Dow -16.61 at 12609.42, Nasdaq
+7.68 at 2370.98, S&P +1.09 at 1370.40
Recession rally. The bad news jobs report on Friday confirmed the
recession likelihood once again and the result was the market held its
ground very well. Investors want to believe that this kind of bad news is priced
in, as they think it is in the financial crisis and they look forward to a
resumption of the bull market while calling this the bottom of the
market.They are putting money to work in looking forward to the turnaround.
After all, often by the time we see the weaker labor numbers the recession has
been going on for some time and this makes some look ahead to the end of the
recession. As Butch Cooley, our weekly commentator points out, the housing
market and financial problems may take a long time to unravel and repair so
while a rally may be tradable it does not look like a long term bottom.
In the Saturday Barrons they mention "..by the time the unemployment rate ticks
above 5%, investors have begun anticipating a recession's end, with the Standard
& Poor's 500 snagging an average return of 15.9% a year later." That would put
the S&P 500 at 1589 within a year from now. While that is only 13 points higher
than the 2007 high I do not think the buying time is yet for that goal.
The buyers this week were not usual as they kept it up -- even with bad news the
sellers were not aggressive and pullbacks were bought. The problem was the light
volume but this also suggests the shorts have yet to cover so a more
aggressive rally may come after the the next pullback. You know regulators did
away with the up tick ruler for shorting. In the past to place a short on a
stock the stock price had to go up to your ask basically so you could not force
a stock down buy continually hitting the bid. It, IMO is an absolutely nutty
idea to remove the up tick rule. While shorting may have its place, the whole
concept of the stock market is to raise money for corporations, helping them
improve business which benefits its shareholders. Totally unrestricted shorting
damages this idea and with no up tick rule we see even more volatility. In the
past a fund with a large short position while covering would only cover a part
as if the markets went lower again they may not be able to re establish a short.
Now they can cover and re short at any time as much as they like, so we see
these big moves in both directions. It is true we have seen even greater
volatility in the past, such as in in bubbles when speculating ran high but this
rule change is not a benefit to any corporation or their stockholders.
While the markets are over bought in general, at some point if this rally is to
become more than a bear market one, we would expect to see much greater
overbought conditions as bulls race to get on board and shorts scramble to
cover.
When earnings season begins again we
will need to see some upside surprises to get things
really going. This week Bernanke said, "It now appears likely that real
gross domestic product will not grow much, if at all,
over the first half of 2008 and could even contract
slightly." His word contract in our dictionary
means recession. This does however not meant that we
cannot have an extended counter trend rally. After all,
we all just want a little butter for our bread.
With the greater than expected job loss report the
headline unemployment rate went up to 5.1%. Economists were expecting an unemployment rate of 5%.
The actual unemployment rate as posted by the Bureau of Labor Statistics is now
9.1% which includes those people removed from the headline figures to make it
look better.
The largest losses were in the
manufacturing and construction sectors. The goods-producing sectors lost 93,000
jobs, while the retail sector lost 12,000 jobs. Jobs at the professional and
business services sector also dropped by 35,000.The services sector added 13,000 jobs
compared to the 6,000 jobs it added in the previous month. Education & health
services, leisure & hospitality and the government sector also added jobs
Thursday morning, the Department of Labor released
its report on initial jobless claims in the week ended March 29, showing that
jobless claims jumped to their highest level in well over two
years. The household survey shows the number of unemployed people rose by
438,000. Job losses since December are now at 286,000 in the private sector
The chart of the week shows the popular Dow chart priced in Gold. At one time
the US dollar was backed in gold but as it is not anymore, the chart may be only
a curiosity. How about one priced in Oil or Cotton since gold is not used as
currency anyway.
Year-to-date, the Dow is now down -4.9%, the S&P 500 -6.7%, Nasdaq
-10.6%, and the Russell 2000 -6.8%.
The weekly major index performance:
And the top and bottom weekly sectors:
With the weakening economy and the job losses the market had a great week.
