[7:53am] A week ago I noted with some foreboding how calm the market has gotten. I remarked, “What a quiet week this one was… Is this the lull before the storm? There were a few interesting equity market plays going on this week, but really this was a week to see if the market can break out of a trading range, up or down. Prices were down a bit, but the picture is still quite fuzzy.”
Well, look what the wind blew in. The S&P 500 soared +3.1%.
Yes, equity prices are up around the globe, except for Shanghai, but where is the volume? Are there too many traders short this market? Could this be a massive short squeeze in the making?
We’ll look at a few situations this week including some comments about McDonalds (MCD), a Cara 100 company that was reviewed by the analyst at Value Line, a terrific performer operationally and financially over the past year, unlike many other companies, but with a stock price (MCD +25.2% 12-months) that only beat four others in the Dow 30.
That’s one of my problems. It happened again this week.
This week’s top five performers were: Boeing (BA +7.55%), Disney (DIS +6.34%), American Express (AXP +5.26%), Alcoa (AA +4.06%) and Caterpillar (CAT +3.82%).
This week’s bottom five performers were: Pfizer (PFE –0.40%), Microsoft (MSFT –0.29%), McDonalds (MCD –0.28%), IBM (IBM +0.07%) and Walmart (WMT +0.13%).
What’s wrong with this picture? The stocks of the highest quality companies are laggards.
The market cap of the big performers this week averages just $41.27 billion compared to the $190.80 billion of the laggards. Also the PE of the week’s big performers is an average of just 15.52 while the average PE of the laggards is 19.52.
Don’t get me wrong here. There are good sound companies in both groups. In fact, there are only two of the ten that are not Cara 100 companies, Alcoa and American Express, and the latter almost made it in. But the point I’m making is that operationally and financially, this week’s losers in the market are actually the best, and could easily form a core portfolio group for longer-term oriented conservative investors, whereas the BA, DIS and CAT in the Cara 100 are likely best for short-term traders.
When you see strong volume and money flowing into the 800-pound heavyweights in the Dow 30, you can pretty much figure there is a Bull on the move. As it is, I don’t really know. As I figure the odds, it’s probably a short squeeze about to happen, taking prices higher into a widespread distribution where the smart money will be selling into strength.
Look at the Big Oils this week. Same scenario. While all the Oilers were soaring (XLE +3.58%), the Exxon (XOM +2.3%) and Chevron (CVX +2.8%) were under-performers. The leaders on my monitor were the higher risk Canadian oilsands companies Suncor (SU +6.8%) and Canadian Natural Resources (CNQ +6.5%). When the Crude Oil price sinks to the 70 level or lower, the Canadian oilers are a disaster, but above 80, which is the present mark, they are expected to out-perform. If you don’t think Crude Oil can stay above 80, maybe you want to think about what’s going on here.
Same thing happened this week in the Big Goldminers. LIHIR (LIHR +11.4%), Harmony (HMY +8.4%) and Gold Fields (GFI +7.1%) were soaring, but, in my view, these are riskier stocks to hold. The lower risk names were the under-performers. In fact Yamana (AUY +0.1%) was almost flat this week.
You never really know what’s going to happen next in capital markets, but these are particularly confusing days for all of us.
Now let’s review the past week and look forward to what may be headed our way.
Global Economics Review
Weekly International Economic Report from Econoday.
Summary: Stocks were up everywhere but in Shanghai last week as Greece moved towards a resolution of its debt woes and economic data indicated that the recovery is continuing. On Monday, a slew of purchasing managers’ surveys indicated that manufacturing is now growing in most of Europe and North America. The icing on the cake is the U.S. employment situation report that shows the January unemployment rate unchanged at 9.7 percent and employment down 36,000 — less than the consensus estimate. The impact of the dreadful snowy weather is difficult to discern. Many analysts said that Friday’s data point to a gradual stabilization of the labor market but at a high unemployment rate and with adverse compositional and structural components. It remains an open question as to whether this stabilization will lead to the monthly gains needed to meaningfully improve the employment, consumption and economic growth outlook in a sustained fashion.
Here are the key US economic reports from last week’s calendar.
US Personal Income and Outlays for January. After release of the data on 3/1/2010 8:30:00 AM ET, Econoday reported, “Wages & salaries were strong in January, up 0.4 percent but were not strong enough to offset a reversal in the prior month's jump in farm income to make for a lower-than-expected 0.1 percent increase in personal income… The spending side is also mixed. A 0.5 percent rise for personal consumption is stronger than expected but, given a 1.8 percent surge in non-durable goods, looks to have been boosted by gasoline. Spending on durable goods rose only 0.1 percent with spending on services up a moderate 0.2 percent… Price readings are flat with core PCE up only 1.4 percent year-on-year, while the savings rate, drawn down by spending, fell 9 tenths to 3.3 percent. Equities got a slight lift on today's report, one highlighted by strong wages.”
US ISM Mfg Index for February. After release of the data on 3/1/2010 10:00:00 AM ET, Econoday reported, “The ISM index eased back in February to 56.5, still very strong but indicating a moderating rate of month-to-month for the manufacturing sector. But February does show increasing month-to-month strength for employment which rose nearly 3 points to a very strong 56.1 and offering an indication that spare capacity is being used up. Slowing deliveries also helped the main index as did strength in inventories… New orders were also strong but did moderate to 59.5, breaking a string of exceptionally strong plus-60 readings. Backlog orders show special strength, up 5 points to 61.0 and are a key factor supporting what is increasingly becoming a positive outlook for employment… Other readings include easing gains for production, strength in both exports and imports, and continued month-to-month pressure for prices paid. Equities got a lift from today's report, which should ease concern over the month's heavy weather. The manufacturing sector has clearly emerged as the economy's central strength.”
I didn’t find this report as “strong” as others did.
US Construction Spending Y/Y for Jan. After the data release on 3/1/2010 10:00:00 AM ET, Econoday reported, “January construction spending dropped a less than expected 0.6 percent to a seasonally adjusted rate of $884 billion after sinking a revised 1.2 percent in December. On the year, total construction has declined by 9.3 percent. Private construction spending also dropped 0.6 percent in January, the 10th consecutive monthly decline, after sinking 1.7 percent in December. Total private construction spending was down 14.3 percent on the year. However, private residential construction spending was up 1.3 percent on the month after dropping 2.8 percent in December. This was more than offset by a decline in the vulnerable private nonresidential sector, which was down 2.1 percent after declining 0.7 percent in the previous month. Public construction spending was down 0.7 percent – its 6th consecutive decline but is up 2.1 percent on the year.”
As I noted before this report was published, “Do you see an improvement here? Dec 2009 looks better than Nov, which looks better than Oct, which looks better than Sept. Hmm, now look at Dec 2009 over Dec 2008 – a horrible number worse than a horrible number -- and over Dec 2007, worse than another horrible number. Tough being in the construction industry...” Maybe I’m not a good tea leaf reader, but I find this data to be uninspiring.
US Motor Vehicle Sales for Feb.
“Resilient” is not a word I would use. The annual rate keeps dropping, and the number was well below analyst’s consensus expectations.
US ISM Non-Mfg Index for Feb. After the data was released on 3/3/2010 10:00:00 AM ET, Econoday reported, “Boosted by significant improvement in employment, the ISM's non-manufacturing index rose a solid 2.5 points to 53.0 to signal month-on-month growth for the bulk of the U.S. economy. Employment jumped 4 points to 48.6 for the best reading since April 2008. Though still below 50, the level will ease concerns of excessive weakness in Friday's employment report… February's new orders could be described as robust, at 55.0 to show the strongest rate of month-to-month growth since August 2007. This strength will help boost future activity which already is very strong with the business activity index up more than 2-1/2 points to 54.8. Equities moved higher following today's results.”
“Robust” and “strong employment growth” are descriptors I couldn’t use. Sorry.
US Jobless Claims for wk2/27, 2010. After release of the data on 3/4/2010 8:30:00 AM ET, Econoday reported, “Jobless claims swung lower, down 29,000 to 469,000 vs. expectations for 475,000. There are no special factors in the Feb. 27 week. The prior week, when heavy weather increased filings, was revised 2,000 higher to 498,000. The weekly data for February show steep swings whether up or down. The four-week average, which helps smooth out volatility, fell 3,500 in the week to 470,750, a level showing no significant change from late January to indicate no improvement for tomorrow's non-farm payroll headline which is expected to fall 50,000. Markets showed no reaction to this morning's report… Continuing claims fell 134,000 to 4.500 million in data for the Feb. 20 week. The drop marks a significant move lower for the data, pointing to an uncertain mix of hiring and benefit-expiration. The unemployment rate for insured workers slipped 1 tenth to 3.5 percent.”
US Productivity and Costs for 4Q2009. After the data release on 3/4/2010 8:30:00 AM ET, Econoday reported, “Both productivity and costs were revised better than expected for the fourth quarter. Businesses clearly are focusing on cutting labor costs to try to boost profits or cut losses. Nonfarm business productivity was revised up to a sharp 6.9 percent boost from the initial estimate of 6.2 percent. This followed a revised 7.8 percent surge in the third quarter. Today's report includes annual revisions which raised the Q3 figure. The consensus had called for a 6.3 percent revised gain for the latest period. Unit labor costs fell an annualized 5.9 percent in the fourth quarter, compared to an initial estimate of minus 4.4 percent and a revised third quarter plunge of 7.6 percent. The market forecast was for a 4.5 percent drop in costs… The fourth quarter jump in productivity reflected a 7.6 percent spike in output, following a 2.2 percent gain the prior quarter. Hours worked edged up a mere 0.6 percent after a 5.3 percent annualized drop in the third quarter. Compensation cost inflation is nearly nonexistent as compensation rose only 0.6 percent, following a 0.4 annualized percent dip in the third quarter… Year-on-year, productivity rose to 5.8 percent in the fourth quarter from 4.6 percent in the third quarter. Year-ago unit labor costs fell to minus 4.7 percent from down 2.7 percent the previous quarter… Today's productivity and cost numbers are good for businesses trying to get back to a healthy cost position. But it also indicates that businesses are still slow to hire. Equities should be up. The favorable inflation implications (low labor costs) should help bond yields ease. But markets are more focused on this mornings' better than expected department store sales. And Wal-Mart announced a boost in annual dividends. Also, initial jobless claims fell more than expected. These factors add to lift for stocks but should help interest rates firm.”
US Factory Orders for Jan. After the data release on 3/4/2010 10:00:00 AM ET, Econoday reported, “Factory orders rose a very solid 1.7 percent in January led by strength in transportation equipment, specifically aircraft. Orders for non-durable goods rose 0.9 percent. Durable goods orders, already released, were revised four tenths lower to a still very strong 2.6 percent. December orders were revised 5 tenths higher to plus 1.5 percent… Factory shipments rose a respectable 0.3 percent in the month following big 1.8 and 1.6 percent gains in the prior two months. January's sharp rise in new orders points to lagging strength for shipments. Factory inventories increased 0.2 percent and are likely to continue to rise as a building cycle begins. Unfilled orders were unchanged, also an improvement from two prior months of decline consistent with a tightening in available capacity… Details include a step back for capital goods shipments, offset by a jump on the orders side. New orders for non-durable goods were led as they usually are by petroleum and coal where prices increased… This week's ISM manufacturing report showed solid strength in February and no major weather effects, pointing to strength for the next readings on the factory sector, the industrial production report on March 15 and the durable goods report on March 24. The manufacturing recovery appears to be hitting stride in what is the economy's central strength.”
