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March 23, 2008
Week in Review #12 (2008-03-23)
A few hours after I finished writing perhaps my most negative Week In Review yet, last week, the credit ring broke as Wall Street’s fifth largest investment bank could not meet its obligations to other bankers. A couple hours later, the Bull run for commodity prices snapped. I received many letters from all over the world thanking me for having pushed you into cash.
You may not be aware – I’ll publish the table later – but those 14 stocks of Cara 100 companies I recommended selling in December (with specific dates and prices) are down in 100 days by -15.7% on average (and hit a subsequent maximum low of -24.2% on average). At the same time the DJIA is down -1.0%.
Proof of concept in a simplistic little computer system.
Meanwhile the world’s great wealth management organizations are underwater, gasping for air, pleading to governments, central banks and sovereign wealth funds for their very existence. Can you imagine the trillions of dollars in losses to their clients since mid-December?
So, you can either trust your banker who says that Thurday’s trading turned everything around, where CNBC called the bottom, or you can re-read my warning from a week ago, which follows below.
But if you truly believe that “the economy is fundamentally strong” as President Bush stated clearly on Thursday, then you agree that the Financials (XLF) should have popped over +6.0% in a single day because their future is so bright now that the Fed is pouring liquidity onto the fire. You of course accept that on Thursday traders ought to have boosted JP Morgan, Bank of America, General Electric (big finance component), American Express, Citigroup and AIG by +8.3%, +5.9%, +5.4%, +9.5%, +10.3% and +6.7% respectively. And you agree that Countrywide, Fannie and Freddie should be up +13.1%, +11.7% and +9.7% on the day, and +21.1%, +49.3% and +54.0% on the four-day week. Of course, you were not surprised that those humungous Private Equity plays Home Depot and General Motors were up +4.6% and +2.5% on Thursday. But the kicker you say was that heavyweight DJIA components Exxon and Chevron deserved to be up +0.7% and +1.6% on Thursday when the whole peer group was getting rightfully smash from -5% to over -18% over the past four days, and of the goldminers on Thursday Barrick was plunging -7.2% (-20.8% W/W) and Newmont was down -5.6% that day and -14.5% W/W.
Now if you believe your banker, I think you’ll believe anybody including that Bear Stearns CEO who a couple days before his company instantly turned $10 billion into $250 million told the world “the company is fundamentally strong” -- to paraphrase what the President said on Thursday.
A week ago, I started my blog by saying that the week was one where:
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… 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.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.
…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 (in the Financials) will probably take a few years to resolve.
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.
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%. … 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.
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.
There is really not much more I can add. I told you a week ago that if you try to swim upstream carrying gold bricks in each hand, you are going to drown. There are times when you have to protect yourself. Now is one of them.
You should reinvest in equities only when two things happen: (1) economic wealth is being created faster than fiat money, and (2) you feel comfortable that panicking traders are throwing babies out with the bathwater.
The market hasn’t reached either point yet, although the latter is starting to happen. You’ll see panic setting in if and when you observe the stochastics for the Daily and Weekly price data series tracking along the bottom for weeks on end, not being able to lift much above 30-40 without more selling. We're not there yet.
Based on my reading of the MACD/RSI data and the worsening economic and corporate data, and my understanding of the problems within banks and brokers, I expect the DJIA to grind down to 11200, where it will begin to form a base. That may take weeks or months of increasingly bad economic data and lower corporate profits due to economic recession. Then, at some point, I expect to see another round of bank and broker-dealer failures that will set off the final burst to the downside, which is the point we back up the truck of the stocks of Cara 100 companies in the Accumulation Zone.
Of course, the window of opportunity may be much briefer than I presently imagine. Did you see the number of Buy Alerts given by my “simplistic little system” in the past 10 days? So, we must stay alert. Values are starting to pop up; it’s just a matter of how much risk are we prepared to accept buying stocks of good quality companies that have already sunk some 25% to 35% or more. If you have a ten-year time horizon, now could be the right time.
Besides, at the week-ending session close, technical analysts would tell you there were several long lower shadows on the candlestick charts for the CRB, $WTIC, $GOLD, and +PLAT. According to StockCharts.com, candlesticks with long lower shadows “indicate that sellers dominated during the session and drove prices lower. However, buyers later resurfaced to bid prices higher by the end of the session and the strong close created a long lower shadow.”
This late buying action in the commodities may be confirmed or discounted on Monday morning. Following such an extreme sell-off as seen Thursday, there often is a bounce. As it could go either way, the smart play would have been to put on straddle trades prior to the close on Thursday.
