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November 26, 2005

Week #47 (2005-11-26) in Review

Summary:

I continue to be 80-pct invested in cash or equivalent; locked, loaded and ready to fire. I believe that the fundamental drivers of share prices are, in the balance, negative, and the best strategy for long-term gain is to temporarily hold a combination of T-Bills, high dividend yielding equities, and (mostly) precious metals-related equities.

As I believe that most international markets (except Japan) are presently in a terminating bullish cycle within a Distribution Zone, I anticipate that what follows will be an intermediate-term (3 to 6 month) pullback of perhaps 15 pct of total market capitalization, maybe more.

I recognize the challenge to stray from my market discipline, and to try to earn more than an annualized 6-pct return on capital through this market phase. But I don't.

The sell-side is presently peddling the story that global inflation is under control, that money supply growth is not rampant, that the economy is healthy, and that corporations are investing massively in CAPEX. I disagree with this entire scenario.

I believe commodity price inflation is an issue today, and that CPI/PPI data is both incorrect and incorrectly being interpreted. Government data shows that money supply is soaring, which I interpret as an attempt of the one hand to stave deflation, and to meet the growing debts of government, while the other hand is raising interest rates to stem inflation.

Moreover I believe that the facets of the global economy that remain fundamentally sound are being used by the sell-side as the face of the whole economy. The storyline is focussed on the part of the glass that is full, telling you that the whole glass is full.

In my view, today's economic and market conditions represent a much greater risk to capital than the opportunities that are available at the current price of equities. As the broad market indexes rise, I am increasingly focussed on the risks. Since my investment objective is to protect against risk, I scaled down my expectations of an average 24+ pct annual return on capital to just +6 pct returns.

As I say, this is temporary. but if you might think it is a weakness on my part, I suggest you read the average portfolio performance of mutual funds year-to-date (against +6 pct total returns). Moreover, there were periods earlier in 2005 when I was aggressively seeking capital growth, and was 100 pct allocated to equities, across many sectors and countries.

As you know, on May 17, I advised switching out of real estate assets and into shares related to gold (then at $418.60) and oil (then at $50.17) as a hedge to the economic woes of this world.

After a huge run up, largely on speculation, Crude Oil prices then pulled back to the $55 level that is more in balance with the economic data. Unless the global economy recedes in the near future, I believe that oil prices will stay above this level, and may even rise from here temporarily.

Gold is another story, however. Unlike oil, which is a consumable, gold is both a collectible (based on appreciation of fine art) and a storehouse of economic value. Gold is in a long-term growth trend, and, whether it is temporarily strong or weak in price, it is destined to revert to its long-term relationships to both the growth (over time) and the accumulation of real wealth (total at any point in time), i.e., where assets enjoy a fair market rate of return consistent with the capitalist notion of wealth.

There are many reasons why the price of gold (either in USD or other currencies) has rising and falling cycles within the context of a long-term rising trend. In an economic era where real wealth is being created quickly, the price of gold will be depressed; and where wealth is being either destroyed (through e.g., war) or inflated in price (by monetary aggregates that grow faster than wealth is being created), the price of gold will rise.

At the present time I am 40-pct of my minimally (20 pct) invested assets in gold-related securities. And the remaining 12 pct of invested portfolio assets are in areas where (i) the companies have proven to be superior performers among peers, (ii) the price cycle in reverting to the mean has fallen below the long-term average trend, and (iii) the price trend is rising because the company is creating real wealth (and not for reasons of financial accounting quirks, such as share buy-backs, employee layoffs, and the like).

Unlike the traditional gold bug, I trade (or try to invest in growing portfolio positions) purely by analysis, and not by following fashion that has been created by storytellers. As markets fluctuate, there are times I expect to be temporarily wrong, i.e., earning less return on capital invested than many others, but that is simply because I have, in light of my analysis of risk, a large percentage of assets uninvested, which is to say allocated to cash (and gold, which is a form of cash i.e., unallocated asset), at those times.

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Portfolio/Trades: Missed yet again on XLF, but now I'm still up +4.8 pct " not as good as last week's +6.1 pct, but up from +4.0 pct two weeks ago. By removing one of the longs, I am now net short. I don't mind, of course, but that was not my intention. It happened that Thursday was a Holiday and Friday I was in meetings for the part day the market was open.

U.S. Sector ETFs: Not participating in year-end rally (but staying 80-pct cash in portfolio)

10: Market-weighted: blow-off rally; number#1 performer
15: Market-weighted: being carried by the metals; lagging
20: Market-weighted: GE leading (up +4.44 pct W/W)
25: Market-weighted: Wal-Mart shoppers killing to buy stuff
30: Market-weighted: Lagging the pack
35: Market-weighted: sold IYH early this week at $62.43
40: Under-weighted: blow-off rally ending; AXP +6.3 pct W/W
45: Market-weighted: late in blow-off rally; INTC +6.8 pct
50: Market-weighted: up +2.8 pct W/W for some reason
55: Market-weighted: only 7th best performer this week

Bonds: This 3-week old bull trap is massive. I say: Follow the U.S. treasury yield curve", which is now perfectly flat between 2 and 5 year, and almost out to 10-year. The Bulls are telling you the Fed won't tighten more because the curve could invert from T-Bills through the 10-year paper.

