ThePreparedInvestor - Market favors the prepared mind!

"Double top", "Empire Manufacturing survey", "FOMC decision", "CPI data", "Philly fed"

2010-03-15T07:58:00.000-07:00

Though double top cannot be ruled out, Bulls still control the equities since 2/8 bottom. US dollar and Japanese yen are softening and the euro is showing signs of bottoming. But Gold and commodities have been the losers this week. Long term treasuries, TLT, respected the support at $89.

Since oscillators for the equities are in overbought zone and the equity Put/Call ratio is at the lowest, we can anticipate at least a slight pullback in the rally this week or a broadening of the top. Look for leadership from Nasdaq and the small caps however. US REITs showed extra strength this week

Will the small caps be able to pull SP500 and other global indexes any higher? Emerging markets, Europe and commodities have not broken above January highs still.

Retail sales came in better at 0.3% compared to expected 0.2%, but the lower reading on Michigan consumer sentiment dashed the rally on Friday.

Last week's (week over week) market Sectors Returns and Internals:

SP 500: 0.99%
Volatility Index change, VIX = 0.91%
Short term bond rate (average of 3 year and 5 year) = 1.96%
Small Cap (IWM): 1.65%
Latin America (ILF): 1.27%
Europe (IEV or EFA): 1.19%
Emerging Markets (EEM): 1.03%
Commodities (DBC): -1.75%
Long term Bonds (TLT): 0.23%
US Dollar Index, 8 DMA =80.29
Gold, (GLD) 8 DMA = -2.58%

NYSE (New Highs - New lows), 8 DMA = 340.41
10 year Treasury yield = 3.71%

Put/Call Ratio, total of equity/Index = 0.91
Bull/Bear Ratio, Investors Intelligence survey =1.9

Next Week's economic calendar:

Empire Manufacturing survey - 3/15
FOMC Rate Decision - 3/16
Core CPI, Philly Fed - 3/18

"Inventory levels", "Retail Sales", "Trade Balance", "Gold Bugs"

2010-03-08T07:41:00.000-08:00

Small cap soared more than 6% last week, indicating the increase in risk appetite among investors. Dow too joined the party after being behind. All 4 indexes, SPY/QQQQ/DIA/IWM are all back above their 50 DMA. VIX dipped by 10.67%. Though breadth has been increasing, some more volume would have made the rallies more justifiable. Only US equity markets seemed to have turned green for the year with many countries, particularly emerging markets, still struggling to move to green for th year.

US dollar and Yen are slowing down, and Euro consolidating at $1.35 range. The dollar may soon test support at 79.6 or its 50 day moving average. May be the carry trade is resuming and hence making bullish ways for commodities and equities. Gold too showed bullish signs. The Greek Austerity measures has provided hopes for Euro zone recovery, and this was well reflected in more than 5% return on EFA.

We have come to expect Mondays to be friendly for equities and we may see that March 8th too. But with such a sprint in the past week, we can expect a breather next week. While all indexes other than small cap have not surpassed January highs, let us hope the internals improves along with the price rallies.

Last week's (week over week) market Sectors Returns and Internals:

SP 500: 3.1%
Volatility Index, VIX = -10.67%
Short term bond rate (average of 3 year and 5 year) = 1.89%
Small Cap (IWM): 6.08%
Latin America (ILF): 4.81%
Europe (IEV or EFA): 5.05%
Emerging Markets (EEM): 5.11%
Commodities (DBC): 1.31%
Long term Bonds (TLT): -1.21%
US Dollar Index, 8 DMA =80.45
Gold, (GLD) 8 DMA = 1.26%

NYSE (New Highs - New lows), 8 DMA = 265.15
10 year Treasury yield = 3.69%

Put/Call Ratio, total of equity/Index = 1.01
Bull/Bear Ratio, Investors Intelligence survey =1.85

Next Week's economic calendar:

Inventories - 3/10
Trade Balance - 3/11
Retail Sales, Michigan Sentiment - 3/12

"dragging Dow (DIA) and springing small cap (IWM)"

2010-03-03T19:31:00.000-08:00

Dow has been a drag on the stock markets this week, but the small cap and NASDAQ have been leading the charge on the Bullish side. But the late day fade off in the recent two days is alerting a caution for the Bullish side. Internals are not boding well with the rally - Breadth, NYSE ticks and volume differential are not in harmony with the equity rally. But declining dollar is helping the cause for rallies in stocks and commodities.

"ISM Index", "Unemployment Report", "Greece Bailout Plan", "ISM Non Manufacturing Index"

2010-03-01T07:31:00.000-08:00

The US dollar has been losing steam and that has been fueling equity/commodity rallies. Though the price decline is not much in the dollar, the momentum is declining. If nothing else is considered, then this should be positive for equities next week. But, there are many more economic reports that can influence the equities next week starting with ISM index on Monday and ending with Unemployment report on Friday.

But dollar strength or weakness is so much dependent on the news from Greece and Spain currently. The plan to reduce Greece's debt to 9% of GDP will be proposed this week. The Fed's beige book is not expected to add any new news.

Also note that Gold is consolidating around $1100 and may initiate a new rally if dollar declines from here. Notable however is also that long term treasuries are holding up well above the resistance. Both Gold and Long term treasuries respecting support indicates to me that "flight to safety" (may be from Europe) is still in play.

