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October 19, 2008
Week in Review #42 (2008-10-19)
A week ago, the Dow Jones Industrial Average capped its worst week since 1914. The MSCI World Index of equities in 23 developed countries slid 20 percent, the most since records began in 1970. This week, with a modest recovery, life moved on.
That’s not to say that people are not just as anxious. Perhaps they are even more so because this week they have had the time to review their holdings and dwell on the results. Most people are emotionally injured, some overwhelmed.
Yes, we need to practice prudence; however, there is little I can do at this point for people who would like to believe dim-witted economists who are saying that the world is falling apart. Perhaps this anecdote will help in a small way.
Hello Bill, I want to thank you for all the work you do for the community. Stating your position in a clear manner and staying the course is difficult to say the least. These are indeed historic times. I am in the market as of 9/24/08, and added since. Still have some cash left. This reminds of Oct.1987, I was stockbroker and my clients were hurting. I felt terrible! We made it thru. Life goes on. Thank you. God bless. /AnonI replied,
Hi Anon,
Thank you. All the people heard this week on TV was that the world is falling apart, and that must mean my urging last weekend to get back on the horse may be seen as terrible advice -- but this week 27 of 30 DJIA stocks were up, and 10 of 10 sectors. The S&P 500 (+4.60%) and NASDAQ (+4.74%) had huge gains despite a bad Friday. All I can do is try to keep people calm. Yes, there are serious problems such as with the mega-trillion dollar CDS market that has almost stopped the credit market in its tracks, and with the dramatic impact this has had on the economy. But all governments are committed to fixing that – regardless of the cost. The higher the cost, the higher PM and Oil must go. So there is always a silver lining, if we choose to look for it. Now that we have sunk to such a depth, as in October 1987, now is the time to look up.
Best,
/Bill
That man is a former stockbroker. He knows that economists, as a rule, don’t understand capital markets. People like Warren Buffett and Bill Cara do.
Buffett, you say, has an axe to grind; well, I don’t. I’m telling it like it is.
I said this a week ago, that an economist on Wall Street is considered a lower class of employee than the staff who the big hitters send out for box lunches. An economist working in the Ivory Tower is counted on for one thing only – as part of a marketing show. These people are never allowed in a sales room or near a trading floor.
Sales people and traders are paid the best money on Wall Street because they make money. If they don’t, they get fired. Economists are like government, part of the overhead.
Here’s another anecdote. Several years ago, the firm I was running had a small team of proprietary traders. If the individuals couldn’t measure up with 100% annual profit performance, they were terminated. Admittedly, profit-making is much tougher today; but I can tell you that back then, if an economist got within eyesight of the firm’s capital traders, I would have been fired.
I’m just trying to tell you the way it is; not just make enemies with economists.
What is an economist anyway? The name has been bastardized, like accountant. Anybody today can get a PhD or a CPA and call themselves whatever they want. The banks even call their sales people financial advisors for Pete’s sake.
We live in a world of make believe. I told you that the first month I started to blog, back in April 2004. Too few people want to tell the truth.
I always said that to be successful in trading you need to follow just a few simple rules: a key one is do nothing different in the management of your portfolio than you would in managing your business, career or household.
Something else you should know; if you can trade A, B or C – whatever it is – then you can trade D, E and F. Case in point: I’d like to invite the Economics Departments of Princeton, Yale and Harvard to a New York City Police lost and found auction. Disperse them through the crowd. Let them bid for any item… bicycles, watches, laptops, whatever. If any economist that day happens to buy a single item without raising laughter and ridicule from the crowd I’ll be shocked.
They could all go home and write a wonderful dissertation on the auction process, maybe even submit it for a Nobel Prize, but every one of these people would be a dismal failure at the trading process because they are not traders.
Let me hand-pick a dozen street people from that Police lost and found auction room and within a month or two I’d put them up against your pick of a dozen of the top economists from Ivy League Schools, the Fed, and the National Economic Council of the President in competition to trade a billion dollars for a month.
Head to head; I assure you, the brainiacs will lose.
We are learning a lot from this period in history. You need to learn how to trade, which means you have to dismiss all the clap-trap that salespeople and economists have taught you.
Why do you think I never refer to you as an investor? Wall Street calls you an investor – if they’re not calling you a sucker. Investors buy things like homes and cars and insurance. But a capital market doesn’t have goods and services. A capital market only has prices. The price one minute is different from the next.
In the capital market, you and I can only trade prices. That makes us traders.
Although it may appear to be, because Wall Street wants you to think that way, trading is not simple. It requires an understanding of nuances – just like the successful traders in that police auction have an understanding of street value and can sense the mood swings during the bidding there.
At the end of February this year I sent a report to well over 200 of you to say that I believed that Goldcorp (GG) should be sold at $44.71 and bought back in the low 30’s. By the end of April, the price had dropped to 34. Then, the gnomes who control these things pushed GG to a high of $52.65 on July 15. I wasn’t dismayed; I told you at the start of July and again in early September that the share prices of the major base metals companies had hit the wall, and the metals market was looking shaky. This time GG really collapsed. There was a delay in timing that you might have expected from my earlier words that “gold is the last dancer off the floor”.
Here is an interactive chart of Goldcorp (GG) vs diversified base metal miner Teck (TCK). You can see how my call to sell GG at the end of February was prescient. You can see the break-downs in July and September. You can see the relative strength in recent weeks, which showed me that GG was ready to come back. I opined that the much more important base metal miners would also need to have a come-back before any meaningful rally could happen in the goldminer stocks.
Look at the move in late April with TCK, which was similar to the ones in the rest of the base metals. That pulled GG higher, but at a slower pace, so I stuck to my guns. Btw, the TCK move at the end of August was an anomaly caused by an acquisitions deal done by Teck, so that was what I call ‘noise’.
A couple weeks ago (Sept 12 in Seeking Alpha as well as in the blog) I opined that GG should be bought at 26, following which the price zoomed the next day, lasting until precious metals prices were hit yet again, this time to a low for GG on Friday of $18.56.
But, as you know, I said in that article that the price of GG could trade down from 26, and my readers also understand that I use put writes during cycle bottom periods to pick up positions of the volatile traders, using the premiums that expire to also lower my cost base. So my price would be known, by those who appreciate the nuances, to be lower than 26, possibly down to 20-22. At $20.09, I am in the ball-park, which is the reason I am not concerned.
One of my associates wrote in the Discourse before the Friday session started that he was taking part positions in a few leading gold producers, including GG, following the early sell-off that was expected. Within an hour, the price of GG did hit $18.56; however, it closed the day higher, as I say at $20.09, where I think it represents good long-term value.
Is gold ready to fly, which is necessary for the goldminer Bull to start his run? Gold, silver and platinum prices were hammered on Friday, so I believe there will be lots more sell orders – some from margin calls – on Monday, for both the gold futures and the goldminer stocks.
On Friday, however, I noted that palladium was up almost +1.0% and copper jumped +4.2%. But, why would these economic metals be jumping when the economy is supposed to be going to hell in a hand-basket as the messages from Princeton, Harvard and even the Fed’s Bernanke are saying?
Prices move one way or another when the beliefs of the buyers or the sellers are greater. On Friday, there were believers in copper and palladium. Now, I won’t trade copper because, as you know, I don’t work in Zug Switzerland or trade at Mick’s desk in London. But, I know enough that I have to keep my eyes on the prices of the economic metals (ie, the base metals like copper) and particularly the mining giants that produce them.
As well, I keep my ears closed when economists are doing most of the talking on TV. Call it experience.
My understanding of macro-economic relationships tells me that (i) several trillions of reflation by each of the US and Europe, plus lesser but still huge amounts by other governments, must ultimately be priced into gold, and (ii) the gnomes who make these things happen (remember the FIFO rule as well as the Golden Rule, ie, those who control the gold make the rules) are awaiting the outcome early this coming week of some $400 billion in Credit Default Swaps that get presented at the closed teller window of bankrupt Lehman Brothers.
Will the US Treasury, Fed, FDIC and HB&B step up to the plate and catch the ball. I think they will, but the possibility of their dropping it has traders on edge.
I mean, what’s another $400 billion when there is already five times or more in the ante. The players will call, and then the rest of us will get to see the result. Of course, not being in the room, we don’t get the telephone call. We have to wait to see the share blocks being bid or offered by the gnomes.
Capital market prices are always on a hinge. At certain points, when trends and cycles are in the process of turning there is extra volatility when the major forces in the market duel it out. Right now the Bears are very strong in the precious metals because they have the backing of the US Administration, the Fed, and HB&B, all needing a stronger $USD to allay the fears of the public and their creditors around the world that the $USD is going to collapse because of this Paulson Reflation Program, the likes of which nobody has ever seen before.
My bet is that the Interventionists get to save the financial system at this point anyway, but the cost will be humungous.
To hedge the weaker USD, traders have been hopping on the bullion train. Paper gold, ie, ETF’s and futures, has been rejected for now by independent traders. The chosen hedge is real gold, the physical bullion. It can’t be printed from trees or made electronically out of credit and the fractional reserve system, like fiat money, ETF’s and futures. That’s obvious to the public because the bullion and coin suppliers have run out of inventory to sell you.
Something has got to break open here. If the Interventionists were to keep forcing the gold price lower, the hurting public would pawn their gold, believing the price will never return to its former glitter. But, at some point soon, the debt-free goldminers would stop production, conserve their cash and wait out the ultimate pressures of the Paulson Reflation Program, which will return gold to prices above and beyond anything seen to date.
