Bill Cara’s Blog for Apr 10, 2012

CTA Trading Desk Morning Report

[8:45am ET] Good morning, Geoff here.

Following yesterdays decline, stocks are stable this morning.

The S&P 500 found support on the February high of 1378. The next support is that 1370 level. Quite frankly, I expected a “turnaround Tuesday” morning with a bigger bounce in the futures because of two things; Apples strength and the piercing of the lower Bollinger Band which usually leads to a rally. However, we didn’t make any major portfolio changes yesterday, preferring to see if bids enter the market today.

Bonds continue to hold yesterday’s bid and should until stocks move higher.

Gold held the .236 Fib at 1618ish and looks to be finding some footing. We have our core positions in place and will feel more comfortable adding in another week or so. Sentiment has been extremely negative on the metals and one more push down into our timing band would be the last shaking of the tree barring an all encompassing global asset meltdown.

Other than that, its pretty slow this morning but there is some Fed speak later today that might move the markets.

Have a great trading day!


This from Bill:

Bloomberg has reported that the California city of Stockton (pop. ~300,000) is facing bankruptcy. Is anybody surprised?

http://www.thestar.com/news/world/article/1158697–california-city-faces…

In 2004 and 2005 I wrote in this blog about what the problem was.

http://www.billcara.com/archives/2005/08/whatas_wrong_wi.html

I wrote about this problem some time ago, using southern California as a case study.

A California landowner, who has been biding his time for price appreciation to kick in (so he can make a real estate killing), has used that land to grow tomatoes. But Americans won’t take those low-paying and backbreaking tomato pickers’ jobs, so Mexicans are brought in.

Americans would prefer to be financiers, like the ones who take the savings of other Americans and invest it in modern plants in Mexico, for example, that manufacture food products and glass containers for those food products, which are high value-add industries that pay their workers well.

These plants then import cheap California tomatoes, picked by cheap Mexican labor in California, and produce in their factories a variety of value-added products like salsa and tomato paste, which are then exported and sold back into California as high-cost staples.

At the same time, Americans are inflating the real estate price of the tomato fields in California, which are going to be developed for houses, for which there is additional demand to meet the needs of the immigrant Mexican community. So when the house is actually built and sold, it is now very expensive because of the higher cost of the land and imported building materials.

This is one vicious circle of transferring wealth abroad and building higher economic cost locally, which will continually pull down the price of the USD, or at the least work against those who are working hard to build it up.

To get off that treadmill, America has to stop financing wealth-creating capital expenditure abroad, and start doing it at home. For as long as they continue to invest in foreign plants and equipment, then traders like you and me have no option but to invest in emerging foreign economies because that’s where the wealth is going to grow fastest.

This is not rocket science. The problem is rooted in greed.

Have a good day.


Here are the 7:00am ET snapshots of the latest equity market trading results for Europe, and futures prices plus 5-minute charts of the futures for S&P 500, 30-year US Treasury Bond, US Dollar index, Gold and Crude Oil.

Symbol Name Last Trade Change Related Info
^ATX ATX 2,036.62 6:44AM EDT Down 23.11 (1.12%) Components, Chart, More
^BFX BEL-20 2,246.10 5:25AM EDT Down 0.90 (0.04%) Components, Chart, More
^FCHI CAC 40 3,270.60 7:00AM EDT Down 49.21 (1.48%) Chart, More
^GDAXI DAX 6,725.78 6:45AM EDT Down 49.48 (0.73%) Components, Chart, More
^AEX AEX General 309.20 6:45AM EDT Down 5.71 (1.81%) Chart, More
^OSEAX OSE All Share 470.17 6:45AM EDT Down 6.45 (1.35%) Components, Chart, More
^OMXSPI Stockholm General 324.79 6:59AM EDT Down 3.40 (1.04%) Components, Chart, More
^SSMI Swiss Market 6,110.22 6:45AM EDT Down 53.27 (0.86%) Components, Chart, More
^FTSE FTSE 100 5,678.16 6:45AM EDT Down 45.51 (0.80%) Components, Chart, More
FPXAA.PR PX Index 928.50 6:59AM EDT Up 1.00 (0.11%) Chart, More
MICEXINDEXCF.ME MICEX Index 1,518.16 6:45AM EDT Up 9.05 (0.60%) Chart, More
GD.AT Athex Composite Share Price Index 723.16 6:45AM EDT Up 15.56 (2.20%) Chart, More

