[1:50pm] As I see it there are more negative high-impact events on the horizon than positive ones for the independent capital markets trader. Fighting for top spot are (i) the government debt crises (from sovereign debt of countries like Portugal, Italy, Greece and Spain [PIGS] to state debt like California, Florida, New Jersey, Ohio, Michigan and Illinois), and (ii) regulatory reform, so sorely needed by workers and capital owners of the world, but being fought tooth and nail by Humungous Bank & Broker (HB&B) in the US Congress today.
Goldman Sachs, JP Morgan et al (HB&B) at this point is more powerful than the President/Volcker team, but Congress does hold the balance of power. As to the eventual winner, I will give you a hint: the outcome will be decided by whoever prints the money, and the last time I checked, it was the governments that spend it and the banks that print it.
However, the Volcker Rule announcement, as part of President Obama’s State of the Union address, changed my view in terms of how long it might take to clean up the mess caused by people like Greenspan, Rubin, Gramm, Paulson, Summers, Geithner and Bernanke. Depending on how things go forward in Congress, following the Senate Banking Committee meetings this past Tuesday (Volcker) and Thursday (Goldman Sachs et al), I think that matters will be brought to a head. We will definitely have reform, although I don’t yet see a clear winner between HB&B and Volcker as to the completeness of the reform program.
As far as the plight of the PIGS and bankrupt US States, this is really a matter to be decided between the banksters and the US government, and that’s why the regulatory reform issue has surfaced at the same time. The banksters are holding the best cards, and now they are playing them, at the precise point they want to play them. This week’s market volatility was just a mere shot across the bow.
A week ago I opined in the WIR, “…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 I see it, Friday was truly a showdown, although not the big one to come, and probably just one of a series. As the week was coming to a close, Paulson, Summers, and Geithner all spoke in favor of the status quo, but, for some reason, Volcker disappeared. That concerned me.
Senator Shelby, for one, was outspoken for his masters (the banks who contribute to his re-election campaign), in passing faint praise to Volcker by saying that most of his good ideas were already incorporated into the legislation he wanted passed. Damn the guy. He ought to be turfed by the voters for his role as spinmeister for the banksters. Instead, let’s hear what Volcker and Obama has to say about their take on the goings-on in Congress.
We are at a watershed in terms of this crucial regulatory reform matter, and we need to hear people speak for themselves so, from my perspective, the voters can oust the jerks that were accountable for this mess by changing the rules in the past ten years to favor their HB&B patrons, and now leaning that way again despite all the grief these people have brought us.
I’ll say this; if Congress makes another mess of it, you can expect the rest of the world (ex-UK, which is the US mini-me) not to get shagged by their stupidity. Europe and Asia will get it right, and US owners of capital will start to migrate their funds to those more credible jurisdictions, and major US listed corporations will follow.
Such a transition will be slow, but it will happen. Then let the finger pointing in DC begin. There will be plenty of targets going back to Phil Gramm who I believe was the worm in Washington that poisoned the system.
[Wiki: Some economists state that the 1999 legislation spearheaded by Gramm and signed into law by President Clinton — the Gramm-Leach-Bliley Act — was significantly to blame for the 2007 subprime mortgage crisis and 2008 global economic crisis.[9][10]The Act is most widely known for repealing portions of the Glass-Steagall Act, which had regulated the financial services industry.[11]
Gramm responded to criticism of the act by stating that he saw "no evidence whatsoever" that the sub-prime mortgage crisis was caused in any way "by allowing banks and securities companies and insurance companies to compete against each other."[12]The Act passed the House by an overwhelming majority and passed by unanimous consent in the Senate, though it was introduced on the last day before Christmas holiday and never debated by either congressional body.[13]
Gramm's support was later critical in the passage of the Commodity Futures Modernization Act of 2000, which kept derivatives transactions, including those involving credit default swaps, free of government regulation.[14]
In its 2008 coverage of the financial crisis, The Washington Post named Gramm one of seven "Key Players In the Battle Over Regulating Derivatives", for having "[p]ushed through several major bills to deregulate the banking and investment industries, including the 1999 Gramm-Leach-Bliley act that brought down the walls separating the commercial banking, investment and insurance industries".[15]
2008 Nobel Laureate in Economics Paul Krugman, a supporter of Barack Obama and former President Clinton, described Gramm during the 2008 presidential race as "the high priest of deregulation," and has listed him as the number two person responsible for the economic crisis of 2008 behind only Alan Greenspan.[16][17] On October 14, 2008, CNN ranked Gramm number seven in its list of the 10 individuals most responsible for the current economic crisis.[18]
In January 2009 Guardian City editor Julia Finch identified Gramm as one of twenty-five people who were at the heart of the financial meltdown.[19] Time included Gramm in its list of the top 25 people to blame for the economic crisis.[20]
Late in the day Friday, equity prices were getting hammered, and then suddenly turned when the $USD weakened a tad. Maybe, for a moment, HB&B was satisfied with the way their demands for financial reform (as opposed to our demands) were shaping up in Congress. Maybe it was the FOMC trading desk following orders from the Obama/Volcker team as who knows where Bernanke stands at the moment. Then, again, maybe the reversal was simply a topping of the $USD when it ran into resistance at 80.68 mid day. The close was 80.36, up +0.44 (+0.55%) on the day, but moving rapidly down as traders piled into equities in the final hour.
With Thursday and Friday an all-out rout until the dramatic reversal late in the day Friday, it’s anybody’s call (plus Goldman Sachs of course) as to how next week will go. Then again, if on Sunday, wearing robes on the central balcony of Saint Peter's Basilica, is our man Paul Volcker, we don’t have to wait for a smoke signal to tell us this equity market is going south, and the $USD higher.
But, who’s to say. We are out of the room; out of the deal. We are merely part of the crowd watching the balcony.
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. But, we must say, a picture that in the last hour of the week attempted to posit a major attitude adjustment on the crowd. Anything is possible when emotions are running this high.
Global Economics Review
Weekly International Economic Report from Econoday.
Summary: …All global equity market indexes are below year-end levels. The primary reasons for the declines last week are two —
• The growing worries about the fiscal health of Europe’s weakest economies triggered a worldwide flight to the safety of the U.S. dollar and Treasuries. Confidence waned in European governments’ ability to repay their debts, a combination of fears over Greece, a troubled auction of Portugal’s debt and mounting fears that Spain’s much bigger economy appears to be in deeper trouble than either Greece’s or Portugal’s. In a relatively short time span, investor fears which had been limited to Greece have now spread elsewhere and to equity markets.
• The impact of declining sentiment in Europe was compounded in the U.S. by poor employment data, with the number of American workers claiming jobless benefits rising unexpectedly last week. The data are noisy and may be affected by the bad winter weather. But there were 6 percent more new claims last month than in December. This is a great leading indicator and it is rising again.
In the periphery, investors are restive about the end of quantitative easing programs with the UK QE program on hold and the U.S. ending its credit easing initiative soon. Investors fear that the markets will come under intense pressure without this stimulus. Markets now must learn to live without the government stimulus.
Here are the key US economic reports from last week’s calendar.
US Personal Income and Outlays data for December. After release of the data on 2/01/2010 8:30:00 AM ET, Econoday reported, “This morning's personal income report definitely requires some digging beyond the headline numbers. Income was not as good as the headline but spending might be a little better. Personal income in December advanced 0.4 percent, following a gain of 0.5 percent in November. The latest number beat the median forecast for an increase of 0.3 percent. But where it really counts, income barely rose. The important wages and salaries component edged up 0.1 percent after improving 0.4 percent increase in November. Strength in December income was in proprietors' income (notably, the farm component) and in rental income… Spending shifted around a bit last quarter as personal consumption expenditures (nominal) posted only a 0.2 percent gain in December, following a 0.7 percent boost the month before. The December gain came in below expectations for a 0.3 percent rise in PCEs. However, November was revised up from the original estimate of 0.5 percent. Apparently, most of the holiday shopping was front loaded in a post-Thanksgiving surge as December sales slowed. The December increase in PCEs was led by a 0.5 percent gain in services. Meanwhile, the durables component was flat and nondurables fell 0.6 percent. The nondurables dip was not price related as real nondurables declined more than current dollar nondurables… Inflation was quite soft in December. Headline PCE price inflation slowed further in December, rising only 0.1 percent, following a 0.3 percent rise the month before. Meanwhile, core PCE inflation in December firmed incrementally to a 0.1 percent increase, following no change in November. The consensus had projected a 0.1 percent uptick in the core rate… Year on year, personal income growth for December came in at plus 0.5 percent, gaining from minus 0.2 percent in November. Year-ago headline PCE inflation jumped to plus 2.1 percent from plus 1.5 percent in November. Year-ago core PCE inflation came in at up 1.5 percent, compared to up 1.4 percent in November… Today's income report does not bode well for spending in coming months by the average consumer as wages & salaries are being constrained by lack of employment growth. Equities should focus on the softness in wages & salaries – and not like it. ”
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. After the data release on 2/01/2010 10:00:00 AM ET, Econoday reported, “The construction sector is still mired in contraction based on recent construction outlays. Overall construction spending for December dropped another 1.2 percent, following a revised decrease of 1.2 percent in November. The latest number was worse than the consensus forecast for a 0.5 percent decline. Weakness in December was led by decreases in private residential spending and by public outlays… Reflecting a recent weakening in housing starts, private residential spending dropped 2.8 percent after a 1.4 percent fall the month before. The December decline was in the multifamily component which fell 4.4 percent as new single-family outlays rose 0.6 percent. Public outlays decreased 1.2 percent, following a 1.2 percent decline in November. Private nonresidential outlays made a partial rebound of 0.2 percent after a 0.9 percent drop in November… On a year-ago basis, overall construction outlays improved to minus 9.9 percent in December from minus 12.0 percent the previous month… The economy cannot count on a rise in the tapping of hammers on rooftops and the roar of bulldozers for growth engines for now. Construction appears to remain in recession. However, the markets are paying more attention to the rise in the ISM manufacturing index, adding modestly to earlier gains.”
