[10:16am ET] I regret having to miss a couple weeks of the Week In Review, for several reasons, not the least of which is that I do this report for myself too, as it forces me to study the big picture of the global capital market. Once I am away from the trenches, it usually takes me as long as I have been away to get my groove back. I don’t care whatever the endeavor; every professional needs a regimen of daily practice to stay on top of their game.
Of course, I never get far removed from the market; however, the past two weeks, with the conference and then with installing new computer systems, I have been distracted.
Do you recall what I wrote in WIR#12, my last one before this?
[Sunday March 22 6:53pm ET] In my momentum studies, I can see that early February was similar to the situation the market is in today. Using the Monthly-Weekly-Daily Relative Strength Index (RSI) technical indicator as a guide, I could see, without looking at index values, that the momentum of the market was headed south. Then in the last week there was a change in the Daily RSI’s for each of the NASDAQ, S&P 500, DJIA, and Russell 2000 (small caps), but the Monthly and Weekly RSI’s were still dropping. In the first week of March, all indicators were headed south again. Then a week ago, there was a clear turn as 30 of 30 DJIA components made gains as did 10 of the 10 market sectors, and all time series of the RSI turned to head north. So, I concluded that it was a time to watch markets closely. We were getting a number of Buy Alerts on our ‘simple little system’ and many were paying off with big moves after the signal. This week, the Daily has turned south again, right after Wednesday’s FOMC announcement to reflate and stayed that way after Treasury Secretary Geithner said that he had a plan to announce soon as to how the government intends to deal with toxic assets held by banks. The Monthly and Weekly RSI indicators, however, are still pointing north.
So, I interpret this situation as being one of wait-and-see what Geithner has to say, and then watch the Financials to see if the traders there like the way the stars have lined up. If so, then this market, from small cap to large, will be ready to move higher. With extreme reflation indicated by the printing of money in the order of at least $1 trillion, the Energy, Basic Materials, Industrials, Tech and Utility sectors will likely be the primary beneficiaries; however, with the tox assets being made atoxic, if you will, the Financials will certainly also rally, and if that happens, the Consumer Discretionary sector will get a leg up too. Taking on more appetite for risk will mean that Consumer Staples and Healthcare companies are likely to be laggards unless they happen to be hyped on rumored or actual take-over plays, where their stock is going to be bought for a premium.
The following morning told me all I needed to know:
[Monday March 23 6:51am ET] TAP, TAP, TAP… BOOM. You must be deaf if you don’t hear the opening shots of the next Bull phase of the equity markets. They are coming in from all over the world this morning…
So the beat goes on. I had opined that the G-20 meeting would be the crucial factor, and it has been.
Tony Boeckh, Boeckh Investments Inc., formerly the owner and operator of the outstanding Bank Credit Analyst writes that the shape of life after the G-20 meeting has become clear.
The countries that can, will sustain quantitative easing and unprecedented levels of fiscal stimulus, until the threat of debt deflation and mass unemployment recede. The great global reflation is now well underway. At the G-20 there was virtually no discussion of future monetary discipline, control of Government debt: GDP ratios, and the critical need for the reserve currency country to stop running balance of payment deficits. Therefore, asset price bubbles, banking crises and massive bailouts will likely become regular occurrences in the future.
This assessment is along the lines of my comments in the last Week In Review (dated March 22). Reflation of the type that occurred in the 1930’s is the way out of the mess caused by Humungous Bank & Broker (HB&B) and permitted by politically compromised regulators.
Mr. Beockh continues:
Much higher volatility is here to stay following below trend volatility while the credit bubble was inflating. As the US economy recovers, expect the US current account deficit to explode upwards again, the Chinese and others to buy dollars and, as always, instantly return them to the US money markets. As Jacques Rueff famously remarked, ‘the childish game of marbles, where the winner returns his marbles to the loser after each round’ will continue. Artificially low interest rates will prevail, and the resumption – with a lag – of credit inflation, in both the surplus countries and the US, will resume.
Interestingly, Mr. Boeckh’s recommended asset classes and equity sectors are similar to my own, with some explanation.
The odds are high that US stocks have put in their lows; the excellent rally off the February bottom has taken the S&P back to the long-term falling trend line. A period of correction is natural, possibly a test of the lows (unlikely), followed by more upside. US markets will be in a wide trading range for a very long time and it will take years before the old highs are exceeded. There is still a lot of stress out there and it is not going away anytime soon.
Other markets, like China, Hong Kong, and Canada look better. The trend of narrowing credit spreads will continue but high volatility must be expected as bankruptcies lag the cycle. Commercial real estate is heading for a train wreck. Government-controlled rates will stay low.
Gold continues to struggle for the reasons mentioned in earlier commentaries – global deflation and excessive speculation. The flows into Gold ETFs has been massive as speculators discount a weaker dollar, and inflation, which is years away. Long-term, gold will prove to be a useful asset.
The lows in the pound sterling, Euro and Canadian dollar are in place, but it will be some time before large gains are made. The trade-weighted dollar is still 15% above its 2008 low and will weaken gradually.
Crude oil has also put in its low and higher prices will gradually emerge. OPEC spare capacity and high inventories will prevent major increases for some time. Canada, Norway, Colombia, and other net energy exporters will clearly be beneficiaries of this trend.
Regarding the opinion that US stocks have put in their lows, I am on the record being in agreement. I also think there will be during 2009 a re-test of those lows (S&P @ 666) and DJIA @ 6470). I look back to the 1930’s and see five Bull phases that averaged gains in the DJIA index of almost +100% each, and think we are in similar market conditions today, so while the S&P is presently at 856.56, and apparently breaking out to the upside well above the technical resistance of 850-855, and may reach 950-1000 as the shorts get squeezed further, I also think that 675-700 is possible on a fear-ridden spike this year.
With so much uncertainty and volatility in capital markets today, wealth must be protected through moving stops and use of options tactics, where possible.
Regarding gold and inflation vs deflation, let’s look at facts.
During the period of greatest inflation in the past 100 years, 1966-1980, while the DJIA increased just +8%, the price of gold lifted +2300% and Homestake Mining (biggest gold producer at the time) gained +506%. So, gold bullion and related securities were the #1 investment.
During the period of greatest deflation in the past 100 years, 1929-1939, while the DJIA dropped -61%, the price of gold lifted +69% and Homestake Mining soared +506%. Gold bullion and related securities were also the #1 investment during deflation as well.
Since there are arguments being presented in favor of both inflation and deflation, my view is that, while ultimately inflation will be the most likely case, it doesn’t matter to traders who are concerned about the short- and intermediate-term.
Like a Bull market or a Bear market, no one knows which is which, until there is a price move in the major indexes of +/- 25%; and with today’s extreme volatility even that industry accepted definition is now considered dubious.
So, for many months, we have been positioned in our accounts to favor the asset bubble that Mr. Boeckh writes about. In addition, I have written recently that I believe gold will be hit a price of $2000 by the end of this year.
About China, Mr. Boeckh writes:
As the principal counter-party to both the US current account and fiscal deficits, China is in a unique position and is currently undergoing a transformation to a fully developed economy that will be accelerated by the current financial crisis. The Chinese and Hong Kong stock markets are two bright spots for global investors, up 80% and 45% respectively from the lows. The former has crossed above its rising long-term moving average, almost always a sign that a new bull market has begun. The dramatic 70% sell-off in 2008 from the peak, not only cleansed speculation but, discounted a recession far worse than what appears to have occurred in China. There is evidence to suggest that the economy bottomed in the IV Q and growth is accelerating. One good barometer is the copper price, which is looking quite frisky, driven in part by heavy Chinese buying in anticipation of much stronger industrial growth.
The key issue is dependence on exports, which accounted for 8.9% of GDP in 2007. Exports, which have fallen by 50% since mid-2008, are not likely to recover much in the near future. But this weakness is being tempered by massive fiscal stimulus, and the authorities are pursuing polices to support domestic consumption. The contribution of consumption to GDP growth surpassed that of investment in 2008. Consumption has been supported by strong income growth and the savings rate remains high, giving consumption significant room to grow further. Fixed investment has also beaten analyst
expectations in the last quarter. The real estate market has also defied the China bears, as transaction volume remains high, and prices in major cities are now rising.Given the authorities’ capacity to increase the size of stimulus further if needed, it is likely that a soft landing is in store for China, if not already in place. GDP growth and unemployment may continue to surprise on the upside. The market is still 60% below peak values, and is trading on a P/E of 11x FY09E (based on JP Morgan’s growth forecast of 7.4%).
We continue to like China for the long run, but investors have to be prepared to live with sharp corrections in the short-term. For those who want generic exposure, there are a variety of Exchange Traded Funds (ETFs) with modest transaction and management fees.
Claymore/AlphaShares China Small Cap Index ETF (HAO) is one that we think investors should investigate.HAO gave a high-risk Buy signal on Thursday. There was a 52-week low of $9.23 set on Oct 28, and a short-term cycle high of $16.43 set on Monday and at $16.36 on Thursday before closing at 15.72. The gain from low to high was + 78.3%, so profit taking on a broad market pullback could be a factor. But, high-risk Buys are usually late-cycle moves, and tend to be above average as short sellers tend to come in and later get squeezed.
Any late-cycle purchase requires closer attention to the use of stops (or option tactics) for protection.
Interestingly, HAO is presently at 59.43% of its 52-week high while the Russell 2000 small cap index of US equities is at 61.25% of its 52-week high.
With regard to the other comments on China by Mr. Boeckh, I am a believer. The two primary themes of the recent Cara Bahamas 2009 Conference were (i) China and (ii) gold. My company plans to issue a China-based exchange-traded closed-end fund this year. I am also giving consideration establishing an office in Hong Kong because I am seriously concerned about high-handed tactics of the G-20 nations regarding countries like Bahamas that have legitimately elected to adopt a different fiscal regime than theirs. It will be a long time, if ever, before these G-20 fraudsters ever tell China what to do with Hong Kong and Macau.
As a trader of risk, I seek comfort above all.
Finally with respect to Tony Boeckh, seldom do I report to this extent on the commentary of someone else, but I have long held a high regard for the professionalism of this outstanding Canadian economist. Please see the attachment at the end of the WIR.
