Rising inflation based on record high oil prices, banks in trouble and in dire need of replacing lost reserves due to worsening credit market problems, and a slowing economy that is starting to show softness among reporting corporations. These are the key factors as noted. But the loss of confidence of international bankers in the Fed and of over-spending politicians is mostly to blame.

Goldman Sachs started the day by recommending short sales in General Motors and Citigroup. I cannot recall that ever happening before.

General Motors (GM) couldn’t withstand the rising crude oil price and the Goldman call. Its stock plummeted to a three-year low.

Goldman also opined that Citigroup (C) may report an $8.9 billion Q2 write-down and have to cut its dividend. The stock has had a tough eleven months sinking from a high on July 16 at $52.97 to the close yesterday at $17.67.

Second largest US bank, Bank of America (BAC) say they will slash 7,500 jobs upon taking over Countrywide Financial (CFC). The CFC co-founder and CEO Mozilo was choked up, calling himself typically Italian, in the 15 minutes he showed before security guards ushered everybody out of the meeting.

Brunswick Corp (BC), the maker of Sea Ray yachts and Boston Whaler fishing boats, plans to close four North American plants and may slash 10% of its workforce to cut costs in a very tough operating environment.

Sales of previously owned homes in the US rose in May from the lowest level in at least nine years. Some say it was the price reductions that lured buyers into the market. Who knows?

At the end of the day, the leading sector was Energy, but even that sector ETF (XLE) lost -0.72%).

The losing sectors were all over the board, but Financial sector (XLF) was down -3.60%.

For the industry groups, only the goldminers index ($XAU) was up and that was up a lot (+4.4%) as traders sought a safe-haven in cash, gold and goldminer shares.

For the Cara 100, the leaders were all the precious metals players: SLW +9.1%, GG +6.5%, and ABX +6.4%. Maybe BBBY has an inventory of gold plated faucets because it was up +4.3%. The losers were RIMM, GOL and NKE.

Research In Motion (RIMM) missed consensus earnings estimates by 1 cent a share ($0.84 vs $0.85), but the problem was that guidance for next quarter’s earnings was only 84-89 vs an expected 91. The shares were hammered, and now there is talk that Apple’s iPhone will cut into margins. The stock broke down completely, losing -$18.88 (-13.3%) on the day.

The Nike CEO reported ok results but said going forward would be a challenge and probably result in flat results. Traders decided to sell the stock down -9.8% on +4.3 times the average daily volume.

On the mergers & acquisitions front, Anheuser-Busch (BUD), the maker of Budweiser beer, rejected InBev's (ABV) $46.3 billion hostile takeover offer just three hours after receiving it.

At the close yesterday, the long 30-year US Bond ($USB) had rallied large (+0.90%) to 115.00. The yield on the T-bills dropped to 1.680, which is down from 1.960 in 10 days, which shows pressure in the credit market (as the Fed squeezes liquidity), and with traders flocking toward cash, gold, oil and into bonds.

Yesterday, the oil and gold speculators ran up the price of these respective commodities by +$5.09/bbl and +32.80/oz in what appears to be an attempted run against the $USD, but for the large part is being thwarted by the Fed squeezing liquidity. However the $USD did manage to still lose -0.52% to 72.47.

$WTIC closed at a record high of $139.64/bbl, but there was no sudden supply issue at all. Similarly, $GOLD closed very high at $915.10, but there was no sudden supply deficiency issue there either.

This morning (6:40am ET), the $USD futures are at 72.72 and the Euro futures are at 156.98, which show a modest reversal. The Crude Oil futures are at 140.95, after hitting an all-time record of 141.70 overnight. The spot prices for gold, palladium, platinum and silver are modestly higher than yesterday’s close at: 921.70, 465, 2062, and 17.375, respectively. In fact you will see that the palladium and platinum prices are lower than yesterday morning, so it appears to be oil and gold traders who are trying to stretch the present cycle to higher levels.

Overnight there was the anticipated sell-off in Asia-Pacific equity markets, but no more: Australia -1.33% to 5349.4, Shanghai -5.29% to 2748.4, Hong Kong -1.84% to 22042.4, India -4.30% to 13802.2, and Japan -2.01% to 13544.4. There was no run on equities.

