[4:45pm] It appears we are all afflicted with “Chinese Curse Syndrome”. With this week’s seeming explanations from Geithner and Paulson of their role in the recent global financial crisis, of the reappointment of Bernanke, of the threat to Goldman Sachs of something called “the Volcker Plan”, and of an equity market that continues to sink, can anyone say we don’t live in interesting times?
http://en.wikipedia.org/wiki/May_you_live_in_interesting_times
For a couple years leading up to the financial crisis of 2007-2010, I railed in these pages about conflict of interest issues in the financial system, about Paulson’s Folly, and about how capital markets had become, in the control of a few persons, an instrument that was destroying social equity.
http://en.wikipedia.org/wiki/Financial_crisis_of_2007–2010
Now you can see why, for the second time in ten years, I decided to come out of retirement – to take up the fight, in the best way I could, against the evil empire of Humungous Bank & Broker (HB&B) and their so-called financial engineering ways. Not the least interested in their hedge funds, mutual funds, syndicated loan products, and phony credit default swaps, I decided to show the way back to financial normality with vision, integrity and performance, which just happens to be the tag line for my new company, Cara Trading Advisors (CTA).
Our trading service is available to either private clients in the form of discretionary portfolio management of client-owned accounts, or to the general public in (soon to be) actively-managed exchange traded funds. Apart from modest administrative charges for the ETF's, our fees are strictly performance based. In other words, if we provide a wealth generating service, we get paid.
What we do is precisely what HB&B, in its present construct, does not want to see. With them, it’s, if you take risk, a case of “heads they win; tails you lose” or else they want your government guaranteed deposits, at the lowest cost to them, to be multiplied in the federal reserve banking system anywhere from seven to thirty times, for their benefit.
This is not fair to society, but nobody ever said that life was fair.
Starting in 2005 and 2006, I told you that books would be written about what I claimed would be a financial accident ready to happen, something like an unchecked automobile manufacturing process that stamped out vehicles with gas pedals that stick.
By the way, this sticky gas pedal problem has been affecting Toyota, General Motors and Ford cars for many months, as the literature clearly shows, but is being used specifically this month as an instrument to slander Toyota, and hopefully boost the US Dollar, and squeeze the Dollar shorts and the Gold Bulls.
http://www.usrecallnews.com/2009/09/toyota-recalls-3-8-million-vehicles-...
How many of you are aware of a growing controversy, disputed by the company, as follows:
[AutoBlog.com] The accelerators in question – subject to recall for sticking and causing unintended acceleration – are made by CTS Corp, based in Elkhart, Indiana. While CTS makes throttle pedal assemblies for other automakers, Toyota and Ford are the only companies thus far to announce production stoppages.
http://www.autoblog.com/2010/01/28/report-toyotas-gas-pedal-supplier-woe...
http://www.ctscorp.com/publications/press_releases/nr100127.htm
CTS closed Jan 4 at $10.36 and closed -26.5% lower at $7.61 on Jan. 29 (i.e., in 18 sessions).
Simultaneously, there is George Soros at the Davos World Economic Forum – let’s call it a stage for shills and charlatans -- claiming that Gold is “the ultimate bubble”.
http://en.wikipedia.org/wiki/Shill
http://en.wikipedia.org/wiki/Charlatan
If this were American football, there would be a penalty for piling on.
As I say, markets are marketing, and most people do not buy their portfolio positions, they accept what is sold to them.
In any case, what I have advocated for years – the return of Glass-Steagall – is apparently a part of the Volcker Plan or as Obama himself called it, “The Volcker Rule”. The following is an article that speaks my words.
http://www.telegraph.co.uk/finance/comment/liamhalligan/7112237/Bring-ba...
Please read this Jan 30 NY Times article from 82-year old Paul Volcker himself, and another on the Volcker Rule, which independently describes the man and his long-held views, ones I share.
http://www.nytimes.com/2010/01/31/opinion/31volcker.html?emc=eta1
http://www.theglobeandmail.com/globe-investor/investment-ideas/the-nuts-...
Volcker will explain his program to the Senate Banking Committee on Tuesday and, two days later in front of that same committee, HB&B will fight back with all their power.
http://www.politico.com/news/stories/0110/32240.html
As I say, these are interesting times.
Finally, for background on the big picture fight, you might find this article to be of interest, as I did.
http://www.truthout.org/the-battle-titans-jpmorgan-vs-goldman-sachs-or-w...
Shorter-term, traders are looking forward to TARP Monday. Vad pitched in with his views:
[Vad:] two sides to it. First is "constant" - my IF-THEN scenarios are materialized in my setups. Each of them is based on a set of possible developments and defines my actions for each of those... Second is variable - when I encounter/expect an unusual day, unusual event etc (most of such examples occurred in the fall of 2008, we had them on almost daily basis), I develop a set of such scenarios. Some material event that is going to influence the market requires this kind of preparations. To give an example of how such scenarios are being prepared (this below is actual set from the September 2008):
- IF TARP is approved and the market doesn't spike, THEN I look for short entry.
- IF TARP is rejected THEN I short outright.
- IF TARP is approved and market spikes up sharply, THEN I look for short entry on one of trend reversal setups.
- IF TARP is approved and market climbs slowly and orderly, THEN I wait for pullback and seek long entry.First scenario (which I put first because I gave it the highest probability at the time) materialized, and according trades took place... I don't expect anything ground-shaking on Monday, so I don't have any specific scenarios. Simply waiting for my setups to be spat by a scanner and going to trade them as on any other day.
The TARP Special Inspector made sharp criticisms of the program this week.
http://money.cnn.com/2010/01/31/news/companies/tarp_report/
Let’s now look into the details of the capital markets for this past week, which was, as I anticipated, another bad one for the equity Bulls.
Global Economics Review
Weekly International Economic Report from Econoday.
Summary: The year got off to a rocky start for equities with all but one of the indexes followed here down for the month. Only the Jakarta Composite managed a positive January. For the week, losses ranged from 1 percent for the Dow to 4.5 percent for the Shanghai Composite. And for January, losses ranged from 8.8 percent for the Shanghai Composite to 1.1 percent for the KLCI. Again, only the Jakarta Composite gained — it was up 3 percent for the month.
Equities were pretty rocky during the week as risk aversion was the prevailing theme. There were both positive and negative factors.
• Investors were still reacting to the previous week’s moves by China to reign in rampant growth. And with that brought fears that the nascent global recovery would be weakened.
• Ben Bernanke’s reappointment as Fed chairman looked to be in trouble. But after much political rhetoric, he was confirmed on Thursday for another four-year term.
• And of course, everyone vigils the FOMC meeting announcement. Markets were pleased that there was no change in policy and it maintained its promise to keep rates exceptionally low for an extended period. There was one dissention to the decision which got a lot of attention.
• Profits continue to be in the spotlight with many companies beating analysts’ estimates and as usual, some disappointing. But the commotion over Apple’s new iPad had Asian companies counting the ways they would benefit from the new product.
• In his State of the Union address, U.S. president Barack Obama reiterated that the worst of the crisis is over for the economy, but the devastation from it still exists. He stressed jobs creation and also proposed a three-year freeze on government spending to tackle deficits. He also seemed to tone down his verbal assault on banks.
• There was a spate of mixed new economic data that made investors wary of the strength of the current recovery.
• Concerns about Greece’s dire fiscal situation and whether the European Union would bail the country out sent the euro to a six-month low against the U.S. dollar.
Here are the key US economic reports from last week’s calendar.
US Existing Home Sales data for December. After release of the data on 1/25/2010 10:00:00 AM ET, Econoday reported, “Existing home sales plunged a little deeper than expected in December though prices surprisingly firmed in the month. Sales fell 16.7 percent for the largest monthly decline in data going back to 1968. The annual rate of 5.45 million units compares with expectations for 5.90 million and against the 2009 total of 5.16 million. Declines swept all regions especially the Midwest and were split evenly between single-family homes, down 16.8 percent to a 4.79 million rate, and condos, down 15.4 percent to 0.66 million… Now the goods news. Prices firmed, up a sizable 4.9 percent on the median to $178,300 and up 6.4 percent on the average to $225,400. The National Association of Realtors, which compiles the report, attributed the gain to a higher proportion of repeat buyers during the month. First-time buyers, enticed by special credits, were a key force behind the housing sector's pop higher in the second half of last year. The first round of housing credits expired in November before being extended and expanded into the spring, a factor that is likely to lead to acceleration in home buying in the coming months… But right now the housing sector is once again very soft. A special negative in today's report is a rise in supply, to 7.2 months at the current sales rate vs. 6.5 months in November. Reaction to today's report was muted with stocks and the dollar slipping very slightly. New home sales will be posted on Wednesday and are expected to firm following an 11 percent tumble in November.”
US Consumer Confidence for January. After the release of the data on 1/26/2010 10:00:00 AM ET, Econoday reported, “Consumer confidence edged forward in January to 55.9 vs. December's 53.6 in welcome but far from exciting gains. The assessment of the present situation remains near historic lows though it did improve noticeably, up nearly 5 points to 25.0. The assessment of the outlook has been far better than that of the present situation with the expectations index adding another 7 tenths to 76.5. An 80 reading for the expectations index is widely considered to be a signal of economic health… The assessment of the present jobs market remains very weak but has now improved for three straight months. Those saying jobs are hard to get fell 7 tenths to 47.4 percent vs. 48.1 percent in December and 49.2 percent in November. This reading hit a cycle peak of 49.4 percent in October. This improvement points to a gain for total payrolls which did inch higher in November before descending again in December. Another key reading is future income which shows fewer seeing declines, to 16.2 percent from 18.4 percent… Today's report isn't robust but does point to incremental gains in jobs and consumer spending. The next reading on consumer confidence will be Reuters/University of Michigan's consumer sentiment report on Friday. ”
US New Home Sales for December. After the data release on 1/27/2010 10:00:00 AM ET, Econoday reported, “The housing market sank deeply in December, the result of November's first-round expiration of buyer credits. New home sales fell 7.6 percent to an annual sales rate of 342,000 units. The result is 28,000 lower than expected but offset by upward revisions to prior months that total 23,000. Supply on the market rose to 8.1 months vs. November's 7.6 months… There is good news as this report falls in line with others indicating a firming in home prices. The median price rose 5.2 percent to $231,000 while the average rose 7.6 percent to $290,600. The year-on-year rate for the average price is actually up 10.5 percent… The second-round expiration of buyer credits at the end of April points to gains ahead for the housing market, but the gains are likely to be clumped just ahead of the expiration which point to continued housing weakness through much of this quarter. There was little reaction to today's report.”
US FOMC Meeting Announcement. After the announcement on 1/27/2010 2:15:00 PM ET, Econoday reported, “January's FOMC statement offers no pivot in policy. Policy makers kept the funds and discount rates unchanged at very low levels where they said they will likely remain for an extended period. The Fed is holding to the first-quarter wind-down of mortgage repurchases. Special liquidity facilities, put in place at the worst of the 2008 meltdown, will be wound down as planned with most expiring on Feb. 1… The economic assessment is mostly unchanged: the economy is strengthening, deterioration in the labor market is abating, and household spending is expanding at a moderate rate though it is being held back by an unchanged list of negative factors led by the weak labor market. One change is a positive comment for equipment & software investment which they now describe as "picking up." Yet they said non-residential construction is weak and employers remain reluctant to hire. The wording on inventories is more upbeat than in December, that stocks are now in "better" alignment with sales… There are a couple of new twists on the negative side. They note that bank lending continues to contract and they omit commentary on the housing sector which in December they said showed some signs of improvement. They still see financial markets supporting growth and they still see inflation subdued, the result of substantial resource slack… There was a dissenter: Kansas City boss Thomas Hoenig who believes exceptionally low rates are no longer warranted, which is a view expected to gain favor if the economy continues to improve… Markets showed little reaction to the results with stocks and the dollar firming slightly. Commodities were little changed. With all the heat right now in Washington, a no-surprise FOMC statement is certainly no surprise.”