Factory orders were up less than forecast, but are clearly gaining, and although it’s only a small part of the total US economy, traders like what they see here.
US National Jobs Report for January. After the data release on 3/5/2010 8:30:00 AM ET, Econoday reported, “Severe weather in February did not have as much impact on jobs numbers as feared. But government layoffs are now weighing on the numbers. Nonfarm payroll employment in February declined 36,000, following a revised 26,000 decrease in January and revised fall of 109,000 for December. The February payroll decline was less negative than the market forecast for a 50,000 fall in employment. The January and December revisions were up a net 35,000… Weakness in February was led by a 64,000 drop in construction jobs. Rounding out the goods-producing sector, manufacturing actually edged up 1,000 and mining rose 4,000. Service-providing jobs were up 42,000 in February, following a 20,000 increase the month before. The highlight was temp help being up 48,000 in the latest month. Government jobs fell 18,000 despite the hiring of 15,000 temporary Census workers. At the federal level, the U.S. Postal Service cut 9,000 jobs. Local governments shrank their work forces by 31,000 in the latest month… On the issue of snow storms potentially lowering payroll jobs, the Labor Department made a point to include a special memo that stated that workers are counted as employed for the month if they receive pay for any portion of the pay period-for example, even just one hour. So, even if workers had fewer hours, they were still counted as employed. Hence, the impact of the snowstorms likely was exaggerated headed into the report… On a year-ago basis, payroll jobs improved to minus 2.5 percent in February from minus 3.0 percent in January… From the household survey, the unemployment rate held steady at 9.7 percent in February… Wage inflation in February eased to an anemic 0.1 percent rise from 0.2 percent the month before. The consensus had expected a 0.2 percent gain. The average workweek (traditional series for production & non-supervisory workers) slipped to 33.1 hours in February from 33.3 the month before. One of the biggest negatives in the report is a drop in the manufacturing workweek to 39.5 hours from 39.9 in January (traditional series)… It's hard to really determine the direction of momentum this month given the heavy snowstorms. However, two divergent movements stand out. The rise in temp help is good news but the drop in local government and USPS employees may portend more job cuts within government. Equities traders, however, see the report as positive and futures are up. Rates firmed on the news.”
I believe the data is this report is bogus and manipulated to the extreme. I believe the true unemployment rate is north of +20%. But at the end of the day, it’s the spin and the trader’s reaction to the spin that is most important. We trade prices, not the pain felt by the general public with regard to unemployment.
US Consumer Credit Report for January. After the data release on 3/5/2010 3:00:00 PM ET, Econoday reported, “Consumer credit broke a record cycle of decline in January, rising +$5.0 billion and led by a +$6.6 billion rise in non-revolving credit (car loans, mobile homes, education, boats, trailers, vacations). But revolving credit (credit cards) still declined, down -$1.7 billion but much less moderate than December's -$9.4 billion plunge. Today's news is good but consumer reluctance and/or inability to borrow on their credit cards is still a sign of economic distress.”
This seems to be a bullish report for the consumer discretionary spending sector, and is confirmed by the recent strength in that sector’s ETF (XLY). XLY is the best of the ten sectors in price performance this past month, YTD, and over the past 3- and 6-month periods.
That is amazing since credit card loans are still declining.
Here are the key US economic reports from next week’s calendar.
US Treasury Budget for February. Prior to release of the data on 3/10/2010 2:00:00 PM ET, Econoday reported, “The U.S. Treasury monthly budget report posted a deficit of $42.6 billion in January, bringing the year-on-year rise in the fiscal year-to-date deficit down to 8.8 percent from 16.8 percent in December. The improvement came from the outlay side, which was down 3.9 percent from a year ago. In particular, outlays related to TARP fell to $125 million, compared to December's $3.9 billion. Looking ahead, for historical perspective, the month of February typically shows a deficit for the month. Over the past 10 years, the average deficit has been $108.0 billion and $144.3 billion over the past 5 years. The February 2009 deficit came in at $192.8 billion.”
US International Trade for Jan. Prior to the release of the data on 3/11/2010 8:30:00 AM ET, Econoday reported, “The U.S. international trade gap in December unexpectedly ballooned to $40.2 billion from a $36.4 billion gap in November. The worsening in the trade deficit was largely due to a widening of the petroleum deficit as the non-petroleum gap actually shrank. The good news was that exports jumped 3.3 percent in December-the eighth consecutive monthly increase. The trade gap could worsen again in January as the seasonally adjusted price of West Texas Intermediate jumped about 9 percent on a monthly basis.”
US Jobless Claims for the Week ending 3/6. Prior to the data release on 3/11/2010 8:30:00 AM ET, Econoday reported, “Initial jobless claims for the week of February 27 swung lower, declining 29,000 to 469,000. There were no special factors in the week. Filings were up the prior week due to severe weather. Now many file online rather than waiting in line and being snowed in at home may have actually boosted online filings. The weekly data for February showed steep swings. The four-week average, however, fell 3,500 in the week to 470,750, a level showing no significant change from late January.”
US Retail Sales for Feb. Prior to the announcement on 3/12/2010 8:30:00 AM ET, Econoday reported, “Retail sales in January posted a healthy rebound of 0.5 percent after dipping 0.1 percent the month before. Excluding autos, sales in January were up 0.6 percent, following December's drop of 0.2 percent. Components were mixed with gasoline playing an essentially neutral role. Excluding both autos and gasoline, January sales rebounded 0.6 percent, following a 0.3 percent decrease in December. Better-than-expected store sales for February have raised hopes that February will continue the up-trend in overall retail sales. But unit new motor vehicles sales fell 4.2 percent for the month and likely will dampen retail sales.”
US Consumer Sentiment for March. Before the data is released on 3/12/2010 9:55:00 AM ET, Econoday reported, “The Reuter's/University of Michigan's Consumer sentiment index edged lower in February, extending the recent recession's run of very weak readings. Reuters/University of Michigan's consumer sentiment index for the full month of February slipped to 73.6 from 73.7 at mid month and compared to 74.4 in January. Expectations dipped lower in the latest report while current conditions improved. Most analysts are counting on a little bounce back but higher gasoline prices and a weak labor market likely will keep sentiment low in March.”
US Business Inventories for January. Prior to release of the data on 3/12/2010 10:00:00 AM ET, Econoday reported, “Business inventories slipped 0.2 percent in December after two moderate gains of 0.5 percent in November and 0.3 percent in October. For the latest month, the decline was led by a 0.8 percent fall in wholesale inventories. A large part of wholesale inventories are imports. The other two components of business inventories also were soft with manufacturing inventories dipping 0.1 percent and retail inventories unchanged. More recently, factory inventories rose 0.2 percent in January. We will get an update on wholesale inventories for January on Wednesday, March 10.”
Despite massive government spending, the economy is not recovering at a typical recovery rate, and so fiscal revenue is low and the budget deficits increasing. This is not a good time for the Fed to be raising rates, but the consumer inflation picture could start to get out of control otherwise. So, from my perspective, 2010 appears to be another challenging one for business, and for Bond Bulls.
International Equity Markets Review
With the exception of the Shanghai Composite (-0.7% W/W and –7.5% YTD), all the exchange indexes we follow were up this week.
So far in 2010, the FTSE leads with an increase of +3.5% and the NASDAQ Composite follows with an increase of +2.5%.
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 Milan Italy stock exchange MIBTEL.
Italian Milan Index stockcharts.com chart
Here is the latest session data for the Swiss market index. Swiss Market Index stockcharts.com chart
Asia-Pacific
Here is the latest session data for the Asia-Pacific stock exchanges.
Here is the latest chart for the Japanese Nikkei 225 index.
Tokyo Nikkei 225 Index stockcharts.com chart
Here is the latest chart for the Singapore index .
Singapore Straits Times Index stockcharts.com chart
Here is the latest chart for the Shanghai Composite index .
Shanghai Composite Index stockcharts.com chart
Here is the latest chart for the Hong Kong Hang Seng index .
Hong Kong Hang Seng stockcharts.com chart
Here is the latest chart for the India BSE 30 index .
Mumbai BSE 30 Sensex Index stockcharts.com chart
Here is the latest chart for the Australian All Ordinaries index .
Sydney All Ordinaries Index stockcharts.com chart
Russia (RTS) stockcharts.com chart
ETFs Review for International equity market
Of the country ETF’s that trade in USD in New York, all were up strongly W/W, and all were up on Friday. On Friday, the Daily RSI-7’s soared. If you suffer nose-bleeds, take precautions. This could be a short-squeeze, taking stock prices up too far, too fast, signaling high risk. That’s where the pro’s sell into strength.
While the S&P 500 jumped +3.1% W/W, it appears the average of the international ETF’s, ex-Japan’s EWJ (+2.01%) were up well over +5.5% on average by my eyeball estimate).
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 Billcara2.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
What a difference a week makes!
This week, the S&P 500, NASDAQ and DJIA were up +3.1%, +3.9% and +2.3% respectively. YTD, these indexes are up +2.1%, +2.5% and +1.3% respectively.
A week ago, the S&P 500, NASDAQ and DJIA were down -0.4%, -0.3% and -0.7% respectively. At that point, those indexes were down -1.0%, -1.4% and -1.0% YTD respectively.
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 BillCara2.com, input up to 30 tickers in the window above “Summaries” – say AAPL MSFT GOOG QCOM RIMM CSCO INTC ORCL GILD EBAY AMZN DELL JAVA YHOO plus up to 16 more – and click on Tech Chart, Basic View, Daily Watch, Performance or Fundamentals and you’ll get a lot of information to compare one against the others.
Here is the Monthly data chart of the Interactive Chart of Nasdaq Composite, S&P 500, Dow30, and Russell 2000 (small cap) indexes.
Here is the Weekly data chart of the Interactive Chart of Nasdaq Composite, S&P 500, Dow30, and Russell 2000 (small cap) indexes.
Here is the Daily data chart of the Interactive Chart of Nasdaq Composite, S&P 500, Dow30, and Russell 2000 (small cap) indexes.
Dow 30 Stocks Review
Among the DJIA components this week, 27 were higher, and 3 down. Almost like two weeks ago.
A week ago, we started to get the feeling that the storytellers were setting up the market when we stated:
Bankers Bank of America (BAC +4.91%) and JP Morgan (JPM +4.85%) were by far the best of the lot. Friday morning, it seemed that when the Chicago Purchasing Managers Business Barometer for February came out looking real good, as expected, there was a pop in the Financial sector, which closed up most on the day and on the week. I also noted that there was talk op upwards earnings revisions to come for the bankers. Whether any of this is sustainable or not, I don’t know, but the stronger Euro on Friday tells me there might just be a pop coming. I sensed it in the precious metals on Friday as well… So I think Monday will be golden.
This is why you come here, right?
Anyway, as I stated off the top, this week’s top five performers in the Dow 30 were: Boeing (BA +7.55%), Disney (DIS +6.34%), American Express (AXP +5.26%), Alcoa (AA +4.06%) and Caterpillar (CAT +3.82%). That’s quite a pop.
This week’s bottom five performers were: Pfizer (PFE –0.40%), Microsoft (MSFT –0.29%), McDonalds (MCD –0.28%), IBM (IBM +0.07%) and Walmart (WMT +0.13%). That’s not so hot, but it’s not so bad either.
Again, I remarked off the top that I would prefer top see this latter group up big time and not the former group. The latter ones are the heavy weights in the DJIA index.
Could be a set-up for, say, about Tuesday when the sell-off starts. But, there also could be a short squeeze in the works here. We’ll just have to wait to see.
