[7:12pm ET Sunday] Mixed signals. Traders are taking on more risk in the short term and yet they fear the distinct possibility of a massive shake-out to come this fall.
A week ago we referred to the possibility of a wall of worry filled summer rally. This week we will be looking for clues from bonds, the Yen and Gold.
Now and then I do get it right. A look back to WIR 17, which was 13 weeks (1 Qtr) ago, the date was April 25, which was the absolute peak of the market cycle at that time. After you look at the next chart, which clearly shows the destruction, read some of the many words of heads-up I published that weekend.
May and June was a terrible time for the Bulls. Here’s what I wrote in the days leading up to the late April sell-off:
[From the Wrap-up of WIR 17 April 25, 2010] I don’t know the biggest problem that faces the equity market today, but I can see that something big is looming.
I have a theory about fear. Under stress, people withdraw. In capital markets they tend to sell risk, which they perceive is foreign, and buy local. Americans and US-based bankers are the world’s biggest players in the capital markets. So, when stressed the most, they tend to buy the S&P 500 and sell foreign stocks. When foreign stocks are sold and money repatriated, there is a stronger Dollar. That started just before year-end.
But look at this chart of the S&P 500 (SPY) versus the Global 100 (IOO), which includes some stocks in the S&P 500 and some in the S&P 700 (non-US-based mega cap stocks). The comparative relative strength RSI-7 Weekly index of SPY:IOO has skyrocketed from under 30 in 4Q2009 to the nose-bleed extreme of 87.15 today.
Now look again at the chart above to see what happened in every period of great anxiety.
In early 2008, Bear Stearns became a problem to the credit ring of banks. Their leverage had grown to greater than 35, and that was assuming the assets they held were fully saleable to other banks, which was not the case. Leading to the Bear Stearns bankruptcy in March 2008, this SPY:IOO to an RSI-7W of about 78 from about 20 in 4Q2007.
In July 2008, the SPY:IOO RSI-7W had fallen to a low of about 33, and then in response to the sudden implosion of Lehman Brothers in September, that index skyrocketed to a peak of 80 in Sept-Oct. After other banks moved quickly to take over the Lehman assets and liabilities, the RSI-7W quickly dropped back under 30.
Then the economic crisis of the world hit in January 2009, as banks were not lending money, consumption seized up, production was shut down, and unemployment soared around the world. So, for 1Q2009, the G-20 decided to flood the world with money, causing the RSI-7W for SPY-IOO to plunge again from almost 70 to just a tad under 30, and it has stayed in the 30-40 range mostly until the latter part of 4Q2009.
Now look at that RSI-7W for 2010 (over 70 and up to this week’s extreme of 87.15) and look at the SPY:IOO comparative index, which is the highest in years at 1.982.
US-based shareholders and money managers then are buying American, which basically is what the S&P 500 is, and the most American of the US sectors are the Financials, Consumer Discretionary and Industrials. That’s because the biggest companies in Energy, Basic Materials, Consumer Staples, and Healthcare have a larger non-American base of stakeholders, relatively speaking. So, ahead of a harsh winter, Americans start squirreling away their “nuts” if you will, and as I say, that happens to be Financials, Consumer Discretionary and Industrials.
Now look at the market sector performance since January 1 this year. XLF +14.2%, XLY +18.9% and XLI +17.0%.
I say something is about to break here, taking the S&P down faster than the IOO, both of them probably tumbling together as happened for several months after the Lehman collapse.
Something to think about this weekend.
That was late-April, and the market did sell off severely. Now I see something quite different. Yes, there are mixed signals, but everything is telling me that the first move is up.
As you know, a couple weeks ago I opined that the market was oversold, and ready to rally.
Then, a week ago in this space, following a treacherous session on the closing Friday, I further suggested that traders were too negative. I opined: “Yes, I have opined that we’ll see 880 on the S&P 500 this year, but not before a Summer Rally, one that includes Crude Oil prices in the 80’s and the $GOLD price over $1350. You see; I’m counting on the Fed, ECB, Bank of Canada, and Bank of Japan to start printing money. I hear it comes on trees… Then, when people realize it doesn’t; that’s when I think we’ll see 880 on the S&P.”
This week, with the S&P 500 up +3.6%, the Bulls have had what I believe may be a counter-trend rally inspired by short-covering -- remember, a week ago the Bulls were in a state of panic. Also, after hitting a high for the week of $79.60, Crude Oil has lifted +3.6% to $79. Due to the confidence shown by Europeans in their banking system following the release of the stress test results -- ergo the release of the safe-haven gold trade -- $GOLD at $1189 is lagging, but has shown signs of lifting along with the higher prices of equities and commodities. So, the market has unfolded pretty much as I presumed.
Summer rally? How long and how high? Hmm; that’s the thing about trading – traders get a feeling based on the indicators, which is why I had an unusually strong feeling back on April 25. But we know from experience there are no absolutes, and that knowledge causes us to trade the prices we see.
As for the market scenario I have painted for the near future, I think there will be higher prices, but possibly not for long, and not significantly higher. I think we’ll see a lot of churn in the market as the major capital pools offload their inventory of stocks they don’t feel are well positioned for the central bank tightening and higher interest rates to come. At some point, possibly in September or October, the Fed will shut down their money printing exercise so as to not impact the election results on November 2. That de facto tightening plus the increased selling and lack of new buyers would likely cause a significant sell-off. My crystal ball is flashing S&P 950 and then 880, still.
You see, I don’t think the bad loans held by investors have been written down to the extent needed to bring risk in line with the extremely low interest rates set by central bankers and bond yields set by the market. Moreover, I think equity prices are too high relative to prospects a year out for sustainable profitability; hence current prices, in my mind, exceed fair value.
But here’s the second part of the story. As and when normal trading volumes return to capital markets, I think these factors will be in balance, and the equity market will have returned to its status as a functional price discovery mechanism. Then the market will be ready for a very significant Bull phase.
We’re not there yet. The process of deleveraging is probably not yet complete, as I see it.
Lower equity prices and higher bond yields are required to set it up. Either that or else we’ll soon see more inflation in equity and commodity prices, which will lead to economic stagflation, which would not be a good thing for the higher levels of employment and spending needed to sustain satisfactory economic growth plus that Bull market I foresee.
Now, let’s review the weekly details and look for evidence to support my views.
Global Economics Review
Weekly International Economic Report from Econoday.
Summary: “The week’s events surged to a climax with the release of the European bank stress tests. Whether they will mollify investors concerned with the health and well-being of the European banking system remains to be seen — closer study is needed. With European and Asian markets already closed for the week, response was minimal with little reaction in still open North American markets… Earlier in the week, better than expected earnings along with several solid European economic releases overshadowed Fed Chairman Ben Bernanke’s semi-annual congressional testimony mid-week. However, his cautious tone and a comment that the outlook for the U.S. economy was ‘unusually uncertain’ disheartened traders on Wednesday and they sold equities. But on Thursday, after Bernanke’s second day of testimony (mostly a repeat of the day before), investors changed their minds and U.S. equities enjoyed their best day of the week.”
Here are the key US economic reports from last week’s calendar.
US Housing Starts for June. Following release of the data on 7/20/2010 8:30:00 AM ET, Econoday reported, “Housing is still suffering from the end of expired tax incentives as starts fell sharply in June. But the good news is that housing permits rebounded, perhaps indicating a bottom for starts. Homebuilders again slowed the pace of ground breaking as housing starts in June declined 5.0% after a 14.9% plunge in May. The June annualized pace of 0.549 million units fell well short of analysts' expectations for 0.580 million units and is down 5.8% on a year-ago basis. The latest fall was primarily due to a 21.5% plummet in multifamily starts, following a 4.3% gain in May. The single-family component only slipped 0.7% after an 18.8% decrease the prior month… By region, the decline in starts was led by an 11.3% drop in the Northeast Census region. Decreases also were seen in other regions with the Midwest down 6.9%; West, down 5.9%; and the South, down 2.4%… The near term outlook is less gloomy as permits rebounded 2.1% in June, following a 5.9% drop in May. Permits in June came in at an annualized rate of 0.586 million units and are down 2.3% on a year-ago basis… Clearly, the starts and permit levels are weak. But June's starts numbers are not as bad as at face value as the multifamily component is very volatile and led the drop. And the comeback in permits suggests that the post-tax credits decline is leveling off. ”
US Jobless Claims for week ending July 17. After release of the data on 7/22/2010 8:30:00 AM ET, Econoday reported, “The Labor Department confesses: it was holiday distortions tied to July 4 that held down initial claims in the prior week. Claims for the July 17 week jumped 37,000 to 464,000 (prior week revised 2,000 lower to 427,000). Despite the jump, the four-week average, at 456,000, is slightly lower than this time last month which does hold out hope for improvement in monthly payroll data… Continuing claims fell 223,000 in data for the July 10 week. The four-week average for this reading shows only marginal improvement from a month ago: at 4.567 million vs 4.573 million in the June 19 week. The unemployment rate for insured workers fell two tenths in the week to 3.5%… Weekly initial claims data will be distorted through the month of July, beginning with the opening holiday and in following weeks on calendar shifts for retooling in the manufacturing sector. Nevertheless, today's report isn't very good.”
US Existing Home Sales for June. Following release of the data on 7/22/2010 10:00:00 AM ET, Econoday reported, “Existing home sales fell in June but not as much as expected, down 5.1% to a 5.37 million annual rate. Prices are a big positive in the report, up 5.2% for the median price to $183,700. Yet supply is a big negative, up to 8.9 months from 8.3 months. Heavy supply will hold back price improvement. The National Association of Realtors, which compiles the report, sees inventories rising to 10 months in the next report. The association stresses that the housing market will turn on the unemployment rate. New home sales will be posted on Monday.”
US Leading Indicators for June. After release of the report on 7/22/2010 10:00:00 AM ET, Econoday reported, “The index of leading economic indicators fell 0.2% in June and, excluding the interest rate spread, would have fallen a rounded 0.6%. The rate spread, exaggerated by near zero rates on the front end, has been holding this index up throughout the recovery… The factory workweek was the single biggest negative for the report followed by vendor performance. These are two readings hinting at trouble for the manufacturing sector, the sector that has been leading the economy out of recession. The stock market was also a negative as were unemployment claims… The index of coincident economic indicators also shows trouble, unchanged in June following a run of gains. Today's report echoes Ben Bernanke's sound bite yesterday warning that the economic outlook is "unusually uncertain."”
Here are the key US economic reports from next week’s calendar.
US New Home Sales for June. Prior to release of the data on 7/26/2010 10:00:00 AM ET, Econoday reported, “New home sales plunged 33.3% in May to an annual rate of 300,000, the lowest rate on the books in data going back to 1963. The latest pace compares to an April peak of 446,000 units. Months' supply on the market, due to the drop in sales, surged to 8.5 months from April's 5.8 months. But the actual number of new homes on the market, down 1,000 in the month to an adjusted 213,000, is the lowest since 1970. The median price for new homes sold fell a monthly 1.0% to a $200,900-with the year-ago pace at down 9.6%.”
US Consumer Confidence for July. Prior to release of the data on 7/27/2010 10:00:00 AM ET, Econoday reported, “The Conference Board's consumer confidence index for June fell to 52.9 in a nearly 10 point decline the size of which usually corresponds with an economic shock. At the national level, the drop was mainly due to concern over the job market and income growth. At the regional level, there were indications that confidence also was pulled down by the ongoing psychological and economic damage from the Gulf oil spill. The June decline was led by severe weakness in the East South Central and the South Atlantic. More recently, the mid-July reading for Reuters/University of Michigan consumer sentiment dropped sharply from June.”
US Durable Goods Orders for June. Prior to release of the data on 7/28/2010 8:30:00 AM ET, Econoday reported, “Durable goods orders in May declined a revised 0.6% after jumping 2.9% in April. Excluding the transportation component, however, new durable orders rebounded a revised 0.6%, following a 0.9% decrease in April. The big negative in the report was the transportation component which dropped 6.9% in May-tugged down by a 29.6% plunge in the volatile nondefense aircraft subcomponent. Advances were widespread in other components. Looking ahead, we may see some softening in the underlying trend for new orders. The new orders index in the ISM manufacturing report eased to 58.5 in June from 65.7 in May, with 50 being breakeven. But a rebound in aircraft likely will boost the headline number.”
US Jobless Claims for the week ending 7/24. Prior to release of the report on 7/29/2010 8:30:00 AM ET, Econoday reported, “Initial jobless claims for the July 17 week jumped 37,000 to 464,000. This followed a 31,000 drop the week before. The Labor Department indicated that the volatility was related to seasonal adjustment difficulties around the July 4 holiday. Continuing claims fell 223,000 in data for the July 10 week.”
US Advanced Estimate of US GDP for Q2. Prior to release of the data on 7/30/2010 8:30:00 AM ET, Econoday reported, “GDP growth for the first quarter's third estimate was revised down to an annualized 2.7 pace from the prior estimate of 3.0% and an initial estimate of 3.2%. The downward revision to GDP growth primarily reflected an upward revision to imports and a downward revision to personal consumption expenditures that were partly offset by upward revisions to exports and to private inventory investment. Looking ahead, traders will not just focus on overall growth but also on final sales. However, a wild card is the annual revisions to GDP and prior quarters' growth could come into play for market reaction.”
US Employment Cost Index for Q2. Prior to release of the data on 7/30/2010 8:30:00 AM ET, Econoday reported, “The employment cost index for civilian workers in the first quarter rose 0.6% (not annualized) for the highest rate of the recovery and compared with a 0.4% rise in the fourth quarter. The year-on-year rate increased to 1.7%, 2 tenths above the fourth-quarter pace. The latest quarterly gain was led by benefits costs which jumped 1.1% while wages & salaries remained tame at plus 0.4%.”
