for durable goods in July following fractional gains the prior two months. With slowing rates of orders coming in and backlogs being worked down, the outlook for shipments is no longer so good. Shipments did jump 1.1% in July but a significant degree of this, due to lead times, reflects the filling of prior orders. On inventories, yesterday's ISM data offer hints that a significant build is underway, one that may prove to be unwanted should orders fail to pick up. Inventories jumped 1.0% in today's data… Other readings are also less than positive. Capital goods data show strength in shipments, tied here definitely to the group's long lead-times, but show significant and surprising weakness in orders. The factory sector remains at the crossroads, having led the economy out of recession but now showing an aging slope.”
US ISM Pending Home Sales Index for August. After release of the data on 9/02/2010 at 10:00 AM ET, Econoday reported, “A sign of life from the housing sector! The Pending Home Sales Index rose 5.2% in July to end two months of post-stimulus decline for a positive indication on existing home sales in August and September. Gains were posted in all regions. Yet this is only one sign of improvement, underscored by the National Association of Realtors which is warning that the housing sector faces a "long recovery" ahead.”
US National Employment Report for August. After release of the report on 9/03/2010 at 8:30 AM ET, Econoday reported, “Overall payroll employment fell for the third straight month but there was a moderate gain in the private sector. Also on the positive side, wages were up. Overall payroll jobs in August slipped 54,000 after falling a revised 54,000 in July (yes, they are the same) and contracting 175,000 in June. The August overall number was less negative than the consensus forecast for a 90,000 decrease. The June and July revisions were net up 123,000… A big part of the latest month's weakness was seen in the government sector, which still includes layoffs of temporary Census workers. Government jobs dropped 121,000 after falling 161,000 in July. In contrast, private nonfarm employment continued to rise, gaining 67,000 in August, following a revised boost of 107,000 the month before. Analysts had called for a 40,000 advance for private payrolls in August. July had previously been estimated to be a 71,000 increase… Looking at private sector components, private service providing jobs rose 67,000 after a 70,000 boost in July. Leading the way was a 45,000 boost in education & health services, with health care up 40,000. Professional & business services returned to positive territory, rising 20,000 after dipping 3,000 in July. For the latest month temp help was up 17,000. Some weakness was seen in retail trade, down 5,000 in August… Goods-producing jobs were unchanged in August after a 37,000 advance in July. In the goods-producing sector, manufacturing fell 27,000 with 22,000 of this accounted for in motor vehicles. This may be partly related to atypical seasonals in retooling timing this year. Construction jobs actually rebounded 19,000 after dipping 4,000 in July. Mining rose 8,000… Average hourly earnings improved to 0.3% from up 0.2% in July. The August number topped the market estimate for a 0.1% gain. The average workweek for all workers was unchanged at 34.2 hours in July. The market forecast was for 34.2 hours… Looking ahead to the personal income report, aggregate weekly earnings were favorable toward a moderately healthy wages & salaries component. Aggregate weekly earnings rose 0.3% in August, following a 0.6% gain the month before… On a year-ago basis, overall payroll jobs nudged up to 0.2% in August from up 0.1% in July… Turning to the household survey, the unemployment rate came in at 9.6%, compared to 9.5% in July. The consensus projected a 9.6% figure for August… Overall, today's report shows that the economy is not going back to recession. Still, growth is less than robust. For now, it appears to be a growth recession (less than long-term trend), but not an outright recession. The bottom line is that the private sector is holding up better than expected. ”
US ISM Non-Manufacturing Index for August. After release of the data on 9/03/2010 at 10:00:00 AM ET, Econoday reported, “A new optimism after today's jobs report -- not so fast. The ISM non-manufacturing report shows broad and deeper-than-expected slowing. New orders at 52.4 are down more than four points in August for the slowest rate of month-to-month growth so far this year. Employment, which in this report includes government workers, is signaling contraction, at 48.2 for a nearly three point decline for the worst reading since January. The composite headline index at 51.5 is down exactly three points for what is also the worst reading since January… Backlog orders are basically flat, export orders are down, deliveries are showing less delays, and general business activity is slower. Imports did rise as did raw material prices… Immediate reaction to the report is muted in part because of a rumor for a weak report that hit the markets just before the 10:00 ET release. Yet this report isn't likely to help the markets through the remainder of the pre-holiday session. Just barely holding its own, the economy is in a touchy spot.”
US International Trade for July. Prior to release of the data on 9/09/2010 8:30:00 AM ET, Econoday reported, “The U.S. international trade gap in June spiked to $49.9 billion from $42.0 billion in May. Exports fell 1.3%, following a 2.5% gain in May. Overall imports advanced 3.0% in June after rising 2.8% the month before. The widening of the trade gap was primarily in non-oil. The nonpetroleum deficit widened to $40.0 billion in June from $32.2 billion the prior month. The petroleum goods gap, however, narrowed to $21.2 billion from $21.5 billion in May.”
US Jobless Claims for Week Ending Sept 3. Prior to release of the data on 9/09/2010 at 8:30:00 AM ET, Econoday reported, “Initial jobless claims for the August 28 week declined 6,000 to 472,000 from a revised 478,000 in the prior week. The numbers are still high but still notably below the 2010 peak of 504,000 the week before that. Continuing claims fell 23,000 to 4.456 million in data for the August 21 week. The decline in continuing claims reflects both hiring and unfortunately also the expiration of benefits.”
US Wholesale Trade data for July. Prior to release of the data on 9/10/2010 10:00:00 AM ET, and following the prior report, Econoday reported, “Activity at the wholesale level continues to fade in the latest disappointment for the economic outlook. Wholesale inventories did rise 0.1% in a gain however that likely reflects unwanted buildup. Sales at the wholesale level fell for a second straight month in June and fell steeply, down 0.7% following a downward revised 0.5 decline in May (originally a 0.3% decline). The June sales decline is the steepest since March last year which of course was a low point for the economy… Lumber, hit by weak construction, continues to show rising inventories and very weak sales. Both paper and apparel show a similar profile. Petroleum products, always sensitive to price change, show both declining sales and declining inventories… The stock-to-sales ratio says it all for the wholesale sector, up one tenth for a second straight month to 1.15. Factory inventories fell 0.1% in data already released leaving it to retail inventories to determine whether June shows an overall build or draw, with the latter being preferable given the slowdown underway in consumption.”
International Equity Markets Review
Regardless of the past six day’s trading action in US and international markets, the international equity markets have not confirmed a new Bull phase yet. But we will keep watching.
Markets were all green this week, but except for the regional Malaysia, Philippine and Thailand indexes, August was not a good month.
It’s ok to cheer for the green, but managing risk still comes first!
Below are 16 country index chart links from StockCharts.com (with their formal approval btw). Global equity markets do not trade in a vacuum. It is important to be watching these markets move through a trend juncture together, pushed and pulled by global currency and commodity strength or weakness as well as local and regional economic forces.
Here is the latest session data for the exchanges of the Americas.
Here is the latest chart for the Brazilian Bovespa stock exchange in Sao Paulo.
Brazilian Bovespa stockcharts.com chart
Here is the latest session data for the Toronto Stock Exchange composite index.
Toronto 300 stockcharts.com chart
Toronto CDNX stockcharts.com chart
Europe
Here is the latest session data for the bourses of Europe.
Here is the latest session data for the London stock exchange FTSE.
FTSE 100 stockcharts.com chart
Here is the latest session data for the German DAX.
Here is the latest session data for the French CAC 40.
Here is the latest session data for the Swiss market index. Swiss Market Index stockcharts.com chart
Asia-Pacific
Here is the latest session data for the Asia-Pacific stock exchanges.
Here is the latest chart for the Japanese Nikkei 225 index.
Tokyo Nikkei 225 Index stockcharts.com chart
Here is the latest chart for the Singapore index .
Singapore Straits Times Index stockcharts.com chart
Here is the latest chart for the Shanghai Composite index .
Shanghai Composite Index stockcharts.com chart
Here is the latest chart for the Hong Kong Hang Seng index .
Hong Kong Hang Seng stockcharts.com chart
Here is the latest chart for the India BSE 30 index .
Mumbai BSE 30 Sensex Index stockcharts.com chart
Here is the latest chart for the Australian All Ordinaries index .
Sydney All Ordinaries Index stockcharts.com chart
Russia (RTS) stockcharts.com chart
ETFs Review for International equity market
Of the 16 USD-denominated country ETFs trading in NY, all of them were up W/W and all but Brazil (EWZ) was up on Friday. A week ago they were all up on Friday too, but W/W there were 10 down and 6 up. Definitely bullish.
I have been watching the EWZ because I do think that if, as and when the US Dollar index ($USD) lifts to a rising trend, there will be a sell-off in non-US stocks and in commodity-related stocks of which Brazil has many.
Brazil’s two large oil companies were in the news at the end of the week, which did have an impact on the Bovespa index, which was also down on the day (-0.2%). Friday on the Bovespa, PetroBrazil stock jumped +4.9% after announcing the mother of all capital raise-ups planned for this month. A lot of cash will come from competitor OGX Petroleum, which dropped in the market Friday by -5.4%. Cash will also have to come from other stocks too unless investors decide to move out of their cash holdings to buy risk.
Keep your eye on the Bovespa and the Real to USD in the forex market.
Here is a 2-year chart plus RSI-7 for the Bovespa. The index price and momentum weakness in August is discernible.
The Brazilian Real is also over-bought here. Any weakness of the Real to the USD would likely be accompanied by a fall in commodity prices and in the Bovespa index. So keep an eye on Brazil.
Table 14: International equities via an ETF perspective (in $USD)
| Symbol | Close | 1Day Change |
1Day %Change |
1W %Change |
2W %Change |
4W %Change |
YTD %Change |
3M %Change |
6M %Change |
12M %Change |
Japanese equity market ETF: EWJ
Here is the Japanese (EWJ) equity market ETF Monthly, Weekly and Daily data charts:
U.K. equity market ETF
Here is the United Kingdom (EWU) equity market ETF Monthly, Weekly and Daily data charts:
EWU Daily data: 
Canada’s equity market
Here is the Canadian (EWC) equity market ETF Monthly, Weekly and Daily data charts:
Taiwan’s equity market
Here is the Republic of China/Taiwan (EWT) equity market ETF Monthly, Weekly and Daily data charts:
Indonesia equity market ETF
Here is the Indonesia Fund (IF) equity market ETF Monthly, Weekly and Daily data charts:
IF Summary from Yahoo Finance:
http://finance.yahoo.com/q/pr?s=IF
IF Summary from Google Finance:
http://www.google.com/finance?q=AMEX:IF
IF chart from StockCharts.com:
http://stockcharts.com/charts/gallery.html?IF
Here are the links to interactive charts from Investertech.com for the key country ETFs, which you can add technical indicators for as well.
Group 1:
(list one)
(list two)
Group 2:
(list one)
(list two)
US Equity Markets Review
A week ago, the US small cap index (Russell 2000 $RUT +0.98% W/W) was the only one to lift, and that was only because of an enormous +2.83% gain on Friday. This week all 30 Dow stocks lifted and the small cap index lifted more than the others.
NASDAQ Composite ino.com chart
NASDAQ Composite stockcharts.com chart
Here is the list of the ten highest-weighted non-financial stocks in the NASDAQ Composite. Put them in a watchlist (see Google Finance Portfolio) and watch them like a hawk:
AAPL MSFT GOOG QCOM RIMM CSCO INTC ORCL GILD EBAY
Daily RSI-7 for the Nasdaq 100 Big-10
Weekly RSI-7 for the Nasdaq 100 Big-10
Monthly RSI-7 for the Nasdaq 100 Big-10
Add two of AMZN, DELL, JAVA or YHOO to get a Cara Dozen.
Or while you are at Investertech.com, input up to 30 tickers in the window above “Summaries” – say AAPL MSFT GOOG QCOM RIMM CSCO INTC ORCL GILD EBAY AMZN DELL JAVA YHOO plus up to 16 more – and click on Tech Chart, Basic View, Daily Watch, Performance or Fundamentals and you’ll get a lot of information to compare one against the others.
Here is the Monthly data chart of the Interactive Chart of Nasdaq Composite, S&P 500, Dow30, and Russell 2000 (small cap) indexes.
Here is the Weekly data chart of the Interactive Chart of Nasdaq Composite, S&P 500, Dow30, and Russell 2000 (small cap) indexes.
Here is the Daily data chart of the Interactive Chart of Nasdaq Composite, S&P 500, Dow30, and Russell 2000 (small cap) indexes.
Dow 30 Stocks Review
This week, 17 of the 30 Dow stocks closed lower. Things are improving for the Bulls. A week ago, 23 of the 30 Dow stocks closed lower, and the week before that 26 of the 30 closed lower.
But a week ago I wrote in this space, “Rring the bell Abel and Mabel. When was the last time we saw Cisco (CSCO +4.07% W/W) top the Dow 30 leaderboard? Didn’t I recently write something abut Cisco as in it’s a good buy down at these levels.”
The Bulls must be crushed. From 1st to last in the Dow 30. This week CSCO dropped -6.39%, and I saw no indication, at any point, that traders were becoming investors with a longer-term time horizon. No, the fact is that traders are still apprehensive.