US Durable Goods Orders data for December. After release of the data on 1/28/2010 8:30:00 AM ET, Econoday reported, “Today's durables report is showing the manufacturing sector continuing to slowly gain momentum. Despite a December gain, the immediate question for the markets is whether a disappointment on headline expectations is offset by upward revisions to November and favorable detail for December. New orders for durable goods in December rebounded 0.3 percent after a revised 0.4 percent drop in November. The November number had previously been estimated to be a 0.7 percent decline. However, the December gain fell short of the market forecast for a 1.6 percent spike. But weakness was the lack of a rebound in Boeing orders. Excluding the transportation component, new durables orders advanced another 0.9 percent, following a 2.1 percent rebound in November… Excluding the weakness in civilian aircraft, December was positive overall. Also, there is an indication of growing optimism by businesses. Nondefense capital goods orders excluding aircraft increased 1.3 percent in December after jumping 3.1 percent in November… Year-on-year, overall new orders for durable goods improved to minus 3.1 percent in December from minus 6.9 percent the month before. Excluding transportation, new durables orders returned to positive territory, rising to plus 0.5 percent from down 5.5 percent in November… Despite a shortfall in headline expectations for December, upward revisions to November, a jump in ex-transportation in December and another gain in nondefense capital goods ex aircraft may turn the report into a net positive-even compared to overall expectations. However, initial jobless claims were worse than expected.”
US Jobless Claims data for the week of 1/23. After the data release on 1/28/2010 8:30:00 AM ET, Econoday reported, “Jobless claims fell 8,000 in the Jan. 23 week to 470,000 (prior week revised 4,000 lower to 478,000). The improvement was smaller than expected given that the Jan. 16 week was inflated by holiday processing delays, which the Labor Department said have now eased. Expectations, at 440,000, were looking for a return to the prior trend of late December and early January. The four-week average, up 9,500 to 456,250, rose for the second straight week, a disappointment that ended a string of improvement going back to the beginning of September… Continuing claims for the Jan. 16 week fell 57,000 to 4.602 million with the insured unemployment rate dipping 1 tenth to 3.5 percent. Improvement here is distorted to a degree by the expiration of benefits which are pushing the jobless out of the insured workforce. Those receiving extended benefits edged lower to nearly 262,000 with those receiving emergency compensation falling a little more than 300,000 to 5.35 million (these data are for the Jan. 9 week)… Today's report is a disappointment pointing to no improvement, and even the risk of a set-back, for monthly payroll data. Stocks and the dollar edged lower in reaction to today's 8:30 data that included a smaller-than-expected gain for durable goods.”
US GDP estimate for 4Q2009. After the data release on 1/29/2010 8:30:00 AM ET, Econoday reported, “Fourth quarter advance estimate of gross domestic product was up more than expected at an annualized rate of 5.7 percent. This was the quickest growth rate in more than six years. Analysts had expected an increase of 4.5 percent. The fourth quarter gain primarily reflected a deceleration in inventory disinvestment (de-stocking), a deceleration in imports and an upturn in nonresidential fixed investment that were partly offset by decelerations in federal government spending and in PCE. Real final sales of domestic product - GDP less change in private inventories - increased 2.2 percent in the fourth quarter, compared with an increase of 1.5 percent in the third… The change in real private inventories added 3.4 percentage points to the fourth-quarter change in real GDP after adding 0.7 percentage point to the third-quarter change. Private businesses decreased inventories $33.5 billion in the fourth quarter, following decreases of $139.2 billion in the third quarter and $160.2 billion in the second… Fourth quarter real personal consumption expenditures increased 2.0 percent compared with an increase of 2.8 percent in the third. Durable goods declined 0.9 percent, in contrast to an increase of 20.4 percent. Nondurable goods increased 4.3 percent, compared with an increase of 1.5 percent. Services increased 1.7 percent, compared with an increase of 0.8 percent… Real nonresidential fixed investment increased 2.9 percent in the fourth quarter, in contrast to a decrease of 5.9 percent in the third. Nonresidential structures decreased 15.4 percent, compared with a decrease of 18.4 percent. Equipment and software increased 13.3 percent, compared with an increase of 1.5 percent. Real residential fixed investment increased 5.7 percent, compared with an increase of 18.9 percent… Real federal government consumption expenditures and gross investment edged up 0.1 percent after jumping 8 percent in the third… Slower inventory depletion is not the most promising way to guarantee growth and may indicate a slower rate of growth ahead until companies become more confident about the recovery. The biggest challenge to sustainable growth still remains with employment. ”
US Employment Cost Index for 4Q2009. After release of the data on 1/29/2010 8:30:00 AM ET, Econoday reported, “The employment cost index edged higher in the fourth quarter, up a sequential 0.5 percent for total compensation vs. the third quarter which saw an unrevised 0.4 percent rise. But the year-on-year rate was unchanged in the fourth quarter, at a record low 1.5 percent which is below the 1.7 percent year-on-year fourth-quarter rate for consumer prices. The breakdown shows 1 tenth gains for both wages & salaries and for benefits with both components up 0.5 percent. The year-on-year rates were unchanged, at 1.5 percent for wages & salaries and 1.6 percent for benefits… Pressure in the fourth quarter is tied to government employment as total compensation for state & local government jumped 0.5 percent vs. no change in the third quarter. Year-on-year, compensation for this component is up 2.4 percent… But excluding government the report shows easing pressure. Total compensation for private industry eased 1 tenth to a sequential plus 0.4 percent with the year-on-year rate at a dormant plus 1.2 percent. Wage pressures are not now the concern of policy makers who see inflation expectations as tame and who instead are focused on job growth.”
US Chicago Purchasing Managers Index for Jan. After the data release on 1/29/2010 9:45:00 AM ET, Econoday reported, “The Chicago purchasers' index rose a strong 2.8 points to 61.5 in January, hitting the whispers that traders passed to each other minutes before the public release at 9:45 ET (this report is first issued to subscribers). New orders show a fourth straight month of rapidly increasing month-to-month acceleration, at 66.4 in January. Production is following orders showing a similar trend and a similar January reading at 66.6… Production is accelerating quickly but still not fast enough to keep up with new orders as backlog orders show a second month of acceleration at 54.3. Businesses in the region apparently can no longer rely on existing capacity to meet production needs and they went on a hiring spree this month with employment jumping to 59.8. Deliveries slowed and input prices rose, both in line with the increasing pace of the region's manufacturing and non-manufacturing sectors (note purchasers in the sample are drawn from both)… Earlier releases specifically on the manufacturing sector from the New York and Philadelphia Federal Reserves point to a strong month for Monday's ISM manufacturing report. The economy's fourth-quarter momentum, evident in today's GDP report, appears to be extending into the first quarter. Stocks and commodities rose in initial reaction to this report.”
US Consumer Sentiment for Jan. After the data release on 1/29/2010 9:55:00 AM ET, Econoday reported, “Consumer sentiment is still weak but is improving, adding to an upbeat morning for economic data. Reuters/University of Michigan consumer sentiment index rose 1.6 points to 74.4 in the final January reading vs. the mid-month reading of 72.8, a gain that points to month-end acceleration. Note a comparison of the mid-month reading against the final December reading of 72.5 indicates little movement in the early part of January… Gains in the latest report are in the expectations component, the leading component now at 70.1 for a 2.6 point rise from mid-month to indicate a tangible easing in pessimism that hopefully is tied to hiring in the jobs market, recovery hinted at in this morning's Chicago purchasing report though not one supported by weekly jobless claims data. Inflation expectations are tame, unchanged at 2.8 percent one-year out… Today's consumer sentiment is more upbeat than Tuesday's consumer confidence report from the Conference Board whose cut off date is the third week of the month. The Reuters/University of Michigan report suggests a late-month boost, perhaps one tied, if not only to employment, then to recent action in Washington including President Obama's memorable stand against bank risk.”
Here are the key US economic reports from next week’s calendar.
US Personal Income and Outlays data for December. Prior to release of the data on 2/01/2010 8:30:00 AM ET, Econoday reported, “Personal income in November posted a gain of 0.4 percent, following a rise of 0.3 percent the month before. The important wages and salaries component advanced 0.3 percent after a 0.1 percent increase in October. Keeping in line with earlier reported gains in retail sales and motor vehicles sales, personal consumption jumped a healthy 0.5 percent, following a 0.6 percent increase in October. Inflation eased in November as headline PCE price inflation slowed to 0.2 percent from 0.3 percent in October. Core PCE inflation decelerated to no change in November from up 0.2 percent the prior month. Looking ahead, personal income growth is likely to be positive but more moderate as suggested by a December rise in aggregate weekly earnings of only 0.2 percent. Personal consumption expenditures (current dollar) should be up about 0.6 percent based on previously released fourth quarter PCEs although revisions to monthly numbers could shift strength within the quarter. Expect soft inflation numbers-the December headline CPI and core CPI both came in at 0.1 percent.”
US ISM Mfg Index for January. Prior to the release of the data on 2/01/2010 10:00:00 AM ET, Econoday reported, “The composite index from the ISM manufacturing survey posted solid month-to-month growth in December, rising to 55.9 from the 53.6 reading in November. The composite has been in positive growth territory for five consecutive months. Healthy results are likely for January based on the forward momentum suggested by December's ISM new orders index which jumped 5.2 points to 65.5-indicating moderately strong growth.”
US Construction Spending for December. Prior to the data release on 2/01/2010 10:00:00 AM ET, Econoday reported, “Construction spending for November fell 0.6 percent, following a decline of 0.5 percent the month before. In the latest month, private residential spending fell 1.6 percent, public outlays dipped 0.4 percent, and private nonresidential outlays were flat. Analysts are a expecting broad-based decline for December due in part to unseasonably bad weather. A dip in starts in December should tug down on residential outlays. High vacancy rates and tight credit continues to weigh on multifamily construction and nonresidential outlays.”
US Motor Vehicle Sales for Jan. Prior to the announcement on 2/02/2010, Econoday reported, “Sales of domestic-made light motor vehicles in December rose to a seasonally adjusted 8.4 million annual unit rate from an 8.2 million rate in November. Combined import and domestic-made sales advanced to an 11.2 million unit pace in December from 10.9 million the month before. With income growth sluggish and unemployment still high, analysts are not expecting improvement in sales for January.”
US ISM Non-Mfg Index data for Jan. Prior to release of the data on 2/03/2010 10:00:00 AM ET, Econoday reported, “The composite index from the ISM nonmanufacturing survey in December rose 1.4 points to 50.1, a level indicating very little month-to-month change in overall activity for the bulk of the economy. We may see some progress in January based on a surge in the Chicago PMI. Although this index covers both manufacturing and nonmanufacturing, a 2.8 point jump to 61.5 suggests at least some improvement in nonmanufacturing. However, the ISM nonmanufacturing new orders index has been soft recently, barely above breakeven.”
