Yesterday, the Major US equity indexes closed at 4-month lows with losses in the DJIA (-207.6 -1.57 pct), S&P 500 Index (-26.38 -1.82 pct), Nasdaq Composite (-43.12 -1.70 pct), and Russell 2000 small caps (-16.94 -2.17 pct).

The Home Depot (HD) and Wal-Mart (WMT) earnings reports and guidance were indicators of the ongoing problems in the US retailing market, with households reducing discretionary spending. Retailers ($RLX -3.62 pct) were the worst performers on the day.

Basic Materials (Goldminers $XAU -3.30 pct and Paper $DJUSPP -3.15 pct), Financials (REITs $DJR -3.36 pct and Broker-Dealers $XBD -3.10 pct) were also big losers yesterday.

Energy outperformed the market, specifically integrated oil firms.

Wal-Mart earnings soared +49 pct but missed consensus estimates and Home Depot reported net income fell -15 pct as housing markets continue to suffer.

Macro economic data released early in the day revealed non-core inflationary pressures persist as the PPI came in up +0.6 pct, but Core PPI was mostly in line, up +0.1 pct. The gap between the two figures represents an inability of companies to pass higher energy costs to customers.

The Fed is not likely to be swayed by the higher PPI data to increase interest rates. That is one of the reasons I think precious metals prices will rally soon. $GOLD yesterday were almost flat, down a modest -0.18 pct. Nevertheless, the stocks ($XAU) still got crushed. Copper futures dropped about -3.0 pct.

The US trade deficit dropped -1.7 pct to $58.14 billion on increases in exports of industrial supplies.

The International Council of Shopping Centers-UBS Retail Chain Store Sales Index dropped by -0.9 pct due to such factors as "a tornado in Brooklyn, N.Y., heavy rainfall from Chicago through New England, and the hottest early August week in six years," according to Mike Niemira, chief economist at ICSC.

Medium and long-term Treasury prices recovered (lowering yields), after equities turned weak (along with the USD against the Yen) as carry trades were unwound.

Crude Oil (near) futures finished up +$0.76/bbl to close at $72.38 as hurricane warnings were issued for the Gulf of Mexico.

These are exciting days for short-term traders, but pure agony for the conservative long-term trader. Has the 2007 Bear finally gotten under way or is this pull-back another warning? It’s a tough call because HB&B are not too forthcoming as to the losses they are taking in various hedge fund investments.

Overnight, the Asia-Pacific equity markets have shown a degree of selling panic.

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International Economics Review

I believe that the G-20 central banker liquidity injections will continue until Euro LIBOR and Bankers Acceptance rates come off their 52-week highs. This is an emergency situation, and with respect to the key econ data that is being released this week, the capital market is presently focused almost entirely on credit collapse; hence the G-20 is the party with the answers the market is looking for.

US Economic Calendar

Econoday Weekly International Report

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The Cara Global 100 Stockwatch

Here are the Tuesday session Cara 100 gainers. There were only 3 of 100. Note also that the 25th best loser was down -3.5 pct on the day!

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Here are Cara 100 losers from Tuesday.

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Here are the Cara 100 stocks that hit 52-week intra-day highs or lows in the Tuesday 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. In this market pull-back, watch the expanding volume on the downside. So far, there has not been much, even yesterday.

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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 .

Here are the charts of up to a dozen stocks with RSI-7 above 70 and below 30, from Tuesday.

RSI > 70 (0)

RSI < 30 (12 of 32) (Without ASD post spinoff)

Note the split turned from 1>70 and 11 <30 to 0>70 and 32<30 (not counting ASD). There were no stocks for the Daily RSI-7 >70 or for Monthly, Weekly & Daily >70. Clearly, traders are no longer chasing stocks. You recall a month ago when the market was hitting highs, and I was pointing out all the Monthly, Weekly & Daily RSI-7 level stocks and then the increasing numbers that had dropped the Daily RSI-7 below 70 (ie, Sell Alert).

So when do you think you should have sold – then, into market strength – or today in extreme weakness? It’s too late today. Today we are on the lookout for a possible rally. If the rally doesn’t materialize, then we will be moving to shorts and long puts for the first time. I need to see the technical support levels break down first for the DJIA, FTSE and Nikkei 225.

The market is either over-sold here and ready to recover in a day or so or else it is so damaged it will now start to plunge. You know I have taken the alternative viewpoint, but it is a day-to-day thing here.

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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

Yesterday’s session was a horrible day for the Bulls, down over -200 points on the DJIA, closing at 13028.

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NASDAQ Composite (interactive) chart

The Nasdaq Composite was also quiet, closing at 2542.

The six-month chart shows the technical resistance levels that traders must push through if the Bulls are to stay in control. It will be interesting to see if the tech-strong Nasdaq can hold up here while the financials-heavy NYSE (and Dow 30) undergo their credit market shake-out.

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International Equity Markets Review

The indexes across Asia-Pacific equity markets were all down sharply today.

