Dow -315.79 at 12266.39, Nasdaq
-60.09 at 2271.48, S&P -37.05 at 1330.63
Giveth and taketh away
The is what the markets did in the last 6 trading
days as the Dow chart shows. From the Friday, February 22 low the Dow ran up 687
points over 4 days then dropped 533 points from the high. For the week it lost
just under 1%. A real roller coaster ride and the futures players who swung bull
to bear made out very well
.
Friday was the largest of the week's sell off. Friday morning there were better
than expected income and spending numbers as January personal income increased
by 0.3% month over month and spending increased by 0.4%. I have no idea how they
figure spending but as prices keep rising, of course people will spend more even
if they do not buy more goods. In Barrons this weekend there is an article that
states: "Investors who play their cards right could see big payoffs in
debt-laden companies whose shares have been pummeled in recent months. - A look
at stocks that could rebound sharply when the credit climate improves."
- They say credit markets may start returning to normal by midyear. Mid year is
in 3 months on my calendar yet on Friday from Bloomberg there was a note that
UBS believes collective write-downs for financial
firms could total at least $600 billion. An economist from Goldman Sachs pegged
total write-downs at $400 billion. Current write-downs total $181 billion. I
cannot imagine that the credit problem will improve in a few months and in fact
it is likely to get worse.
There was data showing a
7.7% year-over-year jump in producer prices, the
largest increase since 1981. This will get passed on to the consumer in higher
prices as well. Home prices in major metropolitan areas fell 8.9% last quarter,
and this limits the the use of a home as an ATM. With this kind of news it is
very interesting that we still have not yet even tested the January lows.
RTTNews Here is the personal income
and spending as mentioned above. The personal consumption expenditure price
index rose at a monthly pace of 0.4% from the previous month. If that
continues for 12 months it would be 3.6% for the year.
This housing price chart is
inflation adjusted but we have no idea what inflation
figures were used. Regardless, this seems to visually
show the situation. Some feel there may be an additional
10-18% decline in home prices in some area. As
home prices continue to fall new construction is also
slowing. Now the supply of homes is at an all time high.
Have read there is at least a 10 month supply of homes
and foreclosures are increasing.
Despite
the negative news and the markets being locked into the trading
range all month, we had 75 stocks from our watch hit buy
or sell points in February giving at least short term gains.
Trade Record
Some had extensive gains. SWC hit our buy
point at $10.36 and is now at $19.47 or up about 90% for the
month. PAL was a buy at $4.40 and and ran to $9.43 - a
gain of over 110%. We have consistently made solid monthly
profits year after year by taking some profits the first day and
then using stops accordingly.
This is how the
major indexes performed last week.
These or the top and bottom sectors for the week:
The Dow is in the same trading range since
the second week of January. Stochastics once again
dropped below 80 and maybe in the next couple of
weeks it will make it under 20 and test the January
lows. The apex of this triangle is two or three
weeks form now and we may hit a low by then.
The longer term Dow - seen it before
The Dow point
and figure chart filters out the noise and clearly showed the
12750 resistance.
If you have been short and do not use futures than DXD is one way to play
the downside. It hit the perfect double bottom at 53.50 on Tuesday and Wednesday
and has gone up $4.
The transports still holding up better than the Dow.
The Nasdaq even with the rally, was unable to reach the past resistance
at 2377. It gapped down on Friday and closed at weak support and you see the
next two levels underneath.
We read that at the August low there were 480 stocks making new
lows on the NASDAQ and near the January low there were 877. Both of those
numbers were high enough that suggest that a retest of the lows in in order.
There were only 167 lows on Friday so unless that number increases a lot in the
continuing decline we may hit an intermediate term bottom in the next couple of
weeks.
Nasdaq still has not closed below the orange trend line
on the weekly chart though stochastics has been under 20. It may
dip to the lower gray line to put in a trading low.
The NAAD still point
down. This is a cumulative chart of advance decline so it does
not have to go up dramatically to show a rally is starting. Just
a break of the yellow line as it has done in the past.
The Nasdaq 100 as show on the QQQQ
monthly as it is just a bit above the 50-month EMA. RSI and
stochastics are at possible support but my bet is that they will
be broken this month.
The is the Proshares Ultrashort ETF QID to trade
the QQQQ on the short side for twice the gain of the QQQQs
The SOX semiconductor index still has not broken its support.
The S&P 500 similar to
the others in a trading range. Ran into the 50-day EMA and it
failed to break over so became a short.
The monthly S&P 500 when in a bear market, like now, will see its
stochastics go under 20. You can see that during the last bear market it stayed
under 50 for over 2 years. No way to know if it will be that time frame this
time but seems the housing situation and the credit crisis may take a couple of
years to work through. And typically the first year of a new president is not so
good for the economy or the market.