US Chigago PMI for July. Prior to release of the data on 7/30/2010 9:45:00 AM ET, Econoday reported, “The Chicago PMI edged down six tenths in June to 59.1 but remained well over 50 to indicate significant month-to-month growth for the area's business activity. The new orders index for June, however, slipped to 59.1 from a prior string of 60-plus readings.”
US Consumer Sentiment for July. Prior to release of the report on 7/30/2010 9:55:00 AM ET, Econoday reported, “The Reuter's/University of Michigan's Consumer sentiment index plunged in the mid-July reading, down nearly 10 points to a 66.5, putting this index back to the lows of last year. Both the expectations and current-conditions components showed roughly 10 point drops. Since the last reading, there hasn't been any notable net progress in unemployment claims, the stock market has swung back and forth, and economic news has been less positive. So, odds are that sentiment will be soft for the final July number.”
International Equity Markets Review
There were some significant gains this week in the US and European markets, but nothing like in the Shanghai Composite, which gained +6.1% and is now down “just” -21.5% YTD.
Is the Shanghai market ready to rally? If so, what might that mean for other international markets? Obviously, the primary beneficiary would be Hong Kong, so we’ll have to watch that index and its components carefully.
There are some like Credit Suisse researchers who believe that China could bounce well over +20% this year. We’ll just have to watch it.
If you happen to be watching the FXI China 25 mainland China stocks that trade in Hong Kong, you might want to set up this monitor with (free) ADVFN.com.
HKX:941, HKX:2628, HKX:883, HKX:762, HKX:386, HKX:728, HKX:857, HKX:2600, HKX:3988, HKX:2318, HKX:3968, HKX:1088, HKX:3328, HKX:1898, HKX:998, HKX:1211, HKX:1800, HKX:753, HKX:2899, HKX:1398, HKX:1919, HKX:390, HKX:991, HKX:902, HKX:2388
Here was Friday’s monitor after the close in Hong Kong. I look at this every morning.
The Hong Kong chart shows a likely break-out, but the good time might just be for a short time, so I’d ensure stops were put on.
Friday in Europe was all about bank stress test results. The news was good, but prices barely moved. Could the reason be that certain parties knew in advance and floated some other story to cover their pre-event buying?
Here’s the Econoday report:
Below are 16 country index chart links from StockCharts.com (with their formal approval btw). Global equity markets do not trade in a vacuum. It is important to be watching these markets move through a trend juncture together, pushed and pulled by global currency and commodity strength or weakness as well as local and regional economic forces.
Here is the latest session data for the exchanges of the Americas.
Here is the latest chart for the Brazilian Bovespa stock exchange in Sao Paulo.
Brazilian Bovespa stockcharts.com chart
Here is the latest session data for the Toronto Stock Exchange composite index.
Toronto 300 stockcharts.com chart
Toronto CDNX stockcharts.com chart
Europe
Here is the latest session data for the bourses of Europe.
Here is the latest session data for the London stock exchange FTSE.
FTSE 100 stockcharts.com chart
Here is the latest session data for the German DAX.
Here is the latest session data for the French CAC 40.
Here is the latest session data for the Milan Italy stock exchange MIBTEL.
Italian Milan Index stockcharts.com chart
Here is the latest session data for the Swiss market index. Swiss Market Index stockcharts.com chart
Asia-Pacific
Here is the latest session data for the Asia-Pacific stock exchanges.
Here is the latest chart for the Japanese Nikkei 225 index.
Tokyo Nikkei 225 Index stockcharts.com chart
Here is the latest chart for the Singapore index .
Singapore Straits Times Index stockcharts.com chart
Here is the latest chart for the Shanghai Composite index .
Shanghai Composite Index stockcharts.com chart
Here is the latest chart for the Hong Kong Hang Seng index .
Hong Kong Hang Seng stockcharts.com chart
Here is the latest chart for the India BSE 30 index .
Mumbai BSE 30 Sensex Index stockcharts.com chart
Here is the latest chart for the Australian All Ordinaries index .
Sydney All Ordinaries Index stockcharts.com chart
Russia (RTS) stockcharts.com chart
ETFs Review for International equity market
Market volatility is extreme. Two weeks earlier all 16 country ETF’s in the table here were positive; then a week ago there was a turn-about as 14 of 16 country ETFs sank W/W and on the Friday all 16 were down. The Bulls were anxious going into the weekend. The weakest of the 16 a week ago was Brazil’s EWZ, which dropped -4.74% as a result of a loss on Friday of -3.02%. It was a very tough three days for the Brazilian EWZ.
In the Basic Materials review a week ago I wrote:
But market psychology is extremely brittle today. To most traders, things are either terrific or terrible.
In this sector, there were several Brazil stock’s that had very bad weeks: FBR -8.4%; GGB -8.0%; and VALE -7.5%. But just think about the percentage gains when they have very good weeks, and they do.
These three Brazilian favorites have lost favor in the YTD. In the past three months, FBR, GGB and VALE are down a lot: -39.1%; -23.4%; and -27.3%, respectively. That’s not to suggest they won’t go down even more before hitting bottom. But we are seeing signs of a bottom.
These Brazilian stocks broke down in late April, about a week ahead of the Dow 30. The reason being that the initial move to a safe haven was from foreign equities to US equities, which was seen as the US Dollar popped. After a few days of a rising $USD, the broad market finally gave way, and even those Dow 30 stocks began to tumble.
Now, when traders rush back into risk, I think they’ll look up Brazil again, probably ahead of China, which has a tightening policy going on, and much productive over-capacity, and probably inventory.
This week, EWZ, the Brazilian ETF, soared +8.29%. The FBR, GGB and VALE tickers I referred to as “bounceable” led the pack with gains of +16.4%, +14.1% and +13.9% respectively. By comparison, the Dow 30 average was up +3.2%. Yes, risk was being bought. This week, at least!
Here are the comparative charts:
Weekly: http://billcara2.com/tkchart/tkchart.asp?stkname=FBR,GGB,VALE,$DJX0X&wt=1&ind=rsi
Daily: http://billcara2.com/tkchart/tkchart.asp?stkname=FBR,GGB,VALE,$DJX0X&wt=0&ind=rsi
Let me remind you, however, of the remark I made in this space a week ago: “Because of the opening gaps and intra-day saw-tooth patterns, I am finding it is almost impossible to trade these country ETFs with any degree of control and success.”
Table 14: International equities via an ETF perspective (in $USD)
| Symbol | Close | 1Day Change |
1Day %Change |
1W %Change |
2W %Change |
4W %Change |
YTD %Change |
3M %Change |
6M %Change |
12M %Change |
Japanese equity market ETF: EWJ
Here is the Japanese (EWJ) equity market ETF Monthly, Weekly and Daily data charts:
U.K. equity market ETF
Here is the United Kingdom (EWU) equity market ETF Monthly, Weekly and Daily data charts:
EWU Daily data: 
Canada’s equity market
Here is the Canadian (EWC) equity market ETF Monthly, Weekly and Daily data charts:
Taiwan’s equity market
Here is the Republic of China/Taiwan (EWT) equity market ETF Monthly, Weekly and Daily data charts:
Indonesia equity market ETF
Here is the Indonesia Fund (IF) equity market ETF Monthly, Weekly and Daily data charts:
IF Summary from Yahoo Finance:
http://finance.yahoo.com/q/pr?s=IF
IF Summary from Google Finance:
http://www.google.com/finance?q=AMEX:IF
IF chart from StockCharts.com:
http://stockcharts.com/charts/gallery.html?IF
Here are the links to interactive charts from Billcara2.com for the key country ETFs, which you can add technical indicators for as well.
Group 1:
(list one)
(list two)
Group 2:
(list one)
(list two)
US Equity Markets Review
A week ago, I wrote in this space: “A week ago, the S&P rallied +5.42% W/W to close at 1077.96. Five days later, the S&P stands at 1064.88 (-1.21%), and by most accounts traders are fearing a crash. Of course, Friday’s loss of -2.88% will shake up a few people.”
The market had been mildly bullish until that Friday when the bottom fell out. I asked and then answered: “The question now is, how far does the elevator go down?... Most traders believe it’s going to fall a lot here. However, it’s my view that higher prices are forthcoming as long as 1040 holds on the S&P, with the first real sign of trouble being a violation of the 50% retracement at 1055… Being able to see both sides of a trade is a valuable trait of successful traders. If 1055 and especially 1040 is taken out, the weight of the evidence will demand extra caution and protection of long exposure. Until now, the S&P has been stymied at the 50-day moving average, which has coincided with the downtrend line off the April 26th peak, leaving potentially three lower highs on the daily chart… By the time we start trading on Monday, there will be lots of evidence from Asia-Pacific and European markets to consider. But, we anticipate adding to long positions into weakness early this coming week with stops placed under 1040, looking for a rise into the 1130 to 1150 area.”
Here once again, we had correctly called the short-term cycle bottom, but were too slow to take advantage on the Monday when the opportunity was there. It wasn’t until Tuesday this week before the S&P 500 showed strength, i.e., was able to get above 1075 and to close above 1080. Tuesday was also the week’s S&P low (1056.88). The successive highs each day told the story: 1074.70, 1083.94, 1088.96, 1097.50, 1103.73. After Tuesday, the daily lows also lifted: 1065.25, 1072.14, and 1087.88.
Have you ever noticed how frequently the number 88 comes up, or the numbers 8, 6 and 3? These are numbers that to the Chinese represent positive wealth, health, and luck. Look down the historical price table for the S&P 500 and from May 7 through July 23, which is just 54 sessions (the odds of 88 would happen are 0.54), the ending digits 88 occur 3 times, which is six times more than random, including six days ago, at the bottom (1064.88). There was an 88 ending to the daily low two times in the past four (50% vs a random 0.04%?). And note the number of 3’s, 6’s and 8’s.
My telephone numbers end in 3333 and 6333 for a reason, btw.
NASDAQ Composite ino.com chart
NASDAQ Composite stockcharts.com chart
Here is the list of the ten highest-weighted non-financial stocks in the NASDAQ Composite. Put them in a watchlist (see Google Finance Portfolio) and watch them like a hawk:
AAPL MSFT GOOG QCOM RIMM CSCO INTC ORCL GILD EBAY
Daily RSI-7 for the Nasdaq 100 Big-10
Weekly RSI-7 for the Nasdaq 100 Big-10
Monthly RSI-7 for the Nasdaq 100 Big-10
Add two of AMZN, DELL, JAVA or YHOO to get a Cara Dozen.
Or while you are at BillCara2.com, input up to 30 tickers in the window above “Summaries” – say AAPL MSFT GOOG QCOM RIMM CSCO INTC ORCL GILD EBAY AMZN DELL JAVA YHOO plus up to 16 more – and click on Tech Chart, Basic View, Daily Watch, Performance or Fundamentals and you’ll get a lot of information to compare one against the others.
Here is the Monthly data chart of the Interactive Chart of Nasdaq Composite, S&P 500, Dow30, and Russell 2000 (small cap) indexes.
Here is the Weekly data chart of the Interactive Chart of Nasdaq Composite, S&P 500, Dow30, and Russell 2000 (small cap) indexes.
Here is the Daily data chart of the Interactive Chart of Nasdaq Composite, S&P 500, Dow30, and Russell 2000 (small cap) indexes.
Dow 30 Stocks Review
This week, 24 of the 30 Dow stocks closed higher, and some of the gains were spectacular. Except for American Express (AXP +8.2%), the best four were Industrials, Boeing (BA +9.7%), Caterpillar (CAT +8.4%), General Electric (GE +8.0%) and United Technologies (UTX +7.4%). Although it’s only a week, seldom do you see America’s manufacturers look so good.
A week ago, these Industrials were nowhere to be seen on a leaders’ list. In fact, a week ago, going into the Farnsworth International Air Show in England, BA dropped -4.3% W/W.
I had an inkling that traders were being pushed too negative in their thinking, so I commented as follows in this space a week ago:
Trading in the Dow 30 stocks has been extremely volatile. Three weeks ago, 25 of the Dow 30 stocks closed lower, and the DJIA was down -2.94%. That was just the prelude to the next week where 29 of the Dow 30 were down and the DJIA index fell -4.51%. Then, by the end of the following week, the DJIA managed a gain of +5.29% and 29 of the Dow 30 stocks were up. Unable to make up much ground through Thursday this week, Friday was a wipe-out as all Dow 30 closed lower on the day, taking the index down -2.52%, leaving it down -0.98% lower W/W.
In my mind, that’s not too bad a loss. In fact the leaders this week, Intel, Microsoft, Hewlett-Packard, McDonald’s, Wal-Mart, Procter & Gamble and JP Morgan are pretty solid companies, and, despite taking big losses on Friday, all made gains on the week. Over the past two weeks, in fact, these stocks have made very solid gains: INTC +9.2%; MSFT +7.5%; HPQ +7.7%; MCD +4.8%; WMT +2.8%; PG +4.1%; and JPM +8.1%.
If you are long these stocks and are more worried today than you were two weeks ago, simply put on stops at the amount of these gains, and move them up by the amount of any gains going forward.
I think that turned out to be a sound assessment and pretty good advice.
Where Mr. Market goes from here is probably higher, possibly two to four percent higher, before the sellers return.
Table 16: Dow 30 List
| Symbol | Close | 1Day Change |
1Day %Change |
1W %Change |
2W %Change |
4W %Change |
YTD %Change |
3M %Change |
6M %Change |
12M %Change |
Here are the links to interactive Dow charts from Billcara2.com that I broke into groups of ten, which you can add technical indicators for as well.
