Bill Cara’s Week in Review #4, 2012

[12:45pm ET] For many months I have been steadfast in opining that the US and international economies have not been crashing. Now we can see that the data I was reporting week after week was giving us the supporting evidence and so I was correct to ignore the day to day nonsense in the mainstream media as the banks, central banks and government leaders, in open warfare, were playing the media for all they could.

For a couple months, you also saw me growing more irritable at the repetitious bunk I read in this blog from the doom and gloom crowd, sticking to my thesis that while the economy is not the greatest it was in fact stabilizing and modestly strengthening, which is what traders were looking for before taking on additional risk.

Not that I am always right in my opinions, but let’s look at the facts. Over the past four weeks the S&P 500 is up +6.14% and its up +8.12% over three months. Over a ten and 20 year time horizon, these would be excellent performance numbers, worthy of top one or two percentile accomplishment.

If you prefer to dwell on the “staring into the abyss” crapola, then you will continue to make a good reader, but not a good trader. A great trader, you should know, evolves from his/her dealing with adversity, not from wallowing in it.

In recent months, many of you were being scared out of positions in some of the goldminers, particularly US Gold (UXG), so a month ago I wrote up a glowing report, in considerable detail, telling you it was ok to buy the stock and that it would be my pick for the year ahead. You also saw me support Silvercorp (SVM), calling for regulators and police to stop the intervention by fraudsters trying to screw the shareholders. Many of you were afraid to touch the stock, fearing that maybe there was truth behind the outlandish accusations.

The results that followed are that the two best performers of the quality US listed goldminers over the past month have been UXG and SVM. SVM is up +13.19%, the #2 best performer, which is well ahead of the #3. But the #1 is UXG, up a stunning +53.7% over the past four weeks.

This is more proof of concept, but what is important to me in the WIR is to be able to explain to you what is important to me in capital markets, and why, and how you might consider looking at the market in order to win. If you prefer to stare at the empty houses on your street (there are none on mine) and chew over the unemployed and underemployed among your friends and family (yes, we all know some), then you won’t be a winning trader.

As I say, “Stick to the facts ma’am.”

Speaking of facts, this week I will be starting a new section on Technical Indicators & Patterns that will reflect the current bullishness/bearishness of equity markets of the US, Canada, London and Europe. The charts and tables will be posted as of the close of markets on the Friday.

So now when I opine that the markets are generally bullish or bearish, this will be another source of evidence.

As for the markets this week, let’s see what happened regarding the Economy, Currencies, Bonds, Equities, Commodities and Precious Metals. I cannot sum it up in advance as in my study I will be looking at the latest data for the first time myself.

From the published reports, here are this week’s headlines from the highly regarded Econoday analysts:


– Industrial production bounces back – mfg is on a moderately healthy uptrend
– Empire State and Philly Fed—positive but mixed in strength
– Housing starts hold on to most of recent gains
– Existing home sales show a little more life
– Consumer price inflation flattens
– Producer price inflation mixed in December

The results continue to be mildly positive, as they have been for at least six months. The bottom line is “The recovery remains subpar but it is gaining strength in manufacturing and housing.  And this past week’s sharp drop in initial jobless claims indicates that the consumer sector also may be gaining traction.  While worries about contagion from Europe are likely to keep U.S. financial markets volatile, the real economy in the U.S. now appears to have reached the point where forward momentum will continue and can withstand bumps in the road.”

Let’s now look at the detailed economic data for the week that passed and the one ahead.


Global Economics Review

International Report from Econoday.

Equities were up for the most part last week as investors became more confident that Europe would eventually find a way out of its debt morass. While earnings reports released thus far have not been anywhere near spectacular, traders seemed to accept the results with equanimity. All indexes followed here (except the KLCI which was unchanged) were up on the week. Advances ranged from 0.7% (Taiex) to 4.7% (Hang Seng)… Stocks advanced after the International Monetary Fund announced Wednesday that it is seeking up to $500 billion in additional lending resources. The IMF said that it would need about $1 trillion in financing in the coming years for loans to countries with short term difficulties. Given that the fund currently has unused lending capacity of about $380 billion, it said it will seek to raise up to $500 billion in new funds to lend, plus $100 billion as a cash buffer. The new funds include the $200 billion already committed by European Union countries in December… Additional financing might bolster the IMF’s ability to aid Europe, though even with $1 trillion in available funds, it would not have the necessary resources to help big countries like Italy or Spain alone. A participant in the executive board meetings said that non-European members insisted that Europeans take the lead in providing funds for Europe through a firewall. The additional financing would significantly bolster the IMF’s ability to help smaller countries and the “innocent bystanders” that might be hurt by the Eurozone crisis… The markets cheered the announcement. However, the IMF might face resistance to expanding its lending capacity. The United States — which holds the biggest voting share within the fund and is the only country with an effective veto on major decisions — has insisted that it will not pour any additional resources into the IMF. According to a Treasury spokesperson, the U.S. continues to believe that the IMF can play an important role in Europe, but only as a supplement to Europe’s own efforts.

Econoday’s International Perspective is written by chief economist Anne Picker.

US Report from Econoday.

It was a good week.  Economic news in the U.S. was largely positive—notably for manufacturing and housing.  Earnings were better than expected more often than not.  And risk was “on” regarding favorable progress on resolving the European sovereign debt crisis.  All in all, this confluence of agreeable conditions has not been seen in a while.  Still, conditions are moderate and still at risk but less so.

Econoday’s US report is written by Mark Rogers. He is the author of The Complete Idiot’s Guide to Economic Indicators, Penguin Books, 2009. I recommend it.

The reason I devote much time to the reporting and analysis of economic data is for us to gain an understanding of the reasons behind the ebb and flow of capital market prices and the sector rotation within markets. After you follow these reports from month to month you will get a sense of the interrelationships between the business or economic cycle and the market cycle.


Here are the key US economic reports from last week’s calendar.

US ISM Manufacturing Index for Dec.

Following release of the report on 01/17/2012 8:30:00 AM ET, Econoday reported, Acceleration in the manufacturing sector is the latest good news on the economy. New orders in the ISM’s manufacturing report for December rose nearly one point to 57.6 to signal acceleration from what was already a solid rate of growth in November. Other readings on orders include a slowing draw for backlog orders and acceleration for new export orders, the latter perhaps a surprise given trouble in Europe and dislocations tied to Thailand. Strength in orders points ahead to strength in general business activity including employment which is already gathering steam, at 55.1 for a nearly 3-1/2 point gain… Other details include a strong rate for production, which explains the gain in employment, as well as continued easing in input price pressures. The stock market is adding to early gains following these results.

US Producer Price Index for Dec.

Following release of the latest data on 01/18/2012 8:30:00 AM ET, Econoday reported,  At the producer level in December, inflation was tugged down by gasoline and food costs but the core was warmer than expected. Producer prices edged down 0.1% after rebounding 0.3% the prior month. The latest number posted lower than market expectations for no change… By major components, energy declined 0.8%, after nudging up 0.1% in November. Within energy, gasoline fell 2.3%, following a 0.1% dip in November. Food cost inflation eased to a 0.8% decline after jumping 1.0% the month before… At the core level, the PPI firmed 0.3% after rising a modest 0.1% in November. A big part of this acceleration was due to reduced discounting for motor vehicles by dealers. Leading the core up were passenger cars, light trucks, pharmaceuticals, and tobacco… For the overall PPI, the year-ago rate in December was 4.8%, compared to 5.9 in November (seasonally adjusted). The core rate in December edged up to 3.0% from 2.9% the month before. On a not seasonally adjusted basis for December, the year-ago headline PPI was up 4.8% versus 5.7% in November. The core firmed to 3.0% from 2.9% on an NSA year-ago basis.

US Industrial Production data for Dec.

Following release of the latest report on 01/18/2012, Econoday reported, Industrial production in December posted a healthy gain but the manufacturing component was even more robust. Overall industrial production rebounded 0.4% after dipping 0.3% in November. The latest number came in slightly lower than the consensus forecast for a 0.5% jump. By major components, manufacturing made a 0.9% comeback, following a 0.4% drop in November. The market median forecast for the manufacturing component was for a 0.5% gain. Econoday has added this component to its consensus forecasts. In December, utilities fell 2.7% while mining output expanded 0.3%… Within manufacturing, durable goods rose 0.9% in December. Wood products, primary metals, and machinery registered gains of more than 2%. Some weakness was seen in nonmetallic mineral products, aerospace and miscellaneous transportation equipment, and furniture. Nondurable goods advanced 0.8% in December. Textile & product mills, petroleum & coal products, chemicals, and plastics & rubber products all gained 1.0% or more. Paper and apparel & leather fell… Overall capacity utilization rebounded to 78.1% from 77.8% for November. Market expectations were for 78.1%… The manufacturing sector appears to have regained some momentum and it is broad based.

US Housing Market Index for Jan.

Following release of the latest data on 01/18/2012 10:00:00 AM ET, Econoday reported, Though moving from a low base, activity in the new home sector is picking up dramatically based at least on the home builders’ housing market index which is up 4 points this month to 25. This is the best reading in 4-1/2 years and the 4th straight gain against September’s recovery low of 14… Gains sweep components: present sales, future sales, traffic. Gains also sweep regions led by the Northeast but with the Midwest lagging… The housing sector is beginning to show life with this indicator signaling the greatest strength. The Dow is moving to opening highs following release of today’s report.

US Jobless Claims data for week ending 1/14.

Following release of the latest data on 01/19/2012 8:30:00 AM ET, Econoday reported, A very large weekly drop in initial jobless claims offers a splashy, but not definitive, indication of rising strength in the jobs market. Initial claims fell 50,000 in the January 14 week to 352,000 for the biggest drop since September 2005 when economic expansion was in full gear (prior week revised to 402,000). But weekly data early in the year are often choppy, the result of shortened holiday weeks. The 4-week average, down 3,500, points to less strength with the level of 379,000 not convincingly lower than the mid-December level of 380,750… Continuing claims likewise show huge improvement, down 215,000 to 3.432 million. Here the 4-week average is down 34,000 to a recovery low of 3.576 million. While declines in initial claims point to an easing in layoffs, declines in continuing claims represent a mix of new hirings and new drop outs from the jobs market. The unemployment rate for insured workers slipped one tenth to 3.2%… Today’s report is certain to support the stock market, though questions over holiday factors will likely limit its impact. Yet should this improvement hold in next week’s report, expectations for strong monthly employment data would really begin to build.

US Consumer Price Index for Dec.

Following release of the latest data on 01/19/2012 8:30:00 AM ET, Econoday reported, Consumer price inflation was nonexistent in December at the headline and core levels. The consumer price index in December was unchanged for the second month in a row with lower energy costs playing a key role. The December figure was lower than market expectations for a 0.1% rise. Excluding food and energy, the CPI decelerated to a modest 0.1% increase after gaining 0.2% in November. Market expectations were for a 0.1% rise… By major components, energy dipped 1.3% after declining 1.6% in November. Gasoline fell 2.0%, following a 2.4% decline in November. Food price inflation firmed to 0.2% after rising 0.1% the prior month… Within the core, upward pressure was seen in medical care, recreation, and rent. Declines were seen in used cars & trucks, new vehicles, and apparel… Year-on-year, overall CPI inflation posted at 3.0%, compared to 3.4% in November (seasonally adjusted). The core rate edged held steady at 2.2% on a year-ago basis. On an unadjusted year-ago basis, the headline number was up 3.0% in December versus 3.4% in November. The core was up 2.2%, matching November’s rate… The latest CPI report continues to give the Fed leeway for continued loose monetary policy. Year-ago rates are above the implicit Fed target range for inflation but on the margin, they are coming down as some Fed officials have predicted. 

US Housing Starts for Dec.

Following release of the latest data on 01/19/2012 8:30:00 AM ET, Econoday reported, New residential construction slipped in December but remains somewhat healthy after the jump the prior month. Permits are encouraging. Starts declined 4.1%, after surging 9.1% in November. December’s annualized pace of 0.657 million fell short of market expectations for 0.678 million units and is up 24.9% on a year-ago basis. The dip in the latest month was led by a 20.4% drop in the multifamily component, following a 23.0% boost in November. The single-family component advanced 4.4% after rising 3.0% the month before… By region, the decline in starts was led by a 41.2% drop in the Northeast. Other regions showing decreases were the West, down 17.6%, and the South, 3.0%. The Midwest rebounded a sharp 54.8%. Seasonal factors are large this time of year and small unadjusted changes can lead to hefty seasonally adjusted changes… Homebuilders remain modestly optimistic. Housing permits held steady, nudging down a mere 0.1%, following a 5.6% advance in November. The December rate of 0.679 million units annualized came in essentially equal to the consensus forecast for 0.680 million. Permits in November are up 7.8% on a year-ago basis… The November ease in permits was led by a 3.7% decrease in multifamily permits after a 13.0% boost the month before. Single-family permits rose 1.8%, following a 1.9% increase in November… Given that November was unexpectedly strong, the December dip in starts still reflects a recent and modest uptrend. And yesterday’s NAHB housing market index gain adds to the view of modest upward momentum. Nonetheless, it still appears to be mainly in the multifamily component as the year-ago gain is stronger there-up 78.1% versus up 11.6% for single-family. And there is still plenty of supply for single-family homes.

US Philadelphia Fed Survey for Jan.

Following release of the latest data on 01/19/2012 10:00:00 AM ET, Econoday reported, A moderate start to the year is the indication from the Philly Fed whose regional manufacturing index edged five tenths higher to 7.3, nearly 3 points below the Econoday consensus. The 7.3 level indicates moderate month-to-month growth in general business activity while the comparison against December’s revised 6.8 indicates only the slightest monthly acceleration. The Dow is moving lower following today’s report… The new order index is arguably the most important reading in the report and it shows slowing monthly growth, to 6.9 from December’s 10.7. Clearly unfavorable is contraction in unfilled orders, to minus 4.1 from plus 5.1. Shipments, reflecting more than six months of weakness in the sample’s new orders, slowed to 5.7 from 9.1. Employment is an important positive, edging higher to 11.6 to indicate a solid rate of hiring… Other readings include a moderating rate of inventory destocking and also a quickening in delivery times which indicates slack in the supply chain consistent with slowing conditions. Price data are stable showing significant inflation for raw material prices and moderate pass through to final goods… Tuesday’s Empire State report was stronger than today’s Philly Fed, but together they offer a positive initial signal for the start of the year. 

US Existing Home Sales for Dec.

Following release of the latest data on 01/20/2012 10:00:00 AM ET, Econoday reported, Low mortgage rates and low prices are doing the trick for the housing sector where sales are up and, for the first time in a long time, supply is coming down. With gains sweeping all regions, sales of existing homes rose 5.0% to a 4.610 million unit rate in December, a third straight month of improvement that has drawn down supply on the market to 6.2 months. This is the lowest reading on supply since 2006! …Prices have been coming down the last six months but December’s sales strength gave sellers the edge with the median price rising 2.3% to $164,500. The year-on-year rate is still in the single digit negative area, at minus 2.5%… All cash transactions are up in the month, at 31% vs 28% in November, with one third of all contracts ending in failure. The housing market may still be bumpy but it is definitely moving in the right direction. The Dow is moving to session highs following today’s report.



Here are the key US economic reports from next week’s calendar.

US Pending Home Sales Index for Nov.

Prior to release of the report on 01/25/2012 10:00:00 AM ET, Econoday reported, The pending home sales index rose a very strong 7.3% in November on top of October’s 10.4% gain. Regionally, November’s gains were led by the West and include the Northeast and Midwest with the South showing no change. November and October taken together show solid gains for all regions. The index was at its highest level since April 2010. For this week’s release, the forecast panel range is rather wide, suggesting that the median is not a strong number.

US FOMC Meeting Announcement.

Prior to release of the latest data on 01/25/2012 12:30:00 PM ET, Econoday reported,  The FOMC announcement at 12:30 p.m. ET for the January 24-25 FOMC policy meeting is expected to leave the fed funds target unchanged at a range of zero to 0.25%. Some Fed watchers are increasingly expecting QE3 and traders will be looking for language supporting this view or not. Also, the Fed will release its quarterly forecast between the announcement and the chairman’s press conference. This forecast for the first time will include projections for the fed funds rate.

US Fed Chairman press conference.

Prior to meeting on 01/25/2012 at 2:15 PM ET, Econoday reported, Given that this will be the first forecast to include projections for the fed funds rate, the press conference will get greater than usual attention. Bernanke likely will also be asked to respond to economic views given by President Barack Obama’s State of the Union speech.

US Durable Goods Orders for Dec.

Prior to release of the latest data on 01/26/2012 8:30:00 AM ET, Econoday reported, Durable goods orders in November surged a revised 3.7%, following a 0.1% uptick the prior month. Excluding transportation, durables grew 0.3% after a 1.6% gain in October. Outside of transportation, new orders were led by primary metals and machinery with fabricated metals and “other” also gaining. Weakness was seen in computers & electronics and also electrical equipment. A disappointment was in civilian capital equipment excluding aircraft which dipped 1.2% after a 0.9% decline in October.

US Jobless Claims data for week ending 1/21.

Prior to release of the latest data on 01/26/2012 8:30:00 AM ET, Econoday reported, Initial jobless claims fell 50,000 in the January 14 week to 352,000 for the biggest drop since September 2005 when economic expansion was in full gear. But weekly data early in the year are often choppy, the result of shortened holiday weeks. The 4-week average, down 3,500, points to less strength with the level of 379,000 not convincingly lower than the mid-December level of 380,750. Continuing claims likewise showed huge improvement, down 215,000 to 3.432 million. Here the 4-week average was down 34,000 to a recovery low of 3.576 million.

US New Home Sales data for Dec.

Prior to release of the latest data on 01/26/2012 10:00:00 AM ET, Econoday reported, New home sales rose 1.6% in November to a 315,000 annual unit rate. However, the median price fell 3.8% in the month to $214,100 for a year-on-year decline of 2.5%. A key positive was a further draw down in available supply, to 158,000 units for a 1.3% dip in the month. This put supply at a recovery low of 6.0 months from 6.2 and 6.3 in the prior two months.

US Leading Economic Indicators for Dec.

Prior to release of the latest data on 01/26/2012 10:00:00 AM ET, Econoday reported,
The January 26 release includes comprehensive revisions to the Conference Board’s index of leading indicators. Prior releases are not comparable. This is the first major overhaul of the LEI since 1996. According to the Conference Board, the changes respond to structural changes in the U.S. Economy: (i) The former Real Money Supply (M2) component will be removed, retroactive to 1990, and replaced by a new Leading Credit Index (LCI) component. (ii) The Institute of Supply Management (ISM) Supplier Delivery Index will be replaced as a component by the ISM New Orders Index. (iii) The Reuters/University of Michigan Consumer Expectations Index will be replaced by an equally weighted average of consumer expectations measures that come from surveys conducted by The Conference Board and Reuters/University of Michigan. (iv) The “New Orders for (nondefense) Capital Goods” component will be replaced by “New Orders for (nondefense) Capital Goods, excluding Aircraft.” 

4Q2011 Advanced estimate of US GDP.

Prior to release of the latest data on 01/27/2012 8:30:00 AM ET, Econoday reported, GDP growth for its third estimate for the third quarter was nudged down to 1.8% annualized growth from the prior estimate of 2.0% annualized. The third quarter was still a little healthier than the second quarter’s 1.3% gain. The downward revision for the third quarter primarily was due a smaller decline in inventories and also to less robust growth in personal consumption. The slower growth in PCEs was in a lower estimate for hospital services… Final sales of domestic product were revised down to 3.2% from the second estimate of 3.6%. Final sales to domestic purchasers were down to 2.7% from the prior estimate of 3.0% annualized. Economy-wide inflation revised up marginally to 2.6% from the second estimate of 2.5%.

US Consumer Sentiment Survey (Final) for Jan.

Prior to release of the latest data on 01/27/2012 9:55:00 AM ET, Econoday reported, The Reuter’s/University of Michigan’s consumer sentiment index rose to 74.0 at mid-month from 69.9 in December. The index has been moving straight up since the August low of 55.7. Composite components both showed solid gains with current conditions up 3 points to 82.6 and expectations up nearly 5 points to 68.4.


Technical Indicators & Patterns of International Markets

Clearly, the technical indicators and patterns used by technical analysts must be summarized as bullish.

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Data to be found at http://stockcharts.com/def/servlet/SC.scan

I recommend this service.


International Equity Markets Review

The international equity markets were mostly strong again this week, particularly those of Brazil (+5.4% W/W) and the Asia-Pacific region. Overall, this is one of the most bullish starts to the year for many years.

Here is this week’s international equity re-cap from Econoday:

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Below are 16 country index chart links from StockCharts.com (with their formal approval btw). Global equity markets do not trade in a vacuum. It is important to be watching these markets move through a trend juncture together, pushed and pulled by global currency and commodity strength or weakness as well as local and regional economic forces.


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.

DAX stockcharts.com chart


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

CAC 40 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


Review of the ETFs for the International equity market

As you know, the country Exchange Traded Funds (ETF) are not the same as the domestic exchange indexes, but are (i) denominated in US Dollars, (ii) traded in NY, mostly by Americans, (iii) traded for several hours each day after Asia-Pacific and European markets have been closed, and (iv) a reflection of the most up-to-date news stories and investment analysis.

Also, depending on extreme currency fluctuations, the USD denominated ETFs may widely differ in performance from the results of the domestic exchanges.

When the world is worried and goes risk-off, it’s the international equities that get hammered the most, and that feeds the US Dollar market, which further lifts the Dollar and worsens the crisis. If Dollar buying gets out of hand as appeared to happen this week, the markets take on the appearance of a death plunge.

This week all 11 of the top 11 country ETF’s were up significantly. The laggard was Canada (EWC), which gained +1.61% W/W. The leader was Hong Kong (EWH), which gained +5.99% this week, but as the following chart shows has been a significant laggard to the S&P 500 (solid thin brown line) since Nov. 21.

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Table 14: International equities via an ETF perspective (in $USD)

Sorted by 1-Week Price Performance
Symbol
Close 1Day
Change
1Day
%Change
1W
%Change

2W
%Change

4W
%Change

YTD
%Change

3M
%Change

6M
%Change

12M
%Change

EWY

56.76 0.59 1.05% 6.71% 6.33% 10.09% 4.59% 9.91% -14.30% -8.89%

EWH

16.80 0.19 1.14% 5.99% 6.94% 9.52% 6.19% 10.09% -7.95% -14.89%

EWS

11.94 0.09 0.76% 4.74% 6.80% 9.94% 6.61% 3.29% -14.16% -12.91%

EWZ

65.05 0.25 0.39% 4.70% 10.05% 13.05% 8.96% 15.56% -6.64% -14.24%

EWQ

20.66 -0.01 -0.05% 4.55% 6.55% 7.60% 2.48% 0.15% -19.04% -18.73%

IFN

21.59 0.05 0.23% 4.45% 9.54% 8.22% 9.71% -9.70% -28.42% -31.98%

EWG

20.93 -0.01 -0.05% 4.13% 6.51% 8.67% 4.29% 4.49% -18.91% -14.99%

GXC

68.59 0.00 0.00% 3.78% 7.64% 9.66% 6.82% 15.06% -10.90% -11.63%

ILF

46.44 0.02 0.04% 3.64% 7.05% 10.13% 6.10% 12.20% -6.45% -11.56%

EWJ

9.450 0.120 1.29% 3.50% 3.05% 4.54% 1.72% -0.42% -12.26% -14.56%

RSX

28.93 -0.24 -0.82% 3.47% 6.44% 5.82% 4.74% 3.92% -25.13% -26.67%

EWW

57.25 -0.36 -0.62% 2.56% 4.83% 7.69% 3.51% 11.34% -5.62% -7.82%

EWU

16.64 0.08 0.48% 2.09% 1.71% 4.65% 0.00% 2.91% -5.83% -4.53%

EWA

22.94 0.10 0.44% 2.05% 4.04% 6.90% 3.89% 1.77% -9.97% -6.97%

EWT

12.46 -0.05 -0.40% 1.88% 4.71% 11.05% 5.24% 0.97% -17.81% -20.33%

EWC

27.75 -0.04 -0.14% 1.61% 2.10% 8.31% 1.28% 3.78% -13.93% -10.05%

Japanese equity market ETF: EWJ

Here is the Japanese (EWJ) equity market ETF Monthly, Weekly and Daily data charts:

Interactive EWJ Monthly data:

Interactive EWJ Weekly data:

Weekly EWJ

Interactive EWJ Daily data:

Daily EWJ


U.K. equity market ETF

Here is the United Kingdom (EWU) equity market ETF Monthly, Weekly and Daily data charts:

Interactive EWU Monthly data:

Interactive EWU Weekly data:

Weekly EWU Data

Interactive EWU Daily data:

EWU Daily data: Daily EWU Data


Canada’s equity market

Here is the Canadian (EWC) equity market ETF Monthly, Weekly and Daily data charts:

Interactive EWC Monthly data:

Interactive EWC Weekly data:

Weekly EWC Data

Interactive EWC Daily data:

Daily EWC Data


Taiwan’s equity market

Here is the Republic of China/Taiwan (EWT) equity market ETF Monthly, Weekly and Daily data charts:

Interactive EWT Monthly data:

Interactive EWT Weekly data:

Interactive EWT Daily data:


Indonesia equity market ETF

Here is the Indonesia Fund (IF) equity market ETF Monthly, Weekly and Daily data charts:

IF Summary from Yahoo Finance:
http://finance.yahoo.com/q/pr?s=IF

IF Summary from Google Finance:
http://www.google.com/finance?q=AMEX:IF

IF chart from StockCharts.com:
http://stockcharts.com/charts/gallery.html?IF

Interactive IF Monthly data:

Interactive IF Weekly data:

Interactive IF Daily data:


Here are the links to interactive charts from Investertech.com for the key country ETFs, which you can add technical indicators for as well.