The Russell 2000
also a clone it seems and a short again under the support line.
Here is its long term view in
weekly. From the 2003 low it is still above the 38%
retrace.
To trade the Russell on the short side the Profunds Ultrashort is TWM.
Usually as the volatility index rises the markets decline. The VIX
bounced right at the 200-day EMA as it has done two other times since October.
The percentage of stocks on
the NYSE trading above their 50-day moving average is sill at a
mid point - not to cold and not too hot. But not just right.
The Japanese Yen took off with the US dollar decline and the US
markets drop.
Inflation anyone? The over extended CRB added another 11.7% in February.
Oil has broken
over $100. The pattern measures maybe another $20 or so but the
127% Fibonacci number is closer to $103.50 so we will see what
happens there.
Platinum put in a consolidation week. Someday that steep rise will fall.
Palladium keeps going but in very thin air right now.
Copper is clearly above its trend.
JJG is a way to trade grains. It seeks results that correspond generally to the
price and yield performance, before fees and expenses, of the
sub-index of the Dow Jones-AIG Commodity index. The fund is
designed to reflect the performance of grains. The index is
composed of three futures contracts, corn, soybeans and wheat.
Gold is getting closer to the $1000 mark and the large traders continue
to buy while the commercial traders add to their short positions. We experiment
with placement of the Fibonacci at various logical points and at this placement
the top is at about $1010. At the moment there is still negative divergence in
the MACD and RSI.
On the Gold weekly chart
you see how far away it is from the 65-week EMA - a long
term support area. We can be sure that it will get close to the
65-week again but we do not know when or at what price it will
be. When it pulled back in the summer of 2006 you can see that
it was pretty dramatic and this may happen again.
Gold stocks have actually be lagging the move in gold as they are not making new
highs. The XAU though did break out and is now consolidating.
This week the US dollar hit an all-time low against the EURO and fell also against
about every other every currency in the world. This means that people in the USA
pay a lot more for all imported goods and of course they pay more for travel
outside the USA. During the Clinton' years the Dollar was much stronger
than the EURO and in Russia it bought more rubbles. Right now it is rather
depressing to see such a fall and see the exchange rates get worse and worse.
The exchange rate now
in Russia is
24 rubles to a US dollar and 36 rubles for a EURO. To illustrate
what this mean for someone earning dollars, lets take a
small
apartment at 50,000 rubles / month - $2,000 US or 1,388 Euros.
So you have to spend 50% more using dollars. $25k car
is 16k EURO. This is really an awful situation brought on by the
government printing more and more money. The Republican or
Democratic presidential candidates do not even address this
issue.
For a laugh - (not really)
Feb. 28 (Bloomberg) -- Treasury Secretary
Henry Paulson said he favors a strong U.S. dollar that over the
long term reflects the competitiveness of the world's largest
economy.
"In my heart and soul, I just know and
believe that a strong dollar is in our nation's interest''
How can this man keep a straight face while
talking? Look at the chart below - is this a strong dollar as
his heart an soul suggests? How does he still have a job? The
chart below if only a short term chart - it was at 121 in 2001
and 2002 so has lost 40% of its value against other currencies
in 6 years.
This week the Australian currency hit 94
cents - the highest in 25 years.
When Ben Bernanke was giving his
testimony this week,
Congressman Ron Paul made some comments to him. In it he
mentioned the gold standard and although Bernanke
works for the banks so is not in that area , it was
refreshing to see someone actually bring up some
meaningful questions. I do not know much of Ron Paul but
saw him on Meet the Press. They only gave him 30 minutes
instead of the 60 they gave to others but it was very
clear that he has much more interesting and thoughtful
idea than any other candidate. They should have given
him 2 hours. Too bad the electorate does not pick such
people. Here is the short video of his comment and it is
clear that some do not like this kind of straight talk
that gets to issues.
Ron Paul's statements and Bernanke's response at FSC this
past week
|
Butch Cooley Market Comments
(Butch is founder of
Leg Up House
and the
Butch Cooley Worldwide
Hunting and Fishing . He has
been an active trader for decades.)
Market Comments February 29, 2008
I spent the best part of Wednesday and Thursday this
week actually listening to Big Ben before the Senate.
These are a "few" rather unique adjectives and adverbs
I was able to write down: ....."distinctly less
favorable, significant slowdown, market strains,
exceeded all predictions, continue to weigh, abnormally
high, subtract from overall growth, downgrade in our
projections, effects of financial turmoil, housing
contraction, more severe than expected, sluggish
economic activity, downside risks, less well anchored,
unmoored, eroded, and counter shortfalls"….. but the Fed
will continue to closely monitor the inflation. Wow!!