(list one)
(list two)
For those of you who are relatively new at trading, or to this blog, why not pull the ten (10) Cara 100 companies out of the DJIA 30 list, and study the links for just these stocks? Keep a hard copy of the Value Line quarterly report plus a record of the Daily-Weekly-Monthly RSI-7 technical indicator. Study up on what the RSI is so you know it and have confidence that it is just like a football game yardstick that shows you how much risk your team is facing when trying to score points.
The Cara 100 high-quality company list has the following ten DJIA components:
Wal-Mart (WMT), Disney (DIS), Johnson & Johnson (JNJ), McDonalds (MCD), Exxon (XOM), Boeing (BA), Procter & Gamble (PG), IBM (IBM), Intel (INTC), and United Technologies (UTX)
There is no rocket science to these high-quality companies. In your typical week, you shopped at Wal-Mart and along the aisles, mostly the personal consumer products were from Procter & Gamble, except for maybe the baby powder from Johnson & Johnson. On the way there, you may have filled-up at an Exxon gas station, and on the way home, maybe you stopped for a Big Mac or a salad at McDonalds. Overhead, you watched airplanes from Boeing. If you were in a high-rise building, you probably rode in an Otis elevator from United Technologies. Maybe you no longer have an IBM PC, but you do know the company, and your present PC is likely powered by Intel. Every parent's kids want you to take them to Disney… All in all, this is just life we're talking about here. If you are alive, you know these companies like your children. You probably even see more of them… So, just quickly read those Value Line reports – one per company every 13 weeks – and keep an eye on the RSI (momentum) and MACD (trend)… Those guys on Wall Street may be worth a gazillion dollars, but they didn't do it the way you and I have to do it. So, stop listening to their stories that financial engineering and out-sourcing is what's making America strong. That is such a crock. Instead, live life, use common sense, do only what you understand, feel comfortable, and you'll be surprised at how quickly you can take control and free yourself of the shackles of HB&B.
This paragraph continues to run because, over time, it works.
Value Line Report(s) this past Friday
This week in the quarter yearly WIR 4- 17-30-43 series, Value Line reported on three DJIA components, all of them Industrials: General Electric (GE), United Technologies (UTX) and Caterpillar (CAT). Only United Technologies is a Cara 100 company.
As General Electric is tending to stabilize now, we are going to discuss it more. The issues with GE Capital still are serious in our eyes, but I’ll give you a heads-up here that over the next year, two and three, I believe GE will outperform its peer group.
General Electric [GICS 20, Dow 30, ex-Cara 100]
(GE: Google Finance file)
(GE: Yahoo Finance file)
(GE: StockChart chart)
(GE: Billcara2 chart)
(GE: ADVFN Financial Data)
(GE: Value Line Report Jul. 23: next one is due Oct. 22)
United Technologies [GICS 20, Dow 30, Cara 100]
(UTX: Google Finance file)
(UTX: Yahoo Finance file)
(UTX: StockChart chart)
(UTX: Billcara2 chart)
(UTX: ADVFN Financial Data)
(UTX: Value Line Report Jul. 23: next one is due Oct. 22)
Caterpillar [GICS 20, Dow 30]
(CAT: Google Finance file)
(CAT: Yahoo Finance file)
(CAT: StockChart chart)
(CAT: Billcara2 chart)
(CAT: ADVFN Financial Data)
(CAT: Value Line Report Jul. 23: next one is due Oct. 22)
Here are my notes from WIR #17, WIR #30, and WIR #43 from 2009 and WIR #4 and #17 from 2010 re United Technologies and Caterpillar: I will continue to downplay General Electric (GE) discussion other than to say the company still has work to do in cleaning up its balance sheet. Selling control of NBC was a good start. I’d like to see them hive off GE capital too. I have never lost confidence in Jeff Immelt although I don’t put him on the pedestal I do for several other CEO’s.
For study purposes, here is what I wrote about these companies in WIR #17-2009 (April 26):
The two Industrial sector companies, United Technologies and Caterpillar, ran into the same economic problems caused by the credit market squeeze in September 2008: pullback in spending followed by inventory glut. Being closely linked to the woes of the global economy, both companies have a challenging operating environment, but that’s not to say they are not high quality ones. They are. Based on various metrics and impressions, I happen to think United Technologies is the superior one; however, I do like both…
Here are my notes from WIR #30, July 26, 2009:
…On a comparative basis, Caterpillar clearly had the superior price performance over the past three months, mostly in the past few weeks. The reason was, as explained here through-out, was on account of the Great Reflation play as the Fed (and other central banks as well) has printed a lot of money to spur economic growth. The $USD has dropped as a result, which has boosted commodity prices, which in turn has aided the commodity-price sensitive sectors like Energy, Basic Materials and Capital Goods Industrials and Transports industries of which Caterpillar is a leader.
In my previous analysis, I blew it. The following low reached almost 30, but I opined that I would have waited until 27-28. You cannot and will not be right all the time. In my case, I was too negative, and completely overlooked the Great Reflation play. CAT had a blow-out 13-week performance of +24.9%.
UTX stock has lifted +5.8% in the past 13 weeks, closing 52.23. The stock hit interim short-term cycle lows of 47.34 and 49.00, which is well over the price that I said would attract me (42-44), so I was wrong on this one too; but not nearly so bad as CAT…
Here are my notes from WIR #43, October 25, 2009:
…Where does one begin when the financial world has gone crazy? … As you can see from my words above, I think highly of these two companies. I’d like to own them; but I am not going to over-pay. United Technologies has been a long-time Cara 100 favorite of mine for all the reasons that I like quality. Caterpillar too would make that list except for the one weakness that the balance sheet is not as strong as I’d like to see for a company whose operations are so highly correlated to the global economy and affected by currency fluctuations. Even at that, I have often said that CAT is almost in my top group.
There is a big difference however – these days at least – in a company financial position and operating results and the reportage in mainstream media. Seldom do you see such nonsense as the media is presently spewing regarding corporate results as we have today. After the CAT quarterly report was released, it seemed like Hollywood screenwriters got into the act, and I felt compelled to write it up in the blog Wednesday morning after the stock had hit a high of 61 and change the day before and everybody was repeating the mantra “CAT just crushed earnings”:
The average PE for CAT is in the low teens, and it seldom goes above 20 (but is now double its average and traders are excited). But there is a lot more to this than meets the eye. Independent traders are confounded because prices are moving on pure b.s. Fourteen weeks ago (7/14), when Value Line created its report on CAT, the price was $31.93. Today the price was $59.81 when I last checked. That's a gain of +87.3% in a quarter. This week VL will update their CAT report. Interestingly, in their last report, the analyst had just downgraded the technical outlook rating to a "5" (lowest) and a couple weeks earlier had downgraded CAT's fundamental timeliness rating to a "5" (lowest). He wrote in the report published July 24: "We advise investors to stay on the sideline... we are cautiously optimistic quarterly sales will soon hit bottom... the company is slashing costs and endeavoring to preserve cash... reducing production runs, shortening work weeks, laying off workers, (etc)..."
On that basis, and I happen to believe that Value Line has fairly good analysts and a good track record over the years, there was no reason for the recent moonshot in the CAT price. Wall St analysts agreed with the VL report. Thirteen weeks ago, 14 rated the company a Hold, 4 a Buy/Strong Buy and 5 an Underperform/Sell. The overall rating was about 3 on a scale of 5. Last week it was 2.8 (a very weak hold).
So, what's happening here? Yesterday at the open, the stock gapped from 58 (over-bought) to a nose-bleeding height of 61.
Why? The sales guidance for 2009 is $32-33 billion, but even VL had it estimated at $35 bil in their 7/24 report. And sales for 2008 were $51.234 billion. Earnings were a surprise at $0.64, but they were also $1.39 in the comparable year earlier quarter.
Right at the pre-market peak in hype, Reuters ran a headline story: "Will cash-rich CAT bankroll cash-poor suppliers?" Do you believe that garbage? CAT has been desperately trying to conserve cash, and their balance sheet is rated only A (not A+ or A++) and the Safety rating is only a "3" because the cash on hand equals only the accounts payable. In fact the company's quick assets (cash and receivables -- the one's they have difficulty collecting) are $20 bil and the current liabilities are $22 bil. So CAT is hardly a cash-rich company, and their sales have plummeted because the economy is in crisis and their distributors are going out of business left, right and center.
So, what the heck is going on here? This is all about Stimulus 2.0. If you want to buy the risk, go ahead. As for CAT and others like it, I'll pass thank you.
Look closely at the VL report dated Oct 23 (but clearly written ten days earlier, which irks me btw because there is no reason it cannot go from the analyst direct to the market without first being seen by goodness knows how many people). The projected next five year annual rates of growth for sales, cash flow and earnings are one-third those of the past five years. Nothing, I believe, has a greater impact on sustainable share prices that momentum of growth in these three metrics. So where’s the beef? Then, projected earnings for this year AND next combined are about half the actual earnings for 2008. Sales for 2009 and 2010 combined are projected at $67 bil vs 2008 sales at $51.3 bil. Truly, how can people get excited and be talking “blow-out” earnings, and using words like “crushed”. 2009 earnings are projected to come in at $0.95, which is a far cry from 2008 when earnings were $5.71. The current December quarter, they are projected to be $0.53 vs the comparable quarter at $1.13. Like, where is the beef here?
Just because the Wall Street scriptwriters are telling you things are great doesn’t mean they are. Prices, simply, are escalating and people are excited – just like the condo owners were in Miami in 2005 after stunning price gains over 2004, which followed stunning price increases over 2003, etc. Where are they now? I said in the summer of 2005 that books would be written about that sordid affair and I held CNBC accountable. It’s happening all over again. If there was a factual basis for these price increases, I would be holding positions. Unfortunately I have to manage risk.
Last night at a party everybody was talking up the market. One fellow says he bought Citi at 94 cents and sold it a couple weeks later for 3 something, making $500,000 in his personal account, and now that he is a genius he says he absolutely knows the market is going higher. I asked him what his picks were and the answer was “All of them. Buy them all. They are all going higher, and I got a $100,000 (wager) that says I’m right.” So I asked what if he’s wrong, and he replied “In that case my $100,000 turns to $5,000… so big deal.” He was drunk in more ways than one.
Another friend who is also a construction worker and who also bought Citi down near the low dropped by yesterday to ask me what he should do with it. I was surprised he was still holding it, and mentioned his $1.00 cost base. No, he says, he paid $1.04 for 100,000 shares and was thinking of selling a week ago at $5. Now the price has been sliding, down to $4.46, he wanted my counsel. “Sell now” I said and “go to cash, and after C crashes, buy another $100,000 worth, and no matter what happens to it, you cleared a quarter million (it’s tax free in Bahamas). There will be lots of quality opportunities that are less risky.” Ok he says, he’ll do that, and then proceeds to tell me he also bought at Australian bank at the same time at 10 and its now 80. The mind boggles. I figured maybe he should be working with me or me with him. I just have a different kind of hard hat.
My mind just had a flash-back to the 1970’s when a friend who was a commodities broker was telling me he was making a killing in pork bellies. I really didn’t know back then what a pork belly was, but it wasn’t long after that this guy was no longer a commodities broker.
There are extreme cycles at times and we are going through one. The money has moved from the taxpayer’s account to Humungous Bank & Broker (HB&B) and through their books to their proprietary trading desks and those of their friends and best clients. Regrettably, that money never made it to the loan department despite the no-brainer profit set-up from the Fed. So, it went into the market with a little bit kept in reserve to pay off the script writers and talking heads. I don’t know what’s grown faster, the prices or the hype?
Nothing much changes at every extreme cycle top. People who don’t know gamble. They can’t stay out of the action. It’s in their blood. They couldn’t care less whether Caterpillar is CAT or 0228 or the stock is $40 or $60. Pick a number.
…The skinny on United Tech is a little easier to comprehend. Extremely strong balance sheet is being used to ramp up the dividend and buy in the stock. The metrics always look better. No brainer. Paulson pulled that one after he became Treasury Secretary. I called it Paulson’s Folly because when he told Wall Street to do the same thing when the share prices were at their peak. When these banks, names you now know have failed, were spending over $10 billion to buy in their shares at record high prices, I asked in this blog if anybody with common sense really believed that was a good thing.
What goes around comes around.
With UTX, the financials and operating results are better that Caterpillar’s. But, there too the projected next five year annual rates of growth for sales, cash flow and earnings are a fraction of those of the past five years – unless of course you believe that every one in China was going to buy an elevator…
Notes for WIR#4 Jan 24, 2010
Here are the charts for CAT ($54.25 1/22 close; down -$3.35 10/23 close; down -5.82% in qtr):
At 1/22, the RSI-7 for the Monthly/Weekly/Daily for CAT is 58.5 (falling; bearish) / 40.6 (falling; bearish) / 22.6 (has fallen to Accumulation Zone consideration).At 10/23, the RSI-7 for the Monthly/Weekly/Daily was 66.5 (presently bull) / 76.1 (a bull with a nosebleed) / 63.2 (down sharply after so-called “blow-out earnings).
Our automated RSI-7 signal system gave a Weekly-based SELL Alert @ $54.25 on 1/22. But, since the Daily hit the Accumulation Zone and closed Friday with a 22.6 RSI-7, I would hesitate selling if there is any attempt by international metals stocks to rally early this coming week [based on presumed Quantitative Easing]. I think the easing will come early if equity markets look like they will crater early in Monday morning in Europe, or if not then there could be small selling though the President’s State of the Union address on Wed. night…
If the selling continues through the week, CAT’s RSI-7 could drop to the teens or lower before there is a bounce. Watch the RSI-7 on Silver bullion and the Silverminer stocks for indication of a bounce. But any bounce is expected to be a small, short one.
Deleveraging of financial assets takes the speculation out of stocks like the metal miners.