US Motor Vehicle Sales for Jan. After the announcement on 2/02/2010, Econoday reported, “The motor vehicle component for January's retail sales report, which will make up about 20 percent of the report, looks to be a negative factor. Manufacturers reported selling about 511,000 U.S.-made cars and light trucks in January, which comes to an adjusted annual unit rate of 7.9 million, a sizable decline from December's rate of 8.5 million. Lost sales at Toyota, the result of the company's paralyzing gas-pedal recall, were not fully made up by sales at other manufacturers. The rate of decline at Toyota was the deepest of any maker, at an unadjusted month-to-month minus 45 percent for cars and minus 47 percent for trucks. Thursday's run of chain-store results will fill in expectations for next week's retail sales report.”
US ISM Non-Mfg Index data for Jan. After release of the data on 2/03/2010 10:00:00 AM ET, Econoday reported, “New orders are the good news out the ISM's non-manufacturing report as they were the good news out of Monday's ISM report on the manufacturing side. New orders rose more than 2-1/2 points in January to 54.7, a reading that still lags manufacturing orders by more than 10 points but is still the strongest in more than two years. Rising orders point to rising business activity ahead, here defined as production, and to improvements for the labor market as well. The business activity index, still reflecting softness in new orders in prior months, slipped back 1 point to 52.2 while employment continues to show contraction, well below the break-even 50 level at 44.6 though up 1 point in the month… The headline composite index continues to hover at no-change, up 7 tenths to 50.5 indicating flat conditions for the bulk of the economy. This reading stands in contrast to GDP which took off in the fourth quarter and which is expected to show continued though slower growth in the first quarter… Other readings in today's report include pressure for prices paid, at 61.2, which reflects higher energy costs. Inventories fell back 5 points to 46.5 while backlogs fell 2.5 points to 45.5. But note that inventories and backlog in the non-manufacturing are very thin compared to those for manufacturers. Today's report is mixed but new orders do hold out hope for greater strength in future reports. Equities rose slightly in initial reaction to the results.”
US Jobless Claims data for the week of 1/30. After the data release on 2/04/2010 8:30:00 AM ET, Econoday reported, “Layoffs appear to have picked up through January judging by disappointing jobless data. Initial claims in the Jan. 30 week rose 8,000 to 480,000 with the prior week revised 2,000 higher to 472,000. Importantly, the Labor Department said there are no special factors in the latest week. The four-week average rose for the third straight week, up 11,750 to 468,750. The average hit a low of 440,750 in early January before the run higher. A month-to-month comparison of the four-week average against December shows little change. Equities and commodities fell in immediate reaction to the data… Continuing claims rose 2,000 to 4.602 million in data for the Jan. 23 week. The four-week average fell 51,000 to 4.618 million. The unemployment rate for insured workers is unchanged at 3.5 percent. The change in continuing claims, a mix of new hiring and the expiration of benefits, is harder to read than the change in initial claims. In data for the Jan. 16 week, 281,442 filed emergency unemployment compensation claims bringing the total to 5.632 million. Extended benefit claims fell 391,239 to 222,833.”
US Productivity and Costs estimate for 4Q2009. After the data release on 2/04/2010 8:30:00 AM ET, Econoday reported, “With the earlier announced surge in fourth quarter real GDP, today's outstanding productivity report should not be much of a surprise. An output jump led to a fourth quarter spike in productivity and drop in unit labor costs. The initial estimate for fourth quarter nonfarm production came in at a strong 6.2 percent annualized boost, following a revised third quarter 7.2 percent gain. The latest productivity number marginally beat the market forecast for a 7.0 percent increase. Unit labor costs declined again, dropping an annualized 4.4 percent in the fourth quarter, following a revised 1.5 percent dip the prior quarter. The consensus expectation called for a 3.8 percent decrease in costs… The fourth quarter boost in productivity reflected a 7.2 percent surge in output, following a 2.2 percent gain the prior quarter. Hours worked actually rebounded a modest 1.0 percent after a 4.7 percent annualized drop in the third quarter. Compensation cost inflation is easing as compensation rose only 1.5 percent, following a 5.5 percent boost in the third quarter… Year-on-year, productivity improved to up 5.1 percent in the fourth quarter from 3.8 percent in the third quarter. Year-ago unit labor costs decreased to minus 2.8 percent from down 1.2 percent in the prior quarter… The latest productivity and costs report is good for near-term corporate profits. However, they come at the expense of a continuation of a lack of hiring. Analysts will be lowering their expectations of recovery in the labor market. Equity futures dipped on the news. Also, a rise in initial jobless claims weighed on stock futures… Next up for an update on the labor market is tomorrow's employment situation report for January which will include benchmark revisions. We could see sharp downward revisions to 2009 if the Labor Department overestimated the impact of net growth of business establishments.”
US Factory Orders data for Dec. After release of the data on 2/04/2010 10:00:00 AM ET, Econoday reported, “Factory orders rose solidly in December, up 1.0 percent on top of a 1.0 percent gain in November (revised 4 tenths higher) and an unrevised 0.8 percent gain in October. Strength in orders was split evenly between durable goods and non-durable goods, both up 1.0 percent (durables revised 7 tenths higher). Capital goods readings show strength in the month. Today's report points to strong momentum for the manufacturing sector going into the New Year, momentum that may have picked up steam judging by Monday's ISM report for January… Inventories are getting close scrutiny amid expectations that businesses are just about ready to restock. But today's data don't support that hope yet, at least not on the factory side. Factory inventories edged 0.1 percent lower with durable goods down 0.2 percent for a second month in a row and non-durable goods rising only 0.1 percent vs. 0.8 percent and 1.5 percent gains in the prior two months. The data show draws across many non-durable industries including paper, chemicals, and plastics. Continued declines in backlog, down 1.0 percent in the month, don't point to an urgency to build stocks… Shipments jumped 1.9 percent, adding to a 1.6 percent rise in November and October's 0.9 percent gain. Shipments were strong across the bulk of nondurable industries led by petroleum & coal products, pharmaceuticals and beverage & tobacco. Textile shipments were weak but are likely to bounce back in January given Monday's ISM data that showed strength for the group, reflecting a bounce back in the auto sector, an important customer for the group, and a holiday surge for apparel sales. Shipments on the durable side show a 7.3 percent jump in autos and a 3.7 percent rise for light trucks. Heavy duty trucks, boosted by pre-buying ahead of 2010 emission standards, jumped 8.8 percent. Primary metals showed strength, machinery showed strength, and computers & electronic products showed strength.”
US Employment Report for Jan. After the data release on 2/05/2010 8:30:00 AM ET, Econoday reported, “Today's employment report had conflicting trends between the payroll numbers and the household survey. Although the unemployment rate fell unexpectedly, payroll jobs continue to contract. Nonfarm payroll employment in January fell 20,000, following a revised 150,000 drop in December and revised gain of 64,000 for November. In the previous employment situation report, December showed an 85,000 drop and November rose 4,000. However, today's report contains annual revisions and they were down significantly. The December payroll decrease fell short of the consensus forecast for no change in payroll jobs… The December decline was led by a 60,000 drop in the goods-producing sector which included a 75,000 decrease in construction. Manufacturing employment actually rose 11,000 after a 23,000 fall the month before. Mining advanced 4,000 in the latest month… The service providing sector rebounded 48,000 after dropping 69,000 in December. The biggest gain in the latest month was in professional & business services with a 44,000 increase, including a 52,000 boost in temp help. This jump in temps may be the biggest positive in today's report. Temp hiring tends to be a leading indicator for overall payrolls. A sizeable gain of 42,000 also was seen in retail trade… On the downside within services, financial activities declined 16,000 while leisure & hospitality fell 14,000… On a year-ago basis, payroll jobs improved to minus 3.0 percent in January from minus 3.6 the previous month… The annual revision to payroll jobs was sharp. Prior to today's release, the drop in employment from the expansion peak in December 2007 was 7.242 million through December 2009. That number is now a loss of 8.404 million-more than a million worse. Through January 2010, the net job loss is 8.424 million…Wage inflation in January edged up to a 0.2 percent increase, following a 0.1 percent gain the month before. The median expectation was for a 0.2 percent gain in January. Using the BLS's new, expanded definition, the average workweek rose to 33.9 in January from 33.8 in December. This series includes supervisory workers in addition to non-supervisory and production workers. Based on the traditional measure (just non-supervisory and production workers), the average workweek edged up to 33.3 hours from 33.2 hours in December… From the household survey, the unemployment rate declined to 9.7 percent from 10.0 percent in December. The household survey for January 2010 reflects updated population estimates. The household survey is based on a much smaller survey sample than the payroll survey… Today's report, from the payroll survey, shows the economy weaker than previously believed due to downward revisions from annual updates. Also, January contracted despite the startup of the hiring of temporary Census workers. One temporary factor that could reverse next month was the sharp drop in construction. This may have been weather related and may reverse and add to February. Overall, the labor sector is still struggling as employers are reluctant to hire… On the news, the dollar was down against the euro, equity futures were mixed, and Treasury yields were mostly up slightly.”
