Dow +68.73 at 8281.22, Nasdaq
+17.49 at 1529.33, S&P
+6.38 at 850.12
Martin
Luther King
Jr. (January
15, 1929 – April 4, 1968) A market holiday on
Monday to honor Martin
Luther King
Jr. who with his dream set the stage actually for the
inauguration which will follow on Tuesday. We hope that
President Obama will be good for the country and the
world and hopefully his years will be kind for the
markets also. This is the way the Dow reportedly has
performed under the last 12 presidents: Clinton +226%,
Roosevelt +194%, Reagan +135%, Eisenhower +120%, Truman
+81%, G. Bush +45%, Johnson +30%, Ford +23%, Kennedy
+12%, Carter -0.9%, Nixon
-16%, GW Bush
-21%.
On
Thursday and Friday the markets were higher but it was a
real effort as the financials have been exceedingly
weak because of the continuing and seemingly escalating
problems. Bank of America
made new lows as they missed the earnings
expectation with a loss of $0.48 per share. They are
going to get an additional $20 billion from the US
taxpayers as a reward for running the business so
poorly. They received $25 billion in the previous
funding. Businesses who are still doing well receive
nothing. Meanwhile Citigroup if splitting off into two
units so one would think that they will be now be asking
for two separate bail out checks.
On
earnings Intel reported $0.04 per share on $7.3 billion
in sales. This shows us that chips are still being
bought. How much is this? $7.3 billion
divided by 90 days in a quarter = $81,111,111 in sales
per day or three million, three hundred seventy-five
thousand dollars per hour, 24-hours a day. So yes the
world is in a slow down but this is still a lot of
sales. $56k a minute. I read that technology is currently the
largest sector in the S&P 500 by market weight. You
will see below that the Nasdaq 100 has been out
performing the S&P 500 lately.
On
Friday there were announced additional 50,000 job lay
off from companies all over the country.
Jobless claims rose to 524,000 from the
previous week's revised figure of 470,000. Economists had been expecting a
increase in claims to 501,000 from the originally reported figure of 467,000 for
the previous week The Labor Department also said that the less volatile
four-week moving average declined to 518,500 from the previous week's unrevised
average of 526,500.
.
The Philadelphia Federal Reserve
Bank reported its business activity index at minus
24.3 after a reading of minus 36.1 for December. Any
reading below zero indicates contraction in the
region's manufacturing sector. Economists had
expected a result of minus 35.0, according to the
median of 54 forecasts in a Reuters poll which
ranged from minus 41.3 to negative 23.7.
.
Retail sales fell 2.7% month-over-month in December. The previous month's sales
were downwardly revised to show a 2.1% decline. Economists had estimated a 1.2%
decline for December. On a year-over-year basis, retail sales were down 9.8%
Sales, excluding autos, slipped 3.1%, adding to the 2.5% decline
in the previous month. The decline was worse than the 1.3% drop predicted by
economists. Sales at motor vehicle & part dealers edged down 0.7% compared to
the previous month, and they declined 22.4% from the year-ago period. Sales at
electronics & appliance stores fell 1% in December compared to 1.5% growth in
the previous month. Sales at gasoline station sales slumped 15.9% compared to a
18.3% decline witnessed in the previous month.
.
A Labor Department report showed that import
prices declined 4.2% in December, tamer than the 7% drop in November. The
decline reflected a 21.4% fall in petroleum import prices and a 1.1% drop in
non-petroleum import prices. On a year-over-year basis, import prices were down
9.3% Export prices fell at a 2.3% rate in December, adding to the 3.4% drop in
the previous month. Agricultural export prices fell 6.5% compared to a 1.9% drop
in export prices of non-agricultural commodities. On a year-over-year basis,
export prices declined 2.3%.
.
Inventories at U.S. businesses fell for a third straight month in November as
companies tried to keep up with plunging demand, a government report showed. The
value of unsold goods at factories, retailers and wholesalers fell 0.7 percent,
more than forecast, following a 0.6 percent decline in October, the Commerce
Department said today in Washington. Sales dropped 5.1 percent, the most since
records began in 1992.
Only oil gained on the week.
Few sectors made gains and not by much this past week.
The top and bottom performing
industries for the week.
The broad market overview of the S&P 500 shows a long time in this range
between 800 dab 950. If it
turns out that the bear will last as long as the bull we will have quite some time to
go.
The multi index chart. Note how the Dow had fallen under the Bollinger band,
made a hammer candle then moves a bit more on Thursday. The blue lines are the
50-day EMA and will again be resistance if we can mount a rally this week.
