[1:31pm ET] Friday helped kick the US equity market into over-drive after a smoother climb earlier in the week.
After months of being told the US economy was about to collapse, traders now see the writing on the wall: For several months, as prices wallowed at intermediate cycle lows, they were tricked into deferring equity and commodity contract purchases as the economy was in fact strengthening and they should have been buying.
Now, albeit a little late to the party, they are chasing prices with a ‘risk-on’ mind-set – doing all the things we repetitively state are wrong.
In any case, this week, there were 10 rising sectors and zero that fell. For the Dow 30, 25 traded higher this week, led by Bank of America (BAC +7.54% W/W), which was up an eyebrow lifting +5.23% on Friday.
Why the ongoing deceit regarding the state of the economy vs the state of the banking system? After all, we know the reason. Governments can only over-spend with the ongoing support of their bankers. When the bankers got into a deflationary cycle, needing to sell over-priced and non-performing assets, they reached out to central bankers who reached out to their government leaders. For optics sake, govt had to say that their policies in support of the bankers were in fact done for the public’s benefit, i.e., to support the economy. The govt’s mantra is that it’s always the people’s interests closest to their hearts.
What flat-out liars the majority of these people are.
Anyway, for six or seven months I told you what was happening, and now you realize I wasn’t misleading you. From a series of five short-term cycle bottoms during August and into October, around 1100 on the S&P 500, the benchmark equity market index has lifted over +22%. Measured against history, that’s a very impressive performance.
You were set up to miss it.
My junior precious metals portfolio btw is now up +26.0% YTD, up from +21.2% a week ago and we’ve just finished January. Yes, it’s true; if I could only have skipped four weeks from mid-November! What pleases me more is that the GDX and GDXJ ETFs this week fell -1.79% and -1.92% W/W while my juniors were up +3.93%.
That’s almost +6% out-performance this week, which is possible when I focus.
As for the markets this week, let’s see what happened regarding the Economy, Currencies, Bonds, Equities, Commodities and Precious Metals.
From the published reports, here are this week’s headlines from the highly regarded Econoday analysts:
• Employment shows surprising strength
• Momentum is building in the labor market
• Personal income gets lift while spending is flat
• Motor vehicle sales rev up in January
• Consumer confidence slips but moderately positive
• ISM manufacturing shows mild acceleration
• ISM non-manufacturing gains strength
• Case-Shiller home prices fall in November
• Construction spending continues uptrend
•
The results continue to be positive, as they have been for at least seven months. The bottom line is “ Overall, the past week’s indicator news clearly shows the economy improving with the exception being home prices. Manufacturing has regained earlier strength and is leading the recovery. Importantly, the latest employment report points to strengthening in the consumer sector.”
Let’s now look at the detailed economic data for the week that passed and the one ahead.
Global Economics Review
As investors wait — and wait — for a conclusion to the Greek talks, they turned their attention to the continuing stream of earnings reports and the slew of new economic reports globally. On the upside were the manufacturing purchasing managers’ surveys that reported stabilization and — in some — improvement in many of the major global economies. However, sentiment suffered a January post holiday sag. On Friday, the U.S. employment situation report beat all expectations by a mile. Nonfarm employment jumped by 243,000 jobs — well over consensus estimates of 135,000. The details were positive as well. Needless to say, investors in Europe and the U.S. sent equities higher while the dollar fluctuated against its major counterparts… Most equities were up for the month of January and continued their positive performance into February despite mixed earnings reports. For the week, only the All Ordinaries and Nikkei were down. Gains ranged from % to %. Analysts noted that investors needed to adjust to signs that global economic growth, though very fragile, may be turning out to be better than many had expected. Among the many positives in last week’s data were Japanese industrial production, Germany’s continued decline in unemployment and better than anticipated manufacturing and services purchasing managers surveys globally.
Econoday’s Global Perspective is written by chief economist Anne Picker.
The highlight of the week was an unexpectedly strong jobs report. But other data were also positive indicating that momentum is picking up in all sectors—including manufacturing, construction, and services. The weak spot remains housing prices.
Econoday’s US report is written by Mark Rogers. He is the author of The Complete Idiot’s Guide to Economic Indicators, Penguin Books, 2009. I recommend it.
The reason I devote much time to the reporting and analysis of economic data is for us to gain an understanding of the reasons behind the ebb and flow of capital market prices and the sector rotation within markets. After you follow these reports from month to month you will get a sense of the interrelationships between the business or economic cycle and the market cycle.
Here are the key US economic reports from last week’s calendar.
US Personal Income and Outlays for Dec.
After release of the report on 01/30/2012 8:30:00 AM ET, Econoday reported, Personal income picked up strength in December but spending softened. But the numbers were consistent with expectations and earlier released data. Personal income in November advanced 0.5%, following a 0.1% rise the prior month. The December boost posted a little higher than market expectations for a 0.4% jump. The important wages & salaries component grew a healthy 0.4% after no change in November. In the earlier employment report, aggregate private earnings had been strong… Consumer spending in December was sluggish, coming in at flat after edging up 0.1% in November. Analysts had called for a 0.1% increase. Weakness was in both durables and nondurables, reflecting in part a decline in auto sales and gasoline prices. Durables dipped 0.4% after a 0.3% gain in November. Nondurables fell 0.4%, following a 0.3% decline. Services in December advanced 0.2% in both December and November… Inflation at the headline and core levels was soft. The headline PCE price index firmed a bit to a 0.1% rise after no change in November. The market median forecast was for a 0.1% rise in December. The core pace was a touch warmer at 0.2% in December, compared to 0.1% in November and expectations of 0.1%… Year-on-year, headline prices were up 2.4%, compared to 2.6% in November. The core was up 1.8% versus 1.7% the month before… While recent spending has slowed to catch up with income, the income gain in December is favorable to future gains in consumer spending. Also, durables spending is likely to be supported by the Fed's pledge to keep rates low until late 2014. Favorable auto financing is likely to encourage an increase in auto demand… At the time of release, equity futures fell back but on concern about a Greek debt deal and potential fallout on Portugal and not on the personal income report. Personal income numbers were essentially as expected.
US Dallas Fed District Manufacturing Survey for Jan.
After release of the latest data on 01/30/2012 10:30:00 AM ET, Econoday reported, Manufacturing regained some momentum in the Texas economy in January. Perceptions of broader economic conditions were notably more positive in January. The general business activity index shot up to 15.3 after dipping to minus 0.3 in December. The company outlook index also increased markedly, rising from 5.0 in December to 13.5. Both indexes reached their highest readings in 10 months… The production index rose from 0.2 to 5.8, suggesting growth resumed this month. Other measures of current manufacturing conditions also indicated growth in January. The new orders index jumped to 9.5, its highest reading in six months, from minus 2.0 in December. Similarly, the shipments index turned positive at 6.1, rising from minus 1.1… Prices and wages increased in January. The raw materials price index was 24.4, little changed from December. The finished goods price index climbed from minus 0.8 to 9.0, suggesting selling prices rose. The January wages and benefits index came in at 17.5, down slightly from a reading of 19.4 in December but still indicative of rising labor costs… Expectations regarding future business conditions were markedly more optimistic in January. The index of future general business activity rose sharply from 9.5 to 22.3, reaching its highest level in almost a year. The index of future company outlook came in at 27.9, up from 19.9 last month. Other indexes for future manufacturing activity also increased.
US 4Q2011 Employment Cost Index.
After release of data on 01/31/2012 at 8:30 AM ET, Econoday reported, Wages are showing some pressure, nothing severe but pressure that contrasts a bit with the high rate of unemployment. The employment cost index rose 0.4% in the fourth quarter, up from the third quarter's 0.3% rise. The index's wages & salaries component shows the same rates of increase the last two quarters which hints at worker wage power. The year-on-year rate of plus 2.0% is unchanged from the prior quarter… The unemployment rate, at 8.6%, has been coming down which does give those who are employed a greater advantage when negotiating pay. But the wage power is likely centered in high skill employees, which means the average worker may not be enjoying increasing leverage. Next data on workers and pay will be the quarterly productivity & costs report on Thursday and monthly earnings data in Friday's employment report.
After release of the latest data on 01/31/2012 9:00:00 AM ET, Econoday reported, Home prices are continuing to erode with no meaningful signs of a turnaround in the offing. This is the conclusion of the Case-Shiller report where in November, for the third straight month, the composite-20 index fell a sizable 0.7% (October revised). All but 3 of the 20 cities show monthly contraction. The year-on-year rate of contraction for the composite-20 deepened slightly to minus 3.7% from minus 3.4%… Unadjusted data are focused on in this report and tell a story of greater monthly weakness, greater weakness tied to weather effects. The unadjusted composite-20 index is down 1.3% for a second straight month (October revised) with 19 of 20 cities showing declines. Year-on-year, the unadjusted rates in November and October are the same as the adjusted rates… Falling prices are a major factor that's helping to lift housing sales from depressed levels. But at the same time, lower prices are a major negative for existing home owners, trapping many with negative equity and limiting resale options.
After release of the latest data on 01/31/2012 9:45:00 AM ET, Econoday reported, Slowing at a still high rate of expansion is the call on overall business conditions in the Chicago area. The Chicago composite index eased 2 points this month to 60.2 (prior revised), well over 50 to indicate strong growth in year-on-year business activity though slightly below December to indicate a slightly slower rate of growth. The new orders index is the most important component and it tells the same story, at 63.6 this month vs December's 67.1. In the report's biggest sign of trouble, the level of backlogs is down 9 points, to a sub-50 level of 48.3 to indicate a monthly draw… The report's sample, which in distinction to regional manufacturing reports is drawn from all areas of the economy, also reports the lowest rate of employment expansion in five months which is not a positive indication for Friday's employment report. But other readings point to strength including a steady and strong rate of production, a steady rate of input price pressure, and further slowing in deliveries which points to congestion in the supply chain… This report has been uniformly and strongly positive this recovery, but not this month. Today's report hints at the risk of slowing for both of this week's ISM reports. The Dow is down from opening highs.
US Consumer Confidence for Jan.
After release of the latest data on 01/26/2012 10:00:00 AM ET, Econoday reported, Weakness in the assessment of current conditions -- likely reflecting rising gas prices and perhaps a more difficult jobs market -- pulled down consumer confidence this month to 61.1 from December's revised 64.8. The report's present situation component fell more than 8 points to 38.4 in what nearly erases December's strong showing. Weakness here is centered unfortunately in the jobs market where 43.5% say jobs are hard to get. This is not a good indication for Friday's employment report and compares with the recovery low of 41.6% in December… The expectations component also slipped but just barely, to 76.2 vs 77.0. The job readings on the expectations side showing rising optimism that contrasts with the current assessment of the jobs market. This suggests that consumers think current troubles will be temporary. Still, consumers see their income power falling in the months ahead which is a negative for the consumer spending outlook… Gas prices likely have much to do with income expectations and they certainly affect inflation expectations which are up 2 tenths this month to plus 5.5% for the one-year outlook. This report hints at trouble for January suggesting the month may prove to be a weak one in what is otherwise a rising trend for the economy. The Dow is moving further off opening highs following this report.
US Motor Vehicle Sales for Jan.
After release of the latest data on 02/01/2012 during the morning, Econoday reported, Vehicle sales jumped to a 14.2 million annual rate in January for a 5% gain from December. But sales, no doubt due to rising gas prices, were concentrated on cars which jumped 13% to a 7.4 million rate. Truck sales actually fell in January, down 4% to a 6.8 million rate. This is the first time in nine months that the car sales rate exceeded the truck sales rate. The concentration in cars, which have lower sticker prices, trims dollar totals and limits the indication for the month-to-month gain in the government's motor vehicles component. Chain stores will post January results tomorrow.
After release of the latest data on 02/01/2012 10:00:00 AM ET, Econoday reported, Moderate and steady growth is the indication from the ISM manufacturing report where readings pretty much match those of December. The January composite index rose to 54.1, safely over 50 to indicate monthly expansion and 1 point over December to indicate a slightly faster rate of expansion (prior revised). A key highlight of the report is the new orders index which rose nearly 3 points to 57.6 to indicate a little bit more than just a moderate rate of monthly expansion. In another positive, backlog orders increased 4.5 points to show a build at 52.5… Growth for some factors did slow in the month but not very much including production, which is at 55.7, and employment, which is at 54.3 for a 5 tenths decline and what is not a positive indication for Friday's employment report. Price pressures for raw materials picked up slightly in the month to end three months of contraction…
The manufacturing sector is a bulwark of the economy and, despite troubles in Europe and slowing in Asia, continues to expand, underscored by a faster rate of expansion for new export orders which rose 2 points to 55.0. Despite the strength in orders, there's little initial reaction to today's report.
US Construction Spending for Dec.
After release of the latest data on 02/01/2012 10:00:00 AM ET, Econoday reported, Construction spending rose more than expected in December but November was not as strong as earlier estimated. Construction spending in December jumped another 1.5% after a 0.4% increase the month before (originally up 1.2%). Analysts projected a 0.5% increase for December… The boost in December was led by a 3.3% surge in private nonresidential outlays after a 0.5% dip the month before. Residential spending rebounded 0.8% after a 0.3% decline. Public outlays rose 0.5%, following a 1.7% boost in November… Within the private residential component, new one-family construction advanced 1.5% while the new multifamily subcomponent eased 0.3% after a 6.1% surge in November. Private nonresidential spending was led by a monthly 13.6% spike in manufacturing… On a year-ago basis, overall construction posted a gain of 4.3% in December, compared to 0.1% the month before… Overall, the construction sector is showing signs of improvement though still at low levels of activity. The broad-based gains in the private sector are moderately encouraging… On the release, equity futures were little changed and up notably. ISM manufacturing posted at the same time, showing improvement and only a little short of expectations.
US Jobless Claims data for week ending 1/28.
After release of the latest data on 02/02/2012 8:30:00 AM ET, Econoday reported, Layoffs continue to trend lower and point to improvement for the labor market. Initial claims fell 12,000 in the January 28 week to a slightly lower-than-expected total of 367,000. In a partial offset, the prior week is revised 2,000 higher to 379,000. The results in this weekly series are always clouded during the shortened weeks of January and December which puts the focus on the 4-week average -- and it continues to improve with a 2,000 decline to 375,750. This is the third straight decline and the 8th decline in 9 weeks for the average which has held below the 400,000 mark for a very convincing 12 weeks in a row. Yet the declining trend is subtle and a look at the 4-week averages in December vs January shows no significant change… Continuing claims in data for the January 21 week fell a very steep 130,000 to 3.437 million, bringing down the unemployment rate for insured workers by 1 tenth to 2.7%. The 4-week average for this series is 3.528 million, down nearly 100,000 from December's trend. But the signal from continuing claims is difficult to isolate given that declining numbers reflect both new hiring but also unfortunately new drop outs from the labor market… This report is positive but isn't likely to improve expectations for tomorrow's employment report where month-to-month improvement is expected to slow. There's no significant immediate reaction to today's report.
US 4Q2011 Productivity and Costs data.
After release of the latest data on 02/02/2012 8:30:00 AM ET, Econoday reported, Productivity growth slowed in the fourth quarter despite a gain in output as hours worked rose faster. Nonfarm business productivity eased to an annualized 0.7% in the fourth quarter after gaining 1.9% in the previous quarter. Expectations were for a 0.8% rise for the fourth quarter. The output component improved to 3.6% from 2.8% in the third quarter. However, hours worked increased an annualized 2.9% after a 0.9% gain the third quarter. In turn, unit labor costs rebounded an annualized 1.2%, following a 2.1% decrease in the third quarter. The consensus forecast was for a 1.0% increase… Compensation rose an annualized 1.9% after a 0.3% dip in the third quarter… Year-on-year, productivity was up 0.5% in the fourth quarter, compared to 0.8% in the prior quarter. Year-ago unit labor costs posted at up 1.3%, compared to a rise of 0.5% in the third quarter… Productivity and unit labor costs are volatile on a quarterly basis. The headline numbers appear to have worsened but the key driver was a boost in hours worked and this is good for the economy. Long-term trends for productivity and unit labor costs remain on track and are favorable.
US National Jobs Report for Jan.