US Consumer Credit for December. After the data release on 2/05/2010 3:00:00 PM ET, Econoday reported, “Contraction in consumer credit slowed in December, to minus $1.8 billion reflecting an $8.5 billion contraction for revolving credit offset by an actual increase in non-revolving credit which, boosted by solid vehicle sales, rose $6.8 billion. But December's improvement was not enough to offset prior weakness as consumer credit contracted an annualized 4.7 percent in the fourth-quarter vs. minus 3.3 percent in the third quarter. Contraction in consumer credit, the result of a still weak jobs market and still tight lending standards, is a key negative for consumer spending and the whole economy.”
Here are the key US economic reports from next week’s calendar.
US International Trade data for December. Prior to release of the data on 2/10/2010 8:30:00 AM ET, Econoday reported, “The U.S. international trade gap in November widened to $36.4 billion from a $33.2 billion shortfall in October. Exports gained another 0.9 percent while imports surged 2.6 percent. The worsening in the trade deficit was largely due to an expansion of the petroleum deficit, which came in at $19.9 billion compared to a differential of $17.8 billion the previous month. However, the nonpetroleum gap also grew-to $27.1 billion from $25.6 billion in October. While it might be a little early for the recent strengthening of the dollar to impact exports and imports, sluggish growth in Europe could be slowing U.S. exports. On the import side, the price of crude was higher in December on a seasonally adjusted basis and that likely will bump imports up for the month.”
US Treasury Budget for January. Prior to the release of the data on 2/10/2010 2:00:00 PM ET, Econoday reported, “The U.S. Treasury monthly budget report showed a deficit of $91.9 billion in December - the largest December deficit on record. Fiscal year-to-date, the deficit is running ahead of last year: $388.5 billion versus $332.5 billion for a 17 percent rise. On the other side of the ledger, year-to-date receipts were down 11 percent at $478 billion. For historical perspective, the month of January typically shows a modest surplus for the month. Over the past 10 years, the average surplus for the month of January has been $19.4 billion and $0.4 billion over the past 5 years.”
US Retail Sales for Jan. Prior to the data release on 2/11/2010 8:30:00 AM ET, Econoday reported, “Retail sales in December fell 0.3 percent after a 1.8 percent surge in November. Excluding autos, sales decreased 0.2 percent after jumping 1.9 percent in November. Excluding both autos and gasoline, the December number still was disappointing, declining 0.3 percent, following a 1.0 percent boost in November. Looking ahead, weak auto sales should weigh on January retail sales. Already announced, unit new motor vehicle sales fell 4.2 percent in January. But department store sales have been moderately positive.”
US Jobless Claims data for wk2/6. Prior to the announcement on 2/11/2010 8:30:00 AM ET, Econoday reported, “Initial jobless claims in the January 30 week rose 8,000 to 480,000 with the prior week showing a 7,000 dip. The problem is that levels have not come down as expected after a 35,000 jump for the week ending January 16, indicating a weaker labor market than earlier believed. With this past week's unexpected drop in the monthly unemployment rate to 9.7 percent in January from 10.0 percent in December, traders will be watching to see if initial claims dip or not to either confirm the dip in the unemployment rate or to imply that the rate decline was a statistical fluke.”
US Business Inventories data for Dec. Prior to release of the data on 2/11/2010 10:00:00 AM ET, Econoday reported, “Business inventories rose 0.4 percent in November, the same rate of build posted in October. There is a good chance that November and October mark the cycle pivot and likely end of the inventory correction. The rebuilding recently has been led by wholesalers where inventories jumped 1.5 percent in November and 0.6 percent in October. But the restocking of inventories may be uneven. News from the factory orders report showed a 0.1 percent dip in factory inventories for December. We will get an update for December wholesale inventories on Tuesday, February 9, ahead of overall inventories.”
US Consumer Sentiment for February. Prior to the data release on 2/12/2010 9:55:00 AM ET, Econoday reported, “The Reuter's/University of Michigan's Consumer sentiment index rose 1.6 points to 74.4 in the final January reading, compared to the mid-month reading of 72.8. Gains in the latest report were in the expectations component with this leading component now at 70.1 for a 2.6 point rise from mid-month. Looking ahead, the rise in the second half for the overall index could carry over into early February. But stocks have fallen and jobless claims have edged back up – suggesting a dip in sentiment.”
The most recent reports of economic data continue to be less positive and hopeful than earlier.
International Equity Markets Review
Except for Canada and Mexico bourses on Friday, all international as well as US equity markets were colored red this week. For the YTD, they all are.
Shield the children’s eyes; the glowing red in the following picture may cause UV damage!
Of the ten non-North American equity markets I follow, the average loss this week was -2.34% and the loss YTD is -8.0%.
Below are 16 country index chart links from StockCharts.com (with their formal approval btw). Global equity markets do not trade in a vacuum. It is important to be watching these markets move through a trend juncture together, pushed and pulled by global currency and commodity strength or weakness as well as local and regional economic forces.
Here is the latest session data for the exchanges of the Americas.
Here is the latest chart for the Brazilian Bovespa stock exchange in Sao Paulo.
Brazilian Bovespa stockcharts.com chart
Here is the latest session data for the Toronto Stock Exchange composite index.
Toronto 300 stockcharts.com chart
Toronto CDNX stockcharts.com chart
Europe
Here is the latest session data for the bourses of Europe.
Here is the latest session data for the London stock exchange FTSE.
FTSE 100 stockcharts.com chart
Here is the latest session data for the German DAX.
Here is the latest session data for the French CAC 40.
Here is the latest session data for the Milan Italy stock exchange MIBTEL.
Italian Milan Index stockcharts.com chart
Here is the latest session data for the Swiss market index. Swiss Market Index stockcharts.com chart
Asia-Pacific
Here is the latest session data for the Asia-Pacific stock exchanges.
Here is the latest chart for the Japanese Nikkei 225 index.
Tokyo Nikkei 225 Index stockcharts.com chart
Here is the latest chart for the Singapore index .
Singapore Straits Times Index stockcharts.com chart
Here is the latest chart for the Shanghai Composite index .
Shanghai Composite Index stockcharts.com chart
Here is the latest chart for the Hong Kong Hang Seng index .
Hong Kong Hang Seng stockcharts.com chart
Here is the latest chart for the India BSE 30 index .
Mumbai BSE 30 Sensex Index stockcharts.com chart
Here is the latest chart for the Australian All Ordinaries index .
Sydney All Ordinaries Index stockcharts.com chart
Russia (RTS) stockcharts.com chart
ETFs Review for International equity market
Except for Canada (EWC), all the country equity market ETF’s [denominated in USD and traded in the US] were losers this week, down on average -2.17% across the eleven markets that I monitor. The losses of the country indexes were just a bit higher. The reason for the latter point is that except for the Cdn market, which was open simultaneous with the US trading in EWC, the other exchanges were closed when the US market (and these ETF’s) started lifting late in the day on Friday. I then anticipate that the international markets will recover as their days begin with higher gap openings on Monday. But if those markets are weak during their sessions, then expect to see prices of these ETF’s to drop in the US trading later in the day, also with lower gap openings.
YTD, the table shows that these international ETFs are down far more than their home exchange indexes. There will have to be an adjustment. If these ETFs trade at a continuing discount to the exchange price levels, then common sense says that there ill be upward pressure on the $USD as the foreign equity markets are sold off. Conversely, if the ETF’s get stronger, then it ought to be that the $USD must get weaker.
Let’s watch for that early this week because it appears to me that the $USD was over-bought and will now weaken, likely pushing up these ETFs in price faster than their related foreign exchange indexes.
People often ask where do I get my material to write this blog, and I say that the market gives me 99% of it. Very seldom do I read anybody else’s work and think I found an insight I didn’t have previously. With me, it’s on the job learning. We are all students of the market and the data is continuously being fed into our market model (i.e., our brain), and we become one with the market after a while. I say trading is like breathing or dancing to the price motion. These little relationships are there – everywhere – if you just take the time to look for them.
After a while, you will see that there is a logical flow to prices – usually, except when the Interventionists come storming in like a bull in a china shop, smashing these relationships, for a while at least. In the long run, however, you will see that the market operates via natural law, just like we do because the market is us.
Table 13: International equities via an ETF perspective (in $USD)
| Symbol | Close | 1Day Change |
1Day %Change |
1W %Change |
2W %Change |
4W %Change |
YTD %Change |
3M %Change |
6M %Change |
12M %Change |
Japanese equity market ETF: EWJ
Here is the Japanese (EWJ) equity market ETF Monthly, Weekly and Daily data charts:
U.K. equity market ETF
Here is the United Kingdom (EWU) equity market ETF Monthly, Weekly and Daily data charts:
EWU Daily data: 
Canada’s equity market
Here is the Canadian (EWC) equity market ETF Monthly, Weekly and Daily data charts:
Taiwan’s equity market
Here is the Republic of China/Taiwan (EWT) equity market ETF Monthly, Weekly and Daily data charts:
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
After the S&P 500 had a loss of -1.6% a week ago, following one of -3.2% the week before that, I noted that this “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.”
Once broken, technical support becomes resistance.
Two weeks ago I opined that for the intermediate-term (i.e., several months), “Now we expect a series of lower lows and lower corrective highs as the equity market seeks to complete a full cycle”.
