DOE Crude Inventories for week of December 22nd:
Crude inventories dropped more than 8 mln barrels vs. consensus estimate of 2.5 mln... Holy Cow! in the words of the great Phil Rizzuto. Gasoline inventories rose by nearly 3 mln barrels vs the consensus estimate of 750K. Distillates were 472K vs. consensus estimate of 500K.
Some analysts are saying the recent fog and grog problem at the Houston ship channel account for these wild readings. Thus far, crude is up only 18-cents and nat gas is holding to a rebound of 2.5%.
Thursday, December 28, 2006
Post Data
Better than expected Consumer Confidence, Chicago PMI and Existing Home Sales, but Euro still up 20 against the dollar and gold hanging on to a gain of about $5. interesting.
12/28/2006 Morning Market Comment
Last night I left off with a little red-flag dollar missive. This morning the dollar is falling - with the euro up 75 points... (Read about it here) on more ECB jawboning. Jobless claims rose by a scant 1k. 10 a.m. is when there's further market moving potential with Conference Board Consumer Confidence and Existing Homes Sales. I've decided to jump back into gold futures again with a wider stop loss in light of recent negative developments in dollar sentiment and geopolitical concerns which have given gold more a safe have luster again. Even the Yuan in China rose to its highest point against the buck (Click here) ahead of the long New Year's holiday in that part of the world. Depending on the data at 10, I may add more to the gold position. This is a trade that I'm going to be in for the long haul and plan to add to in the New Year even into any weakness.
By the way, one of the blogs which I check out on a regular basis is Kevin's Market Blog. Today he has an especially insightful post about Jake Bernstein's Rules of Trading which is definitely worth a look: http://kevinsmarketblog.blogspot.com/2006/12/trading-rules.html.
Marketwatch characterizes this morning's action in stock futures as the market being on "pause" after the Dow's run to yet another lifetime high. They also devote some space to Apple (AAPL) which is down only about 2% (Click Here). I thought Howard Lindzon did a clever job blogging about the potential play on words for possible Apple headlines (http://www.howardlindzon.com/) in light of what is rapidly becoming known as Apple-gate on the Street.
In addition to Euro strength, we're also seeing some bounce to the ounce in nat gas - rebounding after getting slammed earlier in the week.. even a modest bid to crude oil ahead of inventory data a little later this morning.
Barrons.com alerts to heavy insider transactions:
"Insider sales overall rose to $2.8 billion for the week ended Dec. 22 from $1.6 billion the week before, according to Thomson Financial. Most of the selling is options-related as the average premium shot up to 70%, generally a high level. The number of sellers outpaced buyers 2.7 to 1, a bearish sign.Insider sales overall rose to $2.8 billion for the week ended Dec. 22 from $1.6 billion the week before, according to Thomson Financial. Most of the selling is options-related as the average premium shot up to 70%, generally a high level. The number of sellers outpaced buyers 2.7 to 1, a bearish sign."
But then Barron's then goes on to quote a market maven who says the insider selling is not as bad as selling that preceded recent bear markets... so carry on... no worries.
It appears that prosecutors investigating the radiation poisoning of the former Russian spy in London last month are doing what amounts to "following the money"... and that there may be a tie to Yukos, according to this report in The New York Times. Truth is indeed stranger than fiction.
By the way, one of the blogs which I check out on a regular basis is Kevin's Market Blog. Today he has an especially insightful post about Jake Bernstein's Rules of Trading which is definitely worth a look: http://kevinsmarketblog.blogspot.com/2006/12/trading-rules.html.
Marketwatch characterizes this morning's action in stock futures as the market being on "pause" after the Dow's run to yet another lifetime high. They also devote some space to Apple (AAPL) which is down only about 2% (Click Here). I thought Howard Lindzon did a clever job blogging about the potential play on words for possible Apple headlines (http://www.howardlindzon.com/) in light of what is rapidly becoming known as Apple-gate on the Street.
In addition to Euro strength, we're also seeing some bounce to the ounce in nat gas - rebounding after getting slammed earlier in the week.. even a modest bid to crude oil ahead of inventory data a little later this morning.