After release of the latest data on 02/03/2012 8:30:00 AM ET, Econoday reported, The January jobs report posted stronger than expected with payroll gains and unemployment dip. Payroll jobs in January advanced 243,000 after jumping 203,000 in December (originally 200,000) and rising 157,000 in November (prior estimate up 100,000). The net revisions for November and December were up 60,000. Analysts projected a 135,000 boost for January. Today's report includes annual revisions to payroll series, including benchmark revisions to payroll levels and new seasonal factors. Household data received annual revisions last month but reflect updated population estimates in January data… As for some time, private payrolls outstripped the total, increasing 257,000 in January, following a gain of 220,000 in December. Expectations were for a 150,000 rise in private payrolls. Private-sector employment was led by gains in professional and business services (+70,000), leisure and hospitality (+44,000), and manufacturing… In the private sector, goods-producing jobs advanced 81,000 after a 71,000 boost in December. Manufacturing jobs increased 50,000 in January after rising 32,000 the month before. Construction employment gained 21,000 after increasing 31,000 in December. Mining increased 10,000, following an 8,000 advance the prior month. Private service-providing jobs jumped 176,000 in January, following a 149,000 expansion in December… The public sector continued to shrink as government employment slipped 14,000, following a 7,000 decline in December… Average hourly earnings rose 0.2% in January, following a 0.1% increase the prior month. The consensus called for a 0.2% gain. The average workweek for all workers in January held steady at 34.5 hours. Analysts projected 34.4 hours… From the household survey, the unemployment rate dropped to 8.3% from 8.5% in December. The market median forecast was for an 8.5% unemployment rate… On the news, Treasury rates rose and equity futures gained. Today's report is favorable toward improvement in personal income and industrial production. Despite worries about adverse seasonal adjustment issues, the January employment report indicates that the recovery is gaining momentum.
After release of the latest data on 02/03/2012 10:00:00 AM ET, Econoday reported, Factory orders rose a very healthy 1.1% in December on top of November's even stronger and upwardly revised 2.2% jump. The gain is centered in durable goods which jumped 3.0% in the month on top of November's 4.2% rise. Orders for nondurable goods, always affected by monthly swings in energy prices, fell 0.4% in December… Other data are positive including a solid 0.7% rise for factory shipments, a 1.4% jump in backlog orders, and a thin 0.1% rise inventories that point to very lean and healthy conditions in the supply chain. The manufacturing sector is once again providing leadership in the economy's recovery.
US ISM Non-Manufacturing Index for Jan.
After release of the latest data on 02/02/2012 10:00:00 AM ET, Econoday reported, A gigantic surge in employment and almost an equally dramatic surge in new orders headline a very strong ISM non-manufacturing report where the headline composite index jumped to 56.8, well beyond Econoday's consensus for 53.3 and a strong 3.6 points above December's upwardly revised 53.0… New orders jumped nearly 5 points to a 59.4 level that indicates strong monthly growth and points to acceleration in general activity in the months ahead. But the employment index is the eye catcher, up 8 points to 57.4 for by far the strongest reading of the recovery. This index has been lagging improvement in employment data from the government -- but not any more… Other readings include acceleration for business activity (production) and a slowing in the backlog draw. This report is echoing the message of this morning's jobs report -- that the economy is pivoting higher. This report should add to bullish sentiment through the session.
Here are the key US economic reports from next week’s calendar.
US Jobless Claims data for week ending 2/04.
Prior to release of the latest data on 02/09/2012 8:30:00 AM ET, Econoday reported, Initial jobless claims fell 12,000 in the January 28 week to 367,000. The 4-week average improved with a 2,000 decline to 375,750. This was the third straight decline and the 8th decline in 9 weeks for the average which has held below the 400,000 mark for a very convincing 12 weeks in a row. Continuing claims in data for the January 21 week fell a very steep 130,000 to 3.437 million, bringing down the unemployment rate for insured workers by 1 tenth to 2.7%. The 4-week average for this series was 3.528 million, down nearly 100,000 from December's trend.
US Wholesale Trade data for Dec.
Prior to release of the latest data on 02/09/2012 10:00:00 AM ET, Econoday reported, Wholesale inventories in November slowed to a 0.1% gain from October's outsized build of 1.2%. Build relative to sales has been steady with the inventory-to-sales ratio holding at 1.15.
US International Trade for Dec.
Prior to release of the latest data on 02/10/2012 8:30:00 AM ET, Econoday reported, The U.S. international trade gap in November widened sharply due largely to a jump in oil imports but also due to a dip in exports. The trade gap grew to $47.8 billion from $43.3 billion in October. Exports declined 0.9% after dipping 0.7% in October. Imports rebounded 1.3% in November, following a 1.0% decline the prior month. The worsening in the trade gap was led by the petroleum gap which expanded to $27.6 billion from $24.2 billion in October. The nonpetroleum goods deficit widened to $34.8 billion from $33.2 billion the month before. The services surplus was slightly improved at $15.4 billion from $15.3 billion in September.
Prior to release of the latest data on 02/10/2012 9:55:00 AM ET, Econoday reported, The Reuter's/University of Michigan's consumer sentiment index rose 1 point in the final January reading to 75.0. The mid-month reading of 74.0 was up more than 4 points from the final December reading which is a very strong gain. The implied reading for the last two weeks was a very solid 76.0 (based on the monthly survey sample being about equally distributed between the first half and second half). Levels were above the year-ago comparison for the first time in a year… The latest rise in the sentiment index was led by the leading component of expectations which was at 69.1 for a 5.5 point gain from December. Current conditions, at 84.2, were up 4.6 points from December.
Prior to release of the latest data on 02/10/2012 2:00:00 PM ET, Econoday reported, The U.S. Treasury monthly budget report showed a December deficit of $86.0 billion. The deficit for the first three months of the government's fiscal year continued to show sizable improvement with receipts up 4.4% and spending down 2.6%. Looking ahead, the month of January typically shows a modest surplus for the month. Over the past 10 years, the average surplus for the month of January has been $10.9 billion. However, over the past 5 years it has averaged a deficit of $5.8 billion. The January 2011 deficit came in at $49.8 billion.
Technical Indicators & Patterns of International Markets
Clearly, this week’s technical indicators and patterns, as used by technical analysts, must be summarized as bullish.
Data to be found at http://stockcharts.com/def/servlet/SC.scan
Compare the current data above with the prior Friday’s data:
I recommend this service. Now I am looking to find someone in the Cara Community who is able to interpret the signals and patterns and the week over week changes so that I can insert their text in this space each week. Anybody out there who is able and willing?
Also, this week I decided to publish the week-ending RSI-7 and EMA-8 Daily, Weekly and Monthly data for the Cara 100.
All the data in this section will run for about a month and then be available only in an exclusive trader support website that I am starting, which will be published along with daily updates, commentary and recommendations. News will come out on this later.
International Equity Markets Review
The international equity markets continued to move higher this week except for Australia and Japan. The European markets plus NASDAQ are the leaders. YTD, the German DAX is the #1 performer (+14.7%).
This is one of the most bullish starts to the year for many years.
Markets in China and Taiwan were open following Chinese New Year.
Here is this week’s international equity re-cap from Econoday:
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
Review of the ETFs for the International equity market
As you know, the country Exchange Traded Funds (ETF) are not the same as the domestic exchange indexes, but are (i) denominated in US Dollars, (ii) traded in NY, mostly by Americans, (iii) traded for several hours each day after Asia-Pacific and European markets have been closed, and (iv) a reflection of the most up-to-date news stories and investment analysis.
Also, depending on extreme currency fluctuations, the USD denominated ETFs may widely differ in performance from the results of the domestic exchanges.
When the world is worried and goes risk-off, it’s the international equities that get hammered the most, and that feeds the US Dollar market, which further lifts the Dollar and worsens the crisis. If Dollar buying gets out of hand as appeared to happen this week, the markets take on the appearance of a death plunge.
This week all 11 of the top 11 country ETF’s were up for the third consecutive week and Friday was also an all-green day.
The leader was India (IFN +4.99% W/W) and Russia (RSX +4.39%). RSX was #1 performer a week ago.
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
This week was a winner for the equity Bulls, but especially on Friday following the headlines positive national employment report.
NASDAQ and the Russell 2000 small cap continued to be huge winners.
Econoday has summed up the US equity market as follows:
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.
Value Line Dow 30 Stocks Review
This week in the quarter-yearly WIR 6-19-32-45 series; Value Line reported on one DJIA component, Wal-Mart (WMT), which is a Cara 100 company and which we hold in both the large cap portfolios.
Wal-Mart [GICS 30, Dow 30, Cara 100]
(WMT: Google Finance file)
(WMT: Yahoo Finance file)
(WMT: StockChart chart)
(WMT: Investertech chart)
(WMT: ADVFN Financial Data)
(WMT: Value Line Report Feb 3: next one is due Apr 4)
http://investertech.com/tkchart/tkchart.asp?stkname=WMT&ind=rsi&wt=3
http://investertech.com/tkchart/tkchart.asp?stkname=WMT&ind=rsi&wt=1
http://investertech.com/tkchart/tkchart.asp?stkname=WMT&ind=rsi&wt=0
Here are my notes from previous WIRs re Coca-Cola and Kraft Foods:
In the WIR#6-2011, I reported as follows:
WMT was the worst performer of all Dow 30 stocks this week. In the past 52 weeks, there have been only 6 of the 30 that performed worst… So, why do I like the stock?… Probably for many of the same reasons Value Line likes it: there are Y/Y increases in revenue, cash flow, earnings, dividends and book value/share EVERY YEAR including through recessionary years… In fact, since I started blogging and telling readers about my appreciation of this company, there has been almost a doubling of revenues, cash flow and earnings per share, about 15% fewer shares outstanding, and almost a tripling of dividends per share. This is one of the biggest companies in the world, clearly the 800-pound gorilla in global retailing, and yet the law of big numbers doesn’t seem to apply. The company maintains its path from big to bigger.I’ll be writing about this again today. Here is a company that continues to strengthen, but has a share price that goes nowhere [until this past month, which has presented an unusual buying opportunity]. The best you can do as a trader is put it into your income group and write puts every time the share price falls a lot, as it did in mid-February and again this Friday.
Here are my notes from previous WIRs re Wal-Mart:
In this space, I review my previous WIR notes before making up-to-date comments.
[For WIR#32-2010 Aug 8] Here is my current thinking re WMT ($51.79 Aug 6, down from $52.40 May 14), based on the technical charts as well as the information provided at Value Line.My thinking on Wal-Mart (WMT) is different from probably anything you are likely to hear on Wall Street. That’s because Wal-Mart is based in Bentonville Arkansas, 100 miles from nowhere, and not NYC, Connecticut, Chicago, Silicon Valley, LA, Dallas, Atlanta, and so forth, and mostly because it’s controlled by the Walton family and not Humungous Bank & Broker (HB&B). So, this isn’t General Electric, Boeing, Home Depot, Coca-Cola, IBM, or JP Morgan. No, Wal-Mart is an outsider, not a place where hoity-toity bankers would care to shop, but more for the hoi polloi.
You will likely not hear from HB&B that WMT just six weeks ago gave us a long-term Buy signal, under $49, which was the first since Jan 2009, Sept 2007, and Sept 2005. Not that many of you will care, mind you, since the average price of the shares this year is pretty close to its level 6, 7, 8, 9, 10… years ago.
But you should care because, as I see it, those shares are soon going to soar from the very low 50’s to the very high 60’s. Here are some reasons:
The Stochastics and the RSI-7 for the Monthly data series have turned positive only for the third time since 2Q2005 and the 4th time in over 10 years. Something positive is happening inside this company.
Value Line is showing annual growth rates for sales, cash flow, earnings, dividends and book value of +10% to +11% through 2013-2015. The company growth is keeping pace with that of the past five years and there are no roadblocks in sight. How many other large or mega cap companies can you honestly say the same about?
Most people are not aware and cannot fathom the immensity of this company. The number of stores has more than doubled in 10 years, from 4200 to over 9000, with almost one trillion square feet of store space and 2.1 million employees. In 10 years, earnings and cash flow per share have tripled, and dividends have even doubled that incredible pace.
Dividends might be lower now, but that’s mostly because most companies have cut their dividends for optics reasons due to the tough economic times, and not because of corporate fundamentals, which are growing stronger each year. So, when dividends get ramped up, and I believe they will, traders will pile on. The dividend payout is down at just 29% of net profit, which is extremely low for a Dow 30 company.
But the bottom line here is that Wal-Mart is no longer America’s largest retailer; it’s clearly the favorite retailer of the whole world, and much of the world is getting richer, faster, than the USA. Non-US growth for Wal-Mart is now about four to five times greater than US growth, proving that the company delivers what people everywhere want, value pricing, a great many products and choices among them. Well, like I say, maybe that’s not for the hoity-toity.
That reminds me of a conversation I had maybe 20-25 years ago when trying to convince a computer geek to build a database for capital markets. He answered with a question: “Do you know how many people in the world are interested in stocks and bonds versus plants and flowers? About 5%.” He turned down my proposal.
Even today I have to admit that I never once visited a Wal-Mart store until 2004, the year I started to blog, and that’s because there wasn’t much choice in the countryside near where my parents lived, and their health issues kept me returning there often, needing to buy this or that. That old-timer at the front door who took me around to the different departments let me know right then and there that Wal-Mart was in business to serve me right. I’ve been a fan ever since. Contrast that with my experiences at Home Depot, where at this point I absolutely refuse to go near the place.
I suppose we all have our stories, but, believe me, I think WMT is worth the wait. If you see the stock pull back into the 40’s again, load up the truck. Buy the stock and write puts.
[For WIR#45-2010 Nov 7] WMT ($55.20 Nov 5, up +6.6% from $51.79 Aug 6, and from $52.40 May 14) comments today are based on the technical charts as well as the information provided at Value Line.
Following my encouraging write-up of Wal-Mart in the early August WIR, the stock dipped twice in late August to $50.06 and $50.14 lows in late August before soaring to a high of $55.36 this week, closing Friday at $55.20. Had you bought stock and wrote puts, as I recommended after the price pull-back, you’d be a happy Wal-Mart investor today.
Going forward, WMT needs some time to consolidate its recent gains. My simple little system gave a Daily price data based SELL Alert this Friday as the RSI-7 dropped from the Accumulation Zone (above 70) to 69.94. Maybe you don’t want to quibble for a fraction like that but the fast Stochastic I use on the Daily (5,2,3) has dropped from to 81.00, well below the slow Stochastic at 88.21, indicating to me that the share price could pull back maybe -1% early in the week. Then again, the more important Weekly RSI-7 shows full steam ahead, with RSI-7 at 71.13 and rising and the fast Stochastic at 73.49 above the slow Stochastic at 63.31.so I’d hold on for now.
These technical indicators are useful in helping you understand and apply the art of trading, but remember they are not absolutes, just mathematical indications of the nature of the trading in the minutes up to the close on Friday. So, when I refer to my crystal ball, this is the stuff I am referring to, and you can see its just part of the picture you need to see. Another part of the technical picture I look at is the MACD, which is simply a smoothed gap between the shorter 12-week and longer 26-week Moving average of the price. Unlike Stochastics, which is a cyclical indicator, the MACD is a trend indicator, with a slightly different methodology. The MACD presently and since August shows the trend is up. Its your job to stay on the right side of the trend, meaning if MACD is up, we probably want to be long. Only when the MACD flattens, do we ignore it and stick to the cyclical indicators like Stochastics.
That’s technical, which is important to timing entry and exit trades. Whether you want to even invest or not is mostly dependent on improving fundamentals of this company. We study those fundamentals versus other companies or if you have gazillions to invest versus sector or peer group companies. We also want to know what the sell-side analysts think because we know they influence their firms’ clients and the media. But, mostly, we need to just study the data for revenues (top line), earnings (bottom line), cash flow (the company’s most valuable asset), dividends (next to share price growth, the investor’s next best friend), and book value (the figure that omits the goodwill and other fluff).