As for Value Line, the analyst David Reimer, raised the Timeliness from 4 (bad) to 3 (average) on 11/06 and the Technical from 3 (average) to a 2 (good) on 10/30. From this report dated 1/22, but clearly written well before as the price is shown as $62.24 but closed 1/22 at $54.25, I don’t see what positives he saw. Obviously with a price of $54.25, the risk is lower.
So, when you read any report from an analyst always be sure to note the date and price change.
Frankly, I see nothing in this report that would help me trade the stock. The analyst has had to retract some statements re earnings and revenue expectations, so he clearly knows that long-term oriented investor/traders are not going to have any confidence in what he writes, so he can opine whatever he wants about a 3- to 5-year Total Return potential being ok. In fact, despite his “positive” notes, the Annual TR has been dropped from a hi-lo of 22%-10% on the previous quarterly report to just 17%-6% for this one. Given that he shows a Dividend Yield of +2.7%, he’s obviously saying that the low expectation is for a minimal capital growth through rising share price. I don’t disagree; I just think the analyst ought to not be so hype-oriented as to conclude his report with, “We believe that a rising share price is beginning to attract more investors with a year-ahead view, as opposed to those looking further out”. Oh, really?
Notes for WIR#17 Apr 25, 2010
Here are the charts for UTX ($76.47 4/23 vs $69.08 1/22 close; up +10.7% over qtr):
At 4/23, the RSI-7 for the Monthly/Weekly/Daily for UTX has moved to 79.8 (and rising) / 80.4 (a big week this was) / 71.2 (Thurs and Fri came off after that incredible move on Wednesday) vs the values on 1/22, which had been 73.5 (still elevated) / 55.1 (falling) / 30.1 (falling rapidly).
Our automated RSI-7 signal system noted a Monthly and Weekly SELL Alert back in January, but the UTX has kept powering north. There had been a Daily-based Accumulation Zone @ $69.08 on 1/22, but I ignored it, thinking the stock would move lower. I decided to go with the SELL Alert given on the Weekly on 1/22 @ $69.08, saying “this is no time to be brave, regardless of what bullish analysts might opine.”
The Value Line analyst, Erik Manning, indicates an anticipated 2012-2014 Annualized Total Return (Dividends and Capital Growth) in a hi-lo range of 16%-10%, which, given a solid dividend of well over +2.0%, is not so hot.
Today, I am not considering any Buys in UTX. The Monthly and Weekly RSI-7 numbers are just too extreme at the high end. I’d wait until the anticipated intermediate-term Bear phase takes the stock to a Daily/Weekly Buy Alert level before thinking about venturing into new positions.
It now appears that 2008 revenue levels will not be achieved again until 2012, and that earnings per share in 2008 will possibly be surpassed in 2011. The latter is happening because cash flow is being used to buy back the stock.
The VL analyst opines only average performance here for the foreseeable future. I agree. More to the point; I’d be concerned about capital safety, not because of the company, but because of the state of the broad equity market.
Here are the charts for CAT ($68.78 4/23 vs $54.25 1/22 close; up +26.8% in qtr):
At 4/23, the RSI-7 for the Monthly/Weekly/Daily for CAT is 73.9 (back to the danger zone) / 81.2 (bullish extreme) / 74.8 (simply too high).
At 1/22, the RSI-7 for the Monthly/Weekly/Daily for CAT is 58.5 (falling; bearish) / 40.6 (falling; bearish) / 22.6 (has fallen to Accumulation Zone consideration). At the 1/23 review in the WIR, I stated that my automated RSI-7 signal system gave “a Weekly-based SELL Alert @ $54.25 on 1/22. But, since the Daily hit the Accumulation Zone and closed Friday with a 22.6 RSI-7, I would hesitate selling if there is any attempt by international metals stocks to rally early this coming week [based on presumed Quantitative Easing]. I think the easing will come early if equity markets look like they will crater early in Monday morning in Europe”.
As we see from the table and chart at the beginning of this WIR, the Fed was pumping then and these stocks began to soar a week or so later. It was be nice to get that call. Maybe we will just have to study the weekly Fed reports more closely!
2008 revenues will likely not be reached again until 2013! Same for EPS. The VL analyst says that potential Total Return (TR) is less than average, citing a 3-5 year hi-lo of 17%-6%. At the low end, you need to factor in today’s dividend yield of +2% and figure that’s not much of a capital return on investment. Too much risk here, for the moment. In fact, I think as soon as the Fed starts cleaning up its balance sheet by offloading dubious quality assets, there will be a broad market smack down and this is one stock that doesn’t have enough going for it to hold off the Bear attack. If there is a capex issue with major corporations, and there may be if interest rates start to lift, which would negatively impact Internal Rate of Return budgets for long term projects, then companies in the heavy equipment business like Caterpillar are going to suffer. That’s not to say this company has not done an excellent job cleaning up inventory and distribution channel issues, and so forth; it’s just not got enough going for it to sustain higher share prices during a broad market pullback or any double dip to economic recovery should that occur.
Here are the charts for GE ($19.07 4/23 vs $16.11 1/22 close; up +18.4% over qtr):
At 4/23, the RSI-7 for the Monthly/Weekly/Daily for GE is 63.4 (rising) / 85.4 (bullish extreme) / 61.0 (down for the past week).
Our automated RSI-7 signal system last noted a BUY Alert a long time ago @ $11.95 on 7/23/2009, with no change since then. Most recently there was a SELL Alert on the Daily data @ $18.97 on 4/16. Obviously on the Weekly data, GE is in the Distribution Zone.
VL raised the Technical (6 month rating) from a ‘4’ to a ‘3’ on 4/16, which was the day I got a SELL Alert on the Daily data. We’ll have to see how these two fare over the next month or two.
VL analyst Orly Seidman gives a hi-lo 3-5 year projected annualized Total Return (TR) of 32%-18%. With the issues still to be resolved at GE Capital, maybe the potential risk of capital loss is elevated as well. Yes, the balance sheet appears to have improved over the past two years, and as I see it the management team there is excellent, albeit a little too bullish all the time. The Return on Equity and profit margins, however, fell so much, and the risks increased so much with GE Capital, I simply had to remove GE from the Cara 100 a while back. If the directors would agree to hive off the Financial Services interests, like they did the NBC holding, I’d likely put GE back into the Cara 100 as one of the world’s great manufacturing companies.
But, I don’t trade it as it’s too hard to know when the Fed is going to pump or withdraw liquidity in the system. GE CEO Jeff Immelt would know, however, as he sits on the Board of the all-important Fed Bank of New York, which employs the 400-plus traders who run the $2.35 trillion hedge fund.
I also don’t like not being in or close to the GE boardroom the times the Board is discussing the dividend, which at some point may double. That would soar the stock overnight. As an outsider, I don’t like the odds of beating insiders. They hold what GE themselves refer to as “The Unfair Advantage”.
So, while I am back to looking at GE again, I’ll stay away from the stock for now, knowing there could be things happening there that would attract my interest sometime in the future.
Notes for WIR#30 July 25, 2010
Here are the charts for UTX: http://billcara2.com/tkchart/tkchart.asp?stkname=UTX&ind=rsi&wt=3
http://billcara2.com/tkchart/tkchart.asp?stkname=UTX&ind=rsi&wt=1
http://billcara2.com/tkchart/tkchart.asp?stkname=UTX&ind=rsi&wt=0
Here are the charts for CAT:
http://billcara2.com/tkchart/tkchart.asp?stkname=CAT&ind=rsi&wt=3
http://billcara2.com/tkchart/tkchart.asp?stkname=CAT&ind=rsi&wt=1
http://billcara2.com/tkchart/tkchart.asp?stkname=CAT&ind=rsi&wt=0
Here are the charts for GE:
http://billcara2.com/tkchart/tkchart.asp?stkname=GE&ind=rsi&wt=3
http://billcara2.com/tkchart/tkchart.asp?stkname=GE&ind=rsi&wt=1
http://billcara2.com/tkchart/tkchart.asp?stkname=GE&ind=rsi&wt=0
Best these three stocks were avoided as I recommended in the previous quarterly write-up.
UTX was $76.47 on 4/23 but hit a high of just $77.08 a couple days later, falling to a low of $62.88 before closing 7/23 at $70.90. From the July 1 low, UTX has moved in 15 sessions up +11.4% and now has a Monthly/Weekly/Daily RSI-7 of 60.4/57.9/73.9. The Daily RSI-7 is high, so traders would be wrong to chase the stock here.
In the previous WIR, I stated: “The VL analyst for UTX opines only average performance here for the foreseeable future. I agree. More to the point; I’d be concerned about capital safety, not because of the company, but because of the state of the broad equity market.”
Clearly, you could have bought the UTX ($76.47 on 4/23) in the following quarter as low as $62.88, so I made a good call.
CAT was $68.78 on 4/23 but hit a high of just $72.83 a couple days later, falling to a low of $54.89 before closing 7/23 at $69.31. From the July 1 low, CAT has moved in 15 sessions up +19.4% and now has a Monthly/Weekly/Daily RSI-7 of 68.1/64.1/75.0. The Daily RSI-7 is very high, so traders would be wrong to chase the stock here.
In the previous WIR, I stated: “That’s not to say CAT has not done an excellent job cleaning up inventory and distribution channel issues, and so forth; it’s just not got enough going for it to sustain higher share prices during a broad market pullback or any double dip to economic recovery should that occur.”
You could have bought the CAT ($68.78 on 4/23) in the following quarter as low as $54.89, so I made another good call.
Re: GE, in the previous WIR I stated: “So, while I am back to looking at GE again, I’ll stay away from the stock for now, knowing there could be things happening there that would attract my interest sometime in the future.”
GE was $19.07 on 4/23 and hit a high of just $19.70 a couple days later, falling to a low of $13.75 on July 2 before closing 7/23 at $15.71. You could have bought the GE ($19.07 on 4/23) in the following quarter as low as $13.75, so this too was a good call.
From the July 1 low, GE has now moved in 14 sessions up +14.3% and has a Monthly/Weekly/Daily RSI-7 of 47.3/49.7/70.5. The Daily RSI-7 is high, so traders should not expect the stock to soar here, but it may lift some more, and may lead the Summer Rally. In fact of these three, I like GE the best moving forward for the next three to six months and also out for the next two to three years.
Going out to 2013-2015, the Value Line analyst projects a lo-hi Annualized Total Return (TR), which includes dividends and capital gains, of 30% to 40%. That would be quite impressive, but I agree with the rationale, i.e., changing momentum re top- and bottom-line growth. The balance sheet is improving, liabilities are being quickly reduced, a higher dividend was just declared, the share buy-back program was extended, and the non-core assets are being dealt. Book value per share is clearly on the rise. By sometime in 2013, the stock will likely trade in the $40 to $45 range based on a 19x PE of $2.25 (my estimate). By buying low (presently $15.71), supplemented by put writes, a three-year triple is possible.
I think that 3x share performance would be impossible for the UTX and CAT. In fact, if you look at VL’s next 5-year projections for each company compared to the past 5-year data for per share revenues, cash flow, earnings, dividends and book value, the UTX and CAT are going in the wrong direction.
I just happen to think that once the long-term cycle bottom has been reached, probably later this year, the sailing aboard the good ship GE will be remarkably pleasant and profitable.
The Dow 30 Company links in chronological order of the upcoming reports.
