« Daily Report for Sat, Aug 09, 2008 | Main | Daily Report for Mon, Aug 11, 2008 »
August 10, 2008
Week in Review #32 (2008-08-10)
The gold bugs have not enjoyed my reporting in the past month. They are certainly not going to like it this week!
In a nutshell, the precious metals are now in a confirmed Bear, and the gold bugs and silver crazies have been duped by their preachers. Now the flock is hearing all the old conspiracy theories, and the dialogue is getting more insane by the day.
If life were a computer game, I’d line all those precious metals newsletter writers up against the wall and dispose of them the way games do. They are a complete waste of your time and money, and those of you who continually ask me to comment on the value of their advice are wasting my time and trying my patience.
Professional traders laugh at that junk. Can you imagine what Xstrata’s Mick Davis and his Glencore backers, the Metals Men of Zug, think?
It’s time to get serious. I will always tell you straight. You trade prices. The answers are in the data, not in the words of a group of cheerleaders who have an axe to grind.
Moreover, the cheerleading crowd is so busy flying from one “investor” conference to the next, drinking in bars with their peers, scratching one another’s backs, that I don’t see how it’s possible for them to be spending the time needed to study the data—and do it with the independent and objective clear-headed mindset that traders need.
So, when people persist in asking me to meet so-and-so or call them, etc, you have to know I won’t even take the time to read the stuff. It’s dangerous.
So, why am I pushing hard here? It’s because I carefully set it up starting in early July, and now you have the proof of concept. The market has fundamentally changed. If you want to ignore it, there is nothing further I can do.
What the price series data shows is that gold and silver have turned bearish. If that’s a conspiracy, then how is that the commodity index, copper, palladium, platinum, oil (soon), the Euro, British Pound, Canadian and Australian Dollars, and Japanese Yen also turned bearish at the same time? These prices are all linked. We don’t trade in a vacuum.
Does anybody honestly believe that conspirators purposefully decided to short the penny mining and explorer stocks so the major companies could buy them out? Do you really think my old firm Canaccord Capital, where I was founder/CEO of Eastern Canada, is making a killing shorting these stocks? One look at their chart and the most recent news releases shows that the world’s number one financier of junior miners and explorers can’t find many clients (corporate or retail) to put deals together. Their stock has plunged in the past 15 months or so from a high of $25.92 to a low this summer of $6.68. From a look at the P&L, I’d say their big producers are having trouble gassing up their Rolls Royce’s. The writing has been on the wall there since the start of May.
Let’s look at the big picture.
Something serious happened to capital markets on July 7. The commodities markets tanked. The oil price collapsed for two days, then recovered as the $USD lost more ground for the next four days. Then at July 14 and 15, the oil, platinum and palladium markets crashed and the Yen, Pound and Loonie swooned, followed later by the Euro, gold and silver. I had been watching two stocks for the keys to this move: Xstrata (LSE:XTA) and Teck (TSE:TCK.B).
Let’s look at Teck since the Xstrata data is available only to those who get the London Exchange. But the Xstrata data is the same. So is the other major miners, as I’ll show in a moment.
While Canada enjoyed its national Flag Day on the 1st, the NYSE was open and there was no indication from price or volume in TCK that a sell-off was expected. But, on July 2, Teck shares on Toronto dropped from C$49.17 to C$45.06 (low of C$44.16) on 3.39 million shares, which at the time was very heavy volume. Selling over the next week became relentless on even higher volume as the price dropped to C$40.00. This was a typical Bear market cycle (ie, -20%) in about two weeks.
But by the end of the month, which happens to be a convenient time for booking a nice profit, timed perfectly with the Company announcement of their purchase of the excellent Fording Canadian Coal Trust assets, there was a huge move back into TCK.B on Toronto (19 million shares in two days) and into TCK on the NYSE (13 million shares in those two days). That trading surge followed a mid-July low in the 30’s on both the NYSE and TSE, finishing with a month-end close of $45.38/C$47.03. Then, with more downward pressure on oil, there was an immediate sell-off in TCK to start August, where the stock dropped into the 30’s again, where it is today ($38.60).
It’s been quite a dance with a falling oil price and a corresponding rise in the $USD providing the music.
BMO’s commodity fund guy Don Coxe opined that the rush of capital into XLF was the driving factor that killed commodity prices. I called him out. This chart proves my case. Commodities and the commodity-beneficiary stocks were crashing two weeks before XLF enjoyed a temporary moonshot.
For a guy who trades commodities (I call him a front man for a loser group of commodity traders), I’m wondering why he wasn’t watching the commodity-beneficiary stocks. In addition to the metal miners, he could have been looking at Exxon Mobil (XOM). After hitting a high of $96.12 on May 21, XOM had dropped to $88.35 on July 1, then down to $80.81 on July 16. That happened before XLF took off on a huge short-covering rally.
Anyway, I have the utmost respect for Don Coxe as a writer. For the year my parents were in hospitals and the nursing home, leading to their death in 2005, which, to take my mind off those circumstances was the reason I started blogging, I read everything Don had published in Macleans, the magazine of choice for healthcare waiting rooms.
Do you recall what I wrote at the end of June about the $XAU (goldminer share index): “Two-day rocket!” That was the trap that sucked the gold bugs in, and then I saw XTA and TCK shares plummeted immediately after that. I have opined in the blog that these two stocks are traded by the world’s best traders, bar none, so I always keep my eye on them.
Maybe you recall the take-over of Canada’s base metals mining industry in the summer of 2006? Xstrata acquired Falconbridge and CVRD/Vale (RIO) bought Inco. Teck for Vancouver was in the thick of it. The other majors watched this fight for control of metal supply (and, to a large extent, prices). The others are BHP (BHP), Rio Tinto (RTP) and Anglo American (AAUK).
These are the world’s major metals miners, and in the first couple days of July their share prices also crashed. In each case, gold mining is a very small part of their whole operation. Trust me; there was no conspiracy against gold or junior companies.
When all these stocks recover, then gold will recover.
As I told you all along, the goldminers and the gold bullion would be the last off the dance floor. How many times have I written that?
Oil, then metals, then gold. Up, then down. Only occasionally is that cycle contorted.
I’d like you to study the charts of major currencies I provide in this report, and you will see confirmation of the busting of the commodities boom cycle, and the new Bull for the $USD. That Bull phase for the US Dollar will first have to test the 200-day Moving Averages support ($USD) and resistance (Euro, Pound, Yen, Loonie, CRB commodities index) before it really breaks out. That will trap more gold bugs and ‘peak’ oil bulls, causing them more capital losses eventually. But, then the $USD will start to move higher as the media starts talking about deflation.
The first round of deflation talk will knock the price of gold down to its cycle low in its ongoing secular (ie, multiple cycle) trend. That’s where I will be a buyer of gold again, maybe it’s here at 850-860, and maybe it’s down at 800, as originally forecasted by me, or even lower. Nobody knows. We just need to watch the data.
Yes, watch the data. Connect the dots. Close your eyes and ears to newsletter writers unless they have proven themselves to be 100% independent and objective in their assessment of prices.
You need to learn this stuff because you are trading against the top traders in the world backed up by whatever resources (computers, analysts, capital) they need to screw you over. They want your capital. I’m speaking of Humungous Bank & Broker, your personal and corporate financial advisor, the very people who trade against your order flow.
It’s not a level playing field, and it may never be. But that doesn’t mean to say people like you and I can’t win at their game. We can move millions and billions; HB&B has to move trillions. We can move faster.
But the point to today’s blog is that we can’t be looking in all the wrong places. Regardless of how much we may like the enemy on a personal level, they are still the enemy. They want our capital; we want theirs.
Now, let’s take a look at the data.
Global Economics Review
With respect to the US economy that is in dire straits, note that the tone is improving.
Weekly International Economic Report .