Trading is not rocket science. Only the mere mortals pretending to be rocket scientists (ie, HB&B) would have you believe otherwise, asking you to reach out to them for help.
But, I’ll leave you with the final thought: Do you recognize who among us is pleading for help these days? Yes, it’s the banks and brokers.
I think this community can go a long way to helping one another.
Well, here is another (final) thought; forget the ego of the newsletter writers who tell you they called this week’s collapse of gold to the hour – the best call anybody made in 28 years yada yada. Nobody should be interested in that stuff. What is important is learning why markets move the way they do, and what you can do with that knowledge. The market’s not about the newsletter writers; it is about you.
Global Economics Review
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.
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
So much for last week. Let’s look ahead.
US Existing Home Sales for FebruaryUS Conference Board Consumer Confidence Survey for March
US Durable Goods Orders for February
US New Home Sales for February
Final revision to 4Q US GDP and GDP Price Index
US weekly report of New Unemployment Claims
Yes, there are economic issues that Americans are struggling with. But, I have been saying for some time now that:
…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, and significant increases in inflation rates, this year.
Weekly International Economic Report dated March 20.
Weekly International Economic Report dated March 13.
As I say, positive economic news is now infrequent, and the same is happening around the world. The focus should not be on the negativity but on the data trends and the solutions that are being put forth by politicians. Traders need to be looking forward.
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
“Jock” is on sabbatical for a few weeks, visiting with his family the Renaissance city of Florence Italy.
I think it’s time for my own retreat. I need the break.
US Equity Markets Review
DJIA stockcharts.com chart
For this holiday shortened week, for the Dow 30 stocks: 20 were up, 10 down. Just like the previous Friday, with a week ending spike near the close, this Friday was a pre-holiday spike that was largely contained to a few groups, mostly tied to the banks and brokers and private equity deals.
By the end of the week, the DJIA closed higher by +410 points, or +3.4%, but +2.2% was the rally on Thursday. The Nasdaq and Russell small cap picture was even move skewed by Thursday’s move that started in the financials. I attribute those moves to be largely short-covering.
NASDAQ Composite ino.com chart
NASDAQ Composite stockcharts.com chart
The Nasdaq Composite gained +2.06% W/W but the gain on Thursday was +2.18%.
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
Four 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 gained +0.33% from 129.61 to 132.08. That’s nowhere near the move in Financials (XLF +6.19%). Besides, the gain on Thursday was +1.35%, so the rest of the week’s trading was unimpressive.
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 crushed -6.87% this week. Only the DJIA components showed any life at all, lifting a small amount in the HB&B led rally.
A week ago in this space, I made the following statement:
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.
This week, the $USD rallied +1.51% to 72.75. The Yen rallied +0.28% to 101.06. Most other currencies sank. Crude Oil ($WTIC -$6.90/bbl) also plunged to 101.84.
A week ago I wrote here
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.
This week, XOM and CVX dropped -2.4% and -4.4% respectively, although both were up a bit on Thursday. The other oils were crushed: China’s CEO -18.5%, Brazil’s PBR -14.3% and Canada’s SU -13.5% were leaders on the downside as XLE dropped -6.87% W/W.
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 -7.33% W/W) was also crushed this week after the upward spike in commodity prices was hammered down, and the $USD strengthened.
Dow (DOW -2.5%) was the best of a bad lot. TCK -13.7%, RTP -13.2% and BHP -10.1% all got beaten down.
All the goldminers were blown up as $GOLD plunged -$79.50/oz. ABX -20.8% (I warned!), KGC -18.1% and GG -16.8% (I issued that SELL on Feb 28) were toast. There may be a mild bounce here, which would trap the weak hands, but the smart play is to run for cover on any rally. Clearly, the banks and the Administration need the commodity prices lower if there is any hope of saving some of the big banks and brokers and a big piece of American industry like the homebuilders and the retailers.
So I think the short-term play was to trade out of gold and goldstocks a week or more ago, and to get ready to step back in, especially some (but not all) of the juniors.
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 just -0.08% this week. Of course, the General (Electric) was up a monstrous +9.5%, but you ought to be aware by now that the GE Chairman/CEO sits on the Board of the New York Fed along with the heads of JP Morgan and Lehman Brothers. Well JPM just happened to rally +20.7% this week in what I see as a clear cut case of the boys trying to save a Brother.