Coca Cola [GICS 30, Dow 30, Cara 100]
(KO: Google Finance file)
(KO: Yahoo Finance file)
(KO: StockChart chart)
(KO: Billcara2 chart)
(KO: ADVFN Financial Data)
(KO: Value Line Report Apr 30: next one is due Jul 30)
Kraft Foods [GICS 30, Dow 30]
(KFT: Google Finance file)
(KFT: Yahoo Finance file)
(KFT: StockChart chart)
(KFT: Billcara2 chart)
(KFT: ADVFN Financial Data)
(KFT: Value Line Report Apr 30: next one is due Jul 30)
Wal-Mart [GICS 30, Dow 30, Cara 100]
(WMT: Google Finance file)
(WMT: Yahoo Finance file)
(WMT: StockChart chart)
(WMT: Billcara2 chart)
(WMT: ADVFN Financial Data)
(WMT: Value Line Report May 7: next one is due Aug 6)
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 May 14: next one is due Aug 13)
3M Company [GICS 20, Dow 30, Cara US 100 June 25-06]
(MMM: Google Finance file)
(MMM: Yahoo Finance file)
(MMM: StockChart chart)
(MMM: Billcara2 chart)
(MMM: ADVFN Financial Data)
(MMM: Value Line Report May 14: next one is due Aug 13)
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 May 21: next one is due Aug. 20)
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 May 21: next one is due Aug. 20)
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 May 21: next one is due Aug. 20)
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 May 21: next one is due Aug. 20)
Johnson & Johnson [GICS 35, Dow 30, Cara 100]
(JNJ: Google Finance file)
(JNJ: Yahoo Finance file)
(JNJ: StockChart chart)
(JNJ: Billcara2 chart)
(JNJ: ADVFN Financial Data)
(JNJ: Value Line Report May 28: next one is due Aug 27)
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 Jun. 4: next one is due Sept. 3)
Chevron Corp [GICS 10, Dow 30]
(CVX: Google Finance file)
(CVX: Yahoo Finance file)
(CVX: StockChart chart)
(CVX: Billcara2 chart)
(CVX: ADVFN Financial Data)
(CVX: Value Line Report Jun. 11: next one is due Sept. 10)
ExxonMobil [GICS 10, Dow 30, Cara 100]
(XOM: Google Finance file)
(XOM: Yahoo Finance file)
(XOM: StockChart chart)
(XOM: Billcara2 chart)
(XOM: ADVFN Financial Data)
(XOM: Value Line Report Jun. 11: next one is due Sept. 10)
Boeing Co [GICS 20, Dow 30. Cara 100]
(BA: Google Finance file)
(BA: Yahoo Finance file)
(BA: StockChart chart)
(BA: Billcara2 chart)
(BA: ADVFN Financial Data)
(BA: Value Line Report Jun. 18: next one is due Sep. 17)
Travelers Co [GICS 40, Dow 30]
(TRV: Google Finance file)
(TRV: Yahoo Finance file)
(TRV: StockChart chart)
(TRV: Billcara2 chart)
(TRV: ADVFN Financial Data)
(TRV: Value Line Report Jun. 18: next one is due Sep. 17)
AT&T [GICS 50, Dow 30]
(T: Google Finance file)
(T: Yahoo Finance file)
(T: StockChart chart)
(T: Billcara2 chart)
(T: ADVFN Financial Data)
(T: Value Line Report Jun. 25: next one is due Sep. 24)
Verizon [GICS 50, Dow 30]
(VZ: Google Finance file)
(VZ: Yahoo Finance file)
(VZ: StockChart chart)
(VZ: Billcara2 chart)
(VZ: ADVFN Financial Data)
(VZ: Value Line Report Jun. 25: next one is due Sep. 24)
Cisco Systems [GICS 45, Dow 30, Cara 100]
(CSCO: Google Finance file)
(CSCO: Yahoo Finance file)
(CSCO: StockChart chart)
(CSCO: Billcara2 chart)
(CSCO: ADVFN Financial Data)
(CSCO: Value Line Report Jun. 25: next one is due Sep. 24)
Procter & Gamble Co. [GICS 30, Dow 30, Cara 100]
(PG: Google Finance file)
(PG: Yahoo Finance file)
(PG: StockChart chart)
(PG: Billcara2 chart)
(PG: ADVFN Financial Data)
(PG: Value Line Report Jul. 2: next one is due Oct. 1)
Home Depot [GICS 25, Dow 30]
(HD: Google Finance file)
(HD: Yahoo Finance file)
(HD: StockChart chart)
(HD: Billcara2 chart)
(HD: ADVFN Financial Data)
(HD: Value Line Report Jul. 2: next one is due Oct. 1)
Hewlett-Packard [GICS 45, Dow 30]
(HPQ: Google Finance file)
(HPQ: Yahoo Finance file)
(HPQ: StockChart chart)
(HPQ: Billcara2 chart)
(HPQ: ADVFN Financial Data)
(HPQ: Value Line Report Jul. 9: next one is due Oct. 8)
IBM [GICS 45, Dow 30, Cara 100]
(IBM: Google Finance file)
(IBM: Yahoo Finance file)
(IBM: StockChart chart)
(IBM: Billcara2 chart)
(IBM: ADVFN Financial Data)
(IBM: Value Line Report Jul. 9: next one is due Oct. 8)
Intel [GICS 45, Dow 30, Cara 100]
(INTC: Google Finance file)
(INTC: Yahoo Finance file)
(INTC: StockChart chart)
(INTC: Billcara2 chart)
(INTC: ADVFN Financial Data)
(INTC: Value Line Report Jul. 9: next one is due Oct. 8)
Alcoa [GICS 15, Dow 30]
(AA: Google Finance file)
(AA: Yahoo Finance file)
(AA: StockChart chart)
(AA: Billcara2 chart)
(AA: ADVFN Financial Data)
(AA: Value Line Report Jul. 16: next one is due Oct. 15)
Dupont [GICS 15, Dow 30]
(DD: Google Finance file)
(DD: Yahoo Finance file)
(DD: StockChart chart)
(DD: Billcara2 chart)
(DD: ADVFN Financial Data)
(DD: Value Line Report Jul. 16: next one is due Oct. 15)
Merck [GICS 35, Dow 30]
(MRK: Google Finance file)
(MRK: Yahoo Finance file)
(MRK: StockChart chart)
(MRK: Billcara2 chart)
(MRK: ADVFN Financial Data)
(MRK: Value Line Report Jul. 16: next one is due Oct. 15)
Pfizer [GICS 35, Dow 30]
(PFE: Google Finance file)
(PFE: Yahoo Finance file)
(PFE: StockChart chart)
(PFE: Billcara2 chart)
(PFE: ADVFN Financial Data)
(PFE: Value Line Report Jul. 16: next one is due Oct. 15)
General Electric [GICS 20, Dow 30, ex-Cara 100]
(GE: Google Finance file)
(GE: Yahoo Finance file)
(GE: StockChart chart)
(GE: Billcara2 chart)
(GE: ADVFN Financial Data)
(GE: Value Line Report Jul. 23: next one is due Oct. 22)
United Technologies [GICS 20, Dow 30, Cara 100]
(UTX: Google Finance file)
(UTX: Yahoo Finance file)
(UTX: StockChart chart)
(UTX: Billcara2 chart)
(UTX: ADVFN Financial Data)
(UTX: Value Line Report Jul. 23: next one is due Oct. 22)
Caterpillar [GICS 20, Dow 30]
(CAT: Google Finance file)
(CAT: Yahoo Finance file)
(CAT: StockChart chart)
(CAT: Billcara2 chart)
(CAT: ADVFN Financial Data)
(CAT: Value Line Report Jul. 23: next one is due Oct. 22)
Sector ETF Summary for the US equity market
The tables I show are for eleven GICS Sector Index Funds (ETF’s), including two for Technology (XLK and SMH), for a total of ten GICS sectors. They cover the full spectrum of the US equity market.
Only one sector ETF was down this week (Healthcare IYH -0.54% W/W). On Friday all 10 were higher.
A week ago I wrote that Consumer Staples (XLP) was the only one higher. “which shows the kind of week it was, which is to say one where traders were running for cover, selling equities and buying bonds. That’s not to say they wanted bonds; they were simply seeking the closest port in a storm… On Friday that storm came in. Whether it clears out over the weekend, we will likely know in several hours, after equity markets open in Asia-Pacific and later in Europe… For the Bulls, it’s nail biting time.”
The storm blew itself out on that Friday, basically a one-day flurry of selling and trapping of Bears. Monday was a tad slow, but, starting Tuesday, the sectors then moved higher across the board.
Table 1: Cara ETF List is sorted by price performance Week over Week (W/W), i.e. 1W%N.
| Symbol | Close | 1Day Change |
1Day %Change |
1W %Change |
2W %Change |
4W %Change |
YTD %Change |
3M %Change |
6M %Change |
12M %Change |
You can do this table yourself by entering the following string into the Summary window at Billcara2.com and then clicking on the link for Performance.
SPY XLE XLB XLI XLY XLP IYH XLF XLK SMH IYZ XLU .
You can also add more ETFs - up to 30 in total. For a list of components to many ETFs, go to the AMEX.com and NYSE.com web sites, and click on ETFs.
You can use this tool to set up watchlist charts by industry group and sub-groups.
Here’s the SPY Monthly, Weekly and Daily data charts:
SPY Monthly data: 
SPY Weekly data: 
SPY Daily data: 
10 (energy: XLE) 
15 (basic materials: XLB) 
20 (industrial: XLI) 
25 (consumer discretionary: XLY) 
30 (consumer staples: XLP) 
35 (healthcare: IYH) 
40 (financial: XLF) 
45 (technology, semiconductor: SMH) 
50 (telecom: IYZ) 
55 (utilities: XLU) 
Individual Sector ETF Review
Sector 10 (energy: XLE, IYE, VDE, OIH, PBW and IXC)
Here’s the XLE Monthly, Weekly and Daily data charts:
XLE Monthly data: 
XLE Weekly data: 
XLE Daily data:
Table 2: Senior oil & gas equities
| Symbol | Close | 1Day Change |
1Day %Change |
1W %Change |
2W %Change |
4W %Change |
YTD %Change |
3M %Change |
6M %Change |
12M %Change |
Crude Oil ($WTIC +$2.76/bbl +3.62% W/W) closed higher at $78.98/bbl. That helped the Oiler stocks (XLE +3.96% W/W), which closed higher at 53.78.
A week ago re the Oiler stocks (XLE -1.69% W/W), I wrote in this space, “I have nothing more to add here except that patience is a virtue. I wrote in this space a week ago, “It’s almost like the market takes and then gives back. The only losers are those traders who make bad decisions right before a break-out to a new level… That level in the very long-term will be higher, assuming that the global economy starts running on all cylinders before then. Otherwise, it’s the car goes into the garage as we’re headed for really tough times, and the price of Crude Oil sinks… Again, it’s a matter of time horizon. But, remember: the market is not a destination; it’s a journey. In the end we are all dead. It’s mostly a question of how active you choose to be while on the journey… (This week) China National Offshore (CEO -8.0%) and PetroBrazil (PBR -5.1%) were badly hit.”
Well this week CEO soared +7.9% and PBR was up +5.2%. PetroChina (PTR) was up +5.6%.
As for BP, I cannot stomach to write about a company that has acted so badly. Accidents will happen, but the shameless acts of doctoring photos at the crisis center, blocking access to SEC insider trading reports, and buying the google search word “oil spill” so researchers could be redirected to BP’s favorable b.s. reports, are so very telling about the culture there, an insight to what’s up with this company. As bad as Exxon behaved after the Valdez accident in Alaska, they couldn’t hold a candle to BP.
This company will continue because it is a strong one. The UK pensioners, the shareholders and the employees will manage to get by. But, if there ever was a social equity case that all of us – customers, shareholders and prosecutors – should examine deeply and make right, BP is the model. I sincerely hope the senior officers and directors there are taken in hand by the US Dept of Justice and made to personally pay for their role in the cover-up. Getting rid of Tony Hayward in exchange for new CEO Bob Dudley is nothing more than a 2% solution. This is a deep-rooted corporate culture issue that has gone on for decades and needs to be put in its place by a civilized society.
News from The Wall Street Journal
The board of troubled oil giant BP is negotiating the departure of embattled Chief Executive Tony Hayward, according to people familiar with the matter. The BP board is scheduled to meet Monday and Mr. Hayward's possible departure will be discussed then, these people said. They described the decision to move toward Mr. Hayward's departure as "mutual."
http://online.wsj.com/article/SB1000142405274870471910457538892036061806...
The CNQ price data in our table has not accounted for the stock split a while back. That data quality is out of my control. Sorry.
Oil & Gas Exploration & Production -Canada
Sector 15 (basic materials: IYM, XLB, IGE and VAW)
Here’s the XLB Monthly, Weekly and Daily data charts:
XLB Monthly data:
XLB Weekly data:
Table 3: Senior Basic Materials:
XLB Daily data:
| Symbol | Close | 1Day Change |
1Day %Change |
1W %Change |
2W %Change |
4W %Change |
YTD %Change |
3M %Change |
6M %Change |
12M %Change |
What I wrote in this space a week ago pretty much sums up how and why most traders are confused and getting whip-sawed:
The Basic Materials (XLB) sector ETF gained +8.34% a week ago. This week there was a loss of -1.84% to close at 29.83, and everybody’s thinking the gold has turned to rust. Wow, what a difference a day makes. Up through Thursday, I never heard many complaints.
As I wrote a week ago in this space, “How much of this extreme trading in the large cap stocks is caused by algo trading is anybody’s guess. I just know for a fact that the underlying fair value of these corporations changed in the past couple weeks by a smidgeon.”
But market psychology is extremely brittle today. To most traders, things are either terrific or terrible.
In this sector, there were several Brazil stock’s that had very bad weeks: FBR -8.4%; GGB -8.0%; and VALE -7.5%. But just think about the percentage gains when they have very good weeks, and they do.
This week, the XLB was (surprise, surprise!) the #1 sector performer and the Brazilian stocks were the leaders. Amazing, eh? (Yes, I’m back in Canada eh!)
XLB soared +7.31% to close the week at 32.01.
These three Brazilian favorites FBR, GGB and VALE were up this week +16.4%, +14.1%, and +13.9%.
I had written a week ago, “(Despite the plunge this week) we are seeing signs of a bottom.”
Here are the comparative charts:
Weekly: http://billcara2.com/tkchart/tkchart.asp?stkname=FBR,GGB,VALE,$DJX0X&wt=1&ind=rsi
Daily: http://billcara2.com/tkchart/tkchart.asp?stkname=FBR,GGB,VALE,$DJX0X&wt=0&ind=rsi
Sector 20 (industrial: IYJ, XLI, VIS, and IYT)
Here’s the XLI Monthly, Weekly and Daily data charts:
XLI Monthly data: 
XLI Weekly data: 
XLI Daily data:
Table 4: Senior capital goods makers and transportation:
| Symbol | Close | 1Day Change |
1Day %Change |
1W %Change |
2W %Change |
4W %Change |
YTD %Change |
3M %Change |
6M %Change |
12M %Change |
The Industrials ETF (XLI) gained +7.13% this week, closing at 30.07.
A week ago I wrote in this space, “(re XLB) the loss on Friday was -3.37%... One encouraging sign was that leading economic indicators Fedex (FDX +0.5% W/W) and UPS (UPS -0.6%) were strongest in this sector… Boeing (BA -4.3%) had a tough week with further delays to the Dreamliner 787 program. If you hear that such issues are considered “minor” or have been “resolved”, then look for a pop in the S&P… Sometimes, I think these things are set-ups… Call me from Missouri… Another one of these possible “set-ups” is Home Depot (HD), which just happened to have had a blood-letting -4.34% loss on Friday to send that stock down by -4.07% W/W… I guess you know I’m not enamored with that mover and shaker behind this stock. Far too close to the NYSE and the Wall Street crowd, I think… So, when BA and HD are ready to rock and roll again, I think “the boys” will be ready to pump some life into the ol’ S&P.
http://billcara2.com/tkchart/tkchart.asp?stkname=BA,HD,$DJX0X&wt=0&ind=rsi
This week the BA led the Dow 30 with a W/W gain of +9.74% and the HD jumped +4.21%. Now you know why I say I’m from Missouri.