GDP revised higher for Q4 2009
Consumer sentiment weakens in Feb 2010
Bernanke announces that Interest rate might be on hold for a while

Last week's (week over week) market Sectors Returns and Internals:

SP 500: -0.42%
Volatility Index, VIX =19.5
Short term bond rate (average of 3 year and 5 year) = 1.83%
Small Cap (IWM):-0.41%
Latin America (ILF): -1.25%
Europe (IEV or EFA): -1.42%
Emerging Markets (EEM): -1.07%
Commodities (DBC): -1.34%
Long term Bonds (TLT): 2.48%
US Dollar Index, 8 DMA =80.51
Gold, (GLD) 8 DMA = -0.04%

NYSE (New Highs - New lows), 8 DMA = 128.23
10 year Treasury yield = 3.61%

Put/Call Ratio, total of equity/Index = 1.03
Bull/Bear Ratio, Investors Intelligence survey =1.76

Next Week's economic calendar:

ISM Index, PCE prices - 3/1
Auto Sales - 3/2
ISM services, Fed Beige book -3/3
Unemployment report - 3/5

"Broken Correlation of US dollar and equities", "Case schiller 20 city index", "GDP report", "Durables Reports"

2010-02-22T07:10:00.000-08:00

Is the anti-correlation between US dollar and the US equities broken? Last week we had both US dollar and the equities/commodities rally together. So either the anti-correlation is broken or one of the rallies is fake. It could be possible that the short-Euro could have been squeezed on Friday and hence Euro refused to bow down. All in all, there is much to distrust the recent rally in equities and commodities. However S&P 500 is hovering around 50 day moving average, and a decision is to be made - to stay above 50 DMA or below 50 DMA.

The holiday shortened week was a good one for equities. Many of the Asian traders were off for the week on Chinese new year and you should not forget that Shanghai Index is one of the indexes that is leading the equities downward. The Feds made a bold decision to increase the Discount rate, but the market recovered in its stride by early Friday morning. Manufacturing and Industrial production data was decent too. IMF announced that it will sell the remaining 191.3 tonnes of Gold.

Technically speaking the equities are little stretched on the long side, and they are facing 50 DMA. Interesting to see the conviction of the bulls here since we did not see big volume in the rallies last week. Money flowed into the equity funds last week and the price action was positive. The dollar strengthened, and yet the commodities continued to roll.

Last week's (week over week) market Sectors Returns and Internals:

SP 500: 3.13%
Volatility Index, VIX = 20.02
Short term bond rate (average of 3 year and 5 year) = 1.995%
Small Cap (IWM): 3.34%
Latin America (ILF): 4.05%
Europe (IEV or EFA): 2.64%
Emerging Markets (EEM): 2.45%
Commodities (DBC): 4.04%
Long term Bonds (TLT): -0.82%
US Dollar Index, 8 DMA =80.20
Gold, (GLD) 8 DMA = 2.25%

NYSE (New Highs - New lows), 8 DMA = 108.23
10 year Treasury yield = 3.78%

Put/Call Ratio, total of equity/Index = 0.8
Bull/Bear Ratio, Investors Intelligence survey =1.28

Next Week's economic calendar:

Case-Schiller 20 city index -2/23
New home sales - 2/24
Durable Orders - 2/25
GDP, Existing Home sales - 2/26

"Housing Starts", "Building Permits", "CPI PPI report",

2010-02-16T07:24:00.000-08:00

The S&P 500 held above 1050, the last week's low point. And in fact, the index rallied upto 1075. But the rally of 25 points in S&P 500 did little to improve the internals like New Highs - New lows or the Advance-Decliners. The volume in the indexes was not massive either. Naturally we tend to not emphasize the rally much. Notable however was the strength in NASDAQ and IWM (small cap) with respect to S&P 500 and Dow Jones Index. May be IWM and NASDAQ indexes can provide a shorting opportunity this week if we get an indication for market weakness earlier in the week.

China raised the reserve requirements for the second time to reign in on the overheated economy. Greece is looking forward for anyone to help and the elusive package from EU's help may not be sufficient.

Good News: Retail sales were up in January. Jobless claims for first week of February declined more than expected. Google announced new Buzz.

Bad News: Euro currency is in a spiraling downwards, with the PIIGS screaming for help. The safe currencies are being harbored by the "flight to safety". Interesting to note that Gold is heading to decision point in the form of a triangle. Bernanke announced that the Feds will take steps to dismantle the extra boosting the economy received. The recalls now extended to Honda as well. That ought to help American car makers, whenever the Auto sales pick up.

Last week's (week over week) market Sectors Returns and Internals:

SP 500: 0.87%
Volatility Index, VIX = 22.73
Short term bond rate (average of 3 year and 5 year) = 1.865
Small Cap (IWM): 2.95%
Latin America (ILF): 4.49%
Europe (IEV or EFA): 1.77%
Emerging Markets (EEM): 3.33%
Commodities (DBC): 2.86%
Long term Bonds (TLT): -2.35%
US Dollar Index, 8 DMA =79.93
Gold, (GLD) 8 DMA = 2.25%

NYSE (New Highs - New lows), 8 DMA = 39.82

10 year Treasury yield = 3.69%

Put/Call Ratio, total of equity/Index = 0.86
Bull/Bear Ratio, Investors Intelligence survey =1.31

Next Week's economic calendar:

Housing Starts, Building permits, FOMC minutes -2/17
Core PPI - 2/18
Core CPI - 2/19

"Volker vs. Goldman", "PIGS vs. US States", "Retail Sales", "Wholesale Inventory", "Commision free Fidelity ETFs"

2010-02-08T06:01:00.000-08:00

There is a new acronym in town "PIGS" standing for Portugal, Ireland/Italy, Greece and Spain. Few months back we had BRIC for Brazil, Russia, India and China. Its interesting how we have learned to create acronym for grouping countries that represent certain traits, once for bullish case and again for bearish case. The PIGS phenomenon (=worry about fiscal health of weaker European economies) is spooking the investors, besides the weaker sentiment emerging from US Unemployment report.

