|
Stock Tiger Stalking Stocks™
For Monday November 3, 2008
You may subscribe to this newsletter free -
subscribe
Past 5 days
|
Dow
|
Nasdaq
 |
Close Friday
Dow +144.32 at 9325.01, Nasdaq
+22.43 at 1720.95, S&P
+14.66 at 968.75
 "Election
rally" Well maybe only an oversold bounce but the market made its largest
one week gain in many years - the Russell 2000 was up 14%. (for the month
though the market was almost 17% lower) We begin
November, which has historically been up 67% of the time (Nasdaq) and gained
about one and a half percent. More than looking at the index charts we are
seeing a lot of stocks that have build bases in the last week or so and are in a
position to advance. This may not happen but it is quite encouraging at the
moment for the long side as we have not seen so many promising stocks in quite
some time. To have the election out of the way will remove one uncertainty
and perhaps be another step toward less volatility. Over the medium term in
reality it probably does not mater who takes office in 2009 as far as fixing the
financial crisis as that will take time. The current administration and congress
allowed this all to happen on their watch so hopefully many of them will be
replaced. Alan Farley had two suggestions to help the market that does not cost
$750 billion: 1. Reinstate the Uptick Rule 2. Establish 1990s Style Circuit Breakers.
Even with many charts looking better we do know that this past week was the end
of month window dressing time and October is also the fiscal year end for many
funds so if the market made some good ground last week it would have helped them
all look better for the year. If these were all that has been propelling the
market we will soon see it in a move lower again. There is a solar storm
predicted for November 7 as mentioned on the
moon page.
Does it make a difference for the market if the administration is democratic or
republican? The Stock Trader's Almanac shows a
$10,000 investment compounded during Democratic presidencies since 1901 would be
worth $279,705 after 48 years. The same $10,000 investment during 56 Republican
years would have been worth just $78,699. If you adjust for inflation, the value
of a $10,000 investment under Democratic presidents is $33,426.The
inflation-adjusted value under Republican presidents is $26,145 so the
Democratic ticket on average is better for the stock market.
The Fed cut overnight rates to 1% as
it was in 2004.
In the Fed's they in part wrote, "The
pace of economic activity appears to have slowed
markedly, owing importantly to a decline in consumer
expenditures". Well they noticed. Japan's
central bank cut its rate to 0.3% and the market there
fell as some thought it was not aggressive enough. Like
the extra 0.3% would have fixed things. You do have to
wonder how many more tricks the central banks have up
their sleeves. They have backed up just about every
asset out there, and now they need credit markets to
loosen up and the economy to start showing some signs of
stabilizing. The signs do not have to be long term true
but enough so for a tradable extended rally.
The third quarter
GDP report showed that the U.S. economy contracted at a
0.3% rate. In the second quarter, the GDP growth was
2.8%. On a year-over-year basis, third quarter GDP
growth was 0.8% compared to 2.1% in the second quarter.
As it is the
preliminary number, and does not really have much data from
September, it is likely that future revisions will see the number be
even worse.
We may have posted this before as it shows the US
economy with and without Mortgage Equity Withdrawals. In real terms
the GDP over the last 6 years has been very poor but that does not
win elections so if you allow people to buy homes with no or little
money down house prices go up and people then borrow money against
their homes. They spend the money and as a result the economy does
not look too bad and elections are won. As the chart though shows if
you back out those house ATM machine withdrawals, after the 2001 and
2002 recession the economy alone did not even reach a GDP of over 1%
until 2006. No one would have reelected the same president in that
case so it was important to allow people to keep borrowing so the
economy looked better. The government does not like people to
save money - only to spend it.
Since the peak
of Mortgage Equity Withdrawals in 2006 this shows the
huge drop in the amount of them. Quarter two of 2006 has
$211 billion pumped into the buying publics hands from
inflated home prices but by quarter two of 2008 it
dropped to only $9.5 billion. Also remember that the
stimulus package was in the second quarter worth about
$150 billion so without that government expenditure the
GDP would be even lower.
Now that people cannot use their
homes for cash they are using their credit cards much
more and that situation is not good.
American Express said that delinquencies on credit
payments rose to 4.1% of all credit outstanding in the
3Q, up from 2.5% in 3Q of 2007, with Bank of America's
rate rising even more steeply, to 5.9% in the quarter. I
read that the second largest "merchant-vendor" for
credit card use is now McDonalds. It is good that people
can still go to a restaurant but to use a credit card to
buy a Big Mac is not encouraging. These factors will
likely change habits of many and the US should see an
increased saving rate of the coming years. This may not
be good short term for sales of things but long term it
would help a great deal.