Group 1:

(list one)

(list two)

(list three)

Group 2:

(list one)

(list two)

(list three)


US Equity Markets Review

This week was a winner for the equity Bulls. Friday was a big loser, but Monday through Thursday had gains. By the close Friday, eight of ten sectors and 21 of the Dow 30 stocks were up W/W.

Econoday has summed up the US equity market as follows:

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DJIA ino.com chart

DJIA stockcharts.com chart

NASDAQ Composite ino.com chart

NASDAQ Composite stockcharts.com chart

Here is the list of the ten highest-weighted non-financial stocks in the NASDAQ Composite. Put them in a watchlist (see Google Finance Portfolio) and watch them like a hawk:

AAPL MSFT GOOG QCOM RIMM CSCO INTC ORCL GILD EBAY

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

Add two of AMZN, DELL, JAVA or YHOO to get a Cara Dozen.

Or while you are at Investertech.com, input up to 30 tickers in the window above “Summaries” – say AAPL MSFT GOOG QCOM RIMM CSCO INTC ORCL GILD EBAY AMZN DELL JAVA YHOO plus up to 16 more – and click on Tech Chart, Basic View, Daily Watch, Performance or Fundamentals and you’ll get a lot of information to compare one against the others.


Here is the Monthly data chart of the Interactive Chart of Nasdaq Composite, S&P 500, Dow30, and Russell 2000 (small cap) indexes.

Monthly Nasdaq Composite Data

Monthly S&P 500 Data

Monthly Dow 30 Data

Monthly Russell 2000 Data

Here is the Weekly data chart of the Interactive Chart of Nasdaq Composite, S&P 500, Dow30, and Russell 2000 (small cap) indexes.

Weekly Nasdaq Composite Data

Weekly S&P 500 Data

Weekly Dow 30 Data

Weekly Russell 2000 Data

Here is the Daily data chart of the Interactive Chart of Nasdaq Composite, S&P 500, Dow30, and Russell 2000 (small cap) indexes.

Daily Nasdaq Composite Data

Daily S&P 500 Data

Daily Dow 30 Data

Daily Russell 2000 Data


Value Line Dow 30 Stocks Review

This week in the WIR 4- 17-30-43 series, Value Line reported on Four DJIA components: General Electric (GE), United Technologies (UTX), Caterpillar (CAT) and 3M (MMM).

3M and United Technologies are presently Cara 100 companies, while Caterpillar has been a borderline candidate for some time. 3M was added to this report group at the beginning of 2011, and so I didn’t report it with the others until that January. I also missed the April WIR as I was on vacation.

As I see it, America’s economic strength is linked to its industrial-military complex, which is essentially the Sector 20 Industrials, as well as Sector 45 Technology. The Japanese and Germans, as good as they are, never quite managed to reach the levels of excellence of the great American companies in this sector. I do like the Swiss company ABB (ABB) however. Perhaps in future years, we’ll see the Chinese and Indians develop strength in the Industrials and Transports; but if so, I don’t see it happening for at least the next decade.

As you know, a Cara 100 designation relates to my assessment of the quality of the company (and our need to continuously focus on the best of the best), and not to market timing considerations or the attractiveness of the stock price as I see it because every company, good and bad, will go through phases of their stock being over-bought and over-sold.


3M Company [GICS 20, Dow 30, Cara US 100 June 25-06]
(MMM: Google Finance file)
(MMM: Yahoo Finance file)
(MMM: StockChart chart)
(MMM: Investertech chart)
(MMM: ADVFN Financial Data)
(MMM: Value Line Report Jan. 20: next one is due Apr. 20)


Caterpillar [GICS 20, Dow 30]
(CAT: Google Finance file)
(CAT: Yahoo Finance file)
(CAT: StockChart chart)
(CAT: Investertech chart)
(CAT: ADVFN Financial Data)
(CAT: Value Line Report Jan. 20: next one is due Apr. 20)


General Electric [GICS 20, Dow 30, ex-Cara 100]
(GE: Google Finance file)
(GE: Yahoo Finance file)
(GE: StockChart chart)
(GE: Investertech chart)
(GE: ADVFN Financial Data)
(GE: Value Line Report Jan. 20: next one is due Apr. 20)


United Technologies [GICS 20, Dow 30, Cara 100]
(UTX: Google Finance file)
(UTX: Yahoo Finance file)
(UTX: StockChart chart)
(UTX: Investertech chart)
(UTX: ADVFN Financial Data)
(UTX: Value Line Report Jan. 20: next one is due Apr. 20)



What did I last write about these companies in the past year or two?

Here are my notes from WIR #17, WIR #30, and WIR #43 from 2009 and WIR #4, #17, #30 and #43 from 2010 re United Technologies and Caterpillar. For a while there I refused to discuss General Electric (GE) other than to say the company still has work to do in cleaning up its balance sheet. Selling control of NBC was a good start. I’d like to see them hive off GE capital too. I have never lost confidence in Jeff Immelt although, as you’ll note from my comments below, I don’t put him on the pedestal I do for several other CEO’s.


For study purposes, here is what I wrote about these companies in WIR #17-2009 (April 26):

The two Industrial sector companies, United Technologies and Caterpillar, ran into the same economic problems caused by the credit market squeeze in September 2008: pullback in spending followed by inventory glut. Being closely linked to the woes of the global economy, both companies have a challenging operating environment, but that’s not to say they are not high quality ones. They are. Based on various metrics and impressions, I happen to think United Technologies is the superior one; however, I do like both…


Here are my notes from WIR #30, July 26, 2009:

…On a comparative basis, Caterpillar clearly had the superior price performance over the past three months, mostly in the past few weeks. The reason was, as explained here through-out, was on account of the Great Reflation play as the Fed (and other central banks as well) has printed a lot of money to spur economic growth. The $USD has dropped as a result, which has boosted commodity prices, which in turn has aided the commodity-price sensitive sectors like Energy, Basic Materials and Capital Goods Industrials and Transports industries of which Caterpillar is a leader.

In my previous analysis, I blew it. The following low reached almost 30, but I opined that I would have waited until 27-28. You cannot and will not be right all the time. In my case, I was too negative, and completely overlooked the Great Reflation play. CAT had a blow-out 13-week performance of +24.9%.

UTX stock has lifted +5.8% in the past 13 weeks, closing 52.23. The stock hit interim short-term cycle lows of 47.34 and 49.00, which is well over the price that I said would attract me (42-44), so I was wrong on this one too; but not nearly so bad as CAT…


Here are my notes from WIR #43, October 25, 2009:

…Where does one begin when the financial world has gone crazy? … As you can see from my words above, I think highly of these two companies. I’d like to own them; but I am not going to over-pay. United Technologies has been a long-time Cara 100 favorite of mine for all the reasons that I like quality. Caterpillar too would make that list except for the one weakness that the balance sheet is not as strong as I’d like to see for a company whose operations are so highly correlated to the global economy and affected by currency fluctuations. Even at that, I have often said that CAT is almost in my top group.

There is a big difference however – these days at least – in a company financial position and operating results and the reportage in mainstream media. Seldom do you see such nonsense as the media is presently spewing regarding corporate results as we have today. After the CAT quarterly report was released, it seemed like Hollywood screenwriters got into the act, and I felt compelled to write it up in the blog Wednesday morning after the stock had hit a high of 61 and change the day before and everybody was repeating the mantra “CAT just crushed earnings”:

The average PE for CAT is in the low teens, and it seldom goes above 20 (but is now double its average and traders are excited). But there is a lot more to this than meets the eye. Independent traders are confounded because prices are moving on pure b.s. Fourteen weeks ago (7/14), when Value Line created its report on CAT, the price was $31.93. Today the price was $59.81 when I last checked. That’s a gain of +87.3% in a quarter. This week VL will update their CAT report. Interestingly, in their last report, the analyst had just downgraded the technical outlook rating to a “5″ (lowest) and a couple weeks earlier had downgraded CAT’s fundamental timeliness rating to a “5″ (lowest). He wrote in the report published July 24: “We advise investors to stay on the sideline… we are cautiously optimistic quarterly sales will soon hit bottom… the company is slashing costs and endeavoring to preserve cash… reducing production runs, shortening work weeks, laying off workers, (etc)…”

On that basis, and I happen to believe that Value Line has fairly good analysts and a good track record over the years, there was no reason for the recent moonshot in the CAT price. Wall St analysts agreed with the VL report. Thirteen weeks ago, 14 rated the company a Hold, 4 a Buy/Strong Buy and 5 an Underperform/Sell. The overall rating was about 3 on a scale of 5. Last week it was 2.8 (a very weak hold).

So, what’s happening here? Yesterday at the open, the stock gapped from 58 (over-bought) to a nose-bleeding height of 61.

Why? The sales guidance for 2009 is $32-33 billion, but even VL had it estimated at $35 bil in their 7/24 report. And sales for 2008 were $51.234 billion. Earnings were a surprise at $0.64, but they were also $1.39 in the comparable year earlier quarter.

Right at the pre-market peak in hype, Reuters ran a headline story: “Will cash-rich CAT bankroll cash-poor suppliers?” Do you believe that garbage? CAT has been desperately trying to conserve cash, and their balance sheet is rated only A (not A+ or A++) and the Safety rating is only a “3″ because the cash on hand equals only the accounts payable. In fact the company’s quick assets (cash and receivables — the one’s they have difficulty collecting) are $20 bil and the current liabilities are $22 bil. So CAT is hardly a cash-rich company, and their sales have plummeted because the economy is in crisis and their distributors are going out of business left, right and center.

So, what the heck is going on here? This is all about Stimulus 2.0. If you want to buy the risk, go ahead. As for CAT and others like it, I’ll pass thank you.

Look closely at the VL report dated Oct 23 (but clearly written ten days earlier, which irks me btw because there is no reason it cannot go from the analyst direct to the market without first being seen by goodness knows how many people). The projected next five year annual rates of growth for sales, cash flow and earnings are one-third those of the past five years. Nothing, I believe, has a greater impact on sustainable share prices that momentum of growth in these three metrics. So where’s the beef? Then, projected earnings for this year AND next combined are about half the actual earnings for 2008. Sales for 2009 and 2010 combined are projected at $67 bil vs 2008 sales at $51.3 bil. Truly, how can people get excited and be talking “blow-out” earnings, and using words like “crushed”. 2009 earnings are projected to come in at $0.95, which is a far cry from 2008 when earnings were $5.71. The current December quarter, they are projected to be $0.53 vs the comparable quarter at $1.13. Like, where is the beef here?

Just because the Wall Street scriptwriters are telling you things are great doesn’t mean they are. Prices, simply, are escalating and people are excited – just like the condo owners were in Miami in 2005 after stunning price gains over 2004, which followed stunning price increases over 2003, etc. Where are they now? I said in the summer of 2005 that books would be written about that sordid affair and I held CNBC accountable. It’s happening all over again. If there was a factual basis for these price increases, I would be holding positions. Unfortunately I have to manage risk.

Last night at a party everybody was talking up the market. One fellow says he bought Citi at 94 cents and sold it a couple weeks later for 3 something, making $500,000 in his personal account, and now that he is a genius he says he absolutely knows the market is going higher. I asked him what his picks were and the answer was “All of them. Buy them all. They are all going higher, and I got a $100,000 (wager) that says I’m right.” So I asked what if he’s wrong, and he replied “In that case my $100,000 turns to $5,000… so big deal.” He was drunk in more ways than one.

Another friend who is also a construction worker and who also bought Citi down near the low dropped by yesterday to ask me what he should do with it. I was surprised he was still holding it, and mentioned his $1.00 cost base. No, he says, he paid $1.04 for 100,000 shares and was thinking of selling a week ago at $5. Now the price has been sliding, down to $4.46, he wanted my counsel. “Sell now” I said and “go to cash, and after C crashes, buy another $100,000 worth, and no matter what happens to it, you cleared a quarter million (it’s tax free in Bahamas). There will be lots of quality opportunities that are less risky.” Ok he says, he’ll do that, and then proceeds to tell me he also bought at Australian bank at the same time at 10 and its now 80. The mind boggles. I figured maybe he should be working with me or me with him. I just have a different kind of hard hat.

My mind just had a flash-back to the 1970’s when a friend who was a commodities broker was telling me he was making a killing in pork bellies. I really didn’t know back then what a pork belly was, but it wasn’t long after that this guy was no longer a commodities broker.

There are extreme cycles at times and we are going through one. The money has moved from the taxpayer’s account to Humungous Bank & Broker (HB&B) and through their books to their proprietary trading desks and those of their friends and best clients. Regrettably, that money never made it to the loan department despite the no-brainer profit set-up from the Fed. So, it went into the market with a little bit kept in reserve to pay off the script writers and talking heads. I don’t know what’s grown faster, the prices or the hype?

Nothing much changes at every extreme cycle top. People who don’t know gamble. They can’t stay out of the action. It’s in their blood. They couldn’t care less whether Caterpillar is CAT or 0228 or the stock is $40 or $60. Pick a number.

…The skinny on United Tech is a little easier to comprehend. Extremely strong balance sheet is being used to ramp up the dividend and buy in the stock. The metrics always look better. No brainer. Paulson pulled that one after he became Treasury Secretary. I called it Paulson’s Folly because when he told Wall Street to do the same thing when the share prices were at their peak. When these banks, names you now know have failed, were spending over $10 billion to buy in their shares at record high prices, I asked in this blog if anybody with common sense really believed that was a good thing.

What goes around comes around.

With UTX, the financials and operating results are better that Caterpillar’s. But, there too the projected next five year annual rates of growth for sales, cash flow and earnings are a fraction of those of the past five years – unless of course you believe that every one in China was going to buy an elevator…


Notes for WIR#4 Jan 24, 2010

Here are the charts for CAT ($54.25 1/22 close; down -$3.35 10/23 close; down -5.82% in qtr):
At 1/22, the RSI-7 for the Monthly/Weekly/Daily for CAT is 58.5 (falling; bearish) / 40.6 (falling; bearish) / 22.6 (has fallen to Accumulation Zone consideration).

At 10/23, the RSI-7 for the Monthly/Weekly/Daily was 66.5 (presently bull) / 76.1 (a bull with a nosebleed) / 63.2 (down sharply after so-called “blow-out earnings).

Our automated RSI-7 signal system gave a Weekly-based SELL Alert @ $54.25 on 1/22. But, since the Daily hit the Accumulation Zone and closed Friday with a 22.6 RSI-7, I would hesitate selling if there is any attempt by international metals stocks to rally early this coming week [based on presumed Quantitative Easing]. I think the easing will come early if equity markets look like they will crater early in Monday morning in Europe, or if not then there could be small selling though the President’s State of the Union address on Wed. night…

If the selling continues through the week, CAT’s RSI-7 could drop to the teens or lower before there is a bounce. Watch the RSI-7 on Silver bullion and the Silverminer stocks for indication of a bounce. But any bounce is expected to be a small, short one.

Deleveraging of financial assets takes the speculation out of stocks like the metal miners.

As for Value Line, the analyst David Reimer, raised the Timeliness from 4 (bad) to 3 (average) on 11/06 and the Technical from 3 (average) to a 2 (good) on 10/30. From this report dated 1/22, but clearly written well before as the price is shown as $62.24 but closed 1/22 at $54.25, I don’t see what positives he saw. Obviously with a price of $54.25, the risk is lower.

So, when you read any report from an analyst always be sure to note the date and price change.

Frankly, I see nothing in this report that would help me trade the stock. The analyst has had to retract some statements re earnings and revenue expectations, so he clearly knows that long-term oriented investor/traders are not going to have any confidence in what he writes, so he can opine whatever he wants about a 3- to 5-year Total Return potential being ok. In fact, despite his “positive” notes, the Annual TR has been dropped from a hi-lo of 22%-10% on the previous quarterly report to just 17%-6% for this one. Given that he shows a Dividend Yield of +2.7%, he’s obviously saying that the low expectation is for a minimal capital growth through rising share price. I don’t disagree; I just think the analyst ought to not be so hype-oriented as to conclude his report with, “We believe that a rising share price is beginning to attract more investors with a year-ahead view, as opposed to those looking further out”. Oh, really?


Notes for WIR#17 Apr 25, 2010

Here are the charts for UTX ($76.47 4/23 vs $69.08 1/22 close; up +10.7% over qtr):

At 4/23, the RSI-7 for the Monthly/Weekly/Daily for UTX has moved to 79.8 (and rising) / 80.4 (a big week this was) / 71.2 (Thurs and Fri came off after that incredible move on Wednesday) vs the values on 1/22, which had been 73.5 (still elevated) / 55.1 (falling) / 30.1 (falling rapidly).

Our automated RSI-7 signal system noted a Monthly and Weekly SELL Alert back in January, but the UTX has kept powering north. There had been a Daily-based Accumulation Zone @ $69.08 on 1/22, but I ignored it, thinking the stock would move lower. I decided to go with the SELL Alert given on the Weekly on 1/22 @ $69.08, saying “this is no time to be brave, regardless of what bullish analysts might opine.”

The Value Line analyst, Erik Manning, indicates an anticipated 2012-2014 Annualized Total Return (Dividends and Capital Growth) in a hi-lo range of 16%-10%, which, given a solid dividend of well over +2.0%, is not so hot.

Today, I am not considering any Buys in UTX. The Monthly and Weekly RSI-7 numbers are just too extreme at the high end. I’d wait until the anticipated intermediate-term Bear phase takes the stock to a Daily/Weekly Buy Alert level before thinking about venturing into new positions.

It now appears that 2008 revenue levels will not be achieved again until 2012, and that earnings per share in 2008 will possibly be surpassed in 2011. The latter is happening because cash flow is being used to buy back the stock.

The VL analyst opines only average performance here for the foreseeable future. I agree. More to the point; I’d be concerned about capital safety, not because of the company, but because of the state of the broad equity market.


Here are the charts for CAT ($68.78 4/23 vs $54.25 1/22 close; up +26.8% in qtr):

At 4/23, the RSI-7 for the Monthly/Weekly/Daily for CAT is 73.9 (back to the danger zone) / 81.2 (bullish extreme) / 74.8 (simply too high).

At 1/22, the RSI-7 for the Monthly/Weekly/Daily for CAT is 58.5 (falling; bearish) / 40.6 (falling; bearish) / 22.6 (has fallen to Accumulation Zone consideration). At the 1/23 review in the WIR, I stated that my automated RSI-7 signal system gave “a Weekly-based SELL Alert @ $54.25 on 1/22. But, since the Daily hit the Accumulation Zone and closed Friday with a 22.6 RSI-7, I would hesitate selling if there is any attempt by international metals stocks to rally early this coming week [based on presumed Quantitative Easing]. I think the easing will come early if equity markets look like they will crater early in Monday morning in Europe”.

As we see from the table and chart at the beginning of this WIR, the Fed was pumping then and these stocks began to soar a week or so later. It was be nice to get that call. Maybe we will just have to study the weekly Fed reports more closely!

2008 revenues will likely not be reached again until 2013! Same for EPS. The VL analyst says that potential Total Return (TR) is less than average, citing a 3-5 year hi-lo of 17%-6%. At the low end, you need to factor in today’s dividend yield of +2% and figure that’s not much of a capital return on investment. Too much risk here, for the moment. In fact, I think as soon as the Fed starts cleaning up its balance sheet by offloading dubious quality assets, there will be a broad market smack down and this is one stock that doesn’t have enough going for it to hold off the Bear attack. If there is a capex issue with major corporations, and there may be if interest rates start to lift, which would negatively impact Internal Rate of Return budgets for long term projects, then companies in the heavy equipment business like Caterpillar are going to suffer. That’s not to say this company has not done an excellent job cleaning up inventory and distribution channel issues, and so forth; it’s just not got enough going for it to sustain higher share prices during a broad market pullback or any double dip to economic recovery should that occur.


Here are the charts for GE ($19.07 4/23 vs $16.11 1/22 close; up +18.4% over qtr):

At 4/23, the RSI-7 for the Monthly/Weekly/Daily for GE is 63.4 (rising) / 85.4 (bullish extreme) / 61.0 (down for the past week).

Our automated RSI-7 signal system last noted a BUY Alert a long time ago @ $11.95 on 7/23/2009, with no change since then. Most recently there was a SELL Alert on the Daily data @ $18.97 on 4/16. Obviously on the Weekly data, GE is in the Distribution Zone.

VL raised the Technical (6 month rating) from a ‘4’ to a ‘3’ on 4/16, which was the day I got a SELL Alert on the Daily data. We’ll have to see how these two fare over the next month or two.

VL analyst Orly Seidman gives a hi-lo 3-5 year projected annualized Total Return (TR) of 32%-18%. With the issues still to be resolved at GE Capital, maybe the potential risk of capital loss is elevated as well. Yes, the balance sheet appears to have improved over the past two years, and as I see it the management team there is excellent, albeit a little too bullish all the time. The Return on Equity and profit margins, however, fell so much, and the risks increased so much with GE Capital, I simply had to remove GE from the Cara 100 a while back. If the directors would agree to hive off the Financial Services interests, like they did the NBC holding, I’d likely put GE back into the Cara 100 as one of the world’s great manufacturing companies.

But, I don’t trade it as it’s too hard to know when the Fed is going to pump or withdraw liquidity in the system. GE CEO Jeff Immelt would know, however, as he sits on the Board of the all-important Fed Bank of New York, which employs the 400-plus traders who run the $2.35 trillion hedge fund.

I also don’t like not being in or close to the GE boardroom the times the Board is discussing the dividend, which at some point may double. That would soar the stock overnight. As an outsider, I don’t like the odds of beating insiders. They hold what GE themselves refer to as “The Unfair Advantage”.

So, while I am back to looking at GE again, I’ll stay away from the stock for now, knowing there could be things happening there that would attract my interest sometime in the future.


Notes for WIR#30 July 25, 2010

Best these three stocks were avoided as I recommended in the previous quarterly write-up.

UTX was $76.47 on 4/23 but hit a high of just $77.08 a couple days later, falling to a low of $62.88 before closing 7/23 at $70.90. From the July 1 low, UTX has moved in 15 sessions up +11.4% and now has a Monthly/Weekly/Daily RSI-7 of 60.4/57.9/73.9. The Daily RSI-7 is high, so traders would be wrong to chase the stock here.

In the previous WIR, I stated: “The VL analyst for UTX opines only average performance here for the foreseeable future. I agree. More to the point; I’d be concerned about capital safety, not because of the company, but because of the state of the broad equity market.”

Clearly, you could have bought the UTX ($76.47 on 4/23) in the following quarter as low as $62.88, so I made a good call.

CAT was $68.78 on 4/23 but hit a high of just $72.83 a couple days later, falling to a low of $54.89 before closing 7/23 at $69.31. From the July 1 low, CAT has moved in 15 sessions up +19.4% and now has a Monthly/Weekly/Daily RSI-7 of 68.1/64.1/75.0. The Daily RSI-7 is very high, so traders would be wrong to chase the stock here.

In the previous WIR, I stated: “That’s not to say CAT has not done an excellent job cleaning up inventory and distribution channel issues, and so forth; it’s just not got enough going for it to sustain higher share prices during a broad market pullback or any double dip to economic recovery should that occur.”

You could have bought the CAT ($68.78 on 4/23) in the following quarter as low as $54.89, so I made another good call.

Re: GE, in the previous WIR I stated: “So, while I am back to looking at GE again, I’ll stay away from the stock for now, knowing there could be things happening there that would attract my interest sometime in the future.”

GE was $19.07 on 4/23 and hit a high of just $19.70 a couple days later, falling to a low of $13.75 on July 2 before closing 7/23 at $15.71. You could have bought the GE ($19.07 on 4/23) in the following quarter as low as $13.75, so this too was a good call.

From the July 1 low, GE has now moved in 14 sessions up +14.3% and has a Monthly/Weekly/Daily RSI-7 of 47.3/49.7/70.5. The Daily RSI-7 is high, so traders should not expect the stock to soar here, but it may lift some more, and may lead the Summer Rally. In fact of these three, I like GE the best moving forward for the next three to six months and also out for the next two to three years.