Barrons.com alerts to heavy insider transactions:
"Insider sales overall rose to $2.8 billion for the week ended Dec. 22 from $1.6 billion the week before, according to Thomson Financial. Most of the selling is options-related as the average premium shot up to 70%, generally a high level. The number of sellers outpaced buyers 2.7 to 1, a bearish sign.Insider sales overall rose to $2.8 billion for the week ended Dec. 22 from $1.6 billion the week before, according to Thomson Financial. Most of the selling is options-related as the average premium shot up to 70%, generally a high level. The number of sellers outpaced buyers 2.7 to 1, a bearish sign."
But then Barron's then goes on to quote a market maven who says the insider selling is not as bad as selling that preceded recent bear markets... so carry on... no worries.
It appears that prosecutors investigating the radiation poisoning of the former Russian spy in London last month are doing what amounts to "following the money"... and that there may be a tie to Yukos, according to this report in The New York Times. Truth is indeed stranger than fiction.
Gold
I've jumped back into the gold frey this morning at $632.10... more in the morning market comment a little later.
Wednesday, December 27, 2006
The Dollar Conundrum
With the Dow passing and closing above 12,500 for the first time stocks remain all the rage - the dollar? Who gives a ... well, never mind. The dollar got a reprieve from the new home sales which the market interpreted as being better than expected, but before the data came out, things weren't looking so happy for the dollar on word that the UAE decided that it will be diversifying some if its reserves away from the buck (Click Here). There was that flurry of angst over the dollar around Thanksgiving, but that's all largely been forgotten as the blue chips rage higher like the Colorado River used to before they dammed it up. Since the U.S. current account deficit requires a 'round the clock need from every central bank around the globe to continuously buy dollar based financial instruments, today's hardly noticed UAE story may have been the most important piece of news of the day.
As the Apple Turns - AAPL
Tonight's after-hours action in Apple Computer shares was nothing short of extraordinary following an almost unbelievable regular trading session. After rallying from a 5-percent early morning tumble to finish regular trading 1-cent higher, Apple pretty much drifted from 4 p.m. until 7:48 p.m. It was at that point that the fireworks re-erupted when the Financial Times moved a report concerning a huge stock options grant to AAPL CEO Steve Jobs in 2001 that was not authorized (or 'authorised' as the Brits spell it) by the company's board (Click Here). The report was eventually picked up by CNBC which sent AAPL down 3% during the final 12 minutes of after-hours trading in one of the more unusual bouts of late, late after-hours activity I've ever seen.... level 2 quotes went nuts.
We'll see how things shake out tomorrow morning. Call me loony, but I find it hard to believe that 3% can be melted off the bid on shares of a 69-BILLION dollar company literally in the final 12 minutes of late after-hours trading because some small timers unloaded their odd-lots of AAPL because they heard only half the story on CNBC about Jobs receiving the improper grant, but not surrendering them. Seeing that bid evaporate in real time was remarkable - not often seen since stocks are usually halted pending news - and fortunately 8 p.m. came along to stop everyone dead in their tracks until tomorrow morning. I'm willing to concede that only about $12 mln worth of volume was involved in the late selling spree, so if I'm wrong, I'm wrong - and after hours trading be damned if the market can be manipulated that sharply.
We'll see how things shake out tomorrow morning. Call me loony, but I find it hard to believe that 3% can be melted off the bid on shares of a 69-BILLION dollar company literally in the final 12 minutes of late after-hours trading because some small timers unloaded their odd-lots of AAPL because they heard only half the story on CNBC about Jobs receiving the improper grant, but not surrendering them. Seeing that bid evaporate in real time was remarkable - not often seen since stocks are usually halted pending news - and fortunately 8 p.m. came along to stop everyone dead in their tracks until tomorrow morning. I'm willing to concede that only about $12 mln worth of volume was involved in the late selling spree, so if I'm wrong, I'm wrong - and after hours trading be damned if the market can be manipulated that sharply.
A number of analysts today defended the stock which leaves me wondering who's left for tomorrow morning, and tonight Drudge has the FT story emblazoned in red which may make for a rough go in the A.M.... I'm trying longs, but it's not looking good at this point.
As mentioned earlier in the week, I've been off to the sidelines amid the thin holiday volume in both futures and stock trades. With respect to Apple, the smartest thing would be to WAIT until the SEC filing is out this Friday - likely after the close on Friday (wouldn't it be fun if Apple surprised everyone with an earlier than expected filing?!). Until then, longs and shorts will be flying in a thick fog until that filing is out... an awful position to be in. No one knows for sure exactly what's going on - it's all a crap shoot until we get 'official' information. There will be plenty of time to jump in next week to either ride the stock back up if all of this is much ado about nothing, or ride the stock down further if we're looking at a protracted saga involving a formal SEC and Justice Department process.... or to simply pass. The FT's "sources", or assurances from Wall Street analysts just aren't enough for me.
