Thursday, May 21, 2009
Is the US-Dollar Headed for a Mighty Crash?
Each month, the US Treasury publishes its International Capital account, (TIC) which foreign currency traders and bond dealers use to gauge the flows of money from around the world, into and out-of the US-capital markets. The demand for a nation's bonds and stocks, combined with international trade flows for goods and services, plus behind the scenes intervention by central banks, all act in concert to influence the foreign exchange market which handles $4-trillion per day.
A surplus in TIC inflows is generally seen as a positive for the US-dollar, because it signals that foreigners are willing to increase their holdings of US-securities, displaying greater confidence in the currency. On the other hand, a TIC deficit is generally interpreted as bearish for the US-dollar, because it means that foreign inflows into the US aren't sufficient enough to fund government borrowing.
The release of the TIC report often sparks a flurry of trading activity in the foreign exchange market, due to speculators seeking to earn a fast profit. However, the initial knee-jerk reaction to the news headlines, can be very misleading, and often isn't long-lasting. For instance, the US-Dollar Index, measured against a basket of six-currencies, defied conventional logic in February, by climbing +2.7% higher, even in the face of a net outflow of $91-billion in the TIC account. (more)
Wednesday, May 20, 2009
The Market's Next S&P Targets
By: CNBC.com
Stocks continue to gently whipsaw Wednesday, but the Vix volatility/fear index is still subsiding.
Art Cashin, UBS Financial Services director of floor operations, offered CNBC his stock-market insights.
In a sports metaphor, Cashin agreed that the bulls have stolen the ball back from the bears. "But now we have to see if they can score with it."
"What you're going to test for is...yesterday's highs, followed by a real resistance." (more)
Stocks continue to gently whipsaw Wednesday, but the Vix volatility/fear index is still subsiding.
Art Cashin, UBS Financial Services director of floor operations, offered CNBC his stock-market insights.
In a sports metaphor, Cashin agreed that the bulls have stolen the ball back from the bears. "But now we have to see if they can score with it."
"What you're going to test for is...yesterday's highs, followed by a real resistance." (more)
MarketTrends: May 20, 2009
Issued by Colin Cieszynski, CFA, CMT, Market Analyst, CMC Markets Canada
North American Indices and Commodities: Broad-Based Commodity Breakout
Energy prices have been leading commodities higher today, with buying momentum accelerating following the release of the weekly US DOE inventories report. Last week, US crude oil inventories fell by 2.1 million bbls when a 0.4 million bbl decrease had been expected, while gasoline inventories fell by 4.3 million bbls, more than the 1.2 million bbl drop expected. This may be viewed as particularly significant with US summer driving season set to kick off this weekend (Memorial Day holiday on Monday).
Earlier this week, US crude broke through $60.00/bbl resistance, successfully tested it as a new support level, and now has broken out to a new high on trend. Next significant resistance hurdle appears at the 200-day moving average near $63.30/bbl.
A number of other commodities have also been posting significant gains today in oil’s wake, suggesting that attitudes toward the health of the global economy continues to improve and that investors may be starting to anticipate an improvement in the demand for resources. For example, wheat has climbed to test $6.00/bushel resistance, corn has broken through $4.25/bushel, and natural gas has been trending toward a test of $4.00/mmbtu. Copper has broken through $2.10/lb once again, but still faces significant resistance in the $2.20-$2.25/lb range.
Precious metals have also been picking up today despite gains in equities and commodities. This suggests that short term fear capital may have already rotated back out into other market areas. It also indicates that investors may now be focusing on the long-term implications of bailouts and stimulus on inflation. Gold has broken through resistance at $935/oz this morning with next resistance near $945-950/oz and $970-975/oz. Meanwhile, silver has broken through $14.25/oz resistance with next resistance near the $14.70/oz level.
Equity markets have also been climbing today, but remain short of the highs set last week. Significant resistance levels that would need to be overcome to signal the start of a new upleg include: 8,600 for the Dow Industrials (US30 CFD), 930 for the S&P 500 (SPX500 CFD), 1,435 for the NASDAQ100 (NDAQ100 CFD), 4,700 for the FTSE 100 (UK100 CFD) and 5,000 for the DAX (German30 CFD). Next significant resistance levels for US markets appear near 8,900 for the Dow, 965 for the S&P, and 1,470 for the NASDAQ.