In Europe this morning there was a catch-up to yesterday’s late session selling, but the CAC and DAX are down -0.7% only at this hour and the UK FTSE in fact is up +0.2%.

The DJIA futures this morning are slightly positive at 11469, which indicates a flat open.

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Comments & Outlook

Central banks are trying to hold the speculators down. History shows that when oil and gold speculators take control of the US Dollar, the central banks squeeze the speculators’ lifelines, which causes further damage to the broad equity market. That’s what happened yesterday, and will likely happen until the DJIA settles down at around 11000. Then, after a period of stability, there will be profit-taking by the speculators—mostly hedge funds of the type run by Boone Pickens—and as the price of oil and gold sink for a time the equity market tries to rally. The media will call this one a summer rally because the media likes handles.

But, don’t chase high commodity prices. Before the FOMC decision to do-nothing and say-nothing, which was a mistake, I opined that if that was the decided course there would be a weaker dollar and higher gold price. Hours after the FOMC decision, I alerted you to the fact that process had started. Yesterday was only an attempt by the speculators to run these prices up and the $USD down. There is no economic justification. So, I will put my confidence at his point in central banks and the ages-old prospects of profit-taking.

I note that Fed lending to banks has lessened a bit, but is still high. This may be the Fed’s desire or the bankers’ inability to borrow.

Now we get word the Fed is seeking to find new ways of facilitating investment into the shares of banks. Obviously the banks need the capital to build reserves that are required to make additional borrowings at the Fed window. Hmmm, the new investment banker on the block—the Federal Reserve Bank of the United States. If private equity is insufficient, there’s always public equity, and a Mr. Moral Hazard Treasury Secretary to watch over the process.

Barclay’s Bank now says about inflation today and on the horizon: blame it on the Fed! What are those people smoking? But for your reading enjoyment, catch the last few paragraphs of this article. It seems that ten banks have ten sources of the problems they face—none of which they caused, of course—and ten solutions.

“You say inflation; I say deflation.” Trust these million dollar salaried bankers not to get it right.

A few of these global banks are becoming penny stocks. I wonder if the NYSE will cancel their listings?

Speaking of penny stocks, some of you recall I know Garth Pierce, the VP Exploration and head geologist at Inter-Citic Minerals Inc (TSE:ICI), a small China-based gold exploration company I like. Last evening, the company reported that gold mineralization was found in all 22 new drill holes in a step-out drill program at their Dachang Project in Qinghai Province China, with 29.5 metres averaging 4.78 grams per tonne contained gold. Garth told me at PDAC 2008 he was expecting good results, and I wrote about it (early March). I also wrote about it in March 2007 after PDAC that year. If you are interested in the stock, I’d go to the company web-site to read the latest release. The stock closed at C$1.77 yesterday and had a high of $2.50 on Nov 7.

These are interesting days for students of the market. Emotions become enflamed, but it is wise to keep them under control. The market is a game that plays people, not the other way around. You are being played--even by headlines of the major media (e.g., "The worst June since the Great Depression!").

Yes, these are challenging times, particularly for the Buy-and-Hold "investor". But, let me just say that I believe a week from now that oil and gold prices will be lower that the current price.

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Links & Charts

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International Economics Review

US Economic Calendar.

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Knobias Cara100 Tables

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Cara 100 Daily RSI-7 Charts

At least one RSI value >70:

Ticker	Last	RSI-7M	RSI-7W	RSI-7D	Zone
SYT	62.53	86.97	56.72	41.97	Sell alert (trig. 6 days ago [on 2008-06-19 at $65.11, -3.96% chg], after a 1 day DZ)
TS	69.03	81.71	82.76	75.39	Distribution Zone (for 2 days)
WMT	56.83	80.83	53.08	40.84
ECA	88.92	79.90	60.15	41.84
ATVI	34.80	79.69	66.11	45.76	Sell alert (trig. 5 days ago [on 2008-06-20 at $35.85, -2.93% chg], after a 1 day DZ)
TT	46.49	76.65	65.62	56.92
EXC	87.43	72.16	54.42	35.24
GG	44.34	72.07	65.56	78.83
GGB	23.14	70.62	56.48	35.73
ABX	43.04	56.27	55.33	73.10

At least one RSI value <30:

Ticker	Last	RSI-7M	RSI-7W	RSI-7D	Zone
BC	11.56	9.13	16.70	31.58	Buy alert (trig. 2 days ago [on 2008-06-25 at $12.05, -4.07% chg], after a 3 day AZ)
GOL	11.31	19.06	25.84	24.19	Accumulation Zone (for 1 days)
WFMI	25.10	21.48	20.84	28.08	Accumulation Zone (for 1 days)
UBS	22.05	22.06	17.06	40.45	Buy alert (trig. 3 days ago [on 2008-06-24 at $22.03, +0.09% chg], after a 2 day AZ)
CCL	33.47	22.71	24.27	32.56
DB	88.72	23.45	9.25	24.09	Accumulation Zone (for 1 days)
GE	26.53	23.57	15.25	20.54	Accumulation Zone (for 1 days)
BMY	19.67	24.64	29.92	36.59	Buy alert (trig. 4 days ago [on 2008-06-23 at $19.70, -0.15% chg], after a 1 day AZ)
SBUX	16.28	24.66	36.15	33.84
GFI	11.92	26.12	38.35	62.96	Buy alert (trig. 5 days ago [on 2008-06-20 at $11.15, +6.91% chg], after a 2 day AZ)
BDK	58.74	26.69	22.19	42.15	Buy alert (trig. 6 days ago [on 2008-06-19 at $59.66, -1.54% chg], after a 2 day AZ)
WAG	32.88	27.03	27.70	16.10	Accumulation Zone (for 1 days)
GRMN	42.69	28.83	34.26	34.79
SNDK	19.93	28.83	25.49	15.48	Accumulation Zone (for 5 days)
JCP	35.98	28.91	28.57	32.90	Buy alert (trig. 6 days ago [on 2008-06-19 at $37.25, -3.41% chg], after a 1 day AZ)
ERJ	27.91	29.00	9.32	13.29	Accumulation Zone (for 18 days)
TM	94.50	29.31	35.56	25.11
AET	39.59	31.20	27.80	12.00
IBN	30.99	31.88	16.68	26.44
TGT	47.64	32.08	24.91	28.23
WHR	66.25	32.16	29.11	45.54
SWK	44.82	33.07	25.14	32.26
HDB	72.76	33.20	15.38	19.25
BA	68.21	33.85	27.46	17.63
DEO	73.81	34.11	21.09	39.23
NOK	25.06	34.26	27.14	44.01
PAYX	32.04	34.36	28.60	37.64
UTX	62.79	34.41	22.81	14.65
DOW	35.10	36.48	24.40	15.66
ERTS	44.39	36.77	30.99	25.60
YHOO	21.37	37.22	19.55	19.03
TGP	26.93	37.32	32.21	27.10
CSCO	23.82	38.23	34.79	23.36
KO	53.22	38.98	22.41	34.83
PG	62.25	39.16	22.27	23.13
WBK	98.55	39.32	28.09	40.08
CHA	54.06	39.93	27.59	27.04
RY	45.37	41.98	33.78	27.50
HBC	77.94	42.10	31.22	21.99
ABV	63.86	43.74	25.55	30.81
CHL	66.04	45.28	25.54	29.07
TEF	78.82	46.16	26.42	34.04
DIS	31.53	46.46	37.21	29.51
CTSH	32.51	47.21	48.82	28.13
VCP	26.68	47.66	31.82	10.46
NKE	59.50	47.96	32.25	12.25
LLTC	31.99	48.62	35.90	26.20
GOOG	528.82	48.67	43.40	28.18
CHRW	55.88	53.71	35.73	27.25
ABB	28.21	56.60	40.32	20.96
MICC	107.11	56.61	46.54	26.92
PDA	53.61	57.87	41.90	22.60
IMO	54.33	58.12	39.88	29.34
STO	35.85	63.41	51.96	28.74
RIMM	123.46	63.66	46.05	25.40	Sell alert (trig. 5 days ago [on 2008-06-20 at $144.56, -14.60% chg], after a 2 day DZ)

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International Equity Markets Review

Europe

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

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

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Here is the latest session data for the German DAX.

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

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

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

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Asia-Pacific

Here is the latest session data for the Asia-Pacific stock exchanges.