Econoday summed up the week thusly: “The Federal Reserve, European Central Bank, the Bank of England and the Reserve Bank of Australia all kept their key interest rates unchanged at 2 percent, 4.25 percent, 5 percent and 7.25 percent respectively despite deteriorating growth and continued high inflation. It is one year since the advent of the credit crisis and the outlook continues to be grim. Data continue to point to slowdowns in Australia, the UK, EMU and the U.S. while Japan has also weakened and could declare a technical recession. Yet everywhere inflation is above its declared or implicit target, and likely to remain there for some time… But the dip in oil, which after surging all the way to $147 has fallen back about $30 from its peak, offers a glimmer of hope. Central bankers had some tough decisions to make in their policy deliberations. As growth continues to slow, economies could benefit from a fillip provided by lower rates. But inflation continues to run above targets and it takes time for recent declines in oil prices to filter through the economy. Reactions to post-meeting statements by central bankers played out in the foreign exchange markets where the dollar rose against virtually all major currencies including the pound sterling, Canadian and Australian dollars and the euro. And the list goes on. And lower crude prices also helped push the dollar up in value as well.”
This is an excellent report by the way. I encourage everybody to read it and discuss it in the Discourse.
Here are the key US economic reports and the Econoday analysis from last week.
US Economic Calendar.US Personal Income and Outlays Report for June. For June, Econoday reported: “Personal income growth in June decelerated after a sharp boost in May-primarily due to a drop off in income tax rebates. Inflation, however, worsened - even at the core level. Personal income in June edged up 0.1 percent, following a 1.8 percent surge in May… On the spending side, personal consumption in June remained on the high side with a 0.6 increase after surging 0.8 percent in May. Spending was led by a 1.3 percent boost in nondurables which includes gasoline. Essentially June's gain was due to a spike in gasoline prices as overall real spending slipped 0.2 percent, following a 0.3 percent rise in May… Turning to inflation, the headline PCE price index worsened even more to a 0.8 percent gain after jumping 0.5 percent in May. The core PCE price index also firmed in June, increasing 0.3 after a 0.2 percent rise in May… Overall, the income and spending numbers continued to be affected by the income tax rebates and higher gasoline prices. We will likely see some unwinding of these effects in the next few months as rebate income drops off and gasoline prices have slipped. But wages and salaries income has slowed due to a weak labor market and that is likely to persist. We can expect consumers to become increasingly cautious about spending and that points to sluggish economic growth ahead.” I had said a week ago, “We’ll be watching the wages and salaries component for anything good here.” This week the economists are pointing you to “demand destruction,” which happens in a weak labor market.US ISM Non-Manufacturing report for July. For July, Econoday reported: “U.S. purchasers are reporting declines in new orders, pointing to trouble for second-half growth and employment. The new orders index in ISM's non-manufacturing report fell nearly 1 point to 47.9, the lowest reading since January and the second lowest of the whole expansion.”
US Pending Home Sales index for June. For June, Econoday reported: “Pending home sales bounced back in June, up 5.3 percent compared to May and down 12.3 percent in a year-on-year reading, benefiting from easier comparisons, that continues to improve. Strength was centered in the South and West with the Northeast and Midwest lagging but still showing gains. The National Association of Realtors said tax credits to first-time buyers may have given a boost to the month's sales. The dollar firmed in immediate reaction to the report which will improve the outlook for July home sales data.”
US Productivity and Costs Estimate for Q2. Econoday stated: “Productivity and labor costs in the second quarter were mixed but still point to cost cutting by companies and an easing in labor cost pressures. Second quarter productivity slowed to an annualized 2.2 percent increase, following a 2.6 percent gain in the first quarter. The second quarter increase was below the market forecast for a 2.7 percent annualized boost. Unit labor costs continued to ease with a 1.3 percent annualized increase, following a 2.5 percent rise in the first quarter. The second quarter number matched the consensus expectation. The weaker gain in productivity was due to less of a drop in hours worked. Hours worked fell an annualized 0.5 percent, following a 1.6 percent drop in the first quarter. Output posted an annualized 1.7 percent advance after rising 0.9 percent in the prior quarter.”
US Wholesale Trade data for June. For June, Econoday reported: “Inventories at the wholesale level rose 1.1 percent in June, a sharp jump but well below a 2.8 percent rise in sales at the wholesale level. The inventory-to-sales ratio in fact fell 2 tenths to a record low 1.06 to indicate that inventories are historically lean. Special factors in the data are price effects tied to energy and food and to the severe contraction underway in the auto sector. Wholesale inventories of nondurables, inflated by oil and food prices, jumped 1.8 percent while sales of nondurables jumped 4.1 percent. Inventories of petroleum products jumped 8.3 percent in the month with inventories of farm products up 7.1 percent. Inventories of paper products, where price increases are also underway, rose 3.1 percent. Note that the jump in petroleum inventories still lagged the price-inflated 12.7 percent jump in petroleum sales and pulled the inventory-to-sales ratio 1 tenth lower to 0.23. This is a price-based measure; in volume terms sales of petroleum products are down slightly according to EIA data.”
How is next week’s calendar looking?
US Economic Calendar.US International Trade Report for June. For May, Econoday reported: “The U.S. trade deficit in May surprisingly narrowed despite a huge run up in oil prices as exports outpaced imports. The overall U.S. trade gap narrowed to $59.8 billion from a revised $60.5 billion deficit in April and came in smaller than the market forecast for a $62.1 billion deficit. In May, exports continued upward with a healthy 0.9 percent gain while imports rose a moderate 0.3 percent. The oil gap actually shrank to $33.2 billion in May from $34.8 billion in the prior month, while the nonoil deficit widened to $38.0 billion from $35.8 billion in April. Not surprisingly, the average price of imported oil set another record high, reaching $106.21 per barrel in May from $96.81 per barrel in April. Strength in exports was led by industrial supplies. Import growth was slowed by a decline in automotive and in industrial supplies (which includes oil). Today's report shows that the international sector is supporting growth in the U.S. despite the spike in oil prices. Equities should like the numbers as well as the dollar… Year-on-year, overall exports were up 17.8 percent in May while imports were up 12.5 percent.” A rallying $USD could hurt the prospects for export growth.US Retail Sales for July. For June, Econoday reported: “Retail sales for June were disappointing with income tax rebate checks apparently going mostly into drivers' gasoline tanks. Overall retail sales posted a modest 0.1 percent in gain in June, following a 0.8 percent boost the month before. The headline number was considerably softer than the market forecast for a 0.5 percent increase. Excluding motor vehicles, retail sales increased a strong 0.8 percent in June, after advancing 1.2 percent the month before. The consensus expectations for ex-auto sales were for a 1.0 percent increase. However, strength was mostly due to higher gasoline prices. When excluding both motor vehicles and gasoline, sales advanced 0.2 percent, after rising 0.8 percent in May… Indeed, inflation largely led retail sales as the strongest component was gasoline stations with a 4.6 percent boost in June. Food and beverage stores also posted a sizeable increase at 0.7 percent. Other strength was in nonstore retailers and clothing & apparel… Weakness was led by building materials & garden equipment and by motor vehicles & parts which dropped 0.9 percent and 3.3 percent, respectively… Overall retail sales on a year-on-year basis in June were up 3.0 percent while excluding motor vehicles, the year-on-year gain came in at up 6.2 percent… The June retail sales report shows consumers being hard hit by higher gasoline prices and cutting back in other areas. With higher prices underlying much of June's gains, we are likely to see little if any real gain in personal consumption for the month.”
