But with a big final hour pull-back, there were losses in the Dow (-56.7 -0.42 pct to 13322), S&P 500 (-12.6 -0.85 pct to 1466.8), and Nasdaq (-15.4 -0.60 pct to 2561). The story of the day, however, was the huge loss taken by the Dow Utilities (-16 -3.21 pct to 482.81).

Other weak sectors were the Consumer Discretionary (XLY), and the Financials (XLF).

The CBOE Volatility Index increased +9.65 pct, but volume was low.

Resales of single-family homes and condos dropped -0.2 pct to 5.75 million, increasing inventories for existing home sales by +2.2 pct to 3.85 million in July.

The Federal Reserve Bank of Dallas' manufacturing index for August moved to 21.6 from -9.7 the prior month and the Federal Reserve Bank of Chicago reported its manufacturing activity index rose +0.6 pct in July.

The Federal Reserve injected a further +$9.5 billion to the financial system yesterday in a 10-day repurchase, which basically says that the Fed remains concerned about the tight credit market. With the Fed liquidity injection, US Treasury prices rebounded.

Home Depot (HD) agreed to sell Home Depot Supply for about -$1.8 billion lower than previously expected. The winners there were Bain Capital, Carlyle Group and Clayton, Dubilier & Rice.

Lots of deals surfaced Monday: SachsenLB needed to sell itself to another state-owned bank, Landesbank Baden Wurttemberg, US Steel (X) agreed to buy Canadian steel maker Stelco for $1.1 billion in cash, and Taiwan's Acer (my laptop maker) reached an agreement to acquire Gateway (GTW).

The $USD traded in a tight range after the ECB's Jean-Claude Trichet's made comments yesterday morning.

It is a quiet market – the Dog Days of Summer. Many traders and bankers are on vacation.

As for me, I just pretend to be working. :-)

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International Economics Review

US Economic Calendar

Another excellent Economic Calendar is provided by BMONesbittBurns.

Econoday Weekly International Report

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The Cara Global 100 Stockwatch

Here are the Monday session Cara 100 gainers.

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Here are Cara 100 losers from Monday.

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There were no Cara 100 stocks that hit 52-week intra-day highs or lows in the Monday session.

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Here are the Cara 100 stocks that had extreme volume changes.

It pays to watch the price and volume extremes, ie, Money Flow, especially when markets start trending.

If you noticed, it’s only the China stocks that ballooned the volume yesterday, and they also led the Cara Global 100 gainers.

The trick to trading here is to tighten stops after stocks like this have had a run to where the RSI-7 on the Daily price data has moved up over the 70 line. You don’t want to sell until the RSI-7 falls back below 70 because as the charts show, these stocks have really had a ride in the past few days and selling too early may hurt your portfolio performance.

Pro traders will have international accounts where they can track the stocks in the offshore markets, eg, Hong Kong, where they would sell on a pull-back. Another Tactic is to use put and call options to control the downside risk, but also stick with the “glorious China” opportunity of the present rally.

The reference to glorious China relates to how the Chinese pronounce the name CARA, which is ca-wa, which they interpret as “glorious China” – or so I was told in China.

Either that’s true or I, like far too many, suffer credulity syndrome. LOL

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Key Stocks plus Cara 100 In Focus

I am appreciative to the folks at KNOBIAS, Inc for providing the Cara 100 summaries.

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Relative Strength Index (RSI) analysis of the Cara 100 company stocks .

RSI > 70 (7)

RSI < 30 (3)

VIP split several days ago, but it seems its chart doesn't reflect that… I’ll send an e-mail to try to clean up these charts. It seems that the data vendor sells the data but only checks for splits of US-based companies, ignoring the fact these are US-listed companies.

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Here are the Cara 100 stocks trading with the highest and lowest RSI-7, sorted by (i) daily and (ii) monthly values, for Monday:

“Chris,” used BillCara2.com data that is unsmoothed, unlike the data from Worden used by “David”.

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US Equity Markets Review

DJIA (interactive) chart

The DJIA dropped -57 points (-0.43 pct) to 13322.

For short-term oriented traders, you were impressed that the Dow dropped like a stone in the final hour. I see that as building the wall of worry, discouraging some of you from participating in the rally with net buys until it’s over, when you need to selling rather than listen to advisors who then tell you it’s time to get in.

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NASDAQ Composite (interactive) chart

The Nasdaq Composite was off -15 points (-0.21) pct to close at 2561.

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International Equity Markets Review

Asia-Pacific

The indexes across Asia-Pacific equity markets were mixed, with a modest negative bias, led by Hong Kong and Singapore.

Here is the latest session data for the Asia-Pacific stock exchanges.

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Here is the latest chart for the Japanese Nikkei 225 index.

The Nikkei Dow was down -0.09 pct at 16287.5.

Traders should continue to watch (i) the Dollar: Yen trade; (ii) the EWJ (Japan ETF that trades in USD in NY); and (iii) the key Japanese stocks and ADRs that trade on the NYSE to determine how the Nikkei 225 is likely to open the following day.

Yen strength hurts Japanese exporters, including the auto manufacturers. As I wrote a week ago, I would be bottom-fishing the top quality auto makers, but only if, as, and when the Yen weakens, which it seems to be doing with the Bank Of Japan liquidity injections, and a return (for now at least) of the Carry Trade.

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Here is the latest chart for the Singapore index .

Today, the Singapore STI was down -1.3 pct at 3343, which has consolidates last Thursday’s strong gap open.

Indonesia dropped -0.72 pct again +1.20 pct to 2159.6.

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Here is the latest chart for the Shanghai Composite index .

The Shanghai Composite gained +0.87 pct today to 5194.7, which is another fresh all-time closing record high.