Commodities: Prices increased moderately in the index because of strength in the NY Crude Oil and the Gold contracts

Oil & Gas: NY crude rebounded higher, as forecasted last week, by +2.62 pct W/W to 58.71; likely to range trade unless global economy goes into recession (unlikely), and may rebound further with onset of winter, or further problems in Middle East and Venezuela

Gold: Gold (up +2.12 pct W/W) continues to rally strongly as forecast (and higher targets have now been set) as fiat currencies (USD in particular) are rapidly depreciating against the value of gold

Goldminers: Shares are up between +2.6 and 3.1 pct on average, and likely to go much higher through the winter, as people's appetite for gold around the world is clearly growing rapidly, and the Treasury is pumping up M3

Forex: USD was modestly (+0.15 pct) up on the week. The Euro was weak, and needs ECB tightening " if those countries can agree

International Equities: EWJ (Japan) and EWU (UK) did hit resistance. EWJ was down 0.24 pct and EWU was up +0.48 pct W/W. But EWC (Canada) was recipient of Goodale pre-election goodies plus higher oil prices

U.S. Equities : The four main broad market indexes are moving still higher, but also being lifted more by hype and momentum. Last week I suggested it could be Dow=11,000 before 2006, which now seems assured. The charts below show the Bush Administration-fuelled rocket has entered outer space, on its way to the moon.

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ETF Portfolio:

Weekly
Daily
30-Minute

I declined slightly to +4.8 pct from +6.1 pct, but still up from two weeks ago. I sold the IYH at a +3.1 pct profit in just over a month, without buying a replacement long position, so now I am now short on account of my not having time to blog.

It's hard to be short in a rising market, but except for XLF, which I intend to double up on the short (soon), I'm ok.

Short:
XLF (29.13) 32.45 -11.40 pct
IYZ (23.50) 24.04 -2.30 pct
EWH (13.03) 13.01 +0.15 pct

Long:
TSX: XGD (53.03) 58.87 +11.01 pct
XLP (22.75) 23.70 +4.20 pct
IYH (60.54) 62.43 +3.12 pct SOLD

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Sector ETF:

Here are the ETF charts I follow for the ten sectors of the U.S. equity market:

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)

Here is the weekly performance of my favorite ten Sector Index Funds. The table is sorted by price performance Week over Week (W/W), i.e. 1W%N, but is otherwise unsorted.

Symbol	Close	Net	%Net	1W %Net	2W %Net	4W %Net	YTD %Net	3M %Net	6M %Net	Yr %Net
XLE	51.00	0.13	0.26%	4.04%	8.30%	8.53%	45.80%	5.07%	24.09%	36.00%
SMH	37.46	0.30	0.81%	3.74%	3.60%	12.22%	14.70%	2.55%	9.76%	11.79%
XLF	32.45	0.07	0.22%	2.89%	3.02%	8.89%	6.67%	10.19%	11.55%	9.44%
IYZ	24.04	0.19	0.80%	2.82%	2.91%	5.76%	-0.46%	1.56%	4.89%	0.97%
XLY	33.68	0.00	0.00%	2.15%	2.34%	9.46%	-3.94%	0.27%	2.31%	-2.04%
XLI	31.61	0.01	0.03%	2.03%	3.74%	8.33%	2.70%	6.15%	4.81%	3.57%
XLU	31.75	0.12	0.38%	1.67%	2.68%	4.30%	15.33%	-1.40%	6.44%	13.39%
XLP	23.70	0.02	0.08%	1.54%	0.98%	4.41%	2.69%	3.00%	1.11%	4.22%
XLB	29.66	0.14	0.47%	1.51%	5.10%	9.65%	0.78%	8.13%	6.96%	0.82%
IYH	62.44	0.08	0.13%	0.45%	0.79%	5.53%	7.17%	1.10%	1.33%	12.83%

After four weeks running with nine ETF's up, and one down, this week all ten were up. Since I'm 80-pct cash, it hurts to miss the rally. I'll make up for it in spades later.

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Sector 10 (energy: XLE, IYE, VDE, OIH, PBW and IXC)

Here's the XLE Weekly, Daily and Hourly data charts:

XLE Weekly data:

XLE Daily data:

XLE Hourly data:

XLE was up +4.04 pct this week, after having a strong week earlier. XLE is now at 51.00. NY Crude Oil is now up to 58.71. I am glad I did not jump off the bandwagon.

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Sector 15 (basic materials: IYM, XLB, IGE and VAW)

Here's the XLB Weekly, Daily and Hourly data charts:

XLB Weekly data:

XLB Daily data:

XLB Hourly data:

XLB was up +1.51 pct W/W, which was only 9th best of ten sector ETFs.

