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February 24, 2008
Week in Review #8 (2008-02-24)
Understand this: securities analysts, sales persons, and members of the financial mass media, are not traders. Traders do not dwell on the present; they are looking ahead. What they see today is a horrible liquidity crunch coming the market's way as Humungous Bank & Broker works through its deep problems. The owners of capital should not treat this lightly.
Given that interest rates do not balloon, the sub-prime fiasco at HB&B is mostly under control at this point. There may be, from all accounts, maybe another $100 to $250 billion in write-offs to come, which in the context of global wealth in securities that is capitalized at some $100+ trillion is not a real big deal. But, the next problem is going to be more difficult to resolve.
The Treasury Secretary will find it politically impossible to run up the 1-800-HELP flag for owners of real estate that fall into the alt-A and Prime rate crowd who cannot make their payments because they too speculated on price increases by purchasing with ARM instruments. Moreover, these typically successful business people did not figure on the prospects of economic recession (or worse), and now they already cannot get the rents they need to keep up the debt service.
1-800-HELP for the successful, working, middle-class of America: Think about it.
A number of years ago it happened to a close friend and business associate of mine. Driven in a black stretch limo to and from his work as one of Canada’s most successful ever commodities traders and advisors, this chap decided to diversify his assets into real-estate condominiums that he would rent in a part of downtown Toronto that he conceived would always be 100 pct rentable. Not only did he buy a few of these units, he bought many, and he financed them with short-term mortgages. When interest rates ballooned due to inflation and rental prices dropped in the simultaneous recession, he was cooked. Bankrupt.
A few years earlier I had a young neighbor who also invested in similar fashion in that area of the city. Not having the financial resources, despite his solid job as manager of a farmer’s co-op, he bought only a couple units. The same thing happened to him, except in that chap’s case he decided to leave his young wife and newborn child to fend for themselves. He shot and killed himself.
These are real-life stories of people I know who got sucked in by their greed plus the encouragement of an aggressive sales person and, at the time, a friendly banker.
(WIR #7 Feb. 17) Smart traders are waiting for the massive liquidity crunch that must happen to bring the spending back into line with the savings and income needed to pay for it, with commodity prices under control.I hardly think that the S&P 500 at 1350 or the DJIA at 12348 or Nasdaq Composite at 2322 can stand up to the pressures of “the price of a barrel of crude at $100, $110, $125… or an ounce of platinum at $2100, $2200, $2500…”
Remember, prices are merely bids. The liquidity crunch happens when bids are withdrawn, as we saw starting in 2005 as house prices reached a very high level.
To parody the dim-witted TV advertising that runs day and night for one of Canada’s largest banks, “We are not as rich as we think we are.”
In fact, a lot of us in six months are going to be that much poorer… I wonder if that bank will refrain from margin calls.”
What happened in the market this week was a killing of the short-sellers, those people who rationally took measure of the soaring commodity prices, worsening economy, stagnant corporate profits and softer forward guidance, analyst ratings downgrades, and so forth. The take-out agent was a CNBC “personality” whose timely speculation on another government agency bail-out, this time of the bond insurance industry, was used by (in all likelihood) HB&B prop desk traders to do what they do best, which is to trade prices for profit.
You see, in a famine, which is the case at HB&B today, the equity market is like the Serengeti Plains of Africa. Predators kill anything in sight.
As I see it, there is little difference between the zebra and wildebeest and the market short-sellers, and the Maasai and lion population who, like HB&B traders, need to eat and have the tools to do so.
On Friday this week in the equity market, the Bears were herded and slaughtered. Next week it may be the Bulls. Meanwhile the famine (ie, the liquidity crisis) will worsen. Bids will drop. Hot money will continue to flood into and out of so-called “safe-havens”.
At the end of the day, conditions will change; the predators will be sated – at least those who survive the carnage because they too can and do fall victim to famine.
This week hot money flooded into the metals: platinum (+6.4 pct), palladium (+11.7 pct), copper (+7.5 pct), silver (+5.3 pct) and gold (+4.3 pct). Inflation was the lion. Next week, deflation may be the lion.
It should be occurring to you by now that maybe we could all get our stories straight if certain media networks and personalities were not so close to HB&B.
Why this cabal exists between financial services and media is quite obvious. Both have the same need to push market prices to extremes so they can feed off the emotions of the crowd. Moreover, without the advertising sponsorship from HB&B, the business media – certainly Financial Entertainment TV – would not exist. So these people work hand in glove. It’s one reason why I think that one day the financial TV networks will be regulated.
You see, with more of the last-hour antics as happened on Friday, the public will take their capital and walk. Legislators will be sent by HB&B to pin the tail on the donkey – you see, somebody has to be the scapegoat for the public’s loss of capital. You can be assured that as long as the financial services industry (ie, HB&B) controls our capital markets, the fall guy will not be the bankers.
Time, of course, doesn’t heal all things. Some things, as I have been saying, die. So, it follows that over time there will be an erosion of the power of HB&B. We saw the introduction of discount brokerage, with the elimination of 3-pct in and 3-pct out commission costs, after the 1981-2 Bear market. Then we saw it again after the Black Monday debacle in 1987 when securities regulators caused direct access trading, and penny pricing versus eighths, to be introduced to the Buy-side trader. More recently, following the 2000-2002 Bear, we saw the multi-billion fines of HB&B and the changes required to sell-side analyst ratings methodologies.
I can only imagine that after the trillion dollar class-action lawsuits against HB&B as a consequence of the 2008 Bear market, we’ll see even more progress with regard to a fairer marketplace.
There is a growing sophistication among buy-side traders. As long as we experience stuff happen like what occurred shortly before the close on Friday afternoon, we need to get smarter. The headline may have read: “Ambac Bailout Discussion Scores +225 Dow Point Turnaround,” but inquiring minds will be demanding to know why, who, how…
Some of us have it figured out. It would be nice to think the regulators were there with us, and did something about it. I will end the discussion with one final point: it is not a fair society when a couple thousand of us can move the total capitalization of billions of people by +1.83 pct in 30-minutes of savage trading in New York.
Bears on Friday; Bulls next week. It’s not right such capital slaughtering moves can be orchestrated by rumor and innuendo. This isn’t entertainment; for that we have casinos. The capital market is supposed to be the place where value is priced, and that process has become secondary to the desperate gang in charge.
It’s time to get serious about this. More government investigations and reports as to why liquidity disappeared are superfluous. All of us know the reason. Let’s solve the problem.
