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March 16, 2008
Week in Review #11 (2008-03-16)
Another week of all-time record high commodity prices and a fresh record low US Dollar has had the expected result in US equity markets: the stocks of the commodity producers and export manufacturing sectors have led the way to a week over week gain in the broad indexes, but traders are focused on the macro picture and remain nervous.
US Dollar and commodity price sensitive Basic Materials (XLB +3.16%), Energy (XLE +1.36%) and Industrials (XLI +1.15%) were the strongest of the market’s ten sectors. The only other one that was positive were the Utilities (XLU +0.53%), which is also a beneficiary of higher energy prices.
The weakest sectors this week were those that are linked to liquidity issues that have become extreme in the present credit market crisis: Telco (IYZ -3.94%), Healthcare (IYH -2.69%), owing to trader concerns over financial aspects of the health providers and insurers like Wellpoint (WLP -29.8%), United Health (UNH -17.7%) and Aetna (-6.9%), and the Financials (XLF -1.44%), which were crunched -3% on Friday.
But even the Commodity producers were flashing warning signs this week. The 800-pound gorillas among various nations like China (Petro-China PTR -5.0%), Canada (Imperial Oil IMO -3.3%) and Brazil (Petro-Brazil PBR -3.1%) were under pressure from rising production and refining costs and higher taxes.
Capital markets are operating in a stagflationary environment, similar to the 1970’s. The combined impact of slowing or receding economies and rising costs is that equity prices, which are based on inflation-adjusted corporate revenue, cash flow and earnings growth, are under pressure. Should inflation worsen, interest rates will rise, with further damage to economic growth and corporate earnings and net cash flow.
The problem has been caused by the massive increase in debt on the one hand without a counter-balance increase in economically-based sustainable asset prices. Phony asset prices, which had been used to support the debt bubble, were discovered as banks tried to rein in credit that had been expanding at rates that were out of control. In the typical credit contraction cycle, the parties that suffer most are business corporations and real estate developers that are over-leveraged, which did not happen in this cycle. This time, it was the banks and brokers that were over-leveraged on the basis of these phony assets they carried on their books. A proper write-down of those assets to economic reality means that many of the financial institutions have capital reserves below the ratios permitted by regulators. In fact, there are concerns that should all banks write off these dubious assets, the result would be insolvency, which is to say a complete elimination of equity, and worse.
So, the big picture is looking bleak, and it is not one that can be fixed overnight or even in a month or a quarter. This problem will probably take a few years to resolve.
As the credit contraction cycle works itself through the economy, cash and unencumbered assets will continue to be king. Periodically, there are injections of liquidity by central bankers and by sovereign wealth funds, but these are mostly based on new debt, which is like pouring fuel onto the fire, stealing from the children and grandchildren of the future, and the elderly and others who are presently or soon to be in need of social assistance, all done with the intent that vested interests among bankers can be protected today.
At the heart of today’s economic and capital market woes is the unnecessary Iraq War. Nobel laureate economist Joseph Stiglitz, and his associate, sums up the issues in their book, The Three Trillion Dollar War. Others are saying this war will cost five trillion. The architects of this war attempted to pay for it, not in the normal course with an increase in taxes, but by a lowering of taxes and a huge push to base economic growth, and revenue from taxation from real estate construction, largely fueled by speculators and others who did not have the savings or incomes to afford it, and so who turned to easy credit that was made available by bankers who securitized these dubious loans.
As long as there was a conspiracy among bankers to price these real estate assets on fiction, backed by so-called insurance programs that work only as long as the credit ring remains intact, the beneficiaries of a strong US Dollar, and low interest rates, such as the bankers, telcos and regulated utilities were able to lead equity market indexes higher. But as the real estate market peaked and headed south, and higher inflation set in, the US Dollar started to plunge. Capital markets remained stable only as long as bankers could continue to sell their fiction-based assets, and the available excess capital went into bonds.
That process started to come to a conclusion in June 2007, and the big capital pools started to switch from equities to the most risk-free bonds, the US Treasuries.
Now, even that safety valve has come to the end as the yields have collapsed on short-dated US Treasuries to the point where in just four weeks, the yield on 2-year T-Notes has plunged from 1.90% to 1.48% and on the 3-month T-Bills from 2.17% to 1.06%. The excessive negativity moniker among bloggers doesn't hold water. The fact is that traders are simply prepared to earn little to nothing if their capital base is preserved at this point, and the T-Bill rate proves just how negative is the market reality..
These yields are massively under the inflation rate, so wealth is rapidly being destroyed. As soon as the commodity price bubble bursts (and it will since record high oil and precious metal prices are economically unsustainable and will crack, just like real estate prices cracked in the summer of 2005), there will be a huge deflationary wave engulf the world.
Writing his syndicated column Global Issues today, David Crane points to the red flags waving when the International Monetary Fund warns that governments need to “think the unthinkable.” He opines, “Indeed, we could be headed for the worst financial crisis since the 1929 stock market crash and the Great Depression of the 1930’s.” Negative I might be, but not nearly that much so.
Where I see the credit crunch has hit home the most – the banks and telcos – traders have been selling to raise cash. In fact over the past six and twelve months the price performance in these sectors is the worst across the broad market: down over 3, 6 and 12 months -18.7%, -29.2%, and -31.3% for Financials (XLF) and -24.6%, -32.0%, and -26.6% for Telcos (IYZ), respectively. How can anybody be positive with such a disaster.
A week ago I asked rhetorically, “As a trader you have to ask yourself if conditions are likely to change in the next three to six months to where Mom & Pop start getting ahead financially, start spending again, and start saving and buying equities. You want to ask how the Telcos (and other financial income sources) are going to pay out high returns on capital without it being a return of capital. In addition, you want to know how the Banks can recapitalize their balance sheets without traders somewhere in the world taking on huge debt. Debt inspired by greed, after all, is the cause of the problems today.”
I am asked every day what my recommendation would be to defend against a financial Armageddon, and I will sum it up here:
(1) Go temporarily to a combination of cash, in the form of US Dollars held with the most secure financial institutions (preferably a Swiss bank outside UBS and Credit Suisse, which are international investment banks), and 3-month T-Bills, regardless of how low the yield is. (The minimum account size for private banking with Swiss banks is about $250,000 for those who are interested.) In the meantime, maintain small loans at various financial institutions -- if the interest rate is low -- because your continued payment of the principal and interest will put you into the most valued client category when the global financial crisis is ended and banks are seeking to issue new loans.
