[4:23pm] Shell game is the word that comes to mind when reviewing the US equity market action this week. Friday’s trading action gave me a strong sense that something unanticipated is about to happen, so this weekend I started looking at the data, and there it was. On a massive scale, money was flowing out of and not into the Dow 30 stocks. Let me show you what I see.
Let’s start with the premise that the three companies in the DJIA index that control the Fed and who print the money in the US – Humungous Bank & Broker (HB&B) components JP Morgan, Bank of America and General Electric -- are the real promoters of this humungous market rally, the likes of which have not ever before seen.
Focusing on these three companies, I see that this week’s gains in BAC, JPM and GE were +11.02%, +9.60% and +9.7% respectively. In comparison, the DJIA index gained only +2.16%. So, let’s take a look at the other 27 stocks.
Would it surprise you to know that the smallest 12 components of the Dow 30 by market capitalization lifted +6.50% and the 15 heaviest weighted stocks (ex-JPM, GE and BAC) were down -1.16% on the week. And you thought the market had a great winning week, didn’t you?
On deeper examination, those 15 top weighted DJIA components have an average capitalization of $147.3 billion versus the smallish $39.5 billion of this week’s market winners.
Moreover, five of the top seven companies lost market capitalization this week: XOM (-1.31%), WMT (-1.18%), JNJ (-1.63%), PG (-6.27%) and T (-2.33%). These five Dow 30 companies, with an average market cap of 198.8 billion lost an average of -2.54% this week, while the smallest five by capitalization, AA, TRV, DD, CAT and BA, averaging just 26.6 billion, gained this week on average +8.86%.
So what is it America, did the US stock market actually rally this week or was it a case of capital being pulled out? I think the later.
The bigger question one has to ask is if the market is free and independent, moving higher based on real growth in corporate revenues, cash flow, earnings, dividends and book value, or is it a shell game?
http://en.wikipedia.org/wiki/Shell_game
I think the data shows Friday’s result, which happened to make the week a success btw, was a sleight of hand. Let’s call it David Copperfield visits Wall Street.
As the day moved along, and prices peaked mid day, there was a crescendo of talking heads on Financial Entertainment TV. It was stomach turning. I had to turn it off. I refuse to listen to promoters tell me that the economic data has suddenly turned rosy and that corporate earnings will soar from here, lagging the market prices by a couple months only. I heard the same nonsense from the CNBC Bill Griffeth traveling America roadshow in June 2005 hyping the housing market right before the top blew off. I was so pissed at that time I referred in the blog to two real estate ladies from Miami Beach as bimbos, and that’s not like me. But when they told the national audience that buyers have to close their eyes to +25% price gains that year because next year would be even bigger, I said that books would be written about this scam. I stated the truth about real estate investment, which is that because these are very long-term carefully structured and financed investments there must be a viable economic return. There must be a cash-on-cash return to the investor similar to the long-term return from bonds plus a liquidity risk factor. Instead, those Miami condos could never return an economic return at those prices, and people in the industry knew that speculation alone was driving the prices higher – speculation caused by promoters being accepted by an advertising revenue hungry mainstream media.
I don’t think the equity market is close to that deplorable situation in the housing market in 2005 or the 1999 Internet craze or the 1980 Hunt Brothers silver market bubble, but maybe the bond market is, and therein lies the problem with equities.
You cannot have a 5-year Treasury bond yield of just 2.8% and expect the private sector to endorse it. Only central bankers, intent on keeping rates down, would buy those bonds. I suggest that if the world’s central bankers want to hold the world’s real estate mortgages at ridiculously low rates, then they ought to expect the taxpayers of the world to demand that govts cut their strings to central bankers. Why is the taxpayer paying to hold up real estate prices? Enough already. Govt fears deflation so they engage in practices that are certain to bring in inflation. That is stupid.
The closer that markets move to a clarification on long-term price direction, there is this build-up in arguments between those who see deflation versus those who see inflation. I refuse to get caught up in that argument because we can have significant deflation one quarter and the start of massive inflation the next. That happened this decade in Argentina.
I feel something big is about to happen in the market, and I don’t think it will be friendly to the bond or equity Bulls. There is a problem in the forex markets. There is a crisis with US federal and state government spending and debt. It is out of control, and before the situation is resolved or even managed at all, there is a US President, Administration and Congress threatening to push the deficit to a point the US Dollar becomes so low in value that foreigners no longer want to buy that debt.
Same thing happened in the Argentine crisis, with nobody wanting the debt or the peso. The country was bankrupt. The once unthinkable can and in fact is now likely to happen to the US. Michael Panzner described these problems a few years ago in ‘Financial Armageddon’.
http://www.financialarmageddon.com/
Personally, I am an optimist. I get up every day thinking good things are going to happen because I work hard to make them happen. But, I’m also a trader of capital market prices, and I don’t like what I see. I don’t like it when I see the Old Boy’s Club scratching one another’s backs, ignoring the reality that most of us see. I don’t like watching young and inexperienced talking heads paid to peddle somebody else’s nonsense, maybe doing it to suck up to their OBC mentors. It’s all a mind-set they try to impose. Their will against ours.
It’s tough for us because we just need to protect our capital while HB&B is still in a struggle for survival. They still have to raise hundreds of billions in total to reach minimal capital reserve levels. And they will need a lot more capital if interest rates start lifting as they should to cover the heightened market risks, and as they must if, as and when either (i) foreign investors are no longer prepared to buy US Treasury debt in a falling USD environment, (ii) the global economy – god forbid – would actually start to strengthen, crowding out the public and private entities that need capital to grow and survive, or (iii) the assets that collateralize loans are found to be sinking even deeper in market price, as they appear to be in the commercial real estate market.
I am not impressed that there is any sustainability of corporate earnings and industrial production results that came from the one-time largesse of the US taxpayer in helping the auto manufacturers with the ‘cash for clunkers’ program, just like I am not keen to see the government own big stakes in these auto manufacturers, taking the taxpayer money to benefit their holdings.
I am not impressed that HB&B sucked hundreds of billions of taxpayer monies into their balance sheets and then sold large equity interests to government to assuage the public, but also protect the status quo. Those taxpayer funds made things worse off for the average person, but led to huge gains in profits and employee bonuses for the top tier staff at HB&B. No, I am not impressed. And, I am really pissed when people tell me I ought to be.
The impression the public is being fed today is that the economy is heating up, the recession is probably over and just not yet apparent because of lagging indicators. There are positive results as I have already alluded to but the recession is not over. Companies are still cutting back, eliminating employees and offices and factories and other assets that create wealth. The residual effect is that productivity is higher, inventories are bare and need rebuilding, the private sector has loads of cash, etc, but the question to ask yourself when you read the notes below from Econoday, is the economy as strong as talking heads portray. Ask college age people if they are confident financially, either to return to school this fall or to get a fine job that will enable them to quickly pay off student debt. Ask them if they got any bail-out like the top tier staff of JP Morgan and Goldman Sachs. Ask them what they think of white collar crime today, and what’s being done about it. Ask them if they think the capital market is the place for people to invest their future, or whether they think it’s a scam. Ask them, really, because 99.9% of them have never heard of me, and see how closely our thinking is aligned.
No, I’m just like the young students today; intellectually curious, an idealist, an optimist and someone who doesn’t like what I see around me or most places I look in the world.
Unlike them I have had a good life, and I am not going to be leading the next generation anywhere. These people are the future of America and Europe and Japan, and I too think they are pissed at the state of the world today, and can’t wait to change it, to destroy those phony people who have put them and their soon-to-be children at such a disadvantage.
Okay, enough. Let’s start to review what’s happened this week in the capital market, and share a few of my insights. You’ve already gathered that my performance is stuck with the top 15 market cap stocks of the Dow 30 and that I am struggling to keep up since I refuse to gamble on phony Banks and REITs, traders in fact who have blown it and are now operating due to taxpayer bail-outs.
Global Economics Review
Weekly International Economic Report.
The Bank of England moved markets Thursday morning when it announced that it would expand its quantitative easing program. Most anticipated that the monetary policy committee would once again say that they were waiting to see results of its £125 billion gilt purchases. Instead they said they would purchase £50 billion more. Despite better economic news, the MPC’s view of the economy was decidedly dour. Gilts and equities were up while sterling sank after the announcement. In contrast, the European Central Bank provided no surprises as it left its key interest rate unchanged at 1 percent and said rates remained at an “appropriate” level. However, it looks increasingly likely that Australia will be among the first nations to raise interest rates in the current cycle after data showed an unexpected increase in employment last month… Investors were severely tested last week as new data releases went into overdrive and threatened data poisoning. Manufacturing orders, industrial production and merchandise trade data for Germany were a mixed bag with orders soaring, industrial production ailing and the trade surplus increasing. And in the UK, industrial and manufacturing output pleasantly surprised while producer prices gave no hint of inflationary pressures. And in the U.S., Friday’s employment situation report vied with the BoE for attention. Investors were very nervous leading up to the report but were rewarded positively when job losses were less than expected and the unemployment rate actually inched down.
Here are the key US economic reports from the past week.
US ISM Manufacturing Index for July. Following the data release on 8/3, Econoday reported, “The march to 50 is almost complete. July's ISM manufacturing index jumped a very big 4.1 points to 48.9, pointing to a 50 reading for the August report which would mark no-change from July and the bottom of the manufacturing recession. Strength is all over the place in July: new orders 55.3 vs. July's 49.2, production 57.9 vs. 52.5, backlogs 50.0 vs. 47.5, employment 45.6 vs. 40.7. Inventories also added to the headline index, at 33.5 for a 2.7 point improvement from June. Inventories are very likely to continue to rise in the coming months, indicated not only by the gain in new orders but also by customer inventories which continue to fall, down a point to 42.5 and indicating that firms believe inventories at their customers are too low. Prices paid also rose, up 5 points to 55.0 to hint at the beginning of pricing power. Treasuries slipped back in immediate reaction to today's results which appear certain to increase appetite for equities and commodities.”