This week, the winners were Kraft Foods (KFT +3.09% W/W), which is not an inspirational story if you happen to be a Bull. In 2nd place was Home Depot (HD +2.02%), which is a follow up on the previous week’s gain of +3.15%. In 3rd place was AT&T (T +1.85%), which along with Verizon (VZ) in 6th place and the KFT in 1st, shows traders were nibbling at high dividend payers.
The leading losers (in addition to CSCO) were: Hewlett-Packard (PQ -4.34%), Caterpillar (CAT -4.30%), Intel (INTC -2.86%) and Alcoa (AA -2.37%).
As I continue to say; at the end of the day, we need to see more volume to have much appreciation for what’s truly happening.
Table 16: Dow 30 List
| Symbol | Close | 1Day Change |
1Day %Change |
1W %Change |
2W %Change |
4W %Change |
YTD %Change |
3M %Change |
6M %Change |
12M %Change |
Here are the links to interactive Dow charts from Investertech.com that I broke into groups of ten, which you can add technical indicators for as well.
(list one)
(list two)
For those of you who are relatively new at trading, or to this blog, why not pull the ten (10) Cara 100 companies out of the DJIA 30 list, and study the links for just these stocks? Keep a hard copy of the Value Line quarterly report plus a record of the Daily-Weekly-Monthly RSI-7 technical indicator. Study up on what the RSI is so you know it and have confidence that it is just like a football game yardstick that shows you how much risk your team is facing when trying to score points.
The Cara 100 high-quality company list has the following ten DJIA components:
Wal-Mart (WMT), Disney (DIS), Johnson & Johnson (JNJ), McDonalds (MCD), Exxon (XOM), Boeing (BA), Procter & Gamble (PG), IBM (IBM), Intel (INTC), and United Technologies (UTX)
There is no rocket science to these high-quality companies. In your typical week, you shopped at Wal-Mart and along the aisles, mostly the personal consumer products were from Procter & Gamble, except for maybe the baby powder from Johnson & Johnson. On the way there, you may have filled-up at an Exxon gas station, and on the way home, maybe you stopped for a Big Mac or a salad at McDonalds. Overhead, you watched airplanes from Boeing. If you were in a high-rise building, you probably rode in an Otis elevator from United Technologies. Maybe you no longer have an IBM PC, but you do know the company, and your present PC is likely powered by Intel. Every parent's kids want you to take them to Disney… All in all, this is just life we're talking about here. If you are alive, you know these companies like your children. You probably even see more of them… So, just quickly read those Value Line reports – one per company every 13 weeks – and keep an eye on the RSI (momentum) and MACD (trend)… Those guys on Wall Street may be worth a gazillion dollars, but they didn't do it the way you and I have to do it. So, stop listening to their stories that financial engineering and out-sourcing is what's making America strong. That is such a crock. Instead, live life, use common sense, do only what you understand, feel comfortable, and you'll be surprised at how quickly you can take control and free yourself of the shackles of HB&B.
This paragraph continues to run because, over time, it works.
Value Line Report(s) this past Friday
This week [cycle 10, 23, 36 and 49], Value Line reported on one DJIA component: McDonald’s (MCD), which is a Cara 100 company based on financial strength, management, returns on equity, profit margins, and so forth.
McDonalds [GICS 30, Dow 30, Cara 100]
(MCD: Google Finance file)
(MCD: Yahoo Finance file)
(MCD: StockChart chart)
(MCD: Billcara2 chart)
(MCD: ADVFN Financial Data)
(MCD: Value Line Report Sept. 3: next one is due Dec. 3)
Before opining on a stock, I return to my previous notes. When you put the facts and your assessment and opinions in writing, the exercise puts your feet on the ground. You cannot fool yourself. In my case, I am teaching a rather large class, so it would be impossible not to be grounded in reality. As a trader of securities prices, you are dealing in fact versus fantasy every minute, every day. You must be grounded.
Here is what I have written in past WIR’s about McDonald’s:
From WIR #23-09 June 7, 2009 (MCD $):
You know I like the company although I profess not to be a big trader in the stock at this point. As we extend the range of our services as my company grows, I’m sure there will be MCD in core positions in some portfolios. When markets are stable, it’s a stock I feel good about trading because overwriting puts and calls can be an effective boost to Total Return (TR).
Before I review the last WIR write-up I did for MCD, let me say right up front, I nailed it. But you be the student here and tell me what else I could have done.
Re: McDonald’s (MCD), let’s see what I wrote in WIR #49-2008. It ought to be interesting because the S&P 500 closed that week at 876.07, and this week the close was 683.38, which is a loss over one-quarter or 13-weeks of -22.0%. MCD closed this week at 52.12, and was 62.72 at the close 13-weeks ago, which is a loss of -16.9%.
Value Line rates McDonalds very highly, and so do I. Management has excelled with much higher operating margins and return on equity performance. The balance sheet is solid, and the dividend is high and growing. Earnings and cash flow per share are accelerating. In tough economic times, the company offers a value proposition that customers clearly want.
On pull-backs, traders can write out-of-the-money puts for solid income. Caution is needed, however. There has been a large price move from Tuesday’s low of $55.44 to Friday’s close of $62.72. The Value Line report dated Dec 5 (priced at $55.51) seemed to nail the low.
The last trade for the March 47.50 puts was $2.15, but that price does not reflect the Friday afternoon rally in the market and the stock.
With a dividend of about $2.10 over the next 12 months on a price of 47.50 less the 2.15 premium income, the dividend yield would be 4.63%. Given that the yield on the 30-year US Treasury bond is 3.12%, and the PE at a price of 45.40 (ie, the option strike price less the premium income) and 2009 projected earnings (Value Line’s estimate) of 3.85, would be 11.8. Since the average annual PE is 17 and the lowest average annual PE multiple in the past 20 years has been 14.1, I would feel very comfortable having the stock put to me at 47.50. The last trade in the March 50 puts was 2.50, which would take your price to 47.50 if the stock was put to you. There was a spike down to a low of 45.79 in October. Prior to that you’d have to go back to April 2006 to see those prices, but the company has earned 8.91/share in the past two years, and paid out 6.56. So, as time goes on, the company is becoming financially stronger. If you were put into a situation where your cost basis in MCD was 47.50, the dividend yield in the next 12 months would be 4.42%, which is still excellent given that the forward PE would be just 12.3, still well under the lowest average annual PE for the past 20 years. So, if you can get the right price on a pull-back now that there was an end of the week rally in this stock, the decision would be an easy one to make, I feel.
When you buy stock or write puts in a challenging, volatile market like we have experienced since mid-September, you have to go in when the RSI-7 technical indicator shows that the price has come to you, as was the case in early to mid-October, and possibly a couple times since. At this point, however, the M-W-D RSI-7 indicator is 65.9-64.7-74.7, so this is no time to be chasing it even though I do expect the price to continue lifting from today’s price of 62.72.
All I can do is point to the companies that I believe have the highest quality and to the methodology I use in trading the stock price. I am a mechanic and these are my tools. The rest is up to you. Seldom does it happen that the date the Value Line report is published and I comment on it, the best time for us to be a buyer or a seller of that stock.
This is why I continuously state that I educate and inform, but don’t recommend specific trades. The ones where people know I have, I am doing that for purposes of case study and discussion.
(As of WIR#49-08 Dec. 5 2008 @ $62.72) As I say, “the M-W-D RSI-7 indicator is 65.9-64.7-74.7, so this is no time to be chasing it.” (However) By Mar. 6, the stock had fallen -16.9% to 52.12, so I was right to be cautious. Moreover, the stock on January 6 had lifted to a high of $64.46, which was +2.8% higher, so for a time the price did “continue lifting”.
The biggest point however is that while the stock cratered -16.9% over 13 weeks, I advised writing the March 47.50 puts, which that day were $2.15 – at a higher premium, on extreme stock price weakness, rather than on that day at $62.72. Those short puts are now bid $0.30, and have been as low as $0.20. In any event, if you bought at the latest close and sold back then 13-weeks ago, your profit would be +$1.85 on a cost base of $0.30. That’s a gain of 1.85-0.30=1.55/0.30=+517% over one-quarter year. You didn’t have to lose -16.9% in the stock or -22.0% in broad market index – you could have made a good profit from the trade I gave you here – for the [serious] “purposes of case study and discussion” of course.
Trading however is not easy. As anybody who was in there fighting can attest, it was one of the toughest periods in memory – and I have a long memory. But, it’s the principles of trading we can all learn, and over time use to our advantage.
Now as to the company and the stock price today, Value Line’s analyst likes it, and so do I. These are tough times, so people will continue to seek value in McDonald’s as opposed to the upscale restaurants. The operating metrics for revenues, earnings, cash flow and dividends per share are almost certain to grow. Look around the S&P 500 corporations and ask how many are going to do that. Not very many.
Sure, the PE is a tad high, but with a 4-percent (solid +$2.00) dividend on a $52 stock, and the fact that the average annual PE has not been lower than it is presently, there is not a lot of capital risk at this level. You don’t have to be a trader, you could buy the stock and write a relatively long-term call to drop your cost base well under 50, and sit on that dividend, which is probably as risk-free as Uncle Sam and pays a heck of a lot more.
Say you wrote the Jan 45 2011’s @ $7.70 along with the stock at 52. Your cost base is 44.30 and you may be assigned more stock at 45. Your dividend this year will be maybe $2.10 and next year maybe $2.50. So you are earning about 5% cash on cash and have plenty of upside (ie, capital gain potential) in the stock. The gain would likely be +25+% per year, taking your Annual Total Return to maybe +30%.
You show me your hedge funds and mutual funds that are getting those kinds of returns, and I’ll buy the Big Macs on our way to Space Mountain and Cinderella’s Castle.
As I see it, the Jumbo Diet Coke is half-full. No complaints here.
First off, I must note that I corrected a typo re dividend. The previous WIR referred to a dividend of $4, when it was obviously a yield of about $2 pay-out on a $50 stock. I’m really sorry, but I seldom re-read my stuff, for which I am in the habit of apologizing. In terms of judgment, I also opined that the dividend would be “maybe $2.10 and next year maybe $2.50”. Well, even taking the four quarters forward, I was still too high. It now looks like a dividend of $1.90-$2.00 in the four quarters going forward and $2.35 the year after that. That’s still assured by the financial strength of this company and the fact that, when pressed by bad economic circumstances, people will turn to fast food. They didn’t in 2001-2002, but that, I believe, was that 9-11 put people into such a dour and fearful mood they didn’t want to venture outside and into crowds. Even with the heightened risks today though, it appears no longer to be a factor.The big point is that the price at the last WIR was $52.12 for MCD, during a major sell-off in equity markets, and it closed this week at $59.87, so any of the bullish positions I advocated worked out quite profitably.
Return to those Cara charts for the Monthly-Weekly-Daily and you will see that there was also only a small risk in buying MCD on the pull-backs, particularly when my ‘simple little trading system’ gave an Accumulation Zone Buy Alert.
Heck, just writing puts whenever the Daily RSI-7 dropped below 30 and then recovered would have significantly reduced your cost base, and increased your cash on cash return from dividends, which is what portfolio management is truly all about.
The stock is at 59.87, after opening Friday at 60.40. It made a solid run from 51 to 61 in the past week, so it’s very pricey right now in terms of a new entry point. I’d stand aside – maybe a week, maybe a month, and watch. I never chase a stock in any case.
A couple days ago, the Daily RSI-7 for MCD jumped above the 70 level, while the Weekly was almost up to 70; then the Daily retreated. Potentially that gives some time to write calls or sell – if you didn’t do it a couple days ago. If you are not invested, volatility in markets is so enormous; all you can do is watch the technical indicators and buy the dips, perhaps writing puts and buying calls if those pull-backs are extreme.
From WIR #36-09 Sept 6, 2009 (MCD $56.14):
Here we are at Sept 6, and my last paragraph shows how accurate I was in my MCD outlook once again. The current price is $56.14. The price at the last WIR (June 1: $59.87) was the absolute high since then. I had recommended traders write calls (to reduce the cost base if they were committed to holding onto the stock) or sell. And I said, “Don’t buy”.
The low since then occurred in the week of Aug 17 at $54.43, and even this week the low was $54.69, so we are around the low for the quarter.
The RSI-7 for the Monthly-Weekly-Daily is presently 48.8 (sidetracking), 48.8 (sidetracking) and 53.3 (rising). Essentially the stock is motionless and will likely move with the broad market, but slower to lift and slower to fall, if that’s the case.
I commented earlier that the dividend going forward (from one quarter ago) would be 1.90-2.00 then moving to 2.30. As it turns out that 2.00 and 2.30 would have been a solid estimate. Going forward four quarters, the dividend will almost certainly be $2.45. On a price of $56.14, the dividend of $2.45 would be a yield of 4.36%, which is excellent for a company of this caliber.
If you can buy the stock at say 54, with the help of some put write premium, or a pull-back in prices, your yield would be 4.54%. In comparison, the 30-year US Treasury bond is currently priced to yield just 4.273%, and the 10-year Treasury is yielding just 3.442%. With due respect, I think the McDonald’s balance sheet and operating budgets are in far better shape that those of the United States government.