Going out to 2013-2015, the Value Line analyst projects a lo-hi Annualized Total Return (TR), which includes dividends and capital gains, of 30% to 40%. That would be quite impressive, but I agree with the rationale, i.e., changing momentum re top- and bottom-line growth. The balance sheet is improving, liabilities are being quickly reduced, a higher dividend was just declared, the share buy-back program was extended, and the non-core assets are being dealt. Book value per share is clearly on the rise. By sometime in 2013, the stock will likely trade in the $40 to $45 range based on a 19x PE of $2.25 (my estimate). By buying low (presently $15.71), supplemented by put writes, a three-year triple is possible.

I think that 3x share performance would be impossible for the UTX and CAT. In fact, if you look at VL’s next 5-year projections for each company compared to the past 5-year data for per share revenues, cash flow, earnings, dividends and book value, the UTX and CAT are going in the wrong direction.

I just happen to think that once the long-term cycle bottom has been reached, probably later this year, the sailing aboard the good ship GE will be remarkably pleasant and profitable.


Notes for WIR#43 October 24, 2010

(Chartwise) Caterpillar ran out of steam a month ago after a powerful rally since early March 2009. The other three pull-backs in CAT over this stretch – May-June 2009, Jan 2010 and May 2010 – all had declines from the peak of about -25%. So far, the market is down just -3.5% from the high of $81.20. My crystal ball, then, says with the Monthly RSI-7 at 71.3 and ready to fall through 70, the Weekly RSI-7 at 65.0 and falling and the Daily at 43.3 and falling, the greatest probability for future price trend is down and the loss could be severe.

Interestingly, the United Technologies stock (UTX) has M-W-D RSI-7 of 63.6, 71.7 and 72.9 and for the most part rising, so there appears to be a little steam left in this one. At least we have to wait to see the Monthly and Weekly RSI-7 roll-over before turning bearish.

The one that could lead a near-term rally, as Generals usually do, but is more likely to just stagnate here, is General Electric (GE), which has M-W-D RSI-7 of 50.0 (and negative), 49.3 (and negative) and 32.0, which has recently tumbled down close to a potential bounce area.

When Value Line produced the analytical and informational reports on these companies, dated Oct 22, the closing price that day on Oct 12 was much higher (see brackets) for GE and CAT and lower for UTX. That puts important metrics like Dividend Yield potentially out of whack from what you read in the report. In this case, because the prices have fallen, the yields are higher.

For these three stocks the one with the superior annual Total Return (TR) potential going out to 2013-15 is General Electric at $16.06 ($17.19 on Oct 12) because the analyst anticipates a high-low in that time of 45-30, which would result in a TR range of 29%-17%.

Over the same time frame, the Caterpillar at $78.33 ($79.34) has an anticipated annual TR ranging from 14% to just 4% based on a hi-lo of 125-85, and the United Technologies at $74.94 ($72.98) ranging from 16% to 10% based on a hi-lo of 116-100.

From the VL reports, I see that for GE, the Return on Equity has fallen a lot down to about 10%, although that % is expected to grow to maybe 16% in the next couple years. This is one reason (i.e., inadequate ROE) that I dropped GE from the Cara 100 a couple years ago. Another was the dividend cut. But I see that the Q3 dividend has moved to $0.12 from $0.10 – still a far cry from the once regular $0.31 per quarter and growing.

Now if the dividend moves to $0.52 for 2011 as VL suggests, and the stock price falls a bit, the GE will be an acceptable dividend play. You can help this along by buying the stock along with a put write that lowers your cost base. In fact I see the effective yield moving higher into the future, so GE is really an attractive stock once again.

GE’s Q3 earnings were recently reported at $0.29/share, up a penny from the street expectation, and up +32% over the Prior Year’s quarter. Book value is a solid $11.60/share too, so that’s another plus. Finally, the company recently spent $3.0 billion to acquire Dresser Inc, a global energy infrastructure tech and services provider, which is a positive.

As I opined above, you certainly don’t have to chase the stock here, as I see the big picture.

For the VL report on United Technologies, I see that Q3 earnings was recently reported at $1.30 vs an expected $1.28, up +13% over the Prior Year’s Quarter. Pratt & Whitney jet engine company of the aerospace division has been flying. But alas the revenue growth is disappointing over all. The recent quarter came in with revenues at $13.52 billion vs an expected $13.93 billion, so the earnings lift have come via cost cutting and jobs. Forward earnings too are being guided less than what the street expects today.

So, while the stock is in a bullish pattern still, I’d certainly not chase it. The stock will come back to you if you give it time.

As for Caterpillar, this is one well-hyped company. These people affirm their higher revenues and earnings guidance about twice a week. (Joking.) But the management did perform this quarter for sure.

Full-year earnings are now guided at $3.80-$4.00 vs the VL estimate of $3.50, and revenues of $41-$42 billion vs the VL estimate of $40.5 billion.

As part of the hype, the company’s $820 million acquisition of Electric Motive Diesel company is likely management says to push earnings and revenues for 2012 into the $8-$10/share area (quite a spread), with revenues up at $55-$60 billion.

I don’t care for the stock price at this level ($78.33). I have been wrong on the CAT before though I’m wondering how many lives it really has.


Notes for WIR#4 January 23, 2011

Re: UTX

The RSI-7 for UTX for the Monthly, Weekly and Daily price series data is 70.9 (rising), 76.0 (rising) and 67.4 (sidetracking). These values are high and the ominous note is that the Daily RSI-7 cannot seem to move above 70.

The stock price hit a 52-week high on Friday at $80.50, and also with the close at $80.20, but, for short-term traders, there is technical resistance a tab above that, and a modicum of support a tad below $79. I’m neutral to bearish for now, and if I held it and wanted to add, I would await a pull-back before adding positions.

Earnings will be released before the open Wed., Jan 26.

For long-term oriented traders, Value Line analyst Damon Churchwell remains “conservative”, looking for “average” performance in the year ahead as well as 3-5 years out.


Re: CAT

The RSI-7 for CAT ($92.75) for the Monthly, Weekly and Daily price series data is 79.5 (rising), 71.5 (falling and about to give an intermediate cycle sell alert), and 38.4 (clearly falling since December).

The 52-week high was set at $96.80 on Wednesday. This chart, however, looks vulnerable as the price seems unable to move above the 52-week high any time soon.

Value Line analyst David Reimer has the stock ranked “average”, saying the current price is not compelling for a 3-5 year holding.

The BUCY deal, announced in November, could be a good one long-term for the company, but will first have to go through regulator scrutiny. There is also a lot of added debt that would have to be paid down in order for the CAT to retain an A-rated balance sheet.

DOJ Seeks Information On Caterpillar Inc.’s Proposed Bucyrus International, Inc. Buyout-DJ
Thursday, 20 Jan 2011 06:35am EST 
Dow Jones reported that Bucyrus International, Inc. and Caterpillar Inc. received requests from the Department of Justice for additional information regarding the latter’s proposed $7.6 billion acquisition of the mining-equipment company. The heavy equipment giant in November agreed to buy Bucyrus in a deal valued at $8.6 billion including the target’s debt. The acquisition comes as Caterpillar’s fortunes have improved mightily the past year as construction and mining companies replenish equipment after cutting back in 2009. But the companies received a so-called second request for further information and documentary material from the department’s antitrust division on Wednesday.

Yes, earnings will likely rise to an all-time high at about $6.00/share this year, but the price too is at an all-time high this week, and the dividend is not so hot, so the Annualized Total Return for 3-5 years is projected by Value Line at just -2% to +8%.

I would not buy or hold the stock at this level.


Re: GE

The RSI-7 for GE ($19.74) for the Monthly, Weekly and Daily price series data is 66.7 (rising), 84.7 rising but at extremely high level), and 79.5 (rising at unsustainable rate). Friday’s intra-day high of $19.97 might not be exceeded in the current cycle. In any event, I believe GE is within a week of peaking.

For the same reason that I think GE got an extra special lift to share prices this week, following the company’s excellent earnings report, which is that GE CEO Jeff Immelt was appointed the US President’s new Council on Jobs and Competitiveness. So, in addition to being GE’s man at the crucially important Fed of NY (until Dec 31), he is also now also in the White House (ongoing, I suppose, unless Obama loses the next election).
http://www.msnbc.msn.com/id/41186668/ns/business-eye_on_the_economy/

What kind of message does this send?

Crony capitalism. …Same thing as Obama on January 6 taking JP Morgan’s senior exec Mayor Bill Daley into the White House as Chief of Staff.
http://www.whitehouse.gov/the-press-office/2011/01/06/remarks-president-…

So now with JP Morgan’s CEO Jamie Dimon as senior and most influential director on the Fed of NY Board, along with Immelt, you have JP Morgan’s man running the White House staff. I find this amazing. Obama was elected on a platform of hope and change and now he’s sealed the deal: same old same old bought and paid for politician.

After news of the JPM coup must have made the rounds in late-December, the stock soared. And why not, it’s the Old Boys Club.

At the risk of sounding overly rhetorical, I always looked at large cap America as a call on Freedom, worthy of the premium. Is it any wonder in today’s climate that many US investors are pulling out, looking to BRIC markets and small-cap investments for the greater potential? In its place, capital must now come from fascist smelling Sovereign Wealth Funds.

Simply put; the Old Boys Club doesn’t work. The rich get richer and the remainder relatively much poorer. This is not what the majority of people want. They want capital markets that are free of OBC domination and government and central bank intervention.

We are going in the opposite direction.

Btw, Pres Obama is looking to Jeff Immelt for jobs, but as CEO of GE, in the past 36 months he has cut 23,000 jobs (-7.03% of the total). In GE’s 2007 annual report, they state that “Over 70% of total compensation for our five most-senior executives last year was ‘at risk.’” In 2008, Immelt earned total compensation of $9.28 million, in 2009, it was $9.89 million (when the average compensation of all GE employees was $32,048), and in 2010 it will likely exceed $10 million. On the other hand, GE revenues in 2008 were $182.5 billion, $156.8 bil in 2009 and are now reported to be just $150.2 bil for 2010, which is obviously going in the opposite direction to Immelt’s “at risk” compensation.

Is there something Obama sees that we don’t see at GE and with Immelt? No, it’s just the OBC scratching their own backs.

As for the GE financials and operating metrics, there’s good and bad. The balance sheet is rated less than A, and who really knows the condition of GE Capital. Also, GE is close to closing the $6.4 sale of 51% of NBC Universal to Comcast, putting a value of $13 billion on the company that provides 10% of revenue and earnings. However the market cap is over $200 billion, so maybe investors are not quite the realists that Comcast are. Do you think?

I do like the dividend hike, and the yield, and that yield to a lower cost basis will increase if, as and when the share price pulls back, as I expect. I also anticipate more dividend increases with GE down the road, and that will lift the share price.

Also, the $1.22 earnings for Q4 handily beat estimates of $1.12, and revenues were well up as well. That was definitely a positive.

Long-term I wouldn’t fight GE, now with its man in the White House in addition to the NY Fed. Value Line’s Churchwell is also projecting a 3-5 year Annualized Total Return of a low of +15% to a high of +26%.

I concur this is not a stock you want to short. If you own it, it might be a good time to hedge with long puts.

The results of the two models we use to rank the Cara 500 for Timeliness (next six months anticipated performance) are as follows for these three stocks:
UTX: 244/235 out of 500
CAT: 326/409 out of 500
GE: 453/481 out of 500

So UTX is in the middle of the pack, CAT at about the 75 percentile, and GE down near the bottom. Note that all 500 companies are purchase candidates, however. We just want to see how they stack up against the others week after week.

This is just another view, but in the long-run, these models have proven to outperform the market. By itself, any model based on fundamental and quantitative studies is not the Holy Grail. There needs to be a Technical input as well.


Notes for WIR#30 July 24, 2011

All of these charts (Monthly, Weekly, Daily) taken as a whole reflect a Bull phase still underway. But in all cases there are threats of an intermediate cycle pull-back. However, the rising Stochastics in the Daily price series data for each indicates to me that there is still more upside likely. The one serious decline this week was in CAT, but that seems overdone as there were excessive charges put through re the BUCY acquisition, which is likely to generate strong earnings growth in the future.

With the hammering that the CAT took on Friday, the Industrials (XLI -1.05% on the day) were the worst performing sector that day. Again, I think it was overkill.

To appreciate my view of the Industrials, which are dominated by these four mega-caps, one has to only see how concerned are the G-20 governments over unemployment, and how they will push these so-called public-private partnerships (PPP) into job creating infrastructure projects. These companies are flush with cash and have strong balance sheets. They are ready to exploit the growth I see about to happen in capex programs all over the world in roads and bridges, mining, alt energy, and so forth.

Having said that, you should know I hate the concept of PPP.

In Rick Davis’ discussion on Corporatism, Statism and Interventionism this week in the Consumer Metrics Institute newsletter, these words, accurately presented, infuriate me:

U.S. Interventionism

However ingrained the cultural vision of the United States as the bastion of unfettered capitalism may be, it (like every other economy on the planet) has always floated somewhere in the grey zone between utter laissez-faire and total state control — at least since the “Whiskey Excise Act” of 1791. Despite the best efforts of Andrew Jackson and Martin Van Buren in the 1830′s, there has been an inexorable drift towards increased governmental intervention and economic statism since then. That drift accelerated sharply in several phases during the 20th Century — particularly during the “Great Depression,” World War II and the continued growth of the “military/industrial complex” during the Cold War. It arguably surged again after Paul Volcker allegedly demonstrated the power of the Federal Reserve to control inflation, and yet again when Alan Greenspan was widely perceived to have at last learned how to tame the U.S. business cycle. Since then Ben Bernanke and Timothy Geithner have once more expanded the monetary interventions to unprecedented levels, although in fairness a major portion of the recent interventions have actually been in defense of the Federal Reserve’s original 1913 mandate as the liquidity source of last resort.

Throughout all of this movement towards increased governmental intervention in the economy, the members of the S&P 500 peerage (and their predecessors) have prospered. As noted Austrian School economist Murray Rothbard observed in his 1978 “For a New Liberty”:

“Big businessmen tend to be admirers of statism … because a good thing has thereby been coming their way. Ever since the acceleration of statism at the turn of the twentieth century, big businessmen have been using the great powers of State contracts, subsidies and cartelization to carve out privileges for themselves at the expense of the rest of the society … that the vast network of government regulatory agencies is being used to cartelize each industry on behalf of the large firms and at the expense of the public.

“In reality, all of these reforms, on the national and local levels alike, were conceived, written, and lobbied for by these very privileged groups themselves. The liberal reforms of the Progressive-New Deal-Welfare State were designed to create what they did in fact create: a world of centralized statism, of “partnership” between government and industry, a world which subsists in granting subsidies and monopoly privileges to business and other favored groups.”

Corporatism

The “partnership” that Mr. Rothbard describes is an early form of the more extensive “corporatism” that was familiar to the people sitting for Mussolini’s 1933 address. It was the means by which Mussolini and his friends in Germany controlled their economies — just as it is the means by which the nominally communistic leaders of China now control their economy.

And in 1936 Gaetano Salvemini, a first-hand observer of the Italian economy during the 1930′s, wrote in his book “Under the Axe of Facism” an eerily prescient description of the moral hazards so vividly seen in the U.S. financial industry some 70 years later:

“In actual fact it is the State, that is, the taxpayer who has become responsible to private enterprise. In Fascist Italy the State pays for the blunders of private enterprise … Profit is private and individual. Loss is public and social.”

To understand how corporatism works one only need look at the likely workings of the post Dodd-Frank financial industry (or indeed, the Health Care Industry after the eventual full implementation of the Patient Protection and Affordable Care Act of 2010), and extrapolate those nominally capitalistic industries to the entire economy: private ownership of production capacity, but with the actual operations largely regulated and controlled by industry specific ministries, councils and commissions according to the political designs of the State.

Cynics will note that Mr. Rothbard’s “big businessmen” will be fully represented in those ministries, councils and commissions. In Japan there is a name for the cross-employment collusion between big business and the governmental agencies entrusted to regulate them: “amaagari,” the ascent to heaven. Here we simply call it the “Treasury/Federal Reserve/Goldman Sachs” revolving door. While the “Keiretsu” in Japan and the S&P 500 peerage in the U.S. will be able to safeguard their interests in a corporatist world, the businessmen on “Main Street” will be expected to scramble for whatever crumbs may fall from the table.

Written about the impact of PPP under fascism 75 years ago, these words are chilling: “Profit is private and individual. Loss is public and social.

This, I believe, is where Bernanke and his handlers, and Capital Hill have taken America. Divided and conquered, without even a single shot being fired.

For most of you, this is a dilemma. The Big Four industrial corporations in the Dow 30 are or should be Cara 100 companies and warrant your investment interest. But they are also bad for social equity. As Rick Davis says, “…the businessmen on “Main Street” will be expected to scramble for whatever crumbs may fall from the table.”

As for me, I finally made a choice: Got gold? I now spend my days studying capital markets to help me be a more successful investor in metals and minerals because at the end of the day there is a virtually unlimited demand and a limited supply, and these interventionists will have a tough time controlling that.

Getting back to the study of these four industrial conglomerates, the Value Line reports show:
3 to 5 year projected annual total returns (capital appreciation plus dividends) of 31% to 17% (high-low) for GE, 17% to 11% for MMM, 17% to 7% for CAT and 13% to 8% for UTX.
The 6 month price outlook (“Technical”) was recently raised from ‘3’ (average) to ‘2’ (above average) for GE and UTX and from ‘4’ (below average) to ‘3’ for MMM. CAT was lowered from ‘3’ to ‘4’.
The 12+ month price outlook (“Timeliness”) was raised for CAT to a ‘2’ but lowered to a ‘3’ for the others.
Annual projected growth rates for revenues, cash flow, earnings and book value are significantly higher for CAT and MMM than for GE and UTX, possibly because the latter two companies benefit to a greater extent from US military spending and govt is being forced to cut back.
The 2009 shock to revenues and earnings for these companies has been overcome and all four are enjoying a return to the good times. GE’s numbers are down owing to the sale of NBCUniversal, but like the others the continuing ops are thriving.
UTX seems to be the only one intent on buying back material amounts of its shares.
MMM and UTX have the strongest balance sheets (rated A++), with GE the weakest (due to GE Capital). CAT has to work off lots of debt taken on with the BUCY acquisition, but with the very high cash flow growth there, that does not appear to be a problem.
Return on Equity is outstanding for CAT and very good for MMM and UTX. ROE for GE is not bad and is improving.
MMM has the best operating and net profit margins, but all of them are good.

All in all, I like CAT best of the four if I’m looking to buy on weakness and that is supported by the best Timeliness rating given by Value Line. GE, as indicated by VL, probably does hold the best upside over the next several years, but I still have concerns about GE Capital and how the imploding debt bubble will affect the stock.

If you find that the broad market pulls back to where the Monthly, Weekly and Daily RSI-7 numbers have fallen into the 30’s and below, I would be looking out a year or two and not hesitate to buy on that level of weakness with an expectation of receiving about +20% annual total returns for at least the following two years.


Notes for WIR#43 October 24, 2011

I really wish that Value Line would wake up to the nonsense that mainstream media is pushing onto the people where in this case they put GE into the same Industrials category with 3M, United Technology and Caterpillar. That’s all for show folks. There is not a single analyst on Wall Street that can make heads-or-tails out of the GE balance sheet because of the inclusion of GE Capital, which for all we know is insolvent.

Instead, VL in their wisdom put Boeing (BA), which should be here with MMM, UTX and CAT, in the weekly review cycle with insurer Travelers Company, which is probably where GE ought to be unless they put it out by itself.

Unfortunately I am really pressed for time today, so I’m going to have to pass over the latest assessment. I’m sorry. Then again; whatever happens in European financial crisis meetings in the next couple days will have a significant impact on all these stocks; so why bother writing stuff today when it must be so heavily qualified that it becomes meaningless.

Generally, I think all these stocks will lift if the Euro strengthens and US Dollar weakens over the next three months.

The VL analyst for General Electric is projecting the highest annualized Total Return there. IBM was also my pick at Whistler, along with Microsoft, for the Tech selection in the Total Return portfolio. Since then IBM is up +4.8% (2nd worst for TR and also for all my 22 picks). But I figured at the time that IBM was a higher risk selection for the near-term, based on recent price performance, and that if the quarterly report didn’t measure up to expectations there would be some selling.

The need with any portfolio is that you have to watch it closely, and that’s the reason we in this community will be given the tools to do that for all Cara 100 stocks.

One final point; I do like the United Technologies deal to acquire Goodrich for about $18.4 billion. Also, of these four stocks, the VL analysts have given UTX the best rating, a ‘2’, for the six-month price outlook, which they changed this week from a ‘3’.


Notes for WIR#4 January 22, 2012

UTX: $76.69, down -0.71% W/W, but up +3.29% over 13-weeks.

Here is the six-month Weekly data chart for UTX (solid blue line) along with the S&P 500 (solid brown line):

wir12_4.1.gif

Note that the current price (76.69) is well above the 8-week EMA (75.09) and both lines are rising. The RSI-7 Weekly is also rising but is only at 56.64, so it has some room to grow. UTX is underperforming the S&P 500. For the past 12-months, UTX is down -3.60% whilst the S&P 500 is up +2.70%.

The Daily data for RSI-7 and EMA-8 is not quite so positive, so if I were looking to be adding stock here, I would wait a couple days to see if these still bullish Daily data indicators can stay bullish.

http://investertech.com/tkchart/tkchart.asp?stkname=UTX&ind=rsi&wt=3
http://www.investertech.com/tkchart/tkchart.asp?stkname=UTX&ind=rsi&wt=1
http://investertech.com/tkchart/tkchart.asp?stkname=UTX&ind=rsi&wt=0

CAT: $105.64, up +3.63% W/W, and up +25.37% over 13-weeks.

Here is the six-month Weekly data chart for CAT (solid blue line) along with the S&P 500 (solid brown line):

wir12_4.2.gif

Note that the current price (105.64) is well above the 8-week EMA (96.66) and both lines are rising. The RSI-7 Weekly is also rising at 69.81, and is closer to the Distribution Zone. CAT is outperforming the S&P 500. For the past 12-months, CAT is up +12.85% whilst the S&P 500 is up +2.70%.

The Daily data for RSI-7 (89.48) and EMA-8 (102.51) is bullish but overbought, so if I were looking to be adding stock here, I would definitely wait a couple weeks to see if there is a pullback in the price. If I was holding it, with a 3-month time horizon, I’d put in a stop sell at the 8-day EMA and probably expect to be taken out.

http://investertech.com/tkchart/tkchart.asp?stkname=CAT&ind=rsi&wt=3
http://investertech.com/tkchart/tkchart.asp?stkname=CAT&ind=rsi&wt=1
http://investertech.com/tkchart/tkchart.asp?stkname=CAT&ind=rsi&wt=0

GE: $19.15, up +1.16% W/W, and up +15.15% over 13-weeks.

Here is the six-month Weekly data chart for GE (solid blue line) along with the S&P 500 (solid brown line):

wir12_4.3.gif

GE has similar high-risk price characteristics as CAT. Note that the current price (19.15) is well above the 8-week EMA (17.97) and both lines are rising. The RSI-7 Weekly is also rising at 73.51, and is in the Distribution Zone. No SELL Alert would be issued unless and until the RSI-7 Weekly and Daily (75.59) drop below 70. GE is slightly outperforming the S&P 500. For the past 12-months, GE is up +3.91% whilst the S&P 500 is up +2.70%.

The Daily data for RSI-7 (75.59) and EMA-8 (18.92) is bullish but overbought, so if I were looking to be adding stock here, I would definitely wait a couple weeks to see if there is a pullback in the price. If I was holding it, with a 3-month time horizon, I’d put in a stop sell at the 8-day EMA and probably expect to be taken out.

http://investertech.com/tkchart/tkchart.asp?stkname=GE&ind=rsi&wt=3
http://investertech.com/tkchart/tkchart.asp?stkname=GE&ind=rsi&wt=1
http://investertech.com/tkchart/tkchart.asp?stkname=GE&ind=rsi&wt=0

MMM: $85.65, up +1.63% W/W, and up +8.86% over 13-weeks.

Here is the six-month Weekly data chart for MMM (solid blue line) along with the S&P 500 (solid brown line):

wir12_4.4.gif

Note that the current price (85.65) is well above the 8-week EMA (82.53) and both lines are rising. The RSI-7 Weekly is also rising at 65.53, and has room to grow before hitting the Distribution Zone. MMM is underperforming the S&P 500. For the past 12-months, MMM is down -2.71% whilst the S&P 500 is up +2.70%.