US Jobless Claims data for the week of 1/30. Prior to the data release on 2/04/2010 8:30:00 AM ET, Econoday reported, “Initial jobless claims fell 8,000 in the January 23 week to 470,000. The improvement was smaller than expected given that the January 16 week was inflated by holiday processing delays, which the Labor Department said have now eased. The four-week average, up 9,500 to 456,250, rose for the second straight week. Recently, initial claims have oscillated in a narrow range, not continuing an earlier downtrend.”
US Productivity and Costs estimate for 4Q2009. Prior to the data release on 2/04/2010 8:30:00 AM ET, Econoday reported, “Non-farm productivity in the Labor Department's final estimate for the third quarter was revised down but was still robust with an annualized 8.1 percent surge. Unit labor costs were revised up somewhat (less negative) to an annualized decline of 2.5 percent. Fourth quarter numbers should be comparable or even better, based on the fourth quarter GDP growth rate of 5.7 percent annualized. While a strong gain in the output component of productivity and unit labor costs will not be a surprise, analysts also will be looking to see what companies are doing with labor hours and whether that is leveling off.”
US Factory Orders data for Dec. Prior to release of the data on 2/04/2010 10:00:00 AM ET, Econoday reported, “Factory orders rose 1.1 percent in November, led by a huge surge in nondurables orders tied largely to price hikes for petroleum and coal products. Durables edged up only 0.2 percent in November, according to the estimate for the overall factory orders report. More recent data suggest another gain for overall orders in December but a downward revision to November. In the more recent advance report, new orders for durable goods in December rebounded 0.3 percent after a downwardly revised 0.4 percent drop in November. Higher oil prices in December also should support nondurables orders.”
US Employment Report for Jan. Prior to the data release on 2/05/2010 8:30:00 AM ET, Econoday reported, “Non-farm payroll employment should be interesting for January. Not only will traders be watching to see if job growth returns to positive territory but benchmark revisions also will be seen in the latest numbers. Nonfarm payroll employment in December fell 85,000, following a revised gain of 4,000 in November and a revised fall of 127,000 in October. November's rise in jobs ended a 22-month streak of declines but revisions could do away with that modest gain. A big question, however, is whether benchmark revisions are significant. During recession, the estimates for jobs from new firms are often over estimated, leading to downward revisions when benchmark data are released. Growth in average hourly earnings in December came in at 0.2 percent. From the household survey, the unemployment rate was unchanged at 10.0 percent in December. Looking ahead, market estimates for the jobs report might be affected by ISM employment indexes, Challenger, ADP, Monster, and initial claims prior to Friday.”
US Consumer Credit for December. Prior to the data release on 2/05/2010 3:00:00 PM ET, Econoday reported, “Consumer credit outstanding contracted at an accelerated pace in November, plunging $17.5 billion, following a $4.2 billion contraction in October. November's fall was the 10th contraction in a row. Weakness in November was centered in revolving credit, reflecting tightening credit standards along with consumer paydowns and defaults. Nonrevolving credit fell $3.8 billion. Looking ahead, nonrevolving credit may rebound in December given the month's very strong car sales. But revolving credit likely will continue its downtrend.”
The most recent reports of economic data continue to be less positive and hopeful than earlier.
On 2/2/2010 at 10:00:00 AM ET, Treasury Secretary Geithner testifies before the Senate Finance Committee on the FY2011 budget. That ought to be interesting TV.
International Equity Markets Review
Of some 19 important international equity markets outside the US, this week saw all but Indonesia falling, and many dropping hard. Worst hit were the South Korea Kospi (-4.9%) and the Shanghai Composite (-4.5%). For January, the Shanghai market is down -8.8% and Hong Kong is down -8.0%.
In fact all markets are down YTD except Indonesia (+3.0%), which is why three weeks ago, I pointed to this market as the tell to when traders should understand that the sell-off would be either an intermediate-term, or possibly even long-term, one.
Below are 16 country index chart links from StockCharts.com (with their formal approval btw). 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.
Here is the latest session data for the exchanges of the Americas.
Here is the latest chart for the Brazilian Bovespa stock exchange in Sao Paulo.
Brazilian Bovespa stockcharts.com chart
Here is the latest session data for the Toronto Stock Exchange composite index.
Toronto 300 stockcharts.com chart
Toronto CDNX stockcharts.com chart
Europe
Here is the latest session data for the bourses of Europe.
Here is the latest session data for the London stock exchange FTSE.
FTSE 100 stockcharts.com chart
Here is the latest session data for the German DAX.
Here is the latest session data for the French CAC 40.
Here is the latest session data for the Milan Italy stock exchange MIBTEL.
Italian Milan Index stockcharts.com chart
Here is the latest session data for the Swiss market index. Swiss Market Index stockcharts.com chart
Asia-Pacific
Here is the latest session data for the Asia-Pacific stock exchanges.
Here is the latest chart for the Japanese Nikkei 225 index.
Tokyo Nikkei 225 Index stockcharts.com chart
Here is the latest chart for the Singapore index .
Singapore Straits Times Index stockcharts.com chart
Here is the latest chart for the Shanghai Composite index .
Shanghai Composite Index stockcharts.com chart
Here is the latest chart for the Hong Kong Hang Seng index .
Hong Kong Hang Seng stockcharts.com chart
Here is the latest chart for the India BSE 30 index .
Mumbai BSE 30 Sensex Index stockcharts.com chart
Here is the latest chart for the Australian All Ordinaries index .
Sydney All Ordinaries Index stockcharts.com chart
Russia (RTS) stockcharts.com chart
ETFs Review for International equity market
A week ago, I reported here that “all the country equity market ETF’s [denominated in USD and traded in the US] were demolished! The losses were significantly greater than due to the local exchange losses, mostly because the US equity market was last to close on Friday and got ahead of the pack. Also, the $USD was up +1.36% on the week, which explains some of the foreign company stock losses.”
This week, the entire list of country ETF’s was down again, from -1.33% for Russia (RSX) to -4.83% for Brazil (EWZ).
Over two weeks, these ETF’s are down from -6.20% for Japan to -13.14% for Brazil. The best was the Japanese EWJ (-3.05%), while all the rest plunged from -6.07% for India’s IFN to -9.24% for France’s EWQ. Germany’s EWG (-9.19%) and the EWZ of Brazil and EWA of Australia (both down -8.74%) were close behind.
Even the IF (Indonesia Fund) dropped -2.6% W/W, which followed the loss of -4.4% a week ago. Indonesia has been the top performer for the past year.
http://billcara2.com/tkchart/tkchart.asp?stkname=IF&wt=1&ind=rsi
The Jakarta Exchange data can be monitored at ADVFN.com. The one-year chart shows that the IF fund peaked at the end of September and for three months was quite flat except for a spike down at the end of October, and quick recovery in November, but is now falling.
http://www.advfn.com/p.php?pid=countrysum&cid=12
Table 13: International equities via an ETF perspective (in $USD)
| Symbol | Close | 1Day Change |
1Day %Change |
1W %Change |
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Japanese equity market ETF: EWJ
Here is the Japanese (EWJ) equity market ETF Monthly, Weekly and Daily data charts:
U.K. equity market ETF
Here is the United Kingdom (EWU) equity market ETF Monthly, Weekly and Daily data charts:
EWU Daily data: 
Canada’s equity market
Here is the Canadian (EWC) equity market ETF Monthly, Weekly and Daily data charts:
Taiwan’s equity market
Here is the Republic of China/Taiwan (EWT) equity market ETF Monthly, Weekly and Daily data charts:
Indonesia equity market ETF
Here is the Indonesia Fund (IF) equity market ETF Monthly, Weekly and Daily data charts:
IF Summary from Yahoo Finance:
http://finance.yahoo.com/q/pr?s=IF
IF Summary from Google Finance:
http://www.google.com/finance?q=AMEX:IF
IF chart from StockCharts.com:
http://stockcharts.com/charts/gallery.html?IF
Here are the links to interactive charts from Billcara2.com for the key country ETFs, which you can add technical indicators for as well.
Group 1:
(list one)
(list two)
Group 2:
(list one)
(list two)
US Equity Markets Review
The S&P 500 had a loss of -1.6% this week, following one of -3.2% a week ago. The key index is now down -3.7% YTD to 1073.9. The 1083 major support level has been broken, and next level of support is 1064.
A week ago I opined, “Now we expect a series of lower lows and lower corrective highs as the equity market seeks to complete a full cycle” and this week shows no evidence to the contrary. Next week, we will be watching the 1064 level.
Also, this week the NASDAQ Composite fell -2.6%, following one of -3.6% a week ago. This index is now down -5.4% YTD to 2147.4. The 2199 first line of technical support was taken out and the next crucial level of 2150 is under stress.
As opined in the previous WIR, “Traders are advised to avoid purchases and to look for any strength to hit the bids and lower their risk exposure. Just as the market bull phase from early March 2009 was extended many months beyond the norm, and prices reached over-bought levels taking the PE multiple of the S&P 500 to almost 20, the ensuing intermediate-term (or long-term) cyclic market decline could be severe.”
So far, the pull-back in January exceeds the extent and rate of price decline of last October. Is the broad market over-sold, and in need of a corrective phase, or is it going into a full-out free-fall?
Perhaps, my words of “wizdom” from a week ago still apply? I stated, “As we will discuss later today, the RSI-7 levels of the major US indexes are now down to the low 20’s, which is typically a period of consolidation and attempt at recovery, particularly should the indexes get to RSI-7’s in the teens.”
The RSI-7 for the S&P 500 Daily, Weekly and Monthly is now 23.3/40.5/56.7. For the NASDAQ Composite, it is 22.6/40.9/59.3.
A week ago, I advised, “For the broad US equity markets, watch the small cap Russell 2000 index perform relatively worse on the downside.” This week, the Russell 2K dropped -2.44% while the S&P 500 dropped -1.64%, so small cap traders are moving out quicker than large cap traders, as expected in a trending market. Keep your eye on this.
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.
Among the DJIA components this week, 8 were higher and 22 lower, which obviously is a tad better than the prior week when 29 were down.
Over 4 weeks, eight are winners and 22 losers. Boeing (BA +10.26%) is the best for January. General Electric (GE +4.76%) is 2nd best performer and Merck (MRK +3.02%) was 3rd best this year. But the other five “winners” this YTD are up just +0.86% or less.
There are five losers over four weeks that have fallen more than ten percent (AA, VZ, HPQ, T and CAT), and Alcoa (AA -21.9%) is by far the worst of those.
As pointed out a week ago, “Normally, as January goes, so goes the year”.
Table 14: Dow 30 List
| Symbol | Close | 1Day Change |
1Day %Change |
1W %Change |
2W %Change |
4W %Change |
YTD %Change |
3M %Change |
6M %Change |
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Here are the links to interactive Dow charts from Billcara2.com that I broke into groups of ten, which you can add technical indicators for as well.
(list one)
(list two)
For those of you who are relatively new at trading, or to this blog, why not pull the ten (10) Cara 100 companies out of the DJIA 30 list, and study the links for just these stocks? Keep a hard copy of the Value Line quarterly report plus a record of the Daily-Weekly-Monthly RSI-7 technical indicator. Study up on what the RSI is so you know it and have confidence that it is just like a football game yardstick that shows you how much risk your team is facing when trying to score points.