About McDonald’s financial strength, of which I have consistently remarked is outstanding, look at the balance sheet summary in the left side column mid page of the Value Line report. McDonald’s in just 18 months has dropped its current liabilities by $1.66 billion while actually raising its current assets a tad. It slipped back a bit this year, but wow, that 18 month performance is excellent.
Yes, revenues per share are expected to drop a tad this year, but cash flow and earnings per share are expected to rise.
Look at the operating margin over 32%; the net profit margin up to 19.0% and rising; the Return on Shareholder Equity of 31.0%, and the company is dividending out just 53% of net profits, so the dividend is solid. This company is a machine. Kaching, kaching, kaching.
With earnings projected by Value line for the 4 quarters going forward of $4.05/share, the current price of $56.14 represents a PE multiple of 13.86. Now go to the VL report and see the Average Annual PE is 17.0, and when you thumb along the live for PE each year, you’ll see how good that 13.86 looks. At a possible cost basis of $54, the PE would be just 13.33. What’s not to like.
So, on downspike days, why not consider writing some puts at lower strike prices? These are like stink bids. Infrequently you will get filled. When you do, your cost basis will be even lower by the sum of all those put write premiums you earned. Just be sure you have the cash in reserve to meet an option exercise fill because sometimes it can get ugly, like Black Monday 1987, when there was no hope of selling out even an MCD in that crashing market.
You know, I wrote about this in my book Lessons (I think); if you are young and in a self-employed business that can’t meet these metrics, maybe you are not cut out for business. Why not try to get employment with a solid company and put your excess funds into the shares of companies like McDonald’s. Spend your excess time learning how to trade prices. At least consider it.
There is not much more I can say.
WIR #49-2009 Dec 5 (MCD $61.59):
The charts show me the following Monthly-Weekly-Daily RSI-7 numbers: 61.1 59.1 30.5 for Dec 4 and 48.8 48.8 53.3 on Sept 4. The Daily RSI-7 in early Sept was falling and dipped to 30, which was the time to but some MCD and then the RSI-7 lifted to 90 in mid-Nov, which was the time to sell some. Presently the Daily RSI-7 is down to 30.5 and falling, but is it time to buy more yet? Judging from the Weekly RSI-7, which is at 59.1, I’d say no, that number needs to fall into the 30’s and the Daily below 30 before I would be ready to add positions.
In early November, MCD had an extreme pop from 59 to a cycle high of 64.75 on Nov 16. Yes, the financial metrics are looking sound, but that was too much of an up-move in a short period. Since that recent high, MCD has dropped -$3.16 (-4.9%) in just 13 sessions. Even if you deduct the dividend payout of $0.55 during this time, the decline of -$2.61 is still a loss of 20 cents a day, which is a lot for MCD.
I think the big money is moving out. I’d wait for the RSI-7 and the price ($61.59) to come to you. The dividend over the next four quarters is projected to be $2.25/share. If you can buy the stock below 58, your dividend return would be over +3.9%. That’s about the same as on a 20-year Treasury from Uncle Sam and I think Ronald McDonald is just as secure, and has far more upside. If you question the upside, just look at the line items for revenues, earnings, cash flow, and dividends per share every year for many years. Almost straight up. Unlike Uncle Sam, always borrowing, going further in debt, Ronald McDonald is always building assets, building wealth. People all over the world love it; in fact, +65% of systemwide sales and +53% of profit is non-U.S. Unlike the liar banksters, this company doesn’t pretend to be American. There is nothing phony or questionable about this company. Everybody understands exactly what it is, and they know that in the foreseeable future, it will grow its business.
The corporate picture is improving too. The Value Line analyst even raised his earning’s estimate from $4.20 to $4.45 for 2010. The financial picture is being aided by a weak economy where the average person is trying to save money at these inexpensive, fast-food restaurants, and by a global economy that may have bottomed in its cycle, making the restaurant affordable to even more people. Revenues, profit margins and return on equity percentage are all expected to rise for the next couple years, and the number of shares outstanding decrease as the company continues to buy back shares, which are all factors in favor of higher prices.
All in all, I am not a buyer at this point in the broad market cycle that needs to consolidate its recent gains, which usually happens by testing the support levels. An ebb tide will lower all boats except those that are rocket science maybe, and McDonalds is not that. But McDonald’s is a solid long-term performer that would look good at say 58. On weakness to close to that level, I would think some put writes would get you a favorable price, possibly below 58. But do not ignore the Weekly RSI-7 as well as the Daily. You want the price to come to you.
WIR #23-2010 June 6 (MCD $66.70):
Due to my traveling to Toronto for the Prospector and Developers Convention 13 weeks ago, there was no WIR#10-2010, hence no write-up for McDonald’s at that point.
In the earlier WIR (Dec 6, 2009), with the MCD at $61.59, I opined that the stock was still dropping and would be a good buy at ~58 and that close to that level I would sell some puts for premium income that would take my cost to about 58. A week after that WIR, MCD hit a low of $60.04, and I suppose you might have picked the exact right time to buy the stock and sell the right puts to put you into MCD at close to 58. But then again, traders must deal with reality, and 99% of us would have missed that trade, even if trying.
I also opined that the RSI-7 for the Daily price series data was falling to an acceptable level for entry at that point, but I wanted to see the Weekly RSI-7 drop a lot more. It didn’t drop below 50 until this past week. That’s what happens when the stock of a solid company like McDonalds starts a Bull run from a Sept 2009 low of ~$53.03 to an April 2010 high of $70.56.
Had you put on that recommended trade (i.e., long stock, short put) in December, paying say 59 or even 60 or 61, you would have been a happy trader through April, and even today with the stock priced at $66.70.
If you can make a timely entry, MCD is still an attractive stock. There was one day in late May when the RSI-7 on the Daily dropped to about 20 and the stock fell to a low of ~$65.46 when you might have written some puts to take in premium (or lowered your cost base if you had been long the stock), but with the Weekly Stochastics in free-fall since the April high and the Daily Stochastics giving me an uncertain message at that point, I would have passed on the opportunity.
The thing is we are not looking for perfection, just following a system that has an art and science to it that can help us make better trades. Sometimes we put in a bid or offer and don’t quite get it. That’s trading. At the end of the day though, we know we are better off for sticking to a disciplined approach to trading.
Always before I study a company, I take a quick look at the Monthly-Weekly- and Daily charts.
RSI-7 and Full Stochastics are negatively biased. Price has fallen a lot since the end of April, but the indicators are not yet showing a reason to get interested. This stock is like one of the best built boats in the harbor, but still going to lift or fall with the time.
The Value Line analyst now has an earning’s estimate of $4.50 for 2010 (up from $4.45, which was up from $4.25), so there is earnings momentum, which is a very good thing. The 2011 earnings estimate is $4.85. Let’s say that would be $5.20 for 2012 and $5.60 for 2013. At a 16 PE multiple, that would take the stock to $90. But in a Bull market, there would likely be a 17 multiple, taking MCD to about $95 in three years.
What else could happen to put the stock there?
Presently the company has about 1.076 billion shares outstanding. The Value Line analyst is projecting a share buy-back program that will take that figure to 1.00 billion in 3 to 5 years, and the company has the cash flow to do that. Fewer shares means better per-share metrics.
Then you have that solid dividend that is expected to grow by about 9.5% annually. Conservative investors like that. If you own rental real estate, that’s like an increase in rent of almost 10% a year, which in property ownership would be as outstanding as it is in securities ownership.
Next, you can see that foreign ops contribute about 65% of total revenues and 53% of profits. Three years ago that was 65% and 40%. So, pricing power is getting better abroad, which can be expected to continue because those economies are growing much faster than the US.
Finally, on my scorecard at least, the higher trend of the US Dollar has actually hurt earnings when factoring in currency losses, but, if I’m right, the Bull market that exists today in US Dollars – largely due to the problems in Europe – will later this year reverse. I expect to see a stronger Yuan and weaker Dollar at some point, and that would pump currency gains into those foreign profits.
So by 2013, McDonald’s might even have a 65% revenue and 60% profit contribution from foreign operations.
These are reasons why I think that MCD will hit a high of $95 inside three years. The question now is to time the entry.
My feeling is that in the long run, there is usually a significant Bear phase in the stockmarket cycle, and that, as solid is the company, MCD will not be fortunate enough to miss that. So, let’s suppose that the high of $71.84 of a month ago represents the long-term cycle high – a big presumption on my part – then how low could the cycle low get to? Without looking at a chart, I’d guess -30% lower than the high, which would put that low at say $50. I see from the VL report that the 2009 low was 50.4 and in 2008 it was 45.8, so is a $50 price possible? I think so. With a dividend this year, that would put the yield at 4.5%, which would be outstanding and solid, especially if inflation figures were to remain low. Could we go back to the Lehman Bros spike low of ~$45.80? anything’s possible. But the point is that regardless how low the stock hits in a Bear cycle, there will follow a Bull cycle, and as customers around the world will find a way to get to McDonald’s, I expect revenues per share to continue to grow year after year as they have for as long as I can remember. And in the past 20 years, only the 9-11 disaster of 2001 caused earnings to drop year-over-year, and even in that extreme case, McDonald’s only dropped from $1.46 to $1.36 (2001) and $1.32 (2002), coming right back in 2003 to $1.43. But that was the year 2003-2004 that the McDonald’s board of directors agreed on a masterful policy change – to switch from company-owned stores, which required an investment in real estate (which had been getting way too expensive) to relying on franchised operations. Today, fully 81% of the stores are franchised or run by affiliates, and the company does what it does best, which is to meet the needs of the customer. Amazing how the real estate market crapped out just a year or two later. Earnings in 2004 were $1.93 and from then through the present time have soared. Here in 2010, admittedly a tough year, the earnings are expected to be about $4.50/share, and that’s a lot of beef.
So, the market is a tad shaky right now, and if it were to go into a Bear, I think the price of MCD will come right into your line of sight. When things get so nasty that you think it can’t get any worse, buy MCD.
WIR #23-2010 Sept 3 (MCD $75.09, up +12.6% in 13 weeks from $66.70):
Always before I study a company, I take a quick look at the Monthly-Weekly- and Daily charts:
http://billcara2.com/tkchart/tkchart.asp?stkname=MCD&ind=rsi&wt=3
http://billcara2.com/tkchart/tkchart.asp?stkname=MCD&ind=rsi&wt=1
http://billcara2.com/tkchart/tkchart.asp?stkname=MCD&ind=rsi&wt=0
For a long time now you have gotten my message that McDonald’s (MCD) is a superior stock for investors interested in Growth & Income. I have long given my reasons, and I will again this report. In my previous WIR assessment of MCD, however, I started to show some angst that a broad market pullback would also take MCD with it.
The Bulls can be thankful that didn’t happen. On Friday, MCD hit an all-time high of $75.35 a minute from the close at $75.09. The 1-minute chart reflects the enthusiasm of buyers who were chasing the price higher, and that for me is a clear and present danger.
The Daily data chart is more illuminating. It shows that from mid-August, traders in MCD were grinding through 72, 73, 74, 75 without any relief. When you see the RSI within a 15% level for two straight weeks, and the Stochastics flat-lining on the chart, then you know the stock is under control, whether that control be from a few Big Players or from a market mind-set. The thing is that you need to be wary of stock prices that don’t trade naturally, i.e., in a rhythm. When they break – up or down – the subsequent move tends to be a big one – as happened at the end of April when the price dropped from $70.40 to $66.94 in a few days and to $64.97 in a couple weeks.
That was a bearish move, but these same characteristics for the RSI and STO, had they been inverted on a chart, would have been very bullish. Something to watch.
This Daily chart (and the Weekly one below) will tell you why its time to start looking to an exit point. To make it easy for you, I’ll tell you that there is a rationale for that to be at a bit below the 8-day Exponential Moving Average (presently 73.90), say 73, or maybe when the Daily RSI-7, which is presently 77.8, falls to 71, figuring many others will bail at 70. In other words, if the price keeps moving up, those who are long are good; but don’t give away the profits you have earned.
The study of trends and cycles is an art as much as a science. Looking at a single chart is pretty much like looking at a photo of a single car on a highway and trying to determine the traffic. You need to look at different time frames and angles, and see how many cars, in what direction, at what time of day, and so forth. Then you can have an opinion about traffic. Same thing applies to my approach to trading.
So, what I am saying then is that these charts show me the risk of holding MCD is elevated, but, other than placing an exit stop, I need to also study many other factors before planning my trade in MCD. I need to also assess the broad market, the consumer staples, the restaurant group, bonds and high dividend payers, personal income and spending data, and the latest corporate data for this company.
This is what a pro trader does, or a successful individual investor. Nothing is presumed or flat-out accepted from a sales rep, talking head or newsletter unless the whole picture is filled in. It doesn’t take that long. In fact, if you were going to purchase an automobile or house, you’d probably spend days or weeks doing the assessment. Spending an hour to review a stock is no big deal, in terms of time that is. But it is a big deal when it comes to probable success or failure.
