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October 25, 2007
Daily Report, Thurs., Oct 25, 2007
The trading yesterday in Amazon.com (AMZN -12 pct) was something to behold. I wonder how many “investors” truly believe that the market today is a fair pricing mechanism, like Treasury Secretary Henry Paulson has been saying? :-)
How many of you believed that Amazon lost over $5 billion in market cap because Harry Potter sales were too heavily discounted this quarter? For those who care about these things, Amazon happened to report revenue and earnings results that handily beat Wall Street consensus estimates.
Actually, in case you are interested in reality, Amazon posted earnings of $80 million vs. $19 million a year ago, thanks to soaring sales for the final installment in the "Harry Potter" series.
If somebody wants this market to go down (as in the morning), they use any excuse. If somebody wants this market to go up (as in the afternoon), they use any excuse. I’m wondering who that somebody is. I used to say the market is us... well it really is us, but nobody I know would sell AMZN down -12 pct on the data that was received today.
What all traders need -- this is absolutely crucial to public confidence in capital markets -- is for the SEC to start investigating which traders are causing sudden and brief market swings of such immense proportions. If it is the Fed or HB&B, we need to know. If so, we can then just take our chips to a different casino. I’d prefer one that offers traders a level playing field where we can trade on the basis of corporate fundamental, quantitative, technical and economic data -- stuff that Graham and Dodd or Edwards and Magee thought that markets were all about.
Yesterday, there were good reasons for the US market to open on a weak note. Stocks took significant losses after it was reported that Existing Home sales saw the largest month-to-month drop since these records have been kept, plunging -8 pct last month. Then Merrill Lynch (MER) reported a 3Q loss of $2.24 billion, compared with a year-earlier profit of $3.05 billion. The Company wrote down $7.9 billion from CDOs and sub-prime mortgages, after recently indicating the problem was much less.
Despite the negatives, the Dow 30 (DJIA -1), S&P 500 (-4) and Nasdaq (-24.5) had a massive late day rally to pare much of the earlier losses.
Also on the earnings front, Boeing (BA) 3Q net income lifted to $1.11 billion, from $694 million a year ago, on higher commercial airplane deliveries. Guidance for next year is that sales momentum will flatten.
Corning (GLW) 3Q net income rose +41 pct to $617 million vs. $438 million a year earlier, on rising display sales and favorable exchange rates.
Norfolk Southern (NSC) reported a -7.2 pct drop in net income to $386 million vs. $416 million a year earlier, due to new tax laws and rising oil prices.
In the commodities, the $USD weakened, so gold stayed strong. Crude Oil surged up over $87/bbl after the Department of Energy report showed unexpected inventory draws. Last week, Crude oil stockpiles fell 5.3 million barrels to 316.6 million barrels, Gasoline stockpiles fell 2 million barrels to 193.8 million barrels, and Distillates fell 1.8 million barrels.
With the huge drop in equity prices at the open, US Treasury instruments saw a strong flight-to-safety move with the 10-year yield moving down to almost 4.3 pct.
International Economics Review
Today is the US Durable Goods Orders data being reported at 8:30am and the New Homes Sales data coming at 10:00am. When I see low numbers for the Durable Goods Orders, that usually leads to (i) a sell-off of Fedex (FDX) and the truckers, and (ii) talk of recession, which leads to pleadings for rate cuts. With the upcoming FOMC meeting, and HB&B in dire need of a rate cut, a low Durable Goods Orders number fits the scenario doesn’t it? So, lets see how the govt prepares it, and CNBC spins it.
Econoday publishes a brief but comprehensive weekly report as to the economic situation around the world today. Well worth reading.
Econoday Weekly International Report
Relative Strength Index (RSI) analysis of the Cara 100 company stocks .
US Equity Markets Review
“Traders are taking note of a possible double top.” (WIR 39, Sept. 29)
Early yesterday, I opined,
After the initial market pull-back to open the week, it was patently obvious to me that Humungous Bank & Broker was in pumping, pumping, pumping... setting up the public for the fleecing that would start later in the week, perhaps even today.