(2) Then wait for the crack in the precious metals market, which will come as most of these record high commodity prices are futures contracts based, which will fall apart when the credit ring snaps and counter-parties are unable to pay off. I’m now looking at $780-$800 gold, possibly lower, for example, in the months ahead. Yes, gold prices may go higher than Friday’s high of $1009 for $GOLD because the market is adrenalin driven at the moment, but if you are not a day-trader with your finger on the buy/sell button, it’s best you stay away.
(3) When precious metal prices, after the peak, spike down on the extreme sell-off days that I see upcoming, use that low price to buy physical bullion bars and coins for safekeeping, preferably in a private Swiss bank. For those who want the least exposure to the current financial crisis, I would not hesitate to put 90% of the cash into a variety of precious metals bullion holdings in safekeeping because even during the Depression era of the 1930’s, physical gold was the best performing asset class.
(4) After the global bankers appear to be resolving their crisis, and real estate prices and equity market prices have sunk to ultra long-term lows, which may take six months to two or three years to unfold, I would begin a program of selectively selling the precious metals and buying real property with rock-solid mortgages, probably in Emerging Markets, plus the stocks of Cara 100 companies that managed to survive the difficult economic period ahead. With that in mind, I would start to narrow the Cara Global 100 down to one in each sector, like: XOM, GG, ABB, TM, DEO, GSK, IBN, GOOG, NOK and EXC, as examples. That list would give a global balance of very strong companies, and I would probably weight the holdings on average with the S&P Global 1200 sector weightings at the point of entry.
These are tough times. It will pay to keep cool. The publishing world today – both hardcopy and electronic – has stooped to a new low of vacillating from “cut and paste” to the shouting of idiots who managed to get themselves a piece of the entertainment media. There is very little rigorous analysis being done today. It’s mostly synthesis (ie, storytelling) by people who really don’t know from nothing. The trouble is that transparency in the global financial system isn’t what those in control crack it up to be, and now that those persons are in deep financial trouble themselves the public is being left even further in the dark.
As I wrote this week, the global liquidity crisis was brought on by bankers and the public ought to protect themselves by pulling their capital out of the market, which would send the system into crisis, forcing these bankers to sort out their various conflicts of interest and return us a legitimate capital market that is not controlled by debt market dependent financial services companies.
Global Economics Review
Other than the upcoming March 18th FOMC decision on monetary policy, last week’s US economic data reports was the biggest of the month and the results were mostly negative.
NEWS ALERT: THE FED TONIGHT CUT THE DISCOUNT RATE AND ANNOUNCED A NEW BORROWING FACILITY.
I believe the US is now clearly in recession, which I have been saying for many weeks. The weight of the evidence, ie, the economic data, has been piling up and can no longer be denied.
Here are the key US economic reports and the Econoday analysis from last week.
US International Trade data for JanuaryUS Treasury Budget for February
US Import and Export Prices for February
US Business Inventories-to-Sales Ratio for January.
US Consumer Price Inflation for February.
U of Michigan Survey of US Households to assess confidence in the US economy in March.
So much for last week. Let’s look ahead.
New York Fed Empire State Manufacturing Survey for MarchUS Industrial Production for February
US Housing Starts for February
US Producer Price Index for February
FOMC decision to cut the Fed Funds Rate by possibly -75bp
The economies of Europe and Japan are almost as bad off as the US and are worsening week by week. I fully expect these economies to go into recession as well, which means that significantly more than 50 pct of the global economy will be in recession at the same time.
The bad news gets worse because, as strong as the growth is in the emerging BRIC economies (Brazil, Russia, India and China), these markets cannot be unaffected by the others. I expect serious declines in the BRIC economic growth rates this year.
Weekly International Economic Report.
As I say, positive news is now infrequent, and the same is happening around the world.
Of greatest concern is that the tools of the Fed being used reportedly to solve the inflation problem are the same ones that caused it, which is excessive credit spurred by interest rates that are too low. In fact, the Fed has not embarked on this course to solve inflation, as they say, but to try to save the US banking industry. But the problem is the carry trade; capital that is created in the US banking system no longer stays (for the most part) in the US, but flees to other countries in search of higher returns. Moreover, the Treasury Dept’s so-called “solution”, which is a cash giveaway to American families to encourage them to spend more is another failure because most of the cash will be used to pay off debts and to make deposits into bank accounts that ultimately be lent to wealthy customers of the banks who will invest a large part of it abroad.
Rather than just letting the economy cycle through a normal credit tightening period, with the usual Bear market damage to stock and bond prices, these interventionists (the Fed and Treasury) are trying to suck and blow simultaneously. They are making the situation worse. Moreover, they are appealing to Sovereign Wealth Funds, which also have objectives that too often are counter to the owners of private capital.
This era of political intervention in capital markets is by far the worst I have seen in 40 years, and I’ll leave it at that.
Here is next week’s economic calendar:
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 2 GREEN industries (energy, and mining) and 14 RED’s, compared to last week's 2 green and 24 Red.This week’s “market tenor” was, thus, 12 net RED versus 22 last week.
We can see that banking and financial services (although weak) have NOT been the consistently worst industries since the start of the year. That title goes to drugs and health services. We can also see that the consistently strongest have been energy and mining.
The DJIA, Nasdaq and NDX stayed NEUTRAL, while the SP-500 stayed RED. The Bombay and Shanghai Composites were RED, Brazil’s Bovespa stayed NEUTRAL, Russian RSX Index fund switched from RED to GREEN.
The US$ index stayed RED, seeing an all-time low, while the CRB index stayed GREEN, again reaching (though not closing at) an all-time high.
GOLD and SILVER stocks stayed GREEN. In fact, Media General’s gold stock index once again saw all-time highs (data extends back to 1989).
BOTTOM LINE: Despite Friday’s drama and pain, 10 industries recovered from RED to NEUTRAL.
