« Daily Report for Sat, Jan 26, 2008 | Main | Cara's Commentary & Community Chat, Mon., Jan. 28, 2008, 8:07am ET »
January 27, 2008
Week in Review #4 (2008-01-27)
Depending on where you were positioned in equity markets this week, you either won big or you lost big. Only the Energy sector seemed to be caught in No-Man’s Land, undecided as to whether or not a $150 billion economic stimulus package combined with an emergency -75 basis point Fed Rate cut, and the coming State of the Union Address, can actually stave a recession in the US.
Mr. Market seems to be of the opinion that the sector winners were (i) the Financials, where costs of capital have been lowered AND where Mom & Pop are going to get enough fiscal relief to be able to pay down debt and possibly avoid foreclosure, (ii) the Consumer Discretionary, where Mom & Pop may have enough left over to buy a small boat, washing machine, clothing at JC Penny, and a Caribbean cruise, and (iii) the Basic Materials, whose prices go up as the $USD falls.
On the other hand, if Bankers like Société Générale Corporate and Investment Banking (SG CIB) can at the same time win the industry award for Best Equity Derivatives Bank and blow up $7.14 billion capital in equity derivatives at the same time, then traders are probably justified in panicking as they did, fleeing to cash this week.
Does the left hand at SocGen, or any other bank for that matter, really know what the right hand is doing? Isn’t that the problem?
As quoted in Risk Magazine, having won the award for Equity Derivatives House of 2008, Arnaud Sarfati, head of equity-linked structured products at SG CIB, had this to say: "At the end of the day, you have much more flexibility than a traditional asset manager because both can use a traditional asset, but you can also get exposure to hidden assets on an actively managed basis. You have much more tools at your disposal than a traditional asset manager.”
As the article states, these services contributed to a sharp rise in the assets under management of Lyxor Asset Management, the asset management arm of SG CIB, from EUR61 billion at the beginning of last year to EUR73 billion as of end of October.
Can anybody say at this point that some of that EUR14 billion gain in AUM didn’t come from trading losses within SocGen itself. In other words, did the bank move US$7.14 billion from the P&L to the balance sheet in order to meet reserve requirements? Where is Inspector Clouseau when you need him anyway?
The truth is I haven’t much of a clue about these exotic derivative products. Somebody wrote me this weekend to ask about a derivatives strategy used by a Santa Monica-based fund manager who happens to be setting performance records in this area. I think when a Fund has +1000 pct performance; it’s probably a record of some kind.
Anyway I begged off. I told the gentleman that maybe one of the Caraistas could explain what he was asking.
Bill, Do you have any thoughts about investing in a fund (Short Credit Fund) such as the one discussed in the attached newsletter. The investment approach relies on buying CDS's on the debt of rock solid companies with the expectation that the credit contraction and an emerging recession will eventually affect the rock solid companies, too. The strategy is doesn't require that the rock solid companies fail or even default, but rather a widening of their spreads on Swaps.
The irony of this strategy is that a worsening recession and credit contraction may cause the spreads to widen while also increase the likelihood that the counterparties themselves will fail or default. This particular fund manager indicates that he is aware of that risk and is managing the funds in a way to minimize that risk.
Any thoughts on investing in this manner in light of the risks and opportunities that are out there?/J
This linked attachment was sent to me by “J”. It is a report from Andrew Lahde, CFA, of Lahde Capital Management.
The thought just occurred to me: “Lessons from the Caraistas” could be the title of my next book. If I start on it right away, maybe it’ll be published ahead of the other one. (Not LOL)
Back to the market, is it time to buy the Banks? If not, why not?
Well, in the past three weeks, which is the period of the greatest losses in equity prices, I ran some numbers for sector performance. I discovered that the Big Winners had been the sectors traders were short the most (Financials and Consumer Discretionary, both down -4.161 pct over 3 weeks) while the Big Losers had been the biggest winners up until that point (eg, Telecom and Energy, which have been down -14.364 pct and -13.585 pct respectively over 3 weeks).
What’s my take? Well, HB&B is desperate to save its bacon and the Interventionists are doing all they can to help, but now solvency and the need to re-build reserves is the issue, which means share dilution. In other words, you are hearing the good stuff now; the downside will follow. We need to wait to get the whole picture.
Could the Energy and Telecom come back soon? I don’t think so.
The West Texas Intermediate price is falling in the US. Similarly, the Brent price is falling in Europe. That happens when economies slow down. I don’t see an immediate reversal of fortunes, but I do think that traders will continue to sell off the oil stocks as crude oil prices fall and cost inflation rises.
OPEC leaders are happy, they say, with $75 oil, and I think that’s what they are going to get. The shareholders of Big Oil will not be so happy.
As to Telecom, wasn’t this mostly a dividend income play? With the yield of US Treasuries now down to 2.17-2.18 pct for the T-Bills through to the 2-year Notes, which is less than the true US inflation rate by a mile, wealth is being lost. The obvious alternative would be high-yielding Telecom and Utilities, and yet Telecom is the worst sector performer over 3 weeks and Utilities (-9.313 pct over that span) is 4th worst, barely edged out by Semi-conductors (my proxy for Technology).
So traders are worried about the economy here too. Clearly, they are paying attention to the 1Q guidance from companies like AT&T and Verizon, and what does a high dividend mean if your Total Return (including price appreciation or loss) is a negative?
This week is likely to be another interesting one with the President’s State of the Union Address coming on Tuesday evening as he addresses both Houses of Congress for the final time.
Do you think we could write his speech?
First off, he is going to get right into the need for bipartisan support of his $150 billion economic stimulus package. The keywords will be “quick”, “temporary”… I know, you heard all this before. But those are the words that will bring applause from both sides of the House, which is what a desperate President needs. He’d like to say that his tax cuts of the past seven years should be made permanent, but that would not be roundly applauded, and in his speech this year, especially, the President needs to stay on a roll, so he may just refer to that in some roundabout way.
Next, he will salute the military personnel present, including the ones recently home from Iraq and Afghanistan who will be sitting with the First Lady. He’ll say there is huge progress being made in recent months in the Middle East, with references given, as well as a need to bring home the young men and women asap because the latter point will get another cheer from both sides of the House. The cameras, of course, will not be directed to the frowning Vice President at that moment. (LOL)
Finally, he will say that his legacy ought to be seen as a President who fought against the evils of global warming and America's dependence on foreign oil, and for alternative energy, during which he’ll announce his billion dollar contribution to General Electric windpower. (LOL) Nothing he will say on this topic will have meaning, but the President will take comfort in the amount of bipartisan cheering at that point in his speech.
How do I think this will play on Wall Street? HB&B will clearly support the stimulus plan and the work of their “inside man” Treasury Secretary Paulson because they are the major beneficiary. I don’t think Financial Entertainment TV would be able to find an unhappy banker to interview or one, like the President, who will not state that this stimulus is intended to help the Little Guy.
So Wednesday (ie, the next morning) ought to be more pump and dump.
At the end of the day, speeches mean little. Actions speak louder than words. Politicians can say what they want about the strength of the economy, but the people know how they are being affected. The truth is that this President has been good for a small slice of American society. The rich and powerful have managed to become more so, while the rest have been floundering. The polls point to their discontent and that is a fact that mere words will not reverse.
As I say, back to the market.
The Bears are in control. The probabilities are close to 50:50 whether, at this point, they decide to run south-east like 2000-2002 or due south like 1987. That’s another way of saying I don’t see signs of a return of the Bull.
A look at the recent performance of the Bond market will show that traders are engaged in a continuing flight to safety. A week ago I noted that the 2-year US Treasury Note had W/W “dropped -24 basis points to an extremely low 2.32 pct yield”. This week, the yield plunged again to 2.18 pct, a loss of a further -14 basis points.
But the 3-month T-Bill yield really illustrates my point. Two weeks ago, the yield dropped -10bp from 3.09 to 2.99 pct. One week ago there was a drop of -31bp to 2.68 pct. Then this week the yield plunged -51bp to just 2.17 pct, which is almost the same as the 2-year Note yield.
Wealth is being destroyed in the billions of dollars because inflation is growing at a faster clip. Moreover, traders do not yet see adequate signs of economic reversal to commit their cash funds to equities. They are still concerned about solvency issues in the banking system.
Why I say the last point is true is because after the FOMC emergency rate cut, and the President’s huge econ stimulus package were announced early in the week, the Financials really popped. But on Friday, having given further thought to the SocGen debacle, XLF nose-dived -2.62 pct on the day, and were not looking good at the close, falling from 27.50 to about 27.13 in 20 minutes before closing at 27.17.