Global Economics Review
US Economic Calendar for next week.
It is important to review economics reports published this past week on the US economy that continues to worsen. As I say, the positive news is now infrequent.
(Published in previous WIRs) Whether the case is negative or very slow real economic growth, the fact is that global inflation is now in the 3- and 4-pct range by even the most positively-biased calculations, so investment returns from dividends and short-term debt instruments and money market funds is clearly negative. Moreover, as equity prices are falling, the total returns from most stocks are negative. In summary, wealth is being destroyed by the trillions, month after month. One of the reasons is that the economy is in a downswing.
Along with many weekly reports, the big monthly reports that arrived this week were all negative, as follows. Going forward, I don’t see major changes to the landscape.
US Consumer Price Index for January, which is a key measure of inflation.
US new housing starts for January, the trend of which points to rising or falling demand for furniture, home furnishings and appliances.
Minutes of the previous FOMC meeting.
So much for last week. Let’s look ahead.
US Existing Home Sales for January.
US Producer Price Index for January, which is a forerunner of consumer inflation.
US Consumer Confidence for February by the Conference Board.
US Durable Goods Orders for January.
US New Home Sales for January.
US Personal Income and Spending Data for January.
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 4 GREEN industry (chemicals, energy, mining, and food/beverage) and 2 RED’s (drugs, health services) compared to last week's 3 green and 4 Red.This week’s “market tenor” of 2 net GREEN was a gain of 3 industries vs. last week. Drugs have been RED for 9 of the past 10 weeks!
MACD-H rose on all industries but tobacco, drugs, and health services. Prices over the week rose in 19 industries and fell in 12.
My formula for assessing Cara100's is busted, and there’s no time to fix it. Perhaps Jeff will supply this.
[Jeff: My algorithm has some slight differences from Jock's, but I show I net of 22 green versus 2 net green last week, showing continuing improvement over the last few weeks -- see chart below.]
Ticker Name Score
-5wksScore
-4wksScore
-3wksScore
-2wksScore
-1wksScore
-0wksABB ABB Ltd. -2 -2 -2 -2 -2 +0 ABV COMP DE BEBA AM ADS -2 -2 +0 +2 +2 +2 ABX Barrick Gold Corp. +2 +2 +2 +0 +0 +0 ADBE Adobe Systems Inc. -2 -2 -2 -2 +0 +0 AET Aetna Inc. +0 -2 -2 -2 -2 -2 AMAT Applied Materials Inc. +0 +0 +0 +0 +2 +2 ATVI Activision Inc. +0 +0 +0 +0 +0 +0 BA Boeing Co. -2 -2 +0 +0 +0 +0 BBBY Bed Bath & Beyond Inc. -2 +2 +2 +0 +0 -2 BBD Banco Bradesco S.A. -2 -2 -2 -2 +0 +2 BC Brunswick Corp. -2 +0 +2 +0 +0 -2 BDK Black & Decker Corp. -2 +0 +0 +0 +0 +0 BHP BHP Billiton Ltd. -2 -2 +0 +0 +0 +2 BMY Bristol-Myers Squibb Co. -2 -2 -2 -2 +0 +0 CCJ Cameco Corp. -2 -2 -2 -2 +0 +0 CCL Carnival Corp. -2 +0 +2 -2 +0 +0 CEO CNOOC Ltd. -2 -2 -2 -2 +0 +2 CHA China Telecom Corp. Ltd. +0 -2 -2 -2 +2 +2 CHL China Mobile Limited -2 -2 -2 -2 -2 +0 CHRW CH Robinson Worldwide Inc. -2 -2 +2 +2 +2 +0 COST Costco Wholesale Corp. -2 +0 +2 -2 -2 +2 CSCO Cisco Systems, Inc. -2 -2 -2 -2 +0 +0 CTSH Cognizant Technology Solutions Corp. -2 -2 +0 +0 +2 +2 CVX Chevron Corp. -2 -2 -2 -2 +0 +0 DB Deutsche Bank AG -2 -2 -2 -2 -2 +0 DELL Dell Inc. -2 +0 -2 -2 +0 +0 DEO Diageo plc -2 -2 -2 -2 +2 +0 DIS Walt Disney Co. -2 -2 +0 +2 +2 +2 DOW Dow Chemical Co. -2 -2 +0 +0 +0 +0 DNA Genentech Inc. +0 +0 +0 +0 +2 +2 ECA EnCana Corp. -2 -2 +0 -2 +2 +2 ERJ EMBRAER - Empresa Brasileira de Aeronutica S.A. -2 -2 -2 -2 +2 +2 ERTS Electronic Arts Inc. -2 -2 -2 -2 +0 +0 EXC Exelon Corp. +0 -2 -2 -2 +0 +2 GE General Electric Co. -2 -2 +0 -2 +0 +0 GFI Gold Fields Ltd. +2 +2 -2 -2 -2 +0 GG Goldcorp Inc. +0 +2 +0 +0 +0 +2 GGB Gerdau S.A. -2 -2 -2 -2 +2 +2 GOL GOL Linhas Areas Inteligentes S.A. -2 -2 -2 -2 +0 -2 GOOG Google Inc. -2 -2 -2 -2 -2 -2 GRMN Garmin Ltd. -2 -2 +0 +0 +0 +0 GS Goldman Sachs Group Inc. -2 -2 +0 -2 -2 -2 GSK Glaxosmithkline plc -2 -2 -2 -2 -2 +0 HBC HSBC HLDGS PLC ADS -2 +0 -2 -2 +0 +0 HDB HDFC Bank Ltd. +0 -2 -2 -2 -2 -2 IBKR Interactive Brokers Group, Inc. IBN ICICI Bank Ltd. +2 -2 +0 -2 -2 -2 IMO Imperial Oil Ltd. -2 -2 -2 -2 +2 +2 INFY Infosys Technologies Ltd. -2 -2 +0 +0 +0 +0 INTC Intel Corp. -2 -2 -2 -2 +0 +0 JCP J. C. Penney Company, Inc +0 +0 +2 +2 +0 +2 JNJ Johnson & Johnson +2 -2 -2 -2 -2 +0 KB Kookmin Bank -2 +0 +0 -2 -2 +0 KO Coca-Cola Co. +0 -2 -2 -2 -2 -2 KSS Kohl's Corp. -2 +0 +0 +0 +0 +0 LEH Lehman Brothers Holdings Inc. -2 +0 +2 -2 -2 -2 LLTC Linear Technology Corp. -2 -2 -2 -2 +0 +0 MBT Mobile Telesystems OJSC -2 -2 -2 -2 -2 +0 MFC