Ticker Name Score
-5wksScore
-4wksScore
-3wksScore
-2wksScore
-1wksScore
-0wksABB ABB Ltd. -2 -2 +0 +0 +2 +2 ABV COMP DE BEBA AM ADS +2 +2 +2 +2 +0 +0 ABX Barrick Gold Corp. +0 +0 +0 +2 +0 +2 ADBE Adobe Systems Inc. -2 +0 +0 +0 +0 +0 AET Aetna Inc. -2 -2 -2 -2 -2 -2 AMAT Applied Materials Inc. +0 +2 +2 +2 +2 +2 ATVI Activision Inc. +0 +0 +0 +0 +0 +0 BA Boeing Co. +0 +0 +0 +0 -2 -2 BBBY Bed Bath & Beyond Inc. +0 +0 -2 -2 -2 +0 BBD Banco Bradesco S.A. -2 +0 +2 +2 +2 +2 BC Brunswick Corp. +0 +0 -2 -2 -2 -2 BDK Black & Decker Corp. +0 +0 +0 +0 -2 +0 BHP BHP Billiton Ltd. +0 +0 +2 +2 +2 +2 BMY Bristol-Myers Squibb Co. -2 +0 +0 +0 +0 -2 CCJ Cameco Corp. -2 +0 +0 +2 +0 +2 CCL Carnival Corp. -2 +0 +0 -2 -2 -2 CEO CNOOC Ltd. -2 +0 +2 +2 +0 +0 CHA China Telecom Corp. Ltd. -2 +2 +2 -2 -2 -2 CHL China Mobile Limited -2 -2 +0 +0 -2 -2 CHRW CH Robinson Worldwide Inc. +2 +2 +0 -2 +0 +2 COST Costco Wholesale Corp. -2 -2 +2 -2 -2 -2 CSCO Cisco Systems, Inc. -2 +0 +0 +0 +0 +0 CTSH Cognizant Technology Solutions Corp. +0 +2 +2 +0 -2 -2 CVX Chevron Corp. -2 +0 +0 +2 +0 +0 DB Deutsche Bank AG -2 -2 +0 +0 -2 +0 DELL Dell Inc. -2 +0 +0 +0 +0 +0 DEO Diageo plc -2 +2 +0 +0 +0 +0 DIS Walt Disney Co. +2 +2 +2 +2 -2 -2 DOW Dow Chemical Co. +0 +0 +0 +0 -2 +0 DNA Genentech Inc. +0 +2 +2 +2 +2 +2 ECA EnCana Corp. -2 +2 +2 +2 +2 +2 ERJ EMBRAER - Empresa Brasileira de Aeronáutica S.A. -2 +2 +2 +0 -2 -2 ERTS Electronic Arts Inc. -2 +0 +0 +0 +0 +0 EXC Exelon Corp. -2 +0 +2 -2 +0 +2 GE General Electric Co. -2 +0 +0 +0 -2 +0 GFI Gold Fields Ltd. -2 -2 +0 +0 +2 +2 GG Goldcorp Inc. +0 +0 +2 +2 +2 +2 GGB Gerdau S.A. -2 +2 +2 +2 +2 +2 GOL GOL Linhas Aéreas Inteligentes S.A. -2 +0 -2 -2 -2 -2 GOOG Google Inc. -2 -2 -2 -2 -2 +0 GRMN Garmin Ltd. +0 +0 +0 +0 +0 +0 GS Goldman Sachs Group Inc. -2 -2 -2 -2 -2 -2 GSK Glaxosmithkline plc -2 -2 +0 +0 -2 -2 HBC HSBC HLDGS PLC ADS -2 +0 +0 +0 +0 +0 HDB HDFC Bank Ltd. -2 -2 -2 -2 -2 -2 IBKR Interactive Brokers Group, Inc. +0 +0 +0 -2 -2 -2 IBN ICICI Bank Ltd. -2 -2 -2 -2 -2 -2 IMO Imperial Oil Ltd. -2 +2 +2 +2 +2 +0 INFY Infosys Technologies Ltd. +0 +0 +0 -2 -2 -2 INTC Intel Corp. -2 +0 +0 +0 +0 +0 JCP J. C. Penney Company, Inc +2 +0 +2 +0 -2 -2 JNJ Johnson & Johnson -2 -2 +0 -2 -2 +0 KB Kookmin Bank -2 -2 +0 +0 -2 -2 KO Coca-Cola Co. -2 -2 -2 -2 +0 -2 KSS Kohl's Corp. +0 +0 +0 +0 -2 -2 LEH Lehman Brothers Holdings Inc. -2 -2 -2 -2 -2 -2 LLTC Linear Technology Corp. -2 +0 +0 +0 +2 +2 MBT Mobile Telesystems OJSC -2 -2 +0 -2 -2 -2 MFC Manulife Financial Corporation -2 +0 +0 +2 +0 -2 MICC Millicom International Cellular SA -2 +2 +2 +2 +0 -2 NKE Nike Inc. +0 +2 +0 -2 -2 +0 NOK Nokia Corp. -2 +0 +2 +0 -2 -2 NTES Netease.com Inc. -2 -2 +2 +2 +2 +0 NUE Nucor Corp. +2 +2 +2 +2 +2 +2 ORCL Oracle Corp. -2 -2 -2 -2 +0 +0 OXPS optionsXpress Holdings, Inc. -2 -2 -2 -2 -2 -2 PAYX Paychex Inc. +0 +0 +0 +0 -2 +0 PBR PETROLEO BRASILEIRO +0 +2 +2 +0 +0 -2 PDA Perdigao S.A. +0 +2 +2 +2 +2 +2 PG Procter & Gamble Co. -2 +0 +0 +0 +0 +0 PTR PetroChina Co. Ltd. -2 +0 +0 +0 -2 -2 QCOM QUALCOMM Inc. +2 +2 +2 +2 -2 -2 RIO COMPANHIA VALE ADS +0 +2 +2 +2 +2 +2 RIMM Research In Motion Ltd. -2 +0 +2 +2 +0 +2 RY Royal Bank of Canada +2 +0 +0 +0 -2 -2 SBUX Starbucks Corp. +0 +0 +0 +0 -2 +0 SLW Silver Wheaton Corp. -2 -2 +2 +2 +2 +2 SNDK SanDisk Corp. +0 +0 +0 +0 +0 +0 STO StatoilHydro ASA -2 +0 +2 +2 +2 +2 SU Suncor Energy Inc. -2 +0 +0 +2 +2 +2 SWK Stanley Works +0 +2 +2 +0 -2 -2 TCK Teck Cominco Ltd. +0 +0 +2 +2 +2 +2 TEF Telefonica SA -2 -2 -2 +0 +0 +0 TGP Teekay LNG Partners LP. +2 +2 +2 +0 -2 -2 TGT Target Corp. +0 +0 +0 +0 +0 -2 TM Toyota Motor Corp. +2 +2 +2 +2 -2 -2 TOT Total SA -2 -2 +0 +0 +0 +0 TS Tenaris SA -2 +0 +0 +2 +2 +2 TT Trane Inc +0 +0 +0 +0 +0 +0 UBS UBS AG -2 -2 -2 -2 -2 -2 UTX United Technologies Corp. -2 +0 +0 -2 -2 -2 VCP Votorantim Celulose e Papel S.A. +0 +2 +2 +2 +0 -2 VIP Vimpel-Communications -2 +0 +2 -2 -2 -2 WAG Walgreen Co. +0 +0 +2 +2 +0 +0 WBK Westpac Banking Corp. -2 -2 -2 +0 -2 +0 WFMI Whole Foods Market Inc. +0 +2 -2 -2 -2 -2 WHR Whirlpool Corp. +2 +2 +2 +0 -2 -2 WMT Wal-Mart Stores Inc. +0 +0 +0 +0 +0 +0 XOM Exxon Mobil Corp. -2 +0 +2 +0 -2 +0 YHOO Yahoo! Inc. +2 +2 +2 +2 +2 +0 Summary: (+2/-2/other) 11/58/31 26/24/50 38/16/46 31/26/43 21/47/32 23/42/35 Net: (+2)-(-2) -47 +2 +22 +5 -26 -19 Answer to last week’s gold question: it cracked 1000, closed the week in New York just below, but at this writing sits at 1003.
