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November 29, 2007
Cara's Daily Report, Thurs., Nov 29, 2007
The headline reads, “Dow sees largest percent gain in 4 1/2 years.” “Fed Vice Chairman Kohn says December rate cut is highly probable.” Read all about it.
The DJIA (+331.01), S&P 500 (+40.79), and Nasdaq Composite (+82.11) rocketed on plunging oil prices and short covering in HB&B stocks. Don’t worry about recession and deflation prospects though, the hype suggests.
But, the economic facts of life are that yesterday’s US Durable Goods Orders for October declined faster than expected. The Commerce Department reported orders for factory goods dropped -0.4 pct to an estimated $214.45 billion, and capital spending by corporations fell again. Moreover, Existing Home Sales (ie, resales) for October fell another -1.2 pct M/M, the eighth consecutive month of declining sales, to a 4.97 million annual rate.
On the earnings front, Wells Fargo Bank (WFC) said it will charge $1.4 billion against 4Q earnings to cover higher losses on home-equity loans.
In shades of famine on the Serengeti, Verizon Wireless reported it will allow wireless customers on its network to use phones and mobile devices from other providers.
The $USD strengthened against the Euro and Yen as bond prices sunk (the flight back from safe-havens to riskier equities), which hurt the precious metal prices.
After the US Department of Energy reported a surprise build in gasoline inventories and a lower-than-anticipated draw in crude inventory, Crude Oil immediately plunged below $91/bbl, down $3.80.
As bond prices sunk, US Treasury yields jumped, with the 10-year rising above +4 pct, having sunk to about 3.84 pct just a couple days earlier.
Asian markets finished down about -1 pct yesterday and European shares started the day up about +1.0 pct, but then surged before the session ended as it became clear that US stocks were in hyper-rally mode. At the close, yesterday, the FTSE 100 gained +2.70 pct, the DAX +2.55 pct, and the CAC 40 +2.34 pct.
The DJIA closed at 13,289.45, so it appears from trading over the past two days that the DJIA=12,850 is the short-term technical support.
This morning, Shanghai Composite had closed up on the session +4.16 pct, Hong Kong +4.06 pct, and Singapore +3.22 pct. But the Bombay Sensex was up just +0.34 pct and the Australian All-Ordinaries +1.16 pct.
Two days ago, the buying burst came in selected large cap Broker-Dealers ($XBD +3.31 pct), Banks ($BKS +2.60 pct), and REITS ($DJR +2.19 pct). Yesterday it was Banks ($BKS +5.28 pct), and REITS ($DJR +3.83 pct).
Today the $USD is strong at 75.588.
At 9:20 am today, spot Gold is at 798.28, and spot silver at 14.25. These prices are bang on yesterday morning, but appear to be softening as the $USD strengthens here.
The Jan-08 e-miNY Crude Oil is presently at 92.25, having fallen from a high of just over 99 on Monday morning.
The Dow futures for Dec this morning are down from the open -27 at 13280.
(Cara 100) American Standard has changed it's name to Trane Inc. The new ticker is NYSE:TT.
Comments & Outlook
I strongly feel this US market is being set up to take out HB&B positions and the positions of friends and family and corporate insiders whose business HB&B relies on. I believe the past seven and a half hours of trading in New York has been a classic Bull trap.
I gave you my take on the previous day’s rally in the DJIA at the top of yesterday’s daily report. I wrote: “With the help of approximately eight and a half minutes of program trading, including two bursts of buying -- one at 3:10 pm and the other at 3:31 pm that lifted the DJIA by over +150 points, the DJIA closed +215 points higher (+1.69 pct) at 12,958.44.”
Then at mid-day, I wrote: “The gap open in NY this morning, and the melt-up that is presently underway, has too many traders thinking the Bull market lives on. The Bull market died.” I gave you my reasoning at that point, but i want to update it here because the market is at a critical juncture.
Consider if you will the opening gap yesterday and the past hour of trading the previous day. That was the ammunition the interventionists needed that I talked about a couple days ago when I saw a late session pull-back, ie, getting their ducks in a row for the following morning.