On the jobs front the four-week moving average
unemployment declined to
475,500 from the previous week's revised average of 480,500. I read
a report though that noted that the
duration of unemployment is now over 9 months. Unemployed will
stop receiving benefits when their time period runs out so so can
spend little and the government will not collect taxes.
How long might this recession last? Here are ones from the past. This
week the National Bureau
of Economic Research, an official panel of senior economists, has
declared that the US entered recession in March this year. If this
recession is as long as 1981 - it would end in July of 2010.
How does the current bear market stack up so far?
(the right panel is from a week ago)
With all the negative news
above - what a big week!
These or the top and bottom sectors for the week.
And the leading and lagging industries.
We liked the operation of the
new blog but
it did not allow inline images which means we needed to post links to them. Now
we are linking directly to the message board blog topic where we can post inline
images and you can upload images to the server directly from "additional
options". When you log in you can set it to keep you logged in forever so you
need not do it again. Please post current trading ideas and charts of interest.
Let us know if you like the format better.
All of these major indices closed above the center Bollinger band for the first
time in over a month - or longer which is bullish. The big indices this week
were up 3 out of 5 days while the S&P 400 Midcaps and Russell 2000 were up the
last 4 days in a row. This is at least short term oversold. If the rally does
continue we watch the top Bollinger bands as resistance.
The Dow monthly chart shows the that the RSI did get below 30 and
stochastics under 20 so technically this a very valid low which could support an
extended rally. The MACD however and the histogram do not yet confirm though
they are slower moving.
This long term Dow also shows that although the 50% line was not reached,
nor the test of the 2002 lows, it came close enough to also be a tradable low.
Once election results are taken into account we will have a better picture.
You know that there are many ways to count waves. Some like to count the recent
bottom as a number 3 to be flowed by a wave 4 up then a final wave 5 down at
some future point. This on a medium term could also be a wave 5 completed and
and ABC to follow. Regardless of numbers and letters we see the resistance at
the Fibonacci retrace and then at the broken bottom trend line.
The daily Dow chart shows that the Dow is now at resistance and the
really last week only took it back to the top of this range.
The recent trading may also form a triangle. On this chart the top line is
really not yet known so we will move it as necessary. It could break out or
pullback to make a D then up to an E. The real indicators do show progress as
RSI was clearly oversold in early October and now it and stochastics have
confirmed the buy and MACD has crossed over while the histogram is now positive.
The option is that it will top out and fall back to retest the recent lows and
have the lower trend hold.
One long side trade for the Dow is using the Ultra Dow DDM. There are
many mechanical systems if you prefer not to trade on your own ideas and here we
show how the modified histogram has performed since March. Buying when it goes
below the zero line and short selling (or buying DXD) when it goes above. There
is no guarantee that this will keep working but this shows some very sizable
gains.
The Nasdaq had a 10% gain week and it ran back up almost to the 62%
retrace. This may turn out to have been a place to short but the RSI and
stochastics are still oversold and may turn upk to give a buy signal on the
weekly chart.
The Nasdaq 100 bounced at support and also ran appropriately as it is the
top 100 market cap stocks on the Nasdaq. Actually this index is market cap
weighted so it is only a few of the 100 that do most of the movement for the
index.
The Nasdaq has an important element with its semiconductor stocks and this Ultra
long ETF - USD tracks the semis. It has made a nice move and is above the
trend line. To short it one can use SSG.
We saw the TRIX crossover last week and the VIX continued its move down.
Into the 50s means less volatility and that is needed before much longer term
money will enter the market. Of course the 50s seemed a crazy high number only 3
months ago when we though the 30s was a high.
The summation index NASI had a crossover this week for the Nasdaq which
is bullish as it not so often gives whipsaws.
The NAMO on the other hand does move quickly from one extreme to the
other but we will look for an extended time in the green zone.
The S&P 500 weekly shows the nice 10% rally this week with
a bullish engulfing candle. It was pointed out by Mike Burk that last week only
1% of S&P stocks were trading over their 50-day moving averages. This also
happened in July of 2002. In the 6 days following that time the S&P
rallied
14% in 6 trading days and the percentage of stocks over the 50 day average went
to 27%. Then the S&P fell 8.4%
in 3 trading days followed by a 15.3% jump over the next 3 weeks. It then fell
19.3% to a new and final low 6 weeks later.
One way to trade the S&P 500 long is with SSO Ultra. You can short it
also or use the SDS.
The New York Stock Exchange also had a good week of course and MACD has
crossed over.
The number of stocks on it trading over their 50-day average has gone up from
1.1% to 8.5%.
The NYSE A/D radio chart did dip below the support but is now back over
it.
The Russell 2000 had a low in October of 442 and closed on
Friday at 537 for a gain of 21%. The typical figure used to designate a bull
market is a gain of 20% or more. Anyway it did close back over its 62% retrace
as seen on this monthly chart.