To provide MORE perspective (and comic relief?) here again is Nixon’s 1971 speech taking the US$ off the gold standard (credit to themessthatgreenspanmade.com). (It was “just a temporary measure”, until a better international system could be arranged!)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 coming week will be a short one in North America because of the Easter Good Friday holiday.
For this past week, for the Dow 30 stocks: 16 were up, 14 down. The huge volatility occurred in spikes – up at the open on Tuesday, down at the open on Thursday and down shortly after the opening on Friday, followed a week ending spike higher near the close, which put the DJIA higher by +58 points and more than 50% of the Dow stocks up on the week.
Traders are struggling to learn the quick step as this dance is making them nervous.
The biggest losers this week again were those stocks that have a strong financial component, like the regulated health insurers, telcos, banks and broker-dealers.
In the Dow 30, stocks like General Motors (GM -12.5%), Citigroup (C -5.4%) and AIG (AIG) -4.0%) were dumped, although the last two suffered less of a loss than the previous week.
NASDAQ Composite ino.com chart
NASDAQ Composite stockcharts.com chart
The Nasdaq Composite stayed flat at 2212.5 this week. There have been some shining stars like Bed, Bath & Beyond (BBBY +6.7%) this week, but Friday’s action took many of the week’s stronger performers down. For example RIMM dropped -3.8% on Friday, which pulled the week’s gain down to +3.7 %.
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.
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
Three weeks ago, I added charts for the S&P 500 ETF (SPY) as well as put SPY into the expanded sector performance tables so that you can see how each sector is doing relative to the industry benchmark. I also added XLK for Technology, while keeping SMH (Semi-conductors) in the list.
This week SPY futures dropped marginally from 129.71 to 129.61. The S&P 500 dropped from 1293.4 to 1288.14.
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.
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
This week, there were 4 sectors (5 ETF’s) above SPY and 6 below. The worst performers were IYZ, IYH and XLF. The best were XLB, XLE and XLI.
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) was the second best performing sector this week, which was not surprising as the past two weeks XLE went against the grain of the rising Crude Oil price, but couldn’t do it a third week in a row as $WTIC jumped +3.59/bbl to a close of 108.74.
I am going out on a limb when I say that the $USD, which is extended on the downside, will weaken through this week’s FOMC decision (further large Fed Rate cut), but then start to strengthen as the month-end appears. March is the fiscal year-end of governments, and I think the Japanese govt will want to square the books, which may further strengthen the Yen only until month-end, following which we may see a weak Yen again and a stronger USD. Just a possibility to consider.
I also continue to believe that traders are worried that recession will create demand issues that will soon pull the price of oil down. That situation will further depress the price of the oil stocks.
Exxon Mobil (XOM) is the company and stock that Value Line has reported on this week. As you know, I didn’t like (Cara 100) XON at 94-95, and have profited on the slide to the low 80’s, which happens to be a massive loss of capitalization, meaning of course a hit to the customer accounts and also the marginability of customer accounts. So I’m not surprised to see a pop of +4.5% to the XOM share price this week following the massive Fed injection (over $200 billion). XOM is now up to 85.91, although it did drop -1.3% on Friday.
My outlook is starting to change however, which I will disclose later in this report. After the next down-dip into the 70’s, I will be recommending that traders consider starting to accumulate XOM. Because of the inflation cycle, I doubt the 30-level for the Monthly or Weekly RSI-7 will be reached. I think there will be support found around the 40-level.
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 +3.16% W/W) was lifted higher as this was a week where higher commodity prices and the lower $USD were highlights.
GGB (+7.0%), NUE (+6.8%) and MT (+5.6%), all huge steelmakers out-performed this week. There is hope that if the Fed and the other major central banks continue to inject liquidity into the system, the economy might work itself into a growth mode. I don’t agree – at least not without a considerable lag time.
Brazil’s GGB had been down -5.7% a week earlier, so the recovery over two weeks is not much. And South Korea’s Posco (PKX), the world’s biggest steelmaker, which had been down -5.0% a week earlier, this week was crushed -13.2%, including a loss on Friday of -7.7%. The reports from Korea indicate that the worry there is the US economy, but really this stock (of a highly admired industrial leader) has been selling off for six months now.
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) gained +1.15% (they lost -2.22% the week earlier), closing at 36.02. XLI dropped -1.75% this Friday and they had dropped -1.44% the previous Friday.
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) had a bad week on Friday, losing -0.67% on Friday to take the ETF down -0.40% W/W. The earlier gain was welcomed by some as XLY had been crushed -3.21% the prior week and -2.99% on the previous Friday. Ouch.
The only Cara 100 winner was BBBY, which was up +6.65% W/W including a gain of +1.09 pct on Friday when the overall market was down sharply.
The price of Crude Oil set another record this week, including over $4.00/gallon in the parts of the country I guess the President doesn’t get to much.
