Friday, March 21, 2014

Charles Nenner: Why the Dow Jones Will Fall to 5,000

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This 'Bargain' Oil Giant Offers 75%-Plus Upside: Petroleo Brasilero (NYSE: PBR)

Last summer, I wrote about an odd disconnect between rising oil prices and a strong U.S. dollar.
Since then, that disconnect has dissipated. The dollar has appreciated about 6% to 7%, and inversely, the price of West Texas Intermediate crude (WTI) has fallen at about the same rate. Two of my recommendations, Valero (NYSE: VLO) and Phillips 66 (NYSE: PSX), have gone up an average of 32%.
The third recommendation was integrated Brazilian oil producer Petroleo Brasilero (NYSE: PBR),aka Petrobras. Since then, the stock has fallen 26%.
Do I still like it? More than ever.
Another BRIC Faces Adversity
Not long ago, Brazil and its fellow BRIC nations were the world's fastest-growing emerging-market economies.  (more)

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NatGas Poised To Slide To $4; That’s Good If You’re A Buyer

Natural gas inventories fell by 48 bcf last week, below expectations.

Natural gas was last trading higher by close to 3 percent to $4.35/mmbtu after the Energy Information Administration reported that operators withdrew 48 billion cubic feet from storage last week, below the 55 to 60 bcf that most analysts were expecting.
The latest withdrawal was below last year’s draw of 62 bcf, but above the five-year average draw of 30 bcf.

In turn, inventories now stand at 953 bcf, which is 923 bcf below the year-ago level and 875 bcf below the five-year average (calculated using a slightly different methodology than the EIA). (more)

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Teradata Corporation (NYSE: TDC)

Teradata Corporation provides analytic data platforms, marketing and analytic applications, and related consulting services in the United States and internationally. Its analytic data platforms comprise software, hardware, and related business consulting and support services for data warehousing, active intelligence, big data analytics, and data discovery. The company’s products comprise Teradata Analytic Database Software that delivers near real-time intelligence; Teradata Workload-Specific Platforms; Teradata Aster Discovery Platform, which is pre-configured with Teradata Aster Database; and Teradata Logical Data Models that are blueprints for designing an integrated data warehouse.
To review Teradata’s stock, please take a look at the 1-year chart of TDC (Teradata Corporation) below with my added notations:
1-year chart of TDC (Teradata Corporation)
TDC has been trading sideways for the last 4-5 months. Over that period of time the stock has formed a clear resistance level at $48 (purple). In addition, the stock has also created a strong level of support at $40 (blue). At some point the stock will have to break one of the two levels the rectangle pattern has created.

The Tale of the Tape: TDC has clear levels of support ($40) and resistance ($48). The possible long positions on the stock would be either on a pullback to $40, or on a breakout above $48. The ideal short opportunities would be on either a break below $40 or on a rally back up to $48.
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The Euro Chart

This is a big one. I think the weekly chart of $EURUSD is telling us a lot as we hit levels not seen since 2011. A failure up here could mean trouble for European stocks, and really stocks as an entire asset class.
Here are the weekly candles for $EURUSD – I don’t think it’s a coincidence that we’re failing exactly at this downtrend line from the 2008 highs:
3-20-14 eurusd weekly
Every time prices rally up to this downtrend line, the $EURUSD fails very hard. The first time in 2008 we saw a 23% sell-off in the currency. After failing up there again in 2011, euro fell 20%. What’s going to happen this time?
If this week’s failure is just that, then I would imagine European stocks will also come off. The currency and their stocks are very highly correlated over the past year. If you run the numbers, the Euro and Euro Stoxx 50 (FXE/FEZ) have a 0.9% positive correlation.
Meanwhile, European stocks are very highly correlated to US Stocks as well. We see a 0.94% positive correlation between Euro Stoxx 50 and S&P500 (FEZ/SPY). So I don’t think it matters whether you trade currencies or US stocks, this is a chart that we all need to be watching.
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