The Dow weekly has the stochastics still going up and the histogram is
also positive. It has held above the closing lows so far so may turn back up but
the number of new lows on stocks at the November low suggests a test of it. At
some point we expect a rally that will last a while but this may come before or
after a test or a new low. The inauguration is Tuesday and by mid week we may
see a rally begin. Earnings season is here so some better guidance or other
positive news could spark a relieve rally to go back to test recent highs at
least.
Transportation average came within 104 points of the November low. No
valid sign yet of any turn up though the stochastics has a small hook now..
The Nasdaq daily has a bullish flag with higher volume on Thursday and
Friday. This week may show a tide change if the up volume increases.
The NASI though ran about to levels where it has pulled back in the
past and it has started to crossed over. Maybe it will turn back up as it has
done the last two times.
This is the Nasdaq 100 to S&P 500 ratio chart and the Nasdaq has
led the charge which is bullish for a continuation scenario.
The S&P 500 weekly chart looks about like the Dow chart. Now 817 is
an important number as a break will likely go to the November low.
The daily S&P 500 had
a small hammer on Thursday with increased volume.
Stochastics may cross back over 20 and wil watch MACD.
The 60-min S&P 500 has resistance at the 862 50-period and then 882
200-period which is near the broken trend line.
The NYSE similar to the others but never got down to the support as
shown.
The percentage of stocks on the NYSE now trading over their 50-day moving
average has declined in the last week.
The Russell 2000 monthly chart now the candle is sitting right on the
200-month EMA. The RSI is overbold but it could stay there a while or go even
lower.
The daily Russell 2000 also had gone under the lower Bollinger band which
brought in the buying automatically in a technical basis as it seems to do each
time. Each time on the chart it paid to go long when it dipped under the bottom
band.
The 60-minute Russell 2000 as you have seen many times, the Russell seem
more often than other indexes to pay close attention to former support and
resistance points. This double bottom on Thursday hit as the RSI went under 30
and produced a gain of 28 points for the 2 days. The last time the Russell had
gone under RSI 30 on the 60-minute was in late December so this oversold reading
pointed to a decent rally.
The 15-minute Russell 2000 shows that after the initial buy the
index pulled back two times to support and rallied back up both times. It is now
near the 200-period EMA and the top Bollinger band.
The Value Line Arithmetic weekly chart showing again the 4-year cycle and
if it plays out we may hit a cycle bottom in the last quarter of 2010. Cycle
bottoms do not always coincide with price bottoms.
The 30-year bond
prices rallied the first part of the week as yields dipped.
Financial sector XLF is testing its November lows. The financials will
really have to rebound for the markets to have any decent rally unless some new
leaders show up.
London's FTSE bounced at a minor support level. Good volume on the
Thursday turn around.
Commodity index fund GSG
pulled back to a support area but so far the larger
volume was on the sell off which is bearish. If the US
dollar pulls back these may again move up but it looks
now that they will eventually head lower.
Oil gapped up on Monday but pulled back some
the rest of the week. February crude futures
contracts expire Tuesday so that day may be
erratic trading in oil. The gap-up island is a positive
and another rally may begin soon.
The US oil fund USO monthly is back to its
support area.
Double oil long ETF DXO also in a tight range
which is not so common so a break this week is expected.
The ETF OIL is similar but in this view it is
back inside the channel and a break above would be
positive.
Gold this week fell to the upward trend line
support and bounced on Friday. To soon to know if this
is the start of a move but if stochastics moves back
over 20 the gold price is likely to return to the
top resistance..
The gold cloud chart as it fell to the top of the
support cloud. Its signal lines are still bullish since
the November crossover.
The GDX Renko chart ended its short and switched
back to a long position.
The gold bugs HUI had fallen to the support shown
and now in a two day rally.
The XAU 60-minute chart shows the resistance
right where it closed a it also was the gap filling
line.
Silver also had dipped to the upward support
trend line and rallied nicely on Friday.
Platinum which has broken out 3 weeks again also fell back to support and
had a Friday bounce.
Copper ran to its 50-day EMA and now is in a
position where it could break out over the 50-day EMA
but this is not a prediction so far as it could also go
the other way.
The US dollar rallied back up to resistance at the trend line and the
horizontal line. This double resistance suggests the the dollar may once again
retreat. For the Russian currency it is not so much that the dollar is strong
but that the Ruble has been allowed to devaluate perhaps to make oil
cheaper for buyers. Months ago I wrote that a dollar could only buy about 23
rubles and today it could buy 34. That is a big difference.
|
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
predict future happiness for Americans if they can
prevent the government from wasting the labors of the
people under the pretense of taking care of them."