The Value Line report scorecard shows that on Friday, MCD Technical outlook rating (i.e., up to six months ahead) dropped from a ‘3’ (market average) to a ‘4’ (below average). That’s because of price. Why do I say that? Look at the data. One quick look at the earnings and dividends tables in the lower left of the page shows these crucially important metrics are consistently rising, and by a considerable amount. The ‘average’ stock should be so fortunate. In the table at the top of the page, you’ll also see that per share revenues and cash flow just keep advancing like the Energizer Bunny.
The average annualized dividend yield has also expanded through the years. The only reason this year will be lower is because the stock price has gotten so high and the McDonald’s board is unlikely to increase the dividend an imprudent amount, beyond say $2.25/share this year. That btw is another red flag that maybe the price has gotten ahead of itself this quarter.
Would I buy the stock here? No. Even Growth & Income investors need growth from a rising stock price as well as from the dividend. Looking forward, where is that growth likely to come from? The Weekly and Daily charts show the RSI-7 is very elevated. That condition can persist but for how long? Look at the table on the right of the VL page: Annual Rates for Revenue, Cash Flow, Earnings and Dividends. For the past five years (since McDonalds changed its business model from owning stores to leasing to entrepreneurs who would pay royalties), these metrics have ballooned. But for the next five years, they are expected to be growing too, but at a drastically lower pace. Investors won’t like that. Give them time to see these projected results show up as actuals.
As long as the operating and net profit margins remain consistently high, and revenues (same store and new store) are lifting, investors are always going to be in good shape with MCD. Rising food costs will be passed along to the consumer easily because if that same consumer were to stay at home to eat, they’d also be hit with those same rising costs.
I can’t beat this story to death – I could but I don’t have the time. In summary: McDonald’s is unquestionably a huge American success. Families in most countries – even those that don’t normally eat frozen food, like China for instance, have flocked to McDonald’s. The stock is the 2nd best performer in the Dow 30 in the past six months and the 3rd best in the past 12 months. The record high price on Friday has also made the stock susceptible to a market pull-back. Traders beware. It won’t take much for my simple little system to be flashing SELL.
The Dow 30 Company links in chronological order of the upcoming reports.
Chevron Corp [GICS 10, Dow 30]
(CVX: Google Finance file)
(CVX: Yahoo Finance file)
(CVX: StockChart chart)
(CVX: Billcara2 chart)
(CVX: ADVFN Financial Data)
(CVX: Value Line Report Jun. 11: next one is due Sept. 10)
ExxonMobil [GICS 10, Dow 30, Cara 100]
(XOM: Google Finance file)
(XOM: Yahoo Finance file)
(XOM: StockChart chart)
(XOM: Billcara2 chart)
(XOM: ADVFN Financial Data)
(XOM: Value Line Report Jun. 11: next one is due Sept. 10)
Boeing Co [GICS 20, Dow 30. Cara 100]
(BA: Google Finance file)
(BA: Yahoo Finance file)
(BA: StockChart chart)
(BA: Billcara2 chart)
(BA: ADVFN Financial Data)
(BA: Value Line Report Jun. 18: next one is due Sep. 17)
Travelers Co [GICS 40, Dow 30]
(TRV: Google Finance file)
(TRV: Yahoo Finance file)
(TRV: StockChart chart)
(TRV: Billcara2 chart)
(TRV: ADVFN Financial Data)
(TRV: Value Line Report Jun. 18: next one is due Sep. 17)
AT&T [GICS 50, Dow 30]
(T: Google Finance file)
(T: Yahoo Finance file)
(T: StockChart chart)
(T: Billcara2 chart)
(T: ADVFN Financial Data)
(T: Value Line Report Jun. 25: next one is due Sep. 24)
Verizon [GICS 50, Dow 30]
(VZ: Google Finance file)
(VZ: Yahoo Finance file)
(VZ: StockChart chart)
(VZ: Billcara2 chart)
(VZ: ADVFN Financial Data)
(VZ: Value Line Report Jun. 25: next one is due Sep. 24)
Cisco Systems [GICS 45, Dow 30, Cara 100]
(CSCO: Google Finance file)
(CSCO: Yahoo Finance file)
(CSCO: StockChart chart)
(CSCO: Billcara2 chart)
(CSCO: ADVFN Financial Data)
(CSCO: Value Line Report Jun. 25: next one is due Sep. 24)
Procter & Gamble Co. [GICS 30, Dow 30, Cara 100]
(PG: Google Finance file)
(PG: Yahoo Finance file)
(PG: StockChart chart)
(PG: Billcara2 chart)
(PG: ADVFN Financial Data)
(PG: Value Line Report Jul. 2: next one is due Oct. 1)
Home Depot [GICS 25, Dow 30]
(HD: Google Finance file)
(HD: Yahoo Finance file)
(HD: StockChart chart)
(HD: Billcara2 chart)
(HD: ADVFN Financial Data)
(HD: Value Line Report Jul. 2: next one is due Oct. 1)
Hewlett-Packard [GICS 45, Dow 30]
(HPQ: Google Finance file)
(HPQ: Yahoo Finance file)
(HPQ: StockChart chart)
(HPQ: Billcara2 chart)
(HPQ: ADVFN Financial Data)
(HPQ: Value Line Report Jul. 9: next one is due Oct. 8)
IBM [GICS 45, Dow 30, Cara 100]
(IBM: Google Finance file)
(IBM: Yahoo Finance file)
(IBM: StockChart chart)
(IBM: Billcara2 chart)
(IBM: ADVFN Financial Data)
(IBM: Value Line Report Jul. 9: next one is due Oct. 8)
Intel [GICS 45, Dow 30, Cara 100]
(INTC: Google Finance file)
(INTC: Yahoo Finance file)
(INTC: StockChart chart)
(INTC: Billcara2 chart)
(INTC: ADVFN Financial Data)
(INTC: Value Line Report Jul. 9: next one is due Oct. 8)
Alcoa [GICS 15, Dow 30]
(AA: Google Finance file)
(AA: Yahoo Finance file)
(AA: StockChart chart)
(AA: Billcara2 chart)
(AA: ADVFN Financial Data)
(AA: Value Line Report Jul. 16: next one is due Oct. 15)
Dupont [GICS 15, Dow 30]
(DD: Google Finance file)
(DD: Yahoo Finance file)
(DD: StockChart chart)
(DD: Billcara2 chart)
(DD: ADVFN Financial Data)
(DD: Value Line Report Jul. 16: next one is due Oct. 15)
Merck [GICS 35, Dow 30]
(MRK: Google Finance file)
(MRK: Yahoo Finance file)
(MRK: StockChart chart)
(MRK: Billcara2 chart)
(MRK: ADVFN Financial Data)
(MRK: Value Line Report Jul. 16: next one is due Oct. 15)
Pfizer [GICS 35, Dow 30]
(PFE: Google Finance file)
(PFE: Yahoo Finance file)
(PFE: StockChart chart)
(PFE: Billcara2 chart)
(PFE: ADVFN Financial Data)
(PFE: Value Line Report Jul. 16: next one is due Oct. 15)
General Electric [GICS 20, Dow 30, ex-Cara 100]
(GE: Google Finance file)
(GE: Yahoo Finance file)
(GE: StockChart chart)
(GE: Billcara2 chart)
(GE: ADVFN Financial Data)
(GE: Value Line Report Jul. 23: next one is due Oct. 22)
United Technologies [GICS 20, Dow 30, Cara 100]
(UTX: Google Finance file)
(UTX: Yahoo Finance file)
(UTX: StockChart chart)
(UTX: Billcara2 chart)
(UTX: ADVFN Financial Data)
(UTX: Value Line Report Jul. 23: next one is due Oct. 22)
Caterpillar [GICS 20, Dow 30]
(CAT: Google Finance file)
(CAT: Yahoo Finance file)
(CAT: StockChart chart)
(CAT: Billcara2 chart)
(CAT: ADVFN Financial Data)
(CAT: Value Line Report Jul. 23: next one is due Oct. 22)
Coca Cola [GICS 30, Dow 30, Cara 100]
(KO: Google Finance file)
(KO: Yahoo Finance file)
(KO: StockChart chart)
(KO: Billcara2 chart)
(KO: ADVFN Financial Data)
(KO: Value Line Report Jul 30: next one is due Oct 29)
Kraft Foods [GICS 30, Dow 30]
(KFT: Google Finance file)
(KFT: Yahoo Finance file)
(KFT: StockChart chart)
(KFT: Billcara2 chart)
(KFT: ADVFN Financial Data)
(KFT: Value Line Report Jul 30: next one is due Oct 29)
Wal-Mart [GICS 30, Dow 30, Cara 100]
(WMT: Google Finance file)
(WMT: Yahoo Finance file)
(WMT: StockChart chart)
(WMT: Billcara2 chart)
(WMT: ADVFN Financial Data)
(WMT: Value Line Report Aug 6: next one is due Nov 5)
Disney [GICS 25, Dow 30, Cara 100]
(DIS: Google Finance file)
(DIS: Yahoo Finance file)
(DIS: StockChart chart)
(DIS: Billcara2 chart)
(DIS: ADVFN Financial Data)
(DIS: Value Line Report Aug 13: next one is due Nov 12)
3M Company [GICS 20, Dow 30, Cara US 100 June 25-06]
(MMM: Google Finance file)
(MMM: Yahoo Finance file)
(MMM: StockChart chart)
(MMM: Billcara2 chart)
(MMM: ADVFN Financial Data)
(MMM: Value Line Report Aug 13: next one is due Nov 12)
American Express [GICS 40, Dow 30]
(AXP: Google Finance file)
(AXP: Yahoo Finance file)
(AXP: StockChart chart)
(AXP: Billcara2 chart)
(AXP: ADVFN Financial Data)
(AXP: Value Line Report Aug. 20: next one is due Nov. 19)
Bank of America [GICS 40, Dow 30]
(BAC: Google Finance file)
(BAC: Yahoo Finance file)
(BAC: StockChart chart)
(BAC: Billcara2 chart)
(BAC: ADVFN Financial Data)
(BAC: Value Line Report Aug. 20: next one is due Nov. 19)
JP Morgan [GICS 40, Dow 30]
(JPM: Google Finance file)
(JPM: Yahoo Finance file)
(JPM: StockChart chart)
(JPM: Billcara2 chart)
(JPM: ADVFN Financial Data)
(JPM: Value Line Report Aug. 20: next one is due Nov. 19)
Microsoft [GICS 45, Dow 30]
(MSFT: Google Finance file)
(MSFT: Yahoo Finance file)
(MSFT: StockChart chart)
(MSFT: Billcara2 chart)
(MSFT: ADVFN Financial Data)
(MSFT: Value Line Report Aug. 20: next one is due Nov. 19)
Johnson & Johnson [GICS 35, Dow 30, Cara 100]
(JNJ: Google Finance file)
(JNJ: Yahoo Finance file)
(JNJ: StockChart chart)
(JNJ: Billcara2 chart)
(JNJ: ADVFN Financial Data)
(JNJ: Value Line Report Aug 27: next one is due Nov 26)
McDonalds [GICS 30, Dow 30, Cara 100]
(MCD: Google Finance file)
(MCD: Yahoo Finance file)
(MCD: StockChart chart)
(MCD: Billcara2 chart)
(MCD: ADVFN Financial Data)
(MCD: Value Line Report Sept. 3: next one is due Dec. 3)
Sector ETF Summary for the US equity market
The tables I show are for eleven GICS Sector Index Funds (ETF’s), including two for Technology (XLK and SMH), for a total of ten GICS sectors. They cover the full spectrum of the US equity market.
A week ago, there was a big gain in prices on the Friday, which made traders think that Augusts’ pessimism might have been over-done. I wrote “(despite Friday’s gains), there were two sectors that actually had gains W/W. The rest of the week therefore was a disaster for the Bulls… But, it’s still summer vacation for many people. Trading volume is still down… We are all waiting for something to break, and we are not at all certain it happened on Friday.”
This week, all 10 sectors lifted a lot. So for the past six sessions the US market has gone from doom to boom.
Well, a little rumbling anyway.
When trading volume gets back to normal, we’ll believe the rider is back on the bull. For the present, however, that deficient volume situation is still an issue.
With this in mind, I went through the data for the ten sector ETFs I follow and for the Dow 30 stocks. Here is what I discovered.
Volume on Friday -- a day pointed to by the Bulls as being an important one, with the S&P 500 gaining +1.3% -- was actually a very slow trading day. Traders disappeared at noon.
Volume in Telecom IYZ was way up on the day (+3.8%), but the “exciting” Financials XLF had volume that was bang on the 3-month average, and the other sectors were all trading much less than average. The relative volume of the Dow 30 stocks on Friday was just 0.81% of the 3-month average. So, in summary, if strong bull moves are defined by higher price and higher volume, sorry, but the volume was missing. It was missing Friday and it was missing all week. In fact the past 3-month average volume is down from the past 12-month volume, and the past 12-month volume is down from the previous 12 months.
In summary, the volume data should not be comforting to the Bulls.