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 |
This week, XLP dropped -0.41%. The loss on Friday was -1.61%, so the damage was done on Friday.
After KR jumped +5.8% the week earlier, this week it was down -5.34%.
SBUX, down -4.9% a week ago, recovered partly (+1.70%) this week.
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 |
A week ago, I wrote that IYH (healthcare) had lost -3.34% W/W, making it one of the worst performers. This week, IYH dropped -2.69%, including -1.55% on Friday, to be the second worst performer.
A closer look shows the stocks of companies that have a health insurance component were hit badly. Inflation is driving up costs, and the consumer is losing the ability to pay, directly and a result of employment. The highest paid employees had the best health plans and these have been where the job cuts are happening. The people are being forced to take low paying service industry jobs that don’t have attractive health insurance coverage, so all sides are losing. This is a tough issue and one where my drive for social equity puts me squarely against my interest in having govt involved in industry. Having employed many Americans in Atlanta and Dallas in the past, and getting to know the staff and their families, I have to say, as much as I know many of you think I’m nuts for saying it, the Canadian system of universal insurance, which is far from perfect, is a much better solution for the majority of Americans. My only gripe with Canada is that govt shouldn’t be running the system. There is no reason they couldn’t put the system out for private sector tender to regulated entities.
In any case, this is a sector where traders have a need to understand which of the pharma companies have strong product pipelines, and which have issues with government.
JNJ enjoyed a lift of +1.85% this week. The big losers were HMO companies like Wellpoint (WLP -29.8 %), United Health (UNH -17.7%) and Aetna (AET -6.86%).
WellPoint set off the industry slide when it lowered guidance after the close on Monday, stating concerns over escalating medical costs, lower fully insured enrollment and the weak economy. On Tuesday, Aetna reaffirmed an outlook that fell short of Wall St expectations. Then on Wednesday, Humana (HUM) also cut its forecast, citing higher-than-expected Medicare prescription drug plan claims.
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 |
This week, the Financials (XLF -1.44%) dropped to 23.97, after losing -2.99% on Friday.
Two weeks ago, I wrote, “This picture (XLF) is so unhealthy that I don’t want to write about it anymore. Month after month, I kept writing, “I wouldn’t touch these Financials with your ten-foot pole… How big is the disaster?... (its) country wide.” …For the record, America’s biggest mortgage lender CFC is down YTD -43.7 pct (and nobody truly knows if there’s any equity left) and the so-called Government Sponsored Enterprises FNM and FRE are down -39.2 pct and -40.0 pct respectively over that span. We’re only in Week #10.”
The losses mount up.
Countrywide (CFC -11.24% to $4.50) is now a penny stock waiting for a banker with real assets to close the deal.
As for Lehman Bros (LEH), how long will a financial service giant like that be able to take a hit of -14.63% on a single day, Friday, and be able to stay the course? Capital losses of that magnitude destroy the goodwill behind the name. Imagine the impact on the clients, the staff and the long-term investors.
And that’s nothing like Bear Stearns (BSC), which collapsed from 70 to 30 this week, including an intra-day low of $26.85 on Friday. Less than 11 months ago on Apr 25-07, the BSC 52-week high was $159.36.
Is there light at the end of the tunnel that is definitely not an oncoming train? It’s not up to you or I to figure it out. Not being in the boardroom, we are out of the deal. It would be pure conjecture and speculation on our part. I happen to respect these two firms a lot – Lehman was a Cara 100 until Friday – but frankly I’m not going to speculate as to the outcome. Time to stick to our knitting, which is to analyze the fundamentals, quant data, trends and cycles, and macro-econ impact on the stocks of companies we believe are of highest quality, where we can sleep at night, believing they can get through the rough patches like the survivors we all are.
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:
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 |
Semi-conductors (SMH) dropped -2.15% on Friday, which pulled SMH down to a small gain of +0.17% W/W, closing at 28.68.
ADSK bounced back further by +7.8%, following a gain of +1.7% a week ago. But, after falling the week earlier by -19.5%, I still feel that is a classic proverbial Dead Cat Bounce.
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:
Telecom (IYZ) suffered a further loss W/W of -3.94% to 22.19. The loss on Friday was -2.12%. Over the past couple months, IYZ was a high of 30.60. That -27.5% pullback was not helped by being a relatively conservative sector, high dividend paying fund. IYZ set a cycle high of 35.18 on July 16-07, so the loss has been -36.9%.
AT&T (T) gained +0.06% W/W but lost -1.76% on Friday, closing at 35.03. Meanwhile, Verizon (VZ) dropped -3.59% W/W including down -2.45% on Friday to close at 33.82.
The RSI-7 for Monthly-Weekly-Daily for IYZ is 16.6, 20.2, 25.7, which puts it into the Accumulation zone. But the M-W-D RSI-7 for T is 38.9, 37.0 44.9, which is in no-man’s land. However, look at this: VZ has a M-W-D RSI-7 of 29.1, 21.4, 28.7. That means a rally would kick off a Buy Alert as early as Monday, depending on how the market opens.
The VZ buy decision here would be an interesting one. Speculation has it that the company might just buy out Sprint Nextel (S $6.00) for a song (I love NY, NY…). At the price Sprint has sunk to, the deal could even be accretive after cutting that company to the bones. S hit a 52-week high on June 4-07 of $23.42. In the hands of Verizon, I think there’s value there. In any case, VZ is now paying a dividend yield of 5.0% and for as far as Value Line goes back, they have never cut that dividend. In the 3Q, they even raised the quarterly dividend from $0.405 to $0.430, and they have lined up plenty of cash to buy back stock, so I don’t think they will cut that dividend.
Ergo: for all those who think the world is going to hell in a hand basket, I say drop some chips on VZ at $33.82. Given that the absolute lowest I think the stock could go here would be 29-30, below which would take it back to the 2002 Bear market bottom, and before that back to 1997 (1997!). So I would write the July 30 puts for about $1.50+ and the 27.50 puts for about 80 cents. In addition to some stock at $33.83, I could get my cost basis down to about 30 with a $1.72 annual dividend yielding 5.73% on a company rated by Value Line as A+ for financial strength. They could slash that dividend in half (they won’t!) and the yield would be no worse than a 5-year US Treasury. Well, this financial crisis will be long resolved before 5 years, which means the VZ price will be going much higher. How high is anybody’s guess, but I’ll go along with Value Line’s forecast of 45-65 for 2010. I think by mid-year 2010, VZ will be trading at about 6.5 times cash flow of $9.00 (est 2010) or 18 times earnings of about $3.20, which averages say $58. With a cost basis of 30, that’s almost a double over two years. That’s called a Buffett Beater. So, for those who think I’m getting too negative here in the past couple months, let’s just say that I love the limbo dance, which is to say, the lower they go, the prettier they are. Something like bad is good, or whatever.
