Washington's
Birthday (Declared
a federal holiday in 1879 and it still is as there has been no name change)
US Markets closed on Monday. 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."
And The National Debt has continued to
increase an average of $1.56 billion per day since September 29, 2006. The
estimated population of the United States is 304,383,829 so each citizen's share
of this debt is $30,540. The bear continues.
This past week saw minor gains in the major
indexes. Even the Wilshire 5000 added 1.2%. I do not think that the test we have
seen so far of the January lows is sufficient for a good trading rally and would
like to see another test to really get us oversold but the market so far has held up
even with the straighter talk from Fed chairman Ben Bernanke saying that
there will likely be slow growth in the economy for 2008. Now he has not yet
said "no growth" but that my show up a bit later. Even Alan Greenspan, the
former Federal Reserve Chairman said we are on the "edge" of a recession".
Bernanke also said he sees investment banks taking more write-downs on losses
from subprime mortgages. This is no surprise of course but it may take many
months or over a year to know how bad the damage really is. Actually being
in a recession is not necessarily always bad for stocks but the unknown is.
We sill see some mixed signals as industrial
production rose 0.1%, which was in-line with
expectations. This is not strong by any means but it is
still growth. In surveys the February NY Empire State Manufacturing Index
dropped about 21 points to -11.7 in February, the lowest level seen since April
2003, from 9.0
in January. Because the reading is below 0, it reflects
a contraction in manufacturing in the New York area. Also the University of
Michigan Sentiment Survey fell to 69.6, from 78.4. Economists expected a reading
of 76.5. This is the lowest confidence level since 1992. This may signal a rally
building as confidence is getting perhaps overly negative. Short term.
People do not really turn too bearish longer term on only one earnings disappointment
quarter so a
couple of quarters can be needed to set up a longer term mood. Also the willingness
to pay higher prices for shares of stocks changes over time. When we
look at the average PE of the S&P 500 over the last 60 years it is about 15.8
so a company earning $1 per share would trade at $15.80. Some GOOG
estimate are for it to earn $17.70 in 2008 so if it was average S&P long term PE
of 15.8 it would trade
at $279. Its 2009 current estimate are for about $22.30 so if average it would
trade at $352. So for some stocks people are still willing to pay a great deal
higher than the average PE. The Hoover's AAPL earnings estimate for $6.39
in 2009 at an average 15.8 PE would put it at $101. Some stocks that are expected
to really outperform command higher PEs but this is paragraph only to show that the term
"cheap prices" is relative. At some points in history the S&P 500 PE has
traded at a PE under 10 and it has been over 40.
I read that the S&P earrings for 2007 was $71.56. The projection for 2008
is $71.20 and currently the S&P is at 1347 or a PE of 18.8 for 2008. The
historical low near 10 would have the S&P 500 at 715 and the average 15.8 PE
would place it at 1130. We do not know what the real earnings for 2008 will be
or what valuation the market will place on them but at this time the price to
earnings is not at any bargain, historically.
The major index
for the past week. All had gains except gold.
The weekly top and bottom
sectors.
The charts do not give any clear estimate of the direction for the week
but there are some indicators and trend lines to watch.
The Dow longer term
perspective. Not conclusive in the intermediate term.
The Dow shorter term failed to break trend line.
Maybe during this shortened week it will give it another try.
The Dow Jones transportation index has been
relatively strong. It remains just under the trend.
The Nasdaq long term weekly chart to show the over
view. Still above the trend and 200-week. If the market could rally with some
90% upside volume days it could made a shorter term tradable bottom - but no buy
signal yet.
The Nasdaq ran right into resistance on Thursday and pulled back to the
trend line. It has a little hammer candle from Friday so could try to rally
back.
The monthly on the Nasdaq 100 QQQQ still above the
50-month but the MACD just had a negative crossover and stochastics may reach
under 20 over time.
The semiconductor index SOX is still hanging at the 62% retrace and
the stochastics on the weekly chart may even cross over the 20 line. At the
moment however the pattern looks like it is weakening.
The S&P 500
was up 1% for the week but was unable to break above the
trend line.
NYSE - no clear direction
short term.
The long term
Russell 2000. With luck we will at some point rally to
the trend line again or at least the 50-day EMA and this
may then make a good long term short.
The Russell 200 is similar to other indexes above. You can see support and
resistance and can be traded either way - buy at support and sell at resistance
- or change position if support or resistance are broken. This way your stop
losses are close.
The DXD ultra short Dow
still in the trading range. If you cannot trade
futures than it is good to keep this and the DDM
long version for the Dow or any other ultra ETFs to use
for trading or hedging.
The Nasdaq in the lower
part of this chart has not yet hit the trend line. The
NAAD shows the decliners still outnumber
advancers and no bottom yet.
The 30-year bond yield
rose to the 200-day EMA at 4.66% and then started the
pullback on Friday. While the Fed is lowering short term
rates the bond market is still counting on higher rates
in the future when the Fed will have to fight inflation.
On this oil
chart we moved the Fibonacci lines so that the 38%
line up with the support at $83. We see that it brings
the top line to $103 so if this rallies again we would
expect resistance at that price.