Sometime yesterday afternoon I blinked and the Dow 30 had jumped +50 points, then a while later another +50 points, and then another +50 points. This is not the public buying stock. This is not a free and transparent market. Where are these orders coming from?
To this point, corporate earnings are disappointing, I think, so I believe that the Fed and Humungous Bank & Broker are working in sync to try to stabilize market prices at these high levels. Unless interest rate yields and the rates set by the Fed are lowered, which makes dividend paying equities more attractive, I do not see the reason to hang on.
I have pointed out for several weeks that “selling into strength the stocks in your portfolio that have already had a Sell Alert and then a subsequent big run-up in price to a second Sell Alert is usually the right decision.”
NASDAQ Composite (interactive) chart
The US equity market Sector ETF Summary
The tables I show in this section 2007_10_24 are for ten (GICS) Sector Index Funds (ETF’s) only, but they cover the full spectrum of the US equity market.
Table 1: Cara ETF List is sorted by price performance Week over Week (W/W), i.e. 1W%N.
| Symbol | Close | 1Day Change |
1Day %Change |
1W %Change |
2W %Change |
4W %Change |
YTD %Change |
3M %Change |
6M %Change |
12M %Change |
You can do this table yourself by entering the following string into the Summary window at Billcara2.com and then clicking on the link for Performance. XLE XLB XLI XLY XLP IYH XLF SMH IYZ XLU . You can also add more ETF’s – up to 30 in total.
For a list of components to any ETF, go to the AMEX.com web site, and click on ETF’s.
10 (energy: XLE)
15 (basic materials: XLB)
20 (industrial: XLI)
25 (consumer discretionary: XLY)
30 (consumer staples: XLP)
35 (healthcare: IYH)
40 (financial: XLF)
45 (technology, semiconductor: SMH)
50 (telecom: IYZ)
55 (utilities: XLU)
Bonds & Yields Review
Table 10: US Treasury Yields
| Maturity | Yield | Yesterday | Last Week | Last Month |
|---|---|---|---|---|
| 3 Month | 3.68 | 3.83 | 3.84 | 3.66 |
| 6 Month | 3.82 | 3.93 | 3.99 | 3.92 |
| 2 Year | 3.73 | 3.82 | 3.97 | 4.04 |
| 3 Year | 3.73 | 3.82 | 3.99 | 4.09 |
| 5 Year | 3.98 | 4.05 | 4.21 | 4.30 |
| 10 Year | 4.34 | 4.40 | 4.55 | 4.63 |
| 30 Year | 4.64 | 4.69 | 4.83 | 4.88 |
| Maturity | Yield | Yesterday | Last Week | Last Month |
|---|---|---|---|---|
| 2yr AA | 3.34 | 3.37 | 3.39 | 3.40 |
| 2yr AAA | 3.35 | 3.37 | 3.41 | 3.49 |
| 2yr A | 3.37 | 3.41 | 3.45 | 3.41 |
| 5yr AAA | 3.44 | 3.46 | 3.51 | 3.52 |
| 5yr AA | 3.40 | 3.40 | 3.50 | 3.55 |
| 5yr A | 3.60 | 3.58 | 3.76 | 3.74 |
| 10yr AAA | 3.76 | 3.76 | 3.77 | 3.79 |
| 10yr AA | 3.68 | 3.66 | 3.75 | 3.76 |
| 10yr A | 3.89 | 3.89 | 3.90 | 3.92 |
| 20yr AAA | 4.38 | 4.37 | 4.42 | 4.48 |
| 20yr AA | 4.57 | 4.57 | 4.62 | 4.88 |
| 20yr A | 4.39 | 4.38 | 4.43 | 4.76 |
| Maturity | Yield | Yesterday | Last Week | Last Month |
|---|---|---|---|---|
| 2yr AA | 4.51 | 4.54 | 4.70 | 4.84 |
| 2yr A | 4.68 | 4.71 | 4.85 | 4.99 |
| 5yr AAA | 4.76 | 4.82 | 4.89 | 5.05 |
| 5yr AA | 4.96 | 5.00 | 5.11 | 5.18 |
| 5yr A | 4.93 | 4.98 | 5.14 | 5.26 |
| 10yr AAA | 5.27 | 5.23 | 5.39 | 5.41 |
| 10yr AA | 5.59 | 5.60 | 5.62 | 5.80 |
| 10yr A | 5.57 | 5.57 | 5.68 | 5.88 |
| 20yr AAA | 5.65 | 5.74 | 5.80 | 6.00 |
| 20yr AA | 5.83 | 5.87 | 5.99 | 5.95 |
| 20yr A | 5.99 | 6.08 | 6.14 | 6.34 |