The stocks of companies in much the same heavy industry stuff as GE, like FLR (-6.8%) and ABB (-7.3%), were crushed. No, I don’t think GE had any
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 great week on Thursday, gaining +2.80% on Thursday to give a gain of +2.29% W/W.
A week ago 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. This week BBBY lifted +9.1%. BC (+10.1%) and NKE (+10.2%) were the big winners of the Cara 100.
The price of Crude Oil collapsed -$6.90/bbbl this week, so the Consumer Discretionary sector was greatly helped.
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 gained +0.80%. The gain on Thursday was +0.62%.
The big American Dow stocks WMT (5.2%) and KO (+3.6%) were the leaders, of course, and the stocks of the big European and South American companies in this sector (ABV -3.8% and DEO -2.6%) were losers.
This is why I ask, who is pumping what? Clearly, American banks, central bank, mainstream media, and Administration are collaborating to pump America, hoping perhaps that the rest of the world gets caught hook, line and sinker.
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) gained +0.57% W/W to close at 63.09.
The winner, not surprisingly, was Dow component JNJ (+4.10%) while the losers were AMGN (-15.0%) and UNH (-7.7%).
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 +6.02% on Friday) closed with a gain of +6.19% W/W.
Laughable to me were the stock gains of the American banks and brokers vs their foreign-based counterparts: JPM +20.7%, MS +20.0%, GS +8.6%, C +6.8%, and LEH +5.8% led the pack. The big losers were IBN -14.9% and BBD -9.5%, while both UBS and CS were also losers.
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) lost -0.75% W/W and Technology (XLK) gained +0.72% W/W. Both gained ground on Thursday.
AAPL (+4.2% W/W) was the winner and SNDK (-10.7%) was the loser.
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.
A week ago I pointed out
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.
This week, VZ gained +4.2%, including a gain of +2.8% on Thursday. That means the advice I gave you [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] looks pretty good. VZ closed the week at 36.12. The 2 puts could be bought back at $1.40 for a net gain of +$0.90, which I deduct from the $33.83 to give me a cost base of $32.93 and a possible sell price of $36.12. These are just closing prices, but in four days, with the written word and subsequent result as proof of concept, the gain would be +9.7% in four days. Of course, I am not suggesting that; I’m just following through for those students who are trying to learn a life skill.
Also, I wrote that I expected a Buy Alert on Monday, right? The stock closed at $34.61, which would have triggered a Buy alert on Monday.
Little by little we move forward.
Sector 55 (utilities: IDU, XLU, and VPU)
Here’s the XLU Monthly, Weekly and Daily data charts:
XLU Monthly data:
XLU Weekly data:
XLU Daily data:
XLU (Utilities) dropped -2.14% W/W to close at 37.45.
A week ago I wrote: “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.”
This week, EXC closed at $80.40 and traded as high as 82.46 on Wed. I’d still like to buy it down in the low 70’s.
Bonds & Yields Review
Table 10: US Treasury Yields
| Maturity | Yield | Yesterday | Last Week | Last Month |
|---|---|---|---|---|
| 3 Month | 0.34 | 0.47 | 1.26 | 2.14 |
| 6 Month | 1.08 | 1.10 | 1.43 | 2.05 |
| 2 Year | 1.58 | 1.46 | 1.62 | 2.07 |
| 3 Year | 1.46 | 1.34 | 1.57 | 2.08 |
| 5 Year | 2.37 | 2.31 | 2.50 | 2.94 |
| 10 Year | 3.33 | 3.34 | 3.53 | 3.90 |
| 30 Year | 4.17 | 4.21 | 4.44 | 4.67 |
| Maturity | Yield | Yesterday | Last Week | Last Month |
|---|---|---|---|---|
| 2yr AA | 2.54 | 2.46 | 2.57 | 2.36 |
| 2yr AAA | 2.51 | 2.53 | 2.55 | 2.31 |
| 2yr A | 2.83 | 2.61 | 2.65 | 2.44 |
| 5yr AAA | 3.09 | 3.09 | 3.07 | 2.78 |
| 5yr AA | 3.05 | 2.86 | 3.07 | 2.85 |
| 5yr A | 3.10 | 3.09 | 2.98 | 2.97 |
| 10yr AAA | 3.70 | 3.67 | 3.74 | 3.48 |
| 10yr AA | 3.85 | 3.86 | 3.57 | 3.54 |
| 10yr A | 3.99 | 3.95 | 4.04 | 3.80 |
| 20yr AAA | 4.64 | 4.65 | 4.64 | 4.32 |
| 20yr AA | 4.85 | 4.85 | 4.82 | 4.34 |
| 20yr A | 4.99 | 4.99 | 4.97 | 4.90 |
