Not surprisingly, the DJIA closed up +192 points (+1.4 pct) at 14087, hitting an all-time intra-day high. Traders must think New York is Shanghai or Hong Kong, Bombay or Sydney.

Citigroup (C) warned 3Q07 net income may fall -60 pct, and UBS (UBS) stated they are posting a 3Q loss in the billions after making humungous write-downs in its fixed income portfolio. But, this bank also plans to cut -1500 jobs, so the stock jumped +3.2 pct on bigger than normal volume. Within the banks, and probably the entire market, something other than the usual fundamental, quantitative and economic factors is now driving prices.

Speaking of banks, yesterday I commented that Canada’s TD had made good strategic headway in the US with positions in BankNorth and Ameritrade. Today TD announced it has acquired for $8.5 billion, control of Commerce Bancorp, making TD the seventh largest North American bank when measured by number of retail branches.

All is not perfect, however. (Cara 100) Walgreen (WAG) reported 4Q net income fell to $396.5 million (40 cents/share), from $412.3 million (41 cents/share), but the Street had been anticipating 47 cents. So the stock dropped -15 pct on the day. And, Nokia (NOK) announced a deal to acquire Navteq (NVT), a major supplier to (Cara 100) Garmin (GRMN), so GRMN was dumped, closing down -10.2 pct.

Worldwide semiconductor sales increased in August +4.9 pct Y/Y to $21.52 billion, which Talking Heads took as a signal that tech growth will be the hottest part of the market, and will average over +20 pct annualized earnings growth for the next five quarters. Hmmm. Cisco (CSCO), Oracle (ORCL) and SanDisk (SNDK), which are big weights in the Tech sector, didn’t seem to care. All were down on the day – a day the Nasdaq jumped +1.5 pct.

But, traders cannot overlook the massive increase in prices in all international equity markets that appears to be underway. Just because a stock price is high, ie, in the Cara Distribution Zone, is not a reason to sell. There must also be a pull-back in the Daily RSI-7 and also maybe the Weekly RSI-7 to give a Sell-Alert.

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International Economics Review

US Economic Calendar

How’s business activity in the US? Here is the Econoday report for August for the US ISM Manufacturing Index. Note that the index fell from 53.8 to 52.0, which is a serious drop, and that export orders dropped from 57.0 to 54.5. On Wednesday, the US Non-Manufacturing Survey will be out.

Today, the reports to come are for US (i) Pending Home Sales and (ii) Motor Vehicle Sales.

On Thursday, there is the rate/monetary policy announcement of the Bank of England and the European Central Bank. If they cut, the USD will strengthen. If not, it will continue to fall.

On Friday, the US Jobs Report and Consumer Credit reports are out.

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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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Here are the Cara 100 stocks that hit 52-week intra-day highs or lows in the Thursday session. The New Highs list is growing. Watch the Distribution Zone for Sell Alerts. Successful traders sell into strength (and buy into weakness), like any businessperson would do.

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

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Key Stocks plus Cara 100 In Focus

There are various sources for up/down grades by broker-dealers. One is at Briefing.com. Traders ought to check everyday for ratings changes. That website is updated later in the morning.

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 (12 of 49)

RSI < 30 (2)

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

“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

At 14087, the DJIA blew right through what technicians were calling overhead supply from traders who believed there would be a double-top condition unfolding. That may still happen, but the Bulls have mounted a serious push to take the US market higher.

Why did the Financials (XLF +2.03 pct) rocket higher today to lead the US equity market higher? Is the credit market problem fixed? No. Are there not banks struggling for survival? Yes. So why did the total value of US financial companies rally more than +2 pct in a single day?

You know I like Hovnanian (HOV), but the company is in crisis? So why did the stock pop almost +5 pct today? Crisis over? I hardly think so. UBS just had some monster write-offs, yet was up over +3 pct in six and a half hours. That makes sense. NOT. And I guess, Warren Buffett is looking over the books while preparing to buy a stake in Lehman Bros (LEH) because the stock was also up more than +3 pct on the day. Not a month, but a day. That also makes sense. NOT.

I just put it down to a chorus of storytellers getting in tune.

My thoughts are that markets in Asia-Pacific (ex-Japan), Brazil and possibly Canada are deserving of a continued Bull phase, probably (as long as the USD is falling), but US, UK and Western European markets are quite over-priced on a normalized PE basis.

With the Pound and Euro so extreme to the upside, it’s hard to tell where equity markets might be priced with a Euro under 140, and a $USD above 79.50-80.00, for example.

My concern for the Bulls is that Wall Street is beginning to fabricate reports that Tech across the board will have annualized profit growth of +20 pct in 4Q07 and +22 pct in all of 2008. Many of us are scratching our heads as to how that can happen. You see, so much of tech is embedded in consumer discretionary products like autos and trucks, household appliances, consumer electronics and the like. These markets are declining, not growing.

Transportation is declining. Home construction is declining. Banks and mortgage companies are laying off people left, right and center. And so forth. These are also major buyers of technology, and they won't be buying more at times like this. At least not for long, and not across the board.

Yes, there are pockets of growth, but across the board +20-22 pct profit growth over the next five quarters? I’m wondering what these people are smoking?

Yesterday, traders saw what can happen with over-blown profit expectations, as in the case of Walgreens (WAG). Poof, the stock plunged -15 pct in a day. Walgreens is not a high-flyer tech company either; it is a stable retail drug store. Did you note that the volume on yesterday’s huge loss day was almost 14 times normal? That shows me that traders are willing to throw away stocks. What would have happened had the Dow dropped -190 points during the day instead of rallying that much?