US Construction Spending for June. Econoday opined following the data release on 8/3, “Construction outlays in June unexpectedly rebounded. Overall construction spending rose 0.3 percent in June after falling a revised 0.8 percent in May. The June boost was well above the consensus forecast for a 0.5 percent decrease. The gain in spending in June was led by a 1.0 percent increase in public outlays. Also, private residential outlays rebounded 0.5 percent in June after a 3.1 percent drop in May. However, private nonresidential construction spending fell 0.5 percent, following a 0.4 percent decline in May… We may be seeing another sign that we have hit bottom in the single-family housing sector. Within private residential, one-family outlays rebounded 2.4 percent while the multifamily component dropped 7.2 percent… The 0.5 percent decline in private nonresidential outlays included component decreases in lodging, commercial, educational, amusement & recreation, transportation, communication, and power. Posting gains were office, health care, religious, and manufacturing components… On a year-on-year basis, overall construction outlays rose to minus 10.3 percent in June, from minus 11.6 percent the month before… Overall, today's report suggests that the recent rise in housing starts is translating into construction outlays. However, it still is uncertain about why public outlays are up. Fiscal stimulus may be kicking in but a decline in state revenues is still an issue. The further dip in nonresidential spending should not be a surprise but some may have forgotten that nonresidential construction is a lagging indicator… Equities rose on today's report but there also was a boost from the ISM manufacturing report which moved up significantly and close to breakeven. ”
US Personal Income and Outlays for June. After the data release on 8/4, Econoday reported, “Personal income in June fell back heavily due mostly to an end to a specific fiscal stimulus program. Meanwhile, spending and inflation were up. Personal income fell a sharp 1.3 percent after jumping a revised 1.3 percent in May. The drop was worse than the consensus forecast for a 1.1 percent decrease. June's fall was primarily due to a 5.9 percent fall in transfer payments which had spiked 8.0 percent in May from one-time payments under the American Recovery and Reinvestment Act of 2009. In the latest month, the wages and salaries component dropped 0.4 percent after dipping 0.1 percent in May. Consumer spending jumped 0.4 percent after edging up 0.1 percent in May. However, June's gain was price related from higher gasoline prices… The boost in consumer spending was led by a 1.7 percent surge in non-durables which includes gasoline. Durables slipped 0.2 percent while services edged up a meager 0.1 percent. Inflation was behind the latest rise in consumer spending as real PCEs slipped 0.1 percent in June, following no change the month before… PCE inflation made a strong comeback on energy costs. The headline PCE price index spiked 0.5 percent, following a 0.1 percent up-tick in May. Meanwhile, the core PCE price index firmed to a 0.2 percent increase in June after edging up 0.1 percent in May. The markets had expected a 0.2 percent rise in core inflation for the latest month… Year on year, personal income growth decreased to minus 3.4 percent from minus 2.2 percent in May. Headline PCE inflation eased to down 0.4 percent from down 0.3 percent the prior month. Year-ago core PCE inflation eased--to 1.5 percent from 1.6 percent in May… Today's report shows the consumer sector getting hit hard in the wallet as income fell and prices rose. However, all of the numbers were very close to market expectations and should be already baked into the mix.”
US Factory Orders for June. Following the data release on 8/5, Econoday reported, “Improvement in factory orders slowed in June, to plus 0.4 percent vs. a 1.1 percent gain in May (revised from plus 1.2 percent). But even the plus 0.4 percent gain masks overall weakness as it reflects that month's jump in energy prices reflected in the non-durables component which rose 2.7 percent vs. a 2.2 percent decline for durable goods. Note that energy prices fell back in July pointing to month-to-month trouble for non-durables. Backlogs continued to fall in June, down 0.9 percent as did inventories, down 0.8 percent to extend a run of declines as manufacturers scramble to draw down their stocks. Shipments did improve, up 1.4 percent vs. a 0.8 percent decline in the prior month. The ISM manufacturing report released Monday points to important improvement in July and holds out the promise that the factory sector is about to enter a period of stable, consistent recovery as soon as this month or perhaps September.”
US Non-Manufacturing Index for July. Prior to the data release on 8/5, Econoday reported, “Right at the moment when improvement seemed in hand, the ISM's non-manufacturing report proved disappointing in a clear indication that the road to recovery is bumpy. The composite headline index came up well short of expectations at 46.4 to indicate continuing month-to-month contraction for the bulk of the nation's businesses. The change from June isn't that significant but still the minus 6 tenths difference indicates that conditions in July actually fell back, though very slightly. New orders moved closely in line with the composite index, at 48.1 for a 5 tenths decline. The business activity index fell nearly 3 points to 46.1 while the employment index, in a key indication for Friday's jobs report, continues to show steep contraction and unfortunately at an accelerating rate, at 41.5 vs. 43.4… The kicker in this report is prices which really fell back, down more than 12 points to 41.3 in a decline reflecting the month's dip in energy prices but also indicating a general lack of pricing power not consistent with economic strength. Though this report may pop back in August, economic activity in July, again, looks to have been weaker than June. This report's a negative for stocks and commodities and may raise demand for safe-haven assets.”
US Jobless Claims for the week ending Aug 1. Prior to the 8/6 data release, Econoday reported, “Initial jobless claims for the week ended July 25 jumped 25,000 to 584,000. After swings related to earlier-than-seasonal layoffs in manufacturing-notably in the auto sector-it appears that initial claims have returned to trend. Still, if the high 500s is the new trend, this indicates easing layoffs from the mid 600 level before the distortions appeared. Continuing claims fell 54,000 to 6.197 million for the week ended July 18 and came in much lower than prior weeks but likely reflected the expiration of benefits and not necessarily new employment.”
US Employment Report for July. Prior to the 8/6 data release, Econoday reported, “Initial jobless claims fell 38,000 to a much better-than-expected level of 550,000 (prior week revised 4,000 higher to 588,000). Very importantly, there were no special factors in the week. The current level is right at the four-week average of 555,250, more than 50,000 lower than the average at June's end. These results will lock expectations for month-to-month improvement in tomorrow's jobs report… Continuing claims are harder to read, up 69,000 in data for the July 25 week to 6.310 million. The four-week average is nearly 500,000 lower than the comparable period in June, but there's a risk that much of this improvement reflects expiration of benefits, not new hiring… There was very little initial reaction to the results, in part because of caution awaiting an ECB news conference. Still, results for initial claims are a positive, pointing to slowing losses for payrolls.”
US Consumer Credit for June. After the data release at 3pm Friday, the end of the week, Econoday reported, “Banks are cutting down credit while consumers, hit by job loss or the fear of job loss, are paying down credit, not good news for policy makers who are trying to stimulate spending. Consumer credit has been contracting at a record pace this year including in June when credit contracted $10.3 billion. The contraction was split evenly between revolving, down $5.3 billion, and non-revolving, down $5.0 billion. Consumer credit contracted at an annual rate of $5.2 billion in the second quarter, more severe than the $3.6 billion rate of contraction of the first quarter. There's never much initial reaction to the consumer credit report, mostly because it's issued near the end of the day. But this report is certain to appear in next week's commentaries, especially among the bears and realists.”
Whether it’s a fear factor in people or more realistic lending policies at banks, there was a massive 2Q09 consumer credit contraction of $30.0 billion, and this must be hurting retail sales, which leads me to think that any pull-back in share prices will involve consumer discretionary and staples sectors.
Here are the key US economic reports on next week’s calendar.
US Productivity and Labor Cost data for 2Q09. Ahead of the data on 8/11, Econoday reported, “Non-farm productivity for the first quarter came in at a gain of 1.6 percent annualized. Meanwhile, unit labor costs rose an annualized 3.0 percent. We are likely to see higher productivity and lower labor costs in the second quarter based on less of a drop in second quarter GDP (down 1.0 percent annualized versus a revised 6.4 percent drop in the first quarter) while worker hours continued to fall in the second quarter. The output number for productivity and unit labor costs has many source components that overlap with those for GDP.”
US International Trade data for June. Econoday opined before the 8/12 data release, “The U.S. international trade gap in May unexpectedly narrowed on both a rebound in exports and a drop in imports. The overall U.S. trade gap shrank to $26.0 billion from a revised $28.8 billion shortfall the previous month. The May differential was the smallest since the $25.7 billion for November 1999. For the latest month, exports rebounded 1.6 percent while imports declined another 0.6 percent. Looking ahead, a weaker dollar in recent weeks points to a rise in export and possibly a dip in non-oil imports. However, oil prices rose during the month and likely will overwhelm any improvement in exports and non-oil imports. Markets should pay attention to exports for impact on U.S. manufacturing but the overall deficit for impact on the dollar. ”
US Treasury Budget for July. Ahead of the 8/12 data release, Econoday reported, “The U.S. Treasury monthly budget report showed a budget gap totaling $94.3 billion in June bringing the fiscal year-to-date total, now nine months into the 2009 fiscal year, to $1.1 trillion. The full-year gap is expected to top $1.8 trillion. The year-to-date gap through June last was only $285.9 billion. Looking ahead, the month of July typically shows a moderate deficit for the month but history provides little guide for this economy's budget. But for historical perspective, over the past 10 years, the average deficit for the month of July has been $31.7 billion and $49.2 billion over the past 5 years.”
US FOMC meeting announcement. Prior to the 8/12 2:15pm ET announcement, Econoday reported, “The FOMC announcement for the August 11-12 FOMC policy meeting is expected to leave the fed funds target unchanged at a range of 0.0 to 0.25 percent. Markets, however, will be looking for any commentary on improvement in the economy and on timing for unwinding the Fed's balance sheet.”
US Retail Sales for July. Prior to the 8/13 data release, Econoday reported, “Retail sales posted a 0.6 percent gain in June after rebounding 0.5 percent in May. Excluding motor vehicles, retail sales gained 0.3 percent, following a 0.4 percent boost in May. The increase in overall sales was led by a 5.0 percent surge in gasoline station sales. Excluding motor vehicles and gasoline, retail sales slipped 0.2 percent after easing 0.1 percent in May. Looking ahead, motor vehicles sales jumped in July on the "cash for clunkers" program. But, oil prices declined for the month (even though August oil prices have jumped, they were down in July on average). The spike in autos will probably top the dip in gasoline prices. But after autos and gasoline are excluded, recent chain store sales suggest that retail sales will be weak. ”
US Jobless Claims for the week ending Aug 8. Prior to the 8/13 data release, Econoday reported, “Initial jobless claims fell 38,000 to a much better-than-expected level of 550,000. Businesses appear to have made their major cuts in labor costs in earlier weeks and are now trimming fewer jobs. Continuing claims, however, rose 69,000 for the July 25 week to 6.310 million, indicating that it is still hard to get rehired.”