Manulife Financial Corporation -2 -2 +0 -2 +0 +0 MICC Millicom International Cellular SA -2 -2 +0 -2 +2 +2 NKE Nike Inc. -2 -2 +0 +0 +2 +0 NOK Nokia Corp. -2 +0 +2 -2 +0 +2 NTES Netease.com Inc. -2 -2 -2 -2 -2 +2 NUE Nucor Corp. -2 +2 +2 +2 +2 +2 ORCL Oracle Corp. +0 -2 -2 -2 -2 -2 OXPS optionsXpress Holdings, Inc. +0 -2 -2 -2 -2 -2 PAYX Paychex Inc. -2 -2 +0 +0 +0 +0 PBR PETROLEO BRASILEIRO -2 +0 +0 +0 +2 +2 PDA Perdigao S.A. -2 -2 -2 +0 +2 +2 PG Procter & Gamble Co. -2 -2 -2 -2 +0 +0 PTR PetroChina Co. Ltd. -2 -2 -2 -2 +0 +0 QCOM QUALCOMM Inc. +2 +2 +2 +2 +2 +2 RIO COMPANHIA VALE ADS -2 -2 +0 +0 +2 +2 RIMM Research In Motion Ltd. -2 -2 -2 -2 +0 +2 RY Royal Bank of Canada -2 +0 +0 +2 +0 +0 SBUX Starbucks Corp. +0 +0 +0 +0 +0 +0 SLW Silver Wheaton Corp. +0 +0 -2 -2 -2 +2 SNDK SanDisk Corp. -2 -2 +0 +0 +0 +0 STO StatoilHydro ASA -2 -2 -2 -2 +0 +2 SU Suncor Energy Inc. -2 -2 -2 -2 +0 +0 SWK Stanley Works +0 +0 +2 +0 +2 +2 TCK Teck Cominco Ltd. -2 -2 +0 +0 +0 +2 TEF Telefonica SA -2 -2 -2 -2 -2 -2 TGP Teekay LNG Partners LP. +2 -2 -2 +2 +2 +2 TGT Target Corp. +0 +0 +2 +0 +0 +0 TM Toyota Motor Corp. -2 -2 +2 +2 +2 +2 TOT Total SA -2 -2 -2 -2 -2 +0 TS Tenaris SA -2 -2 +0 -2 +0 +0 TT Trane Inc +0 +0 +0 +0 +0 +0 UBS UBS AG -2 +0 -2 -2 -2 -2 UTX United Technologies Corp. -2 -2 +0 -2 +0 +0 VCP Votorantim Celulose e Papel S.A. -2 -2 +2 +0 +2 +2 VIP Vimpel-Communications -2 -2 -2 -2 +0 +2 WAG Walgreen Co. -2 +0 +0 +0 +0 +2 WBK Westpac Banking Corp. -2 -2 +0 -2 -2 -2 WFMI Whole Foods Market Inc. -2 +0 +0 +0 +2 -2 WHR Whirlpool Corp. -2 +0 +2 +2 +2 +2 WMT Wal-Mart Stores Inc. +0 +2 +2 +0 +0 +0 XOM Exxon Mobil Corp. -2 -2 -2 -2 +0 +2 YHOO Yahoo! Inc. -2 -2 -2 +2 +2 +2 Summary: (+2/-2/other) 6/75/18 7/67/25 17/47/35 11/58/30 26/24/49 38/16/45 Net: (+2)-(-2) -69 -60 -30 -47 +2 +22 All the major US stock indices stayed NEUTRAL. The Bombay and Shanghai composites were RED. The US$ index slid from neutral to RED, while the CRB index stayed GREEN.
In fact, CRB index leapt 3.72% to an all-time high for my chart (my data goes back to 1992).
GOLD stocks stayed neutral, while SILVER stocks moved from RED to GREEN.
BOTTOM LINE: The “ market tenor” crossed into positive territory - the 2nd week of advance, +3 vrs. +16 last week.
Silver flipped from RED to GREEN, while GOLD stocks stayed neutral. Some believe that when silver advances vrs. Gold, speculative money is flowing into the market. (This is because central banks don’t hold silver, and therefore can’t act to dampen the price as they can with gold.)
1 week’s change in precious metals doesn’t tell much, but does bear watching.
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 stockcharts.com chart
This week, for the Dow 30 stocks: 14 were up, 1 flat and 15 down. The DJIA moved from 12348 to 12381, but +225 points were accomplished in the last hour of the week.
This week the biggest winners in the Dow 30 included some banks and companies that have a huge financial component, and were the biggest losers a week ago: AIG (+7.4 pct W/W after being down -11.9 pct the previous week) and JPM (+3.1 pct W/W after being down -5.54 pct the previous week). So, I believe it was a short-covering rally late Friday.
Also HPQ moved to a gain of +7.6 pct and AA was up +3.4 pct. Big Oil (CVX and XOM) was also strong.
The biggest losers were the Telco’s T (-7.6 pct W/W) and VZ (-4.8 pct) as well as GM (-6.7 pct). INTC dropped -3.0 pct.
NASDAQ Composite ino.com chart
NASDAQ Composite stockcharts.com chart
The Nasdaq Composite dropped from 2321.8 to 2303.4. So, the last hour rally didn’t put tech above the previous water mark. In fact, Technology (XLK), which has started the previous week on a very strong note, but cooled out that Thursday and Friday, which sent the broad market into a week ending funk, was flat through Thursday of this week. Then XLK boomed in the final hour and closed Friday up +2.18 pct, which incidentally is exactly the gain on the full week.
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
A week ago, I added charts for the S&P 500 ETF (SPY) as well as inserting SPY into the expanded sector performance tables so that you can see how each sector is doing relative to the industry benchmark.
This week SPY futures gained +0.38 pct on the week (+0.62 pct on Friday !!) to close at 135.62. The S&P 500 closed at 1353.11, up from 1349.99 (up +0.23 pct). So the SPY was used as an instrument to pump the market on Friday.
Here’s the SPY Monthly, Weekly and Daily data charts:
SPY Monthly data:
SPY Weekly data:
SPY Daily data:
The tables I now show are for eleven GICS Sector Index Funds (ETF’s), including two for Technology (XLK and SMH), for a total of ten GICS sectors. They cover the full spectrum of the US equity market.
