AI
Sunday, September 25, 2005 1:30:34 AM
~:~Market Trend Update for the Week Ahead~:~
OVERVIEW:
It’s that time once again to review the past week and look into the next. As mentioned in the previous update with which this post replies; What is noteworthy though is the extreme amount of shares exchanged. We are talking 3.1 Bln on the NYSE and 2.5 Bln on the COMP, whoa! That’s some freakish volume. The bottom line is we are in for some explosive movement in one direction or the other. I was looking for a peak around mid-Sept and I think we may have gotten it. If this holds true, then the lower high with a lower low is in the cards. So far, this has been the case with a couple of heavy down days in the middle of the week. COMP is testing 2100, SPX is testing 1210, the DJIA is testing 10400 and R2k is testing 650. By the end of the week we had closed out on a positive note for the most part and slightly higher than the numbers mentioned, but these numbers are the ones to watch in the week ahead. A little later I will get into the next areas of support should we break these areas. As for the U$D, Gold and Oil, I mentioned this in the previous update; This week we get a dose of Fed-Speak and most likely we see another rate increase. This will in turn probably give some support to the U$D, but I expect it will be short lived. Gold may take a small breather here as the new high becomes the old high and another new high is set in fairly short order (give or take a week or two). Oil is due for some consolidation, no big surprise here as we may do a plunge back into the 50’s. Oil gained strength on the hurricane news, but has since fallen back to test its 50DMA and while Gold is yet to make its move to new highs, the U$D did react to the Fed as expected. The CoT’s data is quite interesting once again as open interest on the majors and Oil took a nosedive, but did shoot up on Gold. The Commercials got long the DJIA and heavily short on Gold while Oil picked up some Commercial longs. CoT data can be viewed at #msg-7253670 -- Equity funds reported net cash inflows totaling $724 Mln ($748 Mln xETF’s) with $1.115 Bln ($885 Mln xETF’s) going to Non-domestic funds and Domestic funds reporting net outflows of -$391 Mln (-$137 Mln xETF’s). International funds reported net inflows of $902 Mln ($672 Mln xETF’s) with all Developed and Emerging regions reporting inflows excluding ETF’s. Money Market funds reported net outflows of -$4.536 Bln. The CRB launched from its 50DMA touching 330 during the week before falling back to 323, but since Jun’05 the 50DMA has provided support. The 10-yrs and 30-yrs T-Note yields weakened slightly and are now at 4.248% and 4.509% respectively…
ECONOMIC #’s:
A slow week on the Econ front, but the numbers we did get were weak. The slow spots were filled in courtesy of the Fed and Rita…
Building Permits for Aug were 2.124 Mln vs 2.171 Mln previously reported with expectations having been for 2.129 Mln.
Housing Starts for Aug were 2.009 Mln vs 2.035 Mln previously reported with expectations having been for 2.050 Mln. This equates to a 1.3% decline after posting a 1.5% decline in July and marked the first back-to-back decline in housing starts since early 2004. By area of the country, construction rose by 13.3% in the West to an annual rate of 561K units. All other areas of the country posted declines in August from the level of activity in July. The area of the country with the biggest drop in activity was the South, where construction fell by 6.6% to an annual rate of 915K units. Analysts blamed this decline on unusually wet weather during the month, even before Katrina struck. Construction was down 5.2% in the Midwest to an annual rate of 346K units and down 4.1% in the Northeast to an annual rate of 187K units.
MBA Mortgage Applications rose 1.5% in the week ended Sept. 16 compared to the prior week. Also on a seasonally adjusted basis, applications for mortgages to purchase homes fell -2.6%, while refinancing applications increased by 7.0%. Refinancings accounted for 45.6% of total applications last week, up from 42.9% a week earlier, while adjustable-rate morgages reached 29.8% from 28.2%. The average contract interest rates on 30- and 15-year fixed-rate mortgages rose to 5.81% and 5.38%, respectively, from 5.72% and 5.29% on a week-to-week basis. The rate on 1-year ARMs averaged 4.94%, up from 4.82%. Overall, the 4-week moving average tracking mortgage applications was up 0.5%.
