[6:35pm] The market is set to crash – first equities; later bonds – because HB&B is likely going to permit it. They are aware that the Glass-Steagall debate is on fire and about to burn them beyond recognition. They are undoubtedly livid and, judging from the charts of the past couple weeks as well as the holding action I observed this week, have probably decided to sell everything.
This week I alone pointed you to the fact that while there was no interest at all for equities in any market of the world there was a huge pumping action that was sending bank stocks soaring. Banks in Japan, China, India, Greece, France, Germany, UK, Ireland, and everywhere I looked were bouncing from +2% to +10% for several days in a row, which was strange because the market indexes in those countries were dropping. I came to the conclusion it was the pump before and during the dump. By the end of the week though, those bank stock charts were looking rather sick.
First, what is Glass-Stegall?
[Wiki] The Glass-Steagall Act of 1933 established the Federal Deposit Insurance Corporation (FDIC) in the United States and included banking reforms, some of which were designed to control speculation. [1] Some provisions such as Regulation Q, which allowed the Federal Reserve to regulate interest rates in savings accounts, were repealed by the Depository Institutions Deregulation and Monetary Control Act of 1980. Provisions that prohibit a bank holding company from owning other financial companies were repealed on November 12, 1999, by the Gramm-Leach-Bliley Act. [2] [3]
[1] "Frontline: The Wall Street Fix: Mr. Weill Goes to Washington: The Long Demise of Glass-Steagall". www.pbs.org. PBS. 2003-05-08.http://www.pbs.org/wgbh/pages/frontline/shows/wallstreet/weill/demise.html. Retrieved 2008-10-08.
[2] "The Repeal of Glass-Steagall and the Advent of Broad Banking" (PDF). http://www.occ.treas.gov/ftp/workpaper/wp2000-5.pdf.
[3] "GRAMM'S STATEMENT AT SIGNING CEREMONY FOR GRAMM-LEACH-BLILEY ACT".http://banking.senate.gov/prel99/1112gbl.htm.
http://wapedia.mobi/en/Glass-Steagall_Act
To understand the controversy, read the following article:
“The "Glass-Steagall" debate has now caught fire.”
http://www.telegraph.co.uk/finance/comment/liamhalligan/6475009/Is-Georg...
For months, the big names of Wall Street and the City have done everything possible to douse the flames of open and honest discussion. But now, the logic of common sense burns brightly… We urgently need to re-impose the firewall – separating commercial "utility" banks safeguarded by government from lightly-regulated investment banks that would then be exposed to the full force of the market. At a stroke, our banking system would be far safer and the "too big to fail" issue solved. Needless to say, this is anathema to the "universal banks" of the City and Wall Street who rely on government cash for survival and from whom politicians, in turn, receive campaign donations and cushy banking jobs once their political careers have expired… It was at this disgraceful, corrupt consensus that Mervyn King earlier this month hurled a well-aimed grenade. In a speech of historic importance, the Bank of England governor boomed that Glass-Steagall's removal, and the "breath-taking" scale of the bail-outs, had created the "biggest moral hazard in history"… Other important voices have since joined him. George Soros, the supremely influential financier, now agrees that there "has to be internal compartments that separate proprietary trading from commercial banking".
“The big names of Wall Street and the City” of course refer to Humungous Bank & Broker, Dealer, Insurance, Principal, Agent, Analyst, Financial Advisor, Syndicator, Underwriter, Sales Distributor, Ad Nauseum”. I just shorten it to HB&B. I have written about this ugly conflict of interest problem for years. In the 1990’s I presented it to a forum of chair persons of Canada’s largest nine securities commissions, and they ignored me. I presented it to a panel of 15 Senators of the government of Canada in formal session of the Senate Banking committee, and they ignored me.
I have also written it in this blog since April 2004, and in the Wall Street Journal in June 2006, and many people in very high places have read it and chosen to dismiss it.
http://www.dailymarkets.com/economy/2009/10/19/a-revolt-against-the-conc...
http://online.wsj.com/public/article/SB114919299432468995-i_QZj733SC_6xd...
http://www.billcara.com/archives/2006/06/trading_shots_r.html
What these people in authority have done is a disgrace. They have ruled against common sense. They have allowed a bank to be all things financial to all people and to be self-regulated as well.
Tell me honestly; who didn’t see a financial accident in the making?
The rationale of course is that as long as equity markets can rally, all is fine. Is that not the same as thinking as long as I don’t get caught at the crime scene, I’m ok? Is that not an invitation to destroy all attempts at transparency?
What I noted in the blog and on the trading desk this week was that many buy signals from our system were quickly being hit with offers, reversing the cycle, pushing the stocks back into the Accumulation Zone. An AZ with a falling Daily RSI-7 is not particularly attractive. A stock with a falling Weekly RSI-7 as well is downright ugly.
I cannot begin to tell you how many ugly charts I am looking at. There are a couple industry groups or sub-groups that appear to be holding their own, but did you see that on Friday there was not a single Cara 100 company stock that lifted in price. That’s right: zero for 100. That followed Thursday when the broad equity market indexes were up +2%. Talk about night and day.
After hanging in suspended animation for five trading days from about Wednesday Oct 14, five of the past six have had losses. After hitting an intra-day high of 1101.36 on Oct. 21, the S&P 500 index closed Oct. 30 at 1036.19. That’s a drop of -5.92% in just over seven sessions. Friday’s loss was -2.81%.
A week ago, I noted an ominous Friday-Monday double down. Then Tuesday, Wednesday and Friday followed suit. A second in a row Friday-Monday double down would serve as a black flag to many traders; so watch Monday. HB&B either decide this weekend to give it another shot or else they have already made the decision to withdraw except for a well-timed pump and dump of their own stock to benefit their employees who management would not want holding the bag.
Bag-holders is what HB&B thinks of us. Why not? They are proprietary traders winning billions trading against our accounts, meaning that we are losing those billions, so we are in fact chump change bag holders. We had the money from our labor and improvement to land, and they had the schemes. They ended up with the money, and we got the change, but not the kind we had hoped for and voted for.
When Wells Fargo CEO John Stumpf told the House Banking Committee in a February 11, 2009 hearing, "We are Americans first and bankers second," WFC stock closed at $17.50 that day; it’s $27.52 today, having taken a hit of -3.7% on Friday, but still up +57.3% since the man told what I call the lie of the century.
So we are back full circle. “The "Glass-Steagall" debate has now caught fire.”
I saw the train coming. A week ago in this WIR, I cautioned you:
After a spate of corporate earnings reports this week in which traders heard the word “blow-out” a record number of times where the details showed otherwise, equity prices on North American and Asia-Pacific markets finally turned south on Friday, ending the week down. The bullish traders, to say the least, are nervous… The small cap investors, the ones who usually bail first, led the Russell 2000 index to a -2.49% loss W/W.
I even went so far as to tell the story of encounters with my neighbors last weekend because I felt there was a message there:
Just because the Wall Street scriptwriters are telling you things are great doesn’t mean they are. Prices, simply, are escalating and people are excited – just like the condo owners were in Miami in 2005 after stunning price gains over 2004, which followed stunning price increases over 2003, etc. Where are they now? I said in the summer of 2005 that books would be written about that sordid affair and I held CNBC accountable. It’s happening all over again. If there was a factual basis for these price increases, I would be holding positions. Unfortunately I have to manage risk.
Last night at a party everybody was talking up the market. One fellow says he bought Citi at 94 cents and sold it a couple weeks later for 3 something, making $500,000 in his personal account, and now that he is a genius he says he absolutely knows the market is going higher. I asked him what his picks were and the answer was “All of them. Buy them all. They are all going higher, and I got a $100,000 (wager) that says I’m right.” So I asked what if he’s wrong, and he replied “In that case my $100,000 turns to $5,000… so big deal.” He was drunk in more ways than one.
Another friend who is also a construction worker and who also bought Citi down near the low dropped by yesterday to ask me what he should do with it. I was surprised he was still holding it, and mentioned his $1.00 cost base. No, he says, he paid $1.04 for 100,000 shares and was thinking of selling a week ago at $5. Now the price has been sliding, down to $4.46, he wanted my counsel. “Sell now” I said and “go to cash, and after C crashes, buy another $100,000 worth, and no matter what happens to it, you cleared a quarter million (it’s tax free in Bahamas). There will be lots of quality opportunities that are less risky.” Ok he says, he’ll do that, and then proceeds to tell me he also bought at Australian bank at the same time at 10 and its now 80. The mind boggles. I figured maybe he should be working with me or me with him. I just have a different kind of hard hat.
My mind just had a flash-back to the 1970’s when a friend who was a commodities broker was telling me he was making a killing in pork bellies. I really didn’t know back then what a pork belly was, but it wasn’t long after that this guy was no longer a commodities broker.
There are extreme cycles at times and we are going through one. The money has moved from the taxpayer’s account to Humungous Bank & Broker (HB&B) and through their books to their proprietary trading desks and those of their friends and best clients. Regrettably, that money never made it to the loan department despite the no-brainer profit set-up from the Fed. So, it went into the market with a little bit kept in reserve to pay off the script writers and talking heads. I don’t know what’s grown faster, the prices or the hype?
Nothing much changes at every extreme cycle top. People who don’t know gamble. They can’t stay out of the action. It’s in their blood. They couldn’t care less whether Caterpillar is CAT or 0228 or the stock is $40 or $60. Pick a number.
Reminds me of the time back in the late 1990’s when I was looking at buying into a proprietary trading firm and so I sat with the management and traders for a couple weeks. I soon gathered none of them had a clue about the market and for sure I knew they didn’t know how to trade when one of them told me he was trading Intel INTL. I told him he had the wrong symbol on the screen – he was actually trading 1,000 share blocks of INTL not knowing the correct symbol was INTC.
Truly, the mind boggles. When it comes to money, people go funny.
The skinny on United Tech is a little easier to comprehend. Extremely strong balance sheet is being used to ramp up the dividend and buy in the stock. The metrics always look better. No brainer. Paulson pulled that one after he became Treasury Secretary. I called it Paulson’s Folly because when he told Wall Street to do the same thing when the share prices were at their peak. When these banks, names you now know have failed, were spending over $10 billion to buy in their shares at record high prices, I asked in this blog if anybody with common sense really believed that was a good thing.
What goes around comes around.
With UTX, the financials and operating results are better than Caterpillar’s. But, there too the projected next five year annual rates of growth for sales, cash flow and earnings are a fraction of those of the past five years – unless of course you believe that every one in China was going to buy an elevator.
I don’t want to waste more of my time writing about this stuff. It’s a matter of respect. If people with money don’t understand and respect risk, then they will soon be parted from that money by very brilliant schemers.
In Saturday’s report I wrote about some indicators and tools you can use to take a measure of risk. For years now, I have been writing about others, like the RSI-7 indicator or the Cara 100 quality companies, and so on. It’s up to you whether you want to be in Vegas or the capital market.
Somehow the picture of horses being led to water and not drinking comes to mind. :-)
I also gave some advice here for those who do listen:
So, first a pull-back and then a lift, probably favoring US stocks, including many smaller cap stocks of companies with new cleantech products (alt-energy, biotech, semi-conductor, networks, water).
Mind you all of this is floating in my head right now and maybe it’s time to go for a walk on the beach. That would give me a couple hours not having to think about how nervous this market is; a market that is clearly in distribution.