Yes, bond prices are rising (and yields falling), but the big question to ask is how low can the USD go? Another question is are traders conscious of and pricing in corporate risk. This write-off by Merrill Lynch, for instance, means the company has not made a profit for two years. I happen to think that Merrill Lynch is a well-run company, so what is the situation within the walls of some of the others in the financial services industry that supported this house-building craze on the backs of “liar loans”?
Typically, when traders have concerns of such magnitude, rates rise to compensate for risk. They are not rising because that would surely send the US into massive recession, and many more financial services companies, among others in other industries, would fail. So, it is a case of America walking a fine line today thanks to the policies of Treasury Secretary Henry Paulson who took office in June 2006. At that point, he had an obligation to tighten fiscal policy, but he loosened, and now he has to loosen even more.
The result is higher commodity prices and wage increases, and slow job growth (180,000 meaningful full-time jobs are required to sustain economic growth, and that’s not happening). The public in America has had it to the teeth being lied to by the Administration and their supporters as to the state of the economy. People on Main Street know the truth.
At some point, the corporate bond market must price in these risks. As for the Treasury market, it’s much the same or else watch gold quickly climb to the four digit prices.
Here is the $USB 30-year Treasury Bond chart.
Interactive Daily data charts:
Interest rates and bond yields.
Interactive Chart of Interest rates and bond yields.
US Bond Funds -- Interactive Daily Data Charts
SHY Daily data series chart:
IEF Daily data series chart:
TLT Daily data series chart:
AGG Daily data series chart:
LQD Daily data series chart:
TIP Daily data series chart:
US Bond Funds -- Interactive Weekly Data Charts
SHY Weekly data series chart:
IEF Weekly data series chart:
TLT Weekly data series chart:
AGG Weekly data series chart:
LQD Weekly data series chart:
TIP Weekly data series chart:
Table 11: Interest-sensitive securities
| Symbol | Close | 1Day Change |
1Day %Change |
1W %Change |
2W %Change |
4W %Change |
YTD %Change |
3M %Change |
6M %Change |
12M %Change |
Consumer Finance -USA -- Interactive Daily Data Charts
Consumer Finance -USA -- Interactive Weekly Data Charts
Commodities Review
Until last Friday, there were seven weekly gains in the past eight weeks in the $CRB. It may be time the finance ministers and central bankers try to put a floor under the plunging USD and Yen, so be careful chasing these commodities higher.
Yes, Henry Paulson apparently refused to go along with the G-7 transcription of their meeting discussion. Clearly, he needs to push down rates to keep the economy from collapsing. How he thinks he can do that without crashing the USD is beyond imagination. Maybe he just intends to flat-out lie to the public. America is at a crossroads, and the Paulson Pride is soon to turn ugly, I think.
With today’s economic and political policies of the US, I continue to believe the next balloon will be the commodity price balloon. I still believe, however, that Paulson will call in all his markers, saved up from a lifetime in the banking industry to help him hold the line on the USD and commodity prices. One more time. Then all hell will break loose.