But I think the bigger impact is coming from the tussle between Obama/Volker/JPMorgan group and the Paulson/Geithner/Goldman groups. The balance of power in the senate between these groups is the one that is calling shots in the equity markets. With computer programs available at the whim of these groups, they can really demonstrate to the other team, the consequence of not yielding to their request.

Economic factors: Though the Unemployment rate dropped to 9.7% for January from 10% in December, the revised job losses from 2007 peak is now more a million more (at 8.424 million) than was reported earlier. The ISM manufacturing Index was at 58.4 which is gaining a foothold though ISM services did not expand as much as expected. The Q4 productivity was strong at 6.2%. The consumer credit contraction slowed to -1.7B for December. We see generally that the negativity in the economy is decreasing, however the positivity has to set in.

For the next week, watch out for the Retail Sales numbers and the Wholesale inventories reports. Also keep a good eye on the US dollar, and you can then easily guess what is happening to the equities and to Gold.

Note that Fidelity is lauching its commission free ETFs for 25 of them - IVV, IWM, AGG, etc

Last week's (week over week) market Sectors Returns and Internals:

SP 500: -0.72%
Volatility Index, VIX = 26.11
Short term bond rate (average of 3 year and 5 year) = 1.755
Small Cap (IWM): -1.4%
Latin America (ILF): -1.76%
Europe (IEV or EFA): -3.87%
Emerging Markets (EEM): -2.82%
Commodities (DBC): -1.37%
Long term Bonds (TLT): -0.01%
US Dollar Index, 8 DMA =79.41
Gold, (GLD) 8 DMA = -1.21%

NYSE (New Highs - New lows), 8 DMA = 70.13
10 year Treasury yield = 3.59%

Put/Call Ratio, total of equity/Index = 1.06
Bull/Bear Ratio, Investors Intelligence survey =1.75

Next Week's economic calendar:

Wholesale Inventory -2/9
Trade Balance -2/10
Retail Sales -2/11
Michigan Sentiment -2/12

Banker caught on TV staring at nude sexy lady

2010-02-02T19:38:00.000-08:00

The banking job is an easy money these days .. not much work, but you get a stimulus pay check .. then how the heck do you kill time at work .. lets watch naked ladies ..

"TARP report - Neil Barofsky", "ISM Index", "Unemployment report", "Glass-Stegall Act"

2010-02-01T07:24:00.000-08:00

Pretty much all technical indicators for Intermediate term equities have turned south - as you can see from the "Index Radar Screen" at the right hand column below. Only US dollar and the long term bonds are heading North. Makes sense, as "flight to safety" play has been in place since second week of January. Interesting to note that of all the sectors, the banking sector is showing the greatest strength in the last few days.

But why is the market heading down? OR what is driving the stock markets down - JP Morgan vs. Goldman Sachs? An excerpt from this interesting article is below:

Goldman's crimes, says Chapman, were that it "got caught stealing. First in naked shorts, then front-running the market, both of which they are still doing, as the SEC looks the other way, and then selling MBS-CDOs to their best clients and simultaneously shorting them." ...Volcker's proposal would rein in these abuses, either by ending the risky "proprietary trading" (trading for their own accounts) engaged in by the too-big-to-fail banks, or by forcing them to downsize by selling off those portions of their businesses engaging in it. Until recently, President Obama has declined to support Volcker's plan, but on January 21 he finally endorsed it. .. The immediate reaction of the market was to drop - and drop, day after day. At least, that appeared to be the reaction of "the market." Financial analyst Max Keiser suggests a more sinister possibility. Goldman, which has the power to manipulate markets with its high-speed program trades, may be engaging in a Mexican standoff. ..

The government's response to the financial meltdown has made it more likely the United States will face a deeper crisis in the future - says Neil Barofsky, the special inspector general for the trouble asset relief program, or TARP. Much of Barofsky's report focused on the government's growing role in the housing market, which he said has increased the risk of another housing bubble. This does not bode well for any equity recovery even if it were to occur next week.

More on the tussle between Obama/Volcker and Investment Banking behemoths can be read in this interesting article. Will Obama succeed in bringing back Glass-Steagall Act?

As Bill Gross of Pimco points out, the theme for next 2 years will be - De-leveraging, Re-regulating and De-globalization. All these will keep the economy sluggish and hence equity growth may not expected much. Even when it does, will probably be in a range bound condition. In the interim, next week's unemployment report has the biggest impact on economy and the market can trade in a tight range before then.

-Nidhi

Last week's (week over week) market Sectors Returns and Internals:

SP 500: -1.64%
Volatility Index, VIX = 24.62
Short term bond rate (average of 3 year and 5 year) = 1.86%
Small Cap (IWM): -2.62%
Latin America (ILF): -3.86%
Europe (IEV or EFA): -1.89%
Emerging Markets (EEM): -3.36%
Commodities (DBC): -3.53%
Long term Bonds (TLT): 0.34%
US Dollar Index, 8 DMA =78.6
Gold, (GLD) 8 DMA = -1.13%

NYSE (New Highs - New lows), 8 DMA = 79.4
10 year Treasury yield = 3.63%

Put/Call Ratio, total of equity/Index = 0.8
Bull/Bear Ratio, Investors Intelligence survey =1.72

Next Week's economic calendar:

ISM Index -2/1
Pending Home sales -2/2
Factory Orders -2/4
Unemployment Rate -2/5

"Existing Home Sales", "FOMC Decision", "GDP report", "Chicago PMI"

2010-01-25T05:52:00.000-08:00

Last week I was expecting correction due to earnings in components in XLF. The correction happened last week nonetheless, but the main reason can be attributed to Obama's reforms on banking sectors - separating trading desks (investment units) from banking, bringing back some form of Glass-Seagall's act, etc. And the tightening policies of China also had its effect. No matter what the reason was, the market was looking for a reason to correct itself.