Oil Inventories as reported by the DoE (Dept of Energy) and API (American Petroleum Institute). Crude according to DoE fell by –300K bbls, but according to API fell by –158K bbls. Gasoline according to DoE rose by 3.4 Mlm bbls and according to API rose by 2.1 Mln bbls. Distillates according to DoE rose by 300K bbls, but according to API rose by 3.2 Mln bbls.
Initial Claims for the week of Sept 17th were revised to 432K vs 424K revised from 398K previously reported with expectations having been for 450K. About 103K claims last week were from people who lost their jobs as a result of the hurricane. The 4-week moving average of claims rose to 376K from 347K the week before. The number of people continuing to collect state jobless benefits increased to 2.666 Mln the week ended Sept 10th from 2.578 Mln the week before. The 4-week average rose to 2.603 Mln from 2.579 Mln. The insured employment rate rose to 2.1% from 2.0%.
LEI (Leading Economic Indicator) for August was –0.2% vs –0.1% previously reported with expectations having been for –0.3%. A drop in consumer confidence and building permits were among the biggest contributors to the decline in August. The back-to- back declines were the 1st since 2001.
Econ activity picks up with Existing & New Home Sales, Consumer Sentiment, Durable Orders, GDP & Chain Deflator, Initial Claims, Personal Income & Spending, Michigan Sentiment (rev) and Chicago PMI.
No matter how bad the news there is always a silver lining or so we are told. Anything short of a terror attack on US soil is met with unfounded optimism. While optimism is a wonderful thing, it can be detrimental to your health when it flies in the face of reality. Here’s an example: We have known for a while that Hurricane Rita was coming to the Gulf, so much so that oil rigs and power facilities have been shut down well in advance, evacuations have taken place and nothing is open for business in the effected region. So during the normal trading day (if you can call it that) we see that the market is sinking. The next thing you know we hear that winds from Hurricane Rita have weakened from 150mph to 135mph and the markets recover, even finishing out the day in positive territory for the most part. So forget that the Gulf region is and has been shutdown for a week and that a hurricane is certain to make landfall and forget that the economy is on a slippery slope prior to any of this. The winds have weakened by 15mph and all is well in the world! I hate to be the one to tell you this, but all is not well. I do not know about you, but I find this reaction to this kind of news as peculiar. To see markets react to a 15mph difference in a hurricanes wind speed seems contrived to say the least. Don’t get me wrong, it is good news that the hurricane has weakened, but to stage a market come back or any market action based on a hurricanes wind speed is laughable. What’s next, basing market moves on whether it is a sunny or rainy day? I mean come on… What’s even more ludicrous is the train of thought that has followed these natural disasters and that is the benefits of such a tragedy. Benefits? That’s right the benefit of the rebuilding to follow. Well isn’t that grand! I think the world has lost their mind. Forget about all the lives lost or ruined, forget about the economic impact or the fact that the USA is so deep in hock that the rebuilding of these trashed regions will be done via the borrow and spend policies coupled with that lovely hidden tax called inflation. And as luck would have it (yeah right, luck) the same companies that are rebuilding Iraq such as Haliburton, Fluor, KBR, etc., get to rebuild the Gulf Coast via no bid contracts. Is it any wonder why the president enacted an executive order allowing these same federal contractors who are to do the rebuilding in the aftermath of the hurricanes to pay below the prevailing wage to construction workers? Is it any wonder why we do not want to leave Iraq? And how about the other Gulf? There have been troops and civilians dying in the Persian Gulf everyday for the last 3 years. In August alone 85 American troops have died, that’s an average of nearly 3 a day. Did you happen to see any market reaction to this statistic? How about the month before? At anytime for any month since the war started? Probably not… As a matter of fact, you rarely hear anything mentioned about the Iraq War on the business news networks. Why do you think that is? I can tell you why, but it is so blatantly obvious