The Cara 100 high-quality company list has the following ten DJIA components:
Wal-Mart (WMT), Disney (DIS), Johnson & Johnson (JNJ), McDonalds (MCD), Exxon (XOM), Boeing (BA), Procter & Gamble (PG), IBM (IBM), Intel (INTC), and United Technologies (UTX)
There is no rocket science to these high-quality companies. In your typical week, you shopped at Wal-Mart and along the aisles, mostly the personal consumer products were from Procter & Gamble, except for maybe the baby powder from Johnson & Johnson. On the way there, you may have filled-up at an Exxon gas station, and on the way home, maybe you stopped for a Big Mac or a salad at McDonalds. Overhead, you watched airplanes from Boeing. If you were in a high-rise building, you probably rode in an Otis elevator from United Technologies. Maybe you no longer have an IBM PC, but you do know the company, and your present PC is likely powered by Intel. Every parent's kids want you to take them to Disney… All in all, this is just life we're talking about here. If you are alive, you know these companies like your children. You probably even see more of them… So, just quickly read those Value Line reports – one per company every 13 weeks – and keep an eye on the RSI (momentum) and MACD (trend)… Those guys on Wall Street may be worth a gazillion dollars, but they didn't do it the way you and I have to do it. So, stop listening to their stories that financial engineering and out-sourcing is what's making America strong. That is such a crock. Instead, live life, use common sense, do only what you understand, feel comfortable, and you'll be surprised at how quickly you can take control and free yourself of the shackles of HB&B.
I must say that I continue to run the paragraph above because, in the long run, it works. Every few long-term cycles, possibly once in ten or 12 years or so, the equity markets fall under the control of interventionist parties that operate with different objectives than most traders. These parties, including central banks, are backed by trillions of dollars, so until their objectives are met or defeated, the market will behave strangely. That makes it difficult for us because central banks and most sovereign wealth funds are using taxpayer money, which seems to be an endless source.
You have read the above for many months. Recently I added the cautionary words,
The good news is that governments need the public to participate in capital markets. Without our capital, the global financial system would collapse. So, sooner or later – and I suspect pretty soon – the Mr. Market will regain control, and the risks will (start to) normalize… I will add that this is a long-term process, which may take another three to five years to come full circle.
I will now insert that it is an ex-Goldman Sachs executive that is running the Federal Reserve Bank of NY, and the $2 Trillion FOMC hedge fund. The announcement of the Volcker Rule as part of the State of the Union address changes my view. Depending on how things go in the Senate Banking Committee meetings this Tuesday (Volcker) and Thursday (Goldman Sachs), I think the FOMC traders may be directed to crash the market, i.e., to pull their bids. If the black box trading algorithms at Goldman Sachs then load up on puts across the board, the action could be fast and furious on the downside. I will be watching the action on Friday afternoon most closely as that leaves the players some time to spin and observe public emotions and the inevitable response from Congress plus some time for those backroom phone calls.
If octogenarian Paul Volcker is still vertical and on center stage by noon Friday, I think we are going to be seeing fireworks. Either Volcker (Obama) Rules or Goldman Sachs does. Finally, it’s come to a head.
As to the Cara 100, it was three weeks ago I made six additions and six deletions to the list. I advised that “I may make another couple in the next month or so” and a week ago I added: “In the next week I will do that. The reason for the multiple changes is to prepare a suitable list of candidates for a Cara 100 Model Portfolio that I hope to have trading on the Toronto Stock Exchange as an actively managed Exchange Traded Fund, in about two months. The decision and implementation process has begun. Participants at the Cara Freeport Bahamas 2010 Conference were privy to these events”.
We actually made seven additional changes. The final list is here, although the notes in the Cara 100 link on the top menu have not yet been updated because of lack of time.
http://caracommunity.com/sites/default/files/user6/02Cara100modelportfol...
As you know, a company is not a stock. Boeing, for example, is a Cara 100 company for reasons of the quality of its business model, products, management, balance sheet, and operating metrics over the very long term, but its stock rises and falls in trends and cycles that offer you and me the opportunity to buy when risk is low and possible gain is high and to sell when risk is high and possible continued gain is low.
Some people call this “Value investing”. Not being one for labels, I call it common sense.
Value Line Report(s) this past Friday
This week, Value Line reported on two DJIA components: Coca Cola (KO) and Kraft Foods (KFT), two giants in the Consumer Staples sector. Of these, only Coca Cola is a Cara 100 company. In terms of the quality of the management, balance sheet, and operating metrics compared to a peer group, like Procter & Gamble, for instance, I don’t think Kraft cuts the muster or, in their case, the mustard.
As we all have biases, I am not a fan of processed foods, of which Kraft is King and Queen of the kitchen. Nor do I like the Kraft parent Philip Morris (now named Altria as if they give you something better than cancer).
Having been nasty, I will say that Kraft has now made a successful take-over deal with UK’s Cadbury, the giant chocolate company, so now Kraft is the sweetest Dog of the Dow – or will soon be. The company is not as bad as I make it out, and actually may have superior performance to Coca-Cola in 2010.
Coca Cola [GICS 30, Dow 30, Cara 100]
(KO: Google Finance file)
(KO: Yahoo Finance file)
(KO: StockChart chart)
(KO: Billcara2 chart)
(KO: ADVFN Financial Data)
(KO: Value Line Report Jan 29: next one is due Apr 30)
Kraft Foods [GICS 30, Dow 30]
(KFT: Google Finance file)
(KFT: Yahoo Finance file)
(KFT: StockChart chart)
(KFT: Billcara2 chart)
(KFT: ADVFN Financial Data)
(KFT: Value Line Report Jan 29: next one is due Apr 30)
Before I begin to think about the current prospects of a company I review my recent notes, and study the charts.
For study purposes, here is what I wrote in the WIR #5-09 (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.
For WIR #18-09 (May 3, 2009), with KO at $42.47 and KFT at $23.49, I wrote that 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 #31-09, 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.
Then for WIR #44-09, 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.
For today’s WIR#5-2010 (Jan 31, 2010), there is a wide divergence between the last prices on 1/29 on KO and KFT ($54.25 and $27.66 respectively) to the ones done on 1/19, when the Value line reports were done ($56.42 and $29.41), but little change to the ones on 10/30 thirteen weeks ago for WIR#44-2009 ($53.31 and $27.52).
Really, not much has happened as equity prices that were booming for 2009 -- the last 10 months of it anyway – have stalled and started to head south in the past four weeks. As these companies are leaders in the Consumer Staples sector, which are stocks known as defensive ones when volatility increases and high-beta issues start tumbling, the losses to this point are minimal. But, if you look across the top of the Value Line charts you will see that the hi-lo range for each year is considerable nonetheless, so, while they may be defensive, it’s only relative. In absolute dollars, you ought to expect a fall.
Besides what I added in my earlier notes, I will point you to the Kraft share buy-back program, which has traditionally made the metrics look better (with the smaller share base), but that program may have to be curtailed for a year or two as the company needs to fund its $19.5 billion Cadbury acquisition, which is in both shares and cash.
The RSI-7 for the Monthly-Weekly-Daily for KFT has dropped to 53.0 (sidetracking)/50.2 (falling)/35.9 (falling) from the 10/30 readings of 63.5 (falling)/59.5 (sidetracking)/37.9 (falling). Generally speaking, I’d avoid the issue until the Monthly and Weekly drop below 30 and the Daily pops up from below to above 30. In other words, I want to see an Accumulation Zone and then Buy Alert before taking action. If I was to go long the stock, I would also write puts on extreme down days in order to either take in option premium to lower my cost base or set up a possible exercise (to my cash position) at really attractive prices. At all times, I would be conscious of my dividend (presently just over 4.0%) to my cost base. In 2010, I’m anticipating a $1.20 dividend, which on the current price of $27.66 is an attractive (and fairly secure) 4.34% yield. But, I’d like to buy the stock cheaper than $27.66 – possibly in the 25-26 range. At that purchase point plus some additional put option premium that would take my cost base even lower to say $24, that projected $1.20 dividend would be yielding 5.0%, and the dividend would likely increase each year going forward, as would the share price in time. At the end of say five years, I’d be hoping for an annualized Total Return (TR) of maybe +16%. Using the Rule of 72, that would mean a doubling of your asset in just four and a half years. Nobody knows what the increase in share price or dividend will be, but you can always focus on lowering the cost base. That is what portfolio management is all about.
Believe me, disciplined investing/trading will yield higher risk-adjusted returns than real estate over time, but you need to work hard to earn it.
Regarding Coca Cola, I’m going to project a 2010 dividend of $1.76. At the current price of $54.25, that would be a yield of +3.24%. But if I could buy the KO at 48, my yield would be +3.67%, which is a lot more. That dividend ought to continue growing at about +7% annually, so with a locked in price, my cash on cash yield is going to increase each year without me doing anything.
I could wait for weaker share prices this year, which have been coming, and also be a put options writer on extreme down days as well, for the same reasons as expressed with KFT. I am just trying to lower my cost base, taking it below that price the rest of the market is paying for the same thing, which is another way of saying my risk is lower than theirs. I can only do this if I follow the trends and cycles and do the simple arithmetic as described here. This is precisely the same money management you’d do in running any business. It’s certainly not rocket science.
Like Kraft, Coca Cola will be around for many years, and the balance sheets are strong enough to get these companies through think or thin. Actually, Coke’s balance sheet is the strongest, which is one of the reasons I like the company a lot. A lower dividend pay-out ratio is another. Besides I like to drink Diet Coke. Now if only the company would manufacture Coconut Water (my favorite!).
Gin & Coconut Water: [from a popular website] A very popular Bahamian drink is ‘Gin & Coconut Water’ which is also a very famous Bahamian song. So when in the Bahamas, climb a coconut tree, (or get a native to do it for you-they are more experienced!) pick your coconut, make a large hole at soft end of coconut, add gin and stir! MMMMMM, good Mon!!!!!
I will say that I drink my gin with Ritz Tonic Water and a slice of lemon – because that’s what’s available and what I like best on a hot and humid summer day. Ritz soda btw is a product of National Beverage Corp, not Coca-Cola – not even the Bahamas Brewery and Beverage Corp of Jimmy Sands! We’ll have to fix that. http://www.ritzsoda.com/
The Coca-Cola operating performance this year is not expected to be exciting, as the Value Line analyst also opines. The top line revenue might even pull back a tad, and earnings momentum without a share buyback program will likely stall out. No need to chase the stock here.