Now, let’s get on with the task. How did the market do this week, and how does it look to us.
Global Economics Review
With the G-20 meeting communiqué plus the FOMC and Bank of Japan policy decisions within a short span, this was a power packed week for information that did in fact significantly affect capital markets although, as yet, the prices have not yet shown it.
Weekly International Economic Report .
Econoday summarized their Weekly International Economics report as follows:
With the dawning of a new quarter, risk once again reasserted itself and investors looked ahead to earnings reports with dread. Latent worries about banks resurfaced as well as investors faced the prospects of what those earnings reports might reveal. Overseas equities, especially in Asia, in large part took their cue from U.S. market behavior. Despite risk concerns, equities were mixed at the close of business on Thursday (most markets are closed on Friday)… Several Asian/Pacific central banks met last week with the Reserve Bank of Australia — one of the few central banks that has substantial wiggle room left — lowering its key rate by 25 basis points to 3 percent. However, the Bank of Japan, which made its announcement shortly before the RBA, does not have wiggle room. As a result, it resorted to expansion of its non-traditional policies regarding loans — it widened the range of collateral it would accept — as it tries to dig Japan out of its deep recessionary hole. And for the Bank of England, interest rate change was not on the table — rather the results of their quantitative easing program were under review.
In my summaries here, I rely on the Econoday service. It costs nothing, but its value to me is huge. Anne Picker of Econoday is an economist whom I like reading because every week she writes truly informative, concise, and objective reports that can actually teach you something you can use in your trading decisions. I put the time and effort into summarizing the reports, but I leave the links in because the individual reports contain terrific charts and other information, and after the report is published, the link leads to the updated report. Be sure to get the latest report though; so read the date.
Here are the key US economic reports from this past week: US Economic Calendar.
US Consumer Credit report for Feb. After the data release, Econoday reported, “Consumer credit outstanding fell $7.4 billion in February, just about reversing a sharp $8.1 billion climb in January ($1.8 billion first reported). Revolving credit, down $7.8 billion, was behind the month's decline. Non-revolving credit rose $0.3 billion. Declining levels of consumer credit have been a chief feature of the economic collapse, the result of tightening lending standards and declining demand for borrowing. Today's report may encourage further policy efforts to widen bank lending.”
US Wholesale Trade data for February. After the data was released, Econoday reported, “February's wholesale trade is the latest report to fall into the growing plus column for the economy. Wholesale inventories fell 1.5 percent, the biggest percentage drop in 17 years and extending a string of declines as wholesalers scramble to reduce unwanted stocks. And a 0.6 percent rise in sales for February will help wholesalers in their efforts. Lower stocks relative to sales shaved 3 tenths from the stock-to-sales ratio which is now a less heavy 1.31… Autos showed the steepest draw in wholesale inventories at -7.9 percent in the month as the auto industry desperately tries to bring stocks in line with sales. Wholesalers drew down stocks across categories including furniture, metals and machinery… Factory inventories have already been reported showing a 1.2 percent decline for February. This decline together with today's decline point to an overall decline for Tuesday's business inventory data which will include the missing retail component. Today's news is good news suggesting that the nation's purchasers are finding traction in their efforts to cut inventories.”
US Petroleum Inventories for week of April 3. Following the data release, Econoday reported: “How long can oil prices remain near $50 with stocks rising and demand on the slide? Crude oil inventories jumped 1.7 million barrels in the April 3 week. Inventories for refined products were mixed showing a 3.4 million barrel draw for distillates but a 0.6 million build for gasoline, which is the more important of the categories going into the spring driving season… And rising pump prices are keeping demand down going into the season. Demand is down 0.2 percent year-on-year, a disappointment following mild improvement through most of the first quarter. Badly swollen stocks are keeping refinery activity down as refineries operated at only 81.8 percent of capacity in the week… Bulls justify $50 oil by pointing to rising expectations for global economic recovery and expectations that the U.S. driving season is about to give a strong boost to demand. Oil prices fell in immediate reaction to the news before bouncing back to pre-data levels near $49 for West Texas Intermediate.”
US Fed FOMC Minutes of the Mar 17-18 meeting. After the data was released, Econoday reported, “he minutes of the March 17-18 FOMC meeting showed worsening in the economic outlook by FOMC participants and by the Board's staff economists. It was specifically noted that conditions had worsened since the prior FOMC meeting when compared to their expectations. The minutes took a very different angle as participants agreed that further easing was needed beyond the fed funds target range of zero to one-quarter percent already established this past December. Discussion focused on how much to expand the Fed's balance sheet-so-called quantitative easing… The Fed's staff lowered their projections for 2009 and put recovery off until early 2010. As a result, unemployment projections were raised significantly…. "The staff's projections for real GDP in the second half of 2009 and in 2010 were revised down, with real GDP expected to flatten out gradually over the second half of this year and then to expand slowly next year as the stresses in financial markets ease, the effects of fiscal stimulus take hold, inventory adjustments are worked through, and the correction in housing activity comes to an end. The weaker trajectory of real output resulted in the projected path of the unemployment rate rising more steeply into early next year before flattening out at a high level over the rest of the year." Inflation was expected to remain "subdued."
Turning to comments by participants, what particularly stood out to them was the unexpectedly sharp drop off in exports. This sector was no longer seen as supporting growth in the U.S. Participants were not so optimistic about housing despite some modestly positive news prior to the meeting… "Participants did not interpret the uptick in housing starts in February as the beginning of a new trend, but some noted that there was only limited scope for housing activity to fall further. Nonetheless, large inventories of unsold homes relative to sales and the prospect of a continued high level of distressed sales would continue to hold down residential investment in the near term."
You can pretty much sum up the discussion of potential changes in monetary policy as just like Dorothy telling Toto that it looks like we aren't in Kansas anymore. It wasn't about interest rates-it was about expanding the Fed's balance sheet. Discussion was on several issues-how much to expand, the timing, and what securities to purchase. In the end, participants compromised on a rather large boost in the Fed's balance sheet but also agreed to give the Trading Desk discretion on how fast to make the purchases.
"In the discussion of monetary policy for the inter-meeting period, Committee members agreed that substantial additional purchases of longer-term assets eligible for open market operations would be appropriate. Such purchases would provide further monetary stimulus to help address the very weak economic outlook and re-duce the risk that inflation could persist for a time be-low rates that best foster longer-term economic growth and price stability. One member preferred to focus additional purchases on longer-term Treasury securities, whereas another member preferred to focus on agency MBS. However, both could support expanded purchases across a range of assets, and several members noted that working across a range of assets and instruments was appropriate when the effects of any one tactic were uncertain… Ultimately, members agreed to undertake additional purchases of agency MBS of up to $750 billion and of agency debt of up to $100 billion, and they also agreed to purchase up to $300 billion of longer-term Treasury securities. The Committee believed that purchases of these amounts would help to promote a return to economic growth and price stability. The period for conducting the agency debt and MBS purchases was extended from the next three months to the next nine months; members agreed to allow the Desk flexibility within this horizon to respond to market conditions.” … FOMC participants did want the pace of purchases tempered by the likely impact of new expansion of TALF facilities. This was a key reason the Desk was given a lot of flexibility.
The bottom line is that the economy worsened more than expected since the end of January in the Fed's view. But the Fed also is injecting liquidity at a rapid pace. We can count on seeing huge increases in the Fed's balance sheet in coming months.
US Jobless Claims for the Week Ending 4/4. After the week’s data was released, Econoday reported, “Jobless claims data are mixed with initial claims showing some improvement but continuing claims showing deterioration. Initial claims for the April 4 week fell 20,000 to a lower-than-expected level of 654,000 (prior week revised 5,000 higher to 674,000). The latest level, right in the middle of readings over the last eight weeks, still remains extreme… Continuing claims, in data for the March 28 week, rose 95,000 to a record level of 5.840 million -- confirmation that jobseekers are having a very hard time finding work. Over the last five weeks alone, 766,000 unemployed workers have been added to the continuing claims list. There were no special factors affecting any of the data… There's a lot of economic numbers this morning including a shocking fall in the trade balance, but the jobless claims report indicates little let up in labor force contraction.”
US Import and Export Prices data for March. After the data was released, Econoday reported, “The rise underway in oil is making for higher import prices which rose 0.5 percent in March to end a very long string of declines. Prices for imported petroleum products jumped 10.5 percent in March following a 5.2 percent rise in February, gains that compare with a long run of steep declines… But a key number in this report, one that offers indications on price pressures for imported finished goods, is ex-petroleum import prices which fell 0.7 percent, the third straight 0.7 percent monthly decline to extend a long streak of declines that have raised major concerns of disinflation/deflation among policy makers. Prices for imported capital goods fell 0.3 percent in the month with prices for imported consumer goods (ex-auto) down a steep 0.5 percent… Export prices, much less affected by oil, are also showing contraction, down 0.6 percent in the month following a 0.3 percent decline in February. Prices for farm exports fell 3.5 percent, excluding which export prices were down 0.3 percent… Monetary policy across the globe is aimed at stimulating demand and stimulating prices. The rise underway in oil, which is holding above $50, will pass through to other prices and go a long way to ease deflationary concerns. Today's data, despite the ex-oil declines, point to positive price pressures in next week's producer and consumer price reports."
US Treasury Budget for March. After the data was released, Econoday reported, “The Treasury's deficit in March was higher than expected at $192.3 billion. Again, that is one month's total! Half way through the fiscal year the deficit stands at $956.8 billion, about double the deficit at this time last year. Data on stimulus fills the report with spending on housing & economic recovery at $46 billion in the month, mortgage securities purchases at $17.4 billion and TARP outlays at $2.9 billion. This spending, as heavy as it is, is sustainable as long as there are buyers at Treasury auctions.”
Here are the key US economic reports on next week’s calendar.
US Economic Calendar for the week of Apr. 13.
US Producer Price Index for March. After the February data was released, Econoday reported, “The producer price index in February rose a modest 0.1 percent, following a 0.8 percent boost in January. Meanwhile, the core PPI rate eased to 0.2 percent rise after a 0.4 percent increase the prior month. For the headline number, the slowing was primarily due to a 1.6 percent drop in food prices. Energy increased 1.3 percent after a 3.7 percent boost in January. Looking ahead, a rebound in oil prices is likely to boost the headline PPI in March.”