November New Home Sales
By all media accounts today's data on New Home Sales portrays a better than expected performance during the month of November. My realtor wife was quick to chide and remind that the government's figures do not take into account cancellations, but count signed contracts as sales. Oy. She's right. And you'll recall that Ara Hovnanian and Robert Toll both noted a heavy rate of cancellations during their recent earnings conference calls. So these November numbers are muddy, but the markets will take what they can get; stocks are getting a lift, bonds pulling back off this data.
Natural Gas
While we're enjoying natural gas prices in the $6 per decatherm, or million BTU, or 1,000 cubic feet price range here in the U.S. thanks to the mild winter and abundant supply, the ongoing nat gas crisis involving Belarus is nothing short of astrounding. The Stratfor people (see link in the right column) sent this email dispatch a little while ago as part of their daily updates of problems around the world:
"BELARUS: Belarusian First Deputy Prime Minister Vladimir Semashko said Belarus will increase transit fees for Russian natural gas going though its territory to Western Europe if Russian energy giant Gazprom increases its prices for gas to Belarus. Semashko's comment follows Gazprom's announcement that it will increase the cost of gas for Belarus from $46 per 1,000 cubic meters to $200."
Keep in mind 1 cubic meters = 35.3146667 cubic feet (ah, what would we do without Google), so even at $200 per 1,000 cubic meters that price is still pretty darned good... but still a gargantuan shock to various parties involved. Read more about the situation via this Business Week story. Bigger and nastier natural resources disputes are just one more pleasant thing to look forward to as we move deeper into the 21st century.
"BELARUS: Belarusian First Deputy Prime Minister Vladimir Semashko said Belarus will increase transit fees for Russian natural gas going though its territory to Western Europe if Russian energy giant Gazprom increases its prices for gas to Belarus. Semashko's comment follows Gazprom's announcement that it will increase the cost of gas for Belarus from $46 per 1,000 cubic meters to $200."
Keep in mind 1 cubic meters = 35.3146667 cubic feet (ah, what would we do without Google), so even at $200 per 1,000 cubic meters that price is still pretty darned good... but still a gargantuan shock to various parties involved. Read more about the situation via this Business Week story. Bigger and nastier natural resources disputes are just one more pleasant thing to look forward to as we move deeper into the 21st century.
Apple - AAPL
It looks like the Law.com story has roused many Wall Street analysts out of vacation rest to defend Apple. If this were a normal week, analyst comments would have been out en masse by the 9:30 open, but now at just before noon east coast time some damage control is under way. According to flyonthewall.com JPMS, PIPR and MSCO have come out to defend the stock. Piper even went as far as saying there is only a 5% chance Steve Jobs has direct involvement with falsified documents. The stock is now close to going green. . That's an impressive comeback from a 5% drubbing this morning which took the stock into very oversold territory. This is a drama that will no doubt play out in the weeks ahead and will likely keep a cloud of uncertainty hanging over the shares... or will it? The street seems content to dismiss this morning's news as old and inconsequential.
WTI - Texas Tea - West Texas Intermediate Crude
Back at it's 50 day moving average...
This has been good news for us at the pump! 50 dma is an interesting area for crude. The last big break below the 50 dma sent WTI from $73 right down to $57. Does that mean crude is going to fall another $20? Wouldn't that be wonderful, but the answer to that is in the realm of "now way, Jose". Already today, the bears have lost their ambition with follow through crude selling of only 17-cents more to the downside following yesterday's slide. If the bears acquire further gumption for a further push lower the $57 area remains key. The chart clearly shows that you can draw a line just above $57 from today all the way back to March of 2005 as support/resistance. If ever there was a time for the bears to test this $57 support area again, the coming early January time frame (if this mild weather can stick around) ahead of another OPEC output cut and months before the summer driving season would be it. Whether they will is a completely different story, especially with major geopolitical tensions looming on the horizon. The complete shrugging off of the UN-Iran sanctions was somewhat surprising, but until crude breaks $60 I'm not convinced the market has thrown all geopolitical caution to the wind.