Do you recall the statement I made in the WIR on Sunday about Bull raids? Well, it was on my mind we were about to see one.
One evening, a couple of the fellows (from my commuter train group) told us they had been in late in the day conference calls with industry leaders out of New York and Boston where money was being lined up to paint the market the next morning with size bids. This involved multiple financial institutions. Let’s call it a planned Bull raid.This was mid-August 1982 when the Bear market in the US had dragged on longer than Canada’s, which had been over in June. US trading volumes had been pathetic, the Dow was under 800, the clients didn’t care to put in a bid, and brokerage houses were shriveling to nothing.
Then suddenly, the next day after I was told this HB&B intervention would happen, all hell broke loose. The tape showed huge blocks one after the other in the most important stocks. Volumes more than doubled. And that my friends was how the Death of the Bear was engineered by market insiders, the supposedly lily-white HB&B crowd, the ones who preach transparency, but are anything but transparent.
So these Bull raids are known to happen, and the same people are involved.
For my Thursday US Thanksgiving report I wrote, “Yesterday, the Daily RSI-7 for the Cara 100 dropped to zero over 70 and 36 under 30, which sets up a rally base… Equity prices flow in a rhythm. There is an ebb tide and a flood tide. Let’s face it; the waters are receding, and the Bulls are suffering. That’s not to say there will be no recovery -- I have already opined that the rally base is building and I anticipate a rally starting on Friday -- but the rallies will be less frequent and smaller than when the Bull was healthy...I also, as you know, recommend selling into strength.”
On Monday morning, I wrote: “The growing economic power of China and weakness of the US is the story this morning. On the latter point, the precious metals prices are bursting out again. Regarding China, there are rumors that China’s new sovereign wealth fund may hook up with domestic steelmakers to bid $200 billion for Rio Tinto. So all the metals prices are on the move this morning, and this is a story that probably has legs.”
On Tuesday morning, I wrote, “On Monday, the DJIA (-237.44), S&P 500 (-33.48), and Nasdaq Composite (-55.61) plunged from about 2:30 pm ET as worries over the weakening state of the US economy and the solvency of Financials hit the market in waves.” That was the ammo needed for the following two days.
Then yesterday (at 1:41pm ET) I said,
“Early this morning I saw the same trap being set up for the Precious Metals. From 8am ET until just past 9:40am, spot gold, silver and platinum were pumped. That made traders think the equities would open with a bullet and they did.”What we are seeing is intervention by major capital pools who are trying to stretch out high prices through into late December, in my opinion. So, this is a Bull trap. The gap up this morning gives evidence of a trapping technique.
The “interpretation” of Bernanke comments were that rates are headed south. HB&B are getting their act together to deny SIV problems, figuring they are all going to have their companies sued for fraud anyway so why not lie and misrepresent the situation that will unfold in due course anyway. And since the year-end holiday sales are starting to ring the cash register, the US retailers are being pumped on the unbelievable 50 pct and 70 pct off sales that will do nothing for the bottom line, but will remove inventory (assets) from the balance sheet with no (once expected) profit to show for it. So, just like the Dot Con phony metrics that were laid by investment bankers like Goldman Sachs onto unsuspecting traders in 1999-2000, HB&B is back to its old tricks today with the retailers.
All this pumping action gives serious traders a chance to sell into strength the positions they are uncomfortable with.
Legitimately bullish market conditions that are based on corporate fundamentals and quantitative data, technical price action and positive economic data are none existent. They were not existent early in the day when almost all the Asia-Pacific markets were down. They were non-existent with the important economic data that was released this morning, or in the weekly energy inventories that were posted this morning.
So, Crude Oil is down. After the data came out at 10:30am, the price plunged from 95 to 91.375, mostly in a matter of minutes. Why? Because there is no economic case for Oil at 95 right now.
After hitting 815 on spot gold around 9:40am, the price has dropped to 805. Why? Because, like for Oil and other commodities, there is no speculative reason to chase gold higher right now only to see the gnomes sell their positions into strength. Bankers, central bankers and commodity exchanges run by bankers and regulated by bankers do not want more speculation in commodities right now because it it pushing the $USD down further, and they need to stop that trend. In fact, the $USD has bumped up a bit today, supported by higher yields on the Treasuries.
