Tuesday, December 18, 2012

Canadian Banking System Exposed

Despite what is commonly understood, the Canadian banking system is NOT as strong and resilient as most people might assume. According to the World Economic Forum, Canada is ranked #1 in the world for “the most sound banking system in the world”. I am not sure what world they live in, though. The Canadian banking system is no different than most of its counterparts, and Canada’s economic crisis is just as inevitable.
Key Arguments about the Canadian Banking System’s unsound economics: 
  • Canadian banks received a bailout in 2009 from the Fed, BoC, and CMHC;
  • The key reason underlying this bailout was that Canadian banks are actually under-capitized;
  • Canadian banks operate under a fractional reserve system, with 0% reserve requirement;
  • The Canadian Deposit Insurance Corporation does not hold enough cash on hand;
  • Canadian banks hold the majority of their balance sheets on non-productive assets;
  • The Bank of Canada has virtually no gold left to back their monetary system

Canada’s Secret Bank Bailout and the CMHC

Although conventional wisdom tells us that the US banks received a bank bailout and the Canadian ones did not, Canadian banks did in fact receive a bank bailout. If Canadian banks are as strong as the media portrays them to be, then why did they need to be rescued in 2008? And why did they get rescued by the combination of the US FED, Bank of Canada and the CMHC in that and the following year? The exact details of these bailouts are not even accessible to the public, even though, quite ironically, Canadians paid for it through their taxes. The Canadian Centre for Policy Alternatives, however, did release a report with some estimates on the publicly available data from the Canadian Mortgage Housing Corporation (CMHC, the Freddie Mac of Canada).
To prevent a US-style housing catastrophe, the US Fed and the BoC offered short-term collateralized loans to Canadian banks, and the Canadian Mortgage Housing Corporation (owned by the Canadian federal government) bought $69 billion worth of mortgages off Canadian Chartered Banks. Does this sound familiar? Of course it does–the US FED is doing the same with their quantitative easing programs.
At its peak, support Canadian banks received reached $114 Billion. That is 7% of the entire Canadian economy in 2009 or $3,400 per Canadian.  (more)

Norman Barnett – Dividends Can Save Your Retirement

from FinancialSurvivalNet
Norman Barnett is an investment expert. One result of financial repression is the inability of retirees to earn a reasonable return on their savings. This can lead greatly diminished standards of living for the elderly. They are effectively penalized for being thrifty and properly saving for their retirement. But it doesn’t have to be this way. While the Fed says that inflation is well under control, Dr. Norman L. Barnett believes that in addition to low interest rates, inflation is having a devastating impact upon your retirement. That’s why stocks with increasing dividend yields along with MLP’s can be the salvation to your retirement needs. Dr. Barnett is an expert in these stocks and he’s here to help you.
Click Here to Listen to the Audio

Atwood Oceanics, Inc. (NYSE: ATW)

Atwood Oceanics, Inc., an offshore drilling contractor, engages in the drilling and completion of exploratory and developmental oil and gas wells. The company owns a fleet of approximately 11 mobile offshore drilling units primarily located in the United States, Gulf of Mexico, the Mediterranean Sea, offshore West Africa, offshore Southeast Asia, and offshore Australia. It also has three ultra-deepwater drill ships, and two high-specification jack ups under construction. The company was founded in 1968 and is headquartered in Houston, Texas.

To review Atwood’s stock, please take a look at the 1-year chart of ATW (Atwood Oceanics, Inc.) below with my added notations:
1-year chart of DLB (Dolby Laboratories, Inc.)
After a sever sell-off from March until June, ATW worked it’s way up to $50 and has now stalled within a common rectangle pattern. Rectangle patterns form when a stock gets stuck bouncing between a horizontal support and resistance. A minimum of (2) successful tests of the support and (2) successful tests of the resistance will give you the pattern. ATW’s rectangle pattern has formed a $50 resistance (red) and a $44 support (green). A break above $50 would also be a new 52-week high.


Last summer I told traders to watch the oil cycle as the CRB was working its way down into a final three year cycle low. At the time I was confident that the entire commodity complex was just waiting for the oil cycle to bottom. Once it did, the rest of the commodity complex launched out of that bottom like a rocket.