I don’t think I need to explain to you how/why the media is controlled. So in the face of adverse conditions -- death, debt and debauchery, a hurricane in the Gulf Coast slightly weakens and the markets rise. Is this good news for the economy? How about for the people affected by these storms? Is it good news because it will lower the price of Oil? Is it good news for the people dying everyday over that same Oil yet nobody seems to care a lick about? Pretty disgusting if you ask me… Our lives have been consumed with the price of Oil in many ways and all the while the powers that be divide our nation and pit us against each other while they loot our taxpayer dollars. Talk about a bait and switch of grandiose proportions. So where does the hypocrisy end? I do not know how much more of the deceit on their part and the stupidity on ours that I can take. I feel like this guy in the movie “Scanners” just before his head explodes…
Rant over, cranium still intact…
WHAT CAN WE EXPECT NOW?:
In the week ahead I am looking for more of the same, weakness across the board mainly spurned by weak economic numbers and the aftermath of Rita although Rita remains a wild card. The market may use it to push the market up because of the comparisons having been made to Katrina and in this light was far less destructive. Either way, my rant in “Spin of the Day” pretty much summarizes what reality means to the market (i.e. nothing, nada, zilch). Then again it could be a set-up to sucker in more gamblers. As mentioned a little earlier, COMP 2100 -- SPX 1210 -- DJIA 10400 -- R2k 650 are at their respective lines in the sand. I do not believe these support areas will hold, but we may see a bounce in here. I am more inclined to watch for a test of COMP 2055 or 50% Fib followed by 2016 or 61.8% Fib -- SPX 1203 or 38.2% Fib followed closely by 1190 or 50% Fib -- DJIA 10363 or 50% Fib followed by 10277 or 61.8% Fib -- R2k 643 or 50% Fib followed by 629 or 61.8% Fib. So to be clear, these are the support levels that may or may not be reached in the week ahead, but all in due time. NOTE: These Fib’s are based on the Apr’05 lows and not the intermediate July’05 lows. Also of note is that all of these indices with the exception of the SPX are weak in tandem, in other words they are all very close to a 50% retrace. On the bullish side of the coin, this is generally an area where a bounce may occur. Couple this with the fact that all/most of these indices are just moving off of the lower Bband and that Rita may be viewed as a positive by this goofy market that finds a reason for an intermediate bounce. All of this may or may not be of significance, but worth keeping in mind. As for the U$D, Oil and Gold, I think last weeks update still stands where I mentioned the following; All in all, in the weeks ahead I am looking for tests of U$D 85, Gold $485 and Oil $57… This is my outlook over weeks to come, but for the week ahead we may just see the U$D test 90 before the 85 I am looking for with Gold most likely following the U$D’s lead, Oil is a wild card.
Technically speaking, Bullish Advisors are at 54.3% with Bearish Advisors at 25.5% and as bullish advisors has now risen for the 4th straight week. The VIX is still in a range between 12-14 and VXN between 14-16, an oscillation of sorts. The CBOE Equity P/C Ratio ended the week at .630 with a 21DMA of .612. The RSI 5-Days are Neutral across the board. The $NASI Daily (Summation), $NAMO Daily (McClellan), NAHL Daily (Highs/Lows), $NAAD Daily (Advance/Decline) and Bullish %'s are in downtrends and charts thereof can be viewed below along with the major indices…
Weekly charts of the COMP, SPX and DJIA posted earlier in the week #msg-7806818
NOTE:
I continue to hold a USPIX position, which I will flip to UOPIX when appropriate.
As mentioned in last week’s update and executed the week of 9/12, I dumped GCH and put the $$$ towards Gold. Stopped out of WPTE, took the loss and moved it along with the GCH funds into a PMPIX position. Most likely will hold into the Holiday Season.
CORE:
Funds; HSGFX, PCRDX, PRPFX, QRAAX, RSNRX ,TAVIX, XLE
Individual Stocks; BHP, SWWC
Speculative Stocks; ANO
SWING:
PMPIX
Disclaimer:
This disclosure is not a recommendation to buy, sell or do as I do. It is only to give my thoughts on current market conditions and share the positions that I am holding. I am not a day trader and invest mostly in funds or baskets of stocks and attempt to identify up/down trends and occasionally perform swing trades.