The airlines are up today because oil prices are down, but in the event of a recession, ask yourself about the prospects for business and personal air travel. The Broker-Dealers and Banks are up today, on average over +4 pct. Ask yourself why? They are selling the story that Bernanke is going to cut rates. If so, why are gold and oil prices NOT skyrocketing this morning and why is the $USD rising.
Computer hardware is up well over +4 pct to this point. Ask yourself why their biggest customers (HB&B) are laying off hundreds of thousands of workers, including thousands today, and who is going to be using those computers and peripherals. Durable goods orders were expected to be up +0.3 pct, but plunged -0.4 pct in the report this morning. So factories are going to slow, which means transport is going to slow. Home resales dropped this morning below expectations and the average resale selling price plunged. All this means the economy is hitting the wall.
Lower rates from Bernanke will not put money into the pockets of consumers. Manufacturers and Retailers will have no extra pricing power. Credit card rates will not drop. Mortgage rates are not dropping today, at least, because bond yields have popped.
So what’s it all about Alfie? Why is the DJIA up +2.2 pct (+300 points to 13260) and the Nasdaq +2.7 pct (70.4 points) at this point? (1:41pm ET)
I’ll tell you why. America's financiers are in trouble and are trying desperately to keep America out of a recession, so they are pumping stocks.
Secondly, professional traders who are using Other People’s Money are in a race to not lose. They are following the herd in the hopes of staying in the top 50 pct, so they too don't lose their jobs.
As well, HB&B is sucking people in because they need to sell their inventory at high prices soon in order to stay solvent for the days in the not-too-distant future when their liabilities are fully marked to market.
Posted by: Bill Cara  at November 28, 2007 1:41 PM
In yesterday morning’s report I discussed one thing, which was economic data that was going to be published that day. I indicated (i) it was going to be negative, (ii) it would be spun as needed, and (iii) it was important that you study the facts in order to objectively assess conditions in which the corporations (behind the shares you trade) have to operate. Points one and two happened.
If you are strategically managing a portfolio, rather than just executing tactics or simply day trading, you cannot listen to stories such as why a sovereign fund is keen to invest a gazillion into ABC stock or maybe the Fed is going to drop rates, etc, without thinking through why these stories are out there and what are the real implications.
I am a believer in the principles behind Dow Theory. Richard Russell of The Dow Theory Letters, writing about the market pull-back on Monday said,
"Yesterday the S&P 500 joined the Dow by breaking below its August 16 low. One by one the various indices are dropping below their August 16 low, and the list now includes the D-J Industrial Average, the D-J Transportation Average, the D-J Composite Index, the D-J Financial Index, the S&P 600 small cap, the S&P 500, the Russell 2000, the Value Line, the Semi-Conductor (SOX) Index, and the NYSE advance-decline line (operating companies only)."
The Aug 16 DJIA low was 12456 and the close 12846. That was a volatile day from which the market rallied off a very over-sold condition. Here is what I wrote in the Aug 17 Daily Report,
Today will be a moonshot in US capital markets. Color it golden. The ball had been in Bernanke's court and true to form, he did not disappoint. Enough said… The Fed has caved. Gold will now rocket. The time to buy precious metal stocks is NOW. The shares of HB&B will soar. The shorts in the home-builders and mortgage companies will be squeezed.The market movers yesterday happened to be HB&B, which pleases me because on August 14, in the midst of a panic sell-off, I provided a list of ten bank and broker-dealer purchase candidates. Bear Stearns Corp (BSC) had been $106 at the close Aug 14, and I recommended trying to buy it at $100. Yesterday the stock dropped below $101.23 and then rocketed up to a close of $116.44. This move by the Fed had been presumed in some quarters late in yesterday’s session.
That my friends is why there was a 300+ point rally in the Dow 30 late in the session yesterday… I’m not going to waste any more time writing about yesterday. The story for today and next week just happened. Moonshot to come. The Bulls are bowing to Bernanke.