US Business Inventories for June. Prior to the 8/13 data release, Econoday reported, “Business inventories in May dropped 1.0 percent after decreasing 1.3 percent the month before. Business inventories have fallen for nine straight months through May. Businesses have been de-stocking at a greater rate than sales have falling. More recently, factory inventories fell 0.8 percent in June. We will get wholesale inventories for June on August 11. At this point, we are likely to get another dip in inventories in June.”
US Consumer Price Index for July. Prior to the 8/14 data release, Econoday reported, “The consumer price index surged 0.7 percent, following a 0.1 percent uptick in May. In the latest month, energy costs posted a 7.4 percent hike while food price inflation was unchanged. Meanwhile, core CPI inflation firmed to 0.2 percent in June from a 0.1 percent up-tick in May. The 7.4 percent boost in energy costs was largely due to a 17.3 percent spike in gasoline prices after a 3.1 percent gain in May. Looking ahead, energy prices are likely to dip temporarily in July and help ease the headline number. Also, the core should be very soft as the "cash for clunkers" program cut motor vehicle prices net for consumers toward the end of the month.”
US Industrial Production for July. Prior to the 8/14 data release, Econoday reported, “Industrial production fell "only" 0.4 percent in June, following a revised 1.2 percent drop in May. Notably, the important manufacturing component also fell at a less rapid pace, decreasing 0.6 percent after dropping 1.1 percent in May. Overall capacity utilization in June dropped to another record low, declining to 68.0 percent in June from a revised 68.2 percent in May. Looking ahead, the early indicators are mixed. The ISM manufacturing index, Philly Fed index, and Empire State index remain a little below breakeven for July. However, aggregate production hours rose 0.4 percent for manufacturing in July-indicating that at least the manufacturing component of industrial production will be moderately positive. A rebound in motor vehicle employment for July also suggests a boost in motor vehicle production and almost guarantees a rebound in industrial production.”
US Consumer Sentiment for the first half of August. Prior to the 8/14 data release, Econoday reported, “The Reuter's/University of Michigan's Consumer sentiment index edged 1.4 points higher to 66.0 for the final July reading, compared to 64.6 at mid-month but still down from 70.8 for final June. Still, the latest is quite an improvement from the 56.2 reading in mid-February which marked the year's low.”
Econoday’s reports are informative, concise, and objective. I use them here because they actually teach people something that can be used in trading decisions. The individual reports contain terrific charts and other information. When I think it is important, I try to add comments or bolding, but for the most part, Econoday does an exceptionally fine job. Most people do not need any more information on the US economy than what Econoday provides.
Summary for the International equity market ETFs
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)
Among the international ETFs this week, there were some signs of weakness after three straight weeks where all them lifted in price. This week, Hong Kong (EWH -1.82%), India (IFN -0.39%), Canada (-0.33%) and Japan (EWJ +0.10%, after losing -0.40% on Friday) were clearly not strong. The biggest gainers were Brazil (EWZ +5.95%) and Russia (RSX +4.61%). Both these were strongest on Friday too.
US Equity Markets Review
Two weeks ago, the major market index RSI-7 data was as follows: (S&P 500 Weekly and Daily at 69.7 and 85.8) (DJIA Weekly and Daily at 69.9 and 83.8) (NASDAQ Composite Weekly and Daily at 74.8 and 83.4). One week ago, the same RSI-7 data was: (S&P 500 Weekly and Daily at 71.1 and 80.4) (DJIA Weekly and Daily at 71.4 and 82.2) (NASDAQ Composite Weekly and Daily at 75.7 and 76.8). I noted that in each case, the Weekly RSI-7 lifted, but the Daily RSI-7 fell, which I said was a first level warning.
I also noted that if, as and when the Weekly RSI-7 hits 70, which it will likely do this week, then falls back a bit, there will be a second warning. If, as and when the Daily RSI-7 falls below 70, that’s a Sell Alert for these major market indexes. You can then expect to see many of the sector indexes already with Sell Alerts, which means that many of the stocks in those sectors would already have Sell Alerts.
This week the major market index RSI-7 data closed as follows: (S&P 500 Weekly and Daily at 74.8 and 78.4) (DJIA Weekly and Daily at 75.0 and 80.8) (NASDAQ Composite Weekly and Daily at 77.3 and 66.0).
In every case the Daily RSI-7 is falling, and the next warning signal has been given with the NASDAQ falling below 70 on the Daily. Moreover, the Russell 2000 small cap RSI-7 for the Weekly and Daily has moved from a week ago at 70.5 and 79.0 to 74.2 and 71.7, which, like the other major indexes, is in nose bleed territory for the Weekly, and also close to falling below 70 for the Daily.
Just a word to be extra cautious here. Yes, the S&P 500 could move to 1050 from 1010, which would be a gain of +4%. There could also be a move back to 950 (-6%) or 920 (-9%) or lower. The risks are growing and it shows up in the RSI data.
NASDAQ Composite ino.com chart
NASDAQ Composite stockcharts.com chart
Here is the list of the ten highest-weighted non-financial stocks in the NASDAQ Composite. Put them in a watchlist (see Google Finance Portfolio) and watch them like a hawk:
AAPL MSFT GOOG QCOM RIMM CSCO INTC ORCL GILD EBAY
Daily RSI-7 for the Nasdaq 100 Big-10
Weekly RSI-7 for the Nasdaq 100 Big-10
Monthly RSI-7 for the Nasdaq 100 Big-10
Sector ETF Summary for the US equity market
Here’s the SPY Monthly, Weekly and Daily data charts:
SPY Monthly data: 
SPY Weekly data: 
SPY Daily data: 
The tables I show are for eleven GICS Sector Index Funds (ETF’s), including two for Technology (XLK and SMH), for a total of ten GICS sectors. They cover the full spectrum of the US equity market.
Table 1: Cara ETF List is sorted by price performance Week over Week (W/W), i.e. 1W%N.
| 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.
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
For these charts, at points in time when I think that market conditions might be changing, I’ll switch from RSI-7 to the more sensitive (but similarly constructed) indicator called Stochastics. These charts include the %K (fast) and %D (slow) stochastics. It will pay you to look at times when %K is above the %D and rising to stay with your price a bit. Let the force be with you. And when the %K crosses down through %D, it’s time to consider selling or taking other defensive action.
These charts show the numbers and the lines, so it’s not rocket science to follow.
Sector 10 (energy: XLE, IYE, VDE, OIH, PBW and IXC)
Here’s the XLE Monthly, Weekly and Daily data charts:
XLE Monthly data: 
XLE Weekly data: 
XLE Daily data: Table 2: Senior oil & gas equities
| Symbol | Close | 1Day Change |
1Day %Change |
1W %Change |
2W %Change |
4W %Change |
YTD %Change |
3M %Change |
6M %Change |
12M %Change |
This week the price of Crude Oil ($WTIC) lifted +1.48/bbl (+2.13%) to close at $70.93. A week ago, there was a gain of +3.47/bbl and the week before that the gain was +$4.69/bbl.
Despite the Crude price gains, the price of the Oilers (XLE) gained just +0.41% this week and fell -1.11% the prior week. So, despite a gain of $6.35/bbl in the Oil price over three weeks, the XLE has dropped -0.70% in the past two.
The large cap oil stocks in the XLE have many trillions in market cap – the total of all US listed oil stocks is about $9 trillion, so when there is a loss of -0.70% in market cap over two weeks, that’s probably over $50 billion taken out of the market. The game players like GS know it takes a tiny fraction of this to pump the oil futures and pay off hundreds of newsletter writers and media writers. In fact, just get that action started, and the public hops on board the Mo Train.
Four weeks’ ago, I noted that over four weeks the Crude Oil price dropped -$11.87/bbl and that the XLE had been smashed -17.32% over that time. Then I opined that how you trade oil “depends on whether or not you think the G-8 leaders will decide to continue to prop the market with another reflation play. No pump job, (then) no oil and lube, and no lift for the metals, and probably more weakness for the Financials. What’s left to hold the S&P at 880? We’ll just have to wait and see. But, they are, I believe, over-sold.”
XLE had dropped to 44.67 at that point, and then miraculously, following the G-8 meeting, money was being printed again. Two weeks later XLE had lifted to 51.19 and I opined it “appears to be within a week of topping out in the short-term cycle. The Daily RSI-7 is up to 79.6”
Well, today the XLE is down to 50.83 and the RSI-7 is down to 55.3. Yet, the Crude Oil price has lifted $6.35/bbl (+9.83%) in the past three weeks.
A week ago I smelled a rat here. I wrote, “Yes, our weighting in the oils is just 3.3%. There was a small lift in price of the XLE and the Daily RSI-7 moved higher from 79.6 to 82.2. The Oilers usually drop out of the dance a few bars before the Goldminers”.
You see; I no longer trust anything in the market, particularly futures. Goldman Sachs can make pretty much any result happen these days and they are making boatloads of money when experienced traders are wondering how.
The big winner among the Oilers I follow was China National Offshore (CEO +4.6%). Canada’s baby Exxon, Imperial Oil (IMO -6.6%) was a huge loser. How is that possible when Exxon owns about 70% of the stock?
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 |
This week Basic Materials (XLB) was 4th best sector performer with a gain of +3.74% to close at $30.21. The Goldminers (GDX +0.7%) were largely quiet.
This week’s winners were led by Alcoa (AA +10.5%), Nucor Steel (NUE +10.5%) and Dow chemical (+8.9%).
The best of the Goldminers was again Eldorado Gold (EGO +6.9%), which has had a pretty good run.
The Daily RSI-7 for XLB has fallen from 88.4 to 76.4. If it falls below 70, I still believe the papers and chemicals, especially, are at risk.
The Papers lifted +10.3%, so my assertion a week ago here that the chart shows there was a resistance level was wrong.
http://stockcharts.com/charts/gallery.html?$DJUSPP
The Chemicals lifted a further +3.9%, which I still think bears watching.
http://stockcharts.com/charts/gallery.html?$DJUSCH
I opined here a week ago, “As long as the Banks and Goldminers are strong, I guess the Papers and Chemicals will remain strong. After all, this is the Great Reflation play. But, at some point soon, I do anticipate a pull-back.” The Banks ($BKX +12.4%) were soaring this week.
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 |
Industrials (XLI +5.19% W/W to 25.12) was the second leading sector again.