The Daily data for RSI-7 (70.64) and EMA-8 (84.70) is bullish but a tad overbought, so if I were looking to be adding stock here, I might wait a couple weeks to see if there is a pullback in the price. If I was holding it, with a 3-month time horizon, I’d put in a stop sell at the 8-week EMA and not expect to be taken out, but maybe have to continue lifting the stop.

http://investertech.com/tkchart/tkchart.asp?stkname=MMM&ind=rsi&wt=3
http://investertech.com/tkchart/tkchart.asp?stkname=MMM&ind=rsi&wt=1
http://investertech.com/tkchart/tkchart.asp?stkname=MMM&ind=rsi&wt=0

Here are the comparative charts for AA, DD, MRK and PFE, along with the DJIA:

Monthly: http://investertech.com/tkchart/tkchart.asp?stkname=AA,DD,MRK,PFE,$DJX0X&wt=3&ind=rsi
Weekly: http://investertech.com/tkchart/tkchart.asp?stkname=AA,DD,MRK,PFE,$DJX0X&wt=1&ind=rsi
Daily: http://investertech.com/tkchart/tkchart.asp?stkname=AA,DD,MRK,PFE,$DJX0X&wt=0&ind=rsi

Here are the Candleglance charts for AA, DD, MRK and PFE, along with the DJIA:

http://stockcharts.com/freecharts/candleglance.html?AA,DD,MRK,PFE,$INDU|B

http://tinyurl.com/63oteaj

From the Value Line studies for these four companies, I note the following:

For UTX, VL likes the $18.4 billion Goodrich acquisition, slated to close mid-year, but thinks the first year will be earnings dilutive. The analyst is pleased with the late 2011 operating performance but still thinks that looking out 3-5 years will be slightly underperforming the peer group.

Based on the +7% revenue and +16% earnings growth Y/Y, high 22.14% ROE and satisfactory 2.50% Dividend Yield, plus the A++ financial strength, we hold UTX in both the All-Weather and Growth portfolios, but are underweighted for the Industrials vs the S&P 500.

For CAT, VL notes the high earnings growth rate – from $1.43 in 2009, to $4.15 in 2010 to probably $7.30 in 2011 and $9.00 in 2012. VL is also looking for earnings to grow to $14.50 in 3-5 years with emerging markets the primary catalyst. Because of the share price increase of +15.2% in the past four weeks, the Dividend Yield is down to 1.84%.

Given that CAT is not a Cara 100 company, we do not hold it in our portfolios. But, it is a close one, pulled down a bit by its less than stellar financial strength, which may hurt some if, as and when interest rates start to lift. The mid-30′s % ROE is outstanding. With a PE of say 14 and $14.50 earnings in a few years, it won’t take long for the share price to double, I believe.

For GE, VL just (on 1/13) increased the 3-6 month price outlook from a ’3′ (market average) to ’2′ (outperforming). Earnings growth is accelerating – from $1.03 in 2009, to $1.15 in 2010, to maybe $1.35 in 2011 and $1.60 in 2012. With the dividend growing from $0.58 to maybe $0.72 for 2012, GE represents a dividend growth story. At $0.72 on $19.15, that’s a fwd yield of 3.76%, which is very good.

VL likes the revenue and profit growth of many of the GE business units, but the aggregate top line doesn’t seem to move too much – from $156.8 bil in 2009 to $150.2 bil in 2010 to probably $149.0 bil in 2011 and $152.0 bil in 2012.

GE is not in the Cara 100, and with a financial strength rated by VL as just B++, it will not likely be there soon, hence we do not invest in GE.

MMM is back in the Cara 100, but we don’t hold it as we are not satisfied with the earnings outlook. 2011 earnings of $5.75 might grow a tad to $5.90 in 2012, but Q4 looks like it will be well down from earlier consensus. VL refers to the stock as an “untimely blue chip”.


The Dow 30 Company links in chronological order of the upcoming reports.


Coca Cola [GICS 30, Dow 30, Cara 100]
(KO: Google Finance file)
(KO: Yahoo Finance file)
(KO: StockChart chart)
(KO: Investertech chart)
(KO: ADVFN Financial Data)
(KO: Value Line Report Oct. 28: next one is due Jan. 27)


Kraft Foods [GICS 30, Dow 30]
(KFT: Google Finance file)
(KFT: Yahoo Finance file)
(KFT: StockChart chart)
(KFT: Investertech chart)
(KFT: ADVFN Financial Data)
(KFT: Value Line Report Oct. 28: next one is due Jan. 27)


Wal-Mart [GICS 30, Dow 30, Cara 100]
(WMT: Google Finance file)
(WMT: Yahoo Finance file)
(WMT: StockChart chart)
(WMT: Investertech chart)
(WMT: ADVFN Financial Data)
(WMT: Value Line Report Nov 4: next one is due Feb 3)


Disney [GICS 25, Dow 30, Cara 100]
(DIS: Google Finance file)
(DIS: Yahoo Finance file)
(DIS: StockChart chart)
(DIS: Investertech chart)
(DIS: ADVFN Financial Data)
(DIS: Value Line Report Nov. 11: next one is due Feb. 10)


American Express [GICS 40, Dow 30]
(AXP: Google Finance file)
(AXP: Yahoo Finance file)
(AXP: StockChart chart)
(AXP: Investertech chart)
(AXP: ADVFN Financial Data)
(AXP: Value Line Report Nov 18: next one is due Feb 17)


Bank of America [GICS 40, Dow 30]
(BAC: Google Finance file)
(BAC: Yahoo Finance file)
(BAC: StockChart chart)
(BAC: Investertech chart)
(BAC: ADVFN Financial Data)
(BAC: Value Line Report Nov 18: next one is due Feb 17)


JP Morgan [GICS 40, Dow 30]
(JPM: Google Finance file)
(JPM: Yahoo Finance file)
(JPM: StockChart chart)
(JPM: Investertech chart)
(JPM: ADVFN Financial Data)
(JPM: Value Line Report Nov 18: next one is due Feb 17)


Microsoft [GICS 45, Dow 30]
(MSFT: Google Finance file)
(MSFT: Yahoo Finance file)
(MSFT: StockChart chart)
(MSFT: Investertech chart)
(MSFT: ADVFN Financial Data)
(MSFT: Value Line Report Nov 18: next one is due Feb 17)


Johnson & Johnson [GICS 35, Dow 30, Cara 100]
(JNJ: Google Finance file)
(JNJ: Yahoo Finance file)
(JNJ: StockChart chart)
(JNJ: Investertech chart)
(JNJ: ADVFN Financial Data)
(JNJ: Value Line Report Nov 25: next one is due Feb 24)


McDonalds [GICS 30, Dow 30, Cara 100]
(MCD: Google Finance file)
(MCD: Yahoo Finance file)
(MCD: StockChart chart)
(MCD: Investertech chart)
(MCD: ADVFN Financial Data)
(MCD: Value Line Report Dec 2: next one is due Mar 2)


Chevron Corp [GICS 10, Dow 30]
(CVX: Google Finance file)
(CVX: Yahoo Finance file)
(CVX: StockChart chart)
(CVX: Investertech chart)
(CVX: ADVFN Financial Data)
(CVX: Value Line Report Dec. 9: next one is due Mar. 9)


ExxonMobil [GICS 10, Dow 30, Cara 100]
(XOM: Google Finance file)
(XOM: Yahoo Finance file)
(XOM: StockChart chart)
(XOM: Investertech chart)
(XOM: ADVFN Financial Data)
(XOM: Value Line Report Dec. 9: next one is due Mar. 9)


Boeing Co [GICS 20, Dow 30. Cara 100]
(BA: Google Finance file)
(BA: Yahoo Finance file)
(BA: StockChart chart)
(BA: Investertech chart)
(BA: ADVFN Financial Data)
(BA: Value Line Report Dec. 16: next one is due Mar. 16)


Travelers Co [GICS 40, Dow 30]
(TRV: Google Finance file)
(TRV: Yahoo Finance file)
(TRV: StockChart chart)
(TRV: Investertech chart)
(TRV: ADVFN Financial Data)
(TRV: Value Line Report Dec. 16: next one is due Mar. 16)


AT&T [GICS 50, Dow 30]
(T: Google Finance file)
(T: Yahoo Finance file)
(T: StockChart chart)
(T: Investertech chart)
(T: ADVFN Financial Data)
(T: Value Line Report Dec. 23: next one is due Mar. 23)


Verizon [GICS 50, Dow 30]
(VZ: Google Finance file)
(VZ: Yahoo Finance file)
(VZ: StockChart chart)
(VZ: Investertech chart)
(VZ: ADVFN Financial Data)
(VZ: Value Line Report Dec. 23: next one is due Mar. 23)


Cisco Systems [GICS 45, Dow 30, Cara 100]
(CSCO: Google Finance file)
(CSCO: Yahoo Finance file)
(CSCO: StockChart chart)
(CSCO: Investertech chart)
(CSCO: ADVFN Financial Data)
(CSCO: Value Line Report Dec. 23: next one is due Mar. 23)


Procter & Gamble Co. [GICS 30, Dow 30, Cara 100]
(PG: Google Finance file)
(PG: Yahoo Finance file)
(PG: StockChart chart)
(PG: Investertech chart)
(PG: ADVFN Financial Data)
(PG: Value Line Report Dec. 30: next one is due Mar. 30)


Home Depot [GICS 25, Dow 30]
(HD: Google Finance file)
(HD: Yahoo Finance file)
(HD: StockChart chart)
(HD: Investertech chart)
(HD: ADVFN Financial Data)
(HD: Value Line Report Dec. 30: next one is due Mar. 30)


Hewlett-Packard [GICS 45, Dow 30]
(HPQ: Google Finance file)
(HPQ: Yahoo Finance file)
(HPQ: StockChart chart)
(HPQ: Investertech chart)
(HPQ: ADVFN Financial Data)
(HPQ: Value Line Report Jan. 6: next one is due Apr. 6)


IBM [GICS 45, Dow 30, Cara 100]
(IBM: Google Finance file)
(IBM: Yahoo Finance file)
(IBM: StockChart chart)
(IBM: Investertech chart)
(IBM: ADVFN Financial Data)
(IBM: Value Line Report Jan. 6: next one is due Apr. 6)


Intel [GICS 45, Dow 30, Cara 100]
(INTC: Google Finance file)
(INTC: Yahoo Finance file)
(INTC: StockChart chart)
(INTC: Investertech chart)
(INTC: ADVFN Financial Data)
(INTC: Value Line Report Jan. 6: next one is due Apr. 6)


Alcoa [GICS 15, Dow 30]
(AA: Google Finance file)
(AA: Yahoo Finance file)
(AA: StockChart chart)
(AA: Investertech chart)
(AA: ADVFN Financial Data)
(AA: Value Line Report Jan. 13: next one is due Apr. 13)


Dupont [GICS 15, Dow 30]
(DD: Google Finance file)
(DD: Yahoo Finance file)
(DD: StockChart chart)
(DD: Investertech chart)
(DD: ADVFN Financial Data)
(DD: Value Line Report Jan. 13: next one is due Apr. 13)


Merck [GICS 35, Dow 30, Cara 100]
(MRK: Google Finance file)
(MRK: Yahoo Finance file)
(MRK: StockChart chart)
(MRK: Investertech chart)
(MRK: ADVFN Financial Data)
(MRK: Value Line Report Jan. 13: next one is due Apr. 13)


Pfizer [GICS 35, Dow 30, Cara 100]
(PFE: Google Finance file)
(PFE: Yahoo Finance file)
(PFE: StockChart chart)
(PFE: Investertech chart)
(PFE: ADVFN Financial Data)
(PFE: Value Line Report Jan. 13: next one is due Apr. 13)


3M Company [GICS 20, Dow 30, Cara US 100 June 25-06]
(MMM: Google Finance file)
(MMM: Yahoo Finance file)
(MMM: StockChart chart)
(MMM: Investertech chart)
(MMM: ADVFN Financial Data)
(MMM: Value Line Report Jan. 20: next one is due Apr. 20)


General Electric [GICS 20, Dow 30, ex-Cara 100]
(GE: Google Finance file)
(GE: Yahoo Finance file)
(GE: StockChart chart)
(GE: Investertech chart)
(GE: ADVFN Financial Data)
(GE: Value Line Report Jan. 20: next one is due Apr. 20)


United Technologies [GICS 20, Dow 30, Cara 100]
(UTX: Google Finance file)
(UTX: Yahoo Finance file)
(UTX: StockChart chart)
(UTX: Investertech chart)
(UTX: ADVFN Financial Data)
(UTX: Value Line Report Jan. 20: next one is due Apr. 20)


Caterpillar [GICS 20, Dow 30]
(CAT: Google Finance file)
(CAT: Yahoo Finance file)
(CAT: StockChart chart)
(CAT: Investertech chart)
(CAT: ADVFN Financial Data)
(CAT: Value Line Report Jan. 20: next one is due Apr. 20)


Recognizing how destructive a force volatility is, all investors must nevertheless study the price data as well as the corporate fundamentals. Previously I have written in this space:

Admittedly, these are really challenging times in capital markets for anybody who hopes to grow wealth. But the message I continue to give is that by studying the facts and using them to your advantage, while dissociating the excessively hyped, agenda laden, storylines from MSM and Financial Entertainment TV, you can and will succeed… You must, however, develop an investment plan and stick to it through thick and thin. In recent years, the market volatility has caused me to trade more frequently than before, using short-term technical indicators, but the essential study of corporate fundamentals, quantitative peer reviews and macroeconomic data is timeless, and the Cara 100 companies, selected for Growth or Value reasons, enables anyone to focus on quality. Over time, the combination of understanding price drivers and the quality of one’s selections is a proven winner.

There is nothing to stop the average person from chatting up the local managers of the Home Depot or Walmart (15% of Procter & Gamble sales) to see how business is going. Ask them if they are hiring or laying off staff, and if they are running into product shortages, etc.

Sometimes you’ll run into info in the strangest places. Once, several years ago, I recall striking up a conversation on the public transit with a friend who was national mortgage manager of a large trust company. When I proffered that the housing market was a disaster, he replied that he had been working overtime and the mortgage applications were falling off his desk. He couldn’t cope! I was shocked. As soon as I got to the office I looked at the charts of both the housing market and the trust company he worked for.

A week ago I vacationed at a 5-star business class hotel where I set up a meeting with the General Manager. Although I don’t know how many people would do this, I asked lots of questions and discovered that his occupancy was 82% for 2011 and on the rise. The next day I met the COO of the corporate owner of the hotel property and asked for their annual report and financial statements. So, even when on vacation, my wife says I am taking a bus man’s holiday. She did appreciate the bonus box of chocolates from the GM and I’m sure he will enjoy the autographed copy of Lessons from the Trader Wizard!


With respect to investing in general for most people, I think if you focus on just six to ten stocks and the reports of the same one or two analysts for each, you will be less likely to miss the nuances. The greater depth of understanding of the companies will help you better analyze the price charts. In other words, you’ll be able to gain control of your investments rather than get stuck on the road to perdition, flipping from one salesperson’s pitch to another.

With the help of the free Dow 30 quarter-yearly reports from Value Line, it’s easy to pick those 6 to 10 stocks, keep the reports and your notes in a hard-copy binder, plus carefully selected items from other analysts you can find on the Web and print out for your files.

It may take years, but it really is worth the time and effort to get to know the companies you trade. After a while, you’ll appreciate the price motion of each stock and, with more confidence, you’ll be able to go with the flow, selling when the market is chasing the price, and then letting the price come to you when they are trying to sell it, and you may want it.

In other words, do the homework to find the companies with very high quality and then put yourself into selling in a seller’s market and being a buyer in a buyer’s market, as the real estate people like to say.

For our Growth accounts we are significantly over-weighted in Technology issues presently, with high expectations for 2012. The Tech sector has been hammered lately, but the guidance of management indicates things are not that bad. The mood of investors is being set by politicians and central bankers who have their own problems. But as long as interest rates and wage rates stay low, and productivity and job growth rising, then I think the equity market will come out of its funk.


Sector ETF Summary for the US equity market

The price performance tables that I show every day 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.

Sorted by 1-Week Price Performance
Symbol
Close 1Day
Change
1Day
%Change
1W
%Change

2W
%Change

4W
%Change

YTD
%Change

3M
%Change

6M
%Change

12M
%Change

SMH

33.67 0.24 0.72% 4.60% 7.74% 12.12% 9.14% 12.87% 2.09% -0.59%

XLE

71.38 0.01 0.01% 2.28% 0.73% 5.51% 0.46% 6.05% -8.25% 2.37%

XLK

26.80 0.03 0.11% 2.17% 3.24% 5.39% 3.84% 6.31% 1.63% 3.59%

XLY

41.16 -0.34 -0.82% 1.81% 2.93% 6.88% 4.60% 7.58% 1.73% 9.09%

XLF

14.14 0.09 0.64% 1.58% 4.90% 11.16% 6.00% 10.47% -5.73% -13.41%

SPY

131.54 0.08 0.06% 1.57% 2.73% 6.14% 3.17% 8.12% -0.84% 2.70%

XLI

36.16 -0.21 -0.58% 1.09% 4.33% 8.13% 4.84% 12.82% -1.39% 1.54%

IYH

74.12 -0.00 0.00% 0.82% 2.49% 5.06% 2.46% 10.74% 1.27% 11.14%

XLP

32.40 0.01 0.03% 0.71% 0.09% 1.22% -0.18% 4.62% 2.73% 10.05%

XLB

36.58 -0.16 -0.44% 0.66% 5.05% 10.15% 6.24% 12.52% -7.77% -2.64%

IYZ

21.59 -0.05 -0.23% 0.61% 3.20% 3.20% 1.31% 2.71% -11.04% -4.89%

XLU

34.61 0.05 0.14% -0.86% -1.70% -1.14% -2.07% 0.90% 3.22% 8.22%

Table 1 shows that for the past six months, the S&P 500 (SPY) has dropped about -0.84%. Four of the ten sectors have been the culprits: Telecom (IYZ -11.0%), Energy (XLE -8.3%), Basic Materials (XLB -7.8%), and Financials (XLF -5.7%).

If your portfolio has out-performed over the past 26 weeks, you should be thankful; however, I continue to believe and report here that XLE, XLB and XLF are on the rise and I think 2012 will be much superior to 2011. After a few weeks, I can say it has started out that way.

You can do a table like Table 1 (below) by entering the following string into the Summary window at Investertech.com and then clicking on the link for Performance. You can also add more ETFs – up to 30 in total. For a list of components to many ETFs, go to the AMEX.com and NYSE.com web sites, and click on ETFs.

SPY XLE XLB XLI XLY XLP IYH XLF XLK SMH IYZ XLU .

You can use this tool to set up personal watchlist charts by industry group and sub-groups.

Another chart you ought to be reviewing every week is the candleglance view from StockCharts.com:

http://stockcharts.com/scripts/php/candleglance.php?XLE,XLB,XLI,XLY,XLP,…
http://tinyurl.com/33m3ss4

Sector rotation is one study I spend hours doing every week.

http://en.wikipedia.org/wiki/Sector_rotation

For a summary chart view, this presentation from StockCharts will save you lots of time.
http://stockcharts.com/scripts/php/candleglance.php?XLE,XLB,XLI,XLY,XLP,…
http://tinyurl.com/33m3ss4

Once involved, you’ll drill down into the nuances of this next chart (link), looking at the cyclical reversals and trying to see the drivers.

http://stockcharts.com/charts/performance/perf.html?[SECT]

http://tinyurl.com/ykk3oyc

The principles of sector rotation have been studied and written about for hundreds of years by many people. My work is based on the individual who mentored me in this subject and taught me more about investing and trading than any other, the late Ian Notley, my former associate. Notley is considered perhaps the finest trend and cycles analyst of the past 50 years. He was recruited to North America in the 1970’s by another friend of mine, Ian McAvity, editor of Deliberations, himself one of the world’s great trend and cycle analysts.

http://www.topline-charts.com/ian_mcavity.htm

The technical analysis work of both Ian’s was inspired by E.S. Coppock.

http://www.topline-charts.com/Encyclopedia/coppock_curve_interpretation.htm


Here’s the SPY Monthly, Weekly and Daily data charts:

SPY Monthly data: SPY Monthly Data

SPY Weekly data: SPY Weekly Data

SPY Daily data: SPY Daily Data


10 (energy: XLE) ETF Chart for Energy:XLE

15 (basic materials: XLB) ETF Chart for Basic Materials:XLB

20 (industrial: XLI) ETF Chart for Industrial:XLI

25 (consumer discretionary: XLY) ETF Chart for Energy:XLY

30 (consumer staples: XLP) ETF Chart for Consumer Staples:XLP

35 (healthcare: IYH) ETF Chart for Health Care:IYH

40 (financial: XLF) ETF Chart for 00Financial:XLF

45 (technology, semiconductor: SMH) ETF Chart for Technology, Semiconductor:SMH

50 (telecom: IYZ) ETF Chart for Telecom:IYZ

55 (utilities: XLU) ETF Chart for Utilities:XLU


Individual US Sector ETFs and Stocks Review

This week nine of the ten sectors and 28 of 30 Dow 30 stocks lifted, for the week. But, on Friday only five of the ten sectors lifted and one was flat. The charts and the summary table of technical indicators and patterns continues to show overall bullishness, both for the US and non-US equity markets.


Sector 10 (energy: XLE, IYE, VDE, OIH, PBW and IXC)

Here’s the XLE Monthly, Weekly and Daily data charts:

XLE Monthly data: XLE Monthly Data

XLE Weekly data: XLE Weekly Data

XLE Daily data: XLE Daily Data

Table 2: Senior oil & gas equities

Sorted by 1-Week Price Performance
Symbol
Close 1Day
Change
1Day
%Change
1W
%Change

2W
%Change

4W
%Change

YTD
%Change

3M
%Change

6M
%Change

12M
%Change

RIG

44.72 -0.32 -0.71% 10.23% 12.56% 12.11% 11.35% -15.67% -30.20% -42.94%

SLB

73.80 0.94 1.29% 5.88% 8.42% 8.26% 5.29% 8.55% -16.53% -13.46%

PBR

29.82 -0.14 -0.47% 5.71% 14.21% 18.05% 14.21% 29.04% -7.51% -18.30%

PTR

145.58 -0.62 -0.42% 4.40% 4.27% 21.56% 10.81% 20.33% -2.06% 6.17%

SU

33.35 -0.21 -0.63% 4.12% 8.14% 22.61% 8.77% 13.01% -17.41% -11.73%

TOT

51.86 -0.30 -0.58% 3.37% 1.27% 7.02% -1.16% 0.14% -5.23% -9.21%

XOM

87.49 0.46 0.53% 3.25% 2.02% 6.70% 1.73% 11.15% 5.19% 12.53%

IMO

46.54 0.86 1.88% 3.19% 2.76% 11.15% 2.24% 15.92% 0.63% 10.36%

CEO

199.59 -1.29 -0.64% 2.82% 1.60% 12.15% 8.10% 19.93% -10.92% -17.36%

APA

96.80 -0.36 -0.37% 2.65% -0.38% 9.43% 0.91% 6.04% -23.13% -22.04%

CNQ

38.51 -0.31 -0.80% 2.18% -0.23% 9.22% -2.23% 20.38% -10.32% -8.68%

CVX

106.89 -0.04 -0.04% 1.83% -2.03% 3.11% -3.15% 3.39% -0.31% 15.30%

The ETF for Oiler stocks is XLE. This week, XLE was up +2.28% W/W to close at 71.38.

Over the past three months, XLE is up +6.05%, which is the #7 sector performer, underperforming the S&P 500, which has been up +8.12%.

Here is the Weekly chart of XLE (in solid blue with the 8-week EMA in dashed blue) with the correlated S&P 500 ($SPX) in solid brown.

wir12_4.8.gif

One week ago I wrote in this space: “…the Oilers were the worst performing sector this week, but the good news for those who are long is that the price closed the week at 69.44 while the 8-week EMA dropped to 69.01 and the Weekly RSI-7 is now a tad higher at 52.72. I read this as a bullish trend… I also read the Hourly data as being bullish… If the central banks decide to follow through with money pumping, then the oil will flow as well, at high prices and a positive quarter year ahead for XLE. By high prices I mean prices in the $95-$100/bbl level.”

Here is the Hourly chart of XLE (in solid blue with the 8-hour EMA in dashed blue).

wir12_4.9.gif

These charts continue to show bullishness.

This week, TransGlobal (RIG +10.2% W/W), Schlumberger (SLB +5.9%), PetroBrasil (PBR+5.7%), PetroChina (PTR +4.4%), Suncor (SU +4.1%) and Total (TOT +3.4%) were all strong. That pretty much covers the world.

FD: We have added to the Oilers, figuring there will be higher oil prices. For Growth accounts we added some PDS plus hold APA, CVX, NE, PBR, SLB and XOM, and, for All-Weather portfolios in this sector, we hold the same stocks except PDS, but with a smaller total percentage weighting.

Note that we are still under-weighted Energy to the S&P sector weighting, given the cash plus the excessive weighting we hold in Technology, but we have been adding Oilers. Note also that our equity positions are, by policy, restricted to Cara 100 companies in the broad based portfolios.