Yes, a lot of money was parted this week; the S&P 500 was down -4.02%. CAT dropped -4.41%. UTX plunged -6.63%. Citigroup (C -8.30%) was hammered even worse. The market was clearly in distribution.
Global Economics Review
Weekly International Economic Report.
Econoday reported for the week ending Oct. 30:
After equities were dragged down all week, investors took solace in the positive gross domestic product reading from the U.S. and as a result, equities rebounded strongly on Thursday, only to lose all of their gains once again on Friday, and then some. While GDP was up at an annualized pace of 3.5 percent, most of the growth was the result of temporary stimulus packages for cars and homes. Just how much of this growth will stick to the ribs is open for question. Friday’s losses were attributed to poor consumer spending reports in the U.S. and Germany… Markets for the most part were dragged down by a combination of so-so profits, mixed economic data and investor uneasiness regarding that old nemesis — risk. Investors bailed out of stocks as they worried about the impact of reduced stimulus on growth and whether the markets had gone too far too fast…
All indexes followed here were down last week with losses ranging from 0.8 percent for the Topix and PSEi to 7.0 percent for the Bolsa. The DAX, CAC, Nasdaq and Sensex incurred losses over 5 percent. For the month of October, four indexes managed to post gains while the Dow was virtually unchanged on the month — all others declined anywhere from 1 percent to 7.2 percent.
Here is the Econoday analysis of the key US economic reports on last week’s calendar.
US New Home Sales for Sept. Following the data released 10:00am ET on 10/28, Econoday reported, “New home sales took a step backward in September, showing a much lower-than-expected annual rate of 402,000 in a report that includes a steep downward revision of 25,000 to prior months. The year-on-year rate also took a step backwards, moving from the low single digits to minus 7.8 percent. The adjusted number of new homes for sale showed a little improvement, at 251,000 vs. August's 261,000 but not supply relative to the sales rate which held unchanged at 7.5 months, a reading however that is much improved from earlier in the year and especially against the year-ago level of 10.9 months. Note that the 251,000 new homes on the market is the lowest level since 1982, a reminder of the upheaval that has hit the housing sector… But a big plus in the report is a rise in the median price, up 2.5 percent to $204,800 (data not seasonally adjusted). Indications on home prices have been mixed but today's result tilts the balance toward appreciation especially given a seasonality bias that is likely understating true prices (see today's Econoday Short Take: "House Price Indexes -- Seasonality Matters!"). Housing starts have been bumpy lately and today's results don't point to improvement, which is an unfortunate negative for the construction industry and construction jobs. Expect efforts to extend buyer credits to pick up steam in Washington. Stocks and commodities moved lower in immediate reaction to the results with demand for the safety of Treasuries picking up.”
US Consumer Confidence for Oct. Econoday opined after the data release at 10:00am ET on 10/27, “Consumer confidence is falling backwards as pessimism grows over the jobs market. The Conference Board's index fell more than 5-1/2 points to 47.7 in October, barely above 47.4 seen in July. The assessment of current conditions is alarming, at 20.7 for a nearly 2-1/2 point decline and the lowest reading yet of the cycle. Job readings are very weak for the present situation with 49.6 percent, that is nearly half of the 4,000 sample, saying jobs are hard to get, that's up more than 2-1/2 points from September. This reading contrasts with improvement underway for jobless claims and will raise questions whether payroll contraction will deepen, not improve, in October… The expectations component also fell, down 8 points to 65.7. Here the key reading is expectations for future income where fewer see an increase, 10.3 percent vs. September's 11.2 percent, and more see a decrease, 19.5 percent vs. 19.3 percent. These results are uncomfortably close to the worst levels for this reading in 40-plus years of data. Buying plans all decreased, down for cars, homes and appliances. Inflation expectations are unchanged at 5.3 percent one-year out… Stocks, commodities and the dollar all moved lower in immediate reaction to the results. The one plus in the report is that the overall index, thanks to expectations for improvement ahead, is still well above the cyclical low of 25.3 hit in February. But if the jobs market doesn't begin to improve soon, confidence will continue to weaken and will very likely raise expectations for a turn lower in consumer spending.”
US Durable Goods Orders for Sept. After the data release at 8:30am ET on 10/28, Econoday reported, “According to the latest durable goods report for September, manufacturing is still on track for a moderate recovery. Durable goods orders in September rebounded 1.0 percent, after a 2.6 percent drop in August and a 4.8 percent surge in July. However, September's boost was below the market forecast for a 1.5 percent increase. Excluding the transportation component, new durables orders posted a 0.9 percent boost, following a downwardly revised 0.4 percent dip in August and 0.9 percent advance in July. Overall, the gains in September indicate forward momentum for manufacturing-especially in the context of earlier strong increases mixed with occasional dips… The rebound in new orders was led by machinery which surged a monthly 7.9 percent, followed by a 1.1 percent rebound in transportation equipment. Transportation was boosted by a rebound in defense aircraft, up 12.5 percent, as motor vehicles and nondefense aircraft slipped 0.1 percent and 2.1 percent, respectively. Primary metals advanced 0.3 percent while fabricated metals were flat. Weakness was seen in electrical equipment, down 0.9 percent; computers & electronics, down 0.2 percent; and "all other durables," down 1.4 percent… Businesses may be investing in equipment more in coming months as orders for nondefense capital goods rebounded 2.5 percent in September, following a drop of 7.7 percent the month before and a 7.0 percent boost in July… Year-on-year, overall new orders for durable goods improved to minus 19.6 percent in September from down 20.4 percent the previous month. Excluding transportation, new durables orders rose to minus 16.9 percent from down 19.2 percent in August… While today's report shows durables manufacturing on a moderate uptrend, equities may not like the numbers as the headline figure fell short of expectations. Nonetheless, manufacturing appears to be doing its part to keep the recovery going-even with less of a contribution from autos going forward.”
US Jobless Claims for the week ending 10/24. Following the data release at 8:30am ET on 10/29, Econoday reported, “Jobless claims are not offering a clear indication of what to expect for the October employment report. Initial claims held steady for a fourth straight week, edging 1,000 lower to 530,000 in an Oct. 24 week that was not skewed by special factors. The four-week average is at 526,250 and does show improvement, down about 20,000 vs. this time last month. Continuing claims, where the latest data is for the Oct. 17 week, fell substantially, down 148,000 to 5.797 million and, for the first time since April, bringing the four-week average below 6 million at 5.961 million. But the improvement reflects an uncertain mix of hiring together with the expiration of benefits. Those receiving emergency compensation fell more than 21,700 to 3.369 million with those receiving extended benefits down more than 49,300 to 526,700. Today's GDP report shows significant strength but continued strength will depend on improvement in the labor market. The next key reading on the labor market will be the ISM's manufacturing employment index on Monday followed on Wednesday by ADP's payroll count.”
US GDP Announcement for 3Q2009. After the data release at 8/30am ET on 10/29, Econoday reported, “Today's moderate increase for third quarter GDP should provide some psychological lift for consumers and businesses since it is the first positive growth for the overall economy in just over a year. And financial markets are likely to like it since it is all about expectations and the advance estimate topped expectations. Real GDP in the third quarter rebounded an annualized 3.5 percent, after declining by only 0.7 percent in the second quarter. The third quarter boost came in above the market consensus for a 3.0 percent increase… The improvement in real GDP in the third quarter primarily reflected upturns in personal consumption, inventory investment, exports, and residential fixed investment and a smaller decrease in nonresidential fixed investment that were partly offset by rise in imports, a downturn in state and local government spending, and a deceleration in federal government spending… Indeed, some of the component numbers were encouraging. PCEs rose an annualized 3.4 percent, led by durables with a 22.3 percent jump. Residential investment made a partial rebound of 23.4 percent-the first gain since a 2.6 percent rise in the second quarter of 2006. Inventories did add to third quarter growth but the "increase" was actually less of a decline in the change in inventories. Businesses are still facing lean inventories and any rise in demand could boost production for inventories. Both exports and imports were up after a string of negative quarters for both… Cash for clunkers did add substantially to third quarter growth as motor vehicle output added 1.66 percentage points to the third-quarter change in real GDP after adding 0.19 percentage point to the second-quarter change…
Year-on-year, real GDP improved to down 2.3 percent from minus 3.8 percent in the second quarter… Inflation is still subdued as the GDP price index edged up 0.8 percent, following no change in the second quarter. The consensus had projected a 1.4 percent rise in the latest period… Today's report should be a positive for equities, possibly damping the view that stocks are in a correction.”US Personal Income & Outlays Report for Sept. After the data release at 8:30am ET on 10/30, Econoday reported, “The consumer sector softened in September in both income and spending. Personal income in September was unchanged, following a revised 0.1 percent gain in August. The September number matched the market forecast for no change. The wages and salaries component, however, declined 0.2 percent after rising 0.2 percent in August… With cash-for-clunkers having expired in August, consumer spending in September fell significantly on a plunge in motor vehicle sales. Personal consumption expenditures dropped 0.5 percent after a 1.4 percent surge in August. The September decline was led by durables, which fell a monthly 7.0 percent. Non-durables increased 0.7 percent while services advanced a moderate 0.2 percent… Inflation was subdued in September. The headline PCE price index eased a little to a 0.1 percent increase, following a 0.3 percent jump in August. Core PCE inflation was steady with a 0.1 percent boost in September which is the pace seen for several months… The inflation-adjusted spending numbers call into question some of yesterday's excitement about a stronger-than-expected GDP report with relatively strong PCE numbers. The quarter "on average" was healthy, but on the margin, it ended with a whimper. Real PCEs fell 0.5 percent in September, following a 1.4 percent spike in August and a 0.2 percent rise in July… Year on year, personal income growth for September came in at minus 2.8 percent, down from minus 2.7 percent in August. Year-ago headline PCE inflation was steady at minus 0.5 percent in September. Year-ago core PCE inflation was unchanged at up 1.3 percent… The bottom line is that the consumer sector weakened in September but in line with expectations. The news itself should have no impact on the markets since expectations were met. But equity futures are down on profit taking and belief that yesterday's run up was a little too much. Markets now will be focusing on the consumer sentiment index coming up shortly this morning.”
US Employment Cost Index for 3Q2009. After the data release at 8:30am ET on 10/30, Econoday reported, “Third-quarter wages popped higher compared to the second quarter but not at all compared to the year-ago quarter in what are mild results for the employment cost index. The employment cost index, a measure of total compensation, rose 0.4 percent quarter-to-quarter, the same rate of increase as in the second quarter and 1 tenth less than the 0.5 percent gain that was expected. What pressure there is is in the wages & salaries component which rose 0.5 percent vs. two consecutive quarters at 0.2 percent. The benefit component lagged wages, at a gain of 0.3 percent, mild but still a 1 tenth increase from the prior two quarters… Year-on-year comparisons are the lowest in the 27-year history of the series. Total compensation is up only 1.5 percent, down sharply from 1.8 percent in the second quarter, with wages & salaries up 1.5 percent and benefits, which historically have been a center of concern for policy makers, up 1.6 percent. But private industry, a reading that excludes government employees, shows much less year-on-year pressure with total compensation up 1.2 percent and the benefits component up only 1.1 percent. The cost of labor is not yet a concern for policy makers who instead are focused on the critical need to boost the labor market.”
