Dow +217.52 at 8280.59, Nasdaq
+45.47 at 1591.71, S&P
+22.75 at 868.60
The money man.
Treasury Secretary Geithner will
announce his next phase of the bank bail out on Monday.
There may be some continued buying interest in front of
this but we could easily see some "sell the news"
situation after unless it is a plan that really excites
stockholders. In the past these government plans have
been met with more selling. Over the years it has never
proven really beneficial for the government to try and
manipulate the economy as it only achieves larger
problems long term. Right now they want lending to
resume and that is what caused the problems. Too much
consumer buying on borrowed money. If they would leave
things alone, in time the economy would improve on its
own. All people need goods and services and there will
always be others willing to provide these. In the
interim time it is only a matter of finding an agreeable
price for these. In either case it will take time but
one method places a huge debt on the taxpayers and the
other does not.
On Thursday there was some indication from Senator Chris
Dodd that the Senate Banking Committee is considering
the temporary relaxing of the "mark-to-market"
accounting rules which require banks to mark assets
according to prevailing market prices. This seems to
have sparked the end of week rally and the very bad
employment report on Friday instead of being sold,
started what seems like a short covering rally that
lasted all of Friday. As the market was up 4 out of 5
days last week it is now short term overbought and we
expect a high to form this week.
The rally was driven by financial stocks and tech
stocks. Financials had been quite oversold and the hope
of much more government money coming added to the
buying. The stimulus plan is also due to be announced
soon but this will not likely have as much of an immediate impact on the financial system and the
broader economy.
The market itself is very much news
driven from day to day but there are really a lot of
charts that are well positioned to move higher on a
technical basis so we will continue to present those as
long as they keep breaking out and moving up. On Friday
alone we had 11 new buys and many former stocks
continued to move higher. These are a couple of examples
of the solid gainers we have been presenting on the
watch list each day.
598,000 more jobs were lost in January.
(actually a lot more than that if you use the raw
figures before the adjustments) The unemployment rate based on the
household survey rose 0.4% to 7.6%, slightly higher than
the 7.5% rate expected by economists. Meanwhile, the
average hourly earnings rose $0.05 or 0.27% to $18.46.
While the goods producing sector lost
319,000 jobs, the service producing sectors lost 279,000
jobs. Barring education and health services, which added
54,000 jobs and the government sector, which added 6,000
jobs, all the other sectors lost jobs, with the weakness
more pronounced in the construction, manufacturing and
professional and business services sectors.
The pace of borrowing by U.S. consumers fell in December
for the fourth time in five months as the deepening
recession and restrictions on bank lending crimped
purchases.
Consumer credit fell by $6.6 billion, or 3.1 percent at
an annual rate, to $2.56 trillion, according to a
Federal Reserve report released today in Washington. In
November, credit decreased by $11 billion, more than
previously estimated and the biggest drop since records
began in 1943.
The January
ISM Service Index came in at 42.9, which is better than
the 39.0 reading that was expected. It also exceeds the
40.1 revised reading from December. Though the January
reading reflects continued contraction, it is up for the
second straight month.
Crude oil stockpiles climbed 6.2 million barrels to
338.9 million barrels in the week ended January 23rd and
inventories remained above the upper limit of the
average range for this time of the year. Gasoline
inventories edged down by 0.1 million barrels and
distillate fuel inventories declined by 1 million
barrels. Refinery
capacity utilization averaged 83.9% over the four-weeks
ended January 23rd, unchanged from the previous week.
Jobless claims rose to 626,000 from the previous week's revised
figure of 591,000. Economists had been expecting a decrease in claims to 580,000
from the originally reported figure of 588,000 for the previous week. The Labor
Department also said that the less volatile four-week moving average rose to
582,250 from the previous week's revised average of 543,250.
New orders received by U.S. factories slumped a greater-than-expected 3.9
percent in December, the fifth monthly decline in a row for manufacturers.
Inventories of manufactured durable goods rose in December to the highest level
on record.