To check on general and detailed info for the Industrials group, the Thomson Reuters service is a good one:
http://www.reuters.com/sectors/industries/significant?industryCode=52442
Here is the link to all sectors and industries as classified by Reuters:
http://www.reuters.com/assets/siteindex#sectorsAndIndustries
Sector 25 (consumer discretionary: XLY, IYC and VCR)
Here’s the XLY Monthly, Weekly and Daily data charts:
XLY Monthly data: 
XLY Weekly data: 
XLY Daily data:
Table 5: Senior consumer discretionary equities
| Symbol | Close | 1Day Change |
1Day %Change |
1W %Change |
2W %Change |
4W %Change |
YTD %Change |
3M %Change |
6M %Change |
12M %Change |
Consumer Discretionary (XLY +5.10% W/W) closed higher at $31.55. A week ago there was a loss of -1.28% and I remarked:
It would not have been bad at all except for Friday, when the XLY dropped -3.57%... And you know I’ve been talking about the plight of the retailers, right? When take a look at this set of cash registers on Friday! Looks like “the boys” at Humungous Bank & Broker (HB&B) might have made a few phone calls after the market closed Thursday, threatening to cut their lines of credit. :-)
You know, I think that HB&B could be doing the same to the hedgies who are playing the BC (-7.3% W/W) and JCP (-7.0% W/W).
Would make for an interesting study, if we could ever get people to admit the truth.
So, let’s take this a step further. Here is the Retailer list from this Friday of most of the same names – but notice the amazing share price turnaround on the same day a week later!
And how about the BC and JCP! This week the BC soared +14.8% and JCP beat that with a win of +15.3%. No longer a price-value discovery system, the market is now a casino folks and the SEC is sitting idly by.
Sector 30 (consumer staples: XLP, VDC, RTH and IYK)
Here's the XLP Monthly, Weekly and Daily data charts:
XLP Monthly data: 
XLP Weekly data: 
XLP Daily data:
Table 6: Senior consumer staples equities
| Symbol | Close | 1Day Change |
1Day %Change |
1W %Change |
2W %Change |
4W %Change |
YTD %Change |
3M %Change |
6M %Change |
12M %Change |
Consumer Staples (XLP) gained +2.38%% to close at $27.15 this week.
Coca-Cola (KO) was a winner.
But, along with the other defensive stalwart Healthcare, which was this week’s worst sector performer, Consumer Staples was 2nd worst performer of ten, and Basic Materials was #1. That’s a clear sign that traders were buying risk this week.
Sector 35 (healthcare: IYH, XLV, VHT, IXJ, and IBB)
Here’s the IYH Monthly, Weekly and Daily data charts:
IYH Monthly data: 
IYH Weekly data: 
IYH Daily data:
Table 7: Senior healthcare equities
| Symbol | Close | 1Day Change |
1Day %Change |
1W %Change |
2W %Change |
4W %Change |
YTD %Change |
3M %Change |
6M %Change |
12M %Change |
The healthcare sector (IYH) dropped -0.54% this week to close at 58.65. A week ago the loss was -1.42% W/W.
This week’s losers were: MYGN, JNJ, MRK, BMY, MDT, NVO and NVS, all tickers of some very sound companies. Traders instead were chasing GENZ +20.8% W/W with 21 million shares traded Friday (up +$8.35 to $65.52 on the day) as Genzyme is believed to be pursued as an acquisitions candidate by the French pharma group Sanofi-Aventis (SNY), although so far this is just rumor.
Wouldn’t it be nice if after a stock traded higher by +5% in a couple hours based on rumor that the SEC shut it down until the parties make a formal statement? As it stands, the present system encourages rumor mongering and insider trading.
Sector 40 (financial: IYG, IYF, XLF, VFH, IXG, VNQ, RWR, IYR, and ICF)
Here’s the XLF Monthly, Weekly and Daily data charts:
XLF Monthly data: 
XLF Weekly data: 
XLF Daily data:
Table 8: Senior financial company equities
| Symbol | Close | 1Day Change |
1Day %Change |
1W %Change |
2W %Change |
4W %Change |
YTD %Change |
3M %Change |
6M %Change |
12M %Change |
The Financials (XLF +3.04%) closed at $14.56.
In the previous WIR, you saw my skepticism with the take-downs of key banking stocks that would give very bearish impressions. In this space I wrote:
“…And let’s scare Brazil by taking down Banco Bradesco (BBD -13.4%)… And how about this timely article in the Wall St Journal network, a once highly valued source of quality independent journalism:
http://www.marketwatch.com/story/non-us-banking-stocks-are-they-worth-th...
Interesting trading in this stock, to say the least:
http://www.learningmarkets.com/News-Feed/2010071530408/banco-bradesco-sa...
Well, this week, BBD soared +8.6%.
A week ago in this space, I opined that there would likely be more confidence moving into the banks. I suggested that the European bank stress tests would likely be positive. In fact, 7 of 91 European banks that were tested failed the 6% tier one capital stress test requirement, but ALL 91 would, under unfavorable circumstances, continue to meet regulatory requirements. That ought to be inspiring.
Here is the news release and the data:
http://stress-test.c-ebs.org/documents/CEBSPressReleasev2.pdf
http://stress-test.c-ebs.org/documents/Listofbanksv2.pdf
Daily charts of electronic brokers and exchanges
Weekly charts of electronic brokers and exchanges
Sector 45 (technology: IGM, IGV, IGW, XLK, VGT, IYW, IGN, IXN, MTK and SMH)
Tech (XLK +3.84% to 22.19) and the Semi-conductors (SMH +3.61% to 28.44) were stronger than a week earlier when, despite losses all around, I said they were “actually strong”.
I added that, “(Two weeks ago) …these ETFs were also flying. Astounded at one person’s timely TV appearance (that was re-run ad nauseum), I wrote in this space a week ago after XLK gained +5.3% and SMH gained +5.7%: “Not a bad week after Wall Street Titan Barton Biggs said avoid this group.”
Are you starting to get the feeling you’ve been set up? Don’t worry; I’ve been watching these games for 40 years, which is why I say you don’t play the market, but that the market is a game that plays you.
Here’s the SMH Monthly, Weekly and Daily data charts:
SMH Monthly data: 
SMH Weekly data: 
SMH Daily data:
Here’s the XLK Monthly, Weekly and Daily data charts:
XLK Monthly data: 
XLK Weekly data: 
XLK Daily data: 
Table 9: Senior technology equities
| Symbol | Close | 1Day Change |
1Day %Change |
1W %Change |
2W %Change |
4W %Change |
YTD %Change |
3M %Change |
6M %Change |
12M %Change |
| Symbol | Close | 1Day Change |
1Day %Change |
1W %Change |
2W %Change |
4W %Change |
YTD %Change |
3M %Change |
6M %Change |
12M %Change |
Sector 50 (telecom: IYZ, VOX and IXP)
Here again, a week ago I expressed my skepticism for the goings-on at the time. I wrote:
The Telecom sector (IYZ) dropped -0.88% W/W to 19.16, following a loss of -2.04% on Friday… However, AT&T (T -0.6% W/W) and Verizon (VZ +0.3% W/W) were ok.
The big loser was China Telecom (CHL -3.4% W/W)… If you want to deflate a stock group real quick, you take down the biggest of the group, and in the China 25 index of mega-cap stocks that trade in Hong Kong, CHL is the biggest weight… Is this pressure on the market coming from a computer algo operating normally or people tweaking their computer programs to cause a market to tumble quickly? I wish I worked for a few weeks inside the SEC to be able to find out… It just seems to me that all the generals in Brazil and China, etc, are getting their legs cut out from underneath them. Usually in a Bear phase, the strongest hold out til the end… I’m very suspicious.
Daily: http://billcara2.com/tkchart/tkchart.asp?stkname=CHL,IYZ,$DJX0X&wt=0&ind=rsi
I have already told you about Brazil (EWZ +8.3% W/W), and China (GXC +6.7% W/W), and now here is the rest of the story: this week the IYZ gained +5.22% to close at 20.16. Up +7.8% each were Nokia (NOK) and Millicom International (MICC). Even Verizon (VZ +5.0%) and AT&T (T +3.4%) made big gains.
Table 14: Telecom
| Symbol | Close | 1Day Change |
1Day %Change |
1W %Change |
2W %Change |
4W %Change |
YTD %Change |
3M %Change |
6M %Change |
12M %Change |
Here’s the IYZ Monthly, Weekly and Daily data charts:
IYZ Monthly data: 
IYZ Weekly data: 
IYZ Daily data:
The Utilities sector ETF (XLU) gained +2.66% W/W to close at 30.48.
Table 12: US Utilities
| Symbol | Close | 1Day Change |
1Day %Change |
1W %Change |
2W %Change |
4W %Change |
YTD %Change |
3M %Change |
6M %Change |
12M %Change |
Sector 55 (utilities: IDU, XLU, and VPU)
Here’s the XLU Monthly, Weekly and Daily data charts:
XLU Monthly data: 
XLU Weekly data: 
XLU Daily data:
http://billcara2.com/markets/mkview.asp?qte=ss&ty=tk&qt=AEP+D+DUK+ED+EXC...
Here is the list of North American Utilities that I follow:
AEP D DUK ED EXC FE FPL NGG PCG PEG SO TRP
For study purposes, there is a good mix of electric (AEP, D, DUK, FE, FPL and SO), gas (NGG, TRP) and diversified (ED, EXC, PCG, PEG) utilities.
Bonds & Yields Review
Table 10: US Treasury Yields
| Maturity | Yield | Yesterday | Last Week | Last Month |
|---|---|---|---|---|
| 3 Month | 0.12 | 0.13 | 0.12 | 0.10 |
| 6 Month | 0.18 | 0.18 | 0.17 | 0.17 |
| 2 Year | 0.58 | 0.56 | 0.58 | 0.64 |
| 3 Year | 0.94 | 0.90 | 0.92 | 1.10 |
| 5 Year | 1.73 | 1.67 | 1.67 | 1.92 |
| 10 Year | 2.99 | 2.93 | 2.92 | 3.12 |
| 30 Year | 4.02 | 3.95 | 3.94 | 4.06 |
| Maturity | Yield | Yesterday | Last Week | Last Month |
|---|---|---|---|---|
| 2yr AA | 0.73 | 0.74 | 0.83 | 0.83 |
| 2yr AAA | 0.72 | 0.76 | 0.77 | 0.65 |
| 2yr A | 1.15 | 1.17 | 1.25 | 1.37 |
| 5yr AAA | 1.52 | 1.53 | 1.56 | 1.64 |
| 5yr AA | 1.61 | 1.64 | 1.63 | 1.81 |
| 5yr A | 2.15 | 2.10 | 2.34 | 2.42 |
| 10yr AAA | 2.89 | 2.89 | 2.76 | 3.08 |
| 10yr AA | 2.98 | 2.96 | 2.80 | 3.24 |
| 10yr A | 3.19 | 3.19 | 3.06 | 3.71 |
| 20yr AAA | 4.25 | 4.80 | 4.47 | 4.87 |
| 20yr AA | 5.04 | 5.17 | 4.98 | 4.82 |
| 20yr A | 5.18 | 4.77 | 4.91 | 4.84 |
| Maturity | Yield | Yesterday | Last Week | Last Month |
|---|---|---|---|---|
| 2yr AA | 1.38 | 1.31 | 1.31 | 1.45 |
| 2yr A | 1.59 | 1.60 | 1.61 | 1.88 |
| 5yr AAA | 2.13 | 2.00 | 2.02 | 2.30 |
| 5yr AA | 2.45 | 2.40 | 2.39 | 2.77 |
| 5yr A | 3.15 | 3.05 | 3.04 | 3.41 |
| 10yr AAA | N/A | N/A | N/A | N/A |
| 10yr AA | 3.96 | 3.89 | 3.83 | 4.26 |
| 10yr A | 4.29 | 4.20 | 4.32 | 4.63 |
| 20yr AAA | N/A | N/A | N/A | N/A |
| 20yr AA | N/A | N/A | N/A | N/A |
| 20yr A | 6.30 | 6.23 | 6.04 | 6.16 |
Treasury Bonds sold off a bit this week as risk returned to the market. The 20-year TLT lost -1.01% W/W due to a drop of -1.06% on Friday to close at 99.78.
This week, the yields for the 2-year were flat at 0.58% while the 5-, 10- and 30-year were up +6, +7, and +8 basis points (BP) at 1.73%, 2.99% and 4.02% respectively.
A week earlier I wrote, “(On Friday) Bond prices were bought as traders rushed into the safe haven of treasury bonds and out of equities… Why they chose to do this on Friday morning is a matter of interest.”
Increasingly I am seeing these moves that trap traders, so I have to believe they are designed to be that way. Unlike the public, the trading rooms at Humungous Bank & Broker (HB&B) remain open pretty much around the clock, allowing their traders, using Assets Under Management (AUM) to move prices any way they want. Performance bonuses are a significant factor.
At the end of the day, if the trend is deflationary, yields will drop and bond prices rise, although at a certain point there would be no return and investors would seek alternative investments like gold and collectibles, which pay no economic return, and if the trend is inflationary, investors will sell bonds (which will raise yields) in order to take greater risk in equities until they determine that the risks of receiving an economic return are insufficient, at which point they will also turn to alternative investments in gold and collectibles, based on their belief that speculative price increases will produce a return commensurate with the risk. Bonds, then, are the lowest risk instruments that could pay an economic return and hence are the best indicator of whether price trends are inflationary or deflationary.
For the most part, bond prices trade within the margin, hardly reflective of the terms inflationary and deflationary.
Here is the $USB 30-year Treasury Bond chart.
Interest rates and bond yields.
Interactive Daily data charts:
Interactive Chart of Interest rates and bond yields.