The big winners were Embraer (ERJ +13.3%), Fluor (FLR +10.3%), Textron (TXY +10.0%), General Electric (GE +9.7%), Boeing (BA +8.8%), and Caterpillar (CAT +8.6%). All the ones I follow were up.
Two weeks ago I wrote, “The XLI Daily RSI-7 is at 79.1 and could pop into the mid-80’s” and this week it is 81.1.” This week it is up to 85.9.
I’ll give you that Brazil is growing, which explains ERJ, but is the industrial might of America really that strong? Why then are these US corporations laying off people and refusing to hire summer students? Why are they closing plants?
The prices of these six large cap industrial stocks over just four weeks have gained +45.7%, +23.9%, +65.1%, +36.4%, +17.8%, and +56.5%. That’s an average of +40.9% for the six and +40.0% for the five American companies.
Has the market decided to bid up these stocks on the basis of growing revenues, cash flow, earnings, dividends and book value, or is it just a matter of beating easily beatable estimates? Is the market momentum game now just one of musical chairs?
I don’t know; I have never seen anything like this. I have seen the opposite though, living through October 19, 1987 where these stocks dropped -25% in a day.
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 +4.87% W/W to 26.50) was actually the 3rd strongest performing sector. Noteworthy was the fact that after several of the large Retailers reported weak sales, there was an extra special pump job given the others on Friday. XLY soared +3.27% on Friday, far exceeding the performance of any other sector on the day. There was no good reason for it.
This week Brunswick Corp (BC +19.2%), JC Penny (JCP +14.2%), and Black and Decker (BDK +10.4%) were huge winners. Target (TGT -1.6%) was not.
As I said here a week ago, “The problem for us independent traders is that we don’t know when Humungous Bank & Broker is about to goose one of the friendlies. So HB&B ends up making the gains and the rest of us are left to stare with envy at their quarterly “proprietary” trading performance.”
Has Brunswick publicly reported that their financial and operational conditions have solidified? Then why is the stock up +82.9% over two weeks and +130.1% over 4 weeks? This stuff is all about AIG and CIT and darkened boardrooms on Wall Street.
All the little guy can do is watch and be envious or jump into extreme risk and hope for the best.
Do you recall my construction worker friend who put all his eggs into a single basket, Citigroup (C) at $1.00 in March, telling me he didn’t believe the industry or the government or the Fed would let them die? He figured somebody would save Citi, so he plunked down $100,000, which was all he had. He became absolutely giddy when the stock ran well over $4 in the next couple months. Well, he’s been working a job at Acklins or Ragged down near Cuba, no TV etc. Came back to Nassau two weeks ago and C had dropped to $2.69 and he asked my opinion. Gee, I said, wait a week or two and, like the weather, things can change. “Good plan; I’m hanging in.” Ok, this week the stock hit $4.24, closing at $3.85. My next trader might be wearing a hard hat and driving a new F-150. Either that or I know who I’m taking to the Cable Beach casino down the road next time. He’s beating any money manager I’ve heard of. Maybe I can sell him to Goldman Sachs?
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 -0.98% W/W) closed the week at 24.28, which meant this defensive sector went from small loser to bigger loser this week.
The biggest winner among the Cara 100s was Whole Food (WFMI +17.5%), while Starbucks (SBUX +7.5%) was second best. Perhaps these companies ought not be considered staples as the high prices seems to make them discretionary purchases.
If, as and when the broad market pulls back, XLP will likely be a relative winner, although a loser also.
There is an issue, though, which relates to consumer spending. Proctor and Gamble (PG -6.3%) dropped this week after reporting revenues had dropped -11% and earnings -17%. PG dropped -0.6% a week ago too. Their biggest retailer is Wal-Mart (WMT -1.2%). Target (TGT -1.6%) was also soft.
Right now I’m holding a bearish position in WMT and COST via puts.
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 -0.69% W/W) closed at 56.66, which followed last week’s lagging performance.
Traders and taxpayers continue to watch the proposed US healthcare legislation, which will not be decided for a couple months at least, and they are noting the often ugly crowds at the town hall meetings.
Most stocks here were down, led by United Health (UNH -5.5%).
Sector 40 (financial: IYG, IYF, XLF, VFH, IXG, VNQ, RWR, IYR, and ICF)
Here’s the XLF Monthly, Weekly and Daily data charts:
XLF Monthly data: 
XLF Weekly data: 
XLF Daily data:
Table 8: Senior financial company equities
| Symbol | Close | 1Day Change |
1Day %Change |
1W %Change |
2W %Change |
4W %Change |
YTD %Change |
3M %Change |
6M %Change |
12M %Change |
Financials (XLF +10.30% to 14.35) was a shocking performer to the upside. A week ago I wrote here, “I suppose Bernanke has it figured out. If the sector starts to lag or fall, he starts up his helicopter again.”
The winners here were Citi (C +21.5%), Bank of America (BAC +11.0%), and JP Morgan (JPM +9.6%), which happen to be the HB&B components that hold (or did hold at one point) 95% of the failed Credit Default Swaps (CDS). Clearly, the public-private partnership works for these banks. The public had the money and the banks had the hope; now the bankers have the money and the people are left with the hopes. Interesting how life’s fortunes can be turned around.
A week ago here I commented, “This week Royal Bank (RY) gained just +1.6%, but the M-W-D RSI-7 is now up to 67.7 (close to 70), 78.9 (and topping), and 81.5 (lifted on Thursday and Friday after giving a Sell Alert on Wednesday). Caution urged here.” The only bank on my monitor that seems to be having trouble is RY, which lost -0.5% this week.
Daily charts of electronic brokers and exchanges
Weekly charts of electronic brokers and exchanges
Sector 45 (technology: IGM, IGV, IGW, XLK, VGT, IYW, IGN, IXN, MTK and SMH)
Tech (XLK +0.46% to 19.79, which is a gain of 9 cents) and Semi-conductors (SMH -1.28% to 24.63) were not so hot this week.
A week ago I wrote in this space, “This week, the W-D RSI-7 has moved to 82.7 and 81.1. It will likely be tough on the Bulls when the Daily RSI-7 drops below 70 and the Weekly is also headed south.” This week the Weekly and Daily RSI-7 for XLK is at 78.6 and 62.7.
Caution is urged when the tech sector and the semi-conductor industry groups are not out-performing a rising market.
Here’s the SMH Monthly, Weekly and Daily data charts:
SMH Monthly data: 
SMH Weekly data: 
SMH Daily data:
Here’s the XLK Monthly, Weekly and Daily data charts:
XLK Monthly data: 
XLK Weekly data: 
XLK Daily data: 
Table 9: Senior technology equities
| Symbol | Close | 1Day Change |
1Day %Change |
1W %Change |
2W %Change |
4W %Change |
YTD %Change |
3M %Change |
6M %Change |
12M %Change |
| Symbol | Close | 1Day Change |
1Day %Change |
1W %Change |
2W %Change |
4W %Change |
YTD %Change |
3M %Change |
6M %Change |
12M %Change |
Sector 50 (telecom: IYZ, VOX and IXP)
Telecom (IYZ -0.83% to 17.86) was, next to Staples, the worst performing sector.
The big guys, AT&T (T -2.3%) and Verizon (VZ -3.1%) made solid gains a week ago and I opined, “Maybe not so next week. The Daily RSI-7 on T is 75.7 and on VZ is 71.6. The weekly could still run higher, but the gains in the last three weeks of July are too much, too fast, for these clunkers. Speed bumps somewhere ahead, I think, but I also think the downside will not be so bad.”
As I expected, the Daily RSI-7 could not hold up. The Daily RSI-7 for T is now 50.8 and for VZ it is 46.2.
Here’s the IYZ Monthly, Weekly and Daily data charts:
IYZ Monthly data: 
IYZ Weekly data: 
IYZ Daily data:
Sector 55 (utilities: IDU, XLU, and VPU)
Here’s the XLU Monthly, Weekly and Daily data charts:
XLU Monthly data: 
XLU Weekly data: 
XLU Daily data:
Utilities (XLU -0.07%) closed at 28.92, which was flat.
Here is the list of North American Utilities that I follow:
AEP D DUK ED EXC FE FPL NGG PCG PEG SO TRP
For study purposes, there is a good mix of electric (AEP, D, DUK, FE, FPL and SO), gas (NGG, TRP) and diversified (ED, EXC, PCG, PEG) utilities.
Table 12: US Utilities
| Symbol | Close | 1Day Change |
1Day %Change |
1W %Change |
2W %Change |
4W %Change |
YTD %Change |
3M %Change |
6M %Change |
12M %Change |
Bonds & Yields Review
Table 10: US Treasury Yields
| Maturity | Yield | Yesterday | Last Week | Last Month |
|---|---|---|---|---|
| 3 Month | 0.15 | 0.14 | 0.15 | 0.15 |
| 6 Month | 0.26 | 0.25 | 0.23 | 0.24 |
| 2 Year | 1.30 | 1.20 | 1.11 | 0.91 |
| 3 Year | 1.83 | 1.72 | 1.58 | 1.41 |
| 5 Year | 2.82 | 2.70 | 2.52 | 2.22 |
| 10 Year | 3.85 | 3.75 | 3.48 | 3.30 |
| 30 Year | 4.60 | 4.53 | 4.30 | 4.19 |
| Maturity | Yield | Yesterday | Last Week | Last Month |
|---|---|---|---|---|
| 2yr AA | 0.89 | 0.95 | 0.94 | 1.09 |
| 2yr AAA | 0.66 | 1.00 | 0.81 | 0.97 |
| 2yr A | 1.27 | 1.30 | 1.85 | 1.93 |
| 5yr AAA | 1.67 | 1.67 | 1.74 | 2.01 |
| 5yr AA | 1.64 | 1.74 | 1.87 | 2.12 |
| 5yr A | 1.86 | 1.92 | 2.17 | 2.35 |
| 10yr AAA | 2.92 | 2.89 | 3.59 | 3.41 |
| 10yr AA | 3.13 | 3.03 | 3.54 | 3.38 |
| 10yr A | 3.43 | 3.43 | 3.89 | 3.87 |
| 20yr AAA | 4.77 | 4.76 | 5.24 | 5.03 |
| 20yr AA | 4.39 | 4.37 | 4.95 | 5.29 |
| 20yr A | 4.77 | 4.75 | 4.93 | 4.85 |
| Maturity | Yield | Yesterday | Last Week | Last Month |
|---|---|---|---|---|
| 2yr AA | 1.99 | 2.05 | 1.85 | 2.08 |
| 2yr A | 2.62 | 2.90 | 3.28 | 3.25 |
| 5yr AAA | 2.99 | 2.93 | 2.78 | 2.70 |
| 5yr AA | 3.74 | 3.64 | 3.51 | 3.80 |
| 5yr A | 4.27 | 4.17 | 4.01 | 4.51 |
| 10yr AAA | 4.11 | 4.07 | 3.85 | 4.16 |
| 10yr AA | 5.04 | 5.05 | 4.34 | 4.89 |
| 10yr A | 5.64 | 5.67 | 5.15 | 6.24 |
| 20yr AAA | N/A | N/A | 5.64 | 5.97 |
| 20yr AA | N/A | N/A | 5.13 | 5.45 |
| 20yr A | 5.86 | 5.79 | 5.82 | 6.14 |
Despite the large gains made in the US Treasury market a week ago, I wrote here, “In any case, bonds are priced at abnormally high levels presently, which will fall when the economy grows healthier and interest rates rise after governments, corporations and individuals start competing for the money that banks have available. That will happen unless the recession becomes permanent, which never happened even during the 1930s.”