The Value Line report is a succinct summary of the data plus a few opinions and the rating of the analyst. The Technical Rating at the top left of the page shows a ‘2’ (better than average), moved from a ‘3’ (average) on Oct 29. That’s a six-month outlook. The Timeliness Rating has been a ‘3’ since July 2009, referring to a one-year outlook.
To judge the value of the Value Line analyst, then, go to Table 16 (The price performance of all the Dow 30 stocks over the past year). In the case of WMT, the 12-month price change has been 7.64%. You’ll see there were 21 Dow 30 stocks that did better and only 8 that did worse, and from Table 1, you’ll see that the S&P 500 future grew +14.86% in the past 12-months. So WMT did not perform up to average, i.e., a ‘3’. The result was a ‘4’.
Now in early August I got keen on WMT [perhaps calling it a ‘2’ if I were to do ratings, which I don’t] and on Oct 29 Value Line upped their short-term rating [also] to a ‘2’. So, we are now in the same bullish camp on this stock.
Looking at the important fundamental metrics, you’ll see that 2009 was a comfortable increase over 2008, and you’ll see the 2010 performance will be better than 2009 and the 2011 better than 2010. So, while as a shopper you might disagree, as a trader I believe it’s “Better At Wal-Mart”. :-)
Oh, there is some discussion by the Value Line analyst that covers the placement of deep discount items in certain places within a store and management’s decision to compete with dollar stores with smaller stores, and all that, but the big picture here is one of continuous growth over many decades. Going forward, I cannot imagine how Africa and China would not prove very good markets for expansion too. So, the Wal-Mart picture will continue to get better even though at times there are and will be recessionary periods that lower expectations, and which cause the share price to stumble, enabling resourceful traders to buy more at discount prices during those times.
The WMT chart over eleven years exhibits a wonderful long-base price pattern tied to continuously improving fundamentals over that period. PE multiples have dropped from the high 30’s to the low teens. Compared to the flame-outs in the Internet space going back 11 years, however, I hardly think that cut in multiple is justified.
WMT is a brute, a monster company that keeps on moving forward. They are not headquartered in New York or Chicago or Boston, LA, Atlanta or Dallas, but in small town Arkansas, so right off they are not that popular on Wall Street. I’m sure that if the head office was in Shanghai, however, you’d see that 13 PE double. It’s always the way, eh?
Whenever the big guys in hedge funds and mutual funds decide to climb back on board as they were in the 80’s and 90’s, based on quality growth metrics, I think the stock price will show its real value. Until then, I will be a trader in and out.
Right now is the time for the long-term, conservatively minded trader to be in. Not as good as when I last wrote about WMT in August, but not bad.
[For WIR#6-2011 Feb 6] WMT ($56.03 Feb 4, up +1.5% from $55.20 Nov 5, which was up +6.6% from $51.79 Aug 6, and from $52.40 May 14) comments today are based on the technical charts as well as the information provided at Value Line.
The RSI/Stochastic charts don’t show me much. However, the Point & Figure chart shows a recent price break-out with a $67 objective.
WMT was the worst performer of all Dow 30 stocks this week. In the past 52 weeks, there have been only 6 of the 30 that performed worst.
So, why do I like the stock?
Probably for many of the same reasons Value Line likes it: there are Y/Y increases in revenue, cash flow, earnings, dividends and book value/share EVERY YEAR including through recessionary years.
In fact, since I started blogging and telling readers about my appreciation of this company, there has been almost a doubling of revenues, cash flow and earnings per share, about 15% fewer shares outstanding, and almost a tripling of dividends per share. This is one of the biggest companies in the world, clearly the 800-pound gorilla in global retailing, and yet the law of big numbers doesn’t seem to apply. The company maintains its path from big to bigger.
On Jan 7, Value Line raised the Timeliness Rating (12-month outlook for relative price growth) from a ‘2’ (Good) to a ‘1’ (Top 10%). In this Feb 4 report, VL raised the Technical Rating (6-month outlook) from a ‘3’ (Average) to a ‘2’.
The VL report this week gets into some weird discussion of “management’s admittedly ill-conceived strategy shift away from everyday low prices” but that sounds half-baked to me. This company is like a machine, just grinding out improved results month in and month out, so I’ll leave it at that.
Dividends for the next four quarters is likely to be about $1.33, which puts the yield at close to 2.4%, which is not quite good enough for me to slot it into one of my large cap Value picks. And with a Cara 500 ranking last week of 345, I wouldn’t be buying the stock here either.
It was the summer of 2010 [WIR 19, Aug 6, 2009 $51.79] when I last opined that the time to buy WMT was looking good as we had just had at that point a long-term Buy Signal. In fact, although you may have already re-read my notes above, here it is again:
You will likely not hear from HB&B that WMT just six weeks ago gave us a long-term Buy signal, under $49, which was the first since Jan 2009, Sept 2007, and Sept 2005. Not that many of you will care, mind you, since the average price of the shares this year is pretty close to its level 6, 7, 8, 9, 10… years ago… But you should care because, as I see it, those shares are soon going to soar from the very low 50’s to the very high 60’s.The stock price is up +8.2% since I wrote that opinion, and a lot more since we received the Buy signal at under $49.
Investing in WMT requires patience. Knowing that the price of the stock has remained in a flattish trading pattern for the past 10 or 11 years, you must be patient. But, every year, it seems, there is one opportunity to make a timely purchase, which if you add some offsetting put writes and long call purchases, adds some possible sizzle to the upside. Or, if you are super conservative, just buying the stock at very low cycle points and writing the puts for premium income to lower your cost base, is also likely a good strategy.
There is not much more for me to add, so I’ll move on.
[For WIR#19-2011 May 8] WMT ($55.02 May 6, down -% from the close of $56.03 Feb 4, which was up +1.5% from $55.20 Nov 5).
The stock has gone nowhere for six months.
So much for the Point & Figure chart “break-out” in Q1.
The longer-term chart shows that risk is elevated. The 30-min data chart shows that since Tuesday afternoon, a topping process has started. There may be a couple days early in the week where WMT is given a boost, but the cyclic motion, I believe, is telling me the price will fall back a bit after that, and probably be a market performer for the next quarter.
Based on a very low PE ratio (12.3%) and earnings that are likely to hit $4.45 for 2011 and $4.90 for 2012, I doubt the price would fall much if at all below 50, which is the strike where, on high intra-day weakness I would selling puts. Longer-term – say two years out – I think the price will be in the mid-60’s – say $5.00+ earnings and 13 PE.
Value Lie’s Kevin Downing likes the stock, probably more than me at this point, pointing out the “favorable risk-and-reward scenario” and “China focal point”.
The company is doing well though. Hard to argue with the +10% earnings growth this year, which is likely to repeat in 2012. Return on Equity is staying above 20%, which is solid. Noteworthy also is the quickly rising dividend, from $1.21 in 2010 to $1.46 this year, but even if the yield were to lift to say +3.0% from today’s +2.7%, there are better income stocks around.
So, I’ll leave it that I like WMT for the 12-24 months outlook but not so much for the 0-12 months timeframe, mostly because I think the broad market is likely to undergo some pressures as the US Dollar starts to lift as traders see that the Fed will stop Quantitative Easing.
[For WIR#32-2011 Aug 7] WMT ($50.85 Aug 5, down -% from $55.02 May 6.
Until two or three weeks ago, the stock had gone nowhere for nine months, at around the price of $55.20 at the close Nov 5). But this week, Mr Market gave Walmart a haircut of -3.5%, down to $50.85.
That 2011 dividend of $1.44 produces a +2.83% dividend yield. For 2012 we’re looking at a dividend of $1.75, which would be a yield of +3.44%, which may be the highest in Walmart’s history. Not intended as a play on words, but this seems to be safer than income from Uncle Sam.
Today’s comments, as usual, are based on the technical charts as well as the information provided at Value Line.
Clearly I like the Walmart stock at these levels. You don’t buy WMT to flip it, but as part of a core portfolio, because over the years the company has strong and improving fundamentals.
This Friday, Value Line lowered the 6-month Technical (“short-term”) outlook from an outperforming ‘2’ to a market average ‘3’. I think they panicked. Maybe, on the other hand, VL decided to weight all the Dow 30 as a ‘3’? Maybe they decided to over-weight the cyclicals? No; I think they just panicked.
There are many times to seize the opportunity in the cyclicals, but seldom do you see these situations arise in the staples, and when you do, you have to go for it, i.e., if you want a fairly well-balanced portfolio.
Interesting is that 54% of Walmart’s US revenue comes from groceries, where huge volume enables the company to reduce the prices below any competitor. Also noted; the public doesn’t want to food shop in mega-stores, so Walmart is proceeding to build 300 small-format stores in the next five years.
I note that a lot of cash flow is going to buy back shares. Within a couple years, there will likely be just 2.90 billion shares outstanding from today’s 3.47 billion, and well down from the 4.45 billion outstanding ten years ago. While the share price may not have done much over this time, the per share revenues, cash flow, earnings, and book value has almost tripled. The dividends have gone from $0.27 to $1.44/share for 2011 and are expected to be $1.75 for 2012. The latter would, as already pointed out, yield a high return of 3.44% on today’s cost base. Return on shareholder equity (23.0%) and Gross Margin (25.0%) is the highest ever and will likely hold or possibly increase a tad. Global revenues are expected to continue growing at a rate of +9.0% or more per year.
At this week’s close of $50.85, it makes sense to me to buy with a view to a long-term hold.
[For WIR#45-2011 Nov 6] WMT ($57.50 Nov 4, up +13.1% from $50.85 Aug 5).
On the basis of price movement after I last wrote on Walmart, you have to agree that my recommendation was spot on.
Today’s comments, as usual, are based on the technical charts as well as the information provided at Value Line.
http://billcara2.com/tkchart/tkchart.asp?stkname=WMT&wt=3&ind=nn
http://billcara2.com/tkchart/tkchart.asp?stkname=WMT&wt=1&ind=nn
http://billcara2.com/tkchart/tkchart.asp?stkname=WMT&wt=0&ind=nn
The issue for me here is that WMT has a current price (CP) of $57.50 and an 8-week EMA of just $55.23, plus an RSI-7W that is presently an elevated 74.36 and the 7W Stochastic above 91. This represents high risk, which is not a good time to buy. You want to buy during periods when market conditions are just the opposite – as they were on Oct 3 when I recommended WMT at Whistler as the CP was $51.96.
A purchase then, just shy of four weeks ago, would have resulted in a price gain of +10.7%. In a “safe” 10-year US Treasury bond, you would be waiting almost 5 years for that % gain.
But you also see my point that prices ebb (to a point of low risk) and flow (to a point of high risk).
The Daily and 30-Minute data charts show me that short-term oriented traders have only a day or two of rising prices remaining before a pull-back and test of $56.25. If that level doesn’t hold, I’d look to the $54.15 level that was reached twice in July. Resistance then would be a possible support level here.
The Value Line write-up by analyst Kevin Downing shows me just how important Walmart must be as a case study in business school. Whether it be used for teaching a first year or fourth year university class or any level CFA program, the data on this single sheet from Value Line could be used to teach a complete semester program.
Getting into the detail, on Oct 21, VL increased its 6-month price outlook (“Technical Rating”) from a Market-Perform “3’ to a Market-Outperform ‘2’. In March, VL lowered its long-term (1+ Year) outlook (“Timeliness Rating”) from a ‘1’ Superior rating (actually their top 6% of all stocks they rate) to a ‘2’.
To show how good the VL rating system has performed, go to the Dow 30 12-Month price performance table #16 and you’ll see that only McDonalds (MCD) and IBM (IBM) were clear out-performers of the 30 Dow average component stocks.
Earnings per share are forecast to lift from $4.07 in 2010 to maybe $4.55 for 2011 and $5.00 for 2012. Dividends are projected to grow from $1.21/share in 2010 to $1.46 for 2011 and $1.75 for 2012. With stable earnings and a low 30% pay-out ratio, you can basically bank on these dividend increases.
Putting aside the company’s solid metrics in operations (8.0% Operating Margin on +9.0% revenue growth) and financial (23.0% Return on Equity), and the future (12-24 month) Total Return prospects for the stock, I happen to agree with the report conclusion of the VL analyst: “Recent share-price appreciation and the risk involved with low-income consumer spending prospects may dissuade some investors from jumping in at this price point.”
But, when you observe the technical indicators showing an opposite market condition, I would not hesitate to be a buyer again.
[For WIR#6-2012 Feb 6] WMT ($62.03 Feb 3, up +8.03% from $57.50 Nov 4, which had been up +13.1% from $50.85 Aug 5).
On the basis of price movement after I last wrote on Walmart, and from my Whistler Conference 12-24 month Balanced portfolio selection for Sector 30 (done at $53.70, you have to agree that my recommendations were spot on.
Today’s comments, as usual, are based on the technical charts as well as the information provided at Value Line.
http://billcara2.com/tkchart/tkchart.asp?stkname=WMT&wt=3&ind=nn
http://billcara2.com/tkchart/tkchart.asp?stkname=WMT&wt=1&ind=nn
http://billcara2.com/tkchart/tkchart.asp?stkname=WMT&wt=0&ind=nn
Monthly data series chart with WMT in solid blue, the 8-month EMA in thin dashed blue and the S&P 500 in solid orange:
Weekly data series chart with WMT in solid blue, the 8-month EMA in thin dashed blue and the S&P 500 in solid orange:
Hourly data series chart with WMT in solid blue, the 8-month EMA in thin dashed blue and the S&P 500 in solid orange:
[inline:]
These charts indicate that WMT might have reached a cycle peak at the open at the open on Wednesday this week. However, we continue to hold the stock in both large cap portfolios.
With this year’s dividends likely to come in at $1.72, the forward yield is about 2.77%, which is very good. These dividends are all but assured and have risen from $0.95 (2008), $1.09 (2009), $1.21 (2010) and $1.46 (2011).
If you want to continue holding the stock, you might consider writing a March 62.50 call ($0.87-$0.89) and take in the premium income. I don’t think I’d go out to June with the 62.50s, but maybe the 65s because that would be about $1.70 for the option plus another $3 to have the stock called away, which in that case would be a return over about four months (or possibly less) of +7.58%. Annualized, that would be a fairly good return. But more than likely the stock is likely to consolidate its recent gains here, somewhere in the mid to high 50s.
Value Line have a ‘2’ (out-perform the S&P) rating for the next year or more. I’m not so sure unless both go down, which I don’t think will be the case a year from now.
The company is operationally and financially sound, but I note that the growth metrics are likely to be a tad lower for the next five years compared to the past five and ten years. Customer disposable income is obviously an issue.
But in addition to the operational and financial strength, the operating margins and Return on Equity metrics I want to see sustained for a Cara 100 company will almost certainly be for WMT.
So, really, my only concern is that the share price has gotten ahead of itself for now. Otherwise I haven’t changed my opinion, which is positive.
The Dow 30 Company links in chronological order of the upcoming reports.