The dollar continued its strengthening rally and dollar index surpassed 78 mark, and any surge beyond 78.3 should be marked as intermediate term strength in dollar. It could be a good time to bring out pro-dollar trades into play. And shun anti dollar trades - like Gold.

The equity markets tanked by largest amount in the past 3 days since March 2009, but small cap is surprisingly showing relative strength to the large caps. Its normal to expect an immediate bounce on Monday Jan 25th, after a sell off like that last week. Besides Mondays have been stronger in the recent weeks. But the
Existing home sales report can set the mood on monday.

Next week brings lot of heavy economic reports and it will be prudent to wait for those reports to be out before any long term decisions can be deduced.

Last week's (week over week) market Sectors Returns and Internals:

SP 500: -3.9%
Volatility Index, VIX =27.31
Short term bond rate (average of 3 year and 5 year) = 1.88%
Small Cap (IWM): -3.06%
Latin America (ILF): -6.6%
Europe (IEV or EFA): -6.8%
Emerging Markets (EEM): -5.5%
Commodities (DBC): -3.48%
Long term Bonds (TLT): 1.0%
US Dollar Index, 5 DMA = 77.94
Gold, (GLD) 5 DMA = -3.33%

NYSE (New Highs - New lows), 5 DMA = 180.01
10 year Treasury yield = 3.62%

Put/Call Ratio, total of equity/Index = 0.93
Bull/Bear Ratio, Investors Intelligence survey = 2.76

Next Week's economic calendar:

Existing Home sales, - 1/25
Case Schiller, Consumer Confidence, - 1/26
New Home sales, FOMC decision - 1/27
GDP, Chicago PMI, Michigan sentiment - 1/29

"Building Permits", "Core PPI", "Financial earnings week C BAC HDFC MS WFC IBN"

2010-01-19T06:33:00.000-08:00

Japanese Yen is rising against the dollar and so is the Nikkei Index. And the Euro is weakening from the financial crisis in Greece. Both these facts doesn't bode well for equities in the US. With $VIX at the lowest level and expectation for correction being high, any weak earnings report can send the market reeling.

Long term yields are falling indicating flight into treasuries. With many banks (BAC, C, IBN, WFC, MS, HDFC) scheduled to release earnings next week, the mood for the equities will be set by XLF.

Last week's (week over week) market Sectors Returns and Internals:

SP 500: -0.7%
Volatility Index, VIX =17.91
Short term bond rate (average of 3 year and 5 year) = 1.94%
Small Cap (IWM): -1.3%
Latin America (ILF): -4.6%
Europe (IEV or EFA): -1.19%
Emerging Markets (EEM): -2.8%
Commodities (DBC): -3.9%
Long term Bonds (TLT): 2%
US Dollar Index, 5 DMA = 76.97
Gold, (GLD) 5 DMA = -0.4%

NYSE (New Highs - New lows), 5 DMA = 350.2
10 year Treasury yield = 3.83%

Put/Call Ratio, total of equity/Index = 0.76
Bull/Bear Ratio, Investors Intelligence survey = 3.36

Next Week's economic calendar:

Building Permits, Core PPI - 1/20
Philadelphia Fed, Leading Indicators - 1/21

"Alcoa earnings", "Feds beige Book", "Retail Sales", " CPI report", "Michigan Sentiment"

2010-01-10T10:33:00.000-08:00

The new year started with a bang in equities market. All the broad US indexes showing short term buy signal. See the "Index Radar Screen" on the right hand side column below. Is that the January effect that was anticipated or is new money moving in?

All in all, the rally has continued for more than 9 months and there is uncomfortable feeling about this rally particularly since the employment scene is not improving at all. Trimtabs CEO Charles Biderman became the latest credible source to accuse government of manipulating the market to lead them higher. "The source of approximately $600 billion net new cash necessary to lift the market's overall capitalization by $6 trillion last year could not be identified by TrimTabs, Biderman said. The money, he said, didn't come from traditional players such as companies, retail investors, foreign investors, hedge funds or pension funds." This suspicion has plagued the economists for few months now, ever since "V" shaped recovery is in place, and this conspiracy theory probably will continue until "W" recovery really materialize. Will we ever know the truth behind the Plunge Protection Team's (PPT) action (just like in 1987)?

Weaker unemployment report for December (at 10% unemployment rate and 85,000 job losses) dealt a blow on the US dollar and the weakening US dollar can boost commodities and Latin American equity. But will this overextended rally show any sign of cooling off next week?

Long term treasuries continued (TLT) continued its sell off and has reached an important support level at $89. Watchout this critical support level for TLT this week. The investors seemed to have shunned caution and are embracing risky trades last week. But as Quantifiable-edges has noted, when an up-day starts the new year the odds are that the markets turn negative within the next 3 days.

Earnings season starts this week and also is an Options expiry week and can be little volatile.