US Consumer Price Index for July. For June, Econoday reported: “Consumer price inflation got even hotter in June. The headline CPI soared 1.1 percent, following a 0.6 percent surge the month before. June's boost was above the consensus forecast for a 0.8 percent jump. The core rate firmed to a 0.3 percent increase after a 0.2 percent rise in May. The market had forecast a 0.2 percent increase… Once again, energy led the surge in overall inflation with a monthly 6.6 percent increase, following a 4.4 percent gain in May. Gasoline was up a monthly 10.1 percent after rising 5.7 percent in May. Food inflation accelerated sharply with a 0.8 percent jump in June, following 0.3 percent increase the month before… There are signs that the core rate is heating up, too. Recreation and education & communication were up 0.5 percent and 0.4 percent, respectively. Housing was up 0.5 percent also but much of the increase was energy related as the shelter subcomponent was a more moderate 0.3 percent in the latest month. On the soft side were apparel, up 0.1 percent; recreation, up 0.1 percent; and medical care, up 0.2 percent. But apparel has actually firmed compared to typical monthly declines, indicating that imported inflation is hitting the consumer… Year-on-year, the overall CPI jumped to up 4.9 percent in June (seasonally adjusted) from up 4.1 percent in May. The core rate edged up to up 2.4 percent, compared to up 2.3 percent in May. The headline year-ago rate is at its highest since 5.6 percent for January 1991… Higher energy and food prices are clearly boosting inflation and now there are signs of seepage into the core. This is certainly putting the Fed between a rock and a hard place.”
US Industrial Production for July. For June, Econoday stated: “Industrial production in June topped expectations, primarily on a rebound in utilities, although manufacturing did post a modest rebound. Overall industrial production rebounded 0.5 percent in June, following a 0.2 percent decline in May. The June gain was above the market forecast for no change. The manufacturing component made a 0.2 percent comeback, after slipping 0.1 percent in May. Utilities output increased 2.1 percent in June while mining output rose 1.1 percent… Although the manufacturing component did rise in June, strength was led by a monthly 5.4 percent jump in motor vehicle output which followed a 0.6 percent rise in May. Excluding motor vehicles, manufacturing output slipped 0.1 percent - the same as in the prior month. Other components were mixed. Moderate gains were seen in wood products, primary metal, computer & electronic products, apparel & leather, petroleum & coal, and plastic & rubber… On a year-on-year basis, industrial production in June improved marginally to up 0.3 percent from up 0.2 percent in May… Overall capacity utilization in June rose to 79.9 percent from 79.6 percent in May and compared to the market forecast for 79.3 percent for the latest month… Today's report indicates that manufacturing is slightly better than recent regional surveys have suggested. Keeping in mind that overall production was boosted by utilities, manufacturing is still very sluggish, with the recent trend still flat. After all, June's modest rebound followed two negative months.”
A week ago, I opined: “I don’t see how interest rates in the US, UK or Europe can fall from here unless the fix is in for $200 oil.” To the contrary, the Crude Oil price ($WTIC) dropped -7.9% this week after central banks everywhere left rates unchanged.
US Equity Markets Review
DJIA stockcharts.com chart
The Monthly, Weekly and Daily RSI and Stochastics indicators are on the rise for the major market indexes, all of which had an outstanding rally this week. But the Dailies are elevated now, showing me that the short-term rally is headed toward resistance in the next few weeks. If that were to happen, I’d say the driver would have to be a higher oil price. So as long as oil prices are falling, I’d say hang on to your calls and longs. Sell into strength on a very strong up day.
At the end of this week though, there were 8 of 10 sectors that lifted in price. Only the commodity-related sectors, Energy and Basic Materials, were down. There were 25 of 30 Dow components that were up. A week ago, despite a big sell-off on the Friday, I opined, “So, the damage wasn’t all that much. In fact, while the DJIA was driven lower (-0.4%) by General Motors (GM -14.0%), the S&P 500 index actually gained (+0.2%).”
The DJIA increased +3.6% to 11734.32 and the S&P 500 was up +2.9% to 1296.32.
NASDAQ Composite ino.com chart
NASDAQ Composite stockcharts.com chart
The NASDAQ Composite was up this week by +4.5% to 2414.10. Some of the ones I pointed to for watching closely: SanDisk (SNDK +16.9%), Research In Motion (RIMM +11.3%), Microsoft (MSFT +10.6%), Cisco (CSCO +10.3%), Adobe (ABDE +9.5%), Oracle (ORCL +9.4%), Intel (INTC +8.4%), and Apple (AAPL +8.2%), really cranked it up this week. I had a sense of it early in the week when I opined in the Daily Report that I was expecting weakness at the open, but strength after that.
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. If you want, add a couple like SNDK and ADBE:
AAPL MSFT GOOG QCOM RIMM CSCO INTC ORCL GILD EBAY
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
This week, there were 8 sectors up and 2 down. On Friday there were also 8 of 10 up.
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 many ETFs, go to the AMEX.com web site, and click on ETF’s.
10 (energy: XLE)
15 (basic materials: XLB)
20 (industrial: XLI)
25 (consumer discretionary: XLY)
30 (consumer staples: XLP)
35 (healthcare: IYH)
40 (financial: XLF)
45 (technology, semiconductor: SMH)
50 (telecom: IYZ)
55 (utilities: XLU)
Individual Sector ETF Review
Sector 10 (energy: XLE, IYE, VDE, OIH, PBW and IXC)
Here’s the XLE Monthly, Weekly and Daily data charts:
XLE Monthly data:
XLE Weekly data:
XLE Daily data:
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 |
Crude Oil ($WTIC -$9.90/bbl -7.91% to 115.20) has dropped from $145 just four weeks ago.
The Energy sector ETF (XLE) lost -4.43% to close at 71.19.
The US integrated oils, Chevron (CVX +0.1%) and Exxon (XOM -1.3%) held up the best, but there were some major losses taken here this week: China Offshore (CEO -10.0%), and Imperial Oil (IMO -9.4%) and EnCana (ECA -8.2%) among them.
I will re-state from two weeks ago, and the week before that:
“… this is a solid sector for the future Bull, which means you need to start looking at the potential winners, and XOM, SU and PTR are ones I like at a price. The bigger the account (presumably longer term oriented), the more that it’s advisable to write puts on market pull-back days. But don’t chase them. Let them come to you. XOM closed at $79.72, but hit a low of $79.45 on Friday. The mid-70’s is my target. You can write the Jan-09 75 puts for $4.00 and the 70 puts for about $2.35. I think that’s money in the bank even if the stock is put to you. With a basis in the 60’s (say 68), and 2008 earnings projected at $8.72 (with $4.28 already in the bank), that would be a PE of just 7.8x. The average annual PE is going to be running ~12.0x, so I would feel good at writing those puts, particularly on very weak days in the market, and for XOM. In fact, I think the cash flow/share will be about $12.00 for 2009, so if I could buy the stock in a terrible Bear market at 6x cash flow (say mid-70’s or better), I’d be a happy trader. That’s because the Value Line chart shows the price tracking at 9x cfps since mid-2002, and I think we’ll see that again in 2010 (when cash flow/share is likely to exceed $13) with a price let’s say about $120. Besides, over the next two years, I’d expect to take in $3.00 in dividends. XOM goes ex-dividend on Aug 11.
This week XOM dropped -1.3% to close at $78.72. The Jan-09 75 puts closed at $4.25 and the 70 puts at $2.52. The lower in price that XOM trades, in the next month or so, the higher the prices of these puts, which means when you sell them, you take in more premium, which lowers your cost base, possibly into the high 60’s. As I opined, if you have a basis in the mid-70’s or better, you are probably very well set for the next Bull market.
To repeat, the point is that (i) you have to pick sound companies, and (ii) buy and sell their shares at attractive prices so that your dividends to basis is always rising. Don’t lose sight of the fact that when you trade, you are in the money business.
Oil & Gas Exploration & Production -Canada
Sector 15 (basic materials: IYM, XLB, IGE and VAW)
Here’s the XLB Monthly, Weekly and Daily data charts:
XLB Monthly data:
XLB Weekly data:
XLB Daily data:
Table 3: Senior metals and steel equities:
| Symbol | Close | 1Day Change |
1Day %Change |
1W %Change |
2W %Change |
4W %Change |
YTD %Change |
3M %Change |
6M %Change |
12M %Change |
Basic Materials (XLB -1.93% to 38.60) was, like XLE, a loser this week.
