Odd market action today, in which curious rumors surfaced out of quant land, that Goldman was being used as a gold surrogate for liquidation purposes. We closed at last Friday intraday high: should the market continue upward, the NFP news from last week that the economic situation is now indicative of a double dip will be fully priced in. Alas, volume now refuses to confirm trends on either the upside or the downside. More and more investors will simply not participate whatsoever in this incredibly volatile market. Below is a PV of the SPY (no ES today due to the June-September roll): volume is now consistently below cumulative averages.
Courtesy of JESSE’S CAFÉ AMÉRICAIN
This is making the rounds as a rumour, but it has credibility, and I have been expecting it as they need to set aside some serious reserves for litigation and damages caused.
The company is in deep trouble, and the CEO is making all the classic errors we learned not to do in the crisis management courses in business school.
The rumour is so widespread that I am sure it will make the wires somewhere and I will look for it.
I do not expect BP to declare bankruptcy as this story suggests, although it would be an interestingly foul gambit to try and avoid its liabilities.
British Petroleum had been at the heart of darkness many years ago, as in the example of the Iranian coup d’etat of 1953 and imprisonment of Iran’s democratically elected leader Mohammad Mosaddegh, followed by over twenty years of tyranny and torture. Some think this is what had inspired Eisenhower’s parting words about the Anglo-American military-industrial complex.
Although through aggressive use of public relations had improved its image, BP has long been noted by investigative reporters and environmentalists as a bad boy among the corporate multinationals, preferring to spend money on PR, politicians, and regulators rather than planning and safety. BP: Slick Operator and BP’s Other Spill by Greg Palast for example, and those radicals at the Seattle Times: BP’s Trail of Accidents and Scandals Lead to Alaska. When Sarah Palin, former governor of Alaska winks and says “I’m your gal,” she just might not be winking at you, chump change.
I thought it was interesting that they bought the search term “oil spill” from Google to better direct the flow of information from the public.
And then of course there is the issue of insider selling that occurred prior to the more complete release of the extent of the Gulf oil leak disaster involving BP executives and former executives, and of course Goldman Sachs. Gulf Oil Spill to Drag Goldman Sachs into Trading Scandal?
This is not to say that all corporations are corrupt all the time, not at all. But neither are they naturally good, all the time. It underscores the need for regulation, and investigations into the type of corruption which was apparently widespread in the agencies that regulated the banks, the oil drilling industry, and the stock markets. Maintaining a system of justice, the rule of law, is not something you do once and then sit back and then trust to the natural goodness of men and women to limit their profits to do the right thing when no one is watching.
“How are the mighty fallen, and the weapons of their warfare perished.”
From the Federal Reserve: Beige book
Economic activity continued to improve since the last report across all twelve Federal Reserve Districts, although many Districts described the pace of growth as “modest.”
On Real Estate:
Residential real estate activity improved since the last report. Most Districts noted an increase in home sales and construction prior to the April 30th deadline for the homebuyer tax credit, with contacts in many of these Districts also indicating a corresponding slowing in activity in May. Tight credit, the elevated inventory of homes available for sale, and the “shadow inventory” of foreclosed properties on banks’ balance sheets held back residential development in the New York, Cleveland, Atlanta, and Chicago Districts. Commercial real estate activity generally remained weak. Office, industrial, and retail vacancy rates continued to drift upward in many Districts putting downward pressure on rents. However, lower rents were said to have led to an increase in leasing activity in New York, Philadelphia, Richmond, Kansas City, Dallas, and San Francisco. The elevated inventory of existing properties for sale or rent continued to weigh on new private nonresidential construction. However, stronger industrial demand was noted in several Districts. Public construction increased in Philadelphia, Cleveland, and Chicago, but slowed in Minneapolis.
This is the first mention of shadow inventory on banks’ balance sheet (at least recently).
Even non-sports fans have heard by now about the recent debacle known as Baseballgate.
With two outs in the ninth inning, a first-base umpire called “SAFE” when the runner was clearly “OUT.” But this was no ordinary missed call; it cost Detroit Tigers pitcher Armando Galarraga a perfect game.