US Chicago Purchasing Managers Index for Oct. After the data release at 9:45am ET on 10/30, Econoday reported, “Huge swings are common for the Chicago purchasers' report, the effect of small sample sizes. Chicago's business barometer jumped more than 8 points in October to 54.2 reflecting a nearly 17 point month-to-month surge in production and a more than 15 point surge in new orders. Employment is one reading that didn't surge, slipping 5 tenths to a 38.3 level that indicates a slightly increasing rate in layoffs. Businesses in the Chicago area, evidently pressed to keep up with production needs, drew down their inventories in the month with the index down nearly 7 points to 32.2. Prices showed little change in the month, hovering near the break-even level of 50 for a third month in a row. Stocks moved off opening lows in reaction to the results, a reaction however that proved only brief as stocks soon resumed their declines. Chicago's data, whose sample includes both manufacturing and non-manufacturing firms, seems to be following, not leading national data from the Institute For Supply Management (ISM) which will be posting its October results next week.”
Here are the key US economic reports on next week’s calendar.
US ISM Manufacturing Index for October. Ahead of the data at 10:00am ET, at 11/2, Econoday reported, “The Institute for Supply Management's manufacturing index was little changed in September at 52.6 from August's 52.9. Importantly, it was still over 50, indicating that more purchasers are reporting expansion rather than contraction. The new orders softened a bit in September, but remained very positive and strong at 60.8—down from 64.9 in August. Prices paid continue to show upward pressure, coming in at 63.5 and down only marginally from 65.0 the prior month.”
Except for September, forward momentum has been building all year following a cycle low in December 2008.
US Construction Spending for Sept. Ahead of the data at 10:00am ET, at 11/2, Econoday reported, “Construction spending rebounded 0.8 percent in August after declining 1.1 percent in July. The boost in spending in August was led by a 4.7 percent jump in private residential outlays. In contrast, private nonresidential slipped 0.1 percent and public outlays dropped 1.1 percent in August. Looking ahead, based on the recent uptrend in housing starts (up in four of the last five months), the private residential component for outlays will likely post a gain for September. But high vacancy rates weigh on the nonresidential component as does state & local government revenue declines on public outlays.”
Three months ago, this same report stated, “Construction spending declined 0.9 percent in May after gaining 0.6 percent in April. The reversal in outlays in May was led by a 3.4 percent drop in residential outlays, followed by a 0.6 percent decline in public construction. Nonresidential outlays gained 0.5 percent. Looking ahead, healthy gains in housing starts of 17.3 percent in May and 3.6 percent in June could push the residential component of outlays back up. But the public component is still being weighed down by declines in state & local government revenues and nonresidential outlays are on an easing trend due to lower corporate profits, less cash on hand, and cutbacks in commercial lending.”
Clearly the home-owner tax incentive program had a big impact, which is why it is being extended. The govt continues to hit the ‘easy’ button at the expense of taxpayers.
US Factory Orders for Sept. Prior to the data release at 10:00am ET on 11/3, Econoday reported, “Factory orders in August fell 0.8 percent, following a 1.4 percent rise in July. August's data were pulled lower by durable goods. New orders for non-durables were up, reflecting higher prices for oil & coal. Looking ahead, the advance report on durables orders suggests a rebound in overall factory orders. Durable goods orders in rebounded 1.0 percent in September, after a 2.6 percent drop in August and a 4.8 percent surge in July. Also, higher oil prices will likely boost the non-durables component of factory orders in September.”
US Non-Manufacturing Index for Oct. Prior to the data release at 10:00am ET on 11/4, Econoday reported, “The composite index from the ISM non-manufacturing survey finally pushed beyond the breakeven mark of 50, rising to 50.9 in September for a solid 2-1/2 point gain. And we may see further improvement in October as the new orders index rose more than 4 points to 54.2. Also, the backlogs index spiked 10-1/2 points to 51.5 to underscore the strength.”
US Jobless Claims for the week ending 10/31. Prior to the data release at 8:30am ET on 11/5, Econoday reported, “Initial jobless claims edged down in the October 24 week by 1,000 to 530,000. The four-week average was 526,250, showing improvement from late September, down about 20,000. Continuing claims for the October 17 week fell a sharp 148,000 to 5.797 million. But the improvement reflects an uncertain mix of hiring together with the expiration of benefits with the latter the more likely reason.”
US Productivity and Costs Report for #Q2009. Prior to the data release at 8:30am ET on 11/5, Econoday reported, “Non-farm productivity in the final reading for the second quarter was revised up slightly to an annualized 6.6 percent boost from the initial estimate of a 6.4 percent gain. Unit labor costs were revised to an annualized drop of 5.9 percent, compared to the original estimate of a 5.8 percent fall. Looking ahead, we are likely to see a notably positive gain for third quarter productivity as the output component will be somewhat tracking the third quarter GDP boost of 3.5 percent and labor inputs are likely continued to have been cut.”
US Employment Situation for October. Ahead of the data release 11/6 at 8:30am ET, Econoday reported, “Non-farm payroll employment in September fell 263,000, following a decline of 201,000 in August and a decrease of 304,000 in July. Job losses were widespread in both goods-producing and service-providing sectors. Wage inflation eased sharply as average hourly earnings in September grew 0.1 percent, following a 0.4 percent gain in August. Turning to the household survey, the civilian unemployment rate continued its uptrend, rising to 9.8 percent from 9.7 percent in August. Looking ahead, relatively unchanged initial unemployment claims in recent weeks suggest little progress in cutting payroll job losses for October and the unemployment rate is likely to drift higher.”
US Consumer Credit for Sept. Prior to the data release, Econoday reported, “Consumer credit outstanding has been showing signs of ill health as consumer credit outstanding contracted a steep $12.0 billion in August after a giant $19.0 billion drop in July. Revolving credit outstanding fell $9.9 billion, following a $2.4 billion decline in July. Non-revolving credit got support from cash-for-clunker sales, helping to limit the decrease in August to only $2.1 billion—much less severe than July's $16.6 billion contraction. Looking ahead, September is likely to be a large negative as non-revolving credit will take a hit from the expiration of cash-for-clunkers in August.”
Quantitative easing by the Fed is not going into loans to the People. It has gone to trading departments in the banks. This is a serious problem, leading to a collapse in the consumer segment of the equity market. Friends of the banks will now become acquiitors.
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, but for the most part, Econoday does an exceptionally fine job.
Here is a plug for Cynthia Parker at Econoday:
International Equity Markets Review
A week ago I stated in this space, “The international stock exchange indexes also reflect some nervousness.”
This week, every exchange index of the 21 reported by Yahoo Finance were down. The average was close to the S&P 500 decline of -4.0%. That means the total value of all stocks in the world this past week was down about -4%. To put some perspective on that, consider that the world equity market had a total capitalization of at least $35 trillion and a -4% loss would be almost -$1.5 trillion. The loss was therefore equal to about $300 billion every day this week.
My neighbor was willing to bet me $100,000 that it was going straight up. Hmm. I don’t think people realize the extent of the losses this week, and I think the losses have just begun.
Look at it another way: Black Monday Oct 19, 1987 started with the S&P 500 at 282.70 and closed the week at 248.22. In percentage terms, that’s a loss of -12.2%, just three times bigger than the loss this week. But, the S&P has just fallen from Monday’s open at 1080.36 to the close at 1036.19, which is a loss of -4.1%. But the S&P is now 4 times bigger. Translate the size of the S&P in Oct 1987 to Oct 2009 versus the global market, and it’s smaller. In other words, the world equity market has grown faster. So, the losses in the equity market this week, in absolute dollars, was greater than the one following Black Monday.
Moreover, when you look at the inter-listed market prices, and the enhanced global business being done today versus 1987, you can no longer say somewhere in the world there is a Bull market. Prices can get smashed anywhere, quickly.
In any case, I gave the heads-up a week ago in this space:
The mood (in til then bullish India) shifted to negative after the closing of the markets ahead of the Bombay time zone. It’s likely they open weak overnight. If so, the indication of follow-through, or not, will come from the FTSE 100 later in the morning… A few key stocks to watch in domestic markets will be local tickers for BHP, RTP, CEO, PTR, UBS, DB, HBC, and BCS… Also, will the strong USD on Friday continue through to start the coming week? As I wrote here a week ago, if and when the $USD starts to lift, the pressure on these equity prices will reverse regardless of what the pundits say.
I don’t have all the prices of the stocks of these mega cap companies in their home markets, but here is their performance on the NYSE this week: BHP (-10.13%), RTP (-8.80%), CEO (-8.53%), PTR (-9.25%), UBS (-8.29%), DB (-9.56%), HBC (-3.18%), and BCS (-10.61%). That’s an average loss of -8.54%. And you know the $USD soared +1.17%.
I did conclude a week ago that: “The only supporting factor could be a real turn in the global economy, based on consumer and industrial demand. At some point following the global recession, there will be boom times, but nobody knows for sure when that will be.”
Without credit, it may not happen for quite a while. First that may take a change in attitude by the free spenders of the world to start saving, and, in order to entice them to do that, interest rates are going to have to rise. Classic chicken and egg.
We can be deceived by political leaders and central bankers, but at the end of the day, the markets speak. None of the authorities will even dare to explain why the US Treasury Bill yield has fallen this week to 0.01%. Unless you are doing business in the billions of dollars, the administrative costs are greater than the pay-out. For almost all denominations being traded in T-Bills, there is a loss to the capital owner; but you know why? They refuse to put the money in the bank because they don’t know which banks are going to fail as soon as interest rates start to rise as they must when the economy starts to expand and business needs capital to build production. So, the market is telling you that the banks are toast – or many of them are anyway – and the same banks are raising their ratings on each other and pretending to have made money in the past quarter. The only money they have made is by scamming you and me in the capital market. Despite all the money available to the banks from the lowest central bank rates in history, they are not lending it according to the Econoday charts of industrial and consumer loans. They have embarked on a policy of speculation in the equity, commodity and currency markets, and they have been using those high equity and commodity prices and falling $USD to support their argument that (i) the economy is stable, and growing, and (ii) the markets are healthy.
The economy is not stable and growing and the equity market is not healthy. The US T-Bill shows you all you need to know on that score. The fact that no banker wants to discuss this is not surprising. As interest rates rise, the banks will start falling like dominos. Rates are where they are because they have to be.
The reason my clients sleep at night is because my team doesn’t. We are the ones who have to deal with reality. Of course our accounts were not down like the NASDAQ -3.6% this month or -5.1% this month, or the S&P down -2.0% this week or -4.0% this month. We were not down -3.8% like the FTSE this week, or -5.3% like the French CAC or -5.7% like the German DAX. If I was a client, I couldn’t sleep taking hits like that in a single week. And I certainly would not be closing my eyes to the many things I have been writing about in this blog.
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 additions to the country-based ETF tables as I intend to focus more on ETF’s in 2009-2010. Now that the Drupal platform is well in place, we can expand these tables, and 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
International equity market ETFs Review
There was a big hit to the international ETFs this week. Of course, these ETFs are traded in NY and denominated in USD, and you know the $USD gained +1.17% W/W, so that explains part of the decline.
However, all 11 country ETFs I track were down on Friday, most between -3.0 and -5.0%. For the week, they were down mostly between -7.0% and -10.0%, with Russia (RSX -10.5%) down the most. So, pay attention here.
Japan (EWJ -1.44% W/W) was the best one this week. The second best, UK (EWU) dropped -3.61% and the 3rd best, Hong Kong (EWH -4.14%) was relatively well off too. The 4th best performer was China (GXC -6.34% W/W).