Yesterday, they were bowing to Bernanke’s right-hand man, Prof. Kohn, Dep. Chair of the Fed, who happened to indicate there was a high probability of a Fed rate cut in December.
Why do you think HB&B is so eager for Fed rate cuts? Well, in addition to making more money when interest rates fall because their cost of money drops much faster than these bankers are ever going to pass it along to you or me, there is another factor. It’s called the changing face of stagflation, which is a term used to define stagnant economy and inflation.
The change is this: the ‘stagnant’ is soon to become recession (a small possibility of depression but we don’t know yet because nobody knows how bad the asset quality is behind the mortgage-backed securities). In other words, deflation is a process we are likely going to be talking about, as Richard Russell has been doing, apparently, in his Dow Theory Letters.
The worst of it is that inflation is going to stay with us too. Like AC:DC can work different machinery at the same time, I think we are no longer going to call this the Goldilocks Economy (smiley here for CNBC’s Kudlow who likes to say meaningless things like ‘not too hot, not too cold’). No, it’s going to be called the AC:DC economy-- representing Inflation AND Deflation.
Prices of residential and commercial real estate, oil and some other commodities, and most manufactured goods as well are going to sink, financial assets (stocks and bonds) are going to sink (lower earnings and higher risks of failure during recessions/depressions). That’s deflation.
But prices of property taxes, insurance, education, healthcare, building infrastructure, social programs, sophisticated war materials, public transit, mail service, heat, water and power, and on and on… they will also continue to escalate… credit card debt as people get deeper into the banks… wages of skilled labor because the people in high demand will themselves demand more income in order to meet their bills and to live like their bosses, etc… unions becoming more powerful, with labor strikes and stoppages in order to obtain more wages so their people can just survive… you get the picture. That’s inflation.
And wars will continue because that’s politics. Wars are inflation creators.
With elements of inflation AND deflation, fiat money will continue to be printed at multiple rates of GNP growth, which devalues the currency and drives up the price of gold.
These facts of life are not being explained to Jane & Joe 6-Pack, who must by now know something smells because they rate their politicians in the US polls at something like 10 pct popularity, which I have never seen before. Traders, though, are starting to pay attention. They know that in the words of Richard Russell, “Almost every sector that I examine or study is overpriced -- from the US stock market selling at over 18 times earnings to the Shanghai stock market selling at a ridiculous 55 times earnings. Housing is overpriced, commercial real estate is overpriced, land almost everywhere is overpriced, stocks everywhere are overpriced, most currencies are overpriced. You name it today, and it's probably overpriced.”
And you know, Richard Russell has been around, I think, since my late parents were kids, and he’s seen it all. I’ve seen a lot, and I agree with him.
So, at the end of the day, just like in the summer of 2005 when I promised readers there would be lessons learned from the melt-up in residential real estate prices, suggesting deflation would follow, so too am I saying this market is at a peak.
Links & Charts
International Economics Review
Cara 100 Daily RSI-7 Charts
International Equity Markets Review
Europe
Here is the latest session data for the bourses of Europe.
Here is the latest session data for the London stock exchange FTSE.
Here is the latest session data for the German DAX.
Here is the latest session data for the French CAC 40.
Here is the latest session data for the Milan Italy stock exchange MIBTEL.
Here is the latest session data for the Swiss market index.
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 .
US Equity Markets Review
NASDAQ Composite (interactive) chart
Table: Dow 30 List
| 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 Summaries window at www.billcara2.com and then clicking on the link for Performance.
AA AIG AXP BA C CAT DD DIS GE GM HD HON HPQ IBM INTC JNJ JPM KO MCD MMM MO MRK MSFT PFE PG T UTX VZ WMT XOM
Here are the links to interactive Dow charts from Billcara2.com that I broke into groups of ten, which you can add technical indicators for as well. (list one) (list two) (list three)
The Americas
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.