Canadian markets have been benefiting from improvement in general equity sentiment and commodity price gains. The S&P/TSX Composite has been testing resistance at 10.350 today with next resistance near 10,700, while the S&P/TSX 60 (Toronto60 CFD) has been testing 630 resistance with next resistance near 670.
Note that the minutes from the last Fed meeting are due for release at 2:00pm ET, which may have an impact on afternoon trading.
Canada and US Share Update: Semis, Solar and Steels Lead Market Gains
The Semiconductor sector continues to rally today. Sentiment toward the group has continued to turn positive after Analog Devices (ADI up 14.0%) reported EPS of $0.21 which handily beat the $0.07 street estimate, and posted guidance of $0.17-$0.19 for next quarter, well above the $0.11 street estimate. Other leading advancers in the group include: National Semiconductor (NSM) up 9.1%, Micron (MU) up 7.1% and AMD (AMD) up 7.6%.
Interest in the energy sector also appears to be increasing with US crude oil prices holding above their key $60.00/bbl support/resistance level. In Canada oil and gas producers have been attracting attention led by Iteration (ITX) up 9.4%, Advantage Energy (AVN-u) up 8.7%, and Crew Energy (CR) up 6.8%. In the US, attention appears to be more focused on the alternative energy/solar group, led by JA Solar (JASO) up 16.0%, Yingli Green Energy (YGE) up 9.7%, and First Solar (FSLR) up 5.3%. Coal producers have also been climbing, led by Massey Energy (MEE) up 8.9%, Arch Coal (ACI) up 8.6%, and Consol Energy (CNX) up 6.5%.
Steel producers have also been picking up today, which suggests that investors may be looking at deep cyclical plays for a potential early economic recovery situation. Leading advancers in the group include: AK Steel (AKS) up 8.3%, US Steel (X) up 8,5%, and Steel Dynamics (STLD) up 7.5%.
North American Indices and Commodities: Broad-Based Commodity Breakout
Energy prices have been leading commodities higher today, with buying momentum accelerating following the release of the weekly US DOE inventories report. Last week, US crude oil inventories fell by 2.1 million bbls when a 0.4 million bbl decrease had been expected, while gasoline inventories fell by 4.3 million bbls, more than the 1.2 million bbl drop expected. This may be viewed as particularly significant with US summer driving season set to kick off this weekend (Memorial Day holiday on Monday).
Earlier this week, US crude broke through $60.00/bbl resistance, successfully tested it as a new support level, and now has broken out to a new high on trend. Next significant resistance hurdle appears at the 200-day moving average near $63.30/bbl.
A number of other commodities have also been posting significant gains today in oil’s wake, suggesting that attitudes toward the health of the global economy continues to improve and that investors may be starting to anticipate an improvement in the demand for resources. For example, wheat has climbed to test $6.00/bushel resistance, corn has broken through $4.25/bushel, and natural gas has been trending toward a test of $4.00/mmbtu. Copper has broken through $2.10/lb once again, but still faces significant resistance in the $2.20-$2.25/lb range.
Precious metals have also been picking up today despite gains in equities and commodities. This suggests that short term fear capital may have already rotated back out into other market areas. It also indicates that investors may now be focusing on the long-term implications of bailouts and stimulus on inflation. Gold has broken through resistance at $935/oz this morning with next resistance near $945-950/oz and $970-975/oz. Meanwhile, silver has broken through $14.25/oz resistance with next resistance near the $14.70/oz level.
Equity markets have also been climbing today, but remain short of the highs set last week. Significant resistance levels that would need to be overcome to signal the start of a new upleg include: 8,600 for the Dow Industrials (US30 CFD), 930 for the S&P 500 (SPX500 CFD), 1,435 for the NASDAQ100 (NDAQ100 CFD), 4,700 for the FTSE 100 (UK100 CFD) and 5,000 for the DAX (German30 CFD). Next significant resistance levels for US markets appear near 8,900 for the Dow, 965 for the S&P, and 1,470 for the NASDAQ.