So the system is really screwed up while the CDS problems are sorted out between finance ministers, central bankers and the heads of the major private sector banks. Independent traders are waiting for an outcome. Those who have no debt are in the fortunate position of not having to panic and kowtow to the Golden Rule. I hate to say it, but those of you who are submerged with debt are the ones who are desperate and complaining most today. [I also understand that most of you are not prepared to day trade!]
In closing this intro, I need to repeat what I believe is needed for US politicians to do in this time of financial system crisis. A week ago I wrote,
“Value-add is good. In fact, the new financial system to be developed by the G-7 needs to be built on that principle, along with the following precepts:• eradication of self-regulation and all possible conflict of interest dealings;
• independent and separate financial services and capital markets regulation as a subset of the federal judiciary, with filings managed by Finance ministers;
• removal of central banks and Government Sponsored Entities (GSE) like Fannie and Freddie as quasi government (public) financial institutions, putting them entirely back in the private sector;
• independent private sector depositories for securities and precious metals;
• independent marked-to-market vs cost basis double accounting;
• transparent and fully-disclosed credit markets and financial services, with the elimination of non-disclosed contingent liabilities and off-balance sheet items;
• required time-stamped, on-line XBRL filing of all public data, including all parts of financial reports, notes, management discussions, speeches, and news releases, from all parts of the public as well as the private sectors in each country;
• capital markets that are operated in the best interests of the owners of capital and not for the capital managers or administrators, and
• the universal (general) agreement on currencies to start as soon as possible, and a system for five-year re-balancing.
I’d like to think these were marching orders, but I am clearly not the one in control. My pockets and influence do not even run deep enough to even influence legislation in a small way.
I am also too sensible to rely on the lawmakers to do the right thing. They will do as instructed by their masters who, unfortunately, are not the voters. As Venezuela’s Hugo Chavez stated this week, these lawmakers are too busy listening to their blue-ribbon advisors. Either that or handing over the Treasury keys to them.
My plan will be ignored because it’s not in the financial interests of these advisors to the President and to the leaders in Congress. However, every point I make here is an absolute requirement to build a foundation for global trade and investment that would best serve the world at large rather than those of the bankers who created the problems in the first place. Hence, bankers will fight this tooth and nail, fearing the public will finally have that level playing field.
The misuse of credit is at the heart of all problems facing the world today with respect to the financial system, economic situation and capital market.
Credit is the product of a banker. Bankers have over-extended it to government and the private sector alike. At an open bar, the bartender must take responsibility. In this case, however, the bankers looked the other way – in fact sought to engineer products like Credit Default Swaps to help keep their profits rolling in. That’s the problem. We all know it, including the lawmakers.
God willing, the lawmakers will acknowledge the fact that without the help of the community at large their solutions will fail. For every Paulson, Bernanke and Cox, there are a million of us who put our pants on same way. We are pissed at their bringing this economy to a state where unemployment is getting out of control, and the people are losing hope, knowing that will only bring out crime waves and violence.
I asked rhetorically a couple years ago when I saw this crisis building, how high can these bankers build the walls of their office and residential compounds. Do they wish to be driven to work in armored vehicles? There will become a point where no wall is high enough and no vehicle strong enough. The Soviets discovered that.
The message here is clear.
As I closed a week ago,
We trade as individuals to build a better life. But, there is every reason that, as a community, we should also try to do the same. We don’t have revolutions in North America; but we the people can work to the same ends. It will just take longer… God willing; we’ll get there.
We’ll get there faster and with less grief if we get back to work studying prices and the various market drivers impacting these prices. So let’s get started.
Global Economics Review
Weekly International Economic Report .
I encourage everybody to read these reports and discuss them in the Discourse, but check the publishing date if you are looking for the latest data. The current issues, when posted, are good ones.
As one leading economist from RBC said on Friday, the data this week was “horrid”.
But I remind you that the darkness always is worse before the storm comes in to clear it away. A couple years ago I wrote here that millions of Americans would be foreclosed and many put out on the street. Early this year, I wrote that unemployment would become a very serious issue – using figures like 8% when economists were talking 4.5% unemployment – and now you can see the direction the US economy is headed.
But that’s the storm. You needed to protect yourself before it hit. Now that you are in the middle of it, you need to be looking ahead to see how you can benefit from the post-storm period. That’s how you need to look at capital markets.
Business, sports, the capital markets; it’s all the same. You need to anticipate and act; not react.
Here are the key US economic reports and the Econoday analysis from last week.
US Economic Calendar.US Retail Sales for September. After the data release, Econoday reported, “Retail sales in September came in far worse than expected, indicating that the consumer sector is in retreat. Weakness was led by autos. Overall retail sales fell 1.2 percent in September, following a 0.4 percent decline in August. The headline number was far more negative than the consensus forecast for a 0.6 percent drop. Excluding motor vehicles, retail sales declined 0.6 percent in September, after a 0.9 percent drop the month before. The September ex-auto number was worse than the market forecast for a 0.3 percent decline. Excluding motor vehicles and gasoline, retail sales decreased 0.7 percent, after slipping 0.6 percent the month before… Components were widely negative. Particularly weak were motor vehicles, down 3.8 percent; furniture, down 2.3 percent; and clothing, down, 2.3 percent… Overall retail sales on a year-on-year basis in September were down 1.0 percent - compared to up 1.5 percent in August. Excluding motor vehicles, the year-on-year gain came in at up 3.6 percent while excluding motor vehicles and gasoline, the year-ago increase stood at 1.6 percent… The September retail sales report shows a consumer sector that has pulled back over concerns over job losses and overall concern for the economy. Poor earnings reports and a negative Empire State manufacturing report added to today's dour mood for equities. Bond yields are likely to ease due to flight to safety.”US Producer Price Index for September. After the data release, Econoday reported: “Producer price inflation at the headline level continued downward due another drop in energy costs. Core inflation, however, rebounded. The overall PPI fell 0.4 percent, following a 0.9 percent fall in August. The September decline was greater than the consensus projection for a 0.4 percent drop in the overall PPI. In contrast, the core PPI rate rose to 0.4 percent, following a more moderate 0.2 percent gain in August. The September core topped the market forecast for a 0.2 percent increase. The core was led by a rebound in prices for cars and trucks but other components also showed a firming in price pressure… As in August, energy pulled headline inflation down in September with a 2.9 percent drop after a 4.6 percent drop the prior month. Food price inflation eased to 0.2 percent from 0.3 percent in August… Motor vehicles reversed their impact on the core in August. The core rebounded in large part due to the end of discounting by auto dealers. Passenger cars jumped 0.5 percent while light trucks spiked 1.0 percent… For the overall PPI, the year-on-year rate dropped to up 8.7 percent in September from up 9.7 percent the month before (seasonally adjusted). The core rate jumped to up 4.1 percent from up 3.7 percent in August… Today's PPI report is mixed toward equities and bonds as the core is still showing the effects of earlier cost hikes from energy and commodity prices. But looking forward, lower oil prices and a weak economy will help all components soften. Markets are more likely focusing today, however, on poor earnings, a negative retail sales report, and a down Empire State manufacturing down.”
US Consumer Price Index for September. After the data release, Econoday reported: “Consumer price inflation in September came in quite tame - thanks to lower energy and motor vehicle prices. The headline CPI was unchanged, following a 0.1 percent dip the month before. The September headline number matched the consensus forecast for no change. The core rate softened to a 0.1 percent gain in September and came in lower than the consensus forecast for a 0.2 percent rise. As for August, a drop in energy costs - down 1.9 percent for September was the main factor behind flat headline inflation. Also declining were new & used vehicles and apparel. Housing declined but that was due to the energy subcomponent. In contrast, food costs are still seeing the impact of a higher cost structure as food inflation was unchanged at a high 0.6 percent… The recent decline in crude oil prices is clearly impacting the CPI favorably. Behind the 1.9 percent drop in energy were a 5.8 percent fall in heating oil, a 3.2 percent decline in piped gas & electricity, and a 0.8 percent decrease in motor fuel (minus 0.6 for gasoline)… The slowing in the core was led by decreases for new vehicles, down 0.7 percent; used cars & trucks, down 1.8 percent; public transportation, down 1.0 percent (includes air fares); and apparel, down 0.1 percent… Year-on-year, the overall CPI dropped to up 4.9 percent (seasonally adjusted) in September from 5.4 percent in August. The core rate was unchanged from a 2.5 percent year-ago boost in August… The bottom line is that inflation is slowing due to lower energy costs and a flat economy and the good news on inflation is giving the Fed room to keep rates low and keep pumping liquidity.”