Just like the traders at HB&B played the equity market like a fiddle higher as they pulled the $USD lower, it works the other way too. And with the average daily turnover in global foreign exchange markets estimated at $4.0 trillion according to the Bank for International Settlements, it should not be shocking that international equity prices rise and fall quickly. The stock exchanges of the world are now a casino.
Do you recall a couple years ago when the NYSE and NASDAQ were on the prowl to buy up (i.e., control) the major equity markets of the world. I was saying that would be a very bad thing. It’s already a casino. The world needs different owners and different regulators of this casino. Either that or bring back Glass-Steagall.
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:
Here are the links to interactive charts from Billcara2.com for the key country ETFs, which you can add technical indicators for as well.
Group 1:
(list one)
(list two)
Group 2:
(list one)
(list two)
US Equity Markets Review
The S&P 500 dropped -4.0% W/W, and the prior Friday’s loss was -1.22%. NASDAQ dropped -5.1% this week and -0.5% the previous Friday.
And remember that Thursday this week was up well over +2%. So, it’s been a wild six days in the market. Volatility has soared. Prices have been collapsing.
A week ago I gave a heads-up in this section too:
Light volume is still a factor, and most of the trading is being done by black-box computer algorithms… A week ago, I noted that the stocks of five very strong companies in the Dow 30 were hammered on the Friday: IBM -4.95%; BAC -4.64%; GE -4.23%; INTC -2.37% and JPM -2.33%... This week the results for these stocks were IBM -1.05%; BAC -6.03%; GE -5.47%; INTC -1.98% and JPM -1.80%... So, over six trading sessions, are you too starting to get nervous?
This week’s scorecard reads: IBM +0.21%; BAC -10.11%; GE -6.18%; INTC -3.39% and JPM -7.65%.
Here are the charts:
http://billcara2.com/tkchart/tkchart.asp?stkname=IBM,BAC,GE,INTC,JPM&ind...
NASDAQ Composite ino.com chart
NASDAQ Composite stockcharts.com chart
Here is the list of the ten highest-weighted non-financial stocks in the NASDAQ Composite. Put them in a watchlist (see Google Finance Portfolio) and watch them like a hawk:
AAPL MSFT GOOG QCOM RIMM CSCO INTC ORCL GILD EBAY
Daily RSI-7 for the Nasdaq 100 Big-10
Weekly RSI-7 for the Nasdaq 100 Big-10
Monthly RSI-7 for the Nasdaq 100 Big-10
Add two of AMZN, DELL, JAVA or YHOO to get a Cara Dozen.
Or while you are at BillCara2.com, input up to 30 tickers in the window above “Summaries” – say AAPL MSFT GOOG QCOM RIMM CSCO INTC ORCL GILD EBAY AMZN DELL JAVA YHOO plus up to 16 more – and click on Tech Chart, Basic View, Daily Watch, Performance or Fundamentals and you’ll get a lot of information to compare one against the others.
Here is the Monthly data chart of the Interactive Chart of Nasdaq Composite, S&P 500, Dow30, and Russell 2000 (small cap) indexes.
Here is the Weekly data chart of the Interactive Chart of Nasdaq Composite, S&P 500, Dow30, and Russell 2000 (small cap) indexes.
Here is the Daily data chart of the Interactive Chart of Nasdaq Composite, S&P 500, Dow30, and Russell 2000 (small cap) indexes.
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. Instead, live life, use common sense, do only what you understand, feel comfortable, and you'll be surprised at how quickly you can take control and free yourself of the shackles of HB&B.
Value Line Report(s) this past Friday
This week, Value Line reported on two DJIA components: Coca Cola (KO) and Kraft Foods (KFT), two large consumer goods manufacturers, one of which I like.
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 Oct 30: next one is due Jan 29)
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 Oct 30: next one is due Jan 29)
For study purposes, Here is what I wrote in the WIR #5 (Feb 1, 2009), notable only for my restraint:
With regard to this week’s Value Line review of the Dow 30 stocks KO ($42.72) and KFT ($28.24), I put the following charts on my screen, as follows:
http://billcara2.com/tkchart/tkchart.asp?stkname=KO,KFT&ind=rsi&wt=3
http://billcara2.com/tkchart/tkchart.asp?stkname=KO,KFT&ind=rsi&wt=1
http://billcara2.com/tkchart/tkchart.asp?stkname=KO,KFT&ind=rsi&wt=0These charts show me a long-term cycle bottom pattern, which will likely result in good share price performance over the next two to three years. However, I don’t follow these stocks (closely), and I don’t trade them.
The Value Line reports seem to be well done for both companies.
These two consumer staples companies are both fundamentally sound and well regarded by long-term oriented defensive traders. There is a relatively high dividend yield in each case that appears safe, so the Total Return (TR), including capital growth and dividend yield, ought to be satisfactory for 2009 and 2010.
To increase my income, if these stocks were of interest, I would buy the stock and write puts on extreme down days.
Beyond that, there is really not much I can add.
With KO at $42.47 and KFT at $23.49,
Here is what I wrote in the WIR #18 (May 3, 2009), where you can see I didn’t believe much of what the Value Line analyst wrote about Kraft (was he on the payroll?), but was, on the other hand, starting to like Coca-Cola. I mentioned that I believed the market was beginning to look opportunistic for put writes in May-June, and these would have been big winners, but overall I was too pessimistic at that point, given the market run-up in prices.
I also neglected to mention that Coca-Cola is a Cara 100 company, just stating that I don’t trade it. If we had a stable market environment, however, I’d want to trade KO.
The Value analyst for Kraft (KFT $23.49) seems to like the stock as “a descent defensive play in the current market environment”. Maybe he just likes Oscar Mayer because he’s full of baloney. The “market environment” has been pretty good for the past eight years since this company floated an IPO at $31. His report was priced at $22.75. That’s a loss of -27% over eight years. I suppose he likes the accumulated dividend of $7.67 since June 2001. That results in value of $30.42 for a cost many years ago of $31.
He doesn’t point to the obvious, but instead concludes with a warning that their very established brands carry “a private label threat”, so he’s “reluctant to recommend these shares for the long haul”.
Whoa fella, do you actually get paid for this analysis? I think maybe you ought to be taking at least the weekend off to visit the stables at Churchill Downs (Kentucky Derby). At least your manure fits right in.
Also, you might want to comment that the pension fund is under-funded to the tune of $2.34 billion, which some people might want to look at. For a company one-third the capitalization of Coca-Cola, its under-funded pension liability is $1 billion bigger, and Coca-Cola is the financially stronger company.
The Value Line analyst for Coca-Cola (KO $42.47) sums up the situation as “challenging operating environment proving a bit difficult”. He says the stock carries top marks for both Safety (1) and Financial Strength (A++) but I think he means the company is considered financially strong, and hence the stock is not speculative quality.
In any case, he is not enthusiastic, and just this week lowered the Technical rating from 2 (good) to 3 (average). I suppose the corporate results speak for themselves.
If the company pays a dividend in 2009 of $1.64 and you have to pay $42.47 to receive it, you would have a dividend yield of 3.86%, which is what you might earn as an interest yield on a 20-year US Treasury bond. But Coca-Cola is financial strong, and the KO dividend is safe and will grow almost every year, and the share price will grow more years than not, so if it’s return you want, I’d stick with KO over DC.
As stock price plays a bigger role in determining Total Return (TR), particularly in the short- and intermediate-term, I’d look at RSI, Stochastics and MACD for the M-W-D data charts before I would decide. Quickly you can see that 39 is a pretty solid floor for KO going back into the 1990s. Moreover the Daily data charts show the technical indicators pointing lower, the Monthly indicators showing a bit more bottom work to be done, and the Weekly indicators still looking a bit negative, but the downside is not likely to be excessive.
With all that in mind, and knowing the market has had a seven week run to the upside, I would not enter this stock in the Kentucky Derby. I might want to pick it up in a low-level claiming race in a month or two, with the knowledge I’d then have a stalwart in the barn that I could run long and hard for solid gains in 2010 and 2011, albeit not super-sized ones.
If I was pushed into trading KO, I might buy the stock and write some covered calls or write some call spreads on their own.
Then again I don’t get “pushed” into taking positions in anything.
For WIR #31, and July 31 prices of KO at $49.84, and KFT at $27.58, I wrote:
Regarding Kraft (KFT), the Value Line analyst posits an opinion (somehow I get the sense he is hoping) “that commodity cost pressures will soon begin to ease, and that the company will garner more benefits from strategic price hikes, the elimination of unprofitable product lines, and synergies related to its large biscuits acquisition (Kraft bought Groupe Danone’s cookie and cereal operations in late 2007). Additionally, we look for market-share trends to gradually become more favorable, as the U.S. economy turns the corner, promotional spending picks up, and the company focuses more on product innovation.” He concludes that KFT at $27.58 “will probably provide investors with good risk-adjusted returns out to 2012-2014.” Hmmm. VL recently dropped the rating for Timeliness (fundamentals) and Technical from 2 and 3 to 3 and 4 respectively. That’s from Good and Average to Average and Poor. Longer term, I cannot disagree with the rating downgrade, but near-term it looks to me that the shares are over-bought and may pull back. But I really have no confidence in any opinion I might have. The VL analyst wrote the report at $27.58 and the stock closed at $28.54. I doubt we’ll see annual Total Returns (TR) of 13% to 18% with KFT. I suppose if the stock dropped -20% from here, you might buy the stock and over-write puts to try to make a +15% annual total return over the next 3 or 4 years. There is a pension deficit of some -$2.34 billion, which doesn’t impress me. Maybe if my possible TR was over 30%, I’d overlook the pension liability. In any case, Kraft used to be part of a carcinogen manufacturer, which didn’t interest me in the least then, and now on its own, I’m looking at processed meats and cheese, creamed cheese, and cookies, which isn’t part of my lifestyle either. I’m hoping for a long life. I do admit, however, that I have Maxwell House coffee in the cupboard, for the occasional sip. But, if Kraft were to depend on my buying or investing interest, they’d soon be out of business.
Regarding Coca-Cola (KO), I must admit, I am partial to Diet Coke, Atlanta and the color red. I also like the fact that Value Line lifted the Timeliness and Technical ratings from 3 and 4 to 2 and 3 in the past nine months. Maybe that had something to do with my inserting Coca-Cola into the Cara 100. Maybe it’s the consistent growth in per share revenue, cash flow, earnings and dividends that made me focus on this company. Maybe the fact that the CEO of arch-rival Pepsi is in the White Plains white shoes and Fed of New York directors’ crowd that turned me back to the south, Atlanta, for which I have a soft spot in my heart. Maybe it’s the 30% operating margins and the 30% return on equity that I like – or the A++ financial strength. This is what I look for in a high quality company, and Coca-Cola is all of that. Sure, there are issues; but what company is free and clear of those in an international recession like the one that Coke must operate. Consumers really don’t need to drink the stuff, you know. In the last recession, 2001, revenues slid, and they have here as well, but this is all manageable, in my view. I like the company even though I don’t trade the stock. As to the stock, KO has come a long way (+33.1%) since it hit a low of $37.44 on March 5. It’s now $49.84, and was recently (July 20) at a high of $51.03. The RSI-7 for Monthly-Weekly-and Daily price series are in the mid-50s. The stock could go higher, especially if the $USD were to sink further because business outside North America accounted for 75% of 2008 net sales, so there are currency gains as the Dollar sinks.
The bottom line is that if you are going to trade these or any stocks profitably you need to do your homework, more analysis than sometimes I do here with stocks and companies I comment on.