A week ago I added, “… this week shows no evidence to the contrary. Next week, we will be watching the 1064 level. 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. (But) 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?”
I concluded with the cautionary advice, “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.
If you go to the Tables and Charts for the Thursday close, you will see almost 25% of the Cara 100 with a Daily RSI-7 number at under 25, and almost half were under 30. That represents an extreme over-sold condition, which after the open on Friday became even more excessive. If there was going to be a rally attempt, the conditions were right. Either that or what was likely to follow could have been an all-out rout like Black Monday October 19, 1987.
What did happen was that Cisco’s CEO John Chambers opined that the economy was actually looking pretty good, and there were reports that AT&T’s network was stressed and in dire need of upgrading. Of course there were a bevy of network and semiconductor suppliers ready to step up. Also, this week, rumors were floated that Research in Motion (RIMM) would soon be firing with all guns in the Smartphone War with Apple’s iPhone (AAPL) and Google’s Androids (GOOG) by introducing two new Blackberries, one of which (Storm 2) would feature a touch-enabled, Web-friendly operating system, and the other (a new 3G Pearl) with an optical tracker replacing the scroll ball.
The Bulls liked what they were hearing. After touching a low of 1044.50 in a fast market from 1pm to 2pm (at which point I asked the trading desk, “Is the slingshot being loaded?”), the S&P 500 recovered a bit for an hour, and then suddenly snapped back in about 15 torrid minutes of buying, largely in the precious metals.
The S&P then closed at 1066.19, with the 1064 technical support holding, leaving us to wonder how the early morning battlefield on Monday would look.
Now, here is the same S&P 500 chart for Friday, but with RIMM, BRCM, CSCO, GG and NEM overlaid. CSCO was the background story, but the money was flowing into the others at precisely 10:20am ET to try to goose the market; then again at 2:00pm to stem the widespread selling, and again for about 30 minutes after 2:45pm.
Is that enough or will the Bears fight back following the weekend?
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, 11 were higher and 19 lower, which continues to improver over a couple weeks ago. However, if it was not for the last hour drama in NY, there would have been a worse condition this week over the previous one.
Over 4 weeks, only three are winners and 27 losers. Travelers (TRV +3.39%), McDonalds (MCD +2.37%) and Procter & Gamble (PG +1.29%) were the only winners over this time frame.
Over four weeks there are five losers that have fallen more than ten percent (AA, JPM, CAT, BAC and CVX), and Alcoa (AA -20.8%) is by far the worst of those even though it was a winner (+3.5%) this week.
As pointed out a week ago, “Normally, as January goes, so goes the year”. But markets do not move in a straight line.
Table 14: Dow 30 List
| Symbol | Close | 1Day Change |
1Day %Change |
1W %Change |
2W %Change |
4W %Change |
YTD %Change |
3M %Change |
6M %Change |
12M %Change |
Here are the links to interactive Dow charts from Billcara2.com that I broke into groups of ten, which you can add technical indicators for as well.
(list one)
(list two)
For those of you who are relatively new at trading, or to this blog, why not pull the ten (10) Cara 100 companies out of the DJIA 30 list, and study the links for just these stocks? Keep a hard copy of the Value Line quarterly report plus a record of the Daily-Weekly-Monthly RSI-7 technical indicator. Study up on what the RSI is so you know it and have confidence that it is just like a football game yardstick that shows you how much risk your team is facing when trying to score points.
The Cara 100 high-quality company list has the following ten DJIA components:
Wal-Mart (WMT), Disney (DIS), Johnson & Johnson (JNJ), McDonalds (MCD), Exxon (XOM), Boeing (BA), Procter & Gamble (PG), IBM (IBM), Intel (INTC), and United Technologies (UTX)
There is no rocket science to these high-quality companies. In your typical week, you shopped at Wal-Mart and along the aisles, mostly the personal consumer products were from Procter & Gamble, except for maybe the baby powder from Johnson & Johnson. On the way there, you may have filled-up at an Exxon gas station, and on the way home, maybe you stopped for a Big Mac or a salad at McDonalds. Overhead, you watched airplanes from Boeing. If you were in a high-rise building, you probably rode in an Otis elevator from United Technologies. Maybe you no longer have an IBM PC, but you do know the company, and your present PC is likely powered by Intel. Every parent's kids want you to take them to Disney… All in all, this is just life we're talking about here. If you are alive, you know these companies like your children. You probably even see more of them… So, just quickly read those Value Line reports – one per company every 13 weeks – and keep an eye on the RSI (momentum) and MACD (trend)… Those guys on Wall Street may be worth a gazillion dollars, but they didn't do it the way you and I have to do it. So, stop listening to their stories that financial engineering and out-sourcing is what's making America strong. That is such a crock. Instead, live life, use common sense, do only what you understand, feel comfortable, and you'll be surprised at how quickly you can take control and free yourself of the shackles of HB&B.
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 and sovereign wealth funds, 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 those players 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.
When I overlaid these stocks on the S&P 500 chart for Friday, it was apparent that BA was very weak at the open and INTC very strong at 10:20am. MCD, 4th strongest performer in the DJIA 30 this week (+1.5%), was a drag on Friday, closing down -1.1% on the day. But the rest of this diverse list seemed to move pretty much in line with the S&P moves during the day, reflecting the massive money that goes in and out of the index futures.
Value Line Report(s) this past Friday
This week [cycle 6, 19, 32 and 45], Value Line reported on a single DJIA component: Wal-Mart (WMT), the world’s largest and most successful retailer of the past two generations. As you know, it’s one of the Cara 100, and one I like to write about.
Wal-Mart [GICS 30, Dow 30, Cara 100]
(WMT: Google Finance file)
(WMT: Yahoo Finance file)
(WMT: StockChart chart)
(WMT: Billcara2 chart)
(WMT: ADVFN Financial Data)
(WMT: Value Line Report Feb 5: next one is due May 7)
For study purposes, Here is what I wrote in the WIR in 2009 about Wal-Mart (WMT)
[From WIR#6-2009 Feb 8] We were active in WMT trading this week, and I told you about it in the Trader's Conference Call notes in the Daily Reports. Hopefully you were listening.
After the close on Monday, I wrote: “We have to believe there is some value in Wal-Mart (WMT), down -25% in a few short months to 46.57 from the low sixties. We understand that unions have renewed clout in the Obama administration, but we like our chances making money by beginning to ladder into out-of-the-money puts sales in WMT. We shall see.”
Then after the close Wednesday, I wrote: “Wal-Mart (WMT +2.66%) had a nice pop today and we may add to shares if it trades back down to 47. We don’t think it will be a leader, but may be good for a trade.”
Then after the Thursday close, “We closed many our short put positions opened just a few days ago. Profits were booked in POT, WMT, GG, and AAPL. Risk management is our prime focus so when we are able to book 60-75% profits in a few days-especially before an economic release certain to increase volatility-we take the trade off.”
What we were in effect doing was reducing our cost base on WMT shares, having just bought positions in WMT at low prices, but in a very weak market that could have sunk lower.
WMT closed the week at $49.63, a move off the closing price of 46.57 just four days earlier, which I alerted you to.
If you go to the Weekly data chart, you'll see that my only real indication that WMT was ready there was the RSI-7 move back above 30, consistent with the Daily turn that day. Not being enamoured with Wal-Mart's fundamentals or Retailers at the moment, I needed those put writes to help me manage the risk I wanted to take. No option, no trade. Simple as that.
What we're doing here is fine tuning dinner just like the best Parisian chef. It's a matter of combining your experience, knowledge and mathematics to result in what some people call skill.
I can tell you that no economist gave you profits like this over a couple days in WMT. Yes, I'll make that flat-out statement. Just like none of us could have landed that Airbus safely in the Hudson, we have to put our trust and faith in people who know what they are doing, and then hope for the best.
To me, Wal-Mart was my Hudson. WMT's not some sexy penny stock, but our crew managed to get the passengers home safely.
Why is Wal-Mart my Hudson, as I say? Look at the Value Line report. A small child can run their finger along the lines for Sales per share, cash flow per share, earnings per share, dividends per share, and book value per share – for 17 consecutive years – and see that every consecutive number in the series was higher than the previous year. You don't need a PhD in Time Series Analysis to see that Wal-Mart is growing, getting stronger, a company you can count on.
No, Wal-Mart is not a sexy structured investment vehicle peddled by HB&B to hoodwink us out of our hard-earned wealth. We can walk into any Wal-Mart store, say hello to the elderly greeter, and then see for ourselves that there's nothing remarkable going on other than we get exactly what was advertised, at a fair price. I like to trade stocks of companies like that.
Patience, patience, patience. You wait until the WMT price comes to you, and then you buy. And later when too many people and the talking heads on TV start yapping about it, you sell.
Wal-Mart is not a perfect company, but then nothing in life is perfect, not even rocket science. Taking profits like we did this week in WMT is about as good as it gets.
It more than makes up for the bad days.
[From WIR #19-2009 May 10] By following these notes and the accompanying charts you can see how I trade. With WMT in early February, I said that 47 would attract me, but I was also not thinking the stock would be a market leader so I determined that the best trade was to put on some put writes. Traders with a longer term time horizon would have been well served to buy the stock at 47 that month if they had sold out within a month of that with a gain of 12.5-13%. In a volatile (unstable) market, you have to learn to take trades like that when they come to you.