Disney [GICS 25, Dow 30, Cara 100]
(DIS: Google Finance file)
(DIS: Yahoo Finance file)
(DIS: StockChart chart)
(DIS: Investertech chart)
(DIS: ADVFN Financial Data)
(DIS: Value Line Report Nov. 11: next one is due Feb. 10)
American Express [GICS 40, Dow 30]
(AXP: Google Finance file)
(AXP: Yahoo Finance file)
(AXP: StockChart chart)
(AXP: Investertech chart)
(AXP: ADVFN Financial Data)
(AXP: Value Line Report Nov 18: next one is due Feb 17)
Bank of America [GICS 40, Dow 30]
(BAC: Google Finance file)
(BAC: Yahoo Finance file)
(BAC: StockChart chart)
(BAC: Investertech chart)
(BAC: ADVFN Financial Data)
(BAC: Value Line Report Nov 18: next one is due Feb 17)
JP Morgan [GICS 40, Dow 30]
(JPM: Google Finance file)
(JPM: Yahoo Finance file)
(JPM: StockChart chart)
(JPM: Investertech chart)
(JPM: ADVFN Financial Data)
(JPM: Value Line Report Nov 18: next one is due Feb 17)
Microsoft [GICS 45, Dow 30]
(MSFT: Google Finance file)
(MSFT: Yahoo Finance file)
(MSFT: StockChart chart)
(MSFT: Investertech chart)
(MSFT: ADVFN Financial Data)
(MSFT: Value Line Report Nov 18: next one is due Feb 17)
Johnson & Johnson [GICS 35, Dow 30, Cara 100]
(JNJ: Google Finance file)
(JNJ: Yahoo Finance file)
(JNJ: StockChart chart)
(JNJ: Investertech chart)
(JNJ: ADVFN Financial Data)
(JNJ: Value Line Report Nov 25: next one is due Feb 24)
McDonalds [GICS 30, Dow 30, Cara 100]
(MCD: Google Finance file)
(MCD: Yahoo Finance file)
(MCD: StockChart chart)
(MCD: Investertech chart)
(MCD: ADVFN Financial Data)
(MCD: Value Line Report Dec 2: next one is due Mar 2)
Chevron Corp [GICS 10, Dow 30]
(CVX: Google Finance file)
(CVX: Yahoo Finance file)
(CVX: StockChart chart)
(CVX: Investertech chart)
(CVX: ADVFN Financial Data)
(CVX: Value Line Report Dec. 9: next one is due Mar. 9)
ExxonMobil [GICS 10, Dow 30, Cara 100]
(XOM: Google Finance file)
(XOM: Yahoo Finance file)
(XOM: StockChart chart)
(XOM: Investertech chart)
(XOM: ADVFN Financial Data)
(XOM: Value Line Report Dec. 9: next one is due Mar. 9)
Boeing Co [GICS 20, Dow 30. Cara 100]
(BA: Google Finance file)
(BA: Yahoo Finance file)
(BA: StockChart chart)
(BA: Investertech chart)
(BA: ADVFN Financial Data)
(BA: Value Line Report Dec. 16: next one is due Mar. 16)
Travelers Co [GICS 40, Dow 30]
(TRV: Google Finance file)
(TRV: Yahoo Finance file)
(TRV: StockChart chart)
(TRV: Investertech chart)
(TRV: ADVFN Financial Data)
(TRV: Value Line Report Dec. 16: next one is due Mar. 16)
AT&T [GICS 50, Dow 30]
(T: Google Finance file)
(T: Yahoo Finance file)
(T: StockChart chart)
(T: Investertech chart)
(T: ADVFN Financial Data)
(T: Value Line Report Dec. 23: next one is due Mar. 23)
Verizon [GICS 50, Dow 30]
(VZ: Google Finance file)
(VZ: Yahoo Finance file)
(VZ: StockChart chart)
(VZ: Investertech chart)
(VZ: ADVFN Financial Data)
(VZ: Value Line Report Dec. 23: next one is due Mar. 23)
Cisco Systems [GICS 45, Dow 30, Cara 100]
(CSCO: Google Finance file)
(CSCO: Yahoo Finance file)
(CSCO: StockChart chart)
(CSCO: Investertech chart)
(CSCO: ADVFN Financial Data)
(CSCO: Value Line Report Dec. 23: next one is due Mar. 23)
Procter & Gamble Co. [GICS 30, Dow 30, Cara 100]
(PG: Google Finance file)
(PG: Yahoo Finance file)
(PG: StockChart chart)
(PG: Investertech chart)
(PG: ADVFN Financial Data)
(PG: Value Line Report Dec. 30: next one is due Mar. 30)
Home Depot [GICS 25, Dow 30]
(HD: Google Finance file)
(HD: Yahoo Finance file)
(HD: StockChart chart)
(HD: Investertech chart)
(HD: ADVFN Financial Data)
(HD: Value Line Report Dec. 30: next one is due Mar. 30)
Hewlett-Packard [GICS 45, Dow 30]
(HPQ: Google Finance file)
(HPQ: Yahoo Finance file)
(HPQ: StockChart chart)
(HPQ: Investertech chart)
(HPQ: ADVFN Financial Data)
(HPQ: Value Line Report Jan. 6: next one is due Apr. 6)
IBM [GICS 45, Dow 30, Cara 100]
(IBM: Google Finance file)
(IBM: Yahoo Finance file)
(IBM: StockChart chart)
(IBM: Investertech chart)
(IBM: ADVFN Financial Data)
(IBM: Value Line Report Jan. 6: next one is due Apr. 6)
Intel [GICS 45, Dow 30, Cara 100]
(INTC: Google Finance file)
(INTC: Yahoo Finance file)
(INTC: StockChart chart)
(INTC: Investertech chart)
(INTC: ADVFN Financial Data)
(INTC: Value Line Report Jan. 6: next one is due Apr. 6)
Alcoa [GICS 15, Dow 30]
(AA: Google Finance file)
(AA: Yahoo Finance file)
(AA: StockChart chart)
(AA: Investertech chart)
(AA: ADVFN Financial Data)
(AA: Value Line Report Jan. 13: next one is due Apr. 13)
Dupont [GICS 15, Dow 30]
(DD: Google Finance file)
(DD: Yahoo Finance file)
(DD: StockChart chart)
(DD: Investertech chart)
(DD: ADVFN Financial Data)
(DD: Value Line Report Jan. 13: next one is due Apr. 13)
Merck [GICS 35, Dow 30, Cara 100]
(MRK: Google Finance file)
(MRK: Yahoo Finance file)
(MRK: StockChart chart)
(MRK: Investertech chart)
(MRK: ADVFN Financial Data)
(MRK: Value Line Report Jan. 13: next one is due Apr. 13)
Pfizer [GICS 35, Dow 30, Cara 100]
(PFE: Google Finance file)
(PFE: Yahoo Finance file)
(PFE: StockChart chart)
(PFE: Investertech chart)
(PFE: ADVFN Financial Data)
(PFE: Value Line Report Jan. 13: next one is due Apr. 13)
3M Company [GICS 20, Dow 30, Cara US 100 June 25-06]
(MMM: Google Finance file)
(MMM: Yahoo Finance file)
(MMM: StockChart chart)
(MMM: Investertech chart)
(MMM: ADVFN Financial Data)
(MMM: Value Line Report Jan. 20: next one is due Apr. 20)
General Electric [GICS 20, Dow 30, ex-Cara 100]
(GE: Google Finance file)
(GE: Yahoo Finance file)
(GE: StockChart chart)
(GE: Investertech chart)
(GE: ADVFN Financial Data)
(GE: Value Line Report Jan. 20: next one is due Apr. 20)
United Technologies [GICS 20, Dow 30, Cara 100]
(UTX: Google Finance file)
(UTX: Yahoo Finance file)
(UTX: StockChart chart)
(UTX: Investertech chart)
(UTX: ADVFN Financial Data)
(UTX: Value Line Report Jan. 20: next one is due Apr. 20)
Caterpillar [GICS 20, Dow 30]
(CAT: Google Finance file)
(CAT: Yahoo Finance file)
(CAT: StockChart chart)
(CAT: Investertech chart)
(CAT: ADVFN Financial Data)
(CAT: Value Line Report Jan. 20: next one is due Apr. 20)
Coca Cola [GICS 30, Dow 30, Cara 100]
(KO: Google Finance file)
(KO: Yahoo Finance file)
(KO: StockChart chart)
(KO: Investertech chart)
(KO: ADVFN Financial Data)
(KO: Value Line Report Jan. 27: next one is due Apr. 27)
Kraft Foods [GICS 30, Dow 30]
(KFT: Google Finance file)
(KFT: Yahoo Finance file)
(KFT: StockChart chart)
(KFT: Investertech chart)
(KFT: ADVFN Financial Data)
(KFT: Value Line Report Jan. 27: next one is due Apr. 27)
Wal-Mart [GICS 30, Dow 30, Cara 100]
(WMT: Google Finance file)
(WMT: Yahoo Finance file)
(WMT: StockChart chart)
(WMT: Investertech chart)
(WMT: ADVFN Financial Data)
(WMT: Value Line Report Feb 3: next one is due Apr 4)
Recognizing how destructive a force volatility is, all investors must nevertheless study the price data as well as the corporate fundamentals. Previously I have written in this space:
Admittedly, these are really challenging times in capital markets for anybody who hopes to grow wealth. But the message I continue to give is that by studying the facts and using them to your advantage, while dissociating the excessively hyped, agenda laden, storylines from MSM and Financial Entertainment TV, you can and will succeed… You must, however, develop an investment plan and stick to it through thick and thin. In recent years, the market volatility has caused me to trade more frequently than before, using short-term technical indicators, but the essential study of corporate fundamentals, quantitative peer reviews and macroeconomic data is timeless, and the Cara 100 companies, selected for Growth or Value reasons, enables anyone to focus on quality. Over time, the combination of understanding price drivers and the quality of one’s selections is a proven winner.I would add that since my trading firm returned to a policy of investing only in Cara 100 equities, which requires a unique focus, we started to return much better performance.
With respect to investing in general for most people, I think if you focus on just six to ten stocks and the reports of the same one or two analysts for each, you will be less likely to miss the nuances. The greater depth of understanding of the companies will help you better analyze the price charts. In other words, you’ll be able to gain control of your investments rather than get stuck on the road to perdition, flipping from one salesperson’s pitch to another.
With the help of the free Dow 30 quarter-yearly reports from Value Line, it’s easy to pick those 6 to 10 stocks, keep the reports and your notes in a hard-copy binder, plus carefully selected items from other analysts you can find on the Web and print out for your files.
It may take years, but it really is worth the time and effort to get to know the companies you trade. After a while, you’ll appreciate the price motion of each stock and, with more confidence, you’ll be able to go with the flow, selling when the market is chasing the price, and then letting the price come to you when they are trying to sell it, and you may want it.
In other words, do the homework to find the companies with very high quality and then put yourself into selling in a seller’s market and being a buyer in a buyer’s market, as the real estate people like to say.
For our Growth accounts we are significantly over-weighted in Technology issues presently, with high expectations for 2012. The Tech sector has been hammered lately, but the guidance of management indicates things are not that bad. The mood of investors is being set by politicians and central bankers who have their own problems. But as long as interest rates and wage rates stay low, and productivity and job growth rising, then I think the equity market will continue to come out of its funk.
Sector ETF Summary for the US equity market
The price performance tables that I show every day 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.
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 |
Table 1 shows that for the past 12 months, the S&P 500 (SPY) has gained +2.88%. If your portfolio has out-performed over the past 52 weeks, you should be thankful; however, XLI, XLB and XLF are on the rise and I think 2012 will be much superior to 2011.
You can do a table like Table 1 (below) by entering the following string into the Summary window at Investertech.com and then clicking on the link for Performance. 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.
SPY XLE XLB XLI XLY XLP IYH XLF XLK SMH IYZ XLU .
You can use this tool to set up personal watchlist charts by industry group and sub-groups.
Another chart you ought to be reviewing every week is the candleglance view from StockCharts.com:
http://stockcharts.com/scripts/php/candleglance.php?XLE,XLB,XLI,XLY,XLP,...
http://tinyurl.com/33m3ss4
Sector rotation is one study I spend hours doing every week.
http://en.wikipedia.org/wiki/Sector_rotation
For a summary chart view, this presentation from StockCharts will save you lots of time.
http://stockcharts.com/scripts/php/candleglance.php?XLE,XLB,XLI,XLY,XLP,...
http://tinyurl.com/33m3ss4
Once involved, you’ll drill down into the nuances of this next chart (link), looking at the cyclical reversals and trying to see the drivers.
http://stockcharts.com/charts/performance/perf.html?[SECT]
http://tinyurl.com/ykk3oyc
The principles of sector rotation have been studied and written about for hundreds of years by many people. My work is based on the individual who mentored me in this subject and taught me more about investing and trading than any other, the late Ian Notley, my former associate. Notley is considered perhaps the finest trend and cycles analyst of the past 50 years. He was recruited to North America in the 1970’s by another friend of mine, Ian McAvity, editor of Deliberations, himself one of the world’s great trend and cycle analysts.
http://www.topline-charts.com/ian_mcavity.htm
The technical analysis work of both Ian’s was inspired by E.S. Coppock.
http://www.topline-charts.com/Encyclopedia/coppock_curve_interpretation.htm
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 US Sector ETFs and Stocks Review
This week ten of the ten sectors and 25 of 30 Dow 30 stocks lifted, for the week. Friday was particularly strong. The charts and the summary table of technical indicators and patterns continues to show overall bullishness, both for the US and non-US equity markets.
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 |
The ETF for Oiler stocks is XLE. This week, XLE was up +1.80% W/W to close at 72.77.
Over the past three months, XLE is up +2.03%, which is the #9 sector performer, significantly underperforming the S&P 500, which has been up +6.57%.
Here is the Weekly chart of XLE (in solid blue with the 8-week EMA in dashed blue) with the correlated S&P 500 ($SPX) in solid orange.
Here is the Hourly chart of XLE (in solid blue with the 8-hour EMA in dashed blue).
These charts continue to show bullishness; however, the indicators are showing an over-bought condition.
This week, China National Offshore (CEO +7.7% W/W) and Apache (APA +3.2%) were leaders.
A week ago I gave a heads-up re this sector after CVX and XOM were down, apart from all the rest. This week, XOM was down again and the sector chart is showing a topping process.
FD: We continue to be significantly underweighted in this sector. For Growth accounts we dropped NE and still hold APA, CVX, PBR, PDS, and XOM, with a two-thirds S&P portfolio percentage weighting and, for All-Weather portfolios in this sector, we hold APA, CVX and XOM, but with a 25% S&P portfolio percentage weighting.
Note that our equity positions are, by company policy, restricted to Cara 100 companies in the broad based portfolios. Next week I hope to have added all the Cara 100 to the price tables in the daily blog and for the WIR.
Here is the current candleglance chart of 10 important Sector 10 components:
http://stockcharts.com/scripts/php/candleglance.php?XOM,PTR,CVX,PBR,TOT,...
Here below is the list of Cara 100 companies in this sector along with their stock tickers. For the Energy (Oil & Gas industries) Sector, the market cap (Dec. 9, 2011) of the 12 Cara 100 stocks was $1.114 trillion. I’ll try to update this data once a month or two.
I won’t repeat this for every sector study we do, but there is a difference between a company and a stock. At times, you can be invested in a great company but the stock is a disappointment.
A stock is a price set in the market. It could change minute to minute or second to second depending on various price drivers, some of which have little or nothing to do with the corporation. That price might be materially different that say a consensus valuation of enterprise value of the company, which in turn might be materially different than one company or individual might be prepared to pay to acquire the whole company.
But, first and foremost I believe in investing in the shares of the highest quality companies – just like I believe that we must choose our friends wisely. Track records like price trends tend to persist. For a Cara 100 company, I select only those that trade its shares on the NYSE or NASDAQ, which requires a high level of transparency and where the information is easy to come by. Most major Canadian companies and a great many international companies are dually listed on these exchanges in the US too. I try to build the Cara 100, which is where I invest, with an international flavor, which helps me diversify risk and also observe many different operating environments simultaneously, which also helps me better interpret the macro-economic data we get.
A Cara 100 company has to have a strong balance sheet and a strong Board of directors and management team, the CEO in particular. Compared to the peer group, the operating and net profit margins must be at or near the highest, the Return on Shareholder Equity up there as well, generally close to or above 20%. I need to see acceptable growth rates in revenues, cash flow, earnings, dividends and book value.
These figures are easy to get. FINVIZ.com does a good job of that.
As for the price data charts I find best, I like StockCharts.com.
Cara 100 Sector 10 (Energy) list:
APA Apache Corporation [GICS 10, Cara 100 V50]
CNQ Canadian Natural Resources [GICS 10, Cara 100 V50]
CVX Chevron Corp [GICS 10, Cara 100 V50]
CEO CNOOC [GICS 10, Cara 100 G50]
XOM Exxon Mobil Corp [GICS 10, Cara 100 V50]
NFX Newfield Exploration [GICS 10, Cara 100 G50]
NE Noble Corp [GICS 10, Cara 100 V50]
PBR Petroleo Brasileiro SA [GICS 10, Cara 100 V50]
PDS Precision Drilling [GICS 10, Cara 100 G50]
SLB Schlumberger [GICS 10, Cara 100 V50]
SU Suncor Energy Inc [GICS 10, Cara 100 G50]
TLM Talisman Energy [GICS 10, Cara 100 G50]
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 |
The ETF for Basic Materials stocks is XLB. These are the producers of commodities and related products.