US Retail Sales data for March. Following February’s data release, Econoday reported: “Retail sales in February fell back 0.1 percent after a 1.8 percent rebound in January. But weakness was largely in motor vehicles. Excluding this component, retail sales increased 0.7 percent, after a 1.6 percent gain in January. While gasoline sales were up sharply, this was not the only factor behind better sales. Excluding motor vehicles and gasoline, retail sales still posted a 0.5 percent advance after jumping 1.4 percent rebound the previous month. Looking ahead, the headline number for March likely will get help from higher gasoline prices and from a bump up in motor vehicle sales.”
US Business Inventories data for February. After the January data was released, Econoday reported, “Business inventories fell 1.1 percent in January, surprisingly in line with sales which fell 1.0 percent. Pulling inventories lower was destocking at retailers where inventories fell 1.7 percent, and particularly at auto dealers who cut inventories by 4.4 percent. We will likely see a decline in inventories in February as retail sales spiked 1.8 percent for the month and manufacturing inventories dropped 1.2 percent.”
US Consumer Price Index data for March. After the February data was released, Econoday reported, “The consumer price index rose 0.4 percent in February, following a 0.3 percent boost the month before. Meanwhile, core CPI inflation came in at 0.2 percent, unchanged from January and matching the consensus. The headline number was boosted by higher oil prices as seen in the 3.3 percent jump in energy costs, including an 8.3 percent spike in gasoline prices. Food actually slipped 0.1 percent. Looking ahead, the headline number is likely to be on the high side as oil prices have been firming.”
US Empire State Manufacturing Survey data for April. After the March data was released, Econoday reported, “The Empire State manufacturing index fell 3-1/2 points in March to a very low and contractionary minus 38.2. New orders were even weaker at minus 44.8, down nearly 15 points. A positive in the report was improvement in the 6-month outlook where readings generally edged into positive ground. But that optimism is for further down the road-the deeply depressed and negative new orders number suggests another decline in the overall index for April.”
US Industrial Production data for March. After the February data was released, Econoday reported, “Industrial production posted its fourth consecutive decline in February, dropping 1.4 percent in February, following a 1.9 percent fall in January. But the headline number for February was pulled down heavily by a massive 7.7 percent drop in utilities output due to above average winter temperatures. The manufacturing component fell 0.7 percent after a 2.7 percent drop in January. But manufacturing was bolstered by the return of auto assemblies. Looking ahead, outside of a likely rebound in utilities output, industrial production is likely to post another drop in March. More recent manufacturing surveys have been deeply negative and production worker hours in manufacturing fell 2.1 percent in March.”
US Housing Starts data for March. After the February data was released, Econoday reported, “Housing starts in February made a significant comeback but it likely was mostly a technical rebound after January's very low number. Starts jumped 22.2 percent, following a 14.5 percent drop in January. The improvement in starts was led by the multifamily component which made an 82.3 percent monthly surge while the single-family component edged up 1.1 percent. It strongly appears that worse-than-average weather in January in the South contributed to the decline in January and better-than-average weather boosted starts in February. Although there are signs of improved home sales, there is not yet reason to expect any real pick up on construction as supply remains quite elevated-- 9.7 months for existing homes and 12.2 months for new homes on the market.”
US Philadelphia Fed Survey for April. After the March data was released, Econoday reported, “The general business conditions component of the Philadelphia Fed's business outlook survey index rose 6 points in March but remained at a still severely depressed minus 35.0 level that indicates a great many more manufacturers in the region are reporting month-to-month contraction in business conditions than those reporting a gain. Looking ahead, the new orders index suggests a worsening in conditions. The new orders index plunged more than 10 points to minus 40.7.”
US U Mich Consumer Sentiment for April. After the March data was released, Econoday reported, “The Reuter's/University of Michigan's Consumer sentiment index edged slightly higher in March to 57.3. The latest up-tick was due to the expectations component as current currents fell back. Recent readings remain near historic lows. Inflation expectations for one year out, however, edged up to 2.0 percent from 1.9 percent in February.”
Sector ETF Summary for the International equity markets
With the exception of the UK (EWU -1.94%) and France (EWQ -0.82%), all the country ETFs lifted again this week in NY – aided by the strong gains made on the final day of trading, Thursday. The leaders were Russia (again) (RSX (+11.64%), India (IFN +6.92%) and Brazil (EWZ +6.82%).
The leaders are the highest-beta ETF’s, which is part of the reason I say that traders decided to buy risk again this week – at least they did on Thursday, which was the dominant trading session this week.
US Equity Markets Review
This week the NASDAQ (+1.89% to 1652.54), S&P 500 (+1.67% to 856.56), DJIA (+0.81% to 8083.38), and Russell 2000 (+2.65% to 468.20) were all in rally mode, again. But, the Thursday gains were, respectively, +3.89%, +3.81%, +3.14%, and +5.90%. The fact that the higher-beta small cap Russell 2000 index rallied so much this week is another reason why I say traders were buying risk, ie, becoming less risk averse.
Here below is what I wrote in this space in WIR#12 (three weeks ago), when I last produced the WIR. You will note that (i) I had seen a momentum change in the market four weeks ago, (ii) there were Buy Alerts popping up on my simple little RSI system, (iii) traders were cautious in the near-term that maybe the Geithner Plan would be a failure, (iv) the Financials would confirm the rally, (v) Consumer Discretionary sector stocks would hitch their wagon to the Financials, (vi) Consumer Staples and Healthcare company stocks would be laggards, and (vii) the principal driver would be extreme reflation. I think all of the above happened. On a risk-adjusted basis, I am quite happy to over-weight in the Energy, Basic Materials, Industrials, Tech and Utility sectors, although I am not much one to trade the Utilities, unless it’s Cameco (CCJ), which feeds the nuclear power utilities.
In my momentum studies, I can see that early February was similar to the situation the market is in today. Using the Monthly-Weekly-Daily Relative Strength Index (RSI) technical indicator as a guide, I could see, without looking at index values, that the momentum of the market was headed south. Then in the last week there was a change in the Daily RSI’s for each of the NASDAQ, S&P 500, DJIA, and Russell 2000 (small caps), but the Monthly and Weekly RSI’s were still dropping. In the first week of March, all indicators were headed south again. Then a week ago, there was a clear turn as 30 of 30 DJIA components made gains as did 10 of the 10 market sectors, and all time series of the RSI turned to head north. So, I concluded that it was a time to watch markets closely. We were getting a number of Buy Alerts on our ‘simple little system’ and many were paying off with big moves after the signal. This week, the Daily has turned south again, right after Wednesday’s FOMC announcement to reflate and stayed that way after Treasury Secretary Geithner said that he had a plan to announce soon as to how the government intends to deal with toxic assets held by banks. The Monthly and Weekly RSI indicators, however, are still pointing north. So, I interpret this situation as being one of wait-and-see what Geithner has to say, and then watch the Financials to see if the traders there like the way the stars have lined up. If so, then this market, from small cap to large, will be ready to move higher. With extreme reflation indicated by the printing of money in the order of at least $1 trillion, the Energy, Basic Materials, Industrials, Tech and Utility sectors will likely be the primary beneficiaries; however, with the tox assets being made atoxic, if you will, the Financials will certainly also rally, and if that happens, the Consumer Discretionary sector will get a leg up too. Taking on more appetite for risk will mean that Consumer Staples and Healthcare companies are likely to be laggards unless they happen to be hyped on rumored or actual take-over plays, where their stock is going to be bought for a premium.
Presently, the trend and momentum charts are telling me that there is a possible 10% to 15% move higher in the S&P before the equities start to pull back, and consolidate the move with profit-taking. At that point, I will be looking to write calls on long positions that I wish to continue holding, or possibly sell them to raise capital to be ready to move into stocks I believe will be better positioned to resist a market decline, and also meet my risk-reward criteria at that point in time.
None of us knows when a pull-back will occur, but the data will be the ‘tell’. Raise your stops, and consider employing straddle and strangle options tactics, and remain flexible because you might have to start selling positions. Watch the highest-beta international markets like Brazil, Russia and India for indications. Also, keep watching the NASDAQ 10 that I have outlined for you. The HB&B stocks may have big-sized moves that scare you, but remember that a -10% drop could be just a down-draft after a +35% rally, and that the rally could regain strength the following day or week. So, focus on other parts of the market, like the $USD (which you want to see drop), the action of the highest-beta stocks and international markets, and the market reaction to negative corporate earnings reports, for example.
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
Sector ETF Summary for the US equity market
Here’s the SPY Monthly, Weekly and Daily data charts:
SPY Monthly data:
SPY Weekly data:
SPY Daily data:
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.
Table 1: Cara ETF List is sorted by price performance Week over Week (W/W), i.e. 1W%N.
Sorted by 1-Week Price Performance Symbol Close 1Day
Change1Day
%Change1W
%Change2W
%Change4W
%ChangeYTD
%Change3M
%Change6M
%Change12M
%ChangeYou 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 web site, and click on ETFs.
10 (energy: XLE)
15 (basic materials: XLB)
20 (industrial: XLI)
25 (consumer discretionary: XLY)
30 (consumer staples: XLP)
35 (healthcare: IYH)
40 (financial: XLF)
45 (technology, semiconductor: SMH)
50 (telecom: IYZ)
55 (utilities: XLU)
Individual Sector ETF Review
Sector 10 (energy: XLE, IYE, VDE, OIH, PBW and IXC)
Here’s the XLE Monthly, Weekly and Daily data charts:
XLE Monthly data:
XLE Weekly data:
XLE Daily data:
Sorted by 1-Week Price Performance Symbol Close 1Day
Change1Day
%Change1W
%Change2W
%Change4W
%ChangeYTD
%Change3M
%Change6M
%Change12M
%ChangeThe Crude Oil price lifted (+$2.18/bbl or +4.15%) to close at 54.69.
Eventually, I believe oil will settle in the 60-75 range. But Econoday has pointed to rising inventories plus higher prices at the fuel pumps, which might depress demand for the summer driving season.