After trading on behalf of clients for almost six months now, I think it would be fair to say that my clients – and maybe many of you -- are surprised at how conservative I am. But, from the outset of our trading the S&P is down -11% and we are up +8%. The benefit to clients is that we have achieved that performance using an average of under 20% of available cash. We have managed to be very effective in writing puts.
[From WIR#32-2009 August 9] Based on Wal-Mart (WMT $49.24) at August 10, here is Pierre Brodeur’s quantitative analysis of WMT:
http://caracommunity.com/blogs/pierre-brodeur/2009/08/wal-mart–-august-10th-2009
Pierre says he “would watch for a break above $51 or below $47 for an indication of the next move”. Presently, there is some downward pressure using the MACD M, W, D, and H price series data. He says that “a clear breakout from strong resistance at $49.50 would negate the inverse head and shoulder formation which if the neckline is broken ($48.75) would provide for a minimum price objective of $47.10.”
Long-term, he is looking to be a buyer.
Generally speaking, in my writing I probably have too much of a positive bias about the share prospects for WMT. But I trade for the short run. Presently I am long WMT puts for the reasons I provide here (i.e., net bearish), mostly because of my concerns about consumer spending.
The charts today show me a long-term and short-term range bound pattern, which will only result in good share price performance if you trade it frequently, with complementary options strategies. Writing puts and calls for premium income, will continuously lower the cost base, but judicious use of stops is typically useful whenever RSI-7 rises above 65-70 for the Weekly data series.
Presently we are short via puts. There is a falling Monthly and Weekly RSI-7 but, due to Friday, a rising Daily RSI-7. Should markets sell off next week, the Daily price will also likely fall. However, with Friday’s unexpected broad market rally caused by the Bank of England “surprise” on Thursday and Friday’s helpful US Employment Report, we are at now at risk, and we may put on more puts after the short-term price RSI-7 peaks again because, if that were to occur next week, we do think there is at least a 75% probability of the $47.10 floor being reached in WMT in the next month, and possibly a further chance for the price to go to $45 a month or two after that.
One of my concerns for the Retailers is that consumers are earning less and saving more. That’s not good for spending. Retailers like Wal-Mart can only do so much to encourage spending. Recently we saw that Procter & Gamble revenues and earnings were down in double digits, and we know that Wal-Mart is that company’s major retailer. If shoppers are walking down the aisles at Wal-Marts and avoiding P&G products, that means they are doing the same elsewhere. Target confirmed it. So, just because Friday was a market rally day, I’ll wait out the puts I have on WMT.
But ultimately I do like these long base patterns. Ian Notley taught me that.
WMT is a quality asset to hold in your portfolio. The company’s financial strength is rated A++. Over many years, the growth in sales, cash flow, earnings and dividends is frankly stunning. There is really not much more you need to study in this particular Value Line report. The only thing you have to do is make well-timed entries and then wait for the best time to apply stops, which is always after the RSI-7 is rising above 65-70 on the Monthly, Weekly, or Daily price series depending on your time horizon. If you over-use stops, you will get shaken out at lower than acceptable prices. If you turn a bit bearish, but still undecided, or if you want to lock in a quick profit, you can over-write calls on your stock position.
These charts also show me a long-term cycle bottom pattern, which will likely result in good share price performance over the next two to three years should the $51 level be crossed on the upside.
As for the company itself, this world leading consumer staples company is both fundamentally sound and well regarded by long-term oriented defensive traders aka value investors. There is a satisfactory dividend yield (about 2.3%) that is safe, so the Total Return (TR), including capital growth and dividend yield, ought to be satisfactory for 2010-2012.
To increase one’s income, if these stocks were of interest, I would buy the stock on extreme down days and write puts during periods where the Daily and Weekly RSI-7 is below 30 or maybe even 35 if the RSI-7 has started to lift.
If you have just six stocks like this in your portfolio like WMT, such as XOM, PG, MSFT, IBM, JNJ, and/or MCD, I think you will do well over the years ahead. If there happens to be a market crash below say S&P 950 or 920 if you are very nervous, I would not hesitate to buy these stocks and on Buy Alerts write two-month puts if you have the funds to acquire more if exercised at what I refer to as ‘stink bid’ prices.
My words are based on sound investment/trading principles. At times like the present, however, the market fools us and doesn’t follow logic. There are reasons for these anomalies, of the kind I have stated, but that blind faith in chasing prices higher is only a recipe for disaster.
Tough to accept sometimes; but true.
[From WIR#45-2009 Nov. 6] We got a Sell Alert @$50.63 on Oct 21, but the broad market then reversed, aborting that signal a week later at about 50. There is nothing I see in the chart to stop WMT from moving higher here, but the key may be competitor Target (TGT $49.70), which needs to lift above its 52-week high of $51.77 set on 10/14.
TGT has had a tremendous run from its low of $25.00 on Mar. 6, and WMT really hasn’t kicked into gear.
Thirteen weeks ago, Pierre Brodeur advised to “watch for a break above $51 or below $47 for an indication of the next move. Since then there have been five separate attempts for a break-out as prices each time ran over 52, but then backed off.
I read this as being the stock is ready, but maybe the broad market isn’t. If the S&P cannot soon break out above 1101 or TGT above say 52, then I would hold off on WMT purchases.
The company itself appears to be doing well. Despite a horrendous economy, company revenues, cash flow and earnings continue to rise. There are now some share buy-backs so the metrics going forward will be easier to beat.
This week, Wal-Mart announced they would sell DVD’s normally costing $27-30 at just $10, so management is being aggressive. As the Value Line analyst has pointed out, they are also cutting back on capital expenditures and slowing their domestic supercenter store openings. All that will result in higher ROI and cash flow. Internationally, management is being very aggressive with acquisitions in China and Chile, and so sales growth is now coming from abroad. As for earnings, VL anticipates +6% growth in 2009 and 8-9% growth for 3 to 5 years forward.
Looking at the tables in the VL Report, the comparables for 1999-2001 are really unbelievable. Total shares are now much less, which makes for easier to beat metrics like revenues, cash flow, earnings and dividends per share, but number of stores and total sales have more than doubled, and all the key metrics are growing much faster each year than the share reduction. The annual dividend yield has tripled. With consistent operating margins and financial returns, and constant growth in the key metrics, I can’t see why the average PE multiple has collapsed by half or more this decade, and the price is now under 3 times book value whereas it was over 6x less than ten years ago. But it is what it is, and probably has something to do with concerns that should China increase their product selling prices or revalue the Yuan much higher against the USD, Wal-Mart could suffer.
To put some numbers on WMT, I would be looking for dividends to increase from $1.0565 in 2009, to maybe $1.18 (2010), $1.30 (2011), and $1.45 (2012). As to cash flow per share in 2012, I’d be looking for $7.
At a price-to-cash flow of ~10.5, the 2012 target would be about 75, which hits the low end of the VL projection, and would result in a dividend yield of under 2.0 and the PE at a respectable 15.
I keep testing the water with some WMT puts, with a sense that lower consumer spending should have an impact, but I have been consistently wrong, so I think that this stock is ready to move higher. If, as and when the broad market pulls back in this or the next quarter, I intend to be writing puts and buying calls as well as starting to establish a long-term core investment holding in this stock.
VL rates earnings predictability and stock price stability at 100%. The cash flow is quite stable (in fact growing every year), so I am not concerned about the dividend. In fact, looking at a possible $1.45 for 2012, and an attainable share price in the high 40’s, that would be a yield of over 3.0%, which has not happened for this company in the past, so that price is well protected.
As I say, it’s just a matter of waiting for the pull-backs and writing puts and buying calls. That may result in getting cheap stock put to you at times, which means you would only be buying less of it when the opportunity otherwise comes up.
I might even think about shorting TGT against WMT, but I wouldn’t go so far as to recommend it with doing a lot of homework.
[For WIR#6-2010 February 7] Here is my current thinking re WMT ($53.45 Feb 5), based on the following charts:
http://billcara2.com/tkchart/tkchart.asp?stkname=WMT&ind=rsi&wt=3
http://billcara2.com/tkchart/tkchart.asp?stkname=WMT&ind=rsi&wt=1
http://billcara2.com/tkchart/tkchart.asp?stkname=WMT&ind=rsi&wt=0Presently, the M-W-D RSI-7 is at 57.6 (sidetracking)/55.4 (sidetracking)/49.6 (lifting). I don’t see anything in the indicators to help make a decision.
We received a Sell Alert on the Weekly on 12-08 @ $54.41 and then the stock dropped to $52.76 on 12-17. That’s the problem; the stock has been side-tracking in a narrow range of 52.76-55 for almost three months, virtually impossible to trade.
Meanwhile the operating results and balance sheet picture are improving. The balance sheet at 10/31 is not as good as 12/31/2008 but much stronger than a year before that. Revenues are starting to kick in now and operating margins are consistent going back at least 10 years, so the earnings will likely increase about +10% for 2010 (Value Line is forecasting +8% to +10%). But the company continues to do share buy-backs so the eps is likely to come it at least $3.95 for 2010, and the dividend will likely grow from $1.09 to $1.17.
This is a healthy company. Expansion will come outside the US. Management is projecting selling space to increase at just +2% in the US but +9% elsewhere this year. And, despite the global recession, you couldn’t tell from looking at the progression of Wal-Mart EPS numbers: $2.92 (2006); $3.16 (2007); $3.42 (2008); $3.62 (2009e); and $3.95 (projected 2010).
Across all the important metrics, this world leader has increased +50% or more since I started blogging almost six years ago. The problem is that WMT was priced at $58.44 that week (April 12, 2004). The law of big numbers isn’t stopping them; the stock market is.