No comment on the Japanese yen
as it is pulling back but we watch it so will notice
if carry trade comes back into play.
Gold has had negative divergence for some time
but has not corrected too much so far. The metal could
of course run to $1,000 as so many are expecting it but
at some point it will also test support that is lower.
The 50-day EMA is now above the trend line but we will
see where it is when the correction comes.
The gold silver index XAU is in a triangle
and could break either way but it is at the moment below
its 50-day EMA. A break below would have first support
near the 200-day EMA. The lower part of the chart shows
the XAU to gold ratio chart. Often a break below or
above the small trend lines indicate buys and sells of
gold stocks in general.
Platinum has been a
killer from $420 in 2001 to the new highs this week.
This parabolic move can not last forever so be cautious.
We show this as we had 2 stocks in this group for the
last several weeks. Below we show copper as maybe it may
get back into its move up. Maybe not but we are
watching. Platinum futures trade on the
New York Mercantile Exchange
NYMEX with the symbol PL.
London Stock Exchange also has an ETC - Exchange Traded
Commodity for Platinum. If you are interested long term
in Platinum and Palladium there is much to read as a
possible world wide deficit has been talked of many
times so Google it.
Palladium
could go to $500 but is has made a very rapid rise so a
better long term entry would be on a pullback. Palladium
futures trade on the New York
Mercantile Exchange NYMEX
with the symbol PA.
SWC we
mentioned on the audio update on Monday that a pullback
was likely short term and it did so the next day but it
did not last long. Friday morning we mentioned than a
new buy would be on a break over $15.00 and it again
made a nice trade. It is not over the top Bollinger band
but there is some minor negative divergence present in
the RSI and stochastics. This has doubled in less
than a month so use caution so you can keep most of your
gains when eventually it pulls back.
PAL was a break out buy at about $4.00 and again at $4.50 and on Friday
made it over the 200-day again. Palladium is very extended and though it may
continue to run - at some point a pullback may be dramatic.
Copper made a great run from $60 in 2001 to $394 in 2006 and has been
consolidating since then. The 50 and 200-day may cross soon and the pattern
could make a break out in the coming weeks or months so it is worth paying
attention too. We show 3 copper stocks below that we think may move well if
copper does again get hot.
OLN attempted a break out last week and has pulled back a bit. Note that
the 200-day is moving under the 50-day making a golden bullish cross.
FCX
copper and gold was $5.70 in 2001 so has been great and
is now toying with the 50-day EMA. The trend line is not
too far overhead so watch if copper moves.
This copper
stock PCU was $2.97 in November of 2001 and it
hit its $138 high in October. Absolutely fantastic run.
It has been making a recovery from its pullback and note
that the 200 and 50-day averted a bearish crossover and
the stock is back over the 50-day and trend lime. If
copper starts to move again this for sure is one to
watch.
The US dollar could not make it to resistance and
again is pulling back.
The Value Line
monthly chart now in the 4th month. RSI about half way
to 30. We expect to see at least the 1900 level though
it may have a rally at any point before then. This index
ran up 300% since its 2002 bottom so an extended
pullback is in order.
Note on Morning Audio Update:
We make one most days within the first two hours. On
some days it is useful as it can point to stocks
that look like they may move. On Friday we noticed the
SWC was nearing its recent high so would buy at
$15.50 and later it did and ran to $16.16. If you
receive the email and it says "Break Man Alert" - this
week that system has been very slow and sometimes many
hours in delay. So we suggest you send a note to
news@stocktiger.com
and we will place you on a separate list that gets sent
within a minute or two.
(Butch also has a photograph today at
the Newsletter end)
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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.)
Market Comments...Feb 15, 2008
Warren Buffet's offer to provide insurance to the bond
insurers is a pretty cool idea on his part. But more
importantly, he is serious. Never having met the man, I
still believe he can smell a buck under a rock, a mile
away. But this is also indicative of just how bad this
bond insurance issue really is. I have mentioned in the
past that bond insurers had a good deal going with
insuring municipalities for different construction
packages. The screw up came when they took on other
issues, like mortgages wrapped up in disguises called
SIVs and CDOs..
But the more I've thought about this, the more I suspect
the bond insurers will not go for the deal. No…. not
willingly. Because they would have to split the
company, and I'm not positive that is even legal. I can
understand someone buying the cream, but who wants the
garbage? And the garbage is where the problem lies.
Basically Buffet and BRKA want the cream, and not the
garbage. But it's the garbage that is causing all the
credit problems. In the end, the bond insurers may be
forced to take BRKA's offer.
There is still a bigger problem if these companies can
even go for the deal. They would have to split the good
books and bad books, so to speak. That would mean
"opening" the books for others to see, and eventually
that information would bleed into the markets. And
these companies are holding their books pretty close
right now. Believe me, they do not want us to know just
how badly they screwed themselves up.
I also think, once the bond insurers did open the books,
it would send a shock wave back into the financial
companies, both banks and brokerages. And neither of
these business want their dirty laundry hung out
anywhere right now.