This week, XLB was up +1.88% W/W. The close was 37.88.
Over the past three months, XLB is up +8.04%, which is the #4 sector performer, outperforming the S&P 500, which has been up +6.57%. YTD though, XLB is #2 performer with a gain of +10.02%, which is close behind Financials (XLF).
Brazilian steeler Gerdau (GGB +10.1% W/W) was the big winner. The company decided to sell its mining interests for $2.5 billion and the stock perked up. It’s had a huge run up since the beginning of Dec. and may be over-bought here though. I like the stock for later in the year after a test of a new support level.
Here is the Weekly chart of XLB (in solid blue with the 8-week EMA in dashed blue) with the correlated S&P 500 ($SPX) in solid orange.
Note the extremely high correlation with the S&P 500. Also note the recent bullishness with a rising RSI-7 off the August lows plus the current price (37.88) that has lifted well above the 8-week EMA (35.87) and the 8-month EMA (35.76), which are bullish signs. There is still room to move higher, I believe.
Here is the Hourly chart of XLB (in solid blue with the 8-hour EMA in dashed blue).
FD: Other than the CEF, which is by far our biggest All-Weather position and several other goldminers, plus copperminer FCX, we presently hold POT and DOW in the All-Weather portfolios (switching DOW for VALE) and, after dropping VALE, we now hold BHP, CCJ, FBR, POT, TCK, and TS in the Growth portfolios in this sector. Overall, we are over-weighted the S&P sector weighting.
Like Energy, the stocks in this Basic Materials sector are the most cyclical in nature meaning that as demand and supply changes, the prices rise and fall. They are also most susceptible to big Dollar rallies, particularly the big metals like VALE. The stocks are also higher beta, which means that they tend to move to a greater degree, both up and down, than does the broad market.
As at Dec. 9, 2011, the total market cap of the 17 Cara 100 stocks in this sector was $567.3 billion. Of course, 56% of the total is attributed to two stocks, BHP and VALE.
Cara 100 Sector 15 (Basic Materials) list:
BHP BHP Billiton Ltd [GICS 15, Cara 100 V50 G50]
CCJ Cameco Corp [GICS 15, Cara 100 G50]
CEF Central Fund [GICS 15, Cara 100 V50]
VALE Companhia Vale Do Rio [GICS 15, Cara 100 G50]
DOW Dow Chemical Co [GICS 15, Cara 100 V50]
FBR Fibria [Votorantim] Celulose [GICS 15, Cara 100 G50]
FCX Freeport McMoRan [GICS 15, Cara 100 G50]
GGB Gerdau SA [GICS 15, Cara 100 G50]
GG Goldcorp Inc [GICS 15, Cara 100 G50]
NGD New Gold Inc [GICS 15, Cara 100 G50]
NUE Nucor Corp [GICS 15, Cara 100 V50]
POT Potash Cp of Saskatchewan [GICS 15, Cara 100 G50]
SLW Silver Wheaton Corp [GICS 15, Cara 100 G50]
SVM Silvercorp Metals [GICS 15, Cara 100 G50]
TCK Teck-Cominco Ltd [GICS 15, Cara 100 G50]
TS Tenaris SA [GICS 15, Cara 100 G50]
UXG US Gold [GICS 15, Cara 100 G50]
Here is the current candleglance chart of 10 important Sector 15 components:
http://stockcharts.com/scripts/php/candleglance.php?BHP,VALE,RIO,MT,DOW,...
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 ETF for Industrial and Transportation stocks is XLI. These are the users of commodities and related products as well as the freight transportation systems that move commodities and business packages to markets around the world.
This week, XLI was up +2.19% W/W to close at 37.26, which was the 4th best sector performance out of 10.
Over the past three months, XLI is up +10.0%, which is the #1 sector performer, solidly outperforming the S&P 500, which has been up +6.6%.
This week's leadership has come from Fluor (FLR +4.6% W/W), United Technologies (UTX +4.4%), and Honeywell (HON +4.3%)).
Here is the Weekly chart of XLI (in solid blue with the 8-week EMA in dashed blue) with the correlated S&P 500 ($SPX) in solid orange.
Note the extremely high correlation with the S&P 500. The current price (37.26) is above the 8-month EMA (34.78) and the 8-week EMA (35.42). The Monthly and Weekly RSI-7 are at 65.9 and 74.8 respectively and all are rising. The Monthly Stochastic is now very definitely positive.
Here is the Hourly chart of XLI (in solid blue with the 8-hour EMA in dashed blue).
The XLI Weekly RSI-7 is only slightly elevated and could stay that way for several weeks.
As noted previously, my picks for the next 12-24 months are Cummins (CMI) for Growth and ABB (ABB) for All-Weather.
FD: After adding ERJ this week, we presently hold ABB, CMI, ERJ and UTX in this sector in the Growth and All-Weather portfolios, and also some PAYX in the All-Weather, but we are underweighted vs the S&P 500.
As at Dec. 9, 2011, the total market cap of the 7 Cara 100 stocks in this sector was $257.5 billion. Almost 90% of the total is attributed to four stocks, UTX, MMM, BA and ABB.
Cara 100 Sector 20 (Industrials and Transports) list:
MMM 3M [GICS 20, Cara 100 V50]
ABB ABB Ltd [GICS 20, Cara 100 V50]
BA Boeing Co [GICS 20, Cara 100 V50]
CMI Cummins Inc [GICS 20, Cara 100 V50]
ERJ Embraer-Empresa Brasil [GICS 20, Cara 100 G50]
PAYX Paychex Inc [GICS 20, Cara 100 V50]
UTX United Technologies, [GICS 20, Cara 100 V50]
The Industrials, Base Materials and Energy sectors are typically the three sectors that are most inversely correlated to the US Dollar. The US, Swiss and Brazilian companies in the Industrial sector, like the others, get most of their income from abroad. They are also producers and/or transporters of commodities, which increase in price as the Dollar falls.
Here is the current candleglance chart of 10 important Sector 20 components:
http://stockcharts.com/scripts/php/candleglance.php?GE,UTX,UPS,MMM,CAT,A...
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 stocks are organized by the S&P industry classification system as either Discretionary Spending, Staples (must have consumer purchases) and Healthcare. Most income here is from the US consumer – in US Dollars – so there is less of an inverse correlation as we saw in Energy, Basic Materials and Industrials/Transports.
The ETF for Consumer Discretionary stocks is XLY. This week XLY was up +1.95% W/W to close at 42.46. That was middle of the pack sector performance, and without Friday’s gain of +2.05% would have been a laggard.
The big winners here this week were the Wall St favorites – I think the young traders there love to gamble on options – Whirlpool (WHR +25.8% W/W) and Brunswick Corp (BC +11.6%).
Re Whirlpool, did it really matter that the company missed on consensus earnings and revenue?
http://www.zacks.com/stock/news/68871/Whirlpool+Misses,+Profits+Dip
Tata Motors of India gained a further +7.6% W/W this week after gaining +8.3% a week ago and +11.6% two weeks ago, and is up +41.9% YTD. As you know, I really like this company, but to trade it successfully you need to be in tune with XLY, India’s Sensex index, and the Rupee. The Rupee was hot again this week!
Following the catastrophe in Italy, Carnival Cruise (CCL) dropped -10.1% two weeks ago and -3.4% one week ago. This week CCL gained +5.0% W/W and is back to $32.00. When the company stock collapsed below 30 following the accident, I wrote that the market cap had taken a $6+ billion hit, but the uninsured loss was reported by the company to be just under $100 million. I said that if the loss on the ship is 5x what the company estimates (before tax considerations), then the stock was going, like the sunken ship, to rise again and get back into play. This was a tragedy without question, but speculative traders are making money. The rest of us are standing by.
Here is the Weekly chart of XLY (in solid blue with the 8-week EMA in dashed blue) with the correlated S&P 500 ($SPX) in solid orange.
Note the extremely high correlation with the S&P 500. The current price (42.26) is above the 8-week EMA (40.52) and the 8-month EMA (39.57) and all are rising, and so the intermediate- and long-term charts are bullish. The RSI-7 for the Weekly price series data is 73.7 and rising.
Here is the Hourly chart of XLY (in solid blue with the 8-hour EMA in dashed blue).
The Daily chart is bullish as well.
FD: We presently hold COST, MCD, NKE and TM in the All-Weather and Growth portfolios, with NKE and MCD in both.
As at Dec. 9, 2011, the total market cap of the 15 Cara 100 stocks in this sector was $572.6 billion. Over 50% of the total is attributed to three stocks, TM, MCD and AMZN.
Cara 100 Sector 25 (Consumer Discretionary) list:
AMZN Amazon.com [GICS 25, Cara 100 G50]
BBBY Bed Bath & Beyond [GICS 25, Cara 100 G50]
BC Brunswick Corp [GICS 25, Cara 100 G50]
CCL Carnival Corp [GICS 25, Cara 100 G50]
COST Costco [GICS 25, Cara 100 V50]
DIS Disney Co [GICS 25, Cara 100 V50]
JCP J.C. Penney Company Inc [GICS 25, Cara 100 V50]
KSS Kohl's Corp [GICS 25, Cara 100 V50]
MCD McDonalds Corp [GICS 25, Cara 100 V50]
NKE Nike Inc [GICS 25, Cara 100 G50]
RCL Royal Caribbean Cruises [GICS 25, Cara 100 G50]
TGT Target Corp [GICS 25, Cara 100 V50]
TTM Tata Motors [GICS 25, Cara 100 G50]
TM Toyota Motor Corp [GICS 25, Cara 100 V50]
WHR Whirlpool Corp [GICS 25, Cara 100 V50]
Here is the current candleglance chart of 10 important Sector 25 components:
http://stockcharts.com/scripts/php/candleglance.php?TM,DIS,NKE,TGT,EBAY,...
Sector 30 (consumer staples: XLP, VDC, RTH and IYK)
Here's the XLP Monthly, Weekly and Daily data charts:
XLP Monthly data: 
XLP Weekly data: 
XLP Daily data:
Table 6: Senior consumer staples equities
| Symbol | Close | 1Day Change |
1Day %Change |
1W %Change |
2W %Change |
4W %Change |
YTD %Change |
3M %Change |
6M %Change |
12M %Change |
The ETF for Consumer Staples stocks is XLP. As the purchases are considered must-have, the normal swings in economic growth and contraction do not affect these companies as much as say the Consumer Discretionary stocks.
This week, XLP was up +0.81% W/W to close at 32.48, which was the 2nd worst performing sector again.
There was nothing remarkable among the leading stocks here this week. Anheuser-Busch-InBev (BUD +4.9% W/W) was this weeks leader, probably because traders were thinking Super Bowl ads.
Here is the Weekly chart of XLP (in solid blue with the 8-week EMA in dashed blue) with the correlated S&P 500 ($SPX) in solid orange.
Note the extremely high correlation. Since March, the chart does show that XLP out-performed the S&P 500, but since mid-December the S&P 500 has the upper-hand, which means that traders are taking on more risk now.
The current price (32.48) is above the 8-month EMA (31.40) and 8-week EMA (32.13) and both are rising.
Here is the Hourly chart of XLP (in solid blue with the 8-hour EMA in dashed blue) with the correlated S&P 500 ($SPX) in solid orange.
FD: We presently hold SBUX, WFM and WMT in this sector in the Growth portfolios and all those plus PG in the All-Weather. But we are under-weighted to the S&P 500 by about 50%.
As at Dec. 9, 2011, the total market cap of the 8 Cara 100 stocks in this sector was $773.8 billion. About 80% of the total is attributed to four stocks, WMT, PG, KO and ABV.
Cara 100 Sector 30 (Consumer Staples) list:
ABV AmBev (Companhia de Bebidas) [GICS 30, Cara 100 V50]
KO Coca-Cola [GICS 30, Cara 100 V50]
DEO Diageo plc (ADR) [GICS 30, Cara 100 V50]
PG Procter & Gamble Co [GICS 30, Cara 100 V50]
SBUX Starbucks Corp [GICS 30, Cara 100 G50]
WAG Walgreen Company [GICS 30, Cara 100 V50]
WMT Wal-Mart Stores Inc , [GICS 30, Cara 100 V50]
WFM Whole Foods Market Inc [GICS 30, Cara 100 G50]
Here is the current candleglance chart of 10 important Sector 30 components:
http://stockcharts.com/scripts/php/candleglance.php?WMT,PG,KO,PEP,ABV,KF...
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 ETF for Healthcare stocks is IYH. At least, that is the ETF I use.
This week IYH gained +1.10% W/W to close at 75.25.
Bio-tech company Gilead Sciences (GILD +12.3% W/W including a gain of +10.9% on Friday) was the leader. GILD was my Whistler 2011 Conference 12-24 month sector selection for Growth accounts. The price on that day Oct 3 was $37.11. GILD closed Friday at $54.70, a gain of +47.4% since my recommendation about four months ago.
Gilead Sciences Q4 reported net earnings $665.1 million ($0.87/share) vs. $629.4 million ($0.76/share) for the same quarter a year earlier. Revenue lifted +10.1% from the year earlier quarter to $2.2 billion, which exceeded estimates. Adjusted net earnings were $0.97/sh, which was shy of the $1.00 consensus from analysts.
Novo Nordisk (NVO +10.6% W/W) was another leader, but I can’t see why the stock was up so much.
Here is the long-term chart for the sector ETF IYH, which shows new all-time highs.
Like many other sector charts, the Weekly data chart of IYH shows that Healthcare has had a successful re-test in mid-Sept and mid-Nov of the early August low and an end to the mid-cycle correction that was similar to the one in May 2010.
I think there is more room to go on the upside, but would start watching for weakness among some of the stocks that are well ahead of themselves in this sector.
Here is the Weekly chart of IYH (in solid blue with the 8-week EMA in dashed blue) with the correlated S&P 500 ($SPX) in solid orange.
Note the extremely high correlation, and, as pointed out five weeks ago in this space, “the relative bullishness of this chart”. The IYH price (75.25) is above the 8-month EMA (71.44), 8-week EMA (72.87), and 8-day EMA (74.64) with all lines rising, which is bullish. But, as I pointed out a week ago, the stock is getting a bit over-bought short-term. The Weekly and Daily RSI-7 is 77.2 and 74.6 respectively, is showing a potential near-term soft period.
Here is the Hourly chart of IYH (in solid blue with the 8-hour EMA in dashed blue) with the correlated S&P 500 ($SPX) in solid orange.
FD: We presently hold AET, JNJ, MRK, NVS and PFE in this sector in the All-Weather portfolio, all these except MRK is not in the Growth portfolio.
As at Dec. 9, 2011, the total market cap of the nine Cara 100 stocks in this sector was $867.8 billion. Of these, the smallest two are AET, with a market cap of $14.4 Billion and Gilead Sciences at $29.3 B. Five of the nine are over $100 B in market cap.
GILD’s market cap is now up to $41,2 B, so I’ll have to update the data when I get the opportunity.
Cara 100 Sector 35 (Healthcare) list:
ABT Abbott Laboratories [GICS 35, Cara 100 V50]
AET Aetna Inc [GICS 35, Cara 100 G50]
BMY Bristol Myers Squibb Co [GICS 35, Cara 100 V50]
GILD Gilead Sciences [GICS 35, Cara 100 G50]
GSK GlaxoSmithKline plc (ADR) [GICS 35, Cara 100 V50]
JNJ Johnson & Johnson [GICS 35, Cara 100 V50]
MRK Merck [GICS 35, Cara 100 V50]
NVS Novartis [GICS 35, Cara 100 V50]
PFE Pfizer [GICS 35, Cara 100 V50]
Here is the current candleglance chart of 10 important Sector 35 components:
http://stockcharts.com/scripts/php/candleglance.php?JNJ,PFE,NVS,MRK,GSK,...,
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 was where the action was this week. Bank of America (BAC +7.54% W/W) and American Express (AXP +4.81%) were #1 and #2 best performers in the Dow 30 this week.
The ETF for Financial stocks is XLF. If you want to check on strictly banking stocks, the $BKX Banking Index is what you want.