Maybe this was re-loading ammo for Monday morning, but I think traders were worried that the weekend might also bring news of another SocGen, or even that the so-called “rogue trader” at SocGen was located and he was going to tell the truth that perhaps the loss of -$7.14 billion dollars was not entirely hidden from management.
This is where “Better dead than red” takes on a whole new meaning. I wouldn’t want to be in the shoes of that 31 year old trader, for sure.
As I wrote last week:
Government leaders and central bankers clearly have the power to move markets in the short term, but in the total picture the world economy is so huge and the capital base of the buy-side so large that normal (ie, long term) economic relationships will continue to dominate. The present sophistication of independent traders backed by the power of advanced computer and telecommunications technology ensure that capital will flow from one asset class to another and from industry to industry, sector to sector and country to country, faster that any ability of market interventionists to dominate. Yes, for the cost of a penny or two a minute, we now conference on a global scale. The news in say Santiago Chile is instantly known in San Francisco, Shanghai, Sydney and Stockholm. What was once called “hot” money is now just called money. The world can see that governments are printing and spending money three and four times faster than economic wealth is being created. That fact will become the biggest story of the next several years in the capital markets. Oil and gold will continue in the long-term bull phases until the major country governments come to an agreement to balance budgets and the finance ministers and central bankers hold them to it. I don’t see that happening in the foreseeable future, but I do see a time, following a deep Bear market in equities, where the economy will right itself, at least temporarily.
I still hold the opinion that the equity market Bear trend exists and that rallies are counter-trend. I feel that, despite several trillion dollars of lost wealth in the equity market since October, the Bear is just half over. There are too many Bulls and too much hope for the condition referred to as capitulation to exist.
Using the DJIA as a measuring device, the cycle top was 14200 and my target for the low is 10,000. We are now watching Dow=12207. Despite the +107 point gain in the Dow 30 this week, the market has erased 2000 of the 4200 points I was expecting.
Due to the continuing issues facing the housing and credit markets, solvency issues at HB&B, and inflation and budget deficits in the US, as well as global economic slowing, there is a lot more to come, both in terms of points off the DJIA (ie, liquidity issues) as well as rate cuts from the Fed and other central bankers and econ stimuli from government, both in the US and abroad.
It takes time for monetary and fiscal stimuli to kick in. Time is of the essence. But, due to the magnitude of the issues, and the need for HB&B to clear away the junk and rebuild its reserves, time can not be made to move quicker. A clock is what it is.
A week ago, I opined [with this week’s results inserted],
If the DJIA is going to drop that much further, I believe the Financials (C, JPM, AXP, AIG, and GE [has a huge financial component]) will not be the problem. The damage there is already three quarters done, or more. [This week XLF was the big winner.]
I expect the largest losses will be in the Energy, Basic Materials, Consumer Cyclicals and Staples, Telecom and Technology.
My belief is that (i) commodity-based equities like oil and gold are the leading late-cycle performers on the downside as well as the upside, and (ii) I anticipate declines in the related share indexes of -25 to -27 pct, still, whereas I believe the DJIA, for example, may have a further -17 pct to drop.
If there is a place to hide, relatively speaking, it is in XLF, the giant Financials ETF, which has dropped from 36 in mid-October to 27.18 on Friday (-24.5 pct loss). There may be another -15 pct loss in XLF remaining in this cycle before the bottom is reached.
Following a brief attempt to rally from Tuesday morning’s short-term oversold condition, helped largely by traders closing short positions, rather than initiating new Buy programs, I anticipate more losses.
Prudent traders ought to consider selling their risky positions into the strength of rallies, and gather the ammunition in cash or near-cash to be ready and able to buy the stocks of the best quality companies at or near the long-term cycle bottom.
Remember, traders need to keep some distance between their bigger picture market and economic perspective and their eye on the short-term technical picture, ie, the price series of the securities they are trading. A Bear market means a series of lower highs and lower lows, which means that counter-trend rallies do occur and you must be vigilant not to be trapped or whip-sawed.
Extreme volatility as the US equity market has shown this week [XLF, XLB and XLY up +5.6 pct, +4.1 pct and +4.1 pct vs IYZ, XLU and IYH down –5.5 pct, -6.0 pct and -6.4 pct] presents challenges to the average trader and significant opportunities to the most nimble ones.
It is a great time for learning.
To wrap this up, I’d like to repeat something I wrote a week ago.
One final point is that oil and gold, should they pull back to their 200d MA’s, or a bit lower, would still be considered to remain in long-term Bull markets. Within a couple years I believe new cycle highs will be reached, particularly for gold, which has become, with the strength of the emerging BRIC economies, and the decline in relative importance of the $USD, the new reserve currency of the world.Given the reluctance of finance ministers and central bankers of the economically powerful G-20 nations to revert to a gold standard that hinders their domestic political and monetary policy freedoms, I think that traders now are generally in agreement that gold is the standard.
If gold is, in fact, the standard, after a pull-back, caused perhaps by increased margin requirements on commodity exchanges, I believe the gold price (along with silver and platinum) will rise to very high levels well above $2000 per troy ounce within five years.
Global Economics Review
Econoday International Report (Jan 25).
US Economic Calendar for next week.
It is important to review the following reports published this week on the US economy that continues to worsen.
US Comparable Sales for Retail Chain Stores weekly report.
The US Existing Home Sales report for December.
On Monday, the New Homes Sales data will be published.
The US New Home Sales report for December.
On Tuesday morning, the US Durable Goods Report will set the tone for the day. But, the FOMC starts to meet, so market volatility is likely to calm down.
The US Durable Goods Orders report for December.
On Wednesday afternoon at 2:15pm ET, the Fed reports on further policy changes, following last week’s emergency announcement of an interim report of -75 basis point cut in the Fed Rate.
The FOMC decision on monetary policy.
Industry and Cara 100 “Impulse” Review
Applied weekly to major industry groups, the “impulse system”, based on the excellent work of Dr. Alex Elder, gives a sense of market internals.
“Jock” reports:
THIS WEEK closed with zero GREEN industry and 25 RED, compared to last week’s 0 green, 29 Red. Tobacco and Health Services fell from neutral to RED, while several rose from RED to neutral: Banking, Real Estate, Leisure, Retail, Speciality Retail, and Transportation.