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 Nov 6: next one is due Feb 5)
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 Nov. 13: next one is due Feb. 12)
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 Nov. 13: next one is due Feb. 12)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 Nov. 22: next one is due Feb. 19)
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 Nov. 22: next one is due Feb. 19)
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 Nov. 22: next one is due Feb. 19)
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 Nov. 22: next one is due Feb. 19)
Johnson & Johnson [GICS 35, Dow 30, Cara 100]
(JNJ: Google Finance file)
(JNJ: Yahoo Finance file)
(JNJ: StockChart chart)
(JNJ: Billcara2 chart)
(JNJ: ADVFN Financial Data)
(JNJ: Value Line Report Nov 27: next one is due Feb 26)
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 Dec. 4: next one is due Mar. 5)
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 Dec. 11: next one is due Mar. 12)
ExxonMobil [GICS 10, Dow 30, Cara 100]
(XOM: Google Finance file)
(XOM: Yahoo Finance file)
(XOM: StockChart chart)
(XOM: Billcara2 chart)
(XOM: ADVFN Financial Data)
(XOM: Value Line Report Dec. 11: next one is due Mar. 12)
Boeing Co [GICS 20, Dow 30. Cara 100]
(BA: Google Finance file)
(BA: Yahoo Finance file)
(BA: StockChart chart)
(BA: Billcara2 chart)
(BA: ADVFN Financial Data)
(BA: Value Line Report Dec. 18: next one is due Mar. 19)
AT&T [GICS 50, Dow 30]
(T: Google Finance file)
(T: Yahoo Finance file)
(T: StockChart chart)
(T: Billcara2 chart)
(T: ADVFN Financial Data)
(T: Value Line Report Dec. 24: next one is due Mar. 26)
Verizon [GICS 50, Dow 30]
(VZ: Google Finance file)
(VZ: Yahoo Finance file)
(VZ: StockChart chart)
(VZ: Billcara2 chart)
(VZ: ADVFN Financial Data)
(VZ: Value Line Report Dec. 24: next one is due Mar. 26)
Procter & Gamble Co. [GICS 30, Dow 30, Cara 100]
(PG: Google Finance file)
(PG: Yahoo Finance file)
(PG: StockChart chart)
(PG: Billcara2 chart)
(PG: ADVFN Financial Data)
(PG: Value Line Report Dec. 31: next one is due Apr. 2)
Home Depot [GICS 25, Dow 30]
(HD: Google Finance file)
(HD: Yahoo Finance file)
(HD: StockChart chart)
(HD: Billcara2 chart)
(HD: ADVFN Financial Data)
(HD: Value Line Report Dec. 31: next one is due Apr. 2)
Hewlett-Packard [GICS 45, Dow 30]
(HPQ: Google Finance file)
(HPQ: Yahoo Finance file)
(HPQ: StockChart chart)
(HPQ: Billcara2 chart)
(HPQ: ADVFN Financial Data)
(HPQ: Value Line Report Jan. 8: next one is due Apr. 9)
IBM [GICS 45, Dow 30, Cara 100]
(IBM: Google Finance file)
(IBM: Yahoo Finance file)
(IBM: StockChart chart)
(IBM: Billcara2 chart)
(IBM: ADVFN Financial Data)
(IBM: Value Line Report Jan. 8: next one is due Apr. 9)
Intel [GICS 45, Dow 30, Cara 100]
(INTC: Google Finance file)
(INTC: Yahoo Finance file)
(INTC: StockChart chart)
(INTC: Billcara2 chart)
(INTC: ADVFN Financial Data)
(INTC: Value Line Report Jan. 8: next one is due Apr. 9)Alcoa [GICS 15, Dow 30]
(AA: Google Finance file)
(AA: Yahoo Finance file)
(AA: StockChart chart)
(AA: Billcara2 chart)
(AA: ADVFN Financial Data)
(AA: Value Line Report Jan. 15: next one is due Apr. 16)
Dupont [GICS 15, Dow 30]
(DD: Google Finance file)
(DD: Yahoo Finance file)
(DD: StockChart chart)
(DD: Billcara2 chart)
(DD: ADVFN Financial Data)
(DD: Value Line Report Jan. 15: next one is due Apr. 16)
Merck [GICS 35, Dow 30]
(MRK: Google Finance file)
(MRK: Yahoo Finance file)
(MRK: StockChart chart)
(MRK: Billcara2 chart)
(MRK: ADVFN Financial Data)
(MRK: Value Line Report Jan. 15: next one is due Apr. 16)
Pfizer [GICS 35, Dow 30]
(PFE: Google Finance file)
(PFE: Yahoo Finance file)
(PFE: StockChart chart)
(PFE: Billcara2 chart)
(PFE: ADVFN Financial Data)
(PFE: Value Line Report Jan. 15: next one is due Apr. 16)
General Electric [GICS 20, Dow 30, ex-Cara 100]
(GE: Google Finance file)
(GE: Yahoo Finance file)
(GE: StockChart chart)
(GE: Billcara2 chart)
(GE: ADVFN Financial Data)
(GE: Value Line Report Jan. 22: next one is due Apr. 23)
United Technologies [GICS 20, Dow 30, Cara 100]
(UTX: Google Finance file)
(UTX: Yahoo Finance file)
(UTX: StockChart chart)
(UTX: Billcara2 chart)
(UTX: ADVFN Financial Data)
(UTX: Value Line Report Jan. 22: next one is due Apr. 23)
Caterpillar [GICS 20, Dow 30]
(CAT: Google Finance file)
(CAT: Yahoo Finance file)
(CAT: StockChart chart)
(CAT: Billcara2 chart)
(CAT: ADVFN Financial Data)
(CAT: Value Line Report Jan. 22: next one is due Apr. 23)
Coca Cola [GICS 30, Dow 30, Cara 100]
(KO: Google Finance file)
(KO: Yahoo Finance file)
(KO: StockChart chart)
(KO: Billcara2 chart)
(KO: ADVFN Financial Data)
(KO: Value Line Report Jan 29: next one is due Apr 30)
Kraft Foods [GICS 30, Dow 30]
(KFT: Google Finance file)
(KFT: Yahoo Finance file)
(KFT: StockChart chart)
(KFT: Billcara2 chart)
(KFT: ADVFN Financial Data)
(KFT: Value Line Report Jan 29: next one is due Apr 30)
Sector ETF Summary for the US equity market
The tables I show are for eleven GICS Sector Index Funds (ETF’s), including two for Technology (XLK and SMH), for a total of ten GICS sectors. They cover the full spectrum of the US equity market.
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.
For the week-ending 1/29, nine of the ten (10) sector ETFs were down. The Financials (XLF) closed flat W/W, but lost -0.70% on Friday and is now down -7.02% over two weeks.
Otherwise, prices were said to continue plunging.
The worst performers were (in order): Basic Materials (XLB –4.71%), after also being down -7.11% a week earlier, Technology (XLK -3.24%), after being down -5.74% a week earlier, and Energy (XLE -3.20%), after being down -5.76% a week earlier.
Much of the selling that took place in the final afternoon of the previous week followed the announced Volcker Plan. As I remarked, traders apparently got the message that there will finally be change in Washington. But, in further thinking, now that I see this week’s line-up of Volcker on Tuesday and Goldman Sachs on Thursday in front of the Senate Banking Committee, we have to consider the possibility that it is Goldman Sachs sinking the equity market until and unless they get Congress to maintain the status quo. After all, who else in the world is coining trading profits like Goldman Sachs. Profiting, as I have been saying, by front-running insider knowledge and “huddles” and any other illegal or immoral trick they can refer to as “God’s work”.
So, we just have to wait to see if the $2 Trillion FOMC Hedge Fund is going to be turned over to JP Morgan Chase et all, and its leader Jamie Dimon parachuted into the Office of the Treasury Secretary, replacing Teflon Timmy Geithner. My, what a scenario -- one Teflon Man for another, one HB&B King to replace the one who got the world in crisis (Henry Paulson). I suppose if he takes the Volcker-inspired move into Treasury, he would have to resign his seat as the key director on the Fed Reserve Bank of NY. I couldn’t wait to see the replacement! Bets anyone?
Here’s the SPY Monthly, Weekly and Daily data charts:
SPY Monthly data:
SPY Weekly data:
SPY Daily data:
10 (energy: XLE)
15 (basic materials: XLB)
20 (industrial: XLI)
25 (consumer discretionary: XLY)
30 (consumer staples: XLP)
35 (healthcare: IYH)
40 (financial: XLF)
45 (technology, semiconductor: SMH)
50 (telecom: IYZ)
55 (utilities: XLU)
These are interesting Daily charts with many of the RSI-7 levels now down in the teens and twenties, but the Financials at 35.9, with room to fall.
Straddles anyone?
Individual Sector ETF Review
Watch the changing Stochastics.
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 for when %K is above the %D and rising to stay with your price a bit. And, if you are at a decision point, it’s time to consider selling or taking other defensive action when the %K crosses down through %D. Let the force be with you.
These charts show the numbers and the lines, so it’s not rocket science to follow.
Previously I gave a list of five components of the DJIA index that I said were important and have been, I believe, in large scale distribution. Take a look at the chart with 9-period Stochastics (%K and %D) added to the RSI-7. The arithmetic is similar, but the STO is more sensitive.
http://billcara2.com/tkchart/tkchart.asp?stkname=IBM,BAC,GE,INTC,JPM&ind...
From reading this blog, you know I like the companies, but felt some weeks back that there would be a breakdown in the Bull, and that, if you are patient, you’ll be able to Buy the stocks of the highest quality companies after the price comes to you in the Accumulation Zone.
I’ll try to give you a Daily heads-up if you are a short-term oriented swing trader, but frankly for the intermediate and long-term investor/traders, you need to be focused on risk management at this point. It might be status quo (business as usual on Wall Street and the City) or it might be change of the kind Americans hoped for and voted for (Obama/Volcker). We just have to wait and see.
Sector 10 (energy: XLE, IYE, VDE, OIH, PBW and IXC)
Here’s the XLE Monthly, Weekly and Daily data charts:
XLE Monthly data:
XLE Weekly data:
XLE Daily data:
Table 2: Senior oil & gas equities
Sorted by 1-Week Price Performance Symbol Close 1Day
Change1Day
%Change1W
%Change2W
%Change4W
%ChangeYTD
%Change3M
%Change6M
%Change12M
%ChangeThis week, the Energy ETF (XLE) dropped a further -3.20% to 54.50, after plunging -5.76% a week earlier.
The Crude Oil price ($WTIC) has fallen from a cycle peak in early January of $83.95 to just $72.89. This week the price dropped -$1.65/bbl (-2.21%). That’s what happens when speculators jump ship, or as the case may be are forced to jump.
It was just three weeks ago when I noted “the price had rallied a further +$3.39/bbl (+4.27%) to 82.75. The lift over the previous three weeks was +1.68%, +4.88% and +3.43%. Why? The economy is looking rather tentative at this point, so traders are anticipating another round of Quantitative Easing. That increase in the amount of money pushes up prices particularly where there are storehouses of value, like oil and metals. Not surprising then, the Energy (XLE) and Basic Material (XLB) sectors were #2 and #1 respectively this week, down from #8 and #5 the previous week… Many of these oil stocks were on fire this week: Transocean (RIG +12.3%), PetroChina (PTR +9.7%), China National Offshore (CEO +9.0%, Schlumberger (SLB +8.5%) and the list goes on… Was Goldman Sachs a good forecaster re $85 oil or did they know something in advance or, possibly, did they merely engineer it? I just know it certainly helps some of their biggest clients, like UAE for example.”
But, in the end, in the absence of strong economic demand, it’s central bank tightening and a rallying $USD that pressures commodity prices lower, and that is what has been happening.
This week, the best performer among my watchlist of Energy stocks was TransOcean (RIG) and it fell -1.14%. Suncor was worst performer, losing -4.98%. Traders are not throwing the babies out with the bathwater at this point as the oil sell-off has been rather extreme for three weeks, and the Daily RSI-7 on the XLE is down to 16.9.
As I opined a week ago, there may be periodic bounces, but deleveraging will likely take the price of Oil into the 60’s or even possibly lower, and the related equity prices of the Oil companies will fall a lot more from here.