The weekly Russell 2000 has the RSI just crossing up over 30 while
stochastics have not yet gone over 20 and MACD still looking down.
A way to trade long the Russell 2000 is with the IWM Ultra or short with
the TWM. $18 to $25 a nice move.
The S&P 400 mid caps also had a great gain and are almost at the
resistance as shown. Note the indicators.
Commodities put in a perhaps over due or maybe exactly due bounce as seen on
GSG. Weekly chart shows no crosses up yet on the indicators.
The daily GSG does show positive indications as all three issued buys.
Oil almost touched the trend line and closed at the 62% retrace. It may
get down to RSI 30 but a bounce may be in order before then.
USO actually broke below tend line but is still over the 62% retrace from
the 1999 low.
The daily USO chart shows the support area bounce and a possible target
at the dotted line for a final low.
Natural gas index up another week and at the underside of the 200-week
EMA and the 50% retrace so a pullback would be routine. With heating season
coming a break over here could take it to the 50-day EMA and 38% retrace.
A long side play for oil and gas is DIG Ultra and to short you can use
DUG. We had this on our list to buy this week and it did well.
Gold continued its pullback. Threes weeks down so could still bounce
also but the 62% is at 658 for longer term.
On the Blog GG gave a heads up that gold was breaking its 5-day trend line. This
made a good short for gold shown here using GLD.
Gold stocks actually
continued to climb as gold pulled back. We has several but now
expect a rest. We will watch the US dollar and any gold stock
pullback to see if another entry looks good.
Our GDX Renko chart is still on the buy side as the parabolic SAR is sill
over the pattern. This mechanical system may not enter and exit at exact lows
and highs but has done well for the last 6 months so the advantage is it cuts
out the noise so no over trading. The chart is live on our public page at
stockcharts.
Silver gave a bounce and closed back over the support line drawn. MACD
has not yet shown a change of direction. The silver stock we had as a buy at
support SIL ran up 49% this week.
The Japanese Tokyo Nikkei
index really took a fall this month to put it back to 1982 levels
until the recent rally. The frightening this about this chart is it
is like a reverse cup and handle but no worry the it could make a
measured move as the height of the cup is 32,000 so it cannot fall
that much.
The London FTSE also had a good week and is almost to the 62% retrace.
The Russian exchange RTS
had a weekly gain of 40% - can you imagine if they had a VIX how
high it would have gone. This kind of gain would put the S&P 500
back to 1355.
You can trade the Russian market with the ETF RSX.
Home builder XHB ETF
had a good week and this chart shows why - it had hit the bottom
channel and many saw it.
The US dollar monthly
with solid gains for two months.
The US dollar daily may be making a bear flag for a
drop back or another possibility is it made a wave 4 and is now going to go to a
top to complete wave 5. Looks like the pullback was too short a time to complete
a wave already so another pullback may be in order which may give gold a bounce
also.
|
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.)
Stock Market Comments
I have to tell you, I will so glad when Tuesday night
finally gets here and all the Presidential Election
stuff comes to an end. Well, hopefully it will come to
an end. Supposedly the Markets already have adjusted
upward for an Obama win. But we are also told, if he
wins too big, the markets will give ground. Too big
would mean the Democrats take Congress. Ok, I guess
that makes sense. And if McCain pulls off a come from
behind victory, we could see 1000 points on Wednesday.
Well, that would nice too. Seems like it will ok so
long as Obama doesn't win big. I can handle that.
But the truth is, in my opinion of course, it makes no
difference. It never makes any difference. One will
win, and one will loose. That is the way it always is.
Do we ever get to find out if the other guy won, things
would have been better? No, of course not. All or
nothing. Will the country be any better off is not
even a question at this point. We won't. We are in
such a mess, nothing but time and losses will fix our
ailments. Oh yeah, and more money. The economy
certainly needs more capital. Whatever plan each is
selling, it won't even have a chance of hatching. It
never does. Whoever is the next President will be
hamstrung from the beginning. Whoever gets the minimum
270 electoral votes has 4 years of some trying times
ahead. But there is always something, some serious
issue that we face, this one just being the next in a
long line in the past.
The Republican Party chose John McCain. The Democrats
chose Barack Obama. The Libertarian Candidate is
Congressman Bob Barr. The Constitution Party is is
Pastor Chuck Baldwin and the Green Party has
Congresswoman Cynthia McKinney running. Ralph Nader,
he's always a runner, is Independent this time around.
That will work Ralph!!!
And there are a bunch of "Firsts" this time around.