| Maturity | Yield | Yesterday | Last Week | Last Month |
|---|---|---|---|---|
| 2yr AA | 3.60 | 3.60 | 3.47 | 3.46 |
| 2yr A | 3.48 | 3.34 | 3.28 | 3.43 |
| 5yr AAA | 3.71 | 3.71 | 3.90 | 4.22 |
| 5yr AA | 4.20 | 4.17 | 4.19 | 4.31 |
| 5yr A | 4.56 | 4.50 | 4.92 | 4.69 |
| 10yr AAA | 4.46 | 4.55 | 5.12 | 5.24 |
| 10yr AA | 5.47 | 5.40 | 5.75 | 5.50 |
| 10yr A | 5.39 | 5.48 | 5.76 | 5.92 |
| 20yr AAA | 6.21 | 6.25 | 6.54 | 5.83 |
| 20yr AA | 5.79 | 5.83 | 6.59 | 6.41 |
| 20yr A | 6.08 | 6.12 | 6.41 | 6.41 |
The bond market was on wheels again this week, with yields in the 10-year through 30-year Treasury bonds dropping -7 and -19 basis points respectively to 3.33 and 4.17. Five weeks ago these yields were 3.73 and 4.53.
But the big move this week was the -72bp drop in the 3-month T-Bill yield from 1.06 to 0.34. Just 5 weeks ago, the T-Bill yield was 2.17.
Clearly, this is the definition of flight to safety. As I wrote a week ago, traders may even take zero return if their capital remains intact.
A week ago I wrote: “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.”
Crystal ball at work.
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 were saved by the Fed and HB&B this week: CFC (+13.1% on Thursday and +21.1% W/W), FNM (+11.7% on Thursday and +49.3% W/W) and FRE (+9.7% on Thursday and +54.0% W/W).
A week ago these stocks were getting absolutely crushed, but I wrote some words of wisdom: “I am not following this mess too closely because, you know, out of the room, out of the deal.”
This game is so crooked that we don’t have to live in Washington and New York to smell the stench. As a trader, I don’t mind the volatility at all – in fact I love it – but what concerns me is that the Fed and Admin actually think that these moves to help Friends & Family out of their dire straits by using the People’s money (and their children’s and grandchildren’s) is not being noticed by the People (and many of their children and grandchildren). They must take us all for fools.
If politics wasn’t so corrupt at the highest levels, there would surely be an impeachment of certain people.
The TLT gained +3.56% to 97.18 for a second solid week of gains.
The TIP lost -0.32% this week, which squares it over two weeks.
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 crashed -28.10 this week (-6.75%) to 388.30 from 416.40.
A week ago I wrote about the booming price in commodities: “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.”
You were warned.
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) crashed -6.90/bbl (-6.35%) to 101.84.
A week ago I wrote here: “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 $WTIC is now at 96.83, and the 200d MA is 85.43.
Here is the e-miNY Dec-07 Crude Oil chart.
Interactive Chart of Weekly Crude Oil:
Interactive Chart of Daily Crude Oil:
Gold & Precious Metals Review
A week ago I wrote: “$GOLD was flying again this week, up +25.30/oz (+2.60% W/W) to a record high weekly close of 999.50. 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. I think we might have seen it on Friday when $GOLD hit 1009.00. I believe the intermediate top has been put in now. But, really, I have no solid evidence – just a very strong feeling.”
$GOLD this week crashed -$79.50/oz to 920.00, which is a drop of -7.95%.
The 50-day MA for $GOLD is now 934.25, and the 200d MA is 784.48. So the current price is now below the 50-day MA.
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 crashed -$3.81/oz from 20.66 to 16.85, which is a loss of -18.42%. The loss on Thursday was -8.65% as the sell-off continued through the session whereas for Gold, Platinum and Palladium I detected some late-session buying.
Seven weeks ago, $SILVER closed at 16.87. The high was 21.33 two weeks ago Thursday. I said then that I thought that may have been the intermediate-term top.
For $SILVER, the 50d MA is now 17.89, and the 200d MA is 14.66. The current price is now below the 50-day MA.
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.
A week ago I wrote the ultimate warning: “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. Then… Well, plat and pall climbed back. $PLAT this week gained +38.40 (+1.88%) to 2081.40.”