I still don't like the paper and forest products and chemicals during times when the bond yield curve is flattening like this. That is warning an economic slowdown or recession.

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Sector 20 (industrial: IYJ, XLI, VIS, and IYT)

Here's the XLI Weekly, Daily and Hourly data charts:

XLI Weekly data:

XLI Daily data:

XLI Hourly data:

XLI gained +2.03 pct W/W to 31.61, led by GE (+4.44 pct). A week earlier XLI was up +2.52 pct, led again by GE (+3.2 pct).

XLI is topping, and I expect the bear will visit soon. The key is when GE rolls over.

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Sector 25 (consumer discretionary: XLY, IYC and VCR)

Here's the XLY Weekly, Daily and Hourly data charts:

XLY Weekly data:

XLY Daily data:

XLY Hourly data:

XLY was up +2.15 pct W/W to 33.68. DIS continues significant weakness.

Two weeks ago I wrote words that still apply: This is a sector that could still be lifted by momentum players hoping to see retail stores ringing in good sales gains during December holiday sales. But the first sign that consumers have no tickee", XLY will head south " along with most of the others."

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Sector 30 (consumer staples: XLP, VDC, RTH and IYK)

Here's the XLP Weekly, Daily and Hourly data charts:

XLP Weekly data:

XLP Daily data:

XLP Hourly data:

XLP (Consumer Staples) closed up +1.54 pct to 23.70, but really (except for a couple days this week) has gone nowhere for three weeks, or, for that matter, four months.

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Sector 35 (healthcare: IYH, XLV, VHT, IXJ, and IBB)

Here's the IYH Weekly, Daily and Hourly data charts:

IYH Weekly data:

IYH Daily data:

IYH Hourly data:

IYH closed the week at 62.44; up +0.45 pct. I started the week by selling IYH at 62.43. I wish I had rolled the proceeds into a hot market.

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Sector 40 (financial: IYG, IYF, XLF, VFH, IXG, VNQ, RWR, IYR, and ICF)

Here's the XLF Weekly, Daily and Hourly data charts:

XLF Weekly data:

XLF Daily data:

XLF Hourly data:

Does anybody have John Snow's private cell phone number? I am locked and loaded for put buys on XLF. Just give me the word when you stop printing money, John. :-)

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Sector 45 (technology: IGM, IGV, IGW, XLK, VGT, IYW, IGN, IXN, MTK and SMH)

Here's the SMH Weekly, Daily and Hourly data charts:

SMH Weekly data:

SMH Daily data:

SMH Hourly data:

SMH was very strongly up this week +3.74 pct to 37.46, and +50 pct since the rally started -- but is still nowhere nar Jan-04 highs (when the yield curve was looking healthy).

As you know I like the sector and this sub-sector group, but I can wait.

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Sector 50 (telecom: IYZ, VOX and IXP)

Here's the IYZ Weekly, Daily and Hourly data charts:

IYZ Weekly data:

IYZ Daily data:

IYZ Hourly data:

IYZ was up +2.82 pct W/W to 24.04. Ouch!

Don't worry, be happy! ??? RSI at 90 on the Hourly and 82 on the Daily. No, Be worried.

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Sector 55 (utilities: IDU, XLU, and VPU)

Here's the XLU Weekly, Daily and Hourly data charts:

XLU Weekly data:

XLU Daily data:

XLU Hourly data:

XLU (Utilities) was up +1.67 pct W/W to 31.75. I told you last week I liked Exelon Corp (NYSE: EXC), and it was up +1.8 pct W/W. But I really mean I like it for the long term. I'm biding my time to buy it.

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Bonds:

I have been late publishing today because I spent the day going through the M3 money supply numbers (that are published weekly by the Fed " the H.6 data) and have correlated the data to the moves in both the stock and bond markets since 3Q02.

I'll make the statement (and leave it for now) that the Administration must be playing the public for fools. Every time there is a huge increase in the M3, which is a Treasury function, there is a strong increase in prices of bonds and stocks, and every time there is a slowing or decline in M3, there is an abrupt decline in these prices.

Get the H.6 data back through 2002, and you will note that there was a massive boost to M3 starting in Aug-02, and through Aug-Sep-02 the 10-year Treasury Note yield, which had been dropping, fell through the 4.00 pct floor to move to roughly 3.60 pct (all figures approximate because I am doing this by sight). Finally the 2000-2002 great bear market reached a bottom at about 7200 in Oct-02.

So, the U.S. Treasury printed their way out of a terrible bear in equities. The gold bulls took notice.

As the Dow 30 moved up to about 9000 by the end of Nov-02, yields had backed up to 4.35 pct, following which the equity market fell apart once again. So the Treasury pumped again, and yields just happened to fall from 4.35 to 3.80 pct., with the Dow down at 8300 by the end of Dec-02.

Then in Jan-03 the Dow 30 moved strongly higher, but so too did the 10-yield Treasury yields, backing up to 4.20 pct by the end of Jan-03. Then, in Feb, as the Dow started sinking, M3 was pumped up again strongly in Feb and especially Mar-03.