And as the blogosphere flooded with memories of other historic slip-ups that cost “so and so” star “this and that” honor. Demands for the commissioner of baseball to reverse the bad call grew louder by the hour.
It was indeed a very bad call. But the biggest, baddest call of all was not made on a sports field. It was made in the field of finance — specifically on the stock market. To wit: The mainstream umpires of finance stood near first base, and in April made this emphatic call for the uptrend in stocks:
“SAFE!!”
Call Your Own Shots — Remove Dangerous Mainstream Assumptions from Your Investment Process. Elliott Wave International’s FREE, 118-page Independent Investor eBook shows you exactly what moves markets and what doesn’t. You might be surprised to discover it’s not the Fed or “surprise” news events. Click here to learn more and download your free, 118-page ebook.
In case you missed the event, here’s an instant replay:
- “Stocks Remain In A Powerful Bull Market.” (April 10 Bloomberg)
- “Stocks Haven’t Lost Their Appeal As The Market Goes Up, Up, And Away.” (April 21 US News & World Report)
- “You can use any number of words to describe this bull market. Frothy is not one of them. This market is reasonably priced.” (April 21 AP)
- “US Stocks Post Longest Winning Streak Since 2004. The recovery should be sustainable and that will drive the market.” (April 24 Bloomberg)
- “All the economic reports are pointing up… despite lingering worries over debt problems in Greece. Right now, there is virtually no evidence of a top.” (April 30 USA Today)
Yet from its April 26 peak, the DJIA turned down in a jaw-dropping 1000-plus point selloff. The market suffered its worst May since 1940.
The markets have no commissioner to reverse the bad call of the financial mainstream. But at least one team of analysts remained ahead of the most game-changing moves in the world’s leading stock market, including a forecast that called the rally “OUT” in April 2010. Consider the following insight from EWI President Robert Prechter:
On April 16, Prechter published his April Elliott Wave Theorist titled “”Deadly Bearish Picture.” Notice the dates.
“We can project a top…between April 15 and May 7, 2010. It is rare to have technical indicators all lined up on one side of the ledger. They were lined up this way — on the bullish side — in late February-early March of 2009. Today, they are just as aligned, but on the bearish side.”
April 26 marks the high for the DJIA, followed by the devastating drop on May 7 — exactly within the date range Prechter’s forecast called for.
Call Your Own Shots — Remove Dangerous Mainstream Assumptions from Your Investment Process. Elliott Wave International’s FREE, 118-page Independent Investor eBook shows you exactly what moves markets and what doesn’t. You might be surprised to discover it’s not the Fed or “surprise” news events. Click here to learn more and download your free, 118-page ebook.
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( click to enlarge )
( click to enlarge )Earnings Announcements for Wednesday
Alliance One International, Inc. – AOI
AMERCO – UHAL
Analogic Corporation – ALOG
APPLIED NEUROSOLUTIONS INC – APSNE.OB
Ciena Corporation – CIEN
DPAC Technologies Corp. – DPAC.OB
Enzo Biochem – ENZ
Ferrellgas Partners – FGP
GameTech International – GMTC
ITEX CORP – ITEX.OB
Korn Ferry International – KFY
Luby’s, Inc. – LUB
Magal Security Systems – MAGS
Men’s Wearhouse – MW
Navistar International – NAV
ORAMED PHARM INC – ORMP.OB
Piedmont Natural Gas – PNY
PURE Bioscience – PURE
Repligen Corporation – RGEN
Shuffle Master, Inc. – SHFL
Spartech – SEH
Stewart Enterprises, Inc. – STEI
SYNUTRA INTL INC – SYUT
Thor Industries – THO
Titan Machinery Inc. – TITN
Ulticom – ULCM
Vail Resorts – MTN
VIMICRO INTERNATIONAL CO-ADS
Virco – VIRC
Pattern is cup and handle
MFA – Mfa Financial
CAL – CONTINENTAL AIRLINES
AAI – AirTran Holdings, Inc
ADCT – ADC Telecommunications
LO – Lorillard Inc
CTRP – CTRIP.COM INTL LTD ADS
NHP – NATIONWIDE HLTH PRO
ARBA – Ariba, Inc.