Table 15: Dow 30 List
| Symbol | Close | 1Day Change |
1Day %Change |
1W %Change |
2W %Change |
4W %Change |
YTD %Change |
3M %Change |
6M %Change |
12M %Change |
Here are the links to interactive Dow charts from Billcara2.com that I broke into groups of ten, which you can add technical indicators for as well.
(list one)
(list two)
For those of you who are relatively new at trading, or to this blog, why not pull the ten (10) Cara 100 companies out of the DJIA 30 list, and study the links for just these stocks? Keep a hard copy of the Value Line quarterly report plus a record of the Daily-Weekly-Monthly RSI-7 technical indicator. Study up on what the RSI is so you know it and have confidence that it is just like a football game yardstick that shows you how much risk your team is facing when trying to score points.
The Cara 100 high-quality company list has the following ten DJIA components:
Wal-Mart (WMT), Disney (DIS), Johnson & Johnson (JNJ), McDonalds (MCD), Exxon (XOM), Boeing (BA), Procter & Gamble (PG), IBM (IBM), Intel (INTC), and United Technologies (UTX)
There is no rocket science to these high-quality companies. In your typical week, you shopped at Wal-Mart and along the aisles, mostly the personal consumer products were from Procter & Gamble, except for maybe the baby powder from Johnson & Johnson. On the way there, you may have filled-up at an Exxon gas station, and on the way home, maybe you stopped for a Big Mac or a salad at McDonalds. Overhead, you watched airplanes from Boeing. If you were in a high-rise building, you probably rode in an Otis elevator from United Technologies. Maybe you no longer have an IBM PC, but you do know the company, and your present PC is likely powered by Intel. Every parent's kids want you to take them to Disney… All in all, this is just life we're talking about here. If you are alive, you know these companies like your children. You probably even see more of them… So, just quickly read those Value Line reports – one per company every 13 weeks – and keep an eye on the RSI (momentum) and MACD (trend)… Those guys on Wall Street may be worth a gazillion dollars, but they didn't do it the way you and I have to do it. So, stop listening to their stories that financial engineering and out-sourcing is what's making America strong. That is such a crock. Instead, live life, use common sense, do only what you understand, feel comfortable, and you'll be surprised at how quickly you can take control and free yourself of the shackles of HB&B.
I must say that I continue to run the paragraph above because, in the long run, it works. Every few long-term cycles, possibly once in ten or 12 years or so, the equity markets fall under the control of interventionist parties that operate with different objectives than most traders. These parties, including central banks and sovereign wealth funds, are backed by trillions of dollars, so until their objectives are met or defeated, the market will behave strangely. That makes it difficult for us because those players are using taxpayer money, which seems to be an endless source.
You have read the above for many months. Recently I added the cautionary words,
The good news is that governments need the public to participate in capital markets. Without our capital, the global financial system would collapse. So, sooner or later – and I suspect pretty soon – the Mr. Market will regain control, and the risks will (start to) normalize… I will add that this is a long-term process, which may take another three to five years to come full circle.
For the present though, Mr. Market is withdrawing from the game, and it’s not just to watch a Crouching Tiger, Hidden Dragon.
Btw, why is the world so caught up with liars and cheaters?
Value Line Report(s) this past Friday
This week, Value Line reported on one DJIA component: McDonald’s (MCD), which is a Cara 100 company based on financial strength, management, returns on equity, profit margins, and so forth.
McDonalds [GICS 30, Dow 30, Cara 100]
(MCD: Google Finance file)
(MCD: Yahoo Finance file)
(MCD: StockChart chart)
(MCD: Billcara2 chart)
(MCD: ADVFN Financial Data)
(MCD: Value Line Report Mar. 5: next one is due Jun. 4)
Before opining on a stock, I return to my previous notes. When you put the facts and your assessment and opinions in writing, the exercise puts your feet on the ground. You cannot fool yourself. In my case, I am teaching a rather large class, so it would be impossible not to be grounded in reality. As a trader of securities prices, you are dealing in fact versus fantasy every minute, every day. You must be grounded.
From WIR #23-09 June 7, 2009 (MCD $59.87):
You know I like the company although I profess not to be a big trader in the stock at this point. As we extend the range of our services as my company grows, I’m sure there will be MCD in core positions in some portfolios. When markets are stable, it’s a stock I feel good about trading because overwriting puts and calls can be an effective boost to Total Return (TR).
Re: McDonald’s (MCD), let’s see what I wrote in WIR #49-2008. It ought to be interesting because the S&P 500 closed that week at 876.07, and this week the close was 683.38, which is a loss over one-quarter or 13-weeks of -22.0%. MCD closed this week at 52.12, and was 62.72 at the close 13-weeks ago, which is a loss of -16.9%.
Value Line rates McDonalds very highly, and so do I. Management has excelled with much higher operating margins and return on equity performance. The balance sheet is solid, and the dividend is high and growing. Earnings and cash flow per share are accelerating. In tough economic times, the company offers a value proposition that customers clearly want.
On pull-backs, traders can write out-of-the-money puts for solid income. Caution is needed, however. There has been a large price move from Tuesday’s low of $55.44 to Friday’s close of $62.72. The Value Line report dated Dec 5 (priced at $55.51) seemed to nail the low.
The last trade for the March 47.50 puts was $2.15, but that price does not reflect the Friday afternoon rally in the market and the stock.
With a dividend of about $2.10 over the next 12 months on a price of 47.50 less the 2.15 premium income, the dividend yield would be 4.63%. Given that the yield on the 30-year US Treasury bond is 3.12%, and the PE at a price of 45.40 (ie, the option strike price less the premium income) and 2009 projected earnings (Value Line’s estimate) of 3.85, would be 11.8. Since the average annual PE is 17 and the lowest average annual PE multiple in the past 20 years has been 14.1, I would feel very comfortable having the stock put to me at 47.50. The last trade in the March 50 puts was 2.50, which would take your price to 47.50 if the stock was put to you. There was a spike down to a low of 45.79 in October. Prior to that you’d have to go back to April 2006 to see those prices, but the company has earned 8.91/share in the past two years, and paid out 6.56. So, as time goes on, the company is becoming financially stronger. If you were put into a situation where your cost basis in MCD was 47.50, the dividend yield in the next 12 months would be 4.42%, which is still excellent given that the forward PE would be just 12.3, still well under the lowest average annual PE for the past 20 years. So, if you can get the right price on a pull-back now that there was an end of the week rally in this stock, the decision would be an easy one to make, I feel.
When you buy stock or write puts in a challenging, volatile market like we have experienced since mid-September, you have to go in when the RSI-7 technical indicator shows that the price has come to you, as was the case in early to mid-October, and possibly a couple times since. At this point, however, the M-W-D RSI-7 indicator is 65.9-64.7-74.7, so this is no time to be chasing it even though I do expect the price to continue lifting from today’s price of 62.72.
All I can do is point to the companies that I believe have the highest quality and to the methodology I use in trading the stock price. I am a mechanic and these are my tools. The rest is up to you. Seldom does it happen that the date the Value Line report is published and I comment on it, the best time for us to be a buyer or a seller of that stock.
This is why I continuously state that I educate and inform, but don’t recommend specific trades. The ones where people know I have, I am doing that for purposes of case study and discussion.
(As of WIR#49-08 Dec. 5 2008 @ $62.72) As I say, “the M-W-D RSI-7 indicator is 65.9-64.7-74.7, so this is no time to be chasing it.” (However) By Mar. 6, the stock had fallen -16.9% to 52.12, so I was right to be cautious. Moreover, the stock on January 6 had lifted to a high of $64.46, which was +2.8% higher, so for a time the price did “continue lifting”.
The biggest point however is that while the stock cratered -16.9% over 13 weeks, I advised writing the March 47.50 puts, which that day were $2.15 – at a higher premium, on extreme stock price weakness, rather than on that day at $62.72. Those short puts are now bid $0.30, and have been as low as $0.20. In any event, if you bought at the latest close and sold back then 13-weeks ago, your profit would be +$1.85 on a cost base of $0.30. That’s a gain of 1.85-0.30=1.55/0.30=+517% over one-quarter year. You didn’t have to lose -16.9% in the stock or -22.0% in broad market index – you could have made a good profit from the trade I gave you here – for the [serious] “purposes of case study and discussion” of course.
Trading however is not easy. As anybody who was in there fighting can attest, it was one of the toughest periods in memory – and I have a long memory. But, it’s the principles of trading we can all learn, and over time use to our advantage.
Now as to the company and the stock price today, Value Line’s analyst likes it, and so do I. These are tough times, so people will continue to seek value in McDonald’s as opposed to the upscale restaurants. The operating metrics for revenues, earnings, cash flow and dividends per share are almost certain to grow. Look around the S&P 500 corporations and ask how many are going to do that. Not very many.
Sure, the PE is a tad high, but with a 4-percent (solid +$2.00) dividend on a $52 stock, and the fact that the average annual PE has not been lower than it is presently, there is not a lot of capital risk at this level. You don’t have to be a trader, you could buy the stock and write a relatively long-term call to drop your cost base well under 50, and sit on that dividend, which is probably as risk-free as Uncle Sam and pays a heck of a lot more.
Say you wrote the Jan 45 2011’s @ $7.70 along with the stock at 52. Your cost base is 44.30 and you may be assigned more stock at 45. Your dividend this year will be maybe $2.10 and next year maybe $2.50. So you are earning about 5% cash on cash and have plenty of upside (ie, capital gain potential) in the stock. The gain would likely be +25+% per year, taking your Annual Total Return to maybe +30%.
You show me your hedge funds and mutual funds that are getting those kinds of returns, and I’ll buy the Big Macs on our way to Space Mountain and Cinderella’s Castle.
As I see it, the Jumbo Diet Coke is half-full. No complaints here.
First off, I must note that I corrected a typo re dividend. The previous WIR referred to a dividend of $4, when it was obviously a yield of about $2 pay-out on a $50 stock. I’m really sorry, but I seldom re-read my stuff, for which I am in the habit of apologizing. In terms of judgment, I also opined that the dividend would be “maybe $2.10 and next year maybe $2.50”. Well, even taking the four quarters forward, I was still too high. It now looks like a dividend of $1.90-$2.00 in the four quarters going forward and $2.35 the year after that. That’s still assured by the financial strength of this company and the fact that, when pressed by bad economic circumstances, people will turn to fast food. They didn’t in 2001-2002, but that, I believe, was that 9-11 put people into such a dour and fearful mood they didn’t want to venture outside and into crowds. Even with the heightened risks today though, it appears no longer to be a factor.
The big point is that the price at the last WIR was $52.12 for MCD, during a major sell-off in equity markets, and it closed this week at $59.87, so any of the bullish positions I advocated worked out quite profitably.
Return to those Cara charts for the Monthly-Weekly-Daily and you will see that there was also only a small risk in buying MCD on the pull-backs, particularly when my ‘simple little trading system’ gave an Accumulation Zone Buy Alert.
Heck, just writing puts whenever the Daily RSI-7 dropped below 30 and then recovered would have significantly reduced your cost base, and increased your cash on cash return from dividends, which is what portfolio management is truly all about.
The stock is at 59.87, after opening Friday at 60.40. It made a solid run from 51 to 61 in the past week, so it’s very pricey right now in terms of a new entry point. I’d stand aside – maybe a week, maybe a month, and watch. I never chase a stock in any case.
A couple days ago, the Daily RSI-7 for MCD jumped above the 70 level, while the Weekly was almost up to 70; then the Daily retreated. Potentially that gives some time to write calls or sell – if you didn’t do it a couple days ago. If you are not invested, volatility in markets is so enormous; all you can do is watch the technical indicators and buy the dips, perhaps writing puts and buying calls if those pull-backs are extreme.