OVERVIEW:
It’s that time once again to review the past week and look into the next. As mentioned in the previous update with which this post replies; What is noteworthy though is the extreme amount of shares exchanged. We are talking 3.1 Bln on the NYSE and 2.5 Bln on the COMP, whoa! That’s some freakish volume. The bottom line is we are in for some explosive movement in one direction or the other. I was looking for a peak around mid-Sept and I think we may have gotten it. If this holds true, then the lower high with a lower low is in the cards. So far, this has been the case with a couple of heavy down days in the middle of the week. COMP is testing 2100, SPX is testing 1210, the DJIA is testing 10400 and R2k is testing 650. By the end of the week we had closed out on a positive note for the most part and slightly higher than the numbers mentioned, but these numbers are the ones to watch in the week ahead. A little later I will get into the next areas of support should we break these areas. As for the U$D, Gold and Oil, I mentioned this in the previous update; This week we get a dose of Fed-Speak and most likely we see another rate increase. This will in turn probably give some support to the U$D, but I expect it will be short lived. Gold may take a small breather here as the new high becomes the old high and another new high is set in fairly short order (give or take a week or two). Oil is due for some consolidation, no big surprise here as we may do a plunge back into the 50’s. Oil gained strength on the hurricane news, but has since fallen back to test its 50DMA and while Gold is yet to make its move to new highs, the U$D did react to the Fed as expected. The CoT’s data is quite interesting once again as open interest on the majors and Oil took a nosedive, but did shoot up on Gold. The Commercials got long the DJIA and heavily short on Gold while Oil picked up some Commercial longs. CoT data can be viewed at #msg-7253670 -- Equity funds reported net cash inflows totaling $724 Mln ($748 Mln xETF’s) with $1.115 Bln ($885 Mln xETF’s) going to Non-domestic funds and Domestic funds reporting net outflows of -$391 Mln (-$137 Mln xETF’s). International funds reported net inflows of $902 Mln ($672 Mln xETF’s) with all Developed and Emerging regions reporting inflows excluding ETF’s. Money Market funds reported net outflows of -$4.536 Bln. The CRB launched from its 50DMA touching 330 during the week before falling back to 323, but since Jun’05 the 50DMA has provided support. The 10-yrs and 30-yrs T-Note yields weakened slightly and are now at 4.248% and 4.509% respectively…
ECONOMIC #’s:
A slow week on the Econ front, but the numbers we did get were weak. The slow spots were filled in courtesy of the Fed and Rita…
Building Permits for Aug were 2.124 Mln vs 2.171 Mln previously reported with expectations having been for 2.129 Mln.
Housing Starts for Aug were 2.009 Mln vs 2.035 Mln previously reported with expectations having been for 2.050 Mln. This equates to a 1.3% decline after posting a 1.5% decline in July and marked the first back-to-back decline in housing starts since early 2004. By area of the country, construction rose by 13.3% in the West to an annual rate of 561K units. All other areas of the country posted declines in August from the level of activity in July. The area of the country with the biggest drop in activity was the South, where construction fell by 6.6% to an annual rate of 915K units. Analysts blamed this decline on unusually wet weather during the month, even before Katrina struck. Construction was down 5.2% in the Midwest to an annual rate of 346K units and down 4.1% in the Northeast to an annual rate of 187K units.
MBA Mortgage Applications rose 1.5% in the week ended Sept. 16 compared to the prior week. Also on a seasonally adjusted basis, applications for mortgages to purchase homes fell -2.6%, while refinancing applications increased by 7.0%. Refinancings accounted for 45.6% of total applications last week, up from 42.9% a week earlier, while adjustable-rate morgages reached 29.8% from 28.2%. The average contract interest rates on 30- and 15-year fixed-rate mortgages rose to 5.81% and 5.38%, respectively, from 5.72% and 5.29% on a week-to-week basis. The rate on 1-year ARMs averaged 4.94%, up from 4.82%. Overall, the 4-week moving average tracking mortgage applications was up 0.5%.