In this space a week ago, in discussing liquidity, I commented,
“… stagflation in the 1970’s took equities through a grinding 1973-74 bearish period and another milder one in 1978. At the end of the decade, however, the liquidity that had to be pumped into the system (similar to today) pushed inflation higher and interest rates soaring.But in today’s reality, soaring rates in the next two years would cause a run on mortgage foreclosures, evictions, property tear-downs and financial service company failures. So, the interventionists are likely to stay the course with more Northern Rock-type deals to come.
That is not the picture of a capital market ready to snap back to health. Good health will return as and when the dubious assets on the books of banks and investors have been written off to their realistic economic value. The prospects of that, as I say, will take time.
This week, the Bulls rallied on the innuendo that government would save the bond insurers like Ambec. It’s not up to government to save the capital market. Clearly the people crying on the shoulders of government today are the ones who run the capital markets, and who call it a free capital market with a level playing field. They demand hands-off when their stocks are in high gear and their year-end bonus payouts supreme, but now that they are facing the music to the script they wrote, they want the right to obligate the public to pay for their mistakes.
This is the act of simultaneous sucking and blowing. We know lawyers do it; but now the bankers want in the deal. After all, the public has to pay.
It’s not right, and we all know it.
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. SPY XLE XLB XLI XLY XLP IYH XLF XLK 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
A week ago I wrote, “One quick look at the Daily RSI-7 of even the strongest sectors (the inflation-beneficiaries Energy and Basic Materials) shows that values could not cross back above the 70 line, despite trends (MACD) that are still rising. The weakest sectors (Financials in particular) failed to reach the 50-line during the recent rally. There is nothing in the technical indicators of these charts, across all sectors that show a recovering Bull. Let’s be honest: the Bull is dead. Goldilocks is dead.”
There are almost seven billion people living on this planet. So how is that capital market prices can be jerked around on rumor and innuendo from an individual TV “personality” to skyrocket +1.83 pct, some $2 trillion, in 30 minutes?
Same old, same old, nonsense.
Do I think the equity market turned bullish at 3:00pm ET Friday in New York? Could have happened, I suppose; but I wouldn’t hold my breath waiting for that outcome.
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), liked what it saw on the newswires before the market open on Friday. An invading Turkish military moved into Northern Iraq and killed some Kurdish people it says have been stirring up problems in the region. That’s not to say that this long-running feud has any right or wrong sides, but merely to point out that oil futures were down a bit at the moment the news came to traders who then jumped on the bid, sending Crude Oil higher by $1.
XLE traders liked the move and pumped the price up +1.13 pct on the day and +3.00 pct W/W, to move this sector ETF into first place performance wise.
How much buzz was made in the media this week when Venezuela’s Pres. Chavez made good on his promise to pay for confiscated assets? Compare that to the howl over PR put out by ExxonMobil the week before.
If there is one sector that is moved by constant PR and media communications – paid for by the biggest lobby in Washington and New York – it’s the Energy sector.
But the dollars invested are so big, it’s a fact that Big Oil is like a tanker ship in the bath tub. If little Johnny can plug his ears from all the nonsense and disinformation that pollutes our airwaves from Big Oil, his trading ought to whip the market. You see, for conservative traders, it’s relatively easy to spot the capital flowing into and out of this sector.
In other words, when Big Oil (XOM and CVX), capitalized at a combined $635 billion, moves up an average of +2.5 pct, as it did this week, even Johnny might be able to spot the $16 billion move.
The $USD dropped -0.68 pct this week, which doesn’t justify Crude Oil lifting by +2.74 pct, and with the economy worsening, traders should be questioning why XLE jumped +3.00 pct W/W. Nevertheless, the trend and cycle indicators still look positive for the near-term, so maybe there is more news to come from Iraq, Nigeria, Iran, Venezuela, and so forth. I’m sure the scribes working at and for Big Oil will be sure to tell us when they want to.
The 200-day Moving Average of $WTIC is up to 81.69, up from 80.79, 80.07, 79.46, 78.81, and 78.30 over the past five weeks. The 50-day MA is now up to 93.15, from 92.20, and 91.74, after being at 92.55, 92.69 and 93.21 the previous weeks. So, short-term and long-term the price of Crude is rising. Inflation is rising. If interest rates don’t start rising, the $USD will continue to fall; and the Crude Oil contracts will continue to rise. But, will the share price components of XLE, moving like the tanker ship they are, do the same?
A week ago, I pointed to the reality: “Here now is the next big issue for traders to dwell on in the Energy sector. … Big Oil is not replacing reserves as quickly as being used for production. These companies have been spending the capital instead to buy back shares and boost dividends. Everybody wants to get “theirs” today. Not enough planning is being done for tomorrow… (Dow Jones quote)--Citing the loss of Venezuelan oil reserves, Exxon Mobil Corp. (XOM) Friday became the latest oil major to fall short of 100% reserve replacement in 2007, posting a 76% reserve replacement for the year… Exxon's disclosure Friday marks the latest weak reserves replacement figure for oil majors. Chevron Corp.'s (CVX) executive warned analysts on Feb. 1 that the company replaced just 10-15% of its reserves in 2007. Royal Dutch Shell (RDSA) also has hinted at bad results, raising suggestions that reserves replacement will come in well below 100%... ”
Traders beware of Big Oil that is becoming Big Accounting Legend. You are not getting purely a return on capital; it’s partly a return of capital.
As I wrote,
”I have really had it with this nonsense from commodity-price sensitive companies trying to dupe the public that their shares are attractive on the basis of improved operations and finances. It’s mostly a bad joke. What these companies have going for them is government that continues to spend but not tax, which means they print money, and, with abnormally low interest rates, the resultant increase in commodity prices makes them look “richer than they really are”. (LOL Scotiabank). It also helps to spend the shareholders’ capital by needless share buybacks (instead of increasing reserves and other important metrics in a meaningful way) and paying incredible premiums to market in buying control of competitors, thereby building in oligopoly-based price controls.
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:
Basic Materials (XLB +1.90 pct W/W) was aided by the boost of +0.90 pct on Friday, despite a USD that hardly moved on Friday.
A week ago I pointed out, once again, the parabola that defines the metals and precious metals charts. That’s another way of saying INFLATION. HIGHER RATES OR MASSIVE RECESSION TO COME!! TAKE YOUR PICK.
Either that or more restrictions on commodity trading of the kind that Japan initiated this week.