Sector ETF Summary for the US equity market
The tables I show in this section 2007_11_28 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)
International Equity Market USD-denominated ETF Review
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 Daily data charts:
U.K. equity market ETF
Here is the United Kingdom (EWU) equity market ETF Daily data charts:
EWU Daily data:
Canada’s equity market
Here is the Canadian (EWC) equity market ETF Daily data charts:
Bonds & Yields Review
Table 10: US Treasury Yields
| Maturity | Yield | Yesterday | Last Week | Last Month |
|---|---|---|---|---|
| 3 Month | 2.93 | 3.04 | 2.97 | 3.81 |
| 6 Month | 3.24 | 3.24 | 3.16 | 3.89 |
| 2 Year | 3.18 | 3.07 | 2.99 | 3.80 |
| 3 Year | 3.11 | 2.99 | 2.89 | 3.79 |
| 5 Year | 3.49 | 3.38 | 3.34 | 4.05 |
| 10 Year | 4.03 | 3.95 | 4.01 | 4.38 |
| 30 Year | 4.43 | 4.36 | 4.46 | 4.66 |
| Maturity | Yield | Yesterday | Last Week | Last Month |
|---|---|---|---|---|
| 2yr AA | 3.21 | 3.18 | 3.23 | 3.30 |
| 2yr AAA | 3.24 | 3.24 | 3.27 | 3.33 |
| 2yr A | 3.36 | 3.36 | 3.39 | 3.36 |
| 5yr AAA | 3.33 | 3.32 | 3.38 | 3.44 |
| 5yr AA | 3.28 | 3.28 | 3.31 | 3.39 |
| 5yr A | 3.43 | 3.43 | 3.49 | 3.59 |
| 10yr AAA | 3.71 | 3.73 | 3.80 | 3.76 |
| 10yr AA | 3.56 | 3.61 | 3.68 | 3.72 |
| 10yr A | 3.94 | 3.96 | 4.02 | 3.96 |
| 20yr AAA | 4.38 | 4.41 | 4.44 | 4.35 |
| 20yr AA | 4.59 | 4.62 | 4.59 | 4.55 |
| 20yr A | 4.74 | 4.74 | 4.78 | 4.36 |
| Maturity | Yield | Yesterday | Last Week | Last Month |
|---|---|---|---|---|
| 2yr AA | 4.35 | 4.25 | 4.15 | 4.59 |
| 2yr A | 4.68 | 4.54 | 4.28 | 4.70 |
| 5yr AAA | 4.62 | 4.57 | 4.53 | 4.80 |
| 5yr AA | 4.82 | 4.82 | 4.72 | 5.01 |
| 5yr A | 4.70 | 4.62 | 4.55 | 5.01 |
| 10yr AAA | 5.10 | 5.07 | 5.13 | 5.20 |
| 10yr AA | 5.51 | 5.53 | 5.54 | 5.58 |
| 10yr A | 5.59 | 5.69 | 5.54 | 5.69 |
| 20yr AAA | 5.60 | 5.55 | 5.54 | 5.71 |
| 20yr AA | 5.74 | 5.70 | 5.73 | 5.87 |
| 20yr A | 6.06 | 6.01 | 6.00 | 6.04 |
Here is the $USB 30-year Treasury Bond chart.
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:
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
Commodities Review
Interactive Chart of Daily CRB Commodities Index:
Interactive Chart of Weekly CRB Commodities Index:
Oil Review
Here is the e-miNY Jan-08 Crude Oil chart.
Interactive Chart of Daily Crude Oil:
Interactive Chart of Weekly Crude Oil:
Table 2: Senior oil & gas equities
| Symbol | Close | 1Day Change |
1Day %Change |
1W %Change |
2W %Change |
4W %Change |
YTD %Change |
3M %Change |
6M %Change |
12M %Change |
Gold & Precious Metals Review
Interactive Chart of Daily Gold EOD Continuous Contract Index:
Interactive Chart of Weekly Gold EOD Continuous Contract Index:
Spot silver chart for the week
Interactive daily data
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:
Spot platinum chart for the past three days
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.
Interactive Chart of Weekly Copper EOD Continuous Contract Index:
Interactive Chart of Daily Copper EOD Continuous Contract Index: </