This has been good news for us at the pump! 50 dma is an interesting area for crude. The last big break below the 50 dma sent WTI from $73 right down to $57. Does that mean crude is going to fall another $20? Wouldn't that be wonderful, but the answer to that is in the realm of "now way, Jose". Already today, the bears have lost their ambition with follow through crude selling of only 17-cents more to the downside following yesterday's slide. If the bears acquire further gumption for a further push lower the $57 area remains key. The chart clearly shows that you can draw a line just above $57 from today all the way back to March of 2005 as support/resistance. If ever there was a time for the bears to test this $57 support area again, the coming early January time frame (if this mild weather can stick around) ahead of another OPEC output cut and months before the summer driving season would be it. Whether they will is a completely different story, especially with major geopolitical tensions looming on the horizon. The complete shrugging off of the UN-Iran sanctions was somewhat surprising, but until crude breaks $60 I'm not convinced the market has thrown all geopolitical caution to the wind.
12/27/2006 Morning Market Comment
Apple Computer is a stock that's been featured in this space a number of times recently for the unattractiveness of its stock chart after having been one of the grandest of high flyers not only of the year but of the past several years. This morning it's taking a 4% beating ahead of the open in the style of many want out, only a small one door exit. 
The first sign of trouble was it's failure to move past the $100 mark; it simply it a brick wall in the low 90's in late November, consolidated only briefly and then headed south and never looked back. This morning the stock is sliding as stock options troubles are making headlines with the element that federal prosecutors are taking a look. (Where have we heard this script before?) While the stock is close to becoming severely oversold - what's that old saying about catching falling knives? And if this news of a possible federal "probe" has any merit (that word "probe" always reminds me of a visit to my urologist and the snap of the glove), this will be a long term cloud over the stock.
Otherwise, it's looking as if the late Santa rally has further legs with continued excitement over the Ford-Toyota talks; the sale of the Minneapolis Star Tribune for $530 mln and the recent slide in the price of crude. WTI down another 30-cents this morning as natural gas continues to lead the way lower on the mild winter weather. As stated yesterday, indeed there are red flag divergences (eg. breakdown in Dow transports, QQQQ; low put to call) but as long as the S&P is able to remain above its 30 day moving average, the bulls seem good to go.
Lightreading.com's 2007 Unstrung's Look Ahead is worth a read (Click Here). Among the predictions: Sirius Satellite could be bought out and that Time Warner could be the buyer.
It's likely that next Wednesday markets will be closed in observance of the death of former President Gerald R Ford. We'll see what the regulators decide. Monday is already a market holiday for the New Year Holiday, so a Tuesday close is highly doubtful. Kudos, by the way to Reuters, for including the ticker symbol F, for Ford Motor, in one of the early obits of the former President... you can't make this stuff up.
The first sign of trouble was it's failure to move past the $100 mark; it simply it a brick wall in the low 90's in late November, consolidated only briefly and then headed south and never looked back. This morning the stock is sliding as stock options troubles are making headlines with the element that federal prosecutors are taking a look. (Where have we heard this script before?) While the stock is close to becoming severely oversold - what's that old saying about catching falling knives? And if this news of a possible federal "probe" has any merit (that word "probe" always reminds me of a visit to my urologist and the snap of the glove), this will be a long term cloud over the stock.Otherwise, it's looking as if the late Santa rally has further legs with continued excitement over the Ford-Toyota talks; the sale of the Minneapolis Star Tribune for $530 mln and the recent slide in the price of crude. WTI down another 30-cents this morning as natural gas continues to lead the way lower on the mild winter weather. As stated yesterday, indeed there are red flag divergences (eg. breakdown in Dow transports, QQQQ; low put to call) but as long as the S&P is able to remain above its 30 day moving average, the bulls seem good to go.
Lightreading.com's 2007 Unstrung's Look Ahead is worth a read (Click Here). Among the predictions: Sirius Satellite could be bought out and that Time Warner could be the buyer.
It's likely that next Wednesday markets will be closed in observance of the death of former President Gerald R Ford. We'll see what the regulators decide. Monday is already a market holiday for the New Year Holiday, so a Tuesday close is highly doubtful. Kudos, by the way to Reuters, for including the ticker symbol F, for Ford Motor, in one of the early obits of the former President... you can't make this stuff up.
