Dow -82.35 at 7850.41, Nasdaq
-7.35 at 1534.36, S&P -8.35
at 826.84
Washington's
Birthday
US Markets will be closed on Monday.
As we wrote a year ago, on April 30,
1789, George Washington, standing on the
balcony of Federal Hall on Wall Street in
New York, took his oath of office as the
first President of the United States.
Cool - he did it on Wall Street. He was the
first President of the United States
after it had a constitution. Before then the
country had 8 presidents but none of them
got a holiday named after them or their
pictures on money.
The first
President under the Articles of
Confederation,
was John Hanson
in 1781 and as they could only serve one
year he was followed by Elias Boudinot
(1782-83), Thomas Mifflin (1783-84), Richard
Henry Lee (1784-85), John Hancock (1785-86),
Nathan Gorman (1786-87), Arthur St. Clair
(1787-88), and Cyrus Griffin (1788-89)
then Washington - the 9th president.
Washington was not a member of any political
party, and hoped that they would not be
formed as he feared the conflict and
stagnation they could cause governance.
Smart Guy.
Two
presidents later...President Thomas
Jefferson said, "I sincerely believe... that
the principle of spending money to be paid
by posterity under the name of funding is
but swindling futurity on a large scale."
Swindle is what some
banks and others seem to have done and
now taxpayer money is being used to try and
fix things. It will not be so easy as even
if banks start to loan more money - who will
borrow it? And Should they? In the last 3
months about 2 million jobs have been lost
in the USA and China reported losses of 10
times that amount - huge. Europe is also
seeing unemployment rise and there was a
report last week that suggested even larger
bank bail outs there. Many of the S&P 500
companies sell products and services outside
the USA so their revenues should continue to
decline.
The treasury and Fed
announced part of a $1.5 trillion bailout
expansion plan and so far the market is
skeptical if that will work. Then the
additional "stimulus" package which is now
just under $800 billion and both of these
may have to be repeated again before the end
of the year or maybe in 2010. No one knows
for sure so certainly not a good reason for
any long term market rally.
The game has been to
rally on these announcements or even on news
that there will be an announcement and then
to sell the actual news. Perhaps when the
plans are started and all are not waiting
each day for announcements the market can
make a direction decision.
The Nasdaq 100 has been
relatively strong and there is a chance
still that it goes to test the recent high
and even breaks out but our confidence level
for a break out are muted. Quite some time
ago it looked like a general wave A down may
have ended with the November low and that we
could rally up 38-50% from the drop off the
October 2007 high in a Wave B and then fall
to a final low into 2010 or later. It is now
looking more like like we are still in
the Wave A decline and if so would not start
the Wave B rally until the next low is
reached. We will talk of this on the S&P 500
chart a bit later.
The Commerce Department said
retail sales rose 1% month-over-month in
January following a downwardly revised 3%
decline in December. Economists had
estimated a 0.8% decline for January. On a
year-over-year basis, retail sales were down
9.7%.
.
First-time
claims for unemployment benefits declined in
the week ended February 7th. Jobless claims
fell to 623,000 from the previous week's
revised figure of 631,000. The Labor Department also said that the
less volatile four-week moving average rose
to 607,500 from the previous week's revised
average of 583,500.
The trade deficit narrowed to $39.9
billion from an upwardly revised deficit of $41.6
billion in the previous month. The narrower
deficit reflects a decline in exports, which in turn is
seen as a corollary of slowing global growth, and a drop
in imports. December exports were down $8.5 billion to
$133.8 billion, while imports fell $10.2 billion to
$173.7 billion. The goods deficit fell $1.7 billion to
$51.6 billion and the services surplus fell $0.1 billion
to $11.6 billion.
Crude oil inventories rose by
7.2 million barrels in the week ended January 30th to
346.1 million barrels. Crude stockpiles were above the
upper limit of the average range. Refinery capacity utilization averaged 83.6% over the
four weeks ended January 30th compared to 83.9% in the
previous week.
When measured in US dollars, the Dow
currently trades 44% off its October 2007 record high.
However, when measured with gold, the bear market is much more significant. To
help illustrate the point, this chart presents the
Dow divided by the price of one ounce of gold. This
results in what is referred to as the Dow / gold ratio
or the cost of the Dow in ounces of gold. For example,
it currently takes 8.4 ounces of gold to “buy the Dow.”
This is considerably less that the 44.8 ounces it took
back in 1999. When priced in gold, the Dow from 1999 to
today is down 81%!
Major indices from last week.
Leading and losing sectors from last week.
The top and bottom industries last week.
This Dow chart is from one year ago 2008 - noticed the
similarity to today's chart except the price.
The multi index chart shows the weakness and except for
the Nasdaq, the others could roll over quite easily.
Dow weekly chart is surely not at all bullish. It is at a multi year
closing low and unless the bailout plan or stimulus includes some widely liked
changes soon the market will test and maybe break the November lows. A crash may
happen in in the next few weeks so at least be prepared for such a possibility.