Ticker Name Score
-5wksScore
-4wksScore
-3wksScore
-2wksScore
-1wksScore
-0wksABB ABB Ltd. -2 +2 +0 -2 -2 -2 ABV COMP DE BEBA AM ADS -2 +2 +2 +2 -2 -2 ABX Barrick Gold Corp. -2 +0 +2 +2 +0 +2 ADBE Adobe Systems Inc. -2 +0 -2 -2 -2 -2 AET Aetna Inc. +2 +2 +0 +2 +0 -2 AMAT Applied Materials Inc. +0 +0 -2 -2 +0 +0 ATVI Activision Inc. +2 +2 +0 +0 +0 +0 BA Boeing Co. -2 +0 +0 -2 -2 -2 BBBY Bed Bath & Beyond Inc. -2 -2 -2 -2 -2 +0 BBD Banco Bradesco S.A. +0 +2 -2 +0 -2 -2 BC Brunswick Corp. -2 +0 -2 -2 -2 +0 BDK Black & Decker Corp. -2 -2 -2 -2 -2 +0 BHP BHP Billiton Ltd. -2 -2 -2 -2 -2 -2 BMY Bristol-Myers Squibb Co. -2 -2 -2 +0 -2 -2 CCJ Cameco Corp. -2 +0 +2 +0 -2 -2 CCL Carnival Corp. +0 +2 -2 -2 -2 +0 CEO CNOOC Ltd. -2 +0 +0 +2 -2 -2 CHA China Telecom Corp. Ltd. +0 +0 +2 +2 +0 -2 CHL China Mobile Limited +0 +0 +0 +0 -2 -2 CHRW CH Robinson Worldwide Inc. +2 +2 +0 -2 -2 +0 COST Costco Wholesale Corp. +0 +2 +0 +0 -2 -2 CSCO Cisco Systems, Inc. +0 +0 -2 -2 -2 -2 CTSH Cognizant Technology Solutions Corp. +0 +2 +0 -2 -2 -2 CVX Chevron Corp. +2 +2 +2 +0 -2 -2 DB Deutsche Bank AG +0 +2 +2 -2 -2 -2 DELL Dell Inc. -2 +0 -2 -2 -2 -2 DEO Diageo plc -2 -2 -2 -2 -2 -2 DIS Walt Disney Co. +2 +2 -2 -2 -2 -2 DOW Dow Chemical Co. +0 +0 -2 -2 -2 +0 DNA Genentech Inc. -2 -2 -2 +0 +0 -2 ECA EnCana Corp. +2 +2 +2 +0 -2 -2 ERJ EMBRAER - Empresa Brasileira de Aeronutica S.A. -2 +2 +2 +2 -2 -2 ERTS Electronic Arts Inc. +2 +2 -2 -2 -2 -2 EXC Exelon Corp. +2 +0 +0 +2 -2 -2 GE General Electric Co. -2 +0 +0 -2 -2 -2 GFI Gold Fields Ltd. -2 -2 +0 +2 +0 -2 GG Goldcorp Inc. -2 +2 +2 +2 +0 +2 GGB Gerdau S.A. -2 +2 +2 +2 -2 -2 GOL GOL Linhas Areas Inteligentes S.A. -2 +2 -2 -2 -2 -2 GOOG Google Inc. +0 +2 +0 -2 -2 -2 GRMN Garmin Ltd. -2 +2 -2 -2 -2 -2 GS Goldman Sachs Group Inc. -2 +2 -2 -2 -2 -2 GSK Glaxosmithkline plc -2 -2 -2 +2 -2 -2 HBC HSBC HLDGS PLC ADS +0 +0 -2 -2 -2 -2 HDB HDFC Bank Ltd. +0 +0 +0 +0 -2 -2 IBKR Interactive Brokers Group, Inc. IBN ICICI Bank Ltd. +0 +2 +0 +2 +0 +0 IMO Imperial Oil Ltd. +2 +2 +2 +0 -2 -2 INFY Infosys Technologies Ltd. +0 +2 +0 +0 -2 -2 INTC Intel Corp. +0 +2 -2 -2 -2 -2 JCP J. C. Penney Company, Inc +0 +0 +0 -2 +0 +0 JNJ Johnson & Johnson +0 +0 -2 +0 +0 -2 KB Kookmin Bank +0 +2 -2 -2 -2 -2 KO Coca-Cola Co. +0 +0 +0 +2 +0 -2 KSS Kohl's Corp. +0 -2 -2 -2 -2 +0 LEH Lehman Brothers Holdings Inc. +2 +2 -2 -2 -2 -2 LLTC Linear Technology Corp. +0 +2 +0 -2 -2 -2 MBT Mobile Telesystems OJSC +0 +2 +2 +0 -2 -2 MFC Manulife Financial Corporation -2 -2 -2 -2 -2 -2 MICC Millicom International Cellular SA +0 +2 +0 -2 -2 -2 NKE Nike Inc. +0 +2 -2 -2 -2 -2 NOK Nokia Corp. -2 +0 +0 -2 -2 -2 NTES Netease.com Inc. +0 -2 -2 -2 -2 -2 NUE Nucor Corp. +2 +2 +0 -2 -2 +0 ORCL Oracle Corp. +2 +2 +2 +0 -2 -2 OXPS optionsXpress Holdings, Inc. +2 +2 +2 +0 -2 -2 PAYX Paychex Inc. -2 -2 -2 -2 -2 +0 PBR PETROLEO BRASILEIRO +0 +2 +2 +0 -2 +0 PDA Perdigao S.A. +0 +0 +0 +2 -2 -2 PG Procter & Gamble Co. +0 +0 +0 +0 -2 -2 PTR PetroChina Co. Ltd. -2 -2 -2 +0 -2 -2 QCOM QUALCOMM Inc. -2 +2 -2 -2 +0 +2 RIO COMPANHIA VALE ADS -2 +0 +0 -2 -2 -2 RIMM Research In Motion Ltd. -2 +2 +2 -2 -2 -2 RY Royal Bank of Canada -2 -2 -2 -2 -2 +0 SBUX Starbucks Corp. -2 +0 -2 +0 +0 +0 SLW Silver Wheaton Corp. -2 +2 +2 +0 -2 +0 SNDK SanDisk Corp. +0 +0 +0 -2 -2 -2 STO StatoilHydro ASA -2 -2 +2 -2 -2 -2 SU Suncor Energy Inc. +2 +2 +2 +0 -2 -2 SWK Stanley Works -2 +0 -2 +0 +0 +0 TCK Teck Cominco Ltd. -2 +0 +0 +0 -2 +0 TEF Telefonica SA +0 +0 +0 +2 -2 -2 TGP Teekay LNG Partners LP. +0 +0 +0 +2 +0 -2 TGT Target Corp. -2 -2 -2 +0 +0 +0 TM Toyota Motor Corp. -2 +0 -2 -2 -2 +0 TOT Total SA -2 +2 +2 +2 -2 -2 TS Tenaris SA -2 +0 +0 -2 -2 -2 TT Trane Inc +2 +2 +2 +0 +0 +0 UBS UBS AG +0 -2 +0 +0 -2 -2 UTX United Technologies Corp. +2 +2 +2 -2 -2 +0 VCP Votorantim Celulose e Papel S.A. +0 +0 +0 -2 -2 -2 VIP Vimpel-Communications +2 +2 +2 +0 -2 -2 WAG Walgreen Co. +0 +0 -2 -2 -2 +0 WBK Westpac Banking Corp. +0 -2 -2 -2 -2 -2 WFMI Whole Foods Market Inc. -2 +0 -2 -2 -2 +0 WHR Whirlpool Corp. +0 +0 +0 -2 -2 +0 WMT Wal-Mart Stores Inc. +2 +2 -2 +2 +0 +0 XOM Exxon Mobil Corp. +2 +2 +2 +0 -2 -2 YHOO Yahoo! Inc. -2 -2 -2 +0 -2 -2 Summary: (+2/-2/other) 19/43/37 45/19/35 24/42/33 18/51/30 0/80/19 3/69/27 Net: (+2)-(-2) -24 +26 -18 -33 -80 -66
1 Cara100 was GREEN (Qualcomm) and 69 were RED.Among the major indices, NONE were GREEN; only the US$ index, the CRB, and Bombay were neutral.
All the major US stock indices were RED – the exact same reading as the last weeks. (This week, I’m not able to provide the breakdown of index components, due to time commitments on the Junior Miners project.)
GOLD stocks rose to GREEN, while SILVER stocks stayed neutral.
BOTTOM LINE: Some improvement in previously weakest sectors. Is it just a bounce?
Jock
______________________________________________________________
NOTE: Alex Elder’s “impulse system” considers both the “inertia” in prices (where prices stand vs. their 26 wk. moving average) and their “momentum” (the rate their 13wk. and 26wk. moving averages are converging or diverging).
When both indicators (EMA and MACD-H) tick up, the reading is “green”; when both decline, it’s “red”. Applied weekly to major industry groups, indices, and their components, a sense of market internals emerges.
US Equity Markets Review
DJIA=12207, up from12099 in this shortened trading week. On Friday, however, the DJIA dropped -1.39 pct.
Over the past five sessions, including Friday of the prior week, for the Dow 30 stocks, 18 were up and 12 down.
Traders are nervous. The Interventionists are pumping hard to put life back into a dead Bull. The Bear lives.
NASDAQ Composite ino.com chart
NASDAQ Composite stockcharts.com chart
Nasdaq=2326 is down from 2340 over the past four days in this holiday shortened week.
Traders are nervous. The worst sector perform on Friday was semi-conductors (my proxy for Tech), which dropped -3.01 pct on the day.
Several weeks ago I wrote in this space, “Here is the list of the ten highest-weighted non-financial stocks in the Nasdaq Composite. Put them in a watchlist (see Google Finance Portfolio) and watch them like a hawk:
AAPL MSFT GOOG QCOM RIMM CSCO INTC ORCL GILD EBAY” I said that the Techs would lead the market one way or the other, and you know which way I was indicating.
Daily RSI-7 for the Nasdaq 100 Big-10
Weekly RSI-7 for the Nasdaq 100 Big-10
Monthly RSI-7 for the Nasdaq 100 Big-10
The US equity market Sector ETF Summary
The tables I show are for ten (GICS) Sector Index Funds (ETF’s) only, but they cover the full spectrum of the US equity market.
This week (the past five sessions including the prior Friday), the scoreboard reads five up and five down. Over four days, it was also the same five up and five down.
The best performer was Financials and the worst, Healthcare.
Presently there are 3 of the Cara 100 in the Accumulation Zone (GOL, BMY and SNDK) and there have been 14 recent Buy Alerts (with mixed success after the knock-down on Friday) and 3 Sell Alerts.
Volatility means traders must use prudence as in a Bear market, there are many confounding whip-saws. Still, if there is to be a rally, the AZ/BA is the place to look.
Sophisticated traders will wait for the Buy signals in Bear markets to sell positions into strength. All traders have to learn this tactic.
In any case, a technology feature I hope to implement will be a table that tracks the gains and losses of this simple RSI-7 system. It is an unsophisticated system that I can easily flesh out into something very valuable.