Tuesday, December 26, 2006
Energy Whipsaw and a Word about WXRISK
The muted retailing selling season came even with lower energy prices both at the pump and no doubt showing up in home heating bills. Crude oil higher earlier on the Iran tensions, has done a complete about face and is now down by more than $1/bbl following the lead of a 6% natural gas slump. Over the next 10 days here in the NY Metro area daytime high temps are forecast to stay mostly in the 40s!
This doesn't mean winter is completely DOA. I've got a new link in my favorite's section to the right. It's Dave Tolleris' wxrisk.com weather blog. Dave, or DT to his friends, is a pro meteorologist based in Virginia - he is THE man when it comes to forecasting and serves a number of big name clients in the commodities world. He's also nice enough to blog and share his weather insights with anyone who stops by his blog. Just the other day DT emailed me to say that "there may still be some winter left". We'll see what that means from a trading standpoint.
Of course, sooner than you know it, we'll be talking Spring again and with that season comes the speculation and trading opportunities in gasoline ahead of the driving season, along with summer demand for natural gas to fire power plants, not to mention the threat to energy assets from hurricane season. Reliable weather knowledge is key to being able to trade in the energy markets and DT's company is at the forefront providing that type of information.
DT's blog is something I look at every day. The first thing you realize with DT's blog is that you have escaped the powder puff and scripted world of the Weather Channel, or even your local tv weather babe or dude, and have entered a nuts and bolts world of original thinking, real science and real weather forecasting that still has wit and a sense of humor.
This doesn't mean winter is completely DOA. I've got a new link in my favorite's section to the right. It's Dave Tolleris' wxrisk.com weather blog. Dave, or DT to his friends, is a pro meteorologist based in Virginia - he is THE man when it comes to forecasting and serves a number of big name clients in the commodities world. He's also nice enough to blog and share his weather insights with anyone who stops by his blog. Just the other day DT emailed me to say that "there may still be some winter left". We'll see what that means from a trading standpoint.
Of course, sooner than you know it, we'll be talking Spring again and with that season comes the speculation and trading opportunities in gasoline ahead of the driving season, along with summer demand for natural gas to fire power plants, not to mention the threat to energy assets from hurricane season. Reliable weather knowledge is key to being able to trade in the energy markets and DT's company is at the forefront providing that type of information.
DT's blog is something I look at every day. The first thing you realize with DT's blog is that you have escaped the powder puff and scripted world of the Weather Channel, or even your local tv weather babe or dude, and have entered a nuts and bolts world of original thinking, real science and real weather forecasting that still has wit and a sense of humor.
Manufacturing Contraction in Dallas and Richmond
Barely noticed, but a couple of Fed bank surveys point to weak manufacturing in the Dallas region and in Richmond (Click Here)
QQQQ and Some Other Problem Stocks
Last week I noted the troubles the Nasdaq 100 shares, or QQQQ were running into - slicing through the 50 day moving average. As demonstrated by the weekly chart below QQQQ had been trading in a sideways pattern since November even as S&P and Dow have maintained their narrow upward channels. This past week things got very ugly with what appears to be a near term top registered at just above the 44 level.
While the Nasdaq sold off more sharply than did the S&P and Dow earlier in the year, the breakdown underway in the Nasdaq at this point bears close watching given that the Dow Transports have been under heavy pressure of late. Within the Nasdaq, big names leading the way lower in recent weeks include: Apple (recently breaking through its 50 dma), Google (breaking down following a head and shoulders top) and Ebay (falling apart following a break below its 200 day moving average). If those examples aren't shabby enough, behold... Gilead's chart... Yikes, it has Sominex written all over it:
So more reasons to be cautious going into the New Year. Whether it's 2005 all over again and the markets slump and dump right away in '07, or the topping out process results in one more blow off rally and the process takes us into February is anyone's guess. But it does appear as if the winds are shifting and we're now getting a whiff from the direction the bulls have been grazing in.... potent aroma.
Ford and Toyota
The heads of Ford and Toyota held talks last week, at Ford's request. to discuss possible future partnerships... that's the word from Nihon Keizai Shimbun (Click Here, subscription required).
Retailing Ripples
Mastercard (MA) says holiday sales rose only 3% this year over last year (Click Here). This would confirm what I observed on my shopping adventures on Saturday and Sunday. On Sunday I ventured out to the 3 mln sq ft Palisades Mall expecting total retail mayhem, but easily found a parking space and the ability to pick up the few last minute items that I needed with ease. A variety of retailers from SHLD and WMT to TGT to ANF to COH are all lower today.