A friend of mine who I refer to often in these pages said to me one day that if he ran a fund he’d trade just one stock, which he named. I thought about that afterwards and concluded the risks would be considerably lower than even I have been taking. It was a stable DJIA component issue that can be fairly easily analyzed based on cross analysis with commodity prices and the $USD, and with regard to peer groups that manufacture and sell the same product elsewhere in the world and trade on a few different exchanges. The company/stock was Alcoa (AA). My Dad used to do something of the same idea with Stelco and Ford stock.
Today for WIR #44, with the price of KO at $53.31 and KFT at $27.52, I size up the situation as follows:
The Monthly-Weekly-Daily RSI-7 for KO is 63.5 (falling) / 59.5 (sideways) / 37.9 (falling). It is not oversold, but could still fall with the market. Not yet time to buy.
The Monthly-Weekly-Daily RSI-7 for KFT is 51.6 (rising) / 59.1 (rising) / 70.1 (has peaked). It’s oversold short-term, may come down a bit, but as a relative strength play may be one to hold in a falling market if you like the company and want to keep it in your portfolio.
As you can see from my notes in prior months I am not a fan of Kraft. When in the supermarket, I look at the dietary values of some of their processed foods, and blink. OMG; I am not eating that stuff, I say to myself. But, that’s their business, and they do a good job of marketing it.
As a trader, I believe the only reason they are in the Dow 30 is the same reason Travellers Group made it. The honchos at Philip Morris/Altria (MO) and Citigroup (C) must have paid the Dow Jones Company an awful lot of money to incorporate companies their former ex-Dow 30 parents hived off.
The Dow 30 Company links in chronological order of the upcoming reports.
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)
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 Aug 14: next one is due Nov. 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 Aug 14: next one is due Nov. 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 Aug 22: next one is due Nov. 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 Aug 22: next one is due Nov. 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 Aug 22: next one is due Nov. 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 Aug 22: next one is due Nov. 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 Aug 29: next one is due Nov 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 Sept. 4: next one is due Dec. 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 Sept. 11: next one is due Dec. 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 Sept. 11: next one is due Dec. 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 Sept. 18: next one is due Dec. 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 Sept. 25: next one is due Dec. 24)
Verizon [GICS 50, Dow 30]
(VZ: Google Finance file)
(VZ: Yahoo Finance file)
(VZ: StockChart chart)
(VZ: Billcara2 chart)
(VZ: ADVFN Financial Data)
(VZ: Value Line Report Sept. 25: next one is due Dec. 24)
Procter & Gamble Co. [GICS 30, Dow 30, Cara 100]
(PG: Google Finance file)
(PG: Yahoo Finance file)
(PG: StockChart chart)
(PG: Billcara2 chart)
(PG: ADVFN Financial Data)
(PG: Value Line Report Oct. 2: next one is due Dec. 31)
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 Oct. 2: next one is due Dec. 31)
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 Oct. 9: next one is due Jan. 8)
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 Oct. 9: next one is due Jan. 8)
IBM [GICS 45, Dow 30, Cara 100]
(IBM: Google Finance file)
(IBM: Yahoo Finance file)
(IBM: StockChart chart)
(IBM: Billcara2 chart)
(IBM: ADVFN Financial Data)
(IBM: Value Line Report Oct. 9: next one is due Jan. 8)
Intel [GICS 45, Dow 30, Cara 100]
(INTC: Google Finance file)
(INTC: Yahoo Finance file)
(INTC: StockChart chart)
(INTC: Billcara2 chart)
(INTC: ADVFN Financial Data)
(INTC: Value Line Report Oct. 9: next one is due Jan. 8)
Alcoa [GICS 15, Dow 30]
(AA: Google Finance file)
(AA: Yahoo Finance file)
(AA: StockChart chart)
(AA: Billcara2 chart)
(AA: ADVFN Financial Data)
(AA: Value Line Report Oct. 16: next one is due Jan. 15)
Dupont [GICS 15, Dow 30]
(DD: Google Finance file)
(DD: Yahoo Finance file)
(DD: StockChart chart)
(DD: Billcara2 chart)
(DD: ADVFN Financial Data)
(DD: Value Line Report Oct. 16: next one is due Jan. 15)
Merck [GICS 35, Dow 30]
(MRK: Google Finance file)
(MRK: Yahoo Finance file)
(MRK: StockChart chart)
(MRK: Billcara2 chart)
(MRK: ADVFN Financial Data)
(MRK: Value Line Report Oct. 16: next one is due Jan. 15)
Pfizer [GICS 35, Dow 30]
(PFE: Google Finance file)
(PFE: Yahoo Finance file)
(PFE: StockChart chart)
(PFE: Billcara2 chart)
(PFE: ADVFN Financial Data)
(PFE: Value Line Report Oct. 16: next one is due Jan. 15)
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 Oct. 23: next one is due Jan. 22)
Caterpillar [GICS 20, Dow 30]
(CAT: Google Finance file)
(CAT: Yahoo Finance file)
(CAT: StockChart chart)
(CAT: Billcara2 chart)
(CAT: ADVFN Financial Data)
(CAT: Value Line Report Oct. 23: next one is due Jan. 22)
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 Oct 30: next one is due Jan 29)
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 Oct 30: next one is due Jan 29)
Sector ETF Summary for the US equity market
Here’s the SPY Monthly, Weekly and Daily data charts:
SPY Monthly data:
SPY Weekly data:
SPY Daily data:
The tables I show are for eleven GICS Sector Index Funds (ETF’s), including two for Technology (XLK and SMH), for a total of ten GICS sectors. They cover the full spectrum of the US equity market.
Table 1: Cara ETF List is sorted by price performance Week over Week (W/W), i.e. 1W%N.
Sorted by 1-Week Price Performance Symbol Close 1Day
Change1Day
%Change1W
%Change2W
%Change4W
%ChangeYTD
%Change3M
%Change6M
%Change12M
%ChangeYou can do this table yourself by entering the following string into the Summary window at Billcara2.com and then clicking on the link for Performance.
SPY XLE XLB XLI XLY XLP IYH XLF XLK SMH IYZ XLU .
You can also add more ETFs - up to 30 in total. For a list of components to many ETFs, go to the AMEX.com and NYSE.com web sites, and click on ETFs.
You can use this tool to set up watchlist charts by industry group and sub-groups.
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.
In the US equity market review, I gave a list of five components of the DJIA index that I said were important and have been in large scale distribution. I showed you the chart. Take a look at the same chart, but with 9-period Stochastics (%K and %D) added to the RSI-7 chart. The arithmetic is similar, but the STO is more sensitive.
http://billcara2.com/tkchart/tkchart.asp?stkname=IBM,BAC,GE,INTC,JPM&ind...
This week nine of the ten sector ETF’s fell. Tech (XLK +0.99%) was up. On Friday, they were all down.
Sector 10 (energy: XLE, IYE, VDE, OIH, PBW and IXC)
Here’s the XLE Monthly, Weekly and Daily data charts:
XLE Monthly data:
XLE Weekly data:
XLE Daily data:
Sorted by 1-Week Price Performance Symbol Close 1Day
Change1Day
%Change1W
%Change2W
%Change4W
%ChangeYTD
%Change3M
%Change6M
%Change12M
%ChangeThe Crude Oil price dropped -$3.50/bbl -4.35% to close at 77.00.
A week ago I stated here: “Two weeks ago, $WTIC was 72.25 and NOBODY was talking up $100 oil. Now, many people are. Is it any wonder why I am so skeptical of media? Rather than softballs, just once I’d like them to ask a talking head when did these people change their opinion (and prove it) and on what basis was that opinion changed and what would it take to change it back. And btw stop asking people with a vested interest in higher oil prices. What do you expect them to say? That’s just loading up the bandwagon… $80 oil has no economic justification. It is based on excess cash chasing too few contracts, when trading volume is low. This is hot money.”
So was it Goldman Sachs this week that raised their outlook for Oil to $85? Do you they have a motive? Like staying in business should Oil drop to 50 and equities crash and interest rates soar? Do not trust these people.
The XLE dropped -5.23% W/W to close at 55.25. A week ago here I said, “traders have been taking profits”.
I also pointed out that “The two main Chinese oil stocks were strong this week, but nothing much else was. China National Offshore (CEO +5.9) and PetroChina (PTR +2.9%) were strong, and CEO has now had a gain over two weeks of +11.8%.” Aha, pump and dump. That’s how Goldman Sachs does it. This week CEO and PTR dropped -8.53% and -9.25% respectively. The two-week losses are –3.18% and -6.65%. Did you get hooked by that 85 dollar oil puffery?
A week ago, Canada’s Suncor (SU -5.1%) took a big hit. This week SU was smashed -9.7%..
A week ago, I wrote: “The charts were looking toppy and are now in clear distribution mode. Even $80 oil is not helping.”
$77 oil is not going to help either. But wait until oil drops below 70? SU did you fall and can’t get up?
Don’t worry; the price will be taken low enough for Goldman Sachs to swing some really big foreign money into it. We’ll be there too.
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:
Sorted by 1-Week Price Performance Symbol Close 1Day
Change1Day
%Change1W
%Change2W
%Change4W
%ChangeYTD
%Change3M
%Change6M
%Change12M
%ChangeA week ago, I wrote, “This week, the Basic Materials sector (XLB -1.53% W/W to 31.55) was lower, and the result happened because of Friday’s sell-off (1.99%). In fact, XLB dropped -1.39% on the previous Friday as the $USD lifted that day too.”
That was a prelude. This week was uglier. XLB dropped -7.0% to 29.34. The best one on my monitor was Brazil’s VALE at a loss of -5.42%. The losers were the usual Goldman Sachs play list: Brazil’s Votorantim (VCP -16.9%), Canada’s Teck Corp (TCK -12.9%) and Argentina’s Tenaris (TS -11.5%)
Argentina’s steel tube maker for the oil industry, Tenaris was up +4.3% a week earlier.
Hard to know whether the toilet seat is going up or down.
Sector 20 (industrial: IYJ, XLI, VIS, and IYT)
Here’s the XLI Monthly, Weekly and Daily data charts:
XLI Monthly data:
XLI Weekly data:
XLI Daily data:
Table 4: Senior capital goods makers and transportation:
Sorted by 1-Week Price Performance Symbol Close 1Day
Change1Day
%Change1W
%Change2W
%Change4W
%ChangeYTD
%Change3M
%Change6M
%Change12M
%ChangeIndustrials (XLI -5.21% to 25.29) was sold down Friday by -3.40%.
There were no winners here this week, nevertheless a big one. UPS (UPS -3.6%) was best off. Boeing dropped -4.2% to $47.80. It was $47.22 when we released our report. We wrote some puts (bullish), which made some money.
The losers were Brazil’s Embraer (ERJ -13.8%) and Switzerland’s ABB (ABB -13.3%).
Sector 25 (consumer discretionary: XLY, IYC and VCR)
Here’s the XLY Monthly, Weekly and Daily data charts:
XLY Monthly data:
XLY Weekly data:
XLY Daily data:
Table 5: Senior consumer discretionary equities
Sorted by 1-Week Price Performance Symbol Close 1Day
Change1Day
%Change1W
%Change2W
%Change4W
%ChangeYTD
%Change3M
%Change6M
%Change12M
%ChangeConsumer Discretionary (XLY -5.06% to 26.82) dropped from second best performing sector to 6th best. I indicated a week ago, I didn’t see it staying in 2nd for long. Who has money to buy stuff?