Anyway, Verizon is on my radar for accumulation. Thought you should know. And I should remind you that on Feb 1, 2005, I wrote: “For VZ, why not write the July 32.50 puts for $0.90 premium. If you can buy this stock for $31.60, should it be put to you at $32.50, it's a steal.” Then a year or so later you could have bought the stock for 31 or better, with a basis under 30. The subsequent high was on Oct 11-07 at $46.24. I was out in mid-June 2007 at 43. Anyway that’s just proof of concept if you follow these pages closely.
Verizon is not a Cara 100 company but it is a good port in a storm, and many of you seem to be seeking shelter.
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) were up +0.53% this week after taking a hit of -0.97% on Friday, closing at 37.90.
I still like the nuclear power generation companies. Excelon (EXC 79.75) was a Buy in the low 70’s in January, and may get back there again at some point.
Bonds & Yields Review
Table 10: US Treasury Yields
| Maturity | Yield | Yesterday | Last Week | Last Month |
|---|---|---|---|---|
| 3 Month | 1.06 | 1.26 | 1.35 | 2.17 |
| 6 Month | 1.27 | 1.43 | 1.48 | 2.01 |
| 2 Year | 1.48 | 1.62 | 1.50 | 1.90 |
| 3 Year | 1.39 | 1.57 | 1.46 | 1.92 |
| 5 Year | 2.39 | 2.50 | 2.42 | 2.72 |
| 10 Year | 3.44 | 3.53 | 3.52 | 3.73 |
| 30 Year | 4.36 | 4.44 | 4.54 | 4.53 |
| Maturity | Yield | Yesterday | Last Week | Last Month |
|---|---|---|---|---|
| 2yr AA | 2.59 | 2.57 | 2.59 | 2.22 |
| 2yr AAA | 2.47 | 2.55 | 2.57 | 2.28 |
| 2yr A | 2.68 | 2.65 | 2.63 | 2.34 |
| 5yr AAA | 3.03 | 3.07 | 3.03 | 2.78 |
| 5yr AA | 3.06 | 3.07 | 3.13 | 2.67 |
| 5yr A | 2.97 | 2.98 | 3.40 | 3.06 |
| 10yr AAA | 3.74 | 3.74 | 3.71 | 3.46 |
| 10yr AA | 3.57 | 3.57 | 3.81 | 3.47 |
| 10yr A | 4.03 | 4.04 | 4.19 | 3.68 |
| 20yr AAA | 4.67 | 4.64 | 4.50 | 4.34 |
| 20yr AA | 4.85 | 4.82 | 4.85 | 4.37 |
| 20yr A | 4.99 | 4.97 | 4.89 | 4.36 |
| Maturity | Yield | Yesterday | Last Week | Last Month |
|---|---|---|---|---|
| 2yr AA | 3.37 | 3.47 | 3.19 | 3.35 |
| 2yr A | 3.19 | 3.28 | 3.16 | 3.42 |
| 5yr AAA | 3.68 | 3.90 | 3.78 | 3.99 |
| 5yr AA | 4.00 | 4.19 | 4.08 | 4.08 |
| 5yr A | 4.55 | 4.92 | 4.53 | 4.26 |
| 10yr AAA | 5.07 | 5.12 | 5.09 | 5.09 |
| 10yr AA | 5.60 | 5.75 | 5.60 | 5.31 |
| 10yr A | 5.71 | 5.76 | 5.94 | 5.47 |
| 20yr AAA | 6.40 | 6.54 | 6.63 | 5.61 |
| 20yr AA | 6.47 | 6.59 | 6.67 | 5.99 |
| 20yr A | 6.26 | 6.41 | 6.49 | 6.25 |
The bond market was on wheels this week, with yields in the 10-year through 30-year Treasury bonds dropping -12 and -18 basis points respectively to 3.44 and 4.36. Four weeks ago these yields were 3.73 and 4.53.
But the big move this week was the -29bp drop in the 3-month T-Bill yield from 1.35 to 1.06. Just 4 weeks ago, the T-Bill yield was 2.17. Now that is the definition of flight to safety. Traders may even take zero return if their capital remains intact.
In four weeks, the yield on the 2-year Treasury has plummeted from 1.90 to 1.48, so there is clearly illiquidity building here as traders are worrying about capital risk. It’s no wonder that the Fed is having to inject “temporary” funds into the system and why the Fed funds rate is likely to drop by -75bp on Tuesday.
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.
The mortgage companies like Countrywide, Fannie and Freddie suffered greatly on Friday: CFC (-5.7% and -11.2% W/W), FNM (-2.7% on Friday and -1.8% W/W) and FRE (-0.6% on Friday but up +7.8 pct W/W).
I am not following this mess too closely because, you know, out of the room, out of the deal.
The TLT gained +3.00% to 95.00. A week earlier it had dropped -2.27%. It’s volatile.
The TIP gained +0.30% this week and +0.11% a week ago.
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 a bit this week (+1.15%) to 416.40, and after a lull a week ago has been up strongly for several weeks now as the $USD spiraled down to the incredible depth of 71.67 at the close this week.
As I wrote two weeks ago, “Prices of all commodities are bursting out. This is not a matter of shortages. It’s about a $USD comprised of twenty wooden nickels…. how long ago did I first write about that 20-wooden nickel dollar? Isn’t it pathetic to see the trade-weighted $USD plunge to 73.70 from over 91 in 4Q05, just a little more than two years?”
Yes, this week, the $USD dropped to $71.67.
If you think this is not inflationary, consider how much you have to pay to import the same goods and services now vs two and three years ago.
I do think the short-term market cycle must be playing itself out, however, because, as I have been saying the talk in cabs and pubs now is about pork bellies or about $110 oil going to $200, and gold zooming to $2500.
Exactly the same thing happened in the late 1970’s at the peak of the commodity price cycle.
