By the closing bell, the DJIA (-171.44 -1.38 pct to 12207), S&P 500 (-21.46 -1.59 pct to 1330.6), and Nasdaq Composite (-34.72 -1.47 pct to 2326) had been pulled down by weakness in the Financials (XLF -2.62 pct), Cons Discretionary (XLY -2.06 pct), Energy (XLE -1.79 pct) and Healthcare (XLV -1.58 pct). Only Basic Materials (XLB +0.50 pct) lifted among the ten sectors, and barely so.

In the final hour of the week, the DJIA appeared on the verge of a breakdown of technical support at 12200.

Earlier in the day, after the Asia-Pacific equity markets had been red hot, the European bourses closed mostly flat with the UK FTSE -0.10 pct and German DAX -0.06 pct down a bit. On the heels of a shocking -$7.14 billion trading loss in the quarter by French bank Societe Generale, which the management claims, somewhat incredulously, was done with no one’s knowledge by an individual 31 y.o. rogue trader, the CAC 40 dropped -0.70 pct.

On the earnings front, Microsoft reported 2Q profit jumped +81 pct to $4.7 billion vs $2.6 billion a year ago, based on strong sales of its Windows software. Honeywell’s 4Q net income lifted +18 pct to $689 million vs $585 million a year earlier; however, the company warned of a "softer" global environment in 2008. Caterpillar’s 4Q net income lifted +11 pct to $975 million vs $882 million a year earlier, largely due to strong overseas sales.

Crude Oil moved back to the 90’s with a close for the $WTIC of 90.71, up +1.30/bbl on speculation that the US $150 billion stimulus plan will boost fuel demand.

$Gold started the day strong, but gave back some of its early momentum. At the close, $GOLD was up +0.54 pct to 910.70.

The $USD climbed +0.38 pct. The Euro ($XEU) dropped -0.66 pct to 146.66.

US Treasury instruments lifted from flight-to-safety bids. The 30-year long bond ($USB) gained +0.76 pct to 119.88 as the yield ($TYX) dropped -1.63 pct to 4.282. The 10-year yield ($TNX) dropped -1.54 pct to 3.584. And the 2-year ($IRX) yield dropped -3.48 pct to 2.22.

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Comments & Outlook

On Friday, Value Line published its quarterly review of Caterpillar, and also United Technologies.

(CAT: Value Line Report Jan. 25: next one is due Apr. 25)

(UTX: Value Line Report Jan. 25: next one is due Apr. 25)

With respect to the earnings bump reported on Friday by Microsoft, Honeywell and Caterpillar, traders are not fooled by results that are boosted as a result of huge share buy-backs.

To show how earnings are increased via financial balance sheet restructuring rather than from operations, look to the number of outstanding shares as reported by Value Line:

MSFT
2005: 10700 mil shs
2006: 10062
2007: 9380
2008: 9000e

HON
2005: 829.48 mil shs
2006: 800.59
2007: 745.00
2008: 745.00e

CAT
2005: 670.87 mil shs
2006: 645.81
2007: 635.00
2008: 615.00e

Despite higher internal rate of return from operations, these corporations were buying back treasury stock in the open market at cycle-high prices. As I see it, these companies seek to boost their per share profit in order to derive higher management bonuses and/or to rationalize extreme compensation.

It’s a case of everybody has to get theirs as soon as they can get it.

To get another insight into the mindset of the people who run these shareholder-owned corporations, look at the insider buying/selling reports as also shown in the top left corner of the Value Line reports.

http://valueline.com/dow30/f5905.pdf
http://valueline.com/dow30/f337.pdf
http://valueline.com/dow30/f1767.pdf

You should not be shocked to see that of these three companies over a period of 12 months, there was a single insider Buy in a single month for one company vs a total of 26 sellers. These insiders, by the way, are the senior officers and directors who are guiding shareholders with confident, optimistic reviews of management performance.

If shareholders, not management, controlled the Boards of these corporations, you would see an immediate change in compensation practices. What you read in college textbooks fails to grasp today’s reality. Shareholders are an after-thought.

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Links & Charts

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International Economics Review

US Economic Calendar.

Here is more bad news – the negative wealth effect of a declining US housing market. As the Econoday economist reported: “Treasury yields and the dollar slipped in immediate reaction to the headline disappointment.”

US Existing Home Sales report for December.