They certainly don’t have money to buy boats or go on cruises. The big losers of the week were Brunswick Corp (BC -15.7% and Carnival Cruise Line (CCL -9.1%).
Whirlpool went through the spin cycle, closing up +6.1%.
A week ago I wrote in this space,
The leader here was, again, Brunswick Corp (BC +6.6% W/W and +23.1% over two weeks). I don’t see the boat industry returning quick enough to justify a gain of +185.7% over 3 months or +211.5% over 6 months. This is little more than speculative money as well as inside players like Goldman Sachs squeezing the shorts who simply are in a state of disbelief between the share gains and the real state of affairs at Brunswick Corp… When a trader cannot estimate the extent of short-term liabilities or the intent of bankers and creditors of a company like Brunswick, no matter how impressive is a company, and I believe Brunswick is, you have to stand aside. And when you miss gains like +200% and more over just 6 months, you must only grin and bear it, putting it down to unstable and perhaps illegally traded markets… Fourteen weeks ago, the close was $3.72. I wrote in this space a week ago, “I wrote about it so much, I am shocked I didn’t ride it all the way up. I guess with T-Bills yielding 0.04% at the close this week; (however), I figured the credit market issues are not yet over… Let’s see what happens after the banks start reporting earnings on Wednesday, starting with JP Morgan (JPM). There may be some issues between bankers and independent analysts or with the professional analysts at Humungous Bank & Broker (HB&B) if those people are actually allowed by their employer to speak up and out the truth… If the bank ETF XLF sinks, then XLY will be close behind. Watch for rising yields and lower bond prices, and a higher $USD, for XLF/XLY to hit the skids.”
This week we saw rising bond yields in the 5, 10 and 30 year Treasuries, plus a strong Dollar on Friday, and the big loser for the week was Brunswick Corp (BC -12.0%). Another of our favorites, the thinly traded high beta Tata Motors (TTM -6.3%) was also sold off.
Sector 30 (consumer staples: XLP, VDC, RTH and IYK)
Here's the XLP Monthly, Weekly and Daily data charts:
XLP Monthly data:
XLP Weekly data:
XLP Daily data:
Table 6: Senior consumer staples equities
Sorted by 1-Week Price Performance Symbol Close 1Day
Change1Day
%Change1W
%Change2W
%Change4W
%ChangeYTD
%Change3M
%Change6M
%Change12M
%ChangeConsumer Staples (XLP -0.92% to 25.83) had a loss on Friday of -1.56%.
The biggest winner on my Staples monitor W/W was Diageo (DEO +3.1%), while the losers were PDA -7.4%, and it lost -4.3% a week ago, and Starbucks (SBUX -6.4%).
Diageo (DEO) can still sell Guinness of course, but Walgreen (WAG -3.1%) was having problems at the dispensary. Shucks, if you have been following, I think I caught that one, even though for a few days the outcome was uncertain, as last week’s commentary suggested.
Three weeks ago I suggested: “A good trade in this sector might be to buy Diageo (DEO) and sell Walgreen (WAG), two great companies, but WAG is flying on hopes of a healthcare reform package that brings consumers to its stores, which might not happen for a while depending on Congressional voting, and DEO’s Guinness and strong booze line-up is always a staple.” I followed up two weeks ago by stating, “That worked out Friday, but was a bad trade Monday through Thursday. On the Weekly, the RSI-7 is now 87.0 for WAG and 53.6% for DEO. The WAG is now priced at resistance points going back into 2007.” One week ago I added, “WAG was up +2.33% and DEO +1.62%, so in the near term this trade did not work. With the Senate committee approval of a Healthcare reform bill, WAG is still a winner. The Daily RSI-7 is in the Distribution Zone and still rising… All the more reason not to put on a trade just because it looks good. Big money is on the line, and these people have their people closely tuned to what’s going on in Washington, and in this case, the money into WAG preceded the Senate affirmation… The important point though is that pro traders plan out scenarios and watch market bids and offers for confirmation. If they see that happening, they’ll put on the trade.”
(But) The TV video of problems with supply of the H1N1 vaccine is virtually non-stop at this point. Walgreen is taking full advantage, or at least the traders are. But this week WAG dropped -3.3% and DEO lifted +0.6%. So WAG lifted +$1.00 or +2.6% while DEO has come through with a gain of $2.29% or +3.8%. WAG may fill the gap from 34-37 on the way down, so although the RSI-7 on the daily is now in balance, I’d still hang in with that trade (which I did not personally do btw – it was for illustrative purposes).
On Oct 9, WAG was 39.45, with a very high RSI-7 and everybody hyping H1N1 shots; it’s now 37.83, for a loss of -1.62. DEO was 61.69 on Oct 9, with a very low RSI-7; it’s now 65.02, for a gain of +4.67. In early October the decision was an easy one for me: do I want to take a shot in the arm or in a highball glass? No contest.
Just illustrating the power of the RSI-7 tool, and trying to make sense of the hype in the marketplace.
Sector 35 (healthcare: IYH, XLV, VHT, IXJ, and IBB)
Here’s the IYH Monthly, Weekly and Daily data charts:
IYH Monthly data:
IYH Weekly data:
IYH Daily data:
Table 7: Senior healthcare equities
Sorted by 1-Week Price Performance Symbol Close 1Day
Change1Day
%Change1W
%Change2W
%Change4W
%ChangeYTD
%Change3M
%Change6M
%Change12M
%ChangeThe Healthcare sector (IYH -2.58% to 57.38) was the second best sector performer this week after being worst a week ago.
Other than Myriad Genetics (MYGN -6.9%) taking another big hit this week, there was little I found noteworthy.
There is a lot of politics going down in Washington over this sector, which apparently has the biggest lobby group there.
Sector 40 (financial: IYG, IYF, XLF, VFH, IXG, VNQ, RWR, IYR, and ICF)
Here’s the XLF Monthly, Weekly and Daily data charts:
XLF Monthly data:
XLF Weekly data:
XLF Daily data:
Table 8: Senior financial company equities
Sorted by 1-Week Price Performance Symbol Close 1Day
Change1Day
%Change1W
%Change2W
%Change4W
%ChangeYTD
%Change3M
%Change6M
%Change12M
%ChangeFinancials (XLF -6.95% to 14.05) was second worst sector performer.
Hong Kong Bank (HBC -3.2%) was one that got off lightly this week.
Among the big losers: Bank of America (BAC -10.1%), and it dropped -6.0% a week ago and -4.64% on the Friday before that after reporting earnings. That’s a tough 11 trading days, but analysts cannot ignore the loan losses.
The biggest loser was India’s ICICI Bank (IBN -18.7%), and it was down a week ago -4.6% also.
Deutsche Bank (DB -9.6%), Citi (C -8.3%), and UBS (UBS -8.3%) were also down big. DB dropped -3.3% and C dropped -2.8% the previous week plus -3.8% the previous Friday.
Lots of the same names popping up.
As stated a week ago, any bank that doesn’t have a strong prop trading division is losing big money in the lending end of the business and not doing well overall.
The post reporting period could be pretty tough as regulators and the public focus on Wall Street bonuses that many people believe were not fairly earned.
Daily charts of electronic brokers and exchanges
Weekly charts of electronic brokers and exchanges
Sector 45 (technology: IGM, IGV, IGW, XLK, VGT, IYW, IGN, IXN, MTK and SMH)
Tech (XLK -3.38% to 20.61) was the only winning sector ETF a week ago, but a loser this week.
Qualcomm (QCOM +1.6%) made a small gain, but how about First Solar (FSLR -20.0%), SAP (SAP -12.5%) and Research in Motion (RIMM -10.7%).
Semi-conductors (SMH -4.24% to 24.19) had no notable winners, but Advanced Micro Devices (AMD -17.9%) and Teradyne (TER -14.2%) were massive losers.
http://billcara2.com/tkchart/tkchart.asp?stkname=AMD,TER&prt=0&ind=rsi
Here’s the SMH Monthly, Weekly and Daily data charts:
SMH Monthly data:
SMH Weekly data:
SMH Daily data:
Here’s the XLK Monthly, Weekly and Daily data charts:
XLK Monthly data:
XLK Weekly data:
XLK Daily data:
Table 9: Senior technology equities
Sorted by 1-Week Price Performance Symbol Close 1Day
Change1Day
%Change1W
%Change2W
%Change4W
%ChangeYTD
%Change3M
%Change6M
%Change12M
%Change
Sorted by 1-Week Price Performance Symbol Close 1Day
Change1Day
%Change1W
%Change2W
%Change4W
%ChangeYTD
%Change3M
%Change6M
%Change12M
%Change
Sector 50 (telecom: IYZ, VOX and IXP)
Telecom (IYZ -4.09% to 17.34) was fourth best sector performer. How is it that Verizon (VZ +2.6%) and AT&T (T -0.2%) were strong – VZ was best in the DJIA index this week – but the telecom sector was down -4.1%?
I have pointed out that the big guys like AT&T and Verizon are big losers when the bond market gets creamed. This week, bonds were up – TLT up +0.9% W/W and +1.5% on Friday -- which helped the big guys, and the little guys were lagging.
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 -3.53% to 28.39) had some notable losses this week in FPL and EXC, down -6.7% and -5.8% respectively. Be careful here as these stocks plummeted in the summer of 2008 right before Lehman Bros came unglued.
http://billcara2.com/tkchart/tkchart.asp?stkname=fpl+exc&cht=Tech+Chart&...
I don’t like the look of these Utilities charts.
http://billcara2.com/markets/mkview.asp?qte=ss&ty=tk&qt=AEP+D+DUK+ED+EXC...
Here is the list of North American Utilities that I follow:
AEP D DUK ED EXC FE FPL NGG PCG PEG SO TRP
For study purposes, there is a good mix of electric (AEP, D, DUK, FE, FPL and SO), gas (NGG, TRP) and diversified (ED, EXC, PCG, PEG) utilities.
Table 12: US Utilities
Sorted by 1-Week Price Performance. Symbol Close 1Day
Change1Day
%Change1W
%Change2W
%Change4W
%ChangeYTD
%Change3M
%Change6M
%Change12M
%Change
Bonds & Yields Review
Table 10: US Treasury Yields
US Treasury Bonds Maturity Yield Yesterday Last Week Last Month 3 Month 0.01 0.01 0.03 0.09 6 Month 0.14 0.14 0.15 0.16 2 Year 0.89 0.97 0.94 0.95 3 Year 1.39 1.49 1.56 1.42 5 Year 2.31 2.40 2.44 2.31 10 Year 3.38 3.49 3.49 3.30 30 Year 4.23 4.33 4.29 4.05
Municipal Bonds Maturity Yield Yesterday Last Week Last Month 2yr AA 1.04 0.97 1.02 0.96 2yr AAA 0.98 0.84 1.15 0.96 2yr A 1.42 1.45 1.33 1.20 5yr AAA 1.88 2.00 1.87 1.57 5yr AA 1.95 1.96 1.90 1.68 5yr A 2.18 2.24 2.18 1.86 10yr AAA 3.00 2.93 2.95 2.79 10yr AA 3.29 3.31 3.23 2.81 10yr A 3.73 3.70 3.82 3.27 20yr AAA 3.97 3.54 4.48 3.66 20yr AA 4.43 3.99 4.44 4.31 20yr A 5.05 4.89 4.79 4.49
Corporate Bonds Maturity Yield Yesterday Last Week Last Month 2yr AA 1.39 1.48 1.60 1.58 2yr A 1.97 2.07 2.11 2.19 5yr AAA 2.94 3.10 3.17 3.14 5yr AA 3.26 3.41 3.46 3.49 5yr A 3.70 3.92 3.86 3.83 10yr AAA 3.54 3.63 3.76 3.55 10yr AA 4.92 5.08 4.79 4.82 10yr A 4.68 4.78 4.90 4.70 20yr AAA 4.86 5.04 5.01 5.31 20yr AA 4.76 4.94 4.91 5.14 20yr A 5.80 5.98 5.95 6.26
This week, the US Treasury market had a gain on the week all because of a monster day on Friday, right before Halloween. The 20-year US bonds (TLT +0.87% W/W to 95.78) was up, but only because of the +1.45% gain on Friday on Friday.