US Industrial Production for September. After the data release, Econoday stated: “Industrial production in September was down extremely sharply but special factors did play a role. Overall industrial production dropped an unexpectedly sharp 2.8 percent in September, following a 1.0 percent decline in August. The Federal Reserve specifically noted that the decline was due in part to the impact of hurricanes Gustav and Ike and the Boeing strike. Also, the Fed stated that the hurricane effect was about 2-1/4 percentage points and the Boeing strike effect was about 1/2 percentage point… The September decrease was far below the consensus forecast for a 0.5 percent drop and even exceeded the consensus low end forecast of minus 1.7 percent… The manufacturing component fell 2.6 percent after a 0.9 percent fall in August. Meanwhile, utilities output rose 2.2 percent in September while mining output dropped a dramatic 7.8 percent (reflecting oil rig shutdowns in the Gulf of Mexico)… On a year-on-year basis, industrial production in September dropped to down 4.5 percent from down 1.4 percent in August… Overall capacity utilization in September fell to 76.4 percent from 78.7percent in August and compared to the consensus forecast for 78.4 percent… Today's report shows industrial production is about flat after discounting special factors. But outside of the industries affected by the special factors, there were widespread declines with automotive being about the only positive exception. Although the sharp decline for September is not the true trend for industrial production, a weakening economy and negative growth abroad indicate that manufacturing likely is on a moderate downtrend. Discounting special factors since they eventually smooth out, the latest industry detail suggests that manufacturing is in recession and likely is helping to tug the overall economy into at least a brief contraction if not longer if credit markets do not improve.”
US Housing Starts for September. After the data release, Econoday reported: “Housing starts in September continued to plummet, adding to recession worries. Starts declined 6.3 percent, following an 8.1 percent fall in August. The September pace of 0.817 million units annualized was down 31.1 percent year-on-year and was below of the consensus projection for 0.880 million units. The drop in starts was led by single-family starts, which fell 12.0 percent, after a 4.0 percent decline in August. Multifamily starts rebounded 7.5, after dropping 16.7 percent in August… By region, the fall in starts was led by a monthly 20.9 percent decline in the Northeast. Starts in the West also dropped - by 16.8 percent in September. The Midwest and South posted gains of 5.6 percent and 0.5 percent, respectively… Permits also declined in September, falling 8.3 percent, following a 8.5 percent decrease in August. The September 0.786 million unit pace for permits was down 38.4 percent year-on-year… Today's report indicates that homebuilders have cut back sharply on construction. This reduction in needed to work on unsold inventories of unsold homes on the market. The permits and starts numbers indicate that housing has a long way to go to recover. This is another sign glaringly pointing to recession.”
How is next week’s calendar looking?
US Economic Calendar.At 10:00am ET on Monday, Federal Reserve Chairman Bernanke will testify to the House Budget Committee in Washington on the plan for a US economic recovery.
At 9:00am ET on Tuesday, the Bank of Canada Governor will announce monetary policy.
The following Wednesday Oct 29 at 2:15pm, the US Fed will announce their decision. The talk today is that the Fed will cut 50 basis points, which means the Canadians will cut. That means that, in all likelihood, the Loonie will suffer between this Tuesday and the following Wednesday, and then start to recover after the FOMC announcement.
There is not a lot of news next week that is on the calendar. The Bernanke testimony may be a tough one for him because these politicians need to use the photo opportunity to their advantage prior to the federal election early next month. I’m sure he’s prepared.
US Personal Income and Outlays for September. After the August data release of this important report, Econoday reported, “The August personal income report looks good on the income side but is worrisome on the spending side. But as expected, we got good news on the inflation front. Personal income in August rebounded 0.5 percent, following a 0.6 percent drop in July. The August gain beat the consensus forecast for a 0.2 percent increase. Within personal income, the wages and salaries component posted a 0.4 percent increase in August, after advancing 0.3 percent the previous month… Spending was flat overall but there was large divergence by components. Personal consumption expenditures in August were unchanged, following a 0.1 percent uptick in July. The market had forecast a rise of 0.2 percent for personal spending. For the latest month, a spike in auto sales led to a 1.4 percent jump in durables PCEs. Weak gasoline sales pulled down nondurables, which fell 0.6 percent. Services rose a mere 0.1 percent. On the inflation front, the headline PCE price finally eased on lower energy costs. The overall index slowed to no change, following hefty gains in July and June of 0.6 percent and 0.8 percent, respectively. The core PCE price index eased to 0.2 percent from 0.3 percent in July. The market had projected a core increase of 0.2 percent for the latest month… Year on year, personal income growth rose to up 4.6 percent from up 4.5 percent in July. Headline PCE inflation slowed to up 4.5 percent from up 4.6 percent the month before. Core PCE inflation firmed to 2.6 percent from 2.5 percent in June. Both headline and core PCE price inflation remain above the Fed's implicit inflation target range of 1-1/2 to 2 percent annualized… The August personal income report points to weak third quarter GDP.”
US Equity Markets Review
DJIA stockcharts.com chart
A week ago, history was made: the DJIA and S&P 500 took their biggest percentage weekly losses in almost 100 years. All ten sectors were down for the week, and over the week all 30 DJIA components were down… The losses this week will long be remembered as five of the DJIA 30 were down over -25%: General Motors (GM -45.7%); Alcoa (AA -41.5%); Bank of America (BAC -39.5%); Chevron (CVX -27.2%); and American Express (AXP -25.0%)… That is unprecedented.”
This week, however, the only historical proportions I see are the mountains of negativity being spread by economists, recent book authors, newsletter writers and people on the speaker’s circuit. If it’s the market you are interested in; the DJIA and S&P 500 soared +4.60% and +4.74% respectively.
Respectfully too because I practically got on my knees in last Sunday’s Week In Review begging you to start the week on a buying spree.
The big winners were: GM (+31.5%); T (+12.8%); JNJ (+12.2%); PFE (+11.7%); and BAC (+11.4%). Week over week, the DJIA 30 had only three losers. Compare the 27 winners to the previous week where there were zero winners
I try my best, but there is an overwhelming sense of hopelessness that permeates the public. Too bad.
NASDAQ Composite ino.com chart
NASDAQ Composite stockcharts.com chart
The NASDAQ Composite rallied +3.75% this week. Admittedly, like the DJIA rally, these prices are nowhere close to the prices of just three weeks ago. But we have to walk before we run. In fact, some people have to learn how to walk.
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
If you find these stocks rallying hard on high volume next week, then I believe you will be watching the power of the Bull.
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
Sector ETF Summary for the US equity market
For the three consecutive weeks leading up to this one, there were zero sectors up and 10 down. I cannot recall that happening before.
But that’s history because this week, there were 10 of ten sectors up. That’s right; all sectors were winners.
The best performers were: Healthcare (IYH +7.2%); Utilities (XLU +6.4%); Telecom (IYZ +6.1%), Energy (XLE +5.1%) and Technology (XLK +4.0%).
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 closed the week down -7.51% this week to 72.13. The past couple weeks were down -16.93% and -12.17%, so the Energy market has taken on a new complexion.
I do understand why many people are now talking $50 oil. I think, however, some of the same people were touting $200 oil two months ago. You see, they want you coming and going – when they are going and coming. That’s how they take profits in markets.
Mind you, I didn’t say earn profits. What we need is a public censor for our side who could use the latest TV technology to super-impose the word “crook” on the speaker’s forehead – like the old Sprint commercials. That would wake up some of the audience, at least.
Lower oil prices did not take the stock prices down in this sector this week, however, because XLE (the Energy ETF) closed up +5.07% W/W to 45.60.
Mind you, just two weeks earlier, XLE closed at 67.70, so the loss over three weeks is -32.6%.
Three months ago, XLE was 90. The loss is almost exactly -50%.
Over 1, 3 and 6 months, XLE is worst in class (10th out of 10) in every time frame.
Exxon (XOM), which is a recent Buy pick of mine, dropped -43% in the previous two weeks, but was up +9.1% this W/W. I worked really hard last weekend to bring about that result. The big belt buckles in Irving TX ought to thank me. :-)
The price a week ago was $62.36. Today it’s $68.04. What happened in the interim?
Last week I wrote in this space:
When did I recommend that traders sell this stock? Yes, in November 2007, at 94, and again in December at 95. Nobody who reads this blog missed what I wrote about the biggest US-headquartered company.What I wrote here a week ago is very important. I don’t know precisely how markets are going to move week to week or even day to day or hour to hour. But I know trading. Let’s follow my words of wisdom:I am confident of that because these (like Exxon) are stable, very large cap companies with very few meaningful “surprises”. That means you can confidently apply put and call option strategies. At what I believe is a cycle bottoming condition, I write puts at strike prices where I find solid economic value (ie, very low capital risk), and where I believe I have an upside Total Return growth of say +26% per year.
With XOM, if my cost base is say 68 and my two-year target is say 120 (low end for VL forecast), plus a growing dividend (one that I project to be $1.55 (2008), $1.78 (2009) and $2.02 (2010), you will significantly exceed your performance expectations. You will even beat it if your next sale at say 120 takes three years. VL is projecting up to ~145 for XOM into the 2011-2013 period, based on 10x cash flow per share of $14.65. This is a reasonable analysis and conclusion… If there is a roaring bull market between now and say 2011, which is quite possible, then 145 is also possible. But, I am more conservative; I don’t think the global economy is going to be that hot, so I’ll stick to the long-term 120 price target. With the extensive stock buy-backs in process, I could see that Earnings Per Share might approach say $10.50 in 2011, so a 120 price target would require a PE of 11.4, which in a Bull market would be quite reasonable… Exxon will remain a core component of my portfolio. Well-timed put writes plus a solid dividend (please make it higher) give me high income, and well time purchases of the stock and long calls provide solid capital growth. What’s not to like… I won’t even argue that many of you were waiting until the price of XOM got down to 68, and when you saw the price of Crude Oil collapsing, the $USD soaring, and the broad market looking awfully shaky, you froze, which means you sold at 94 and you are still out at $62.36. I will presume you did buy at an average of 68, which means your present holding is down -8.3%, and you are concerned. But if you sold at 94, you missed a loss of -27.7%... If you on Friday you wrote the Jan 60 puts for at least +8.00, your cost is now 60 and you have given another trader the opportunity to put more XOM to you at 60. So, your cost basis is at worst 60. Wow!