-Nidhi

Last week's (week over week) market Sectors Returns and Internals:

SP 500: 2.68%
Volatility Index, VIX =18.13
Short term bond rate (average of 3 year and 5 year) = 2.065%
Small Cap (IWM): 3.33%
Latin America (ILF): 4.25%
Europe (IEV or EFA): 3.39%
Emerging Markets (EEM): 4.1%
Commodities (DBC): 3.09%
Long term Bonds (TLT): -0.67%
US Dollar Index, 5 DMA = 77.12
Gold, (GLD) 5 DMA = 3.78%

NYSE (New Highs - New lows), 5 DMA = 350.2
10 year Treasury yield = 3.83%

Put/Call Ratio, total of equity/Index = 0.65
Bull/Bear Ratio, Investors Intelligence survey = 2.86

Next Week's economic calendar:

Trade Balance - 1/12
Feds Beige Book, - 1/13
Retail Sales - 1/14
Core CPI, Industrial Production, Michigan Sentiment - 1/15

"ISM Index", "Unemployment Report", "Pending Home Sales"

2010-01-04T11:49:00.000-08:00

Happy new year to you all and hope your trading in 2010 will be as smooth as the later half of 2009!

The last two weeks of December was of light volume and is little importance for January trading. But the first week of January is loaded with important economic reports and we should watch for the direction of the equity markets for the first few days, particularly since the market struggled to take a direction in the last couple of months in 2009.

Last week's (week over week) market Sectors Returns and Internals:

SP 500: -1.01%
Volatility Index, VIX =21.68
Short term bond rate (average of 3 year and 5 year) = %
Small Cap (IWM): -1.45%
Latin America (ILF): 0.89%
Europe (IEV or EFA): -0.66%
Emerging Markets (EEM): 0.75%
Commodities (DBC): 1.15%
Long term Bonds (TLT): 0.56%
US Dollar, 5 DMA = 77.84
Gold, (GLD) 5 DMA = -0.97%

NYSE (New Highs - New lows), 5 DMA = 240.4
10 year Treasury yield = %

Put/Call Ratio, total of equity/Index = 0.91
Bull/Bear Ratio, Investors Intelligence survey = 3.28

Next Week's economic calendar:

ISM Index, Construction spending - 1/4
Pending Home sales, Auto Sales - 1/5
ISM and Factory Orders - 1/6
Unemployment Report - 1/8

Happy Holidays & a new year

2009-12-26T10:35:00.001-08:00

I will not be posting this week and the next due to holidays. Talk to you next year!

"Existing Home Sales", "GDP Estimate", "New Home Sales", "Durables Goods Orders"

2009-12-20T20:52:00.000-08:00

The downgrades of sovereign funds made the risk investment flee into US dollars, notably Latin American equities taking the hit by -4.4%. Euro was particularly week against the dollar may be due to its relative closeness to the sovereign funds. Stronger US dollar usually means weaker commodity prices, but that did not happen last week. Commodities rallied despite the dollar strength. Gold was weak, but not by much. Don't they believe in Dollar rally? Or is it because the US dollar is reaching a technical resistance level?

Though US equities were generally weak, particular strength was noticed in NASDAQ stocks and the small caps. They both ended positive for the week. The Consumer Staples sector broke down below 50 DMA. Is that an indication of risk taking or a total market melting?

Interesting to note that the Bull/bear ratio has reached a highest point of 1.48 since July. This high Bull/Bear Ratio tends to provide impetus for growth. However, since we are at the year end and seeing very narrow trading range, we might be at the brink of point of Inflection either to the upside or to the downside. We can expect to have a light trading volume for the next two weeks.

US dollar and Euro are around their technical trading range. We can expect to these support/resistance to have impact on the US equities. But we need to watch-out if decoupling of US dollar and US equities will happen.

Happy Holidays and Happy New Year !

- Nidhi

Last week's (week over week) market Sectors Returns and Internals:

SP 500: -0.36%
Volatility Index, VIX =21.68
Short term bond rate (average of 3 year and 5 year) = 1.81%
Small Cap (IWM): 1.68%
Latin America (ILF): -4.4%
Europe (IEV or EFA): -1.61%
Emerging Markets (EEM): -2.39%
Commodities (DBC): 0.68%
Long term Bonds (TLT): 0.76%
US Dollar, 5 DMA = 77.12
Gold, (GLD) 5 DMA = -0.34%

NYSE (New Highs - New lows), 5 DMA = 206.8
10 year Treasury yield = 3.55%

Put/Call Ratio, total of equity/Index = 0.91
Bull/Bear Ratio, Investors Intelligence survey =3.13

Next Week's economic calendar:

GDP Q3 estimate, Existing Home sales - 12/22
New Home sales, Mich sentiment revised for Dec - 12/23
Durable Goods Order - 12/24

"Core PPI CPI", "FOMC Rate decision", "Leading Indicators"

2009-12-14T06:36:00.000-08:00

First it was Dubai, the next in the line was Greece and Spain with Credit troubles as S&P and Fitch downgraded their credit outlook - that is shaking up the global banking sector now. The dollar carry trade unwinding is still gripping the markets despite a few positive economic reports last week.

The retail sales were up more than expected - twice the expected amount at 1.3%. The Trade balance also shrunk in October. This is in addition to the improved unemployment report last week. The preliminary Michigan sentiment report also improved to 73.4 - up from 67.4 last month.

Barring any surprises in CPI data next week and with upward pressure on US dollar, Gold should continue to experience selling pressure and technically the next support is at 1050 area. Long term bond (TLT) continues to be in the oversold territory with no recovery in sight. Commodities are under pressure from surging dollars. And there is good buying pressure on the US dollar as seen in the Dollar Bullish ETF - UUP.

The major broad US market indexes are trading in tight narrow range searching for a clear direction. While risk taking is seen in small cap and in NASDAQ composite, the markets remain cautious. Is this the calm before the storm or the steam building up will remain to be seen. All the fund managers would want to retain their above 30% returns from 2009 so far and are less motivated to sell before year end. Am beginning to wonder if we get clear direction before the year end unless a major economic event moves the markets.