Bond prices plunged this week although I think it was more the cause of money printing than economic growth. I just can’t see foreign investors buying the paper when the $USD is sinking and rates at some point have to lift.
TLT, which had gained +3.67% a week earlier, plunged -4.56% W/W from 94.81 to 90.41. It was 91.45 two weeks ago.
The 30-, 10- and 5- year yields closed the week at 4.60, up +30 basis points from 4.30; 3.85, up +37 bp from 3.48; and 2.82, up +30 bp from 2.52, respectively. The 2-year yield lifted from 0.99 to 1.30 in the past two weeks including a gain of +18 bp this week.
I suspect there was heavy demand at the banks to borrow to join the run up in Banks and Industrials. I believe that when the equity market prices start to fall, the bond prices will lift and yields fall.
Here is the $USB 30-year Treasury Bond chart.
Interest rates and bond yields.
Interactive Daily data charts:
Interactive Chart of Interest rates and bond yields.
This chart is stunning to long-term observers of the debt markets. Obviously, the banks are being favored.
US Bond Funds -- Interactive Monthly Data Charts SHY Monthly data series chart:
IEF Monthly data series chart:
TLT Monthly data series chart:
AGG Monthly data series chart:
LQD Monthly data series chart:
TIP Monthly data series chart:
US Bond Funds -- Interactive Weekly Data Charts SHY Weekly data series chart:
IEF Weekly data series chart:
TLT Weekly data series chart:
AGG Weekly data series chart:
LQD Weekly data series chart:
TIP Weekly data series chart:
US Bond Funds -- Interactive Daily Data Charts SHY Daily data series chart:
IEF Daily data series chart:
TLT Daily data series chart:
AGG Daily data series chart:
LQD Daily data series chart:
TIP Daily data series chart:
Table 11: Interest-sensitive securities
| Symbol | Close | 1Day Change |
1Day %Change |
1W %Change |
2W %Change |
4W %Change |
YTD %Change |
3M %Change |
6M %Change |
12M %Change |
Fannie (FNM) and Freddie (FRE) closed up +13.8% and +19.4% W/W but we are talking about stocks at about 60 cents.
As friend of Barack Obama and Barney Frank, they continue to trade on the NYSE in violation of the NYSE $1 minimum price rule.
http://billcara2.com/tkchart/tkchart.asp?stkname=fnm+fre&cht=Tech+Chart&...
Consumer Finance -USA -- Interactive Weekly Data Charts
Mortgage Finance -USA -- Interactive Daily Data Charts
Commodities Review
More of the Fed’s money printing. The $CRB index rallied +2.84% to 264.77, a gain of +4.54% in just six sessions.
The 50d MA for $CRB is now up to 251.56, and the 200-day MA has now bottomed to 233.43.
Two weeks ago I wrote, “Locked and loaded, the Fed came through a week ago when and where it counted”. $CRB is up +5.04% since then.
But Oil and Gold are not the problem so far. It’s more Copper, Platinum, Palladium, and Silver. I don’t follow the other commodities close enough to comment.
Although I use the $CRB (Reuters/Jeffries Index), principally because it’s the oldest, there are many commodity indexes: http://www.crbtrader.com/crbindex/ • Astmax Commodity Index(AMCI) • Commin Commodity Index • Dow Jones-AIG Commodity Index • Goldman Sachs Commodity Index • Reuters/Jefferies CRB Index • Rogers International Commodity Index • Standard & Poor's Commodity Index • NCDEX Commodity Index • Deutsche Bank Liquid Commodity Index (DBLCI) • UBS Bloomberg Constant Maturity Commodity Index (CMCI)
Here is a link to an article that discusses the major ones that have been around for a while: http://www.rogersrawmaterials.com/overviewandanalysis.PDF
Here is a current price summary of the heaviest weighted commodities contracts: http://money.cnn.com/data/commodities/
These indexes change their component weightings perhaps annually or even monthly, for example: http://www.seekingalpha.com/article/43586-the-new-generation-of-diversif... http://tinyurl.com/a5myfj
Interactive Chart of Weekly CRB Commodities Index:
Interactive Chart of Daily CRB Commodities Index:
Oil Review
This week, Crude Oil ($WTIC) gained +$1.48/bbl (+2.13%) to close at 70.93, which was about the same as the week prior. It is a fourth straight week of rising prices.
For $WTIC, the 50-day MA is now at 67.68, up in twelve weeks from 51.85. The 200-d MA is 54.33, down in a week from 54.36.
It will take many weeks, I believe, before we see a bearish cross-over of the rising 50-day MA through the 200-d MA. So, don’t expect the price of oil to plunge. It’s more than likely to stay in the 60-75 trading range until the global economy and the US economy in particular starts to grow back to good health. Then I expect to hear a bit about peak oil because there’s no doubt in my mind that discovery is lagging production.
Here is the e-miNY Dec-07 Crude Oil chart.
Interactive Chart of Weekly Crude Oil:
Interactive Chart of Daily Crude Oil:
Gold & Precious Metals Review
This week, $GOLD lifted +$1.60 (+0.17%) to 955.70.
As I wrote here a week ago, “I think the Fed is holding the price down. But there are signs of an impending break-out. I would be a seller, however, should $GOLD move close to $1,000/oz. I wouldn’t be out for long, but the Fed has a habit of trying to bury the goldbugs alive. I don’t want to be caught in a $100 slide”.
For GLD, the W-D RSI-7 is just 60.1 and 54.5, moving from 58.5 and 60.9 a week ago. There is clearly room for Gold to rally from here, but watch the movement in the other three precious metals.
The $GOLD 50d Moving Average is now at 943.26 and the 200d MA is 887.35, both rising.
$XAU, GDX and XGD this week were +0.22%, +0.65% and +0.53%, respectively W/W, but the losses on Friday were significant. On Friday, $XAU, GDX and XGD were 2.48%, -2.13% and -1.85%. Let’s see Monday because the European Central Bank put out an innocuous statement on Friday early morning about gold sales, which happened to frighten some traders, but was nothing to be concerned about in my view.
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 +$0.69 (+4.99%) to close at 14.62/oz.
For $SILVER, the 50d MA is now 14.10, down a tad, and the 200d MA is 12.48, up a tad.
Many technical analysts are looking to the silver market for leadership in the precious metals, and are now calling for a Bear phase. I’m still in the Bull camp, still thinking one more Bull cycle run, although it might be a brief one.
As I said here last week, “A week ago in this space, I wrote, “I am also reviewing this situation closely because the charts are not bullish”. The first half of the week was a dog. Now, it’s a pony.” I lightened up a bit, however.
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.
$PLATINUM gained +$54.70/oz (+4.50% W/W) to 1269.00, which is on top of the prior week’s gain of $22.90 and the one before that of $15.30.
The 50d MA is now at 1204.21, up from 1192.38, and the 200d MA is at 1053.26, up from 1044.96, also rising quickly.
Spot platinum chart for the week
Interactive Chart of Weekly Platinum EOD Continuous Contract Index:
Interactive Chart of Daily Platinum EOD Continuous Contract Index:
Interactive chart of the Platinum metal index.
$PALL gained +$14.40/oz (+5.42%) to close at 280.20, which is a huge gain from 253.15 over four weeks.
The 50d and 200d MA is now at 252.40 and 217.20, respectively, so the present MA prices are rising, and the current price is solidly in Bullish territory.
Perhaps I was prescient in writing in this space four weeks ago,
My thinking, probably skepticism based, is that the Interventionists have pushed down commodity prices as hard as they can before announcing another round of money printing, which they may think is essential to stave a depression. They would be concerned that the money printing on top of commodity prices that a month ago were pushing upper range limits would be received by the public with some hostility. So, knock it down a peg and then watch those prices back into recent trading levels rather than breaking to new high ground… I have been too busy to read the literature on this, but it’s clearly a feeling I have.
I still feel there is still some room to lift before the heavy hand of the Fed slams the window shut.
Spot palladium chart for the week
Interactive Chart of Weekly Palladium EOD Continuous Contract Index:
Interactive Chart of Daily Palladium EOD Continuous Contract Index:
Interactive chart of the Palladium metal index.
$COPPER contracts gained +16.20 W/W (+6.17%) to close at 278.55, which is a gain of $36.25 in three weeks, clearly bullish.
The 50d and 200d MA’s are 238.45 (rising) and 188.43 (now rising), respectively, so technically the copper price is now clearly in Bull territory also.
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
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 |
As I wrote above, $XAU, GDX and XGD this week were +0.22%, +0.65% and +0.53%, respectively W/W, but the losses on Friday were significant. On Friday, $XAU, GDX and XGD were 2.48%, -2.13% and -1.85%. Let’s see Monday because the European Central Bank put out an innocuous statement on Friday early morning about gold sales, which happened to frighten some traders, but was nothing to be concerned about in my view.
A week ago I wrote, “We increased our weightings in the Goldminers a bit this week. It’s not a long-term oriented move. Let’s wait before commenting further.” I guess I have been surprised that Gold is not moving higher when the other three precious metals plus copper are.