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)
Individual Sector ETF Review
Sector 10 (energy: XLE, IYE, VDE, OIH, PBW and IXC)
Here’s the XLE Monthly, Weekly and Daily data charts:
XLE Monthly data:
XLE Weekly data:
XLE Daily data:
The Energy sector ETF (XLE), in four days, dropped marginally from 68.90 to 68.70.
The 200-day Moving Average of $WTIC is up to 78.81 from 78.30, which continues to rise. The 50-day MA is now at 92.69, down from 93.21, and falling.
Over the past five days, XOM (-0.04 pct) is flat, but on Friday dropped -2.40 pct.
PBR was up +13.0 pct this past 5 sessions, on news of a major discovery. TOT dropped -5.8 pct.
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 |
Oil & Gas Exploration & Production -Canada
Sector 15 (basic materials: IYM, XLB, IGE and VAW)
Here’s the XLB Monthly, Weekly and Daily data charts:
XLB Monthly data:
XLB Weekly data:
XLB Daily data:
XLB (Basic Materials) was firm, moving from 37.35 to 38.44. There was a small loss on Friday.
Over the past 5 sessions, the winners were NUE +9.3 pct, RTP +7.6 pct, TCK +6.9 pct and AA +6.6 pct. Among the golds, the winners were AEM +17.2 pct, ABX +12.2 pct and GG +11.6 pct. GFI dropped -7.1 pct with a huge loss of -9.3 pct on Friday.
Table 3: Senior metals and steel equities:
| Symbol | Close | 1Day Change |
1Day %Change |
1W %Change |
2W %Change |
4W %Change |
YTD %Change |
3M %Change |
6M %Change |
12M %Change |
Sector 20 (industrial: IYJ, XLI, VIS, and IYT)
Here’s the XLI Monthly, Weekly and Daily data charts:
XLI Monthly data:
XLI Weekly data:
XLI Daily data:
Table 4: Senior capital goods makers and transportation:
| Symbol | Close | 1Day Change |
1Day %Change |
1W %Change |
2W %Change |
4W %Change |
YTD %Change |
3M %Change |
6M %Change |
12M %Change |
XLI (Industrials) lifted from 34.68 to 35.80.
The winners were FDX +8.7 pct, UTX +6.8 pct, and CAT +5.5 pct. UTX and CAT were reviewed Friday by Value Line.
Re Fedex, a week ago I wrote, “FDX (-0.04 pct) held up, for once. I guess the people flying Fedex are happy with the President’s $150 billion stimulus package. We’ll see because FDX moves on reality, not hope. Also, as I have said in the past, there is linkage between FDX and the monthly Industrial Production report, which excluding large aircraft manufacturing (Boeing and all), was not too bad, giving some inspiration to FDX traders.”
The loser was ERJ -3.3 pct W/W.
Sector 25 (consumer discretionary: XLY, IYC and VCR)
Here’s the XLY Monthly, Weekly and Daily data charts:
XLY Monthly data:
XLY Weekly data:
XLY Daily data:
Consumer Discretionary (XLY) lifted from 29.52 to 30.86. As I wrote a week ago in this space, “Traders must have been listening to the President’s $150 billion stimulus package speech. Besides oil prices are on the downswing.”
I wrote two weeks ago in the WIR, “I can’t see US shoppers returning to the stores and malls until the gasoline price drops at the fuel pump. Right now, they are tapped out according to the credit card companies.”
Over the past 5 sessions, the winners were BC +15.0 pct, WHR +11.4 pct, JCP +8.9 pct and CCL +8.6 pct, prompting me to suggest (LOL) off the top that with the $150 billion in hand, consumers would likely be shopping for boats, washing machines, clothes and Caribbean cruises.
Table 5: Senior consumer discretionary equities
| Symbol | Close | 1Day Change |
1Day %Change |
1W %Change |
2W %Change |
4W %Change |
YTD %Change |
3M %Change |
6M %Change |
12M %Change |
Sector 30 (consumer staples: XLP, VDC, RTH and IYK)
Here's the XLP Monthly, Weekly and Daily data charts:
XLP Monthly data:
XLP Weekly data:
XLP Daily data:
Table 6: Senior consumer staples equities
| Symbol | Close | 1Day Change |
1Day %Change |
1W %Change |
2W %Change |
4W %Change |
YTD %Change |
3M %Change |
6M %Change |
12M %Change |
XLP (consumer staples) dropped from 27.15 to 26.70 this shortened week.
Over the past 5 sessions WFMI +6.5 pct was the big winner. ABV/WAG/DEO were up and KO/BUD/PEP/PG were down.
Sector 35 (healthcare: IYH, XLV, VHT, IXJ, and IBB)
Here’s the IYH Monthly, Weekly and Daily data charts:
IYH Monthly data:
IYH Weekly data:
IYH Daily data:
Table 7: Senior healthcare equities
| Symbol | Close | 1Day Change |
1Day %Change |
1W %Change |
2W %Change |
4W %Change |
YTD %Change |
3M %Change |
6M %Change |
12M %Change |
IYH (healthcare) lost the most this week, dropping from 69.40 to 65.97 over four days.
Maybe traders are fearing an Obama Universal Health Plan? Do you think?
AMGN was the winner over five days (+1.5 pct) but the gain on Friday was +4.4 pct.
The big losers were UNH -8.0 pct, JNJ -7.9 pct, BMY -7.6 pct, GSK -7.5 pct and AET -7.4 pct.
I suppose these companies are not ponying up with enough large ones to the Democrat candidates in the presidential campaign? (LOL)
Sector 40 (financial: IYG, IYF, XLF, VFH, IXG, VNQ, RWR, IYR, and ICF)
Here’s the XLF Monthly, Weekly and Daily data charts:
XLF Monthly data:
XLF Weekly data:
XLF Daily data:
Table 8: Senior financial company equities
| Symbol | Close | 1Day Change |
1Day %Change |
1W %Change |
2W %Change |
4W %Change |
YTD %Change |
3M %Change |
6M %Change |
12M %Change |
The Financials (XLF) boomed this week, up from 25.50 to 27.18 in a short week, but one aided and abetted by the Fed and the Administration.
MER gained +11.1 pct over 5 sessions. JPM +9.0 pct, MS +8.0 pct, and C +6.7 pct were all pumping the same shotgun. DB, however, dropped -3.5 pct over 5 sessions.
Sector 45 (technology: IGM, IGV, IGW, XLK, VGT, IYW, IGN, IXN, MTK and SMH)
Here’s the SMH Monthly, Weekly and Daily data charts:
SMH Monthly data:
SMH Weekly data:
SMH Daily data:
Table 9: Senior technology equities
| Symbol | Close | 1Day Change |
1Day %Change |
1W %Change |
2W %Change |
4W %Change |
YTD %Change |
3M %Change |
6M %Change |
12M %Change |
The SMH (semi-conductor) actually gained a bit, from 27.91 to 28.02. Every little bit helps when there are days like Friday where INTC dropped -3.3 pct, SNDK -4.2 pct and CSCO -5.6 pct. That’s some pretty heavy hitting going on there.
Semi-conductors (SMH) have lost over -30 pct over the past six months, which means, you know, that when the Bull market does start, this group will be either number #1 or #2 on the leader board.
Sector 50 (telecom: IYZ, VOX and IXP)
Here’s the IYZ Monthly, Weekly and Daily data charts:
IYZ Monthly data:
IYZ Weekly data:
IYZ Daily data:
IYZ (telecommunications) dropped from 25.22 to 24.98 over 4 days.
On Friday, T (-1.4 pct) and VZ (-1.2 pct) led the loss on the week.
Sector 55 (utilities: IDU, XLU, and VPU)
Here’s the XLU Monthly, Weekly and Daily data charts:
XLU Monthly data:
XLU Weekly data:
XLU Daily data:
XLU (Utilities) dropped from 40.03 to 38.18.
This was another bad week when yields fell and bond prices were lifting, so the competition for fixed income was simply too much for the equity players.