From WIR #36-09 Sept 6, 2009 (MCD $56.14):
Here we are at Sept 6, and my last paragraph shows how accurate I was in my MCD outlook once again. The current price is $56.14. The price at the last WIR (June 1: $59.87) was the absolute high since then. I had recommended traders write calls (to reduce the cost base if they were committed to holding onto the stock) or sell. And I said, “Don’t buy”.
The low since then occurred in the week of Aug 17 at $54.43, and even this week the low was $54.69, so we are around the low for the quarter.
The RSI-7 for the Monthly-Weekly-Daily is presently 48.8 (sidetracking), 48.8 (sidetracking) and 53.3 (rising). Essentially the stock is motionless and will likely move with the broad market, but slower to lift and slower to fall, if that’s the case.
I commented earlier that the dividend going forward (from one quarter ago) would be 1.90-2.00 then moving to 2.30. As it turns out that 2.00 and 2.30 would have been a solid estimate. Going forward four quarters, the dividend will almost certainly be $2.45. On a price of $56.14, the dividend of $2.45 would be a yield of 4.36%, which is excellent for a company of this caliber.
If you can buy the stock at say 54, with the help of some put write premium, or a pull-back in prices, your yield would be 4.54%. In comparison, the 30-year US Treasury bond is currently priced to yield just 4.273%, and the 10-year Treasury is yielding just 3.442%. With due respect, I think the McDonald’s balance sheet and operating budgets are in far better shape that those of the United States government.
About McDonald’s financial strength, of which I have consistently remarked is outstanding, look at the balance sheet summary in the left side column mid page of the Value Line report. McDonald’s in just 18 months has dropped its current liabilities by $1.66 billion while actually raising its current assets a tad. It slipped back a bit this year, but wow, that 18 month performance is excellent.
Yes, revenues per share are expected to drop a tad this year, but cash flow and earnings per share are expected to rise.
Look at the operating margin over 32%; the net profit margin up to 19.0% and rising; the Return on Shareholder Equity of 31.0%, and the company is dividending out just 53% of net profits, so the dividend is solid. This company is a machine. Kaching, kaching, kaching.
With earnings projected by Value line for the 4 quarters going forward of $4.05/share, the current price of $56.14 represents a PE multiple of 13.86. Now go to the VL report and see the Average Annual PE is 17.0, and when you thumb along the live for PE each year, you’ll see how good that 13.86 looks. At a possible cost basis of $54, the PE would be just 13.33. What’s not to like.
So, on downspike days, why not consider writing some puts at lower strike prices? These are like stink bids. Infrequently you will get filled. When you do, your cost basis will be even lower by the sum of all those put write premiums you earned. Just be sure you have the cash in reserve to meet an option exercise fill because sometimes it can get ugly, like Black Monday 1987, when there was no hope of selling out even an MCD in that crashing market.
You know, I wrote about this in my book Lessons (I think); if you are young and in a self-employed business that can’t meet these metrics, maybe you are not cut out for business. Why not try to get employment with a solid company and put your excess funds into the shares of companies like McDonald’s. Spend your excess time learning how to trade prices. At least consider it.
There is not much more I can say.
WIR #49-2009 Dec 5 (MCD $):
The charts show me the following Monthly-Weekly-Daily RSI-7 numbers: 61.1 59.1 30.5 for Dec 4 and 48.8 48.8 53.3 on Sept 4. The Daily RSI-7 in early Sept was falling and dipped to 30, which was the time to but some MCD and then the RSI-7 lifted to 90 in mid-Nov, which was the time to sell some. Presently the Daily RSI-7 is down to 30.5 and falling, but is it time to buy more yet? Judging from the Weekly RSI-7, which is at 59.1, I’d say no, that number needs to fall into the 30’s and the Daily below 30 before I would be ready to add positions.
In early November, MCD had an extreme pop from 59 to a cycle high of 64.75 on Nov 16. Yes, the financial metrics are looking sound, but that was too much of an up-move in a short period. Since that recent high, MCD has dropped -$3.16 (-4.9%) in just 13 sessions. Even if you deduct the dividend payout of $0.55 during this time, the decline of -$2.61 is still a loss of 20 cents a day, which is a lot for MCD.
I think the big money is moving out. I’d wait for the RSI-7 and the price ($61.59) to come to you. The dividend over the next four quarters is projected to be $2.25/share. If you can buy the stock below 58, your dividend return would be over +3.9%. That’s about the same as on a 20-year Treasury from Uncle Sam and I think Ronald McDonald is just as secure, and has far more upside. If you question the upside, just look at the line items for revenues, earnings, cash flow, and dividends per share every year for many years. Almost straight up. Unlike Uncle Sam, always borrowing, going further in debt, Ronald McDonald is always building assets, building wealth. People all over the world love it; in fact, +65% of systemwide sales and +53% of profit is non-U.S. Unlike the liar banksters, this company doesn’t pretend to be American. There is nothing phony or questionable about this company. Everybody understands exactly what it is, and they know that in the foreseeable future, it will grow its business.
The corporate picture is improving too. The Value Line analyst even raised his earning’s estimate from $4.20 to $4.45 for 2010. The financial picture is being aided by a weak economy where the average person is trying to save money at these inexpensive, fast-food restaurants, and by a global economy that may have bottomed in its cycle, making the restaurant affordable to even more people. Revenues, profit margins and return on equity percentage are all expected to rise for the next couple years, and the number of shares outstanding decrease as the company continues to buy back shares, which are all factors in favor of higher prices.
All in all, I am not a buyer at this point in the broad market cycle that needs to consolidate its recent gains, which usually happens by testing the support levels. An ebb tide will lower all boats except those that are rocket science maybe, and McDonalds is not that. But McDonald’s is a solid long-term performer that would look good at say 58. On weakness to close to that level, I would think some put writes would get you a favorable price, possibly below 58. But do not ignore the Weekly RSI-7 as well as the Daily. You want the price to come to you.
For WIR #10-10 Mar 7, 20109 (MCD $63.67):
Always before I study a company, I take a quick look at the Monthly-Weekly- and Daily charts:
http://billcara2.com/tkchart/tkchart.asp?stkname=MCD&ind=rsi&wt=3
http://billcara2.com/tkchart/tkchart.asp?stkname=MCD&ind=rsi&wt=1
http://billcara2.com/tkchart/tkchart.asp?stkname=MCD&ind=rsi&wt=0
The present Monthly-Weekly-Daily RSI-7 numbers: 67.0 57.9 42.2, which are down a few days ago after breaking the important 70 level to give a triple Sell Alert. Previously these numbers were: 61.1 59.1 30.5 for Dec 4 (stock at $61.59) and 48.8 48.8 53.3 on Sept 4 (stock at 56.14). It appears the stock has peaked at almost $66.
The low for the past Quarter was $60.04 and the high (this week) $65.75. The price had been rising, and the Value Line data and analyst’s report clearly show continued strengthening in the financial and operating data. But VL also opines that the “recent quotation (now at $63.67) leaves it with slightly below-average appreciation potential for the pull to 2012-2014”. I cannot disagree although waiting for this stock to dip is like waiting for the line of customers at the cash registers to stop, so maybe we ought to temper our expectations of buying in at 58.
The dividend over the next four quarters is now projected to be $2.35/share. If you can buy the stock below 60, your dividend return would be over +3.92%, which is excellent. And the following year’s dividend is likely to be say $2.60 for a total dividend income over the next eight quarters of say $4.95. If 2012 earnings were to be say $5.25, the price could hit say $84 with a reasonable PE of 16.0. So with a two-year dividend income of about $4.95 plus a projected share price of $84, you can look forward to about a +50% Total Return on a purchase of say $60, which would be in the 22-23% annualized TR range.
For a conservative investor, that would be outstanding. The lower the price dips on a pull-back, the higher your potential returns on a purchase, especially if you also write puts with an even lower strike price since you would earn additional income from the options premium. If you were able to do this a few times during the next eight quarters, your portfolio would be the envy of most.
Final word; let the price settle back to you, and then Buy for a two-year hold.
The Dow 30 Company links in chronological order of the upcoming reports.