It’s not a “laggard” btw, it’s a loser. CNBC and Bloomberg are representing the sell-side, so they’ll say it’s a laggard. The ridiculousness of their “message” is that on the Thursday when the DJIA was down -225 points, and there were no winning sectors, the Talking Heads and on-screen messages were describing “laggards”.
In this space in last week’s WIR, I stated: “The Monday morning opening ought to be an interesting one for the metals and precious metals. Later I’ll show how I warned that the charts were looking weak, which then really disappointed me when one of the people in the Discourse asked if I was buying gold. Btw, the Goldminer share index ($XAU) plunged -6.33% this week. The goldbugs and letter writers were telling the public that the majors were shorting the juniors to buy them cheap (ha!). No, what was happening is that the relatively weak juniors (ie, cash flow wise) were losing bids as traders were getting more nervous about their speculation efforts. The weak die first.”
Now you know the rest of the story: This week, Gold dropped -$52.70/oz (-5.74%), while the loss in silver was -12.50%, and palladium’s loss was -11.08%. The platinum loss was -5.78%, so there was no place to hide if you were a gold Bull. Even copper was down -6.86%. Moreover the goldminer indexes ($XAU and GDX) plunged -11.12% and -13.95% respectively.
People who persist in swimming across lakes carrying gold bricks in each hand drown. There is a time and place for holding those gold bricks; the last month in the market hasn’t been one.
The losers in the Basic Materials stocks I monitor were: TCK (-11.8% including -6.1% on Friday); RTP (-9.5%); GGB (-9.2%); and RIO (-9.0%). The major goldminers we’ll get to later but Goldcorp (GG -15.0%) and Barrick (ABX -13.3%) were surpassed on the downside by many.
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 |
The Industrials (XLI +4.79% W/W) closed at 35.89, helped by Friday’s gain of +4.0%.
The winners were simply incredible (in any sense of the word): Federal Express (FDX +14.0%); Boeing (BA +9.4%); UPS (UPS +5.5%); United Technologies (UTX +5.2%) and General Electric (GE +5.1%).
This might have been America’s answer to China’s wonderful display of artistry at the Beijing Games. Corporate America up!; $USD up!; Shanghai Composite down (-7.0%)!
I wouldn’t put it past Mr Moral Hazard, Treasury Sec Paulson.
This week, Fedex and UPS did have lower fuel prices to contend with; and that would also help Boeing. But, there are serious issues in the economy and, in Boeing’s case, billions of dollars in cancelled orders due to their failure to deliver the Dreamliner anywhere close to on-time. Traders haven’t forgot these things. They simply closed some shorts, for now.
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:
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 |
Speaking of closing shorts, the Consumer Cyclicals (XLY) was up +7.15% W/W, including a gain of +4.93% on Friday, closing at 30.43.
JC Penny (JCP) up +18.4%. How is that? Well, without those shorts, I can see their nuts! (corny joke, repeated often)
The winners also related to falling oil prices: Brunswick (BC +12.3%); Tata Motors (TTM +9.5%); and Carnival Cruises (CCL +9.1%) are good examples.
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 |
Consumer Staples (XLP +3.88% W/W to 28.41) was another winner this week.
Diageo (DEO +10.2%, including Friday’s gain of +4.6%); InBev (ABV +8.3%); and Starbucks (SBUX +4.9%, including Friday’s gain of +4.1%) showed that even in a Bear market, consumers are thinking of their liquid staples.
Whole Foods Market (WFMI -12.9%) really stumbled. Even with cheaper gas, their shoppers must have decided to travel to cheaper stores. This stock could be a symbol of the new economy, which is to say that people are recognizing deflation except for the prices on the shelves at Whole Foods.
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 |
The Healthcare sector (IYH) gained +4.97% W/W to close at 67.84.
The healthcare providers and insurers were flying this week: Aetna (AET +10.4%); United Health (UNH +10.2%); and Wellpoint (WPT +8.3%) had monster gains. I surmise there was a lot of short-covering.
Sector 40 (financial: IYG, IYF, XLF, VFH, IXG, VNQ, RWR, IYR, and ICF)
Here’s the XLF Monthly, Weekly and Daily data charts:
XLF Monthly data:
XLF Weekly data:
XLF Daily data:
Table 8: Senior financial company equities
| Symbol | Close | 1Day Change |
1Day %Change |
1W %Change |
2W %Change |
4W %Change |
YTD %Change |
3M %Change |
6M %Change |
12M %Change |
The Financials (XLF +0.74% to 21.85) managed a modest gain this week after a moonshot last week. Traders know the problems there have been fixed??? I think not!
ICICI of India (IBN +15.6%, including Friday’s gain of +8.0%) was the biggest winner. How is that a bank in India can zoom +8% in a single session? Answer: when the US Treasury Secretary has agreed to cover their losses in “investments” in US sub-prime debt, and other such garbage, like Fannie and Freddie.
Morgan Stanley (MS +9.6%), UBS (UBS +9.1%) and Deutsche Bank (+5.0%) were also strong.
Fannie and Freddie, of course, are ready to die, down -23.4% and -26.1% this week to $9.05 and $5.90 respectively. Putting a Dollar sign in front of them is an insult to the taxpayers who are going to have to pay the losses as the shareholders and bondholders, including 30% foreigners, are made whole by Sec. Paulson.
Fannie dropped -9.1% just on Friday. By now I think you all can see how you’ve been set up by an Administration that is intent on stripping assets from Fannie and Freddie so that the taxpayer will be forced to come to the rescue. Yes, you and I can no longer short those babies, but the fraudsters, HB&B, can. No, HB&B will not raise new capital for Fannie and Freddie, but they’ll take fees from Mr Moral Hazard for “assisting” the Treasury “invest” the people’s money.
The whole situation is bizarre. It’s the most anti-American period in capital markets that I have ever witnessed. Let these mortgage bankers fail. Let any bank fail, like other companies fail. The day after the doors are closed, they will be re-opened with a new owner—one that puts in new capital. Why? These banks hold real mortgages from real people who live in real houses and can meet their mortgage payments with income from real jobs. In the case of Merrill or Lehman, or Wachovia or whatever, let those banks fail too if they must. The next day their doors will re-open under new ownership. The reason is the same: they have real clients, with real assets, receiving real services from experts and so forth. Nobody will buy the crap on the books, which will be written off, and the greedy and/or dumb managers who caused the failure will be out looking for new jobs/careers. As with Fannie and Freddie, the shareholders and bondholders are by far the biggest losers, and that’s the way free markets are supposed to work.
Imagine to my dismay how Treasury Sec Paulson would demand that the Chinese authorities make their markets free like America’s. What an utter insult. What an insult to the US taxpayer to be told that they have to pay the mortgages and bank loans of Wall Streeters who have second homes in the Hamptons, third ones in Connecticut and a fourth in the Caribbean. How free is that America?
If anybody says they are reading this complaint for the first time here, then they haven’t followed my musings of Hank Paulson since he was handed the Treasury job. Wall Street bail-out: I told you this was happening from the very start. I started referring to Paulson Pride in June 2007 after I saw why he had been appointed Treasury Secretary a year earlier. He was there to save Wall Street, Paulson’s pride and joy.
Anyway, don’t get me started. I hate it when the cancer is so obvious, but the surgeons in the legislature can’t or won’t operate.
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 |
Tech (XLK +5.06% to 23.27 and Semi-conductors (SMH +7.61% to 29.98) were in full-out rally mode this week.
What that had to do with all the bad econ news this week, or the higher $USD or lower oil price, is beyond me. I suppose that when banks can print money they can also use it to buy the shares of companies that aren’t likely to fail, so that they can later sell them to others (proving the Greater Fool Theory), in a last ditch attempt to save their bacon.
SNDK (+16.9%), RIMM (+11.3%), MSFT (+10.6%), CSCO (+10.3%), ADBE (+9.5%), ORCL (+9.4%), INTC (+8.4%) and AAPL (+8.2%) were in rare form this week, at least for now.
Isn’t it amazing how the biggest gains happen in Bear markets, caused by a lot of short-covering and other stuff going on?