So, from a bottom of about 7500 in early March, the Dow 30 zipped up to 8500 by the end of Apr-03.

But with no significant increase in M3 for Apr-May-03, the Dow 30 didn't move higher. But note the huge increase in M3 in Jun-03 as yields on the 10-year Treasury notes dropped from 4.10 pct to 3.10 pct during May-June. Voila, the Dow 30 moved sharply up to 9300.

But during Jul-Aug-03, the Dow 30 was able to move up slowly to 9500, and that's because the M3 wasn't increasing as fast, and the Treasury yield had rocketed from a low of almost 3.10 pct all the way to 4.60 pct. Bonds were getting killed. And note that in Sep-Oct-03, the M3 actually dropped.

Alas, the M3 pump was turned on in Nov-03 and yields started to fall gain. And the Dow 30 rocketed up to 10600 by the end of Feb-04. Here is where it gets real interesting. In Mar-04, with the M3 cranking on all cylinders, bond prices zoomed. The yields on the 10-year Treasury notes fell from 4.60 pct to 3.65 pct, BUT this time, the Dow 30 dropped that month from 10600 to 10000.

Then I noted that in capital markets all over the world there was a massive shifting out of interest-sensitives into commodity-price sensitives. By recollection, the date was April 2-04. I got concerned so I started to blog (using the TraderWizard name) on Apr-08-04, which was Easter weekend. I started off by saying: Has anybody been watching what's happening in the China equity market " it's been crapping out in Feb. Then it started taking off, and you will recall that I gave you three Chinese large-cap oil stocks to buy, right at the cycle bottom.

Well what happened of course was that the Fed decided to start tightening in Apr-04. Look at the T-Bill yields starting in April. They take off.

Why? I think it was Greenspan saying enough is enough to the Treasury printing press being put into over-drive. He started to tighten.

In spite of his tightening by raising the overnight lending rate to the commercial banks, the equity markets continued to rally as M3 was increased.

And then in Sep-Oct-04, looked what happened as the M3 pump was turned off at the Treasury: the Dow dropped immediately from 10400 to 9700. All of these moves could have been forecast with a high degree of accuracy had you known what the Treasury was intending to do.

And maybe that's why it's important to spend a couple hundred million dollars to earn a job paying a couple hundred thousand dollars a year. Do you think?

What bothers me is the same thing that has bothered me a couple times in the past two years, including the past month. I think there is no secrecy at all at the Treasury or the Fed. Whether it's pillow talk or something more sinister, there are extreme moves in the capital markets right before the public is informed of these decisions.

I told you that I couldn't understand why all these TH's were visiting CNBC to tell us that inflation was dead, buy the banks, yada yada. Didn't they seem totally confident that something was about to change? Didn't I write a month ago that I felt like something big was about to happen, but that I didn't know in which direction?

I think we are starting to see motive and other causative factors.

I think people on the inside KNEW these bonds were going higher, and that stocks would be going higher because the printing press would be working full time.

And traders like me were starting to hit the Gold button, maybe out of panic that major decisions were being made by this Administration in the secrecy of darkness.

And isn't it an uncanny coincidence that the new Fed under Bernanke is going to drop M3 reporting to the public? Clearly we need more transparency, not less. But I guess that's not on the agenda.

Never forget that a dead fish stinks from the head. There are definitely major things going on at the Administration that we are not being informed about, but are being broadcast to a select audience.

The concept of transparency is a practical joke, i.e., a joke in practice. And the rest of us have to follow the squiggly lines and try to figure it out later.

For these reasons, I decided not to try to explain stock or bond markets this week. I'm going to wait for a couple days. I need to get a better handle on this. If bonds continue to rally in what is being promoted as a strong economy, then I believe the Treasury and Fed are working together to push them there, in order to get an economy to rally in reality.

If the Administration wants to manipulate capital markets into a melt-up here, then I am sticking to gold and holding a lot of capital ready for buying puts for the inevitable crash.

I think the stakes have risen immensely this month.

Interest rates and bond yields.

Weekly data charts:

Daily data charts:

Hourly data charts:

U.S. Treasury Bonds
Maturity	Yield	Yesterday	Last Week	Last Month
3 Month	3.76	3.75	3.82	3.70
6 Month	4.08	4.08	4.09	4.01
2 Year	4.30	4.33	4.38	4.35
3 Year	4.30	4.34	4.39	4.40
5 Year	4.32	4.36	4.41	4.45
10 Year	4.42	4.46	4.49	4.58
30 Year	4.65	4.69	4.68	4.79
Municipal Bonds
Maturity	Yield	Yesterday	Last Week	Last Month
2yr AA	3.14	2.95	2.97	2.76
2yr AAA	2.97	2.95	2.94	2.76
2yr A	3.04	3.00	2.98	2.81
5yr AAA	3.31	3.22	3.23	3.13
5yr AA	3.37	3.29	3.26	3.14
5yr A	3.43	3.32	3.33	3.23
10yr AAA	3.89	3.64	3.68	3.65
10yr AA	3.90	3.63	3.67	3.64
10yr A	3.82	3.88	3.88	3.81
20yr AAA	4.38	4.09	4.12	4.11
20yr AA	4.37	4.07	4.11	4.07
20yr A	3.86	4.22	4.27	4.20
Corporate Bonds
Maturity	Yield	Yesterday	Last Week	Last Month
2yr AA	4.42	4.46	4.48	4.44
2yr A	4.46	4.52	4.57	4.54
5yr AAA	4.57	4.65	4.70	4.62
5yr AA	4.62	4.66	4.72	4.74
5yr A	4.70	4.76	4.83	4.78
10yr AAA	5.09	5.21	5.24	5.09
10yr AA	4.97	5.05	5.13	5.10
10yr A	5.08	5.13	5.35	5.16
20yr AAA	5.45	5.53	5.60	5.38
20yr AA	5.62	5.69	5.80	5.73
20yr A	5.71	5.78	5.86	5.79

I am shocked at the consumer financials, being up +20 pct in less than two months. Just remember, unless the Administration intends to keep interest rates low forever (in which case we'll have $2,000 gold), then these will drop like a stone at some point. If you haven't played musical chairs since childhood; it's time to brush up.

US Bond Funds -- 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 -- 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 -- 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:

US Bond Funds -- Hourly Data Charts

SHY Hourly data series chart:

IEF Hourly data series chart:

TLT Hourly data series chart:

AGG Hourly data series chart:

LQD Hourly data series chart:

TIP Hourly data series chart:

Consumer Finance -USA -- Weekly Data Charts

Consumer Finance -USA -- Daily Data Charts

Consumer Finance -USA -- Hourly Data Charts

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Commodities:

$CRB was up +0.62 pct W/W to 314.67, mostly on oil.

Weekly CRB Commodities Index:

Daily CRB Commodities Index:

Weekly Crude Oil:

Daily Crude Oil:

Crude Oil contracts (NY Crude EOD chart at StockCharts) were up +2.62 pct W/W to 58.71, so I was right when I wrote two weeks ago: There is big support at 57.60-57.90."

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Gold:

Gold closed up +2.12 pct W/W at 496.08 (Continuous contracts). What else can I say? I just love canary yellow, and at Christmas, when I get on that cruise ship, I'll be chirping for another Yellow Bird.

Weekly Gold EOD Continuous Contract Index:

Daily Gold EOD Continuous Contract Index:

This interactive chart shows the recent trading for the Gold Bullion index.

Silver was up +2.05 pct W/W to 8.21. Last week I wrote: For a real silver bull stampede, the Crazy's have to get the price above $8.25. But that is likely to happen."

Weekly Silver EOD Continuous Contract Index:

Daily Silver EOD Continuous Contract Index:

This interactive chart shows the recent trading for the Silver Bullion index.

Platinum closed the week flat at "0.18 pct W/W to $984.30, after hitting a record high $1,000 a week ago Friday. There is technical support at 953.50.

Weekly Platinum EOD Continuous Contract Index:

Daily Platinum EOD Continuous Contract Index:

This interactive chart shows the recent trading for the Platinum metal index.

Palladium weakened "1.65 pct W/W to 264.23. Like Platinum and Copper, it needs to consolidate recent gains.

Weekly Palladium EOD Continuous Contract Index:

Daily Palladium EOD Continuous Contract Index:

This interactive chart shows the recent trading for the Palladium metal index.

Copper was down 2.39 pct W/W to 189.86. The same people who say Copper is going to crash are telling you the economy is red hot. Go Figure.

Weekly Copper EOD Continuous Contract Index:

Daily Copper EOD Continuous Contract Index:

This interactive chart shows the recent trading for the Copper metal index.

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The Philly goldminer index (XAU) was up again this week, +3.09 pct to 118.66. I gave you the news a week early.

Weekly U.S. Goldminers Index:

Daily U.S. Goldminers Index:

The XGD Toronto Exchange-listed goldminer iUnits S&P/TSX Capped Gold Index ETF TSE:XGD was strong again.

XGD is now up to $58.87, which is a gain of +2.58 pct W/W. I am happy to be long.

Here are the Weekly, Daily and Hourly data charts for the TSX Goldshares (XGD) index:

XGD Weekly data:

XGD Daily data:

XGD Hourly data:

For an interactive look, here are links to the Hourly data charts of three groups of proven goldminer stocks. You can click on the tabs for the Monthly, Weekly and Daily data charts.

List #1

List #2

List #3

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Forex:

The trade-weighted USD index closed at 92.04, which is basically flat for three weeks, and btw for 18 months.

Weekly U.S. Dollar Index:

Daily U.S. U.S. Dollar Index:

The Euro (priced in USD) was down "0.39 pct W/W to 117.15. Soon, it'll strengthen. At least I'm praying in that direction. That will help my gold, and set up my puts in XLF, as money flows back to Europe (seeking higher yields there as soon as ECB starts tightening).