If there's anytime of the year when the consumer is going to pull out the stops and spend, it's during the December holiday season, yet they mustered the ability to spend just 3% more than the year before. If that doesn't point to a hangover from years of over reliance on home equity and plastic, then what does?
There's still time for retailers to salvage the season with big sales this week (though margins will be crunched). And if all else fails, the first quarter can be salavaged by turning Groundhog Day in Feburary into some sort of mega-retailing event!!
If there's anytime of the year when the consumer is going to pull out the stops and spend, it's during the December holiday season, yet they mustered the ability to spend just 3% more than the year before. If that doesn't point to a hangover from years of over reliance on home equity and plastic, then what does?
There's still time for retailers to salvage the season with big sales this week (though margins will be crunched). And if all else fails, the first quarter can be salavaged by turning Groundhog Day in Feburary into some sort of mega-retailing event!!
What's In Your Wallet? Capital One
There's some lottery ticket buying today in the January 80 and 85 calls of Capital One (COF). theflyonthewall.com noted some "unconfirmed takeover chatter" . While the call volume on both strikes is active at over 1,000 contracts, volume is still well below open interest on both... sounds like street noise at this stage. COF has a present market cap of over 23 BILLION dollars.
12/26/2006 Morning Market Comment
I took a complete day off from the markets yesterday to enjoy the holiday with the family and to cook the Christmas dinner, which if I do say so myself actually came out pretty tasty, and no one to my knowledge is suffering from e-coli this morning!
Geopolitical events are having the biggest impact on the price movements of gold and crude oil. Gold has been up as much as $10 and crude as much as nearly $1 on the latest round of tensions between Iran and the UN. Crude also got a lift from ongoing unrest in lovely Nigeria. While the sabre rattling goes on between Amhadinejad and the UN, it been interesting to watch the internal political developments within Iran, though most analysts, including the Stratfor people, think that while the average Iranian is unhappy about standards of living, Iranian foreign policy is not about to change since power in the Iranian Assembly is more symbolic and supportive of Ayatollah Ali Khamenei. My entry for gold still remains at above a close of $632... so close, but not yet.
This is a big vacation week for the movers and shakers on Broad and Wall, so almost needless to say, the trading volume will be thin as 2006 comes to a close. But even as junior traders man the desks and floor posts, there will some economic data that may move the markets:
The most important piece of economic data comes this Thursday: the Chicago PMI. Last month, you'll recall, the index of manufacturing in Chicago-land fell to 49.9 in a big surprise to many. The drop brought on talk of a coming recession. Economists are forecasting a slight December rebound back above the expansion line to 50.1%. Incidentally, Marketwatch columnist Mark Hulbert used the "R" word in his column, and not to scoff on the notion of one, but to suggest that IT might be on the horizon: (Click Here).
Other data due out this week: On Wednesday, new home sales are expected at a 1.02 million in annual seasonally adjusted rate compared to 1.004 million in October. On Thursday we'll get figures on consumer confidence and existing home sales. It is conceivable to think that we may see a near term plateau in home sales, but c'mon now, this talk in the mainstream media that housing has already bottom is completely ridiculous! The housing market really fell off a cliff only last summer - so they expect us to believe that the crunch is over only after about 8 months?? I don't think so, since the housing woes are really part of the larger phenomenon of the popping of the Greenpsan 'credit bubble'. This is going to take time to work out, folks.
So it looks like a rebound attempt will try to take hold, but with the VIX surging above 11 on Friday, it will need to be watched closely along with all the usual suspects (breadth, put to call, ticks, etc) for latent strength, or weakness. The chart below clearly shows that SPX has found support at about its 1 month moving average - something I've called the "lower end of its bullish channel".
Geopolitical events are having the biggest impact on the price movements of gold and crude oil. Gold has been up as much as $10 and crude as much as nearly $1 on the latest round of tensions between Iran and the UN. Crude also got a lift from ongoing unrest in lovely Nigeria. While the sabre rattling goes on between Amhadinejad and the UN, it been interesting to watch the internal political developments within Iran, though most analysts, including the Stratfor people, think that while the average Iranian is unhappy about standards of living, Iranian foreign policy is not about to change since power in the Iranian Assembly is more symbolic and supportive of Ayatollah Ali Khamenei. My entry for gold still remains at above a close of $632... so close, but not yet.