The people I feel badly for are the Moms & Pops and Boys & Girls who have to work for a living and don’t get to trade this stuff back and forth. Smart day traders can make their month in a couple hours at this point.
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 +2.39% W/W) closed at 23.54, which happened because the gain on Friday was +3.43%.
Verizon (VZ) and AT&T (T) each gained +1.74% this week.
Sector 55 (utilities: IDU, XLU, and VPU)
Here’s the XLU Monthly, Weekly and Daily data charts:
XLU Monthly data:
XLU Weekly data:
XLU Daily data:
Utilities (XLU +1.08% W/W) closed at 37.32.
As soon as I can get around to it, I’m going to set up new tables for the Dow Utilities and the major Telecom companies.
I’m also thinking of setting up tables of say ten key stocks on all the Exchanges covered by ADVFN.com, which continues to grow its service. Those lists will include many stocks that are listed on more than one exchange. I think HB&B had owned the arbitrage game for their own purposes for too long. It’s time the people got a fair shot too.
Bonds & Yields Review
Table 10: US Treasury Yields
| Maturity | Yield | Yesterday | Last Week | Last Month |
|---|---|---|---|---|
| 3 Month | 1.63 | 1.60 | 1.59 | 1.73 |
| 6 Month | 1.87 | 1.85 | 1.81 | 1.94 |
| 2 Year | 2.49 | 2.42 | 2.48 | 2.38 |
| 3 Year | 2.35 | 2.27 | 2.33 | 2.30 |
| 5 Year | 3.19 | 3.15 | 3.21 | 3.08 |
| 10 Year | 3.93 | 3.92 | 3.93 | 3.81 |
| 30 Year | 4.54 | 4.55 | 4.56 | 4.42 |
| Maturity | Yield | Yesterday | Last Week | Last Month |
|---|---|---|---|---|
| 2yr AA | 2.17 | 2.04 | 2.30 | 2.66 |
| 2yr AAA | 2.12 | 2.16 | 2.15 | 2.50 |
| 2yr A | 2.52 | 2.47 | 2.43 | 2.50 |
| 5yr AAA | 2.94 | 2.87 | 3.06 | 3.08 |
| 5yr AA | 3.03 | 2.98 | 3.08 | 3.14 |
| 5yr A | 3.24 | 3.20 | 3.28 | 3.05 |
| 10yr AAA | 3.72 | 3.76 | 3.76 | 3.70 |
| 10yr AA | 3.69 | 3.70 | 3.70 | 3.64 |
| 10yr A | 3.74 | 3.79 | 3.81 | 3.64 |
| 20yr AAA | 4.73 | 4.76 | 4.87 | 4.56 |
| 20yr AA | 4.57 | 4.81 | 5.10 | 4.58 |
| 20yr A | 4.89 | 4.91 | 5.07 | 4.64 |
| Maturity | Yield | Yesterday | Last Week | Last Month |
|---|---|---|---|---|
| 2yr AA | 4.20 | 4.15 | 4.20 | 4.16 |
| 2yr A | 4.96 | 4.93 | 5.05 | 4.52 |
| 5yr AAA | 4.92 | 4.89 | 5.05 | 4.95 |
| 5yr AA | 5.41 | 5.28 | 5.45 | 5.12 |
| 5yr A | 5.64 | 5.52 | 5.79 | 5.68 |
| 10yr AAA | 4.73 | 4.72 | 5.33 | 5.30 |
| 10yr AA | 5.98 | 6.04 | 6.16 | 6.05 |
| 10yr A | 6.11 | 6.05 | 6.13 | 5.99 |
| 20yr AAA | 6.14 | 6.44 | 6.07 | 6.36 |
| 20yr AA | 5.94 | 6.23 | 5.87 | 6.76 |
| 20yr A | 6.40 | 6.69 | 6.33 | 6.61 |
Bond prices did zip this week. I think it was a case of hurry up and wait until the bond traders can see the implications of this week’s monetary policy decisions and the outcome of the tension building in the Middle East.
For the week, the yields for the US Treasury 2-year, 5-year ($FVX), 10-year ($TNX) and 30-year ($TYX) were +1 bp, -2 bp, flat and -2 bp respectively, causing little change to bond portfolios this week.
The 20-year TLT closed the week up +0.50% to 92.00, caused by Friday’s gain of 0.27%. The TIP lost ground on Friday and over the week.
It could be that over the next few months, deflation in many parts of the economy plus firm interest rates to cut inflation where it exists, will be the winning play. That might mean a narrower trading range for bonds than we’ve seen for a few years.
I think it’s still too early to sell bonds and buy gold though. Probably soon though.
Deflation in the economy can also kill bond prices if the economy stays stagnant and rates lift as banks seek to raise increasing amounts of capital to replace their lost reserves.
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.
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 |
This week, Fannie and Freddie were crushed. FNM dropped -23.4% and FRE -26.1%. I think Wall Street is stripping assets somehow. It’s hard for me to believe that the Treasury Secretary and all of Congress say (constantly btw) they will not let these two companies fail and yet the shares have fallen -86.4% and -90.6% respectively. Somebody knows something, and isn’t telling.
Consumer Finance -USA -- Interactive Weekly Data Charts
Consumer Finance -USA -- Interactive Daily Data Charts
Commodities Review
The $CRB plunged -28.60 (-6.87%) to 387.42 this week. A week ago, I mused after prices stayed up, “I suppose the HB&B firms have cleaned out the accounts of traders who were heavily margined.
I’m wondering how the accounts at companies like Man Financial are holding up? When is the next hedge fund, or the next commodities trading house, going to announce they are for sale, or closing their doors?
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) plunged -$9.90/bbl (-7.91%) to 115.20.
The 50d MA for $WTIC is now at 132.16, and the 200d MA is 109.54.
Three weeks ago in this space, I wrote, “I feel the market price will hit the 200-day MA price (now $108.74) sometime in the next couple months.” We’re getting closer. The close this week was $115.20 and the 200d MA is at 109.54.
One week ago, Crude Oil gained +$1.84 and you felt my utter disrespect: “Top oil analyst Charlie Maxwell started chirping about his Peak Oil theory, and Goldman Sachs chimed in with their $145/bbl forecast by the end of this year. That helped. So too did all the CIA talk re Iran and the fact the Iranian government said “No!” to the open-nuke demands of various countries. Gee, you wonder why the price lifted only $1.84/bbl. Maybe the slowing global economy has something to do with that? Do you think?”
Experience in this business does count. The longer I am around, the more nonsense I see.
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
On July 20, I gave you a heads-up re $GOLD. I wrote,
“For the past four weeks, $GOLD gained +27.00/oz, +2.30/oz, +27.60/oz and +30.60/oz. This week (at $958.00), there was a loss of -$2.60/oz, but I think, what with the oil prices coming off, and the likelihood of the $USD strengthening in the short-run, that $GOLD will start to fall off faster and deeper. That belief, however, is not shared by the gold bugs, who daily are yapping about rocketing prices to come.”
On July 27, I added:
“This week, $GOLD dropped -$21.10/oz (-2.20%) to 936.90. I think it’s going lower… The 50-day MA for $GOLD is now 915.28, and the 200d MA is 884.55. The falling price this week did bounce and rally off the 50-day MA. The gain on Friday was +1.6%, which means that the loss from Monday through Thursday was really severe. I don’t think Friday’s (gain) means much (other than it serves to turn the crank of the gold die-hards). The short-term trend is still down… In the market this week, $XAU, GDX and XGD lost -7.66%, -6.78% and -6.52%. A week earlier the losses (in these goldminer share indexes) were -3.60%, -2.44% and -3.88%, respectively. So the precious metal Bulls are getting smashed. I did point out the likelihood of this happening, and the ridiculousness of listening to the usual newsletter writers/marketers… So, then some idiot writes, “So Bill, are you buying gold?” Is it any wonder, knowing that it takes me about 10 hours to write this free WIR that some people get to me, and I react?.. You will also see in the items below this one where I pointed out how the charts have been breaking down in July.