“How long can oil prices remain near $50 with stocks rising and demand on the slide? Crude oil inventories jumped 1.7 million barrels in the April 3 week. Inventories for refined products were mixed showing a 3.4 million barrel draw for distillates but a 0.6 million build for gasoline, which is the more important of the categories going into the spring driving season… And rising pump prices are keeping demand down going into the season. Demand is down 0.2 percent year-on-year, a disappointment following mild improvement through most of the first quarter.
When I last did the WIR report, March 22, I wrote:
This week, the Cdn Oil Sands Trust Units (COS-UN.TO) moved higher to close at 23.93 for a two-week gain of +19.8%. http://billcara2.com/tkchart/tkchart.asp?stkname=TSE_COS0UN&cht=Tech+Cha...
Isn’t that a good-looking chart? So, what I have been opining here is that the Cdn oil sands are highly-leveraged beneficiaries of higher oil prices and ought to do well as crude oil moves into the 60-75 range I expect, and also that the high-beta stocks in this space are the ones that ought to out-perform at this point in the cycle.
In the 14 trading sessions since, COS-UN.TO has moved up a further +19.4% to 28.57.
A leader in the western Canadian oils, Suncor (SU +8.9%), another favorite of mine, was a leader in the Oil stocks this week. But some of the oils are getting extended, like Cdn Oil Sands, Talisman (TLM), Nexen (NXY) as well as Suncor. The Daily RSI-7’s are getting over 70, which puts them at risk. If you are still bullish, or if you believe crude oil is on its way to 60 soon, then you can raise your stops or even sell calls, which will lower your cost base. On the other hand, if you see the broad market spinning wheels here, or oil prices backing down below 50, you might consider selling the stocks and taking profits.
There were a few losers this week: Total (TOT -5.5%), Imperial Oil (IMO -3.8%), and China National Offshore Oil (CEO -1.6%).
Overall, the sector ETF (XLE) gained +1.02% to close Thursday at 45.60. But, Thursday’s gain was +2.93%, which clearly made the week. You will see that for every sector this week except for Utilities.
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:
XLB Daily data:
Table 3: Senior Basic Materials:
Sorted by 1-Week Price Performance Symbol Close 1Day
Change1Day
%Change1W
%Change2W
%Change4W
%ChangeYTD
%Change3M
%Change6M
%Change12M
%ChangeBasic Materials (XLB) this week had a gain of +1.40% to close at 23.84. However, Friday’s gain was +4.33%.
Do you recall my point here the last time I wrote the WIR (14 trading days ago):
Two weeks ago in this space, I commented that a couple business reporters seemed to be taking a quite bearish stance on the prospects of Teck Corp (TCK), and that my discussions with exec management and reading of much of the professional broker-dealer research on the company, like RBC, which was “constructively positive,” convinced me to add positions as well as buy some deep out-of-the-money puts for 20 cents as insurance. We were rewarded the following week with a gain in the stock +29.7%. This week TCK added +18.8% to close at US$4.69, for a two-week gain of +58.4%.
This week TCK gained +22.7%, and the gain on Thursday was +14.41%. The closing price was $8.10. The 4-week gain has been +107.2%.
Votorantim (VCP) a successful family-controlled pulp and paper manufacturer in Brazil gained +26.8% W/W. When I wrote about VCP in WIR#12, VCP gained +16.8% W/W.
Losers this week in this space were Rio Tinto (RHP -5.0%) and BHP (BHP -5.0%).
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:
Sorted by 1-Week Price Performance Symbol Close 1Day
Change1Day
%Change1W
%Change2W
%Change4W
%ChangeYTD
%Change3M
%Change6M
%Change12M
%ChangeIndustrials (XLI +3.17% W/W) closed at 20.48. Thursday was a huge day with a gain of +4.92%.
In my last WIR, I wrote:
Textron (TXT) jumped +18.8% for a two-week gain of +58.4%. It makes Cessna small planes and Bell Jet Ranger helicopters. Brazil’s Embraer (ERJ), which makes bigger planes, was up +10.3% W/W for a two-week gain of +29.1%.
This week, TXT gained +90.2%, but the big day was Thursday at +48.9%. Financial Times of London published these notes:
Al-Watan, a Kuwaiti newspaper, reported on Thursday that a United Arab Emirates group was close to a deal to acquire Textron, whose businesses range from Cessna aircraft and Bell helicopters to E-Z-Go golf carts, for $21 a share, or more than $5bn. The buyers would then find a US company to take over Textron’s defence division, the paper said, citing unnamed sources.
The report captured the imagination of many investors who had pining for this very scenario since the credit crisis began to take its toll on Textron’s finance unit, which has originated loans for everything from Bell aircraft to vacation homes.
A company spokeswoman declined to comment on “market rumours.”
Textron rejected the NYSE’s request to issue a public statement ”indicating whether there are any corporate developments which may explain the unusual activity,” adding more weight to speculation that deal talks are underway - even if the would-be buyers are far from the Middle East.
“Textron is probably having exploratory discussions with a lot of parties,” one banker said.
Textron shares surged $4.45 to $13.56 on the New York Stock Exchange.
Facing mounting losses, Textron unveiled a plan in December to sell or liquidate most of the finance businesses unrelated to its own products, or roughly $7.9bn the division’s $11.4bn portfolio of managed receivables.
Bell makes the world’s finest helicopters, in my view. The Bell division is headquartered in Ft. Worth TX just a couple blocks from my old office. If it’s for sale, there would be a long list of suitors.
Embraer (ERJ) of Brazil was also strong this week too, up +13.6%.
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
Sorted by 1-Week Price Performance Symbol Close 1Day
Change1Day
%Change1W
%Change2W
%Change4W
%ChangeYTD
%Change3M
%Change6M
%Change12M
%ChangeConsumer Discretionary (XLY +3.79% W/W to 21.91) was second best sector performer this week, next to running mate Financials (XLF). The gain on Friday was +4.09%.
The big story was Tata Motors (TTM +26.1%), which began selling the $2050 Nano on Friday in India.
Somehow, the Robin Williams shtick (Na-nu Na-nu) comes to mind – for those who remember Mork & Mindy.
Bed Bath & Beyond (BBBY +16.7%) and JC Penny (JCP +15.7%) – both Cara 100 US retailers – were very strong as you would expect when the Financials are soaring.
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
Sorted by 1-Week Price Performance Symbol Close 1Day
Change1Day
%Change1W
%Change2W
%Change4W
%ChangeYTD
%Change3M
%Change6M
%Change12M
%ChangeConsumer Staples (XLP -1.10% W/W) was, along with Healthcare (IYH) a loser, closing the week at 21.67.
This sector will lag any further rally.
Wal-Mart (WMT -5.6% to $50.66) sold off following a disappointing quarterly report.
Here is what I wrote about Wal-Mart in the WIR#6 (Feb 8) with the price at $49.35:
http://billcara2.com/tkchart/tkchart.asp?stkname=wmt&cht=Tech+Chart&px=&...We were active in WMT trading this week, and I told you about it in the Trader's Conference Call notes in the Daily Reports. Hopefully you were listening.
After the close on Monday, I wrote: “We have to believe there is some value in Wal-Mart (WMT), down -25% in a few short months to 46.57 from the low sixties. We understand that unions have renewed clout in the Obama administration, but we like our chances making money by beginning to ladder into out-of-the-money puts sales in WMT. We shall see.”
Then after the close Wednesday, I wrote: “Wal-Mart (WMT +2.66%) had a nice pop today and we may add to shares if it trades back down to 47. We don’t think it will be a leader, but may be good for a trade.”
Then after the Thursday close, “We closed many our short put positions opened just a few days ago. Profits were booked in POT, WMT, GG, and AAPL. Risk management is our prime focus so when we are able to book 60-75% profits in a few days-especially before an economic release certain to increase volatility-we take the trade off.”
What we were in effect doing was reducing our cost base on WMT shares, having just bought positions in WMT at low prices, but in a very weak market that could have sunk lower.
http://billcara2.com/tkchart/tkchart.asp?stkname=WMT&wt=0&ind=nnWMT closed the week at $49.63, a move off the closing price of 46.57 just four days earlier, which I alerted you to.
http://billcara2.com/tkchart/tkchart.asp?stkname=WMT&wt=1&ind=nnIf you go to the Weekly data chart, you'll see that my only real indication that WMT was ready there was the RSI-7 move back above 30, consistent with the Daily turn that day. Not being enamoured with Wal-Mart's fundamentals or Retailers at the moment, I needed those put writes to help me manage the risk I wanted to take. No option, no trade. Simple as that.
What we're doing here is fine tuning dinner just like the best Parisian chef. It's a matter of combining your experience, knowledge and mathematics to result in what some people call skill.
I can tell you that no economist gave you profits like this over a couple days in WMT. Yes, I'll make that flat-out statement. Just like none of us could have landed that Airbus safely in the Hudson, we have to put our trust and faith in people who know what they are doing, and then hope for the best.
To me, Wal-Mart was my Hudson. WMT's not some sexy penny stock, but our crew managed to get the passengers home safely.
Why is Wal-Mart my Hudson, as I say? Look at the Value Line report. A small child can run their finger along the lines for Sales per share, cash flow per share, earnings per share, dividends per share, and book value per share – for 17 consecutive years – and see that every consecutive number in the series was higher than the previous year. You don't need a PhD in Time Series Analysis to see that Wal-Mart is growing, getting stronger, a company you can count on.
No, Wal-Mart is not a sexy structured investment vehicle peddled by HB&B to hoodwink us out of our hard-earned wealth. We can walk into any Wal-Mart store, say hello to the elderly greeter, and then see for ourselves that there's nothing remarkable going on other than we get exactly what was advertised, at a fair price. I like to trade stocks of companies like that.
Patience, patience, patience. You wait until the WMT price comes to you, and then you buy. And later when too many people and the talking heads on TV start yapping about it, you sell.
Wal-Mart is not a perfect company, but then nothing in life is perfect, not even rocket science. Taking profits like we did this week in WMT is about as good as it gets.
It more than makes up for the bad days.
The 45 put writes would have closed worthless, giving you an infinite profit on the trade.
Had you bought the stock on Feb 2 with the Buy Alert, as well as write the puts, you could have waited several weeks to sell the 55 calls to lower your cost base even further. Or you could have sold with the Sell Alerts in late March or early April to realize a significant gain.