This shows the earnings for the S&P 500 since 1935.The reported
earnings have declined over 60% over the past 17 months, making this the largest
decline on record. Earnings are currently
lower than they were back in the mid-1960s. During recessions the PE of the S&P
can drop much lower. If it were to drop to 20 the current S&P would be at
600 instead of its current 868. A 15 PE, if earnings do not drop more,
would put it at 450 so there is very clearly much downside risk regardless of
all the bottom callers.
The major
indices this past week.
The week's sectors.
The past week's top and bottom
industries
Triangles of the
multi-index chart shows the January lows were much
higher than the November lows and except for the Dow the
January lows held fine during the recent pullback. Only
the Nasdaq 100 has broken above its trend line.
On the Dow weekly chart the move this week appears minor so far but it is
a positive just the same. We do expect over time the November lows will be
tested.
The Dow daily shows resistance next at the horizontal line near 8400 then
the 50-day and the downtrend line.
The transportation index broke above its resistance and the MACD has
given a positive crossover. Resistance now is the 50-day EMA at 3300.
For a few weeks we have pointed out that the Nasdaq was outperforming the S&P
500 which is what is looked for if a rally is to commence. If this relationship
starts favoring the S&P then the rally may top out.
The Nasdaq bounced off the support line and ran to resistance. It has
improving volume and a break out is positive but the market needs the financials
and consumer stocks also as tech cannot be the only one to run.
Nasdaq summation index NASI did recover from its quick negative crossover
and again is heading up.
The VIX still over its 200-day EMA as support at the 37 area from this
year's low.
S&P 500 has its 50-day EMA and the 50% retrace from the November high
above 877. Many watch this level and if a break above does take place it may run
right to the 38% retrace which is also the trend line at about 907.
NYSE closed under its
50-day EMA which is at at 5537 and a good
volume break could take it to the trend line at 5750
The percentage of stocks on the
NYSE now trading over their 50-day moving averages tells
us little as it is in a respectable area. The TRIX is
still falling.
The S&P 400 mid caps at horizontal
resistance and next would be the recent high at 564.
The Russell 2000 small caps
at resistance and the 50-day EMA with the trend line
overhead at about 500.
The 5-year treasury note yield increased this week to 1.94%
The monthly bank index chart BKX did bounce at the 1994 low and this is
the first green we have seen in a long time. RSI is still at 20 and stochastics
under 10. This would really need to pick up for a sustained market rally.
The homebuilders index XHB has held up remarkably well over several
months.
The London FTSE at a minor horizontal break out area then with the 4423
resistance at the Fibonacci retrace.
Chinese iShares FXI have been rallying with the upper trend line
resistance at just under 30.
The GSG commodity iShares shows no signs of recovery at the moment but
with this tight range a break out will easily be noticed.
Oil monthly chart looks like it may test the former low. There is so much
oil now in storage that it keeps pressure on the price.
US oil fund USO is close to a possible double bottom at 27.73. Watch for
a reversal but it may instead break down.
Gold is at resistance and has not been able to break through. The top
Bollinger band on the weekly chart is at 950 so it has room to run but may have
to again take a step lower before making that try. It is possible that a
much larger retrace could also start.
Our GDX renko chart gave a buy signal but the CCI had not gone under -100
as we prefer. The buy was given on the mechanical system from the parabolic SAR
moving under the candles and by the CCI crossing back over 100. We think this is
not as strong a signal as it would have been if CCI has been coming up from
under -100 to over it but this has happened only one other time since we started
tracking this in April.
The GDX candlestick 60-minute chart shows a break above the trend
line.
Gold Bugs HUI is still under its 200-day EMA and is un able to break out.
Several gold stocks are close to a break out but not much enthusiasm lately in
most.
Silver continues its move and is now over
the 200-day EMA. It may make one last run to tag the
September 2008 high but it is overbought was expect a
retrace then or sooner.
US dollar could go either way. 84 is
the 50-day support and important to hold and the upside
resistance is as shown.