So, traders ought to expect commodity prices to be volatile early, and then move steadily higher through 2008-2010. A cover story to facilitate the reflation policies will be “Peak Oil”, ie, higher prices are due to the industry’s inability to find new oil, yada, yada.
Interactive Chart of Daily CRB Commodities Index:
Interactive Chart of Weekly CRB Commodities Index:
Oil Review
Despite an economy that is slowing, oil prices are staying firm, and could go higher. The risks to traders also are increasing, so in a normal market, the PE multiples would contract. It is not unusual in a Bear market to see price to cash flow down at six and price to earnings at 8. Presently ExxonMobil (XOM) is trading at a PE of 13.2. PetroChina (PTR) is 23.5, Total (TOT) 22.7 and ConocoPhilips (COP) at 12.7. Based on unit volume growth (or lack thereof), these PE multiples are too high. They are ignoring inflation. Traders need to be cautious.
Here is the e-miNY Sept-07 Crude Oil chart.
Interactive Chart of Daily Crude Oil:
Interactive Chart of Weekly Crude Oil:
Gold & Precious Metals Review
Everybody is asking about gold. Thanks to an increasingly weaker $USD, the PM beat goes on. Clearly, there is support for Gold, not just from the public (in growing numbers), but from most of the HB&B analysts, UBS, CS, BMO, RBC, etc.
I think is a dicey time to be taking entry positions at this point following such a long Bull run. I happen to believe that as and when the broad equity market falls (to a significant degree), gold and silver prices will join the rush for the exit.
$GOLD could drop -10 pct to (just a guess) $700 in the next month or two. If so, there will be a basing period, where smart money will be accumulating positions in preparation for a subsequent run to over $1,000 per oz in 2008-9.
Interactive Chart of Daily Gold EOD Continuous Contract Index:
Interactive Chart of Weekly Gold EOD Continuous Contract Index:
With Silver, the long-term outlook is solid, but if and when there is a pull-back in precious metal prices, it is silver that will be hurt most.
My key on the silver market is the share price and the PE multiple of Silver Wheaton (SLW) as this company is not a miner, but is a banker of silver production. Whenever I think silver prices have topped in a cycle, and about to fall, I switch from the SLW to go long silver futures positions. At the bottom of the cycle, I switch back into the SLW.
Spot silver chart for the week
Interactive Chart of Daily Silver EOD Continuous Contract Index:
Interactive chart of the Silver Bullion index.
Interactive Chart of Weekly Silver EOD Continuous Contract Index:
With platinum, traders have to be wary of the Chinese equity markets. Higher prices and trader enthusiasm there typically means higher bids for platinum.
The Chinese people value platinum above gold. Expensive cars, expensive jewelery, expensive liquor, expensive clothing... nothing but the best. But when push comes to shove, when market prices fall and rumors start, they are quick to sell stock and join lines to remove their money from banks.
Generally speaking, the Chinese, are excellent traders, and devout risk-takers.
Spot platinum chart for the week
Interactive Chart of Daily Platinum EOD Continuous Contract Index:
Interactive Chart of Weekly Platinum EOD Continuous Contract Index:
Interactive chart of the Platinum metal index.
Spot palladium chart for the week
Interactive Chart of Daily Palladium EOD Continuous Contract Index:
Interactive Chart of Weekly Palladium EOD Continuous Contract Index:
Interactive chart of the Palladium metal index.
The Metal Men of Zug (Marc Rich, Xstrata, etc) know a lot more about this market than I, and obviously more than most of the analysts at HB&B who continuously get it wrong.
Interactive Chart of Weekly Copper EOD Continuous Contract Index:
Interactive Chart of Daily Copper EOD Continuous Contract Index:
Interactive chart of the Copper metal index.
