Archive for November, 2009
From MarketWatch: CNov. Chicago PMI rises to 56.1%, a 15-month high
The business activity index rose to 56.1% in November from 54.2% in October. … The employment index rose to 41.9% from 38.3% …
Readings above 50% indicate expansion, and below 50% indicate contraction, so this suggests business activity is increasing, but employment is still declining.
This index is for both manufacturing and service activity in the Chicago region. In general the Chicago area is considered representative of the mix of manufacturing and non-manufacturing business activity in the nation.
The national ISM manufacturing index will be released tomorrow, and the ISM non-manufacturing index on Thursday.
Scott Redler of T3Live.com
Friday’s emotional down open provided a great trading opportunity. The strong big cap tech stocks followed the rules and had a decent bounce off the open (THE RULE–in an emotional down open you ALWAYS look to the strongest group for a potential bounce setup).
- The banks, which have been lagging, did nothing but continue to lag (although now that the news is out, could this be a short-term bottom?) Watch GS and Friday’s low around the $163 area.
- Gold–which has been strong–was a great long opportunity off the open.
- Even oil gave us a trade.
NOW WHAT?
We need to see how the news is dealt with now that the emotional component of the move is over. The next few days will be important! To say the least. As long as we hold the 1,080 area in the S&P, we can still have an end-of-year move through the 1,113 highs–but, no matter what, it will be VERY TRICKY. I’d keep it very light.
Sector Rundown:
- All the upper ranges of big cap tech remain intact–AAPL, GOOG, BIDU, AMZN, PCLN
- Gold still remains strong.
- The agricultural group is holding its newly formed upper range.
- Bank charts remain ugly–but this could be a “sell the rumor, buy the news” type of situation–The Dubai news is out, this will help support the S&P and confuse most traders.
- Oil continues to lag.
- The casinos are not compelling right now.
- One-off stocks like RINO, NLST, and AONE, etc. are starting to pop up, which is what tends to happen into year-end.
We had a big move off of Friday’s low, which could potentially lead to tricky trading today. The market can fill the rest of the open gap from Friday; however, buying Friday’s highs will be tough due to the size of the travel range from the open. Be patient today and let price action establish a tradeable pattern.
Did Lehman failure cause the financial crisis? Not if you look at it from an Elliott wave perspective.
The Federal Reserve’s balance sheet hit a new all time record of $2.2 Trillion in assets, after an $11 billion spike in MBS and Agency purchases week over week.
- Securities held outright: $1,785 billion (an increase of $92 billion MoM, resulting from $2 billion in new Treasury purchases, which have tapered off at $776.5 billion, $79 billion increase in MBS and $12 billion in Agency Debt), or a $11 billion increase sequentially.
- Net borrowings: $218 billion. Number for the November 25th week has not been updated.
- Float, liquidity swaps, Maiden Lane and other assets: $195 billion. The CPFF program was flat at $15.0 billion, a second weekly rebound from the all time low. FX liquidity swaps declined by $2.5 billion $26 billion, bringing these to another fresh 52 week low. Maiden Lane I and Maiden Lane II were at $26.4 and $15.8 billion, while Tim Geithner’s Goldman rescue package better known as Maiden Lane III came at $22.9 billion.
Foreign holdings declined by $7.5 billion to $2,925 billion.
Vincent Fernando of Money Game
Templeton’s Mark Mobius, who runs $25 billion in emerging market investments, remains a long-term bull.
Yet he thinks that the Dubai debacle could easily trigger a 20% global market correction, given that it’s about time for the bull market to take a breather.
“How serious will the fall out be?”
“…I think it will be pretty serious. If Dubai were to default, it would cause a wave of defaults in other areas.”
“How should investors be looking at emerging markets?”
“…There’s no question about an ongoing bull market, that’s certain. But we will certainly see corrections and this may very be the trigger for the markets to pull back.”
“…A 20% correction is not unusual in such bull markets, that’s quite possible. So we should be ready for that kind of correction.”
See Bloomberg’s video interview with Mark Mobius here.
| IN ONE HOUR OF TRADING YOU CAN MAKE MORE MONEY THAN MOST PEOPLE DO SLAVING AT A DEAD END JOB ALL WEEK LONG… |
 I didn’t believe it either until I saw the proof with my own eyes…
Click here for the full report Genius chess player with a certified I.Q. of 157 unveils his ’sneaky’ (and 100% legal) trading system which can… … secure net profits up to $1250 |
Courtesy of Phil’s Stock World
Over $1.50 for the Euro this morning!
The Pound ran up to $1.675 and, as soon as the Nikkei closed (up 40 points), the dollar dove to just 87.5 Yen. That sent gold flying up to $1,180, copper to $3.18 and silver to $18.80 but oil couldn’t get back over $76.50, which is strange because the last time the dollar was this low oil was $140 a barrel. Why have the commodity speculators abandoned oil and moved on to metals?