Oil Inventories as reported by the DoE (Dept of Energy) and API (American Petroleum Institute). Crude according to DoE fell by –300K bbls, but according to API fell by –158K bbls. Gasoline according to DoE rose by 3.4 Mlm bbls and according to API rose by 2.1 Mln bbls. Distillates according to DoE rose by 300K bbls, but according to API rose by 3.2 Mln bbls.
Initial Claims for the week of Sept 17th were revised to 432K vs 424K revised from 398K previously reported with expectations having been for 450K. About 103K claims last week were from people who lost their jobs as a result of the hurricane. The 4-week moving average of claims rose to 376K from 347K the week before. The number of people continuing to collect state jobless benefits increased to 2.666 Mln the week ended Sept 10th from 2.578 Mln the week before. The 4-week average rose to 2.603 Mln from 2.579 Mln. The insured employment rate rose to 2.1% from 2.0%.
LEI (Leading Economic Indicator) for August was –0.2% vs –0.1% previously reported with expectations having been for –0.3%. A drop in consumer confidence and building permits were among the biggest contributors to the decline in August. The back-to- back declines were the 1st since 2001.
Econ activity picks up with Existing & New Home Sales, Consumer Sentiment, Durable Orders, GDP & Chain Deflator, Initial Claims, Personal Income & Spending, Michigan Sentiment (rev) and Chicago PMI.
No matter how bad the news there is always a silver lining or so we are told. Anything short of a terror attack on US soil is met with unfounded optimism. While optimism is a wonderful thing, it can be detrimental to your health when it flies in the face of reality. Here’s an example: We have known for a while that Hurricane Rita was coming to the Gulf, so much so that oil rigs and power facilities have been shut down well in advance, evacuations have taken place and nothing is open for business in the effected region. So during the normal trading day (if you can call it that) we see that the market is sinking. The next thing you know we hear that winds from Hurricane Rita have weakened from 150mph to 135mph and the markets recover, even finishing out the day in positive territory for the most part. So forget that the Gulf region is and has been shutdown for a week and that a hurricane is certain to make landfall and forget that the economy is on a slippery slope prior to any of this. The winds have weakened by 15mph and all is well in the world! I hate to be the one to tell you this, but all is not well. I do not know about you, but I find this reaction to this kind of news as peculiar. To see markets react to a 15mph difference in a hurricanes wind speed seems contrived to say the least. Don’t get me wrong, it is good news that the hurricane has weakened, but to stage a market come back or any market action based on a hurricanes wind speed is laughable. What’s next, basing market moves on whether it is a sunny or rainy day? I mean come on… What’s even more ludicrous is the train of thought that has followed these natural disasters and that is the benefits of such a tragedy. Benefits? That’s right the benefit of the rebuilding to follow. Well isn’t that grand! I think the world has lost their mind. Forget about all the lives lost or ruined, forget about the economic impact or the fact that the USA is so deep in hock that the rebuilding of these trashed regions will be done via the borrow and spend policies coupled with that lovely hidden tax called inflation. And as luck would have it (yeah right, luck) the same companies that are rebuilding Iraq such as Haliburton, Fluor, KBR, etc., get to rebuild the Gulf Coast via no bid contracts. Is it any wonder why the president enacted an executive order allowing these same federal contractors who are to do the rebuilding in the aftermath of the hurricanes to pay below the prevailing wage to construction workers? Is it any wonder why we do not want to leave Iraq? And how about the other Gulf? There have been troops and civilians dying in the Persian Gulf everyday for the last 3 years. In August alone 85 American troops have died, that’s an average of nearly 3 a day. Did you happen to see any market reaction to this statistic? How about the month before? At anytime for any month since the war started? Probably not… As a matter of fact, you rarely hear anything mentioned about the Iraq War on the business news networks. Why do you think that is? I can tell you why, but it is so blatantly obvious I don’t think I need to explain to