[5:23pm] A week ago I stated at the open to WIR #10, “You never really know what’s going to happen next in capital markets, but these are particularly confusing days for all of us.” Part of the problem is that trading volume has all but disappeared. Sure, the big boys on Wall Street have their algo-loaded black boxes at work, but apparently the rest of us are asleep or at least we are not playing the game.
For proof that trading volume is down enormously, I pulled out several months data, going back to the Lehman Bros collapse, which I believe heralded the era of trader distrust in capital markets.
As this is WIR #11, I had to go back in the 13-week quarterly cycle to WIR #50-2009 to pick up my published notes on Exxon and Chevron, which Value Line had reviewed that week. Look how much the notes from back then tied into my volume-related comments from a week ago:
From WIR #10 (March 7, 2010):
(If, as and) 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.
Now from WIR #50 (Dec 12, 2009):
The S&P 500 had a high this week of 1110.72. A week ago I wrote that the weekly high was 1119.13, where the tops were still nudging higher. Maybe in the wind of change I have been writing about, this one is a small breeze, but still it is noteworthy I think. If next week’s high is lower than 1110.72 and the low is below 1083, then we’ll be referring to it as a tropical wave, with storm potential.
As I see it, the big story is that total market volume has been declining since mid-May. In the past 29 weeks, the weekly volume was higher than its 60-week Moving Average only four times – twice in August, once in September and once in October. This week, for example, the total S&P 500 volume was 17.55 billion shares, while the EMA(60) is 21.04 bn.
As Mr. Market has disappeared, the Fed hedge fund and HB&B prop desk traders have been able to push and pull prices generally as desired.
The S&P was going to close lower this week until the Interventionists applied some lipstick, lifting the index to a daily gain of +0.37%, which carried the week to a gain of just 0.43 of a point (+0.04%). Computers can engineer these things, somewhat easier than maneuvering the NASA Phoenix Mars Lander.
http://en.wikipedia.org/wiki/Phoenix_(spacecraft)
Somebody wrote me recently to say that he figured the HB&B or Fed hedge fund traders were reading my blog, pointing out the dubious action in the IWM:
A week ago in this space, I wrote:
I suspect that the percentage of trades created by HB&B computer programs has soared, and the public is now largely out of the market or holding to positions for now. That’s an observation, not a fact. For confirmation of my thinking, check the weekly data chart (below) of the Russell 2000 small cap index [IWM], which is favored by non-HB&B traders, and you’ll see that the pattern of higher highs has been broken, and the RSI has broken down as well… Monday’s opening ought to be very interesting.
Despite the widespread selling across international markets into the NY pre-market period on Monday, suddenly the whole picture changed, and that was in advance of economic data being released. Once again the public was not the underlying factor…The public on Friday, for instance, did not buy an extra 50 million shares of the IWM iShares Russell 2000 index @ $60. Average volume over three months for IWM was 50 million; on Friday the volume was 100 million. The action started Monday morning after IWN had spent a couple weeks with very low volume and falling prices, suddenly there were 78 million shares traded that day, closing at $58.09, up from Friday’s $57.58 with an average price that day of about 57.30.
Somebody is moving this market with a purpose and it isn’t you and me or anybody we personally know. I wrote it up Nov 8 in WIR #45:
Oh, you didn’t hear? The Fed’s trading room, now all 400 traders strong, is wielding the biggest ax these days, which happens to be $2 trillion big. No longer content to manage a few tens of billions with a couple traders intervening in the T-Bill market in order to “stabilize” the US Dollar, the Fed’s trading room now manages 20,000 individual securities.
If you haven’t read the article, which was highlighted in the Community Chat on Nov 3, here is the link:
http://online.wsj.com/article/SB125720947716624249.htmlIf you cannot read the whole article because it’s shown as a Subscriber Content Preview, then copy and paste the article headline (as follows) into your browser, which should give you the whole piece.
Brian Sack Engineers Big Moves at Fed
The $2T FOMC hedgefund is a sad state of affairs. Their Plunge Protection Team (aka Goldman Sachs and JP Morgan) wins and we lose. This market was ready to fall on Tuesday this week, but taxpayer money was used to hold it up.
As far as I am concerned, the concept of a free market is dead and so should Congress be for allowing this abomination to capital markets to continue. The ex-head of this FOMC hedge fund is Bill Dudley, the ex-chief economist at Goldman Sachs who then went on to replace Teflon Tim Geithner as head of the Fed Bank of New York. Before he departed he had beefed his PPT to over 200 traders, and now Brian Sack has it over 400.
http://www.newyorkfed.org/aboutthefed/orgchart/dud...
Congress ought to be ashamed.
It’s not hard to get upset at these things because the government and central bank and their friends on Wall Street have made a total abomination of capital markets. The rightful owners of capital are not establishing prices through a fair and transparent auction process. The system has been corrupted and now being managed by Interventionists.
The more that government gets involved in capital markets, the more extreme the cycles become.
Give it time, but I think all my conjecture will be discovered as truth and books will be written.
Wow; I hadn’t realized how much this matter has been on my mind for so long. Obviously I feel there is a connection here. Has Main Street decided to pull the plug on Wall Street, not believing what Humungous Bank & Broker, the Fed, and the Treasury Dept have cooked up?
Definitely, something is worrying us. I truly believe this is a credibility issue. Traders no longer blindly accept the integrity of capital markets. If true, then we ought to see surges in volume only on sell-offs. Time will tell.
Later in this WIR, however, I plan to say that we might not have long to see a sell-off scenario play out. There are too many relationships pointing in that direction for me to ignore the possibility. After all, it’s all about money flow.
Related to this point, I was surprised this week when a 35-year professional in the securities industry asked me the difference between momentum and money flow. Simply put, momentum is the rate of change of a stock price over time whereas money flow tracks the change of the stock price multiplied by the volume.
There could in fact be an accelerating upside price momentum but at the same time a negative money flow, so these are quite different concepts. As an example, say a stock rises in price by $1 four days out of five, and drops -$1 on the fifth day, for a period of four weeks. That’s a gain of +$3 each week for four weeks, a clear sign of rising price momentum. But say volume is 1X on those 16 days when the price lifted, but 10x on each of the 4 days when the price fell. In fact, at the end of the four weeks, money flow would be very negative.
The point is that money flow is a more important concept than price.
I think you will find that when On Balance Volume, which is a money flow indicator, is rising, the price momentum usually rises much faster. Conversely, when OBV is falling, the price momentum is falling much faster. What this says is that large capital funds are not able to buy as fast as price rises or sell as fast as price falls. That knowledge ought to give the small investor comfort that, if they can get the timing down pat, they can out-perform the large fund managers. Of course, it’s not that easy for the small investor as the fund managers are the ones whose spin masters are working in continuous deception mode. When they know prices are falling, their Talking Heads are telling you that things are not really so bad; but when prices are rising, they are planting doubts in your mind, leading objective commentators to talk about Bull markets climbing a ‘wall of worry’.
This is the reason we say it is so important to filter out the noise, and focus only on the price and money flow.
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: All stock indexes followed here were up last week with the exception of the Shanghai Composite which was down -0.6% (and –8.0% YTD). Gains for the week ranged from a low of +0.1% for the PSEi to +3.7% (and now +1.9% YTD) for the Nikkei… Economic data from the U.S. and Europe were better than expected given the severe weather problems encountered during January and February. In Europe, the data focused on international trade and industrial production and the disparities between countries were quite apparent. And in Asia, Japan revised its fourth quarter gross domestic product data lower, although the revisions were nowhere near as large as third quarter revisions.
Here are the key US economic reports from last week’s calendar.
US Treasury Budget for February. After release of the data on 3/10/2010 2:00:00 PM ET, Econoday reported, “Stimulus outlays on tax credits and for small-business subsidies added to February's budget gap which came in at an as-expected $220.9 billion. Tarp outlays were also heavy, at $2.3 billion. A large Fed payment boosted receipts which, in the report's only highlight, show their first year-on-year increase in nearly two years. Government stimulus is the global rule for this recovery. At $651.5 billion, the U.S. fiscal year-to-date deficit is more than $60 billion beyond last year's record pace.”