Yes, the $USD gained a lot this week but (i) all the gain and then some was Friday, (ii) gold dropped Friday, but the other metals continued to strengthen.
I think the ECB statement had a bearish impact, but that shall soon be forgotten. I am looking for a run to $1,000, possibly this week if the $USD weakens again. Longer term I see some good reasons for a stronger Dollar, but not in the immediate term.
To watch the moves in precious metal miners, you will have to monitor the individual stock charts, preferably in real-time, as follows: NEM ABX AU GFI GG HMY AUY KGC BVN
LIHR IAG EGO RGLD GOLD TSE_AGI GSS NG WGW AEM
Here are the key Silver miners and the SLV ETF: SLV SIL SVM CDE HL PAAS SSRI SLW MGN
Here are the Weekly and Daily Data charts of the indexes:
Interactive Chart of Weekly U.S. Goldminers Index:
Interactive Chart of Daily U.S. Goldminers Index:
The U.S. goldminer share trust ETF trades under the ticker symbol GDX.
Here are the U.S. Goldminer ETF (GDX) index Weekly and Daily data charts:
GDX Weekly data:
GDX Daily data:
The Toronto Exchange-listed goldminer iUnits S&P/TSX Capped Gold Index ETF trades under the ticker symbol TSE:XGD.
Just like GDX on the AMEX, you can trade XGD on Toronto.
Here are the Weekly and Daily data charts for the TSX Goldshares (XGD) index:
Interactive Chart of XGD Weekly data:
Interactive Chart of XGD Daily data:
Forex Review
The $USD is a trade-weighted US Dollar index, we used to call the Morgan Dollar.
I believe you cannot trade commodities that are priced in $USD without studying forex movement. So, forex is important.
The Forex market is a multi-trillion dollar marketplace every day, which dwarfs the size of the stock and bond markets. In this market, the Euro/USD is the highest volume trader.
The current value of $USD is a mean value of rate fluctuations of six world currencies (Japanese yen, Euro, British pound, Canadian dollar, Swiss franc and Swedish krona) that each trade against the USD.
There is an ETF that apparently tracks the G-10 currencies. We will investigate it and may start to trade it.
The $USD did lift this week (+0.87% W/W to 78.97), which is a lot, and comes after I wrote a piece about the possibility of a short-term lift, then more weakness until equity prices started to fall. After that the $USD would be a safe haven play and probably strengthen.
In any case, the $USD was losing all week until Friday, when the gain was +1.25%.
The 50-day MA of the $USD is now at 79.61 (down from 81.02 in four weeks and quickly falling). The 200-day MA is 83.58 (down a bit). The spread continues widening (bearish).
At this point, I don’t know how much Geithner and Bernanke can do. Deficit spending and a crisis in tax revenues is pressuring the Dollar. But the G-20 meeting is not until Sept 24 and 25, when the group may decide to do something about the Dollar.
Maybe the Bank of England started the process this week with an unexpected printing of money.
Interactive Chart of Weekly U.S. Dollar Index:
Interactive Chart of Daily U.S. U.S. Dollar Index:
The Euro ($XEU) dropped -0.49% this week to close at 141.87. The loss on Friday was -1.12%. Friday has been a counter-trend day.
The 50d MA and 200d MA for the Euro futures are now 140.84 (up from 138.50 in four weeks and still rising) and 133.89 (also lifting), respectively, so the present price is still well above both, meaning the Euro is in a Bull phase. A further rising 200d MA will let the Euro be called a real Bull.
Despite Friday, as the spread narrows, the risks of a short-term reversal move decrease.
Interactive Chart of Weekly Euro Dollar Index, priced in USD:
Interactive Chart of Daily Euro Dollar Index, priced in USD:
The Pound lost -0.21% W/W to close at 166.83, which is surprising given the extent of the recent bail-outs and spending by government, and by Thursday’s BoE decision for additional monetary expansion.
The 50d and 200d MA is 164.27 (up from 159.54 in four weeks and still rising rapidly) and 152.28 (down from 153.29 in four weeks and still falling), respectively, so it is in a short-term Bull phase, about to take on a full Bull definition if, as and when the 200-d MA begins to move higher.
Weekly British Pound Index:
Daily British Pound Index:
Weekly Japanese Yen Index:
The Japanese Yen ($XJY) plunged -2.88% to close at 102.60 this week. Friday’s loss was -2.07%. There has been a rush to buy risk this week for some reason. The beneficiaries were the US banks and industrials.
The Yen’s 50-day MA is now 104.68 (and flat) and the 200-day MA is 105.21 (rising a bit). The current price is now below both the 50d and the 200d MA, so it’s now in a Bear relative to the USD.
Daily Japanese Yen Index:
The Canadian Dollar stopped soaring – probably when Goldman Sachs instructed it to. This week the Loonie backed down -0.24% to 92.55, a loss of 22 cents American.
The Loonie 50-day MA and 200-day MA are now respectively at 89.48 (rising from 84.57 just nine weeks ago) and 83.62 (rising).
Trading forex is a dicey game, but the price trends and cycles must be studied nonetheless as they serve as confirmations -- or anomalies -- of other prices… In the latter case, with an anomaly, the relationship needs to be studied further.
A higher Cdn Dollar will hurt in-bound tourism and manufacturing exporters in Canada. Traders know that, which is why they study forex market trends and cycles.
Weekly Canadian Dollar Index:
Daily Canadian Dollar Index:
Here is the China Yuan (CNY) chart.
International Equity Markets Review
The international stock exchange indexes made significant gains again this week. Obviously Bullish.
Over the past twelve weeks, there has been a significant lift to international markets. The UK FTSE moved from 4348.1 to 4365.3, 4417.9, 4438.6, 4442.0, 4345.9, 4201.0, 4236.3, 4127.2, 4388.8, 4576.6, 4608.4, and now to 4731.6.
The German DAX moved from 4737.5, 4918.8, 4940.8, 5077.0, 5069.2, 4839.5, 4776.5, 4708.2, 4576.3, 4978.4, 5229.4, 5332.1, and now to 5459.0.
Aussie All-Ords moved from 3758.9, 3755.4, 3813.3, 3969.0, 3894.4, 3899.5, 3826.6, 3790.6, 3992.9, 4097.3, 4249.5, and now up to 4303.1.
HK’s Hang Seng moved from 16790.7, 17062.5, 18171.0, 18679.5, 18889.7, 17920.9, 18600.3, 18203.4, 17708.4, 18805.7, 19982.8, 20573.3, but now down to 20375.4.
Shanghai moved from 2645.3, 2597.6, 2632.9, 2753.9, 2743.8, 2880.5, 2928.2, 3088.4, 3113.9, 3189.7, 3372.6, 3412.1, but now down to 3260.7. A week ago I wrote here, “This has been such a large gain that the authorities appear ready to crack down”. Prices then came off, which impacted HK as well.
Brazil’s Bovespa moved from 49007.2, 50568.5, 53197.7, 53341.0, 55558.2, 51373.8, 51485.6, 50934.7, 49221.0, 52072.5, 54457.9, 54765.7, and now up to 56400.2.
India’s Bombay BSE 30 Sensex index moved from 12173.4, 13887.2, 14625.3, 15103.6, 15237.9, 14521.9, 14764.9, 14913.1, 13504.2, 14744.9, 15379.0, 15670.3, but now down to 15160.2. So, it seems that the high market risk is being recognized in China and India.
There are 16 country index charts from StockCharts.com (with their formal approval btw) because I think it is important to be watching these markets move through a trend juncture together, and in relation to currency and commodity strength or weakness. I also made some additions to the country-based ETF tables as I intend to focus more on ETF’s in 2009. In time, I will also set up more tables and track the domestic market prices. Now that the Drupal platform is in place, it’s just a matter of time and focus for me to expand these tables, and to possibly have separate blog streams.
Here is the latest session data for the exchanges of the Americas.
Here is the latest chart for the Brazilian Bovespa stock exchange in Sao Paulo.
Brazilian Bovespa stockcharts.com chart
Here is the latest session data for the Toronto Stock Exchange composite index.
Toronto 300 stockcharts.com chart
Toronto CDNX stockcharts.com chart
Europe
Here is the latest session data for the bourses of Europe.
Here is the latest session data for the London stock exchange FTSE.
FTSE 100 stockcharts.com chart
Here is the latest session data for the German DAX.
Here is the latest session data for the French CAC 40.
Here is the latest session data for the Milan Italy stock exchange MIBTEL.
Italian Milan Index stockcharts.com chart
Here is the latest session data for the Swiss market index. Swiss Market Index stockcharts.com chart
Asia-Pacific
Here is the latest session data for the Asia-Pacific stock exchanges.
Here is the latest chart for the Japanese Nikkei 225 index.
Tokyo Nikkei 225 Index stockcharts.com chart
Here is the latest chart for the Singapore index .
Singapore Straits Times Index stockcharts.com chart
Here is the latest chart for the Shanghai Composite index .
Shanghai Composite Index stockcharts.com chart
Here is the latest chart for the Hong Kong Hang Seng index .
Hong Kong Hang Seng stockcharts.com chart
Here is the latest chart for the India BSE 30 index .
Mumbai BSE 30 Sensex Index stockcharts.com chart
Here is the latest chart for the Australian All Ordinaries index .
Sydney All Ordinaries Index stockcharts.com chart
Russia (RTS) stockcharts.com chart
Table 13: International equities via an ETF perspective (in $USD)
| Symbol | Close | 1Day Change |
1Day %Change |
1W %Change |
2W %Change |
4W %Change |
YTD %Change |
3M %Change |
6M %Change |
12M %Change |
Japanese equity market ETF: EWJ
Here is the Japanese (EWJ) equity market ETF Monthly, Weekly and Daily data charts:
U.K. equity market ETF
Here is the United Kingdom (EWU) equity market ETF Monthly, Weekly and Daily data charts:
EWU Daily data: 
Canada’s equity market
Here is the Canadian (EWC) equity market ETF Monthly, Weekly and Daily data charts:
Taiwan’s equity market
Here is the Republic of China/Taiwan (EWT) equity market ETF Monthly, Weekly and Daily data charts:
US Equity Markets Review
In the US equity market, the S&P held 880 support four weeks ago. Most traders were looking at a crash, and many were selling. Interesting then there are so many roaring Bulls today. Most are claiming to have forecast a push to the S&P 500 new closing highs of 1010.
