Dow +248.02 at 8943.81, Nasdaq
+38.70 at 1647.40, S&P
+26.11 at 930.99
14-year unemployemnt
low “A new dawn of American
leadership” is what president elect Obama promised in his acceptance speech this
week. We hope this will be true and that the new congress will act more
responsibly than the past ones. This week we learned that nonfarm
payrolls declined 240,000 in October and the previous months were revised so now
the official unemployment rate is at a 14-year high of 6.5%. The official number
of unemployed persons increased to 10.1 million though the actual number is
much higher as many classes of unemployed are not counted. Since December at
least 1.2 million jobs have been lost and no income means no buying, more home
foreclosures, more defaults on credit card payments, more bankruptcies and less
taxes go to the government. It can be understood that the government politicians
want to look like they are doing good
but it may be better to have a shorter term wash out of
poorly run and extremely high risk taking banks and businesses rather than
providing an endless stream of consumer stimulus packages and company loans and
bail outs that simply add to current debt. The next generation will still have
to pay this debt one way or the other.
Over the next year the number of unemployed could double. The government
has already made some loans available to huge companies like GM and are thinking
of more but maybe this is not the best way to use taxpayer money. The automobile
manufacturers fought tooth and nail against raising the CAFE (gas mileage)
standards and instead built gas guzzlers while the foreign companies supplied
most of the hybrids. They were also making too many cars in general and to
entice people to give up their current car they offered discounts and zero
percent financing. As a result a year ago sales were
running at about 17 million new cars a year. Last month's annualized rate was
10.5 million, the lowest level since 1983. Over the next year the rate could
drop another 3 million as people decide it is better to hold on to what they
have for a while longer and probably start to save some money for a change.
GM reported that they spend about $75 million a day to keep their doors open and
last quarter they burned through $6.9 billion while Ford used up $7.7 billion.
Ford by the way announced that they will layoff an additional 10% of their
workforce. Their businesses has not been run well and the normal situation would be for it to
fail if it must and out of that will come new ideas and opportunities as that is
how business works. If the government wants just to help out workers than why
not hire them directly for the time until the economy improves. The USA could
have a modern infrastructure while not tampering with private business. Obama has made
it clear that he wants to bolster the nation's crumbling roadways,
bridges and sewer systems so doing that will keep people working and improve the
country.
Here is the Labor Department non-farm payroll employment as it
fell by 240,000 in October.What the data shows is that the economy has lost 1.2 million jobs
since December, one in
five lost jobs are from the retail sector.
The unemployment rate based on the household survey
rose 0.4 percentage points to 6.5%, ahead of the 6.1% rate expected by
economists. Meanwhile, the average hourly earnings rose $0.04 or 0.22% to
$18.21.
September wholesale inventories were down 0.1%, which is
worse than the 0.3% increase that was widely expected
and the 0.6% increase registered in the prior reading.
So all the figures about this recession are growing worse as has been expected
but not many yet are talking about depression. What is the difference - depends on
your definition. The Business Cycle Dating Committee at the National Bureau of
Economic Research defines a recession as the time when business activity has
reached its peak and starts to fall until the time when business activity
bottoms out. When the business activity starts to rise again it is called an
expansionary period. By this definition, the average recession lasts about a
year. Obviously we have been in a recession under this definition for a long
time. Recession is a fairly new term from the 1930s as all this type of downturn
used to be called a depression but after the "Great Depression" they came up
with the term "recession" to talk of a depression that was not as bad. Basically
now a depression is any economic downturn where real
GDP declines by more than 10 percent. A recession is an economic downturn that
is less severe.
There is an article about or current economic state and why the writer thinks it
is
Worse than the
Great Depression
by Dr. Krassimir Patrov
Russia also is in a financial crisis but not so severe. The majority of people
who fear losing their current jobs think they could find another one with out
too much problem. I noted this statement of the current growth in Russia. "The
pace of the country's economic growth, fueled by revenue from energy sales and
domestic consumption, is set to slow to 7.3 percent this year, compared with 8.1
percent in 2007, the Economic Development Ministry said last week. Service
industries ranging from banking to supermarkets contracted in October for the
first time in more than seven years." (imagine 7% being slow)
The weekly indices showed losses across the board.
The major sectors for the past week.
The
top and bottom industry groups.
Over the next 6-9 months things do not look promising for the economy but in a shorter term
there is always a possibility of a continued relieve rally. We had expected that
until we had such a large pullback in the last few days. The volume though has
not been high so maybe we can continue with our original notion that we would
have a tradable rally for some time. There are still a lot of charts with valid
bottoming patterns. During the Obama talk on Friday
nothing concrete was given the market on which to rally. There is however hope
that a new administration will have some better
solutions and a few hints could spark a rally. Longer term, anything that does
help will not do so quickly so the trend is still down for quite
some time but we will have rallies. On Monday there were only 21 news lows on
the NYSE that is the best reading since April. First we will see if the daily
Dow triangle holds as that may be low enough for the additional test of the
October 24 lows.
Last week this multi chart showed all indices back over their center Bollinger
bands and now they are all back under it.