But for now, I anticipate a small bounce. Of course, it’s anybody’s call through Thursday when the Goldman Sachs people testify in front of the Senate Banking Committee.
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
%ChangeThree weeks ago I wrote in this space, “the Basic Materials sector (XLB) soared +5.85% from 32.99 to 34.92, which was the best move of all ten sectors this week. That’s what happens with Quantitative Easing, at least when traders no longer believe the Fed’s statements that it’s not happening… When you see the shares of state-owned banks popping +10% in a couple hours, you know it’s happening!”
One week ago, with obvious deleveraging, followed by the Volcker Plan, which I noted was surely going to upset the HB&B gang, the price of Basic Materials stocks (XLB) plunged -7.11% to close at 31.63. This week, XLB was the worst performer, down -4.71% W/W to 30.14.
So you need to be looking for clues like, for example, if the bankrupt Greek, Irish and UK banks are being pumped in the early morning ET.
The losers among Basic Materials this week were led by Teck Corp (TCK -10.0%). Tenaris (TS -2.4%) was the best of the lot.
Some of the major Goldminers were off greater than 10% again this week as well.
As I wrote a week ago, “that’s what happens when a pin is stuck into a speculator’s balloon. I alerted you to that probability a couple weeks ago when I opined that the Bullish trend in $SILVER contracts had turned Bearish”.
But Friday may have seen a turn as $SILVER dropped only -0.18% compared to $GOLD’s loss of -0.42% on a day when the $USD was soaring (+0.68%). I noted in the morning call that we had done a bit of buying of precious metal miners at the end of Thursday because I thought I could see a turn coming. I also noted that support levels for $GOLD were holding, but until the upper resistance level was taken out, I was not going to rush in. I feel like this is micro-surgery. At least it felt that way on Friday as the Dollar lifted and precious metal prices were jumping all over the board.
Besides, the RSI-7 for the Daily is now down to 17.4.
Alcoa (AA) in this sector was down -5.00% W/W, which was the worst performing stock in the DJIA index. Next week; not so bad, I think. Either there will be a bit more quantitative easing here or else there could be a full-out rout in market prices. If I only knew who really is running the FOMC Hedge Fund – the Fed or Goldman Sachs – and had my spies there, I could tell you when the easing vs deleveraging actions were to start. Then, I too, would enjoy 99 profitable trading days in every 100!
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
%ChangeThe Industrials ETF (XLI) dropped -1.65% to close the week at 27.38. A week earlier the loss was -5.47% to 27.84.
As I opined a week ago, “A rising USD usually does not support a rising equity market unless the economy is healthy and real wealth is being created. It also puts pressure on major US exporters, which have a tougher time selling their goods, and lowers the currency conversion gains when foreign subsidiary profits are repatriated.”
In my view, there must be net deleveraging, so the market pull-back has only just begun its Bear phase of a complete cycle.
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) lost just -0.38% W/W to close Friday at 28.91. The loss a week earlier was -4.16% to close at 29.02, so the haircut was 11 cents only. The loss on Friday was -0.62%.
A week ago I opined that “This week, Brunswick Corp (BC -10.2%) was a serious loser as traders began “acknowledging reality”. If consumers cannot get jobs or afford homes, they sure as heck cannot afford a SeaRay yacht. Still, I like the company, and it stays in the Cara 100.”
First point is that although I have made something like 13 changes in the Cara 100 this month, I kept Brunswick Corp. I have my eye on that SeaRay – actually, I like management and the factories and distribution system, and know that the company is just going through the thin, which will be followed by thicker, better times. As always, I don’t hesitate to sell a Cara 100 company stock when I perceive thin pickings.
Second point is that BC dropped another -10.6% this week. The real losers in this sector though had more to do with sticking gas pedals. Toyota (TM -12.7%) and Tata Motors (TTM -10.1%) were hammered. Why TTM, I didn’t see. Maybe they use the same accelerator pedal system as Toyota? Someone ought to check. Once I purchased an inexpensive Korean car that was built on Porsche engineering. The road handling was easily better than my previous high end Buick and certainly a dream compared to my old Ford Taurus or my “new” 1990 Mustang convertible, which looks cute but is a dog to drive. Maybe also not as nice as the BMW 750IL, but that’s another story. But for my expensive cars, it was light years the better driving machine than my Silver Shadow.
Speaking of autos, it looks like Ford and GM are both underway to returning to former glory (??) under new management. Ah, there is always hope. But, really, I think there is a couple new ball teams in Detroit, and I wouldn’t overlook their prospects.
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) lost -0.34% W/W to close at 26.20, which is a loss of just 9 cents.
Procter & Gamble (PG) gained +2.1% W/W.
This sector was 2nd best performer this week after being #1 a week ago. Won’t happen after a recovery bounce, but that’s something you’ll be able to see about 9:45am ET the day the rally comes.
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) lost -0.91% W/W to close at 64.18. A week earlier the loss was -2.45%.
As noted a week ago, I added a couple Healthcare stocks to the Cara 100, including Merck (MRK) and also CR Bard (BCR), and I removed Myriad Genetics (MYGN). Accordingly, the Goldman Sachs traders popped the MYGN +3.12% this week, while MRK dropped -1.78%. Just kidding; BCR also popped +4.34%.
I’ll write up all these changes after I have time to collect my thoughts.
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) was flat on the week, while all other nine sectors took losses.
XLF did lose -0.70% on Friday to close at 14.18.
Winners on the week were Citigroup (C +2.2%) and Bank of America (BAC +1.9%).
Interestingly, it was just last week that I reported, “The big losers this week were interestingly all foreign banksters: Banco Bradesco (BBD -17.2%), Credit Suisse (CS -16.8%), Deutsche Bank (DB -15.2%), and UBS (UBS -14.0%) all took massive hits.” Same thing happened this week.
There were also a large number of local and regional US banks that closed their doors this week as HB&B has cut them off.
Within the offshore picture, Switzerland and the UK have come to an agreement regarding the complicity of Swiss banks in causing tax fraud among their clients. Apparently the UK, and presumably the US, authorities will not be able to use the bank records turned over by whistle-blowers to engage in any kind of fishing expedition, but will however be able to use them to prosecute if they have enough other info to make cases.
UBS (UBS -7.1%) took a hit. This issue is not going away, and there are many other Swiss banks caught in the vice. I think most offshore banks will be forced by their home regulators to pull out of tax haven countries. That’s a positive as far as I’m concerned.
As I opined here a week ago, “The Volker Plan has Humungous Bank & Broker (HB&B) thinking maybe there will be a ‘B’ lopped off so that in future they’ll just be referred to as Humungous Bank. Then after the loopholes are discovered, there will likely be busy elevators taking the human resource assets down to Street level where they will soon pop up in newco’s where govt will not likely be able to squeeze added taxes into performance based bonuses. You see, there is nothing wrong with performance bonuses as long as there is no longer the conflict of interest issues that are behind a bankers plan to merge and merge and merge until a few managers control most everything in financial services, and from there take command of capital markets, and hence the foregone conclusion with respect to profits trading against the rest of us. Suddenly, the ‘Too Big to Fail’ concept’ goes away. There, in the end, will be fair competition among many. Let the winners be well paid.”
Having government get involved in the businesses of financial services and capital markets is something I am dead set opposed to. What is needed is what Volcker wants, which is to eradicate conflict of interest issues. The people who argue that proprietary trading did not cause the financial crisis are correct in that sense, but dead wrong when it comes to our needing to stop commercial banks or investment banks (the ones that also advise and lend money to clients) doing it. Once again; it is the conflict of interest issues that must be addressed. Prop trading is just a small part of the dysfunctional bigger picture.
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 -3.24% to 20.96), and Semi-conductors (SMH -3.54% to 24.76) were down a lot W/W, but also fell about half what happened a week earlier. Most of the losses here happened on Friday as traders hit the bids in the morning after some positive earnings reports came out.
When good news leads to selling, then traders can feel the wind of change.
In the Tech sector, Qualcomm (QCOM -16.2%) was a huge loser. In the Semi conductor space in this sector, LSI Logic (LSI -12.9%) and SanDisk (SNDK -10.5%) were the biggest losers among the high quality company stocks.
There are signs of a double dip to economic recovery. A stronger $USD also hurt.
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) dropped -2.67% W/W to close at 18.22. The loss a week earlier was -4.78% to close at 18.72, so this week’s loss was 50 cents.
Verizon (VZ -3.03% W/W) and AT&T (T -0.12%) seemed headed in different directions.
Here’s the IYZ Monthly, Weekly and Daily data charts:
IYZ Monthly data:
IYZ Weekly data:
IYZ Daily data:
Sector 55 (utilities: IDU, XLU, and VPU)
Here’s the XLU Monthly, Weekly and Daily data charts:
XLU Monthly data:
XLU Weekly data:
XLU Daily data:
The Utilities sector ETF (XLU) dropped just -0.97% W/W to close at 29.53 after falling -4.15% a week earlier.
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 0.05 0.05 0.02 0.02 6 Month 0.13 0.13 0.12 0.17 2 Year 0.81 0.86 0.79 1.08 3 Year 1.34 1.40 1.36 1.61 5 Year 2.32 2.39 2.34 2.61 10 Year 3.58 3.64 3.61 3.79 30 Year 4.49 4.55 4.53 4.61
Municipal Bonds Maturity Yield Yesterday Last Week Last Month 2yr AA 0.78 0.71 0.81 0.70 2yr AAA 0.61 0.54 0.73 0.64 2yr A 1.27 1.06 0.96 1.37 5yr AAA 1.55 1.56 1.65 1.63 5yr AA 1.76 1.70 1.77 1.70 5yr A 2.14 2.14 2.12 1.96 10yr AAA 3.01 2.94 2.90 3.09 10yr AA 3.06 3.07 3.01 3.21 10yr A 3.40 3.38 3.12 3.48 20yr AAA 4.38 4.35 4.32 4.42 20yr AA 2.69 4.18 4.12 3.02 20yr A 5.68 5.57 5.34 5.00
Corporate Bonds Maturity Yield Yesterday Last Week Last Month 2yr AA 1.33 1.43 1.35 1.53 2yr A 1.51 1.60 1.52 1.76 5yr AAA 2.82 2.87 2.83 3.14 5yr AA 3.22 3.30 3.23 3.41 5yr A 3.35 3.39 3.27 3.43 10yr AAA 3.45 3.53 3.42 3.48 10yr AA 4.86 5.03 4.91 5.05 10yr A 4.60 4.67 4.57 4.63 20yr AAA 5.40 5.55 5.46 5.23 20yr AA 5.43 5.50 5.40 5.07 20yr A 6.34 6.49 6.40 6.17
The US Treasury bonds were extremely quiet this week, which was surprising given the action in the $USD, and the fact that when equities drop like they have for three or four weeks running there is usually a safe haven thing going on.
Maybe the pressure is coming off the equities and commodities and next week we’ll see the $USD weaken a bit. That would shoot bonds higher as the play these days is variably deleveraging, which removes liquidity, causing equity prices to fall, followed by some more bursts of quantitative easing (which pumps liquidity into stocks and bonds). But, we will have to wait and see.
Usually, if the economic data looks good, the interest rate yields rise as funds become scarcer, and that lowers bond prices. But weaker economic data leads to lower rates and higher bond prices. Then, later, in the economic recovery, the credits improve, which starts to lift the bond prices.
This week, the 20-year US bond (TLT) gained +0.34% to close at 92.31, but there was a gain on Friday of +0.87%.