Canadian markets have been benefiting from improvement in general equity sentiment and commodity price gains. The S&P/TSX Composite has been testing resistance at 10.350 today with next resistance near 10,700, while the S&P/TSX 60 (Toronto60 CFD) has been testing 630 resistance with next resistance near 670.
Note that the minutes from the last Fed meeting are due for release at 2:00pm ET, which may have an impact on afternoon trading.
Canada and US Share Update: Semis, Solar and Steels Lead Market Gains
The Semiconductor sector continues to rally today. Sentiment toward the group has continued to turn positive after Analog Devices (ADI up 14.0%) reported EPS of $0.21 which handily beat the $0.07 street estimate, and posted guidance of $0.17-$0.19 for next quarter, well above the $0.11 street estimate. Other leading advancers in the group include: National Semiconductor (NSM) up 9.1%, Micron (MU) up 7.1% and AMD (AMD) up 7.6%.
Interest in the energy sector also appears to be increasing with US crude oil prices holding above their key $60.00/bbl support/resistance level. In Canada oil and gas producers have been attracting attention led by Iteration (ITX) up 9.4%, Advantage Energy (AVN-u) up 8.7%, and Crew Energy (CR) up 6.8%. In the US, attention appears to be more focused on the alternative energy/solar group, led by JA Solar (JASO) up 16.0%, Yingli Green Energy (YGE) up 9.7%, and First Solar (FSLR) up 5.3%. Coal producers have also been climbing, led by Massey Energy (MEE) up 8.9%, Arch Coal (ACI) up 8.6%, and Consol Energy (CNX) up 6.5%.
Steel producers have also been picking up today, which suggests that investors may be looking at deep cyclical plays for a potential early economic recovery situation. Leading advancers in the group include: AK Steel (AKS) up 8.3%, US Steel (X) up 8,5%, and Steel Dynamics (STLD) up 7.5%.
The Truth about Option ARMs,the Eye of the $469 Billion Toxic Mortgage Hurricane
The Truth about Option ARMs, Pick-a-Pay Mortgages, and Alt-A Loans: Looking at Wells Fargo, Bank of America, and JP Morgan. We are in the Eye of the $469 Billion Toxic Mortgage Hurricane and Silence is not Golden.
Let me be abundantly clear. We still have a Pay Option ARM and Alt-A mortgage problem. This will hit in full force in 2010 and we are already seeing many mortgage holders having trouble with actual recasts brought on by negative amortization. Yet there is a crew of people saying that Alt-A mortgage products will not bring any trouble because of the low interest rate environment. Unfortunately the low rate misses the bigger issue. Low rates are helping but the problem that we will be seeing is the massive onslaught of recasts, not resets that will be occurring over the next few years. This is a big reason why we won’t see a housing bottom in California until 2011 at the earliest. Many of these loans were made to supposedly better qualified borrowers in mid to upper priced areas. These areas will begin to crack like an egg dropped on the floor late in 2009. The Notice of Default tsunami will guarantee this much. (more)
Let me be abundantly clear. We still have a Pay Option ARM and Alt-A mortgage problem. This will hit in full force in 2010 and we are already seeing many mortgage holders having trouble with actual recasts brought on by negative amortization. Yet there is a crew of people saying that Alt-A mortgage products will not bring any trouble because of the low interest rate environment. Unfortunately the low rate misses the bigger issue. Low rates are helping but the problem that we will be seeing is the massive onslaught of recasts, not resets that will be occurring over the next few years. This is a big reason why we won’t see a housing bottom in California until 2011 at the earliest. Many of these loans were made to supposedly better qualified borrowers in mid to upper priced areas. These areas will begin to crack like an egg dropped on the floor late in 2009. The Notice of Default tsunami will guarantee this much. (more)
Tuesday, May 19, 2009
Caught Up in a Sucker's Rally?
www.rufftimes.com
With the S&P now a third higher than it was just 60 days ago, many have turned into stock market cheerleaders, doing jumping jacks and shouting the “irrefutable” news that a new bull market has just been born.