Then along came the crash… this week $PLAT dropped -$199.00/oz (-9.56 %) to 1882.40.
The 50-day MA is 1901.87 and the 200-day MA is 1506.17. Note that the current price is below the 50-day MA.
Spot platinum chart for the week
Interactive Chart of Weekly Platinum EOD Continuous Contract Index:
Interactive Chart of Daily Platinum EOD Continuous Contract Index:
Interactive chart of the Platinum metal index.
Two weeks ago, I wrote, “$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.” I repeated that a week ago after $PALL had gained +19.40/oz (+3.92%) to 514.06. I warned.
This week, $PALL dropped 68.35/oz (-13.29%) to 446.05.
The 50-day MA is now 458.80 and the 200-day MA is 387.39. Note that the current price is below the 50-day MA.
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 -6.65% or -25.45 on the contracts to 357.35. The damage was done a week earlier when traders started thinking more about economic contraction.
The high was 402.40 two weeks ago Thursday, which I wrote on that Sunday “that 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 354.41 and the 200-day MA is 340.83.
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 |
A week ago I wrote: “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.”
This week, the $XAU dropped -34.36 (-16.65%) to 172.01.
The 50d MA for $XAU is 188.37, and the 200d MA is 166.63. Note that the current price is below the 50-day MA.
Also I week ago I wrote something I still believe, “That’s not to say there are not some spectacular values in the developing juniors.”
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
I was concluding in this space in the past couple weeks that the sell-off in the $USD and gains in precious metals was coming to an end.
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.
This week, the $USD gained +1.08 (+1.51%) to 72.75. $GOLD dropped -$79.50/oz. At one point it was off over -$100/oz.
There has been a lot of damage done in portfolios. Retail accounts and hedge funds alike will be getting margin calls. Let’s see how this plays out.
Interactive Chart of Weekly U.S. Dollar Index:
Interactive Chart of Daily U.S. U.S. Dollar Index:
The Euro ($XEU) bubble has popped, down 1.18% W/W to 1.5453.
“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:
A week ago I wrote: “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.”
This week, the Pound dropped -3.83 to 1.9836.
Weekly British Pound Index:
Daily British Pound Index:
Weekly Japanese Yen Index:
The Japanese Yen ($XJY) gained +0.28% W/W, which was a minor gain.
The Yen’s 50-day MA is 94.86 and the 200-day MA is 88.38.
Daily Japanese Yen Index:
The Loonie (Cdn Dollar) lost -3.83 (-3.77%) this week 97.71.
The 50-day MA and 200-day MA is at 99.78 and 98.63 respectively, which means the current price is below both.
Weekly Canadian Dollar Index:
Daily Canadian Dollar Index:
International Equity Markets Review
The FTSE (5632 to 5495), DAX (6452 to 6314) and CAC (4592 to 4534) all sold off again this week. A week ago I added, “So too would the US market except for the final hour rally that seemed to come out of nowhere again.” This week I can add, so too would the US market except for the fantastic (not credible) rally in the Financials on Thursday that came out of nowhere again.”
The Nikkei 225 of Japan is edging up a bit overnight, but nothing remarkable.
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 mostly flat from Monday through Wednesday and then had a huge burst of prices in the Financials on Thursday to close the week for the Easter holiday.
Three 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.” I feel the same, but want to watch Europe decide their course before opining further.
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 Boeing (BA) [GICS 20, Dow 30. Cara 100]
(BA: Value Line Report Mar. 21: next one is due Jun. 20)
If there is one proxy for how the US equity market has gone for the past ten years and is now likely to go forward, it’s Boeing (BA) or what I refer to as Better in America.
(Cara 100) Boeing is the quintessential US company: the global leader in aerospace and defense with 37% foreign sales (thanks to a $USD that has fallen to the point these planes are almost gifts), key to the America’s mighty military-industrial complex (mic), employer of 155,000 high-paid workers, managed by a world-class CEO (James McNerney), a corporate acquisitor (McDonnell Douglas Corp in 1997), and a company that strategically moved its command and control from what some see as the future front line (America’s west coast) to the high ground of Chicago.
I could get into the pay-offs of politicians, the buddy-buddy relationship with Washington and military personnel, the former CEO who ran a self-promotion mill and apparently was fired for hitting on women under his command, the sales of a Dreamliner product that was more concept than reality, and so forth, but let’s be positive because Boeing is truly impressive and one of my favorite companies in the world, now.