Thomas Jefferson
Well, it just doesn't seem like the bailouts have done
much good in a little over 3 months. Maybe it kept a
few banks and brokerage houses from failing. Although
checking, I see where 25 banks failed in 2008, and two
failed already in 2009. That is compared to 3 total for
2007. BAC is back for more money. A lot of money. We
already gave them $25 billion, but they need a little
more, like $20 billion more. Citibank is a mess. And
they announced on Friday they will now split into two
units, creating two separate messes instead of one. I
think Citibank is done. Might take a year, but I doubt
this bank will survive. In fact, I figure all the big
banks are in a mess. Seems to me, we should have given
the $350 billion to the banks who had their books and
balance sheets in order, and let the others go to
bankruptcy court. The "bad" banks would be gone, and
credit might be moving again. But no one asked me!
And Congress came up with the other $350 billion of the
remaining TARP money this week. Was there ever any
doubt? So, where will President Obama put that money?
That remains to be seen at this point. But it will not
be going into the banking system like the last money
did. There is some speculation it will go into housing,
but just how no one is saying yet. The price tag on all
of this is just nuts. Where are we currently, over $10
trillion?? And now President Obama wants a stimulus
package for some $825 billion more. Amazing isn't it?
Congress will surely come up with some amount, and you
can bet it will be more than the $825 billion. I
suspect it will go over $1 trillion by the time a bill
gets through the House and the Senate and on President
Obama's desk. From what I can understand, about $275
billion of this is coming in the form of tax cuts. "Tax
Cuts" are not instant cash. If every single worker in
the US gets $500, and couples get $1,000, this amounts
to about $10 a week per single worker, and $20 for a
couple. I just don't find that very "stimulating"!! I
run one tax loss company, to help offset capital gains
on market investments. Right now, I can only offset
profits going back 2 years. Under the new proposal, I
will be able to use 5 years of profit. I haven't
figured it out yet, but for me, that part will be
welcome.
Another major portion of the stimulus will go to
homebuilders. How that will work is anyone's guess. We
certainly don't need any more homes built right now.
Retail and manufacturing is suppose to get a bunch, but
I suspect none of this will be cash money. Most likely,
this will be done through tax breaks over several
years.
The road system gets some too. Again, how this is going
to work, who knows. The normal procedure here is to put
a construction plan together and then offer it out for
bids. Apparently we will be doing something different
than that??
And of course, there will be a ton of pork. And just
what that will amount to is anyone's guess right now.
What will not happen is institutions who have already
received TARP money, well....they can't have any of this
money. This money is for the "worker" I guess. Of
course, if you throw enough money into the system, at
least in the short term, we will have some stimulus.
But then it just ends. The economy has a way of working
itself out.
What many people don't know, and the Paulson Treasury
did not want us to know, is all of the banks who took
TARP money and picked up failing brokerages and other
failing banks, well...they got tax incentives. And those
incentives are huge. It's estimated they exceed $150
billion right now. Treasury increased the amount banks
could write off in tax liability when they bought other
"troubled" institutions. This allows the banks to avoid
some serious tax liability, offsetting their balance
sheets with the losses they bought into. In many cases,
the banks actually make money on this deal. When Wells
Fargo bought Wachovia, they paid $15 billion (stock) for
the failing bank. But they made $20 billion in monies
saved in tax liability. And the Paulson Treasury does
give out the tax break estimates, and how much this is
costing the taxpayer.
But President Obama's stimulus package plans to do away
with these tax breaks. It won't effect the deals
already done, but it will stop any other banks from
benefiting. In fact, I can't see where his plan is
giving banks any additional money. Maybe that is a good
thing, as the original $350 billion didn't do much. But
if credit doesn't start flowing again....nothing else is
going to matter.
Then there is the alternative energy part of the
stimulus package. I guess we are calling it Renewable
Energy now. Sounds good to me. Oil may be cheap at the
moment, but it is a commodity, subject to change, and
most likely is going back up. And this idea will create
jobs, no doubt. And they are jobs that will stay in the
US, another good thing. But I haven't seen any plan as
to what energy he is talking about, how it will work, or
what the real costs are going to be. I mean is the
government going into the road building business and the
wind farm business? Or are we going to just give money
to existing companies and let them do it? I watched an
interview this week with the Governor of Michigan,
Jennifer Granholm. Now her State as definitely been
hard hit. But she was talking about public road,
bridge, building projects in Michigan. They are
approved, but on hold, due to lack of funding. And
guess how much money is needed? $1 Trillion USD!!!