The Dow chart shows the pullback hat ended the week before and the rally
back to the previous level. It is above the 50-day EMA and that EMA is now
pointed up slightly. The resistance is at the previous February highs, the
200-day EMA and the trend line as drawn. Stochastics is overbought and a failed
rally to resistance may be shorted at leastshort term. A break out that would be
noticed would be back over 12850.
Another view showing how it is now at the top Bollinger
bands so getting extended though it is not yet trading above them.
And the longer term view which also shows the 38% Fibonacci
resistance overhead.
For the Ultra Dow ETF DDM
the $78 to $80 levels show the strong resistance.
The transportation index is right at horizontal
resistance and slightly above the first part.
The Nasdaq also closed at resistance. 2419 was
the February high so this will come into play as that
level is reached.
On the weekly chart we are now above the two lower trend
lines and the 50-week EMA. 2419 then the 50-month at
2467 are the major resistance areas.
The Nasdaq bullish percent
index ran up to the resistance line. The moving
averages on this chart have not been resistance or
support in the past but are there for reference.
Stochastics still climbing and not above 80 signifying
mid term room to move higher for the Nasdaq.
The SOX has re entered its longer term trading
rectangle on this weekly chart. You see the close
resistance but stochastics have just crossed 20 a bit so
a sector to keep an eye on.
The Nasdaq 100 has strong resistance at 1900.
The for Naz 100 proxy, QQQQ the resistance is near $47 but when
eventually broken - $49.
The Monthly chart of the Qs showing the bounce at the 50-month EMA. Long term I
do not like the fact that stochastics only barely went under 20 and that the
trend line on the chart was not touched. I think we will still see this in 2008.
The weekly NAAD we have been watching for a break of the trend line and
it is just sticking its neck out now. The lower portion shows the Nasdaq and its
bounce off the trend line.
The last several times the VIX has touched its 50-day EMA it meant the
short term top for the markets (Dow shown below) So this is a cautionary chart
now for the short term.
The S&P 500 shows the overhead resistance all the way to 1420. The volume
is not at all impressive so far.
The monthly chart and the 20-month EMA resistance at 1400.
Russell 2000 similar to the S&P, has first
resistance 731-735. Then the 200-day at $746.
The number of NYSE stocks now above their 50-day
averages has room to run before a longer term overbought
area.
Oil two times has tested and held support at the 50-day EMA and line as
shown. An eventual test of the 200-day would seem in line if that support gets
broken.
The Yen declines as the US markets rally - or the other way around. there
are still a couple of gaps below and some support at about 95.
Gold may be developing a bearish flag and has
resistance at the trend line and 50-day EMA at $928. An
over sold bounce though can still take place. To short
gold you can use the ETF "double short" DZZ and
to go long the "double long" DGP. They provide
about double the percentage moves a gold so are more
appealing than GLD.
The 38% retrace corresponds with support at the $850 area so that is the first
major support.
The gold and silver stock index XAU is back to the bottom of the 50-day
EMA and a break may send it to the underside of the trend line but still too
early to enter any long term positions in gold stock in general IMO.
Silver - a longer term move
to the 200-day is a spot to watch. Shorter term will
check the MACD for a crossover.
Lows in the EURO to Yen ratio chart correspond to lows in the S&P 500. It
worked this time as well. This is now at a minor trend line resistance. A break
here would be market bullish.
The US dollar cannot get out of its awful slump. A rally in the Dollar
would help the markets. A longer term reversal will come - in time. I hope.
|
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 April 4, 2008
This was actually a busy week, with
no real information coming forth. Bernanke and company
spent a couple days with Congress explaining why they
couldn’t let Bear Stearns hit the skids. I thought they
did pretty well. And by bailing out BSC, if $10 a share
is really a bailout, they prevented a panic in the
markets and a run on other banks in my opinion. It had
to be done whether they wanted to or not. But the
question is still out there, will they need to do it
again? I would think there are other banks equally as
messed up and in time one or more of them will need some
serious help. To date, we still don’t know the bottom
line to just how bad the banking industry is. They are
all stalling for time, trying desperately to increase
their bottom line. Eventually, time will run out and we
will know the full damage. And it will not be good.