America, love it or leave it. For all its imperfections, I do love it because we traders deal with reality.
Which is not to say the stock should not have been sold eight or nine months ago when the RSI was red-lining a screaming 80+ on the Monthly-Weekly-Daily. Since then (7/25 $107.83 record high), the stock dropped almost one third to a low of $71.58 on 3/13, before bouncing back +4.5% to its present $74.80.
If you examine the Monthly and Weekly charts of BA, you will see that Boeing was in a strong rising trend (as measured by MACD) so that when the cycles turned down (as measured by RSI and Stochastics), there was consistently a following high-risk Buy signal that was generated well above the 30-line for the RSI. That’s the reason I call the Cara Accumulation/Distribution Zone and Buy/Sell Alert system a simplistic one. It’s the basis of a technical trading system, which will help your portfolio do well performance wise, but lacks the sophistication of an advanced trading system.
In any case, I plan to write two more books this year – one on advanced trading systems and the other on how to select quality companies like the Cara 100, whose stocks you need to hold in your portfolio when you are seeking growth.
Before I get off the manufacturing aspect, let me focus on the military. This company produces fighters (F-15, F/A-18), C-17 cargo carrier, V-22 helicopter , E-3 AWACS, E-4 command post, E-6 submarine communicator, ground transportation systems, develops the space station, and does work on the F-22 (ATF). The problem that Boeing faces is that the US Air Force has chosen to replace Boeing KC-135 tanker refuelers with planes that are built on the European Airbus A-330 frame rather than the B-767. That could be a $100 billion loss in high margin revenues. Then there are problems with the commercial B-787 Dreamliner that was sub-contracted largely to foreign companies that cannot meet their deadlines, causing three major production delays.
So, it’s not surprising that the stock is off its 52-week high all-time record of almost $108 by a stunning -30.6%. Besides, those 829 Dreamliner orders from 56 customers might be trimmed if this US recession turns into a global recession, or worse.
The good news is (1) Value Line is projecting 5-year annual growth rates for cash flow, earnings, and dividends of +12.5%, +15.5% and +12.0% respectively, which is even better than the company’s superlative 10-year record, and (2) in a recession as ugly as the one I project, the next Congress (if not this one) is likely to reject the Air Force decision on the European KC-45A tanker in favor of one from Boeing that is based on its larger B-777 air frame.
Boeing is a favorite of mine because the company is very strong financially, and Return On Equity has been running at 45%-60% the past couple years and is likely to be at least 27% for the next five years, including recessionary years. That’s because the production slots will remain full, and the military spending will always be strong. 2007 revenues were $66.4 billion and the backlog on the books at year-end was almost $300 billion. In addition, operating margins are in the 11.5%-12.5% range, and net margins are about 6.6%-6.8%, which for a company of this size is very impressive.
Let’s conclude by saying that BA is one stock I intend to load up on during the next down spike in the US equity market. In fact, how many of you caught the 3/13 Buy Alert at $74.13, which was disclosed in my 3/14 Daily Report covering 3/13. The $74.13 was actually the closing price, which followed by a couple hours the intra-day low of $71.59. Even on Thursday you could have bought BA for $72.72. On a subsequent down spike in US equity markets, this is a baby that will get thrown out with the bathwater, so be on your guard.
My point is that only when you focus on a watchlist of say 100 companies and zero in on only the few that are in the Accumulation or Distribution Zone will you spot the decision points for entry-exit when they suddenly come upon you.
Like anything in life, being prepared is half the battle. That’s why I put in the hours on this blog and the WIR.
The Dow 30 Company links in chronological order of next reports
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 Mar. 14: next one is due Jun. 13)
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 Mar. 21: next one is due Jun. 20)
Wrap up:
This was another terrific week for me. My book “Lessons From the Trader Wizard” was shipped. You should be receiving copies before the end of the month. Now I can relax.
I will be setting up a sidebar for comments from those who bought the book. I figure that if you each buy one copy plus a second one for parents or children, I ought to finally get a payback for what this blog is costing me… hahaha.
The book, like my trading, is one where I didn’t take too many risks. It’s full of nuts and bolts – a lot of them.
I’m hoping somebody sums it up as “Written by a personable mechanic”. That’s me. Guru, I’m not. Wizard, maybe, but that’s not for me to say.
Happy Easter.
Chocolate btw is my downfall. It takes me a month to recover from Easter.
Posted by Posted by Bill Cara on March 23, 2008 09:52:30 PM | Category: Cara Week in Review