EGY – Vaalco Energy Inc
DECK – Deckers Outdoor Cor
ALSK – Alaska Communications
LGF – Lions Gate Entertaiment
ANSS – ANSYS, Inc.
Unusual volume
TLCR – Talecris Biotherape
KRY – Crystallex International
APPY – ASPENBIO PHARM
HNAB – Hana Biosciences
VIVK – Vivakor Inc
HRBR – Harbor Bioscience
BTOW – Britton International
DANOY – GROUPE DANONE
GRZ – Gold Reserve Inc
EVTN – Enviro Voraxial Tec
BKPG – Bark Group Inc
MBYL – Endeavor Exploration
RDIAF – ROCKWELL VENTURES INC
MYMX – Mymetics Corporation
DCGNQ – Decode Genetics
ALRT – ALR Technologies Inc
UUGRY – UNITED UTILITIES P L C
EVSP – Glas-Aire Industries
GYSN – Greyson International
RLGT – Radiant Logistics Inc
ALPMY – Astellas Pharma Inc
SLTZ – American United Glo
ZNOM – Znomics Inc
LIHRF – Lihir Gold Limited
EROCR – Eagle Rock Energy P
AHBIF – Inbev SA
PAI – Western Asst
ETEV – Ethos Environmental
WLSA – WIRELESS AGE COMMUN
OCTI – OCTuS Inc
CCMM – Charter Communications
SPHT – Secure Path Tech
FMNPQ – Fremont General Corp
PXMFF – Philex Mining Corp
Bullish Signal Reversal Alerts
ACUR Acura Pharmaceuticals, Inc.
AVNW Aviat Networks Inc.
BRCD Brocade Communications Systems, Inc.
BRKR Bruker Corp.
CAEI China Architectural Engineering, Inc.
CNMD CONMED Corp.
CVVT China Valves Technology Inc.
CXDC China XD Plastics Co. Ltd.
DDIC DDi Corp.
DLLR Dollar Financial Corp.
EBAY eBay, Inc.
ESIO Electro Scientific Industries, Inc.
FBCM FBR Capital Markets Corp.
FMER FirstMerit Corp.
GXDX Genoptix Inc.
IFSIA Interface, Inc.
LFUS Littelfuse, Inc.
MTRX Matrix Service Co.
MYRG MYR Group, Inc.
NWSA News Corp. Ltd.
OPLK Oplink Communication, Inc.
OXPS OptionsXpress Holdings Inc.
PSUN Pacific Sunwear of California, Inc.
RGEN Repligen Corp.
SHLM A. Schulman, Inc.
SMOD SMART Modular Technologies Inc.
STEL StellarOne Corp.
SUPG SuperGen, Inc.
VISN VisionChina Media Inc.
WFSL Washington Federal, Inc.
WMAR West Marine, Inc.
The Labor Department reported that nonfarm payrolls rose by 431,000 in May, however, a full 411,000 of these jobs were temporary positions for work on the 2010 U.S. Census.
Aside from the high level of government hiring, there were only modest job gains in manufacturing (+29,000), professional and business services (+22,000), and education and healthcare services (+17,000) while construction payrolls tumbled (-35,000).
Total nonfarm payrolls for March were revised lower, from a gain of 230,000 to 208,000, while the April gain of 290,000 saw no revisions, meaning that, when the Census hiring is excluded, nonfarm payrolls were virtually unchanged in this report.
In the household survey, the unemployment rate fell from 9.9 percent to 9.7 percent, however, total employment also fell, down 35,000 to 139.4 million.
Some 322,000 people dropping out of the labor market (i.e., no longer officially counting as “unemployed”) allowed the jobless rate to fall and the broader U6 under-employment rate (including those who have given up looking for work and those settling for part-time work) also fell, from 17.1 percent to 16.6 percent.