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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 admit, it was nice to take
a week off. I do get so weary of talking about just how
bad I think things are and are going to get. So the
break was nice, although, nothing seems to have changed
since I last wrote this column. Not for the better
anyway.
Let's just catch up on a few one liners:
Illinois's governor got impeached. Not much to do with
the markets, but it appears President Obama got a clean
bill of health. Had he not, that would have not been
good.
North Korea warned of possible war with South Korea. Oh
yeah...we need this really badly right now.
Citigroup decided not to take possession of their $50
million jet. Smart move guys!!
GM is going to end the union Job banks. Good. I will
believe it when I see it. What do they need now,
another $25 billion, because no one is buying their
cars. No one is buying anything.
President Obama attacked the $18 billion in Wall Street
bonuses, calling them shameful. They are, but they
really don't have anything to do with the economy
getting better or worse. Ken Lewis is upset about the
CEO restriction of $500k a year. I am having a really
hard time feeling badly here!!!
We have lawmakers accusing the SEC of actually hindering
the House's investigations into Madoff. There is no way
Madoff did all this alone. There are plenty of people,
Wall Street types that are in this up their butts. Many
will eventually end up in jail. Along those lines, we
should maybe add the SEC to the list with the Federal
Reserve Bank of things that need to go away.
That pretty much gets us current and where we are at
this weekend. The Senate at the time of this writing is
claiming they have a compromised stimulus bill, no
details at the moment, totaling $780 billion. That's
down from an earlier estimate of $937 billion. And this
bill could pass as early as the end of next week. And I
think that is what the market rallied on today, Friday.
The markets always like it initially when "government"
says they are going to pump money into the economy. But
a few days later, it doesn't really matter, and we head
in the opposite direction again. It is not a good idea
that the government keeps pumping money into the
economy. It is really a very bad idea. So today was
good, maybe Monday, not so good.
The Senate did approve a $15,000 tax credit for home
buyers. But, go out and try to buy a home. It's much
easier said than done. And if our economy is going to
go further south, as many are predicting, why would a
bank choose to lend money now? It wouldn't.
And then today I heard that the Bush Administration
Treasury paid $78 billion "extra" out to banks from the
TARP money. Apparently this was an error, the payment,
not the news. How the heck does someone make an error
of $78 billion dollars?? Whoops????!!!
And the bogus jobless rate hit 7.6%, with 598,000 more
jobs lost during January. Those are really bad
numbers. We have lost 3.6 million jobs according to US
government figures. But my figures are much higher. I
think we are closer to 7 million, and I think we are
very close to 10% unemployment right now. What is
apparent is TARP isn't working and Congress doesn't have
any answers, and it is looking very much like President
Obama doesn't have the magic everyone wanted him to
have. Well, he doesn't. Unemployment like this will
kill our economy, and it is already bleeding badly
anyway. February numbers are likely to end up just as
bad and most economists that I like to follow are saying
the numbers will not get better until sometime in
20011. This kind of down turn is shaping up to be
years, and not just months, before we see some kind of
relief.
Will the stimulus package coming out of Congress help?
Sure, any spending will help. Temporarily anyway. But
it depends on just what we spend and where and how
much. And we don't know that yet. It's time to accept
that we are in the beginning stages of a full blown,
dyed in the wool, 1929, Capital "D", Depression. I
actually hate to say this. It is absolutely terrible.
But I believe we are there. And I don't think anyone
has a clue how to stop it from happening and running
it's course.
I still believe the Bad Bank idea really won't happen.
Paulson couldn't do it, and Geithner most likely won't
go in this direction either. Too much transparency
involved, and believe me, the big banks do not want us
to know at this point just how bad off they are.
Personally, I think that most of them are just
insolvent, and it's time to come clean and get on with
the destruction of these banks. And any further TARP
money should be put into banks that have not killed
themselves with greed, and "toxic assets". There is an
old expression about putting good money after bad.
Let's really think this through people.