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NASDAQ Composite (interactive) chart

The Nasdaq Composite gained +1.5 pct yesterday, closing at 2741.

Sure earnings expectations are high, but look what happened to the inflated expectations for a company like Garmin (GRMN) today. Competition on the scene and poof, the stock dropped over -10 pct on the day, and was down about -14 pct earlier.

If Tech is so strong, why did Cisco (CSCO), Qualcom (QCOM) and SanDisk (SNDK), three leading lights of US technology, and the Nasdaq 100/Composite, all fall today when the DJIA gained +192 points (+1.38 pct) and the Nasdaq Composite gained +39.5 points (+1.46 pct)?

At the end of the day, corporations will have to pony up earnings gains or this market will sell off. Moreover, at a time the financially strongest banks like Citi and UBS are taking massive loan provisions/losses, what could happen to the market if there was a news report of a US bank like Northern Rock going begging to the Fed for a bail-out?

Higher house prices in 2005 didn’t mean there was a sustainable housing market. Capitalization must, over the long run, equate to some form of economic value. Yes, if interest rates collapse, the discounting factor in the cash flow analysis drops and valuation increase. Same thing for PE multiple expansions. They expand when rates fall. But, then why would rates collapse or even fall if commodity prices are high and rising, and the economy is slowing?

The only reason I can see is that the Fed is trying to bail out shaky banks, and if the situation with banks is that bad, then why would traders want to buy the equity market higher? Have the storytellers told them to stop thinking about risk?

I kind of chuckled when at the end of the day, when the market had soared, the Scotiabank commercial was aired, “You’re richer than you think!” Pump, pump, pump.

Anything can happen. Before the crash of 2000, even General Electric was trading at a PE above 50. Pump, pump, pump.

Anyway, when you don’t understand what’s happening, you keep your finger close to the Sell button, looking for technical sell signals. And you raise your stops.

And when, some day, the TV Talking Head tells you that the -4 pct pullback was expected, and that he expects it to fall at most another one or two pct, maybe the reporter could ask what covenant does he/she bring to the table? In other words, given that he/she cannot guarantee that the Dow 30 wouldn’t drop -1000 points the next day, would he/she assure us that we never have to see him/her again if the pull-back became a Bear plunge, and we were misled by those earlier remarks?

I ask these questions because it was only seven years ago that I watched TV Talking Heads, one after another, pump GE to 60, on ridiculous metrics, only to soon plunge to 20. Yes, that General Electric, the solid ground beneath the birds at CNBC. Like granite until the market went poof.

The audience at CNBC – not the Federal Reserve Bank of New York -- should get to vote as to who can return as guests on these shows. I guess by now you know that GE’s Chairman and CEO Jeff Immelt is a Director of the New York Fed, who gets to vote on who runs the FOMC trading desk under Prof. Bernanke. Immelt felt that the Goldman Sachs former chief economist would fit in fine in such a position. Would he hire the man for a job at GE? Not likely; but to run the Fed trading desk, why not!

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International Equity Markets Review

Asia-Pacific

The indexes across Asia-Pacific equity markets soared today. Many all-time records were set. Equities are in a melt-up. If you don’t accept that statement, then look at Hong Kong, which had already set an all-time record. Today the index was up almost +4 pct! In one day! If that was gold, the yellow metal would have gained +$30/oz in a day.

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 traded up today by +1.19 pct to 17047.

The N225 was well over 18000 in July.

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Here is the latest chart for the Singapore index .

Today, the Singapore STI set a new record, closing up +1.03 pct at 3794.

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Here is the latest chart for the Shanghai Composite index .

Another monster day, and new all-time closing record high at 5552.

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

A new record closing high for Hong Kong at 28200.

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

A new record high close and intra-day high for the Bombay Sensex index.

Here is the Deepak Lalwani weekly report on the India market:
Download file

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

A new record high close for the Aussie stock index at 6667.6.

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Europe

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

Gains across Europe today (7:44am ET).

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

The huge gap open, followed by all-day sell-off shows that traders are nervous at the FTSE.

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US Dollar Review

Here is the chart of the recent trading.

This morning, the USD has bounced higher again, presently at 78.357.

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Oil Review

Interactive Chart of Weekly Crude Oil:

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

Higher USD means a drop in Oil. Oil now down to 79.30.

Is this not a re-run? We saw a similar move in July 2006 as central bankers, HB&B and probably Gnomes of the Middle East combined to drop the oil price and lift the equity markets.

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Gold & Precious Metals Review

Here is the Recent Spot Gold chart.

Spot gold is now at 733.15. Commodities are being sold off and broad based equities pushed higher. Interesting, but it only sets up another buying opportunity for a growing legion of gold buyers.

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Here is the Recent Spot Silver chart.

Spot silver is now at 13.28 (7:53am ET). That’s a remarkable drop since Monday morning, and goes to show how volatile are markets today. The pull-back will shake out weak hands. Smart traders will step back in and buy the dip, knowing that before the broad equity market enters a Bear, the precious metals will have the last dance.

Recent Spot Silver chart.

I like the Kitco.com charts btw, but also need the ones at Yahoo Finance, StockCharts.com, BillCara2.com and ADVFN.com before making any opinion.

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Here is the The Goldminers stock index chart.

173.06 on the $XAU yesterday, and probably going to pull back today. Any pull-back will set up another buying opportunity.

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Wrap-up

Another active day on the horizon. Have a good one.

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