Bonds & Yields Review
Table 10: US Treasury Yields
| Maturity | Yield | Yesterday | Last Week | Last Month |
|---|---|---|---|---|
| 3 Month | 2.17 | 2.28 | 2.68 | 3.19 |
| 6 Month | 2.27 | 2.40 | 2.70 | 3.42 |
| 2 Year | 2.18 | 2.31 | 2.32 | 3.29 |
| 3 Year | 2.14 | 2.27 | 2.27 | 3.24 |
| 5 Year | 2.77 | 2.90 | 2.73 | 3.71 |
| 10 Year | 3.56 | 3.71 | 3.62 | 4.28 |
| 30 Year | 4.27 | 4.39 | 4.28 | 4.67 |
| Maturity | Yield | Yesterday | Last Week | Last Month |
|---|---|---|---|---|
| 2yr AA | 2.19 | 2.29 | 2.63 | 3.08 |
| 2yr AAA | 2.34 | 2.42 | 2.65 | 3.11 |
| 2yr A | 2.70 | 2.53 | 2.77 | 3.59 |
| 5yr AAA | 2.76 | 2.83 | 2.87 | 3.35 |
| 5yr AA | 2.70 | 2.76 | 2.84 | 3.38 |
| 5yr A | 3.04 | 3.11 | 3.15 | 3.55 |
| 10yr AAA | 3.44 | 3.34 | 3.41 | 3.87 |
| 10yr AA | 3.36 | 3.26 | 3.39 | 3.46 |
| 10yr A | 3.67 | 3.57 | 3.64 | 4.10 |
| 20yr AAA | 4.29 | 4.19 | 4.17 | 4.42 |
| 20yr AA | 4.42 | 4.33 | 4.31 | 4.56 |
| 20yr A | 4.43 | 4.51 | 4.12 | 4.65 |
| Maturity | Yield | Yesterday | Last Week | Last Month |
|---|---|---|---|---|
| 2yr AA | 3.40 | 3.49 | 3.64 | 4.50 |
| 2yr A | 3.52 | 3.69 | 3.80 | 4.74 |
| 5yr AAA | 3.93 | 4.15 | 4.20 | 4.86 |
| 5yr AA | 4.23 | 4.33 | 4.19 | 5.16 |
| 5yr A | 4.16 | 4.29 | 4.24 | 5.22 |
| 10yr AAA | 4.94 | 4.80 | 4.97 | 5.43 |
| 10yr AA | 5.11 | 5.19 | 5.22 | 5.73 |
| 10yr A | 5.28 | 5.48 | 5.17 | 5.95 |
| 20yr AAA | 5.35 | 5.45 | 5.30 | 5.47 |
| 20yr AA | 5.63 | 5.76 | 5.68 | 5.95 |
| 20yr A | 5.94 | 6.06 | 6.03 | 6.46 |
The booming bond market is not so much a renewal of interest in fixed income as it is that traders are engaged in a continuing flight to safety.
A week ago I noted that the 2-year US Treasury Note had W/W “dropped -24 basis points to an extremely low 2.32 pct yield”. This week, the yield plunged again to 2.18 pct, a loss of a further -14 basis points.
But the 3-month T-Bill yield really illustrates my point. Two weeks ago, the yield dropped -10bp from 3.09 to 2.99 pct. One week ago there was a drop of -31bp to 2.68 pct. Then this week the yield plunged -51bp to just 2.17 pct, which is almost the same as the 2-year Note yield.
The yield on the 5-year Note, however actually lifted as the price fell, and the yields on the 10-year and 30-year instruments fell only -6bp and -1bp respectively.
The 10-year and 30-year US bonds are now yielding 3.56 pct and 4.27 pct. The 3 month T-Bills are trading at a yield of 2.17 down from 2.68 pct.
So this week’s action was a panic move into cash or near cash. We saw the same into gold, which is also near-cash.
Some traders then – those with a short time horizon – are going to gold, which pays no yield, because they believe it will best hedge against inflation and fiat money depreciation. I concur, but I also think it’s best to wait a month or two to try to get a better price from sellers of gold.
Here is the $USB 30-year Treasury Bond chart.
Interest rates and bond yields.
Interactive Daily data charts:
Interactive Chart of Interest rates and bond yields.
This week, TLT lifted from 95.49 to 95.95. All of the gain came on Friday.
For the TIP, the price moved from 108.50 to 109.20.
Two weeks ago, I remarked on some of the issues, when I wrote, “This move into the safety of US Treasuries is an interesting one in that I have been pointing you to central bank re-po issues. What I wrote earlier was, “After year-end, I am expecting some fireworks as central bank funds have to be repaid the massive short-term borrowing they made to banks to avert a year-end liquidity crisis. If the cb’s are repaid, without apparent difficulty, then Bond prices will likely rally because the economy is slowing. But if there are problems in settlement (even possible failures at financial institutions) or if the central banks extend these emergency loans, then I have to believe rates are going to rise and bond prices fall…. The charts are showing the opposite picture though. Looking through the squiggly Stochastics for the Daily and now the Weekly data, it appears that bond prices could rally a bit more. If so, maybe that’s an indication the central banks will extend the loan window an extra couple weeks. That wouldn’t be good for equities though.””
It’s time that central banks and HB&B told us what is happening there with respect to the repayment of these repo agreements.
US Bond Funds -- Interactive Monthly Data Charts
SHY Monthly data series chart:
IEF Monthly data series chart:
TLT Monthly data series chart:
AGG Monthly data series chart:
LQD Monthly data series chart:
TIP Monthly 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:
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 |
Five weeks ago in this space I warned of more problems to come with the mortgage lenders Countrywide (CFC), Fannie Mae (FNM) and Freddie Mac (FRE). The problems persist.
On Friday, for instance, FRE -7.56 pct, FNM -6.99 pct and CFC -1.47 pct, were all hit hard. In fact, although XLF had a monster 5-session week (+5.35 pct), on Friday it plunged -2.62 pct.
I’m thinking that traders do not care much for the President’s econ stimulus plan. I noted that as the CNN roving anchor was making his way through Texas, there were a lot of upset people who figured that a good American is one who works hard to get out of the mess they or others put them in. “Don’t mess with Texas”.
I saw first hand that my former employees in Texas were similarly minded. Dr. Paul kind of people.
Hey what goes with this Ron Paul marriage with Don (“Sell your $400 gold to me”) Laskin. Makes a supporter want to puke. Then again, are any of these politicians any different? Give them 5 minutes on the Larry Clown Show and I guess they’ll appoint anybody.
Interesting that Angelo Mozilo, CEO of Countrywide, seems to be suing everybody or am I mistaken? What are all these class-action suits about anyway? As if I care. I told you, I wouldn’t touch CFC with your ten-foot pole, and now you can be assured that Bank of America (BAC) will never make the Cara 100, globally, in America or even if I put a list together for Sausalito.
At least when Baring Bank went under, the good people of the UK had the common sense to price the remains at $1.00, not over $4 or 6 billion or whatever. Does anybody really know the extent of the losses?
Consumer Finance -USA -- Interactive Weekly Data Charts
Consumer Finance -USA -- Interactive Daily Data Charts
Commodities Review
The $CRB was lifted this 4-day week from 360.87 to 361.64.
The 50-day Moving Average for $CRB is presently at 354.00, up from 353.32 and the 200-day MA is now 329.12, up from 328.11, and still rising.
There was a small gain of +0.21 pct on Friday.
Interactive Chart of Weekly CRB Commodities Index:
Interactive Chart of Daily CRB Commodities Index:
Oil Review
$WTIC (US Light Sweet Crude called West Texas Intermediate) fell a bit from 89.92 to 89.80.
The 50d MA for $WTIC is now at 92.69, down from 93.21, whereas the 200d MA is 78.81, up from 78.30.
As I wrote in this space two weeks ago, “The price probably peaked seven sessions ago at 100.09. I look for lower prices over the next several months.”
Here is the e-miNY Dec-07 Crude Oil chart.
Interactive Chart of Weekly Crude Oil:
Interactive Chart of Daily Crude Oil:
Gold & Precious Metals Review
The $GOLD contract rocketed from 881.70 to 914.12 in the four-session week.
That’s what happens when the FOMC declares an emergency -75 bp drop in the Fed Rate, and the Administration was simultaneously explaining its $150 billion econ stimulus package.
The 50-day MA for $GOLD is now 834.69, up from 829.09, and the 200d MA is 733.05, up from 728.68.
As I wrote in this space a week ago, “I think $GOLD is at a crucial point right now. There could be a rally or the price could collapse. A short straddle might be effective.” Wow, how good was that?
I also wrote, “There are indications from the price chart of gold, platinum and palladium (but not for silver) that the price might break downward. Watch the silver for the key.”
As usual, I’m trying hard to please.
The gain for $GOLD on Friday was a remarkable +3.67 pct.
Traders can now leg out of that straddle, I think. Maybe g034 can explain this?
Interactive Chart of Weekly Gold EOD Continuous Contract Index:
Interactive Chart of Daily Gold EOD Continuous Contract Index:
Interactive chart of recent trading for the Gold Bullion index.
Spot silver chart for the week
This week, $SILVER lifted from 16.22 to 16.47. The gain on Friday was +1.60 pct.
For $SILVER, the 50d MA is now 15.02, up from 14.95, and the 200d MA is 13.71, up from 13.66.
Interactive Chart of Weekly Silver EOD Continuous Contract Index:
Interactive Chart of Daily Silver EOD Continuous Contract Index:
Interactive chart of the Silver Bullion index.