http://finviz.com/futures.ashx

http://finviz.com/fut_chart.ashx?p=m5&t=ES

http://finviz.com/fut_chart.ashx?p=m5&t=ZB

http://finviz.com/fut_chart.ashx?p=m5&t=DX

http://finviz.com/fut_chart.ashx?p=m5&t=GC

http://finviz.com/fut_chart.ashx?p=m5&t=SI

http://finviz.com/fut_chart.ashx?p=m5&t=CL

The team will check in during the day, reporting in the Discourse when there is a new entry.

Enjoy your day.


Cara on Trends & Cycles


Vad’s Catch of the Day


Kaimu’s Sound Money


CTA Trading Desk Mid-Day Report


CTA Trading Desk Post-Close Report


  1. 7:30 AM ET NFIB Small Business Optimism Index 7:45 AM ET... [#107287]
    By: davefairtex (5215 comments) Go to top ↑
    • 7:30 AM ET NFIB Small Business Optimism Index
    • 7:45 AM ET ICSC-Goldman Store Sales
    • 8:55 AM ET Redbook
    • 10:00 AM ET Wholesale Trade
    • 11:30 AM ET 4-Week Bill Auction
    • 1:00 PM ET 3-Yr Note Auction
  2. 2 in Accumulation Zone 3 in Distribution Zone 10 in... [#107288]
    By: davefairtex (5215 comments) Go to top ↑
    • 2 in Accumulation Zone
    • 3 in Distribution Zone
    • 10 in Sell alert

    Accumulation Zone: Monthly 4, Weekly 9, Daily 32
    Distribution Zone: Monthly 13, Weekly 9, Daily 4

  3. ... [#107289]
    By: Bull Hunter (3552 comments) Go to top ↑
  4. ... [#107290]
    By: gregdickie (26 comments) Go to top ↑
    • I have not looked at any steel makers, but I've read/heard... [#107292]
      By: lowpickr (153 comments) Go to top ↑

      I have not looked at any steel makers, but I’ve read/heard that North America is becoming the lowest cost place for steel production due low natural gas prices.

  5. ... [#107291]
    By: Bill Cara (4105 comments) Go to top ↑
  6. I added a comment about the unsurprising plight of Stockton... [#107293]
    By: Bill Cara (4105 comments) Go to top ↑

    I added a comment about the unsurprising plight of Stockton California.

    A truly free Congress could easily remedy the problem. But the people’s representatives are being paid dearly not to.

  7. Only the highest of high quality large cap names have been... [#107294]
    By: BillySundance (1355 comments) Go to top ↑

    Only the highest of high quality large cap names have been working for the last 2 months. Russell 2000 is already off 6-7% from recent highs. RSI(14) on$RUT:$SPX narrowly avoided going sub-30 in early-March but we are hovering just above 30 again and appears we are about to go sub-30.

    Best view right now is sitting on the sidelines.

    http://stockcharts.com/h-sc/ui?s=$RUT:$SPX&p=D&b=5&g=0&id=p77241926487

  8. OK, earning season is dawning... foaming at the mouth !!... [#107295]
    By: baz22 (2871 comments) Go to top ↑

    OK, earning season is dawning… foaming at the mouth !!… well, everyone hates the miners, and since AAPL is the only stock in the universe, and the bond market Will take away Ben’s printing press, I cetainly like those 44 M oz’s that ‘ ng ‘ has laying around ! OK ( again ), never buy an equity for a takeout… yeahhhh, but I never had any common sense anyway.