Since I’m saying it, I get to use block letters if, as and when I deem it important.
The movers this week were: Mittal Steel (MT +11.3 pct), CVRD (RIO +10.6 pct) and Tenaris (TS +9.4 pct), all tied into steel and iron ore. These are big moves, but the biggest moves were in the goldminers: Harmony (HMY +21.9 pct), Lihir (LIHR +14.3 pct), Yamana Gold (AUY +12.5 pct), Gold Fields (+12.4 pct) and Goldcorp (GG/G +11.8 pct).
The Harmony people must have discovered that AussieOnTop is returning to Perth (LOL), following his departure as mine manager for the big Goldcorp mine in Northern Ontario. Good on ya, mate. The Caraistas are anxiously awaiting your arrival at PDAC.
Speaking of (Cara 100) Goldcorp, there has been a concerted effort by this company to build resources, raise capital, and cut operating costs. They have a good operator.
Now let’s see if they buy Geologix (GIX.V) and Crystallex (KRY).
If there are late-planning Caraistas who will be attending PDAC any day from March 2 to 5, and want to participate in the Team Cara study that Jock is managing, please contact him at Jock [at] billcara.com.
You know, Jock was down in Venezuela this week. It’s his old stomping ground when he headed up biz development in the Central and South Americas and Caribbean for AT&T. He likes to say he’s perhaps the only person alive to invite the world’s richest man to lunch (Mexico’s Carlos Slim) and end up paying the tab.
Life does have its twists and turns.
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) lost -0.24 pct W/W after gaining +0.35 pct on Friday, closing at 36.91.
After a couple weeks of losing -3.6 pct and -9.8 pct, ABB gained +3.9 pct this week. Probably short-covering.
A week ago, the aircraft manufacturers had a good one with BA +6.9 pct and ERJ +5.4 pct both taking off. This week the market grounded them again: BA -2.6 pct and those jet engines of GE -2.4 pct.
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) was flat (-0.03 pct W/W) after getting bumped up +1.06 pct on Friday, to 32.05.
Sure, JC Penny had a boost (+6.6.3 pct) because it’s a fixture with Wall Street, but most of the consumer discretionary stocks I monitor went down: GOL -8.6 pct; BC -5.0 pct; BBBY -3.3 pct and NKE -2.7 pct.
Higher Crude Oil prices have moved to higher prices at the fuel pump, which is going to hurt the retailers.
I read this week that the price today (for 1994 value) of an North American manufactured car is a steal. The problem is that a car is transport and to transport the driver and passengers from point A to B is what the owner factors into purchase decisions. At the end of the month, the higher price of fuel from 1994 until today is laughable it’s so ugly. Even a year ago last month, the Crude Oil price hit $51 and it’s now touching $100. Then there are government duties and taxes built into the pump price.
So, as usual, it’s not one cost that matters; it’s all the costs.
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) is a matter of you need it, they got it. Yes, they thought you needed it and they stocked their shelves, but now the inventory is growing because, not being the government, you can’t pay for it. When you write a bad check, you get to go straight to jail. When govt writes such a check, they have your children and their children to pay for it.” Same old. Same old.
XLP managed another slight gain this week (+0.99 pct), including a gain on Friday of +0.73 pct.
The gains of a week ago in WFMI didn’t stay whole this week as the stock plunged -10.0 pct. DEO lost -2.9 pct.
The winners were PDA (+6.7 pct) and ABV (+6.6 pct), which means that consumers in Brazil were sated.
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 -0.77 pct this week, just like last, to close at 65.94.
DNA, which had lifted +3.2 pct the previous week, and enjoyed over-the-top Talking Head support this week, lost -0.7 pct.
NVO (+5.2 pct) was the big winner.
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) finally stopped getting creamed. After being flat all week, probably awaiting the CNBC bombshell late Friday, XLF popped +2.18 pct on the day and (surprise) +2.18 pct on the week.
XLF had plunged -8.25 pct two weeks ago, and a further -3.76 pct last week.
Ambec to get help from NY State?
Brother can you spare a dime?
Merrill Lynch (MER) had a good week on Friday. Yes, the gain on Friday (+4.22 pct) made the gain (+4.45 pct) on the week.
Morgan Stanley (MS +3.68 pct W/W and +2.36 pct Friday) and JP Morgan Chase (JPM +3.10 pct W/W and +2.00 pct Friday) also got a leg up on Friday from NY State.
Credit Suisse (-4.6 pct) and IBN (-7.4 pct) did not. I guess it’s better in America… I love NY… and all.
The problem for the banks today is looking forward to see their higher quality customers reeling. House prices are falling, which means that if appraisals are done the banks don’t have full asset backing. That makes the Alt-A and Prime rated credits somewhat dubious.
Moreover the credit card debt of clients is going to become problematic in a recession where employees are laid off and where bankers have to tighten up on lending practices. Their special loan departments are expected to be quite active later this year.
Also, every time there is a change in management, the new people want to write off anything with a possible taint to it so as to not be unfairly criticized in future. In these cases, guidance should not be full of positive surprises.
There is a lot more downside to the Financials, but frankly I think it will be in the consumer and tech sectors where the biggest losses will occur. And, remember my earlier words: after oil and then gold swoons, the obese lady makes another entrance onto the stage. This will be a difficult market to trade on the long side. The gains will be sharp and over suddenly, mostly due to short squeezes. Over the longer term, prices across the board are still likely headed south. It may just take the Bear a while to reach its final destination.
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:
It’s time to start looking closer at the broad Technology sector (XLK), in addition to just the leading Semi-conductors (SMH). So last week I added charts expanded performance tables to include XLK.
Here’s the XLK Monthly, Weekly and Daily data charts:
XLK Monthly data:
XLK Weekly data:
XLK 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 |
A week ago, SMH gained +3.3 pct W/W but also dropped -2.3 pct on Friday. This week, SMH dropped a further -0.52 pct.
INTC, which dropped -3.5 pct on the previous Friday, dropped -3.0 pct this week.
The Tech stock moon-shot this week was RIMM (+13.0 pct W/W). The BB Wave seems to be adding a small city of subscribers every month.
QCOM was up +6.6.3 pct while AAPL dropped -6.3 pct this week.
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:
The Telco saga continues. Three weeks ago, T jumped +8.6 pct. I said “I didn’t think Ma could jump that high. Must have had a McDonald’s coffee spilled in her lap in the drive-thru. I see that MCD was only up +0.22 pct over the whole five days.”