US International Trade for Jan. After release of the data on 3/11/2010 8:30:00 AM ET, Econoday reported, “Based on the latest trade numbers, either worldwide final demand is not growing as much as hoped or the January numbers are simply coming off sharp gains the month before. The overall U.S. trade deficit unexpectedly shrank in January despite higher oil prices, falling to $37.3 billion from a revised $39.9 billion in December. The January shortfall was much narrower than the consensus forecast for a $41.0 billion gap. Exports slipped 0.3 percent but imports fell a sharper 1.7 percent… The improvement in the trade deficit was about evenly split between the petroleum and non-petroleum balances. The petroleum deficit came in at $22.7 billion, down from $23.6 billion in December as barrels imported fell significantly. The non-petroleum gap narrowed to $25.4 billion from $26.9 billion in December… The decreases in exports and imports were broad based by components but with those for imports more notable. However, both followed strong gains in December as exports jumped 3.4 percent that month and imports surged 4.9 percent in December. At second look, it is not clear whether the drop in imports likely reflects a downgrade in the recovery by U.S. businesses believing that demand growth will be more sluggish… The shrinkage in the petroleum deficit was due to a sharp 11.5 percent fall in barrels imports, following a12.5 percent boost in December. The price of imported oil increased to $73.89 per barrel from $73.20 per barrel in December… Year-on-year, growth in overall exports of goods and services in January increased to 15.1 percent from 7.7 percent in December. The numbers are still coming off a low base during the worst of the recession. Meanwhile import growth rose to 11.9 percent from 4.7 percent the prior month… It would have been nice for the eight month consecutive gains in exports to continue but there are always oscillations in any series. Taking into account recent strong gains, the January dip may or may not mean much in terms of overseas demand. The same may hold true for imports and domestic demand-but we will have to watch for other numbers to see… On the news, markets were little changed this morning.”
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, “Jobless claims remain stubbornly high, pointing to continued slow bleeding for payrolls. Initial jobless claims totaled 462,000 in the March 6 week, about what was expected and driving up the four-week average by 5,000 to 475,500 for the highest level since November when claims first broke below 500,000. There won't be much hope for payroll gains until claims move convincingly below 450,000… An emerging negative may be continuing claims where declines have fizzled out. Continuing claims in the Feb. 27 week rose 37,000, marking the fifth increase out of the last eight weeks. The four-week average has stabilized the last two weeks at 4.581 million. The unemployment rate for insured workers is unchanged at 3.5 percent… This report was unusually choppy week-to-week during February and unfortunately, in the first week of March at least, has stabilized at uncomfortably high levels. Equities and commodities fell as did the dollar in reaction to today's report.”
US Retail Sales for Feb. After the announcement on 3/12/2010 8:30:00 AM ET, Econoday reported, “Apparently, consumers more than caught up on spending when the snow melted as February sales were much stronger than expected for that snow bound month. Overall retail sales in February rose 0.3 percent after rebounding 0.1 percent in January. The gain was higher than the consensus forecast for a 0.2 percent slip. But the gain was far better after discounting a drop in auto sales. Excluding autos, sales in February jumped a sharp 0.8 percent, following a 0.5 percent boost the month before. Excluding both autos and gasoline, February sales spiked 0.9 percent, following a 0.5 percent rise in January… The consumer is spending more than most economists and analysts have been expecting. Most likely, those with jobs are more confident about the economy staying strong enough for them to keep their jobs and are more willing to spend…
The February jump in sales was broad based but leading the increase were electronics & appliance stores, up 3.7 percent; miscellaneous store retailers, up 2.5 percent; food & beverages, up 1.3 percent; and sporting goods, hobby, book & music stores, up 1.2 percent… Overall retail sales on a year-ago basis in February decreased to up 3.9 percent, from up 4.1 percent in the prior month. Excluding motor vehicles, the year-on-year rate slipped to 4.2 percent from 4.3 percent in January… Overall, the latest retail sales report was unexpectedly healthy and should boost equities and bump up Treasury yields. However, rates may be weighed down by a leaked story that President Obama is considering appointing San Francisco Fed President Janet Yellen to the Fed Board of Governors. She is somewhat dovish on monetary policy currently.”US Consumer Sentiment for March. After the data is released on 3/12/2010 9:55:00 AM ET, Econoday reported, “Consumer spending may be warming up but spirits, a reflection of the jobs market, are definitely chilled. Reuters/University of Michigan consumer sentiment index slipped back in the mid-March reading to 72.5 vs. February's 73.6. Both current conditions and expectations are down with expectations showing particular weakness. Expectations are the leading component and are pointing to extended weakness ahead. Inflation expectations are subdued at 2.8 percent one-year out. The stock market came down from opening highs in reaction to the report.”
US Business Inventories for January. After release of the data on 3/12/2010 10:00:00 AM ET, Econoday reported, “Business inventories were unchanged in January, extending a trend and indicating that the de-stocking cycle has likely wound down and that the restocking cycle is about to get underway… Manufacturers are leading the pivot, adding 0.2 percent to inventories in January to $495.2 billion. Wholesalers, a smaller inventory group at $382.2 billion, had stocked up ahead of the holidays but have since been drawing down their inventories, which slipped 0.2 percent in the month… Retailers, at $432.8 billion, have been keeping inventories lean and steady over the last six months, down 0.1 percent in January. But given this morning's strong retail sales data for February, rebuilding pressure may soon appear especially in the key groups of general merchandise and apparel where stocks have been falling while sales have been rising… The inventory curve has flattened and is struggling to build an ascending slope, which when it starts will increase demand for labor.”
Despite massive government spending, the economy is recovering but only at a very slow rate, leading me to believe that challenging times lay ahead for the balance of this year, and that more likely the economic data will begin to show sustainable positive growth in 1Q2011.
One of the critical issues facing the US Treasury is that 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.
Here are the key US economic reports from next week’s calendar.
US Empire State Mfg Survey for March. Prior to release of the data on 3/15/2010 8:30:00 AM ET, Econoday reported, “The Empire State manufacturing index in February jumped nearly 9 points to 24.91 -- a reading that indicated substantial month-to-month acceleration in the region's manufacturing conditions. February's figure was a rebound as this index had hit a recent high of 33.44 in October of this past year. Looking ahead, forward momentum for New York State manufacturing may be pausing as the new orders index eased to 8.78 from 20.48 in December. Nonetheless, it is still above breakeven, indicating modestly positive growth.”
US Industrial Production for Jan. Prior to the release of the data on 3/15/2010 9:15:00 AM ET, Econoday reported, “Industrial production in January advanced 0.9 percent, following a 0.7 percent jump in December. Importantly, the manufacturing component made a robust comeback, jumping 1.0 percent after edging down 0.1 percent the month before. A big chunk of the manufacturing spike was due to a jump in auto assemblies-but gains were healthy elsewhere. The overall capacity utilization rate is still low but rose to 72.6 percent from 71.9 percent in December. Looking ahead, early warnings for the February number are mixed. Although the Philly Fed and New York Fed manufacturing indexes rose for February, the ISM index edged back. All three, however, remained in positive territory, implying positive growth. In contrast, production worker hours for the month fell 0.9 percent, according to the February employment situation numbers. Analysts expect weaker auto production to help pull down the manufacturing component. But higher utilities output from atypically cold February weather could support the headline production number.”
US Housing Starts for Feb. Prior to the data release on 3/16/2010 8:30:00 AM ET, Econoday reported, “Housing starts in January rebounded 2.8 percent after dipping 0.7 percent in December. January's annualized pace of 0.591 million units was up 21.1 percent on a year-ago basis. The January comeback was led by a 9.2 percent increase in multifamily starts while the single-family component edged up 1.5 percent. February snow storms likely slowed starts down during the month. Focus should be more on permits as they are less affected by weather during a given month.”