Over the past 12 months the XLF has still lost -11.3% while the S&P 500 ($SPX) gained +2.8%.
This week XLF was up +4.32% W/W to close at 14.74, which was the best sector performer.
A week ago I noted in this space, “Traders are happy with the Fed report this week…” Yes, it’s all about keeping the bankers happy!
The leaders in this sector this week were Schwab (SCHW +9.8%), Morgan Stanley Facebook (MS +9.4%) and the two big Indian banks ICICI (IBN +8.7%) and HDFC (HDB +7.1%).
The Indian banks HDFC (HDB) and ICICI (IBN) were up +4.4% +3.4% a week ago too and have been soaring in the more than a month since the monetary authorities of India permitted foreign nationals to buy stocks on the National and BSE exchanges.
As pointed out repeatedly, the resultant capital inflow has served to propel the Rupee higher against the US Dollar, and led to a surge in gold buying there.
Here is the Weekly chart of XLF (in solid blue with the 8-week EMA in dashed blue) with the correlated S&P 500 ($SPX) in solid orange.
The Weekly shows room to grow, but the Daily RSI-7 is up to 83.2.
Here is the Hourly chart of XLF (in solid blue with the 8-hour EMA in dashed blue).
The Hourly chart shows a bullish phase since Dec. 20. Maybe it’s now a bit over-done. But along with my ongoing enthusiasm for higher prices among US equities, I do look for the Financials to be a leader.
We hold only SCHW in this sector. Maybe with this week’s performance (+9.8% W/W to $12.81) I can stop saying “we have a fairly small position, thank goodness”. A week ago, SCHW was hammered -8.9% W/W. I noted then that the stock had been downgraded by analysts at Wells Fargo & Co. from an “outperform” rating to a “market perform” rating, but was also upgraded by analysts at Goldman Sachs from a “neutral” rating to a “buy” rating, with a $14.00 price target on the stock. BMO Capital Markets lifted their PT to $15.00, and now have an “outperform” rating on the stock.
SCHW was my pick at the Cara Whistler conference for the 12-24 month Growth Financial sector. The price then was $10.93. Maybe we’ll do well with it. I like their model. I also discussed Goldman Sachs (GS), which was $90.08 at the time and is now $117.53, but I did not pick it as it is no longer a Cara 100 company.
As before, I say that regarding the Financials in general, we prefer to wait to see how the international Financial Stability Board is able to put Humungous Bank & Broker (HB&B) in their place, ending the extreme risk appetite of the crowd that is supposed to be risk averse.
As at Dec. 9, 2011, the total market cap of the seven Cara 100 stocks in this sector was $307.2 billion. Of these, the smallest three are SCHW, and the two Indian banks IBN and HDB.
Cara 100 Sector 40 (Financials) list:
BBD Banco Bradesco SA (ADR) [GICS 40, Cara 100 V50]
BNS Bank of Nova Scotia (USA) [GICS 40, Cara 100 V50]
SCHW Charles Schwab Corp [GICS 40, Cara 100 G50]
HDB HDFC Bank [GICS 40, Cara 100 G50]
IBN ICICI Bank [GICS 40, Cara 100 G50]
RY Royal Bank of Canada (USA) [GICS 40, Cara 100 V50]
TD Toronto Dominion Bank (USA) [GICS 40, Cara 100 V50]
Here is the current candleglance chart of 10 important Sector 40 components:
http://stockcharts.com/scripts/php/candleglance.php?HBC,JPM,WFC,C,BAC,GS...
I wrote all the following previously, but it still applies:
I personally like the Canadian banks because of the more prudent way they are managed, but they a part of a global credit ring, and hence are exposed to massive risk. The Indian banks are much more reliant on domestic operations, but that too has been a problem in the past couple years with stagflation being the issue. The very high inflation has caused the central bank of India to tighten harshly in order to try to cap the rising cost of food, which if it keeps being a problem will lead to considerably more social unrest than is apparent today. Also, with the tightening, the banks have had to pull back on business lending, which has negatively impacted the country’s normally very high rate of economic growth. But now the central bank has just agreed to permit foreign investors to trade stocks right on the BSE and National exchanges, which ought to give a lift (and liquidity) to the Indian banks. So, overall I think that India is at a cross-road here, but may have seen the cycle bottom.
As far as the large US banks, the recent failure of MF Global has already pointed to many weaknesses in the US financial system, eg, the laws, rules and regulations as well as ongoing imprudent management practices, greed at the highest levels, and so forth. I think Congressional committees will discover that the MF CEO Don Corleone knew that his colleagues in the leading gangs had his client money stolen legally and that he hadn’t “intended” for that to happen. But I think he’ll get nailed on perjury, somehow.
This general smear against the industry is a shame because, in my view, most of the people in financial services are honest and capable and the tools they have are second to none. US banking ought to be leading America back to its place as the strongest economy, not one that is deeply in debt and failing its people.
In a country that prides itself on competition, it’s strange that its banks have been allowed to become too large and unwieldy to manage effectively, nevertheless efficiently. There is, in my mind, no reason (other than the grab for control/power witnessed in the past 30 years) that the top four US banks could not be replaced by a top 20, each much more specialized and streamlined. Self-regulated oligopolies have seized control, and what has resulted is the decline of the once proud American way of life.
I assure you that free markets and competition is the best prescription for social equity.
I’d like to add that I have always considered that allowing severely conflicted broker-dealers and asset managers to be directly in the securities lending business to be a preposterous situation. As I presented to the Canadian Securities Administrators (Canada’s SEC) in a formal hearing on electronic trading in 1997, I believe an independent third party company should hold all client assets, which protects the client from losses due to broker-dealer bankruptcy and also stops the funny business that goes on when “friends” on the Street discuss anomalies in the data and conspire to personally take advantage of it. The SEC has to know this fraud is prevalent and ongoing and yet they do nothing to stop it.
I wish I had the time and energy to write a book called Ubitquitous Fraud, a new name for Wall Street best practices.
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 ETF for Technology stocks is XLK. Because the Semi-conductor manufacturers are a technology that is needed in the manufacture of most equipment and in most manufacturing processes today, I think it is the most important technology. So; I also focus on the Semi-conductor industry group, and the ETF for that is SMH.
Over the past 12 months the XLK has gained +4.5% while the SMH has dropped -1.8%. Meanwhile, the S&P 500 ($SPX) gained +2.8%.
Over the past four weeks, XLK is up +6.8%, which is 4th best performer of 10 sectors. SMH is up +10.8% over four weeks.
This week XLK closed at 27.72, up +3.05% W/W and SMH was up +2.55% W/W to close at 34.62.
XLK at 27.72 is the highest weekly closing price level since 2001, about eleven years. Further out I think XLK still looks good, but as you’ll see I think the Daily price series data is reflecting over-bought indications.
One and two weeks ago I wrote in this space, “While the sector continues to move higher, I think the big story here is the continuing negative media and stock sell-off re Google. GOOG was down -1.0% W/W and is now down -7.9% over two weeks, -9.3% over 4 weeks and -12.8% YTD.” I added that “Traders might have had some advance knowledge that Google's ad sales and net earnings were going to be big misses when reported before the market on Friday… But, by and large, I still very much like GOOG. Net earnings rose to $2.71 billion ($8.22/share), compared with $2.54 billion ($7.81/share) a year earlier. We hold GOOG in the Growth but not the All-Weather portfolios.”
Now I’ll tell you that I think the GOOG slam was all about getting ready for Facebook. The selling network now had their funds ready to buy the Facebook IPO and so they caused to be published a lot of crapola on GOOG, expecting to flip some Facebook and buy back the GOOG at lower prices.
Yes, that’s exactly what I think goes on in NYC and CT. Ubitquitous Fraud.
The stocks of the key solar companies were down a tad this week. I didn’t notice anything else worth reporting.
Here is the Weekly chart of XLK (in solid blue with the 8-week EMA in dashed blue) with the correlated S&P 500 ($SPX) in solid orange.
Note the extremely high correlation, and the bullish perspective with the current price (27.72) being higher than the 8-month EMA (26.06), the 8-week EMA (26.46) and the 8-day EMA (27.20). But the Daily RSI is 89, which is extended on the high side and may come down, indicating several days of weakness ahead possibly.
Here is the Hourly chart of XLK (in solid blue with the 8-hour EMA in dashed blue).
As you know, when (i) Tech stocks and (ii) the broad market indexes begin to rally, I look for the semi-conductors to be leading. For the same reason, at the beginning of a construction boom, I expect to see (i) the activity increase in the offices of architects and engineers, and (ii) mortgage applications begin to soar.
FD: After adding some ORCL, we presently hold AAPL, ATVI, CSCO, CTSH, EA, GOOG, IBM, INFY, INTC, MSFT and SNDK in this sector in various portfolios. We continue to be considerably over-weighted in Tech to the S&P, particularly in the Growth oriented portfolios.
As at Dec. 9, 2011, the total market cap of the 17 Cara 100 stocks in this sector was $1.625 trillion. Of these, there are seven over $100 billion in market cap each. There are also seven under $20 billion.
Cara 100 Sector 45 (Technology) list:
AAPL Apple Inc [GICS 45, Cara 100 G50]
ADBE Adobe Systems Inc [GICS 45, Cara 100 G50]
ATML Atmel Corp [GICS 45, Cara 100 G50]
ATVI Activision Inc [GICS 45, Cara 100 G50]
BIDU Baidu [GICS 45, Cara 100 G50]
BRCM Broadcom Corp [GICS 45, Cara 100 G50]
CSCO Cisco Systems Inc [GICS 45, Cara 100 V50][added to DJIA June2009]
CTSH Cognizant Technology [GICS 45, Cara 100 G50]
ERTS Electronic Arts Inc [GICS 45, Cara 100 G50]
FSLR First Solar, Inc [GICS 45, Cara 100 G50]
GOOG Google [GICS 45, Cara 100 G50]
IBM IBM [GICS 45, Cara 100 G50]
INFY Infosys Technologies Ltd [GICS 45, Cara 100 G50]
INTC Intel Corp [GICS 45, Cara 100 V50]
JNPR Juniper Networks [GICS 45, Cara 100 G50]
MSFT Microsoft [GICS 45, Cara 100 V50]
ORCL Oracle [GICS 45, Cara 100 G50]
QCOM Qualcomm Inc [GICS 45, Cara 100 G50]
SNDK SanDisk Corp [GICS 45, Cara 100 G50]
Here is the current candleglance chart of 10 important Sector 45 components:
http://stockcharts.com/scripts/php/candleglance.php?AAPL,MSFT,GOOG,IBM,O...,
Here is the current candleglance chart of 10 important Semi-conductor stock components:
http://stockcharts.com/scripts/php/candleglance.php?INTC,TSM,TXN,BRCM,AM...
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)
The ETF for Telecom stocks is IYZ. At least, that is the ETF I use.
IYZ has been the worst performing sector over six months (26 weeks), being down -4.2%, and the absolute worst over the past year (-5.9%). But for the past four weeks, IYZ has been bang on the performance of the S&P 500, which has been good.
Five weeks ago I opined in this space: “But, although the long and intermediate-term charts don’t really show it, the worst might now be over.”
This week, IYZ gained +3.29% W/W, which was the 2nd best performing sector, next to Financials. The close on Friday was 21.98.
This week, America Movil (AMX +4.5% W/W) was the leader in this sector and it has been #1 over 4 weeks (+9.2%).
Verizon (VZ +1.7%) and AT&T (T +2.7%) made a partial recovery from the hammering of a week ago.
Here is the Weekly chart of IYZ (in solid blue with the 8-week EMA in dashed blue) with the correlated S&P 500 ($SPX) in solid orange.
The current price (21.98) is above the 8-week EMA (21.29) and the 8-day EMA (21.54), but still below the 8-month EMA (21.61). The Weekly RSI-7 at 65.8 this week bounced off the important 50-line, and shows some strength here. In fact the Monthly and Daily RSI are now both slightly above the 50-line, so this chart is now showing clear positive signs.
Here is the Hourly chart of IYZ (in solid blue with the 8-hour EMA in dashed blue). IYZ got a bit over-bought on Friday when the ETF jumped +1.62% on the day.
FD: We hold only Russia’s Mobil TeleSystems MBT in the Telecom sector – for both Growth and All-Weather accounts.
As at Dec. 9, 2011, the total market cap of the 3 Cara 100 stocks in this sector was $147.8 billion. Of these, Telefonica (TEF) has 83.4 billion in market cap, which is smaller than Verizon and about half the size of AT&T’s market cap.
Cara 100 Sector 50 (Telecom) and Sector 55 (Utilities) list:
CHA China Telecom Corp [GICS 50, Cara 100 V50]
MBT Mobile TeleSystems (ADR) [GICS 50, Cara 100 G50]
TEF Telefonica SA [GICS 50, Cara 100 G50]EXC Exelon Corp [GICS 55, Cara 100 V50]
TRP TransCanada Corp [GICS 55, Cara 100 V50]
Here is the current candleglance chart of 10 important Sector 50 components:
http://stockcharts.com/scripts/php/candleglance.php?T,VZ,CHL,CHA,VOD,TEF...,
Table 14: Telecom
| Symbol | Close | 1Day Change |
1Day %Change |
1W %Change |
2W %Change |
4W %Change |
YTD %Change |
3M %Change |
6M %Change |
12M %Change |
Here’s the IYZ Monthly, Weekly and Daily data charts:
IYZ Monthly data: 
IYZ Weekly data: 
IYZ Daily data:
Sector 55 (utilities: IDU, XLU, and VPU)
The Utilities sector ETF is XLU.
XLU has been a major under-performer to the S&P 500 since the start of 2012. Over that time, it’s the only major sector that is down (-1.44% YTD) while the S&P 500 (+5.52% YTD) has been very strong. Call it a laggard if the broad market continues to lift.
This week, XLU gained +0.29% W/W, and closed the week at 34.83.
Here is the Weekly chart of XLU (in solid blue with the 8-week EMA in dashed blue) with the correlated S&P 500 ($SPX) in solid orange.
Three weeks ago in this space, I added: “Interestingly, the XLU current price (34.89) is now a tad below the 8-week EMA (34.91), which is not bullish. It’s not bearish either, but is clearly much less bullish than most of the higher-risk sectors. That shows me that traders might be switching to Growth stocks for 2012.”
Here is the Hourly chart of XLU (in solid blue with the 8-hour EMA in dashed blue).
Five weeks ago in this space I opined: “The Hourly chart indicates that the bullishness is over-done, and risks are now very high.” In the next three weeks after I wrote that piece, XLU dropped over -4%, so my assessment proved accurate. Since then the gains have totaled just +0.64% over two weeks compared to the S&P 500’s two week gain of +2.28%.
FD: For our portfolios, we hold EXC and TRP in this sector. We hold EXC but dropped TRP from the Growth portfolio a few weeks ago, although we still believe that the company’s Keystone XL pipeline will ultimately get to carry crude oil from the Alberta oil sands to refineries in Houston TX even after the White House put the matter off on a “technicality”. What they mean is politics. This project will get the green light right after the Presidential election in November regardless who wins.
Once again, I want to say that while finding new jobs is crucial to the US economy there is a cost factor. I am increasingly concerned with the energy industry practice of high volume hydraulic fracturing (“fracking”), for health reasons but also because of the linkage to earthquakes the procedure appears to be causing. As I see it, the jury is certainly out on this matter!
Table 12: US Utilities
| Symbol | Close | 1Day Change |
1Day %Change |
1W %Change |
2W %Change |
4W %Change |
YTD %Change |
3M %Change |
6M %Change |
12M %Change |
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 NEE NGG PCG PEG SO TRP
For study purposes, there is a good mix of electric (AEP, D, DUK, FE, NEE and SO), gas (NGG, TRP) and diversified (ED, EXC, PCG, PEG) utilities.
Here is the current candleglance chart of 10 important Sector 55 components:
http://stockcharts.com/scripts/php/candleglance.php?SO,NGG,EXC,TRP,D,DUK...,
Bonds & Yields Review
Bond prices dropped a bit this week as traders returned the flow of capital into equities. They are starting to get the message that the Fed will be very accommodative for a very long period of time, which favors equities and puts bonds at a disadvantage.