Chevron Corp [GICS 10, Dow 30]
(CVX: Google Finance file)
(CVX: Yahoo Finance file)
(CVX: StockChart chart)
(CVX: Billcara2 chart)
(CVX: ADVFN Financial Data)
(CVX: Value Line Report Dec. 11: next one is due Mar. 12)
ExxonMobil [GICS 10, Dow 30, Cara 100]
(XOM: Google Finance file)
(XOM: Yahoo Finance file)
(XOM: StockChart chart)
(XOM: Billcara2 chart)
(XOM: ADVFN Financial Data)
(XOM: Value Line Report Dec. 11: next one is due Mar. 12)
Boeing Co [GICS 20, Dow 30. Cara 100]
(BA: Google Finance file)
(BA: Yahoo Finance file)
(BA: StockChart chart)
(BA: Billcara2 chart)
(BA: ADVFN Financial Data)
(BA: Value Line Report Dec. 18: next one is due Mar. 19)
AT&T [GICS 50, Dow 30]
(T: Google Finance file)
(T: Yahoo Finance file)
(T: StockChart chart)
(T: Billcara2 chart)
(T: ADVFN Financial Data)
(T: Value Line Report Dec. 24: next one is due Mar. 26)
Verizon [GICS 50, Dow 30]
(VZ: Google Finance file)
(VZ: Yahoo Finance file)
(VZ: StockChart chart)
(VZ: Billcara2 chart)
(VZ: ADVFN Financial Data)
(VZ: Value Line Report Dec. 24: next one is due Mar. 26)
Procter & Gamble Co. [GICS 30, Dow 30, Cara 100]
(PG: Google Finance file)
(PG: Yahoo Finance file)
(PG: StockChart chart)
(PG: Billcara2 chart)
(PG: ADVFN Financial Data)
(PG: Value Line Report Dec. 31: next one is due Apr. 2)
Home Depot [GICS 25, Dow 30]
(HD: Google Finance file)
(HD: Yahoo Finance file)
(HD: StockChart chart)
(HD: Billcara2 chart)
(HD: ADVFN Financial Data)
(HD: Value Line Report Dec. 31: next one is due Apr. 2)
Hewlett-Packard [GICS 45, Dow 30]
(HPQ: Google Finance file)
(HPQ: Yahoo Finance file)
(HPQ: StockChart chart)
(HPQ: Billcara2 chart)
(HPQ: ADVFN Financial Data)
(HPQ: Value Line Report Jan. 8: next one is due Apr. 9)
IBM [GICS 45, Dow 30, Cara 100]
(IBM: Google Finance file)
(IBM: Yahoo Finance file)
(IBM: StockChart chart)
(IBM: Billcara2 chart)
(IBM: ADVFN Financial Data)
(IBM: Value Line Report Jan. 8: next one is due Apr. 9)
Intel [GICS 45, Dow 30, Cara 100]
(INTC: Google Finance file)
(INTC: Yahoo Finance file)
(INTC: StockChart chart)
(INTC: Billcara2 chart)
(INTC: ADVFN Financial Data)
(INTC: Value Line Report Jan. 8: next one is due Apr. 9)
Alcoa [GICS 15, Dow 30]
(AA: Google Finance file)
(AA: Yahoo Finance file)
(AA: StockChart chart)
(AA: Billcara2 chart)
(AA: ADVFN Financial Data)
(AA: Value Line Report Jan. 15: next one is due Apr. 16)
Dupont [GICS 15, Dow 30]
(DD: Google Finance file)
(DD: Yahoo Finance file)
(DD: StockChart chart)
(DD: Billcara2 chart)
(DD: ADVFN Financial Data)
(DD: Value Line Report Jan. 15: next one is due Apr. 16)
Merck [GICS 35, Dow 30]
(MRK: Google Finance file)
(MRK: Yahoo Finance file)
(MRK: StockChart chart)
(MRK: Billcara2 chart)
(MRK: ADVFN Financial Data)
(MRK: Value Line Report Jan. 15: next one is due Apr. 16)
Pfizer [GICS 35, Dow 30]
(PFE: Google Finance file)
(PFE: Yahoo Finance file)
(PFE: StockChart chart)
(PFE: Billcara2 chart)
(PFE: ADVFN Financial Data)
(PFE: Value Line Report Jan. 15: next one is due Apr. 16)
General Electric [GICS 20, Dow 30, ex-Cara 100]
(GE: Google Finance file)
(GE: Yahoo Finance file)
(GE: StockChart chart)
(GE: Billcara2 chart)
(GE: ADVFN Financial Data)
(GE: Value Line Report Jan. 22: next one is due Apr. 23)
United Technologies [GICS 20, Dow 30, Cara 100]
(UTX: Google Finance file)
(UTX: Yahoo Finance file)
(UTX: StockChart chart)
(UTX: Billcara2 chart)
(UTX: ADVFN Financial Data)
(UTX: Value Line Report Jan. 22: next one is due Apr. 23)
Caterpillar [GICS 20, Dow 30]
(CAT: Google Finance file)
(CAT: Yahoo Finance file)
(CAT: StockChart chart)
(CAT: Billcara2 chart)
(CAT: ADVFN Financial Data)
(CAT: Value Line Report Jan. 22: next one is due Apr. 23)
Coca Cola [GICS 30, Dow 30, Cara 100]
(KO: Google Finance file)
(KO: Yahoo Finance file)
(KO: StockChart chart)
(KO: Billcara2 chart)
(KO: ADVFN Financial Data)
(KO: Value Line Report Jan 29: next one is due Apr 30)
Kraft Foods [GICS 30, Dow 30]
(KFT: Google Finance file)
(KFT: Yahoo Finance file)
(KFT: StockChart chart)
(KFT: Billcara2 chart)
(KFT: ADVFN Financial Data)
(KFT: Value Line Report Jan 29: next one is due Apr 30)
Wal-Mart [GICS 30, Dow 30, Cara 100]
(WMT: Google Finance file)
(WMT: Yahoo Finance file)
(WMT: StockChart chart)
(WMT: Billcara2 chart)
(WMT: ADVFN Financial Data)
(WMT: Value Line Report Feb 5: next one is due May 7)
Disney [GICS 25, Dow 30, Cara 100]
(DIS: Google Finance file)
(DIS: Yahoo Finance file)
(DIS: StockChart chart)
(DIS: Billcara2 chart)
(DIS: ADVFN Financial Data)
(DIS: Value Line Report Feb. 12: next one is due May 14)
3M Company [GICS 20, Dow 30, Cara US 100 June 25-06]
(MMM: Google Finance file)
(MMM: Yahoo Finance file)
(MMM: StockChart chart)
(MMM: Billcara2 chart)
(MMM: ADVFN Financial Data)
(MMM: Value Line Report Feb. 12: next one is due May 14)
American Express [GICS 40, Dow 30, Cara 100]
(AXP: Google Finance file)
(AXP: Yahoo Finance file)
(AXP: StockChart chart)
(AXP: Billcara2 chart)
(AXP: ADVFN Financial Data)
(AXP: Value Line Report Feb. 19: next one is due May 21)
Bank of America [GICS 40, Dow 30]
(BAC: Google Finance file)
(BAC: Yahoo Finance file)
(BAC: StockChart chart)
(BAC: Billcara2 chart)
(BAC: ADVFN Financial Data)
(BAC: Value Line Report Feb. 19: next one is due May 21)
JP Morgan [GICS 40, Dow 30]
(JPM: Google Finance file)
(JPM: Yahoo Finance file)
(JPM: StockChart chart)
(JPM: Billcara2 chart)
(JPM: ADVFN Financial Data)
(JPM: Value Line Report Feb. 19: next one is due May 21)
Microsoft [GICS 45, Dow 30]
(MSFT: Google Finance file)
(MSFT: Yahoo Finance file)
(MSFT: StockChart chart)
(MSFT: Billcara2 chart)
(MSFT: ADVFN Financial Data)
(MSFT: Value Line Report Feb. 19: next one is due May 21)
Johnson & Johnson [GICS 35, Dow 30, Cara 100]
(JNJ: Google Finance file)
(JNJ: Yahoo Finance file)
(JNJ: StockChart chart)
(JNJ: Billcara2 chart)
(JNJ: ADVFN Financial Data)
(JNJ: Value Line Report Feb 26: next one is due May 28)
McDonalds [GICS 30, Dow 30, Cara 100]
(MCD: Google Finance file)
(MCD: Yahoo Finance file)
(MCD: StockChart chart)
(MCD: Billcara2 chart)
(MCD: ADVFN Financial Data)
(MCD: Value Line Report Mar. 5: next one is due Jun. 4)
Sector ETF Summary for the US equity market
The tables I show are for eleven GICS Sector Index Funds (ETF’s), including two for Technology (XLK and SMH), for a total of ten GICS sectors. They cover the full spectrum of the US equity market.
This week, everything was up. On Friday, they were also all up.
Table 1: Cara ETF List is sorted by price performance Week over Week (W/W), i.e. 1W%N.
| Symbol | Close | 1Day Change |
1Day %Change |
1W %Change |
2W %Change |
4W %Change |
YTD %Change |
3M %Change |
6M %Change |
12M %Change |
You can do this table yourself by entering the following string into the Summary window at Billcara2.com and then clicking on the link for Performance.
SPY XLE XLB XLI XLY XLP IYH XLF XLK SMH IYZ XLU .
You can also add more ETFs - up to 30 in total. For a list of components to many ETFs, go to the AMEX.com and NYSE.com web sites, and click on ETFs.
You can use this tool to set up watchlist charts by industry group and sub-groups.
Here’s the SPY Monthly, Weekly and Daily data charts:
SPY Monthly data: 
SPY Weekly data: 
SPY Daily data: 
10 (energy: XLE) 
15 (basic materials: XLB) 
20 (industrial: XLI) 
25 (consumer discretionary: XLY) 
30 (consumer staples: XLP) 
35 (healthcare: IYH) 
40 (financial: XLF) 
45 (technology, semiconductor: SMH) 
50 (telecom: IYZ) 
55 (utilities: XLU) 
Individual Sector ETF Review
I repeat: many of these tables need to be changed. With the old blog set up I could easily do that myself. But with the latest system, more things are automated, which requires a programmer to go in and do that.
I also have been busy on real work. Sorry.
Two weeks ago, all ten sectors lifted in price. Then a week ago, only two did: Financials (XLF) and Consumer Discretionary (XLY). The Basic Materials (XLB) and Energy (XLE) were the two worst, and I said, “that’s due to the profit taking after commodity prices started to come off”.
You knew I was expecting higher prices this week, and we got them. But I also stated a week ago in this space, “Hot money goes in and out of the commodities, but the stocks seem to give you a better sense of direction.” So, my words of wisdom today will be that should the $USD fall next week, and commodity prices continue to lift, you can expect equity prices to continue to move higher, squeezing the shorts. But the pro traders will be recognizing the escalating RSI-7’s and starting to sell into that market strength, leading to a necessary pull-back. How much that sell-off drives prices back down will depend on how much pressure the Fed wants to relieve. Credit is back on the rise and the Fed probably doesn’t like that, and I don’t think they appreciate the Crude Oil prices above 80 or the Gold at all-time record highs. So the next elevator going down might just be a few extra floors.
We’ll see.
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 |
A week ago, the sector ETF (XLE –2.13%) sold off when the price of Crude Oil sold down a bit under 80. This week, with the Crude Oil price lifting +$1.84/bbl (+2.31%) to 81.50, the XLE was up +3.58% to 58.15.
A week ago, Suncor (SU -5.8%) had a bearish week; but this week SU jumped +6.8%. Cdn Natural Resources (CNQ) was up +6.5%.
If you recall, I added Encana (ECA) to the Cara 100, and removed Imperial Oil (IMO). Encana is a pure natural gas player, second biggest in North America (and first once XOM takes over XTO). We need a gas play. XOM owns 70% of IMO, so while IMO is an outstanding company, in my view, ECA is the better fit, and we don’t trade IMO. ECA used to be in the Cara 100 when it was a gas and oil company, but in December the company was split into two separate entities. I think Encana will grow its revenues and earnings by +10% to +12% for the next several years.
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 Basic Materials (XLB) sector ETF went from #1 performer two weeks ago to #10 a week ago, and back to #1 this week. That is not a surprise given that the metal and oil prices are quite volatile here.
XLB gained +5.30% W/W to close at 33.17. While there was some profit-taking a week ago, the gain the week before was +4.06%. Strange that through this period, the $USD has been rather flat.
A week ago, I wrote, “Next week, I feel the Euro will gain some more and XLB will be stronger.” Well XLB soared but the $USD happen to have a small gain (+0.11%).
Anywazy my advice of a week ago is still on the mark I think: “At this point, traders ought to be looking to sell the rallies I think as the $USD is still in an intermediate term Bull phase.”
The stock of Fibria Celulose (FBR), a gorilla Brazilian manufacturer of pulp and paper, soared +12.9% W/W. The ArcelorMittal steel giant (MT) jumped +10.7%, and the monster base metals miner from Brazil, Vale (VALE)) was up +10.1%. Canada Teck Corp (TCK +10.0%), plus Rio Tinto (RTP +8.9%) and BHP (BHP +8.0%) were also flying.
These are mega cap stocks, probably averaging $100 billion, which leads one to believe that prices like this, moving so much in a week, are not sustainable. There was little of consequence the analysts knew this week that wasn’t priced into the stocks a week ago. This is hot money, I think.
Sector 20 (industrial: IYJ, XLI, VIS, and IYT)
Here’s the XLI Monthly, Weekly and Daily data charts:
XLI Monthly data: 
XLI Weekly data: 
XLI Daily data:
Table 4: Senior capital goods makers and transportation:
| Symbol | Close | 1Day Change |
1Day %Change |
1W %Change |
2W %Change |
4W %Change |
YTD %Change |
3M %Change |
6M %Change |
12M %Change |
The Industrials ETF (XLI) gained +3.68% W/W to close at 29.90.
The economy is supposed to be in growth mode and maybe that’s the hand lifting the shippers. Two week ago in this space I stated that “Fedex (FDX) and UPS (UPS) are companies that move US manufactured goods, so your research on the state of the economy should start there.”
A week ago, FDX gained +3.7%, with Friday’s gain being +1.9%. This week FDX was up +2.6% and UPS gained +1.3%. But, I’m not yet convinced.
To check on general and detailed info for this industry group, the Thomson Reuters service is a good one:
http://www.reuters.com/sectors/industries/significant?industryCode=52442
Here is the link to all sectors and industries as classified by Reuters:
http://www.reuters.com/assets/siteindex#sectorsAndIndustries
Sector 25 (consumer discretionary: XLY, IYC and VCR)
Here’s the XLY Monthly, Weekly and Daily data charts:
XLY Monthly data: 
XLY Weekly data: 
XLY Daily data:
Table 5: Senior consumer discretionary equities
| Symbol | Close | 1Day Change |
1Day %Change |
1W %Change |
2W %Change |
4W %Change |
YTD %Change |
3M %Change |
6M %Change |
12M %Change |
Consumer Discretionary (XLY) gained +4.16% W/W to close Friday at 31.79, putting it into 2nd best performer of the 10 sectors again this week.