Let’s wait for trading volumes to pick up, likely in the next month or two, before we decide in our own minds whether the market is likely to be higher or lower six months or a year from now.
Table 1: Cara ETF List is sorted by price performance Week over Week (W/W), i.e. 1W%N.
| Symbol | Close | 1Day Change |
1Day %Change |
1W %Change |
2W %Change |
4W %Change |
YTD %Change |
3M %Change |
6M %Change |
12M %Change |
You can do this table yourself by entering the following string into the Summary window at Investertech.com and then clicking on the link for Performance.
SPY XLE XLB XLI XLY XLP IYH XLF XLK SMH IYZ XLU .
You can also add more ETFs - up to 30 in total. For a list of components to many ETFs, go to the AMEX.com and NYSE.com web sites, and click on ETFs.
You can use this tool to set up watchlist charts by industry group and sub-groups.
Here’s the SPY Monthly, Weekly and Daily data charts:
SPY Monthly data: 
SPY Weekly data: 
SPY Daily data: 
10 (energy: XLE) 
15 (basic materials: XLB) 
20 (industrial: XLI) 
25 (consumer discretionary: XLY) 
30 (consumer staples: XLP) 
35 (healthcare: IYH) 
40 (financial: XLF) 
45 (technology, semiconductor: SMH) 
50 (telecom: IYZ) 
55 (utilities: XLU) 
Individual Sector ETF Review
Sector 10 (energy: XLE, IYE, VDE, OIH, PBW and IXC)
Here’s the XLE Monthly, Weekly and Daily data charts:
XLE Monthly data: 
XLE Weekly data: 
XLE Daily data:
Table 2: Senior oil & gas equities
| Symbol | Close | 1Day Change |
1Day %Change |
1W %Change |
2W %Change |
4W %Change |
YTD %Change |
3M %Change |
6M %Change |
12M %Change |
Crude Oil ($WTIC -$0.31/bbl -0.41% W/W) closed mostly flat at $74.86/bbl.
The Oiler stocks ETF (XLE +4.03% W/W) was 5th best sector performer, closing at 54.20.
I had reported that a week ago on the Friday, the Crude Oil price gained +2.47%, reversing the extreme pullback earlier in the week, and that XLE jumped +2.60% on that day.
So over six sessions, Crude Oil is up over +2.0% and XLE about +6.5%.
In the prior WIR I concluded, “I wouldn’t read too much into this, and so I’m not going to spend much time discussing probabilities since, with volumes down so much, all we have are possibilities.” Yes the volume is still down – XLE’s relative volume on Friday was just 0.78% of the 3-month average and the XLB was at just 0.72% -- and so I will stick with that leaning, i.e., that we are not entering a new Bull phase until price is confirmed by volume.
Now you see why this is as much art as science.
The only really big mover in this Energy sector this week was PetroBrazil (PBR +10.9%), and that was based on news of a gargantuan $64.5 billion stock offering to follow on a $42.5 billion stock deal with government to open up exploration in six oil fields.
These are the biggest equity deals in the history of capital markets. Nippon Telecom did one for $36.8 billion in 1987 and the Agricultural Bank of China raised $22.1 billion earlier this year.
With Brazil hosting the FIFA World Cup of soccer in 2014 and the Summer Olympic Games in 2016, it’s clear that Brazil is the happening place.
Money talks. The Brazilians are saying that Crude Oil will be a big play for many years. As for me, I have been writing in this blog that I believe the next price range for $WTIC will be 80-85. After that I see 85-95, and then higher from there. I base my reasoning on reserve depletions and global economic expansion that should be cranking on all cylinders by late 2011. By 2011, I do think Crude Oil will be trading above $120/bbl.
That ought to be good for Western Canada btw, and the Loonie.
How to play this? What’s wrong with Exxon (XOM)? The current price of $61.32 is an absolute steal. The late-June bottom of $56.17 was, in my mind, the long-term cycle low for many years.
Weekly chart:
Monthly chart:
For a long view of oilers in Canada, I kind of like the chart for Canadian Natural Resources (CNQ), which shows a long base pattern for the past year. This is like a snake coiling before the strike.
Oil & Gas Exploration & Production -Canada
Sector 15 (basic materials: IYM, XLB, IGE and VAW)
Here’s the XLB Monthly, Weekly and Daily data charts:
XLB Monthly data:
XLB Weekly data:
Table 3: Senior Basic Materials:
XLB Daily data:
| Symbol | Close | 1Day Change |
1Day %Change |
1W %Change |
2W %Change |
4W %Change |
YTD %Change |
3M %Change |
6M %Change |
12M %Change |
A week ago Friday, the Basic Materials (XLB) sector ETF was up +2.99%. This week XLB added another +4.30%, closing at 32.73.
There were some big moves W/W in this sector, starting with our favorite Teck Corp (TCK +14.3%), Brazil’s Fibria Celulose (FBR +9.1%), Rio Tinto (RTP +8.9%), ArcelorMittal (MT +7.9%) and Dow Chemical (DOW +7.0%). That covers the basic materials field pretty well, which indicates to me that traders smell another round of Quantitative Easing.
Still, relative volume on Friday foe XLB was just 0.72% of the 3-month average.
Sector 20 (industrial: IYJ, XLI, VIS, and IYT)
Here’s the XLI Monthly, Weekly and Daily data charts:
XLI Monthly data: 
XLI Weekly data: 
XLI Daily data:
Table 4: Senior capital goods makers and transportation:
| Symbol | Close | 1Day Change |
1Day %Change |
1W %Change |
2W %Change |
4W %Change |
YTD %Change |
3M %Change |
6M %Change |
12M %Change |
The Industrials ETF (XLI) gained +4.84% this week to close at 30.13, which made it the 3rd best performer this week among the ten sectors.
Brazil’s Embraer (ERJ +8.9%) and Honeywell (HON +8.0%) were leaders.
Boeing (BA) managed a gain of +2.34% W/W which was good but still put the stock lagging all the others in this sector on my monitor. Friday’s gain of +1.97% helped, leading some to think that maybe traders have already forgotten the news that the first commercial deliveries of the 787 Dreamliner (also called nightmareliner) were postponed another three months.
To check on general and detailed info for the Industrials group, the Thomson Reuters service is a good one:
http://www.reuters.com/sectors/industries/significant?industryCode=52442
Here is the link to all sectors and industries as classified by Reuters:
http://www.reuters.com/assets/siteindex#sectorsAndIndustries
Sector 25 (consumer discretionary: XLY, IYC and VCR)
Here’s the XLY Monthly, Weekly and Daily data charts:
XLY Monthly data: 
XLY Weekly data: 
XLY Daily data:
Table 5: Senior consumer discretionary equities
| Symbol | Close | 1Day Change |
1Day %Change |
1W %Change |
2W %Change |
4W %Change |
YTD %Change |
3M %Change |
6M %Change |
12M %Change |
Consumer Discretionary (XLY +5.18% W/W) closed at 32.28, which was the 2nd best sector performer of ten.
In my last report a week ago I opined that “all of them seemed to be weak, although the ones with the heavy short interest were down most despite a squeeze on Friday… Brunswick Corp (BC) for instance had a pop of +3.3% on Friday, but still ended the week down -9.6%.” This week, BC jumped +7.5%. JC Penny (JCP) was up +7.0% and Carnival Cruise (CCL +10.2%) was riding high in the water, undeterred by Earl and Fiona.
Sector 30 (consumer staples: XLP, VDC, RTH and IYK)
Here's the XLP Monthly, Weekly and Daily data charts:
XLP Monthly data: 
XLP Weekly data: 
XLP Daily data:
Table 6: Senior consumer staples equities
| Symbol | Close | 1Day Change |
1Day %Change |
1W %Change |
2W %Change |
4W %Change |
YTD %Change |
3M %Change |
6M %Change |
12M %Change |
Consumer Staples (XLP) gained +2.25% W/W to close at $27.29, which made it 2nd worst sector performer behind leading loser XLU (utilities).
There wasn’t much happening here. Starbucks (SBUX +6.8%) obviously poured some coffee.
Sector 35 (healthcare: IYH, XLV, VHT, IXJ, and IBB)
Here’s the IYH Monthly, Weekly and Daily data charts:
IYH Monthly data: 
IYH Weekly data: 
IYH Daily data:
Table 7: Senior healthcare equities
| Symbol | Close | 1Day Change |
1Day %Change |
1W %Change |
2W %Change |
4W %Change |
YTD %Change |
3M %Change |
6M %Change |
12M %Change |
The healthcare sector (IYH +2.29% W/W to 60.34) was back to being 3rd worst performer, which tends to happen when traders are buying risk.
The one notable was the money flow into the health insurers, which always seems to happen when traders are buying risk, followed by money flowing out of this group when traders are selling risk.
The group I refer to is Aetna (AET +5.2%), United Health (UNH +4.8%) and Wellpoint (WLP +4.7%). Athos, Aramis and Porthos, the three musketeers, were atop the sector winning the battle this week.
All 18 healthcare stocks in my monitor were higher this week.
Sector 40 (financial: IYG, IYF, XLF, VFH, IXG, VNQ, RWR, IYR, and ICF)
Here’s the XLF Monthly, Weekly and Daily data charts:
XLF Monthly data: 
XLF Weekly data: 
XLF Daily data:
Table 8: Senior financial company equities
| Symbol | Close | 1Day Change |
1Day %Change |
1W %Change |
2W %Change |
4W %Change |
YTD %Change |
3M %Change |
6M %Change |
12M %Change |
The Financials (XLF +5.75%) closed at $14.52, which was the #1 sector performer this week.
These things happen in new Bull phases, or say when Wall Street wants you to believe that.
Here’s what I find interesting: the top two Dow 30 stocks this week were JP Morgan (JPM +7.02% W/W and up +2.65% on Friday) and Bank of America (BAC +6.80% W/W and up +1.66% on Friday), but where was the volume. Friday’s relative volume (compared to the 3-month average in these two stocks) was just 0.88% and 0.95% respectively.
In order for me to believe the Bull (stuff), I want to see a Rel Vol of 1.30, not some wimpy 0.9%, when the stocks are up that much.
As I see it then, these price increases have been caused by hot money – the stuff that can cool out in a week or two.
Thanks to a gain of +5.37% on Friday that old bellwether Goldman Sachs soared +5.66% W/W, which means that until the gap open on Friday and the powerful day that followed, GS was going nowhere. So, if GS is a ‘tell’, then the US Employment data the Dept of Commerce published at 8:30am ET on Friday must have been the script for the new Bull phase.
Funny; but I never read that much into it. Seems to me that jobs were lost again: -54,000 in August; -54,000 in July; and -175,000 in June. So, instead of creating some 600,000 vitally needed jobs this summer, there was a loss of -283,000.
Anyway, I thought that was a negative report, but the one that came out at 10:00am ET on Friday, the ISM non-manufacturing report was definitely negative and yet that didn’t stop buyers chasing GS to a gain of almost +6% on Friday. And, get this: the GS Rel Vol on Friday was a huge 1.49, or 13.55 million shares traded, up from the 3-month average of just 9.11 million.
Maybe Goldman Sachs has called a Bull market and, not being invited to their private “huddle” sessions with best clients, we wouldn’t have the luxury of knowing.
UBS (UBS +7.7% W/W) was the leader of the bankster pack, followed by Buffett Fargo (WFC +7.7%), the aforementioned JPM and BAC, and Morgan Stanley (MS +6.5%).
Interesting that over the past four weeks – after UBS gave up the names of the tax cheats to the US, while withholding the names of the tax cheat co-conspirators employed by UBS – the stock has done real well. Best on my monitor in that time – other than the big banks of India.
Daily charts of electronic brokers and exchanges
Weekly charts of electronic brokers and exchanges
Sector 45 (technology: IGM, IGV, IGW, XLK, VGT, IYW, IGN, IXN, MTK and SMH)
The Tech sector ETF (XLK +3.28% W/W to close at 21.73) and the Semiconductors ETF (SMH +2.17% W/W to close at 25.86) were stronger, but lagging the big movers this week.
There were some nice bullish moves this week (STP +12.6%, EMC +8.4% and AAPL +7.1%) were leaders, but the story here was that of 17 tech stocks and 20 semi-conductor stocks on my monitor, only 1 was a loser, and it took a loss of -2.66% W/W.
That solitary loser was Research in Motion (RIMM). The motion is downhill apparently.
I ought not say too much because I did go to school in RIM City (Waterloo Ontario), and have such terrific memories of the place. Besides, although I have given up my BB, I still think RIMM just needs a few months to come out of its hole.
Weekly chart:
I’m guessing because I know nothing of it, but I have to think that RIM will introduce an iPad this fall in time for holiday season gifts. If they don’t; be prepared to meet Grinch. RIMM could get ugly.
Did you know that iPad or tablet computing is where it’s at today, that probably inside five years people will be declaring the desktop PC is dead. Apple’s iPad now has 75% market share but at least a half dozen major companies are now in the running. Within a couple years they, combined, ought to be able to gain a 40-45 percent market share. But, by then, the market will be massive. We’ll all be carrying tablets, using them to video phone, browse the web, trade securities, play games (the other ones), watch TV and movies, listen to music, and do 99% of what most of us use computers for today. Being tablet-enabled, i.e., more mobile, as in we can take our life with us – no more being chained to a desk, needing a desk-top – the big box era will end. We’ll all have (i) little boxes for our laps, for occasional use, and (ii) our joined-to-the-torso tablet, most of which will be iPad if Steve Jobs has his way.