Yield for the 30-year is now at 4.49 (down from 4.53%), the 10-year at 3.58 (down from 3.61%), the 5-year at 2.32 (down from 2.34%), and the 2-year at 0.81% (up from 0.79%).
As I pointed out earlier, these yields have made significant upward moves in December. On Nov 29, the 20, 10, 5 and 2-year Treasury yields were 4.20%, 3.20%, 2.02% and 0.68% respectively. Holders of bonds have been killed in the literary license, but with the safe have play, prices have regained a bit.
Ultimately, rates/yields will have to rise. But we need a stronger economy for that as corporations, individuals and investors scramble for money in competition with government whose needs appear to be without limit.
Here is the $USB 30-year Treasury Bond chart.
Interest rates and bond yields.
Interactive Daily data charts:
Interactive Chart of Interest rates and bond yields.
Why change the following?
This chart is stunning to long-term observers of the debt markets. Obviously, the banks are being favored. What happens when the banks are forced to borrow at much higher true rates? What happens to the private sector owners of this debt?
Without higher yields, I have been saying, repeatedly, “This situation will end badly, although that scenario might take a year or two to fully play out. Unless the economy collapses into a severe double dip recession or a depression, the long-term risk is to be holding bonds as ultimately rates will have to lift to stabilize debt and equity markets.”
I have also opined that, “…if the rates do move slowly higher in the near term, there will be pressure down on equity prices, which may hurt temporarily, but the longer-term picture could look better unless rates rally to a high enough level that forces more foreclosures before the economy has been proven to be on the rebound.”
US Bond Funds -- Interactive Monthly Data Charts SHY Monthly data series chart:
IEF Monthly data series chart:
TLT Monthly data series chart:
AGG Monthly data series chart:
LQD Monthly data series chart:
TIP Monthly data series chart:
US Bond Funds -- Interactive Weekly Data Charts SHY Weekly data series chart:
IEF Weekly data series chart:
TLT Weekly data series chart:
AGG Weekly data series chart:
LQD Weekly data series chart:
TIP Weekly data series chart:
US Bond Funds -- Interactive Daily Data Charts SHY Daily data series chart:
IEF Daily data series chart:
TLT Daily data series chart:
AGG Daily data series chart:
LQD Daily data series chart:
TIP Daily data series chart:
Table 11: Interest-sensitive securities
Sorted by 1-Week Price Performance. Symbol Close 1Day
Change1Day
%Change1W
%Change2W
%Change4W
%ChangeYTD
%Change3M
%Change6M
%Change12M
%Change
Fannie (FNM from $0.99 to $0.96) and Freddie (FRE -15.2% from $1.17 to $1.18) were mostly unchanged.
Something must happen soon in Congress to replace these monsters.
http://billcara2.com/tkchart/tkchart.asp?stkname=FNM,FRE&ind=rsi&wt=0
Consumer Finance -USA -- Interactive Weekly Data Charts
Mortgage Finance -USA -- Interactive Daily Data Charts
Commodities Review
$CRB dropped -3.62% W/W to close at 265.59 this week. The loss a week ago was -2.08%.
It was just a few weeks ago the cycle high of 293.75 was set.
The 50d MA for $CRB has fallen a tad to 278.33. A week ago I opined here, “The $CRB 50d MA moved up to 278.68, but the long-running Bull trend is now in jeopardy.” Bingo, the evidence may have started coming.
The 200-day MA has moved to 260.38 W/W from 259.17. A week ago I opined in this space, “But, while it will still rise, there will be resistance at about 267. I do not expect to see it above 270 in 2010.”
As I have opined, “rising MA’s for the $CRB is basically the only time that the monetary authorities get concerned. At some point, maybe not for a while yet, but at some point, the trend in the $CRB will have to start falling or else the Fed will have to start lifting rates”.
Let’s just say they are between a commodity and a hard place, and you and I are the ones who will pay for it. Thankfully, the prices will now start falling.
Although I use the $CRB (Reuters/Jeffries Index), principally because it’s the oldest, there are many commodity indexes: http://www.crbtrader.com/crbindex/ • Astmax Commodity Index(AMCI) • Commin Commodity Index • Dow Jones-AIG Commodity Index • Goldman Sachs Commodity Index • Reuters/Jefferies CRB Index • Rogers International Commodity Index • Standard & Poor's Commodity Index • NCDEX Commodity Index • Deutsche Bank Liquid Commodity Index (DBLCI) • UBS Bloomberg Constant Maturity Commodity Index (CMCI)
Here is a link to an article that discusses the major ones that have been around for a while: http://www.rogersrawmaterials.com/overviewandanalysis.PDF
Here is a current price summary of the heaviest weighted commodities contracts: http://money.cnn.com/data/commodities/
These indexes change their component weightings perhaps annually or even monthly, for example: http://www.seekingalpha.com/article/43586-the-new-generation-of-diversif... http://tinyurl.com/a5myfj
Interactive Chart of Weekly CRB Commodities Index:
Interactive Chart of Daily CRB Commodities Index:
Oil Review
The Crude Oil price ($WTIC) was in rally mode for four weeks until three weeks ago when the price hit a cycle high of 83.95. When it did that I was skeptical. I stated, “As I say, there are well known oil analysts who believe a legitimate price, based on economic use, would be close to $55 or $60. I believe it should be in the mid-60’s. But hey, I’m not Goldman Sachs.” Then I added, “I will stick to my prediction of mid-60’s Crude Oil ($WTIC) in 1H2010 because, frankly, the economy is not roaring. Demand is not there yet.”
This week, $WTIC dropped a further -$1.65/bbl to 72.89. Eventually – not in a straight line obviously – the price will fall to the 60s.
For $WTIC, the 50-day MA is now 76.90. Only last week, I opined, “The 50-day MA is now at 77.36, and about to fall. The long-running Bull trend has stopped and a Bear trend is very likely to commence.” Seeing is believing.
The 200-d MA is at 70.27, up from 69.73. As I stated a week ago, “The long-running Bull trend will likely take the 200-day MA 68.47, up from 67.74, 67.13, 66.54, 65.79, 65.04, 64.11, 63.38, 62.42, 61.52, 60.63, 59.75, 58.88, 57.22, 56.68, 56.06, 55.16, 54.86 and 57.96, over 18 weeks”.
You can go to StockCharts.com, gallery, insert: $WTIC:$USD and then at the bottom to chart attributes and put the settings to solid line and the RSI to about 78 before it falls back.
As a general rule, if you are looking to be a trader of Crude Oil, when you see the $WTIC:$USD RSI-7 bottom below 30 and start to rise, you want to be a buyer of Oil and seller of Dollars. When this indicator peaks above 70 and starts falling, you want to sell Oil and buy US Dollars. The reason is that Crude Oil contracts are priced in USD, so higher $USD, lower $WTIC. Also, a stronger $USD, at the reversal of a cycle (but not later) is caused by a change in speculative interest. Stronger $USD; less speculation.
As I offered up here four weeks ago, right at the peak, “On the Weekly data chart this week closed at 68.58. The Daily is at 75.86, hit almost 90 on Wednesday, pulled back and then lifted again on Friday. Soon, friends, soon. Even Goldman Sachs cannot stretch the price to the moon. I think they are just trying to tick 85 so their analyst gets his nice bonus from UAE. :-)”
Yes, I am a skeptic – and sometimes right. But, really, this is no crystal ball; it’s just logic and sometimes – most of the time over the long haul -- logic works.
Here is the e-miNY Dec-07 Crude Oil chart.
Interactive Chart of Weekly Crude Oil:
Interactive Chart of Daily Crude Oil:
Gold & Precious Metals Review
This week, $GOLD dropped -$11.20/oz (-1.02%) to $1081.50. A week ago, the $GOLD plunged -$38.20/oz (-3.38%) to close at $1092.70.
Three weeks ago in the WIR, it had soared +$49.80/oz to close at $1137.30, and I remarked that I remember the days when it traded for $35/oz. But, the high price in this cycle ($1161.80) did not make it back to the all-time high of $1226.40 set in early December. I think it’s fair to say I anticipated a pull-back, along with a stronger $USD.
Now, I think it’s probably time for the red hot $USD to take a short break, which is needed to stop the equity market bleeding. Calling all PPT units! That usually means a short-term pop in the $GOLOD price. As I say; it’s likely for a short time and not a long-term good time. I think it’s best to sell into strength.
http://billcara2.com/tkchart/tkchart.asp?stkname=gld&cht=Tech+Chart&px=3...
http://billcara2.com/tkchart/tkchart.asp?stkname=gld&cht=Tech+Chart&px=1...
http://billcara2.com/tkchart/tkchart.asp?stkname=gld&cht=Tech+Chart&px=0...
The $GOLD 50day Moving Average is now at 1130.93, down from 1134.35. The tide has ebbed, no longer flowing.
The 200d MA is 1012.93, up from 1007.82, which shows a still flooding long-term picture, but not for long if the $USD continues to move higher over the next few months (except for the small pull-backs).
As I opined a week ago, “Watch the $SILVER lead the $GOLD lower in future weeks. But, there will be trading opportunities.” This week the $SILVER dropped -4.68% while the $GOLD dropped -1.02%. Bingo.
Interactive Chart of Weekly Gold EOD Continuous Contract Index:
Interactive Chart of Daily Gold EOD Continuous Contract Index:
Interactive chart of recent trading for the Gold Bullion index.
Spot silver chart for the week
$SILVER lost -$0.80 (-4.68%) to close at $16.20. A week ago the loss was -7.64%, so clearly $SILVER is getting hammered, and I brought to your attention that clear possibility a few weeks ago.
Three weeks ago, in fact, after $SILVER gained +$1.60 (+9.48% W/W) to close at 18.47, up from 16.87, I called the move “surreal”. But I also noted that “There was a high of 18.52, still not up to the 19.45 a month ago. The low was 16.83… A light trading week this week has again not changed my opinions on $SILVER. I think the market wants to see the extent of a correction and the level of support that will set in.”
http://stockcharts.com/charts/gallery.html?s=$silver
http://tinyurl.com/y8k8ud4
For $SILVER, the 50d MA is now 17.81. A week ago I said it was “17.93, but likely to turn down in a couple weeks.” Took one week.
The 200d MA is 15.75, up from 15.65, but, as I opined a week ago in this space, “ this long-term MA may rise for a couple months or so and then find resistance at about $16.15. I would not be surprised to see it stay bullish from there.”
I added “That was a pure guess on my part”. But, actually, there is some simple arithmetic and charts involved. Another story; when I was 16, I took the summer off to join the armed forces militia – two months to see if I could hack the discipline. Like all candidates, I was tested. My scores, I was told, were remarkably high in one area and I was directed to the Artillary – 42nd medium Battery… all two months of it. But artillery… think of it. I like to shoot at moving targets. It’s all a matter of logic and real-time brainiac stuff – just like trading.
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 dropped -$38.50 (-2.49%) to close at $1506.00. A week ago the price plunged -51.50/oz (-3.23%) to close at 1544.50, and I remarked “which may indicate a topping zone. The high this week was $1647.70, set Wednesday. I doubt the next week or two high will be higher, and so we’ll start to see a series of lower highs and lower lows, I believe.” Bingo again. I really love to hit a moving target. Sometimes watching these MA’s pays off!
http://stockcharts.com/charts/gallery.html?s=$plat
http://tinyurl.com/ydwz4pn
The 50d MA for $PLAT is now at 1493.90, up from 1480.91. A week ago I opined in this space, “There could be a test of that in the next week or two.” Now I am saying, there could be a bounce next week and that might stretch it out a bit.