The yields dropped on the 30-year (from 4.29 to 4.23), the 10-year (from 3.49 to 3.38), and the 5-year (from 2.44 to 2.31).
The T-bill yield dropped from 0.03% to 0.01%. I don’t think anybody has ever seen that before.
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
Sorted by 1-Week Price Performance. Symbol Close 1Day
Change1Day
%Change1W
%Change2W
%Change4W
%ChangeYTD
%Change3M
%Change6M
%Change12M
%Change
Fannie (FNM -3.57%) and Freddie (FRE -4.65%) were down but not crushed like the losses of more than -20% a week ago, but, as I say, who really cares other than a few speculators who figure it’s cheaper entertainment than flying to Vegas. These two were pumped up a couple months ago and are almost back to $1 again.
Unfortunately CIT Group the small company financier was expected to declare bankruptcy tonight. The govt walked away because we know who is going to pick up the lion share of that business – GE and JP Morgan. CIT plunged -24.2% on Friday alone, closing the week at $0.72.
http://billcara2.com/tkchart/tkchart.asp?stkname=fnm+fre+cit&cht=Tech+Ch...
Consumer Finance -USA -- Interactive Weekly Data Charts
Mortgage Finance -USA -- Interactive Daily Data Charts
Commodities Review
This week $CRB lost -3.55% to close at 270.38. There was a loss of -0.78% on the prior Friday as the US Dollar strengthened.
The 50d MA for $CRB is up from 254.03 to 255.79 to 256.46 to 257.45 to 258.07 to 259.73 to 261.44 over the past six weeks.
The 200-day MA has moved from 233.50 to 233.82 to 234.05 to 234.99 to 235.75 to 236.57 to 237.70 to 238.60 to 240.00 to 241.36 over nine weeks. It had been at the 233 level for quite a while, as I had pointed out two months ago as it broke free.
Rising MA’s for the $CRB is basically the only time that the monetary authorities get concerned.
Although I use the $CRB (Reuters/Jeffries Index), principally because it’s the oldest, there are many commodity indexes: http://www.crbtrader.com/crbindex/ • Astmax Commodity Index(AMCI) • Commin Commodity Index • Dow Jones-AIG Commodity Index • Goldman Sachs Commodity Index • Reuters/Jefferies CRB Index • Rogers International Commodity Index • Standard & Poor's Commodity Index • NCDEX Commodity Index • Deutsche Bank Liquid Commodity Index (DBLCI) • UBS Bloomberg Constant Maturity Commodity Index (CMCI)
Here is a link to an article that discusses the major ones that have been around for a while: http://www.rogersrawmaterials.com/overviewandanalysis.PDF
Here is a current price summary of the heaviest weighted commodities contracts: http://money.cnn.com/data/commodities/
These indexes change their component weightings perhaps annually or even monthly, for example: http://www.seekingalpha.com/article/43586-the-new-generation-of-diversif... http://tinyurl.com/a5myfj
Interactive Chart of Weekly CRB Commodities Index:
Interactive Chart of Daily CRB Commodities Index:
Oil Review
Crude Oil ($WTIC -$3.50/bbl -4.35% to close at 77.00) finally reversed. A week ago I wrote, “Crude Oil has rallied for four weeks, and now the pundits are talking up $100 oil… As I wrote a couple weeks ago, these contracts are speculative, and hot money will move in and out. So, right now it’s moving in, based on a rapidly falling $USD. But, I still think we’ll see a new trading range of say 60-70 will happen, down from 65-75.”
For $WTIC, the 50-day MA is now at 72.81, up from 72.08, 71.11, 70.20, 69.86, 69.14, 68.25, 68.16 and 70.62 the prior eight weeks. In 24 weeks, it has risen from 51.85.
The 200-d MA is at, up from 60.63, 59.75, 58.88, 57.22, 56.68, 56.06, 55.16, 54.86 and 57.96 the prior seven weeks.
As you know, I have been calling this a $USD speculative play, and there are a lot of $USD shorts out there, so the strength in the past six sessions has caught a few in a trap.
A week ago I added, “The comparative strength chart $WTIC:$USD shows a Distribution Zone in the RSI-7 at 72.9. It usually peaks at 75-90 but lasts in the DZ about a month or two only. So with this indicator, you can watch the peak oil price soon drop off… It’s just a matter of when the $USD starts to lift.” Bingo.
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
$GOLD lost -$9.50/oz W/W to $1,045.70, and had lost -$5.50/oz on the previous Friday as the $USD started lifting.
I gave the heads-up. I wrote,
The RSI-7 is now very high at 81.1 on the Weekly RSI-7 and 71.3 on the Monthly. The Daily RSI-7 has fallen from about 80 to 57.0 in the past couple weeks..
http://billcara2.com/tkchart/tkchart.asp?stkname=gld&cht=Tech+Chart&px=3...
http://billcara2.com/tkchart/tkchart.asp?stkname=gld&cht=Tech+Chart&px=1...
http://billcara2.com/tkchart/tkchart.asp?stkname=gld&cht=Tech+Chart&px=0...
For those who still believe that the precious metals momentum is still up, they should take note that the $SILVER:$GOLD and GDX:$GOLD comparative strength indexes are falling and that’s a definite negative.
As I wrote in this space three weeks ago, right after the week closed with at humungous gain of almost +$50/oz, “I think the music is pretty close to the end, and the last dancers ready to depart the floor.” Later I added, “You will also notice that right then the comparative strength indexes started to show a drop in momentum, which is an important sign of price drops to come.”
The $GOLD 50d Moving Average is now at 1011.83, up from 1001.95, 991.04, 981.39, 971.37, 966.19, 958.67, 949.82, 940.53, and 939.29 going back over the prior nine weeks.
The 200d MA is 948.59, up from 943.16, 938.18, 933.48, 928.70, 924.41, 918.51, 913.32, 903.20, and 897.84 over the prior nine weeks.
As I pointed out four weeks ago, “These are big rises in a short time for the $GOLD MA’s, which likely have been a concern to the Fed. The Fed could step in soon to support the $USD. So, I will stand aside and wait for the outcome.”
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
This week, $SILVER dropped -$1.36 or -7.70% W/W to close at 16.31. A week ago, after its fast run up, I wrote here, “silver has lost 6 cents over the past two weeks, which is why the momentum for precious metals is reversing to negative. Risk management. Profit-taking.” I hope you were listening.
For $SILVER, the 50d MA is now 16.52, up from 16.27, 15.96, 15.64, 15.27, 15.00, 14.64, 14.24, 14.02, and 13.87 the previous nine weeks.
The 200d MA is 14.25, up from 14.11, 13.95, 13.78, 13.61, 13.47, 13.29, 13.12, 12.98, and 12.83 the previous nine weeks.
As I wrote three weeks ago: “Yes, I like the trend, and I’m long, but I still turned cautious in the near term until I see what happen next at the Fed. Higher silver will mean wooden nickels, and other countries may justifiably refuse them.” I then sold the silver positions and said, “Be careful here”.
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.
This week, $PLAT lost -$42.80/0z or -3.13% to close at 1326.30.
The 50d MA is now at 1310.13, up from 1301.52, 1290.59, 1280.92, 1267.58, 1251.02, 1238.81, 1218.89, 1210.77, and 1204.82 over the past nine weeks.
The 200d MA is at 1182.34, up from 1173.49, 1163.36, 1151.74, 1140.09, 1128.78, 1116.00, 1104.08, 1094.46, and 1083.99 the previous nine weeks and from 1074.29 and 1063.85 the two weeks before that.
A week ago I wrote in this space, “A higher $USD will give back of much of these gains”.
I don’t trade plat or pall, but I study them as part of the precious metals study.
Spot platinum chart for the week
Interactive Chart of Weekly Platinum EOD Continuous Contract Index:
Interactive Chart of Daily Platinum EOD Continuous Contract Index:
Interactive chart of the Platinum metal index.
This week, $PALL dropped -$16.10/oz or -4.73% to 324.30, which is quite possibly no longer on a Bull run, no longer leading the group higher.
The 50d MA is now at 308.23, up from 302.88, 296.70, 291.16, 285.68, 281.86, 276.38, and from 265.26 seven weeks ago.
The 200d MA is at 250.40, up from 246.85, 243.24, 239.52, 236.04, 233.16, 230.00, and from 227.13 seven weeks ago.
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.
After $COPPER contracts had dropped a fifth week in a row, I wrote in this space three weeks ago, “There may be a recovery bounce somewhere in here. Watch the $USD and precious metals.” Then two weeks ago, “This week there was a gain of +15.65 W/W (+5.84%) to close at 283.80.” A week ago, I added, “This week, $COPPER lifted just +0.75 or +0.26% to 284.55.”
A week ago I wrote in this space,
$COPPER gained +18.90 a contract or +6.64% to close at 303.45… Analysts are interpreting this move as a sure sign that the global economy has lifted, but I am not in agreement. I think it is little more than traders trading prices with excessive funds in their accounts… BHP, which is the world's second biggest copper producer (state-owned Codelco of Chile is biggest), lifted +1.87% this week… (But) the BHP:$COPPER Comparative Strength index peaked at the beginning of this past week. BHP strength or in this case weakness compared to the metal usually precedes a pull-back in price for both. We’ll have to wait and see. Only Zug knows.
Keep watching that $USD. It could reverse trend any time. You know, I am in the habit of saying that. What it means is that I am on guard.
This week, $COPPER contracts dropped -7.50 (-2.60%) to 295.55. Sometimes I get it right.
The 50d MA is at 286.42, up from 284.45, 282.60, 281.84, 278.85, 274.24, 271.42, 265.26, 260.53, 254.56 and 195.92 over the prior ten weeks, which is bullish.
The 200d MA is at 225.91, up from 222.21, 218.48, 214.69, 210.99, 207.75, 204.45, 201.43, 198.85, and from 195.92 the prior nine weeks.
For those who are keen to study the industrial metals like copper, aluminum and zinc, why not look at the Powershares DBB, which trades on the NYSE.
http://finance.google.com/finance?q=NYSE:DBBInteractive Chart of Weekly Copper EOD Continuous Contract Index:
Interactive Chart of Daily Copper EOD Continuous Contract Index:
Interactive chart of the Copper metal index.
Table 12: Senior gold equities
Sorted by 1-Week Price Performance Symbol Close 1Day
Change1Day
%Change1W
%Change2W
%Change4W
%ChangeYTD
%Change3M
%Change6M
%Change12M
%ChangeThree weeks ago I wrote in this space, “the Goldminers were absolutely ecstatic this week: $XAU (+12.22%), GDX (+12.93%) and XGD (+8.11%), which was a shocking difference to the previous week [$XAU (-0.85%), GDX (-0.72%) and XGD (-1.67%)]… But, the market on Friday was weak as the $USD boomed: $XAU (-0.47%), GDX (-0.22%) and XGD (-1.28%)… So everybody will continue watching the $USD. If the strength can persist beyond Friday, the Goldminers will be getting the shaft. That $46.40 gain in the gold price this week was sparkling, but I have a couple times told you to be wary of the shaft.”