Table 12: Senior gold equities
| Symbol | Close | 1Day Change |
1Day %Change |
1W %Change |
2W %Change |
4W %Change |
YTD %Change |
3M %Change |
6M %Change |
12M %Change |
To watch the moves in precious metal miners, you will have to monitor the individual stock charts, preferably in real-time, as follows:
NEM ABX AU GFI GG HMY AUY KGC BVN
Interactive Daily data
Interactive Weekly data
MDG LIHRY AEM BGO IAG EGO RGLD GOLD CDE GRS
Interactive Daily data
Interactive Weekly data
CBJ SSRI SIL NG KRY UXG GRZ TSE_HRG TSE_GUY TSE_AGI
Interactive Daily data
Interactive Weekly data
NXG GSS MNG DROOY MFN RNO RANGY MRB CLG
Interactive Daily data
Interactive Weekly data
Here are the key Silver miners and the SLV ETF:
SLV SIL CDE HL PAAS SSRI SLW MGN
Interactive Daily data
Interactive Weekly data
Here are the Weekly and Daily Data charts of the indexes:
Interactive Chart of Daily U.S. Goldminers Index:
Interactive Chart of Weekly U.S. Goldminers Index:
The U.S. goldminer share trust ETF trades under the ticker symbol GDX.
Here are the U.S. Goldminer ETF (GDX) index Weekly and Daily data charts:
GDX Daily data:
GDX Weekly data:
The Toronto Exchange-listed goldminer iUnits S&P/TSX Capped Gold Index ETF trades under the ticker symbol TSE:XGD. Yes, just like GDX on the AMEX, you can trade XGD on Toronto.
Here are the Weekly and Daily data charts for the TSX Goldshares (XGD) index:
Interactive Chart of XGD Daily data:
Interactive Chart of XGD Weekly data:
Forex Review
Here is the chart of the week’s trading.
Interactive Chart of Weekly U.S. Dollar Index:
Interactive Chart of Daily U.S. U.S. Dollar Index:
Interactive Chart of Daily Euro Dollar Index, priced in USD:
Interactive Chart of Weekly Euro Dollar Index, priced in USD:
Daily British Pound Index:
Weekly British Pound Index:
Daily Japanese Yen Index:
Weekly Japanese Yen Index:
Daily Canadian Dollar Index:
Weekly Canadian Dollar Index:
International Equity Markets Review
Here is the latest session data for the exchanges of the Americas.
Here is the latest chart for the Brazilian Bovespa stock exchange in Sao Paulo.
Here is the latest session data for the Toronto Stock Exchange composite index.
Europe
Here is the latest session data for the bourses of Europe.
Asia-Pacific
Here is the latest session data for the Asia-Pacific stock exchanges.
Here is the latest chart for the Japanese Nikkei 225 index.
Here is the latest chart for the Singapore index .
Here is the latest chart for the Shanghai Composite index .
Here is the latest chart for the Hong Kong Hang Seng index .
Here is the latest chart for the India BSE 30 index .
Here is the latest chart for the Australian All Ordinaries index .
Table 13: International equities via the USD-denominated ETF perspective
| Symbol | Close | 1Day Change |
1Day %Change |
1W %Change |
2W %Change |
4W %Change |
YTD %Change |
3M %Change |
6M %Change |
12M %Change |
Japanese equity market ETF: EWJ
Here is the Japanese (EWJ) equity market ETF Weekly and Daily data charts:
U.K. equity market ETF
Here is the United Kingdom (EWU) equity market ETF Weekly and Daily data charts:
EWU Daily data:
Canada’s equity market
Here is the Canadian (EWC) equity market ETF Weekly and Daily data charts:
US Equity Markets Review
A dozen NASDAQ stocks to watch.
Here is the Daily data chart of the Interactive Chart of Nasdaq Composite, S&P 500, Dow30, and Russell 2000 (small cap) indexes.
Here is the Weekly data chart of the Interactive Chart of Nasdaq Composite, S&P 500, Dow30, and Russell 2000 (small cap) indexes.
Table 14: Dow 30 List
| Symbol | Close | 1Day Change |
1Day %Change |
1W %Change |
2W %Change |
4W %Change |
YTD %Change |
3M %Change |
6M %Change |
12M %Change |