Dow -146.70 at 11893.69, Nasdaq
-8.01 at 2212.49, S&P -10.97 at 1293.37
Year-to-date, the Dow is now down -10.3%, the S&P 500
-11.9%, the Nasdaq Composite -16.6%, and the Russell
2000 -13.8%. To some this may mean they need the fallout shelter but hopefully
most here are taking some profits on each break out play the first day of the
trade and then setting stops
to protect gains. In this bear market the futures and use of the many ETFs is
also a very attractive way to profit from market declines. If you do hold some
stocks say in a 401K that you are keeping through this bear market you can at
least hedge that long positions with the Proshares short ETFs. Cash is a valid
position also and can be fine in questionable times. The idea is to make a
profit but making sure you preserve capital is also important in these times.
Some of the popular ProShares ETFs for the short side are DXD for the
Dow, SDS for the S&P 500, TWM for the Russell 2000.
This week
the reported Purchasing Managers Index
fell to 48.3 in February from 50.7
previously. The dollar made new lows and now it seems
that traders are expecting a larger rate cut from the
Fed. They currently expect a 2% chance of a 100 basis
point cut with the rest of the bets on a 75 basis point
cut.
Friday was a
continued bad day for bulls as the market fell all day
until some weekend short covering before he close. We
had 6 of our watch list short set ups trigger on Friday
and one long so this made for an excellent day. For the
week we had 23 stocks hit their trade points so we
continue to share exceptional trading opportunities.
There is a lot of
doom and gloom and eventually this will lead to a
tradable rally. In a piece in Barrons this weekend I
noted that they mention we may be on the verge of a bear
market. Hello.
Home foreclosures increased to a
record level as 5.82% of
home loans fell delinquent. The Fed’s
Beige Book reported slower activity. There
were increased fears over US credit conditions as a
mortgage company
Thornburg Mortgage missed a margin call.
We would expect this type of news to continue for quite
some time.
This chart shows the reported jobs decline in the last
couple of months. Of course it is much worse than this as
the country needs more than 150,000 new jobs just to
stay even with new job seekers. This shows a loss of
63,000 jobs in February however to achieve such "good"
results the government added 135,000 jobs to the number
claming it was a birth/death correction. They try to be
so clever. The private sector lost at least 101,000 jobs
but the government had new hires to improve the reported
numbers. The lack of decreasing employment was the one
thing that led some to not claim a recession but now it
is pretty clear that the country is in one. The
manufacturing sector lost 52,000 jobs and the
construction sector 39,000. The professional and
business services sector reported a loss of 20,000 jobs.
The leisure & hospitality sector added 21,000 jobs
compared to an addition of 38,000 jobs in the government
sector.
The unemployment rate fell to 4.8% from 4.9%, likely
due to discouraged workers, which are people that are
able to work but have stopped looking for employment.
Discouraged workers are not included in the unemployment
calculation. (convenient for the government reports)
Speaking of government deception I noticed this quote in
the weekend Barrons -
"NEVER ASK THE BARBER IF YOU
NEED A HAIRCUT. Never ask the Realtor if the house you
are considering buying is a bargain at the price
offered. And never ask the government to calculate the
rate of inflation when it can save millions of dollars
in cost-of-living adjustments." Ray DeVoe.
(BTW some day the inflation may actually be as high as
11% year over year. I do not live in the states so have
no prices to compare.)
The major indexes for the past week:
The top and bottom sectors the last 5 days:
The Dow
closed below the closing lows of the year. We watch that
triangle apex as it could coincide with a rally
later in the month.
The longer term view of the Dow shows its close
below the 62% Fibonacci retrace from the July 2006 low.
Eventually we will have to look longer term as the Dow
will probably go under the 10750 shown on this chart.
The DXD Proshares ultra short ETF did very well
this week and broke above the $60 resistance on Friday.
It will in time test and probably break out over the
$65.32 level.
The transportation index is still 458 points
above its January intra-day low.
And it is above its 50% retrace.
The Nasdaq made a new low
for the year and closed a bit above it.
This shows the support but it is
not very strong. Maybe it will bounce but that 2012 may
be tested during the bear market.
The longer term chart gives a
better view of the 2012 level.
The Nasdaq 100 is the top 100 market cap
companies in the Nasdaq so chart is very similar.
In this monthly view shown using
the QQQQ we see the break of the 50-month EMA and
the trend line that will be tagged near $40 below. Stochastics is now under
20.