Nobody knows at the time how any trade will work out, but there is a discipline ob buying the stock and/or writing the puts after a cycle low where there is a Buy Alert, and later writing calls, selling the short puts, and/or selling the stock after there is a Sell Alert. Trading is art as well as science, but mostly it’s a matter of managing risk, and letting the profits take care of the rest. It makes no sense to go into a trade with a price target, so seeking profit is always Job#2. But, at least you can see how portfolio management is done by professionals – the ones who get to eat what they kill.
I definitely never intended this blog to be a Buy and Sell List, but it does take real-life examples to show ‘proof of concept’ as I call it.
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
Sorted by 1-Week Price Performance Symbol Close 1Day
Change1Day
%Change1W
%Change2W
%Change4W
%ChangeYTD
%Change3M
%Change6M
%Change12M
%ChangeThe Healthcare sector (IYH -0.73% W/W) closed at 49.21.
Four weeks ago I wrote in this space, “I read somewhere where this week was a Healthcare rally. If true, IYH would be higher in the performance rankings than 7th best of ten sectors this week. Too bad we have to stick to the facts here.” You see, much of what you read and hear from the media comes directly from vested interest groups whose objectives may, let me say, not be aligned to yours and mine. So we must always stay on guard. Reminds me of a mining property I knew a lot about some 20 years ago. The property was a monster but also there were severe problems with environmental concerns. One day when watching the CBC national news in Canada, I heard the announcer report that there had been a major minerals discovery called such and such. It was one of the lead stories on the news. Hmm, I thought, I have known about that one for a couple years, so I called the promoter. He told me that one of his close friends, because of vacations or whatever, was called in to read the national news, and voila the man decided to help his friend by announcing a world-class “discovery”. Hahaha. The only discovery was probably the coin this newsman minted in his brokerage account that week. CBC doesn’t pay much you know.”
If you look at Table 1, the ETF performance, over 4-weeks, you ought not be shocked that Healthcare (IYH +3.27%) and Consumer Staples (XLP +6.96%) were the two lagging performers. These are the low-beta defensive sectors, which were bound to lag the SPY +13.66% over four weeks of humungous rally (XLF +30.59% over 4-weeks).
If you hear something, check the facts. In time, you will put two and two together and come up with four. The market is not rocket science. You do have to take risk, but your first job is to manage the risks you take. You do that partly by watching momentum (RSI or Stochastics) and trend (MACD), partly by sticking to trading the shares of the highest quality companies that seem to be best at managing their business environment, and partly by using effective exit and entry points and optics tactics.
You need to stop listening to fish tales, and learn how to fish.
Remember that every pro fisherman has learned by trial and error, has had lots of practice, and works out daily.
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
Sorted by 1-Week Price Performance Symbol Close 1Day
Change1Day
%Change1W
%Change2W
%Change4W
%ChangeYTD
%Change3M
%Change6M
%Change12M
%ChangeThe Financials (XLF +14.18% to 10.63) made their week on Thursday when the gain was +15.54%.
Prior to the open on Thursday there were reports that the banks were stronger than previously believed. Then Wells Fargo Bank (WFC) announced they had earned some $3 billion in the quarter and that the Wachovia deal had been working out very well. The WFC powered north +31.7% on Thursday, which must have sent a few traders (the shorts) to church this holy weekend.
All I could think of during the day was that the Wells Fargo CEO really did lie in Congressional testimony when he said they were Americans first and bankers second. :-) Americans would love to see their portfolio rally +31.7% in two years, nevertheless 6½ hours, all of which and then some was gained in the opening trade of the day.
Btw, I hate those trades because they might have been set up the previous day by the HB&B club, who take advantage with extreme put and call options trades. For instance if just the few bankers who sat together at the recent Congressional hearings agreed amongst themselves to sell off the market the previous day, while buying call options, and then goose the market in the pre-open with Buy orders and positive news releases, then the result we had on Thursday this week would be easily do-able. That’s why the market needs complete transparency and open access to trading records. It’s why I say that HB&B should have no more right to see the client order flow than the client (you and me) have of seeing theirs. This game is so unfair it defies description, and leads to the public’s distaste and admonishment of some bankers and other people and organizations (the Fed for instance) that are widely believed to be behind the shenanigans. We all know what has to be done; I even argued the case before the nine largest securities commissions in Canada in formal session. Those people don’t listen because they are part of the network of a few people that controls the vast majority.
Back to last week’s trading: WFC was even beaten on Thursday by BAC (Bank of America), which soared +35.3% for a gain on the week of +31.9%. Of course, approximately half of America was short the stock and got caught in the squeeze. Wouldn’t it be stunning to discover that the taxpayer TARP funds were used by the banks to squeeze the profits right out of the shorts? I suppose that might even be illegal. Now, if several of these banks conspired to make that trade at the open on Thursday, as I suggested was possible, I ‘know’ it would be illegal.
I am not complaining mind you – (i) I know the game is rigged, and (ii) I don’t trade the Banks very often, and only for a very brief holding period when I do. Besides I am almost never short, so I don’t get squeezed. Not very often, anyway.
Did you see the Table 8 results of performance over four weeks? Citi (C +82.04%), and Bank of America (BAC +63.25%) – those were the two biggest shorts, right? Then there was JP Morgan (JPM +41.16%), which is the third in the evil trilogy of HB&B that held 95% of the Credit Default Swap derivatives problems that brought the financial system and business world to its knees. India’s ICICI Bank (IBN +42.55%) was a huge winner as was the German Deutsche Bank (DB +39.61%), and the UK/Hong Kong HSBC (HBC +39.13%), and Swiss banker Credit Suisse (CS +32.98%). CS actually lost -1.09% this week. Maybe the Swiss can’t tell time? Do you think they lost their groove after President Obama claimed all those Swiss bankers were fraudsters, which is strange in that Americans have been thinking the majority of fraud came from Citi, Bank of America and JP Morgan.
The thing is these banks may have much further to run. The Daily and Weekly RSI-7 on the XLF is 28.1 and 60.3, which is just getting started, really. I mean if traders actually believe that Wells Fargo really earned $3 billion this quarter, anything can happen. With their own version of Mark to Market, and how many trillion in bail-outs and guarantees by the US Treasury, I think we all know anything can happen.
Did you all see the speaking schedule of the Fed this week? It was in the Econoday weekly calendar. Add Geithner and, do I even have to look, Obama, and I’m sure Batman and Robin (the Administration and Fed) might even bring in the Paulson Bazooka on the hood of the Batmobile.
http://en.wikipedia.org/wiki/BatmobileIn something mindful of the movie Life Is Beautiful, I have this fantasy that I can use cartoon characters to resolve my stress over what I know is so unfair in capital markets.
http://en.wikipedia.org/wiki/La_vita_è_bellaWhere is the Joker, Catwoman, the Penguin and Riddler, anyway, when we really need them to destroy the evil HB&B?
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)
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
Sorted by 1-Week Price Performance Symbol Close 1Day
Change1Day
%Change1W
%Change2W
%Change4W
%ChangeYTD
%Change3M
%Change6M
%Change12M
%ChangeTech (XLK +1.52% to 16.73) and Semi-conductors (SMH +3.18% to 20.12) were back in the groove this week.
(Cara 100) Research In Motion (RIMM +30.7% W/W) was far and away the leader in the Tech space. Over two weeks, RIMM is up +42.5%, and over four weeks, it’s up +54.8%.
More of the chip stocks did well, but the biggest gains were not that hot compared to RIMM and the banks.
Cisco (CSC -1.8%) in the telecom network space actually came up a router short.
Sorted by 1-Week Price Performance Symbol Close 1Day
Change1Day
%Change1W
%Change2W
%Change4W
%ChangeYTD
%Change3M
%Change6M
%Change12M
%Change
Sector 50 (telecom: IYZ, VOX and IXP)
Here’s the IYZ Monthly, Weekly and Daily data charts:
IYZ Monthly data:
IYZ Weekly data:
IYZ Daily data:
Telecom (IYZ +0.18% to 17.15) was barely a winner, and it took a gain on Thursday of +2.94% to even manage that. AT&T (+1.7%) and Verizon (-1.1%) were unremarkable.
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:
Utilities (XLU) gained +0.35% to close at 26.07. It was the 4th worst performer, which often happens when competing bond yields rise and bond prices fall.
There were as many up as down.
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
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Bonds & Yields Review
Table 10: US Treasury Yields
US Treasury Bonds Maturity Yield Yesterday Last Week Last Month 3 Month 0.16 0.15 0.18 0.20 6 Month 0.36 0.35 0.37 0.44 2 Year 0.94 0.92 0.88 1.02 3 Year 1.36 1.29 1.23 1.44 5 Year 1.89 1.83 1.75 2.00 10 Year 2.93 2.85 2.77 3.00 30 Year 3.75 3.67 3.59 3.72
Municipal Bonds Maturity Yield Yesterday Last Week Last Month 2yr AA 1.20 1.18 1.32 1.36 2yr AAA 1.46 1.14 1.17 1.59 2yr A 1.46 1.68 1.76 1.85 5yr AAA 2.09 2.12 2.14 2.22 5yr AA 2.18 2.20 2.27 2.43 5yr A 2.33 2.24 2.52 2.72 10yr AAA 3.23 3.21 3.29 3.45 10yr AA 3.32 3.44 3.38 3.39 10yr A 3.51 3.72 3.79 3.72 20yr AAA 5.13 5.18 5.33 4.85 20yr AA 5.08 5.14 5.29 5.09 20yr A 4.75 4.77 4.76 5.22
Corporate Bonds Maturity Yield Yesterday Last Week Last Month 2yr AA 3.24 3.04 3.74 4.01 2yr A 4.73 4.73 5.78 7.34 5yr AAA 2.92 3.02 3.15 6.26 5yr AA 3.91 3.89 4.03 4.13 5yr A 4.82 5.11 5.15 5.62 10yr AAA 4.93 4.93 4.99 9.02 10yr AA 4.64 4.70 4.79 4.89 10yr A 5.54 5.63 5.66 6.24 20yr AAA 6.76 6.56 6.62 6.52 20yr AA 6.25 6.05 6.10 6.01 20yr A 6.93 6.74 6.79 6.69
The 20-year Treasury Bonds (TLT) sank -2.59% W/W to close at 102.35. The 30-, 10- and 5- year yields lifted +16, +16 and +14 basis points (bp) to close the week at 3.75, 2.93 and 1.89 percent, respectively.