Here is the write-up on Bonds done by Econoday this week:
One of the key US Treasury prices I follow and trade is the TLT (average 20-year Treasury fund). A long time ago, these bonds ceased being income instruments; however with a -0.28 beta, they do hedge portfolio risk, and the counter-cyclicality to the S&P 500 is obvious from the chart below.
Two weeks ago in this space, after TLT dropped -2.3% W/W, I remarked: “… the TLT got a bit oversold on Friday and may even bounce back early in the week – especially if, as and when you hear that there are problems putting the Greek debt negotiations to bed.” The following week, I reported, “This week TLT lifted +0.94% W/W to close at 118.08, up from 116.98, which might have been the short-term cycle low. But, I still feel that when traders get back to moving more capital into equities, the TLT will drop to between 112 and 115. You see, Greek is but a pimple on the hide of the Euro elephant. These things take time to resolve.”
This week, the TLT dropped -1.28% W/W to close at 116.57.
But the damage was done on Friday (down -2.56% on the day), which, while I still think the TLT is headed lower in time, was probably over-kill on Friday.
At short-term reversal points, think of a sling-shot being pulled back a little bit more right before the shot. You want to stay out of the line of sight when that happens.
Yields on the 2-, 5-, 10- and 30-year US Treasuries gained +2, +1, +3, and +6 basis points (bp) to 0.23%, 0.76%, 1.92%, and 3.12% respectively.
Here is the Weekly chart of TLT (in solid blue with the 8-week EMA in dashed blue) with the correlated S&P 500 ($SPX) in solid orange.
This chart shows the inverse correlation of bonds to stocks.
Here is the Hourly chart of TLT (in solid blue with the 8-hour EMA in dashed blue) with the correlated S&P 500 ($SPX) in solid orange.
Table 10: US Treasury Yields
| Maturity | Yield | Yesterday | Last Week | Last Month |
|---|---|---|---|---|
| 3 Month | 0.06 | 0.06 | 0.03 | 0.00 |
| 6 Month | 0.08 | 0.08 | 0.07 | 0.04 |
| 2 Year | 0.23 | 0.22 | 0.21 | 0.26 |
| 3 Year | 0.32 | 0.29 | 0.30 | 0.38 |
| 5 Year | 0.76 | 0.70 | 0.75 | 0.88 |
| 10 Year | 1.92 | 1.82 | 1.89 | 1.98 |
| 30 Year | 3.12 | 3.00 | 3.06 | 3.03 |
| Maturity | Yield | Yesterday | Last Week | Last Month |
|---|---|---|---|---|
| 2yr AA | 0.49 | 0.55 | 0.58 | 0.60 |
| 2yr AAA | 0.41 | 0.47 | 0.41 | 0.62 |
| 2yr A | 0.84 | 0.65 | 1.06 | 0.99 |
| 5yr AAA | 0.68 | 0.68 | 0.75 | 0.82 |
| 5yr AA | 0.89 | 0.88 | 0.89 | 1.03 |
| 5yr A | 1.31 | 1.32 | 1.32 | 1.41 |
| 10yr AAA | 1.59 | 1.65 | 1.73 | 1.87 |
| 10yr AA | 1.76 | 1.74 | 2.04 | 2.10 |
| 10yr A | 1.58 | 1.72 | 1.96 | 2.24 |
| 20yr AAA | 2.89 | 2.84 | 2.98 | 3.19 |
| 20yr AA | 3.20 | 3.06 | 3.31 | 4.49 |
| 20yr A | 3.61 | 3.75 | 4.51 | 4.77 |
| Maturity | Yield | Yesterday | Last Week | Last Month |
|---|---|---|---|---|
| 2yr AA | 0.61 | 0.64 | 0.61 | 0.98 |
| 2yr A | 0.91 | 1.08 | 1.08 | 1.64 |
| 5yr AAA | 2.10 | 2.20 | 2.30 | 1.76 |
| 5yr AA | 1.54 | 1.57 | 1.84 | 2.16 |
| 5yr A | 1.91 | 1.77 | 1.96 | 2.27 |
| 10yr AAA | 2.25 | 2.21 | 2.40 | 2.31 |
| 10yr AA | 3.25 | 3.16 | 3.36 | 3.52 |
| 10yr A | 3.33 | 3.29 | 3.47 | 3.38 |
| 20yr AAA | 4.30 | 4.36 | 4.47 | 4.85 |
| 20yr AA | 4.74 | 4.80 | 4.69 | 5.24 |
| 20yr A | 4.46 | 4.52 | 4.64 | 5.02 |
http://stockcharts.com/scripts/php/candleglance.php?TLT,IGOV,$DJCBP
Here is the $USB 30-year Treasury Bond chart.
Interest rates and bond yields.
Interactive Daily data charts:
Interactive Chart of Interest rates and bond yields.
US Bond Funds -- Interactive Monthly Data Charts SHY Monthly data series chart:
IEF Monthly data series chart:
TLT Monthly data series chart:
AGG Monthly data series chart:
LQD Monthly data series chart:
TIP Monthly data series chart:
US Bond Funds -- Interactive Weekly Data Charts
SHY Weekly data series chart:
IEF Weekly data series chart:
TLT Weekly data series chart:
AGG Weekly data series chart:
LQD Weekly data series chart:
TIP Weekly data series chart:
US Bond Funds -- Interactive Daily Data Charts
SHY Daily data series chart:
IEF Daily data series chart:
TLT Daily data series chart:
AGG Daily data series chart:
LQD Daily data series chart:
TIP Daily data series chart:
Table 11: Interest-sensitive securities
| Symbol | Close | 1Day Change |
1Day %Change |
1W %Change |
2W %Change |
4W %Change |
YTD %Change |
3M %Change |
6M %Change |
12M %Change |
Some people think this 11-minute video is a good basic explanation of the bond market:
http://www.youtube.com/watch?v=EmVrny8k6qo
Commodities Review
The commodities index I use ($CRB) was down -1.13% W/W to close at 314.22. The week earlier there was a gain of +2.55%.
Here is the Weekly data chart of $CRB (solid blue line with 8-week EMA in thin dashed blue) vs US Dollar ($USD) (thin dashed green line) and S&P 500 (thin solid orange line).
The chart is a little busy, but worthwhile I think for analysis. This chart clearly shows the inverse correlation of Commodities to the US Dollar, and a fairly close correlation to the S&P 500. If the US Dollar is down, it’s usually commodities up, and vice versa.
Two weeks ago in this space I opined: “The Weekly data chart reflects the beginning of a turn-around.”
Here is the Daily data chart of $CRB (solid blue line with 8-day EMA in thin dashed blue) vs US Dollar ($USD) (thin dashed green line) and S&P 500 (thin solid orange line).
Overall, I am a long-term believer in commodities, especially metals, and in the survival of the Euro. I just believe that the European banks will ultimately take the hit in their sovereign debt holdings if they want to stay in business. The big write-off will be balanced by the big reflation as the IMF and ECB find a way to stem the deflation from those write-offs. They will help the banks to recapitalize, and that process will lead to higher commodity prices and interest rates.
I repeat this statement often here.
But short-term you need to be watching the trends and cycles of the $USD.
Although I use the $CRB (Reuters/Jeffries Index), principally because it’s the oldest, there are many commodity indexes: http://www.crbtrader.com/crbindex/ • Astmax Commodity Index(AMCI) • Commin Commodity Index • Dow Jones-AIG Commodity Index • Goldman Sachs Commodity Index • Reuters/Jefferies CRB Index • Rogers International Commodity Index • Standard & Poor's Commodity Index • NCDEX Commodity Index • Deutsche Bank Liquid Commodity Index (DBLCI) • UBS Bloomberg Constant Maturity Commodity Index (CMCI)
Here is a link to an article that discusses the major ones that have been around for a while: http://www.rogersrawmaterials.com/overviewandanalysis.PDF
Here is a current price summary of the heaviest weighted commodities contracts: http://money.cnn.com/data/commodities/
These indexes change their component weightings perhaps annually or even monthly, for example: http://www.seekingalpha.com/article/43586-the-new-generation-of-diversif... http://tinyurl.com/a5myfj
Interactive Chart of Weekly CRB Commodities Index:
Interactive Chart of Daily CRB Commodities Index:
Oil Review
West Texas Intermediate Crude Oil ($WTIC) dropped -$2.07/bbl (-2.07% W/W) to 97.69 this week. The high-low was 101.29 and 95.44, which showed weakness at the low end, helped by a recovery of +1.06% on Friday.
Econoday also summed up this week in the oil market:
Here’s the Daily data chart of $WTIC in solid blue vs the $USD in thin dashed green and S&P 500 in thin solid orange:
To repeat: I’m not too concerned about economic Armageddon. From what I see about the massive oil finds off Brazil and Cuba, and the new technology to extract shale oil and gas, which is plentiful, and the growing alternative energy sources, including nuclear, solar and biomass, I don’t think that peak oil stories will be much more than stories going forward. So that means a glass ceiling to the price. I have fallen into the camp that the Big Oil companies must become Big Energy companies, diversifying into natural gas (and even solar) for this reason.
Inflation effects on extraction, processing and delivery will however maintain a floor. I do think the Oiler companies will sustain their profitability in 2012.
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
The gold market
Although some of you disagree, I do believe that Gold is money, which, unlike the fiat money that has debt against it, is awfully strategic because it can buy ANYTHING IT WANTS.
Interactive Chart of Weekly Gold EOD Continuous Contract Index:
$GOLD was quiet this week. After all, the recent monster gains had to be digested.
The closing price on Friday was $1730.40, down -$3.10/oz (-0.18% W/W). But it is still up +$165.60 in the past five weeks. The high-low for the week was 1739.80 and 1649.20.
Here is the data chart of $GOLD in the solid blue line (with the 8-week EMA in dashed thin blue), the $USD in the dashed thin green line, and the S&P 500 in the thin solid orange line.
http://investertech.com/tkchart/tkchart.asp?stkname=gld&cht=Tech+Chart&p...
http://investertech.com/tkchart/tkchart.asp?stkname=gld&cht=Tech+Chart&p...
http://investertech.com/tkchart/tkchart.asp?stkname=gld&cht=Tech+Chart&p...
I remain a long-term Gold Bull. We have a large and heavily over-weighted position in both the Growth and All-Weather account portfolios. In the latter we are very over-weighted in the precious metal physical (CEF and PHYS).
My junior portfolio is up +26.0% for the year to date.
Here is the current candleglance chart of 10 important precious metals and copper market components:
http://stockcharts.com/freecharts/candleglance.html?$SILVER,$GOLD,$PLAT,$COPPER,GDX,GDXJ,UXG,SVM,SLW,FCX,
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.
The silver market
Spot silver chart for the week
After some phenomenal gains, $SILVER this week dropped -$0.19 (-0.56% W/W) to close at 33.70. The high-low was 34.41 and 32.93, which was an improvement over the week earlier.
Here is the Weekly data chart of $SILVER in the solid blue line (with the 8-week EMA in dashed thin blue), the $USD in the dashed thin green line, and the S&P 500 in the thin solid orange line.
Compare it to the chart for $GOLD.
The Daily RSI-7 was elevated at 85.5 a week ago and is now down to 65.0, but the Weekly RSI-7 is still just at 60.6, so I'm anticipating a continuation to the present Bull phase, but at the same time I alerted you a week ago to the added risk.
The weekly EMA-8 is at 31.84, up from 31.30, which had been up from 30.57 the week before that, which means that there is a strong support level that is lifting; however, Silver prices are volatile and hot money moves quickly in and out, so beware of traps.
As an active trader, I usually watch the Sydney and London miners overnight to give me a heads-up as to where prices will be at 9:30am ET in the US and Cdn market.
I also watch the action of all the major precious metals and metals, and the related stocks, before I come to a conclusion on any one of them.
Here is the current candleglance chart of 10 important precious metals and copper market components:
http://stockcharts.com/freecharts/candleglance.html?$SILVER,$GOLD,$PLAT,$COPPER,GDX,GDXJ,UXG,SVM,SLW,FCX,
http://stockcharts.com/scripts/php/candleglance.php?$SILVER,$GOLD,$PLAT,$COPPER
http://tinyurl.com/22rsj4r
http://stockcharts.com/charts/gallery.html?s=$silver
http://tinyurl.com/y8k8ud4
Interactive Chart of Weekly Silver EOD Continuous Contract Index:
Interactive Chart of Daily Silver EOD Continuous Contract Index:
The platinum market
http://stockcharts.com/charts/gallery.html?s=$plat
http://tinyurl.com/ydwz4pn
In the past three weeks, $PLAT soared +$210.00/oz to close at $1620.00. This week there was a small gain of +$3.80/oz (+0.23% W/W) to close at $1623.80.
In the WIR five weeks ago, $PLAT closed at 1391.00, and I reported in this space: “The RSI-7 is now below 30 for the Monthly price data series, and it’s down to 25.23 on the Weekly and 23.40 on the Daily. There has been a positive RSI divergence, which you Bulls should be watching. Could be a sign of a turn-around.”
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.
The palladium market
This week $PALL had a gain of +$13.45 (+1.94% W/W) to close at 706.35. A week ago there had been a gain of +$14.00/oz.
A few weeks ago, following five months of Bearish and bottoming action, I opined in this space: “But there could be a turn-around coming in January.”
$PALL has broken-out.
The Bulls are pleased that the Monthly and Weekly price series data has bullish RSI-7’s with plenty of room to grow on the upside. Importantly, what this means is that traders will want to quickly buy the dips – the ones that take the pressure off the extreme levels of the short-term RSI-7’s.
Also, remember that $PALL is a key indicator for the whole precious metals group as is the $SILVER:$GOLD ratio chart.
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.
The (base metal) copper market
This week $COPPER was flat, gaining just a copper penny +$0.01 (+0.24% W/W) to close at 3.90. The high-low was 3.914-3.763, which is a narrowing of spread.
Here is the Daily data chart of $COPPER in the solid blue line (with the 8-day EMA in dashed thin blue), the $USD in the dashed thin green line, and the S&P 500 in the thin solid orange line.
The Daily chart shows the need for consolidation of recent gains, but the Weekly and Monthly charts show room for $COPPER to grow on the upside beyond that brief interlude.
http://stockcharts.com/charts/gallery.html?s=$copper
http://tinyurl.com/ybgnb7f
This week FCX gained +0.76% W/W to close at $46.48.
FD: We hold FCX in both the Growth and All-Weather account portfolios.
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.
Goldminer Equities
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 |
As I mentioned earlier, my junior portfolio is up +26.0% for the year to date. Although the goldminer indexes were down almost -2% each this week, my portfolios were up almost +4%. I also continued to cut down the list and have reduced the portfolio weighting to 90.55.
Some of my stocks are of small explorer and developers in copper and iron ore and some other metals, but most are gold and silver focused. I was pleased to see Canadian Orebodies (CO.V) up +42.9% this week as I hold a 5.40% portfolio weighted position there, and am awaiting a positive new resource report that I think the analysts will like.
Another Iron Ore junior I hold, although just a 1.10% portfolio weighting, is Adriana Resources (ADI.V), which was up +19.4% this week. I intend to continue holding CO.V for the long term.
I also have a new holding in Keegan Resources (NYSE:KGN), which has good management, sound financing and a terrific gold property within about 8 miles of PMI Gold in Ghana, West Africa. KGN closed the week at $4.74. I bought it recently at $3.74, but less than I wanted because it immediately got away from me. KGN was up this week +11.3%.
Finally on the Juniors, my portfolios hold a 2.10% portfolio weighted position in an Australia-based gold play called Crocodile Gold Corp (CRK.TO). There has been an acquisition bid from a NYC hedge fund at $0.62. The stock is $0.60 as no White Knight is expected. My ACB is $0.54. I think the stock is worth $0.73 at a minimum, so I’m not tendering. After raising their original stink bid, I do think this hedge fund will be successful in the take-over but after they clear out the Board, I think they would be foolish to remove the CEO, who is one of the best in the world, and who is the person I had confidence would turn around the problems there. I really like the property and the infrastructure in-site is valuable. So I want to hang in. It’s on my sell list for dumping later at my price, but if I hear good things from this hedge fund, I’ll gladly stick around.