Remember at the time virtually every analyst was predicting the end of the commodity bull market. I knew that was baloney. All that was happening was a completely normal decline into a major three year cycle low.

I also correctly predicted that the bottom in the CRB would mark the three year cycle top in the dollar.

As expected the dollar made a halfhearted attempt to regain the 200 day moving average before rolling over in anticipation of QE4. At this point all we are waiting for is a move below the last daily cycle low at 79.56 to confirm the intermediate cycle has topped, and done so in a left translated manner (left translated cycles are an indication of a cycle that is in decline and making lower lows and lower highs).  (more)

NYSE Summation Update

The market has gone sideways to work off the overbought condition of the market which can be seen as bullish or bearish depending on what your bias is. The concern to me is this sideways action has kept the breadth neutral over the last 10 of 11 trading days and has caused a halt to the crawl up in NYSE summation index this last Friday. The summation index now requires +17 advancers to continue its climb up.
I’ve been very focused on this summation as it’s indicative to what the overall internals of the market are doing presently. If anyone missed the article written by Tom McClellan , I would encourage you to take the time to thoroughly understand what he’s looking for and what I’m keeping a close eye on too.

I’ve included a bar chart summation that I use to help me determine what is required to halt the summation slide, currently it’s tiny at +17 advancers, but never the less the direction of the summation is something I’m watching closely. The second chart is the raw summation and the third chart is a ratio summation that Tom McClellan discusses in his article.

Another chart I watch closely is the 10 Day and 30 Day Moving Average of the NYSE Advancers Minus Decliners. It’s slowly declining and beginning to show a negative reading. The bothersome part of this chart below is a clear negative divergence that took place on Wednesday. When the SPX was testing higher levels, the 10 day (blue line) chart made a lower high. As you can clearly see we’ve gone from +900 area on the 10 Day (blue line) to now a neutral reading of -28 on the 10 Day and +28 on the 30 Day MA.

Looking at the numbers were dropping off from 10 days ago we could easily have a 10 day reading in a deeper negative territory early in the week. What concerns me most about looking to short the market is the fact the 30 Day(red line) is still very low and the 10 Day is starting to get into negative territory. If you look very closely the 30 Day has a strong tendency to climb much higher from where it’s at now, before the market just rolls over. When I look at my spreadsheet I can see that there is a high chance that the 30 Day could be in the +300 area at the end of the month which would make the market overbought on a intermediate time frame.

Lastly, I’m watching the NYSE 10 Day Moving Average Highs Minus Lows Indicator and I’m seeing a stalling in this indicator (see chart above).  A lower high from September would be another negative divergence. At this juncture I don’t see enough evidence for a clear cut reward in any one direction for the market at this time.

John Embry – Chinese Demand For Silver Has Exploded

from King World News
Today John Embry told King World News Chinese demand for silver has skyrocketed. He also spoke about what to expect in 2013 for gold, silver and the global economy. Here is what Embry, who is chief investment strategist at Sprott Asset Management, had to say: “They are still mumbling about the fiscal cliff and there seems to be limited progress on that front. I suspect they will get something cobbled together instead of letting this get to an extreme point because if they let this thing go over the cliff it would be disastrous.”
Continue Reading at KingWorldNews.com…

Chart of the Day - SAP AG (SAP)

The "Chart of the Day" is SAP AG (SAP), which showed up on Friday's Barchart "52-Week High" list. SAP on Friday posted a new 12-year high and closed +1.88%. TrendSpotter has been long since Oct 16 at $72.41. SAP was last featured by "Chart of the Day" as of the close on July 26, 2012, at $63.60. In recent news on the stock, Janney Capital on Dec 14 initiated coverage on SAP with a Buy and a target of $90. William Blair on Nov 19 upgraded SAP to Outperform from Market Perform based on its belief that SAP is benefiting from acquisitions and new innovations and continues to see strong interest in its memory database technology. SAP, with a market cap of $94 billion, is the world's largest business software company and the world's third-largest independent software provider overall.