Three weeks ago in this space I wrote, “Who possibly would be interested in earning 1.638% annual yield on a 5-year bond? Only those who have been taken prisoner…” This week those 5-year Treasuries were paying 1.89% and the buyers from three weeks ago got hosed.
But that’s the way the Admin and Fed (Batman and Robin) deal their cards. They have to keep the rates low, but also allow the market some leeway to lift the yields to compensate for the added risk of reflation.
Now if you are really wicked, you’ll be thinking that Batman is the guy with the beard and Robin the little money man in the Administration. But, no, it doesn’t matter; these people switch teams more than AC-DC.
Ultimately, a stable market environment will not happen until T-Bill yields lift from the present 0.160 percent level up to the 1.60 percent level. But that’s another story.
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.
This chart is stunning to long-term observers of the debt markets.
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
Sorted by 1-Week Price Performance. Symbol Close 1Day
Change1Day
%Change1W
%Change2W
%Change4W
%ChangeYTD
%Change3M
%Change6M
%Change12M
%Change
I will leave the following statement I made in the past WIR here because I would like to see all traders who own and control their own capital to refuse to support Fannie and Freddie, and to instruct their capital managers that you refuse to allow them – unless they want to be sued – to invest your capital in Fannie and Freddie, at least until politicians stop taking election campaign money in return for votes and committee support.
I no longer comment on Fannie or Freddie. It is hard to believe what government has done to the free capital market and to future taxpayers. http://news.ino.com/headlines/?newsid=68973657066710
Whether it’s Fannie, Freddie or AIG, the key politicians who run govt today have all been on the take. It’s beyond outrageous.
Here is INO.com founder Adam Hewison’s personal comment: http://club.ino.com/trading/2009/03/senator-dodd-why-dont-you-be-a-man-a...
How could anybody invest in US Treasury bonds today unless they were forced to?
Consumer Finance -USA -- Interactive Weekly Data Charts
Mortgage Finance -USA -- Interactive Daily Data Charts
Commodities Review
The $CRB index dropped -0.46% W/W to close at 227.88, but that is still up from 211.08 in four weeks, which I attribute to reflation policies agreed to at the G-20, FOMC and Bank of Japan meetings.
The 50d MA is now at 215.57, which is below the present price, which no longer serves as technical resistance, and is now considered short-term support. The longer the period where the current prices stays above support levels, the stronger that support is believed to be.
The 200-day MA has dropped from 326.18 to 288.72 over the past eight weeks. This move leads to more talk of deflation, but the inflation or deflation argument doesn’t matter to traders in the short-term. It’s the degree of the variance from normal that matters. We trade differently when corporations and securities markets operate in normal times versus extreme times. That is 90% of what you need to know.
Actually, deflation in the Great Depression through the 1930’s boosted gold prices more than any other asset class, by a large margin, and more than the inflation affected it in the 1970’s.
Although I use the $CRB (Reuters/Jeffries Index), principally because it’s the oldest, there are many commodity indexes: http://www.crbtrader.com/crbindex/ • Astmax Commodity Index(AMCI) • Commin Commodity Index • Dow Jones-AIG Commodity Index • Goldman Sachs Commodity Index • Reuters/Jefferies CRB Index • Rogers International Commodity Index • Standard & Poor's Commodity Index • NCDEX Commodity Index • Deutsche Bank Liquid Commodity Index (DBLCI) • UBS Bloomberg Constant Maturity Commodity Index (CMCI)
Here is a link to an article that discusses the major ones that have been around for a while: http://www.rogersrawmaterials.com/overviewandanalysis.PDF
Here is a current price summary of the heaviest weighted commodities contracts: http://money.cnn.com/data/commodities/
These indexes change their component weightings perhaps annually or even monthly, for example: http://www.seekingalpha.com/article/43586-the-new-generation-of-diversif... http://tinyurl.com/a5myfj
Interactive Chart of Weekly CRB Commodities Index:
Interactive Chart of Daily CRB Commodities Index:
Oil Review
Four weeks ago in this space, I noted that “$WTIC contracts gained a few more drops this week, lifting +$1.51/bbl to close at 47.03, putting the contracts in the higher trading range it moved into two weeks ago.” Three weeks ago, I noted that $WTIC, like other commodities during the Great Reflation, broke into a higher level yet again, rising +$5.04/bbl to 52.07, with sights on the 60-75 level that I believe will last for some time.
This week, $WTIC added +$2.18/bbl to close at 54.69.
For $WTIC, the 50d MA is at 45.60, which is rising quickly, but still very much below the present price.
The 200d MA is at 75.01, down from 80.84 just three weeks ago. As previously noted here (for a couple months), “The price in mid-July hit a record high of $149.90. When the oil market stabilizes, I expect the 200d MA will be under 75, and possibly lower, so even if there is a sharp bounce, I do expect that the oil market will work through a very long bottom phase.”
In the long-term, after $WTIC lifts into the high end of a trading range (I say it’ll be about 75 before year-end), I believe it will fall back a bit and side-track while $GOLD should continue to rally for a couple years. $GOLD is money (ie, liquidity) and is an easily storable commodity, whereas speculators are presently seeking to lease empty tankers to store oil, which is a consumable, playing the contango. http://en.wikipedia.org/wiki/Contango
Contango and backwardation are concepts you need to understand, particularly where there are storage issues.
http://en.wikipedia.org/wiki/BackwardationHere 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
$GOLD rallied +$22.24/oz three weeks ago, closing at 952.34, looking like it was on its way to testing former highs. I stated at the time that I believe $GOLD will trade at $2,000/oz by year-end. My argument is that the Interventionists (Batman and Robin) “have embarked on a policy of extreme reflation in order to save the financial system, and destroy the toxic assets held by the banks so they can return to their job of extending credit to corporations, large and small, and people on Main Street. There is a cost, and it happens to glitter. Gold, in fact, is the only real money”.
GATA’s Bill Murphy did speak at my Bahamas conference on Saturday March 28. He is the most outspoken of all people on the anti-gold actions of interventionist central bankers.
http://www.gata.org/ http://wapedia.mobi/en/Gold_Anti-Trust_Action_CommitteeAnyway, in the past three weeks, $GOLD has dropped to 878.80, and pundits like Roubini, Faber and Twiggs are advising the price of the yellow metal will fall to as low as 700 or maybe 750 or possibly 800, depending upon one’s mood I suppose.
I believe, right or wrong, that $GOLD has bottomed out in the short cycle at these current levels. Should the broad rally continue in equities, as I expect for maybe +10% to +15% before consolidating, then pulling back to re-test Feb lows, I believe that the gold price will pick up steam again, and that the next lift will be notable.
The charts are not yet showing that, but then the Interventionists are busy making themselves look like they are in control of the financial system, and that doesn’t bode well for precious metals. So, the jury is out, but I remain positioned for higher gold prices.
The gold 50d MA has risen to 927.58 from 912.42 over three weeks and 899.64 over six weeks, and still, I believe, threatens to go parabolic following the next rally.
The 200d MA is at 861.60, up from 860.11 over three 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 dropped -$0.42/oz W/W to close at 12.34.
Three weeks ago, I had expected $SILVER to lead the precious metals complex higher, but the opposite happened. $SILVER is a leader, up and down.
For $SILVER, the 50d MA is now 13.13, up from 12.66 in three weeks, and up from 11.70 seven weeks ago. I would exercise caution should the 50d MA turn south.
The 200d MA is 12.69, down from 12.97 in three weeks and from 13.18 five weeks ago. I am watching for a reversal to the upside there.
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 went against $GOLD, $SILVER and $PALLADIUM this week. It gained +$31.00/oz (+2.66% W/W) to close at 1195.30, up from 1116.90 three weeks ago.
The 50d MA is now at 1077.90, up from 1024.59 three weeks ago and up from 993.46 over just five weeks.
The 200d MA is now at 1177.04, down from 1239.58 over three weeks and down from 1292.15 over five weeks. Did you note that both the 200d MA and the 50d MA are now below the current price of platinum? That’s bullish. The trend is higher.
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.
$PALL dropped -$3.70/oz (-1.65%) W/W to close at 220.00; up from 210.85 three weeks ago.
The 50d and 200d MA is at 205.07 and 253.67, respectively, so the present price is over the 50d MA, but still well below the 200d MA.
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.
$COPPER contracts gained +18.00 (+9.52% W/W) to close at 207.10; up from 179.60 three weeks ago. Four weeks ago in this space, I wrote, “Traders are looking forward to a break-out.” The 50d and 200d MA’s are 166.44 and 230.07, respectively. The range for 2009 had been fairly tight at 137 to 165. So there is your break-out.
There are many traders who believe the economic growth of China is spurring demand for copper.
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:DBBInteractive 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
Sorted by 1-Week Price Performance Symbol Close 1Day
Change1Day
%Change1W
%Change2W
%Change4W
%ChangeYTD
%Change3M
%Change6M
%Change12M
%ChangeThe Goldminer indexes and ETFs settled back again this week: $XAU -3.76% to 122.76; GDX -5.22% to 33.04; and XGD -5.14% to 18.08.
I issued a new report on Kinross Gold (KGC at the Bahamas Conference. The link can be located on the sidebar of this blog. The 50-page report is free.
As I stated at the Conference two weeks ago, I am keen to start closed-end exchange traded funds that will include (i) gold (ii) silver, and (iii) juniors, as well as (iv) Australia and south-east Asia stocks, including China. We have the fundamental and technical/quantitative analysts plus the traders to do a good job.
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 WGW AEM
Here are the key Silver miners and the SLV ETF: SLV SIL SVM CDE HL PAAS SSRI SLW MGN
To repeat: I like silver stocks and the metal, especially when the metal is in a bull phase, racing ahead of the gains in gold. A number of you, as did we, make solid gains in trading Silver Wheaton (SLW) after we published our 100-page Briefing in January.