On August 3, there was more:
$GOLD this week dropped -$19.40/oz (-2.07%) to 917.50 and the 50d MA is now at 916.92 and the 200d MA at 888.65… The three major goldminer stock indexes ($XAU, GDX and XGD) dropped -6.33%, -4.38% and -5.18% respectively. This week. That’s -$40.50/oz since I gave you the alert two weeks ago—the one that came in the midst of the cheerleading rally by all the well-known gold bugs.”
So what do I write this week, August 10, after $GOLD plunged another $52.70/oz (-5.74%) to 864.40? I’ll tell you that holding $GOLD this horrendous week, while shorting $SILVER (-12.50%), $PALLADIUM (-11.08%), $PLATINUM (-5.78%) and $COPPER (-6.86%), would have made you money.
Talk about a crashing market! How about those goldminer share indexes! $XAU -11.12%; GDX -13.95%; and XGD -9.06% were simply smashing. Even the high quality goldminers in the Cara 100, Goldcorp and Barrick, dropped -15.0% and -13.3% respectively.
The only things that immediately come to mind were all those people who wrote to me asking (pleading) when was I going to buy gold, and I kept saying “Be patient; let the prices come to you. And, no, I have no interest in listening to what (so-and-so “expert”) has to say.”
I’m like a rabbit in the forest, determined not to let the fox enjoy a meal at my expense.
Yes, this is a tough business. It’s very easy to die from inexperience or stupidity.
For $GOLD, the 50d MA is now 914.45, and the 200d MA is 891.62. The current price (864.80) is Bearish. I do think that, for gold and the other precious metals, there will be a testing of the 200d MA resistance, but that will likely fail and the market price will sink to a new cycle low that will set a base for the next Bull phase of the long-term secular Bull in precious metals.
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
$SILVER really made me laugh this week. Last week in the WIR I wrote:
This week, $SILVER gained +0.15/oz (+0.83%) to 17.52. I am shocked (LOL). Actually, I call them the Silver Crazies because in the late 70’s and early ‘80’s I watched with disbelief that this network of promoters (i) actually believed a couple brothers could control the world’s silver, and (ii) then refused to sell all the way down from the 40’s to $4.00. About the name, I think I have a point… I love silver too, but I am not crazy over it. It’s not like an outstanding bottle of red wine for instance. Or my children. $SILVER is only a price. Three years ago it was priced below $6.00/oz. Then it went to a high of $21.44 in March this year before falling off to an intermediate cycle low of 16.06. I think there is a chance the 16.06 could be surpassed on the downside before the next Bull phase takes the price eventually to over $25.
This week, $SILVER plunged -$2.19/oz (-11.08%) to 15.33. I can hear the silver crazies screaming from thousands of miles away. Conspiracy, they shout. (LOL)
For $SILVER, the 50d MA is now 17.46, and the 200d MA is 16.83. The current price puts silver in a Bear market. You’ll see the same for gold, platinum, palladium, copper, and the goldminer shares, if you care to look. My prognosis (not that I’m a doctor) is that silver will be like gold and the other precious metals and find a cycle bottom before resuming its secular Bull trend. I can’t guess when that would be. I am like you; we need to watch the data, and then make decisions.
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.
$PLATINUM has also crashed, down -$95.70/oz this week (-5.78%) to 1559.60.
On July 27, I wrote,
“The writing has been on the wall for the losses that $PLAT has been taking. $PLAT sank -$141.50/oz (-7.63%) to 1713.80 this week. A week ago the loss was -$191.90/oz (-9.37%). Traders who are heavily margined are getting wiped out… On July 6, I warned in this space: “A week ago, amid the precious metals rally, I wrote: This week $PLAT lost -32.00/oz to close at 2030.40… (Then) the falling price did stop at the 200d MA for a couple days, but there really was no fight in this dog… The loss a week earlier was -6.50/oz. Over four weeks, there have been big losses in Platinum… As long as Crude Oil is sinking, so too will these precious metals sink. The reason is simple; extreme speculation put them at such high prices. The market needs to find a balance before a new run can be taken at previous record highs.”
The 50-day MA is 1936.91, “which itself is crashing”, and the 200-day MA is 1826.24. How badly off are the Platinum Bulls? The current price of 1559.60 against the 50d and 200d MA’s says all you need to know.
But then you knew it would be so because you read these words in this space a week ago, on Aug 3: “The Point & Figure chart at StockCharts looks absolutely dreadful. And check the price charts three weeks ago to see the capital losses taken by the Platinum Bulls.”
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.
On July 20, which I repeated July 27, I wrote:
“There was a warning in $PALL too. I wrote in this space in the last WIR, that “a week ago, $PALLADIUM lost -4.65/oz to close at 466.55/oz. The prior week’s loss was -8.00/oz. This week, there was a loss of -5.15/oz (-1.10%) to close at 461.40. Not all precious metals are in rally mode.” I added, “$PALL dropped -$33.60/oz (-8.00%) this week to close at 386.30. The loss the week before that was -$41.50/oz (-8.99%). This is an example of how the leverage of margin wipes out trading accounts. The point is you can make +100% and you know where you stand, but you cannot come back after losing -100%... A week ago I wrote, “Note how the current price has sunk below the 200-day MA as well as the 50-d MA. That smells like Bear country… There was no fight at all when $PALL dropped to the 200d MA... The market is that much deeper into it this week.”
On Aug 3, I added: “So this coming week, we need to watch the gold and silver to see if they are going to fall quickly to catch up to the plat and pall.”
The 50-day MA is now 430.69 and the 200-day MA is 426.42.
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.
$COPPER contracts lost -$24.55 (-6.86%), closing at 333.30.
The 50-day MA for $COPPER is now 366.97 and the 200-day MA is 353.93.
As I (continue to) say, “Not working for Glencore and the Marc Rich Metal Men in Zug Switzerland, I don’t have a clue as to how this market will play out.” A week ago, I added: “I just figure that the big metal miners give us a tell. This week they were down again.” This week, those major metal mining stocks were crushed again.
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 archived the losses because I was getting fed up with gold newsletter writers telling their followers that all was well, just a temporary phenomenon that they could explain. I wrote:
The Goldminer stock group indexes dropped this week across the board: $XAU -6.33%, GDX -4.38% and XGD -5.18%. A week ago the losses were: $XAU -3.60%, GDX -2.44% and XGD -3.88%. Two weeks ago, the losses were: $XAU -7.66%, GDX -6.78% and XGD -6.52%... Ouch, if you happen to be a Gold Bull.
This week, losses were even greater: $XAU -11.12%, GDX -13.95% and XGD -9.06%.
The 50-day MA for $XAU is 178.99 and the 200-day MA is 180.97, and the current price is 144.47 after a drop of -18.07. That is significantly bearish.
I warned in this space over several weeks that the Gold Bulls were playing with fire in thinking that central bankers were going to help them. I stated a week ago:
The gold bugs are at the mercy of Bernanke and his peers in the central banks of England and the EU on Tuesday and Thursday. With all the inflation data flying about, I hardly think they are going be getting on their knees to pray. Tough talk is what I expect to hear. Whether traders believe this any more, I doubt. But traders tend to go with the flow and right now the $USD is flowing north.
This week, the $USD had one of its most bullish weeks in recent memory, up +3.3% W/W and up +1.8% on Friday. Gold traders simply cannot sacrifice their capital under such circumstances. At some point in the future, there will, I expect, be an uncoupling in the Gold/$USD hedge, and both prices will flow north together. The prospect of deflation will allow that to happen. But, for now, traders are watching international economies hit the skids and inflation die and that’s boosting the $USD and bad for the goldminers.
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 gained +3.29% to 75.86. The price has been bullish for four straight weeks.
The 50-day MA for the $USD is 73.02 and the 200-day MA is 74.19.