For one thing, energy trading is now under Congressional scrutiny – as well it should be since it is a forced tax on every man, woman and child on the planet. Copper prices don’t affect anybody since no one is building anything anyway and pennies sure aren’t worth saving since you need 5 of them just to buy a piece of gum these days. Silver has industrial uses but there’s not much industry with Industrial Production at less than 80% capacity so no one is complaining (are there any workers left to complain?) about that price and gold consumption is off 34% from last year so the 43% rise in price since last year isn’t tapping more overall global dollars – speculators are just getting much much less for much much more.
Oil collapsed last year because, when push came to shove, people simply couldn’t afford to buy barrels of oil for $140, or $100, or $80. The problem with trying to manipulate the oil market is 86M barrels more come out of the ground every day, whether you want it or not and if people stop consuming then it has to be stored and that can get expensive. As it is now, global stockpiles of crude products are at record levels and it is possible that the US is literally out of room to store natural gas despite massive production cutbacks from cartel members like CHK, XOM and EOG.
So manipulating the price of oil and natural gas gets tough as demand falls off but only 800 tons of gold were consumed in all of Q3, down from 1,206 last year, when gold averaged $825. In India, the world’s largest consumer of gold, demand fell about 50% from 271.2 tons to just 137.6 tons. China picked up the slack as the government stockpiled metals (just another speculator) and demand there went from 116.9 tons to 128.6 tons so a 10% increase in Chinese demand to WOW the investors into thinking there is no stopping this train.
If no one is actually buying gold (a proxy for all our metal speculation) then how does the price go up? Would you be surprised if I said speculators? To keep things simple, we aren’t going to talk about China’s stockpiling or Indias recent $200Bn purchase or the sudden craze to buy gold coins (but really people, does no one remember the last gold craze?) – let’s just talk about one of the many, many speculative ETFs out there – the SPDR Gold Trust (GLD). Out of the 2,400 tons of gold purchased this year (1/3 less than last year) GLD has bought 500 tons of it. This checks out as if we take that 500 tons out of the rest of global demand, we see that only 1,900 tons have been bought outside the ETF, so the whole world’s consumption is down 50%, roughly the same as India’s.
$10Bn has poured into GLD in the past 12 months, causing the ETF to purchase 10M ounces of gold – more than India’s total annual consumption and the year isn’t over yet. That gold has no industrial or consumer use and none of the people trading the bits of paper (if they even have the paper) with GLD stamped on it or staring at GLD on their computer screens have any intention at all of ever owing the gold themselves. One would think, logically, that a stockpike of 1,100 tons of gold that nobody really wants may cause a problem at some point down the road – but only if people ever wise up so nothing to be too concerned about I suppose….
This is not an essay on gold, it’s just an example of all the idiocy that’s going on in the commodites pits at the moment. Demand is way off but the producers of gold cut back production and the holders of gold encourage speculation to spur demand and the brokers on Wall Street see a way to get another speculative bubble going so they can make a quick buck and PRESTO! – we have the same irrational behavior that wiped out investors last year only this time it’s shiny bits of metal nobody actualy wants instead of sticky black goo that nobody actually wants so it must be different. Last year oil was going to $200 because demand was infinite and supplies were falling. This year gold is going to $2,000 because the money supply is infinite and demand for gold is rising.
It’s the same old story again and again but, as PT Barnum used to say, there’s a sucker born every minute. But PT Barnum said that in the early 1800’s, when there were only 1Bn people on the planet. That means there are now 6.5 suckers born every minute and that’s 9,360 suckers a day and 3.4M brand new suckers every year – more than enough to account for 10M ounces of gold puchased by GLD speculators – problem solved!
So things seem to balance out quite nicely, there are plenty of suckers to pick up the slack when real demand fails us. Imagine if PT Barnum had CNBC at his disposal – he’d be unstoppable! Sadly, there was no energy or commodity futures market at the time for him to exploit but his book was the roadmap for what modern day hucksters set up in his wake. Playing the commodity markets is fine but keep in mind what Barnum said about speculation in his day:
A man who is all caution, will never dare to take hold and be successful; and a man who is all boldness, is merely reckless, and must eventually fail. A man may go on “’change” and make fifty, or one hundred thousand dollars in speculating in stocks, at a single operation. But if he has simple boldness without caution, it is mere chance, and what he gains to-day he will lose to-morrow. You must have both the caution and the boldness, to insure success.