RanSquawk report that according to “well-placed sources in Beijing” China is now buying EUR above 1.20 to stabilize the currency in advance of a G20 meeting later in June, per a previous agreement with the G20 members. This surely explains why the euro magically got vacuumed up by 60 pips in a manner of seconds as soon as a breach of 1.20 was imminent. Alas, as we pointed out previously, the half life of central bank interventions is now laughable: at some point interventions using fiat methods will have no impact whatsoever. On the other hand, all those who are short the market, and thus the euro, and in the process are facing the Fed, the ECB, the SNB (or not so much anymore), and now the PBoC, now have a whole new appreciation of the word “Sparta”
The May ISM Non-Manufacturing index was at 55.4%, unchanged from April (slightly below expectations). The employment index showed some growth after 28 consecutive months of contraction.
From the Institute for Supply Management: May 2010 Non-Manufacturing ISM Report On Business®
Economic activity in the non-manufacturing sector grew in May for the fifth consecutive month, say the nation’s purchasing and supply executives in the latest Non-Manufacturing ISM Report On Business®.
The report was issued today by Anthony Nieves, C.P.M., CFPM, chair of the Institute for Supply Management™ Non-Manufacturing Business Survey Committee; and senior vice president — supply management for Hilton Worldwide. “The NMI (Non-Manufacturing Index) registered 55.4 percent in May, the same percentage as registered in both April and March, indicating continued growth in the non-manufacturing sector. The Non-Manufacturing Business Activity Index increased 0.8 percentage point to 61.1 percent, reflecting growth for the sixth consecutive month. The New Orders Index decreased 1.1 percentage points to 57.1 percent, and the Employment Index increased 0.9 percentage point to 50.4 percent, reflecting growth for the first time after 28 consecutive months of contraction. The Prices Index decreased 4.1 percentage points to 60.6 percent in May, indicating that prices are still increasing but at a slower rate than in April. According to the NMI, 16 non-manufacturing industries reported growth in May. Respondents’ comments remain mostly positive about current business conditions and the general direction of the economy.”
Last week looked and felt like a pivotal week for both stocks and commodities. The past two weeks have had investors and traders in a panic as they try to find safe investments for their money. After watching and reviewing the panic selling in the market it looks as though the majority decided to sell everything and be in cash for the time being. This is bullish for the stock market.
I will admit it has been tougher to trade recently because of increased risk levels due to the large 2-4% sell offs and rallies happening within minutes… While this is amazing for disciplined and experienced traders who are able to pull the trigger getting in and out with quick profit in the matter of minutes, this same price action can blow up trading accounts of those who do not have a trading strategy, money management and the discipline to take profits and cut losses very quickly. The speed of the rallies and sell offs is the matter of being up or down thousand of dollars in the matter of 5-10 minutes… That is one of the reasons I have stepped back from being aggressive and into more of an observation mode playing with small amounts of money and focusing on the larger trends at.
My #1 goal is to make subscribers money with the least amount of risk and watching the market swing 2-4% in minutes makes it extremely difficult to get everyone in and out positions with a profit before the market changes directions. As much as I love trading, some times the best position is to have small ones or be in cash.
GLD – Gold ETF Trading
Here is my weekly updated chart of gold as it works its way through the correction from last year. The daily chart looks to be forming a larger Cup & Handle pattern which is extremely bullish. If this pattern does a text book move then we could see GLD reach $140 and spot gold would reach the $1400 area.
That being said this pattern still has to complete the handle portion which could easily last another 4 weeks, so I am not in a panic to add more to our position.
SLV – Silver ETF Trading
Silver is in much of the same situation. Because of the added volatility in silver the charts do not look quite the same but they are similar in many ways… Silver is used a lot for industrial purposes and because the economy which is very weak still (though it is getting better) we are not seeing silver demand rise much. If silver can break this large resistance level then we could see silver surge to $25 (25%) this year.
USO – Oil Fund Trading
USO (Oil) has held up really well in the past 12 months but the recent sell off has seriously damaged the bullish outlook I had not long ago. While it is oversold and looks to have started a bounce last week the chart is pointing to lower prices over the longer term… This USO fund does have contago which makes this fund under perform the actual price of oil. The current prices of oil are still trading at a key support level and could post nice bounce if not trigger a new rally. The problem with following some ETF’s which have contago is that you do not see the real price action of the commodity. But that is were I come in as I track the underlying commodity and relate it to ETFs for you.