Surprisingly, the consumer discretionary spending sector is the best of the ten sectors in price performance this past month, YTD, and over the past 3- and 6-month periods. As I noted here a week ago, “Often there is a correlation with the Financials, and that happened this week as well as XLF was the only other sector to gain W/W”. This week the Financials (XLF) was 3rd best sector performer. Bingo.
The leader on my sector monitor was Tata Motors (TTM +14.7%). TTM was up +5.3% a week ago too. There was a strong corporate report a week ago Friday, and I gave you the heads up in last week’s WIR, saying “(the report and results) more or less explains why I selected this company for the Cara 100 some time ago. I recognized they have managerial talent. http://www.webnewswire.com/node/509524
I feel really good about my selection of Tata Motors for the Cara 100 back on July 19, 2008.
Cara 100 Jul 19, 2008 update
Today I removed Gold Fields (GFI) and added Tata Motors (TTM), an interesting auto manufacturer from India.
What I’m doing is some long-term planning, switching the troublesome infrastructure/divestment issues of the Republic of South Africa for the rapid growth and entrepreneurial brilliance of India. I am no longer interested in South Africa as a place to invest.
As you know, the Cara 100 is a list of companies that I monitor for possible trading purposes. I like the quality, ie, financial strength, superior operating metrics, sound management, macro-economic factors and the like, for these companies. Eventually, that lessens my risk and improves my upside.
Tata has been raising eyebrows among international investors recently with (i) the Landrover-Jaguar deal, (ii) then the world's cheapest car, and (iii) its latest plan to introduce a car that runs on compressed air. As Tata powers forward, the Big Three of Detroit are going in reverse.
Sure, the TTM got hammered in Sept and October that year, but that was the Lehman Bros market crash. Since then the stock more than quadrupled. The consensus rating by analysts is a powerful 1.0 (best). Zacks has a ‘2’ (Buy) rating.Over 12-months, Tata Motors (TTM) is now up +449%.
Sector 30 (consumer staples: XLP, VDC, RTH and IYK)
Here's the XLP Monthly, Weekly and Daily data charts:
XLP Monthly data: 
XLP Weekly data: 
XLP Daily data:
Table 6: Senior consumer staples equities
| Symbol | Close | 1Day Change |
1Day %Change |
1W %Change |
2W %Change |
4W %Change |
YTD %Change |
3M %Change |
6M %Change |
12M %Change |
Consumer Staples (XLP) gained +2.07% W/W to close at 27.59, which was the worst performing sector on the week. Clearly traders this week wanted to take risk, probably talked into it by a mainstream media that has foot-in-mouth disease, blindly following the script by the big money players who I think want to off their stock.
After several ‘hot’ weeks by Whole foods (WFMI), the stock this week was up just +1.8%, leading me to ask if it’s finished the Bull run.
Following on the acquisition a week ago of important Coca Cola Enterprises assets, the Coca Cola (KO) stock was still climbing this week, up +3.7%.
Sector 35 (healthcare: IYH, XLV, VHT, IXJ, and IBB)
Here’s the IYH Monthly, Weekly and Daily data charts:
IYH Monthly data: 
IYH Weekly data: 
IYH Daily data:
Table 7: Senior healthcare equities
| Symbol | Close | 1Day Change |
1Day %Change |
1W %Change |
2W %Change |
4W %Change |
YTD %Change |
3M %Change |
6M %Change |
12M %Change |
The healthcare sector (IYH) gained +2.20% W/W to close at 65.86.
The Medtronic stock (MDT) has had a good run in the past year and it was up this week by +4.8%. The Aetna (AET) was up +4.6% this week as well as +3.7% a week ago.
Healthcare Bill 2.0 is seen as a win for the insurers.
http://www.benzinga.com/general/146475/health-care-bill-version-2-0-is-w...
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 |
Financials (XLF) went from best performer of the ten sectors a week ago to #3 this week with a gain of +3.68% to close at 15.22.
Goldman Sachs (GS +6.9%) was strong, but the real hot banks were all non-American: UBS (UBS +10.3%), Deutsche Bank (DB +9.3%), Credit Suisse (CS +8.0%) and ICICI Bank (IBN +7.4%).
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)
Tech (XLK +2.86% to 22.31) and Semi-conductors (SMH +2.46% to 27.03) were stronger this week, but still laggards.
Among the Techs, the gold medal winner, with no competition to be seen in the figure skating, was SunTech Power (STP +12.1%). Google (GOOG +7.1%) and Apple (AAPL +7.0%) took silver and bronze medals.
You didn’t roll up a win with RIM (RIMM –2.0%).
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)
Telecom (IYZ) rang up a win of +2.99% W/W to close at 19.27.
Verizon (VZ +1.0% W/W) and AT&T (T +0.7% W/W) were laggards. A week ago, I said that “Higher interest rates would hurt” “to under-weight these two during an inflationary, rising interest rate phase of markets, and to over-weight them during disinflationary, falling interest rate periods”.
As stated in this space a week ago, “That statement is important because it’s all part of the picture of how interest rates impact on equity prices as well as bonds. Disinflation favors telcos, financials and bonds, and inflation favors energy, basic materials, commodity producers. To complete the thought; we’re headed for inflation. Central banks can only print so much money and push interest rates so low for so long, and warfare destroy so much economic production and wealth, before inflation returns. Be wary of the words that government and central bankers say when addressing this topic. They have an ax to grind, and they lie.”
This week, rates were up on average about +6 or +7 basis points, taking bond prices south, and commodity prices were higher with Basic Materials (XLB +5.30%) up the most. So, even though there was a win in the sector, everything is relative and lagging telcos ought to have been expected.
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)
Here’s the XLU Monthly, Weekly and Daily data charts:
XLU Monthly data: 
XLU Weekly data: 
XLU Daily data:
The Utilities sector ETF (XLU) gained +2.81% W/W to close at 29.96. It was 29.76 two weeks ago. Not much happening here.
http://billcara2.com/markets/mkview.asp?qte=ss&ty=tk&qt=AEP+D+DUK+ED+EXC...
As I stated in this space a week ago, “The storyline here is that just like there is good debt and bad debt, there are good utilities and bad utilities to invest in at various times in the inflation-disinflation cycle… In the previous section, I stated, “Disinflation favors telcos, financials and bonds, and inflation favors energy, basic materials, commodity producers.” With regard to utilities, the market is split between those that are heavily regulated and those that are not so heavily regulated. The most heavily regulated are favored by disinflation; the least heavily regulated are favored by inflation.”
This week, TransCanada Pipelines (TRP +5.1%) and Exelon (EXC +5.1%) were lifting, which as part of the least regulated group is not so surprising. Then again maybe there’s a snowstorm on the way.
Can’t complain about Toronto weather though. Today was about +10 Celsius. Of course I was the only one I passed on the street dressed in a parka and with winter gloves on. Seriously. First trip back in a year, and I am not used to frost.
The sun is my utility in Nassau.
Here is the list of North American Utilities that I follow:
AEP D DUK ED EXC FE FPL NGG PCG PEG SO TRP
For study purposes, there is a good mix of electric (AEP, D, DUK, FE, FPL and SO), gas (NGG, TRP) and diversified (ED, EXC, PCG, PEG) utilities.
Table 12: US Utilities
| Symbol | Close | 1Day Change |
1Day %Change |
1W %Change |
2W %Change |
4W %Change |
YTD %Change |
3M %Change |
6M %Change |
12M %Change |
Bonds & Yields Review
Table 10: US Treasury Yields
| Maturity | Yield | Yesterday | Last Week | Last Month |
|---|---|---|---|---|
| 3 Month | 0.12 | 0.12 | 0.10 | 0.07 |
| 6 Month | 0.18 | 0.18 | 0.17 | 0.15 |
| 2 Year | 0.89 | 0.85 | 0.81 | 0.87 |
| 3 Year | 1.40 | 1.35 | 1.33 | 1.40 |
| 5 Year | 2.34 | 2.27 | 2.30 | 2.40 |
| 10 Year | 3.68 | 3.60 | 3.62 | 3.71 |
| 30 Year | 4.64 | 4.56 | 4.55 | 4.64 |
| Maturity | Yield | Yesterday | Last Week | Last Month |
|---|---|---|---|---|
| 2yr AA | 0.95 | 0.87 | 1.03 | 0.85 |
| 2yr AAA | 0.95 | 0.51 | 0.52 | 0.53 |
| 2yr A | 1.05 | 1.04 | 1.16 | 0.97 |
| 5yr AAA | 1.59 | 1.55 | 1.54 | 1.62 |
| 5yr AA | 1.78 | 1.71 | 1.66 | 1.74 |
| 5yr A | 1.90 | 1.83 | 1.83 | 2.21 |
| 10yr AAA | 3.24 | 2.76 | 3.29 | 2.92 |
| 10yr AA | 2.94 | 2.94 | 3.03 | 3.01 |
| 10yr A | 3.81 | 3.48 | 3.46 | 2.99 |
| 20yr AAA | 3.51 | 4.15 | 3.99 | 3.91 |
| 20yr AA | 3.76 | 4.39 | 4.24 | 4.12 |
| 20yr A | 4.74 | 5.37 | 5.13 | 5.53 |
| Maturity | Yield | Yesterday | Last Week | Last Month |
|---|---|---|---|---|
| 2yr AA | 1.30 | 1.30 | 1.29 | 1.39 |
| 2yr A | 1.63 | 1.63 | 1.53 | 1.59 |
| 5yr AAA | 2.78 | 2.81 | 2.80 | 2.89 |
| 5yr AA | 3.10 | 3.06 | 3.15 | 3.23 |
| 5yr A | 3.27 | 3.31 | 3.29 | 3.39 |
| 10yr AAA | 3.75 | 3.74 | 3.58 | 3.64 |
| 10yr AA | 4.99 | 4.97 | 5.08 | 4.92 |
| 10yr A | 4.90 | 4.88 | 4.73 | 4.79 |
| 20yr AAA | 5.18 | 5.14 | 5.23 | 5.46 |
| 20yr AA | 5.49 | 5.42 | 5.42 | 5.52 |
| 20yr A | 6.12 | 6.08 | 6.17 | 6.40 |
This week, the US Treasury bonds pulled back a bit. Yields lifted between +4 to +9 basis points (bp) on the 2- to 30-year Treasuries. The 20-year US bond (TLT) lost –1.53% W/W to close at 90.27, although most of that was due to Friday’s loss of –1.31%.
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.
Why change the following?
This chart is stunning to long-term observers of the debt markets. Obviously, the banks are being favored. What happens when the banks are forced to borrow at much higher true rates? What happens to the private sector owners of this debt?
Two weeks ago, the Fed finally (having been unchanged for well over a year) changed policy by charging the banks more to borrow from the Fed, raising the rate from 0.50% to 0.75%. This is only the start. Without higher yields, I have been saying, repeatedly, “This situation will end badly, although that scenario might take a year or two to fully play out. Unless the economy collapses into a severe double dip recession or a depression, the long-term risk is to be holding bonds as ultimately rates will have to lift to stabilize debt and equity markets.”
I noted that a week ago the impressive market technician Louise Yamada (http://www.lyadvisors.com/) spoke to Bloomberg’s outstanding anchor Pimm Fox, with a very negative view on bonds.