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Here is the latest chart for the Japanese Nikkei 225 index.

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Here is the latest chart for the Singapore index .

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Here is the latest chart for the Shanghai Composite index .

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

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

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

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US Equity Markets Review

DJIA (interactive) chart

NASDAQ Composite (interactive) chart

Table 14: Dow 30 List

Sorted by 1-Week Price Performance

Symbol	Close	1Day Change	1Day %Change	1W %Change	2W %Change	4W %Change	YTD %Change	3M %Change	6M %Change	12M %Change
MRK	36.20	-0.78	-2.11%	1.69%	2.26%	-6.99%	-36.90%	-19.02%	-39.08%	-26.30%
XOM	86.41	-1.19	-1.36%	0.72%	-0.75%	-3.29%	-7.59%	0.17%	-8.86%	5.61%
CVX	97.41	-1.95	-1.96%	0.57%	-0.66%	-1.47%	4.23%	14.65%	2.71%	17.79%
KO	53.22	-0.88	-1.63%	-0.26%	-6.86%	-8.04%	-12.88%	-12.97%	-15.54%	2.44%
JNJ	64.26	-1.02	-1.56%	-0.56%	-2.18%	-3.25%	-2.50%	-0.68%	-4.88%	4.23%
WMT	56.83	-1.29	-2.22%	-1.49%	-3.86%	-1.92%	21.17%	7.43%	17.47%	18.47%
IBM	121.13	-3.45	-2.77%	-3.11%	-2.20%	-6.61%	15.70%	3.61%	8.58%	15.00%
PFE	17.17	-0.71	-3.97%	-3.38%	-3.16%	-11.49%	-25.05%	-17.01%	-25.99%	-32.90%
MCD	56.45	-1.60	-2.76%	-3.65%	-4.87%	-5.09%	-2.84%	1.53%	-5.73%	9.08%
MSFT	27.75	-0.60	-2.12%	-4.08%	-1.74%	-1.98%	-21.21%	-2.84%	-24.20%	-6.00%
PG	62.25	-1.24	-1.95%	-4.08%	-6.33%	-4.92%	-13.91%	-10.61%	-15.92%	1.73%
HPQ	44.67	-0.93	-2.04%	-4.12%	-4.90%	-4.78%	-10.32%	-5.64%	-15.35%	0.07%
DIS	31.53	-0.96	-2.95%	-4.13%	-5.14%	-6.74%	-0.97%	-0.72%	-3.93%	-7.43%
T	33.47	-1.00	-2.90%	-4.78%	-8.02%	-16.74%	-18.37%	-11.36%	-20.87%	-14.81%
GE	26.53	-1.46	-5.22%	-4.94%	-8.67%	-13.41%	-27.83%	-28.55%	-29.35%	-30.22%
MMM	70.26	-2.31	-3.18%	-5.21%	-7.00%	-9.65%	-15.05%	-10.68%	-18.37%	-18.38%
INTC	21.59	-1.06	-4.68%	-5.51%	-2.09%	-6.70%	-14.83%	-1.24%	-21.35%	-7.66%
VZ	34.31	-1.28	-3.60%	-6.00%	-6.33%	-10.58%	-20.60%	-5.06%	-23.92%	-16.46%
JPM	36.32	-1.59	-4.19%	-6.03%	-4.45%	-16.64%	-13.87%	-17.66%	-19.18%	-25.27%
CAT	74.28	-2.30	-3.00%	-6.54%	-7.73%	-10.27%	5.17%	-3.98%	0.80%	-7.49%
UTX	62.79	-3.23	-4.89%	-8.76%	-7.55%	-10.59%	-16.51%	-9.80%	-19.31%	-11.02%
AXP	38.89	-2.05	-5.01%	-8.77%	-10.43%	-16.81%	-23.80%	-14.26%	-26.48%	-36.59%
HD	24.66	-0.81	-3.18%	-9.27%	-6.87%	-11.01%	-5.55%	-12.43%	-8.63%	-37.01%
DD	42.82	-1.29	-2.92%	-9.66%	-7.54%	-10.42%	-2.10%	-8.56%	-4.99%	-15.43%
AA	35.30	-1.64	-4.44%	-9.76%	-6.47%	-12.49%	-2.30%	-2.03%