The monthly Dow in portrait mode for a dramatic view. If the fist trend
is broken the next one down is now about at 6600 which is also near at 62%
retrace from the 1987 low to 2007 high.
Transportation average had been looking pretty
good a week ago but gave it all back and the MACD may
have a negative crossover soon.
Nasdaq monthly is back to the long term trend line. The RSI and
stochastics are oversold but they could stay that way for months. Regardless of
the near term the 1100 level will likely be at least tested before a final
bottom is reached and a break below that could send it much lower.
The daily Nasdaq is in the center of the triangle and can break either
way. The volume gives a slight edge to the upside.
The NASI still bullish with resistance back at its recent high.
The VIX has dropped about to the trend line so a break back under 40
would put it back between the lines and probably coincide with as market rally.
For most of the year the Nasdaq has been outperforming the S&P 500 and a
reversal here on this ratio chart would be bearish.
The Nasdaq 100 dipped to the first and shorter term trend line and so far
it moving back up.
Last week we showed how the earnings
of the S&P 500 have declined
more than 60% over the past 17 months. Now they are at
$28.60. The S&P closed at 826 so that gives it a
Price to Earnings ratio of 28.8. It is not
uncommon in a recession for the S&P P/E to drop to 12.
If the earrings stay even this high a P/E of 12 would
put the S&P at 343. Actually though as the PE is usually
forward looking, it is suggested that one may base it
later on a price much higher, say at $50 but with the
typical PEs - so 12 x $50 would be closer to 600.
This is only talk right now but the
chart supports this possibility as we are now near the
50% retrace and the 62% is at 657 which is back within
the longer term dotted-line trading bands.
S&P
500 monthly
The daily S&P
500 is still over the January low so there is still
a chance that it moves back to the top trend line. This
would just make for longer range better short position
entries.
The NYSE similar to the S&P 500.
The S&P 400 mid caps did not pull back quite as much and remains in a
pretty tight range. The pattern can still be traded long or short from both
lines until one breaks out or fails and then trade in the direction of the move.
The Russell 2000 likewise has remained relatively stronger than the Dow.
Usually in a recession the small caps suffer the most as the credit crunch
affects them more than the big caps but so many banks dropped this time the Dow
was hit harder than usual.
The SRS Ultrashort Real Estate 15-minute chart using the 9 and 39 EMA for
mechanical buy and sell signals. Feb 10 gave a buy at about 56 and an exit at
the end of the day was at near 61 for a very nice trade. Most exit this system
at the end of the day but if you held part, the crossover exit came close at the
yellow circle but seems you would still be in the trade.
The banking index BKX monthly is back near its low and even with its
oversold condition we would not at all be surprised to see it break this
support. If the government basically takes more shares the banks will continue
to lose value for stockholders. Right now the medium term plan is not
known.
The Russian market RTSI so far this month is showing its first green
monthly candle after eight red ones and is up over 15%. It has greatly
outperformed the S&P 500 this decade even with its large decline. This was
asupport level but it is still too early to judge if this will hold.
The commodity index CRB weekly chart shows a 5% decline this week. It is
over the RSI 30 but not by much and stochastics are well under 20. MACD has made
a crossover but IMO it would need to get back over the yellow line resistance.
Oil monthly so far shows a green candle also for the first time in many
months but this is still only a day trade according to the whim of the market of
the day.
DXO is the double long oil and it has yet to show any reliable movement
on the daily chart.
Gold is clearly above the trend line but RSI has had negative divergence
on this rise for 16 months. This is bullish but gold stocks are not celebrating
so much. Sure some of our favorites continue to do well but there is no fire in
the sector. This seems not to be so much an interest in gold but just running
from the general market and parking money.
Gold weekly shows the horizontal break
also. It is near the top Bollinger band but not outside
of it and RSI has room to run. Stochastics are high but
can stay there for quite some time.
GDX gold miners Renko chart is still on a buy signal using our mechanical
trading system. For a sell and short the CCI would have to droop under 100 and
the Parabolic SAR dot to go over the pattern. This is up about 2 points from the
last buy.
The HUI Gold Bugs shows little excitement on
the movement of gold as it stays near the 200-day EMA.
Silver made it to our target as it is
at the top Bollinger bands. This could made another push
above but the RSI is overbought so the RSI is
increasing. A gap up would probably be a good place to
lock in profits.
The US dollar had a small topping candle on Thursday and some downside on
Friday but not enough to mean much so far.
|
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
There seemed to be 3 items of
interest to the stock markets this week coming out of
Washington DC. On Tuesday, all eyes were on Secretary
Geithner as he announced his plan to stabilize the
broken financial system. He was talking about the major
banks. At the beginning of his speech, the Dow was
working around the 8200 mark. And it went down from
there. So the markets were not very impressed with
anything Mr. Geithner had to say. In the end Secretary
Geithner said he would commit upwards of $2 trillion
towards his plan. But just how he is going to do this,
and how it's all going to work remained a mystery. It
is apparent that no one really knows what to do with the
so called troubled assets. Once again, these are really
big debts. But banks like to call their debts,
"assets". If you and I had these kinds of assets, they
would call us broke!! And I still think the 8 major
players in the banking industry in this country are just
that, broke. In the end, they will either be forced to
fail, or we will be forced to nationalize them. At what
cost? Well, $2 trillion is number floating around right
now, but it could go a lot higher. And none of this is
thrilling news to the stock markets.