I have also opined that, “…if the rates do move slowly higher in the near term, there will be pressure down on equity prices, which may hurt temporarily, but the longer-term picture could look better unless rates rally to a high enough level that forces more foreclosures before the economy has been proven to be on the rebound.”
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 |
Fannie (FNM) and Freddie (FRE) were up +2.0% and +3.4% W/W, but this amounted to a couple pennies only.
Congress should put the boots to these two, and allow the private sector to maintain the US mortgage market. There are bigger problems to deal with in financial services and healthcare reform.
http://billcara2.com/tkchart/tkchart.asp?stkname=FNM,FRE&ind=rsi&wt=0
Consumer Finance -USA -- Interactive Weekly Data Charts
Mortgage Finance -USA -- Interactive Daily Data Charts
Commodities Review
Thanks to a gain of +0.78% on Friday, $CRB managed to eke out a gain of +0.79% W/W to close at 276.93.
The 50d MA for $CRB has stayed flat for about six weeks, now at 276.53, and is consistent with the present price, so the Fed must be happy.
The 200-day MA has moved to 264.99, up from 264.21, 263.37, 262.55, 261.58, and 260.38 the five weeks earlier. Six weeks ago, I opined in this space, “But, while it will still rise, there will be resistance at about 267. I do not expect to see the 200d MA above 270 in 2010.”
As I have opined, “rising MA’s for the $CRB is basically the only time that the monetary authorities get concerned. At some point, maybe not for a while yet, but at some point, the trend in the $CRB will have to start falling or else the Fed will have to start lifting rates”.
The 300-day MA for $CRB is now up to 250.75, after bottoming at about 244 in mid-Dec. Unless the economy is growing in a healthy state, I doubt the Fed would like to see these long-term MA’s for the $CRB rise above say 270. They have the tools to restrain the rise, including imposing higher margin requirements at the commodity exchanges.
Let’s just say that with their abnormally low interest rate policy, the Fed is between a commodity and a hard place, and you and I are the ones who will pay for it. Thankfully, the commodity prices will now start falling – but that will take a stronger $USD, which will not be good for long-only positions in the equity market. I do think gold and silver will de-couple from the usual link to commodities as precious metals are being hoarded and production is not increasing fast enough to meet real (physical) demand.
Although I use the $CRB (Reuters/Jeffries Index), principally because it’s the oldest, there are many commodity indexes: http://www.crbtrader.com/crbindex/ • Astmax Commodity Index(AMCI) • Commin Commodity Index • Dow Jones-AIG Commodity Index • Goldman Sachs Commodity Index • Reuters/Jefferies CRB Index • Rogers International Commodity Index • Standard & Poor's Commodity Index • NCDEX Commodity Index • Deutsche Bank Liquid Commodity Index (DBLCI) • UBS Bloomberg Constant Maturity Commodity Index (CMCI)
Here is a link to an article that discusses the major ones that have been around for a while: http://www.rogersrawmaterials.com/overviewandanalysis.PDF
Here is a current price summary of the heaviest weighted commodities contracts: http://money.cnn.com/data/commodities/
These indexes change their component weightings perhaps annually or even monthly, for example: http://www.seekingalpha.com/article/43586-the-new-generation-of-diversif... http://tinyurl.com/a5myfj
Interactive Chart of Weekly CRB Commodities Index:
Interactive Chart of Daily CRB Commodities Index:
Oil Review
This week $WTIC gained +$1.84/bbl (+2.31%) to close at 81.50. A closing price of 84 would represent a break-out and I don’t think the Fed wants the market to go there.
For $WTIC, the 50-day MA is now 77.86, up from 77.23, 76.44, and 76.20 over the past three weeks.
The 200-d MA is at 73.04, up from 72.51, 71.99, 71.48, 70.89, and 70.27, and rising quickly.
You can go to StockCharts.com, default sharpchart view, insert: $WTIC:$USD and then at the bottom to chart attributes and put the settings to solid line before hitting update.
As a general rule, as a trader of Crude Oil, when you see the $WTIC:$USD RSI-7 bottom below 30 and start to rise, you want to be a buyer of Oil and seller of Dollars.
Choose Weekly or Daily charts, depending on your preference.
When this indicator peaks above 70 and starts falling, you want to sell Oil and buy US Dollars.
The reason is that Crude Oil contracts are priced in USD, so higher $USD, means lower $WTIC. Also, a stronger $USD, at the reversal of a cycle (but not later) is caused by a change in speculative interest. Stronger $USD; less speculation and lower prices for $WTIC.
Weekly chart with $WTIC:$USD at 58.94.
Daily chart with $WTIC:$USD at 62.54.
Two weeks ago I stated in this space, “So, at this juncture, we want to hang in with our over-weighting in the Oils, but we realize that prices will encounter resistance in the 80’s.” A week ago, after a modest decline, I added, “Oil is hanging in and my positions with it. Next week, I think they will improve”. And bingo, they did. XLE and $WTIC jumped +3.58% and +2.31% respectively.
Here is the e-miNY Dec-07 Crude Oil chart.
Interactive Chart of Weekly Crude Oil:
Interactive Chart of Daily Crude Oil:
Gold & Precious Metals Review
A week ago I wrote in this space, “$SILVER was up +1.04% and $GOLD down -0.15%, and a week ago $SILVER lifted +5.00% and $GOLD was up +2.38%, so I am hanging in. It appears to still have more room to run on the upside… The Weekly RSI-7 for $SILVER:$GOLD is now 41.46 and rising. The Daily RSI-7 for $SILVER:$GOLD is 60.84 and rising. A week ago, the Weekly RSI-7 for $SILVER:$GOLD was just 37.5 and rising. The Daily RSI-7 for $SILVER:$GOLD was 52.1 and rising. As I say, I’m hanging in.” I added that the small loss “was, in my view, profit-taking only and nothing severe”.
That’s why you come here, right?
This week, $GOLD reversed from a small loss of -$1.70/oz (-0.15%) at $1117.60 to lift +$16.70/oz (+1.49%) to close at 1134.30. The high this week was 1144.80.
http://billcara2.com/tkchart/tkchart.asp?stkname=gld&cht=Tech+Chart&px=3...
http://billcara2.com/tkchart/tkchart.asp?stkname=gld&cht=Tech+Chart&px=1...
http://billcara2.com/tkchart/tkchart.asp?stkname=gld&cht=Tech+Chart&px=0...
The $GOLD 50day Moving Average is now at 1108.19, up from 1106.34, and back close to 1108.17 from two weeks ago.
The 200d MA is 1036.71, up from 1031.61, 1026.87, and 1022.57 over the past three weeks.
While I have commented about Fed policy regarding Crude Oil, not wanting it to break out to the upside of 84, I don’t think that’s the case with Gold. Gold is not a consumable. Its price has little impact on the economy. You may disagree, but the fact is that in a growing economy with tight money conditions, interest rates and the Dollar are most likely to have a rising price trend, and Gold can also lift in price under those conditions as well. If it happens, the price of gold is merely an alternative investment and would not be a significant economic factor, and hence of no concern to the Fed.
Look for instance at the Dutch Masters paintings. Do you really think the Fed gives a hoot if wealthy people collect such paintings at tens of millions of Dollars each? Nor would they care about people hoarding Gold anywhere near as much as they do about the price of consumables and interest rates, as these impact inflation.
Anybody who would argue against my point must believe that a higher gold price can only happen with a lower $USD, and that simply is not true. If for instance, the miners and prospectors discovered little new gold resources, or if they ever decided to stop mining, the price would increase whether the $USD is going north, south or east.
Gold is strictly an alternative investment, one that requires the study of its price series in order to make good timing decisions on when to buy and sell. To find an indicator that precious metals are coming to life, or otherwise, you can go to StockCharts.com, default sharpchart view, insert: $SILVER:$GOLD and then at the bottom go to chart attributes and put the settings to solid line and RSI to 7, before hitting update.
As a general rule, as a trader of Precious Metals, when you see the $SILVER:$GOLD RSI-7 bottom below 30 and start to rise, which means that the silver price is advancing faster than the gold price, you want to be a buyer of Precious Metals.
Choose Weekly or Daily charts, depending on your preference.
Alternatively, when this indicator peaks above 70 and starts falling, you want to sell Precious Metals, and go to US Dollars.
The reason is that Gold and Silver contracts are priced in USD, so higher $USD, means lower $GOLD and $SILVER. Also, a stronger $USD, at the reversal of a cycle (but not later) is caused by a change in speculative interest. Stronger $USD; less speculation and lower prices for the Precious Metals.
From the Daily chart, you’ll notice that late October was the time to switch from Dollars to Precious Metals, and mid-January was the time to switch back to Dollars. Then, two weeks ago I stated that “At the present time, the greatest risk is to be out of the Precious Metals. As confirmed by the $WTIC:$USD RSI chart, it appears to me that the $USD is most likely to stay flat or pull-back from an 81 cycle high, which would allow a move higher in most commodity prices, including Oil and Gold and Silver.”
These are common sense relationships that, while they may stumble now and then, do work over the long run. You don’t need to be reading the nonsense that manipulators have made or destroyed the precious metals price. What is happening is that traders legitimate (global money supply changes) and emotional (fear and greed) interest in the precious metals is reaching extreme levels, following which there is what is called a reversal to the mean, or return to normal behavior, if you will.
A final point: this is a Momentum indicator, and not a Trend indicator, as most of you know. The price trend has been rising for Precious Metals for about nine years. I expect the long-term trend to reverse to a Bear only after the global economy starts to become strong, employment is strong, interest rates back to normal and real wealth is being created in business and the equity market. How far out is that? Who knows!
But I do know that until there are signs of a Trend reversal, I’ll be sticking to Cycles Momentum-based indicators.
Interactive Chart of Weekly Gold EOD Continuous Contract Index:
Interactive Chart of Daily Gold EOD Continuous Contract Index:
Interactive chart of recent trading for the Gold Bullion index.
Spot silver chart for the week
$SILVER was up +$0.89/oz (+5.41%) W/W to close Friday at 17.35. On Friday, there was a gain of +1.28% on the day, while $GOLD was up just +0.20%, so the momentum for precious metals is still up.
A week ago I pointed this out as well, saying, “so the week’s gain happened on Friday, leading me to believe that Monday the precious metal prices would be higher. This was confirmed in my mind when the gold and silver miner prices lifted on Friday and the Euro lifted and Dollar dropped. A short-term move anyway.”
The same thing happened this week.
http://stockcharts.com/charts/gallery.html?s=$silver
http://tinyurl.com/y8k8ud4
For $SILVER, the 50d MA is now 16.87, down a tad from 16.89, and from 17.02, 17.23, 17.56, and 17.81 over the past five weeks.
The long-term 200d MA is 16.10, up from 16.03, 15.97, 15.92, 15.85, 15.75, and 15.65 over six weeks. But, as I opined six weeks ago in this space, “this long-term MA for $SILVER may rise for a couple months or so (from 15.65) and then find resistance at about $16.15. (But) I would not be surprised to see it stay a (longer-term bullish picture) from there.” I still believe the long-term trend is up.
You can take the very short-term picture or a longer one depending on your investment time frame.
For the longer view, I believe there are too many very wealthy persons who have started hoarding precious metals because of the intense overspending by governments all over the world for the rising trend to be snapped this early in the cycle. I really believe that, for a major downtrend in precious metal prices to happen, real wealth must be produced faster (in the industrial and commercial economy) than fiat money is printed. Until then, there will be squeezes by the Interventionists and the odd bit of profit-taking by the enterprising and speculative traders.