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Knobias Cara100 Tables

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Cara 100 Daily RSI-7 Charts

At least one RSI value >70:

Ticker	Last	RSI-7M	RSI-7W	RSI-7D	Zone
ABX	52.17	82.19	71.86	68.88	Sell alert (trig. 8 days ago [on 2008-01-15 at $50.25, +3.82% chg], after a 8 day DZ)
IBN	62.26	82.05	51.74	45.06	Sell alert (trig. 8 days ago [on 2008-01-15 at $66.03, -5.71% chg], after a 3 day DZ)
SLW	16.48	76.98	54.71	51.29
PBR	104.62	75.48	55.28	53.88
GG	37.86	74.10	63.00	63.01	Sell alert (trig. 8 days ago [on 2008-01-15 at $36.60, +3.44% chg], after a 1 day DZ)
BC	17.10	12.60	39.77	71.61	Buy alert (trig. 5 days ago [on 2008-01-18 at $15.09, +13.32% chg], after a 3 day AZ)

At least one RSI value <30:

Ticker	Last	RSI-7M	RSI-7W	RSI-7D	Zone
BC	17.10	12.60	39.77	71.61	Buy alert (trig. 5 days ago [on 2008-01-18 at $15.09, +13.32% chg], after a 3 day AZ)
KSS	41.84	15.86	31.36	51.08	Buy alert (trig. 7 days ago [on 2008-01-16 at $39.57, +5.74% chg], after a 9 day AZ)
SBUX	19.66	17.05	32.58	51.35
UBS	41.62	19.14	23.94	41.26	Buy alert (trig. 4 days ago [on 2008-01-22 at $40.56, +2.61% chg], after a 2 day AZ)
BBBY	29.36	20.49	46.41	57.71
JCP	42.48	21.89	40.82	58.82
DELL	20.06	22.04	19.34	34.14	Buy alert (trig. 2 days ago [on 2008-01-24 at $21.09, -4.88% chg], after a 2 day AZ)
WAG	34.28	22.61	33.79	47.10	Buy alert (trig. 7 days ago [on 2008-01-16 at $33.24, +3.13% chg], after a 2 day AZ)
SNDK	25.62	24.34	11.33	29.02	Accumulation Zone (for 1 days)
HBC	75.70	25.17	27.28	40.61	Buy alert (trig. 3 days ago [on 2008-01-23 at $76.62, -1.20% chg], after a 4 day AZ)
BMY	22.97	26.24	19.49	25.68	Accumulation Zone (for 4 days)
TGT	51.60	26.24	39.89	50.37
DOW	36.31	26.84	33.15	49.13
BDK	69.98	27.98	38.38	58.21	Buy alert (trig. 7 days ago [on 2008-01-16 at $65.99, +6.05% chg], after a 9 day AZ)
GOL	18.23	29.06	23.94	22.50	Accumulation Zone (for 1 days)
TM	102.00	29.83	36.11	53.59	Buy alert (trig. 3 days ago [on 2008-01-23 at $99.25, +2.77% chg], after a 1 day AZ)
PAYX	33.14	30.14	18.98	43.14	Buy alert (trig. 3 days ago [on 2008-01-23 at $33.34, -0.60% chg], after a 1 day AZ)
LLTC	27.41	30.34	22.56	36.72	Buy alert (trig. 3 days ago [on 2008-01-23 at $28.05, -2.28% chg], after a 2 day AZ)
DB	111.43	30.56	21.42	29.18
DIS	28.68	31.33	22.38	34.38	Buy alert (trig. 3 days ago [on 2008-01-23 at $28.52, +0.56% chg], after a 2 day AZ)
BA	77.03	31.90	20.94	32.48	Buy alert (trig. 2 days ago [on 2008-01-24 at $77.62, -0.76% chg], after a 1 day AZ)
GSK	46.92	32.80	32.91	14.40
CTSH	26.87	32.99	26.30	40.30	Buy alert (trig. 7 days ago [on 2008-01-16 at $26.20, +2.56% chg], after a 1 day AZ)
TS	37.98	33.05	28.60	39.50
GE	34.00	33.80	29.63	37.31
CSCO	24.20	34.95	20.56	38.31
ADBE	34.84	35.98	20.97	24.64
INTC	20.00	36.57	27.29	38.62
ERTS	47.22	39.26	25.49	24.08
GRMN	64.94	40.73	28.01	37.23
ERJ	40.98	41.81	33.20	28.33
DEO	78.85	43.27	26.49	43.92
JNJ	62.46	46.35	29.60	12.30
PG	65.31	47.75	23.55	19.33
NKE	56.00	49.11	28.74	25.31
CVX	81.82	49.81	31.93	29.49
GOOG	566.40	51.02	31.90	29.23
AET	52.60	55.79	34.77	26.69
TEF	85.58	62.04	36.17	27.33
KO	58.41	64.46	38.58	27.17

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International Equity Markets Review

Europe

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

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Here is the latest session data for the London stock exchange FTSE.

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Here is the latest session data for the German DAX.

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Here is the latest session data for the French CAC 40.

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Here is the latest session data for the Milan Italy stock exchange MIBTEL.