Yes, this week, XOM closed at $68.04. Even though that is a lower price than I had anticipated, the gain this week was +9.1%. Yes, traders who are scaling in will now have a basis in the low 60’s. Traders who got in a week ago at 62.34 are already happy because even though the current price is 68.04, they could have bought XOM down to 59.17 this week.
Look what these low prices this week mean in comparison to those who traded XOM for the past several years. Then look at the Value Line data to see how much this company has strengthened over that period of time.
There is no need to have a panic reaction when this stock dips. You should be waiting for buying opportunities like this.
I also want you to watch the Western Canadian oils. If there is a single lesson learned from the oil price experience of the past year, it’s this. America has no friends in OPEC. Canada is now and will always be the friend America needs. Take that to the bank. Western Canadian oil will continue to help supply the energy needs of the US, and hundreds of billions will be invested, largely by US companies, in the oilfield ownership and infrastructure necessary to get that crude delivered to US refineries. The following are the charts of the US listed Canadian companies that will benefit.
Oil & Gas Exploration & Production -Canada
The Cara 100 energy stocks did ok this week, particularly the ones on my recent Buy list. Canada’s Imperial Oil (IMO +18.9%) was a winner and so was EnCana (ECA +7.4%). Suncor dropped -3.4%, but was up +6.2% on Friday. ECA was up +4.8% on Friday.
Chevron was up +7.8% W/W.
Pretty good week for the Energy stocks, despite Crude Oil prices dropping -7.5%, and price of fuel at the filling stations dropping to the $3.00 level nationally, down from over $4.00 just a couple weeks ago.
Sector 15 (basic materials: IYM, XLB, IGE and VAW)
Here’s the XLB Monthly, Weekly and Daily data charts:
XLB Monthly data:
XLB Weekly data:
XLB Daily data:
Table 3: Senior Basic Materials:
| Symbol | Close | 1Day Change |
1Day %Change |
1W %Change |
2W %Change |
4W %Change |
YTD %Change |
3M %Change |
6M %Change |
12M %Change |
Basic Materials (XLB +1.25% to 26.00) made a small gain on the week thanks to a monster move (+5.09%) on Friday.
The winner on my monitor was Votorantim Pulp & Paper of Brazil (VCP +17.3% W/W) even though Friday was a downer (-12.8%). VCP was this week’s poster for volatility.
US steelmaker Nucor (NUE +9.1%) was strong, but South Korean giant steelmaker Posco (PKX -8.9%) got hammered. Maybe Monday in Seoul will pick up after traders there see the NUE gain on Friday.
There were a lot of the big base metal miners that fared badly this week: Rio Tinto (RTP -9.1%), BHP (BHP -5.9%) and Teck (TCK -4.2%) were in this list.
Watch the big metal miners to see if the goldminers can rise from the doldrums. This week the popular miners were hammered: Goldcorp (GG) and Barrick (ABX), both down -21.4%; Gold Fields (GFI -20.6%); and Kinross (KGC -17.9%).
At what point, with falling gold bullion prices ($GOLD down -$71.30/oz W/W to 787.70), do one of these miners report that they are shutting down production. Unlike OPEC with oil, they would not do it to push prices higher. At a gold price in the 700’s, there are many mines that would operate today at a loss. Why would a miner produce at a loss? Gold is unlike other natural resources in that it holds its value forever. So, at some point, these natural resources will be kept dormant by the mining companies that own it – if those miners are debt free.
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 +0.72% W/W) closed at 23.71.
A week ago in this space I got into the need for traders to use stops and manage positions day to day: “... Does this not tell you that traders (i) need stops, and (ii) often have to day trade or else sit it out in cash?”
A week ago, I wrote in this space: “Brazil’s aircraft maker, Embraer (ERJ) dropped -28.4% this week and -40.6% over two weeks. Ouch. This is a Cara 100, and I like it at $17.20. ERJ was more than double that a month ago. The M-W-D RSI-7 is now at 23.1/14.4/9.9… Boeing (BA), Bombardier (BBD.B on Toronto) or Embraer (ERJ) – take your pick. I assure you they will still be making planes next quarter, next year, and the year after that. And, probably be making solid profits too.”
You must have been listening because even though this sector was up just +0.72%, the result for the three plane makers W/W was: BA (+6.6%); BBD/B.TO (+4.31%); and ERJ (+11.9%). Name me one economist who gave you a trifecta that returned +7.6% this week. Those economists were too busy phoning CNBC/Bloomberg to get airtime where they told you the previous week’s price data scared the hell out of them. Scared me too; but as a trader I get to use my brain, not just advertise it.
Btw, I have a great friend in Toronto, who is the mentor for my writing career, Frank Kaplan, who was financial editor for several important publications, including Financial Post. Along with the late Ian Notley, the world’s best market technician of the past half century, I acknowledge in “Lessons” Frank as the other key person who mentored me.
On page v, I wrote: “Ian taught me how to see the inter-related parts of the big picture, and Frank convinced me to write it simply.” Well, a couple weeks ago, Frank shot me an e-mail that read simply, “You are making enemies; do not make enemies.”
Great advice; but in order to break new ground, I’m afraid I have to destroy myths. It is a myth that economists can help traders. If you don’t believe that, then I’ll say that you could out trade Ben Bernanke probably every day – unless of course he’s trading commodities like Hilary Clinton.
Unfortunately, the people are required to trade honestly, and too often they lose because there are others who are trading dishonestly. That’s a fact. That’s why we need a securities regulator that is set up independently like the federal judiciary.
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 |
Consumer Discretionary (XLY +0.50% W/W) closed at 22.24. There was even a gain of +1.60% on Friday.
But, even after Brunswick Corp (BC) cratered -46.7% the previous two weeks, this week the damage was still an additional -23.0%.
I used to think the crashing oil price would help their business at Brunswick, but alas I suppose for bankers and politicians there are no boats being ordered. Actually, the problem here must be credit. No loan; no boat. Maybe it’s a case of no job; no loan. Maybe no boat manufacturer if the credit squeeze keeps up. Would be a shame too because Brunswick makes some pretty fine boats under the Sea-Ray and Boston Whaler names.
So, let’s watch for the day when the banks start lending to one another, hopefully by mid-week, to see if there is a recovery in the price of BC. But, as you know, I don’t like Consumer Discretionaries, and I warned everybody three weeks ago that my Buy list wouldn’t include them. I don’t say short them either because that’s not my style.
The costs and the risks of shorting are large. When you buy a put, your risk is less – all you can lose is 100% of the premium – but time is your enemy. Trading is mostly about risk management and understanding and being able to control time. I need to have time work for me in the market, so I will write puts (at cycle lows), and occasionally at cycle highs I will write covered calls.
Anyway, I wrote in this space a week ago about BC, “What I think might have happened here … is that … there will be a credit market problem and a homes foreclosure problem, and an employment layoff problem, longer than any of us would care for. So, “no tickee” means I don’t like Consumer Discretionary at this point.”
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 +3.01% W/W to 24.31) was stronger.
The Brazilian’s ABV (+18.9%) and PDA (+14.4%) were jumping up like Carnival, while the American Staples (PEP -6.8%), WFMI (-5.7%) and SBUX (-5.7%) were under pressure from worry-wart economists in TV Land.
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 +7.19% to 53.84) was a winner, #1 in fact.
United Health (UNH +40.6%, including a +7.8% gain on Friday) must be filling up with capital market casualties. [Bad joke; I know, but I’m getting tired.]
Lots of these stocks were up over +10% W/W. NVS (+16.2%) and DNA (+14.4%) were recovering from a sickly spell. Of course they have the drugs to do whatever is needed.
Vinod, are you listening?
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 +1.79% W/W to 15.67) were thought to be a tiny winner, but only because the week goes from Saturday to Saturday. If the week, however, had gone from the prior Friday through Thursday, the win with XLF would be a massive +15.5%.
Still the loss of -3.33% on this Friday was not bad – just enough to send the people home thinking there really was no Banker Bail-out – just help for Mom & Pop. [smiley goes here]
Can you tell I’m a cynic?
Listen; I’ve been around long enough to figure out much of this stuff. If this was a fair market, XLF would have been up on Friday. But with JPM (-5.6% W/W) and Jamie Dimon at the helm, and the Fed’s Ben Bernanke slated to take on the lawmakers in Washington on Monday, what did you expect?
Paulson to Dimon: “Jamie, take it down. Cool it before Ben goes to Congress. It’s going to be bad enough with those mindless idiots preening for the cameras as part of their re-election campaigns.” I swear I heard this. Must be dreaming.
Once the Lehman CDS crisis passes early in the week, Bernanke can part the waters, and permit the rally to continue. Paulson will be up all weekend to ensure it. The storyline has already been scripted: “Treasury, Fed and SEC team working effectively to (i) get Mom & Pop back to work, (ii) get banks to start lending to Mom & Pop again, and/or (iii) use only a small part of the $700 billion commitment from Congress to buy better-than-expected real estate backed loans that were syndicated by Fannie and Freddie.”
Take your pick; not a word of any of it is true. But when you gain control of the people’s treasury, and their gold, you get to make the rules, one of which is to assure your right to write history as you’d like to see it in your biography.