The possibility of this monster move was indicated here last week:
Interesting that the recent intermediate-term cycle high is 74.31, and the short-term cycle high is 73.54, which was set Wednesday. Could it be that next week a new short-term high is reached and the battle will be for the $USD Bulls to challenge the 200d MA?
Look at that Daily data chart! Some days, I just have a terrific feel for price movement. I wish it were that way all the time! Alas, we are human. Perfection is impossible. All we can do is our best.
Interactive Chart of Weekly U.S. Dollar Index:
Interactive Chart of Daily U.S. U.S. Dollar Index:
The Euro ($XEU) lost -3.43% W/W, closing at 1.5023. That’s like dropping off a cliff.
The Euro 50day MA is 1.5634 and the 200day MA is 1.5202. So the current price is bearish.
Interactive Chart of Weekly Euro Dollar Index, priced in USD:
Interactive Chart of Daily Euro Dollar Index, priced in USD:
The Pound lost -2.74% W/W, closing at 1.9215.
The 50-day MA and 200-day MA are at 1.9754 and 1.9927. The current price is very bearish.
Weekly British Pound Index:
Daily British Pound Index:
Weekly Japanese Yen Index:
The Japanese Yen ($XJY) dropped -2.26% to 90.77.
The Yen’s 50-day MA is 93.41 and the 200-day MA is 93.63. So the current price is bearish.
Daily Japanese Yen Index:
The Loonie (Cdn Dollar) lost -3.65% W/W, closing at 93.80. The price is very bearish.
Do you recall how I warned Canadians when the Loonie was above par with the USD that they had a final chance to buy real estate in the US or Bahamas for that matter since the B$ is pegged to the USD. Too late now.
The 50-day MA and 200-day MA is at 98.22 and 99.78 respectively. As the Loonie weakened, I wrote here Aug 3, “… the current price (98.14) is at an important level that could see it go bearish. With more falling prices of crude oil and metals/precious metals, I think the Loonie will go bearish for a while.” The price today is below both the 50d MA and 200d MA. Oil and precious metal prices are seemingly on the downswing.”
Weekly Canadian Dollar Index:
Daily Canadian Dollar Index:
Here is the China Yuan (CNY) chart.
International Equity Markets Review
There were mixed prices this week in the global equity markets.
UK FTSE gained +2.5% from 5354.7 to 5489.2 (down -15.0% over 52-weeks)
German DAX gained +2.6% from 6396.5 to 6561.65 (down -18.7% over 52-weeks)
Aussie All-Ords gained +1.2% from 4978.0 to 5037.6 (down -21.5% over 52-weeks)
Shanghai Composite down -7.0% from 2801.8 to 2605.7 (down -50.5% over 52-weeks)
HK Heng Seng down -4.3% from 22862.6 21885.2 (down -21.3% over 52-weeks)
India’s BSE 30 up +3.5% from 14656.7 to 15167.8 (down -25.2% over 52-weeks)
Japan’s Nikkei 225 up +0.6% from 13094.6 to 13168.4 (down -14.0% over 52-weeks)
There are 16 country index charts from StockCharts.com (with their formal approval btw) 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. This will come after we switch to the Drupal platform this month.
As I say, “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 |
Other than India, France and UK, the International ETF’s that trade in NY (denominated in USD) were soft again, particularly Russia, Brazil, and Canada, which are powerful in commodities, and China, which is showing much power in these Beijing Games.
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 (+3.6%), S&P 500 (+2.9%), NASDAQ Composite (+4.5%), and Russell 2000 small cap (+2.5%) were all very strong.
The big movers in the DJIA were Microsoft (MSFT +10.6%), Home Depot (HD +10.3%), McDonalds (MCD +9.9%), Boeing (BA +9.4%) and Intel (INTC +8.4%). On Friday the broad markets rallied about +2.5% and even Citigroup (C +5.0%) and AIG (AIG +4.3%) were huge gainers in the DJIA index.
Volume was very low for most stocks during the week.
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 CHV DD DIS GE GM HD HON HPQ IBM INTC JNJ JPM KO MCD MMM 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 one DJIA component, Wal-Mart (WMT), which is a Cara 100 company.
Wal-Mart [GICS 30, Dow 30, Cara 100]
(WMT: Google Finance file)
(WMT: Yahoo Finance file)
(WMT: StockChart chart)
(WMT: Billcara2 chart)
(WMT: ADVFN Financial Data)
(WMT: Value Line Report Aug. 8: next one is due Nov. 7)
Wal-Mart is a company many people love to hate, for some reason. For me it is a member of the Cara 100 and a portfolio core holding, although one that requires adroit buy and sell timing and use of put and call option writes to maintain a suitable Total Return.
I see no reason to say much positive about the stock right now. Certainly I am not bullish in the short run. You know when I was discussing it as a purchase candidate. You might recall that in the Aug-27-07 WIR, I recommended “parking the family jewels in a Wal-Mart parking lot”. The price closed at $43.63 that week. So why today at $57.86, where you could have sold for $61.00 two weeks ago (a +40.0% capital gain plus the nice dividend), would I be excited about the stock? I’m not.
But if you really want to get an insight into how I think about trading markets, please revert to WIR#6 Feb 10, 2007, when I reviewed WMT off the top (when the price was $47.97). You will see my reasons for why I was buying WMT below 43 much later in the year. You will also see how I opined that the banks were nuts for buying Fortress Investment Group (FIG) at $35. It went to $8 if anybody cares. But I was telling you that the bank analysts had a hate on for Wal-Mart and it was a terrific Cara 100 company.
So who called it? But you knew that already. (LOL)
I love this stuff.
The Dow 30 Company links in chronological order of next reports. I added the Google Finance links, which are superb.
