During the past week we had the Fed cut interest rates again but instead of
saying to what rate it gave a range of between zero and 0.25%. On top of
lowering the short term rates it said that it will continue to buy US government
bonds which has of course been driving bond prices much higher. They do this by
issuing a credit to the Treasury Dept, which in turn prints currency. The Fed is
a private corporation made up of member banks and they let this financial crises
happen.
The White House announced a plan to provide automakers with more than $17
billion and so far. It seems the market liked the news as it takes it off the
front page of uncertainty and the current worry of the auto industry shut down
can be put off a while at least. The funds won't ensure
automakers achieve a successful recovery so the market
will again show more concern in the future.
In several of the bear markets we have a good rally at some point
which can retrace about 50% of the decline. The first decline is
labeled A and the rally B and then comes the final
decline C. You cannot know for sure until after an event but
we may have completed A down and have started B up.
None of these are annotated on this chart but the 50% level on the
Dow is 10935. The Dow would first have to break above its trend lien
and 50-day EMA as show on its chart later on.
This chart shows Dow from 1929 to 1933 and the first rally from its
initial drop in 1929. It put in a strong rally back to its 200-day
average before starting its larger drop and eventual start to
recovery 3 years later. We may be in a similar situation now but the
200-day is at 11052 so seems unlikely we could rally that far. The
main point of this chart is how much further the decline had to go
after the rally ended and how many years it took. From the November
low this year the Dow rallied 21% to the December high. We will soon
know if we get our year end rally to top that or not.
The major indices for the past week.
The sector winners and losers for the week.
The top and bottom industries for the week.
The reason the precious metals sector was up was due to silver as seen
below. Some of the numbers are not totally accurate though as HL was
really up only 34% and closed at our watch list buy price of $2.38. Others here
that were triggered stocks from our wtch list are SLW and SWC.
In this video Fred Thompson gives a satirical look at the financial crisis but
it seems closer to truth than sarcasm or satire.
Fred Thompson Offers Nation
Sarcastic "Holiday Cheer"
Multi index chart shows that those that broke above a trend line have
pulled back to it so a good set up for year end rally - if only the bulls can
make it so. Just overhead it the 50-day EMA resistance in all cases.
Dow daily and retracement levels. If wishing were to make it so we could
rally up to the 50% retrace as in most bear market declines where you get a wave
B up and then the further C down. If it does not happened before the
decline it may come later. It is just that now the chart is set so well as you
note the two retracement levels had perfect bounces off of them in the past.
The Dow monthly chart as it closed above the 50% retrace line of the
total move since the 1990 low. RSI and stochastics are oversold enough to
support a move up.
Dow Jones transports closed not far from trend line.
The Nasdaq is sitting in its island and would only take a couple of
strong days to move to a new range.
The Nasdaq 60-min chart as it sits at meeting of moving averages and
trend line with resistance near the 1600 area.
The VIX continued to decline.
I was asked about this
S&P 500 weekly chart this week as had
not showed it in a while. This does not show the candles but only the 13 and
34-week EMAs. Looks like it may be quite sometime before we see another crossover
and the end to the bear.
S&P 500 60-minute chart now sits above two trend lines, at the meeting of the
50 and 200-period EMA with the resistance overhead at about 920.
The S&P 60-min chart we shown last week with new trend line on top.
The NYSE ran above resistance on Tuesday but then pulled back some.
If this were a bull market we could see this is preparation to break over the
50-day EMA at 5856. It may still be that in the next two weeks.
The number of stocks on the NYSE now trading over their 50-day moving average
moved up again and is now at 49.4%
Russell 2000 monthly looks like it may end the month in a positive fashion
and over the 200-month EMA. RSI is still under 30 though stochastics did turn up
a bit.
The Russell 2000 does now have a nice pattern and a good base for a
year end rally.
The S&P 400 mid caps still very much like the small caps but this could be
a break out pattern.
