Bill Cara: Market weakness in India, Japan, Fri., Feb. 17, 2006, 6:27 AM

« No slowdown in money supply growth, Thurs., Feb. 16, 2006, 8:25 PM | Main | Economic studies from Haver Analytics, Fri., Feb. 17, 2006, 6:59 AM »

February 17, 2006

Market weakness in India, Japan, Fri., Feb. 17, 2006, 6:27 AM

There was continued volatile trading in the India and Japanese equity markets early today. Headlines may show the European bourses hitting new highs, but they are pointing readers to the strength in U.S. high-tech and to lower oil prices, which are reversing today.

Here is the India and Japanese equity market charts for the past five days. Consider the percentage declines in terms of an 11,120 Dow. In the case of India today it would be "157 equivalent points, and for Japan "229 points, on the Dow.

As you know, in the equity markets, absolute numbers are meaningless to me. I deal strictly in percentages.

After the close on Nasdaq yesterday, Dell Computer announced a superlative quarterly result, but then announced that this quarter may not be as good. Subsequently, the after-hour trades dropped DELL from the close yesterday at $31.96 to $31.69. In Pre-market trading today, the last time I checked, DELL was down to $31.15.

It pays to be watching the after-hours and pre-open hours of trading in key stocks to help you set up for the day. The Nasdaq website offers a very good source. Click on these links.

Today, traders will be on inflation watch. This is the same inflation that Wall Street told you did not exist, which they needed as a cover story for the year-end rally. On the other hand, I pointed you to the PPI and CPI charts at Haver Economics, which I said clearly showed that inflation was a problem.

The fact is that inflation is a factor in the market. It's why I am over-weighted in energy and metals. And I continue to tell you why, which is to say I publish the M3 money supply growth figures each week.

Posted by Posted by Bill Cara on February 17, 2006 06:27:25 AM | Category: Cara Today in the Market

Discourse

Bill-

You have been pointing us to this market volatility for a couple of weeks now. You have been warning us of long positions in the markets. That is why I am also so heavily cash. (Plus, all of my entry attempts seem to get chewed up!)

I refrained from joining the oil rally yesterday because it was based not on fundamentals but on some comments from Venezuela oil ministers about cutting OPEC production. That seemed a pretty thin reason to become involved so I am still watching it closely. I was also very wary of such an abrupt correction suddenly reversing. It didn't seem normal to me. So the broken clock was maybe right.

Posted by: MarkM at February 17, 2006 7:22 AM [link]

Energy and metals appear ready for leadership positions once again, breaking short term down trends. Note spike down in Rydex PM assets yesterday, as previously mentioned energy already flashing buy. I have increased beta in both over the last few days.

In tech land the Rydex Electronics (semiconductors) has taken the cash flows away from those natural resources and is now at an extreme suggesting caution is warranted in the sector. However internet looks attractive as hot money is out (in fear of the GOOG collapse).

Based on the past few years of energy corrections the rebound could last 4-6 weeks and they could carry the broad market with them... jmho

Also of note is the increased confidence exhibited by higher insider buying as well as ceo confidence surveys. While being nimble in a voltile market is critical it would appear that higher exposure is warranted for benchmarked accounts.

Posted by: stockman at February 17, 2006 7:48 AM [link]

Here is what i do... bought sndk yesterday...you have to buy it when it looks hopeless right now it looks hopeless....decide how much you are willing to lose....set a stop loss...and if or when the thing bounces sell it...you should get $5-6 on one like this if it bounces...is this for sure...no but that typically is an effective way to swing trade.....going forward next the few months i like all metals- ts, n, ccj, all the golds, nem, kgc, ego, auy, (i agree with stockman on meds./bios/) mdt, amgn, dna, genz. also trains - rail, cp, as far as oil goes i am going to stay away from oils right now. In a nut shell all metals, med/bios, rails.

Posted by: Bullring at February 17, 2006 9:22 AM [link]

Hi Bill,

Rise in volatility does raise a lot of concerns over the sustainability of the current bull--run. The same is likely to rise manifold in the days to come as far as the Indian markets are concerned. This is Union Budget time in India - a tussle between 'what is expected' (Corporate India) and 'what can be delivered' (the Finance Minister).

I think the markets are in for a correction in the days to come. History too seems to support my argument. Markets ended lower a month after the Budget in eight of the last ten occassions. I've put a small note on the same. It can be found here -

http://graham-2-livermore.blogspot.com/2006/02/go-short-on-nifty-and-sensex-week.html

Posted by: Ravi Purohit at February 20, 2006 12:57 PM [link]