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Asia-Pacific

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 sold down -2.19 pct to 16475. The technical support level may have been broken. Let’s wait another day, and also watch the Yen, which has just put in a 4½ year high versus the USD. That hurts the Japanese exporters, including the auto manufacturers.

The Mar-07 16600 support level for the Nikkei 225 of the very important Japanese market is the critical one to watch this summer.

I believe the successful test in the next day or two will set up a brief rally. For Japan, I would be bottom-fishing the top quality auto makers.

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Here is the latest chart for the Singapore index .

Today, Singapore was down a large -3.35 pct to close at 3273.

I mentioned last week I could see “some bids arriving”, but the former enthusiasm for stocks is not quite there yet, obviously. I think that bullishness will return by the end of the week or Monday.

At least, the Singapore market didn’t get hit like Indonesia, which sold down -6.44 pct today to 2029.

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Here is the latest chart for the Shanghai Composite index .

Last Friday morning I wrote: “Bids came into the Shanghai market late in the session too.

After Shanghai Composite rallied +1.49 pct Monday, and a further +1.09 pct yesterday, today it was flat at 4869.9.

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

The Hong Kong market has pulled back to the first level of support. Today, the index lost -2.87 pct to close at 21375.

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

Today, the Bombay Stock Exchange BSE 30 Sensex index was closed. The index has pulled back from recent record highs but is still well above technical support, denoting the confidence and optimism that Deepak Lalwani speaks of.

Download the Deepak Lalwani “Confidence and Optimism” Report on India .

Download Astaire Weekly Report on India (dated August 7) courtesy of Deepak Lalwani.

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

The All Ordinaries index of Australia lost -3.03 pct today, because commodity prices are well down, but the index is just back to the first level of technical support.

By technical support, I mean the previous cycle high, which at the time was resistance before traders broke through to higher highs.

Traders are still nervous. They are not as positive as I with regard to the basic materials outlook. They see a stronger USD, which is keeping commodity price growth in check.

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Europe>

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

All red arrows at7:41am ET. The recovery has not yet started, as I had earlier anticipated. But the next couple days will tell if the technical support levels can hold.

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

At 7:22am ET, the FTSE was down -1.48 pct. At 7:41am it is down -1.63 pct to 6044, which is still slightly above the 6000 technical level.

In mid-week last week I opined that “this index was over-sold and that there might be a recovery back to the 6500-6600 level. Then at 6250 I wrote, “It now appears that support at 6000 must first be tested.”

In fact, even with today’s enormous weakness, the FTSE is holding and the index is side-tracking, awaiting a rally, I believe.

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US Dollar Review

Here is the chart of the recent trading.

The trade-weighted USD has lifted again to 81.716, which is a reaction to market volatility and safe-haven plays in US Treasuries.

I expect it to stay strong as long as the central banks are pumping money. Besides, the Carry Trade (which had weakened the Yen) is unwinding because equity markets are making traders nervous. A rally in stocks, however, would probably see another round of Carry Trade activity, and a weakness in the USD.

With the drop in commodity prices, the $USD was very strong against the Australian and Canadian Dollars yesterday.

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Oil Review

Interactive Chart of Weekly Crude Oil:

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

It is presently (about 7:50am) at 72.95.

Futures contracts expire today. Markets may be volatile as a result.

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Gold & Precious Metals Review

Here is the Recent Spot Gold chart.

Spot gold is presently (about 7:50am) at 664. This is an excellent opportunity to buy. The futures market has not been as weak as the spot (cash) market, which has been depressed as financial institutions are being squeezed for liquidity. So, I perceive they are selling spot and buying forward.

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Here is the Recent Spot Silver chart.

Spot silver is very weak today (7:55am ET), presently at 12.49.

Take a second look at what will be the last time in this cycle that traders see such low spot silver prices, I believe.

The extreme $USD strength in recent days is throwing much confusion into these precious metals markets.

But, note that gold and silver futures have not caved in. Let the $USD strength play out, and then watch the rally in silver.

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Here is the The Goldminers stock index chart.

The $XAU dropped -3.30 pct yesterday, taking it down just -4.16 pct W/W. Yesterday was a bit of panic selling, and probably a bit of margin loan selling. The index is down to 138.33.

That broke my technical support of 142, and I need to watch today closely, but I do believe that the extreme strength in the $USD will soon abate and that will set up a huge buying opportunity.

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Have a good trading day. If you are bullish, the pull-back yesterday and almost certainly today is a huge bonus.

If I am right and there is a rally soon this month, I do believe things will bounce for a month or two, largely on new liquidity from the G-20 central banks and also from short-covering. Besides, if you are cautious and/or negative, any rally is a time of opportunity to sell into strength.

“Buy into weakness; sell into strength” is a successful traders mantra.

Today in the open chat forum, I listed many over-sold stocks that would probably gain an average +10 pct in a subsequent rally, but I cannot make light of the fact there has been much technical damage done in the past month, and overnight in foreign markets.

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