Weekly Euro Dollar Index, priced in USD:

Daily Euro Dollar Index, priced in USD:

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International Equities:

Two weeks ago I wrote: The high flying international ETFs of the past few weeks have started a speed wobble." And last weed I added Indeed".

Japanese equity market ETF: EWJ

This week, EWJ (Japan) was down 0.24 pct W/W to 12.52. Technically, the Nikkei Dow (and the TOPIX) have broken out to the upside, led by the new General (Motors), i.e., Toyota. TraderWizard readers will recall how I called the Japanese Bull at the bottom in 2Q04, soon after I started to blog.

Here is the Japanese (EWJ) equity market ETF Weekly, Daily and Hourly data charts:

EWJ Weekly data:

EWJ Daily data:

EWJ Hourly data:

U.K. equity market ETF: EWU

The U.K. ETF (EWU) was up +0.48 pct W/W to 18.71. Toppy.

Here is the United Kingdom (EWU) equity market ETF Weekly, Daily and Hourly data charts:

EWU Weekly data:

EWU Daily data:

EWU Hourly data:

Canadian equity market ETF: EWC

The Canadian EWC closed Friday at 21.45, which is a huge gain of +4.99 pct.

This week there was a Liberal Party pre-election bag of goodies from Ralph Goodale, Minister of Finance. The government will fall on Monday! Thank goodness.

But how many billion dollar election promises can be made, and still keep a straight face? These charlatans have no covenant. Their word is worthless. But mark my words now and return a year later to see how many billions promised will never be delivered. My point is that there was never the intent. Sweet nothings spoken to get re-elected.

Here is the Canadian (EWC) equity market ETF Weekly, Daily and Hourly data charts:

EWC Weekly data:

EWC Daily data:

EWC Hourly data:

(Japan, Taiwan, Hong Kong, Singapore)

(U.K., Germany, France, Italy)

(Canada, Mexico, Brazil, Australia).

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U.S. Equities:

Don't worry, mon, be happy. All four of the U.S. broad markets were up W/W by +1.54 pct, +1.60 pct, +1.61, and +1.69 pct. Left, right, left, right, left...

Do you feel like you've been marching to somebody's tune? Like maybe the Pied Piper?

Just remember, I'm the Rat Catcher!

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Here is the Monthly data chart of the Nasdaq Composite, S&P 500, Dow30, and Russell 2000 (small cap) indexes.

Here is the Weekly data chart of the Nasdaq Composite, S&P 500, Dow30, and Russell 2000 (small cap) indexes.

Here is the Daily data chart of the Nasdaq Composite, S&P 500, Dow30, and Russell 2000 (small cap) indexes.

Here is the Hourly data chart of the Nasdaq Composite, S&P 500, Dow30, and Russell 2000 (small cap) indexes.

The following table shows the weekly price performance of the Dow 30 stocks, which I sorted by 1-week price change.