Only I could refer to a 100-page report as a Briefing. :-)
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.
You cannot trade commodities that are priced in $USD without studying forex movement. The Forex market is a multi-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 $USD is a mean value of rate fluctuations of six world currencies (Japanese yen, Euro, British pound, Canadian dollar, Swiss franc and Swedish krona) that each trade against the USD.
This week, the US Dollar had a solid gain ($USD +1.78% tom 86.22). The other major currencies, except the Cdn Loonie, all closed significantly lower (Euro -2.26% to 131.67), Yen (-0.03% to 99.62), and Pound (-0.90% to 146.83). The Loonie gained +0.49% to 81.67 W/W because the Thursday gain was +1.00%.
The 50-day MA of the $USD is now at 86.22. The 200-day MA is now 81.64.
Interactive Chart of Weekly U.S. Dollar Index:
Interactive Chart of Daily U.S. U.S. Dollar Index:
The Euro ($XEU) dropped -2.26% W/W to close at 131.67.
The 50d MA and 200d MA for the Euro are now 130.00 and 137.97, respectively, so the present price is in between. Like tennis, we call that No Man’s Land.
Interactive Chart of Weekly Euro Dollar Index, priced in USD:
Interactive Chart of Daily Euro Dollar Index, priced in USD:
The Pound lost -0.90% W/W to close at 146.83.
The 50d and 200d MA is 143.63 and 163.84, respectively.
Weekly British Pound Index:
Daily British Pound Index:
Weekly Japanese Yen Index:
The Japanese Yen ($XJY) dropped -0.03% W/W to 99.62.
The Yen’s 50-day MA is now 104.43 and the 200-day MA is 101.07.
Daily Japanese Yen Index:
The Loonie (Cdn Dollar) lifted +0.49% to 81.67. There was a gain of +1.00% on Thursday.
The Loonie 50-day MA and 200-day MA are now at 79.95 and 86.57, respectively, so the current price is just above the 50d MA, which is technical support. The “goldbugs like” that as they want to see a strong Cdn Dollar.
Weekly Canadian Dollar Index:
Daily Canadian Dollar Index:
Here is the China Yuan (CNY) chart.
International Equity Markets Review
International stock exchange indexes were all up around the world this week as the Great Reflation starts to take hold.
Over the past three weeks:
UK FTSE moved from 3842.9 to 3983.7. The German DAX moved from 4068.7 to 4491.1. Aussie All-Ords moved from 3405.0 to 3617.5. HK Hang Seng moved from 12833.5 to 14901.4. Shanghai rallied from 2281.1 to 2444.2. India’s BSE 30 rallied from 8966.7 to 10803.9. Japan’s Nikkei 225 moved from 7946.0 to 8964.1. Brazil’s Bovespa has rallied from 40076.4 to 45538.7.
As I remarked here three weeks ago, “So, there are a bunch of markets around the world that appear to have bottomed and are starting to lift higher.”
India and Hong Kong had remarkable rallies.
There are 16 country index charts from StockCharts.com (with their formal approval btw) because I think it is important to be watching these markets move through a trend juncture together, and in relation to currency and commodity strength or weakness. I also made some additions to the country-based ETF tables as I intend to focus more on ETF’s in 2009. In time, I will also set up more tables and track the domestic market prices. Now that the Drupal platform is in place, it’s just a matter of time and focus for me to expand these tables, and to possibly have separate blog streams.
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
Table 13: International equities via an ETF perspective (in $USD)
Sorted by 1-Week Price Performance Symbol Close 1Day
Change1Day
%Change1W
%Change2W
%Change4W
%ChangeYTD
%Change3M
%Change6M
%Change12M
%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:
US Equity Markets Review
All four major US equity market indexes were higher this week by quite a bit, but the Thursday rally more than made up for the week. Thursday was outstanding.
As I remarked in this space three weeks ago, “DC is likely to change the mark-to-market rule imposed on the banks, and (the market) was up this week again across the board because of the apparent reflation move by the Fed, which will pour trillions into the economy very quickly.”
This week, the DJIA (+0.81% to 8083.38), S&P 500 (+1.67% to 856.56), NASDAQ Composite (+1.89% to 1652.54), and Russell 2000 small cap index (+2.65% to 468.20) were higher but did so across the board by the gains on Thursday, which were +3.14%, +3.81%, +3.89% and +5.90%, respectively.
So far, at least, portfolio managers are trying to make up some lost ground – even if they don’t have much of a rationale for their buying. To put it bluntly, they are drinking their own bathwater, buying because everybody else is doing the same. But, at this point, there are lots of shorts being covered. I don’t know how much cash is being moved in from the sidelines.
Here is a dozen NASDAQ stocks to watch.
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.
Table 14: Dow 30 ListYou can do this table yourself by entering the following string into the Summaries window at www.billcara2.com and then clicking on the link for Performance.
Sorted by 1-Week Price Performance Symbol Close 1Day
Change1Day
%Change1W
%Change2W
%Change4W
%ChangeYTD
%Change3M
%Change6M
%Change12M
%ChangeHere 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. So, 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.
Value Line Report(s) this past Friday
This week, Value Line reported on four DJIA components, ex-Cara 100 General Electric (GE), Hewlett-Packard (HWP), IBM (IBM) and Intel (INTC). The latter two are Cara 100 companies.
In the past two weeks, when there was no WIR produced, the missing reports and studies were on the two US telco giants ATT (T) and Verizon (VZ), Proctor & Gamble (PG) and Home Depot (HD). The only one I consider to be highest-quality is Proctor & Gamble, which is a Cara 100 favorite for trading for defensive (ie, risk averse) accounts, particularly with put writes during Bull phases in the stock.
The “simple little system” I devised for this blog, which gives notifications when a stock is in the Accumulation or Distribution Zones (ie, when we need to start focusing on the data), and Buy and Sell Alerts (ie, the day we need to be looking at specific strategic and tactical decisions), is a fairly good one that can be easily tailored for different types of users, eg, day-traders, swing traders, long-term traders, etc.
Remember, we trade only because we know we can be wrong, say one time in three, but that it’s up to us to cut our losses to small ones and let our profits run. We can do this because we understand probabilities and because we are able to rely on our expertise to pull us through in the long run.
For the four companies being analyzed this week by Value Line, I am disappointed in the work done by the analyst who covered GE. The crucial factor here is the potential impact of the GE Capital subsidiary, and this is barely mentioned. Each of these analysts should be directed to take a page out of the trader’s playbook, starting with ‘What are the three most important factors that could change your opinion of this company, and how might each of them impact on the share price long-term and short-term?’ Some of these analysts don’t seem to get it.
I removed General Electric (GE) from the Cara 100 recently because I don’t feel comfortable knowing as little as I do about the trials and tribulations of GE Capital. When in doubt, get out.
That is not to say, the rest of the company is very well managed, financial strong, and churning out operating metrics that are outstanding relative to the horrible business conditions of the time. I like CEO Jeff Immelt. I think he is a better manager than his predecessor Jack Welch, the man who is widely perceived to be the Hall of Fame CEO. He is certainly a better salesman.
I don’t want to repeat what I had to say about GE in WIR#2, because it was so glowing, and I like the rest of you got sand-bagged by the hype out of the Financial Entertainment TV and various Wall Street analysts.
So, overall, the company is out of the Cara 100, and I have nothing more to say about GE.
IBM (IBM) and Intel (INTC) are still Cara 100 companies.
Re IBM, they have excelled at management in recent years. They have strengthened their balance sheet, sustained their strong dividend growth, increased their operating margins and absolutely boomed their Return on Equity. Their attempt to acquire Sun Microsystems is a magnificent move. An acquisition would diversify more an already diverse customer base, and add a powerful software language (JAVA) to their product list.
The proof will be in the pudding. Despite horrible operating conditions, the company expects to continue to grow its revenues, cash flow, earnings and dividends for this year and next, which after a very small stumble in 2001, has really been a magnificent track record.
This company has about 400,000 employees, and represents today a model of how American companies can and should be run. Young people should aspire to work there.
The stock was a Buy in Sept-Oct and again in Feb. But the call I made after the close on Jan. 20, with IBM at 81.24 was perhaps the best call I made this year. The stock went over 97 on Feb 6, and over 100 on April 2. But it was on Jan 20, with the market getting creamed and IBM taking a beating, I urged you to pay attention to the data the company had just reported.
If you had bought at the open the next day (86.29), you’d have received a $0.50 dividend and also looking at 101.70 today.
http://finance.yahoo.com/q/hp?s=IBMLooking for leadership? Try IBM.
Submitted by Bill Cara (435 comments) on Tue, 01/20/2009 - 17:32 #7564Lot's of negative emotions here. Can't blame you, but...
Despite the US Banks (-19.7%) crashing the equity market today (S&P -5.3% and NASDAQ -5.8%), I think that particular developing situation is a once in a lifetime phenomenon. Yes, there are many well-managed banks. The problem is that most are interwoven like the typical straw market product. Counter-party risk is the issue, and BAC, C and JPM have got the entire financial system tied up in their credit derivatives crisis.
With the market coming to me, however, I continue to look for buying opportunities. (Cara 100) IBM (-3.5% today) is one of those. With the Banks and the Inauguration on their minds today, traders ought to be paying attention here.
IBM 4Q and 2008 Corporate Results and Earnings Release
Full-Year 2008:
o Record revenue of $103.6 billion;
o Record pre-tax profit of $16.7 billion;
o Record earnings per share of $8.93;
o Record free cash flow of $14.3 billion, up $1.9 billion,
excluding Global Financing receivables.Full-Year 2009:
o Earnings-per-share expectation of at least $9.20.Fourth-Quarter 2008:
o Diluted earnings of $3.28 per share, up 17 percent;
o Net income of $4.4 billion, up 12 percent;
o Gross profit margin of 47.9 percent, up 3 points;
o Revenue of $27.0 billion, impacted by strong U.S. dollar,
down 6 percent, down 1 percent adjusting for currency;
o Software revenues up 3 percent, up 9 percent adjusting for
currency; pre-tax income up 15 percent;
o Global Technology Services revenue down 4 percent, up 3
percent adjusting for currency; pre-tax income up 35 percent;
o Global Business Services revenues down 5 percent, flat
adjusting for currency; pre-tax income up 26 percent;
o Services signings of $17.2 billion, 24 deals greater than
$100 million;
o Strategic outsourcing signings up 20 percent worldwide,
up 44 percent in North America.In the WIR#2 (Jan. 11) I wrote the following:
Speaking of IBM, the Value Line analyst has a take on the shares that I agree with: “IBM shares have some appeal. The issue is timely. And as economies improve and the company continues to trim costs and repurchase stock, share earnings should again start to expand at a double-digit annual pace. That, and a growing dividend, gives these shares good risk-adjusted 3- to 5-year total return potential.