Take note that this week, while XLF was stuck with a gain of just +1.79%, Goldman Sachs (GS) was up +28.7%, Credit Suisse up +35.6%, and Morgan Stanley (MS) was up +98.8%. MS and GS are now on the path to being two of the leading banks in America, and hence the world. Capital is flowing from small banks to big banks so that eventually the big banks get to buy out the small ones.
Conveniently the three biggest US banks, which together hold 92% of the CDS mega-trillion bag – the one that Treasury and the Fed will patch up this weekend – were down on Friday for good political optics: C -6.4%, BAC -4.2%, and JPM -2.9%.
Have to feed those economists some red meat for the weekend, you know.
In TV Land, this is called the warm-up act. The big show follows.
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 +4.03% to 16.54) and Semi-conductors (SMH -3.20% to 19.65) were headed in opposite directions.
The problem was the economic data doesn’t look good for the chip makers. On Friday, Intel and SanDisk went from winners on the week to losers: INTX dropped -2.4% on Friday, but only -2.0% W/W, while SNDK dropped -5.9% on Friday to close the ween down -2.6%.
I mentioned recently, I liked the price cutting happening to RIMM. The stock rebounded this week by +6.8%.
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 +6.12% W/W) closed at 15.95.
This week, Verizon (VZ +1.6%) and AT&T (T +12.8%) were both up, but what a difference. T was 2nd best DJIA performer, while VZ was #24 of 30.
Over two weeks, VZ is still down -13.0% and T down -10.1%.
As I stated a month ago, “Like the most Financials, I think I’ll avoid the Telco sector when selecting companies whose stocks I want to buy for the next Bull market.”
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 +6.41% to 27.41) had a great week, 2nd best performing sector. But the problem is that traders don’t know if this was the proverbial dead cat bounce. A week ago, XLU was down -19.83%.
Anyway, the big winners this week were NGG +18.4% and EXC +15.0%. All of them, in fact, were winners on the week.
I recently started running this table to help you with the higher income utilities. “But, with the recent losses, the Total Return (TR) is like the Titanic, way underwater.”
Here is the list of North American Utilities that I will be following more closely:
AEP D DUK ED EXC FE FPL NGG PCG PEG SO TRP
For study purposes, there is a good mix of electric (AEP, D, DUK, FE, FPL and SO), gas (NGG, TRP) and diversified (ED, EXC, PCG, PEG) utilities.
Table 12: US Utilities
Bonds & Yields Review
Table 10: US Treasury Yields
| Maturity | Yield | Yesterday | Last Week | Last Month |
|---|---|---|---|---|
| 3 Month | 0.65 | 0.32 | 0.11 | 0.01 |
| 6 Month | 1.12 | 1.04 | 0.72 | 0.69 |
| 2 Year | 1.62 | 1.61 | 1.59 | 1.56 |
| 3 Year | 1.27 | 1.35 | 1.40 | 1.41 |
| 5 Year | 2.82 | 2.83 | 2.75 | 2.51 |
| 10 Year | 3.93 | 3.96 | 3.84 | 3.41 |
| 30 Year | 4.32 | 4.25 | 4.12 | 4.08 |
| Maturity | Yield | Yesterday | Last Week | Last Month |
|---|---|---|---|---|
| 2yr AA | 3.50 | 3.20 | 2.85 | 2.22 |
| 2yr AAA | 3.01 | 2.71 | 2.65 | 2.21 |
| 2yr A | 3.76 | 3.48 | 3.18 | 2.43 |
| 5yr AAA | 3.81 | 3.68 | 3.26 | 2.75 |
| 5yr AA | 4.05 | 3.82 | 3.44 | 2.74 |
| 5yr A | 4.43 | 4.18 | 4.09 | 2.83 |
| 10yr AAA | 5.82 | 5.24 | 4.67 | 3.46 |
| 10yr AA | 5.46 | 4.88 | 4.47 | 3.46 |
| 10yr A | 4.95 | 5.35 | 4.18 | 3.54 |
| 20yr AAA | 5.71 | 5.71 | 5.32 | 4.61 |
| 20yr AA | 6.20 | 6.21 | 5.75 | 4.86 |
| 20yr A | 6.50 | 6.26 | 5.67 | 4.72 |
| Maturity | Yield | Yesterday | Last Week | Last Month |
|---|---|---|---|---|
| 2yr AA | 6.09 | 6.20 | 5.79 | 4.21 |
| 2yr A | 9.76 | 10.05 | 7.44 | 8.06 |
| 5yr AAA | 5.50 | 5.91 | 5.55 | 5.01 |
| 5yr AA | 7.21 | 7.21 | 7.43 | 6.36 |
| 5yr A | 7.41 | 7.25 | 6.96 | 5.49 |
| 10yr AAA | 5.90 | 5.42 | 5.53 | 4.88 |
| 10yr AA | 7.23 | 7.29 | 7.29 | 6.63 |
| 10yr A | 7.35 | 7.45 | 7.24 | 6.30 |
| 20yr AAA | 6.41 | 6.36 | 6.10 | 5.69 |
| 20yr AA | 6.31 | 6.26 | 6.18 | 5.64 |
| 20yr A | 7.20 | 6.80 | 6.79 | 6.08 |
The 20-year Treasury ETF (TLT) took a major hit this week, down -2.17% to 93.87. A week ago, the hit was -1.49% from 97.40.
A few weeks ago I opined that bonds were dead. The TLT in mid-September was 100.86, now 93.87. Less than two months ago the TIP was at 107.01, now 95.38, so it’s not just equities getting hammered. The TIP, in fact, this week gained +0.09% to 95.47, but a week ago the loss was a stunning -6.36% from 101.86.
The Aggregate Bond (AGG) has plunged from 102.08 in mid-Sept to 94.44 presently, and that’s still after a monster gain this week (+6.83%). But the loss over two weeks is still -4.84%, and over 4 weeks, it’s -6.50%. I’m not comfortable with any bonds right now because the Paulson Reflation Program will crowd out the bond market, pushing rates higher and prices lower.
It used to be a balanced market where government’s needs to finance its 20% of the economy was 20% of new capital for bonds. But now with 20% of the economy, the need is for 80% of the capital available for bonds. The Fed is helping the Administration accomplish its needs by lowering the key rates, but that is killing the corporate market. How is a company like Brunswick (BC) for example to compete at those low rates. The risks to bond holders at Brunswick are much greater now because the economy is weaker, consumers can’t get loans, and so forth. So, these companies are being taken to the woodshed and whipped.
Blame it on Paulson and the US Congress. Every time they spend more money than comes in, it has to be printed. The government doesn’t do that; their banker the Fed does it. They can fudge the market only for so long and suddenly voila there is no capital available for corporations or consumers, and Paulson and Bernanke blame it on the banks. This is utter nonsense.
We need an honest government, as kaimu says, in order to have honest money and fairness to the private sector. Ain’t happening.
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 |
Fannie Mae (FNM) and Freddie Mac (FRE) closed the week at $0.95 and $1.10, down from $1.08 and $1.16, respectively. Barney Frank says blame it on the economy or the banks. That’s because his committee is (was) the oversight for Fannie and Freddie until they dropped the ball.
When will these people tell the truth about Fannie and Freddie? The truth is (i) F and F need to be 100% privatized, where proper management can be appointed by a shareholder elected Board, (ii) the bad loans most everybody accuses them of making were in fact syndicated by Humungous Bank & Broker (HB&B) and sold to Fannie and Freddie. F & F were then instructed by govt to buy that bad paper.
I feel sorry for the employees of F & F; they can’t win for trying. Why not just end the charade and let the private sector do its job?
But then of course, Barney Frank wouldn’t have much of a job, and the soon-to-be President-elect Obama would not have had the big retainer that kept him working in Washington, climbing the ladder for the past few years.
Consumer Finance -USA -- Interactive Weekly Data Charts
Consumer Finance -USA -- Interactive Daily Data Charts
Commodities Review
The $CRB dropped a further -2.67% to 282.14. The good news is that the previous two weeks losses were -11.22% and -10.44%.
In early July, the $CRB hit a high of 493.97. The drop since then is having a major impact on inflation data that lags the price move. But the econ data out this week shows that inflation is no longer problem #1.
The 50-day MA for $CRB is 356.30 and the 200-day MA is 397.17.
As I wrote here for the past two weeks, “when bankers call in loans, the high-risk (and potentially high-reward) borrowers of commodities are getting hammered. But, had commodities that are purchased for use in the economy, such as energy, metals, food stuffs, etc, been priced for economic returns instead of speculative returns (ie, like housing earlier, based mostly on inflated and rising prices (ie, hot air)), losses to this extent would not be happening.”
It is an absolute truth that Bernanke’s Fed had the tools to regulate, and failed to use them. So, I don’t find the speculators at fault. Speculators are merely traders with an opportunistic strategy.”
A new regulatory system needs to put all regulation under the same offices, preferably under a judicial system, and separated to the extent possible from political interference. This is so basic that not doing so is destroying the empire.
Interactive Chart of Weekly CRB Commodities Index:
Interactive Chart of Daily CRB Commodities Index:
Oil Review
$WTIC plunged -7.51% this week to 72.13, with a low in the 60’s. The previous two week losses were -16.93% and -12.17%.
The drop in Crude Oil prices -- US Light Sweet Crude called West Texas Intermediate as well as European Brent – is the major reason why the commodity index ($CRB) has tanked.