Disney [GICS 25, Dow 30, Cara 100]
(DIS: Google Finance file)
(DIS: Yahoo Finance file)
(DIS: StockChart chart)
(DIS: Billcara2 chart)
(DIS: ADVFN Financial Data)
(DIS: Value Line Report May 16: next one is due Aug. 15)
3M Company [GICS 20, Dow 30, Cara US 100 June 25-06]
(MMM: Google Finance file)
(MMM: Yahoo Finance file)
(MMM: StockChart chart)
(MMM: Billcara2 chart)
(MMM: ADVFN Financial Data)
(MMM: Value Line Report May 16: next one is due Aug. 15)
American International Group [GICS 40, Dow 30]
(AIG: Google Finance file)
(AIG: Yahoo Finance file)
(AIG: StockChart chart)
(AIG: Billcara2 chart)
(AIG: ADVFN Financial Data)
(AIG: Value Line Report May 23: next one is due Aug. 22)
American Express [GICS 40, Dow 30]
(AXP: Google Finance file)
(AXP: Yahoo Finance file)
(AXP: StockChart chart)
(AXP: Billcara2 chart)
(AXP: ADVFN Financial Data)
(AXP: Value Line Report May 23: next one is due Aug. 22)
Bank of America [GICS 40, Dow 30]
(BAC: Google Finance file)
(BAC: Yahoo Finance file)
(BAC: StockChart chart)
(BAC: Billcara2 chart)
(BAC: ADVFN Financial Data)
(BAC: Value Line Report May 23: next one is due Aug. 22)
Citigroup [GICS 40, Dow 30]
(C: Google Finance file)
(C: Yahoo Finance file)
(C: StockChart chart)
(C: Billcara2 chart)
(C: ADVFN Financial Data)
(C: Value Line Report May 23: next one is due Aug. 22)
JP Morgan [GICS 40, Dow 30]
(JPM: Google Finance file)
(JPM: Yahoo Finance file)
(JPM: StockChart chart)
(JPM: Billcara2 chart)
(JPM: ADVFN Financial Data)
(JPM: Value Line Report May 23: next one is due Aug. 22)
Microsoft [GICS 45, Dow 30]
(MSFT: Google Finance file)
(MSFT: Yahoo Finance file)
(MSFT: StockChart chart)
(MSFT: Billcara2 chart)
(MSFT: ADVFN Financial Data)
(MSFT: Value Line Report May 23: next one is due Aug. 22)
General Motors [GICS 25, Dow 30]
(GM: Google Finance file)
(GM: Yahoo Finance file)
(GM: StockChart chart)
(GM: Billcara2 chart)
(GM: ADVFN Financial Data)
(GM: Value Line Report May 30: next one is due Aug. 29)
Johnson & Johnson [GICS 35, Dow 30, Cara 100]
(JNJ: Google Finance file)
(JNJ: Yahoo Finance fle)
(JNJ: StockChart chart)
(JNJ: Billcara2 chart)
(JNJ: ADVFN Financial Data)
(JNJ: Value Line Report May 30: next one is due Aug. 29)
McDonalds [GICS 30, Dow 30]
(MCD: Google Finance file)
(MCD: Yahoo Finance file)
(MCD: StockChart chart)
(MCD: Billcara2 chart)
(MCD: ADVFN Financial Data)
(MCD: Value Line Report Jun. 6: next one is due Sept. 5)
Chevron Corp [GICS 10, Dow 30]
(CVX: Google Finance file)
(CVX: Yahoo Finance file)
(CVX: StockChart chart)
(CVX: Billcara2 chart)
(CVX: ADVFN Financial Data)
(CVX: Value Line Report Jun. 13: next one is due Sep. 12)
ExxonMobil [GICS 10, Dow 30, Cara 100]
(XOM: Google Finance file)
(XOM: Yahoo Finance file)
(XOM: StockChart chart)
(XOM: Billcara2 chart)
(XOM: ADVFN Financial Data)
(XOM: Value Line Report Jun. 13: next one is due Sep. 12)
Boeing Co [GICS 20, Dow 30. Cara 100]
(BA: Google Finance file)
(BA: Yahoo Finance file)
(BA: StockChart chart)
(BA: Billcara2 chart)
(BA: ADVFN Financial Data)
(BA: Value Line Report Jun. 20: next one is due Sep. 19)
AT&T [GICS 50, Dow 30]
(T: Google Finance file)
(T: Yahoo Finance file)
(T: StockChart chart)
(T: Billcara2 chart)
(T: ADVFN Financial Data)
(T: Value Line Report Jun. 27: next one is due Sep. 26)
Verizon [GICS 50, Dow 30]
(VZ: Google Finance file)
(VZ: Yahoo Finance file)
(VZ: StockChart chart)
(VZ: Billcara2 chart)
(VZ: ADVFN Financial Data)
(VZ: Value Line Report Jun. 27: next one is due Sep. 26)
Procter & Gamble Co. [GICS 30, Dow 30, Cara 100]
(PG: Google Finance file)
(PG: Yahoo Finance file)
(PG: StockChart chart)
(PG: Billcara2 chart)
(PG: ADVFN Financial Data)
(PG: Value Line Report Jul. 4: next one is due Oct. 3)
Home Depot [GICS 25, Dow 30]
(HD: Google Finance file)
(HD: Yahoo Finance file)
(HD: StockChart chart)
(HD: Billcara2 chart)
(HD: ADVFN Financial Data)
(HD: Value Line Report Jul. 4: next one is due Oct. 3)
General Electric [GICS 20, Dow 30, Cara 100]
(GE: Google Finance file)
(GE: Yahoo Finance file)
(GE: StockChart chart)
(GE: Billcara2 chart)
(GE: ADVFN Financial Data)
(GE: Value Line Report Jul. 11: next one is due Oct. 10)
Hewlett-Packard [GICS 45, Dow 30]
(HPQ: Google Finance file)
(HPQ: Yahoo Finance file)
(HPQ: StockChart chart)
(HPQ: Billcara2 chart)
(HPQ: ADVFN Financial Data)
(HPQ: Value Line Report Jul. 11: next one is due Oct. 10)
IBM [GICS 45, Dow 30]
(IBM: Google Finance file)
(IBM: Yahoo Finance file)
(IBM: StockChart chart)
(IBM: Billcara2 chart)
(IBM: ADVFN Financial Data)
(IBM: Value Line Report Jul. 11: next one is due Oct. 10)
Intel [GICS 45, Dow 30, Cara 100]
(INTC: Google Finance file)
(INTC: Yahoo Finance file)
(INTC: StockChart chart)
(INTC: Billcara2 chart)
(INTC: ADVFN Financial Data)
(INTC: Value Line Report Jul. 11: next one is due Oct. 10)
Alcoa [GICS 15, Dow 30]
(AA: Google Finance file)
(AA: Yahoo Finance file)
(AA: StockChart chart)
(AA: Billcara2 chart)
(AA: ADVFN Financial Data)
(AA: Value Line Report Jul. 18: next one is due Oct. 17)
Dupont [GICS 15, Dow 30]
(DD: Google Finance file)
(DD: Yahoo Finance file)
(DD: StockChart chart)
(DD: Billcara2 chart)
(DD: ADVFN Financial Data)
(DD: Value Line Report Jul. 18: next one is due Oct. 17)
Merck [GICS 35, Dow 30]
(MRK: Google Finance file)
(MRK: Yahoo Finance file)
(MRK: StockChart chart)
(MRK: Billcara2 chart)
(MRK: ADVFN Financial Data)
(MRK: Value Line Report Jul. 18: next one is due Oct. 17)
Pfizer [GICS 35, Dow 30]
(PFE: Google Finance file)
(PFE: Yahoo Finance file)
(PFE: StockChart chart)
(PFE: Billcara2 chart)
(PFE: ADVFN Financial Data)
(PFE: Value Line Report Jul. 18: next one is due Oct. 17)
United Technologies [GICS 20, Dow 30, Cara 100]
(UTX: Google Finance file)
(UTX: Yahoo Finance file)
(UTX: StockChart chart)
(UTX: Billcara2 chart)
(UTX: ADVFN Financial Data)
(UTX: Value Line Report Jul. 25: next one is due Oct. 24)
Caterpillar [GICS 20, Dow 30]
(CAT: Google Finance file)
(CAT: Yahoo Finance file)
(CAT: StockChart chart)
(CAT: Billcara2 chart)
(CAT: ADVFN Financial Data)
(CAT: Value Line Report Jul. 25: next one is due Oct. 24)
Coca Cola [GICS 30, Dow 30]
(KO: Google Finance file)
(KO: Yahoo Finance file)
(KO: StockChart chart)
(KO: Billcara2 chart)
(KO: ADVFN Financial Data)
(KO: Value Line Report Aug 1: next one is due Oct. 31)
Wal-Mart [GICS 30, Dow 30, Cara 100]
(WMT: Google Finance file)
(WMT: Yahoo Finance file)
(WMT: StockChart chart)
(WMT: Billcara2 chart)
(WMT: ADVFN Financial Data)
(WMT: Value Line Report Aug. 8: next one is due Nov. 7)
Wrap up:
I hope I didn’t bore you this week with all the hubris following my call on precious metals. I am proud, but not presumptive, and I don’t think arrogant. I just work hard. I focus on what I know works, and I try to be consistent in behavior. That comes with experience.
If I was in some other line of work, like politics or preaching, or newsletter writing for gold bugs, I’d have a consistent message and I too would go with what works. But the fact is I am a trader. Traders call it like they see it. As a consequence, they don’t make friends, and they don’t give in to the enemy.
I used to call myself ‘the mechanic’ because I was so consistent, but lately I have taken to try to be somewhat entertaining because not everybody gets hooked on trading like most of you, or me.
Have a good week. Don’t ask me how it’s going to turn out. I’m too exhausted from the last one to contemplate the next one. Besides I am putting in more time in preparing to venture back into the professional world. Did you know I’ve been retired for almost eight years… ha!
I hope I don’t have too many typos because you should be aware I rushed this report. This one I did in seven hours, but I’m too tired to re-read my work, so I’ll click on the upload button now, and then head out for a G&T.
Posted by Posted by Bill Cara on August 10, 2008 05:13:28 PM | Category: Cara Week in Review