The stock is trading at half the price to book it was six years ago! Earnings (absolute $) were just over $10 billion in 2004, from 5289 stores, and will be almost $15 billion, from about 8900 stores, this year. Besides, the total outstanding shares in 2004 were 4.234 billion and this year will be down to about 3.705 billion. So EPS in 2004 were $2.41 and this year will be about $3.95.
If this was the US government or even your personal household, you’d be extremely happy to have it run this well. So, why has the stock fallen roughly -10% in less than six years?
Amazing to me, WMT is even trading at a discount PE relative to the DJIA, which I find incredible given the number of financially dubious, mismanaged dogs in the Dow. Maybe if the directors renamed Wal-Mart to Wal-GUM, Americans might start buying the shares. Do you think?
Americans love buying anything foreign.
The Dow 30 Company links in chronological order of the upcoming reports.
Disney [GICS 25, Dow 30, Cara 100]
(DIS: Google Finance file)
(DIS: Yahoo Finance file)
(DIS: StockChart chart)
(DIS: Billcara2 chart)
(DIS: ADVFN Financial Data)
(DIS: Value Line Report 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)
Wal-Mart [GICS 30, Dow 30, Cara 100]
(WMT: Google Finance file)
(WMT: Yahoo Finance file)
(WMT: StockChart chart)
(WMT: Billcara2 chart)
(WMT: ADVFN Financial Data)
(WMT: Value Line Report Feb 5: next one is due May 7)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 1/5, eight of the ten (10) sector ETFs were down. Thanks to a bump of +1.87% on Friday, mostly in the late afternoon, the Basic Materials (XLB) closed higher +1.13% on the week. A leader was DJIA component Alcoa (AA), up +3.5% on the week and +2.1% on Friday, but several of the names we trade popped late in Friday’s session, including New Gold (NGD +4.5% Friday), Goldorp (GG +6.9%), and Silver Wheaton (SLW +5.2%). The PM’s really closed with a flourish.
Also, thanks to a lift of +1.01% on Friday, the Tech sector closed up +0.52% W/W. This move Friday was largely in specific Semi-conductor groups [Broadline like Intel +2.4%, Equipment & Materials like AMAT +3.6%, and Integrated Circuits like Broadcom +6.1%], plus Research in Motion (RIMM +2.4% Friday and +7.7% W/W) and Cisco (CSCO +2.3% Friday and +5.5% W/W), all having solid moves in the afternoon.
Otherwise, prices were sluggish.
So, when the Thursday and Friday morning battle was over, with the Bulls getting whipped, you could look through the sectors and spot a few isolated incursions. Otherwise, when you look through the ranks, you will find only one big winner, usually, and many losers.
The question now is, did the Bulls throw enough ammunition into Bear territory late Friday to turn the tide or will the January-early February surge of the Bears continue next week?
Isn’t this a USD story? How high can it go? When will it pull back, even for a brief rest?
Longer-term, we are looking for more Bear side victories as the full bull-bear cycle does not seem complete. There are simply too many Monthly and Weekly RSI-7 values in the 50’s and 60’s. That implies a higher USD ultimately, if not for a day or two intermittently.
Time will tell, and then we’ll do a post-mortem.
On that point; it seems to me there are far too many amateur traders telling us what’s happening, which to me is not an expertise. We can all see what’s happening. What we would like to know is why market prices are moving this way or that.
Here’s the SPY Monthly, Weekly and Daily data charts:
SPY Monthly data:
SPY Weekly data:
SPY Daily data:
10 (energy: XLE)
15 (basic materials: XLB)
20 (industrial: XLI)
25 (consumer discretionary: XLY)
30 (consumer staples: XLP)
35 (healthcare: IYH)
40 (financial: XLF)
45 (technology, semiconductor: SMH)
50 (telecom: IYZ)
55 (utilities: XLU)
Individual Sector ETF Review
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.
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.
Here is the XLE chart as an example:
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.
http://billcara2.com/tkchart/tkchart.asp?stkname=IBM,BAC,GE,INTC,JPM&ind...
From reading this blog, you know I like these particular companies, but companies are not stocks. Stock prices are always in motion. As for the stocks, I felt some weeks back that there would be a breakdown in the Bull, which started off the first of January. Now, if you are patient, you’ll be able to buy the stocks of these highest quality companies after the price comes to you in the Accumulation Zone, which I generally describe as when the RSI-7 technical indicator is below the 30-line for the Weekly and Monthly price series data. Of course, once there, you need to wait for the indicators to start lifting. In particular the Daily RSI-7 needs to rise across the 30-line.
I’ll try to give you a Daily heads-up if you are a short-term oriented trader, but frankly for the intermediate and long-term investor/traders, you need to be focused on risk management at this point.
Friday afternoon shows promise for a rally of some sorts. More than likely it will be a small one. Nobody knows at this point because regulatory reform issues are still to be voted on. Ultimately, the stronger the reform, the stronger the market outlook; but short-term, it’s just the opposite because the banksters want business as usual on Wall Street and the City (London).
So, it might be status quo 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 $71.88 at the close on Friday, down -$1.01/bbl (-1.39%) W/W, caused by Friday’s loss of -1.72%.
It was just four 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, as I pointed out recently, “…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.”
Prices were all over the board this week. China National Offshore Oil (CEO) gained +6.8% while PetroBrazil (PBR) dropped -4.4%. In the western Canadian oil fields, it was Canadian National Resources (CNQ) up +1.5% but Suncor (SU) down -5.9%.
Of course, SU was quite oversold and had a bounce of +1.0% on Friday. After a brief rally in the next few days, if Crude Oil does continue to trade south into the 60s, that SU bounce will be referred to as a Dead Cat one. These high-cost producers need $80 Oil.
Let the prices come to you.
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
%ChangeThanks to a bump of +1.87% on Friday, mostly in the late afternoon, the Basic Materials (XLB) closed higher +1.13% on the week, closing at 30.48. A leader was DJIA component Alcoa (AA), up +3.5% on the week and +2.1% on Friday, but several of the names we trade popped late in Friday’s session, including New Gold (NGD +4.5% Friday), Goldorp (GG +6.9%), and Silver Wheaton (SLW +5.2%).
Four 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 its happening!”
Two weeks 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. One week ago, XLB was the worst performer, down -4.71% W/W to 30.14. Then came Friday of that week with a bit of a lift, followed by a losing week this one except for Friday again, which boosted the index week over week.
As I say, if you are going to play the Energy and Basic Materials, you need to see Quantitative Easing, and for signs of that you need to be looking to see 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 Tenaris (TS -3.5%) and Teck Corp (TCK -2.6%). Alcoa (AA) as I say was the leader. When aluminum is up at the same time as platinum, as it was this week, that’s usually a sign that auto production may be looking up in the 2 to 4 month timeframe ahead.
Then again, maybe I just had it right a week ago in this space when I wrote, “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!”
As most of the major Goldminers were off greater than 10% for a couple weeks in a row, and a week ago here I was saying that the Daily RSI-7 for silver had dropped to 17, which worsened through mid-week, the Friday bounce was understandable, but may or may not be sustainable.
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 just -0.66% to close at 27.20. A week earlier, the loss was -1.65%, and the one before that was -5.47%. All the stocks were down (CAT was the best at down -0.9%), but the losses really were not that bad.
As I opined two weeks 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.”
There will be temporary bounces, probably for a few days to come based on the resistance I see to declining prices and to the rising $USD presently; but, in my view, there must be net deleveraging, so the broad 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 -0.48% W/W to close Friday at 28.77, so the loss was 14 cents this week, following one of just 11 cents the week before.
The winner here in my watchlist was Black & Decker (BDK +6.5%), while the losers were not so badly off, Target (TGT -3.8%) and Brunswick (BC -3.4%).
There had been a Sell Alert for TGT on my system 1-29 @ $51.27 (closing price was the low; $52.38 was the high that day), and the price hit a low of $48.23 four days later, closing Friday at $49.30.
These RSI systems are unsophisticated momentum-based indicators, which serve mostly as guidelines to traders like me. They are not to be followed to the letter. After months and years of detailed application and study, you will pick up the nuances, and, I think, your trading will be improved as a result.
Here is a study of Brunswick Corp (BC).
Daily
Weekly
Monthly
Pick a volatile stock like BC and play with the time horizons (Daily, Weekly and Monthly) and the various momentum indicators like RSI, Stochastics, Money Flow, Rate of Change, which are all similar in construct) and trend indicator (MACD and the MACD histogram), and you will start to get a sense of timing.
For the BC, based on the charts, I think we’ll have a brief bounce soon, then a further pull-back until the Weekly and Monthly RSI-7 drops to the Accumulation Zone below 30.
Over time, you will see that consistently successful decisions cannot be made just on the basis of one indicator or one time frame; you need to weigh the evidence of several. Trading is about the process of review and evaluation of the whole picture in order to make a decision. The technical picture is called the top-down view whereas the economic, financial, operational factors are the so-called bottom-up view.
With respect to Brunswick Corp, they make fairly costly consumer products – some people buy once in a lifetime or in a generation, and many people cannot afford even if they have a desire to buy – like yachts. I like the company for its management, factories, distribution, product price and quality, and so forth, but it’s a discretionary purchase, and right now the consumer is pinched, and the company as well as the consumer needs access to credit, which is also a problem right now. So, its understandable that BC was trading up near $50 in the last couple months of 2004, and down around $2 through the 4Q2008 and 1Q2009. As a trader, when BC was trading at the low, you have to weight the risk of bankruptcy – many fine companies go bankrupt and return to profitability later, but you don’t want to be holding stock when the whole company is at risk. So, you need both top-down and bottom-up views to succeed at trading. It is unwise to focus on only one view and especially only one tiny part of a singular view.