Well…you might want to just hold your horses.
The mere fact that the market is up after so many months of gloomy news is not exactly proof of an economic upswing. It is, in fact, so symptomatic of a recession/depression that the phenomenon has its own name:
The bear market or sucker’s rally.
“The granddaddy of all bear markets, 1929 -1932, had six false alarms with an average gain of percent. And Japan's ongoing bear saw the Nikkei rise by at least a third four times in its first four years with 10 more false dawns since then,” wrote reporter Spencer Jakob in the Financial Times.
“An authority on bear market bottoms, Russell Napier of CLSA, sees a 1974-1976 scenario unfolding followed by an even worse slump. In Anatomy of the Bear, he scanned media coverage around the bottoms of 1921, 1932, 1949 and 1982 and does not see the apathy that characterized those turning points.
“For the great bear market bottoms, you need a society-wide revulsion with equities,’ he said. ‘It just doesn't smell like the big one yet.”
Another sign? Stocks also become very cheap before major bull markets begin. Yet the 2000 bubble never fully deflated and even the recent low did not breach 11 times.
***********************
WHAT TO DO ABOUT IT
FIRST: I agree with this well-reasoned analysis. We will not see a new bull market for several years, but we will see several fake-outs, as we always do during such bear markets. Sometimes my success is measured not by the money you subscribers make, but by the money you didn’t lose. This is one of those times.
Avoid the Dow Jones Industrials, growth mutual funds and most stocks. They will wander around the bottom and drift lower for many years to come. Over the next three years, the big money will be made by a small minority who are willing to go against the Wall Street grain.
SECOND, if you are a true contrarian, you will ignore the stock market, except for a few industry groups, which I have already discussed and will discuss in future newsletters, and you must concentrate on preserving your capital, assuming the dollar will continue to lose value as it has been in slow motion over a hundred years. This will turn into an eventual price explosion in inflation hedges. Invest in bullion, particularly the hold-it-in-your-hands kind. Hide them in a safe place.
With the S&P now a third higher than it was just 60 days ago, many have turned into stock market cheerleaders, doing jumping jacks and shouting the “irrefutable” news that a new bull market has just been born.
Well…you might want to just hold your horses.
The mere fact that the market is up after so many months of gloomy news is not exactly proof of an economic upswing. It is, in fact, so symptomatic of a recession/depression that the phenomenon has its own name:
The bear market or sucker’s rally.
“The granddaddy of all bear markets, 1929 -1932, had six false alarms with an average gain of percent. And Japan's ongoing bear saw the Nikkei rise by at least a third four times in its first four years with 10 more false dawns since then,” wrote reporter Spencer Jakob in the Financial Times.
“An authority on bear market bottoms, Russell Napier of CLSA, sees a 1974-1976 scenario unfolding followed by an even worse slump. In Anatomy of the Bear, he scanned media coverage around the bottoms of 1921, 1932, 1949 and 1982 and does not see the apathy that characterized those turning points.
“For the great bear market bottoms, you need a society-wide revulsion with equities,’ he said. ‘It just doesn't smell like the big one yet.”
Another sign? Stocks also become very cheap before major bull markets begin. Yet the 2000 bubble never fully deflated and even the recent low did not breach 11 times.
***********************
WHAT TO DO ABOUT IT
FIRST: I agree with this well-reasoned analysis. We will not see a new bull market for several years, but we will see several fake-outs, as we always do during such bear markets. Sometimes my success is measured not by the money you subscribers make, but by the money you didn’t lose. This is one of those times.
Avoid the Dow Jones Industrials, growth mutual funds and most stocks. They will wander around the bottom and drift lower for many years to come. Over the next three years, the big money will be made by a small minority who are willing to go against the Wall Street grain.
SECOND, if you are a true contrarian, you will ignore the stock market, except for a few industry groups, which I have already discussed and will discuss in future newsletters, and you must concentrate on preserving your capital, assuming the dollar will continue to lose value as it has been in slow motion over a hundred years. This will turn into an eventual price explosion in inflation hedges. Invest in bullion, particularly the hold-it-in-your-hands kind. Hide them in a safe place.
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