First time two sitting US Senators ever ran against each
other for President. Obama is the first African
American to run for a major party. Both major
Candidates were born outside of the continental US,
Hawaii for Obama, and The Canal Zone for McCain. We
have a woman for Vice Presidential Candidate, so the
winning side will be historic. Senator McCain would be
the oldest first term President. Senator Joe Biden
would be the first Catholic Vice President. Wow!!!
Amazing!!!
Along with the Presidential race, 33 states have Senate
Elections and all states have House of Representatives
being elected. 11 states have governors running for
election.
So on the night of November 4th, all this will be over,
out with the old, in with the new, and we can all go
back to trading.
In 2000, I would have told you Gore was a shoe in.
Wow, was I wrong. I didn't think Bush had a chance. In
2004, it was toss up to me, but I suspected Bush would
follow in his father's footsteps and be a one term
President. He won by a large margin. Who am I voting
for? No one. I don't vote in the Presidential
elections. I boycott this election, and only this one
and I have all my life. I believe in the power of the
vote, my vote, but I don't think we need an Electoral
College any more. We may have once, but no longer.
When I vote for Governor of Colorado, Washington,
Montana, my vote is counted and that is the end of it.
In the President elections that is not the case. Go
back to 2000. Gore had the popular vote by over
500,000. Yet he was not President. Just a few people
in a few States elect the President. I was never one of
them. And I never will be, so you see, it doesn't
matter. It probably is already figured out, someplace.
But like I said, I will be glad when it is all over.
Then we can get down to the business of just how bad
things are going to get.
Butch Cooley
|
Check the
Earnings Calendar
on all overnight holds.
Weekly economic calendar from briefing.com.
Monday ISM, Construction spending and Auto sales. Tuesday is Election day and
Factory orders. Wednesday ADP employment and ISM services. Thursday the weekly
Jobless claims, Productivity and Unit labor costs. Friday Non-farm payrolls,
Wholesale inventories and Consumer credit.
To try futures trading you may
sign up for a free simulated account that used live streaming data.
When any of you sign up for a new
stockcharts.com
account there is a space to put in a referral name
on that form. If you enter
stocktiger@stocktiger.com they give
us credit. Thanks!
Last weeks winners
LVS had a high short interest as they though the earnings would be bad
but a report form a competitor was not as bad as though so this started a huge
short squeeze. Several in the chat room were trading this on Wednesday at around
$6 and it ran up over $10 from there.
PLXS was a break out buy Friday but the volume so far is light.
NBL was also a Friday buy and it ran to the 50-day EMA. If oil give a
good bounce this may continue and a move of the 50-day could lead to a run to
the 200-day in time.
As oil pulled back AAI continued higher.
SIL as mentioned before has a 49% move
from the support buy price.
KGC gold bought a week
ago at the low made a super move over 5 days.
AEM was bought along with KGC.
ABX was also with that
group from the watch list. To lock in profits seemed reasonable at
least to watch for consolidation.
New additions to the
watch list.
Remember that we add many stocks to it each trading day.
ACI Coal over $23.05 is into the gap to $24.50
SLB Good volume over $55.00 looks like
it may work
We have several biotech stocks and it is unusual to
show so many in one group but they all looked like reasonable buy
points so watch the sector in general. ASTM Biotech over $0.41 - also want high
volume - Has 200-day EMA at $0.45
IBB Biotech over about $72.05
AOB Biotech Over $6.25 but watch 50-day
EMA at $6.40 as may be resistance
EBS Biotech over $18.50
IMMU Biotech over $1.55 - has
50-day EMA at $1.65
IDEV Biotech over $2.70 but needs volume
We liked the operation of the
new blog but
it did not allow inline images which means we needed to
post links to them. Now we are linking directly to the
message board blog topic where we can post inline images
and you can upload images to the server directly from
"additional options". When you log in you can set it to
keep you logged in forever so you need not do it again.
Please post current trading ideas and charts of
interest. Let us know if you like the format better.
Feed the Eyes
Photograph by
Nataly Fisher - Moscow Evening new construction
Photograph by
Nataly Fisher - Moscow on the Moscow river
Photograph by
C-man - not Moscow
That's a full lid for today - will see you during the week.
We have published a donation page for the ease of you giving to a
charity of your choice. If you have benefited from our site we
encourage you to share with a charity. We have a few recommendations
who all use a high percentage of the donations for the actual
program use. If you have some we should add please send us a note.
Donation Page
Check the
Earnings Calendar
on all overnight holds.
Check the current
message board also for other good
stock candidates as there are several there right now.
If you use StockTiger mail you can access your account using simply
my.stocktiger.com
 . If
you would like a free StockTiger.com email address that uses the Google Gmail
spam filter and you can check your mail from anywhere. Send me (ST) a
personal message from the
message board.
Include your First and Last names and the name you want to use. Your address will
be (your choice)@stocktiger.com
Best regards,
Stocktiger.com
| 