To short the QQQQ you can use the
Proshares Ultra QID. Up 67% since The November
low and seems to have a nice move ahead this year. If
you pick the ETFs correctly they can do very well.
The semiconductor index SOX
is still holding up relatively well so may be a group to
check when we get a tradable rally.
The S&P 500 weekly shows it closed below its 200-week EMA. 1219 is a
possible target. 1097 is the head and shoulders measured mover target for later.
Lest then call test of the 1060 possible.
On the monthly we watch the RSI as
when it got under 30 in 2002 and came back above, it signaled a buy. Look likes it will take a while
to get back under 30.
The Wilshire 5000 weekly shows the real broad market and
it also closed under its 200-week EMA - quite bearish.
The Russell 2000 is at its 38% retrace again and just over its 650 low.
Will also watch RSI on this.
We show this UCPIX chart from time to time. Before the new ETFs this was
good for shorting the small cap sector. You can only put in your order one day
to execute the next. If this breaks over the trend and horizontal this could
indicate that we may be in for a multi year bear market.
The Value Line monthly has first support and 38% retrace near 1900.
The VIX bottoms at the 200-day often signals additional market
declines as tops signal a pending rally. At the January low the VIX hit 37.50
and now it is only at 27.50 so no washout bottom in sight.
Oil had no problem going above the $103 Fibonacci projection and now the
measured move may come into play as the last two raised were about $16 so if
this time is the same we look at about $116.
As such the USO made nice gains this past week. It has doubled since the
January 2007 low.
Gold ended flat for the week - watch the MACD for possible crossover of
lines which would be bearish.
Gold stocks of the XAU echoed gold by doing nothing as a group.
Silver also ...
Palladium which was such a high flyer lost 100 points in a hurry.
Eventually a test of the 50-day seems in the cards.
Copper in an ok consolidation -
"Every bull market has a copper roof." Or, if copper
rallies, the stock market falls.
Indeed, in the most recent history of copper prices,
an all-out rally in copper prices that started in
November 1986 took off in advance of the 1987 stock
market crash. And the copper rally from December 1989 to
August 1990 got going before the 21 percent decline in
the Dow Jones industrial average between July and
October of 1990. For the most part, though, copper
rallies portend stock market slumps with about the
reliability of a coin toss. But it makes for interesting
comments. Ha.
The Japanese Yen has many gaps below and this is not a strong situation
The US Dollar is a nightmare
On Friday Treasury Secretary Henry Paulson again said a strong dollar was in the
U.S. interest and the greenback's value would ultimately reflect strong economic
fundamentals. Maybe his pay should be tied to performance. In the lower part of
the chart we show Gold in green against the RSI for the dollar. You see on a the
charts a weak trend line so maybe a bounce this week.
The NYSE similar chart to the other major indexes
The percentage
of stocks on the NYSE that are now above their 50-day
average has not reached the levels associated with
rallies.
As the BPCOMP rallied the
Nasdaq did not so now it is going back down.
Still waiting for a break of
trend line on the NAAD weekly.
This is the EURO to the Japanese
Yen ratio chart and in the past when it touches its
lower trend line the market rallies.
|
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 March 7, 2008
It certainly was an interesting week, so now let’s see
if we can make sense of it all. We have oil trading
over $105 (remember I made a prediction we would see
$120 in 2008). And the US Dollar is at an all time
low. That’s ok, but no one seems to care in this
Administration. This Administration is blaming OPEC of
all groups for the high prices of oil. Wow…these guys
need to go to economic school a little longer I think.
If I was in charge of oil at OPEC, every value would be
wide open at this price. I guess we are content to just
let the dollar free fall for now.
Boone Pickens says oil will go higher from here, but
roll back for the summer, and then really go higher by
the end of the year. But eventually, gas prices have to
increase. GM and Ford both reported terrible numbers
for sales. Ambac is trading at $6.50, gets $1.5 billion
from a stock sale and simply put, they are a mess. And
I can’t see them holding on to AAA status much longer.
I am beginning to think ABK demise is already calculated
into the market price by Smart Money. Thornburg
Mortgage (TMA) defaults on a margin call, only $28
million, but none the less, it’s bad news. Thornburg is
in trouble, and that simply means to me, there are
others out there with the same troubles.
And this after Bernanke makes the statement that some
banks will most likely fail. They might be smaller
banks, but they could fail.