Symbol	Close	Net	%Net	1W %Net	2W %Net	4W %Net	YTD %Net	3M %Net	6M %Net	Yr %Net
INTC	26.81	0.17	0.64%	6.77%	6.22%	17.43%	16.21%	5.30%	-0.70%	13.55%
AXP	52.62	0.22	0.42%	6.30%	5.54%	7.61%	-5.88%	-5.58%	-0.02%	-6.45%
XOM	60.11	0.24	0.40%	4.76%	6.48%	8.11%	20.00%	1.57%	7.96%	16.74%
MRK	30.98	0.17	0.55%	4.63%	3.16%	15.08%	-0.90%	11.56%	-4.76%	13.81%
GE	36.20	0.26	0.72%	4.44%	4.93%	7.80%	-1.07%	8.06%	-1.79%	1.57%
AA	27.33	0.44	1.64%	3.33%	4.00%	14.50%	-11.81%	-0.51%	0.63%	-19.02%
C	49.52	0.18	0.36%	3.30%	3.75%	9.05%	2.59%	14.05%	4.36%	8.79%
AIG	68.87	-0.20	-0.29%	2.68%	2.50%	9.09%	4.30%	15.36%	27.35%	7.22%
WMT	50.49	-0.08	-0.16%	2.54%	2.96%	12.85%	-5.36%	11.48%	6.74%	-9.03%
HPQ	29.73	0.35	1.19%	2.52%	5.16%	10.93%	41.24%	10.52%	30.28%	47.62%
SBC	24.77	0.09	0.36%	2.48%	3.68%	4.51%	-3.20%	3.73%	5.18%	-2.33%
JPM	38.86	0.08	0.21%	2.45%	1.41%	7.85%	-0.74%	13.89%	8.21%	3.08%
MO	73.47	0.06	0.08%	2.33%	-1.40%	0.10%	21.18%	5.09%	8.33%	28.09%
KO	42.80	0.15	0.35%	2.22%	0.66%	1.54%	3.03%	-2.31%	-4.68%	7.54%
IBM	88.80	0.00	0.00%	2.20%	5.73%	7.88%	-9.16%	9.49%	16.84%	-6.98%
DD	43.15	0.33	0.77%	2.11%	2.11%	4.30%	-12.15%	7.85%	-7.64%	-5.27%
BA	69.06	-0.38	-0.55%	2.08%	4.48%	7.82%	35.49%	2.75%	12.38%	27.61%
PFE	21.67	0.03	0.14%	1.50%	-2.43%	2.70%	-18.07%	-12.87%	-24.42%	-19.11%
MMM	78.32	0.19	0.24%	1.37%	1.48%	4.69%	-4.95%	9.85%	1.64%	-2.40%
HON	36.92	-0.04	-0.11%	1.35%	2.73%	10.51%	4.59%	-2.89%	0.79%	2.98%
UTX	54.31	-0.09	-0.17%	1.04%	2.70%	7.74%	5.46%	7.29%	1.67%	11.59%
GM	22.86	-0.66	-2.81%	1.02%	-2.76%	-15.92%	-43.28%	-32.94%	-27.41%	-42.21%
VZ	31.98	0.13	0.41%	0.88%	2.70%	3.97%	-21.02%	-2.17%	-9.66%	-21.79%
CAT	57.95	-0.06	-0.10%	0.84%	5.96%	16.13%	21.92%	8.52%	25.32%	25.90%
MCD	33.46	-0.25	-0.74%	0.81%	0.69%	6.05%	5.15%	0.48%	8.32%	10.07%
PG	57.28	0.27	0.47%	0.23%	1.61%	4.11%	3.79%	4.15%	2.78%	6.19%
HD	42.42	-0.07	-0.16%	-0.21%	1.63%	7.69%	-1.58%	5.57%	7.75%	-2.33%
MSFT	27.76	-0.16	-0.57%	-0.75%	2.47%	11.71%	3.81%	2.70%	7.97%	4.20%
JNJ	62.15	0.48	0.78%	-1.88%	1.21%	1.16%	-1.19%	-0.61%	-7.88%	2.71%
DIS	25.05	0.09	0.36%	-3.62%	-2.57%	6.96%	-10.05%	-0.60%	-9.40%	-8.38%

This performance chart of the Dow 30 shows 26 stocks up and just 4 down this week. Just like two weeks ago. A week ago it was 19 up and 11 down. That's a lot of green arrows. Pretty soon you'll be told that the dogs are all rock stars.

Lets take a look at what happened:

The five big winners out of 19 on the week:

INTC, up +6.77 pct: no good reason
AXP, up +6.30 pct: no good reason
XOM, up +4.76 pct: NY Crude up +2.6 pct
MRK, up +4.63 pct: no good reason
GE, up +4.44 pct: no good reason

The only four losers this week were:

DIS, down "3.62 pct: Must really be having issues!
JNJ, down "1.88 pct: Going my way
MSFT, down "0.75 pct: New product must not be such a hot one
HD, down "0.21 pct: Taking a breather, I suppose

Here are the links to interactive Dow charts from Investertech.com that I broke into groups of ten, which you can add technical indicators for as well. (list one) (list two) (list three)

(AA) (AA) (Here is the Oct. 21 Value Line report on AA: next one is due Jan. 20)

(AIG) (AIG) (Here is the Nov. 25 Value Line report on AIG: next one is due Feb. 25)

(AXP) (AXP) (Here is the Nov. 25 Value Line report on AXP: next one is due Feb. 25)

(BA) (BA) (Here is the Sep. 23 Value Line report on BA: next one is due Dec. 23)

(C) (C) (Here is the Nov. 26 Value Line report on C: next one is due Feb. 25)

(CAT) (CAT) (Here is the Oct. 28 Value Line report on CAT: next one is due Jan. 27)

(DD) (DD) (Here is the Oct. 21 Value Line report on DD: next one is due Jan. 20)

(DIS) (DIS) (Here is the Nov. 18 Value Line report on DIS: next one is due Feb. 18)

(GE) (GE) (Here is the Oct. 14 Value Line report on GE: next one is due Jan. 13)

(GM) (GM) Here is the Sep. 2 Value Line report on GM: next one is due Dec. 2)

(HD) (HD) (Here is the Oct. 7 Value Line report on HD: next one is due Jan. 6)

(HON) (HON) (Here is the Oct. 28 Value Line report on HON: next one is due Jan. 27)

(HPQ) (HPQ) (Here is the Oct. 14 Value Line report on HPQ: next one is due Jan. 13)

(IBM) (IBM) (Here is the Oct. 14 Value Line report on IBM: next one is due Jan. 13)

(INTC) (INTC) (Here is the Oct. 14 Value Line report on INTC: next one is due Jan. 13)

(JNJ) (JNJ) Here is the Sep. 3 Value Line report on JNJ: next one is due Dec. 2)