The Daily-Weekly-Monthly RSI-7 is now at 47.47-41.66-29.24, which shows a recent Accumulation Zone (AZ) with Buy Alert. The stock hit a low of 69.50 on 11/21, but any buying under 80 would have been terrific. Even now, long-term oriented traders could look forward to the next drop in the Daily-Weekly RSI-7 to under say 35 to be a buyer.
Well, IBM’s RSI-7 dropped under 30 in late Feb and to almost 30 in March. You could have bought the stock under 84. It’s now 101.70 at April 9.
With Intel (INTC), I continue to like the company and the stock, but frankly the economy is weighing pretty heavily. This is a stock that in situations like this, you ought to, when a Buy signal comes in, consider only writing puts. When you see the (semi-conductor industry ETF) SMH break-out, it will be led by the smaller higher-beta stocks and the 800-pound gorilla Intel will be slow to start but catch up quickly.
In the WIR#2 (Jan. 11) I wrote the following:
Intel (INTC) has long been a favorite. I like their dominant industry position. So does Value Line, which also likes the stock price here: “this issue has solid price-recovery potential for the 3 to 5 years ahead. Investors looking to add a technology holding to their portfolio would do well to consider this industry leader.”
I can’t look 3 to 5 years out unless there is a superb dividend payout involved and I’m looking at income. Intel is growing its dividend nicely, and down at a current price of 14.15 is yielding about +4.0%, which is outstanding for this company, but that’s not why I’d be buying the stock.
Being a short-term trader, I’d also wait a bit for additional weakness before jumping in. Since foreign revenues are presently about 84%, I’d also look for a weaker $USD.
The Daily-Weekly-Monthly RSI-7 is now at 41.36-39.77-28.73, which is much like IBM. The stock (currently 14.15) hit a low of 12.06 on 11/21. For long-term oriented traders, I’d like to see the Daily-Weekly RSI-7 drop back to maybe 35 before climbing on board. Patience in difficult markets can overcome adversity. Let the stock prices come to you.
The stock price is back to 2002 and even 1996 price levels and yet the metrics have improved so much since then. So, really, a price in the 13-14 range will be looked back upon in a couple years with a query, “Why didn’t I buy in then?”
For Hewlett-Packard (HWQ $34.43), I wrote the following in the WIR#2 (Jan. 11):
Re Hewlett-Packard ($37.38), it took me a while to warm to cost-cutter CEO Mark Hurd, but I am pleased to say the man has done a terrific job in my view. I like the company more all the time. The Electronic Data Systems acquisition positions HPQ to compete more effectively against IBM in terms of diversified services, and recurring revenues.
The continuous improvement in metrics is quite impressive. With 69% of revenues coming from foreign sources, earnings are negatively impacted by a strong $USD.
Value Line opines, “Top-quality H-P shares are timely, but 3- to 5-year price appreciation potential is unexciting.” Certainly, the low dividend payout is not enticing.
With the Daily-Weekly-Monthly RSI-7 of 58.88-52.11-39.93, the stock is neither an Accumulation or Distribution candidate. I am not trading it anyway.
I don’t feel up to writing anything about Hewlett-Packard after reading the Value Line conclusions:
The company is taking steps to counteract the tough climate.
We think the company’s efforts will enable it to ride out the rough times.
I guess people on Wall Street actually get paid for that. Read on. There are several other truly inspiring gems in this guy’s report… “(H-P) is working to reduce inventory… Another bright note is H-P’s large recurring revenue stream… it took action in the first quarter to reduce travel expenses and some other discretionary spending.”
Sorry, but I just can’t see myself clear to paying a person over $250,000 a year to write that crapola.
The Dow 30 Company links in chronological order of the upcoming reports.
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. 16: next one is due Apr. 17)
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. 16: next one is due Apr. 17)
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. 16: next one is due Apr. 17)
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. 16: next one is due Apr. 17)
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. 23: next one is due Apr. 24)
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. 23: next one is due Apr. 24)
Coca Cola [GICS 30, Dow 30]
(KO: Google Finance file)
(KO: Yahoo Finance file)
(KO: StockChart chart)
(KO: Billcara2 chart)
(KO: ADVFN Financial Data)
(KO: Value Line Report Jan. 30: next one is due May 1)
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. 30: next one is due May 1)
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. 6: 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. 13: 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. 13: next one is due May. 14)
American Express [GICS 40, Dow 30]
(AXP: Google Finance file)
(AXP: Yahoo Finance file)
(AXP: StockChart chart)
(AXP: Billcara2 chart)
(AXP: ADVFN Financial Data)
(AXP: Value Line Report Feb. 20: 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. 20: next one is due May 21)
Citigroup [GICS 40, Dow 30]
(C: Google Finance file)
(C: Yahoo Finance file)
(C: StockChart chart)
(C: Billcara2 chart)
(C: ADVFN Financial Data)
(C: Value Line Report Feb. 20: 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. 20: 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. 20: next one is due May 21)
General Motors [GICS 25, Dow 30]
(GM: Google Finance file)
(GM: Yahoo Finance file)
(GM: StockChart chart)
(GM: Billcara2 chart)
(GM: ADVFN Financial Data)
(GM: Value Line Report Feb. 27: next one is due May 28)
Johnson & Johnson [GICS 35, Dow 30, Cara 100]
(JNJ: Google Finance file)
(JNJ: Yahoo Finance fle)
(JNJ: StockChart chart)
(JNJ: Billcara2 chart)
(JNJ: ADVFN Financial Data)
(JNJ: Value Line Report Feb. 27: 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. 6: next one is due Jun. 5)
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. 13: next one is due Jun. 12)
ExxonMobil [GICS 10, Dow 30, Cara 100]
(XOM: Google Finance file)
(XOM: Yahoo Finance file)
(XOM: StockChart chart)
(XOM: Billcara2 chart)
(XOM: ADVFN Financial Data)
(XOM: Value Line Report Mar. 13: next one is due Jun. 12)
Boeing Co [GICS 20, Dow 30. Cara 100]
(BA: Google Finance file)
(BA: Yahoo Finance file)
(BA: StockChart chart)
(BA: Billcara2 chart)
(BA: ADVFN Financial Data)
(BA: Value Line Report March 20: next one is due Jun. 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 Mar. 27: next one is due Jun. 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 Mar. 27: next one is due Jun. 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 Apr. 3: next one is due Jul. 3)
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 Apr. 3: next one is due Jul. 3)
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 Apr. 10: next one is due Jul. 10)
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 Apr. 10: next one is due Jul. 10)
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 Apr. 10: next one is due Jul. 10)
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 Apr. 10: next one is due Jul. 10)
Wrap-up:
I have been thinking that I ought to be on better behavior now that I know that HB&B is retaining lawyers to stop bloggers from being so critical. After all, they are “Americans first and bankers second” and hence deserve our support. NOT.
I suppose we are to believe they recognize civil rights (freedom of speech) any more than a Credit Default Swap. Ha.
Article from Telegraph in U.K.
Goldman Sachs is attempting to shut down a dissident blogger who is extremely critical of the investment bank, its board members and its practices.
The bank has instructed Wall Street law firm Chadbourne & Parke to pursue blogger Mike Morgan, warning him in a recent cease-and-desist letter that he may face legal action if he does not close down his website.
Florida-based Mr Morgan began a blog entitled "Facts about Goldman Sachs" – the web address for which is goldmansachs666.com – just a few weeks ago.
In that time Mr Morgan, a registered investment adviser, has added a number of posts to the site, including one entitled "Does Goldman Sachs run the world?". However, many of the posts relate to other Wall Street firms and issues.
According to Chadbourne & Parke's letter, dated April 8, the bank is rattled because the site "violates several of Goldman Sachs' intellectual property rights" and also "implies a relationship" with the bank itself.
Unsurprisingly for a man who has conjoined the bank's name with the Number of the Beast – although he jokingly points out that 666 was also the S&P500's bear-market bottom – Mr Morgan is unlikely to go down without a fight.
He claims he has followed all legal requirements to own and operate the website – and that the header of the site clearly states that the content has not been approved by the bank.
On a special section of his blog entitled "Goldman Sachs vs Mike Morgan" he predicts that the fight will probably end up in court.
"It's just another example of how a bully like Goldman Sachs tries to throw their weight around," he writes.
Speaking to The Daily Telegraph, Mr Morgan explained how he went through a similar battle with US homebuilder Lennar a few years ago after he set up a website to collect information on what he alleged was shoddy workmanship in its homes. The pair eventually settled out of court.
"Since I went through this with Lennar, I've had advice from some of the best intellectual property lawyers, and I know exactly what I can and can't do. We're not going to back down from this," he promises.
Mr Morgan adds that if Goldman manages to shut down his site, he has a number of other domain names registered.
Speculation is mounting that Goldman Sachs is set to raise several billion dollars via a share sale, possibly next week, in order to pay down a $10bn (£6.8bn) US government loan, as revealed in The Sunday Telegraph last week.
Anyway, it is Easter, my five year anniversary in blogging and it has been at least a year since UBS, Morgan Stanley and Merrill Lynch threatened to sue me. But these people all saw my good side, and relented.
My good side? Happy Easter!
Hopefully Jack or Jeff can insert the Easter file here. I am mostly a people person who can’t quite get the hang of these new-fangled computer systems. :-)
(Here is the Easter file: IDtheftadvisory.pdf)
| Attachment | Size |
|---|---|
| Life_After_the_G20_Meeting_April_09_2.pdf | 213.44 KB |
| IDtheftadvisory.pdf | 549.16 KB |