The herd it would appear, would like to believe the
problem with banks has reached some kind of bottom,
hence the 400 pt move up in the Dow this week. But I
don’t invest on what the herd believes or thinks. I
invest on the news and on what the charts tell me. And
still, most of my charts are broken. So we remain range
bound and I am afraid we will stay that way for some
time to come.
The bigger news this week involved the unemployment
numbers. 80,000 negative is not good. But what was of
particular interest was January numbers were revised
from -22,000 to -76,000. That’s significant. February
was revised from -63,000 to -76,000. So it makes you
wonder what March numbers will be revised to? Maybe
-150,000?? Whatever, they are bad numbers. The Fed is
now using the “R” word, and the markets are getting set
up for more interest rate reductions. But none of this
is really going to make any significant change in the
ups and downs of the market trends. We have to clear
out the damage and that won’t happen for some time yet.
But eventually, the Fed has to step up to the plate and
deal with $100 + oil prices, and record breaking
gasoline, which this week surpassed $3.30 a gallon. The
Fed will most likely ignore inflation until the banking
issues are done. And interests rates will continue
downward. But this action will not fix the problem.
What are they going to do, go to 0% interest with a
positive forward bias? This all looks like a repeat of
2000 to 2003. Interest rates dropped to 1% and stayed
there a long time. That was part of what caused the
problems with housing. Eventually banking problems and
credit issues will have to take a back seat to
inflation. And rates will have to go higher. But that
is down the road, and many problems away yet.
There are still many good buys out there, but you need
to stay vigilant and protect your gains. I still
believe cash is king for some time to come.
BC
|
Geomagnetic readings were over 25 on Saturday as
mentioned on the
moon page. A
reading of 30 can often affect the market but 25 is
pretty high. As this happened on Saturday it may not
do much though sometimes the results are 2 days
after the event. The latest Bradley Model turn date
was on April 4 and the next April 30.
Weekly economic calendar from briefing.com
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stockcharts.com
accounts there is a space to put in a referral
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Stocks of longer term
interest:
NNRI
filed its extension so will report year end
results within 10 days.
NNRF, Inc. Announces It Has Filed for Extension of 10K
Regulatory Filing
At the
moment its chart chart show improvement with the bottom
Bollinger band and lower trend line reversal on
increasing volume. Stochastics have moved back up over
20, the MACD lines have made a bullish crossover while
the histogram has turned positive and it shows positive
divergence. The money flow has also turned positive.
Resistance is at the center Bollinger bands then the
trend line and then the top Bollinger band and 50-day
EMA at $0.73. Later the $1.09 February high and $1.65
50-day EMA / $1.70 December high.
CYRX announced it is shipping for a client. Guess
they have to start somewhere so this is positive news
though minor in appearance.
CryoPort, Inc. Begins Pilot Shipping Program for Leading
Global Diagnostic Testing Company
PLTG announced that their natural gas in their
Kentucky field is getting better pricing.
They have several additional wells in stages of
drilling or burn off, just before hooking up the the
pipeline. They really have
a ton of reserves so the stock has a lot of room to run
once this gets recognized.
Platina Energy Group Reports 20% Premium for Its Natural
Gas
PYR.V There was no news but on one day this
week a buyer came in and bought 87,000 shares which is a
high number for this stock so someone wanted in.
Now additions to our watch
list. Check the
trade record
for ones that hit their trade points.
PFB Short
under $5.95 - volume picked up late on Friday.
DUG This is an Oil and Gas ultra
short ETF Short
under $34.60. (shorting this is like going long oil and
gas) You could go long DIG as it is long for
ProShares Oil and Gas but it does not trigger
until over $100.
FLS Over $112.52 - or $112 aggressive
ALTR Over $19.65 to $19.80
XTO Over $63.66 or $64.00
PDE Over $37.40
DTV Over $27.00 - note the top $27.60
top resistance from November.
WLSA Low Volume Penny stock - caution -
over $0.40 on good volume (from Fastcash)
BRCD Over $8.21 - $8.25
GWR Over $36.14
The market so far this year requires some fancy
footwork - looks like they have a bit of that here.
Photograph by H
Photograph by
Pletenka
Photograph by Denis Buchel
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