(JPM) (JPM) Here is the Nov. 25 Value Line report on JPM: next one is due Feb. 25)

(KO) (KO) (Here is the Nov. 4 Value Line report on KO: next one is due Feb. 3)

(MCD) (MCD) (Here is the Sept. 9 Value Line report on MCD: next one is due Dec. 9)

(MMM) (MMM) (Here is the Nov 18 Value Line report on MMM: next one is due Feb 18)

(MO) (MO) (Here is the Nov.4 Value Line report on MO: next one is due Feb. 3)

(MRK) (MRK) (Here is the Oct. 21 Value Line report on MRK: next one is due Jan. 20)

(MSFT) (MSFT) (Here is the Nov. 25 Value Line report on MSFT: next one is due Feb. 25)

(PFE) (PFE) (Here is the Oct. 21 Value Line report on PFE: next one is due Jan. 20)

(PG) (PG) (Here is the Oct. 7 Value Line report on PG: next one is due Jan. 6)

(SBC) (SBC) (Here is the Sep. 30 Value Line report on SBC: next one is due Dec. 30)

(UTX) (UTX) (Here is the Oct. 28 Value Line report on UTX: next one is due Jan. 27)

(VZ) (VZ) (Here is the Sep. 30 Value Line report on VZ: next one is due Dec. 30)

(WMT) (WMT) (Here is the Nov. 11 Value Line report on WMT: next one is due Feb. 11)

(XOM) (XOM) (Here is the Sep. 16 Value Line report on XOM: next one is due Dec. 16)

The Value Line Reports for this week are AIG, AXP, C, JPM and MSFT- all financials. Just joking. Next Friday, Value Line publishes on GM " if it's not declared insolvent by then.

Just joking " GM's already insolvent and unable to meet its massively (i.e., $70 billion) under funded pension liability.

But, just like Stelco, there happens to be 860,000 GM stockholders who still think there's a considerable value in the Old General. Thankfully, unlike Stelco, the Bush Administration, the State of Michigan, and GM management and the shareholder's Board, and a bankruptcy judge, are not working with so-called private equity backed by improperly directed taxpayer money to try to steal it from shareholders and put it into the hands of friends".

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Wrap up

Maybe some readers haven't yet fully appreciated why I am writing so much about Stelco. But Stelco and GM were born with the same genes. They are beset by the same problems.

There is a bigger issue here. If tightly organized and privately controlled groups, operating together with a common agenda, are allowed to resolve the issues of Stelco and GM for their own benefit, then the viability of public capital markets is at stake, and in my opinion doomed.

Readers ask how is it that I can publish a news" headline in advance of the event. I joke that I have a crystal ball, but the simple truth is that I'm always looking forward because I have learned that what has gone around is going to come around.

Our world is not flat. So knowing what" is going to happen, my job (and yours) is to try to figure out when" and how". The answer usually lies in why".

At the end of the day, unless we are crazy or there is an unpredictable or extreme act of nature, actions always follow motives. There is a why".

And, when you clear away all the noise, the job of the buy side is one of analysis. And on the sell side, it is one of synthesis. As soon as you understand that most simple concept, you will be on your way to success.

As for me I use classical (also known as mathematical) analysis in my study of capital markets. If you research the subdivisions of mathematical analysis, you will begin to appreciate why I spend so much time discussing Lee Ann and the Dance" and Stochastics (e.g., RSI).

The buy side has been misled by academias who fail to understand capital markets, not having succeeded at it, but who nevertheless are published widely on share prices. The worst of it was the Random Walk Theory of Prof. Burton Malkiel and of Prof. Eugene Fama.

If you are a student of markets, I urge you not to waste your time on such rubbish. But with correct thinking, anyone can see that there are trends and cycles within price series data, and you will learn through analysis to link these trends and cycles to contributing factors.

These factors are the dynamics of the capital market itself (e.g., interest rates, money supply, velocity of money, foreign exchange rates, consumer demand, commodity prices, and so forth) as well as vested (motivated) interest parties who use the sell side to synthesize and distribute their stories to the owners of capital.

The capital market is not, as you have been led to believe, and as it should be, a fair marketplace between buyers and sellers " the owners of capital -- where prices are traded. Organized groups intent on transferring wealth from many to few have gained control of the capital market. And sadly they are succeeding in meeting their goals and objectives.

When you see the capital marketplace for what it truly is, and how it operates, you become overwhelmed by the enormous burden of the conflicts of interest that the sell-side has managed to put on it. For capitalism to succeed, it has to be rebuilt from the ground up.

Failing that, there will be a series of amputations like Stelco and General Motors until the heart and brain of the capital market are declared dead. And at that point, society might just as well be living in a Gulag.

By the way, I am not whining; I can succeed in a phoney market or a fair market. I merely state that by eliminating the conflicts of interest, the capitalist market, which is what society needs, can and will succeed.

And that's a wrap.

BCara@BillCara.com

Posted by Posted by Bill Cara on November 26, 2005 07:58:19 PM | Category: Cara Week in Review

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