For $WTIC, the 50d MA is now 102.15, and the 200d MA is 111.63. The price in mid-July hit a record high of $149.90.
The good news is that the monster price cut is like a tax rebate to corporations and consumers alike.
Here is the e-miNY Dec-07 Crude Oil chart.
Interactive Chart of Weekly Crude Oil:
Interactive Chart of Daily Crude Oil:
Gold & Precious Metals Review
Three weeks ago I wrote, “$GOLD …dropped -3.60% on Friday to close at 864.70 in the spot market… This is a negative technical picture, but I have opined that too much Fed money will lead to higher gold prices.”
I still believe in that scenario despite the price of $GOLD falling -$71.30/oz this week to 787.70.
The good news is that $GOLD closed Wednesday at 848.28, which is not too far off the price from three weeks ago. I believe the current storm is (i) margin call related and (ii) an attempt by the Fed/Treasury to kill the spirit of speculators and $USD hedgers.
The hit to the price is coming in a monster heavyweight punch to the jaw. On the previous Friday, for example, the spot price dropped -$65.40/oz to close the week at 849.90. This week’s spot price dropped a further -$65.92/oz to 783.98. That means the loss over six sessions has been -$131.32. And that’s the reason the economists are lining up for TV interviews to spew their Great Depression II crapola. These people are whores for the pimps in Treasury and the Fed. They are helping HB&B buy up the contracts at fire-sale prices.
I’ll say this now that there is no reason in the world for gold to plunge -$131.32 (-14.3%) in six days from 915.30. And the intra-day high at that point was 931.70.
A week ago I wrote in this space, “These changes often happen on Fridays, which shakes the emotions of the ‘weak hands’. There is little I can do to calm the nerves of precious metals traders except to reiterate my belief that precious metals ought to be bought on every significant pull-back because the monetary authorities have embarked on a global initiative of reflation, including bail-outs of financial services companies. As soon as the credit markets start to work normally again, there will be only so much time that these market interventionists can hold back precious metal prices… It’s why gold, silver, platinum and palladium are called precious. The miners cannot keep up to demand. Supply must come from government holdings to keep the price down. There are many highly respected sources who believe that the govt no longer has the gold and silver inventory they claim. There is no audit; no check and balance in the system… A new financial system must put govt, as owner of commodities, in the same position as the private sector that trades in these commodities. Otherwise, there is no level playing field. One side is free to cheat with impunity, ie, without fear of punishment. That’s not right and we all know it, so why the charade?”
Why, indeed? It’s corruption, that’s why! There is no free market because the credit system has bastardized the gold market. Gold needs to trade as an unencumbered asset, like fiat money. Both should be treated as unallocated assets, awaiting opportunities for investment in wealth creating assets.
Take that Mr. Economist and stuff it where the sun don’t shine.
As I wrote in this space two weeks ago, “what we can expect in the gold market, at some point soon, is the resultant impact of well over $1 trillion in new money being printed by the Treasury Secretary (and much more) and another $1 trillion (and much more) printed by the other G-20 monetary authorities. The price of gold must, in my view, shoot higher… The tell will be in the Euro/Dollar level.”
$GOLD is under pressure here because the Euro has collapsed from US$1.4624 at the end of September to 134.14 this Friday, Oct 19. The ECB head needs to drop his key lending rate a lot more if currency and gold markets are to stabilize.
In any case, the Euro and $GOLD will rally soon. As soon as the US credit market crisis is gotten under control, traders will stop repatriating $USD from abroad and they’ll start using it to buy commodities like gold and silver (and oil). I wrote that last weekend and probably at other times. I write objectively what I believe is the truth.
Two weeks ago I opined in this space, “I think before that happens, however, the ECB and Bank of England and the European governments will likely agree to join with the US in printing money to try to reflate the region out of the financial and economic problems it faces today. Reflation in Europe ought to temporarily help strengthen the $USD, holding or pushing $GOLD lower. But when all these countries including the US, Japan, Canada and Australia, etc, reflate at once, what they are doing is to devalue their currencies against gold. At some point after the TED spread narrows, I expect $GOLD to zoom. With a wide TED spread, there is a greater opportunity cost to holding gold and not time deposits (aka CDs).”
I added a week ago, “Now that you have seen that situation unfold as I had expected it to, next, the price of gold will soar. Of course, the US authorities will tell you they are selling their gold to hold the $USD from crashing, but who at this point really believes there is more gold in Fort Knox than Cinderella’s Castle?”
I think it’s almost unanimous here, with Joe the Plumber in agreement, that the Disney Castle is the hands-down winner.
For $GOLD, the 50d MA is now 836.16, and the 200d MA is 897.54.
Incidentally, it was just five weeks ago that $GOLD closed the week at 764.50, below today’s price of 787.70.
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 plunged -11.93% W/W, closing at 9.34/oz. This loss followed the losses of -6.40% and -16.13% over the two previous week.
Silver Wheaton (SLW) dropped -9.1% to $4.51. This company is a royalty company, which represents good value at this price.
For $SILVER, the 50d MA is now 12.46, and the 200d MA is 16.28.
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 gained +$77.90/oz (+8.07%) a week ago. This week it lost -$113.90 (-11.33%) to close at 891.30.
Two weeks ago, with the price down to 986.60, I wrote, “It’s hard to believe that as recently as July, $PLAT was trading at $2100/oz, now under $1,000. All the gains back to 2005 have been eliminated.” I understated the case: 986 was not the cycle low.
But, if, as and when the credit market squeeze is over in the banks, I expect $PLAT to soar.
The 50-day MA for $PLAT is 1244.56 and the 200-day MA is 1768.70.
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.
$PALLADIUM has been on a six-week plunge from $300 to $177. As recently as March, $PALL traded as high as 600.
This week $PALL dropped -$22.55 -11.30% to 177.00.
The 50-day MA is now 254.35 and the 200-day MA is 398.53.
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 closed at 217.20. Three weeks ago it was 307.45.
The 50-day MA for $COPPER is 302.07 and the 200-day MA is 350.91.
As I wrote a week ago:
I have believed for years that when traders in private equity, like Glencore in Switzerland (“the Metal Men”), got access to all the capital they wanted – like an endless sub-prime loan if you will – that copper contracts could be manipulated to ridiculous heights. That’s because maybe five people in the world control the delivery of copper. That’s almost absolute control.Independent traders can make money but they need to put in tight stops and expect the people in control will be whip-sawing the rest. That’s a tough way to trade, so I just say that being out of the room (ie, not in the top five), I’m out of the deal. Ergo, no interest!
Markets are not free, but at least most are not controlled and manipulated like copper.
I cannot see either the base metals like copper or the precious metals soaring without some preliminary warming up in the Xstrata, Vale and Teck, which I use as a tell.
Interactive Chart of Weekly Copper EOD Continuous Contract Index:
Interactive Chart of Daily Copper EOD Continuous Contract Index:
Interactive chart of the Copper metal index.
Table 12: Senior gold equities
| Symbol | Close | 1Day Change |
1Day %Change |
1W %Change |
2W %Change |
4W %Change |
YTD %Change |
3M %Change |
6M %Change |
12M %Change |
The Goldminer stocks ($XAU) have now been crucified for three consecutive weeks with losses of -14.63%, -10.29%, and -18.95%. The closing price for the index this week was 85.85. It was 153.84 on Sept 22, and 206.21 in mid-July.
Three weeks ago I said I was concerned. I wrote, “We’ll be watching closely. But, these are volatile markets, which require minute to minute monitoring, so they are not for the typical trader.” A week later, I added, “I cannot stress that point too much. Such volatility requires traders to hit the buy and sell button frequently. Sometimes these trades are stomach turning. It’s not a practice many traders enjoy. The money to be made or lost can be large.”
From the mail I receive, it is clear that too many traders ignored the lessons and warnings that I give. It is not “fun” to call a buy on a gold stock only to see it zoom +10% or +15% the next day. If I wanted to exploit the opportunities I wouldn’t go public with calls like that, I’d just do the trade. I’d much rather see the stocks lift slowly after a bullish call, and have people learn something.
I don’t feel comfortable when people write that they made or lost money after one of my calls. That doesn’t show me a thing. It just makes me feel worse when inevitably the prices go in a different direction.
I believe there are many good quality goldminers that presently have share prices that will yield solid returns over the next year, two or three.
Unlike, the early 2000’s, I now think that the public has endorsed gold as a $USD hedge, and that is a good thing because it forces the Interventionists who say they are just trying to “stabilize” the USD actually be held accountable.
With increasing sophistication by independent traders, I do think there will be more day trading required because the Interventionists will have to become more deceitful in order to “stabilize” markets, which leads to greater volatility. You cannot buy and hold in volatile markets, which is one of the key points of learning this year.
I was asked this weekend about Alamos Gold (AGI.TO). The stock has traded between about $5 and $9 for almost two years, recently dropping below that, like all other goldminers. The company is solid as this presentation shows.
After meeting with the Alamos CEO John McCluskey this week, my associate Tony Garson wrote me to say that with the drop in share price to $4.22 (with a low of $3.55), the AGI.TO is probably a good trade. Gold OZ increasing/qtr. Peso dropping vs US$. Gold sales in US$ and costs in pesos. The company reports in $CDN but CDN$ vs US$ down substantially.