SPY – SP500 ETF Trading
The Stock Market (SP500) sure has been a roller coaster. The chart below shows you what happened in January for the last correction and where we stand currently in comparison. If a setup is obvious in the financial market there is a very high chance it will not work out as planned and by knowing this it allows us to be cautious and take profits at key short term support and resistance levels.
Trend Trading Conclusion:
In short, I feel gold and silver will drift around to digest the recent move up and to form the handle portion. Oil looks to have put in a short term bottom and if we get a small pullback in the coming days to test the intraday chart breakout level and touch the support trend line we could look to take a position.
We tend to see the most price appreciation during the final stages of a trend and we could have seen that on the US Dollar over the past 6 weeks. It looks as though the dollar could have put in a double top. If the dollar rolls over it would help boost precious metals, oil and stocks… But we will not know it’s a top until there is a clear trend reversal which in any case will be weeks before that type of price action can unfold.
As for the SP500, we have seen the same level of selling as we did in Feb-March 2009. High volume panic selling has ruled the market since late April. There are equal arguments for saying the market has bottomed with all the panic selling and that we should start another large rally lasting 8-12 months or one could argue this is capitulation volume signaling massive distribution of shares and now every rally/bounce will be sold… Personally I am torn between the two… but lean more towards higher prices with a multi month grind up at slow rate…
If you would like to receive my trading analysis, thoughts and low risk trading setups check out my trading services at www.TheTechnicalTraders.com
Chris Vermeulen
The famous “10% correction” that market pundits talk about sounds so nice and tidy, so predictable and tolerable. It’s as if this “cute little correction” came neatly wrapped, looked like an M&M candy character, and smiled at you and your family after you open the box.
If only it were so.
“If all the market ever did on the downside was dip 10% once every two years, then investing would be easier than shooting fish in a barrel. Obviously, this is not the case. The fact is that the stock market’s movements are a fractal. Declines come in widely varying sizes.” – The Elliott Wave Theorist, December 2001
There is no way to know in advance whether a particular market downturn will fall 11%, 35% or 89%. Even the Wave Principle only forecasts probabilities — not certainties.
Read Part One of Robert Prechter’s Latest Two-Part, April-May Theorists FREE
The April-May Theorist series entitled “Deadly Bearish Big Picture” reveals a lucid picture for 2010-2016. It’s the flipside of Robert Prechter’s February
2009 Forecast for a ‘Sharp and Scary’ Rally. Click here to download the 10-page part one for FREE now.
One thing that is certain — every bear market reached a 10% drop before prices fell even further.
And another near-certainty is that too many money managers will use the phrase “buying weakness” when the market falls 10%. On May 7, after the Dow Jones had fallen several hundred points in a few days, two money managers being interviewed side by side said in effect, “Buy.” Not a word was said about caution. Not a word was offered about even the possibility of a major trend change in the market.
On the other hand, it was refreshing to hear a representative of a fund family say, “I don’t know why anyone needs to be a hero, and try to catch the bottom.”
You may be tempted to jump back in because the market has recently “corrected.” Yet consider what EWI’s Short Term Update subscribers read on May 7 — “. . .we would caution that some of history’s largest stock declines have occurred only after stocks were deeply oversold.”
Two key features of the Elliott Wave Principle is its ability to establish a price target for the current trend, and a time range.
In his latest Elliott Wave Theorist (a two-part April-May issue), Robert Prechter tells why market participants should look far beyond a mere 10%-15% move in the now-unfolding trend.
Read Part One of Robert Prechter’s Latest Two-Part, April-May Theorists FREE
The April-May Theorist series entitled “Deadly Bearish Big Picture” reveals a lucid picture for 2010-2016. It’s the flipside of Robert Prechter’s February
2009 Forecast for a ‘Sharp and Scary’ Rally. Click here to download the 10-page part one for FREE now.