US FOMC Meeting Announcement. Prior to the announcement on 3/16/2010 2:15:00 PM ET, Econoday reported, “The FOMC announcement for the March 16 FOMC policy meeting is expected to leave the fed funds target rate unchanged at a range of zero to 0.25 percent. However, focus will be on any news on the Fed's balance-sheet exit strategy, including whether there is progress on moving toward using the interest rate paid on reserves as a new target rate. Also, there is a possibility that the Board could announce another 25 basis point increase in the discount rate as the Fed has recently announced that it is gradually moving toward a normalization of the spread between the discount rate and the fed funds target rate (traditionally 100 basis points but currently 50 basis points).”
US Producer Price Index for Feb. Before the data is released on 3/17/2010 8:30:00 AM ET, Econoday reported, “The producer price index in January jumped 1.4 percent after rising 0.4 percent in December. At the core level, the PPI increased to a 0.3 percent gain after a flat reading in December. The headline increase was led by a 5.1 percent surge in energy costs with gasoline up 11.5 percent. Food costs also were up notably, gaining 0.4 but down from 1.3 percent in December. On a seasonally adjusted basis, oil prices were down slightly in February and this will likely weigh on the headline number. But cold weather damage to Florida crops probably will boost food prices.”
US Consumer Price Index for Feb. Prior to release of the data on 3/18/2010 8:30:00 AM ET, Econoday reported, “The consumer price index rose a moderate 0.2 percent in January despite upward pressure from energy costs. The headline number has cross currents as oil prices were seasonally weak in February but food prices could be up (cold weather damage to Florida vegetables and fruits). But expect the core to be soft as shelter costs remain weak.”
US Jobless Claims for the week ending 3/13. Prior to release of the data on 3/18/2010 8:30:00 AM ET, Econoday reported, “Initial jobless claims for the March 6 week remained stubbornly high, slipping only 6,000 to 462,000 and driving up the four-week average by 5,000 to 475,500 for the highest level since November when claims first broke below 500,000.”
US Leading Econ Indicators for Feb. Prior to release of the data on 3/18/2010 10:00:00 AM ET, Econoday reported, “The Conference Board's index of leading indicators in January decelerated to a rise of 0.3 percent from robust gains of 1.2 percent in December and 1.1 percent in November. For February, analysts expect only a modest gain.”
US Philadelphia Fed Survey for March. Prior to release of the data on 3/18/2010 10:00:00 AM ET, Econoday reported, “The general business conditions component of the Philadelphia Fed's business outlook survey index in February improved to 17.6 from 15.2 the prior month. The Philly index in the latest month was at its highest since the 26.2 mark set September 2004. Strength is likely to continue in March as the new orders index really accelerated to 22.7 from January's 3.2.”
International Equity Markets Review
The Shanghai Composite (-0.8% W/W and –8.0% YTD) was by far the weakest as traders have been speculating on a Yuan revaluation coming next week. But Tokyo, Singapore and Jakarta Indonesia were very strong markets.
Trading seems to be mostly based on forex speculation, and has been for at least a year. Investors are yearning for a return to stable markets where they can make longer-term decisions.
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 between +0.5% (Australia EWA) and +2.1% (Germany EWG).
The Daily RSI-7’s have soared. Maybe stock prices are rising too far, too fast, signaling high risk. If the People’s Bank of China were to tighten severely, today’s positive picture could quickly reverse.
I did note that China (GXC –0.65%), Hong Kong (EWH –0.43%) and India (IFN –0.31%) were hard hit on Friday.
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
That’s two weeks of sharply rising prices, although Friday’s action in New York was negative.
This week, the S&P 500, NASDAQ and DJIA were up +1.0%, +1.8% and +0.6% respectively A week ago, the S&P 500, NASDAQ and DJIA were up +3.1%, +3.9% and +2.3%.
YTD, these indexes are up +3.1%, +4.3% and +1.9% respectively.
The big story is that volume is down about –35% over each of the past two months. Traders are nervous.
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, 21 were higher, and 9 down. A week earlier, it was 27 up and just 3 down. This Friday was a bit of a downer for the Bulls, although nothing much happened price wise as well as with volume.
This week’s top five performers in the Dow 30 were: General Electric (GE +4.22%), McDonald’s (MCD +2.92%), Boeing (BA +2.80%), Cisco (CSCO +2.66%) and AT&T (T +2.52%).
This week’s bottom five performers were: Coca-Cola (KO –2.47%), Pfizer (PFE –2.29%), Alco (AA –1.73%), Travelers (TRV –1.46%) and 3M (MMM –1.29%).
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.
When money flow starts to rally (i.e., rising volume times rising prices), we’ll begin to relax, thinking the market is stabilizing. Until then, we think it is vulnerable to many possible negative scenarios.
Value Line Report(s) this past Friday
This week, Value Line reported on two DJIA components: Chevron Corp (CVX), which is no longer a Cara 100 company only because it is too similar to its peer, the other mega-cap fully-integrated US oil company, Exxon Mobil (XOM), which is a Cara 100 company based on financial strength, management, returns on equity, profit margins, and so forth. Some people think that if it were not for the Exxon Valdez 1989 disaster, this company would be in the core group of ten stock’s in Everyman’s portfolio.
http://en.wikipedia.org/wiki/Exxon_Valdez
Is it not interesting how people and organizations alike hide their failures. Having been the cause of one of the world’s largest ecological disasters, Exxon deep-sixed the Exxon Shipping Company and the actual ship was renamed from Exxon Valdez to Exxon Mediterranean, SeaRiver Mediterranean, S/R Mediterranean, Mediterranean, and currently Dong Fang Ocean. After all these years, Exxon has paid or been order to pay less than $1 billion in damages and interest to 38,000 litigants. It would not surprise me if Exxon and/or their insurers paid that much to that many lawyers, and after the defendants’ lawyers were paid how little the defendants actually received, and after government lawyers and others were paid how much the taxpayer paid.
As much as I admire Exxon for the reasons it is a Cara 100 company, like Wal-Mart and other companies that have definite employment-related issues, and other companies in the Cara 100 that manufacturer weapons of mass destruction or toxic chemicals and pharmaceuticals, I have to, as a wealth manager, take the middle road between the oppressed and oppressor. I try to understand all sides, and in doing so it’s easy to see that nobody’s perfect. We have to be practical when making choices, whether that involves the interests of the corporation or people’s rights. Those who fall into the extremist camp become activists, promoters or proselytizers. They cease to become independent and objective traders, which among other things you need to be to become an effective wealth manager or self-manager of wealth, large or small.
Chevron Corp [GICS 10, Dow 30, Cara 100]
(CVX: Google Finance file)
(CVX: Yahoo Finance file)
(CVX: StockChart chart)
(CVX: Billcara2 chart)
(CVX: ADVFN Financial Data)
(CVX: Value Line Report Mar. 12: next one is due Jun. 11)
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 Mar. 12: next one is due Jun. 11)
Always before I study a company, I review my prior written notes, if any.
From WIR #37-2009 (Sept. 12):Here are highlights that the Value Line analysts wrote this week about XOM and CVX:
Exxon (XOM):
The bottom line is summed up by the following statement by VL’s Mitkowski:
This blue-chip stock offers a relatively safe way to participate in long-term global economic expansion. The shares have handily outperformed the major market averages over the past 10, 20, and even 30-year periods. The oil giant has the assets, the skills, the geographic reach, and the financial strength to keep that track record intact for another generation…Over the coming 3 to 5 years, this top quality stock has mild attraction for conservative investors stressing total return potential. For the year ahead, though, these shares are poorly ranked (4) for Timeliness. The stock price seems to already reflect, to some degree, the prospect of better times in 2010.
Dividends for 2009 and 2010 will likely be 1.66 and 1.71, which on a share price of $69.98 is much lower than for CVX, which is expected to be $2.66 and $2.81 on a current price of $70.75. With the financial structure and balance sheet of these companies, the dividends are considered very secure. Obviously on the 2010 dividend, the yield of 3.97% for CVX is much more attractive than XOM’s 2.44% yield. But Exxon is considered the superior quality company as reflected by the higher PE ratio and the higher Value Line financial metrics at the very bottom right corner of the page. Why I selected XOM over CVX was that XOM has higher operating and net profit margins, higher returns on capital and shareholder equity, and a lower dividend pay-out of profit, meaning that the dividend is more secure.