Interactive Chart of Weekly Silver EOD Continuous Contract Index:
Interactive Chart of Daily Silver EOD Continuous Contract Index:
Interactive chart of the Silver Bullion index.
$PLAT gained +$39.20/oz (+2.55%) this week to close at $1579.10.
http://stockcharts.com/charts/gallery.html?s=$plat
http://tinyurl.com/ydwz4pn
The 50d MA for $PLAT is now at 1533.68, up from 1520.40, 1511.07, 1506.31, 1502.04, 1493.90, and 1480.91 the previous six weeks.
The 200d MA is at 1352.15, up from 1341.01, 1331.42, 1323.04, 1312.58, 1305.30 and 1297.81 the prior six weeks. Six weeks ago I opined here, “That long-term MA could lift as high as 1385, and then provide support for short-term price weakness. We shall see.”
I also said, “You know, in the longer-term I am a believer in higher precious metals prices. But short-term, don’t fight a rising $USD – if, as and when you see it”. In other words the elevator doesn’t always go straight up, and you must look for the best opportunities to get on and off.
I don’t trade plat or pall, but I study them as part of the precious metals study.
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.
This week, $PALL soared +$43.00/oz (+9.94%) to close at 475.40.
http://stockcharts.com/charts/gallery.html?s=$pall
http://tinyurl.com/yenr5rj
The 50d MA is now at 426.04, up from 417.55, 411.14, 406.81, 402.56, 396.97, and 390.10 in the six weeks before this.
The 200d MA is at 329.51, up from 323.93, 319.10, 314.77, 310.11, 305.19, and 300.58 in the past six weeks.
As I say, $PALL has been one of the better predictors of the Precious Metals group.
Spot palladium chart for the week
Interactive Chart of Weekly Palladium EOD Continuous Contract Index:
Interactive Chart of Daily Palladium EOD Continuous Contract Index:
Interactive chart of the Palladium metal index.
This week, $COPPER gained +$13.35 (+4.07%) to close at 341.75 on the contracts. Prices have been volatile. A week ago, I remarked, “As I see it, this was a bit of profit-taking. The price on Friday, the price reversed with a gain of +2.31%.”
The world’s biggest copper mines are in the area near the terrible earthquakes in Chile. Prices have lifted.
http://stockcharts.com/charts/gallery.html?s=$copper
http://tinyurl.com/ybgnb7f
For $COPPER, the 50d MA is at 326.24, up from 323.80, 322.54, and 322.07, but down from the prior 323.57, and 325.11.
The 200d MA is at 286.09, up from 282.70, 279.88, 277.48, 274.89, 272.75, and 269.97 in the six previous weeks.
For those who are keen to study the industrial metals like copper, aluminum and zinc, why not look at the Powershares DBB, which trades on the NYSE.
http://finance.google.com/finance?q=NYSE:DBB
Also study Freeport-McMoRan (FCX) share trading. It’s quite volatile, but an effective indicator of copper prices.
Interactive Chart of Weekly Copper EOD Continuous Contract Index:
Interactive Chart of Daily Copper EOD Continuous Contract Index:
Interactive chart of the Copper metal index.
Table 12: Senior gold equities
| Symbol | Close | 1Day Change |
1Day %Change |
1W %Change |
2W %Change |
4W %Change |
YTD %Change |
3M %Change |
6M %Change |
12M %Change |
This week, the $XAU (+5.84%), GDX (+5.79%) and XGD (+3.70%) all were up sharply. The prior Friday saw a reversal with gains in $XAU (+0.87%), GDX (+1.01%) and XGD (+0.15%) on the day, so that’s six days of solid gains.
This week I noted that the lowest risk Goldminers were up the least, so that’s a red flag, but I have no further comment. I am now on my way this morning to PDAC mining convention, where I’ll be holed up in somebody’s core shack for the next four days. Jock says he’ll be there too.
Now I’ll be learning as much as I can about some 50+ Goldminers my team has identified as the ones we want to watch closely. Actually there are more, but I think 53 will be attending PDAC, which is a wonderful show. I’ll be reporting comments each day – if I can stay vertical.
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 U.S. Goldminers Index:
Interactive Chart of Daily U.S. Goldminers Index:
The U.S. goldminer share trust ETF trades under the ticker symbol GDX.
Here are the U.S. 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.
Here are the Weekly and Daily data charts for the TSX Goldshares (XGD) index:
Interactive Chart of XGD Weekly data:
Interactive Chart of XGD Daily data:
Forex Review
The $USD is a trade-weighted US Dollar index, we used to call the Morgan Dollar.
As commodities are priced in $USD you need to study forex price trends and cycles.
The Forex market is a three to four trillion dollar marketplace every day, which dwarfs the size of the stock and bond markets. In this market, the Euro/USD is the highest volume trader.
The current value of $USD is a mean value of rate fluctuations of six world currencies (Japanese yen, Euro, British pound, Canadian dollar, Swiss franc and Swedish krona) that each trade against the USD. The Euro is by far the biggest component.
The ETF that tracks the G-10 currencies is the Powershares DBV. http://tinyurl.com/ltxpk4
Precious metals do not seem pressured one way or the other by the US Dollar for the past couple weeks. But then again, the Dollar has gone almost nowhere.
http://stockcharts.com/charts/gallery.html?s=$usd
http://tinyurl.com/y9c3sr4
Two weeks ago, the $USD gained +0.32%, which was not much, to close at 80.59. One week ago it dropped -0.27%, closing at 80.38. This week, there was a gain of +0.11$ to close at 80.46.
The 50-day MA of the $USD is now at 78.99, up from 78.69, 78.25, 77.85, 77.30, 76.87, and 76.52, in the past six weeks, and still rising.
The 200-day MA is 78.05, down from 78.10, 78.16, 78.24, 78.37, 78.53, and 78.69. Yes, “there is a base forming near this level. Longer-term I think the $USD is going higher”.
Interactive Chart of Daily U.S. U.S. Dollar Index:
This week, the Euro contracts ($XEU) lost –0.05% to close at 136.23, barely changed. The Euro had been down on the week, but gained +0.29% on Friday. The prior week saw a gain of +0.59%, so the Euro over six sessions is stronger, which is consistent with the move in $GOLD, the other precious metals, copper and $WTIC over this time.
http://stockcharts.com/charts/gallery.html?s=$xeu
http://tinyurl.com/ydekjtk
The 50d MA for the Euro futures are now at 139.99, down from 140.67, 141.79, 142.85, 144.18, 145.26, and 146.18 over six weeks.
The 200d MA is at 143.28, up a smithereens from 143.27, which had been up a smidgeon from 143.26, and a tad from 143.20, 143.06, 142.86, and 142.67 over the previous weeks.
Two weeks ago I opined in this space, “I’m expecting the Euro to turn up here against the USD, and for precious metals to continue a brief run. I still have 1150 gold in my sights.” A week ago I stated, “Maybe this started on Friday. We’ll see. All I know at this point is that I’m tired of listening to PIGS stories”. The past six days have been good.
Interactive Chart of Weekly Euro Dollar Index, priced in USD:
Interactive Chart of Daily Euro Dollar Index, priced in USD:
The Pound dropped -1.06% to close at 151.30, which helped support the Dollar. It’s been doing it for a couple weeks now. So too has the Yen. A week ago, I opined, “Gold traders didn’t believe that, and they bought the Cdn Loonie large.” Same thing is happening here, so watch for a reversal in the Pound and Yen and weakness in the Dollar, for a couple weeks.
http://stockcharts.com/charts/gallery.html?s=$xbp
http://tinyurl.com/yasdzc2
The Pound is oversold by a lot, and ready to rebound. Talking Head players want to sell you their short positions, so they can play the rebound.
The 50d MA of the Pound is at 158.19, down from 159.34, 160.25, 160.98, 161.89, 162.71, and 163.25 over the past six weeks.
The 200d MA is 162.34, down a bit from 162.39, but close to the prior weeks at 162.34, 162.21, 161.97, 161.67, and 161.35.
Weekly British Pound Index:
Daily British Pound Index:
Weekly Japanese Yen Index:
The Yen plunged -1.45% to 110.81.
http://stockcharts.com/charts/gallery.html?s=$xjy
http://tinyurl.com/yd2fzv4
The Yen’s 50-day MA is now 110.27, up from 110.14, but close to the previous weeks at 110.31, 110.54, and 110.88.
The 200-day MA is now at 108.65, up from 108.46, 108.23, 108.06, 107.85, 107.60, and 107.33 the previous six weeks.
Daily Japanese Yen Index:
The Cdn Dollar jumped +2.05% to close at 97.13. Must be all the gold medals won at the Vancouver Games! Either that or it’s from all the property sales of foreigners buying a piece of paradise in that area.
http://stockcharts.com/charts/gallery.html?s=$cdw
http://tinyurl.com/ycx58us
Actually, the higher oil, metal and precious metal prices helped. Canada is a storehouse of commodities.
The Loonie 50-day MA is now at 95.36, up from 95.09, which had been pretty much unchanged from 95.04, 94.97, 95.04, 95.09 and 95.22 the previous five weeks.
The 200d MA is at 92.88, up from 92.60, 92.38, 92.16, 91.86, 91.55 and 91.25 over the previous six weeks.
Trading forex is a dicey game, and there are charlatans all around who would sucker the unwary into their seminars, where they sell dubious services. But, for knowledgeable traders, the price trends and cycles must be studied nonetheless as they serve as confirmations -- or anomalies -- of other prices… In the latter case, with an anomaly, the relationship needs to be studied further.
Weekly Canadian Dollar Index:
Daily Canadian Dollar Index:
Here is the China Yuan (CNY) chart.
Wrap-up:
This was a bit of a rough week. I was kinda out of sorts following my trip to Toronto for the PDAC and a series of business meetings. Loaded with two computers, camera and projector, I also packed but left behind all the electronic wires needed to run this stuff.
Later today I will buy a replacement AC adapter for one of the computers, at least, and I should be good to go at PDAC.
Back in Nassau, the Tribune and the Guardian reported that the police have pressed a charge of murder against a 27-year old Bahamian for the slaying of my close friend Hywel Jones less than a month after he participated in the Cara Bahamas 2009 Conference.
http://www.tribune242.com/news/03052010_tt-murdercharge_news_pg1-
http://www.thenassauguardian.com/national_local/307043024522927.php
I still think about Hywel every day. The photo I used to have on the blog was clipped from one taken of Hywel and I by my wife one night we were out for dinner at Columbus Tavern on Paradise Island. At that point I was going to move my office in with him, but, later, after he told me he was having issues with his partner at the time, I begged off.
On the fatal day last April, he was to come to my home after work to celebrate his success in a courtroom fight by enjoying a bottle of the best grappa I could buy in Nassau. He was my registered agent and I was ready to plan going forward in business, possibly by moving my office into his.
Whoever did it was highly paid for an execution-style hit as he was about to enter his office one morning, so I really hope the police can trace this back to the source. It’s a small community of financial people in Nassau; we need to know for certain who is responsible.
Hywel, may his soul rest in peace, was a terrific guy as loannetter, kaimu and others here got to see first hand. At his memorial service, attended by about 500 friends, the country’s Minister of Sport and the former head of the Banker’s Association spoke proudly of working closely with him, and they were in tears. It was so sad for all of us to lose such a friend.
I am now off to PDAC, like I have for the past 30 years. Things are now looking up.
http://www.pdac.ca/pdac/conv/index.html
Enjoy the rest of your weekend.