The 200d MA is at 1305.30, up from 1297.81. A week ago I opined here, “That long-term MA could lift as high as 1385, and then provide support for short-term price weakness. We shall see. You know, in the longer-term I am a believer in higher precious metals prices. But short-term, don’t fight a rising $USD.”
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 -$23.60 (5.36%) to close at 416.50. A week ago the plunge was -$9.65 (-2.15%) to close at 440.10/oz. At that point I opined in this space, “Until this week, $PALL had been rocking and rolling for five weeks in particular, but really since November 2008. There could be a serious price decline here, but like $PLAT, this is an important industrial metal as well as precious metal, and industry people tend to hoard it prior to drawing down the inventory.” One more Bingo.
http://stockcharts.com/charts/gallery.html?s=$pall
http://tinyurl.com/yenr5rj
The 50d MA is now at 396.97 up from 390.10.
The 200d MA is at 305.19, up from 300.58.
A week ago I reminded you “Just think, $PALL was priced at $225 in July 2009 and as low as $175 earlier in the year.” The message was to take profits.
Spot palladium chart for the week
Interactive Chart of Weekly Palladium EOD Continuous Contract Index:
Interactive Chart of Daily Palladium EOD Continuous Contract Index:
Interactive chart of the Palladium metal index.
This week, $COPPER dropped -$29.45 (-8.80%) to 305.25.
A week ago the drop was only -$1.90 (-0.56%) – which was just a tad -- to close at 334.70. But I opined in this space, “There was a cycle high of 354.40 earlier in January, and I don’t think the price will surpass that this next short-term cycle or two.” In other words, take profits.
http://stockcharts.com/charts/gallery.html?s=$copper
http://tinyurl.com/ybgnb7f
For $COPPER, the 50d MA is at 325.11, up from 323.00. Next week down.
The 200d MA is at 272.75, up from 269.97.
Three or four weeks ago (please check when), I offered: “The Freeport-McMoran (FCX) chart may be helpful in figuring out where $COPPER might be headed. There was a peak of $125.07 in May 2008, following which the stock dropped to a low of $15.70 in December 2008. This year there was a steady rise to $87.35 in November. Since then the stock has fallen back and then made a bull run as high as $83.43. This week there was a run up of +9.73% W/W to $88.10. RSI-7 momentum had been falling for the M-W-D price series data.”
A week ago I added, “Not to make a big deal of it, but FCX closed this week at $74.23, and was down W/W by -12.0%”. This week, FCX plunged a further -10.16% to close at 66.69. Another Bingo.
But, if precious metals get a bump with a falling $USD next couple days, the $COPPER and FCX may lift too. But, again, watch the big money sell into strength as the tide has turned.
For those who are keen to study the industrial metals like copper, aluminum and zinc, why not look at the Powershares DBB, which trades on the NYSE.
http://finance.google.com/finance?q=NYSE:DBB
Interactive Chart of Weekly Copper EOD Continuous Contract Index:
Interactive Chart of Daily Copper EOD Continuous Contract Index:
Interactive chart of the Copper metal index.
Table 12: Senior gold equities
| Symbol | Close | 1Day Change |
1Day %Change |
1W %Change |
2W %Change |
4W %Change |
YTD %Change |
3M %Change |
6M %Change |
12M %Change |
A week ago I reported, “The $XAU (-8.10%), GDX (-7.65%) and XGD (-4.98%) were all smashed this week. Yes, the precious metals prices are down. Yes, the speculators have departed the market until it appears to them that the $USD is going to resume its plunge under the weight of Quantitative Easing.”
This week, the $XAU (-6.83%), GDX (-7.01%) and XGD (-5.75%) were also hammered. Maybe that’s enough for now. Otherwise, there could be a free-fall, which would lead traders to think the $USD is going to the moon, which would then crater broad equities. The PPT gang don’t want to see that – but then maybe JP Morgan is no longer in sync with Goldman Sachs, so who really knows? If GS crosses the table to fight the PPT now, it could be free-fall. Then again, let’s wait for a Goldman Sachs analyst to huddle up with their prop desk and best clients, so that word will eventually leak out to the rest of us, and then the game is on.
At the Cara Bahamas 2010 Conference in Freeport a week ago, I noted that the CTA mining team under Chris Start, presented a short list of 15 gold and silver companies of various stages of development from exploration up to mid-level producers. I said they would be published this week, but you have no idea how busy I have been. Sorry. It will come after I catch my breath.
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.
As commodities are priced in $USD you need to study forex price trends and cycles.
The Forex market is a three to four trillion dollar marketplace every day, which dwarfs the size of the stock and bond markets. In this market, the Euro/USD is the highest volume trader.
The current value of $USD is a mean value of rate fluctuations of six world currencies (Japanese yen, Euro, British pound, Canadian dollar, Swiss franc and Swedish krona) that each trade against the USD.
The ETF that tracks the G-10 currencies is the Powershares DBV. http://tinyurl.com/ltxpk4
The $USD had a remarkable bull run from the start of December through the 23rd. Since then the price lifted a smidgeon, but mostly sidetracked, then fell back a bit before moving higher a week ago. Then this week the $USD soared, up +1.51% to close Friday at 79.47.
http://stockcharts.com/charts/gallery.html?s=$usd
http://tinyurl.com/y9c3sr4
The 50-day MA of the $USD is now at 76.87, up from 76.52, and rising.
The 200-day MA is 78.53, down “from 78.69 and still falling but ready to form a base near this level I think”.
Interactive Chart of Daily U.S. U.S. Dollar Index:
This week, the Euro contracts ($XEU) dropped -1.96% against the USD to close at 138.62. There was a loss on Friday of -0.77%.
But, I detect a softening of the $USD. I think these people in Davos are listening too much to George Soros, the gambler who made $10 billion betting $1 billion against the British Pound many years ago. Anyway, the forex market is now very much larger and George is just a player, not THE player.
http://stockcharts.com/charts/gallery.html?s=$xeu
http://tinyurl.com/ydekjtk
Three weeks ago I stated in this space, when the Euro was at 144.10, “There is still a lot of support at the 142.50 level, but it looks to me like the Euro could fall a lot from here. (That would not happen) if only the US Jobs Report would look a little stronger!.. (But) I still believe that in January there could be a test of the August low of 140.47, which would drop the price below the 50d and 200d MA’s, which would be bearish for the Euro and precious metals and oil and, I believe, equities.”
A week ago I added, “This week there was a low of 140.32. That’s like Tiger hitting a short iron from 150 yards out to within five feet of the hole, and why you pay so much for this WIR! :-) … Now we have to see whether the Euro will base for a bit of a run higher, taking the precious metals on another Bull run. The charts are looking like that could happen, but frankly there is so much happening in Washington and I still have my head into Freeport to be able to make a call worthy of your serious consideration.”
Down almost -2.0% W/W is not a basing pattern, but as I have been writing this week, there is not a free-fall likely. In any case, I have my set-ups in place, watching technical support and resistance. Tough game to play for sure.
The 50d MA for the Euro futures are now at 145.26, down from 146.18.
The 200d MA is at 142.86, up a bit from 142.67.
Remember, we trade the actual prices, not what we think will happen.
Interactive Chart of Weekly Euro Dollar Index, priced in USD:
Interactive Chart of Daily Euro Dollar Index, priced in USD:
The Pound dropped -0.81% this week to close at 159.92.
http://stockcharts.com/charts/gallery.html?s=$xbp
http://tinyurl.com/yasdzc2
The 50d MA of the Pound is at 162.71, down from 163.25, which is still remarkably flat since the beginning of October.
The 200d MA is now at 161.67, slightly up from 161.35, still on the rise.
Weekly British Pound Index:
Daily British Pound Index:
Weekly Japanese Yen Index:
This week, the Yen dropped -0.44% to 110.83, and there was a loss on Friday of -0.35%.
After the Yen strengthened, I saw the Quantitative Easing that the new govt started recently, and the weak economy there that needed to be addressed by the monetary authorities. I opined, “Eventually, I do see a pull-back to a cycle bottom around 100.”
http://stockcharts.com/charts/gallery.html?s=$xjy
http://tinyurl.com/yd2fzv4
The Yen’s 50-day MA is now 111.00 down a tad from 111.03, “which has been very flat since the start of December”.
The 200-day MA is now at 107.60, up a bit from 107.33.
Daily Japanese Yen Index:
The Canadian Dollar aka Loonie, dropped -1.16% to close the week at 93.43. A week ago it plunged -2.72% to close at 94.53.
Three weeks ago I reported that “the Loonie gained +2.29% to 97.11, which was quite a jump from 94.94… The price has been side-tracking for almost three months. This might be a late move due to the huge move up in Oil and Precious Metals this week… Prices for Crude Oil and Precious Metals will determine the trend, up or down. As Oil and Gold prices drop, for instance, so too does the Loonie. I think that will happen in the weeks ahead.”
A week ago, I added, “Yes, that happened. Crude Oil and Precious Metals prices did drop sharply in the past two weeks as the $USD lifted. The Loonie is now lower than where it was three weeks ago, and falling. Depending on the price of Crude Oil and Precious Metals falling some more here, the Loonie will continue lower in price. But beware of an oversold situation with a mild pop in the commodity prices starting later this coming week. The charts seem to be setting up for that but, as stated earlier, there really is too much going on in the next three days in DC to make that call.”
I think it might happen this coming week, but again, we trade what we see not what we think might happen.
http://stockcharts.com/charts/gallery.html?s=$cdw
http://tinyurl.com/ycx58us
The Loonie 50-day MA is now at 95.09, down from 95.22.
The 200d MA is at 91.55, up from 91.25.
Trading forex is a dicey game, and there are charlatans all around who would sucker the unwary into their seminars, where they sell dubious services. But, for knowledgeable traders, the price trends and cycles must be studied nonetheless as they serve as confirmations -- or anomalies -- of other prices… In the latter case, with an anomaly, the relationship needs to be studied further.
Weekly Canadian Dollar Index:
Daily Canadian Dollar Index:
Here is the China Yuan (CNY) chart.
Wrap-up:
There are lots of exciting things happening. I have been working hard, as usual, but having returned to Nassau from the conference in Freeport, I did take a lot of time off this week. I don’t know what kaimu is talking about when he says the weather here is too cold. It was in the low 70s when he arrived because of a once in a decade cold snap that frosted out south Florida which is only 75 miles west of Freeport. But the Gulf Stream protects the Bahamas to some extent. As the conference started, the temperature warmed a bit, but then a wind storm took out the front and we had lovely weather after that. This week in Nassau has been 78 to 84, and mostly clear. Nothing wrong with that, so I don’t want my friend to mislead you.
There are some important matters underway. I’ll try to keep you up to speed. I’m booked to go to Toronto on March 3 for the PDAC March 7 to 10. Then I figure I’ll be busy meeting people for a few weeks (in the truly cold weather) before returning to Nassau for my favorite month (April).
I’ll try to get the new BillCara.com portal finished soon as well as the Cara 100 notes that are published in a file linked to the top menu. I also need korvus to replace the table list with the new one.
Onwards and upwards. Have a great weekend. Time for a break.
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