US Bond Funds -- Interactive Monthly Data Charts SHY Monthly data series chart:
IEF Monthly data series chart:
TLT Monthly data series chart:
AGG Monthly data series chart:
LQD Monthly data series chart:
TIP Monthly data series chart:
US Bond Funds -- Interactive Weekly Data Charts SHY Weekly data series chart:
IEF Weekly data series chart:
TLT Weekly data series chart:
AGG Weekly data series chart:
LQD Weekly data series chart:
TIP Weekly data series chart:
US Bond Funds -- Interactive Daily Data Charts
SHY Daily data series chart:
IEF Daily data series chart:
TLT Daily data series chart:
AGG Daily data series chart:
LQD Daily data series chart:
TIP Daily data series chart:
Table 11: Interest-sensitive securities
| Symbol | Close | 1Day Change |
1Day %Change |
1W %Change |
2W %Change |
4W %Change |
YTD %Change |
3M %Change |
6M %Change |
12M %Change |
I have only so much time to blog, so Fannie (FNM) and Freddie (FRE) are no longer of interest to me.
http://billcara2.com/tkchart/tkchart.asp?stkname=FNM,FRE&ind=rsi&wt=1
Consumer Finance -USA -- Interactive Weekly Data Charts
Mortgage Finance -USA -- Interactive Daily Data Charts
Commodities Review
This week, commodity prices ($CRB) lifted +1.68% W/W to close at 266.62.
The index at 266.62 is just below the 200-day Moving Average (270.65) and above the 50-d MA (257.69.
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
$WTIC this week bounced +$2.76/bbl (+3.62%) to close at 78.98/bbl.
A couple weeks ago, I opined, “I still feel the price is range-bound.” Now, I feel the price is more than likely to move to a higher level, perhaps 75-90, for several weeks. Should economic recovery be sustainable, I would anticipate that range or possibly even higher to hold for a while on the basis that (i) discoveries and refineries are getting costlier and (ii) alternatives are both costlier and will take some time to build as a replacement for oil.
For $WTIC, the 50-day MA is now 74.96, up W/W from 74.84, after being down from 75.59, 76.32, 77.20, 78.00, 78.85, 79.72, 80.36, 81.36, 82.43 (after changing course from), 82.82, 82.74, 82.10, 81.05, 79.99, 78.84, 78.30, 78.39, 78.32, 77.86, 77.23, 76.44, and 76.20 over the prior weeks.
The 200-d MA is at 78.04, up from 77.85, 77.62, 77.54, 77.45, 77.26, 77.08, 77.06, 77.01, 76.98 and 76.99 of the past ten weeks.
The future (78.98) is now above both its 50-day and 200-day Moving Average. That’s bullish.
Here is the e-miNY Dec-07 Crude Oil chart.
Interactive Chart of Weekly Crude Oil:
Interactive Chart of Daily Crude Oil:
Gold & Precious Metals Review
A week ago, $GOLD dropped -$18.40/oz to close at 1193.00, down -1.52% W/W. The loss on Friday was -1.27%, so that week was mostly a one-day show. This week, $GOLD dropped -$3.70/oz to close at 1189.30. It continues to be tough to trade, a large part of the reason being that Europeans are finding more confidence in their banking system, and hence less of a need for a safe-haven trade.
http://billcara2.com/tkchart/tkchart.asp?stkname=gld&cht=Tech+Chart&px=3...
http://billcara2.com/tkchart/tkchart.asp?stkname=gld&cht=Tech+Chart&px=1...
http://billcara2.com/tkchart/tkchart.asp?stkname=gld&cht=Tech+Chart&px=0...
The $GOLD 50-day Moving Average is now at 1216.50, down from 1219.45, which peaked after a weekly price series that included 1216.55, 1213.36, 1204.75, 1196.24, 1186.37, 1173.79, 1164.29, 1155.32, 1147.31, 1136.37, 1129.28, 1123.08, 1115.47, 1110.21, 1105.07, 1106.45, and 1110.37.
The 200d MA is 1143.96, up from 1139.77, 1134.55, 1130.70, 1125.25, 1119.06, 1112.07, 1104.93, 1099.37, 1092.95, 1086.98, 1079.82, 1073.77, 1067.77, 1062.17, 1056.79, 1051.39, 1047.82, 1044.22, 1040.67, 1036.71, 1031.61, 1026.87, and 1022.57 over the past 23 weeks.
I feel $GOLD will now lift again, but do so lagging equity prices at the start and then moving more quickly ahead – until the price peaks above $1300. Sometime in September, possibly October, but preceding the Nov 2 US election run-off, I think that $GOLD will start heading south, and so too will equity prices.
Of course I could be wrong. There is precious little evidence to make such a determination. One thing I avoid however is the constant noise from the goldbugs. If ever someone could present the same story 100 different ways, that group can.
Interactive Chart of Weekly Gold EOD Continuous Contract Index:
Interactive Chart of Daily Gold EOD Continuous Contract Index:
Interactive chart of recent trading for the Gold Bullion index.
Spot silver chart for the week
$SILVER gained +$0.25 (+1.40% W/W) to close the week at 18.11. Two weeks ago the price closed the week at 18.12. There has been much sideways action for several weeks now.
http://stockcharts.com/charts/gallery.html?s=$silver
http://tinyurl.com/y8k8ud4
For $SILVER, the 50d MA is now 18.30, down from 18.38, 18.39, 18.41, 18.37, 18.33, 18.27, 18.16, 18.07, 17.98, 17.87, 17.63, 17.44, 17.18, 16.91, 16.73 and 16.68 over the previous weeks. As I noted a couple weeks ago, “Let’s see if the trend has reversed or merely wavering.” The early indication is that it has peaked, but that’s not to say there might not be one more upward thrust that would really nail the Bull trap shut.
The long-term 200d MA is 17.67, up a tad from 17.65, 17.60, 17.58, 17.55, 17.48, 17.39, 17.29, 17.21, 17.12, 17.02, 16.89, 16.77, 16.64, 16.52, 16.41, 16.31, 16.24, 16.20, 16.16, 16.10, 16.03, 15.97, 15.92, 15.85, 15.75, and 15.65 over 26 weeks.
A week ago I said here, “The Silver Crazies are hoping the Loon takes flight.” Now some of them are just hoping it stays aloft.
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 remains volatile. Three weeks ago there was a big loss of -$69.00 (-4.39%), which was followed by a gain of +$29.00 (+1.93%). Then a week ago there was a loss of -$20.00/oz (-1.31%) to close at $1511.00. Now there has been a gain of +$30.00/oz (+1.99%) to close at $1541.00. Half the gain was made on Friday.
http://stockcharts.com/charts/gallery.html?s=$plat
http://tinyurl.com/ydwz4pn
The 50d MA for $PLAT is now at 1551.60, down from 1568.68, 1587.48, 1604.03, 1622.75, 1637.61, 1650.20, 1660.39, 1665.23, 1674.45, 1675.26, after being up from 1660.80, 1645.40, 1625.31, 1602.51, 1585.00, 1566.10, 1562.59, 1560.08, 1548.60, 1533.68, 1520.40, 1511.07, 1506.31, 1502.04, 1493.90, and 1480.91 earlier.
The 200d MA is at 1537.08, up from 1531.60, 1525.92, 1522.18, 1517.28, 1509.86, 1501.49, 1494.49, 1488.49, 1481.61, 1473.21, 1460.14, 1447.70, 1432.87, 1418.16, 1405.15, 1392.10, 1381.91, 1373.75, 1363.46, 1352.15, 1341.01, 1331.42, 1323.04, 1312.58, 1305.30 and 1297.81 the prior 26 weeks.
Note how close the 50d and 200d MA’s are now, one of them rising and one falling. The shorter-term MA is falling.
I don’t trade plat or pall, but I study them as part of the precious metals trading I do.
Spot platinum chart for the week
Interactive Chart of Weekly Platinum EOD Continuous Contract Index:
Interactive Chart of Daily Platinum EOD Continuous Contract Index:
Interactive chart of the Platinum metal index.
This week, $PALL lost -$10.50/oz to close at $456.45/oz.
http://stockcharts.com/charts/gallery.html?s=$pall
http://tinyurl.com/yenr5rj
The 50d MA is now at 462.29, down from 469.13, 475.45, 484.03, 494.39, 499.22, 501.83, 504.71, 505.32, 508.14, which was the peak of a run through 506.75, 499.60, 488.39, 478.78, 464.32, 454.12, 446.09, 443.42, 440.44, 434.95, 426.04, 417.55, 411.14, 406.81, 402.56, 396.97, and 390.10 in the past 26 weeks.
The 200d MA is at 434.15, up from 430.44, 427.04, 424.11, 420.43, 415.78, 411.11, 407.11, 403.59, 398.52, 393.30, 387.78, 379.68, 373.49, 365.65, 358.56, 351.84, 346.02, 341.03, 335.30, 329.51, 323.93, 319.10, 314.77, 310.11, 305.19, and 300.58 in the past 25 weeks.
The current price (456.45) is between the 50-day and 200-day MA, but now below the 50-d MA. As with gold, silver and platinum, traders are wondering if the technical support of the 200-day Moving average will hold up. So far I have presumed that would be the case, and that any pull-back would be sharp and quick to rebound as the $USD starts to fall in a longer-term Bear after the State budgetary issues become thornier issues.
Spot palladium chart for the week
Interactive Chart of Weekly Palladium EOD Continuous Contract Index:
Interactive Chart of Daily Palladium EOD Continuous Contract Index:
Interactive chart of the Palladium metal index.
This week, $COPPER lifted +$25.55 (+8.72%) to close at 318.50. Analysts are buzzing. Could there really be an economy that is much stronger than most of us believe. Apparently, the miners are getting their price increases.
http://stockcharts.com/charts/gallery.html?s=$copper
http://tinyurl.com/ybgnb7f
For $COPPER, the 50d MA is at 299.94, down a tad from 300.94, 303.75, 307.34, 313.12, 318.97, 325.25, 332.51, 335.44, 338.10, 342.14, 344.15, 344.89 after rising through a few months: 343.42, 337.92, 332.21, 328.97, 327.03, 327.29, 327.56, 326.24, 323.80, 322.54, and 322.07.
The 200d MA is at 318.20, which is up from a “recently flattish” 317.36, 316.73, 316.34, 316.12, 315.83, 315.54, 315.70, 315.28, 314.54, 313.94, 312.26, 310.48, 307.73, 304.50, 301.31, 297.89, 294.81, 292.15, 289.30, 286.09, 282.70, 279.88, 277.48, 274.89, 272.75, and 269.97 in the 26 previous weeks.
For those who are keen to study the industrial metals like copper, aluminum and zinc, why not look at the Powershares DBB, which trades on the NYSE.
http://finance.google.com/finance?q=NYSE:DBB
You want to see volatility, watch the mega producer of copper, Freeport-McMoRan (FCX), which we profile here on many occasions:
This is not a penny stock, but you couldn’t tell by the chart!
Interactive Daily data
Interactive Chart of Weekly Copper EOD Continuous Contract Index:
Interactive Chart of Daily Copper EOD Continuous Contract Index:
Interactive chart of the Copper metal index.
Table 12: Senior gold equities
| Symbol | Close | 1Day Change |
1Day %Change |
1W %Change |
2W %Change |
4W %Change |
YTD %Change |
3M %Change |
6M %Change |
12M %Change |
The goldminer indexes and ETF’s made back a bit of ground this week: $XAU gained +3.60% to 173.42. The GDX gained +1.38% to 49.21. Canada’s XGD was a loser again this week as the others were gaining. This week XGD dropped -0.45% to 22.05.
Friday’s action was uninspiring: $XAU gained +0.63%, bringing this index close in line over six sessions; GDX gained +0.10%, which left it a loser of about -2% over six sessions; and XGD was flat on Friday, meaning it too lost about -2% over the past six sessions.
Two weeks ago I wrote in this space, “I don’t like the price action, and so the best move is to stand aside.”
A week ago I added: “…we’ll just have to stay close. One thing I don’t like is the potential head-and-shoulders break-down of the Cdn Dollar versus Euro. The Cdn Loon had better pick it up a notch this week or else the GDXJ position is likely to be down even more.”
I just don’t seem to have a handle on the goldminers at present. The market is largely undecided. It’s a day-to-day thing, I guess. Some of that has to do with the bizarre trading of the Cdn Dollar.
To watch the moves in precious metal miners, you will have to monitor the individual stock charts, preferably in real-time, as follows: NEM ABX AU GFI GG HMY AUY KGC BVN
LIHR IAG EGO RGLD GOLD TSE_AGI GSS NG NGD AEM
Here are the key Silver miners and the SLV ETF: SLV SIL SVM CDE HL PAAS SSRI SLW MGN
Here are the Weekly and Daily Data charts of the indexes:
Interactive Chart of Weekly US Goldminers Index:
Interactive Chart of Daily US Goldminers Index:
The US goldminer share trust ETF trades under the ticker symbol GDX.
Here are the US Goldminer ETF (GDX) index Weekly and Daily data charts:
GDX Weekly data:
GDX Daily data:
The Toronto Exchange-listed goldminer iUnits S&P/TSX Capped Gold Index ETF trades under the ticker symbol TSE:XGD.
Just like GDX on the AMEX, you can trade XGD on Toronto. Canadian Dollar fluctuations will impact XGD vs GDX.
Here are the Weekly and Daily data charts for the TSX Goldshares (XGD) index:
Interactive Chart of XGD Weekly data:
Interactive Chart of XGD Daily data:
Forex Review
The $USD is a trade-weighted US Dollar index, we used to call the Morgan Dollar.
As commodities are priced in $USD you need to study forex price trends and cycles.
The Forex market is a four trillion dollar a day marketplace, which dwarfs the size of the stock and bond markets. In this market, the Euro/USD is the highest volume trader, and London is the center of the universe.