This is a big vacation week for the movers and shakers on Broad and Wall, so almost needless to say, the trading volume will be thin as 2006 comes to a close. But even as junior traders man the desks and floor posts, there will some economic data that may move the markets:
The most important piece of economic data comes this Thursday: the Chicago PMI. Last month, you'll recall, the index of manufacturing in Chicago-land fell to 49.9 in a big surprise to many. The drop brought on talk of a coming recession. Economists are forecasting a slight December rebound back above the expansion line to 50.1%. Incidentally, Marketwatch columnist Mark Hulbert used the "R" word in his column, and not to scoff on the notion of one, but to suggest that IT might be on the horizon: (Click Here).
Other data due out this week: On Wednesday, new home sales are expected at a 1.02 million in annual seasonally adjusted rate compared to 1.004 million in October. On Thursday we'll get figures on consumer confidence and existing home sales. It is conceivable to think that we may see a near term plateau in home sales, but c'mon now, this talk in the mainstream media that housing has already bottom is completely ridiculous! The housing market really fell off a cliff only last summer - so they expect us to believe that the crunch is over only after about 8 months?? I don't think so, since the housing woes are really part of the larger phenomenon of the popping of the Greenpsan 'credit bubble'. This is going to take time to work out, folks.
So it looks like a rebound attempt will try to take hold, but with the VIX surging above 11 on Friday, it will need to be watched closely along with all the usual suspects (breadth, put to call, ticks, etc) for latent strength, or weakness. The chart below clearly shows that SPX has found support at about its 1 month moving average - something I've called the "lower end of its bullish channel".
The 1405 area remains an important area of support for the bulls. At least they've got history on their side since the Santa Claus rally has often extended into the final trading week of the year. But if that 1405 area is broken, it may signal the start of a break and a confirmation of other bearish signals that have been mentioned here in the blog.
My trading activity this week is going to be very limited since volume will be thin in most markets, but I am positioning for a variety of interesting plays in the New Year. I'll have more on that as the time draws closer.
Sunday, December 24, 2006
The Trannies and The Dow
One of my goals is to stay ahead of the curve by discerning trends as early as possible. On December 20th I noted the issue of the break down in the Dow Jones Transportation Average (see: http://buttonwood1792.blogspot.com/2006/12/tranny-breakdown-in-making.html). Indeed, last week the Trannies swooned by over 4% while the Dow-30 slipped 1%. The $64 question is how long can the Dow-30 hold up before it turns and breaks through the lower area of its bullish channel as illustrated in my December 20th post.
Other folks are starting to talk about this problem that the Dow Transports are having, including this write up on Marketwatch.com (Click Here).
Earlier today, technical market guru John Murphy emailed me on the subject, as part of a subscription service and noted:
"In two recent tops (2000 and 1990), the transports peaked at least half a year before the industrials. At two other tops (1994 and 1987), the two peaked together. In all cases, however, a drop in the transports either coincided with -- or preceded -- a top in the industrials. That being the case, the recent downturn in the transports should be enough to raise some concerns about the continuing uptrend in the industrials."
Other folks are starting to talk about this problem that the Dow Transports are having, including this write up on Marketwatch.com (Click Here).
Earlier today, technical market guru John Murphy emailed me on the subject, as part of a subscription service and noted:
"In two recent tops (2000 and 1990), the transports peaked at least half a year before the industrials. At two other tops (1994 and 1987), the two peaked together. In all cases, however, a drop in the transports either coincided with -- or preceded -- a top in the industrials. That being the case, the recent downturn in the transports should be enough to raise some concerns about the continuing uptrend in the industrials."
Later in the week, I'll talk more about other stocks that are showing signs of wear and tear - big names like: Apple, QQQQ, Gilead, Starbucks, Ebay, Intel, Google, Sears and others.
For the benefit of anyone who might be fully invested in stocks, the picture below is something known as CASH. "Cash" is defined as, "money in the form of coins or banknotes, esp. that issued by a government." Fully invested bulls might want to examine the stuff pictured below to get re-aquainted. While I'm not saying that Tuesday is the day to jump into it, there may come a time when allocating at least some portion of portfolio into so-called "cash" might not be a bad idea in 2007... just a thought, or just sayin' as the young crowd says these days here on the net.
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