The daily Dow
chart had the highest volume on the Thursday sell off.
If we are now on course from C to D, it may be doing so
with a mini A-B-C and the move Friday stated the mini b.
Regardless, if we see D hit we will look for a possible
bounce and if not a short there.
The 60-minute Dow chart could use a dip to the bottom trend as if it were
to bounce there the timing is right for a move to the top again.
Noticed the Renko Dow 5-minute chart. On Thursday it would have kept you in the
short all day. To see shorter timeframe charts like this live and to see real time
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The Nasdaq is still oversold on the weekly chart. A move back over the
62% retrace would be bullish but then expect resistance at the test of the
downtrend channel line.
The NASI had a crossover a week ago and it still is holding and giving
some hope that the upside will return as this indicator generally moves some time
before a new crossover.
On Tuesday the VIX hit 44 as the market rallied but its stochastics came
back up as did market fear and it ran to 64 by Thursday to close on Friday at
56. Historically 50 is high but if it can get back there and stay some time it
may bring in some longer term buyers.
The Nasdaq 100 weekly lower volume still oversold reading under the 62%
retrace.
Expressed here as the QQQQ monthly looks like some room to fall for the
RSI to get under 30.
This S&P 500 the price is not shown here but only the 34 and 13-week EMAs. To
be bullish they need to cross back over and instead they are going farther
apart.
S&P 500 monthly under the 200-month EMA.
S&P 500 20-year chart showing the 4-year cycle do to hit again in October
of 2010. As stochastics are now under 20 we will see rallies before that time of
course.
The Daily S&P 500 still in range and for longs we need to see
MACD start to turn up..
60-minute S&P 500 stayed under the 50-period EMA on Friday's rally
and you can see the short that would trigger under the Friday low.
NYSE daily with mixed indicators.
The number of stocks on the NYSE trading over their 50-dau MA was 8% last week and
7.26% this.
S&P 400 mid caps buy over 580 and short under the Friday low looks like a
plan. Of course it may be volatile as usual.
The Russell 2000 weekly still in the same range
The Russell 2000 daily with support and resistance shown. Stochastics
still pointing down.
Before the new ETFs this fund was popular USPIX to short the small caps.
You have to put your order in by the afternoon and it will be executed the next
day so not for short term trading. This is the weekly chart and you can see that
only this Autumn has it broken out and the interesting thing is how low it is
compared to where it was. This may give a hint that even if stocks seem cheap
now -
they can get a lot cheaper. Even in 2002 this was over $80.
We look at the Value Line from time to time as it is a good index with about
1900 stocks given a broader range and a good mixture of the market in general.
While many indexes were just starting to move up in 2002 and 2003 this one was
making new all time highs showing that the market was much stronger than many
thought at the time. It is near that break out line again and RSI has retuned to
under 30.
BKX banking sector index monthly looks lower still.
The FTSE - will see if Monday can rally some more and bring it back over the 62%
retrace. The 50-day EMA was the solid resistance point on the last try up.
Commodities ETF GSG back down to support so caution for sector as a
new break down may be in the cards.
Oil monthly back to touching the trend line and below the 62% retrace
suggesting that the trend line will fail. $51 was the shadow low in 2007.
US oil fund USO did drop under its trend line. It has a shadow low from
2007 at $42.56
The daily USO chart shows the lower low on Friday.
Natural gas XNG weekly fell 4% but still well over the 62% retrace from
the summer 2003 low.
Gold was about unchanged for the week. All the deleveraging helps cause
prices of things to fall and deflation which gives weakness to gold though some
inflation worries still exist and that gives it support.
Our GDX 60-min renko chart
gave a sell signal and locked in at least $3.50 in gains
and started a short.
The Gold Bugs HUI needs to hold above the 192. For wider gold stock
interest the lower HUI to Gold ration needs to move back over the trend line. We
are out of gold stocks but will watch for more setups. The basket mentioned in
the past can still be used for day trading on up days.
Silver has moved up
the last couple of days but as always the risk is that this is again
a bear flag. Watch MACD for a crossover to confirm an
uptrend may had started.
The US dollar ran to
resistance and has had minor movement up and down.
We may be in a wave 4 of 5 and right now could be a little bear flag. If so
expect a drop to complete wave 4 and a rally to run to a wave 5 top.
I noticed Friday Yahoo stated that it is a good fit for
Microsoft and would sell itself for the right price.
|
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
YHOO vs YANG
One of the more interesting deals in the works today is
probably still one of worst handled. I have trouble
believing it is still a "deal". I'm talking about
Yahoo. And more importantly, Jerry Yang, and his
bungled attempts at saving Yahoo. Because that is what
is on the table for Yahoo, survivability. Actually, I
don't think they can survive now, not the way Yang
intends anyway. He is either the world's worst
negotiator, or he doesn't understand simple math, or he
is really nothing more than a CEO who is stuck on
himself.