Should be interesting, because time grows short,
possibly a week left, before these bonding companies get
their rates dropped. So, If...this can happen, it has
to happen early next week. If it happens, the herd will
see it as good news. But smart money will see it as the
can of worms it really is. We will get more than a
thumbnail look into just how bad the sale of SIVs and
CDOs really was, and how deeply it cuts into this
country and other countries.
.
And smart money has most likely already figured in that
the AAA ratings everyone is worried about, is a moot
point by now. If you look at MBI and ABK, they are
trading at prices that are currently in the sewer. How
low can they go?
Secretary of Treasury Paulson rolled out the Bush
Administration's plan for helping with mortgage issues.
But there really is nothing there. Basically, you need
to be behind in your payments 90 days, and you get a 30
day stay on foreclosure. And if I understand this
policy correctly, it's all voluntary on the part of the
lenders. To me it is the same as being on death row in
Texas, and you won't get executed this month.....but
look out next month!!!
I will stick to my previous declarations that GDP and
unemployment are the key issues to watch. I maintain we
are in a recession currently with high inflation just
around the corner. I am sure the market has another 50
basis points figured in for March, but it won't matter.
Eventually, Big Ben is going to have inflation issues to
deal with. We can cut out oil and homes and food etc
etc from the CPI, but they can't keep it out of our
living rooms, out of our cars or off our dinner table.
Sooner or later, gasoline will surpass $4 a gallon in
this country. Food is already on the rise. I do not
have a crystal ball, but I have lived a long time, and
most of it, I was investing in something. If I have to
predict, Memorial Day weekend, look for $4 a gallon, and
most families will be eating 70/30 hamburger!
A month ago you couldn't get anyone to mention the word
recession. Oh yes, and the world economy was
"decoupled" from our economy. And US exports would keep
us all warm and fuzzy. Now, things are getting scaly
and rough.
And what about this guy Greenspan? I thought he retired
and Big Ben was running the Fed. Apparently not. I
have read more about Alan then Ben this week. That just
doesn't seem correct to me???
BC |
Economic calendar from briefing.com
NNRI Last week we said that it
may be a reversal candle as the stock was at oversold
levels where it usually gets a good move. This happened in
December and the stock went from a low of $1.16 to $1.70.
We do not know how much the short term will run this
time but it is a pretty good bet IMO that the long term
bottom has been put in now. The stock has been
green for 6 days in a row and it has not done that since
October. Watch the stochastics if you are only a trader,
to see when it gets back over 80. The top Bollinger band
is now at $0.99 and $1.15 is also resistance. The stock
closed above the center Bollinger band so the first time
since October and is back above the downtrend line. It
is common to have a retest of it but this move has been
expected for weeks as positive divergence pointed it out
and the is pretty dependable over time.
The company has stated that the ATOLL
earnings for the forth quarter should be similar
to the first or second quarter earnings and they were
very good.
CYRX has again had strength and this has clearly
turned the corner as is in an uptrend since September.
This week it dipped again and you were above to buy
under $1.15. The 200-day may soon cross below the 50d-ay
and that golden cross would be bullish. Actually I think
this one does not need a chart as the company gearing up
for larger production and recycling of their one way
shippers and in time they will actually begin the
shipping program with FedEx.
SIPC Sipp Industries did file the annual report
with the SEC. The filing in itself is not so exciting as
it is mostly from the shell they merged with but the
filing brings them in line with regulations and closer
to filing to move to the OTC. It has been fluctuating
between $1.20 and $1.60 with our buy suggesting at the
low end of the range. Spring is coming so we expect
updates to come not far from now.
PYR.v Also in its range of $0.40 to $0.50. Some day
the volume will pick up and it will break clear above
this range. It may be when they list on the Toronto
exchange or maybe on another earnings report.
PLTG tested its low and made a higher volume rise
this week.
Now additions to our
Watch List -
check it each day for new additions
By the way - we have put up a
TV Page. It only
has about 23 channels on it now but thought that it made
it simple to watch channels like the China TV station
CCTV and as we have a lot of international users the
C-Span programs are interesting and also good when the
Fed speaks etc. (This may not work with all browsers
or all computers.)
IGT Over $47.57
PAY Over $20.93 or $21.00
ADEP A pullback buy near $8.75 to $8.40
IDMI Over
$3.88 for momentum or for traders where you like
SDXI Over $11.60
VNUS On break out of flag at about
$18.00 - has an $18.50 shadow
CAMH Over $1.45 has $1.60 resistance
(from Sydney31268)
GTEC Over $0.33 or maybe $0.28
aggressive (from Sydney31268)
USTR Over $57.22 again - careful in the
first few minute after open.
CNI Over $52.66
HPT Over
$35.36 has 200-day at $36.67
Whitefish Lake, Mt, 2006 by our own
Butch Cooley
"Sunrise and sunsets are two of my major reasons to fish
ya know!!!
What An Evening
by Joel Schenk
Mojave Mystic Desert
Rain
by David Doe
That's a full lid for today - will see you all during the week.
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