But Chevron is no sleeper. Although in the past five years, the growth in per share revenues, cash flow, earnings, dividends and book value has been a tad lower than XOM’s, it is projected to be higher in the next five years. And if you check the current figures, you may be surprised at the comparatively superior performance of Chevron on a per share basis. Even Value Line, however, is forecasting that 2009 and 2010 earnings for Chevron will together not match the 2008 result.
In the upper right corner of the Value Line reports, you will note that recently the Timeliness (Fundamentals) and Technical ratings for both companies were lowered from 3’s (average) to 4’s (below average). It would have been nice to see those downgrades before the past quarter. In the past 13 weeks, XOM has dropped from $73.78 to $69.98 (-5.2%), and CVX dropped from $72.67 to $70.75 (-2.6%), which shows that these stocks actually led the decline in the XLE (-0.8%).
This would have been a good put write trade. To show you how a bullish strategy can be used in a falling market, had you written the 3 month 65 puts for each stock, you would have probably not have been exercised, and with the premium, you’d be holding a gain of +maybe $2, which is not bad considering the stock has dropped -$3.80. With CVX, the short 65 put would have been exercised, and your net cost would have been about $63 after taking in the premium. Since the current price is $70.75, your gain would be $7.75 (+12.3%) vs a buy-and-hold loss of -2.6%.
If you understand the power of trend and cycle analysis and time decay of options, your performance ought to improve. Admittedly, most people will not take the time to learn, and that’s a pity.
… (With) Exxon and Chevron, they will still be pumping oil and gas, and refining it, and delivering and marketing it to people who need it, regardless of what they think of battery and hydro electric power… Sometimes, the same old, same old actually does better.
I also take a quick look at the Monthly-Weekly- and Daily charts:
For Chevron, the CVX Monthly, Weekly and Daily RSI-7 is 46.8 (sidetracking), 59.6 (rising) and 59.6 (falling), respectively. Over approximately two months the shares have traded from a low of $61.50 to a high of $72, last at $70.75, near the three-month high.
For Exxon, the XOM Monthly, Weekly and Daily RSI-7 is 39.1 (sidetracking), 51.8 (sidetracking) and 53.0 (falling), respectively. Over approximately two months the shares have traded from a low of $65.00 to a high of $72.50, last at $69.98, near the three-month.
The share prices are drifting and will be subject to pressures from (i) the Crude Oil price, which is trading between 69 and 70, in the middle of its 65-75 range, and (ii) the broad market indexes (S&P 500 at 1043).
So, if Crude Oil gets to 75 or higher and the S&P to 1100 or higher, it’s a safe bet that these share prices will be higher, and the best trading strategy would be to buy the stock, write puts and/or buy calls. However if Crude Oil falls to 65 or lower and the S&P to 990 or lower, it’s just as safe a bet these share prices will be lower, and the best trading strategy would be to sell the stock, write covered calls if you plan to hold it for an indefinite period, and/or buy puts.
To help you make your decision, you can analyze the trends and cycles of the US Dollar, Crude Oil and the S&P 500 or DJIA indexes. You can also read the research data and opinions of analysts at companies like Value Line or any of HB&B.
For Dec. 12 WIR#50-2009, I noted:
After the Sept 12 WIR#37, the Crude Oil price had a quick but brief dip from about 72 to a low of 65.05, and then popped over just 4 weeks to 82.00 in October. But after the Goldman Sachs oil analyst forecasted an 85 price, there have been six or seven straight weeks of falling oil prices, closing this week at 71.95.
There is just phenomenal manipulation in this energy market, which I attribute partly to Goldman Sachs “research” and trading. There is no rational explanation for GS traders having a higher success rate than NASA scientists, so until I see one, I’ll continue to call it manipulation.
Check the oil price chart against the XOM price chart for instance. For starters, Exxon has a U.S. leading market cap of $360 billion. The company’s financial and operating performance is much like one of its container ships – slow and steady. Yet, look at the XOM price chart.
At the time of WIR#37 (Sept 11), XOM closed at $69.98. The price then dropped in early October to a low of $65.73 shortly after the Oil price hit its low of 65.05. Then as Oil soared to 82.00 (+26.1%), XOM soared +16.4% to $76.54. Now as Oil has fallen -12.3% to 71.95 in a few weeks, XOM is down -4.8% to $72.83. These changes in the market cap of the world’s biggest ocean tanker are in the $20 billion to $45 billion range, which is ludicrous.
But, as to my prior quarterly comments, I was correct in saying that XOM and the Oil price would very much move in lock-step. And I am correct in saying that Goldman Sachs “research” plays a big role in the Oil price. And, if I was head of SEC Market Surveillance, I would be checking the GS trading blotters closely between their analyst comments and the oil and XOM prices. That firm did not do by chance 99 in 100 $100 million trading days, and not even by being good, which clearly they are. Something stinks and independent traders need to know what’s going on. If they are found to be trading illegally, then people ought to be criminally indicted. But, lo and behold, it was GS that parachuted a 29-year old ops guy into the top job of Prosecutions at the SEC in recent months. I honestly believe that Hollywood could not get away with such a preposterous script.
Bottom line is that should the Oil price start lifting here, then so too will XOM, and I have to figure that GS will make another couple billion.
The RSI charts are telling me now that:
For Exxon, the XOM [$72.83] Monthly, Weekly and Daily RSI-7 is 50.3 (falling), 53.0 (falling) and 35.3 (rising), respectively.
For Chevron, the CVX [$77.76] Monthly, Weekly and Daily RSI-7 is 61.9 (falling), 65.5 (falling) and 49.0 (rising), respectively.
The share prices are likely to have a small near-term upward bias, but that there would need to be a large short-term price move to reverse the Monthly and Weekly RSI-7.
However, for XOM, I think if 71 is broken on the downside with a daily close this week, the Daily RSI-7 will start to fall along with the Monthly and Weekly, which would be very bearish.
Political events though could mitigate here as Abu Dhabi oil is what’s standing behind a Mount Everest of debt, not just in Dubai, but elsewhere. I think the oil price is critical to the timing of the Bear phase most traders have been waiting for since June.
Despite all the stories to the contrary, the economies of the U.S., Japan and Europe are weak, and could easily slide into what some economists are calling a W pattern, or a double dip. Meanwhile, the economist I like best, David Rosenberg, is calling the present times a depression. David, a down-to-earth Canadian, is no longer working for HB&B BAC ML; he is able to speak his mind. More people ought to listen.
As to the Value Line reports on XOM and CVX this week, I noticed some errors and dubious inferences in both.
The reports say the Technical ratings were lowered 12/11/09 for CVX and 11/27/09 for XOM; but they have been raised from a 4 to a 3 in both cases.
For Chevron, the analyst stated that his estimated production was lifted from 2,550 mboe/d to 2,702; but his report previously stated his estimate was 2,660 mboe/d.
The CVX earnings per share estimate was raised from $4.00 (2009) and $6.80 (2010) to $5.70 and $$7.95 respectively, which is significant. But the Total Return estimate was dropped from 22 (high) to 16 (low) in the prior report to 18 and 11, which is a significant move in the opposite direction. Also, the CVX share price has actually lifted +9.90% since the previous quarterly report.
This kind of so-called professional work makes me question the value of Value Line sometimes.
The VL analyst for XOM has kept his 2009 and 2010 estimates reasonably close, but his estimate for TR has dropped from a high-low of 18-12 to 15-9. That is quite an annual drop.
The analyst has an interesting concluding paragraph:
Exxon Mobil shares carry return potential consistent with the superior level of Safety offered. Conservative investors with an eye for the long term and interested in an oil stock might look closer. Year-ahead performance is only ranked as Below Average (Timeliness: 4), though.