Big gap down in 30-yeer yield. To tie up money for thirty years and only
get 2.5% means that when a recovery does begin - or actually before - there will
be money coming out of bonds and into stocks or real-estate or another
area to try to bring the investment returns higher. Current fixed rate
mortgages are now still over 5% - they were lower when interest rates were much
higher. So banks now are really overcharging it seems.
The 30-year bond price is quite overbought but rates for 30-year are not
at Zero so could go higher - long term though bonds will at some point really be
a nice shorts. With the government buying it is no longer a free market so even
harder to play.
HYG an ETF for high yield corporate bonds - only pointing it out
The London FTSE just below its 50-daY EMA and Fibonacci level.
Oil weekly chart fell below the long term trend line and to one of
several possible supports. It has gone straight down so a bounce will come - but
when? A longer term move up will probably not happen until the economy improves
as when oil goes up stocks generally also do the same as it means demand is
increasing.
Oil closer view downtrend line.
The USO weekly chart illustrates what we said can happen with stocks and
indexes. USO was at 120 and dropped to 60 - so was cut in half. Then it fell
through that support and again got cut in half to about 30. If this is going to
be the bottom we will see it in the indicators. Below is the dotted line,
another level of support.
USO in its channel and a small up turn on Friday.
OIL is an additional ETF way to trade on the price of oil.
DXO the double long ETF for crude oil has positive divergence in the MACD
but that is not a timing indicator. There are no buy signs yet.
Gold ran to resistance on the same day as the dollar hit its low and is
pulling back to the 200-day EMA.
GDX 15-minute renko chart gave a sell during this week as the
Parabolic SAR went above the pattern and the CCI crossed under 100.
This past run up gave about 7 points in profit.
The Gold Bugs HUI hit its high on Wednesday with a reversal
candle so has since been pulling back. It is probably now in a bull
phase so the pullback will likely become a buy.
Silver broke out of its 2-month
range and back over the 50-day EMA.
The US dollar dropped to the 62% retrace
and bounced from the oversold condition. If this is the
end of C down that we would see MACD crossover shortly.
If it drops under the 200-day again though it will
probably be much longer in correction. The weakens in
the dollar does help the multi-national firms as
it makes their prices more competitive.
|
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 don't think anyone was surprised on Friday when the
White House announced loans for Chrysler and GM. It was
pretty much a given and priced into the markets. In
fact, the markets initially sold off following the
news.
I spent much of Friday on the internet looking for the
actual document from the White House.. And in my
opinion, it's not exactly what we are being told it is.
Oh, it's a loan no doubt and there are some strings
attached for the auto industry. But from what I can
read, there is no real enforcement language. And
without that, I see this as the door opening for a
continuous supply of money from the government to the
auto companies. From where I sit, that's just plain
stupid. GM has not been able to get their companies
profitable in 30 years. How do we expect them to get
there in 90+ days? It's not going to happen. So there
will be an exception, and extension, and more money
pumped into the corporation. I guess the real question
is will GM or Chrysler or even Ford for that matter,
ever really change how they do business? And will the
UAW really make further concessions? All of this
remains to be seen.
But in the short term, the loans were probably a good
idea. We now have a bridge in time from the Bush
administration to the Obama administration. Without the
loans, I think we would have seen huge unemployment
numbers, and currently they are high enough. Might have
even taken us to double digits by the beginning of the
first quarter in 2009. So for the short term, that has
been avoided.
On a bit longer term, I don't see that it will make any
difference, and eventually these companies will fall
into some kind of bankruptcy. The loans will not sell
cars. And without sales income, no one is going to show
profitability. So it is now status quo until President
elect Obama takes over and we see what he has to offer.
I'm not certain I comprehend what an "orderly
bankruptcy" really is. So will have to wait and see how
the next administration wants to play this out. But I
remain convinced that at least one of the Big 3 has to
go. GM was in negotiations to take over Chrysler up
until October 2008. They wanted $10 billion of
government money to make that happen, but no one was
willing to drop that kind of money on them at the time.
Maybe that will change in the near future?