People’s ears perk up when we start talking about bank
failures. Dubai comes out and say Citigroup needs more
money. How much more?? A lot!! Now, I don’t think
Citigroup is about to fold, but the problem is I don’t
know what is really going on in their organization, and
they don’t want me to know. Not a good sign. Simply
put, banks are in serious trouble. Write off will
increase in Q1, and now the question is just how much is
going to be written off. $400 billion was one number
several months ago. I saw $600 billion this week. Geez
Marie, is a trillion in the realm of possibility?
Ok, so far, nothing here that really sounds good. But
Bernanke then addresses a group of businessmen in
Florida, and says banks have to reduce the principal on
the mortgage rates next. 0That might work…on paper
anyway…but it’s not going to happen. Banks are not
going to do this. Not in my lifetime. And he is going
to auction more money to banks on short term basis, up
to $100 billion and in certain circumstances, another
$100 billion will be available. These are starting to
become very large numbers.
We finish the week on unemployment news, and it’s all
bad. 63,000 jobs gone, added to 22,000 last month. Ok,
now things are hitting home. 450,000 people aren’t
working and aren’t looking for work. I love that one.
They must be fishing right??!! Who keeps track of
this. How does anyone know if I’m looking for a job or
not? Maybe there is job police out there I don’t know
about. But whatever, the numbers are terrible. So,
whether you like “economic slow down” or you would
rather use “recession”, a rose by any other name is
still a rose.
Personally, I think we are just at beginning of a lot of
bad financial news. Both the Dow and Nasdaq charts
closed the week in a position to now retest bottoms.
But I have grave reservations that these bottoms will
hold. The market factored in 50 basis point cut for mid
March. If we get that, nothing will happen. But now
the talk is 75 basis point cut. And if we don’t get
that, the markets will probably go further negative. In
addition there is a group who thinks the Fed will
intervene on Monday because of the high unemployment
numbers. I don’t see that happening. Not this time. I
maintain 11600 has to be tested and held. But I doubt
it will hold, so we will then need to hit 11,000. That
could hold, depending on a lot of issues coming up. If
we can’t hold 11,000, 10,000 is a realistic level that
could follow.
So, why does anyone wish to be long in this market?
Protect your investments and your investment capital.
Cash is always king. If you have to invest, check Pro
Shares Ultra Shorts. Easy to deal with and easy to
understand. The DXD was up about 5% for this week. QID
did about a 7% gain.
BC
|
Weekly economic calendar from briefing.com
We
have
a relatively light week ahead in terms of economic
data.
The most significant reports come at the end of the
week
with retail sales on Thursday and the CPI and
Consumer
Sentiment reports on Friday.
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!
As for longer term stocks of
interest it is a low time as in a bear market there
is not so much enthusiasm to rush into smaller stocks
ahead of news. NNRI
will give earnings this month
for ATOLL and have their year end report and
the stock continues to base and to us is at a very
attractive price. It was at similar levels last month
and ran up 80% and we expect it will do that and
more again. GWDC had large volume selling a
week ago but it is now less and the CMF indicator is
now positive and the stochastics about to go back
above 20. Paul Khakshouri, the company's COO, bought
200,000 shares of GWDC at $0.27 - $0.28 per share.
This was a direct purchase and certainly a vote of
confidence in the company and stock. I was watching
the time and sales of GWDC on Friday and noticed the
first 105,000 shares traded of the 125,000 were all
buys. PTLG reported
that one of their leaseholds in Seminole County,
Oklahoma is now producing oil and they expect a
monthly output of it at 150-300 barrels of oil per
month and they say a very attractive return on
capital. They are making progress there and in
Tennessee and Texas. We await distribution for
SIPC and further news on CYRX. Many like
to trade CYRX now as t can trade up for no apparent
reason at any time so buying on weakness can work
out long term but also for a trade.
Now additions to our
Watch List. We add more
each day.
BSC
Short under $68.00
AMR Short
under $10.95
BBI Short
under $2.66
WSO Over $40.10 or $40.32
JGT Continuation here at $18.25
LEAP Over $47.40
SLW Silver over $18.50 - has a $19.16
top
AUO Over $20.00 - caution as this has
two gaps below
SMTX Over $2.10 again or on pullback to
50-day area on light volume
AKAM Over $36.20
HANS Over
$42.50 or Short
under $39.60
LUFK Over $62.00 on good volume - Maybe
$60.40 for aggressive
Photograph by
Nilolai Tushkanof
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