Isn’t that a mixed message from an oil analyst: “..investors … interested in an oil stock might look closer”?
The XOM shares have lifted +4.07% in the past quarter, plus the $0.42 dividend, which may not be as good as CVX’s +9.90% gain and dividend of $0.68, but it is a satisfactory return. The question now is whether to buy, sell or hold, and the answer to that lies in the Oil price and word from Goldman Sachs.
For Mar. 14 WIR#11-2010, I note the following:
The RSI charts are telling me now that, all in all, there is no urgency to buy either XOM or CVX here, although the prices have fallen for both over the past 13 weeks.
For Chevron, the CVX [$73.72, down from $77.76 over 13 weeks] Monthly, Weekly and Daily RSI-7 is 50.9 (sidetracking but down over 13 weeks), 47.4 (falling) and 52.9 (rising), respectively.
http://billcara2.com/tkchart/tkchart.asp?stkname=CVX&ind=rsi&wt=3
http://billcara2.com/tkchart/tkchart.asp?stkname=CVX&ind=rsi&wt=1
http://billcara2.com/tkchart/tkchart.asp?stkname=CVX&ind=rsi&wt=0
For Exxon, the XOM [$66.80, down from $72.83 over 13 weeks] Monthly, Weekly and Daily RSI-7 is 40.8 (sidetracking but down over 13 weeks), 47.6 (falling) and 62.7 (recently falling from well above 70), respectively.
http://billcara2.com/tkchart/tkchart.asp?stkname=XOM&ind=rsi&wt=3
http://billcara2.com/tkchart/tkchart.asp?stkname=XOM&ind=rsi&wt=1
http://billcara2.com/tkchart/tkchart.asp?stkname=XOM&ind=rsi&wt=0
From an operating perspective, revenue and earnings metrics are improving in 2010 over 2009, and are expected to improve in 2011 over 2010. However, even in 2011, the revenues and earnings for both companies will almost certainly be less than for 2008, which was a record-breaking year combining higher demand with much higher prices. I think the revenues and earnings of these companies will not reach or surpass 2008 levels until at least 2012, and possibly 2013.
Long-term oriented traders then are looking to accumulate positions when the Monthly, Weekly and Daily RSI-7’s are below 30, which I think will happen in 2010 or 2011. I can wait.
In the interim, I’ll be a trader with my buy orders lined up when the Weekly and Daily RSI-7’s are close to or below the 30 level. I’d also be watching the relative strength of the Crude Oil against the US Dollar ($WTIC:$USD) and the same for the Energy ETF against the S&P 500 (XLE:$SPX) and stock prices against the XLE (CVX:XLE) and (XOM:XLE).
I am always looking for when prices are out of favor, when nonsense is being written about these solid companies, as to points of possible entry. The converse is true for when I look for an exit. Comparative relative strength is a tool that helps one focus on the data and find the anomalies, while laughing at the Talking Heads.
These companies have sound finances, with “1” Safety ratings by Value Line. Their dividends are protected by strong balance sheets, high and growing cash flow and fairly low pay-out ratios. If you can buy in when dividend yields are in the 3.5% to 4.0% level or better, you get a real bargain because the dividends ought to grow each year.
The fact that Exxon agreed to pay about $37 billion to acquire the natural gas giant XTO Energy is a good thing for Canada’s EnCana (ECA). It showed me the high valuation put on natgas by Exxon, and led me to re-appraise ECA, putting the company back into the Cara 100.
Also, I put CVX back into the Cara 100 too as we like to trade the stock. If you look across the top of the Value Line report you will see a good spread in the hi-lo prices each year, far more than the company valuation. Since CVX has a market cap of about $150 billion, that could be a swing of $40 to $50 billion, leading me to want to be a buyer after sell-off’s.
All in all, many of my previous quarterly review notes apply here. These leopards do not change their spots.
The Dow 30 Company links in chronological order of the upcoming reports.
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)
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 Mar. 12: next one is due Jun. 11)
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 Mar. 12: next one is due Jun. 11)
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, eight sectors up. Only Consumer staples (XLP) and Utilities (XLU) were down, and the loss in each case was just –0.40%. On Friday, four were down, but only XLU was down much at all.
I didn’t notice any sector rotation going on – just a general lack of interest overall.
When Telecom (IYZ +2.49%) is the leading performer of the ten sectors, it’s hard to get too excited.
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 will try to get this task done this week coming, just like I’ll try to make the necessary changes in the files for the many changes made in the Cara 100 companies.
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 |
This week, with the Crude Oil price lifting +$0.04/bbl (+0.05%) to 81.54, you should not expect much movement in the energy stocks, and there wasn’t. The XLE was up +$0.35 (+0.60% W/W) to 58.50.
PetroBrazil (PBR +4.8%) and TransOcean (RIG +2.1%) were the big leaders on my Energy monitor, while Chevron (CVX –0.8%) was the weakest.
As you recall, I recently put Chevron (CVX) back into the Cara 100. This week, I review Chevron along with Value Line.
If you recall, I also added Encana (ECA) to the Cara 100, and removed Imperial Oil (IMO). Encana is a pure natural gas player, second biggest in North America (and first once XOM takes over XTO). We need a gas play. XOM owns 70% of IMO, so while IMO is an outstanding company, in my view, ECA is the better fit, and we don’t trade IMO. ECA used to be in the Cara 100 when it was a gas and oil company, but in December the company was split into two separate entities. I think Encana will grow its revenues and earnings by +10% to +12% for the next several years, which is likely to surpass the Chevron performance.
XLE:$SPX shows recent resistance relative to the broad index, and certainly no present indications of an entry point.
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 gained +$0.12 (+0.36% W/W) to close at 33.29. The $USD dropped –081% this week, so traders were a bit surprised at the modest increase s in the Crude Oil and ETF prices.
Anyway, I still 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, was up +3.5% this week, to take top performer in this sector from among the stocks I monitor. A week ago the share price soared +12.9%.
The monster base metals miner from Brazil, Vale (VALE) was the weakest, dropping –2.1% W/W after soaring +10.1% a week ago.
After the prior week’s run-up, along with Teck Corp (TCK +10.0%), Rio Tinto (RTP +8.9%) and BHP (BHP +8.0%), I remarked, “These are mega cap stocks, probably averaging $100 billion, which leads one to believe that prices like this, moving so much in a week, are not sustainable. There was little of consequence the analysts knew this week that wasn’t priced into the stocks a week ago. This is hot money, I think.”
XLB:$SPX shows a strengthening position relative to the broad index, but certainly not presently at an entry point.
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 +1.57% W/W to close at 30.37, which was the 4th best of ten sector performers. It was 4th best a week ago, 3rd the week earlier and 2nd the week before that. So, Industrials have been relatively hot.
XLI:$SPX shows an over-bought position relative to the broad index, and presently is at an exit point.
The economy is supposed to be in growth mode and maybe that’s the hand lifting the shippers. Three weeks ago in this space I stated that “Fedex (FDX) and UPS (UPS) are companies that move US manufactured goods, so your research on the state of the economy should start there.”
Two weeks ago, FDX gained +3.7%, and a week ago it was up +2.6%. I said at that point, “But, I’m not yet convinced.” This week FDX dropped –0.9%. But UPS (UPS +4.7%) was very strong, so the jury is still out.
3M (MMM –1.3%) was weakest on my monitor of Industrial stocks this week.
To check on general and detailed info for this industry group, the Thomson Reuters service is a good one:
http://www.reuters.com/sectors/industries/significant?industryCode=52442
Here is the link to all sectors and industries as classified by Reuters:
http://www.reuters.com/assets/siteindex#sectorsAndIndustries
Sector 25 (consumer discretionary: XLY, IYC and VCR)
Here’s the XLY Monthly, Weekly and Daily data charts:
XLY Monthly data: 
XLY Weekly data: 
XLY Daily data:
Table 5: Senior consumer discretionary equities
| Symbol | Close | 1Day Change |
1Day %Change |
1W %Change |
2W %Change |
4W %Change |
YTD %Change |
3M %Change |
6M %Change |
12M %Change |
Consumer Discretionary (XLY) gained +1.32% W/W to close Friday at 32.21, putting it into 5th best performer of the 10 sectors this week after being 2nd best for a couple weeks.