How do I know this? I compared the last chart to the next chart, and the answer is obvious. Money talks.
I figure that by the time Steve Jobs gets to be 80 he’ll be richer than Saudi Arabia. Think about this; if Apple ever did a 100:1 split, the stock price was be just under $3, and 100 shares would be within reach of almost every person in China. The stock would triple overnight.
The market cap today is $236 billion, nicely ahead of #3 Microsoft at $210 billion, and not far behind Exxon at $312 billion. Cut that stock price from $260 to $2.60 and I think that, knowing children are forking out hundreds of dollars to buy an iSomething, they’ll hand over $260 to buy a round lot. Not even blink. There would be so much “investor education” going on in the streets that AAPL’s market cap would quickly double that of XOM, maybe triple. The gamers would be shooting for the world’s first trillion dollar market cap. In turn, Apple would have to bundle each new product with one share of AAPL just to cool the speculation and bring people back to reality.
Oh my goodness; the mind wanders.
Here’s the SMH Monthly, Weekly and Daily data charts:
SMH Monthly data: 
SMH Weekly data: 
SMH Daily data:
Here’s the XLK Monthly, Weekly and Daily data charts:
XLK Monthly data: 
XLK Weekly data: 
XLK Daily data: 
Table 9: Senior technology equities
| Symbol | Close | 1Day Change |
1Day %Change |
1W %Change |
2W %Change |
4W %Change |
YTD %Change |
3M %Change |
6M %Change |
12M %Change |
| Symbol | Close | 1Day Change |
1Day %Change |
1W %Change |
2W %Change |
4W %Change |
YTD %Change |
3M %Change |
6M %Change |
12M %Change |
Sector 50 (telecom: IYZ, VOX and IXP)
I have just declared the telecom sector (IYZ) irrelevant. Apple now owns it – along with the Tech sector, Consumer Discretionary, Finance if they want to sell products on credit. I’m sure they could fit in Consumer Staples, maybe even Healthcare and Industrials… Convergence made Steve Jobs do it and … he’s going for it all.
It’ll be an iworld.
Come to think of it, Humungous Bank & Broker (HB&B) knew all that years ago. It wasn’t until Steve Jobs turned the “Me” to “I” that we switched to i.
This week the IYZ gained +3.53%. AT&T (T) and Verizon (VZ) gained just +1.9% and +1.2% respectively. Those stock prices would have been higher, but Steve Jobs figures he already has both of them in the bag, so why overpay.
Nokia (NOK +6.8%) was this weeks’ big winner in the telecom transport sector but it’s hard to not put a knock on NOK’s YTD performance, down -30.7% so far, even with this weeks’ big gain.
Table 14: Telecom
| Symbol | Close | 1Day Change |
1Day %Change |
1W %Change |
2W %Change |
4W %Change |
YTD %Change |
3M %Change |
6M %Change |
12M %Change |
Here’s the IYZ Monthly, Weekly and Daily data charts:
IYZ Monthly data: 
IYZ Weekly data: 
IYZ Daily data:
The Utilities sector ETF (XLU +1.54%) closed at 31.62, which made it the worst performing sector this week.
Exelon (EXC +3.6%) was the leader. This stock has fallen a lot since pre-Bear and Lehman. Even at that, it’s a high risk buy at best. The stock is trading now at $42.22, but the analysts’ mean 12-month Price Target (PT) is $41.33, and they rate it a 3 on a scale of 1 to 4, meaning it’s an undesirable.
I no longer follow it and maybe ought to remove it from the Cara 100. It’s the only Utility stock on the list. Maybe I should replace it with AAPL, since that’s a utility to most people. Oh, I forgot that AAPL is already in the Cara 100. Well, I’ll just have to scan the sector for another one.
Let’s see, of stocks with a market cap greater than $5 billion, and an analyst rating averaging Strong Buy, there are just two: The AES Corp (AES) in the US and China’s Huaneng Power (HNP).
I think AES is like EXC, a winner until Lehman and Bear collapsed. Then it performed better until this year. Lately the HNP is the better performer, but over the long run, it doesn’t look so hot. Maybe I’ll look into AES.
Description
The AES Corporation (AES) is a global power company. As of December 31, 2009, AES owns a portfolio of electricity generation and distribution businesses on five continents in 29 countries, with total capacity of approximately 40,300 Megawatts (MW) and distribution networks serving over 11 million people. In addition, it has more than 2,200 MW under construction in six countries. AES owns and operates two primary types of businesses: Generation business and Utilities business. Generation business owns and/or operates power plants to generate and sell power to wholesale customers, such as utilities and other intermediaries. Utilities business owns and/or operates utilities to distribute, transmit and sell electricity to customers in the residential, commercial, industrial and governmental sectors within a defined service area.
Maybe I could get them to come to Nassau and Freeport to replace BEC and Marubeni. Both have been declared “undesirable” by the people who want them dead. Bahamians are affected by very the high price of about 43 cents per kwh – if and when you can actually get electricity. The grid fails to deliver any power at times, and the constant worry is not having sufficient fuel on hand to run our personal generators. With a fabulous national per capita GDP of about $30,000, one would think the electric and telephone companies could actually deliver a respectable service. That’s why, I guess, it’s still called third world.
Yes, it’s better in the Bahamas. If the phone and power worked, everybody would want to live there.
Just joking. I think they want to live there anyway.
Enough of Utilities. I’ll look at AES when I have time.
Table 12: US Utilities
| Symbol | Close | 1Day Change |
1Day %Change |
1W %Change |
2W %Change |
4W %Change |
YTD %Change |
3M %Change |
6M %Change |
12M %Change |
Sector 55 (utilities: IDU, XLU, and VPU)
Here’s the XLU Monthly, Weekly and Daily data charts:
XLU Monthly data: 
XLU Weekly data: 
XLU Daily data:
http://investertech.com/markets/mkview.asp?qte=ss&ty=tk&qt=AEP+D+DUK+ED+...
Here is the list of North American Utilities that I follow:
AEP D DUK ED EXC FE FPL NGG PCG PEG SO TRP
For study purposes, there is a good mix of electric (AEP, D, DUK, FE, FPL and SO), gas (NGG, TRP) and diversified (ED, EXC, PCG, PEG) utilities.
Bonds & Yields Review
Table 10: US Treasury Yields
| Maturity | Yield | Yesterday | Last Week | Last Month |
|---|---|---|---|---|
| 3 Month | 0.10 | 0.11 | 0.12 | 0.13 |
| 6 Month | 0.16 | 0.17 | 0.17 | 0.18 |
| 2 Year | 0.51 | 0.50 | 0.56 | 0.56 |
| 3 Year | 0.79 | 0.75 | 0.82 | 0.83 |
| 5 Year | 1.48 | 1.42 | 1.49 | 1.60 |
| 10 Year | 2.70 | 2.63 | 2.64 | 2.95 |
| 30 Year | 3.78 | 3.71 | 3.69 | 4.08 |
| Maturity | Yield | Yesterday | Last Week | Last Month |
|---|---|---|---|---|
| 2yr AA | 0.74 | 0.59 | 0.49 | 0.58 |
| 2yr AAA | 0.66 | 0.48 | 0.42 | 0.53 |
| 2yr A | 0.88 | 0.84 | 0.72 | 0.75 |
| 5yr AAA | 1.44 | 1.05 | 1.14 | 1.30 |
| 5yr AA | 1.57 | 1.24 | 1.23 | 1.38 |
| 5yr A | 1.80 | 1.77 | 1.52 | 1.85 |
| 10yr AAA | 2.53 | 2.41 | 2.60 | 2.78 |
| 10yr AA | 2.53 | 2.39 | 2.45 | 2.79 |
| 10yr A | 3.32 | 2.76 | 2.53 | 2.95 |
| 20yr AAA | 4.59 | 4.17 | 3.75 | 4.11 |
| 20yr AA | 4.15 | 3.73 | 3.78 | 4.67 |
| 20yr A | 4.39 | 3.96 | 4.93 | 4.19 |
| Maturity | Yield | Yesterday | Last Week | Last Month |
|---|---|---|---|---|
| 2yr AA | 0.98 | 1.11 | 1.28 | 1.25 |
| 2yr A | 1.28 | 1.38 | 1.48 | 1.53 |
| 5yr AAA | 1.64 | 1.68 | 1.67 | 1.92 |
| 5yr AA | 2.08 | 2.18 | 2.23 | 2.37 |
| 5yr A | 2.76 | 2.89 | 2.94 | 2.96 |
| 10yr AAA | 2.88 | 2.81 | 2.86 | N/A |
| 10yr AA | 4.07 | 4.07 | 3.93 | 3.97 |
| 10yr A | 4.11 | 4.23 | 4.27 | 4.27 |
| 20yr AAA | N/A | N/A | N/A | N/A |
| 20yr AA | N/A | N/A | N/A | N/A |
| 20yr A | 5.38 | 5.69 | 5.73 | 6.23 |
This week, the yields for the 2-, 5-, 10- and 30-year Treasuries came in at -5, -1, +6 and +9, so apparently investors have been selling the long end, buying the short end and buying equities.
The question is, will they keep doing it or is this just hot money going from bonds to stocks, which could come back out very quickly?
I don’t know. As I have said, the volumes are still too low to decide although the one place where tons of money went this week, according to the volume on Friday, was the high-yielding telcos. That tells me that some bond investors have decided to make the switch. A little today, a little tomorrow and before you know it, bond prices could start sinking.
The 20-year Treasury Bond ETF (TLT -1.68% W/W) dropped to 103.58. Two weeks ago, TLT closed the week at 106.04.
I did explain why a week ago in this space.
Should (the US Dollar $USD) reverse and head higher this coming week, which would keep it on trend, the TLT will recover that loss and move higher… (But) If you are an equity Bull, you ought to be praying for TLT and the $USD to fall a lot! Until that happens, you need to maintain control over your buying impulse.
This week, the $USD dropped -1.09% and the TLT dropped -1.68% and the $SPX jumped +3.75%. It works that way.
Here is the $USB 30-year Treasury Bond chart.
Interest rates and bond yields.
Interactive Daily data charts:
Interactive Chart of Interest rates and bond yields.
US Bond Funds -- Interactive Monthly Data Charts SHY Monthly data series chart:
IEF Monthly data series chart:
TLT Monthly data series chart:
AGG Monthly data series chart:
LQD Monthly data series chart:
TIP Monthly data series chart:
US Bond Funds -- Interactive Weekly Data Charts SHY Weekly data series chart:
IEF Weekly data series chart:
TLT Weekly data series chart:
AGG Weekly data series chart:
LQD Weekly data series chart:
TIP Weekly data series chart:
US Bond Funds -- Interactive Daily Data Charts
SHY Daily data series chart:
IEF Daily data series chart:
TLT Daily data series chart:
AGG Daily data series chart:
LQD Daily data series chart:
TIP Daily data series chart:
Table 11: Interest-sensitive securities
| Symbol | Close | 1Day Change |
1Day %Change |
1W %Change |
2W %Change |
4W %Change |
YTD %Change |
3M %Change |
6M %Change |
12M %Change |
Commodities Review
This week, commodity prices ($CRB) gained +2.06% W/W to close at 272.77. That wasn’t Crude Oil, which lost a bit this week.
There had been a big +1.22% gain the previous Friday too, so over six sessions the $CRB has been cranked up a notch. That usually happens when the US Dollar gets soft, as it has.
Although I use the $CRB (Reuters/Jeffries Index), principally because it’s the oldest, there are many commodity indexes: http://www.crbtrader.com/crbindex/ • Astmax Commodity Index(AMCI) • Commin Commodity Index • Dow Jones-AIG Commodity Index • Goldman Sachs Commodity Index • Reuters/Jefferies CRB Index • Rogers International Commodity Index • Standard & Poor's Commodity Index • NCDEX Commodity Index • Deutsche Bank Liquid Commodity Index (DBLCI) • UBS Bloomberg Constant Maturity Commodity Index (CMCI)
Here is a link to an article that discusses the major ones that have been around for a while: http://www.rogersrawmaterials.com/overviewandanalysis.PDF
Here is a current price summary of the heaviest weighted commodities contracts: http://money.cnn.com/data/commodities/
These indexes change their component weightings perhaps annually or even monthly, for example: http://www.seekingalpha.com/article/43586-the-new-generation-of-diversif... http://tinyurl.com/a5myfj
Interactive Chart of Weekly CRB Commodities Index:
Interactive Chart of Daily CRB Commodities Index:
Oil Review
This week, the $WTIC dropped -$0.31/bbl (-0.41% W/W) to close at 74.86/bbl.
A week ago I wrote in this space: “If, as and when the US Dollar starts to fall, I expect the price of Crude Oil to lift a tad. The economy may be soft; but there is no indication yet that it hit the wall like 2007 and 2008.” Since then, the $USD did pull back, but so too did Oil this week.