Next Week's economic calendar:

Core PPI - 12/15
Core CPI, FOMC Rate Decision - 12/16
Leading Indicators, Philadelphia Fed - 12/17

Last week's (week over week) market Sectors Returns and Internals:

SP 500: 0.04%
Volatility Index, VIX =21.59
Short term bond rate (average of 3 year and 5 year) = 1.78%
Small Cap (IWM): -1.34%
Latin America (ILF): -0.23%
Europe (IEV or EFA): -2.45%
Emerging Markets (EEM): -1.17%
Commodities (DBC): -3.15%
Long term Bonds (TLT): -1.33%
US Dollar, 5 DMA = 76.1
Gold, (GLD) 5 DMA = -3.89%

NYSE (New Highs - New lows), 5 DMA = 158.2
10 year Treasury yield = 3.55%

Put/Call Ratio, total of equity/Index = 0.91
Bull/Bear Ratio, Investors Intelligence survey =2.93

-Nidhi

"Yen & US dollar carry trade", "Dollar strength", "Wow Gold"

2009-12-07T07:54:00.000-08:00

Of course, last week's highlight was that of dropping Unemployment to 10% from previous 10.2% and the economy did shed only 11,000 jobs as opposed to the expected 111,000. This news bolstered the chances of US equities and also the US Dollar. The Dollar carry trade had to unwind, so the equity rally on Friday was nullified by the Dollar rally.

The Bank of Japan decided to reduce the volatility of yen by injecting $113 Billion worth yen and the yen is expected to stabilize at 90 yen/dollar by March 2010. As a result, yen value declined by 4.18% last week and EWJ rallied quite a bit. The last time correction like this happened in January and in May end, which resulted in a correction in global equity markets. Lets watch what this December and January will hold for equities.

Both Long term bonds and Gold saw a big correction on Friday as a result of surprisingly better than expected Unemployment report. We still need to test the strength of Dollar rally before we can set up concrete trades based on this rally. Lets continue to monitor $USD and $XJY for more evidence of the market direction.

Next Week's economic calendar:

Consumer Credit - 12/7
Treasury Budget- 12/10
Retail Sales, Mich. Sentiment Index - 12/11

Last week's (week over week) market Sectors Returns and Internals:

SP 500: 1.72%
Volatility Index, VIX =21.25
Short term bond rate (average of 3 year and 5 year) = 1.79%
Small Cap (IWM): 4.93%
Latin America (ILF): 0.27%
Europe (IEV or EFA): 1.78%
Emerging Markets (EEM): 4.26%
Commodities (DBC): 0.25%
Long term Bonds (TLT): -2.86%
US Dollar, 5 DMA = 74.87
Gold, (GLD) 5 DMA = -1.14%

NYSE (New Highs - New lows), 5 DMA = 187
10 year Treasury yield = 3.48%

Put/Call Ratio, total of equity/Index = 0.85
Bull/Bear Ratio, Investors Intelligence survey =2.99

-Nidhi

"Chicago PMI", "ISM Index", "Fed Beige Book", "Unemployment Report"

2009-11-30T07:53:00.000-08:00

Did you notice that the previous two Mondays (11/16 & 11/23) kicked off with a bang in equities particularly the Dow Jones, and the spike was given back later in the next two to three days. The new highs were not sustaining and the 7 day RSI did not hold up well. Of course, the last week retreat was on light volume due to Thanksgiving holidays.

Is this the Monthly pattern that equities have been recently exhibiting or is there more than that meets the eye. Is the Dubai financial rescue casting its spell on the financial markets. Clearly Banks worldwide are showing signs of strain and the one year effect of credit squeeze is showing its effects. Will be interesting to note the strength of the US dollar this week because the dollar has been sliding without considerable recovery since March 2009.

Gold is in the short term overbought territory and might take a breather once dollar picks up some steam.And may be due to some profit taking.

The retail sales report from Thanksgiving week could have had its effect on the equities on Monday, but most likely the resolution of Dubai financial debacle will have its strangle hold on the markets next week. Next week is filled with reports that can move the markets - ISM Index, Beige Book and Unemployment numbers.

Next Week's economic calendar:

Chicago PMI - 11/30
ISM Index, Auto sales - 12/1
Fed Beige book - 12/2
Unemployment rate - 12/4

Last week's (week over week) market Sectors Returns and Internals:

SP 500: -0.38%
Volatility Index, VIX =24.85
Short term bond rate (average of 3 year and 5 year) = 1.59%
Small Cap (IWM): -1.72%
Latin America (ILF): 3.64%
Europe (IEV or EFA): -1.87%
Emerging Markets (EEM): 2.71%
Commodities (DBC):1.69%
Long term Bonds (TLT): 97%
US Dollar, 5 DMA = 75.01
Gold, (GLD) 5 DMA = 1.88%

NYSE (New Highs - New lows), 5 DMA = 88.8
10 year Treasury yield = 3.21%

Put/Call Ratio, total of equity/Index = 1.05
Bull/Bear Ratio, Investors Intelligence survey =2.88

-Nidhi

"Free Trading Advice", "Black Friday Sales", "Existing and New Home Sales report"

2009-11-22T23:28:00.000-08:00

The Retail sales increased by 1.4% and that kicked off the last week on a high note for equities, but the retail sales excluding motor vehicles was only 0.2%. So the consumer is still hesitant to spend more. Next week's PCE report can give more insight into this. Insight into consumer spending can be seen in the Black Friday sales as well.

CPI inflation data was weak too at 0.2%, but all that cheap money will pump up inflation in a matter of time. The economic numbers are providing little guidance to the future, but the number of banks that are being shutdown has gone up to 124. The Home sales report (both existing and new homes) may provide some direction to the markets next week. But, the ultimate indicator for the equities is the trend in the dollar value, which has shown support at the current levels last week.