you how/why the media is controlled. So in the face of adverse conditions -- death, debt and debauchery, a hurricane in the Gulf Coast slightly weakens and the markets rise. Is this good news for the economy? How about for the people affected by these storms? Is it good news because it will lower the price of Oil? Is it good news for the people dying everyday over that same Oil yet nobody seems to care a lick about? Pretty disgusting if you ask me… Our lives have been consumed with the price of Oil in many ways and all the while the powers that be divide our nation and pit us against each other while they loot our taxpayer dollars. Talk about a bait and switch of grandiose proportions. So where does the hypocrisy end? I do not know how much more of the deceit on their part and the stupidity on ours that I can take. I feel like this guy in the movie “Scanners” just before his head explodes…
Rant over, cranium still intact…
WHAT CAN WE EXPECT NOW?:
In the week ahead I am looking for more of the same, weakness across the board mainly spurned by weak economic numbers and the aftermath of Rita although Rita remains a wild card. The market may use it to push the market up because of the comparisons having been made to Katrina and in this light was far less destructive. Either way, my rant in “Spin of the Day” pretty much summarizes what reality means to the market (i.e. nothing, nada, zilch). Then again it could be a set-up to sucker in more gamblers. As mentioned a little earlier, COMP 2100 -- SPX 1210 -- DJIA 10400 -- R2k 650 are at their respective lines in the sand. I do not believe these support areas will hold, but we may see a bounce in here. I am more inclined to watch for a test of COMP 2055 or 50% Fib followed by 2016 or 61.8% Fib -- SPX 1203 or 38.2% Fib followed closely by 1190 or 50% Fib -- DJIA 10363 or 50% Fib followed by 10277 or 61.8% Fib -- R2k 643 or 50% Fib followed by 629 or 61.8% Fib. So to be clear, these are the support levels that may or may not be reached in the week ahead, but all in due time. NOTE: These Fib’s are based on the Apr’05 lows and not the intermediate July’05 lows. Also of note is that all of these indices with the exception of the SPX are weak in tandem, in other words they are all very close to a 50% retrace. On the bullish side of the coin, this is generally an area where a bounce may occur. Couple this with the fact that all/most of these indices are just moving off of the lower Bband and that Rita may be viewed as a positive by this goofy market that finds a reason for an intermediate bounce. All of this may or may not be of significance, but worth keeping in mind. As for the U$D, Oil and Gold, I think last weeks update still stands where I mentioned the following; All in all, in the weeks ahead I am looking for tests of U$D 85, Gold $485 and Oil $57… This is my outlook over weeks to come, but for the week ahead we may just see the U$D test 90 before the 85 I am looking for with Gold most likely following the U$D’s lead, Oil is a wild card.
Technically speaking, Bullish Advisors are at 54.3% with Bearish Advisors at 25.5% and as bullish advisors has now risen for the 4th straight week. The VIX is still in a range between 12-14 and VXN between 14-16, an oscillation of sorts. The CBOE Equity P/C Ratio ended the week at .630 with a 21DMA of .612. The RSI 5-Days are Neutral across the board. The $NASI Daily (Summation), $NAMO Daily (McClellan), NAHL Daily (Highs/Lows), $NAAD Daily (Advance/Decline) and Bullish %'s are in downtrends and charts thereof can be viewed below along with the major indices…
Weekly charts of the COMP, SPX and DJIA posted earlier in the week #msg-7806818
NOTE:
I continue to hold a USPIX position, which I will flip to UOPIX when appropriate.
As mentioned in last week’s update and executed the week of 9/12, I dumped GCH and put the $$$ towards Gold. Stopped out of WPTE, took the loss and moved it along with the GCH funds into a PMPIX position. Most likely will hold into the Holiday Season.
CORE:
Funds; HSGFX, PCRDX, PRPFX, QRAAX, RSNRX ,TAVIX, XLE
Individual Stocks; BHP, SWWC
Speculative Stocks; ANO
SWING:
PMPIX
Disclaimer:
This disclosure is not a recommendation to buy, sell or do as I do. It is only to give my thoughts on current market conditions and share the positions that I am holding. I am not a day trader and invest mostly in funds or baskets of stocks and attempt to identify up/down trends and occasionally perform swing trades.
**Happy Trading**
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