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February 5, 2007
Cara’s Daytrader Bull Board, Mon., Feb. 5, 2007, 8:07 AM
This is a crazy market. What will traders be faced with next?
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Today at 10:00am is the ISM Non-Manufacturing Survey. After last Thursday’s low-ball 49.3 level on the ISM Manufacturing Survey, which is a concern, traders will be watching today’s data more closely.
The Shanghai Composite was down -2.3 pct overnight over continuing concerns that Chinese officials will be tightening access to credit. The more important Nikkei 225 was down -1.2 pct, but traders in Japan are still quite bullish.
The European equity markets are mostly down this morning, but the losses are modest at this point.
The $USD has remained strong following the Friday morning US econ data (jobs report, consumer sentiment and factory orders) that was considered very positive. But if the economy is going to strengthen here, so too will monetary policy, which is bad for equities at these levels, and bonds.
U.S. Treasury Bond Mar. contract
The rally in yields last Wed and Thurs morning seems to have abated. Perhaps that was due to intervention from the Fed because the drop in yields didn’t seem congruent with a strengthening economy and rising oil prices. So, to me, the jury is still out on rates.
I think the Fed rate will rise if the stock market continues to move higher and I think the Fed will cut rates if the stock market goes into a Bear. Yes, at this point I think the Fed is watching the stock market more than any other indicator.
Crude Light is up to $58.79. Yes, oil is down a bit this morning, falling just below Friday’s 59, but this rising trend cannot be good for Transports, which hit cycle highs on Friday. There is now some debate about Friday’s Transports being a Dow Theory confirmation as Dow Industrials were also at a high.
I no longer consider Dow Theory because Transports were not even part of the original theory. Also, Dow Theory was originally a technical look at the US economy. But, globalization has skewed these numbers as Fedex is a major Transport component but is a global concern that has benefited most from growth in the emerging economies. So, what technical analysts need now is a Dow America Theory.
Besides, with the easy access to ETF’s and financial leverage (ie, use of extreme margin), I believe that vested interests simply push these indexes through market levels that once were considered critical to analysis. In other words, the market is being duped, and I won’t have any part of it. I still believe that the momentum of the 2002-2006 Bull cycle peaked in May 2006, and that a relatively few players have pushed the broad market into an extra intermediate cycle, which started to decline in January before another push seems to be creating a possible melt-up condition.
All of the market action at this point is on account of the action of central banks printing money, as I see it.
Spot this morning is $646.10. The $USD has been strong since mid-day Thursday. If, as and when the $USD resumes its weakness, I think gold and the other precious metals will start moving back into a higher trading range, eg, 650-700 for gold – on its way to 750 inside two months.
Silver spot this morning is $13.32. It has formed a small base in the past couple hours.
Platinum is trading at $1155, which may be a cycle low after falling back from 1188 on Thursday morning. We’ll see. The $USD strength or weakness is going to be a big factor today.
Palladium has been trading at $330-334 over-night (presently 333). It looks like the 329-330 level is a short-term cycle bottom, but we’ll see if it can withstand another test before moving higher.
$CRB has been in a rally since mid-January. I believe this commodity index will continue higher, but crude oil and natural gas prices will be key.
After the blow-off of gold stock stocks shortly after the open on Thursday, and the start of a recovery on Friday afternoon, it remains to be seen whether these stocks can continue to strengthen. Obviously the precious metal prices are key, and I happen to believe this will be a good week for both the metals and the shares.
In fact, I think at this point the only negative factor for equities and commodities is for central banks to tighten. I haven’t seen evidence of it other than in China. We’ll have to see what the Bank of England and European Central Bank do on Thursday morning. If these banks do not raise rates, then I think precious metals go a lot higher. If one of them (ie, ECB) raises, then I believe that precious metals will go a little higher. What I am watching for is a combined BoE-ECB raise and tightening policy statement. That would hurt precious metal prices. It would also probably hurt other stock and bond prices.