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Here is the latest session data for the Swiss market index.

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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.

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Here is the latest chart for the Singapore index .

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Here is the latest chart for the Shanghai Composite index .

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

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

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

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US Equity Markets Review

DJIA (interactive) chart

NASDAQ Composite (interactive) chart

Table: Dow 30 List

Sorted by 1-Week Price Performance

Symbol	Close	1Day Change	1Day %Change	1W %Change	2W %Change	4W %Change	YTD %Change	3M %Change	6M %Change	12M %Change
GM	25.79	0.17	0.66%	12.92%	8.91%	-2.75%	5.65%	-31.57%	-23.54%	-22.18%
JPM	43.64	-1.32	-2.94%	8.99%	5.59%	-2.89%	3.49%	-5.23%	-3.60%	-13.09%
HD	28.53	-1.03	-3.48%	8.69%	12.86%	5.71%	9.27%	-7.07%	-25.00%	-28.84%
UTX	72.75	0.19	0.26%	6.84%	0.50%	-6.52%	-3.27%	-3.92%	-3.25%	9.88%
C	26.64	-0.69	-2.52%	6.73%	-5.23%	-12.51%	-7.88%	-35.39%	-45.86%	-50.60%
AA	30.69	-0.12	-0.39%	6.60%	-2.39%	-17.96%	-15.06%	-20.06%	-24.98%	-2.48%
AXP	45.44	-1.67	-3.54%	6.49%	-7.11%	-14.10%	-10.97%	-23.96%	-26.39%	-21.34%
CAT	65.93	0.68	1.04%	5.54%	-2.20%	-10.53%	-6.65%	-11.70%	-18.10%	10.57%
HON	58.25	2.05	3.65%	4.82%	0.74%	-5.70%	-2.75%	-1.49%	-4.32%	31.79%
DD	44.72	-0.73	-1.61%	4.49%	-1.24%	-0.78%	2.24%	-7.49%	-9.09%	-9.95%
MCD	54.10	0.10	0.19%	4.08%	-7.00%	-9.65%	-6.88%	-6.84%	6.16%	25.81%
INTC	20.00	-0.69	-3.33%	3.47%	-11.27%	-27.14%	-21.10%	-22.75%	-18.37%	-2.91%
IBM	104.52	-2.39	-2.24%	3.38%	4.60%	-6.31%	-0.16%	-7.35%	-11.50%	7.19%
GE	34.00	-0.65	-1.88%	2.38%	-5.35%	-9.45%	-7.51%	-15.34%	-15.88%	-6.44%
HPQ	43.74	-1.15	-2.56%	1.72%	-3.53%	-17.11%	-12.19%	-14.89%	-7.99%	4.87%
WMT	48.09	-0.82	-1.68%	1.28%	-0.64%	-0.60%	2.54%	9.59%	0.46%	-0.12%
MMM	75.51	-0.22	-0.29%	0.73%	-5.86%	-12.27%	-8.71%	-12.29%	-15.74%	-4.43%
XOM	83.94	-2.06	-2.40%	0.04%	-8.42%	-11.47%	-10.23%	-8.33%	-9.54%	14.17%
DIS	28.68	-0.55	-1.88%	-0.31%	-6.49%	-12.61%	-9.92%	-16.75%	-17.89%	-17.92%
MSFT	32.94	-0.31	-0.93%	-0.51%	-4.05%	-10.02%	-6.47%	2.97%	7.26%	8.14%
PFE	22.61	-0.44	-1.91%	-1.52%	-6.10%	-2.54%	-1.31%	-6.92%	-8.76%	-14.23%
AIG	53.22	-1.82	-3.31%	-1.93%	-7.94%	-10.58%	-5.47%	-13.87%	-21.92%	-22.75%
BA	77.03	-0.59	-0.76%	-3.13%	-6.47%	-14.41%	-11.07%	-19.76%	-28.16%	-10.60%
MO	73.95	-0.94	-1.26%	-3.71%	-6.18%	-4.57%	-1.31%	2.34%	8.99%	12.16%
PG	65.31	-0.84	-1.27%	-4.05%	-9.89%	-11.79%	-9.68%	-8.47%	3.70%	0.60%
T	35.26	-0.49	-1.37%	-5.47%	-10.51%	-16.64%	-14.00%	-14.00%	-12.94%	-4.16%
KO	58.41	-1.47	-2.45%	-5.85%	-10.91%	-7.30%	-4.39%	-4.71%	8.07%	21.84%
VZ	37.76	-0.47	-1.23%	-7.70%	-13.10%	-16.27%	-12.61%	-15.92%	-12.63%	0.69%
JNJ	62.46	-1.05	-1.65%	-7.92%	-8.03%	-7.55%