$PLAT jumped from 1565.50 to a closing day record of 1613.00. The gain on Friday was +3.03 pct.
The 50d MA for $PLAT is 1505.71, up from 1487.62. The 200d MA is 1372.28, up from 1359.50.
The Shanghai market reversed its downward action this week. When it falls, “I anticipate a lot of selling of platinum by Chinese speculators”. This is just another indicator I use. When you get hundreds of them, you look at global market prices like a functioning system with all the interrelated parts. After a while, its like watching the crowd at a football game in action.
Spot platinum chart for the week
Interactive Chart of Weekly Platinum EOD Continuous Contract Index:
Interactive Chart of Daily Platinum EOD Continuous Contract Index:
Interactive chart of the Platinum metal index.
This week, $PALL stayed absolutely flat at 379.30.
The 50d MA is 368.49, down from 368.84, and the 200d MA is 366.92, up from 366.68.
A week ago I wrote, “I think the 50d and 200d technical support may not hold for palladium, but we will have to see on that score.”
Spot palladium chart for the week
Interactive Chart of Weekly Palladium EOD Continuous Contract Index:
Interactive Chart of Daily Palladium EOD Continuous Contract Index:
Interactive chart of the Palladium metal index.
This week, $COPPER dropped from 323.45 to 320.00.
The 50d MA of $COPPER is 310.61, down from 310.77, and down from 328.81 just six weeks ago, and the 200d MA is 338.37, down from 339.05.
The current price (320.00) is well below the 200MA, and may, despite a strong recent past few weeks, continue pointing traders to a recession. A week ago, I gave you a warning when I wrote in this space, “The $COPPER price could, in fact, easily burst down through support of the 50d-MA (310.77 at the time).”
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 |
This week, $XAU (the Philadelphia Exchange goldminer index) lifted to 185.54 from 177.30. But two weeks ago $XAU was at 193.55.
“The past few weeks have been much more explosive to the upside than I had expected, and I was looking for a pull back.” I am still looking for a pull-back, but the Fed and the Administration are keeping the full-court press on with their pump, pump, pumping action.
On Friday, the goldminer ETF’s (the US’s) GDX (+4.30 pct) and (Canada’s) XGD (+3.97 pct) jumped. And $XAU was up +4.65 pct on Friday.
The 50d MA for $XAU is 175.69, down from 175.86, and the 200d MA is 157.28, up from 156.51.
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
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 Weekly U.S. Goldminers Index:
Interactive Chart of Daily 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 Weekly data:
GDX Daily 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 Weekly data:
Interactive Chart of XGD Daily data:
Forex Review
The following data is a simulation of M3 as of the past week.
“US M3 (estimated) continues to grow at an excessive rate, as it does in Europe. Central bankers are constantly diluting all fiat money at extreme rates.”
Here is the chart of the week’s trading.
Wouldn’t you like to be working the prop forex desk at Goldman Sachs?
This week the $USD dropped from 76.37 to 75.99. Just as ex-GS CEO Paulson was doing his current Treasury Secretary gig in explaining the President’s stimulus package, he got trumped by Bernanke’s -75bp emergency Fed Rate drop. He looked good looking surprised. (LOL)
Nothing surprises me any more in DC. With this kind of reality show, there is never a need for Hollywood screenwriters to ever go back to work.
The 50d MA of the $USD is 76.20, up from 76.16, but back to where it was two weeks ago at 76.20, and the 200d MA is 79.37, down from 79.51 a week ago and from 79.68 two weeks ago.
Interactive Chart of Weekly U.S. Dollar Index:
Interactive Chart of Daily U.S. U.S. Dollar Index:
The Euro ($XEU) moved to 146.66 from 146.25 a week ago, but still down from 147.88 two weeks ago.
The Euro 50d MA is 146.61, up from 146.60 and the 200d MA is 139.92, up from 139.66.
Interactive Chart of Weekly Euro Dollar Index, priced in USD:
Interactive Chart of Daily Euro Dollar Index, priced in USD:
The Pound moved from 195.48 to 198.03.
The 50d MA is now 201.10, down from 202.08, and from 203.30 two weeks ago, and the 200d MA remained at 201.46.
Weekly British Pound Index:
Daily British Pound Index:
Weekly Japanese Yen Index:
The Japanese Yen ($XJY) moved to 93.43 from 93.45.
The 50d MA of the Yen is 90.74, up from 90.40, and from 89.80 two weeks ago, and the 200d MA is 86.05, up from 85.85, and from 85.64 two weeks ago.
“As the Yen gains, the money flow is out of US and Japanese equities and back into the banks to repay loans… And vice versa.” Banks are getting reliquified on a Just In Time basis…
But you know that… :-)
Daily Japanese Yen Index:
This week, the Bank of Canada dropped its key lending rate by -25bp and the Fed followed with a -75bp drop. So guess what happened to the currency trade?
Two weeks ago, the Loonie (Cdn Dollar) dropped -1.89 to 98.09. One week ago the loss was -0.74 pct to 97.36. But, how gold goes, so too the Loonie will follow. And $GOLD rocketed from 881.70 to 914.02 this week, so it was not surprising to see the Loon in flight, up from 97.36 to 99.32.
The Loonie’s 50d MA is 99.93, down from 100.56, and from 101.45 two weeks ago, and the 200d MA is 96.79, up from 96.55, and from 96.27 two weeks ago.
It is still a far northern Ontario wilderness cry from 110.17, just a few weeks ago.
Weekly Canadian Dollar Index:
Daily Canadian Dollar Index:
International Equity Markets Review
The international markets were very weak again this week. The non-US indexes with the largest capitalization dropped the most. The FTSE 100 -0.6 pct is down -9.1 pct YTD. The CAC of France dropped -4.2 pct this week, which is now -13.1 pct YTD. The DAX of Germany lost -6.8 pct this week, which is now -15.5 pct YTD. Finally, the world’s number two market, the Nikkei 225 of Japan, dropped -1.7 pct this week for a loss YTD of -11.0 pct.
A week ago, I reported: “The EWC of Canada has a Daily RSI-7 of 14.7, so it pays to watch these markets and their technical indicators on a daily basis. Remember they are only indicators, but after a while, through observation, you will see…”
This week, the Toronto Exchange gained +1.2 pct to 12894.8.
Btw, the Shanghai Fly altered his market outlook this weekend:
Bill, Here is a chart of Shanghai, second one is a chart of Shenzhen index. The Saturday Edition of China Business News has bottom picking more or less on the cover page. An online poll showed 54% of participants believing that the bottom is near. Such sentiment reflects hope, more than reality. Therefore, I think that with further sell-offs to come in the Western markets, Chinese stock markets will not be able to find a steady footing, yet. By the way, market breadth was weak on Friday. Only half advanced while the rest declined.To conclude, I will revise my former opinion that a bottom has been reached, and believe that further risks remain on the downside.
I’m in his camp.
I have added another 16 country index charts from StockCharts.com (with their formal approval btw as long as I don’t publish too many) because I think it is important to be watching these markets move through a trend juncture together, and in relation to currency and commodity strength or weakness.
One of the improvements I plan to make in 2008 is to set up tables that include sector and industry indexes within various international markets so that you can observe and determine commonality of trends and cycles across different markets.
The world is now a very small one in capital markets and international business. No longer are corporations just American, British, French, German, Italian, Canadian or Japanese. Most do business internationally. We need to observe their businesses and capital market prices on a global basis.
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.
Brazilian Bovespa stockcharts.com chart
Here is the latest session data for the Toronto Stock Exchange composite index.
Toronto 300 stockcharts.com chart
Toronto CDNX stockcharts.com chart
Europe
Here is the latest session data for the bourses of Europe.
Here is the latest session data for the London stock exchange FTSE.
FTSE 100 stockcharts.com chart
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.
Italian Milan Index stockcharts.com chart
Here is the latest session data for the Swiss market index.
Swiss Market Index stockcharts.com chart
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.
Tokyo Nikkei 225 Index stockcharts.com chart
Here is the latest chart for the Singapore index .
Singapore Straits Times Index stockcharts.com chart
Here is the latest chart for the Shanghai Composite index .
Shanghai Composite Index stockcharts.com chart
Here is the latest chart for the Hong Kong Hang Seng index .
Hong Kong Hang Seng stockcharts.com chart
Here is the latest chart for the India BSE 30 index .
Mumbai BSE 30 Sensex Index stockcharts.com chart
Here is the latest chart for the Australian All Ordinaries index .