On Thursday, the Dow spent most of the day in the red,
and had just hit the 7,700 mark, when news of President
Obama's plan to cut home foreclosures leaked to the air
waves. Now that did impress the markets, at least for
the remainder of the day, and we shot up above 7,900. I
have to admit, I was caught off guard, as I didn't know
that we had a foreclosure plan in the works. But on
Friday, it turned out that how this plan is going to
work won't be made public until next Wednesday. So
maybe this new Administration didn't know they had a
foreclosure plan either?
And the talk on Friday was Congress had agreed on a $787
billion stimulus bill, calling it a major milestone on
our road to recovery and that it would pass most likely
late Friday. And it did just. And the reaction of the
markets was pretty much nothing at all. Friday was
spent bouncing above and below the 7,900 mark and ended
up a fairly flat trading day. In fact, with all this
stimulating economic news, the Dow was down for the week
about 400 points, give or take a few.
I have a copy of the 1000 + pages of the $787 billion
stimulus bill. And it will take me a week to sift
through it all. apparently I was wrong in my thinking as
to the total amount of the bill. I was pretty certain
it would grow to over $1 trillion. But it was actually
cut down some. I guess they had to make concession to
get the 3 Republicans who voted for it in the Senate,
which turned out to be crucial, as they needed every
vote for passage. Not one Republican voted for it in
the House. But it didn't matter. We don't need any
Republicans in the House.
So far, I can't say I am very stimulated by what I have
read. In fact, I am viewing this bill as a huge
spending spree by Congress. But the effects of
stimulating the economy are vague. Seems about $300
billion will come to us in the form of tax cuts, and
some $300 billion will be put to work helping those who
have lost their jobs, or will be loosing their jobs.
And the remainder is going into stimulating State
coffers towards schools and road construction.
Whatever the effect all this money coming into the
economy will have, it is pretty apparent to me that it
will take some time to be put to work. I have yet to
see anything that will have an immediate effect on our
downward spiral. Surely unemployment is going to
continue to rise. More banks will be closed. What is
it up to now....13 for 2009? GM and Ford and Chrysler
are still going to have trouble selling their products.
More bailout money from TARP headed that way. Main
Street businesses will continue to close. Credit is
still all but nonexistent. And the Dow closed below
7,900. No, I just don't see anything good in the near
future.
NOTE: I will be relocating this coming week to the Cape
Coral, Florida area. Taking my RV on the road. But I
do plan to post comments just the same
BC
|
Here is
a list of stocks reporting earnings on Tuesday. Check the updated
Earnings Calendar
on all overnight holds.
Weekly economic calendar from briefing.com.
To try futures trading you may
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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, to provide wireless network services for its
oil and gas clients. Right now
tens of thousands of dollars are
spent daily at drill sites throughout the country as
they have had to pay for satellite but
ERFW
can provide high-speed broadband wireless to these
remote locations, drilling sites, pump jacks, production
facilities, separation plants, pipeline facilities and
tank batteries. In addition, ERF Wireless’ high-speed
bandwidth can enable a number of other beneficial
applications, such as security cameras that protect both
equipment and employees.
This map shows the oil and gas rigs
in the USA and about 70% of all are in Texas with many
more in Louisiana. ERF with its headquarters in Texas
has its largest exiting wireless foot prints in those
two states which means the initial growth in
supplying wireless to the industry will be quite rapid.
Over the period of the
Schlumberger contract it
shows a minimum of 1077 circuits to be installed
so the penetration into the market will be very
substantial. On top of that the contract pays ERF to
provide the manpower and resources to modify
approximately 750 Mobile Vehicles.
We think that over the next months and
years this will be a major revenue earner for ERFW and
there is even a
minimum number of yearly purchase commitments built
into the agreement.
The stock acted similar to a
biotech who announces an early success with a drug trial
and all scramble in and drive to price too high too fast
and then realize the income does not come immediately so
the stock pulls back substantially. This is why we
mentioned setting very tight stops on the 205% move up
to keep your gains. The stock may have now found its
support. Stochastics was under 20 and it is pointing
back up and there is positive divergence on the
histogram. The MACD has not yet crossed and the RSI did
not make it to 30 but it does not always do that before
a turn up. Fundamentally with this
Schlumberger contract in place this price is again
attractive and for technical buyers - watch the
stochastics for a move over 20 and later a MACD
crossover.
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.
The stock is still at the same level for
over a month but stochastics remains very positive as it seems
investors waiting for a time closer to the production increase
and quarterly SEC filing in Mar
We
will have another
Featured company
within the next month or two but cannot say for sure if
it will open on the Nasdaq small cap exchange or the
over the counter. The company's name is
Back over about $16.20 with good volume-
beware of tall wicks - tight stops
Remember to check the
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