Tony is on my research team. He was formerly the senior gold, metals and goldminer analyst in Toronto, Vancouver and London for companies like ScotiaBank, Dean Witter Canada, Haywood Securities, Canaccord Capital (Canada and UK), and Union Capital Markets (UK).
I too know John McCluskey very well – in fact since his days at Glamis Gold -- and I have a high regard for his professionalism. As for the Alamos property in Mexico, it will likely never cause the share price to soar like some of the other juniors, but the company is solid, and the stock is one that the fund managers in North America and Europe like -- for good reason.
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
You cannot trade commodities that are priced in $USD without studying forex movement. The Forex market is a multi-trillion dollar marketplace every day, which dwarfs the size of the stock and bond markets. In this market, the Euro/USD is the highest volume trader. The $USD is a trade-weighted US Dollar index, we used to call the Morgan Dollar.
The current value of $USD is a mean value of rate fluctuations of six world currencies (Japanese yen, Euro, British pound, Canadian dollar, Swiss franc and Swedish krona) that each trade against the USD. I have discussed this in recent WIRs.
This week the $USD closed down -0.28% at 82.40. The $USD had been on a roll for several weeks, until this week. But so far, there has been no impact on precious metals, which usually trade higher on the softer USD.
I continue to believe a huge drop may happen in the $USD at any time “because the Treasury Secretary has embarked on a program of massive reflation in order to bail out the major US banks.”
But I also added the proviso that when Europe and Japan and Canada reflate, their currencies also drop, as we see has happened in the past two weeks.
Reflation, by the way, is different from inflation, which refers to the increased cost of goods and services. Reflation is money printing.
The 50-day MA for the $USD is 78.58 and the 200-day MA is 74.76.
To reiterate, “My opinion is that the $USD has been rallying since the beginning of July because traders became cognizant of the economic slowdowns in Europe, Canada and Japan that were even worse than the US. In fact, recently the OECD increased its GDP forecast for the US and lowered it for the other countries, which then spiked the $USD. In time, however, the net effect of global reflation ought to be a weakening of the $USD, possibly headed for a test of the all-time low of 70.70. The charts at StockCharts (links below) reflect that opinion, in my view. If so, precious metal prices will ultimately soar… It’s only by looking at the capital marketplace as a continuum of prices, constantly studying price dynamics, will people ever have an understanding of trading.”
Interactive Chart of Weekly U.S. Dollar Index:
Interactive Chart of Daily U.S. U.S. Dollar Index:
The Euro ($XEU) gained +0.07% this week. The close this week was 134.14. There was a loss of -0.24% on Friday.
The Euro 50day MA is 1.4303 and the 200day MA is 1.5127.
Traders are watching the Bank of Canada decision this Tuesday as that will tip the hand of the Fed on the following Wed. If both the North American currencies drop after the anticipated rate cuts, then the Euro ought to strengthen a bit here.
Interactive Chart of Weekly Euro Dollar Index, priced in USD:
Interactive Chart of Daily Euro Dollar Index, priced in USD:
The Pound gained +1.44% this week to close at 1.7298. That’s huge. But the previous week, the Pound had lost -3.96%.
The 50-day MA and 200-day MA are at 1.8049 and 1.9347.
On its own fundamentals, ie, very weak economy in the UK, I don’t see how the Pound could soar, even if the $USD starts to weaken. Actually, all these economies are weak, and the governments pushing reflation plans, which is usually when precious metals start to lift. Didn’t happen this week, though.
Weekly British Pound Index:
Daily British Pound Index:
Weekly Japanese Yen Index:
The Japanese Yen ($XJY) lost -0.97% this week to close at 98.42. The previous week, the Yen had soared +4.59%. That was four straight weeks of up moves.
The Japanese economy is very weak as well. A lower Yen helps exports. Toyota (TM) would benefit. But, as I say, until this week the Yen had been on a bullish roll for a month.
The Yen’s 50-day MA is 94.09 and the 200-day MA is 94.82.
Daily Japanese Yen Index:
The Loonie (Cdn Dollar) dropped -1.18% W/W to close at 84.23. The previous two weeks were big losses as well: -7.87% a week earlier and -4.32% the week before that.
The Loonie traded as high as 110.17 in 3Q07. Even in mid-July, the Loonie traded at over $1.00 American.
The 50-day MA and 200-day MA is at 92.94 and 97.56, respectively.
Weekly Canadian Dollar Index:
Daily Canadian Dollar Index:
Here is the China Yuan (CNY) chart.
International Equity Markets Review
Equity market prices this week were mostly quite robust. But, Russia, India and Hong Kong stayed weak.
UK FTSE gained from 3932.1 to 4063.0, but had closed at 4980.3 the week beforeGerman DAX gained from 4541.2 to 4781.3, but had closed at 5797.0 the week before
Aussie All-Ords gained from 3939.5 to 3944.8 but had closed at 4080.8 the week before
HK Hang Seng dropped from 14796.9 to 14554.2 and had been at 17682.4 the week before
India’s BSE 30 plunged from 10527.9 to 9975.4, and had closed at 12526.3 the week before
Japan’s Nikkei 225 gained from 8276.4 to 86.93.8, but had closed at 10938.1 the week before
As this table shows, traders in all countries are still hurting badly. The recent equity market sell-off is a global phenomenon, not just an American one.
As opined a week ago, I think the equity market is working through a cycle bottom. There will be few believers until the coordinated action of the global monetary authorities, taken a week ago, starts to have an impact on moving the banks to start lending again. That is a matter of confidence – not ours, but between bankers. All of them are fearful that major banks are doomed to fail under the weight of the credit default swaps. If they can’t swap, they are going to default, and once the credit ring is broken for a day or two, the systemic loss may become unstoppable.
At the end of the day, prices will stabilize and large trading profits will be made by those who take measured risk at this point, I believe. But, I do acknowledge that taking risk is something that many accounts ought to avoid for now, particularly those that are close to the margin.
Four weeks ago I wrote here, ‘Don’t fight the Fed-Treasury tag team’ and called for a Bull market, but I also issued a stern warning: “A 70-cent Dollar will boom the equity markets. Watch Russia. Watch Brazil. Watch India. Watch Australia. Watch Canada. Watch Gold. Watch Oil (should make George happy). Watch XLE. Watch XLB. Watch XLI. Watch XLK.”
Well, the $USD has soared and the rest of these market prices have been crashing, which is to say that any serious and capable trader would not stand in the way.
A week ago I wrote: “I am saying this week, again, to watch that $USD and TED spread. If the $USD falls and the TED spread narrows, I believe the global equity markets will go higher.” That’s what happened this past week.
I think I have a handle on the market today, but events are happening behind the scenes that are significant, and could shoot the market off in unexpected directions. So, caution is advised for the majority of you, at least until you see across the board RSI-7’s lift above the 30 level.
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.
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 |
The country market ETFs were mostly much higher W/W. Only India (IFN -3.89%) and Russia (RSX -2.40%) were down. Brazil (EWZ) and Japan (EWJ) soared by +9.0% and +8.0% respectively.
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 (+4.74% to 8852.22), S&P 500 (+4.60% to 940.55), NASDAQ Composite (+3.75% to 1711.29), and Russell 2000 small cap index (+0.76% to 526.23) were strong, but the gains this week were minuscule when compared to the losses of -15.3% to -18.2% a week ago.
The previous week, share prices were hammered worse than for any week going back to 1914, almost 100 years. This was a financial disaster.
The biggest gainer in the DJIA this week were: GM +31.5%, but it was -45.7% a week ago. Other winners were; T +12.8%; JNJ +12.2%; PFE +11.7%; and BAC +11.4%. The losers and laggards were: CAT -8.8%; GE -8.7%; JPM -5.6%; AXP +0.8%; and MCD +1.3%. Note that 27 of 30 DJIA stocks were winners on 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 AXP BA BAC C CAT CVX DD DIS GE GM HD HPQ IBM INTC JNJ JPM KFT 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 four DJIA components, none of which are Cara 100 companies: Alcoa (AA); Dupont (DD); Pfizer (PFE) and Merck (MRK).
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 Oct. 17: next one is due Jan. 16)
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 Oct. 17: next one is due Jan. 16)
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 Oct. 17: next one is due Jan. 16)
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 Oct. 17: next one is due Jan. 16)
After falling from a price of $44.80 earlier this year, which the Value Line analyst figured was ok, he now concludes, at $16.71, (quote) “These shares are now untimely.” No, Hollywood can’t write this well. You can’t do better than that.
Of these four companies, the one I like best is Dupont. I selected Dow Chemical over Dupont because I think the Dow metrics are better.
The Value Line analyst liked the stock at $36.10. He opined, “Bottom-line growth should continue in the coming years. Moreover, this issue has a healthy dividend yield, and
DuPont earns high marks for Safety and Financial Strength. At the current quotation,
this stock offers attractive total return potential on a risk-adjusted basis.”
At Friday’s close of $33.77, the stock is that much more attractive. In late Sep, the stock hit a high of $48.22. That’s quite a drop in four weeks.
Last year, with share prices in the high 50’s, Value Line loved Merck. The PE multiple at the time was in the mid-30’s. Now that PE is well under 10, they conclude (quote) “We remain neutral on these shares.” I ask, seriously, what kind of professional can write like this and keep a job?
Pfizer
With a PE about 8, the same VL analyst concludes (quote): “Although the price-to-earnings ratio is now low by historical standards, we see no catalyst that will buoy these shares in the next year or so.” For starters, how about history; how about a Bull market? The PE at Pfizer has never been so low (at least for the past 20+ years).