I have a small bank in Colorado I use. Academy Bank. It
was started at the Air Force Academy in Colorado
Springs. It has grown and is located at a number of
military institutions. And in many towns it has a spot
in Wal-Mart. I use it because they are simply really
nice people, old fashion type bank. And it is very
convenient. They know me and my business partner by
first name. They know my medical history, and what my
vacation plans are, and where I went last weekend. They
are just a bank, they take in deposits, they lend
mortgage money, auto money, they have money market and
CD's and offer credit cards. They are cash positive. A
really good idea don't you think? They don't have any
"toxic assets". So why wouldn't we want to reward this
little bank for doing a good job and making money and
not putting us in the economic position that many of
these large banks put us in? Let the big guys fall, and
let the small guys grow. We might be a lot better off,
a lot sooner. You give my little bank $40 billion, and
they will get it into the economy, and they will make
money with it. I bet you.
Secretary Geithner is scheduled to announce on Monday
the new plan for Treasury. This ought to be good. I
still like Einstien, "You can not resolve a problem with
the same mentality it took to create it". Hopefully the
Obama Administration has a new idea. But something
tells me, that is not going to be the case.
BC
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Earnings Calendar
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Weekly economic calendar from briefing.com. Not so many items this week.
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Featured Stocks
One of our Featured Stocks
ERF Wireless, Inc.
ERFW
http://www.erfwireless.com/
announced a couple of weeks ago an agreement with
Schlumberger, the world's leading oilfield services
company. We think that over the next months and
years this will be a major revenue earner for ERFW and
there is even a
minimum numbers of yearly purchase commitments built
into the agreement. Oil companies work in remote areas
where there is no traditional phone lines or Internet
availability so they have been forced to use satellite
coverage with even low bandwidth rates of around $6.00
per megabyte in traffic. With their high data transfer
requirement they have had to spend thousands of dollars
per month. The secure wireless network alternative that
ERF will be instilling for
Schlumberger customers will save the oil companies a
significant amount each month and greatly increase their
bandwidth while providing excellent earnings for ERFW.
The stock moved up on very high
volume and pulled back on light volume as it seems most
buyers have invested for the longer term. The MACD and
histogram have remained positive as the stock
consolidates for a move higher as installations begin.
Another Featured company
America West Resources http://www.americacoal.com/
AWSR plans to double coal production this year and has a
main equipment rebuild in progress to be re deployed shortly.
Coal supplies the USA with over 50% of its electrical energy
needs and unlike oil in which the USA has to import most of what
it needs, with coal the USA has the
largest reserves of any county and is a major exporter.
Here are major coal production regions in the USA and the red
arrow is Utah where the AWSR mines are located.
As the employment report this week
shows, there are hundreds of thousands of jobs being
lost yet America West Resources is hiring
additional workers. The demand is higher than the supply
and as clean high
Btu, low-sulfur (environmentally compliant)
coal is sought out AWSR is a
beneficiary.
There are many types of coal and
they have various prices. This graph shows the current
price where you can note that the
coal from the Unita Basin
Utah (AWSR coal) is currently the highest prices (now at
about $73 per ton) and it has been steadily
increasing for over a year. This will be very evident in
the company's earnings increase in 2009.
The stock has been consolidating in
a rectangular pattern at support and $0.30 is its upper
band resistance. We expect a good year for AWSR.
Remember to check the
blog
as
information is posted many times each day - please
post your own comments and charts. In case you do not know, on the
blog
topic or any topic on the message board, if you click on
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email when new posts are made to that topic.
New additions to our
watch list.
Remember that we add many stocks to it each trading day.
PBG Continuation back over $21.11
HPY Over $9.50 or $9.73
with caution - needs strong volume
DRI Over $29.30 not a fast mover
ARD Over $27.44
EBAY Over 50-day at $13.70
EAC Over $30.51
IRF Over $14.50 again
PLL Over trend at about $28.40
GDI Over $23.18 - mind the 50-day
GYMB Over $27.53
For your viewing
Photograph by Olchik Dozhdik
Photograph by studiovog
Photograph by
Igor Kvochka
That's a full lid for today - will see you during the week.
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