The current value of $USD is a mean value of rate fluctuations of six world currencies (Japanese yen, Euro, British pound, Canadian dollar, Swiss franc and Swedish krona) that each trade against the USD. The Euro is by far the biggest component.
The ETF that tracks the G-10 currencies is the Powershares DBV. http://tinyurl.com/ltxpk4
This week the so-called trade-weighted US Dollar index ($USD) followed previous weekly losses of -1.74%, -0.60% and -0.97% to lose just -0.02% to close at 82.47. The Dollar had been up through Thursday. Friday ‘s pull-back may have helped the Industrials (XLI +2.20%) and Basic Materials (XLB +2.20%).
http://stockcharts.com/charts/gallery.html?s=$usd
http://tinyurl.com/y9c3sr4
The 50-day MA of the $USD is now at 85.48, down a bit from back to back weeks of 85.68 and 85.68, but up from 85.46, 85.04, 84.52, 84.04, 83.41, 82.91, 82.24, 81.67, 81.21, 80.90, 80.72, 80.61, 80.48, 80.19, 79.89, 79.48, 79.23, 78.99, 78.69, 78.25, 77.85, 77.30, 76.87, and 76.52, in the past 26 weeks.
The 200-day MA is 80.40, up from 80.25, 80.09, 79.90, 79.68, 79.48, 79.29, 79.05, 78.88, 78.69, 78.49, 78.33, 78.21, 78.16, 78.14, 78.13, 78.11, 78.09, 78.06, 78.04, 78.05, and 78.10, 78.16, 78.24, 78.37, 78.53, and 78.69 of the past 26 weeks.
Interactive Chart of Daily US US Dollar Index:
This week, the Euro lost -0.20% W/W to close at 129.03. A week earlier the contract had soared +2.28% to close at 129.29, with a high that week of 130.06.
With the big move the previous week, I wrote in this space: “For some reason, it’s been on a solid Bull run. Could be the successful bond auctions in Spain, etc? Could be the European bank stress tests are looking like the results (arriving July 23) are coming up roses.”
The current price continues to sit well below the 200-day Moving Average, but is above the 50-day MA, in No Man’s Land.
http://stockcharts.com/charts/gallery.html?s=$xeu
http://tinyurl.com/ydekjtk
The 50d MA for the Euro futures are now at 124.21, up from 124.03, but down from 124.34, 124.85, 125.92, 127.18, 128.29, 129.69, 130.75, 132.16, 133.39, 134.42, 135.10, 135.49, 135.80, 136.14, 136.82, 137.48, 138.51, 139.22, 139.99, 140.67, 141.79, 142.85, 144.18, 145.26, and 146.18 over 26 weeks.
The 200d MA is at 136.76, down from 137.19, 137.66, 138.08, 138.64, 139.16, 139.65, 140.21, 140.62, 141.09, 141.57, 141.96, 142.29, 142.48, 142.62, 142.73, 142.86, 142.95, 143.10, 143.22, 143.28, 143.27, 143.26, 143.20, 143.06, and 142.86 over the past 25 weeks.
Interactive Chart of Weekly Euro Dollar Index, priced in USD:
Interactive Chart of Daily Euro Dollar Index, priced in USD:
The Pound contract lifted +0.86% W/W to close at 154.36, a week after it had jumped +1.59% W/W, closing at 153.04. There was a small loss the prior week that broke a string of five winning weeks. So, a week ago in this space, I wrote: “Now the Pound is back on track, heading towards a reversal of the MA downtrend lines, I think in a few weeks, maybe by late August… Has the reversal begun?”
http://stockcharts.com/charts/gallery.html?s=$xbp
http://tinyurl.com/yasdzc2
The 50d MA of the Pound is at 148.32, up from 147.89, after it had fallen through 147.86, 148.00, 148.28, 148.79, 149.28, 149.73, 150.06, 150.83, 151.46, 151.77, 152.18, 152.55, 152.84, 153.42, 154.30, 155.25, 156.41, 157.30, 158.19, 159.34, 160.25, 160.98, 161.89, 162.71, and 163.25 over the past 26 weeks. Yes, looks like the reversal has begun, and that could be good in the near-term for international equities and commodity prices as it pushed the US Dollar lower.
The 200d MA is 155.78, down from 155.95, 156.15, 156.38, 156.75, 157.13, 157.49, 157.97, 158.35, 158.88, 159.48, 159.91, 160.27, 160.52, 160.74, 161.01, 161.28, 161.54, 161.85, 162.13, 162.34, 162.39, 162.34, 162.21, and 161.97 over the previous 24 weeks.
Weekly British Pound Index:
Daily British Pound Index:
Weekly Japanese Yen Index:
The Yen had a loss against the US Dollar of -1.10% W/W, including a loss on Friday of -0.70%. On Friday, the $USD dipped, but all other major currencies lifted. Could this be due to the fact that Japanese investors are buying foreign stocks and bonds again – the old carry trade at work?
Econoday.com reported: “The Japan Ministry of Finance revealed that Japanese investors purchased a net ¥1.305 trillion in foreign bonds and notes last week. The statement further revealed that Japanese residents also bought a net ¥49.2 billion in foreign stocks. Over the same period, foreign investors sold a net ¥29.8 billion in Japanese stocks and purchased a net ¥231.2 billion in Japanese bonds.”
This week the Yen closed at 114.23. I suspect if, as and when the Yen continues to weaken, the prospects for a stronger $USD and $USB (bonds) as well as US and foreign equities are pretty good.
Why the Japanese would want to take down the Yen might have something to do with their desire to improve exporter conditions, and hence lift employment.
The Yen’s 50-day MA is now 111.29, which is up from 110.66, 109.90, 109.35, 108.80, 108.42, 108.13, 107.97, 108.07, 108.08, and 108.19, but down from 108.67, 108.98, 109.36, 109.82, 110.12, 110.54, 110.74, 110.67, 110.44, 110.27 and 110.14 over the previous 21 weeks.
The 200-day MA is now at 110.38, rising from 110.30, 110.23, 110.14, 110.06, 109.99, 109.92, 109.84, 109.77, 109.60, 109.49, 109.43, 109.40, 109.42, 109.37 and 109.29 the previous 15 weeks.
Daily Japanese Yen Index:
I hold a belief, rightly or wrongly, that the Bank of Canada, since the former Goldman Sachs Canadian managing director took office, is as straight as an arrow. NOT.
A week ago I wrote in this space: “After consecutive losses of -2.54% and -1.32%, the Cdn Dollar flew like a Loon a week ago, closing up +2.77% at 96.74. This week, “the boys” shot the Loon, taking it down -2.31% to a close at 94.51… You see, the Cdn oiler stocks stopped gushing this week. And the miners were very soft as well.”
This week, the Cdn Loonie flew again, up +2.13% in a single week, quite a feat to be up and down so much, particularly when it’s the job of the Bank of Canada to maintain stability. But it is what it is, and we are left to believe what we will.
In any case, the Oilers in NY were up +4.0% this week and the Basic Materials, including a lot of Miners, were up +7.3%.
The point being that if you want to take out all the stops, move all the marbles from the public’s hands to your own, just sink the Loon one week and then make it fly the next.
Whether you accept my theory or not, I don’t really care. I happen to believe that the Bank of Canada governor was parachuted into that job on short notice with a mission to do for certain vested interests – just like Liberal leader Mike Ignatieff was parachuted on a moment’s notice from his Harvard teaching job into the safe riding of Etobicoke, where I’ve lived most of my life, removing an incumbent Jean Augustine, who once was my children’s school principal and who did not want to quit and would not have lost.
I’ve voted Liberal and I’ve voted Conservative, depending on the candidate, but I do know that by and large politics is ugly. And corrupt. That’s typically the case whether it’s Canada, the US or The Bahamas.
When I returned to Etobicoke on Wednesday after a long time away, awaiting TV coverage of the Canadian Open PGA golf on the nearby St. George’s course, I was shocked to see the local coverage was oh maybe 250 to 1 in favour of federal politicians. I figured there must be an election coming up, but no I was told, it’s just the usual govt in your face.
I really wonder if there is anything the people can do about it.
Interesting story came from the cab driver in Nassau who drove me to the airport, a Haitian at least as old as I. He told me he had lived in the US and Bahamas for many years and was ashamed that black people like him had turned out just as corrupt as the white politicians. I did not start that discussion. He finished with: “Do you really think that Obama is a democratic person? I don’t!” “Very few are” I said as we arrived at the airport.
Yes, it seems that people everywhere are ticked off with govt. Times are tough, and the people don’t believe they are the ones at fault.
http://stockcharts.com/charts/gallery.html?s=$cdw
http://tinyurl.com/ycx58us
The Loonie 50-day MA is now at 95.81, down from 95.92, 96.41, 96.88, 97.20, 97.42, 97.63, 97.85, and 98.48, after rising through 98.34, 98.17, 97.82, 97.19, 96.63, 96.10, 95.97, 95.87, 95.59 and 95.36 the previous 16 weeks.
The 200d MA is at 96.06, up from 96.00, 95.85, 95.80, 95.68, 95.53, 95.43, 95.35, 95.23, 95.10, 94.93, 94.64, 94.30, 93.97, 93.67, 93.48, 93.29, 93.10, 92.88, 92.60, 92.38, 92.16, 91.86, 91.55 and 91.25 over the previous 24 weeks.
The current price (96.52) has jumped above the 50- and 200-day MA’s. That’s bullish if the condition can hold. A week ago when the opposite condition was the case, I wrote in this space, “That’s bearish, but somehow I can’t get it out of my mind that the US wants and needs Canadian natural resources, which would best be done by setting up a combined currency, at par: the Dollar-Dollar.
I also wrote here a week ago: “Also noted earlier is the possible head-and-shoulders break-down this week between the Cdn Dollar and the Euro. Ugly, and doesn’t look good for the oilers and miners, which is quite different than the near-term Bullish scenario I have painted this week, but very much in keeping with the short-and intermediate-term bearishness I foresee going forward after a Summer Rally that would trap the Bulls.”
So, you see, the Loonie did revert to help boost the near-term bullishness of commodity prices. After the trap is set with the Summer Rally that not too many other than me called for, I still see tough times ahead.
Weekly Canadian Dollar Index:
Daily Canadian Dollar Index:
Here is the China Yuan (CNY) chart.
Wrap-up:
A week ago, there was a lot of angst among long-term oriented equity traders. There was palpable worry that prices might plummet in the next couple days. I took an opposite view, which happened to work out. Let’s review from last week:
I started this WIR with the question, with the S&P below the 1080 major support level, might Monday and Tuesday bring us a wave of selling? I’ll say now that if investors in Europe, the big guys who are close to the banks there, are confident these stress tests will put the banks in a very good light, then they will buy those banks, and also non-bank stocks, and the Euro will get stronger and the USD weaker.
That will set up a Summer Rally, meaning that this Friday was merely a shake-out of the weak hands. With a rally, the safe-haven trades to precious metals will be unwound, which started this week, picking up steam on Friday. The sell-off in $GOLD and GDX (goldminer stock index ETF) may continue for a couple days. Then after the rally starts, if it does, the gold players will follow the crowd back in.
Yes, I don’t think we are headed to S&P 880 yet. I will be looking for 1350 gold first, and then it will be time to close down the summer party. Looking further out, depending on how Congress is shaping up post-November 2 elections, I think the equity market could be quite positive. With a balanced Congress, I think there will be more investigations into the propriety with which this Administration has conducted itself.
But, mostly I am thinking on the positive side. I think there is a trade to be made here: long then short and then, when everybody’s crying the blues, long again. We’ll have to wait until late tonight or early tomorrow to see if Friday’s weakness turns into a trend and prices sink sooner than later, or if the Bulls still control the ship.
One boat that was floated this week was the Junior Gold Brief, which can be found by linking to the area on the top right side of the home page for that purpose.
This week, I have tried to say that, while I think prices are headed higher, I am truly undecided. Maybe that’s a factor of moving residences, traveling to Canada, working on a major deal, enjoying a birthday party, seeing and holding my first grandchild for the first time, and all. In other words, personal life sometimes gets in the way of market life, rendering it difficult to think and take a firm position.
I suppose there are people who are psychotic in their belief that market prices will always be up or always be down, but that’s not the reality. It’s up to us, at crucial times, to step back from the market, and from personal matters, to objectively assess probabilities with respect to price trends and cycles as well as to appraise our own performance.
Regarding the latter, I decided that the market is just too volatile to stay on top of it without another set of eyes and ears. So, while my associates Geoff and Patrick will continue on as our Chicago team, I decided this week to take on another trader who will work closely with me.
As it stands now, with Patrick, Geoff and Vad, plus this new trader, I believe we have a truly outstanding group of skilled traders and teachers. We are also backed up by an expert team of mining analysts as well. So, going forward, this community and the clients of Cara Trading Advisors will be in good hands – even as I pull back my trading commitment to a normal 40 hours a week. You see; no matter how much I love the market, at my age I feel it is the right time to ease the pressure, and you probably agree.
With the team now the way I want it, we are going to pursue a few co-marketing ventures that could make us more visible than we’ve been, probably after Labor Day.
Today was a wonderful day in Toronto, my first weekend back since March. The weather today was sunny, breezy, perfect. We walked for an hour along the lake but I must say the water was – well, Lake Ontario; picture perfect with hundreds of sailboats, but nothing like the ocean.
If there is one take-away is that I am more bullish now than I have been for some time. Don’t be scared buying the likes of General Electric, Wal-Mart, IBM, Infosys, Intel – I could go on and on. Yes, there may be a severe pull-back after the Summer Rally, but 12-18 months out, most traders will be disappointed if they didn’t climb aboard.
Enjoy the rest of your weekend.
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