I wrote here a week ago that “For a couple weeks, we positioned our accounts in short puts, which gained nicely. But, since we didn’t know the burst in the S&P was going to happen, and the general market is still quite unstable, we were a bit light in our positions. In the past ten days or so, we bought calls and in a couple cases straddles.”
I suppose small gains can be made here and there, but without most of the buying power committed to positions, it’s almost impossible to catch the indexes. There are times occasionally where I say that it just is not worth the extra risk to try to post index matching gains.
As I wrote here a week ago, “Time might work off the RSI-7 excess, but frankly I believe the market is more vulnerable to a stumble.”
As long as we continue to make good gains on the trades we put on, I am a happy camper. I refuse to chase the Banks ($BKX +12.4% W/W) and REITs ($DJR +16.2% W/W) because I don’t trust their balance sheets, and I know the hot money in will be the hot money out when the music stops. And it will stop.
At this point though, I think August is a time when low volumes can help promoters push prices higher. It’s a summertime thing. September and October is usually when volumes pick up, and profit-taking occurs.
I wrote earlier that I sense that something big will happen soon, probably in mid to late September and connected to the G-2- meeting in Pittsburgh. Maybe the issue is going to be linked to US healthcare reform, which is shaping up as a fight for control by the right or left wing elements in America.
Here is a dozen NASDAQ stocks to watch.
Here is the Monthly data chart of the Interactive Chart of Nasdaq Composite, S&P 500, Dow30, and Russell 2000 (small cap) indexes.
Here is the Weekly data chart of the Interactive Chart of Nasdaq Composite, S&P 500, Dow30, and Russell 2000 (small cap) indexes.
Here is the Daily data chart of the Interactive Chart of Nasdaq Composite, S&P 500, Dow30, and Russell 2000 (small cap) indexes.
Table 14: Dow 30 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. So, live life, use common sense, do only what you understand, feel comfortable, and you'll be surprised at how quickly you can take control and free yourself of the shackles of HB&B.
Value Line Report(s) this past Friday
This week, Value Line reported on one DJIA component: Wal-Mart (WMT), one of the companies I find most interesting and do actively trade. Wal-Mart is a Cara 100 company.
Generally speaking, in my writing I probably have too much of a positive bias about the share prospects for WMT. But I trade for the short run. Presently I am long WMT puts for the reasons I provide here (i.e., net bearish), mostly because of my concerns about consumer spending.
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 Aug 8: next one is due Nov 7)
For study purposes, Here is what I wrote in the WIR #6 (Feb 8, 2009):
Here is what I wrote in the WIR #6 (Feb 8, 2009):
We were active in WMT trading this week, and I told you about it in the Trader's Conference Call notes in the Daily Reports. Hopefully you were listening.
After the close on Monday, I wrote: “We have to believe there is some value in Wal-Mart (WMT), down -25% in a few short months to 46.57 from the low sixties. We understand that unions have renewed clout in the Obama administration, but we like our chances making money by beginning to ladder into out-of-the-money puts sales in WMT. We shall see.”
Then after the close Wednesday, I wrote: “Wal-Mart (WMT +2.66%) had a nice pop today and we may add to shares if it trades back down to 47. We don’t think it will be a leader, but may be good for a trade.”
Then after the Thursday close, “We closed many our short put positions opened just a few days ago. Profits were booked in POT, WMT, GG, and AAPL. Risk management is our prime focus so when we are able to book 60-75% profits in a few days-especially before an economic release certain to increase volatility-we take the trade off.”
What we were in effect doing was reducing our cost base on WMT shares, having just bought positions in WMT at low prices, but in a very weak market that could have sunk lower.
WMT closed the week at $49.63, a move off the closing price of 46.57 just four days earlier, which I alerted you to.
If you go to the Weekly data chart, you'll see that my only real indication that WMT was ready there was the RSI-7 move back above 30, consistent with the Daily turn that day. Not being enamoured with Wal-Mart's fundamentals or Retailers at the moment, I needed those put writes to help me manage the risk I wanted to take. No option, no trade. Simple as that.
What we're doing here is fine tuning dinner just like the best Parisian chef. It's a matter of combining your experience, knowledge and mathematics to result in what some people call skill.
I can tell you that no economist gave you profits like this over a couple days in WMT. Yes, I'll make that flat-out statement. Just like none of us could have landed that Airbus safely in the Hudson, we have to put our trust and faith in people who know what they are doing, and then hope for the best.
To me, Wal-Mart was my Hudson. WMT's not some sexy penny stock, but our crew managed to get the passengers home safely.
Why is Wal-Mart my Hudson, as I say? Look at the Value Line report. A small child can run their finger along the lines for Sales per share, cash flow per share, earnings per share, dividends per share, and book value per share – for 17 consecutive years – and see that every consecutive number in the series was higher than the previous year. You don't need a PhD in Time Series Analysis to see that Wal-Mart is growing, getting stronger, a company you can count on.
No, Wal-Mart is not a sexy structured investment vehicle peddled by HB&B to hoodwink us out of our hard-earned wealth. We can walk into any Wal-Mart store, say hello to the elderly greeter, and then see for ourselves that there's nothing remarkable going on other than we get exactly what was advertised, at a fair price. I like to trade stocks of companies like that.
Patience, patience, patience. You wait until the WMT price comes to you, and then you buy. And later when too many people and the talking heads on TV start yapping about it, you sell.
Wal-Mart is not a perfect company, but then nothing in life is perfect, not even rocket science. Taking profits like we did this week in WMT is about as good as it gets.
It more than makes up for the bad days.
Here is what I wrote in the WIR #19 (May 10, 2009):
By following these notes and the accompanying charts you can see how I trade. With WMT in early February, I said that 47 would attract me, but I was also not thinking the stock would be a market leader so I determined that the best trade was to put on some put writes. Traders with a longer term time horizon would have been well served to buy the stock at 47 that month if they had sold out within a month of that with a gain of 12.5-13%. In a volatile (unstable) market, you have to learn to take trades like that when they come to you.
After trading on behalf of clients for almost six months now, I think it would be fair to say that my clients – and maybe many of you -- are surprised at how conservative I am. But, from the outset of our trading the S&P is down -11% and we are up +8%. The benefit to clients is that we have achieved that performance using an average of under 20% of available cash. We have managed to be very effective in writing puts.
Based on a price of $48.92 (July 28), the Value Line analyst for Wal-Mart (WMT $49.24) sums up the current situation as follows:
Didn't have time to review it and write it up, but the Value Line report seems to be well done.
Here is Pierre Brodeur’s quantitative analysis of WMT:
http://caracommunity.com/blogs/pierre-brodeur/2009/08/wal-mart–-august-10th-2009
Pierre says he “would watch for a break above $51 or below $47 for an indication of the next move”. Presently, there is some downward pressure using the MACD M, W, D, and H price series data. He says that “a clear breakout from strong resistance at $49.50 would negate the inverse head and shoulder formation which if the neckline is broken ($48.75) would provide for a minimum price objective of $47.10.” Long-term, he is looking to be a buyer.
Here is my own current thinking re WMT, based on the following charts:
http://billcara2.com/tkchart/tkchart.asp?stkname=WMT&ind=rsi&wt=3
http://billcara2.com/tkchart/tkchart.asp?stkname=WMT&ind=rsi&wt=1
http://billcara2.com/tkchart/tkchart.asp?stkname=WMT&ind=rsi&wt=0
These charts show me a long-term and short-term range bound pattern, which will only result in good share price performance if you trade it frequently, with complementary options strategies. Writing puts and calls for premium income, will continuously lower the cost base, but judicious use of stops is typically useful whenever RSI-7 rises above 65-70 for the Weekly data series.
Presently we are short via puts. There is a falling Monthly and Weekly RSI-7 but, due to Friday, a rising Daily RSI-7. Should markets sell off next week, the Daily price will also likely fall. However, with Friday’s unexpected broad market rally caused by the Bank of England “surprise” on Thursday and Friday’s helpful US Employment Report, we are at now at risk, and we may put on more puts after the short-term price RSI-7 peaks again because, if that were to occur next week, we do think there is at least a 75% probability of the $47.10 floor being reached in WMT in the next month, and possibly a further chance for the price to go to $45 a month or two after that.
One of my concerns for the Retailers is that consumers are earning less and saving more. That’s not good for spending. Retailers like Wal-Mart can only do so much to encourage spending. Recently we saw that Procter & Gamble revenues and earnings were down in double digits, and we know that Wal-Mart is that company’s major retailer. If shoppers are walking down the aisles at Wal-Marts and avoiding P&G products, that means they are doing the same elsewhere. Target confirmed it. So, just because Friday was a market rally day, I’ll wait out the puts I have on WMT.
But ultimately I do like these long base patterns. Ian Notley taught me that.
WMT is a quality asset to hold in your portfolio. The company’s financial strength is rated A++. Over many years, the growth in sales, cash flow, earnings and dividends is frankly stunning. There is really not much more you need to study in this particular Value Line report. The only thing you have to do is make well-timed entries and then wait for the best time to apply stops, which is always after the RSI-7 is rising above 65-70 on the Monthly, Weekly, or Daily price series depending on your time horizon. If you over-use stops, you will get shaken out at lower than acceptable prices. If you turn a bit bearish, but still undecided, or if you want to lock in a quick profit, you can over-write calls on your stock position.
These charts also show me a long-term cycle bottom pattern, which will likely result in good share price performance over the next two to three years should the $51 level be crossed on the upside.
As for the company itself, this world leading consumer staples company is both fundamentally sound and well regarded by long-term oriented defensive traders aka value investors. There is a satisfactory dividend yield (about 2.3%) that is safe, so the Total Return (TR), including capital growth and dividend yield, ought to be satisfactory for 2010-2012.
To increase one’s income, if these stocks were of interest, I would buy the stock on extreme down days and write puts during periods where the Daily and Weekly RSI-7 is below 30 or maybe even 35 if the RSI-7 has started to lift.
If you have just six stocks like this in your portfolio like WMT, such as XOM, PG, MSFT, IBM, JNJ, and/or MCD, I think you will do well over the years ahead. If there happens to be a market crash below say S&P 950 or 920 if you are very nervous, I would not hesitate to buy these stocks and on Buy Alerts write two-month puts if you have the funds to acquire more if exercised at what I refer to as ‘stink bid’ prices.