Here is the current candleglance chart of 10 important Sector 10 components:

http://stockcharts.com/scripts/php/candleglance.php?XOM,PTR,CVX,PBR,TOT,…

Here below is the list of Cara 100 companies in this sector along with their stock tickers. For the Energy (Oil & Gas industries) Sector, the market cap (Dec. 9, 2011) of the 12 Cara 100 stocks was $1.114 trillion. I’ll try to update this data once a month or so.

I won’t repeat this for every sector study we do, but there is a difference between a company and a stock. At times, you can be invested in a great company but the stock is a disappointment.

A stock is a price set in the market. It could change minute to minute or second to second depending on various price drivers, some of which have little or nothing to do with the corporation. That price might be materially different that say a consensus valuation of enterprise value of the company, which in turn might be materially different than one company or individual might be prepared to pay to acquire the whole company.

But, first and foremost I believe in investing in the shares of the highest quality companies – just like I believe that we must choose our friends wisely. Track records like price trends tend to persist. For a Cara 100 company, I select only those that trade its shares on the NYSE or NASDAQ, which requires a high level of transparency and where the information is easy to come by. Most major Canadian companies and a great many international companies are dually listed on these exchanges in the US too. I try to build the Cara 100, which is where I invest, with an international flavor, which helps me diversify risk and also observe many different operating environments simultaneously, which also helps me better interpret the macro-economic data we get.

A Cara 100 company has to have a strong balance sheet and a strong Board of directors and management team, the CEO in particular. Compared to the peer group, the operating and net profit margins must be at or near the highest, the Return on Shareholder Equity up there as well, generally close to or above 20%. I need to see acceptable growth rates in revenues, cash flow, earnings, dividends and book value.

These figures are easy to get. FINVIZ.com does a good job of that.

As for the price data charts I find best, I like StockCharts.com.

Cara 100 Sector 10 (Energy) list:
APA Apache Corporation [GICS 10, Cara 100 V50]
CNQ Canadian Natural Resources [GICS 10, Cara 100 V50]
CVX Chevron Corp [GICS 10, Cara 100 V50]
CEO CNOOC [GICS 10, Cara 100 G50]
XOM Exxon Mobil Corp [GICS 10, Cara 100 V50]
NFX Newfield Exploration [GICS 10, Cara 100 G50]
NE Noble Corp [GICS 10, Cara 100 V50]
PBR Petroleo Brasileiro SA [GICS 10, Cara 100 V50]
PDS Precision Drilling [GICS 10, Cara 100 G50]
SLB Schlumberger [GICS 10, Cara 100 V50]
SU Suncor Energy Inc [GICS 10, Cara 100 G50]
TLM Talisman Energy [GICS 10, Cara 100 G50]

http://tinyurl.com/3m4est9
http://tinyurl.com/3c8sxec

Integrated Oil & Gas – Canada

Oil & Gas Exploration & Production -Canada


Sector 15 (basic materials: IYM, XLB, IGE and VAW)

Here’s the XLB Monthly, Weekly and Daily data charts:

XLB Monthly data:

XLB Monthly Data

XLB Weekly data:

XLB Weekly Data
XLB Daily Data

Table 3: Senior Basic Materials:
XLB Daily data:

Sorted by 1-Week Price Performance
Symbol
Close 1Day
Change
1Day
%Change
1W
%Change

2W
%Change

4W
%Change

YTD
%Change

3M
%Change

6M
%Change

12M
%Change

PKX

91.51 1.09 1.21% 7.53% 8.26% 8.97% 7.96% 16.75% -15.28% -12.71%

MT

21.08 -0.11 -0.52% 6.30% 9.11% 16.46% 6.63% 15.82% -33.69% -41.20%

FBR

8.850 0.230 2.67% 5.61% 13.32% 26.61% 7.93% 8.99% -23.04% -44.79%

TCK

41.32 -0.41 -0.98% 5.30% 9.54% 19.46% 9.05% 22.36% -22.02% -31.69%

RIO

57.34 -0.14 -0.24% 4.75% 10.76% 17.50% 9.57% 19.66% -19.80% -15.99%

VALE

24.21 -0.32 -1.30% 3.95% 6.42% 12.55% 4.35% 9.00% -26.70% -32.13%

DOW

33.39 0.41 1.24% 2.55% 10.78% 23.85% 12.08% 26.33% -5.22% -2.62%

AA

10.17 -0.01 -0.10% 2.42% 8.65% 14.53% 10.18% 2.21% -34.22% -36.36%

BHP

78.15 -0.36 -0.46% 2.30% 6.50% 10.76% 4.53% 7.59% -16.35% -11.27%

NUE

42.87 -0.03 -0.07% 1.42% 4.69% 7.98% 5.80% 19.38% 7.79% -3.92%

GGB

9.520 0.010 0.11% 1.38% 13.74% 25.43% 15.11% 26.76% 1.38% -31.41%

TS

39.92 -0.82 -2.01% -0.22% 1.78% 9.85% -0.57% 40.37% -11.86% -13.46%

The ETF for Basic Materials stocks is XLB. These are the producers of commodities and related products.

This week, XLB was up +0.66% W/W. The close was 36.58. I find that hard to believe because the key stocks I follow in this sector were very strong indeed.

Over the past three months, XLB is up +12.52%, which is the #2 sector performer, next to Industrials XLI, outperforming the S&P 500, which has been up +8.12%.

Two stocks that have been leading are Posco Steel (PKX), which gained +7.5% W/W, ArcelorMittal Steel (MT +6.3%) and Fibria Celulose (FBR), whish gained +5.6% and is up +13.3% over two weeks.

Here is the Weekly chart of XLB (in solid blue with the 8-week EMA in dashed blue) with the correlated S&P 500 ($SPX) in solid brown.

wir12_4.10.gif

Note the extremely high correlation with the S&P 500. Also note the recent bullishness with a rising RSI-7 off the August lows plus the current price (36.58) that has lifted well above the 8-week EMA (34.76), as well as the 8-month EMA (35.02), which are bullish signs.

Here is the Hourly chart of XLB (in solid blue with the 8-hour EMA in dashed blue).

wir12_4.11.gif

FD: Other than the CEF, which is by far our biggest All-Weather position and several other goldminers, plus copperminer FCX, we presently hold POT and VALE in the All-Weather portfolios and after adding TS, we now hold BHP, FBR, POT, TCK, TS and VALE in the Growth portfolios in this sector. Overall, we are over-weighted the S&P sector weighting.

Like Energy, the stocks in this Basic Materials sector are the most cyclical in nature meaning that as demand and supply changes, the prices rise and fall. They are also most susceptible to big Dollar rallies. We have been waiting for the Dollar rally to reverse, and it has not as yet, but still the stocks in this sector are rallying. The stocks are also higher beta, which means that they tend to move to a greater degree, both up and down, than does the broad market.

As at Dec. 9, 2011, the total market cap of the 17 Cara 100 stocks in this sector was $567.3 billion. Of course, 56% of the total is attributed to two stocks, BHP and VALE.

Cara 100 Sector 15 (Basic Materials) list:
BHP BHP Billiton Ltd [GICS 15, Cara 100 V50 G50]
CCJ Cameco Corp [GICS 15, Cara 100 G50]
CEF Central Fund [GICS 15, Cara 100 V50]
VALE Companhia Vale Do Rio [GICS 15, Cara 100 G50]
DOW Dow Chemical Co [GICS 15, Cara 100 V50]
FBR Fibria [Votorantim] Celulose [GICS 15, Cara 100 G50]
FCX Freeport McMoRan [GICS 15, Cara 100 G50]
GGB Gerdau SA [GICS 15, Cara 100 G50]
GG Goldcorp Inc [GICS 15, Cara 100 G50]
NGD New Gold Inc [GICS 15, Cara 100 G50]
NUE Nucor Corp [GICS 15, Cara 100 V50]
POT Potash Cp of Saskatchewan [GICS 15, Cara 100 G50]
SLW Silver Wheaton Corp [GICS 15, Cara 100 G50]
SVM Silvercorp Metals [GICS 15, Cara 100 G50]
TCK Teck-Cominco Ltd [GICS 15, Cara 100 G50]
TS Tenaris SA [GICS 15, Cara 100 G50]
UXG US Gold [GICS 15, Cara 100 G50]

http://tinyurl.com/3uyrm6k
http://tinyurl.com/3hwo6k7

Here is the current candleglance chart of 10 important Sector 15 components:

http://stockcharts.com/scripts/php/candleglance.php?BHP,VALE,RIO,MT,DOW,…


Sector 20 (industrial: IYJ, XLI, VIS, and IYT)

Here’s the XLI Monthly, Weekly and Daily data charts:

XLI Monthly data: XLI Monthly Data

XLI Weekly data: XLI Weekly Data

XLI Daily data: XLI Daily Data

Table 4: Senior capital goods makers and transportation:

Sorted by 1-Week Price Performance
Symbol
Close 1Day
Change
1Day
%Change
1W
%Change

2W
%Change

4W
%Change

YTD
%Change

3M
%Change

6M
%Change

12M
%Change

ABB

21.14 -0.26 -1.21% 4.50% 7.64% 15.08% 6.66% 14.33% -16.94% -7.32%

CAT

105.64 -0.11 -0.10% 3.63% 10.59% 15.16% 12.41% 25.37% -4.27% 12.85%

ERJ

27.80 0.21 0.76% 3.42% 6.68% 14.59% 5.62% 1.24% -4.57% -15.91%

FLR

55.87 -0.76 -1.34% 3.10% 7.53% 13.77% 7.48% 5.91% -14.90% -20.07%

MMM

85.65 -0.15 -0.17% 1.63% 2.21% 6.65% 2.59% 8.86% -9.04% -2.71%

GE

19.15 0.00 0.00% 1.16% 3.23% 10.82% 4.30% 15.15% 1.48% 3.91%

UPS

75.42 0.11 0.15% 0.91% 3.15% 3.94% 1.70% 8.99% 2.58% 3.80%

TXT

21.50 -0.14 -0.65% 0.84% 12.51% 16.97% 15.34% 17.23% -12.53% -17.47%

FDX

91.57 -1.47 -1.58% 0.42% 8.90% 9.26% 7.51% 19.56% -0.74% -2.07%

HON

57.38 -1.12 -1.91% 0.33% 3.22% 5.56% 3.24% 18.41% 0.09% 5.13%

BA

75.52 -0.04 -0.05% 0.01% 2.71% 4.25% 1.75% 20.85% 4.50% 6.19%

UTX

76.69 -0.50 -0.65% -0.71% 3.18% 3.08% 2.72% 3.29% -12.00% -3.60%

The ETF for Industrial and Transportation stocks is XLI. These are the users of commodities and related products as well as the freight transportation systems that move commodities and business packages to markets around the world.

This week, XLI was up +1.09% W/W to close at 36.16, which was middle level sector performance.

Over the past three months, XLI is up +12.82%, which is the #1 sector performer, outperforming the S&P 500, which has been up +8.12%.

This week’s leadership has come from ABB (ABB), which was up +4.5% W/W and and Caterpillar (CAT), which was up +3.6% W/W.

Here is the Weekly chart of XLI (in solid blue with the 8-week EMA in dashed blue) with the correlated S&P 500 ($SPX) in solid brown.

Note the extremely high correlation with the S&P 500. The current price (36.16) is above the 8-month EMA (34.44) and the Weekly and Monthly RSI-7 are at 69.50 and 62.28 respectively and all are rising. The Monthly Stochastic is now very definitely positive.

wir12_4.12.gif

Here is the Hourly chart of XLI (in solid blue with the 8-hour EMA in dashed blue).

wir12_4.13.gif

As noted previously, my picks for the next 12-24 months are Cummins (CMI) for Growth and ABB (ABB) for All-Weather.

FD: We presently hold ABB, CMI and UTX in this sector in the Growth and All-Weather portfolios, and also some PAYX in the All-Weather, but we are underweighted vs the S&P 500.

As at Dec. 9, 2011, the total market cap of the 7 Cara 100 stocks in this sector was $257.5 billion. Almost 90% of the total is attributed to four stocks, UTX, MMM, BA and ABB.

Cara 100 Sector 20 (Industrials and Transports) list:
MMM 3M [GICS 20, Cara 100 V50]
ABB ABB Ltd [GICS 20, Cara 100 V50]
BA Boeing Co [GICS 20, Cara 100 V50]
CMI Cummins Inc [GICS 20, Cara 100 V50]
ERJ Embraer-Empresa Brasil [GICS 20, Cara 100 G50]
PAYX Paychex Inc [GICS 20, Cara 100 V50]
UTX United Technologies, [GICS 20, Cara 100 V50]

http://tinyurl.com/3z2wq7l

The Industrials, Base Materials and Energy sectors are typically the three sectors that are most inversely correlated to the US Dollar. The US, Swiss and Brazilian companies in the Industrial sector, like the others, get most of their income from abroad. They are also producers and/or transporters of commodities, which increase in price as the Dollar falls.

Here is the current candleglance chart of 10 important Sector 20 components:

http://stockcharts.com/scripts/php/candleglance.php?GE,UTX,UPS,MMM,CAT,A…

To check on general and detailed info for the Industrials group, the Thomson Reuters service is a good one:

http://www.reuters.com/sectors/industries/significant?industryCode=52442

Here is the link to all sectors and industries as classified by Reuters:

http://www.reuters.com/assets/siteindex#sectorsAndIndustries


Sector 25 (consumer discretionary: XLY, IYC and VCR)

Here’s the XLY Monthly, Weekly and Daily data charts:

XLY Monthly data: XLY Monthly Data

XLY Weekly data: XLY Weekly Data

XLY Daily data: XLY Daily Data

Table 5: Senior consumer discretionary equities

Sorted by 1-Week Price Performance
Symbol
Close 1Day
Change
1Day
%Change
1W
%Change

2W
%Change

4W
%Change

YTD
%Change

3M
%Change

6M
%Change

12M
%Change

TTM

22.06 -0.03 -0.14% 11.64% 15.50% 32.81% 21.81% 21.95% 1.05% -16.25%

BC

20.76 0.34 1.67% 5.22% 10.07% 22.84% 11.43% 17.49% 7.79% 5.92%

TM

71.40 2.31 3.34% 4.78% 4.05% 10.71% 5.34% 6.90% -15.30% -14.35%

WHR

54.19 -1.24 -2.24% 4.19% 7.69% 12.52% 11.71% -1.62% -28.30% -37.42%

BBBY

61.72 -1.47 -2.33% 3.21% 3.31% 0.28% 5.72% 3.37% 4.57% 28.61%

LVS

46.46 -0.39 -0.83% 2.72% 7.82% 9.27% 4.43% 11.25% 2.54% 2.27%

NKE

101.76 0.18 0.18% 2.68% 3.67% 8.68% 5.11% 10.74% 12.42% 22.50%

JCP

35.09 -0.44 -1.24% 2.42% 3.30% 4.93% 0.20% 9.90% 12.11% 16.58%

DIS

39.31 -0.13 -0.33% 1.50% -0.48% 8.68% 2.61% 16.16% -0.20% 0.36%

EBAY

31.93 0.42 1.33% 1.11% 3.97% 4.24% 1.88% -0.68% -3.74% 3.74%

TGT

50.17 -0.73 -1.43% 0.72% 3.42% -3.11% -1.86% -6.59% -1.57% -9.68%

CCL

31.56 -0.35 -1.10% -10.19% -5.14% -3.63% -4.25% -6.90% -10.85% -31.44%

Consumer stocks are organized by the S&P industry classification system as either Discretionary Spending, Staples (must have consumer purchases) and Healthcare. Most income here is from the US consumer – in US Dollars – so there is less of an inverse correlation as we saw in Energy, Basic Materials and Industrials/Transports.

The ETF for Consumer Discretionary stocks is XLY. This week XLY was up +1.81% W/W to close at 41.16.

Tata Motors of India gained +11.6% W/W and is up +15.5% over two weeks and +32.8% over four weeks.

Toyota Motor gained +4.8% this week, but with the catastrophe in Italy, Carnival Cruise (CCL) dropped -10.1%. Although CCL has come back a bit off the low, the company asserts that the ship will be put back in service in a year and the uninsured losses are a fraction of the loss in market cap. The incident was likely caused by human brain cramp, putting the lives of several thousand people at stake for the sake of a pass-by salute to a colleague. Added to the fact the ship’s captain departed the sinking ship ahead of distraught life-fearing passengers, this episode has to go down in the annals of bad judgment any time, any place.

Here is the Weekly chart of XLY (in solid blue with the 8-week EMA in dashed blue) with the correlated S&P 500 ($SPX) in solid brown.

wir12_4.14.gif

Note the extremely high correlation with the S&P 500. As the RSI-7 for the Weekly price series data is 68.01 and rising and the current price (41.16) is above the 8-week EMA (39.62) and the 8-month EMA (38.77) and all are rising, the intermediate- and long-term charts are bullish.

Here is the Hourly chart of XLY (in solid blue with the 8-hour EMA in dashed blue).

wir12_4.15.gif

The Hourly chart shows a rising trend and a price at $41.16 that a tad higher than the 8-day EMA (40.75), which is bullish.

FD: We presently hold only NKE in the All-Weather portfolios, and NKE, COST, and TM in the Growth portfolios in this sector.

As at Dec. 9, 2011, the total market cap of the 15 Cara 100 stocks in this sector was $572.6 billion. Over 50% of the total is attributed to three stocks, TM, MCD and AMZN.

Cara 100 Sector 25 (Consumer Discretionary) list:
AMZN Amazon.com [GICS 25, Cara 100 G50]
BBBY Bed Bath & Beyond [GICS 25, Cara 100 G50]
BC Brunswick Corp [GICS 25, Cara 100 G50]
CCL Carnival Corp [GICS 25, Cara 100 G50]
COST Costco [GICS 25, Cara 100 V50]
DIS Disney Co [GICS 25, Cara 100 V50]
JCP J.C. Penney Company Inc [GICS 25, Cara 100 V50]
KSS Kohl’s Corp [GICS 25, Cara 100 V50]
MCD McDonalds Corp [GICS 25, Cara 100 V50]
NKE Nike Inc [GICS 25, Cara 100 G50]
RCL Royal Caribbean Cruises [GICS 25, Cara 100 G50]
TGT Target Corp [GICS 25, Cara 100 V50]
TTM Tata Motors [GICS 25, Cara 100 G50]
TM Toyota Motor Corp [GICS 25, Cara 100 V50]
WHR Whirlpool Corp [GICS 25, Cara 100 V50]

http://tinyurl.com/3pxbyu7
http://tinyurl.com/4xx8ogp

Here is the current candleglance chart of 10 important Sector 25 components:

http://stockcharts.com/scripts/php/candleglance.php?TM,DIS,NKE,TGT,EBAY,…


Sector 30 (consumer staples: XLP, VDC, RTH and IYK)

Here’s the XLP Monthly, Weekly and Daily data charts:

XLP Monthly data: XLP Monthly Data

XLP Weekly data: XLP Weekly Data

XLP Daily data: XLP Daily Data

Table 6: Senior consumer staples equities

Sorted by 1-Week Price Performance
Symbol
Close 1Day
Change
1Day
%Change
1W
%Change

2W
%Change

4W
%Change

YTD
%Change

3M
%Change

6M
%Change

12M
%Change

ABV

36.95 -0.38 -1.02% 2.64% 6.21% 1.90% 1.65% 10.99% 15.90% 35.45%

PEP

66.28 0.37 0.56% 2.57% 0.09% 1.14% -0.18% 6.70% -3.17% 0.58%

WMT

61.01 0.40 0.66% 2.54% 2.68% 3.07% 1.13% 8.23% 13.23% 8.97%

BUD

62.11 -0.34 -0.54% 1.84% 3.60% 4.95% 1.21% 13.88% 9.18% 11.23%

KMB

73.83 -0.33 -0.44% 1.36% 1.43% 1.69% 0.83% 2.97% 10.18% 14.39%

KFT

38.67 -0.03 -0.08% 1.18% 2.46% 4.77% 3.76% 10.30% 9.67% 23.82%

SBUX

48.15 0.13 0.27% 1.16% 3.86% 6.86% 6.34% 17.47% 20.89% 45.12%

KO

68.09 0.64 0.95% 0.77% -1.85% -0.45% -2.92% 1.45% -1.03% 8.20%

PG

66.23 0.15 0.23% 0.64% -0.44% 0.67% -0.90% 1.75% 3.23% 0.65%

WAG

33.48 -0.02 -0.06% 0.63% 2.32% -0.06% 1.27% -0.33% -19.83% -19.54%

DEO

86.34 0.70 0.82% 0.26% -1.90% 1.74% -2.55% 3.31% 7.17% 12.55%

KR

23.91 -0.15 -0.62% -0.29% -1.56% -0.29% -2.49% 5.24% -7.33% 10.75%

The ETF for Consumer Staples stocks is XLP. As the purchases are considered must-have, the normal swings in economic growth and contraction do not affect these companies as much as say the Consumer Discretionary stocks.

This week, XLP was up +0.71% W/W to close at 32.40.

Here is the Weekly chart of XLP (in solid blue with the 8-week EMA in dashed blue) with the correlated S&P 500 ($SPX) in solid brown.

wir12_4.16.gif

Note the extremely high correlation. Since March, the chart does show that XLP out-performed the S&P 500, but since mid-December the S&P 500 has the upper-hand, which means that traders are taking on more risk now.

The current price (32.40) is above the 8-week EMA (31.97) and both are rising and the Weekly RSI-7 is 65.17, falling off the 70 line in December but starting to rise again. The chart is bullish.

Here is the Hourly chart of XLP (in solid blue with the 8-hour EMA in dashed blue) with the correlated S&P 500 ($SPX) in solid brown.

wir12_4.17.gif

The Hourly chart shows a rising trend and a price at $32.40 that is barely above the 8-hour EMA (32.35), which is bullish. Normally, I only look at the hourly EMA spread if I see issues in the Weekly and Daily.

FD: We presently hold SBUX, WFM and WMT in this sector in the Growth portfolios and all those plus PG in the All-Weather.

The WMT is now up to $61.01 having gained +2.5% this week. At the Cara Whistler Conference Oct 1-3, WMT was my All-Weather pick for a 12-24 month time horizon. The price was $51.96 then and so the subsequent gain is over +17%.

As at Dec. 9, 2011, the total market cap of the 8 Cara 100 stocks in this sector was $773.8 billion. About 80% of the total is attributed to four stocks, WMT, PG, KO and ABV.

Cara 100 Sector 30 (Consumer Staples) list:
ABV AmBev (Companhia de Bebidas) [GICS 30, Cara 100 V50]
KO Coca-Cola [GICS 30, Cara 100 V50]
DEO Diageo plc (ADR) [GICS 30, Cara 100 V50]
PG Procter & Gamble Co [GICS 30, Cara 100 V50]
SBUX Starbucks Corp [GICS 30, Cara 100 G50]
WAG Walgreen Company [GICS 30, Cara 100 V50]
WMT Wal-Mart Stores Inc , [GICS 30, Cara 100 V50]
WFM Whole Foods Market Inc [GICS 30, Cara 100 G50]

http://tinyurl.com/3m9fr8p

Here is the current candleglance chart of 10 important Sector 30 components:

http://stockcharts.com/scripts/php/candleglance.php?WMT,PG,KO,PEP,ABV,KF…


Sector 35 (healthcare: IYH, XLV, VHT, IXJ, and IBB)

Here’s the IYH Monthly, Weekly and Daily data charts:

IYH Monthly data: IYH Monthly Data

IYH Weekly data: IYH Weekly Data

IYH Daily data: IYH Daily Data

Table 7: Senior healthcare equities

Sorted by 1-Week Price Performance
Symbol
Close 1Day
Change
1Day
%Change
1W
%Change

2W
%Change

4W
%Change

YTD
%Change

3M
%Change

6M
%Change

12M
%Change

MYGN

22.22 0.36 1.65% 7.08% 7.66% 7.81% 5.81% 13.95% -5.33% 6.67%

GILD

47.44 0.23 0.49% 5.66% 11.57% 24.32% 13.33% 15.68% 13.52% 24.29%

AMGN

69.57 0.43 0.62% 3.01% 8.01% 13.75% 8.52% 21.48% 26.51% 21.39%

MDT

39.94 0.80 2.04% 2.81% 3.77% 10.42% 3.23% 19.69% 8.74% 4.86%

BAX

52.68 0.06 0.11% 1.72% 6.08% 7.58% 4.23% -2.19% -13.63% 4.21%

BIIB

118.14 1.36 1.16% 1.58% 2.50% 6.69% 4.09% 16.20% 13.19% 71.77%

MRK

39.20 -0.06 -0.15% 1.53% 1.19% 5.75% 2.35% 19.51% 10.30% 15.12%

NVO

119.11 -2.32 -1.91% 1.20% 1.73% 3.97% 1.84% 20.74% -4.44% 5.83%

CELG

73.84 1.63 2.26% 0.87% 7.78% 11.15% 7.54% 11.96% 22.31% 30.39%

GSK

44.86 0.18 0.40% 0.61% -2.75% -0.82% -3.07% 2.02% 4.45% 21.08%

GENZ

76.25 -0.08 -0.10% 0.32% 0.41% 0.34% 6.23% 0.00% 0.33% 8.20%

JNJ

65.27 0.08 0.12% 0.06% -0.20% 1.16% -0.93% 4.38% -1.42% 3.83%

WLP

71.78 -0.15 -0.21% -0.04% 4.77% 9.64% 6.17% 10.01% -2.91% 16.60%

PFE

21.90 0.06 0.27% -0.41% 1.39% 2.05% -0.32% 16.92% 10.11% 20.07%

AET

43.74 -0.39 -0.88% -0.43% 0.25% 5.02% 3.16% 17.14% 0.51% 32.47%

UNH

52.27 -0.05 -0.10% -1.13% -0.61% 4.92% 1.51% 11.50% 1.30% 29.67%

NVS

55.11 -3.22 -5.52% -2.86% -4.09% -2.03% -5.28% -4.95% -11.73% -2.03%

BMY

32.65 -0.06 -0.18% -4.31% -4.42% -6.79% -6.74% 0.65% 12.78% 26.40%

The ETF for Healthcare stocks is IYH. At least, that is the ETF I use.