Six months ago, MSFT offtered $47.5 billion for YHOO. I
was a stock holder back then, and was simply elated with
the offer. For me, that meant a 30% gain. I'll take
that any day of the week. The stock had been trading in
the $20 range, so a $33 a share offer was pretty good
for me!. But Yang wanted $37 a share. Yahoo had
reached the $43 range in late 2005 and early 2006. But
only briefly. For the most part it had traded below $35
a share. And what was Jerry Yang's comments on this?
Steve Ballmer pulled out too soon! I got lucky and sold
YHOO on the news (buy the rumor, sell the news) and I
got around $30 a share. Still a good deal. For me, not
Yahoo.
The Google deal came off the table, due to the US
Justice Department's ruling that basically made Yahoo
and Gooble collaborators with control of some 90% of the
total internet search advertising. It sounded to me
like a long legal battle, that may not have been won by
Google, so they backed out.
Now Jerry Yang is back to whining about Yahoo's current
plight. He claims he is the guy who can lead Yahoo out
of it's current problems. Well, maybe so, as he is
definitely the one who lead them into it. When the
going gets tough........??? For the record, I bought
a pretty good position near the close on Wednesday in
Yahoo.
So what is next for Yahoo, bearing in mind it closed on
Wednesday just below $14 a share? It would seem to me,
this is a honey of a deal for MSFT. I actually believe
Microsoft needs this deal. And it's probably the last
deal for YHOO. And I believe some kind of offer will be
forth coming from Redmond, Washington. The question I
have is what will Yang do with it? If history truly
repeats itself, if we are destined to make the same
mistakes, Jerry Yang will still want $37 a share and
Yahoo will fade into the past. Times are tough Jerry,
take a look at Ford, and GM and Chrysler, Lehman, Bear
Stearns, Ambac, Washington Mutual. The list is
endless.
Credit Loosening?
Well, Libor is down in the last month. Pretty decent
rates actually. The 3 month rate has dropped a full 2
pts. 4.7 to 2.5%. But are the credit markets freeing
up? Well, not from where I sit. Certainly not
mortgages, and this week mortgage rates were pretty
high. And the applications numbers were terrible. Auto
loans? I guess there still is some money, but it's
costly and you have to have Warner Buffet's credit
rating to qualify. I have some doubt as to GM's life
expectancy right now. Ford seems a little better off.
Chrysler doesn't have a hope without a merger. And even
with a merger, they will be consumed. And we haven't
heard much about credit card debt yet. We will, soon.
Surely we will see that after the Xmas retail season.
If in fact there is a Xmas retail season.
Presidential
Transition:
A lot of talk, speculation about President Elect Obama
coming in early. That is not going to happen. What are
the Democrats going to do, evict George and Company?
And there is worry over problems developing in the next
60 days, and two powers with different ideas, attempting
to resolve these issues. I don't think it's a problem
at all. I guess there is about $400 billion left in the
bailout money. So the Bush Administration is going to
be really busy getting rid of all that money before Jan
21st. President Elect Obama will enter the White House
with nothing!! No problem. Besides, looks like Pelosi
will be running things anyway!!!
Butch Cooley
|
Check the
Earnings Calendar
on all overnight holds.
Weekly economic calendar from briefing.com.
To try futures trading you may
sign up for a free simulated account that uses live streaming data.
ETFs have changed the markets and the way many trade.
Especially in a time when the conventional "investor"
finds it hard to hold or short a stock for any length of
time. They may do so with a group or sector that is
trending. When then one of the components reverses
direction, it does not affect so much the whole group or
index. When the main economic worries lessen over time
more investors will go back to individual stocks but right now ETFs are here and changing the way people trade. We all
know of the Ultra series of ETFs that aim to give 2X the
gains of the index or sector they track but this week 8
more new ETFs came out that aim to give 3X the rewards.
They may not do that exactly. The TNA tracks the
Russell 2000 as a long and on Friday the Russell 2000
was up 2%, the UWM Ultra ETF was up 3.42%
while TNA was up 5.32%. The volume on these will
most likely pick up as people learn of them. As with the
others you trade them like stocks and go long and short
or use the short ones to go long. The table shows the
sectors they track.
The new
new blog link
if you are not registered asks you to do so one time and
you can select to have it remember you for future
visits. (same long in is regular message board) To post
chart images there just save them to your disk and up
load them using the "additional Options" box when you
post a Reply.
This is just to show that speculative stocks and biotech in general still have
strength. IMMU was a break out pick on Monday at $1.55 and it
pulled back for 4 days - (our favorite time frame) to the break out line so you
had another chance to buy it in the morning on Friday and it took off again on
much higher volume.
New additions to the
watch list.
Remember that we add many stocks to it each trading day.
FULT Over $10.75 note the gap
FRPT Over $2.85
EPIC Short under $6.00
has shadow at $5.69
DBRN Short under $7.75
CTS Short under $6.30
and $6.18
APKT Short under $3.70 or
$3.60
WPP Over $9.60 - mind the open on Monday
SMMX Short under $4.00
OSUR Short under $3.25
COIN Over $7.25
LAVA Over $3.00
Feed the Eyes
Photograph by
Evgenni Krevosheny
Photograph by
Garmonique
Photograph by
SCV
That's a full lid for today - will see you during the week.
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