And at the end of all of this, both Chairman Bernanke
and President Bush do not believe we will see a
recession. They must be talking about another planet.
Probably Pluto.
At the time of writing this, oil is up around $102ish a
barrel and I just paid $3.32 a gallon for gasoline,
which last week cost me $2.96 at the same station. And
I'm somewhat afraid to go grocery shopping. I guess I
am going to have to give up espresso and lattes!! Maybe
I will have to give up eating. I know, I'll eat at
someone else's house. Come on people, there was
absolutely nothing good that Big Ben had to report. Not
that I am blaming him or anyone else. That's not my
job; apparently that is the job of Congress. Actually,
I am not at all sure what Congress's job is these days.
Maybe they should take another vacation, and when they
come back, everything will be good again??
But actually the Congress is threatening to do something
about all this. They don't agree on what, nor do they
have any real idea what is wrong, but they will
definitely talk about it. I heard one Senator actually
say we don't have a real housing problem. We have too
many expensive houses and not enough cheaper houses.
Senator Dodd wants to start a new federal company to buy
up bad mortgages, or something to that effect. That's
supposed to cost the tax payers around $20 billion. Now
that has merit!! They are talking about changing the
bankruptcy laws. Make it easier to bankrupt or harder…
I'm not sure which. Another favorite is providing
government assistance for those people facing
foreclosure. Maybe we can get the same group of people
who handled the Katrina deal a few years ago. That
seemed to work out really well!! We will relocate
everyone from distressed houses in one State, and put
them in other distressed houses in another State.
Everyone in Ohio can move to Michigan and so on and so
forth. That'll work!!
We also have a proposal for $200 million for foreclosure
credit counseling service. Geez Marie… what are they
going to do, tell them to pay their mortgage payments?
But my favorite is out of the Federal Office of Thrift
Supervision. I didn't know until this week that such a
place actually existed. It is out of the Department of
the Treasury. Their plan is definitely the best and
they have even come up with yet another new term:
"upside down mortgage". This is where you owe more than
the house is worth. Well, that seems to be one of the
major problems, doesn't it. The idea is to refinance
about 8 million loans that are currently upside down
with government loans, for the actual value. The
difference would be made up with a "certificate", which
the lender would hold, and if the house actually sold
for more than its current loan value, the lender could
collect the difference by redeeming the certificate.
Maybe some of this junk will actually become law in the
next few months… who knows. But nothing will fix the
problem except writing off the losses, and rethinking
business. I have said this before, and will say it
again. Money is math and math is an exact science. The
books have to balance eventually. The sooner we can get
to the balancing, the sooner we can get on a road to
recovery.
BC
|
Weekly economic calendar from briefing.com
We
have the ISM, Beige Book, more home sales
data, and on Friday the jobs report.
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Thanks!
In the long term department not
much to report this week. NNRI
will give earnings this month
for ATOLL and have their year end report and
shareholder's meeting. The stock after running
up 80% from it low is in a low volume retrace the
brought in buying on Friday- I was one of those
buying.
GWDC had large volume on the sell off. The
new rules regarding the holding period for 144 stock
went into effect and there were likely some who held
some from payment received who were able to get paid
though we cant be sure. Because of the huge problem
in China over their holidays GWDC is delayed a
bit in opening their first store there though I
think this has little or no affect on the company.
We should see the forth quarter results in the next
week or two. CYRX has been consolidating
again on low volume with a pop up on Friday. I add
this every time it gets under $1.10. That way if it
moves up on no news you can take a little profit and
buy back on another dip. One day the news will come
and it won't retrace but until then it has been a
nice trading stock for partial positions. (called
trading around a core) Of course you may call if you
have questions.
Now additions to our
Watch List. We add more
each day.
BLOG Above $19.60 and $20.00
(from Fastcash)
BVF Pullback buy near 50-day EMA with
stop about $13.75 area.
IHP Pullback buy perhaps near 50-day and
$44.00
OCTL Over $1.75 or on
slight pullback for aggressive (from
Fastcash)
EBAY Continuation Short or under
$25.64
MOT Short
under $9.80 then $9.43
MRK Short
under $44.20
LINTA Short
under $14.10
JNJ Continuation
Short under $61.85 or under $60.96
LTD Short
under $14.92
COST Continuation
Short or later on a low volume bounce back to the 200-day at
about $63.00
EGO Gold over $7.06
Photograph by NAMIRoS
Photograph by
Vihric
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