This week IYH gained +0.82% W/W to close at 74.12.

Leaders were bio-tech companies Myriad Genetics (MYGN +7.1% W/W) and Gilead Sciences (GILD), which gained +5.7% W/W and is up +11.6% over two weeks.

Here is the Weekly chart of IYH (in solid blue with the 8-week EMA in dashed blue) with the correlated S&P 500 ($SPX) in solid brown.

wir12_4.18.gif

Note the extremely high correlation, and, as pointed out three weeks ago in this space, “the relative bullishness of this chart”. The Weekly RSI-7 is now up to 60.48 and the price (74.12) is above the 8-week EMA (74.02), with all lines rising, which is bullish.

Here is the Hourly chart of IYH (in solid blue with the 8-hour EMA in dashed blue) with the correlated S&P 500 ($SPX) in solid brown.

wir12_4.19.gif

A week ago I opined in this space: “Caution continues to be urged here as more capital might be ready to swing into the commodity price sensitive sectors, particularly Energy.” This week the XLE was up +2.28%, which was the #1 performing sector, while IYH gained +0.82%, which was 6th best out of 10.

FD: We presently hold AET, PFE, JNJ, MRK and NVS in this sector in the All-Weather portfolio, all these except MRK is not in the Growth portfolio.

As at Dec. 9, 2011, the total market cap of the nine Cara 100 stocks in this sector was $867.8 billion. Of these, the smallest two are AET, with a market cap of $14.4 Billion and Gilead Sciences at $29.3 B. Five of the nine are over $100 B in market cap.

In the equity market; like many other sector charts, the Weekly data chart of IYH shows that Healthcare has had a successful re-test in mid-Sept and mid-Nov of the early August low and an end to the mid-cycle correction that was similar to the one in May 2010.

Cara 100 Sector 35 (Healthcare) list:
ABT Abbott Laboratories [GICS 35, Cara 100 V50]
AET Aetna Inc [GICS 35, Cara 100 G50]
BMY Bristol Myers Squibb Co [GICS 35, Cara 100 V50]
GILD Gilead Sciences [GICS 35, Cara 100 G50]
GSK GlaxoSmithKline plc (ADR) [GICS 35, Cara 100 V50]
JNJ Johnson & Johnson [GICS 35, Cara 100 V50]
MRK Merck [GICS 35, Cara 100 V50]
NVS Novartis [GICS 35, Cara 100 V50]
PFE Pfizer [GICS 35, Cara 100 V50]

http://tinyurl.com/4yta7j7

Here is the current candleglance chart of 10 important Sector 35 components:

http://stockcharts.com/scripts/php/candleglance.php?JNJ,PFE,NVS,MRK,GSK,…,


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 Monthly Data

XLF Weekly data: XLF Weekly Data

XLF Daily data: XLF Daily Data

Table 8: Senior financial company equities

Sorted by 1-Week Price Performance
Symbol
Close 1Day
Change
1Day
%Change
1W
%Change

2W
%Change

4W
%Change

YTD
%Change

3M
%Change

6M
%Change

12M
%Change

DB

42.50 0.49 1.17% 14.86% 17.31% 12.26% 6.70% 16.60% -20.53% -27.82%

IBN

34.11 1.26 3.84% 13.85% 19.85% 35.14% 21.17% -2.24% -27.64% -24.74%

UBS

13.70 0.21 1.56% 12.39% 15.32% 16.00% 10.66% 14.26% -19.32% -20.99%

CS

26.04 0.41 1.60% 12.10% 12.82% 11.86% 5.98% -0.15% -27.12% -41.10%

HBC

42.40 1.03 2.49% 9.67% 9.28% 11.55% 8.08% 4.43% -13.19% -23.67%

GS

108.74 1.06 0.98% 7.44% 14.97% 19.52% 14.03% 7.81% -18.64% -34.37%

MS

18.39 0.11 0.60% 7.11% 12.96% 24.26% 14.37% 10.72% -15.87% -36.63%

HDB

29.97 -0.42 -1.38% 6.73% 10.71% 16.93% 10.51% -3.01% -16.70% -0.43%

BAC

7.070 0.110 1.58% 4.12% 12.04% 36.75% 21.90% 9.27% -28.66% -51.38%

BNS

53.25 -0.09 -0.17% 3.80% 5.01% 10.85% 4.29% 4.53% -10.74% -5.32%

WFC

30.54 0.39 1.29% 3.14% 5.24% 15.25% 7.42% 18.56% 6.19% -4.23%

BBD

18.45 0.07 0.38% 3.07% 8.08% 11.75% 8.40% 12.09% -1.81% -4.95%

SCHW

12.81 0.35 2.81% 2.73% 7.47% 13.06% 9.39% 6.75% -16.44% -30.04%

RY

53.12 0.63 1.20% 2.51% 3.49% 11.36% 2.02% 13.36% -6.40% -2.03%

TD

78.14 0.69 0.89% 2.29% 3.94% 9.15% 3.33% 7.41% -6.71% 2.71%

JPM

37.36 0.43 1.16% 1.38% 4.71% 15.99% 6.80% 12.77% -8.88% -16.51%

The ETF for Financial stocks is XLF. If you want to check on strictly banking stocks, the $BKX Banking Index is what you want.

This week XLF gained +1.58% W/W to close at 14.14, which was the 4th best sector performer.

As noted in this space three weeks ago, “I have been watching the European negotiations between bankers, central bankers and politicians. Nobody wants to take the hit on the dubious pricing of sovereign debt that might not be paid in full at maturity. There has been much talk of agreement around the table. Coming up though is the massive haircut the Banks will be forced to take on the Greek bonds coming due for roll-over in March, and by mid-January the Banks will likely return to the battlefield over this issue.”

The Greek negotiations seemed to be going rather well until a dispute over the roll-over interest rate sent the parties home on Saturday.
http://www.marketwatch.com/story/greek-debt-deal-snags-on-interest-rate-…

In any case, there was another spurt in the prices of the Euro bank stocks again this week and for the past three weeks.

The leaders in this sector this week were Deutsche Bank (DB +14.9% W/W – a week ago I called it high risk!), UBS (UBS +12.4%), Credit Suisse (CS +12.1%), HSBC (HBC +9.7%) – all Europeans, plus Goldman Sachs (GS +7.4% W/W, now up to $108.74).

The Indian bank ICICI (IBN) was up +13.9% W/W and is now up +35.1% over four weeks.

Here is the Weekly chart of XLF (in solid blue with the 8-week EMA in dashed blue) with the correlated S&P 500 ($SPX) in solid brown.

wir12_4.20.gif

Note the extremely high correlation, and also the sector under-performance for the past couple years, particularly for 2011. For the past 12 months, XLF is down -13.4%, while the next worst performing sector over that time is Telecom (IYZ), which was down just -4.9% and Basic Materials (XLB), which was down much less at -2.6%. Over the past 12 months the S&P 500 ($SPX) gained +2.70%.

Here is the Hourly chart of XLF (in solid blue with the 8-hour EMA in dashed blue).

wir12_4.21.gif

The Hourly chart shows a bullish phase since Dec. 20.

We hold only SCHW in this sector, and have a fairly small position. We prefer to wait to see how the international Financial Stability Board is able to put Humungous Bank & Broker (HB&B) in their place, ending the extreme risk appetite of the crowd that is supposed to be risk averse.

Whatever happened to the investigation of Jon Corzine btw? Does he get to steal a billion and pay a luxury tax of maybe $10 million?

As at Dec. 9, 2011, the total market cap of the 7 Cara 100 stocks in this sector was $307.2 billion. Of these, the smallest three are SCHW, and the two Indian banks IBN and HDB.

Cara 100 Sector 40 (Financials) list:
BBD Banco Bradesco SA (ADR) [GICS 40, Cara 100 V50]
BNS Bank of Nova Scotia (USA) [GICS 40, Cara 100 V50]
SCHW Charles Schwab Corp [GICS 40, Cara 100 G50]
HDB HDFC Bank [GICS 40, Cara 100 G50]
IBN ICICI Bank [GICS 40, Cara 100 G50]
RY Royal Bank of Canada (USA) [GICS 40, Cara 100 V50]
TD Toronto Dominion Bank (USA) [GICS 40, Cara 100 V50]

http://tinyurl.com/4y24xyy

Here is the current candleglance chart of 10 important Sector 40 components:

http://stockcharts.com/scripts/php/candleglance.php?HBC,JPM,WFC,C,BAC,GS…

I wrote all the following previously, but it still applies:

I personally like the Canadian banks because of the more prudent way they are managed, but they a part of a global credit ring, and hence are exposed to massive risk. The Indian banks are much more reliant on domestic operations, but that too has been a problem in the past couple years with stagflation being the issue. The very high inflation has caused the central bank of India to tighten harshly in order to try to cap the rising cost of food, which if it keeps being a problem will lead to considerably more social unrest than is apparent today. Also, with the tightening, the banks have had to pull back on business lending, which has negatively impacted the country’s normally very high rate of economic growth. But now the central bank has just agreed to permit foreign investors to trade stocks right on the BSE and National exchanges, which ought to give a lift (and liquidity) to the Indian banks. So, overall I think that India is at a cross-road here, but may have seen the cycle bottom.

As far as the large US banks, the recent failure of MF Global has already pointed to many weaknesses in the US financial system, eg, the laws, rules and regulations as well as ongoing imprudent management practices, greed at the highest levels, and so forth. I think Congressional committees will discover that the MF CEO Don Corleone knew that his colleagues in the leading gangs had his client money stolen legally and that he hadn’t “intended” for that to happen. But I think he’ll get nailed on perjury, somehow.

This smear against the industry is a shame because, in my view, most of the people in financial services are honest and capable and the tools they have are second to none. US banking ought to be leading America back to its place as the strongest economy, not one that is deeply in debt and failing its people.

In a country that prides itself on competition, it’s strange that its banks have been allowed to become too large and unwieldy to manage effectively, nevertheless efficiently. There is, in my mind, no reason (other than the grab for control/power witnessed in the past 30 years) that the top 4 US banks could not be replaced by a top 40 or a top 20, each much more specialized and streamlined. Self-regulated oligopolies have seized control, and what has resulted is the decline of the once proud American way of life.

I assure you that free markets and competition is the best prescription for social equity.

Daily charts of electronic brokers and exchanges

Weekly charts of electronic brokers and exchanges


Sector 45 (technology: IGM, IGV, IGW, XLK, VGT, IYW, IGN, IXN, MTK and SMH)

The ETF for Technology stocks is XLK. Because the Semi-conductor manufacturers are a technology that is needed in the manufacture of most equipment and in most manufacturing processes today, I think it is the most important technology. So; I also focus on the Semi-conductor industry group, and the ETF for that is SMH.

This week XLK closed at 26.80, up +2.17% W/W and SMH was up +4.60% W/W to close at 33.67.

A week ago I reported in this space: “The solar companies made a surge in the past two weeks, so it’s apparent that the risk-on trade has returned. Suntech Power (STP) rallied a phenomenal +29.7% W/W and is now up +39.6% over two weeks. First Solar (FSLR) gained +13.2% W/W and is up +21.5% over two weeks. We are still not holding FLSR.”

I can now add “thankfully we didn’t go back into FSLR, which was down -7.6% this week.

Juniper (JNPR) was up +8.0% W/W and SAP (SAP +7.1%).

I think the big story here is the sell-off in Google. GOOG was down -6.9% W/W and -11.1% over two weeks.

Traders might have had some advance knowledge that Google’s ad sales and net earnings were going to be big misses when reported before the market on Friday:
http://www.bloomberg.com/news/2012-01-20/google-ad-price-drop-leads-to-p…

But, by and large, I still very much like GOOG. Net earnings rose to $2.71 billion ($8.22/share), compared with $2.54 billion ($7.81/share) a year earlier.

The Semi-conductors were soaring again this week, which is a bullish sign for Tech and for the broad market. Atmel Corp (ATML) for example was up +13.4% W/W and is now up +17.3% over two weeks and +25.0% over four weeks. ST Micro did as well.

Here is the Weekly chart of XLK (in solid blue with the 8-week EMA in dashed blue) with the correlated S&P 500 ($SPX) in solid brown.

wir12_4.22.gif

Note the extremely high correlation, and the bullish perspective with the current price (26.80) being higher than the 8-month EMA (25.88).

A week ago I noted and opined in this space: “Note also the common features of the four cycle peaks in 2011. The current cycle has the power to break-out to new highs… Two weeks ago in this space, I wrote: “The Hourly chart indicates that traders have been bearish for about six weeks but will soon make up their mind on trend direction.” Subsequently the move has been bullish, but not yet a break-out to new highs. That may soon happen, and my accounts are positioned for it.”

It did and our overweighting of Tech paid off.

Here is the Hourly chart of XLK (in solid blue with the 8-hour EMA in dashed blue).

wir12_4.23.gif

As you know, when (i) Tech stocks and (ii) the broad market indexes begin to rally, I look for the semi-conductors to be leading. For the same reason, at the beginning of a construction boom, I expect to see (i) the activity increase in the offices of architects and engineers, and (ii) mortgage applications begin to soar.

FD: We presently hold AAPL, ATVI, CSCO, CTSH, EA, GOOG, IBM, INFY, INTC, MSFT and SNDK in this sector in various portfolios. We are considerably over-weighted in Tech to the S&P.

As at Dec. 9, 2011, the total market cap of the 17 Cara 100 stocks in this sector was $1.625 trillion. Of these, there are seven over $100 billion in market cap each. There are also seven under $20 billion.

Cara 100 Sector 45 (Technology) list:
AAPL Apple Inc [GICS 45, Cara 100 G50]
ADBE Adobe Systems Inc [GICS 45, Cara 100 G50]
ATML Atmel Corp [GICS 45, Cara 100 G50]
ATVI Activision Inc [GICS 45, Cara 100 G50]
BIDU Baidu [GICS 45, Cara 100 G50]
BRCM Broadcom Corp [GICS 45, Cara 100 G50]
CSCO Cisco Systems Inc [GICS 45, Cara 100 V50][added to DJIA June2009]
CTSH Cognizant Technology [GICS 45, Cara 100 G50]
ERTS Electronic Arts Inc [GICS 45, Cara 100 G50]
FSLR First Solar, Inc [GICS 45, Cara 100 G50]
GOOG Google [GICS 45, Cara 100 G50]
IBM IBM [GICS 45, Cara 100 G50]
INFY Infosys Technologies Ltd [GICS 45, Cara 100 G50]
INTC Intel Corp [GICS 45, Cara 100 V50]
JNPR Juniper Networks [GICS 45, Cara 100 G50]
MSFT Microsoft [GICS 45, Cara 100 V50]
ORCL Oracle [GICS 45, Cara 100 G50]
QCOM Qualcomm Inc [GICS 45, Cara 100 G50]
SNDK SanDisk Corp [GICS 45, Cara 100 G50]

http://tinyurl.com/3d8t3xl
http://tinyurl.com/3stja82

Here is the current candleglance chart of 10 important Sector 45 components:

http://stockcharts.com/scripts/php/candleglance.php?AAPL,MSFT,GOOG,IBM,O…,

Here is the current candleglance chart of 10 important Semi-conductor stock components:

http://stockcharts.com/scripts/php/candleglance.php?INTC,TSM,TXN,BRCM,AM…

Here’s the SMH Monthly, Weekly and Daily data charts:

SMH Monthly data: SMH Monthly Data

SMH Weekly data: SMH Weekly Data

SMH Daily data: SMH Daily Data

Here’s the XLK Monthly, Weekly and Daily data charts:

XLK Monthly data: XLK Monthly Data

XLK Weekly data: XLK Weekly Data

XLK Daily data: XLK Daily Data

Table 9: Senior technology equities

Sorted by 1-Week Price Performance
Symbol
Close 1Day
Change
1Day
%Change
1W
%Change

2W
%Change

4W
%Change

YTD
%Change

3M
%Change

6M
%Change

12M
%Change

JNPR

22.99 -0.89 -3.73% 7.98% 11.39% 16.46% 9.27% 11.82% -26.38% -34.30%

SAP

57.01 -0.04 -0.07% 7.06% 5.42% 2.32% 4.74% -0.66% -2.13% 4.78%

ORCL

28.71 0.15 0.53% 5.67% 7.97% -1.58% 11.02% -8.94% -10.50% -11.14%

DELL

16.67 0.10 0.60% 4.58% 9.89% 10.03% 11.28% 10.76% -4.85% 22.57%

IBM

188.52 8.00 4.43% 4.41% 2.09% 0.68% 1.19% 6.36% 2.65% 21.00%

HPQ

28.13 0.98 3.61% 4.38% 6.15% 8.57% 5.67% 13.70% -20.24% -39.87%

ADBE

30.50 0.26 0.86% 4.34% 7.09% 7.24% 6.76% 16.95% 4.60% -8.93%

CSCO

19.92 0.13 0.66% 4.02% 5.29% 8.20% 6.92% 15.88% 25.92% -4.09%

EMC

23.25 0.09 0.39% 3.43% 6.16% 3.61% 7.04% -2.35% -14.55% -2.47%

RIMM

17.00 -0.57 -3.24% 3.41% 12.96% 35.78% 9.61% -23.80% -36.19% -72.76%

STP

3.2400 0.0400 1.25% 2.53% 35.00% 38.46% 37.87% 51.40% -56.91% -64.40%

QCOM

57.73 -0.27 -0.47% 2.49% 2.98% 6.71% 4.45% 11.00% 0.75% 12.47%

CTSH

70.17 0.35 0.50% 1.53% 4.28% 3.76% 6.77% 1.17% -3.93% -4.67%

INFY

52.29 0.59 1.14% 0.85% -3.18% 1.59% -2.17% -3.88% -15.14% -26.01%

AAPL

420.30 -7.45 -1.74% -0.26% 0.54% 6.15% 2.21% 6.32% 8.63% 26.34%

GOOG

585.99 -53.58 -8.38% -6.93% -11.08% -7.04% -11.94% 0.40% -1.57% -6.51%

FSLR

38.45 -0.25 -0.65% -7.55% 8.37% 16.94% 7.43% -26.50% -68.83% -73.91%
Sorted by 1-Week Price Performance
Symbol
Close 1Day
Change
1Day
%Change
1W
%Change

2W
%Change

4W
%Change

YTD
%Change

3M
%Change

6M
%Change

12M
%Change

ATML

10.15 0.31 3.15% 13.41% 17.34% 25.00% 19.55% -0.59% -19.95% -24.31%

STM

7.300 -0.030 -0.41% 12.83% 19.48% 25.65% 14.06% 2.53% -18.71% -36.85%

AMD

6.420 0.200 3.22% 10.31% 17.58% 23.70% 17.15% 41.41% -2.87% -19.95%

UMC

2.4800 -0.0100 -0.40% 7.36% 13.76% 27.18% 13.24% 22.77% 1.22% -24.62%

TXN

33.64 -0.18 -0.53% 7.27% 12.96% 17.25% 12.96% 12.32% 7.44% -0.80%

BRCM

35.00 0.01 0.03% 7.16% 18.85% 20.48% 18.85% -3.77% -0.17% -22.22%

TER

16.14 0.02 0.12% 7.10% 10.40% 19.03% 17.38% 20.90% 16.70% 16.45%

LLTC

33.06 -0.34 -1.02% 7.02% 9.29% 10.98% 8.97% 10.98% 9.33% -5.22%

XLNX

35.77 0.13 0.36% 6.90% 10.47% 11.89% 10.27% 20.84% 7.81% 14.43%

MU

7.760 -0.120 -1.52% 6.74% 8.38% 34.02% 14.79% 38.82% 2.11% -19.17%

ADI

39.78 0.11 0.28% 6.62% 10.07% 12.76% 10.41% 16.55% 9.98% 2.18%

AMAT

12.47 0.16 1.30% 5.68% 15.14% 19.79% 16.54% 10.06% -1.73% -17.20%

NVLS

46.63 -0.12 -0.26% 5.67% 12.25% 16.63% 14.12% 49.84% 45.22% 31.80%

KLAC

51.50 0.47 0.92% 5.53% 8.38% 7.72% 8.51% 21.06% 21.46% 22.24%

ALTR

40.35 -0.53 -1.30% 4.45% 7.71% 11.59% 7.31% 22.16% -0.88% 7.14%

SNDK

52.49 -0.19 -0.36% 3.98% 6.88% 7.47% 10.32% 15.36% 26.57% 5.09%

LSI

7.060 0.070 1.00% 2.62% 5.37% 21.93% 14.42% 28.36% 6.33% 20.48%

INTC

26.38 0.75 2.93% 2.45% 3.86% 10.65% 7.50% 11.73% 14.75% 25.92%

TSM

13.97 -0.29 -2.03% 1.01% 5.35% 10.35% 5.35% 18.29% 11.85% 5.35%

NSM

24.99 0.01 0.04% 0.28% 0.56% 0.77% 79.91% 1.17% 77.11% 102.51%

Sector 50 (telecom: IYZ, VOX and IXP)

The ETF for Telecom stocks is IYZ. At least, that is the ETF I use.

IYZ has been the worst performing sector over six months (26 weeks), being down -11.0%, and 2nd worst over the past year (-4.9%).

Three weeks ago I opined in this space: “But, although the long and intermediate-term charts don’t really show it, the worst might now be over.”

This week, IYZ gained +0.69% W/W. The close on Friday was 21.59.

This week, Nokia (NOK +5.7% W/W) was the sector leader. Verizon (VZ +0.1%) and AT&T (T +1.3%) were higher.

Here is the Weekly chart of IYZ (in solid blue with the 8-week EMA in dashed blue) with the correlated S&P 500 ($SPX) in solid brown.

wir12_4.24.gif

The current price (21.59) is above the 8-week EMA (21.04) and the Weekly RSI-7 is 62.6, and all lines are rising, which is bullish.

Here is the Hourly chart of IYZ (in solid blue with the 8-hour EMA in dashed blue).

wir12_4.25.gif

FD: We hold only Mobil TeleSystems MBT in the Telecom sector – for both Growth and All-Weather accounts.

As at Dec. 9, 2011, the total market cap of the 3 Cara 100 stocks in this sector was $147.8 billion. Of these, Telefonica (TEF) has 83.4 billion in market cap, which is smaller than Verizon and about half the size of AT&T’s market cap.

Cara 100 Sector 50 (Telecom) and Sector 55 (Utilities) list:
CHA China Telecom Corp [GICS 50, Cara 100 V50]
MBT Mobile TeleSystems (ADR) [GICS 50, Cara 100 G50]
TEF Telefonica SA [GICS 50, Cara 100 G50]

EXC Exelon Corp [GICS 55, Cara 100 V50]
TRP TransCanada Corp [GICS 55, Cara 100 V50]

http://tinyurl.com/3dd857s

Here is the current candleglance chart of 10 important Sector 50 components:

http://stockcharts.com/scripts/php/candleglance.php?T,VZ,CHL,CHA,VOD,TEF…,

Table 14: Telecom 
 

Sorted by 1-Week Price Performance
Symbol
Close 1Day
Change
1Day
%Change
1W
%Change

2W
%Change

4W
%Change

YTD
%Change

3M
%Change

6M
%Change

12M
%Change

NOK

5.610 -0.150 -2.60% 5.65% 3.70% 16.88% 9.14% -13.69% -2.94% -46.47%

AMX

23.34 -0.36 -1.52% 2.50% 3.69% 5.28% 0.65% 1.13% -8.25% -20.18%

T

30.51 0.09 0.30% 1.29% 0.36% 4.77% 0.43% 5.24% 0.46% 8.08%

TEF

17.36 -0.13 -0.74% 0.58% 2.97% 1.28% -2.09% -14.52% -23.25% -76.30%

SI

97.48 -3.54 -3.50% 0.29% -0.10% 2.60% -2.34% -2.29% -25.89% -20.26%

VZ

38.97 -0.03 -0.08% 0.13% 0.08% -0.61% -1.91% 5.04% 4.11% 12.60%

VOD

27.76 0.57 2.10% -0.18% 0.00% 1.35% -1.73% 0.43% 6.61% -0.93%

CHL

49.28 -0.08 -0.16% -0.77% 0.14% 4.05% 0.37% 2.33% 2.33% -1.30%

FTE

14.94 -0.06 -0.40% -1.90% -1.65% -3.43% -7.09% -14.82% -25.37% -29.73%

DCM

17.79 0.04 0.23% -2.57% -3.99% 0.57% -4.51% -0.67% -3.73% -0.11%

 

Here’s the IYZ Monthly, Weekly and Daily data charts:

IYZ Monthly data: IYZ Monthly Data

IYZ Weekly data: IYZ Weekly Data

IYZ Daily data: IYZ Daily Data


Sector 55 (utilities: IDU, XLU, and VPU)

The Utilities sector ETF is XLU.