XLY:$SPX shows an over-bought position relative to the broad index, and presently is at an exit point.
Tata Motors (TTM –2.1% W/W) took a breather from its rapid bullish pace over the past year.
But another 52-week greyhound, Brunswick Corp (BC +22.3% W/W) was up sharply. BC has been up +37.5% over 2 weeks and +470.9% over 52 weeks.
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) lost –0.40% W/W to close at 27.48, which was the 2nd worst performing sector on the week, but a loss of just eleven cents.
Starbucks (SBUX +3.9%) was strongest while Walgreens (WAG –3.0%) was weakest.
XLP:$SPX shows a strongly over-sold position relative to the broad index, reflecting that traders have been taking on too much risk in recent weeks, and that XLP is probably at an entry point.
If you wish to remain fully committed to stocks, short-term traders might wish to look at the recent weakest performers here in Staples, and switch out of the high-flyers in the Consumer Discretionary sector.
If the Banks come off next week, that would be a sign that traders are selling risk, which would be a good time to make this trade.
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 +$0.03 (+0.05% W/W) to close at 65.89.
The Medtronic stock (MDT –3.4%) was down this week but has had a good run in the past year and it was up the previous week by +4.8%.
IYH:$SPX, like another defensive sector XLP, shows a strongly over-sold position relative to the broad index, reflecting that traders have been taking on too much risk in recent weeks, and that IYH is probably at an entry point.
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 two weeks ago to #3 one week ago to #2 this week with a gain of +2.10% to close at 15.54. That’s a gain of +5.9% over two weeks and +11.5% over four weeks, which are the #1 sector performers over those time frames.
What this tells me is that after a significant pull-back in January and February, central banks eased money back into the system to avert a crash. There was a bit of a short squeeze, but most traders stepped aside and stayed in cash. So, yes, risk has been taken on, but volumes are so light it doesn’t matter. Once the central banks start to squeeze again, like the People’s Bank of China, traders will rotate out of the sectors that are considered riskiest, and the $USD is likely to strengthen again.
XLF:$SPX, like XLY and XLI, shows an over-bought position relative to the broad index, and presently is at an exit point. What the following chart, and the others, tells you are that risk-takers have bit off a bit too much, and maybe needing a rest.
This week, Citi (C +13.4%) was up quite sharply, and the C is now up +23.7% over four weeks. Should banks pull back soon, the C could take a big hit.
Goldman Sachs (GS +4.7%) was strong again after gaining +6.9% a week ago. So, traders will be focused on the GS this coming week.
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 +1.97% to 22.75) and Semi-conductors (SMH –0.07% to 27.01) were headed in opposite directions this week. Usually the semi’s take the lead, which if it continues would fit my thesis that maybe the broad market is going to pull back here as the risk-takers are now in a risky position with several over-bought sectors that are known as the most aggressive.
A week ago when many of the high-tech stocks were hot [SunTech Power (STP +12.1%), Google (GOOG +7.1%) and Apple (AAPL +7.0%)], RIM (RIMM –2.0%) was not. But this week, RIMM was soaring +8.4%, and STP dropped –4.0%.
Among the semi’s, Micron (MU +5.4%) and Broadcom (BRCM +4.8%) were strong, whereas Texas Instruments (TXN –3.9%) was not.
XLK:$SPX shows an over-bought position relative to the broad index, and also to SMH. I’d consider switching some of the recent high-flyer techs for some of the under-performing semi’s, but would wait a couple weeks before adding new positions in the Tech sector.
When I do, I’d wait until the SMH:XLK shows an accumulation zone for the semi’s, which ought to be after the $USD has had a run, and ready to come off for a bit, allowing the Euro, Crude Oil, Precious Metals and riskier sectors to run higher.
Here’s the SMH Monthly, Weekly and Daily data charts:
SMH Monthly data: 
SMH Weekly data: 
SMH Daily data:
Here’s the XLK Monthly, Weekly and Daily data charts:
XLK Monthly data: 
XLK Weekly data: 
XLK Daily data: 
Table 9: Senior technology equities
| Symbol | Close | 1Day Change |
1Day %Change |
1W %Change |
2W %Change |
4W %Change |
YTD %Change |
3M %Change |
6M %Change |
12M %Change |
| Symbol | Close | 1Day Change |
1Day %Change |
1W %Change |
2W %Change |
4W %Change |
YTD %Change |
3M %Change |
6M %Change |
12M %Change |
Sector 50 (telecom: IYZ, VOX and IXP)
A week ago, I reported that Telecom (IYZ) rang up a win of +2.99% W/W. This week the win was +2.49% to close at 19.75.
Over four weeks, the IYZ is 3rd best performer after XLF (Financials) and XLY (Cons Discretionary), but over 3-months (13-weeks), the IYZ is only 9th best of 10, beating out only Utilities (XLU).
Verizon (VZ +1.7% W/W) and AT&T (T +2.5% W/W) were winners this week, but maybe not for long. Volume here is pathetic, so it’s hard to tell where the pressure is coming from.
Here’s the IYZ Monthly, Weekly and Daily data charts:
IYZ Monthly data: 
IYZ Weekly data: 
IYZ Daily data:
Sector 55 (utilities: IDU, XLU, and VPU)
Here’s the XLU Monthly, Weekly and Daily data charts:
XLU Monthly data: 
XLU Weekly data: 
XLU Daily data:
The Utilities sector ETF (XLU) dropped –0.40% W/W to close at 29.84. It was 29.76 three weeks ago. Not much happening here.
http://billcara2.com/markets/mkview.asp?qte=ss&ty=tk&qt=AEP+D+DUK+ED+EXC...
TransCanada Pipelines (TRP +3.5%) had another good week, following up the previous week’s gain of +5.1%.
XLU:$SPX shows an over-sold position relative to the broad index, and presently is at an entry point. But I would not be interested in the TRP or any of the least defensive Utilities.
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 | 0.13 | 0.12 | 0.08 |
| 6 Month | 0.21 | 0.20 | 0.18 | 0.16 |
| 2 Year | 0.95 | 0.95 | 0.89 | 0.87 |
| 3 Year | 1.50 | 1.50 | 1.40 | 1.43 |
| 5 Year | 2.41 | 2.41 | 2.34 | 2.36 |
| 10 Year | 3.70 | 3.73 | 3.68 | 3.69 |
| 30 Year | 4.62 | 4.67 | 4.64 | 4.63 |
| Maturity | Yield | Yesterday | Last Week | Last Month |
|---|---|---|---|---|
| 2yr AA | 0.86 | 0.76 | 0.95 | 0.79 |
| 2yr AAA | 0.70 | 0.64 | 0.95 | 0.60 |
| 2yr A | 1.12 | 1.07 | 1.05 | 0.82 |
| 5yr AAA | 1.69 | 1.67 | 1.59 | 1.55 |
| 5yr AA | 1.81 | 1.79 | 1.78 | 1.65 |
| 5yr A | 2.01 | 1.97 | 1.90 | 2.09 |
| 10yr AAA | 3.24 | 3.24 | 3.24 | 2.93 |
| 10yr AA | 3.12 | 2.97 | 2.94 | 2.99 |
| 10yr A | 3.63 | 3.35 | 3.81 | 4.07 |
| 20yr AAA | 4.30 | 4.04 | 3.51 | 3.93 |
| 20yr AA | 4.55 | 4.29 | 3.76 | 4.20 |
| 20yr A | 5.23 | 4.97 | 4.74 | 5.44 |
| Maturity | Yield | Yesterday | Last Week | Last Month |
|---|---|---|---|---|
| 2yr AA | 1.29 | 1.28 | 1.30 | 1.44 |
| 2yr A | 1.67 | 1.68 | 1.63 | 1.63 |
| 5yr AAA | 2.91 | 2.85 | 2.78 | 2.84 |
| 5yr AA | 3.15 | 3.14 | 3.10 | 3.25 |
| 5yr A | 3.40 | 3.35 | 3.27 | 3.34 |
| 10yr AAA | 3.69 | 3.66 | 3.75 | 3.56 |
| 10yr AA | 4.97 | 4.99 | 4.99 | 5.13 |
| 10yr A | 4.84 | 4.81 | 4.90 | 4.71 |
| 20yr AAA | 5.16 | 5.16 | 5.18 | 5.61 |
| 20yr AA | 5.48 | 5.53 | 5.49 | 5.61 |
| 20yr A | 6.10 | 6.10 | 6.12 | 6.56 |
This week, the 20- and 30-year US Treasury bonds gained a bit, but the shorter-term bonds pulled back as yields for those lifted between +2 to +7 basis points (bp).