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 up +2.46/bbl (+3.25 pct) to 105.15 a week ago, and +3.88/bbl to 102.69 the week before that. This week, the gain was +3.59/bbl to a new all-time closing record of 108.74. There was a high of 109.71 on Thursday.
The price had been 88.96 six weeks ago. The rate of increase is unsustainable.
“How quickly we forget. How many remember $51/bbl in January 2007?”
The 50d MA for $WTIC is now at 96.18, and the 200d MA is 84.66.
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
$GOLD was flying again this week, up +25.30/oz (+2.60% W/W) to a record high weekly close of 999.50.
“Some say the contracts needed a rest; others say traders are ready to sell off.” I think the fireworks will begin at near month-end as the various central banks are trying to balance their foreign reserve positions at their fiscal year-end, and realize they have to buy the dollar. I am speculating here, but I have this sense of it.
Remember that when $GOLD had lifted to 944.60 I talked of moon-shots and said, “The moon is now in sight.” I think we might have seen it on Friday when $GOLD hit 1009.00. Clearly I was wrong, when a week ago I wrote, “The high was 995.20 on Wednesday, which may have been the cycle peak.”
The 50-day MA for $GOLD is now 926.60, and the 200d MA is 779.63.
I believe the intermediate top has been put in now. But, really, I have no solid evidence – just a very strong feeling. Clearly, at the G-7 meeting of finance ministers and central bankers five or six weeks ago, the decision was made to let the $USD collapse, and precious metals run. I wish they had told us that.
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 +2.00% from 20.25 to 20.66. And there if you recall, my wife wanted to sell that silver bar she won two years ago this week using my business card. The price that summer of 2006 was $10/oz, down from the $12/oz when she won it, but I said “Stick with me honey, the price is going to $18/oz.”
But more than a double in two years sets up the ultimate investment decision, when do you sell the physical and when do you consider it a â€collectible’? Hahaha, but it’s true. When you trade securities, you simply trade a price. When you hold the thing in your hand, it’s like holding your child or your pet. How can you force yourself to sell.
Clearly there is a different dynamic involved with the traders who buy bullion and those who buy securities. I think, when it comes to precious metals, we all ought to have a Swiss bank account that holds them in a vault. It’s better than land because they say, as the expression goes, they aren’t making more land. But in fact land is made for development as soon as the politicians want to approve it. Flying over any country leaves you with the knowledge there is plenty of land for development. But, when it comes to precious metals, truly, there is no way possible for governments to print money slower than miners and prospectors can find it. This isn’t like oil and its alternative fuels. Gold is gold. Silver is silver. There is no substitute and the world is finding very little more of it.
Six weeks ago, $SILVER closed at 16.87. The high was 21.33 a week ago Thursday. I think that may have been the intermediate-term top, but who really knows.
For $SILVER, the 50d MA is now 17.62, and the 200d MA is 14.56.
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.
I say that $PLATINUM could be the tell to the top of the precious metals market based on what happened a week ago Friday. On that day, $PLAT plunged -$166.20/oz (-7.52 pct) to 2043. I said, “If there is not an IMMEDIATE BOUNCE, I interpret that move to be a reversal. Given that $PALL also plummeted -6.46 pct on the same day, I’d say there is a major move underway. The high was 2299 on Tuesday. That is a significant drop to the Friday close.”
Well, plat and pall climbed back. $PLAT this week gained +38.40 (+1.88%) to 2081.40. There was a loss of -1.0% on Friday, but traders didn’t take note.
The 50-day MA is 1871.08 and the 200-day MA is 1493.34.
Spot platinum chart for the week
Interactive Chart of Weekly Platinum EOD Continuous Contract Index:
Interactive Chart of Daily Platinum EOD Continuous Contract Index:
Interactive chart of the Platinum metal index.
A week ago, I wrote, “$PALLADIUM was down -$81.65/oz W/W to 495. The high was $600 on Tuesday. I think that was the cycle peak for the intermediate term.”
Maybe, but this week, $PALL gained +19.40/oz (+3.92%) to 514.06.
The 50-day MA is now 451.77 and the 200-day MA is 385.43.
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 lost -2.38% or -9.35 on the contracts to 382.80. Friday was flat. The damage was done earlier when traders started thinking more about economic contraction.
The high was 402.40 a week ago Thursday, which I wrote a week ago Sunday “may be the cycle high. In my view, a recessionary economy cannot support these high prices for copper. Also, a credit contraction cannot support the continued speculative pumping of precious metals.”
The 50-day MA for $COPPER is now 350.89 and the 200-day MA is 340.37.
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) was up with a bullet, gaining +5.01% to 206.37 from 196.52.
At some point, I think traders will start to take profits. They must be concerned that credit contraction will take down the inflated commodity prices, which will lead to take-downs in the miner share prices.
That’s not to say there are not some spectacular values in the developing juniors.
The 50d MA for $XAU is 188.46, and the 200d MA is 165.73.
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
This week, the $USD plunged a further -1.87% to 71.67. “Traders are scared now, fleeing into US Treasuries.”
But you knew that a couple weeks ago.
A few weeks ago I wrote, “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 (ha!) 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.”
If, as and when the $USD starts to rally here, (i) precious metals will collapse, or fall by at least $200 for $GOLD, and (ii) many hedge funds will be caught massively short the Dollar, and long the precious metals.
As I reported and opined a week ago, “The technical indicators are more indicative let’s say of a turn in the $USD than say in the Euro or the Pound. The Yen still shows little or no indication of a reversal of its current strength. The Canadian Dollar is showing me nothing in terms of a short-term trend reversal. Collectively, however, the $USD chart does show a possible turn in the near future.”
Surely, at 71.67, we are that much closer to the cycle bottom. Well, maybe??
Interactive Chart of Weekly U.S. Dollar Index:
Interactive Chart of Daily U.S. U.S. Dollar Index:
The Euro ($XEU) has surged in four weeks from 1.4668 to 1.5637 to the USD. This week the gain was +1.86 pct.
“The ECB would like to see it lower, which could mean they drop rates soon, but so far they haven’t.”
This strong Euro can’t be helping exports or in-bound tourism. Investors are uptight according to the surveys.
Interactive Chart of Weekly Euro Dollar Index, priced in USD:
Interactive Chart of Daily Euro Dollar Index, priced in USD:
The Pound rallied a bit +0.31% to 202.19. This helps keep inflation down a bit in the UK, but the UK, like the EU, is dealing with other issues too. The econ problems of the US are also present in Europe. In the UK, house prices are in the same trend pattern as southern California or Florida, which is not good.