This week, XLU dropped -0.86% W/W, which was the only losing sector. XLU closed the week at 34.61.

Here is the Weekly chart of XLU (in solid blue with the 8-week EMA in dashed blue) with the correlated S&P 500 ($SPX) in solid brown.

wir12_4.26.gif

This chart shows how bullish the sector has been throughout the long-term Bull phase that began in March 2009, and has really out-performed the S&P 500 since April. I attribute the latter to an interest in high quality, high dividend yield stocks in 2011 as traders were pleased with the risk-reward profile of the US Treasury Bond market.

A week ago in this space, I added: “Interestingly, the XLU current price (34.89) is now a tad below the 8-week EMA (34.91), which is not bullish. It’s not bearish either, but is clearly much less bullish than most of the higher-risk sectors. That shows me that traders might be switching to Growth stocks for 2012.”

With XLU and Bonds dropping this week while equities moved higher, I think it became apparent to most traders that risk on was happening.

Here is the Hourly chart of XLU (in solid blue with the 8-hour EMA in dashed blue).

wir12_4.27.gif

Three weeks ago in this space I opined: “The Hourly chart indicates that the bullishness is over-done, and risks are now very high.” In the next two weeks, XLU dropped -3.73% and this week it was down a further -0.86%.

However, the market Bulls want this Defensive indicator (XLU, XLP) to stay bullish but just be under-performing the commodity price sensitive XLE, XLB and XLI sectors. But the Bears want the Defensive sectors to go negative as that would likely lead to a market pull-back or even a break-down. I continue to say, I don’t see it happening this month.

FD: For the All-Weather portfolio, we hold EXC and TRP in this sector. We dropped TRP from the Growth portfolio a couple weeks ago, although we still believe that the company’s Keystone XL pipeline will ultimately get to carry crude oil from the Alberta oil sands to refineries in Houston TX even after the White House put the matter off on a “technicality”. What they mean is politics. This project will get the green light right after the Presidential election in November.

Once again, I want to say that I am increasingly concerned with the energy industry practice of high volume hydraulic fracturing (“fracking”), for health reasons but also because of the linkage to earthquakes the procedure appears to be causing. The jury is certainly out on this matter!

Table 12: US Utilities

Sorted by 1-Week Price Performance.
Symbol
Close 1Day
Change
1Day
%Change
1W
%Change

2W
%Change

4W
%Change

YTD
%Change

3M
%Change

6M
%Change

12M
%Change

SO

45.30 0.32 0.71% 0.42% 0.80% -0.26% 0.60% 4.69% 12.07% 17.97%

DUK

21.30 0.06 0.28% 0.09% -0.98% -0.47% -1.48% 5.24% 12.88% 18.01%

ED

58.76 0.02 0.03% -0.37% -1.64% -3.36% -3.12% 0.46% 10.06% 16.29%

NGG

48.41 0.56 1.17% -0.43% 1.38% 1.59% -1.45% -4.23% -0.72% 11.13%

D

50.57 0.27 0.54% -0.71% -2.68% -2.97% -3.68% -0.92% 2.51% 16.60%

AEP

41.01 -0.09 -0.22% -0.82% 0.15% 2.68% 0.59% 5.26% 8.87% 12.45%

TRP

41.28 0.05 0.12% -0.94% -4.16% -2.76% -5.23% -3.78% -1.64% 11.21%

FE

41.53 0.39 0.95% -1.59% -1.26% -4.24% -2.99% -7.83% -4.57% 5.41%

EXC

39.36 -0.14 -0.35% -2.04% -4.58% -7.02% -6.44% -7.87% -9.99% -9.20%

PEG

30.20 -0.05 -0.17% -3.11% -5.62% -3.45% -5.06% -9.61% -5.48% -6.12%

PCG

40.36 -0.84 -2.04% -3.70% -1.68% -0.02% -1.13% -5.30% -4.81% -14.13%

Here’s the XLU Monthly, Weekly and Daily data charts:

XLU Monthly data: XLU Monthly Data

XLU Weekly data: XLU Weekly Data

XLU Daily data: XLU Daily Data

http://investertech.com/markets/mkview.asp?qte=ss&ty=tk&qt=AEP+D+DUK+ED+…

Here is the list of North American Utilities that I follow:

AEP D DUK ED EXC FE NEE NGG PCG PEG SO TRP

For study purposes, there is a good mix of electric (AEP, D, DUK, FE, NEE and SO), gas (NGG, TRP) and diversified (ED, EXC, PCG, PEG) utilities.

Here is the current candleglance chart of 10 important Sector 55 components:

http://stockcharts.com/scripts/php/candleglance.php?SO,NGG,EXC,TRP,D,DUK…,


Bonds & Yields Review

Bond prices sank this week as capital continued to flow into equities, showing me that the previous week was an anomaly. In fact, maybe you recall that when I saw strength in both the bonds and equities I opined in this space: “Something is amiss. Actually, I am speculating that there were front-runners buying US Treasuries knowing that there would be a major European sovereign debt downgrade after the close on Friday… I suspect that US Treasury bond prices are likely to fall off as yields lift. But for that to happen this coming week, the market will have to accept the sovereign debt downgrade of France, which I think it will do just like it accepted the US downgrade.”

And that is just what happened.

Here is the write-up on Bonds done by Econoday this week:

wir12_4.28.gif

One of the key US Treasury prices I follow and trade is the TLT (average 20-year Treasury fund). A long time ago, these bonds ceased being income instruments; however with a -0.28 beta, they do hedge portfolio risk, and the counter-cyclicality to the S&P 500 is obvious from the chart below.

Three weeks ago in this space I opined: “The Monthly and Daily data charts indicate that the TLT bullishness is over-done, and risks are now very high. The Daily chart shows multiple tops since mid-September.”

Two of the next three weeks, there were sell-offs.

This week TLT plunged -2.26% W/W to close at 116.98, well below the close for 2011 at 121.25, which also happened to be close to the price early this week. Yields on the 2-, 5-, 10- and 30-year US Treasuries jumped +1, +9, +16, and +19 basis points (bp) to 0.23%, 0.88%, 2.02%, and 3.10% respectively.

Here is the Weekly chart of TLT (in solid blue with the 8-week EMA in dashed blue) with the correlated S&P 500 ($SPX) in solid brown.

This chart shows the inverse correlation of bonds to stocks.

wir12_4.29.gif

Here is the Hourly chart of TLT (in solid blue with the 8-month EMA in dashed blue) with the correlated S&P 500 ($SPX) in solid brown.

wir12_4.30.gif

I have remarked that traders are no longer pleased with the risk-reward profile of the US Treasury Bond market, but until the equity prices (S&P 500) start breaking to intermediate and long-term cycle highs, I don’t believe the Bond market will collapse.

In fact, the TLT got a bit oversold on Friday and may even bounce back early in the week – especially if, as and when you hear that there are problems putting the Greek debt negotiations to bed.

Table 10: US Treasury Yields

US Treasury Bonds
Maturity Yield Yesterday Last Week Last Month
3 Month 0.03 0.02 0.00 0.00
6 Month 0.06 0.06 0.04 0.02
2 Year 0.23 0.23 0.22 0.27
3 Year 0.37 0.35 0.33 0.39
5 Year 0.88 0.86 0.79 0.91
10 Year 2.02 1.98 1.86 1.97
30 Year 3.10 3.04 2.91 3.00
Municipal Bonds
Maturity Yield Yesterday Last Week Last Month
2yr AA 0.58 0.57 0.59 0.68
2yr AAA 0.41 0.45 0.42 0.50
2yr A 1.11 1.02 0.92 1.35
5yr AAA 0.81 0.78 0.92 1.01
5yr AA 0.92 0.92 1.05 1.14
5yr A 1.43 1.44 1.61 1.85
10yr AAA 1.73 1.58 1.68 2.03
10yr AA 1.92 1.84 2.04 2.15
10yr A 2.15 1.95 1.79 2.57
20yr AAA 2.84 2.79 2.62 3.87
20yr AA 3.30 3.56 2.93 4.41
20yr A 4.48 4.45 3.81 4.41
Corporate Bonds
Maturity Yield Yesterday Last Week Last Month
2yr AA 0.63 0.61 0.76 1.09
2yr A 1.21 1.04 1.50 1.48
5yr AAA 1.78 1.80 1.71 1.89
5yr AA 2.05 1.93 2.05 2.26
5yr A 2.07 1.97 2.23 2.71
10yr AAA 2.38 2.22 2.12 2.36
10yr AA 3.44 3.25 3.41 3.55
10yr A 3.45 3.29 3.19 3.43
20yr AAA 4.65 4.39 4.69 4.46
20yr AA 4.98 5.00 5.20 4.94
20yr A 4.81 4.56 4.86 4.63

http://stockcharts.com/scripts/php/candleglance.php?TLT,IGOV,$DJCBP

Here is the $USB 30-year Treasury Bond chart.

Interest rates and bond yields.

TNX0X Weekly Data

IRX0X Weekly Data

Interactive Daily data charts:

TNX0X Daily Data

IRX0X Daily Data


Interactive Chart of Interest rates and bond yields.


US Bond Funds — Interactive Monthly Data Charts SHY Monthly data series chart:

US Bond Funds - Monthly Data For SHY


IEF Monthly data series chart:

US Bond Funds - Monthly Data For IEF


TLT Monthly data series chart:

US Bond Funds - Monthly Data For TLT


AGG Monthly data series chart:

US Bond Funds - Monthly Data For AGG


LQD Monthly data series chart:

US Bond Funds - Monthly Data For LQD


TIP Monthly data series chart:

US Bond Funds - Monthly Data For TIP


US Bond Funds — Interactive Weekly Data Charts

SHY Weekly data series chart:

US Bond Funds - Weekly Data For SHY

IEF Weekly data series chart:

US Bond Funds - Weekly Data For IEF

TLT Weekly data series chart:

US Bond Funds - Weekly Data For TLT

AGG Weekly data series chart:

US Bond Funds - Weekly Data For AGG

LQD Weekly data series chart:

US Bond Funds - Weekly Data For LQD

TIP Weekly data series chart:

US Bond Funds - Weekly Data For TIP


US Bond Funds — Interactive Daily Data Charts

SHY Daily data series chart:

US Bond Funds - Daily Data For SHY

IEF Daily data series chart:

US Bond Funds - Daily Data For IEF

TLT Daily data series chart:

US Bond Funds - Daily Data For TLT

AGG Daily data series chart:

US Bond Funds - Daily Data For AGG

LQD Daily data series chart:

US Bond Funds - Daily Data For LQD

TIP Daily data series chart:

US Bond Funds - Daily Data For TIP


Table 11: Interest-sensitive securities

Sorted by 1-Week Price Performance.
Symbol
Close 1Day
Change
1Day
%Change
1W
%Change

2W
%Change

4W
%Change

YTD
%Change

3M
%Change

6M
%Change

12M
%Change

DRE

13.50 0.22 1.66% 6.47% 10.20% 12.41% 10.38% 26.40% -7.34% 2.35%

EQR

55.77 0.26 0.47% 3.14% -1.03% -2.31% -1.47% 2.14% -11.15% 8.97%

AVB

127.82 0.73 0.57% 2.86% -1.55% -1.27% -1.71% 6.08% -7.18% 13.89%

NLY

16.54 0.09 0.55% 1.04% 3.70% -0.42% 2.92% 2.67% -7.96% -6.08%

SHY

84.51 -0.02 -0.02% 0.00% 0.05% 0.00% 0.07% -0.01% 0.12% 0.67%

TIP

116.94 -0.24 -0.20% -0.26% -0.03% -0.49% 0.25% 2.07% 4.51% 9.49%

AGG

109.98 -0.28 -0.25% -0.29% -0.05% -0.03% -0.05% 0.58% 2.32% 4.46%

IEF

104.45 -0.36 -0.34% -0.71% -0.13% -0.69% -0.43% 1.52% 7.11% 12.11%

TLT

116.98 -1.34 -1.13% -2.26% -0.70% -3.15% -2.05% 2.31% 21.77% 28.83%

Some people think this 11-minute video is a good basic explanation of the bond market:
http://www.youtube.com/watch?v=EmVrny8k6qo


Commodities Review

The commodities index I use ($CRB) was up +0.72% W/W to close at 309.91. But, there was a loss of -0.66% on Friday as the Euro and Cdn Dollar pulled back.

Here is the Weekly data chart of $CRB (solid blue line with 8-week EMA in thin dashed blue) vs US Dollar ($USD) (thin dashed green line) and S&P 500 (thin solid brown line).

The chart is a little busy, but worthwhile I think for analysis. This chart clearly shows the inverse correlation of Commodities to the US Dollar, and a fairly close correlation to the S&P 500. If the US Dollar is down, it’s usually commodities up, and vice versa.

wir12_4.32.gif

In 2011, since April, the commodity prices have been under pressure as the US Dollar has strengthened.

I have opined in this space: “Bearish for the past quarter, but we are watching to see if a reversal is underway. The co-ordinated expansionary policy of the G-20 central banks (a month ago) made it appear that $CRB is headed north again. But we have to watch the prices (not the headlines).”

Several weeks ago in this space I remarked, “The recent two months shows a consolidation process in an ongoing Bull phase, I believe; but a $USD that continues to fall will be needed if $CRB remains headed north.”

The Daily data chart reflects a modicum of a turn-around, but the US Dollar is still strong. There are still many traders who believe the Euro will fail, believing that the German people hold the cards.

wir12_4.31.gif

Overall, I am a long-term believer in commodities, especially metals, and in the survival of the Euro. I just believe that the European banks will ultimately take the hit in their sovereign debt holdings if they want to stay in business. The big write-off will be balanced by the big reflation as the IMF and ECB find a way to stem the deflation from those write-offs. They will help the banks to recapitalize, and that process will lead to higher commodity prices and interest rates.


Although I use the $CRB (Reuters/Jeffries Index), principally because it’s the oldest, there are many commodity indexes: http://www.crbtrader.com/crbindex/ • Astmax Commodity Index(AMCI) • Commin Commodity Index • Dow Jones-AIG Commodity Index • Goldman Sachs Commodity Index • Reuters/Jefferies CRB Index • Rogers International Commodity Index • Standard & Poor’s Commodity Index • NCDEX Commodity Index • Deutsche Bank Liquid Commodity Index (DBLCI) • UBS Bloomberg Constant Maturity Commodity Index (CMCI)

Here is a link to an article that discusses the major ones that have been around for a while: http://www.rogersrawmaterials.com/overviewandanalysis.PDF

Here is a current price summary of the heaviest weighted commodities contracts: http://money.cnn.com/data/commodities/

These indexes change their component weightings perhaps annually or even monthly, for example: http://www.seekingalpha.com/article/43586-the-new-generation-of-diversif… http://tinyurl.com/a5myfj

$CRB Index

Open Futures Contracts


Interactive Chart of Weekly CRB Commodities Index:

CRB Commodities Index - Weekly Chart

Interactive Chart of Daily CRB Commodities Index:

CRB Commodities Index - Daily Chart


Oil Review

West Texas Intermediate Crude Oil ($WTIC) dropped -$0.53/bbl (-0.54% W/W) to 98.50 this week in what was a quiet market. The high-low was 102.24 and 98.02, which was tighter than the prior week’s 103.41 and 97.70.

Econoday also summed up this week in the oil market:

wir12_4.33.gif

Here’s the Daily data chart of $WTIC in solid blue vs the $USD in thin dashed green and S&P 500 in thin solid brown:

wir12_4.34.gif

From what I see about the massive oil finds off Brazil and Cuba, and the new technology to extract shale oil and gas, which is plentiful, and the growing alternative energy sources, including nuclear, I don’t think that peak oil stories will be much more than stories going forward. So that means a ceiling to the price. I have fallen into the camp that the Big Oil companies must diversify into natural gas (and even solar) for this reason.

Inflation effects on extraction, processing and delivery will however maintain a floor. I do think the Oiler companies will sustain their profitability in 2012. I’m not too concerned about economic Armageddon.

Here is the e-miNY Dec-07 Crude Oil chart.

Interactive Chart of Weekly Crude Oil:

Crude Oil- Weekly Chart

Interactive Chart of Daily Crude Oil:

Crude Oil- Daily Chart


Gold & Precious Metals Review

The gold market

Although some of you disagree, I do believe that Gold is money, which, unlike the fiat money that has debt against it, is awfully strategic because it can buy ANYTHING IT WANTS.

At his meeting on Thursday, Rob McEwen presented a table of the performance of gold in major currencies from 2001 to Jan 18, 2012:
+547% to US Dollar
+493% to the Pound
+531% to the Rand
+394% to the RMB
+341% to the Euro
+312% to the Cdn Dollar
+248% to the Swiss Franc
+200% to the Australian Dollar

All fiat money is depreciating against Gold.

Interactive Chart of Weekly Gold EOD Continuous Contract Index:

The brief rally in $GOLD continues. The closing price on Friday was $1665.60, up +$24.70/oz (+1.51% W/W) and up $100.80 in the past three weeks. The high-low for the week was 1670.60 and 1631.90.

Here is the Daily data chart of $GOLD in the solid blue line (with the 8-day EMA in dashed thin blue), the $USD in the dashed thin green line, and the S&P 500 in the thin solid brown line.

wir12_4.35.gif

The 8-day EMA is 1648.51, the 8-week EMA is 1648.34, and the 8-month EMA is 1632.80, so the current price (1665.60) indicates a successful test of the December weakness, and the momentum is now bullish.
Besides the Monthly RSI-7 bounced off the 50 line after declining from about 85 this past summer, and is now at 57.15. The Weekly RSI-7 is now up to 51.05, which is another positive momentum indicator.

In the WIR of three weeks ago I noted that “(the price) having broken below that important threshold (8-month EMA) for the first time since 3Q2008, is a negative.” A week ago I added, “There are still some technical indicator concerns, but a price of 1700 would soundly resolve those.”

In the WIR of three weeks ago, I reported and opined as follows:

At the end of the day the Fed, ECB and IMF control this market. The massive buying from India stopped this year in August after the Rupee collapsed against the Dollar, thereby lifting the Price of Gold in Rupee to unattractive levels… But this week the govt of India took steps to support the Rupee by allowing foreign portfolio investors to buy India stocks at cheap prices right on the BSE and National stock exchanges rather than on US or UK markets. To do so will require selling Dollars and Pounds and buying Rupee… So, Go Rupee Go!

A week ago I wrote: “I cheered, and finally the Rupee broke out to the upside!”

This week, the Rupee continued to strengthen, and so did Gold.

wir12_4.36.gif

http://investertech.com/tkchart/tkchart.asp?stkname=gld&cht=Tech+Chart&p…

http://investertech.com/tkchart/tkchart.asp?stkname=gld&cht=Tech+Chart&p…

http://investertech.com/tkchart/tkchart.asp?stkname=gld&cht=Tech+Chart&p…

I remain a long-term Gold Bull. We have a large and heavily over-weighted position in both the Growth and All-Weather account portfolios. In the latter we are very over-weighted in the precious metal physical (CEF and PHYS).

Here is the current candleglance chart of 10 important precious metals and copper market components:

http://stockcharts.com/freecharts/candleglance.html?$SILVER,$GOLD,$PLAT,$COPPER,GDX,GDXJ,UXG,SVM,SLW,FCX,

Spot gold chart for the week

Interactive Chart of Weekly Gold EOD Continuous Contract Index:

GOLD EOD Continuous Contract Index - Weekly Chart

Interactive Chart of Daily Gold EOD Continuous Contract Index:

GOLD EOD Continuous Contract Index- Daily Chart

Interactive chart of recent trading for the Gold Bullion index.


The silver market

Spot silver chart for the week

Interactive daily data

On top of the prior week’s gain of +$1.03/oz (+3.57%), this week, $SILVER soared +$2.28 (+7.68% W/W) to close at 32.03. The high-low was 32.21 and 29.45.

Here is the Daily data chart of $SILVER in the solid blue line (with the 8-day EMA in dashed thin blue), the $USD in the dashed thin green line, and the S&P 500 in the thin solid brown line.

wir12_4.37.gif

The Daily RSI-7 is elevated at 78.85, but the Weekly RSI-7 is just 53.97, so I’m anticipating a continuation to the present Bull phase. The weekly EMA-8 is at 30.57, which ought to be a strong support level; however, Silver prices are volatile and hot money moves quickly in and out, so beware of traps.

While the current price has lifted to $32.03, the 8-month EMA (32.91) must be surpassed before I would call a new Bull cycle for Silver. The US Dollar remains hot, so if, as and when the Dollar breaks down, then Silver is likely to soar.

As an active trader, I usually watch the Sydney and London miners overnight to give me a heads-up as to where prices will be at 9:30am ET in the US and Cdn market.

I also watch the action of all the major precious metals and metals, and the related stocks, before I come to a conclusion on any one of them.

Here is the current candleglance chart of 10 important precious metals and copper market components:

http://stockcharts.com/freecharts/candleglance.html?$SILVER,$GOLD,$PLAT,$COPPER,GDX,GDXJ,UXG,SVM,SLW,FCX,

http://stockcharts.com/scripts/php/candleglance.php?$SILVER,$GOLD,$PLAT,$COPPER
http://tinyurl.com/22rsj4r

http://stockcharts.com/charts/gallery.html?s=$silver
http://tinyurl.com/y8k8ud4

Interactive Chart of Weekly Silver EOD Continuous Contract Index:

SILVER EOD Continuous Contract Index - Weekly Chart

Interactive Chart of Daily Silver EOD Continuous Contract Index:

SILVER EOD Continuous Contract Index- Daily Chart


The platinum market

http://stockcharts.com/charts/gallery.html?s=$plat
http://tinyurl.com/ydwz4pn

A week ago, $PLAT soared +$87.00/oz (+6.17% W/W) to close at $1497.00. This week, $PLAT gained a further +$33.00 (+2.20% W/W) to close at $1530.00.

In the WIR three weeks ago, $PLAT closed at 1391.00, and I reported in this space: “The RSI-7 is now below 30 for the Monthly price data series, and it’s down to 25.23 on the Weekly and 23.40 on the Daily. There has been a positive RSI divergence, which you Bulls should be watching. Could be a sign of a turn-around. So too could the smoke signals out of Moscow… Seriously, watch the Ruble. The Dollar might be peaking against the Ruble here, which would be terrific for Platinum and the precious metals generally.” A week ago I added: “The Ruble has not yet broken out to the upside, but is getting close, I feel.”

This week, the Russian Ruble appears to have broken out, which ought to be another bullish indicator for precious metals.

wir12_4.38.gif

Spot platinum chart for the week

Interactive Chart of Weekly Platinum EOD Continuous Contract Index:

PLAT EOD Continuous Contract Index - Weekly Chart

Interactive Chart of Daily Platinum EOD Continuous Contract Index:

PLAT EOD Continuous Contract Index- Daily Chart

Interactive chart of the Platinum metal index.


The palladium market

This week $PALL had a gain of +$39.90 (+6.24% W/W) to close at 678.90, which is almost even to where the price closed two weeks ago.

A few weeks ago, following five months of Bearish and bottoming action, I opined in this space: “But there could be a turn-around coming in January.”

$PALL is now on the verge of a break-out. The current price is 678.90 almost at the 8-month EMA of 679.65 and above the 8-week EMA (646.64).

wir12_4.39.gif

Spot palladium chart for the week

Interactive Chart of Weekly Palladium EOD Continuous Contract Index:

PALL EOD Continuous Contract Index - Weekly Chart

Interactive Chart of Daily Palladium EOD Continuous Contract Index:

PALL EOD Continuous Contract Index- Daily Chart

Interactive chart of the Palladium metal index.


The (base metal) copper market

A week ago, $COPPER soared +$0.22 (+6.40% W/W) to close at 3.65. This week $COPPER gained a further +$0.11 (+2.92% W/W) to close at 3.75. The high-low was 3.59-3.83.