I nailed it because two weeks ago I wrote, “MCD was one of only two winners in the Dow 30 (+2.62 pct) while IYZ played limbo, going down -6.14 pct. Short squeeze pain is over. Ma is back to her normal self. Please, there is no way AT&T could be up +8.6 pct in a week, unless, somehow, Houston discovered a lively Alexander Graham Bell sitting in the space station. In other words, it doesn’t happen without games being played.”
A week ago, T lifted +2.3 pct, despite being down -2.2 pct on Friday, and this week there were more humungous losses at T (-7.56 pct W/W, which puts the loss at about -10.0 pct since a week ago Friday.
So the question is, who got duped into buying into the T surge three weeks ago? I hope you got out with your skin intact.
VZ was down -2.2 pct a week ago Friday. This week VZ dropped -4.79 pct. These are big capital losses to those traders who wanted big dividends. Total Return is the name of the game. Buy low; sell high.
This week T was 30th worst performer of the Dow 30 and VZ the 28th worst. Ouch.
Telecom (IYZ) suffered a loss W/W of -5.69 pct to 24.04. Within the past 60 days, IYZ was a high of 30.60. That -20 pct lost in two months was not helped by being a relatively conservative sector fund.
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) lost -0.20 pct W/W to 39.42, despite gaining +1.55 pct on Friday.
Bonds & Yields Review
Table 10: US Treasury Yields
| Maturity | Yield | Yesterday | Last Week | Last Month |
|---|---|---|---|---|
| 3 Month | 2.12 | 2.11 | 2.09 | 2.11 |
| 6 Month | 2.06 | 2.02 | 2.00 | 2.23 |
| 2 Year | 2.02 | 1.96 | 1.87 | 2.14 |
| 3 Year | 2.01 | 2.00 | 1.93 | 2.08 |
| 5 Year | 2.83 | 2.79 | 2.75 | 2.74 |
| 10 Year | 3.80 | 3.77 | 3.77 | 3.60 |
| 30 Year | 4.57 | 4.54 | 4.58 | 4.31 |
| Maturity | Yield | Yesterday | Last Week | Last Month |
|---|---|---|---|---|
| 2yr AA | 2.48 | 2.43 | 2.30 | 2.24 |
| 2yr AAA | 2.43 | 2.39 | 2.31 | 2.29 |
| 2yr A | 2.63 | 2.56 | 2.36 | 2.41 |
| 5yr AAA | 2.89 | 2.85 | 2.87 | 2.72 |
| 5yr AA | 2.93 | 2.88 | 2.82 | 2.66 |
| 5yr A | 3.07 | 3.04 | 2.92 | 3.00 |
| 10yr AAA | 3.65 | 3.58 | 3.48 | 3.30 |
| 10yr AA | 3.53 | 3.50 | 3.64 | 3.24 |
| 10yr A | 3.80 | 3.75 | 3.92 | 3.53 |
| 20yr AAA | 4.42 | 4.42 | 4.40 | 4.09 |
| 20yr AA | 4.74 | 4.74 | 4.43 | 4.23 |
| 20yr A | 4.91 | 4.90 | 4.86 | 4.04 |
| Maturity | Yield | Yesterday | Last Week | Last Month |
|---|---|---|---|---|
| 2yr AA | 3.42 | 3.35 | 3.38 | 3.49 |
| 2yr A | 3.46 | 3.37 | 3.29 | 3.58 |
| 5yr AAA | 3.95 | 3.91 | 4.05 | 3.87 |
| 5yr AA | 4.29 | 4.22 | 4.07 | 4.21 |
| 5yr A | 4.48 | 4.56 | 4.29 | 4.22 |
| 10yr AAA | 5.29 | 5.23 | 5.25 | 4.75 |
| 10yr AA | 5.45 | 5.40 | 5.35 | 5.24 |
| 10yr A | 5.75 | 5.86 | 5.57 | 5.44 |
| 20yr AAA | 5.76 | 5.73 | 5.66 | 5.28 |
| 20yr AA | 6.37 | 6.31 | 6.19 | 5.67 |
| 20yr A | 6.34 | 6.31 | 6.24 | 6.02 |
The fixed income market saw a little buying in the long-end, and some selling of the short-end this week.
Yields on the 30-year dropped -1 bp to 4.57 pct , while the yield on the 10-year, 5-year and 2-year US Treasuries lifted by +3, +8, and +15 basis points to 3.80 pct, +2.83 pct and +2.02 pct respectively.
The yield on the 3-month T-Bill lifted +3bp to 2.12 pct. As the short-term yields are under the inflation rate, wealth is being lost in holding these risk-free liquid holdings. By withholding that capital from the market, traders are contributing to the liquidity crunch.
But why put money to work if it’s going to work against you. It seems that HB&B prop desks are waiting to hit every bid.
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.
Countrywide, Fannie and Freddie moved in different directions again this week, and I suppose politics played a role.
A week ago, CFC gained +1.17 pct W/W, but FNM (-6.27 pct) and FRE (-8.89 pct) were serious losers. That Friday all of them dropped: -2.26 pct, -3.59 pct and -2.95 pct respectively.
This week, the results were +0.43 pct for CFC (thanks to a gain on Friday of +1.91 pct), -5.34 pct for FNM and -5.94 pct for FRE.
Over 52-weeks, the loss of wealth in the biggest three mortgage lenders is -82.7 pct, -52.3 pct and -59.5 pct. That’s an ugly picture.
The suspect ARM roll-overs will continue to happen this year and next. The losses will continue unabated. The problem is not just sub-prime but Alt-A and Prime. The slowing economy is not helping.
All of these assets were syndicated so the so-called better quality packages will now come under closer review.
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 |
Consumer Finance -USA -- Interactive Weekly Data Charts
Consumer Finance -USA -- Interactive Daily Data Charts
Commodities Review
The $CRB lifted sharply +14.45 this week (+3.76 pct) from 384.23 to 398.68. Three weeks ago, $CRB had been 364.34. This is mostly energy and (now) metals related, but prices are bursting out all over.
You know it is close to the end however, when cab drivers would rather talk about pork bellies than paying passengers.
$CRB Index
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) moved a further +2.62/bbl (+2.74 pct) to 98.07. The price had been 88.96 three week’s ago.
How quickly we forget. How many remember $51/bbl in January 2007?
The 50d MA for $WTIC is now at 93.15, up from 92.20 and 91.74, but down from 92.55, 92.69, and 93.21 the previous three weeks, whereas the 200d MA is 81.69, up from 80.79, 80.07, 79.46, 78.81, and 78.30 the previous five weeks.