We were bold last week and took some speculative upside plays in gold and yesterday we used a little caution and put in an order to cover with a bullish spread on GLL (April) as well as offering .50 for 5 GLL Apr $11 calls in our $100K Portfolio. We didn’t get filled yesterday but hopefully today and, once those are filled, we’ll look at a possible upside play on UGL, as we will have our defenses in place. Just because we think the move is silly, doesn’t mean we aren’t willing to make money on it! While people buying GLD for $114 per share may hope to make 50% if gold goes to $1,800, we’ll be looking at the UGL Jan $49/53 bull call spread for $2 ($200 per contract), which will gain 100% if gold goes to $1,250. Speculation is all well and good, but you don’t have to be an idiot about it…
Vincent Fernando of Money Game
Seasonally-adjusted initital jobless claims fell 35,000 from last week to 466,000. Yet they rose 68,080 on an unadjusted basis. This basically means they rose less than normal for this time of year.
Department of Labor: The highest insured unemployment rates in the week ending Nov. 7 were in Puerto Rico (6.2 percent), Oregon (5.5), Alaska (5.1), Nevada (5.1), Pennsylvania (4.9), Wisconsin (4.9), Arkansas (4.7), California (4.7), Michigan (4.6), North Carolina (4.6), and Washington (4.6).
The largest increases in initial claims for the week ending Nov. 14 were in Florida (+1,313), Indiana (+607), Hawaii (+278), and North Dakota (+81), while the largest decreases were in California (-7,987), Texas (-4,710), Pennsylvania (-4,321), Wisconsin (-2,716), and Ohio (-2,486).
Check out the official release here.
It’s easy for forecasters and amateur statisticians to draw future market conclusions based on select past performance. At every twist and turn of the credit crisis investors have compared and contrasted the current recession with those of the past. In a recent research report Goldman Sachs goes into the many similarities between 2003 and 2009 and the potential for 2010 to mirror 2004. Goldman notes:
As the macro data flow has slowed to a trickle, the weight of the evidence still points to continued, but gradual, improvement. And beyond the data momentum, financial conditions remain supportive for equity risk generally, and for our tactical long positions as well. 2004 contained many similar challenges to what we face on the cusp of 2010: waning cyclical momentum, fiscal drag and exit policy fears.
Based on these similar macro themes Goldman draws some conclusions as to how to play the potential 2010 outcome based on the performance of various asset classes in 2004:
Clear direction emerges earlier in sectors and macro themes relative to the index. Cyclical sectors, and not defensives, were still the right places to be long in 2004, the energy sector was a clear relative outperformer from early in the year, and cyclical macro tilts such as Growth and CHICON (China cyclicals relative to Consumer cyclicals) break out on the upside from mid-2004. But in most cases, the overall returns over the year are in modest single digits with several intra-year ups and downs. If next year is anything like 2004 in this respect, then timing entries and exits nimbly will be as important as identifying the right places to be long and short.
For those that remember, 2004 was an extraordinarily mundane year for equities following the excitement of 2003. Volatility slowed to a trickle and equity returns were closer to the historical norm. Goldman believes this, combined with a weaker economy, will make for a much more challenging investing environment:
But in each case, the overall returns over the year are in modest single digits with several intra-year ups and downs. If next year is anything like 2004 in this respect, then timing entries and exits nimbly will be as important as identifying the right places to be long and short. And, with recent momentum at our backs, we do think that culling winners even at modest returns, may be in order.
Of course, as I’ve often pointed out, it’s fairly foolish to based ones investment decisions based on one data point out of hundreds. In my opinion, the current deleveraging process is unlike any recession the modern economic world has ever seen and that means the outcomes are unpredictable based on past data. The challenges ahead of us are numerous and the differences between the business based recession of 2003 and the consumer based recession of 2009 are staggering. But who am I to say that the almighty Goldman Sachs is wrong?
Today we’re looking at the dollar index and some important elements that I see building in this market and want to bring to your attention. In this short video Adam outlines the key areas to watch for and one important component that you may not have seen. He thinks this factor could, in fact, be a short term game changer for this market.
Click the chart to view the video below
Kenneth Harney at the SF Chronicle lists a few possible changes: FHA looking for ways to pump up its reserves. Harney lists four possible changes:
Currently, FHA charges an “up-front” mortgage insurance premium of 1.75 percent of the loan amount. Most borrowers roll that into their loan and finance it. FHA also charges an annual premium, paid in monthly installments, of either 0.5 percent or 0.55 percent, depending on the down payment. To rebuild reserves, FHA could … raise the up-front premium to 2 percent or as high as the current statutory maximum of 2.25 percent. It could also raise the annual fee…
FHA is by far the most lenient and flexible player when it comes to evaluating applicants’ creditworthiness.
I think the most likely changes are higher insurance premiums, lower seller concessions, and tougher standards.
| IN ONE HOUR OF TRADING YOU CAN MAKE MORE MONEY THAN MOST PEOPLE DO SLAVING AT A DEAD END JOB ALL WEEK LONG… |
| I didn’t believe it either until I saw the proof with my own eyes…
Click here for the full report Genius chess player with a certified I.Q. of 157 unveils his ’sneaky’ (and 100% legal) trading system which can… … secure net profits up to $1250 |