From MarketWatch files:
Cognizant Technology Solutions Corp. (CTSH) said fourth-quarter net income rose 21 pct to $69.5 million, or 46 cents a share, from $57.7 million, or 39 cents a share, a year ago. Excluding stock-based compensation expenses, the company said Monday it earned 50 cents a share in the fourth quarter. Fourth-quarter revenue rose 65 pct to $424.4 million from $256.9 million. Analysts expected the company to earn 43 cents a share on revenue of $405.5 million for the latest quarter.Electronic Arts (ERTS) was downgraded to neutral from overweight at J.P. Morgan. The firm cited valuation and competition from a strong line up of games at its competitors. The broker added another possibility is that the industry could witness further hardware shipment cuts, which could limit demand for Electronic Arts' new titles.
Hewlett-Packard Co. (HPQ) said it plans to withdraw the listing of its stock from the Nasdaq Global Select Market to reduce costs of exchange listing fees and administrative burdens related to being listed in two exchanges.
Overstock.com Inc. (OSTK) filed a lawsuit in the Superior Court of California, County of San Francisco seeking damages of $3.48 billion against a group of companies it says control over 80 pct of the prime brokerage market.
UnitedHealth (UNH) said it revised its 2007 revenue outlook due to lower-than-anticipated enrolment in its SecureHorizons Medicare Advantage plans. The health care services company now expects 2007 revenue to exceed $78 billion, vs. the average analyst estimate of $78.4 billion. The company said it still expects 2007 net earnings of $4.7 to $4.75 billion, as operating cost efficiencies offset the impact of the change in revenue outlook. The stock closed Friday up 11 cents at $52.91.
Wal-Mart Stores (WMT) reported a gain of 2.2 pct in comparable-store sales for the first month of the year, putting it on track to deliver the lowest annual same-store sales growth in more than 25 years. The results topped the company’s prediction that sales in US stores open for at least one year would rise annually by 1 to 2 pct in the five-week period, ending Feb. 2.
Econoday Weekly International Report
Posted by Posted by Bill Cara on February 5, 2007 08:07:13 AM | Category: Cara's Bull Board
Discourse
GSS +5% gap up, that was nice, i guess their country is stable, although lacking in electricity
Posted by: deacon31 ![[TypeKey Profile Page]](http://www.billcara.com/nav-commenters.gif)
at
February 5, 2007 9:37 AM [link]
One of the interesting highlights of Medicare Prescription Drug coverage this year is there are new players on the scene. My insurance agent called me in early December ‘06’ and said he had a great deal for me. Instead of going forward with the Humana plan he had enrolled me in last year, who had notified it would come close to doubling it’s premium price I would have to pay in 2007, introduced me to a new company who would charge nothing for the same Prescription Drug Coverage with lower co-pay plus would include dental and eye care which Humana didn’t offer at all, for the same low price of $0.00. Maybe UNH is running into this type competition also.
Posted by: C.Note at
February 5, 2007 11:29 AM [link]
One of the interesting highlights of Medicare Prescription Drug coverage this year is there are new players on the scene. My insurance agent called me in early December ‘06’ and said he had a great deal for me. Instead of going forward with the Humana plan he had enrolled me in last year, who had notified it would come close to doubling it’s premium price I would have to pay in 2007, introduced me to a new company who would charge nothing for the same Prescription Drug Coverage with lower co-pay plus would include dental and eye care which Humana didn’t offer at all, for the same low price of $0.00. Maybe UNH is running into this type competition also.
Posted by: C.Note at
February 5, 2007 11:35 AM [link]
WFMI update:
WFMI broke another downtrend line today. Trend appears up since last weeks post by me as a follow up to Bill's article.
If you recall, my post came on the day that many comments were being made on some "rumor" at KRY. I mentioned that WFMI was actionable advice with good probabilities vs. stories of KRY. Since that post, KRY is flat, WFMI is up over 4%.
KISS applies.
Long: WFMI, KRY
Posted by: g034 at
February 5, 2007 12:39 PM [link]
ALOHA !!