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 -0.84% W/W to close at 25.98.
Kraft (KFT +2.8%) was a leader and Walgreens (WAG -7.6%) and Diageo (DEO -5.7%) were losers. But, really, not much happened here this week. This was not a week to be protective with defensive sector positions (Cons. Staples, Healthcare and Utilities) as much as it was in watching the goings-on in DC.
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 -1.54% W/W to close at 63.19.
As noted two weeks 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). I still haven’t had the time to change the details in the Cara 100 file, but you can download the list on one page at least.
There really was not much happening here this week. The action in DC was in regulatory reform and not healthcare insurance reform.
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 2nd worst performer of the ten sectors. A week ago, the XLF was flat on the week, while all other nine sectors took losses. I saw that as a bit of pre-Congress meeting posturing. I suppose, with the loss this week, HB&B did not like the action in DC.
After XLF lost -0.70% on the previous Friday, there was a loss this week of -1.69%. But that was net of the gain of +1.16% on Friday. XLF closed the week at 13.94.
The two former investment banking giants, now bank holding companies, Goldman Sachs (GS +3.7%) and Morgan Stanley (MS +1.8%), were the winners, so let’s call that one strike against Volcker.
The losers this week were non-US banks, India’s ICICI Bank (IBN -4.9%), Credit Suisse (CS -4.0%) and Hong Kong and Shanghai Banking Corp (HBC -4.0%).
Interestingly, it was just two weeks ago 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 one week ago, and now again this week.
There were also a large number of local and regional US banks that closed their doors this past couple weeks as HB&B has cut them off.
As I opined here two weeks 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.”
But I must reiterate my position on this matter. 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 +0.52% to 21.07), and Semi-conductors (SMH +1.41% to 25.11) were, along with Basic Materials (XLB), the rallying forces this week.
Can it be sustained? We’ll have to wait and see.
Thanks to a lift of +1.01% on Friday, as I wrote earlier, the Tech sector closed up +0.52% W/W. This move Friday was largely in specific Semi-conductor groups [Broadline like Intel +2.4%, Equipment & Materials like AMAT +3.6%, and Integrated Circuits like Broadcom +6.1%], plus Research in Motion (RIMM +2.4% Friday and +7.7% W/W) and Cisco (CSCO +2.3% Friday and +5.5% W/W), all having solid moves in the afternoon.
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 -1.32% W/W to close at 17.98. Friday was almost a winner, but not quite.
Verizon (VZ -2.31% W/W) has had a tough couple weeks, while AT&T (T -0.47% W/W after being down just -0.12% a week earlier) still seemed headed in different directions. But, these moves tend to balance out.
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 -2.07% W/W to close at 28.92.
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 0.07 0.07 0.05 0.03 6 Month 0.14 0.14 0.13 0.14 2 Year 0.77 0.80 0.81 0.99 3 Year 1.25 1.30 1.34 1.55 5 Year 2.23 2.30 2.32 2.59 10 Year 3.57 3.60 3.58 3.82 30 Year 4.52 4.55 4.49 4.69
Municipal Bonds Maturity Yield Yesterday Last Week Last Month 2yr AA 0.92 0.85 0.78 0.73 2yr AAA 0.64 0.51 0.61 0.68 2yr A 1.03 1.18 1.27 1.04 5yr AAA 1.65 1.63 1.55 1.64 5yr AA 1.69 1.79 1.76 1.72 5yr A 2.25 2.35 2.14 2.25 10yr AAA 3.04 2.87 3.01 3.10 10yr AA 2.98 2.96 3.06 3.11 10yr A 3.17 3.22 3.40 2.90 20yr AAA 3.67 3.87 4.38 4.48 20yr AA 4.25 4.18 2.69 2.79 20yr A 5.36 5.48 5.68 5.14
Corporate Bonds Maturity Yield Yesterday Last Week Last Month 2yr AA 1.32 1.35 1.33 1.44 2yr A 1.54 1.53 1.51 1.67 5yr AAA 2.80 2.80 2.82 2.95 5yr AA 3.15 3.16 3.22 3.35 5yr A 3.30 3.30 3.35 3.48 10yr AAA 3.55 3.54 3.45 3.53 10yr AA 5.05 5.02 4.86 4.93 10yr A 4.69 4.68 4.60 4.68 20yr AAA 5.51 5.47 5.40 5.28 20yr AA 5.47 5.47 5.43 5.36 20yr A 6.46 6.41 6.34 6.22
The US Treasury bonds were fairly quiet again this week.
This week, the 20-year US bond (TLT) lost -0.36% to close at 91.98. A week ago, TLT gained +0.34%.
Yield for the 30-year is now at 4.52 (up from 4.49% and back to about where it was a couple weeks ago), the 10-year at 3.57 (down from 3.58%), the 5-year at 2.23 (down from 2.32%), and the 2-year at 0.77% (down from 0.81%).
Ultimately, I believe the Quantitative Easing policies of most central banks will have to end and deleveraging started. That ought to mean rates/yields will 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.
Econoday has a good write-up on Bonds this week. I encourage you to go to their site as it is clearly one of the worlds best for independent economics.
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 at $0.97) and Freddie (FRE at $1.16) were mostly unchanged.
Congress must replace these monsters, but there are bigger problems to deal with in financial services and healthcare reform.
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 -2.65% W/W to close at 258.55 this week. That’s three weeks of losses in a row.
Perhaps there will be a change next week. The $USD was looking like it would bounce back from technical resistance and weaken a bit before mounting another charge to try to establish a higher trading range in the low 80’s.
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 277.52.
The 200-day MA has moved to 261.58 from 260.38 W/W. Two weeks 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 until four weeks ago when the price hit a cycle high of 83.95. When it did that I was skeptical, stating here that, “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 -$1.01/bbl to 71.88. Eventually – not in a straight line obviously – the price will fall to the 60s. For next week though, there will likely be a bounce, following a bit of weakness in the USD.
For $WTIC, the 50-day MA is now 76.52 and falling.
The 200-d MA is at 70.89, up from 70.27.
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. As a general rule, as 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, means 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.
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 -$15.90/oz (-1.47%) to $1065.60. A week earlier $GOLD dropped -$11.20/oz (-1.02%) to $1081.50, and the week before that it plunged -$38.20/oz (-3.38%) to close at $1092.70.
A week ago, I opined in this space, “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 $GOLD 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.”
That was a pop, then a pull-back and then on Friday another spurt. We have been active in the market. It’s actually a stressful time with so many stories being floated, and meetings going on in Washington, and the $USD looking a bit toppy in the short run.
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 1124.60, down from 1134.35 two weeks ago. As I noted a week ago, “the tide has ebbed, no longer flowing”.
The 200d MA is 1124.60, up from 1012.93, and from 1007.82 two weeks ago, “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 two weeks ago, “Watch the $SILVER lead the $GOLD lower in future weeks. But, there will be trading opportunities.” A week ago, the $SILVER dropped -4.68% while the $GOLD dropped -1.02%. I said “Bingo”. This week, $SILVER was down -6.36% to 15.17 and $GOLD down -1.47%. The trend for precious metals was down – until Friday. Then fiat money hit the fan as the Goldminers started popping.
At exactly 2:00pm ET Friday, the trading desk wanted me to make a Buy decision on NGD. “Do you like it at $4?” NGD was $3.98. I said, let’s wait 30 minutes. By then the price had lifted to $4.03 and I had to go out for a half hour. When I returned the price had lifted to about $4.15, and continued rising to $4.29 a couple minutes before the close. That was the kind of day it was. There were +8% moves in an hour and if you blinked, you missed them.
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 was down -6.36% to 15.17. The low on Friday was 14.68.
There was a loss a week ago, and two weeks ago, the loss was -7.64%. I stated, “… so clearly $SILVER is getting hammered, and I brought to your attention that clear possibility a few weeks ago”. A week ago I added, “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.”
As noted, the low this week was 14.68. I think that will be the cycle low, and now the $USD will drop down and $SILVER lift a bit. This could set up a short-term trade.
http://stockcharts.com/charts/gallery.html?s=$silver
http://tinyurl.com/y8k8ud4
For $SILVER, the 50d MA is now 17.56, down from 17.81. Two weeks ago I said it was “17.93, but likely to turn down in a couple weeks.” Took one week, and this week was piling on.
The 200d MA is 15.85, up from 15.75, which a week ago was up from 15.65. But, as I opined two weeks ago in this space, “this long-term MA may rise for a couple months or so and then find resistance at about $16.15. (But) I would not be surprised to see it stay bullish from there.”
Interactive Chart of Weekly Silver EOD Continuous Contract Index:
Interactive Chart of Daily Silver EOD Continuous Contract Index:
Interactive chart of the Silver Bullion index.
A week ago, $PLAT dropped -$38.50 (-2.49%) to close at $1506.00. This week there was a gain of +$9.20 (+0.61%) to 1515.20. Was that the Chinese buying precious metals early? The rest of the PM’s were down this week, but bounced higher on Friday – as $PLAT dropped a further -3% to 1472.
Two weeks ago the $PLAT 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 $1647.70, set Wednesday. I doubt the next week or two high will be higher, and so we’ll start to see a series of lower highs and lower lows, I believe.”