Good luck Jennifer. And this is only one State.
Also included is $32 billion for our Power Grid
System. We need some improvement there apparently. $20
billion for the development of fuels, other than oil.
And there is undisclosed amounts for housing (have no
idea what that means yet), federal buildings (maybe we
should just lease some of the commercial space already
available??) and money to make your home more energy
efficient. (Storm window?? Geez Marie, more
telemarketers calling at dinner time!!) Oh yes, then
there is money for Health Care, and somehow this is
going to create more jobs. And money for Education, and
there are supposed to be more jobs there too. These
items come up every time there is a Democrat in Office,
we are just using a bad economy to get funds I guess.
Whatever the final outcome, the version from Congress
should be a pip!! The reason I'm even writing about
this is I thought $700 billion for TARP was an
unbelievable amount of money. I guess it wasn't.
What we need to have happen is the abolishment of the
Federal Reserve Bank. And let's throw out the SEC
also. I mean if Steve Jobs retires, Tim Cook can take
over AAPL and they probably won't miss a beat. That is
not going to happen at the SEC, or the Fed.
And who is going to run all this new money? Well, that
seems to be Treasury's job. And that would be Timothy
Geithner. But seems Timmy forgot to pay his income
taxes!!! Oh yeah, his housekeeper was an illegal
alien. I didn't think that was illegal any more???
Wow!!! Ya have to love this stuff. I couldn't make up
stuff as good as all this if I tried!!! But I hear his
confirmation is in the bag. I doubt that!!! Stuart
Levey, who is currently the Treasury under
secretary.....for terrorism and financial intelligence,
is going to be the acting Treasury Secretary. Ok...who
the heck is Stuart?? I had to Google that one. Well,
he has been at this job since July of 2004. I didn't
even know we had such a position. Prior to his under
secretary job, he was a lawyer in private practice. He
also served in the Justice department for a couple of
years. Well, I have an attorney, but I wouldn't turn
the guy loose with my check book.
And why are we doing all this to begin with? According
to the Philly Fed President, Mr. Plosser, our economy is
going to start recovering slowly in the second half of
2009, inflation will be below 2%. But he doesn't expect
the unemployment rate to drop anytime soon, but doesn't
expect double digits. He also warned that the Fed
decision to take rates to zero, and offer new lending
windows would pose "challenges" for the Fed. Called
this "uncharted territory". Well, it may be uncharted
waters for the Fed, but not for Japan. They wrote the
book on this stuff from 1990 to 2000. What was it
called....Japan's Lost 10 Years!!!
10 Years!!
If it wasn't for day traders right now, I don't think
the markets would move up or down.
Butch Cooley
|
Weekly economic calendar from briefing.com. Not much this week.
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Featured Stocks
One of our Featured Stocks
ERF Wireless, Inc.
ERFW
http://www.erfwireless.com/
announced on Friday an agreement with
Schlumberger, the world's leading oilfield services
company with over $26 billion in revenues in the last
year. In part it reads, " ERF Wireless and Schlumberger Sign Exclusive Reseller
Agreement for United States and Canada
“This joint contract with ERF Wireless provides
Schlumberger with the ability to deliver cost effective
ubiquitous communications to the oil and gas industry in
the ERF Wireless coverage areas,”
http://biz.yahoo.com/bw/090116/20090116005097.html?.v=1
This is not only good for ERF in terms of additional
revenues and expansion but this alliance highlights
ERF's integrity and reliability.
Or coal company AWSR
http://www.americacoal.com/
as announced last week, received approximately $5.2
million in gross proceeds from an equity private placement
http://biz.yahoo.com/prnews/090115/fl59217.html?.v=1
As often happens after such events the stock has
pulled back as some mistakably look at dilution instead of the
expansion that this will make possible. This week the company
announced their appointment of a new CFO
America West Resources Names John E.
Durbin as New Chief Financial Officer
He was formerly
with Conoco, ConocoPhilips
and The DuPont Company.
The new management team and their expansion plans will
help build the company significantly over the next months and
years. There was a article in the Wall Street Journal noting
that the new Obama administration is committed
to keeping coal a big part of the nation's energy source.
Can be seen here:
http://stocktiger.com/coal1601.php
There is also a
company overview available as a PDF report.
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