  9. Oil peaking above $100. Interest rates on sovereign debt in... [#107296]
    By: ulvy (70 comments) Go to top ↑

    Oil peaking above $100. Interest rates on sovereign debt in Italy and Spain going up.

  10. Any end in site. All down 50%. PAAS, HL... [#107297]
    By: ulvy (70 comments) Go to top ↑

    Any end in site. All down 50%.

    PAAS, HL, SVM

  11. Any end in site. All down 50%. PAAS, HL... [#107298]
    By: ulvy (70 comments) Go to top ↑

    Any end in site. All down 50%.

    PAAS, HL, SVM

  12. ... [#107299]
    By: Dr. Strangelove (2004 comments) Go to top ↑
  13. big gold spike acoss the board in last... [#107300]
    By: baz22 (2871 comments) Go to top ↑

    big gold spike acoss the board in last 5

  14. Please, does anyone love or hate MT Mittal who has a 5 year... [#107303]
    By: Bear E (287 comments) Go to top ↑

    Please, does anyone love or hate MT Mittal who has a 5 year bond availble at 3.43% APR
    thanks in advance, Bear E

    • It would be my opinion that now is not an appropriate time... [#107309]
      By: MoKat (531 comments) Go to top ↑

      It would be my opinion that now is not an appropriate time to be buying bonds.

      No opinion on Mittal.

      If investing in this sector I would be interested in Messabi Trust currently at $29.97 sporting a yield of 10.10% and Cliffs Nat Resources at $65.48 yielding 3.7% and a one year price target of $93. Cliffs dominates in supplying US steel factories with iron ore and metalurgical coal. The taconite ore is mined in Northern Michigan and Minnesota. The Messabi Trust
      sells its share of output to Cliffs. If the price of nat gas makes US steel products competitive these two companies should do well.

  15. ' rgld ' on their leverage and... [#107304]
    By: baz22 (2871 comments) Go to top ↑

    ‘ rgld ‘ on their leverage and RSI

    • Opened a position in Keegan (KGN) - Esaase may not be the... [#107305]
      By: BillySundance (1355 comments) Go to top ↑

      Opened a position in Keegan (KGN) – Esaase may not be the blockbuster asset some thought it might be, but with appx $200M cash in treasury and a $235M Market Cap, risk is incredibly low here. They will not be forced to dilute shareholders at these prices. Worst case scenario is that gold continues down and this thing is just a pile of cash. At these prices I would be surprised if a suitor doesn’t show up shortly……….Iamgold is stockpiled with cash and already operates in Ghana

  16. Last Saturday I had lunch with an old friend who used to... [#107307]
    By: MoKat (531 comments) Go to top ↑

    Last Saturday I had lunch with an old friend who used to have a seat on the Chicago Board of Trade. He is a technical analyst and just before we parted company, he mentioned that his work suggested a possible “Jaws of Death” formation was building.

    “There is a stock price pattern that has appeared before most of the great plunges over the past century. It looks a bit like an open shark’s mouth with teeth exposed. Once the mouth is opened it widest, it snatches it prey, swallowing months and years of previous stock market gains in short order. In fact, it deserves a name, since it appears so often as a precondition for plunges. We call it The Jaws of Death.

    Let’s make clear at the onset that the appearance of this pattern is no guarantee that we are about to get a major plunge. However, when it appears, the risk to longs has increased significantly since this pattern has shown up so many times in the past before major stock market plunges” R McHugh

    In 1987 and I think 2001 were the last two times this phenomenon occured.

    Just a heads up for those interested.

  17. Until I see the down trend (from 2011) is broken, any... [#107310]
    By: 14them34me (295 comments) Go to top ↑

    Until I see the down trend (from 2011) is broken, any rebound of gold + silver is just that…a reflex rebound. I’m not a day trader so day traders may see this differently. Just my 2 cents.

  18. This decline was due to concerns about Europe? As if any... [#107313]
    By: Tbolt (169 comments) Go to top ↑

    This decline was due to concerns about Europe? As if any time over the past 2 years Europe was not a concern? Or any time over the next 2 years it will not be a concern?