What the analyst failed to tell you is that in the past four years, dividends have almost doubled, consistently rising year after year, and yet earnings per share have remained flat. The pay-out ratio has moved from the low 30’s to the low 60% range. In effect, it’s becoming a business trust, like those in Canada. You need to buy these cash cows at low prices and supplement the high dividend income with put write income, and when the stock (and/or the market) is looking over-bought after a Bull phase, you need to sell the majority of your position, maybe write covered calls against the remaining position, and reduce your cost basis. This is what a professional trader would do.
In other words, thank you to Value Line for the data on Pfizer and Merck, but the market judgment of your analyst is lacking. Overall, I find the work done by most of the analysts to be quite good, but the data itself is outstanding. I think teachers ought to subscribe to the full electronic service and use it as part of their curriculum.
We all make mistakes, but Value Line, in my view, makes fewer than most services of its kind.
A week ago, I wrote, “I elected to use the pre-announcement by IBM of yet another good quarter to report that I find the share price presently offers excellent value. You can review my notes of a couple days ago. I wrote them one evening and repeated them in the next day’s commentary”, and then during this week I followed up with the CFO’s edited comments from the analysts’ conference call.
Here’s what I wrote a week ago in this space:
For the three Cara 100 companies reported on this week by Value Line (GE, INTC and IBM), the VL report refers to excellent recovery potential. That, by the way, was at much higher share prices than the closes on Friday for these stocks. I think you just have to buy them here. You may also want to write puts at attractive premiums to lower your cost base, whether or not you subsequently get the stock put to you.Now, with this market volatility, many of you can see the importance of managing positions, including cash. Portfolio management is not about taking tips from others to buy this or that. It is a process you have to work at, like running a small business.
How did this advice fare after this “horrid” week in the market?
Would you believe that just by buying the stocks of the three Cara 100 companies (GE, IBM and Intel) at the previous Friday’s market close, through this Friday, the compounded annual returns would have been greater than 30%? And if you had also written those puts, your returns would have put you into the Traders’ Hall of Fame. Here’s the chart (for the week ending Oct 17). Next week I expect these gains to grow even more.
Did all three stocks rally? No, the results were: GE (-7.49%); INTC (+4.54%); and IBM (+4.30%). But, successful traders work their positions. In the case of GE, I would have written another put at the lower price because ultimately I believe GE will remain a core part of my long-term portfolio.
The Dow 30 Company links in chronological order of next reports. I added the Google Finance links, which are superb.
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)
Kraft Foods [GICS 30, Dow 30]
(KFT: Google Finance file)
(KFT: Yahoo Finance file)
(KFT: StockChart chart)
(KFT: Billcara2 chart)
(KFT: ADVFN Financial Data)
(KFT: 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)
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 Aug. 15: next one is due Nov. 14)
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 Aug. 15: next one is due Nov. 14)
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 Aug. 22: next one is due Nov. 21)
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 Aug. 22: next one is due Nov. 21)
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 Aug. 22: next one is due Nov. 21)
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 Aug. 22: next one is due Nov. 21)
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 Aug. 22: next one is due Nov. 21)
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 Aug. 22: next one is due Nov. 21)
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 Aug. 29: next one is due Nov. 28)
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 Aug. 29: next one is due Nov. 28)
McDonalds [GICS 30, Dow 30, Cara 100]
(MCD: Google Finance file)
(MCD: Yahoo Finance file)
(MCD: StockChart chart)
(MCD: Billcara2 chart)
(MCD: ADVFN Financial Data)
(MCD: Value Line Report Sept. 5: next one is due Dec. 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 Sep. 13: next one is due Dec. 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 Sep. 13: next one is due Dec. 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 Sep. 19: next one is due Dec. 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 Sep. 26: next one is due Dec. 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 Sep. 26: next one is due Dec. 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 Oct. 3: next one is due Jan. 2)
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 Oct. 3: next one is due Jan. 2)
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 Oct. 10: next one is due Jan. 9)
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 Oct. 10: next one is due Jan. 9)
IBM [GICS 45, Dow 30, Cara 100]
(IBM: Google Finance file)
(IBM: Yahoo Finance file)
(IBM: StockChart chart)
(IBM: Billcara2 chart)
(IBM: ADVFN Financial Data)
(IBM: Value Line Report Oct. 10: next one is due Jan. 9)
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 Oct. 10: next one is due Jan. 9)
Wrap-up:
A week ago, I wrapped up with the statement that the Bear is dead and that I believe that the recession is a year old, at least, and only being held together by excess government spending at all levels. I also believe the data will show recovery in maybe six to nine months and that traders ought to buy shares of high quality companies at the low prices in the market this month. I stated,
“It would be my great pleasure to have you, at this point in history, buy stocks in the quality corporations in the world that serve us and employ us. Capital markets are about us as the readers of my book have seen in the first paragraph:As complex as it might seem, the market is merely a case of “people acting like people” – with all their fears, enthusiasms, prejudices, stupidity and wisdom. Together, we create prices. The market is us.If you believe that -- if you believe in me -- then you will set aside your fears, you will direct your enthusiasm with mine, and you will buy stock.”
Well in many respects, precious metals excepted, it was a great week. As I wrote, this is history, and we are so blessed to be alive and participating in it.
A week ago I wrote: “This week, Morgan Stanley and Merrill Lynch, once the giants of the investment banking world, saw their shares plummet -59.5% and -40.9%, respectively. Nobody would ever have believed that possible even a week or two ago.”
This week, MS and MER had gains of +93.1% and +15.5%, respectively.
Enough said.
Actually MER brings something to mind. This week the head of Intellectual Property Law for Merrill Lynch banned me from using their materials on my blog, so in return I put the hex on MER. Now, with MER not measuring up to MS, he can see the power of the Trading Wizard. :-)
Seriously, if we can get past Monday noon without another financial mess, I think the balance of the week should be a good one. But, keep your eye on BAC, JPM and C.
Some housekeeping matters:
I’d like to say that with reports of suicides caused by plunging capital markets prices, it’s a dangerous thing for me to get involved in trying to help people I don’t know with specific advice. Over the past two weeks, I have received several probably honest, well-intentioned letters from desperate people. You all know it’s my nature to want to help, but I decided, after due consideration of the responsibility and the work involved for people I really don’t know, that any help I could possibly give will be published only on the blog, which is free to all. I will not put myself into a position of being held responsible for the actions of people I don’t know. Sorry.
If you recall, a couple years ago, one of the members of this community, Al Arnold, a would-be silver and gold trader who worked as a contractor doing house renovations, a terrific person who would send me photos of his sailing adventures in the southern Caribbean, committed suicide a few hours of writing a desperate note to me. That experience hit me hard; I hope never to see it repeated.
People have to learn to trade for themselves or at least get themselves sufficiently knowledgeable to be able to effectively communicate with a professional financial advisor. That is what I try to do here. That requires, on the part of each member of the community, taking personal responsibility, avoiding debt, never trading beyond your means, and protecting your positions at all times, even if it means passing up what you might think are wonderful opportunities. Enough said.
As you are probably aware, desperate times lead to scam attempts. Although I have never given out e-mail addresses, I fear these scams may have started to affect some of us. Today I received the following e-mail. I deleted the attachment, but it was obvious from the contents that our community needs to protect itself from unsolicited letters involving money.
> Bill ...
> I wanted you to know I get these scams once in awhile from readers at your
> blog asking me to buy or to join their group or company. Here is one I got
> recently ... I never replied to this one, but I think you should know that
> your blog is being used to possibly scam the community into donating money
> or funding sources for multi-level marketing scams.
> JUST AN FYI ... I am sure others have gotten similar e-mails!
> READ ON: (Attached was a letter pleading for money to help start up a family
> business.)
Enough of that.
As for my business, and the start-up of the new website, there are several reasons for the delays. Being offshore, there are Patriot Act-based requirements of the US broker that have been frustrating to work through. There are also strict privacy laws within the financial services sector here in The Bahamas. Then there are vacations, budgets, other commitments, computer and telecom issues, and countless of other impediments that have held things up. The good news for those who are waiting is that everything seems to be falling into place, and we ought to be good to go early in November. For a select number of you, it will likely be earlier.
I will keep separate this blog, a pro bono affair that is for the benefit of the community at large, from the professional work of Cara Trading Advisors. Each will have their own website.
For CTA clients, our registered services must comply with Know Your Client regulatory requirements as well as other laws and industry rules and regulations. Thankfully, in the free blog, I do not have to get to know the tens of thousands of you in this much wider community, although I am sure it would be delightful if that could be accomplished even on a minimal level.
These are tough times in capital markets. I have never in almost 50 adult years seen things get as bad as this past month. By practicing social equity, however, I know we can get through anything because the market is just us. Your discourse, as little as you think it may be in some cases, is a great help to others.
I thank you for it just as many of you thank me for the time and effort I put into this.
Another 100+ hour week behind me, I can now take off for the beach. The weather is going to be a rather beautiful 86 degrees and sunny with little wind in Nassau. It’s a beach kind of day, so I’m sure I will have a few Kaliks while I unwind. However, with the crushing losses for so many people in the market this week, the movie “Life is Beautiful” comes to mind.
The big difference, of course, is that my dream is reality.
Posted by Posted by Bill Cara on October 19, 2008 10:10:55 AM | Category: Cara Week in Review