Sydney All Ordinaries Index stockcharts.com chart
Russia (RTS) stockcharts.com chart
Table 13: International equities via an ETF perspective (in $USD)
| 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 Monthly, Weekly and Daily data charts:
U.K. equity market ETF
Here is the United Kingdom (EWU) equity market ETF Monthly, Weekly and Daily data charts:
EWU Daily data:
Canada’s equity market
Here is the Canadian (EWC) equity market ETF Monthly, Weekly and Daily data charts:
US Equity Markets Review
After four extremely volatile days, the major US stock indexes closed up and down this week.
While the DJIA and S&P 500 gained +0.9 pct and +0.4 pct respectively, the Nasdaq Composite lost -0.6 pct.
YTD, the DJIA, S&P 500 and Nasdaq Composite are down –8.0 pct, -9.4 pct and -12.3 pct respectively.
A week ago, I wrote, “A tactic I use to watch momentum changes was described in this space a week ago: “One thing traders need to watch for is a sign that the Bulls can muster some strength. I look to the Daily RSI-7 for that – across the major market indexes in the US and then the various industry groups. If you see a STO bouncing across the bottom, take that as a sign the Bulls have been cut into steak and are grilling on the barbi.” There was more bottom-bouncing this week. Next, however, may be different. We’ll just have to keep our eyes open.”
Well, there was a change as buyers did return to the US markets spurred on by huge intervention by the Fed and the Administration.
Where to from here? I think there is still some buying power to come regarding the interventionist action, but the rally is just about spent. The action on Friday showed that with a gap up at the open, followed by a steady sell off all day. The closing half hour action did not change any attitude. It remains negative.
I still haven’t decided whether the rapid-fire selling (ie, drying up of liquidity as bids are pulled) that has characterized the equity market this year is going to take the indexes down south-east as in 2000-2002 or south as in 1987. I suppose, the State of the Union on Tuesday I think, and the corporate earnings season reporting, will have a lot to say. Also, we need to know if central bankers are extending those short-term loan agreements to HB&B.
It is exciting to guess, but the smart money is always watching the price series data.
A dozen NASDAQ stocks to watch.
Here is the Monthly 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.
Here is the Daily 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 |
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)
Value Line Report(s) this past Friday
This week, Value Line reported on Caterpillar [GICS 20, Dow 30], and United Technologies [GICS 20, Dow 30, Cara 100].
(CAT: Value Line Report Jan. 25: next one is due Apr. 25)
(UTX: Value Line Report Jan. 25: next one is due Apr. 25)
United Technologies is a Cara 100 company for reasons of financial strength; diversity of operations in six divisions with foreign revenues averaging 50 pct; consistently high profit margins; recurrent growth in annual performance of revenues, cash flow, earnings and dividends; and a return on equity that exceeds +20 pct.
From 1992 onwards, except for a hiccup in 1999, and a minor issue in 2003, this company has perpetual growth in all the key operating and financial metrics. For the past ten years, earnings and book value have grown at a +16.0 pct annual clip despite growing numbers of shares outstanding until 2006, and then only some minor share buy-backs since then. That is an impressive record under one of the world’s premier CEO’s, George David.
Value Line’s analyst Erik Manning is very high on the company, raising the Technical Rating from a “3” to a “2” on Jan. 11, and the Timeliness Rating also to a “2” on Oct. 26. The VL Safety Rating has been a “1” since May 1997.
A key profit driver will be the fuel-efficient turbofan engines manufactured by the Pratt & Whitney division.
Per share earnings of $3.64 for 2006 will likely come in at $4.25 for 2007 and then jump +14 pct to $4.85 according to VL.
At $72.75, the stock is trading -11.82 pct off its 52-week high of $82.50 (Oct 2, 2007). There was a low of $65.20 near the open this week on Tuesday (following the holiday Monday). The 52-week low was $63.45 on March 5, 2007. I’d be surprised it the market gives us that opportunity again this year, regardless of the Bear.
On extreme weakness, I would write the long 60 puts and buy long calls. If you could get your cost basis down to 60 that $4.85e earnings would give a 12.37 PE multiple. But in a Bull market, I believe the PE would be at least 17 and probably 18, so the Price Target would be say $82.50-87.30. Even Value Line is projecting a range of 95-120 out to 2010-2012.
With a 2008 dividend of $1.30 (VL estimate for 2008, but more likely $1.36) and 2009 dividend of $1.50 (my estimate), you would be looking at an average annual Total Return in the +26 pct range if you can acquire the stock at 60. Of course, doing so may take some effort at over-writing – both the puts and calls. But UTX is a Buy-and-Hold-type core portfolio stock, so put and call writing can and should be done.
Yes, UTX is not a day trader’s favorite. It’s really one for conservative traders who have the patience to add to positions during the most serious pull-backs. Over the years, you should be able to amass a solid cash-on-cash return of dividends to your cost base that is striking.
Except for periods of intense speculation in the real estate market, this one is a serious trader’s dream. Ten, twenty, thirty years from now, I fully expect UTX to be flying onwards and upwards on those Otis elevators, P&W engines and Sikorsky helicopters, and well controlled by Carrier HVAC and Hamilton Sundstrand equipment.
Just think back to Jan 4, 1994; you could have purchased UTX for the split-adjusted price of about $7.25 that day, which is 1/10th what it sells for today. It doesn’t take a rocket scientist to see that (i) 1000 pct returns can be had in 14 years in a conservative way, and (ii) the UTX dividends would have paid for that original purchase many times over -- for the past two years alone those dividends have been $7.89.
I say that this is what successful trading is all about, and why you have to look for Cara Global-100-type companies to monitor.
The one drawback I see for UTX is the heavy insider selling, which you can track in the upper left corner of the VL reports.
As to Caterpillar, I admit to having this one in my USA-100. The company is financially very strong and the return on equity is incredibly high. If there is a drawback it is only that economic recessions hurt the operating performance a lot. Earnings are harder to predict than say for United Technologies.
Some of you have written me to say that the CAT is your favorite stock, but then I know many of you are hot on the bullish prospects of the mining industry and the CAT is that industry’s top supplier of heavy-duty machinery.
Per share earnings for 2007 were not much different than 2006 although many of you expected that to happen. Unfortunately there is a housing industry crisis, so construction activity is well down, and the cost of goods sold has also been hit hard by inflation. Moreover governments do not have flush budgets for roads building.
But business is looking up according to the Value Line analyst David Reimer. His Technical Rating was raised from a below average “4” to an average “3” on Jan 4. He refers to the current stock valuation as “modest”.
CAT opened this Tuesday (Jan 22) at a 52-week low of $59.60. The close for the week at $64.93 was a discount of -24.22 pct from the 52-week high of $87.00 set on July 17, 2007. You remember, I hope, that mid-July was when the mainstream media was hot to trot on the CAT, but that’s when the Cara trading system was issuing a Sell Alert. A Weekly-Daily Buy Alert was set this Tuesday.
But I still feel there is downside action to come for this stock before the next Bull returns. I wouldn’t be surprised to see the stock fall off to the low 50’s at some point. The 50 puts would be good to write on extreme weakness because I think it would be hard to have a price in the 40’s with 2007 earnings projected by Value Line at $5.35, and 2008 estimated at $6.00.
A 50 cost basis or the CAT would take the PE multiple down to 8.33, which would be extremely low for this high quality manufacturer. In a subsequent Bull, I could see the PE back to 15, which with $6 earnings would take the price up to $90.
With a 2008 dividend that I estimate to be $1.52, the yield would be higher than +3.0 pct with a $50 basis. To get that low a basis, you would need to do some heavy-duty over-writing of puts and calls, however, and hope that the recession stretches the stock on the downside.
The point I am making here is that the closer to 50 you buy the stock, the higher will be your Total Return.
In the early 1990’s you could have acquired this stock for under $20 or for the sum of the dividends over the past four years. Clearly the performance has not been up to UTX levels, but that’s the standard for a Cara Global 100 Company, and why the CAT is just a leap and bound short. That plus its financial strength and earnings predictability are not as strong as for United Tech.
The thing I do like about the CAT is that it does give a trader nine lives. There is usually a large spread between the annual high and low, so this is a better trading vehicle for swing traders than say UTX.
Value Line is projecting a range of 85-110 out to 2010-2012. That’s not bad, but if you aspire to Buffett-type +26 pct annual returns, you need to be nimble. Even VL’s Reimer opines that traders ought to wait a few months to get a better entry point.