Two week ago, I added, “the results were: $XAU (+0.07%), GDX (+0.19%) and XGD (-0.88%). So, the goldbugs are trying hard to avoid looking down the shaft. They actually got a pretty good boost on Friday… We have an itchy trigger finger. We closed the Pan American Silver (PAAS) and lightened up about 20% of the Silver Wheaton (SLW) this week.”
A week ago here, I wrote, “I won’t get into this week’s trading, but I will say that the goldminer index results for this week are: $XAU (-2.50%), GDX (-3.49%) and XGD (-2.29%). For Friday, the results were: $XAU (-1.17%), GDX (-0.64%) and XGD (-0.57%).”
This week, the goldbugs have stopped sending me two email blasts an hour. They must be disappointed. The results were: $XAU (-8.98%), GDX (-9.25%) and XGD (-5.54%). The only good news I see for the Bulls here is that typically leading Cdn-based XGD dropped much less than the others.
Agnico-Eagle (AEM -21.9% W/W) was the biggest loser. I guess one could say their shareholders have seen the shaft.
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 three to four trillion dollar marketplace every day, which dwarfs the size of the stock and bond markets. In this market, the Euro/USD is the highest volume trader.
The current value of $USD is a mean value of rate fluctuations of six world currencies (Japanese yen, Euro, British pound, Canadian dollar, Swiss franc and Swedish krona) that each trade against the USD.
The ETF that tracks the G-10 currencies is the Powershares DBV. I intend to start trading it and other currency ETFs soon, and I will write it up more here in the WIR as soon as I start.
This week, the $USD gained +1.17% W/W and +0.52% on Friday. The gain on the previous Friday was +0.56%.
The 50-day MA of the $USD is now at 76.36, down from 77.00, 77.36, 77.58, 77.84, 78.04, 78.37, 78.76, 79.00, 79.20, 79.43, and 79.58 over the past eleven weeks.
The 200-day MA is 81.38, down from 81.57, 81.75, 81.88, 81.98, 82.13, 82.38, 82.62, 82.83, 83.04, 83.23 and 83.40 over the past eleven weeks.
As I wrote in this space three weeks ago,
If there is a rally, I see the 50-day MA being a resistance level, probably around 77.50 at that point. A move back up to 77.50 would squeeze the Dollar shorts. The lower the Dollar goes (in the interim), the bigger will be the squeeze, and the faster the up move, I believe… One morning, you might wake up and watch gold has plummeted -$50 or more. So, be careful here. It’s not just precious metals either; it’s the equity market, which has been puffed up like a balloon at this point.
Interactive Chart of Daily U.S. U.S. Dollar Index:
A week ago, I wrote in this space, “It’s not likely the Euro can continue to climb at this pace. Most interesting is the fact that the Euro this week is the only currency that gained against the USD. It’s no longer the heavy lifter; it’s the only lifter. That is significant.”
This week, the Euro contracts ($XEU) lost -1.96% to close at 147.12, down from 150.06.
The 50d MA for the Euro futures are now 146.44, up from 145.83, 145.03, 144.52, 143.95, 143.54, 142.86, 142.13, and 141.75, and from 140.84 eleven weeks ago.
The 200d MA is at 138.09, up from 137.70, 137.38, 137.16, 137.01, 136.73, 136.26, 135.78, 134.98, 134.59 and 134.25 over the past ten weeks.
Interactive Chart of Weekly Euro Dollar Index, priced in USD:
Interactive Chart of Daily Euro Dollar Index, priced in USD:
The Pound gained +0.93% W/W against the USD to close at 164.60.
The 50d MA is at 162.64, which is close to 162.71, 162.69, 163.59, 164.09, 164.61, and 164.75 over the previous five weeks.
The 200d MA is now at 155.64, up from 155.22, 154.83, 154.45, 154.22, 154.02, 153.66, 153.35, and 153.02, and continuing to lift. But if the 50-d MA continues to fall, so too will the 200-d at some point, and that will be a signal for an intermediate-term $USD rally. We almost hit that trigger point this week.
An intermediate-term rally btw is a big one.
Weekly British Pound Index:
Daily British Pound Index:
Weekly Japanese Yen Index:
The Japanese Yen contracts ($XJY) had a huge winning week, up +2.15% to close at 110.96.
The Yen’s 50-day MA is now 109.63, up from 109.25, 108.66, 108.07, 107.35, 106.84, 106.56, 106.17, 105.77, 105.43, and 105.11 over the past ten weeks.
The 200-day MA is now 105.84, virtually unchanged in the past few weeks from 105.89, 105.85, 105.83, 105.82, 105.78, 105.73, 105.63, 105.54, 105.43 and 105.43.
Daily Japanese Yen Index:
Three weeks ago, I wrote, “The Canadian Dollar rocketed +3.66% to close at 95.97. I have never seen anything like it. One would think the Loonie has gold feathers. [The $GOLD jumped +$46.40/oz that week].
One week later, the Cdn Dollar gained +0.54% against the USD to close at 96.49, and I said that “people are openly talking about parity. What a disaster that would be – unless the US introduces the Cdn universal health insurance system plus (I ought not say) helps Canada become somewhat more efficient in running corporations… Anyway, a Loonie at par with the Buck would be very hurtful to in-bound tourism and export-based manufacturing.” That week, the Loonie dropped -1.62% against the USD to close at 94.93, which I stated is still WAY TOO HIGH. “Do you really think the Republicans are going to give Obama a US version of Canada’s national health insurance? Gimmee a break. They should; but they won’t. The biggest lobby in Washington would get fired otherwise, and they won’t go down in flames without sticking a few millions into the pockets of a couple low-profile Democrats”.
Anyway, the Loonie plunged -2.92% this week to close at 92.16. Where are these clowns who two weeks ago were talking par? Oh, they will be back on camera and spout the same crapola and the public will listen. Why? Probably too lazy.
The Loonie 50-day MA is now at 93.44, up from 93.23, 92.83, 92.47, 92.23, 92.05, 91.60, and 90.86 seven weeks ago, and up from 84.57 just 21 weeks ago.
The 200d MA is at 87.03, up from 86.74, 86.45, 86.07, 85.77, 85.48, 85.15, and 84.84 over the past seven weeks.
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.
Weekly Canadian Dollar Index:
Daily Canadian Dollar Index:
Here is the China Yuan (CNY) chart.
Wrap-up:
A week ago, I opined,
“Firstly, I want to say that I do not believe the coming market pull-back will be all that serious – probably down to maybe 900 on the S&P, which would be about -16-17% only if it should happen from this level. I think it would be quick and dirty and then recover fairly quickly as well before going higher… I haven’t looked at a chart to determine that. It’s not even my crystal ball, which I haven’t even seen around for over a year. This is just how I see the economy and bonds and equities shaping up.”
This week, the S&P 500 dropped -4.02%. So, the market is about one-quarter the way there in one week. Of course a loss of -16-17% for most of you would be terrible, but the point I was making is that this pull-back will be quick like Oct 1987, but nothing as severe. Conditions are different this time around. For one, interest rates are very low and ought to remain low for many quarters. Corporate earnings are improving because govt stimulus programs and corporate belt-tightening are having an impact and the economy is recovering. More of all of this is on the way. Also, the US Dollar is strengthening because the problems with Japan and Europe are every bit as bad and yet foreign equity prices got ahead of the US by a large measure earlier this year, caused by an outflow of funds fed by local doubts and criticisms, and now the Dollar will be returning in order to buy up some relatively low-priced but high quality US equities.
Valuation is a subjective measure, somewhat like quality although just a bit more quantitative. Still, with accounting games being played by large corporations today, I don’t place too much value on the subject of valuation. On a price to earnings basis, the multiples may be high, but not grotesquely so. A bit of a price correction will steady the ship.
Politics too is starting to take on a different look. The questioning of the Treasury Secretary and Fed chief are much sharper these days and the bi-partisan aspects of debate have calmed as I see it. The voter holds the hammer, so these elected representatives are starting to rein themselves in. You cannot dismiss some of the good work some of these people are doing that in previous years was absent. And some of the people in the civil service, people appointed by the president, are starting to speak out, even against the party line, which is good. Those who would continue to rant to the extreme are forgetting that everything political is a matter of negotiation and the result a matter of degree. Activists and forward thinking persons, including myself, ought to take comfort in small gains. After all, who would have thought a year or so ago that Glass-Steagall discussion would be hot, or that a universal health insurance bill would be so close to a fait accompli. Prosecution of important people on Wall Street has taken a serious turn. Leading people on Wall Street are now admitting they made an error in judgment in allowing hedge funds to go unchecked so long. The Madoff story was breaking a year ago and now the man is in prison with a 300 year sentence, meaning he will never come out. Hedge funds Galleon in the US and K1 in Germany are news breaking stories, as well as many other similar cases, most of which will end in very long-term prison sentences. Tax havens are closing shop and fraudsters having to cough up, and their bankers held to account.
There are a lot of positives out there, and they should not be over-looked. As someone said to me this month, we cannot go around with our heads between our knees; we have lives to live. What we feared would happen, has happened, and now that the matter is being addressed, we can afford to look up and take the next step forward.
That next step is to study the equity market opportunities to buy the stocks of high quality companies at low prices. Is that not why we trade prices – to buy low and sell high. It is early yet, but now is the time to begin your study. You need to be making notes like, ‘If I can buy ABC at $xx, my annual Total Returns over the next year or two or three might be a legitimate yy+% with minimum risk.
One word of caution is along the lines of how I started out in this Week In Review. Glass-Steagall II will not come easily. Just like it is not easy to overcome opposition to a national health insurance plan, that’s even truer in the case of the powerful interests on Wall Street, which will be hard to put under control. I don’t think Teflon Tim Geithner or Barney Frank are the people to do it, but I do think the job will get done. There are an overwhelming number of people demanding it. The President is no fool and he is an extremely political animal who likes the big challenges in life. Who knows; maybe after there is a health insurance bill, I might stop saying he is no longer just talking everybody to death. Maybe he turns out to be a worthy President.
It may be tough sledding in capital markets, but if you keep your chin up, I think you’ll come through the rough patches ok. It is a hill though, and if you are a Bull I recommend you tuck your chin in and slide down on your back. Always protect yourself.
Just as I was putting the finish to this WIR, my construction friend invested in Citi dropped by. “Well did you sell after we talked?” “No” he says, “Just got in on a barge from Guana Cay. Beautiful property. I’ve been there all week. So what’s it at?” “$4.09, down over 8%” I replied. “Hmm, now that I’m back, I’ll call tomorrow. I’m in at $1.04; I should be ok.”
http://visitguanacay.com/gallery.html
Another lesson: C hit a high of $5.43 in August. He has 100,000 shares. He’s in construction, often on remote islands. He needs to watch prices closer or get a manager. That won’t be me. His broker put him almost 100% into Citi at $1.04, which is the end of that story.
Sorry for the lateness, but yesterday I spent on the beach and this afternoon I went over to a trade show at the Wyndam on Cable Beach for a couple hours. I should be well rested for Monday.
Ciao.