Gold continued its rally reaching all time high again, with the expectation that many more central banks will be buying more gold. Note that India purchased 200 Tonnes and little Maldives island purchased 2 Tonnes of gold recently. But has the sentiment for Gold has become too bullish?

The Fed's Dollar policy holds the key information for all these questions; Will they support strong Dollar or will the dollar slide continue so that they can help the US exporters. The pain from declining dollar is already seen in many countries like Canada and Brazil, but many more will follow. One other notable point last week is that the top two economies - US & Japan - have hinted at the double dip recession. Is there something in the works?

Next Week's economic calendar:

Existing Home Sales - 11/23
Q3 GDP - 11/24
Durable orders, New Home sales, Michigan Sentiment - 11/25

Last week's (week over week) market Sectors Returns and Internals:

SP 500: -0.19%
Volatility Index, VIX =22.19
Short term bond rate (average of 3 year and 5 year) = 1.725%
Small Cap (IWM): -0.24%
Latin America (ILF): -0.57%
Europe (IEV or EFA): -1.87%
Emerging Markets (EEM): -0.95%
Commodities (DBC):1.89%
Long term Bonds (TLT): 1.28%
US Dollar, 5 DMA = 75.23
Gold, (GLD) 5 DMA = 2.92%

NYSE (New Highs - New lows), 5 DMA = 140.6
10 year Treasury yield = 3.36%

Put/Call Ratio, total of equity/Index = 1
Bull/Bear Ratio, Investors Intelligence survey =2.16

-Nidhi

.

"Retail Sales", "Core CPI PPI Reports", "Leading Indicators"

2009-11-16T07:54:00.000-08:00

Defying all the fundamentals and technical charts, the equities continued its monthly pattern of rallying for the first two weeks of the month. Dollar decline continued unabated, thereby feeding commodities and Gold rally. US treasury issued new bonds and good amount of buyers kept the yield low. Chances are that big banks are using cheap money to load up on the gauranteed returns from treasury instead of lending the money in risky loans.

October federal budget was worse than expected, and so was the preliminary confidence report from Univ of Michigan. US large cap continued to lead the market upwards, but the small cap dragged. Weaker dollar helps bigger multi nationals more than small cap with domestic exposure.

Next week's retail sales reports holds much of the investor sentiments and expectations about the holiday season sales. Not much surprise is expected out of PPI/CPI data.

Next Week's economic calendar:

Retail Sales - 11/16
Core PPI - 11/17
Core CPI - 11/18
Leading Indicators - 11/19

Last week's (week over week) market Sectors Returns and Internals:

SP 500: 2.26%
Volatility Index, VIX =23.36
Short term bond rate (average of 3 year and 5 year) = 1.81%
Small Cap (IWM): 1.12%
Latin America (ILF): 2.38%
Europe (IEV or EFA): 3.08%
Emerging Markets (EEM): 3.51%
Commodities (DBC): 0.21%
Long term Bonds (TLT): 0.63%
US Dollar, 5 DMA = 75.22
Gold, (GLD) 5 DMA = 2.15%

NYSE (New Highs - New lows), 5 DMA = 146.6
10 year Treasury yield = 3.43%

Put/Call Ratio, total of equity/Index = 0.85
Bull/Bear Ratio, Investors Intelligence survey = 1.66

-Nidhi

"Inter Market Relationships" - by Corey Rosenbloom on Finz.tv

2009-11-12T08:28:00.000-08:00

Inter market analysis is an important one and most seem to miss it in their checklist. Highly recommend watching this video from Corey Rosenbloom:

"Gold rate soaring", "Dollar falling", "recession recovery slow"

2009-11-09T14:40:00.000-08:00

Unemployment was worse than expected at 10.2%, but the equity market doesn't seem to care about it much. And the productivity report rose by 9.2% in 3Q, meaning the employers are squeezing out maximum from the employees. This can also be interpreted that employers can delay hiring more workers for some more time and Employment may not recover soon.

For this recession, the housing and the consumer spending might give a good indication for recovery than the unemployment report. So watch closely for Housing data and Consumer expenditure/Consumer confidence data in order to get the pulse of the market.

Besides the US market, the US dollar is feeding the global equity market frenzy, and the rally in Gold/Commodities. The feds are far from raising the interest rates and this cheap money is proliferating into different parts of the world and into different sectors.

On the technical charts, the equity market continued its monthly pattern on rallying by the first two weeks of the month and declining after the expiration's Friday.

Next Week's economic calendar:

Trade Balance - 11/13

Last week's (week over week) market Sectors Returns and Internals:

SP 500: 3.2%
Volatility Index, VIX =24.19
Short term bond rate (average of 3 year and 5 year) = 1.85%
Small Cap (IWM): 3.11%
Latin America (ILF): 7.13%
Europe (IEV or EFA): 3.37%
Emerging Markets (EEM): 5.54%
Commodities (DBC): 0.72%
Long term Bonds (TLT): -2.24%
US Dollar, 5 DMA = 75.96
Gold, (GLD) 5 DMA = 4.78%

NYSE (New Highs - New lows), 5 DMA =47
NYSE (Advances-Declines), 5 DMA = 636
10 year Treasury yield = 3.54%

Put/Call Ratio, total of equity/Index = 0.87
Bull/Bear Ratio, Investors Intelligence survey = 1.96

-Nidhi

"ISM Index", "FOMC Rate Decision", "Unemployment Report"

2009-11-02T08:27:00.000-08:00

Is this the beginning of the much awaited correction in equities? Lets wait to see further confirmation of that. This week is a big one with multitude of reports coming out: FOMC rate decision, Unemployment report and ISM Index. Since market didn't get bullish evidences from Q3 earnings, it is looking for direction now and this week might provide just that.