The Dow 30 Company links
Alcoa [GICS 15, Dow 30]
(AA: Yahoo Finance file)
(AA: StockChart chart)
(AA: Billcara2 chart)
(AA: ADVFN Financial Data)
(AA: Value Line Report Oct. 19: next one is due Jan. 18)
Altria Group Inc [GICS 30, Dow 30]
(MO: Yahoo Finance file)
(MO: StockChart chart)
(MO: Billcara2 chart)
(MO: ADVFN Financial Data)
(MO: Value Line Report Nov. 2: next one is due Feb. 1)
American International Group [GICS 40, Dow 30]
(AIG: Yahoo Finance file)
(AIG: StockChart chart)
(AIG: Billcara2 chart)
(AIG: ADVFN Financial Data)
(AIG: Value Line Report Nov. 23: next one is due Feb. 22)
American Express [GICS 40, Dow 30]
(AXP: Yahoo Finance file)
(AXP: StockChart chart)
(AXP: Billcara2 chart)
(AXP: ADVFN Financial Data)
(AXP: Value Line Report Nov. 23: next one is due Feb. 22)
AT&T [GICS 50, Dow 30]
(T: Yahoo Finance file)
(T: StockChart chart)
(T: Billcara2 chart)
(T: ADVFN Financial Data)
(T: Value Line Report Dec. 28: next one is due Mar. 28)
Boeing Co [GICS 20, Dow 30. Cara 100]
(BA: Yahoo Finance file)
(BA: StockChart chart)
(BA: Billcara2 chart)
(BA: ADVFN Financial Data)
(BA: Value Line Report Dec. 21: next one is due Mar. 21)
Caterpillar [GICS 20, Dow 30]
(CAT: Yahoo Finance file)
(CAT: StockChart chart)
(CAT: Billcara2 chart)
(CAT: ADVFN Financial Data)
(CAT: Value Line Report Jan. 25: next one is due Apr. 25)
Citigroup [GICS 40, Dow 30]
(C: Yahoo Finance file)
(C: StockChart chart)
(C: Billcara2 chart)
(C: ADVFN Financial Data)
(C: Value Line Report Nov. 23: next one is due Feb. 22)
Coca Cola [GICS 30, Dow 30]
(KO: Yahoo Finance file)
(KO: StockChart chart)
(KO: Billcara2 chart)
(KO: ADVFN Financial Data)
(KO: Value Line Report Nov. 2: next one is due Feb. 1)
Disney [GICS 25, Dow 30, Cara 100]
(DIS: Yahoo Finance file)
(DIS: StockChart chart)
(DIS: Billcara2 chart)
(DIS: ADVFN Financial Data)
(DIS: Value Line Report Nov. 16: next one is due Feb. 15)
Dupont [GICS 15, Dow 30]
(DD: Yahoo Finance file)
(DD: StockChart chart)
(DD: Billcara2 chart)
(DD: ADVFN Financial Data)
(DD: Value Line Report Oct. 19: next one is due Jan. 18)
ExxonMobil [GICS 10, Dow 30, Cara 100]
(XOM: Yahoo Finance file)
(XOM: StockChart chart)
(XOM: Billcara2 chart)
(XOM: ADVFN Financial Data)
(XOM: Value Line Report Dec. 14: next one is due Mar. 14)
General Electric [GICS 20, Dow 30, Cara 100]
(GE: Yahoo Finance file)
(GE: StockChart chart)
(GE: Billcara2 chart)
(GE: ADVFN Financial Data)
(GE: Value Line Report Jan. 11: next one is due Apr. 11)
General Motors [GICS 25, Dow 30]
(GM: Yahoo Finance file)
(GM: StockChart chart)
(GM: Billcara2 chart)
(GM: ADVFN Financial Data)
(GM: Value Line Report Aug. 31: next one is due Feb. 29)
Hewlett-Packard [GICS 45, Dow 30]
(HPQ: Yahoo Finance file)
(HPQ: StockChart chart)
(HPQ: Billcara2 chart)
(HPQ: ADVFN Financial Data)
(HPQ: Value Line Report Jan. 11: next one is due Apr. 11)
Home Depot [GICS 25, Dow 30]
(HD: Yahoo Finance file)
(HD: StockChart chart)
(HD: Billcara2 chart)
(HD: ADVFN Financial Data)
(HD: Value Line Report Jan. 4: next one is due Apr. 4)
Honeywell [GICS 20, Dow 30]
(HON: Yahoo Finance file)
(HON: StockChart chart)
(HON: Billcara2 chart)
(HON: ADVFN Financial Data)
(HON: Value Line Report Jan. 11: next one is due Apr. 11)
IBM [GICS 45, Dow 30]
(IBM: Yahoo Finance file)
(IBM: StockChart chart)
(IBM: Billcara2 chart)
(IBM: ADVFN Financial Data)
(IBM: Value Line Report Jan. 11: next one is due Apr. 11)
Intel [GICS 45, Dow 30, Cara 100]
(INTC: Yahoo Finance file)
(INTC: StockChart chart)
(INTC: Billcara2 chart)
(INTC: ADVFN Financial Data)
(INTC: Value Line Report Jan. 11: next one is due Apr. 11)
Johnson & Johnson [GICS 35, Dow 30, Cara 100]
(JNJ: Yahoo Finance file)
(JNJ: StockChart chart)
(JNJ: Billcara2 chart)
(JNJ: ADVFN Financial Data)
(JNJ: Value Line Report Aug. 31: next one is due Feb. 29)
JP Morgan [GICS 40, Dow 30]
(JPM: Yahoo Finance file)
(JPM: StockChart chart)
(JPM: Billcara2 chart)
(JPM: ADVFN Financial Data)
(JPM: Value Line Report Nov. 23: next one is due Feb. 22)
McDonalds [GICS 30, Dow 30]
(MCD: Yahoo Finance file)
(MCD: StockChart chart)
(MCD: Billcara2 chart)
(MCD: ADVFN Financial Data)
(MCD: Value Line Report Dec. 7: next one is due Mar. 7)
3M Company [GICS 20, Dow 30, Cara US 100 June 25-06]
(MMM: Yahoo Finance file)
(MMM: StockChart chart)
(MMM: Billcara2 chart)
(MMM: ADVFN Financial Data)
(MMM: Value Line Report Nov. 16: next one is due Feb. 15)
Merck [GICS 35, Dow 30]
(MRK: Yahoo Finance file)
(MRK: StockChart chart)
(MRK: Billcara2 chart)
(MRK: ADVFN Financial Data)
(MRK: Value Line Report Oct. 19: next one is due Jan. 18)
Microsoft [GICS 45, Dow 30]
(MSFT: Yahoo Finance file)
(MSFT: StockChart chart)
(MSFT: Billcara2 chart)
(MSFT: ADVFN Financial Data)
(MSFT: Value Line Report Nov. 23: next one is due Feb. 22)
Pfizer [GICS 35, Dow 30]
(PFE: Yahoo Finance file)
(PFE: StockChart chart)
(PFE: Billcara2 chart)
(PFE: ADVFN Financial Data)
(PFE: Value Line Report Oct. 19: next one is due Jan. 18)
Procter & Gamble Co. [GICS 30, Dow 30, Cara 100]
(PG: Yahoo Finance file)
(PG: StockChart chart)
(PG: Billcara2 chart)
(PG: ADVFN Financial Data)
(PG: Value Line Report Jan. 4: next one is due Apr. 4)
United Technologies [GICS 20, Dow 30, Cara 100]
(UTX: Yahoo Finance file)
(UTX: StockChart chart)
(UTX: Billcara2 chart)
(UTX: ADVFN Financial Data)
(UTX: Value Line Report Jan. 25: next one is due Apr. 25)
Verizon [GICS 50, Dow 30]
(VZ: Yahoo Finance file)
(VZ: StockChart chart)
(VZ: Billcara2 chart)
(VZ: ADVFN Financial Data)
(VZ: Value Line Report Dec. 28: next one is due Mar. 28)
Wal-Mart [GICS 30, Dow 30, Cara 100]
(WMT: Yahoo Finance file)
(WMT: StockChart chart)
(WMT: Billcara2 chart)
(WMT: ADVFN Financial Data)
(WMT: Value Line Report Nov 9: next one is due Feb 8)
Wrap up:
A systems maintenance problem cropped up when a new, faster disk drive was installed early Friday morning. The site/blog was shut down for too many hours, for which I apologize. But, there were many Caraistas who stayed connected via Skype. Why not e-mail Raul@BillCara.com to see how to get involved.
Eventually the Skype system for groups will be used to organize our special interest sub-groups, client discussions, a Squawk Box for my prop trading desk, and the like. One of many technology initiatives underway at the moment, we are quite fortunate to have Raul turn this into a leading-edge facility. As long as there is Internet connectivity, we will stay connected.
We are also sharing more here. Thank you. It’s quite inspiring to receive the mail I get. It’s a lot of mail, mind you, but every one of them is welcome.
Ciao.
Posted by Posted by Bill Cara on January 27, 2008 04:52:34 PM | Category: Cara Week in Review