A week ago I opined: “I am not convinced the market will take the Crude Oil price back to $100. Economic data in oil-consuming Japan, Europe and the US is growing softer by the week.” Now I can say that speculators, and perhaps geo-political events, are pushing up the price faster.
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
A week ago, the $GOLD contract dropped -16.20 (-1.76 pct W/W) to close at 906.10. However, this week, $GOLD went up on a rocket, +38.50 (+4.25 pct) to 944.60.
The 50-day MA for $GOLD is now 881.22, up from 868.70, 857.42, 847.93, 834.69, and 829.09 over five weeks, and the 200d MA is 756.37, up from 750.20, 744.36, 738.94, 733.05, and 728.68, over that span.
A week ago I wrote: “The precious metals jury seems to be out as platinum and maybe palladium are locked in parabolic moves higher. Can gold and silver do the same? Of course. But, this is a day-to-day market, but there are major speculators involved at this time.”
Gold and palladium came off a bit on Friday, but traders, for sure, are witness to the meaning of parabola as it applies to securities price series data.
How long this move persists is anybody’s guess. It’s day to day, not week to week or month to month.
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 +0.91 (+5.29 pct) from 17.12 to 18.02. Three weeks ago, $SILVER closed at 16.87.
For $SILVER, the 50d MA is now 16.05, up from 15.46, 15.25, 15.02, and 14.95 over four weeks, and the 200d MA is 14.05, up from 13.85, 13.78, 13.71, and 13.66 over the previous five weeks.
Clearly, at the G-7 meeting of finance ministers and central bankers 15 days ago, the decision was made to let precious metals run.
I was wrong in my assessment because, at the time, I opined, “I think that Gold & Silver will likely move in the direction that the G-7 authorities would like, which is down in price. They stated that it would be ok for the IMF to sell its gold starting April. IMF conveniently doesn’t have a currency, so I guess they will sell it in Euros, to help the $USD and the interests of the ECB, which doesn’t want to lower rates, but needs a lower Euro exchange rate with the USD as the ECB opined at Tokyo. To me, I see this statement that precious metals are headed south, and the rally on Friday was a good move by bankers and insiders to squeeze the shorts and sell into higher prices.”
Last week I added, “If it weren’t for plat and pall, I’d be more comfortable in my assessment that gold and silver will pull back in the short-run (before later this year having a huge move upward).” Now all the precious metals are on the run, and so is copper, despite the economy in a sharp slowdown.
In the short-run there is a battle between speculators and HB&B as to where the prices are going to be. Longer-term of course, government spending and wealth development in the private sector are more important factors.
Interactive Chart of Weekly Silver EOD Continuous Contract Index:
Interactive Chart of Daily Silver EOD Continuous Contract Index:
Interactive chart of the Silver Bullion index.
Two weeks ago I wrote, “$PLAT went parabolic, which means the end is near. But I wonder how many hedge funds get taken down in the short squeeze? Seriously.This week, $PLAT soared another $110/oz or +6.30 pct to 1868.20. On Friday alone the price jumped +27.10 (+1.47 pct). There is an obese woman edging closer to the stage. I can hear her practicing off-stage.”
A week ago, I added, “I can still hear her, but she hasn’t made her entry. The shorts must be coming apart. This week, $PLATINUM gained +184.90/oz (+9.90 pct) to 2053.10. The spot price closed the week at 2078. Today (Monday), the price is well above 2100. The metal men of Zug must be making a fortune. How many hedge funds are going to be finished when all is said and done?”
Through Thursday this week $PLAT jumped +130.60/oz (+6.36 pt W/W) to 2183.70. Is the end near, I asked? The RSI-7 was almost 100. Then Friday, $PLAT dropped -22.30/oz (1.02 pct) to 2161.40.
The 50d MA for $PLAT is 1680.45, up from 1625.64, 1573.96, 1539.30, 1505.71, and 1487.62 over five weeks. The 200d MA is 1431.07, up from 1414.43, 1397.68, 1385.29, 1372.28, and 1359.50 over that span.
A week ago, I added, “When markets run to extremes like this, traders put on straddles. After they leg out, they double up on the opposite side. That may happen soon because the Weekly RSI-7 for the Platinum futures is 96.96. For momentum traders, that’s a danger zone.” Well at the close on Thursday, the platinum market went beyond extreme. On Friday, the metal prices started to cool.
That might not be the end of the Bull run, but traders have to use extra caution when watching RSI and Stochastics indicators red-lining these charts.
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.
THE $PALLADIUM PRICE DATA MAY BE INCORRECT AS WELL, SO I WILL NOT COMMENT OTHER THAN TO READ THE CHART AT STOCKCHARTS.COM
This week, $PALL soared jumped +14.22 pct. The price is now 520.05.
I don’t see evidence this move is based on economic fundamentals. So, I have to think it’s another short squeeze, perhaps, like platinum, based on supply withdrawals in South Africa. In any events these markets for pall and plat are now too unreliable for Mom & Pop to trade.
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 was moved up +7.50 pct from 353.90 to 380.45. There was a small loss on Friday.
I will not comment further because I don’t trust the market or the data.
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) gained +12.62 (+7.12 pct) to 189.94. The price had moved down from 193.55 to 184.61 to 181.25 to 177.32 over a few weeks, and is now back pushing the record level.
The Weekly RSI-7 is just at 61, and the Daily at 67, so there could be room to run higher. Then again, if the RSI-7 on the Daily and Weekly turn south early before getting into extreme over-bought conditions, that would be an indication of serious downside action likely to come.
The 50d MA for $XAU is 179.59, up from 178.40, 177.75, 177.18, and 175.69 over four weeks, and the 200d MA is 161.11, up from 160.17, 159.17, 158.31, 157.28, and 156.51 over that span.
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 North American currencies lost out this week to those of Europe and Asia-Pacific regions. If anything, the charts indicate more to come next week, which should give one more boost to commodity prices.
Here is the chart of the week’s trading.
This week the $USD dropped from 76.04 to 75.52. The loss on Friday was -0.17 pct.
Three weeks ago I wrote, “At some point, I am expecting to see a rally in the $USD – right around the time that HB&B cleans the Street of the small speculators in precious metals.”
Last week I added, “The short squeeze that is on now with some of the metals and precious metals, is likely the Bull Trap that is used to hammer these speculators in the precious metals. But the door hasn’t closed yet.”