Commodities (& Latin America), Emerging markets and small cap all took bigger hit last week, despite a good GDP report that was aided by government programs like "Cash for clunkers" and "first time home buyer incentives". However US dollar strength can be attributed to the equities fall too.

Next Week's economic calendar:

ISM Index - 11/2
FOMC rate decision, ADP Employment report - 11/4
Unemployment rate, Consumer credit -11/6

Last week's (week over week) market Sectors Returns and Internals:

SP 500: -4.02%
Volatility Index, VIX =30.69
Short term bond rate (average of 3 year and 5 year) = 1.87%
Small Cap (IWM): -6.21%
Latin America (ILF): -7.48%
Europe (IEV or EFA): 0.2%
Emerging Markets (EEM): -7.83%
Commodities (DBC): -4.53%
Long term Bonds (TLT): 0.87%
US Dollar, 5 DMA = 76.2
Gold, (GLD) 5 DMA = 101.93

NYSE (New Highs - New lows), 5 DMA =37
NYSE (Advances-Declines), 5 DMA = -1056.2
10 year Treasury yield = 3.41%

Put/Call Ratio, total of equity/Index = 1.21
Bull/Bear Ratio, Investors Intelligence survey = 2.15

-Nidhi

"Durable Orders", "Q3 GDP", "New Home sales"

2009-10-26T09:32:00.000-07:00

Dollar continued to fund the global equity and commodity rally. Though last week the large cap stocks seemed to do better than the small cap. Risk avoiding might be in order. Gold and Oil continued the rally. Long term Treasury retreated.

Earnings continued to beat (at 72%) the already battered expectations and guidance has been higher as well. But remember that the expectations are quite low. Interesting point as highlighted by Bespoke is that the Beat rate is so high this quarter that the beat rate in Q4 might fall short.

Other interesting point to note this Q3 earnings season is that even though companies like AA, IBM, AXP beat expectations and the stock rallied, but they were immediately sold into the strength. Aren't investors believing the earnings? or is it the expectations that is not trust worthy?

Brazil decided to impose a 2% tax on foreign investment in local stocks in order to avoid gains in Brazilian Real. This lead to a weekly negative for ILF the last week. Emerging markets can be expected to continue perform well at the expense of US dollar. Some short term weakness can expected however.

Next Week's economic calendar:

Durable Orders, Case Schiller report - 10/7
Michigan Sentiment - 10/30
GDP, PCE - 10/29
New Home sales - 10/28

Last week's (week over week) market Sectors Returns and Internals:

SP 500: -0.74%
Volatility Index, VIX = 22.27
Short term bond rate (average of 3 year and 5 year) = 2.015%
Small Cap (IWM): -2.63%
Latin America (ILF): -0.6%
Europe (IEV or EFA): 0.2%
Emerging Markets (EEM): 0.02%
Commodities (DBC): 3.39%
Long term Bonds (TLT): -0.52%
US Dollar, 5 DMA = 75.31
Gold, (GLD) 5 DMA = 103.49

NYSE (New Highs - New lows), 5 DMA =237
NYSE (Advances-Declines), 5 DMA = -212
10 year Treasury yield = 3.51%

Put/Call Ratio, total of equity/Index = 0.8
Bull/Bear Ratio, Investors Intelligence survey = 2.14

-Nidhi

"Beige Book", "Housing starts", "Existing Home sales", "Leading Indicators"

2009-10-20T10:00:00.000-07:00

We are into Q3 earnings season and the results have been positive so far, particularly technology companies. The number of companies rising their earnings guidance has jumped quite a bit! You may need to be forward looking rather than using historical data in order to benefit from this up swing. Adding fuel to the earnings season is the demise of the US dollar. All in all, this makes the dollars that you have in the bank CD all the more less value when you view it from an international investor's perspective. So holding on to the dollar may not be prudent any more.

Since the equities are in the overbought zone, starting a new long position can only be short term. The economic indicators are not boding well with the equity rally. That makes the argument stronger for an equity rally to be short term.

The US consumer is still in doldrums - September retail sales was -1.5% with all the government incentives ending. The Core consumer prices came in little hotter at +0.2%.

When you look back at the past year's performance, only four sectors have exceeded S&P500's performance - Consumer discretionary (huh? - yeah, its true) , Energy, Materials and technology. Telecom, Utilities and Consumer staples are the most undervalued with respect to S&P 500.

Conditions currently favor the equities outside the US, particularly the ones relates to commodities. You would want to look at ETFs from Latin America - ILF, EWZ, BRF, etc.. Not necessarily buy into them right away, but a good pull back can help.

Next Week's economic calendar:

Core PPI, Housing Starts - 10/20
Fed's Beige Book - 10/21
Leading Indicators - 10/22
Existing Home sales - 10/23

Last week's market Sectors Returns and Internals:

SP 500: 1.51%
Volatility Index, VIX = 21.43
Short term bond rate = 1.93%
Small Cap (IWM): 0.42%
Latin America (ILF): 3.95%
Europe (IEV or EFA): 2.85%
Emerging Markets (EEM): 2.26%
Commodities (DBC): 5.29%
Long term Bonds (TLT): -0.47%
US Dollar, 5 DMA = 75.71
Gold, (GLD) 5 DMA = 103.61

NYSE (New Highs - New lows), 5 DMA =295.2
NYSE (Advances-Declines), 5 DMA = 97.6
10 year Treasury yield = 3.43%

Put/Call Ratio, total of equity/Index = (not able to get this data freely anymore)
Bull/Bear Ratio, Investors Intelligence survey =

-Nidhi