Since I came to Bahamas just a few short weeks ago, the Shanghai Composite index has moved from 3781 to 5194, which is a humungous gain of +37.4 pct. I have never seen a market move like that on the upside.

October 1987 was that magnitude on the downside.

Just remember that what goes up also comes down, so set tight stops and consider engaging in option straddles.

The People’s Bank of China raised rates again last week. Inflation is a problem there, and the equity market is being driven not only by investor confidence in the economy, but by the fact they need to keep pace with inflation.

At the end of the day, inflation serves to pump up the figures for sales and profits. Traders ought to therefore drop the PE ratio as a rule, but when they happen to be super enthused about the country’s economic boom, they tend to miss doing what’s prudent.

The Shanghai Composite has rocketed from 1000 to 5200 in just over 24 months. Pegging the Yuan to the declining USD has really helped.

Ultimately, the end of the Carry Trade and the strengthening of the Yen will hurt China because imports from Japan (and from other neighboring countries) will be more costly. At some point, either raised interest rates (to a level that hurts mortgage finance and construction) or a too weak Yuan (that will elevate the already high inflation rate) will force the Chinese authorities to release the peg to the USD – at least much faster than they have been.

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Here is the latest chart for the Hong Kong Heng Seng index .

The Hong Kong market dropped -0.91 pct to close at 23364. Do you recall a few weeks ago I opined, “I still believe that a new high will be set in the near future”? The intra-day record was set in the morning session today.

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Here is the latest chart for the India BSE 30 index .

A week ago, I said, don’t lose faith in the Indian equity market. Traders there were very confident.

Today, the Bombay Stock Exchange BSE 30 Sensex index gained +0.52 pct to 14919.

A few weeks back, at much lower prices, I wrote, “I believe the recovery from the sharp pull-back this summer is going to proceed to new high levels for the index.” The BSE 30 Sensex index is headed in the right direction.

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Here is the latest chart for the Australian All Ordinaries index .

The All Ordinaries index of Australia dropped -0.12 pct today to close at 6177.

“I continue to believe that a new rally will take the Aussie bourse to a return to July highs. For that to happen, however, the Basic Materials sector will have to take the lead.”

It will.

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Europe>

Here is the latest session data for the bourses of Europe.

There is a broad pullback of today (6:54am ET) across Europe.

Here is the latest chart for the UK FTSE 100 index.

The FTSE is down -0.61 pct at 6182 today in mid session. I do not think that the FTSE will return quite to the former high of 6754 before the start of the next downwave in global equity markets.

The German DAX is down -0.18 pct to 7472 and the French CAC 40 is down -0.92 pct to 5539.

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US Dollar Review

Here is the chart of the recent trading.

The trade-weighted USD is falling again early this morning at 80.656.

“A USD in the 70’s is an almost certainty based on Bank Of Japan plans to raise rates in this or the next quarter.”

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Oil Review

Interactive Chart of Weekly Crude Oil:

Here is the e-miNY Oct-07 Crude Oil chart.

It is presently (about 7:00am) at 72.225.

Blame it all on Borat’s friends. (LOL)

Do you recall that as $WTIC dropped into the 60’s and experts were being sent to Financial Entertainment Media to talk about the prospects of $50 oil, I opined at the time, “I think there will be a recovery in Crude Oil over the next month, to put the price into the low to mid 70’s. There may be a spike to the high 70’s, but I believe a 65-75 trading range is most likely.”

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Gold & Precious Metals Review

Here is the Recent Spot Gold chart.

Spot gold is presently (about 7:02am) at 667.6, a little higher than yesterday.

Do you recall a couple weeks ago I wrote that I like to see a basing pattern like this. The next action is usually a break-out to the upside.

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Here is the Recent Spot Silver chart.

Spot silver is stronger today (7:03am ET), presently at 11.81.

There had been a false break-out to the upside on Friday, but the silver Bulls have the story right.

“I also believe that base metals like copper and nickel are over-sold, and I believe there will soon be a rally. Should that be the case, the miners will out-perform on the upside because of the leverage involved, ie, many of the miners need gold prices of over $600 (for example) just to break even.”

Here is an interesting story, which I commented on late last evening:

"The Globe and Mail reports in its Monday edition that RBC Dominion chartists expect gold to regain its normal seasonal strength, which arrives in early August and runs into October, unless it breaks decisively below its 200-day moving average of $657.30 an ounce. The Globe's Leonard Zehr writes that RBC analyst Ray Hanson argues that if gold were to break its 200-day moving average, "a new round of general liquidation and leverage unwinding would likely be under way." Bullion climbed $9.10 an ounce to $677.50 Friday, and Mr. Hanson called for a "new intermediate momentum upturn" to be registered on a close above $648.42 Friday. The charts he likes best are Barrick Gold among large-cap stocks; Agnico-Eagle Mines and Kinross Gold among mid-caps; and European Goldfields and Anatolia Mineral Development among small caps."

Ray Hanson took over the reins from Ian Notley after I hired Ian and rebuilt the Trend & Cycle Dept for Canaccord Capital. Notley is arguably the finesr market technician in the world. I am biased because Ian was my mentor, so I don't think there is much argument there at all.
I do have great respect for my alma mater RBC Dominion though, and for Ray Hanson. I feel good that he is so positive at this point re gold.

The small cap Anatolia Mineral Development (TSX:ANO) is one I don't know a thing about, but I know if Ray likes it, the whole RBC Dominion system is going to hear of it, and with the Globe & Mail, I guess hundreds of thousands more. So maybe we should look into it?

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Wrap-up

Great weather day here. I think I’ll watch Bloomberg from the boat and spend my day bobbing in the harbour. I think I deserve it.

Have a good one.

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