As I mentioned last week, the most important, and
currently unresolved issue for GM, is the status of
GMAC. The only option for GMAC is to become a bank
holding company. This entitles them to apply for TARP
money. Without that status, I don't see how they can
remain viable. And without GMAC, which is that part of
GM that funds most of the wholesale vehicle purchases
for the dealers, the dealers simply start falling by the
wayside. Last Friday, Dec 12th, 5 pm ET, was the
deadline the GM had to come up with $30 billion in
capital to become a bank holding company. The majority
of that capital was being raised by cutting deals with
bondholders. As it were, the deadline came and went
without raising the $30 billion. So the deadline was
extended, much as I thought it would be, to December
26.
I read yesterday where Barclay's has stated that if GMAC
fails, GM will need immediately at least an additional
$13+ billion to finance vehicles for it's dealers. Now
where will that money come from?
I still don't think it matters what happens to
Chrysler. I think they are a "dead duck" and it just
remains a question of whether they can merge or are
forced into Chapter 11 bankruptcy. For them, bankruptcy
would most certainly be a liquidation process. But for
right now, the Big 3 issues are over, at least until
January 2009. Then it becomes a trading issue all over
again.
And it's more than just the Big 3. Worldwide, no one is
selling cars. And many other government's are
considering bailing out their own car makers. Japan is
calling for 2009 to fall below 5 million for demand on
new vehicles. This would make 2009 the 5th straight
year of declines in that industry. Toyota (US) will
probably post it's first ever losses in the first
quarter of 2009. Honda is having serious problems. So
I see unemployment rising to over 10% sometime in early
2009 in the US. And that is simply not good.
Worldwide, we may see a number of auto brands drop off
the market. Jaguar and Land Rover may not survive.
Without sales, there is no profit for anyone. Tough
times ahead for the entire industry, worldwide.
Butch Cooley
|
Very few earnings being reported this week: - also check the updated
Earnings Calendar
on all overnight holds.
Weekly economic calendar from briefing.com. The market will close on Wednesday
at 1PM and will be closed all day on Thursday. Due to some old rule about not
allowing the market to be closed for 4 days in a row the market will open again
on Friday.
To try futures trading you may
sign up for a free simulated account that uses live streaming data.
Futures have been very volatile so great opportunities right now for
wide swings.
When any of you sign up for a new
stockcharts.com
accounts there is a space to put in a referral name
on that form. If you enter
stocktiger@stocktiger.com they give
us credit. Thanks!
Last week week wrote about the turn-around the coal
mining company America West Resources
AWSR. It gained 40% for the week with its highest one week volume for
2008.
The company
announced a new
12-month contract with a major
multinational natural resource company to
purchase up to $7.14 million in coal.
New additions to our
watch list.
Remember that we add many stocks to it each trading day.
BPOP
Short under
$5.10
NOVL Short
under $3.46
GCO Continuation over $16.75 - note resistance
HTC Short under $6.75
XIDE Over $5.25
SAI Over $19.50
SLB Short under $39.00
EOG Short under $64.00
CEPH Over $79.00 then $80.39
INSU Over $19.90 - $20.00
AMZN Over $54.85
Also remember to check the
blog
as
information is posted many times each day - please
post your own comments and charts.
Feed the eyes
Photograph by
Bartosz Kotulsk
Photograph by
Alexander Bayburov
Photograph by Tuan Manh Tran
That's a full lid for today - will see you during the week.
We have published a donation page for the ease of you giving to a
charity of your choice. If you have benefited from our site we
encourage you to share with a charity. We have a few recommendations
who all use a high percentage of the donations for the actual
program use. If you have some we should add please send us a note.
Donation Page
Check the
Earnings Calendar
on all overnight holds.
Check the current
message board also for other good
stock candidates as there are several there right now.
If you use StockTiger mail you can access your account using simply
my.stocktiger.com
. If
you would like a free StockTiger.com email address that uses the Google Gmail
spam filter and you can check your mail from anywhere. Send me (ST) a
personal message from the
message board.
Include your First and Last names and the name you want to use. Your address will
be (your choice)@stocktiger.com
Best regards,
Stocktiger.com
| |