In a collapsing economy where asset prices are declining why is it Whole Foods would benefit, especially if their goods are mostly imported, which would go up in price with a US dollar downturn and an increase in fuel costs? The last time I went to Whole Foods was in Walnut Creek, CA in 2002 and prices were extremely high, but the atmosphere was pleasant and the food quality looked good(organic). Is it their produce is grown locally and therefore not effected by US dollar flucuations? Yet they offer more than just produce ... I am not sure Whole Foods would survive a severe economic downturn here in the USA.
I do not own shares, just observing and commenting based on my shopping experience there ...
Posted by: kaimu at
February 5, 2007 1:06 PM [link]
kry---------- we are still awaiting for the all important permit to begin mining---hopeful for a feb. clearance. new ceo!!
Posted by: russty1 at
February 5, 2007 1:14 PM [link]
kry---------- we are still awaiting for the all important permit to begin mining---hopeful for a feb. clearance. new ceo!!
Posted by: russty1 at
February 5, 2007 1:16 PM [link]
Kaimu/WFMI:
It's my guess that WFMI was in oversold condition, etc. But to your point, and in my opinion, many of the customers of Whole Foods are those who can afford to, and will, still shop there in the event of an economic downturn. I'm not really in the money-is-no-object income bracket, but I own the stock, and I shop there, and there isn't much that would make me go elsewhere, including price. In the event of a downturn, I simply move down the "food chain," and shop WFMI store brands, moving back up the chain as, for example, gas prices move down. Incidentally, I practice the same at SBUX - went from overpriced, sugary drink (Mocha) to Americano to regular coffee as prices went up. I still go there, but I don't spend as much. (Maybe this argues against both stocks in the long run.) Regarding local produce: my WFMI buys a lot of local produce, and highlights the practice in large overhead posters.
Posted by: writersblock at
February 5, 2007 2:37 PM [link]
Medicare Plans - Humana undercut most competitors in '06 to buy business. It was a sound strategy since most seniors picked a plan based on price and will most likely stick with that plan. The rate increases for '07 put Humana more in line with everyone else. C.Note, the small players you mentioned will get gobbled up in '08 when some of the legislative pricing restrictions expire - probably by the big insurers and Rx managers like Merck/Medco.
I bought WFMI based on the technicals like g034. With their clientele in the upper-middle to upper class, I would think the impact of an economic downturn would be somewhat muted for this stock. A bit like WMT and PG for the "luxury" class.
Posted by: michaer at
February 5, 2007 10:17 PM [link]
ALOHA !!
WFMI:
I understand there is a certain upscale clientele and I used to shop at Whole Foods in Berkeley,CA way back when it wasn't so yuppy-fied. I guess I am a farmer at heart because after one visit to Whole Food Yuppyville I decided I could get organic food a heck of a lot cheaper at local "Farmers Markets" and support the little guys instead of corporate "mark-up land"!
As I recall the East Bay area of San Fran it was the upscale Whole Foods, then the upper middle class Trader Joes and the middle class SafeWay and the middle to low incomers at the local Farmers Market ... more or less ...
I just don't see a lot more upside on the "yuppy- house-flipping-I-Pod-daytraders-temporary-upper class" types! Nobody in America has witnessed a total "downside" yet and a broader based "service industry economy" will never support a SBUX or a WFMI.
Posted by: kaimu at
February 6, 2007 1:24 AM [link]
Regarding Golds, hui lags while equity market are stable, gold & silver looks ok but the commodities indices might face more weakness.
Caution & see my recent posts :
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semi equip. stocks gap up on KLAC earnings report...
BofA affirms Buys on XLNX, ALTR; positive check on TXN, INTC (XLNX on clive's long list last week)...
let's see if NDX SMH can follow thru on daily chart 14-3 slow stochastic and cci(20) buy signals...
WMT gap up on sales data...negatives MSFT in barrons and GM in wsj...crude oil 59.45 as nat gas strong into the cold weather
spot gold the 650 round number is key, if can't hold above it then 635 may be a goal for the bears
typically, when there is such as break in base metals, one should wait another day to see if the bears can shake the tree again
Posted by: deacon31![[TypeKey Profile Page]](http://www.billcara.com/nav-commenters.gif)
at
February 5, 2007 9:19 AM [link]