For $WTIC, the 50-day MA is now 76.57, down again W/W from 76.89 and 77.25, after being up from 77.08, 76.62, 75.46, 74.96 and 74.84, after being down from 75.59, 76.32, 77.20, 78.00, 78.85, 79.72, 80.36, 81.36, 82.43 (after changing course from), 82.82, 82.74, 82.10, 81.05, 79.99, 78.84, 78.30, 78.39, 78.32, 77.86, 77.23, 76.44, and 76.20 over the prior weeks. So there seems to be a bearish tone.
The 200-d MA is at 77.82, down a tad from 77.94, 78.09, 78.18, 78.21, 78.15, and 78.04, but still higher than the previous 77.85, 77.62, 77.54, 77.45, 77.26, 77.08, 77.06, 77.01, 76.98 and 76.99 of the past 16 weeks. But six weeks of a falling 200-d MA plus a 50-d MA that is now also falling is a technically bearish picture.
A week ago I said that “I have been watching Crude Oil and Precious Metals prices if, as, and when the Oilers (2nd last) and Goldbugs (last) depart the dance floor, the Bull party is over. So far our risk models are fairly benign. But it wouldn’t take much for sellers to come into the market to put the Bear into action.”
That’s the point. It’s all about the Dollar now.
Here is the e-miNY Dec-07 Crude Oil chart.
Interactive Chart of Weekly Crude Oil:
Interactive Chart of Daily Crude Oil:
Gold & Precious Metals Review
This week, $GOLD lifted +$9.10/oz (+0.74%) to close at $1247.00/oz. The gains per week over the previous two were almost the same. The DGP (2x long) is $33.43.
The higher gold price has led to a mergers and acquisitions binge. I discussed this a week ago. I wish I had taken my own advice.
At the present price of the gold future ($1240), goldmining companies can make a lot of money – huge cash flow – enough to get them thinking about take-overs, which is usually dilutive, which scares the shareholders. Only competent managers who are M&A savvy should be supported here at this point in the cycle, particularly for the larger cap companies.
I went long again this week, and my gains were pretty good W/W. The problem is I went long in GDX and not GDXJ. You see, I am concerned that the goldminers are over-bought and subject to a brief down-draft. I knew they were also lifting with the falling $USD and I didn’t want to miss the profit. So, being conservative, I added a 70% portfolio weighting to GDX and a further +10% weighting in Rubicon Minerals (RBY).
The RBY was up only +0.94% W/W and because I bought it mid week on a pull-back, my gain in a couple days is +3.4%.
What disadvantaged me was not going into GDXJ. People who read me avoided the GDX because they saw lots of costly and dilutive take-over deals by the major companies. Everybody (but me) turned to buying up the juniors.
This is a touchy time trading gold and the goldminers. It seems that when fear hits you most is the best time to buy, and when complacency settles in, that’s a good time to sell.
I didn’t at all like the trading patterns in ABX and GG this week. There looks like manipulation going on when I see massive volume right at the open and close and thin markets in between. I don’t like it when I see ABX crashing and the GDXJ soaring and the price of gold and silver moving flat to higher. In other words there is no good reason to pull down the ABX unless you are trying to pull down the GDX. I’m referring to the Big Players of course since you and I and thousands like us don’t move markets the way those people do with the hundreds of billions of OPM at their disposal.
I’m up about +12.6% since July 19, and I’ve been in near cash a lot of the time, always conscious of risk, so my returning to Toronto on the 21st has gotten me in a groove apparently. Traders know how quickly we can lose it, so superstition often plays a role. In my case, I’ll wear the same shorts or t-shirt for a week, but then my wife says that’s not unusual. She wonders why I have about 20 or 30 shirts but wear just 2 or 3. Case in point; a couple weeks ago I bought I think four pair of shorts but haven’t worn any yet. Every day I put on the same pair I bought about two years ago. Meanwhile I have about ten pair folded in the drawer. If I was back in Bahamas, I would be occasionally switching that one pair for a bathing suit – the one I like to work in, and swim in, not the other three or four. Really; it’s all about mind-set. To trade successfully, you have to be settled, and not worried about little things like are your shorts clean.
I’m not eccentric, really.
I just like to get in the zone.
http://investertech.com/tkchart/tkchart.asp?stkname=gld&cht=Tech+Chart&p...
http://investertech.com/tkchart/tkchart.asp?stkname=gld&cht=Tech+Chart&p...
http://investertech.com/tkchart/tkchart.asp?stkname=gld&cht=Tech+Chart&p...
The $GOLD 50-day Moving Average is now at 1210.97, up an iota from 1210.65, 1210.51, and down a bit from the prior 1211.51, and 1211.57, and close to the previous 1216.50, and 1219.45. So, really, nothing much has happened recently with the 50-day MA. But, we are now in choppy waters.
The 200d MA is 1164.49, up from 1161.60, 1154.27, 1150.21, 1146.80, 1143.96, 1139.77, 1134.55, 1130.70, 1125.25, 1119.06, 1112.07, 1104.93, 1099.37, 1092.95, 1086.98, 1079.82, 1073.77, 1067.77, 1062.17, 1056.79, 1051.39, 1047.82, 1044.22, 1040.67, 1036.71, 1031.61, 1026.87, and 1022.57 over the past 29 weeks. This is bullish, as it should be for the longer-term picture.
Once the short-term picture works out, taking time to work through an over-bought condition, I think the gold market will go on a tear. I wouldn’t stay short overnight.
Interactive Chart of Weekly Gold EOD Continuous Contract Index:
Interactive Chart of Daily Gold EOD Continuous Contract Index:
Interactive chart of recent trading for the Gold Bullion index.
Spot silver chart for the week
$SILVER gained +$0.78/oz this week to close at $19.84. The AGQ (2x long) is $69.64.
If you are predisposed to try these (precious metals) markets, I find the following $SILVER:$GOLD comparative relative strength chart helpful.
When $SILVER sells off against $GOLD, it means that precious metals prices are under pressure, and that’s when I want to be short. When, however, you see the $SILVER:$GOLD line headed up, as it has been recently, that means traders are bidding precious metals prices higher, and you want to be out of the shorts and into long positions if you think there might be legs to the move.
Unfortunately for the Gold Bulls, of which I’m one today, the $SILVER:$GOLD line is now over-bought. At times like this, experienced traders hold positions for a shorter than usual period. Depending on how I see the risks, my hold time could be hours.
http://stockcharts.com/charts/gallery.html?s=$silver
http://tinyurl.com/y8k8ud4
For $SILVER, the 50d MA is now 18.32, which is up from 18.26, 18.24, 18.21, 18.25, and 18.18, which had been trending down several weeks from 18.30, 18.38, 18.39, and 18.41, after lifting for many weeks: 18.37, 18.33, 18.27, 18.16, 18.07, 17.98, 17.87, 17.63, 17.44, 17.18, 16.91, 16.73 and 16.68. As I have written in this space, “so, the market is choppy and dangerous here.”
The long-term 200d MA is 17.82, up a tad from 17.79, 17.76, 17.72, 17.69 and 17.67, which had been flat a week after rising through 17.65, 17.60, 17.58, 17.55, 17.48, 17.39, 17.29, 17.21, 17.12, 17.02, 16.89, 16.77, 16.64, 16.52, 16.41, 16.31, 16.24, 16.20, 16.16, 16.10, 16.03, 15.97, 15.92, 15.85, 15.75, and 15.65 over 32 weeks.
Whatever direction the PM’s take, I do anticipate $SILVER will be the leader of $GOLD.
Interactive Chart of Weekly Silver EOD Continuous Contract Index:
Interactive Chart of Daily Silver EOD Continuous Contract Index:
Interactive chart of the Silver Bullion index.
$PLAT was up +$26.00/oz this week (+1.70% W/W) to close at $1558.00/oz. $PLAT closed at just $1513.00 two Friday’s ago.
http://stockcharts.com/charts/gallery.html?s=$plat
http://tinyurl.com/ydwz4pn
The 50d MA for $PLAT is now at 1535.76, which is down from 1539.80, 1543.98, 1543.34, 1545.42 and 1538.56. But previous to that, prices have been higher for a while: 1551.60, 1568.68, 1587.48, 1604.03, 1622.75, 1637.61, 1650.20, 1660.39, 1665.23, 1674.45, 1675.26, after being up from 1660.80, 1645.40, 1625.31, 1602.51, 1585.00, 1566.10, 1562.59, 1560.08, 1548.60, 1533.68, 1520.40, 1511.07, 1506.31, 1502.04, 1493.90, and 1480.91 earlier. Choppy here too.
The 200d MA is at 1563.89, up from 1560.98, 1556.92, 1552.32, 1547.60, 1542.04, 1537.08, 1531.60, 1525.92, 1522.18, 1517.28, 1509.86, 1501.49, 1494.49, 1488.49, 1481.61, 1473.21, 1460.14, 1447.70, 1432.87, 1418.16, 1405.15, 1392.10, 1381.91, 1373.75, 1363.46, 1352.15, 1341.01, 1331.42, 1323.04, 1312.58, 1305.30 and 1297.81 the prior 32 weeks.
I don’t trade plat or pall, but I study them as part of the precious metals trading I do.
Spot platinum chart for the week
Interactive Chart of Weekly Platinum EOD Continuous Contract Index:
Interactive Chart of Daily Platinum EOD Continuous Contract Index:
Interactive chart of the Platinum metal index.
After $PALL gained +28.45/oz (+5.97% W/W) a week ago, the contract gained a further +$26.80/oz (+5.31%) this week to close at $531.45. Two weeks ago I commented that “it’s still down in two weeks from $496.05.”
http://stockcharts.com/charts/gallery.html?s=$pall
http://tinyurl.com/yenr5rj
The 50d MA is now at 476.26, up from 473.33, 469.81, 465.88, 463.75, 457.94, after having been down from 462.29, 469.13, 475.45, 484.03, 494.39, 499.22, 501.83, 504.71, 505.32, and 508.14, which was the peak of a run through 506.75, 499.60, 488.39, 478.78, 464.32, 454.12, 446.09, 443.42, 440.44, 434.95, 426.04, 417.55, 411.14, 406.81, 402.56, 396.97, and 390.10 in the past 32 weeks.
The 200d MA is at 457.43, up from 453.57, 448.95, 445.59, 442.17, 438.72, 434.15, 430.44, 427.04, 424.11, 420.43, 415.78, 411.11, 407.11, 403.59, 398.52, 393.30, 387.78, 379.68, 373.49, 365.65, 358.56, 351.84, 346.02, 341.03, 335.30, 329.51, 323.93, 319.10, 314.77, 310.11, 305.19, and 300.58 in the past 31 weeks.
Spot palladium chart for the week
Interactive Chart of Weekly Palladium EOD Continuous Contract Index:
Interactive Chart of Daily Palladium EOD Continuous Contract Index:
Interactive chart of the Palladium metal index.
This week, $COPPER gained +$11.55 (+3.41%) to close at 350.00.
http://stockcharts.com/charts/gallery.html?s=$copper
http://tinyurl.com/ybgnb7f
For $COPPER, the 50d MA is at 320.80, up from 315.96, 312.68, 307.48, 305.06, 301.92, 299.94, which had been down a tad from 300.94, 303.75, 307.34, 313.12, 318.97, 325.25, 332.51, 335.44, 338.10, 342.14, 344.15, 344.89 after rising through a few months: 343.42, 337.92, 332.21, 328.97, 327.03, 327.29, 327.56, 326.24, 323.80, 322.54, and 322.07.
The 200d MA is at 323.79, which is up from 322.84, 322.00, 321.10, 320.32, 319.22, 318.20, 317.36, 316.73, 316.34, 316.12, 315.83, 315.54, 315.70, 315.28, 314.54, 313.94, 312.26, 310.48, 307.73, 304.50, 301.31, 297.89, 294.81, 292.15, 289.30, 286.09, 282.70, 279.88, 277.48, 274.89, 272.75, and 269.97 in the 32 previous weeks.
The copper price is in a Bull market at this point because the price is above a rising 50-day MA and 200-day MA.
For those who are keen to study the industrial metals like copper, aluminum and zinc, why not look at the Powershares DBB, which trades on the NYSE.
http://finance.google.com/finance?q=NYSE:DBB
Freeport McMoRan (FCX) soared +10.32% W/W to close at $78.55. Those who bought eight sessions ago made a very solid gain.
Interactive Chart of Weekly Copper EOD Continuous Contract Index:
Interactive Chart of Daily Copper EOD Continuous Contract Index:
Interactive chart of the Copper metal index.
Table 12: Senior gold equities
| Symbol | Close | 1Day Change |
1Day %Change |
1W %Change |
2W %Change |
4W %Change |
YTD %Change |
3M %Change |
6M %Change |
12M %Change |
The goldminer indexes and ETF’s were divergent this week as the $XAU lifted +1.45% to 186.81; the GDX moved up +0.66% to 53.69; the GDXJ (juniors) lifted +5.58% to 31.99, and Canada’s XGD lost -0.57% to 24.33.