Weekly British Pound Index:
Daily British Pound Index:
Weekly Japanese Yen Index:
The Japanese Yen ($XJY) has surged from 92.90 to 100.78 in four weeks. The move this week was +3.31% and the gain on Friday alone was +2.01%. This is stunning market action. All I can think is that the carry trade is being unwound and equities are being sold and debts being repaid, particularly in Japan. And how can Toyota make any money?
“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…
The Yen’s 50-day MA is 94.06 and the 200-day MA is 87.98.
Daily Japanese Yen Index:
The Loonie (Cdn Dollar) gained +0.48% this week 101.25 to 101.54.
Weekly Canadian Dollar Index:
Daily Canadian Dollar Index:
International Equity Markets Review
The FTSE (5700 to 5632), DAX (6514 to 6452) and CAC (4619 to 4592) all sold off this week. So too would the US market except for the final hour rally that seemed to come out of nowhere again.
But the big move was made as the Nikkei 225 of Japan sold down to 12241.6. Traders are watching to see if Friday’s weakness will continue over to Asia on Sunday evening.
I added 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 also made some additions to the country-based ETF tables as I intend to focus more on ETF’s in 2008. In time, 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 were most flat W/W.
Two weeks ago, I opined in this space, “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 ExxonMobil (XOM).
ExxonMobil [GICS 10, Dow 30, Cara 100]
(XOM: Value Line Report Mar. 14: next one is due Jun. 13)
One of the big concerns for traders in capital markets is when the big weights in the major indexes take large losses. That means that margin calls are likely, which pulls down markets further.
Exxon Mobil is one of those stocks that has come off from 95 to the low 80’s and the loss of capital was significant. However, if Crude Oil is going to stay above $100, and it might, you have to know that Wall Street analysts will be raising their ratings, and that will serve as an underpinning to this market.
What’s not to like when you read the Value Line report of Robt Mitkowski this week on Exxon Mobil. The company’s financial strength is rated A++. With close to $40 billion in cash in the bank, this company has more in cash than the total capitalization of all but a few of the world’s companies. Remember that cash is king. The dividends increase every year. The management buys back treasury stock every year. The annual growth rates for revenues, cash flow, and earnings are, although perhaps not what they have been for the past 10 years, still really high for such a humungous company. The Return on Shareholder Equity is superb. The profit margins are very high.
Even with oil at $75 or $80/bbl, I think Exxon Mobil would do very well. Their reserves, unlike BP and Chevron, are being replenished every year. Their spat with Venezuela will turn out ok because they will get paid a fair price and are probably happier to be out of that jurisdiction anyway.
I just don’t know how anybody can criticize this company. Yes, I opined that 94-95 would be a good time to sell, and it was. This past week the stock rallied a lot, which supported the DJIA and S&P 500, but next week, it might come off again. My thinking is that severe recessions hurt the stock, like 2001-2002 and so I don’t want to chase the price. But, if the price falls into the 70’s, I will at some point be ready to issue a Buy Alert.
The Dow 30 Company links in chronological order of next reports
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 Feb 22: next one is due May 23)
American Express [GICS 40, Dow 30]
(AXP: Yahoo Finance file)
(AXP: StockChart chart)
(AXP: Billcara2 chart)
(AXP: ADVFN Financial Data)
(AXP: Value Line Report Feb 22: next one is due May 23)
Citigroup [GICS 40, Dow 30]
(C: Yahoo Finance file)
(C: StockChart chart)
(C: Billcara2 chart)
(C: ADVFN Financial Data)
(C: Value Line Report Feb 22: next one is due May 23)
JP Morgan [GICS 40, Dow 30]
(JPM: Yahoo Finance file)
(JPM: StockChart chart)
(JPM: Billcara2 chart)
(JPM: ADVFN Financial Data)
(JPM: Value Line Report Feb 22: next one is due May 23)
Microsoft [GICS 45, Dow 30]
(MSFT: Yahoo Finance file)
(MSFT: StockChart chart)
(MSFT: Billcara2 chart)
(MSFT: ADVFN Financial Data)
(MSFT: Value Line Report Feb 22: next one is due May 23)
General Motors [GICS 25, Dow 30]
(GM: Yahoo Finance file)
(GM: StockChart chart)
(GM: Billcara2 chart)
(GM: ADVFN Financial Data)
(GM: Value Line Report Feb. 29: next one is due May 30)
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 Feb. 29: next one is due May 30)
McDonalds [GICS 30, Dow 30]
(MCD: Yahoo Finance file)
(MCD: StockChart chart)
(MCD: Billcara2 chart)
(MCD: ADVFN Financial Data)
(MCD: Value Line Report Mar. 7: next one is due Jun. 6)
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)
Wrap up:
This was a terrific week for me to relax and start preparing for the transition from semi-retired blogger enthusiast to part pro bono blogger and part (full-time) investment professional with commercial publishing interests. As you know, I can be part full-time at things. People that routinely work 80 hour weeks can do that.
In any case, it has been fun. My book “Lessons From the Trader Wizard” comes off the printing press tomorrow, which sends it to the bindery and then the fulfillment center. You should be receiving copies before the end of the month. Finally. Now I can relax.
Just joking.
I tried to finish this WIR earlier, but I had a couple two-hour phone calls in the middle of the day. So blame me for chatting too much. (LOL)
Your queries about Swiss bank accounts can be answered if you send me mail at bill [at] billcara.com. Essentially, the answer is that most Swiss private banks that handle international business have a minimum account size of $250,000 up to a few million. I’m trying to work on something that has easier requirements but the problem is that due diligence checking for new accounts now is so onerous that smaller accounts are not welcomed.
The whole matter is actually academic since my point was that customers of banks should seek out the safest banks, and the medium and smaller ones in Switzerland are the best. But if you simply want a safety deposit box, Canadians can get one from any large bank that would be secure in my view. Scotiabank is a good one that deals in gold. Americans have a problem putting gold in a safety deposit box because there is a precedent where the US government sealed those boxes and made gold trading illegal from 1933 to 1974. That’s one of the reasons I recommend using a Swiss bank outside the US.
Posted by Posted by Bill Cara on March 16, 2008 07:23:14 PM | Category: Cara Week in Review