My words are based on sound investment/trading principles. At times like the present, however, the market fools us and doesn’t follow logic. There are reasons for these anomalies, of the kind I have stated, but that blind faith in chasing prices higher is only a recipe for disaster.
Tough to accept sometimes; but true.
The Dow 30 Company links in chronological order of the upcoming reports.
Disney [GICS 25, Dow 30, Cara 100]
(DIS: Google Finance file)
(DIS: Yahoo Finance file)
(DIS: StockChart chart)
(DIS: Billcara2 chart)
(DIS: ADVFN Financial Data)
(DIS: Value Line Report May 15: next one is due Aug. 15)
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 15: next one is due Aug. 15)
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 22: next one is due Aug. 22)
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 22: next one is due Aug. 22)
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 22: next one is due Aug. 22)
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 22: next one is due Aug. 22)
Johnson & Johnson [GICS 35, Dow 30, Cara 100]
(JNJ: Google Finance file)
(JNJ: Yahoo Finance fle)
(JNJ: StockChart chart)
(JNJ: Billcara2 chart)
(JNJ: ADVFN Financial Data)
(JNJ: Value Line Report Feb. 27: next one is due Aug 29)
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. 5: next one is due Sept. 4)
Chevron Corp [GICS 10, Dow 30]
(CVX: Google Finance file)
(CVX: Yahoo Finance file)
(CVX: StockChart chart)
(CVX: Billcara2 chart)
(CVX: ADVFN Financial Data)
(CVX: Value Line Report Jun. 12: next one is due Sept. 11)
ExxonMobil [GICS 10, Dow 30, Cara 100]
(XOM: Google Finance file)
(XOM: Yahoo Finance file)
(XOM: StockChart chart)
(XOM: Billcara2 chart)
(XOM: ADVFN Financial Data)
(XOM: Value Line Report Jun. 12: next one is due Sept. 11)
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. 19: next one is due Sept. 18)
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. 26: next one is due Sept. 25)
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. 26: next one is due Sept. 25)
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. 3: next one is due Oct. 2)
Home Depot [GICS 25, Dow 30]
(HD: Google Finance file)
(HD: Yahoo Finance file)
(HD: StockChart chart)
(HD: Billcara2 chart)
(HD: ADVFN Financial Data)
(HD: Value Line Report Jul. 3: next one is due Oct. 2)
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. 10: next one is due Oct. 9)
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. 10: next one is due Oct. 9)
IBM [GICS 45, Dow 30, Cara 100]
(IBM: Google Finance file)
(IBM: Yahoo Finance file)
(IBM: StockChart chart)
(IBM: Billcara2 chart)
(IBM: ADVFN Financial Data)
(IBM: Value Line Report Jul. 10: next one is due Oct. 9)
Intel [GICS 45, Dow 30, Cara 100]
(INTC: Google Finance file)
(INTC: Yahoo Finance file)
(INTC: StockChart chart)
(INTC: Billcara2 chart)
(INTC: ADVFN Financial Data)
(INTC: Value Line Report Jul. 10: next one is due Oct. 9)
Alcoa [GICS 15, Dow 30]
(AA: Google Finance file)
(AA: Yahoo Finance file)
(AA: StockChart chart)
(AA: Billcara2 chart)
(AA: ADVFN Financial Data)
(AA: Value Line Report Jul. 17: next one is due Oct. 16)
Dupont [GICS 15, Dow 30]
(DD: Google Finance file)
(DD: Yahoo Finance file)
(DD: StockChart chart)
(DD: Billcara2 chart)
(DD: ADVFN Financial Data)
(DD: Value Line Report Jul. 17: next one is due Oct. 16)
Merck [GICS 35, Dow 30]
(MRK: Google Finance file)
(MRK: Yahoo Finance file)
(MRK: StockChart chart)
(MRK: Billcara2 chart)
(MRK: ADVFN Financial Data)
(MRK: Value Line Report Jul. 17: next one is due Oct. 16)
Pfizer [GICS 35, Dow 30]
(PFE: Google Finance file)
(PFE: Yahoo Finance file)
(PFE: StockChart chart)
(PFE: Billcara2 chart)
(PFE: ADVFN Financial Data)
(PFE: Value Line Report Jul. 17: next one is due Oct. 16)
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. 24: next one is due Oct. 23)
Caterpillar [GICS 20, Dow 30]
(CAT: Google Finance file)
(CAT: Yahoo Finance file)
(CAT: StockChart chart)
(CAT: Billcara2 chart)
(CAT: ADVFN Financial Data)
(CAT: Value Line Report Jul. 24: next one is due Oct. 23)
Coca Cola [GICS 30, Dow 30, Cara 100]
(KO: Google Finance file)
(KO: Yahoo Finance file)
(KO: StockChart chart)
(KO: Billcara2 chart)
(KO: ADVFN Financial Data)
(KO: Value Line Report Jul 31: next one is due Oct 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 Jul 31: next one is due Oct 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 Aug 8: next one is due Nov 7)
Wrap-up:
I had mixed feelings doing this WIR. It is after all the summer doldrums, and low volume in the market, plus some further push from the Interventionists, are sufficient reason for prices to rally.
But, if you think the market is rising because the economy has recovered and that your investment portfolio is no longer at risk, listen to the college students who cannot find work this summer and who don’t know how they can pay for next year’s tuition. Listen to the stories of business people who cannot get bank loans or the average consumer whose credit card borrowing limit has been slashed. Credit is a problem.
The fact is that banks need equity prices to rise because they have so much more capital to raise in order to restore their capital ratios to levels required for them to write off the losses that remain on the books after five years of dubious lending. To help themselves out, these banks are now writing ratings upgrades of fellow banks and industrial corporations that are their main partners, clients and creditors.
I cannot overlook the fact the economy is very weak, with huge unused capacity, brought down by the frivolous lending and investing practices of Humungous Bank & Broker (HB&B), only stabilizing a bit now because of the forced taxpayer largesse and the as yet unseen rise in interest rates that must soon hit all of us.
It is said that manufacturing in the US is a relatively minor 20% of GDP; however, it has been the “Cash For Clunkers” program, courtesy of the US taxpayer that is spurring industrial production, and not much else. In the non-manufacturing sector, it is mostly government jobs that are being added, but government already cannot afford to pay its workers.
In order to pay taxes, one needs to work. The workers need good quality jobs or else they too must rely on a social net. Afraid of the system, Americans have turned to saving whatever money they can, and government, HB&B and big business is trying their hardest to get them to spend. Interestingly, HB&B is also cutting consumer credit.
In 2004 and the 1H2005, house prices continued to lift because government, HB&B and big business said they would. They said the economy was strong, and that personal incomes would continue to pay the higher costs of living in a house that was being priced out of this world. Well, guess what? They lied – there is no other word for what happened. Those house prices were full of hot air.
Today we have a similar situation with equity prices. They are rising because government, HB&B and big business says that earnings are beating estimates, and that the higher prices are sustainable because corporate earnings will soon soar. But guess what, actual earnings are falling, and unless there is an immediate turnaround, which is almost impossible when credit markets are so tight and people would prefer to save than spend, those earnings will not soar. Jobs will not be plentiful. Low tax revenues will continue to put governments underwater.
There is cause and effect and there is lying. Amid the hope, which we all do, the risk is that the liars will win out and the ultimate effect will be gruesome. Yes, equity prices have lifted, but unlike the past housing cycle, the equity market cycle has not yet played out. We don’t yet know the degree of lying that is going on today.
All I can say is that on Friday afternoon, on Financial Entertainment TV, I saw a lot of what I call pathological lying. So much so that, feeling abused in their wasting my time, I turned the TV set off.
But all is not negative; there is both yin and yang in the market. Buy and sell, high and low, put and call – these are the dualities that make capital markets so interesting.
Being in the dog days of summer, a period where volatility falls as market makers do not want to buy risk, the price of puts and calls is presently quite expensive. So we have been waiting to put on a lot of puts, which we would normally do when the RSI-7 reaches such extremes and then peaks and falls as they are or they appear ready to do.
The week before Labor Day is the usually the start of higher volatility, which is when we get ready for action. If this were preparations in the war theater, we’d be waiting for winter to cross our tanks on the river ice, where the odds of a successful crossing are in our favor.
We have roughly two and a half weeks to study the charts to determine where the assault will be made for September. At this point, I see weakness in (i) Energy, Basic Materials and Industrials and Capital Goods, which are the commodity price-sensitive sectors, but mostly Sector 10, Energy, (ii) the economically-sensitive sectors, but mostly Sector 25, consumer discretionary, and Sector 30, consumer Staples, and (iii) in penny stocks; but much can change in a few weeks.
The marketing newsletters are in full-out promo these days. This one came in from one of the world’s largest publishers, which built its reputation on quality editorial; but apparently now has to make its money managing and promoting newsletter writers.
Baidu.com +260% and a Dozen More Chinese Stocks To Buy Now
Dear Investor: Have you been doubling your money -- or better -- as stocks have exploded higher in the past several months? Readers of the X Report are cashing in handsomely and I don't want you to miss out on the profits… Bear markets are brutal, no doubt about it. But when stocks recover, you have a great chance to make absolutely ridiculous profits -- if you own the right stocks at the right time… Like Warren Buffett, Mr. X, editor of the X Report, knows to be greedy when others are fearful and fearful when others are greedy. Right now, says Jim, "Greed is good!"
I saw the same high pressure sales and marketing tactics in 1987 and 1999 right before the crash.
As a polar opposite, why not read this article, ‘The Royal Scam’, in the oftwominds.com blog by Charles Hugh Smith:
http://www.oftwominds.com/blogaug09/KaPoom2CHS.htm
We all need balance. Whether markets are rising or falling, all of us independent traders know that our task is to protect capital and then seek ways to make money. With accurate analysis and a lot of thinking we can do that, but not if we overlook what’s important and start to chase prices.
We also have to be in the right frame of mind to make good decisions. We have to have a happy place to retreat to, I feel, which is why I chose The Bahamas. Whenever I get frustrated, which happens a lot these days, I walk the beach and swim in the ocean. It’s physical and it’s refreshing.
Anticipating the August war preparations and the battles to come, I’m headed for some R&R right now. It’s after 4pm and there is so much I have missed today.
Enjoy the rest of your weekend.