I won’t bore you any more with my war stories, but I do wish I had hung in with GDXJ instead of GDX – for all the reasons I gave here a week ago.
Allied Nevada (ANV +9.8% W/W) is in the news a lot as there is unusual call opions buying and a rapidly rising share price. The stock is up +29.8% over four weeks, which is the most on my monitor.
To watch the moves in precious metal miners, you will have to monitor the individual stock charts, preferably in real-time, as follows: NEM ABX AU GFI GG HMY AUY KGC BVN
LIHR IAG EGO RGLD GOLD TSE_AGI GSS NG NGD AEM
Here are the key Silver miners and the SLV ETF: SLV SIL SVM CDE HL PAAS SSRI SLW MGN
Here are the Weekly and Daily Data charts of the indexes:
Interactive Chart of Weekly US Goldminers Index:
Interactive Chart of Daily US Goldminers Index:
The US goldminer share trust ETF trades under the ticker symbol GDX.
Here are the US Goldminer ETF (GDX) index Weekly and Daily data charts:
GDX Weekly data:
GDX Daily data:
The Toronto Exchange-listed goldminer iUnits S&P/TSX Capped Gold Index ETF trades under the ticker symbol TSE:XGD.
Just like GDX on the AMEX, you can trade XGD on Toronto. Canadian Dollar fluctuations will impact XGD vs GDX.
Here are the Weekly and Daily data charts for the TSX Goldshares (XGD) index:
Interactive Chart of XGD Weekly data:
Interactive Chart of XGD Daily data:
Forex Review
The $USD is a trade-weighted US Dollar index, we used to call the Morgan Dollar.
As commodities are priced in $USD you need to study forex price trends and cycles.
The Forex market is a four trillion dollar a day marketplace, which dwarfs the size of the stock and bond markets. In this market, the Euro/USD is the highest volume trader, and London is the center of the universe.
The current value of $USD is a mean value of rate fluctuations of six world currencies (Japanese yen, Euro, British pound, Canadian dollar, Swiss franc and Swedish krona) that each trade against the USD. The Euro is by far the biggest component.
I don’t understand why the Yuan is not a factor, or the Mexican peso or Brazilian real, and why the krona is so important, but admitting it shows my ignorance.
The ETF that tracks the G-10 currencies is the Powershares DBV. http://tinyurl.com/ltxpk4
Regarding currencies, I find the ADVFN.com service (with inexpensive real-time price feed) to be quite useful. I have set up a monitor (one of 150-some tickers) for currencies, which you can do as well.
Click on: http://www.advfn.com/p.php?pid=m_tools
Into the window for stocks, enter the following string:
FX:EURUSD, FX:AUDUSD, FX:GBPUSD, FX:EURGBP, FX:EURCHF, FX:EURCAD, FX:USDCAD, FX:EURJPY, FX:USDJPY, FX:AUDJPY, FX:EURAUD
When you call up the stocks, you’ll see they are interactive, which means they update in real-time (if you paid the $10/mo for this data) or 15-20-minute delayed prices (free), and can be displayed with indicators and overlays.
Here are some of the charts I keep on a screen AT ALL TIMES, which one can access via the link under the stock name beside the ticker symbol:
US Dollar to Cdn Dollar:
http://www.advfn.com/p.php?pid=fxcharts&symbol=FX^USDCAD&period=1&freq=3
US Dollar to Aussie Dollar:
http://www.advfn.com/p.php?pid=fxcharts&symbol=FX^USDAUD&period=1&freq=4
UK Pound Sterling to US Dollar:
http://www.advfn.com/p.php?pid=fxcharts&symbol=FX%5eGBPUSD&period=1&freq=3
Euro to US Dollar:
http://www.advfn.com/p.php?pid=fxcharts&symbol=FX%5eEURUSD&period=1&freq=3
If you are new to this; think about it that in any pair, if the latest trend line is up, the first ticker is the one that is rising. So EURUSD, which is the way the contract is traded, the trend line is up, meaning the Euro is in rally mode against the US Dollar. The symbol USD in any pair is the denomination versus $USD, which is the trade-weighted US Dollar index (i.e., multiple currencies as described above).
A chart of the Euro vs Dollar (i.e., EURUSD) with an overlay of currencies (GBP, AUD and CAD in this case) will show you if, as, and the point when, currencies are impacting capital markets. We are looking for commonality in trend direction of the currencies in their trading against the US Dollar.
For instance, when the US Dollar is headed sharply down against most of the rest in unison, as happened shortly after 10:00am ET on Friday, and on other occasions in the past month in the following chart, you are likely to see an immediate pop to equity prices. Also, when the Dollar soars rapidly, equity prices tend to drop quickly.
This week the so-called trade-weighted US Dollar index ($USD) dropped -1.09% to close at 82.02. There was a loss of -0.54% on Friday. Where the $USD is headed next week is important. If the trend is down, then equities and commodities are up and bonds are down.
http://stockcharts.com/charts/gallery.html?s=$usd
http://tinyurl.com/y9c3sr4
The 50-day MA of the $USD is now at 82.82, down from 83.13, 83.42, 83.96, 84.48, 85.04, 85.48, 85.68 and 85.68, which peaked from 85.46, 85.04, 84.52, 84.04, 83.41, 82.91, 82.24, 81.67, 81.21, 80.90, 80.72, 80.61, 80.48, 80.19, 79.89, 79.48, 79.23, 78.99, 78.69, 78.25, 77.85, 77.30, 76.87, and 76.52, in the past 32 weeks.
The 200-day MA is 81.37, up from 81.18, 80.99, 80.83, 80.68, 80.55, 80.40, 80.25, 80.09, 79.90, 79.68, 79.48, 79.29, 79.05, 78.88, 78.69, 78.49, 78.33, 78.21, 78.16, 78.14, 78.13, 78.11, 78.09, 78.06, 78.04, 78.05, and 78.10, 78.16, 78.24, 78.37, 78.53, and 78.69 of the past 32 weeks.
More equity and bond traders today are focused on the USD, as they should be.
Interactive Chart of Daily US US Dollar Index:
This week the Euro contract gained +1.27% W/W to close at 128.94. There is going to be resistance at just over 129, but the probabilities are higher for a gain in the Euro to the 133 to 136 levels in the next week or two. I think market interventionists would like to use a weaker US Dollar to support equity prices ahead of the November federal elections in the US.
http://stockcharts.com/charts/gallery.html?s=$xeu
http://tinyurl.com/ydekjtk
The 50d MA for the Euro futures are now at 128.07, up from 127.62, 127.21, 126.38, 125.68, 124.85, 124.21, 124.03, which had been down from 124.34, 124.85, 125.92, 127.18, 128.29, 129.69, 130.75, 132.16, 133.39, 134.42, 135.10, 135.49, 135.80, 136.14, 136.82, 137.48, 138.51, 139.22, 139.99, 140.67, 141.79, 142.85, 144.18, 145.26, and 146.18 over 32 weeks.
The 200d MA is at 133.82, down from 134.35, 134.91, 135.39, 135.89, 136.32, 136.76, 137.19, 137.66, 138.08, 138.64, 139.16, 139.65, 140.21, 140.62, 141.09, 141.57, 141.96, 142.29, 142.48, 142.62, 142.73, 142.86, 142.95, 143.10, 143.22, 143.28, 143.27, 143.26, 143.20, 143.06, and 142.86 over the past 31 weeks. Still a bit on the bearish side.
I think the 200-day MA (presently 133.82) is what will stop the rising short-term trend for the Euro. That leeway ought to facilitate higher equity, commodity and precious metal prices for the next week or two. After that, I see a reversal all around as traders begin to sell risk once again.
Interactive Chart of Weekly Euro Dollar Index, priced in USD:
Interactive Chart of Daily Euro Dollar Index, priced in USD:
The Pound contract dropped a small -0.34% W/W to close at 154.61. But the price is right at, and ever so little above, the 50-day and 200-day MAs (154.43 and 154.59, respectively). So, with the Pond sterling under control for the moment, it’s ok for the British Prime Minister to be taking some time off for paternity leave.
I’m all for it. In fact, it’s nice to have a G-7 leader with a new child. It’s also desirable in my mind to have grandparent leave, so that G-7 leaders could spend a year away and give the people less tax and spend programs. They could take all the time they want. They are not as important as they think.
http://stockcharts.com/charts/gallery.html?s=$xbp
http://tinyurl.com/yasdzc2
The 50d MA of the Pound is at 154.43, up from 153.87, 153.11, 152.04, 150.92, 149.41, 148.32, 147.89, after it had fallen through 147.86, 148.00, 148.28, 148.79, 149.28, 149.73, 150.06, 150.83, 151.46, 151.77, 152.18, 152.55, 152.84, 153.42, 154.30, 155.25, 156.41, 157.30, 158.19, 159.34, 160.25, 160.98, 161.89, 162.71, and 163.25 over the past 32 weeks.
The 200d MA is 154.59, down from 154.94, 155.20, 155.41, 155.60, 155.69, 155.78, 155.95, 156.15, 156.38, 156.75, 157.13, 157.49, 157.97, 158.35, 158.88, 159.48, 159.91, 160.27, 160.52, 160.74, 161.01, 161.28, 161.54, 161.85, 162.13, 162.34, 162.39, 162.34, 162.21, and 161.97 over the previous 30 weeks.
Weekly British Pound Index:
Daily British Pound Index:
Weekly Japanese Yen Index:
This week, the Yen lifted +1.09% to close at 118.46. The Bank of Japan convened a special meeting a few days ahead of the regularly scheduled one. There are huge concerns in Japan that the Yen is too strong for the exporter industry companies to withstand. They want a higher Euro and US Dollar.
The Yen’s 50-day MA is now 115.62, which is up from 114.84, 113.97, 113.20, 112.46, 111.94, 111.29, 110.66, 109.90, 109.35, 108.80, 108.42, 108.13, 107.97, 10 8.07, 108.08, and 108.19, which had reversed from 108.67, 108.98, 109.36, 109.82, 110.12, 110.54, 110.74, 110.67, 110.44, 110.27 and 110.14 over the previous 29 weeks.
The 200-day MA is now at 111.30, rising from 111.12, 110.94, 110.78, 110.59, 110.45, 110.38, 110.30, 110.23, 110.14, 110.06, 109.99, 109.92, 109.84, 109.77, 109.60, 109.49, 109.43, 109.40, 109.42, 109.37 and 109.29 the previous 21 weeks.
That’s bullish, which you would expect when the carry trade is reversing and traders are afraid of taking on too much risk. The BOJ is trying to talk down the Yen and are pretty much backed into a corner with overnight lending rates to the commercial banks almost at zero. Any quantitative easing here would lift equity, commodity and precious metal prices, but the Japanese may have no alternative.
Daily Japanese Yen Index:
This week was a big one for the Cdn Loonie, which gained +1.23% W/W to close at 96.20. The previous Friday the Loonie gained +0.51% on the day as forex markets got shook up between 10:00am ET and 10:30, following the beginning of the Bernanke speech at the Fed-sponsored meeting in Wyoming. So Bernanke is trying to cool the $USD.
Who woulda thought? :-)
http://stockcharts.com/charts/gallery.html?s=$cdw
http://tinyurl.com/ycx58us
The Loonie 50-day MA is now at 95.94, down from 96.14, 96.39, 96.30, and 96.21, after hitting a cycle low at 95.80, and 95.81 after dropping through 95.92, 96.41, 96.88, 97.20, 97.42, 97.63, 97.85, and 98.48, after rising through 98.34, 98.17, 97.82, 97.19, 96.63, 96.10, 95.97, 95.87, 95.59 and 95.36 the previous 25 weeks.
The 200d MA is at 96.24, about flat with 96.25 and 96.23 of the past two weeks and still up from 96.15, 96.11, 96.08, 96.06, 96.00, 95.85, 95.80, 95.68, 95.53, 95.43, 95.35, 95.23, 95.10, 94.93, 94.64, 94.30, 93.97, 93.67, 93.48, 93.29, 93.10, 92.88, 92.60, 92.38, 92.16, 91.86, 91.55 and 91.25 over the prior 26 weeks.
Weekly Canadian Dollar Index:
Daily Canadian Dollar Index:
Here is the China Yuan (CNY) chart.
Wrap-up:
A week ago, I said I wasn’t rushing to return to Bahamas. Things are pretty good here in Toronto. For me, this is important family time. I even indicated I might even stay through the Cambridge Junior Resources Show at the Metro Toronto Convention Centre Sept 25-26.
Cambridge may not have the power of the PDAC, but admittedly September is nicer in Toronto than March. At Cambridge, there will be at least 200 companies represented, mostly precious metals based. If I stay, I’ll get to meet many people that I probably should. My precious metals accounts are doing nicely and, given that we took on another partner this month, a really outstanding trader, I’ll probably focus more on the gold and silver.
I think I managed to stick to my routine by writing quickly and finishing early. Up at 6 and back to bed at 7. Haha! Not. But, now I get to take two days off and you get stuck with a gazillion typos.
If you are a resident of US and Canada, this is a long weekend. Labor/Labour Day. Enjoy.