The charts indicate that possibly there is more $USD weakness to come, but frankly if it drops much lower, the technical support will fail and a whole new trading range in the 73-74 range could develop. Should that occur, I believe Crude Oil would move to the $110 level and gold to over $1,000.
If you are trading this market and not watching it every few minutes, then you are doing a disservice to your capital.
Interactive Chart of Weekly U.S. Dollar Index:
Interactive Chart of Daily U.S. U.S. Dollar Index:
The Euro ($XEU) surged again this week from 146.68 to 148.22. The ECB would like to see it lower, which could mean they drop rates soon, but so far they haven’t.
Interactive Chart of Weekly Euro Dollar Index, priced in USD:
Interactive Chart of Daily Euro Dollar Index, priced in USD:
The Pound rallied again to 196.76, up from 194.63 two weeks ago and from 195.85 last week.
Weekly British Pound Index:
Daily British Pound Index:
Weekly Japanese Yen Index:
The Japanese Yen ($XJY) surged from 92.90 to 93.57, putting the USD on the ropes.
“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…
Daily Japanese Yen Index:
Despite higher oil and metals prices, the Loonie (Cdn Dollar) dropped again to 98.77 from 99.33.
A week ago I opined, “Although the Loonie is strengthened by higher oil and metals prices, I feel it is likely to stay in a trading range just below par with the $USD.” No change there.
Weekly Canadian Dollar Index:
Daily Canadian Dollar Index:
International Equity Markets Review
The Toronto Exchange moved from 13226.76 to 13583.90, largely on the strength of the strong move in commodities.
The FTSE (5888.5 from 5787.6), DAX (6806.3 from 6832.4) and CAC (4824.6 from 4771.8) were mixed.
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.
I made some additions to the country-based ETF tables this week, and I intend to focus more on that in 2008.
I will also set up tables and track the domestic market prices.
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
The DJIA, S&P 500 and Nasdaq Composite regained a little ground this week, but I see nothing happening to inspire the Bulls. I think the market is biding time until the next decline.
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 four financial stocks plus Bank Softie, which could be the biggest cash pig of them all.
It was a big week for VL reports. Unfortunately I don’t have time to review them all.
American International Group [GICS 40, Dow 30]
(AIG: Value Line Report Nov. 23: next one is due Feb. 22)
American Express [GICS 40, Dow 30]
(AXP: Value Line Report Nov. 23: next one is due Feb. 22)
Citigroup [GICS 40, Dow 30]
(C: Value Line Report Nov. 23: next one is due Feb. 22)
JP Morgan [GICS 40, Dow 30]
(JPM: Value Line Report Nov. 23: next one is due Feb. 22)
Microsoft [GICS 45, Dow 30]
(MSFT: Value Line Report Nov. 23: next one is due Feb. 22)
With AIG, traders are seeing prices not often seen since 1998. The liquidity squeeze that is bound to carry on for many months makes this stock a speculation. One serious problem faces is in the area of credit derivative swaps.
With American Express, the $64 million question (hey with inflation you can add three zeros) is how big will be their reserves for credit losses.
At Citigroup, the situation is succinctly wrapped up in a single paragraph by VL analyst, Douglas Maurer:
Citigroup reported a fourth-quarter loss of $1.99 per share. Results were impacted by $18.1 billion in write-downs related to sub-prime mortgage exposures, as well as a $4.1 billion increase in estimated U.S. consumer loan losses. Too, management has taken $49 billion of off-balance sheet SIV (structured investment vehicle) assets onto the balance sheet to protect them from possible rating down-grades, reduced the quarterly dividend from 54 cents to 32 cents, and announced plans to cut about 4,200 jobs.
With JP Morgan Chase, the VL analyst Theresa Brophy seems not too interested in near-term prospects.
With Microsoft, it’s a case of will they or won’t they go through a drawn out battle to acquire Yahoo! Without it, Microsoft cash flow and earnings growth are expected to continue to do well.
I’d buy this one on weakness. It’s actually a well balanced company with a powerful financial strength, impressive returns on equity, terrific margins, and very high growth rates for revenue, cash flow, earnings and dividends.
Microsoft, in fact, would be the only one of these five Dow 30 companies that I would consider for a Cara 100 slot.
The Dow 30 Company links in chronological order of next reports
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)
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)
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)
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)
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)
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)
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)
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)
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)
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)
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)
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)
Alcoa [GICS 15, Dow 30]
(AA: Yahoo Finance file)
(AA: StockChart chart)
(AA: Billcara2 chart)
(AA: ADVFN Financial Data)
(AA: Value Line Report Jan. 18: next one is due Apr. 18)
Dupont [GICS 15, Dow 30]
(DD: Yahoo Finance file)
(DD: StockChart chart)
(DD: Billcara2 chart)
(DD: ADVFN Financial Data)
(DD: Value Line Report Jan. 18: next one is due Apr. 18)
Merck [GICS 35, Dow 30]
(MRK: Yahoo Finance file)
(MRK: StockChart chart)
(MRK: Billcara2 chart)
(MRK: ADVFN Financial Data)
(MRK: Value Line Report Jan. 18: next one is due Apr. 18)
Pfizer [GICS 35, Dow 30]
(PFE: Yahoo Finance file)
(PFE: StockChart chart)
(PFE: Billcara2 chart)
(PFE: ADVFN Financial Data)
(PFE: Value Line Report Jan. 18: next one is due Apr. 18)
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)
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)
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 Feb. 1: next one is due May 2)
Coca Cola [GICS 30, Dow 30]
(KO: Yahoo Finance file)
(KO: StockChart chart)
(KO: Billcara2 chart)
(KO: ADVFN Financial Data)
(KO: Value Line Report Feb. 1: next one is due May 2)
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 Feb 8: next one is due May 9)
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 Feb. 15: next one is due May 16)
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 Feb. 15: next one is due May 16)
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)
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)
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)
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)
Wrap up:
We had some fun doing a logo this week. Thanks everybody for your help.
Today, I am led to understand that in Cuba the power was handed down from Fidel Castro to Raul Castro and not Fidel W. Castro. (LOL)
Letterman breaks me up.
Unfortunately there is only one of me and that person is being summoned to dinner, so enough is enough. I had planned to really get deep into the markets this week, but one thing led to another today. Sorry.
Ciao.
Posted by Posted by Bill Cara on February 24, 2008 06:37:49 PM | Category: Cara Week in Review