Here is the Daily data chart of $COPPER in the solid blue line (with the 8-day EMA in dashed thin blue), the $USD in the dashed thin green line, and the S&P 500 in the thin solid brown line.

wir12_4.40.gif

The Daily chart shows the need for consolidation of recent gains, but the Weekly and Monthly charts show room for $COPPER to grow on the upside beyond that brief interlude. In fact the 8-week EMA and 8-month EMA is 3.55 and 3.74 respectively and the current price is now 3.75, so there is now bullish momentum confirmed.

Copper typically trades inversely to the US Dollar, but has not been held back in the past couple weeks by the strong Dollar.

http://stockcharts.com/charts/gallery.html?s=$copper
http://tinyurl.com/ybgnb7f

In the prior WIR, I wrote in this space: “It’s time to reconsider Freeport McMoRan (FCX), which typically closely tracks the copper price. The current price (42.00) is now above the 8-week EMA (38.75), and 8-month EMA (41.75). The Monthly RSI-7 (48.8) looks ready to break through the important resistance of the 50-line. If, as and when the Dollar strength abates, I think FCX is going to soar.”

This week FCX gained +2.62% W/W to close at $43.10, which is above the 8-week EMA (39.72), and 8-month EMA (41.99). The Monthly RSI-7 (50.39) has also crossed the important 50-line, while the Weekly RSI-7 (63.47) shows room for the share price to grow on the upside.

FD: We hold FCX in both the Growth and All-Weather account portfolios.

wir12_4.41.gif

Interactive Daily data

Interactive Weekly data

Interactive Chart of Weekly Copper EOD Continuous Contract Index:

COPPER EOD Continuous Contract Index - Weekly Chart

Interactive Chart of Daily Copper EOD Continuous Contract Index:

COPPER EOD Continuous Contract Index- Daily Chart

Interactive chart of the Copper metal index.


Goldminer Equities

Table 12: Senior gold equities

Sorted by 1-Week Price Performance
Symbol
Close 1Day
Change
1Day
%Change
1W
%Change

2W
%Change

4W
%Change

YTD
%Change

3M
%Change

6M
%Change

12M
%Change

UXG

4.9800 0.3500 7.56% 20.58% 39.11% 53.70% 33.87% 29.35% -28.96% -22.43%

PAAS

24.72 0.10 0.41% 2.28% 9.62% 11.25% 8.85% -6.75% -27.21% -27.38%

SSRI

15.49 0.12 0.78% 1.71% 4.31% 10.80% 4.80% -7.13% -47.77% -32.86%

GDXJ

27.16 0.46 1.72% 1.46% 4.82% 1.68% 4.14% -3.65% -29.34% -21.43%

SLW

31.50 0.83 2.71% 0.64% 2.97% 5.70% 2.94% 8.28% -20.07% 0.03%

ANV

32.72 -0.21 -0.64% 0.46% 1.14% -0.43% 0.65% -4.99% -18.87% 32.20%

NG

9.230 0.220 2.44% 0.44% 2.78% 3.82% 1.21% 23.56% -8.88% -31.43%

CDE

26.42 0.10 0.38% 0.19% 2.24% 2.96% 4.30% 21.58% -6.64% 14.03%

GFI

15.57 0.16 1.04% -0.38% -0.38% -0.32% -1.27% 3.39% 0.00% -5.46%

AU

43.52 0.04 0.09% -0.39% -0.11% 2.21% -0.75% 9.71% -1.81% -2.44%

SVM

7.210 0.130 1.84% -0.41% 5.56% 13.19% 5.87% -9.87% -37.36% -30.00%

HL

4.7800 0.0500 1.06% -0.42% -16.87% -15.40% -17.01% -10.65% -42.69% -46.59%

GG

44.98 0.57 1.28% -2.20% -0.40% -1.27% -1.19% 1.37% -17.12% 11.06%

AUY

15.34 0.03 0.20% -2.91% 0.52% 4.14% 0.13% 9.26% 16.04% 35.39%

EGO

13.59 -0.13 -0.95% -3.82% -7.17% 1.42% -7.80% -17.44% -25.86% -17.24%

GDX

52.18 0.03 0.06% -4.64% -3.19% -1.53% -3.01% -1.79% -13.54% -4.50%

HMY

11.44 0.14 1.24% -5.06% -3.05% -5.38% -5.14% 0.88% -19.89% 3.16%

ABX

45.83 -0.63 -1.36% -6.11% -4.56% -0.56% -3.54% 3.38% -6.93% -2.45%

AEM

35.14 -0.85 -2.36% -6.17% -7.43% -5.99% -8.18% -19.50% -44.75% -49.41%

BVN

38.04 -0.26 -0.68% -6.24% -2.93% -4.42% -2.21% 0.29% -10.18% -8.56%

NEM

59.27 -0.33 -0.55% -7.45% -4.56% -5.33% -4.53% -3.84% 2.24% 6.39%

IAG

15.61 0.06 0.39% -9.09% -8.87% -3.76% -5.45% -16.88% -27.53% -15.76%

KGC

10.21 0.11 1.09% -20.54% -16.04% -13.91% -16.79% -24.54% -41.66% -40.01%

After three weeks of gains, this week GDXJ and GDX went in opposite directions. The senior producers (GDX) dropped -4.64% while the junior precious metals miners (GDXJ) were up +1.46%.

Pulling down the majors were Kinross (KGC -20.5%), IAMgold (IAG -9.1%) and Newmont (NEM -7.5%), but there were several more like that.

For the juniors, the leaders US Gold (UXG +20.6%) and Minera Andes (MAI.TO +18.3%) were stellar performers. These two companies, controlled by Rob McEwen, held special meetings on Thursday to approve their merger and new name McEwen Mining, soon to be traded on the NYSE and Toronto Exchange under the MUX ticker.

As you know, my biggest positions in the Precious Metals accounts are: US Gold (UXG), which, over the past month, was up +48.2% plus Silvercorp (SVM), which was up +12.7%, Silver Wheaton (SLW), which gained +8.8%, and Minera Andes (MAI.TO), which soared +47.7%.

Given that my weighting in the UXG+MAI.TO combo (the new MUX) had grown to about 15% of the junior miners portfolios late this week, I lightened a bit for risk management purposes. I also will cut my list from about 30 to 20 in total and plan to actively trade about half of them.

Here is the Daily data chart of GDX in the solid blue line (with the 8-month EMA in dashed thin blue), the $USD in the dashed thin green line, and the S&P 500 in the thin solid brown line. The Goldminers clearly trade inversely to the US Dollar.

wir12_4.42.gif

A week ago in this space I opined: “This chart shows some strength, but it cannot be said that the Goldminers are back on the dance floor – yet. For that to happen, the US Dollar will have to weaken.”

That was a good warning.

The Monthly and Weekly 8-period EMA is 55.78 and 53.92 respectively, while the current price is 52.18, and the Monthly and Weekly 7-period RSI is 42.27 and 39.02, so these charts are still bearish.

Here is the same chart for GDXJ. Not being major producers, these junior stocks are not as affected by changes in the US Dollar, and the indicators are more bullish.

wir12_4.43.gif

I like the juniors because (i) many of the companies are growing their resources much more quickly than the senior companies, and (ii) the seniors are likely to buy out the best of the smaller ones at premiums of +30 to +60% to market. The goodwill on these transactions is what depreciates the stocks of the majors, and is the reason I normally avoid them. However, including goldminers in a balanced portfolio does lower the beta, and hence the risk over many years.

As pointed out almost two ago in this space, GDX had been out-performing GDXJ, so the big Bull move still had not happened. I remarked that “For a Bull market in the gold/silver miners, we need a stronger Euro, weaker Dollar, and the really good picture would have the weaker Yen even weaker than the Dollar.”

This Daily data chart shows the ratio of GDXJ and GDX. Gold Bulls want to see a rising line where GDXJ is outperforming GDX. Unfortunately since May 2011, GDX has been out-performing GDXJ, which is the sign of a liquidity squeeze. We need to see the GDXJ:GDX ratio chart showing the RSI running continuously above 70 rather than below 30!

Three weeks ago I noted in this space: “The tide may have turned in favor of GDXJ and risk-on for the goldminers… This is an important chart.”

wir12_4.44.gif

A week ago I added: “And now you see the proof of concept.” This week you saw more.

Here is the current candleglance chart of 10 important Gold and Silver mining companies:

http://stockcharts.com/scripts/php/candleglance.php?ABX,GG,NEM,KGC,BVN,G…,

I previously stated in this space:

To reiterate my belief: I believe the next bullish wave in the Goldminers market will be driven by acquisitions by the major producers acquiring smaller companies – not just intermediate producers, but small producers and developers that will put large scale resources into production within three years… I also believe that resolving today’s financial system problems in Europe, Japan and the US will require central bank balance sheet expansion and that will drive precious metal prices, and with it the related stock prices, to higher levels.

A factor that you need to consider when investing in the major miners – the ones with cash flow and non-cash expenses – is the IFRS (International Financial Reporting Standards), which are being adopted worldwide.
http://en.wikipedia.org/wiki/International_Financial_Reporting_Standards

The use of IFRS became a requirement for Canadian publicly accountable profit-oriented enterprises for financial periods beginning on or after January 1, 2011.

This link might be helpful: http://www.ifrs.com/ifrs_faqs.html


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

LIHR IAG EGO RGLD GOLD TSE_AGI GSS NG NGD AEM

Interactive Daily data

Interactive Weekly data


Here are the key Silver miners and the SLV ETF: SLV SIL SVM 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 US Goldminers Index:

Weekly US Goldminers Index - Weekly Chart

Interactive Chart of Daily US Goldminers Index:

Daily US Goldminers Index - Daily Chart


The US goldminer share trust ETF trades under the ticker symbol GDX.

Here are the US Goldminer ETF (GDX) index Weekly and Daily data charts:

GDX Weekly data:

GDX Weekly Data Chart

GDX Daily data:

GDX Daily Data Chart


The Toronto Exchange-listed goldminer iUnits S&P/TSX Capped Gold Index ETF trades under the ticker symbol TSE:XGD.

Just like GDX on the AMEX, you can trade XGD on Toronto. Canadian Dollar fluctuations will impact XGD vs GDX.

Here are the Weekly and Daily data charts for the TSX Goldshares (XGD) index:

Interactive Chart of XGD Weekly data:

XGD Weekly Data Chart

Interactive Chart of XGD Daily data:

XGD Daily Data Chart


Central Bank Update

In this section, I shall reproduce any of the Econoday studies of international central bank meetings for the current week.

The important meeting is the FOMC meeting as well as the Fed Chairman’s media interview on Wednesday Jan. 25.


Forex Review

You know my posture re currencies: “We are all forced to be currency traders today.”

I have been saying it for years. Now the world agrees… The problem is that the US Dollar is still the reserve currency, and the Fed the reserve bank of last resort, which means that prices of all currencies are affected significantly by US politics and fiscal and monetary policy… For many years I have written about the pressing need for a General Agreement of Currency. I now believe that there will be such an agreement by the G-20 within five years. [Note: Three months ago, I changed my forecast from 10 years] … The biggest problem that I see is the leverage permitted by regulators of the deposit taking banks. While I am typically against more regulation and bigger government, we definitely need banking reform that includes a return of Glass-Steagall legislation that would separate low risk taking deposit banks from the much higher risk taking investment banks… The only reason that the US Congress will not pass such essential legislation is because the leaders in Congress and the White House have taken in the majority of their campaign funds from Wall Street. Upon retirement, or on the graduation of their offspring, these people also can count on incredibly high paying jobs from Wall Street – but only if they have voted in favor of Wall Street’s interests during their time in power… I say Wall Street, but really I mean the people who control Goldman Sachs, JP Morgan, and State Street Bank. They have names like Rockefeller… I say the leaders who have been elected by the US public (and even now the ones in Greece and Italy who have not been) have been bought-and-paid-for and they have. This take-over has happened in Canada, the UK and Europe as well. Canada is no longer a nation that supports peace although they call themselves peace-makers, which is laughable. This change, to which as a Canadian I strongly disagree, has only happened under the Conservatives after Brian Mulroney was elected Prime Minister… The key financial jobs now in government service and at central banks, and the IMF, etc, are now going only to the people who have the best connections on Wall Street. Common sense is no longer a prerequisite. Membership in the country club is… The banks have caused the problems in the currency markets, most of the problems in the capital markets and many of the problems in the economy. HB&B is now so entrenched with the world’s leading politicians and central bankers that, especially now that they are at war against each other, I fail to see who is going to introduce stability, and I don’t see it happening soon. In fact, the situation is so weighty, I think the Interventionists are no longer able to cope…. For years, I thought there was needed a G-20 General Agreement on Currencies – a set of rules if you will – that would serve to stabilize global capital markets — In other words, less volatility… Who benefits most from volatility, at least to a certain level, are the Banks. They use it to control the governments that are deep in debt. Sixteen Tons… Now and then whenever volatility, i.e., the amplitude of price swings, becomes extreme, one of the Banks discovers that a so-called “rogue trader” causes huge losses for them, which is another way of saying that their colleague banks can book their huge profits… That rogue trader is usually a 20-something or early 30-something. Now they have stooped to telling us the latest rogue is Jon Corzine. They must be really getting desperate.

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The $USD is a trade-weighted US Dollar index, we used to call the Morgan Dollar.

The Forex market is a four trillion dollar a day marketplace, which dwarfs the size of the stock and bond markets. In this market, the Euro/USD is the highest volume trader, and London is the center of the universe.

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. The Euro is by far the biggest component.

I don’t understand why the Yuan is not a part of this index, or the Mexican new peso, Brazilian real, Indian rupee, or Russian rouble, and why the krona is so important, but admitting this maybe shows my ignorance.

There is a Powershares ETF that tracks the G-10 currencies (NYSE:DBV).

http://tinyurl.com/ltxpk4

For some time I have opined that the $USD clearly no longer meets the needs of a globalized world with respect to a reserve currency benchmark. I have suggested that Gold may now be the de facto benchmark.

As commodities are mostly priced in $USD for international transactions, you also need to study forex price trends and cycles when trading commodity price-sensitive instruments.

There is also an Emerging economy E-10 currency fund, the Wisdom Tree Emerging Currency Fund (NYSE:CEW), apparently holding the Mexican new peso, Brazilian real, Chilean peso, South African rand, Polish zloty, Israeli shekel, Turkish lira, Chinese yuan, South Korean won, Taiwanese dollar, and Indian rupee.

http://tinyurl.com/6ybt2bz

Regarding currencies, I find the ADVFN.com service (with inexpensive real-time price feed) to be quite useful. I have set up a monitor (one of 200-some tickers) for currencies, which you can do as well.

Click on: http://www.advfn.com/p.php?pid=m_tools

Into the window for stocks, enter the following string of currency pairs:

FX:EURUSD, FX:AUDUSD, FX:GBPUSD, FX:EURGBP, FX:EURCHF, FX:EURCAD, FX:USDCAD, FX:EURJPY, FX:USDJPY, FX:AUDJPY, FX:EURAUD

When you call up the stocks, you’ll see they are interactive, which means they update in real-time (if you paid the $10/mo for this data) or 15-20-minute delayed prices (free), and can be displayed with indicators and overlays.

If you are new to examining currency pairs charts; think about it that in any pair where the latest trend line is rising, the first ticker is the one that is strong. So EURUSD, which is the way the contract is traded, when the trend line is up, the Euro is in rally mode against the US Dollar.

The symbol USD in any pair is the denomination versus $USD, which is the trade-weighted US Dollar index (i.e., multiple currencies as described above).

A chart of the Euro vs Dollar (i.e., EURUSD) with an overlay of currencies (GBP, AUD and CAD in this case) will show you if, as, and the point when, currencies are impacting capital markets. We are looking for commonality in trend direction of the currencies in their trading against the US Dollar.


Here is the Econoday summary of the currency market trading this week:

wir12_4.45.gif

The US Dollar has been soaring for a couple months. This week there was a pull-back of -1.58% to close at 80.22, which is a substantial move. The weekly high-low was 81.70 and 80.00.

Many countries are now fighting the “hot” Dollar, which has been jeopardizing their economies. About three weeks ago, India reacted to support the Rupee.

The current price (80.22) is still above the 8-week EMA (80.06) and well above the 8-month EMA (78.00), which is still Dollar bullish, but the momentum is waning.

Here is the Daily data chart of the $USD (solid blue line along with 8-day EMA in thin dashed blue) vs S&P 500 solid thin brown line, showing counter-cyclicality.

wir12_4.46.gif

A week ago in this space, I wrote: “The question now is whether the $USD can fall from 81.51 and pierce the 8-week EMA (80.22) in order to really lift the equity market, commodities and precious metals. We are at a crossroads, I think.”

The big move this week (down -1.58% to 80.22) may be a start of an even bigger one. A lot depends on the Greek debt problem being successfully resolved. But the weekly EMA-8 is close by at 80.06 and the low this week was 80.00, so I’m thinking that a US Dollar trading in the 70′s will bring a lot of bearish pressure.

Despite the apparent agreement on responses to the European financial crisis, there is a lot going on with respect to the policy differences between the US and European finance ministers and central bankers, and even between the various countries in Europe. During this period, the bankers holding a lot of improperly priced debt of the European nations are putting on the pressure to recover whatever they can. There is a lot of indecision and doubt here as to the final outcome and what Mr. Market – you and me and the people we know – want harmony and precision. I believe there will be an extended period of forex volatility.

As for these talking heads who claim to know the Euro is going back to par with the Dollar – or just the opposite – I pay no mind at all to that stuff. These people are wasters, so don’t let them steal your time.

http://stockcharts.com/charts/gallery.html?s=$usd
http://tinyurl.com/y9c3sr4

Weekly US Dollar Index - Weekly Chart

Interactive Chart of Daily US US Dollar Index:

Daily US Dollar Index - Weekly Chart


The Euro soared this week +2.02% W/W to close at 129.31. Experienced traders have seldom if ever seen such volatility.

As I say, the gains and losses in the Euro have had quite an impact on the equity market. When the Euro rises, the S&P 500 also rises and vice versa.

The charts shows that the Euro has been under pressure since the end of Oct., and really started to under-perform since late Nov. So I asked: “Does that mean equities are ready to collapse like many pundits are shouting? I continue to say I doubt it, and it hasn’t happened.”

Here is the Weekly data chart of the Euro ($XEU) in US Dollar terms (in the solid blue line with the 8-week EMA in thin dashed blue) vs the S&P 500 (in the thin solid brown line).

wir12_4.47.gif

The current price (129.31) is almost up to the 8-week EMA (130.13), but the Weekly RSI-7 at 37.64, while rising, still must get over the resistance ahead at the 50-line as well as the price trading above the 8-Week EMA before I will consider the Euro bullish. We’re close, but not yet there.

Until then, commodity, precious metals and broad equity market prices will continue to be mixed.

Interactive Chart of Weekly Euro Dollar Index, priced in USD:

Weekly Euro Dollar Index - Priced in USD

Interactive Chart of Daily Euro Dollar Index, priced in USD:

Daily Euro Dollar Index - Priced in USD


This week, the Pound sterling future soared +1.68% W/W to close at 155.75 American.

The Pound Sterling has under-performed the S&P 500 since the March 2009 long-term cycle low, apparently more closely aligned with the US Dollar as the UK has seemed to have sided with the Americans against the EU. I wonder if that is much about the worries that high taxes in London have pushed the financial services industry to leave in droves for friendlier places in Europe?

Here is the Weekly data charts of the Pound (solid blue line) and the S&P 500 (in the solid thin brown line).

wir12_4.48.gif

This chart is suddenly bullish since the price (155.75) is now above the 8-week EMA (155.44) and both lines are rising. However the Weekly RSI-7 (47.44), which lifted this week from the Accumulation Zone, giving a Buy Alert, must now get over the 50-line before I will call the Pound bullish. Besides, the 8-Month EMA is up at 158.17, so there is still some lifting before I go all in the Pound.

Btw, this reminds me: A BUY Alert does not mean you want to take a 100% weighted position for your portfolio. It simply means that the indicators are positive for initial trades.

http://stockcharts.com/charts/gallery.html?s=$xbp
http://tinyurl.com/yasdzc2

Weekly British Pound Index:

Weekly British Pound - Weekly Chart

Daily British Pound Index:

Daily British Pound Index - Daily Chart


Weekly Japanese Yen Index:

This week, the Yen (in Dollar terms) was almost flat, losing -0.08% W/W to close at 129.83. There was a gain of +0.11% on Friday.

Here is the Daily data charts of the Yen (solid blue line) and the S&P 500 (in the thin solid brown line), showing that the Yen is mostly counter-cyclical to the S&P 500, but also occasionally cyclical to it, as it has been for the past month.

wir12_4.49.gif

Because the Weekly RSI-7 is at 54.9 and the Weekly EMA-8 is at 129.52 while the current price is 129.83, the Yen is bullish.

Traditionally, but not always week to week, the Yen is an indicator of market direction and sector rotation.

If, as and when there is a broad risk-off trade in global markets, it is usually accompanied with a stronger Yen, as well as a stronger US Dollar.

And, when I see the Dollar down and the Yen to the Dollar down even more, then, all other factors being equal, I believe the equity markets, commodity markets and precious metal markets are probably going to lift around the world.

So, if you hope for the current major rally to continue in those markets, look for a weaker Yen, but particularly against an also dropping US Dollar, which did happen this week, and you saw the result in that the S&P 500 and precious metals and $CRB were higher.

Weekly Japanese Yen - Weekly Chart

Daily Japanese Yen Index:

Daily Japanese Yen Index - Daily Chart


The Canadian Dollar aka Loonie gained +0.97% W/W to close at 98.70 this week. There was a small loss on Friday.

The Daily data chart shows the high correlation between the Cdn Dollar ($CDW) in the solid blue line to the S&P 500 ($SPX) in the thin solid brown line.

wir12_4.50.gif

The Loonie has begun to fly given the boost from the Weekly RSI-7 (now at 54.40) and the Weekly EMA-8 (97.90), which is now below the current price (98.70). But, the crucial levels must be reached for the Monthly RSI-7 (46.51, which must rise to above 50), and the Monthly EMA-8 (99.46, which is still well above the current price).

There is usually a rising Canadian Dollar when inflation beneficiaries like Oilers and Miners are in strong long-term Bull phases. The opposite happens in disinflationary markets, and early on in deflationary markets. Longer-term in deflationary markets, the important govts and central banks tend to flood the international financial system with new money and the Oilers and Miners benefit.

The equity Bulls, particularly the Oilers and Miners, are just calling for Canada to let the Loonie fly! However, since the early October cycle low for the Cdn Dollar and Equities, Commodities and Precious Metals, the Cdn Dollar has under-performed the S&P 500, and exerted downward pressure on Commodities and Precious Metals.

You would like to think the Loonie can get back in sync with a lift, but many traders have gone broke waiting for such phenomena to occur.

http://stockcharts.com/charts/gallery.html?s=$cdw
http://tinyurl.com/ycx58us

Weekly Canadian Dollar Index:

Weekly Canadian Dollar - Weekly Chart

Daily Canadian Dollar Index:

Daily Canadian Dollar Index - Daily Chart

Here is the China Yuan (CNY) chart.


Wrap-up:

This week, the Dollar sold off a lot and so too did US Bonds as capital flowed into equities, commodities and precious metals, which are, for the most part, bullish presently. But strength in the US Dollar is still the fly in the ointment, keeping prices in a trading range rather than permitting a major break-out. There are some bullish break-outs, which I have written about in this WIR, but the jury is still out as to whether the result has been impacted by the closing of shorts or the sense that the financial system crisis is coming under control and the global economy staying out of recession.

The one thing about capital markets is that prices tend to precede volume, which is another way of saying that most people are followers, slow to catch on to what is driving market prices. Then when too many people own the trade, there are too few available to buy from those who are selling, moving on to the next bullish trend. That’s when prices fall.

Markets then are a continuum of rising and falling prices in trends and cycles that require us to study the models. Mostly the dynamic price models work, but often they do not, which makes successful trading so elusive. It’s all we can do to study the data and avoid the headlines and the stories, which I always say are brought to you by people who intend to fleece you via deception.

I’m pleased to say that the great majority of people in this community now understand the market cycle model – at least to a much greater extent than most people. In the past year, this website attracted almost 300,000 unique visitors, which is testimony to its usefulness. That knowledge pleases me.

Soon, Athan and the Team Cara will be making changes to the website, which I believe will improve it. Also, Jack and JeffB will be publishing the new Lessons from the Trader Wizard 2012 Edition e-book, along with Athan’s help.

As for me, apart from watching over Cara Trading Advisors, now in Chicago and run day to day by Geoff Goetz, I will be starting a newco called Greenfield Mining Capital. I’m not an officer of the company but I will be Chairman and mostly involved with raising capital. We are starting from scratch, but have a team that in my view will compete effectively with any merchant bank for early stage mining projects. We have an Offering Memorandum and Term Sheet ready in draft form as we tidy up the US requirements, and will show it to any Accredited Investor.

I am committed to taking life easier in 2012, looking forward to PDAC in early March and to the Cara Toronto Conference in late September plus some more vacation time.

Time is precious. We only live once.

Enjoy your weekend and your week.