The 20-year US bond (TLT) gained +0.23% W/W to close at 90.48, although all of that was due to Friday’s gain of +0.62%.
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 two weeks ago the impressive market technician Louise Yamada (http://www.lyadvisors.com/) spoke to Bloomberg’s Pimm Fox, with a very negative long-term 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 +6.9% and +5.7% W/W to $1.08 and $1.29 respectively, but this resulted only from a single move on Tuesday.
I maintain that 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
Although the US Dollar pulled back –0.81% this week, $CRB took a loss of –1.31% W/W to close at 273.31.
The 50d MA for $CRB has stayed flat for about seven weeks, now at 276.66, and is consistent with the present price, so the Fed must still be happy.
The 200-day MA has moved to 265.50, up from 264.99, up 264.21, 263.37, 262.55, 261.58, and 260.38 the six weeks earlier. Seven 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 251.47, 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 265-270. 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 +$0.04/bbl (+0.05%) to close at 81.54.
As opined in this space a couple weeks ago, 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 78.32, up from 77.86, 77.23, 76.44, and 76.20 over the past four weeks.
The 200-d MA is at 73.54, up from 73.04, 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 60.60, up this week from 58.94.
Daily chart with $WTIC:$USD at 62.02, down this week from 62.54.
Three 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.”
Two weeks 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 as one week ago the XLE and $WTIC jumped +3.58% and +2.31% respectively.
This week, XLE was up only +0.60% and $WTIC up just +0.05%, so resistance is being encountered. Traders are not so inclined to buy risk at this point.
Here is the e-miNY Dec-07 Crude Oil chart.
Interactive Chart of Weekly Crude Oil:
Interactive Chart of Daily Crude Oil:
Gold & Precious Metals Review
This week, $GOLD had a big loss of -$32.30/oz (-2.85%) to close at $1102.00.
Traders are switching from high-risk positions, which is my current thesis.
The comparative relative strength of Siler to Gold shows an extreme reading in the Daily RSI-7 of 82.1. Sayonara to the precious metal positions and the Euro.
Choose Weekly or Daily charts, depending on your preference, but when you see an extreme in the Daily chart, you ought to pay attention.
$SILVER:$GOLD chart for the Daily price series.
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. 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, three 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.
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 1109.90, up from 1108.19, 1106.34, and back above the 1108.17 from three weeks ago – but not for long, I think.
The 200d MA is 1040.67, up from 1036.71, 1031.61, 1026.87, and 1022.57 over the past four weeks.
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 down -$0.28/oz (-1.61%) W/W to close Friday at 17.07.
http://stockcharts.com/charts/gallery.html?s=$silver
http://tinyurl.com/y8k8ud4
For $SILVER, the 50d MA is now 16.86, down from 16.87, 16.89, 17.02, 17.23, 17.56, and 17.81 over the past five weeks.
The long-term 200d MA is 16.16, up from 16.10, 16.03, 15.97, 15.92, 15.85, 15.75, and 15.65 over six weeks. But, as I opined seven 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.
But, for the short-term view, as expressed elsewhere in various pages in this WIR, I am tending toward the defensive. There is heavy resistance here, and I think the $USD is headed higher. The comparative relative strength of silver to gold is excessive, and in need of a pull-back.
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 +$29.30 (+1.86%) to close at $1608.40. A week ago the gain was +$39.20/oz (+2.55%).
http://stockcharts.com/charts/gallery.html?s=$plat
http://tinyurl.com/ydwz4pn
The 50d MA for $PLAT is now at 1548.60, up from 1533.68, 1520.40, 1511.07, 1506.31, 1502.04, 1493.90, and 1480.91 the previous seven weeks.
The 200d MA is at 1363.46, up from 1352.15, 1341.01, 1331.42, 1323.04, 1312.58, 1305.30 and 1297.81 the prior seven weeks. Seven 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 anticipate some weakness in $PLAT next week. Try to avoid the Down elevator.
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 dropped -$13.15 (-2.77%) to close at 462.25. A week ago, $PALL had soared +$43.00/oz (+9.94%). There was a need to take a break.
http://stockcharts.com/charts/gallery.html?s=$pall
http://tinyurl.com/yenr5rj
The 50d MA is now at 434.95, up from 426.04, 417.55, 411.14, 406.81, 402.56, 396.97, and 390.10 in the seven weeks before this.
The 200d MA is at 335.30, up from 329.51, 323.93, 319.10, 314.77, 310.11, 305.19, and 300.58 in the past seven weeks.
As I continue to 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 lost -$3.75 (-1.10%) to close at 338.00 on the contracts. Prices have been volatile.
http://stockcharts.com/charts/gallery.html?s=$copper
http://tinyurl.com/ybgnb7f
For $COPPER, the 50d MA is at 327.56, up from 326.24, 323.80, 322.54, and 322.07.
The 200d MA is at 289.30, up from 286.09, 282.70, 279.88, 277.48, 274.89, 272.75, and 269.97 in the seven 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.
http://www.google.com/finance?q=NYSE:fcx
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 (-2.79%), GDX (-3.10%) and XGD (-3.90%) all were down. A week ago the $XAU (+5.84%), GDX (+5.79%) and XGD (+3.70%) had all been up sharply. But, a week ago I gave a bit of a heads-up in this space, writing: “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… 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.”
Kinross (KGC –6.4%) and Yamana (AUY –4.6%) were down the most this week among the precious metal stocks I trade.
I think there will be further weakness this coming week. I think we are about to see a brief surge in the US Dollar that could take a further -$100-$110 off the price of Gold. If that should happen, I will be loading up the truck with the high quality Goldminers, and some of the juniors we like.
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 $USD is a mean value of rate fluctuations of six world currencies (Japanese yen, Euro, British pound, Canadian dollar, Swiss franc and Swedish krona) that each trade against the USD. The Euro is by far the biggest component.
The ETF that tracks the G-10 currencies is the Powershares DBV. http://tinyurl.com/ltxpk4
Precious metals have not seem pressured one way or the other by the US Dollar for the past couple weeks. But then again, the Dollar has gone almost nowhere.
http://stockcharts.com/charts/gallery.html?s=$usd
http://tinyurl.com/y9c3sr4
Five weeks ago, the $USD gained +1.13% to move up from 79.47 to 80.36. This week there was a loss of –0.81% from 80.46 down to 79.81. We ought to be getting into support near here.
The 50-day MA of the $USD is now at 79.23, up from 78.99, 78.69, 78.25, 77.85, 77.30, 76.87, and 76.52, in the past seven weeks, and still rising, up to near the current price level.
The 200-day MA is 78.04, down from 78.05, 78.10, 78.16, 78.24, 78.37, 78.53, and 78.69. Yes, as the US dollar 200-d MA has been dropping, I’ve been saying in recent weeks, “there is a base forming near this level. Longer-term I think the $USD is going higher”.
I think we are close to that point now.