    • ... [#107315]
      By: Vadym Graifer (4338 comments) Go to top ↑
      • ALOHA!! In terms of Spain 10yr yields the fear is the... [#107318]
        By: kaimu (3288 comments) Go to top ↑

        ALOHA!!

        In terms of Spain 10yr yields the fear is the dreaded 7%! Just as it was in Greece. Yet US 10yr bond yields throughout the 1980s and 1990s were mostly above 7%. What has changed? Why the panic with the high yields? Obviously the fear is in default since countries via political agendas have increased debt levels substantially. Such yields would cause the “minimum due” to severely increase. Like some of us maxing out our credit card limits need rates to stay low, except Congress can always raise the limit! We always have to use either austerity or get another job in the real world. The US FED and Congress conspire to keep rates to as low as possible in order to pay out the smallest amount possible in yields. Anything goes in the pursuit of that strategy. Pay-outs whether bond yields or social security benefits must remain as low as possible without hinting of the C WORD. It is that simple …

        Meanwhile I just paid $4.79USD for a gallon of gas in Hilo, up from $4.71 the week before. I pity fixed income retirees who are getting squeezed from both ends now. Moving to Mexico must be looking more viable for some. Gringo wet backs! Or perhaps ten US retirees renting a garage to save money! Either way we can thank the illegal Mexican workers for such innovations in lifestyle austerity!

        • Given GDP = Consumption + Investment + Gov't Spending + Net... [#107319]
          By: Dr. Strangelove (2004 comments) Go to top ↑

          Given GDP = Consumption + Investment + Gov’t Spending + Net Exports and U.S. GDP has always been dependent on the 70% Consumption to grow its GDP, we can only increase Net Exports to keep this economy alive because cheap credit to drive Consumption has run up to the QE wall of debt consuming its own debt. To increase Net Exports as the last x in the equation to exploit, Timmy will find a way to break the Yuan peg and get those fruggle Chinese to buy U.S. made high tech gizmos OR SOCIALISM IN AMERICA WILL COLLAPSE. Go Apple!

  19. and moved the small amount of remaining cash into an... [#107314]
    By: nebish (297 comments) Go to top ↑

    and moved the small amount of remaining cash into an S&P 500 index fund as of the close. John Bogle be damned! I’m not sitting with any long term exposure to this bond market anymore. These prices and yields are ridiculous.

    I think your ‘trade of a generation’ top in bonds is nigh.

  20. Adjust parameters as you see fit. Seems to me a situation... [#107316]
    By: George (619 comments) Go to top ↑

    Adjust parameters as you see fit. Seems to me a situation of note.

    http://tinyurl.com/7acrrsb

  21. ALOHA!! When I put US Treasury line items on SOUND MONEY I... [#107320]
    By: kaimu (3288 comments) Go to top ↑

    ALOHA!!

    When I put US Treasury line items on SOUND MONEY I always wish I could break down the sober outlay numbers on said line items with a video. It’s one thing to type a bunch of numbers like $820,000USD but it is another thing to see a video representation of that line item and the underlying mentality of the SPEND CULTURE! I know the mentality exists because I saw it displayed so many times on public works projects dating back to the 1980s. The idea that OPM is safe in government hands is to me absurd no matter what Harry Reid says.

    One such line item came into focus recently …

    The GSA is an actual line item on the US Treasury Statement. The GSA manages all the US government’s properties in the USA and around the world. Probably the only entity with more property than the US government is the Catholic church, but only the GSA is taxpayer funded. There is more than just the Goldman Sachs Culture to consider here as it seems spending OPM with “attitude” is endemic no matter.

    LINK: http://www.youtube.com/watch?v=CMFGza8T5Ws

    Unfortunately it seems Hawaii has been captured in a less than perfect paradisical light replete with uke!! Or is it a taxpayer funded America Idol rerun?

    I wonder how many Las Vegas houses the GSA could have bought with that $820,000 instead of blowing it all on training that could have been accomplished online with no travel …