Now that the Fed chairman has announced the policy to keep interest rates at current levels for the next couple years, I will keep buying the junior miners, mine developers and explorers, with diversification between various precious metals, and some copper, iron ore and other metals.
Here is the Monthly data chart of GDXJ in the solid blue line (with the 8-month EMA in dashed thin blue), the $USD in the dashed thin green line, and the S&P 500 in the thin solid orange line.
Although the jury is still out, I think that with a bit of a bump here, I think there will be a new long-term Bull phase for the Junior miners happening. Some of the recent moves have got the promoters back on the phones.
The Goldminers clearly trade inversely to the US Dollar.
I like the juniors because (i) many of the companies are growing their resources much more quickly than the senior companies, and (ii) the seniors are likely to buy out the best of the smaller ones at premiums of +30 to +60% to market. The goodwill on these transactions is what depreciates the stocks of the majors, and is the reason I normally avoid them. However, including goldminers in a balanced portfolio does lower the beta, and hence the risk over many years.
As pointed out until mid-December in this space, GDX had been out-performing GDXJ, so the big Bull move still had not happened. I remarked that “For a Bull market in the gold/silver miners, we need a stronger Euro, weaker Dollar, and the really good picture would have the weaker Yen even weaker than the Dollar.”
This Daily data chart shows the ratio of GDXJ and GDX. Gold Bulls want to see a rising line where GDXJ is outperforming GDX. Unfortunately from May til mid-December 2011, GDX was out-performing GDXJ, which is the sign of a liquidity squeeze. I wrote in this space: “We need to see the GDXJ:GDX ratio chart showing the RSI running continuously above 70 rather than below 30!” Later I added: “(Five) weeks ago I noted in this space: “The tide may have turned in favor of GDXJ and risk-on for the goldminers… This (GDXJ:GDX) is an important chart.”
Three weeks ago I added: “And now you see the proof of concept.” Two weeks ago I added, “This week you saw more.” And the following week was the extreme move. I added as a heads-up a week ago, “But be careful to put in stops.”
Here is the current candleglance chart of 10 important Gold and Silver mining companies:
http://stockcharts.com/scripts/php/candleglance.php?ABX,GG,NEM,KGC,BVN,G...,
I previously stated in this space:
To reiterate my belief: I believe the next bullish wave in the Goldminers market will be driven by acquisitions by the major producers acquiring smaller companies – not just intermediate producers, but small producers and developers that will put large scale resources into production within three years… I also believe that resolving today’s financial system problems in Europe, Japan and the US will require central bank balance sheet expansion and that will drive precious metal prices, and with it the related stock prices, to higher levels.
A factor that you need to consider when investing in the major miners – the ones with cash flow and non-cash expenses – is the IFRS (International Financial Reporting Standards), which are being adopted worldwide.
http://en.wikipedia.org/wiki/International_Financial_Reporting_Standards
The use of IFRS became a requirement for Canadian publicly accountable profit-oriented enterprises for financial periods beginning on or after January 1, 2011.
This link might be helpful: http://www.ifrs.com/ifrs_faqs.html
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:
Central Bank Update
In this section, I shall reproduce any of the Econoday studies of international central bank meetings for the current week.
There was nothing reported this week.
Forex Review
You know my posture re currencies: “We are all forced to be currency traders today.”
I have been saying it for years. Now the world agrees… The problem is that the US Dollar is still the reserve currency, and the Fed the reserve bank of last resort, which means that prices of all currencies are affected significantly by US politics and fiscal and monetary policy… For many years I have written about the pressing need for a General Agreement of Currency. I now believe that there will be such an agreement by the G-20 within five years. [Note: Three months ago, I changed my forecast from 10 years] … The biggest problem that I see is the leverage permitted by regulators of the deposit taking banks. While I am typically against more regulation and bigger government, we definitely need banking reform that includes a return of Glass-Steagall legislation that would separate low risk taking deposit banks from the much higher risk taking investment banks… The only reason that the US Congress will not pass such essential legislation is because the leaders in Congress and the White House have taken in the majority of their campaign funds from Wall Street. Upon retirement, or on the graduation of their offspring, these people also can count on incredibly high paying jobs from Wall Street – but only if they have voted in favor of Wall Street’s interests during their time in power… I say Wall Street, but really I mean the people who control Goldman Sachs, JP Morgan, and State Street Bank. They have names like Rockefeller… I say the leaders who have been elected by the US public (and even now the ones in Greece and Italy who have not been) have been bought-and-paid-for and they have. This take-over has happened in Canada, the UK and Europe as well. Canada is no longer a nation that supports peace although they call themselves peace-makers, which is laughable. This change, to which as a Canadian I strongly disagree, has only happened under the Conservatives after Brian Mulroney was elected Prime Minister… The key financial jobs now in government service and at central banks, and the IMF, etc, are now going only to the people who have the best connections on Wall Street. Common sense is no longer a prerequisite. Membership in the country club is… The banks have caused the problems in the currency markets, most of the problems in the capital markets and many of the problems in the economy. HB&B is now so entrenched with the world’s leading politicians and central bankers that, especially now that they are at war against each other, I fail to see who is going to introduce stability, and I don’t see it happening soon. In fact, the situation is so weighty, I think the Interventionists are no longer able to cope…. For years, I thought there was needed a G-20 General Agreement on Currencies – a set of rules if you will – that would serve to stabilize global capital markets -- In other words, less volatility… Who benefits most from volatility, at least to a certain level, are the Banks. They use it to control the governments that are deep in debt. Sixteen Tons… Now and then whenever volatility, i.e., the amplitude of price swings, becomes extreme, one of the Banks discovers that a so-called “rogue trader” causes huge losses for them, which is another way of saying that their colleague banks can book their huge profits… That rogue trader is usually a 20-something or early 30-something. Now they have stooped to telling us the latest rogue is Jon Corzine. They must be really getting desperate.
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The $USD is a trade-weighted US Dollar index, we used to call the Morgan Dollar.
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 part of this index, or the Mexican new peso, Brazilian real, Indian rupee, or Russian rouble, and why the krona is so important, but admitting this maybe shows my ignorance.
There is a Powershares ETF that tracks the G-10 currencies (NYSE:DBV).
For some time I have opined that the $USD clearly no longer meets the needs of a globalized world with respect to a reserve currency benchmark. I have suggested that Gold may now be the de facto benchmark.
As commodities are mostly priced in $USD for international transactions, you also need to study forex price trends and cycles when trading commodity price-sensitive instruments.
There is also an Emerging economy E-10 currency fund, the Wisdom Tree Emerging Currency Fund (NYSE:CEW), apparently holding the Mexican new peso, Brazilian real, Chilean peso, South African rand, Polish zloty, Israeli shekel, Turkish lira, Chinese yuan, South Korean won, Taiwanese dollar, and Indian rupee.
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 200-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 of currency pairs:
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.
If you are new to examining currency pairs charts; think about it that in any pair where the latest trend line is rising, the first ticker is the one that is strong. So EURUSD, which is the way the contract is traded, when the trend line is up, 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.
Here is the Econoday summary of the currency market trading this week:
The US Dollar was fairly flat this week. The price is now 78.92. The weekly high-low was 79.57 and 78.62, which is down quite a notch W/W.
Many countries are now fighting the “hot” Dollar, which has been jeopardizing their economies. About five weeks ago, India reacted to support the Rupee. Switzerland has made bold statements.
The current price (78.92) is well below the 8-week EMA (79.61), which is a bearish indicator.
Here is the Daily data chart of the $USD (solid blue line along with 8-day EMA in thin dashed blue) vs S&P 500 solid thin orange line, showing counter-cyclicality.
Be wary that the Daily chart shows the Dollar is a tad over-sold here – although another flat week will start to relieve the pressure of a low Daily RSI.
http://stockcharts.com/charts/gallery.html?s=$usd
http://tinyurl.com/y9c3sr4
Interactive Chart of Daily US US Dollar Index:
The Euro was down this week -0.49% W/W. The close was at 131.55.
Here is the Daily data chart of the Euro ($XEU) in US Dollar terms (in the solid blue line with the 8-day EMA in thin dashed blue) vs the S&P 500 (in the thin solid orange line).
The current price (131.55) is now above the 8-week EMA (130.80), but the Weekly RSI-7 is at 48.6, and side-tracking. However, I still consider the Euro bullish.
At this point, commodity, precious metals and broad equity market prices will continue to be favored to lift.
Interactive Chart of Weekly Euro Dollar Index, priced in USD:
Interactive Chart of Daily Euro Dollar Index, priced in USD:
This week, the Pound sterling future lifted +0.60% W/W to close at 158.18 American.
The Pound Sterling has under-performed the S&P 500 since the March 2009 long-term cycle low, apparently more closely aligned with the US Dollar as the UK has seemed to have sided with the Americans against the EU. I wonder if that is much about the worries that high taxes in London have pushed the financial services industry to leave in droves for friendlier places in Europe?
Here is the Daily data charts of the Pound (solid blue line) and the S&P 500 (in the solid thin orange line).
This chart does look a tad over-bought but is still bullish since the price (158.18) is above the 8-week EMA (156.36), which happened two weeks ago and I reported it. Also the Weekly RSI-7 is now up over the 50-line at 55.9, which confirms the Bull.
http://stockcharts.com/charts/gallery.html?s=$xbp
http://tinyurl.com/yasdzc2
Weekly British Pound Index:
Daily British Pound Index:
Weekly Japanese Yen Index:
This week, the Yen (in Dollar terms) gained +0.21% W/W to close at 130.56. There was a loss of -0.50% on Friday as traders went ‘risk-on’ the equity market.
Here is the Daily data charts of the Yen (solid blue line) and the S&P 500 (in the thin solid orange line), showing that the Yen is mostly counter-cyclical to the S&P 500, but also occasionally cyclical to it, as it has been recently.
Because the Weekly RSI-7 is at 61.7 and the Weekly EMA-8 is at 129.90 while the current price is 130.56, the Yen is bullish.
Traditionally, but not always week to week, the Yen is an indicator of market direction and sector rotation.
If, as and when there is a broad risk-on trade in global markets, it is usually accompanied with a weaker Yen, as well as a weaker US Dollar. The Yen was weak this week but the US Dollar flat.
And, when I see the Dollar down and the Yen to the Dollar down even more, as happened on Friday, then, all other factors being equal, I believe the equity markets, commodity markets and precious metal markets are probably going to lift sharply around the world. That happened to Copper and Oil and most commodities this week, but not to Gold and Silver.
As I say, if you hope for the current major rally to continue in those markets, look for a weaker Yen, but particularly against an also dropping US Dollar.
Daily Japanese Yen Index:
The Canadian Dollar aka Loonie gained +0.85% W/W to close at 100.62 this week. There was a gain of +0.52% on Friday as foreign investors piled into the Cdn Oilers and Bankers.
The Daily data chart shows the high correlation between the Cdn Dollar ($CDW) in the solid blue line to the S&P 500 ($SPX) in the thin solid orange line.
In the previous WIR, I noted: “So the Loonie is in a new flight pattern, rising again.”
There is usually a rising Canadian Dollar when inflation beneficiaries like Oilers and Miners are in strong long-term Bull phases. The opposite happens in disinflationary markets, and early on in deflationary markets. Longer-term in deflationary markets, the important govts and central banks tend to flood the international financial system with new money and the Oilers and Miners benefit.
The equity Bulls, particularly the Oilers and Miners, are just calling for Canada to let the Loonie fly! After the early October cycle low for the Cdn Dollar and Equities, Commodities and Precious Metals, the Cdn Dollar under-performed the S&P 500, and exerted downward pressure on Commodities and Precious Metals. Now the cycle has reversed!
http://stockcharts.com/charts/gallery.html?s=$cdw
http://tinyurl.com/ycx58us
Weekly Canadian Dollar Index:
Daily Canadian Dollar Index:
Here is the China Yuan (CNY) chart.
Wrap-up:
This report was hurried as its Super Bowl Sunday. I don’t have a favorite team – they are both outstanding – but, like most, I’ll be glued to the TV this evening.
As many of you know, along with seven other persons I have been actively working to start a merchant bank for early stage mining and minerals related companies. I’ll be chairman but not involved day to day in the company. Our group’s plans are quickly coming together. The most interesting aspect has been the US securities law in this area as it differs from Canadian law. Although it was doubtful until late this week, I now think we have the key issues resolved. We plan to be meeting interested persons at the PDAC international mining convention in Toronto March 4-7, including representatives of the Chinese government.
Also, the new Lessons from the Trader Wizard 2012 edition is in production and has a March 1 release date. This book and all future books will be e-books and have a purchase cost less than 40 percent of the original hard cover book. This book has been updated and substantially improved in many ways. Ownership includes exclusive access to the new trader support website that I referred to earlier in this WIR.
About six months ago I sensed that I was finally resolving the multiple challenges posed by operating a trading company with a diverse group of traders, each with their own style. After starting out well, the next two years caused me to lose a lot of hair. In 4Q2011, I knew we had the situation under control and, despite a tough four week period in Nov-Dec for the metals-specific accounts, the results were becoming apparent. In January, we had a great start to the year, probably moving into the top one or two percent performance of all capital managers, particularly when viewed on a risk-adjusted basis.
YTD, the template accounts for (i) All-Weather (ii) Growth (iii) Emerging Markets, and (iv) Metals (mostly gold and silver) were up +6.0%, +7.0%, +8.5% and +25.1% respectively vs S&P 500 at +5.0% and TSX Composite +3.5%.
Geoff Goetz is to be congratulated. He bought into my investment plan and strategic approach 100% -- the same one I have written about in this blog for almost eight years, and in turn I accepted his desire for an All-Weather approach to our core accounts. That is to say, we now invest only in the Cara 100, in bonds and precious metal bullion securities, but not ETFs. We also do not use options as a primary strategy now because I expect the funds to be fully invested in equities, bonds and precious metals or in a cash reserve that could be instantly ready for deployment. I want to focus on simplicity.
You know, both coaches for today’s Super Bowl game have a similar philosophy to mine. They take the accent off the raw hyped-up emotional aspect of the game and put it squarely on preparation, the simple repetitive blocking and tackling, running and passing drills that enable successful execution in the heat of the battle.
Discipline works in American football as it does in trading. These are just two different slices of life.
You know, I like the way the US Presidential election is shaping up: Romney vs Obama. I have serious concerns about both these candidates, but whereas Obama showed his true character after his election (i.e., puppet to Wall Street), we don’t yet know how Romney will run the Office if given the chance. I have been extremely impressed by Dr. Ron Paul – he did an excellent interview with Piers Morgan on CNN on Friday – but don’t think he can raise the money that Romney can to put him into the Show.
Paul and Romney however seem to be unwilling to upset the other with unwarranted negatives so hopefully they can combine their policies or possibly even work as a slate against Obama, who we all know will be a formidable candidate given that the US economy appears on the mend and the fact he is so well funded from Wall Street.
All in all, I’m looking forward to this election more than any other for many years.
As for the future of America, I believe that Ron Paul’s platform, if implemented, would resolve the financial system instability problems, which is needed as a base for a strong economy. While the process will not be quick, only because Wall Street money is driving both party campaigns, the next five years ought to be considerably better than the past five years both for the US economy and the equity market.
The primary driver is America’s basic need to survive its catastrophic failures in government, banking and business leadership and regulatory matters and the great enabler today is the Internet-driven social connecting of the American people. So, regardless who wins the White House and the Congress this year, the pressure from the people will continue to build until they are accepting of a new system of social equity from the govt, banking and business leaders. As I see it, anyway.
Finally, I am showing my support for the USA in that in 4Q2011 I decided to move my trading company from Bahamas to Chicago and in two weeks my wife Pat and I will be spending 10 days in the Ft Lauderdale area looking to buy a 2/2 condo. We’re booked and have lined up a real estate agent who is already on the job. If you know a deal to be had, please send it along. We may consider Naples too, but we always liked Ft Lauderdale.
Enjoy your weekend and your week.