Interactive Chart of Daily U.S. U.S. Dollar Index:
This week, the Euro contracts ($XEU) gained +1.06% to close at 137.67. The Euro had been down the prior week, but gained +0.29% on that Friday, so the Euro over six sessions was stronger, which has been consistent with the move in $GOLD, the other precious metals, copper and $WTIC. But now I anticipate the Euro running into resistance and backing off again.
http://stockcharts.com/charts/gallery.html?s=$xeu
http://tinyurl.com/ydekjtk
The 50d MA for the Euro futures are now at 139.22, down from 139.99, 140.67, 141.79, 142.85, 144.18, 145.26, and 146.18 over seven weeks.
The 200d MA is at 143.22, not far off the 143.28, 143.27, and 143.26 of the previous three weeks, and close to the 143.20, 143.06, 142.86, and 142.67 over the weeks before that. This reversal is likely to continue as the Euro weakens here.
Three 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.”
$GOLD did move sharply up to about 1145 before backing down to its present level of 1102, likely headed much lower as the euro weakens for a few weeks.
Interactive Chart of Weekly Euro Dollar Index, priced in USD:
Interactive Chart of Daily Euro Dollar Index, priced in USD:
The Pound gained +0.55% to close at 152.13, which, along with strength in the euro, helped push the Dollar down.
http://stockcharts.com/charts/gallery.html?s=$xbp
http://tinyurl.com/yasdzc2
A week ago, I opined here, “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.” Bingo; the action started Friday when the Pound soared +1.00%.
While I say don’t hang in too long because of an anticipated Dollar rally, I also think that a stronger Dollar will hurt the Euro more than the Pound for several weeks.
The 50d MA of the Pound is at 157.30, down from 158.19, 159.34, 160.25, 160.98, 161.89, 162.71, and 163.25 over the past seven weeks.
The 200d MA is 162.13, down from 162.34, 162.39, but close to the earlier weeks at 162.34, 162.21, and 161.97.
Weekly British Pound Index:
Daily British Pound Index:
Weekly Japanese Yen Index:
The Yen dropped –0.34% to 110.43.
http://stockcharts.com/charts/gallery.html?s=$xjy
http://tinyurl.com/yd2fzv4
The Yen’s 50-day MA is now 110.44, up from 110.27 and 110.14, but close to the previous weeks at 110.31, 110.54, and 110.88.
The 200-day MA is now at 108.78, up from 108.65, 108.46, 108.23, 108.06, 107.85, 107.60, and 107.33 the previous seven weeks.
Daily Japanese Yen Index:
The Canadian Dollar jumped +1.01% to close at 98.11, and just when the Talking Heads are shouting prospects of Dollar parity, I’m thinking the Cdn Dollar is now going to soften, along with Oil and Precious Metal prices and a stronger USD.
http://stockcharts.com/charts/gallery.html?s=$cdw
http://tinyurl.com/ycx58us
As the Loonie flew over several recent weeks, I stated, “…the higher oil, metal and precious metal prices helped. Canada is a storehouse of commodities.”
But I think we’;ll soon see a 95 or 96 cent Loonie at the first leg of the journey south, and then 94 for a test of the longer term MA at that point. So, now is the time for Canadians to be buying $USD and US real estate and anything Yankee.
The Loonie 50-day MA is now at 95.59, up from 95.36, 95.09, which had been pretty much unchanged from 95.04, 94.97, 95.04, 95.09 and 95.22 the weeks before.
The 200d MA is at 93.10, up from 92.88, 92.60, 92.38, 92.16, 91.86, 91.55 and 91.25 over the previous seven 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:
The Prospectors and Developers Association of Canada (PDAC) held what was their most successful convention, trade show and investors exchange in their 76 year history. There were 21,660 total in attendance, with 50 countries and over 1,000 companies officially participating. Many of you were there and can attest to my claim that this is the best possible opportunity to meet the industry, the analysts and the newsletter writers, and spend personal time with many of the people you regularly read about or watch on TV. More than just learning and networking, PDAC is a fun time, at virtually no cost. If you spend the four full days there, however, it can be exhausting.
http://www.pdac.ca/pdac/conv/2010/pdf/media/100310-convention-tidbits.pdf
I was also fortunate this week to be invited to meet the investment committee of Horizons Exchange Traded Funds (ETF), which I think went well. Hopefully we will have some news later this month. I also had meetings with individuals to discuss the possibility of setting up an exchange traded closed-end fund for junior miners. There were probably a solid 30 candidate companies exhibiting at PDAC whose shares I’d like to accumulate over time in a fund that shareholders could buy on a stock exchange, but would not be an ETF.
An actively managed ETF differs from an exchanged traded closed-end fund in that an ETF works like a mutual fund in real-time, with a market maker buying and selling shares from the ETF to keep the share price current with the Net Asset Value (NAV) during the day. It’s a wonderfully efficient tool for buying the expertise of a particular fund manager.
But there are several constraints with an actively managed ETF: (i) the market maker needs liquidity, so the manager is not able to trade small cap stocks; (ii) market at open and close orders, with minimal intra-day trading is allowed; and (iii) put and call options are too difficult (presently) for the market maker to manage. In any case, this vehicle is so superior to mutual funds or, as I see it, to passive, index-based ETFs that I am planning to offer a Cara 100 Model Portfolio ETF. If that turns into a success, I will want to be able to offer specialty ETFs, including one for Natural Resources, and for Metals.
For the very small miners and developers that our fundamental research team recommends taking long-term positions in the shares, I will need to organize a public company vehicle that would operate as a closed-end fund. While closed-end funds trade on an exchange, the number of shares does not change, so as the market price changes, there is often a large premium or discount to the NAV, depending on liquidity. Of course, if the shareholder’s intent is to buy-and-hold, the premium/discount is not nearly as much a factor as is the ability of management to build NAV over a long period of time.
In any case, I feel confident that in the past 18 months, I have built the team to succeed as a capital manager. We now have in place, or will within three months, a fleshed out system of excellent traders, fundamental and technical analysts, a risk manager, a R&D team to build proprietary market timing models, market information tools, a research collection and database system, a trader education system, and corporate communication systems that include websites, opt-in emails and the like. Now I have to pull the pieces together so that we achieve optimal performance results.
I was very pleased at the results of the Cara Bahamas 2009 Conference March 28-30 in Nassau and the 2010 conference in Freeport January 15-20. We are working on a video for the 2010 conference that will go up on the website along with the 2009 one, which will show the good times had by all. But I have to say these one-off conferences are difficult and costly to organize and put on. So, we may be making a number changes.
This week, my daughter Stefanie, who from all reviews did a terrific job of managing the recent conference, will be checking out a Miami-Nassau cruiseship as a possible future conference venue. On her return, she will prepare a discussion paper for submission to the management of all the major cruiselines that we think may be able to meet our needs.
Obviously, I’d like to meet the public who might be interested in actively managed fund companies, and this appears to be a good way to do it for me. No promises, but we’re looking into it.
If the interest is there, she’ll look into the possibility of my offering one or two-day workshops out of cities such as possibly Montreal, Boston, New York, Baltimore, Norfolk, Charleston, Jacksonville, Ft. Lauderdale, Miami, Mobile, Galveston, LA, San Francisco, Seattle and Vancouver. I might also do some in connection with investors’ meetings in hotels in various cities, like say the Saturday in Toronto before PDAC 2011, or in Europe and Asia-Pacific.
The issue really is the best use of my time. My first priority in business is to conference calls with my trading and risk management teams, and then to writing the WIR and the morning blog. As long as I’m having fun, and don’t get run down from exhaustion, I don’t mind where I spend the rest of my time, whether it’s in Bahamas or elsewhere. I just like to be active.
Funny situation happened this week. During the meeting with the Horizons executives, I stated that I like to start things from scratch, and then retire, but now with client responsibilities and maybe an ETF, I’ll never retire again. You know, my late Dad was day trading his portfolio on an IBM Thinkpad at the age of 85. I’d love to be doing the same.
I may not like the way Humungous Bank & Broker (HB&B), the Fed, government regulators and our politicians have screwed up the capital markets so badly, but really there is nothing I’d rather be doing than trading prices.
Enjoy the rest of your weekend.
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