From high to low inside three weeks, that’s quite a plunge.
http://stockcharts.com/charts/gallery.html?s=$plat
http://tinyurl.com/ydwz4pn
The 50d MA for $PLAT is now at 1502.04, up from 1493.90, which was up from 1480.91 the previous week. Two weeks ago I opined in this space, “There could be a test of that in the next week or two.” A week ago I added, “Now I am saying, there could be a bounce next week and that might stretch it out a bit.”
Isn’t it interesting that while the rest of the PM’s were down this past week, the $PLAT was up +$9.60/oz, which is what I had anticipated.
The 200d MA is at 1312.58, up from 1305.30, which itself was up from 1297.81. Two weeks 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 -$14.65/oz (-3.55%) to close at 398.00. A week ago, $PALL plunged -$23.60 (5.36%) to close at 416.50. The week before that it dropped -$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 $PLAT, this is an important industrial metal as well as precious metal, and industry people tend to hoard it prior to drawing down the inventory.” Bingo.
http://stockcharts.com/charts/gallery.html?s=$pall
http://tinyurl.com/yenr5rj
The 50d MA is now at 402.56, up from 396.97, which was up from 390.10.
The 200d MA is at 310.11, up from 305.19, which was up from 300.58.
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 -$17.50 (-5.73%) to close at 287.75. A week earlier the loss was -$29.45 (-8.80%) to 305.25. But a week before that, when I noted that “A week ago the drop was only -$1.90 (-0.56%) – which was just a tad -- to close at 334.70. But I opined in this space, “There was a cycle high of 354.40 earlier in January, and I don’t think the price will surpass that this next short-term cycle or two.” A week ago, I said, “In other words, take profits”. I also said, “Next week down”. Bingo.
http://stockcharts.com/charts/gallery.html?s=$copper
http://tinyurl.com/ybgnb7f
For $COPPER, the 50d MA is at 323.57, down from 325.11, but still up from 323.00 of two weeks ago.
The 200d MA is at 274.89, up from 272.75, which was up from 269.97.
About a month ago in this space, 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.
As I noted a week ago, “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.” That buying occurred on the Monday and then the selling into strength happened from Tuesday through into Friday morning, and then more buying.
We bought at the open on Monday, sold at the open on Tuesday and made a nice profit. Then FCX dropped again into Friday morning’s low of $66.03 before rocketing in the afternoon with the 2 o’clock gun, to a close of $70.23, up near its high for the day.
These are not markets that amateurs should be trading.
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 |
Two weeks 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.”
Then, a week ago, I stated, “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.”
This week, right on cue, the $XAU (+4.27%), GDX (+4.15%) and XGD (+4.55%) all lifted. But that rally was all on account of Friday where the scoreboard read, $XAU (+5.35%), GDX (+5.39%) and XGD (+5.05%). After testing the low set at 10:15am ET, at 2:00pm, the miners rocketed north in a spectacular moon-shot.
Whether that launch was aborted over the weekend is a matter we will eagerly await through the night, closely watching the $USD and PM prices, and the prices of the miners in Australia and UK, to see.
On the week, the leaders were Newmont (NEM +7.9%), Agnico-Eagle (AEM +7.0%), Kinross (KGM +5.7%) and Goldcorp (GG +4.6%).
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 $USD had a remarkable bull run from the start of December at about 74 up through the 23rd with a high of 78.45. Then the price sagged to a low of 76.60 in mid-January before soaring to a high on Friday of 80.68. Then it hit the technical resistance and backed off a bit, closing up +1.13% W/W to 80.36.
Interestingly, the precious metals started to move a lot more up than the Dollar has come off. The PM stock’s are usually leaders, but is this a false move, or is the Dollar going to pull back here to consolidate before making another run at the 80.70 level?
http://stockcharts.com/charts/gallery.html?s=$usd
http://tinyurl.com/y9c3sr4
The 50-day MA of the $USD is now at 77.30, up from 76.87, which itself was up from 76.52, and rising.
The 200-day MA is 78.37, down from 78.53, which was down “from 78.69 and still falling but ready to form a base near this level I think”.
Interactive Chart of Daily U.S. U.S. Dollar Index:
This week, the Euro contracts ($XEU) dropped -1.33% against the USD to close at 136.78. There was a loss on the previous Friday of -0.77%, so that’s a loss in six sessions of over 2.1%, which is extreme.
Blame it on the PIGS – at least on stories about the PIGS (Portugal, Italy, Greece and Spain).
Next week, if, as and when the Euro lifts and the US Dollar falls, you can blame it on California, Florida, New Jersey, Ohio, Michigan and/or Illinois, take your pick.
The point is that forex prices are booming, zooming and crashing by the hour and government debt, at least as to the question of whether its going to be defaulted, is like an ocean tanker in a rough sea, almost always getting to its destination.
http://stockcharts.com/charts/gallery.html?s=$xeu
http://tinyurl.com/ydekjtk
Four weeks ago I stated in this space, when the Euro was at 144.10, “There is still a lot of support at the 142.50 level, but it looks to me like the Euro could fall a lot from here. (That would not happen) if only the US Jobs Report would look a little stronger!.. (But) I still believe that in January there could be a test of the August low of 140.47, which would drop the price below the 50d and 200d MA’s, which would be bearish for the Euro and precious metals and oil and, I believe, equities.”
Two weeks ago I added, “This week there was a low of 140.32. That’s like Tiger hitting a short iron from 150 yards out to within five feet of the hole, and why you pay so much for this WIR! :-) … Now we have to see whether the Euro will base for a bit of a run higher, taking the precious metals on another Bull run. The charts are looking like that could happen, but frankly there is so much happening in Washington and I still have my head into Freeport to be able to make a call worthy of your serious consideration.”
Tough game to play for sure – even when you are focused on your monitors.
Remember, we trade the actual prices, not what we think will happen.
The 50d MA for the Euro futures are now at 144.18, down 145.26, which was down from 146.18.
The 200d MA is at 143.06, up a bit from 142.86, which was up a bit from 142.67.
Interactive Chart of Weekly Euro Dollar Index, priced in USD:
Interactive Chart of Daily Euro Dollar Index, priced in USD:
The Pound dropped -2.11% this week (-3.0% over two weeks) to close at 156.55. That’s a lot.
http://stockcharts.com/charts/gallery.html?s=$xbp
http://tinyurl.com/yasdzc2
The 50d MA of the Pound is at 161.89, down from 162.71, which was down from 163.25, which is still largely flat since the beginning of October.
The 200d MA is now at 161.97, up from 161.67, which is up from 161.35, still on the rise.
Weekly British Pound Index:
Daily British Pound Index:
Weekly Japanese Yen Index:
This week, the Yen soared +1.11% to 112.06.
http://stockcharts.com/charts/gallery.html?s=$xjy
http://tinyurl.com/yd2fzv4
The Yen’s 50-day MA is now 110.88 down a tad from 111.00, “which has been very flat since the start of December”.
The 200-day MA is now at 107.85, up from 107.60, which was up a bit from 107.33 the previous week.
Daily Japanese Yen Index:
The Canadian Dollar aka Loonie, was flat this week, closing at 93.39, down a bit from 93.43. But there were losses the two previous weeks of -1.16% and -2.72%, especially as Crude Oil and $GOLD were tumbling, which helped push the $USD higher.
http://stockcharts.com/charts/gallery.html?s=$cdw
http://tinyurl.com/ycx58us
The Loonie 50-day MA is now at 95.04, down from 95.09 a week ago, which was down from 95.22 the previous week.
The 200d MA is at 91.86, up from 91.55 W/W, which was up from 91.25 the week before that.
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:
Market prices operate in cycles, in an ebb and flow motion like the ocean tide, which is affected by natural laws such as the lunar cycle. Not that I am fixated on cycles you can set your clock by, like the lunar cycle, I do note that there will be a full moon at the end of the month and that, some people believe, will pressure the people to buy stock. That means, they say, that prices this month ought to stay under pressure. Perhaps by the end of the month, Mr. Moon will be smiling on the Bulls. We’ll just have to see.
Early on in the week, I am anticipating a bit of strength, but I also think that the buying will move prices into the gunsights of traders waiting to hit the bids to offload stock positions, hoping to lighten up into the 2H2010.
This evening, the New Orleans Saints and Indianapolis Colts vie for the Super Bowl championship of American football. About 100 million will be watching. My neighbors will be hanging a large screen TV from a second floor railing clamp, and there will be a gang cheering below. Drinking actually, by that’s the way these things go. Not a big crowd here for milk, I suppose we’ll be cheering loudest for New Orleans.
As for the Big Easy, there is no bigger easy than Nassau Bahamas, let me tell you. Drinking and driving here is permitted, actually encouraged. Mind boggling actually.
But at the end of the day, nobody, and I mean no human being alive, wants to crack up and hurt somebody and then be sent to Fox Hill Prison. Built for 400, there are reportedly almost four times that many prisoners, in deplorable conditions. This is a pay-as-you-go society, and the people don’t want to pay for a proper prison or else there will be even more criminals wanting to go there.
People do want to go to Vancouver Canada though. Later this week, the Olympic Winter Games begin, and there are many Canadians who actually believe the home side will win more medals than any other nation. Wouldn’t that be something!
As always, here in The Bahamas, it’s Forward Upwards Onwards Together! And that’s a motto I believe in.
Time for another party. Have a great weekend, y’all.
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