Your Economy (No Politics)

[Bullwinkle]

~:~Market Trend Update for the Week Ahead~:~



OVERVIEW:
What a volatile week… Turns out we were all dressed up with nowhere to go. The beginning of the week saw everything sell off, just the opposite of the prior week where everything was climbing. That changed by mid-week after some controversial statements made by the EX-fed chairman that preyed mostly on commodities. Primarily PM’s and Oil were the most volatile while adding strength to the U$D. The Treasury yields continue to flatten as the 2-yrs note is beginning to breakaway from the pack. This is not a very encouraging sign and while the majors held there own it was nothing to get excited about. There is an air about the strength of the indices that says to me we are walking a tightrope that could effect everything should the economy slow to a crawl. Even with all of the economic and geo-political shenanigans taking place, this market cannot climb that wall. I cannot speak for anyone, but as for myself I have a funny feeling that something wicked this way come. Forget all of the talking heads, economists and analysts. Forget the technical and fundamental analysis. Just take a look around you -- Interest rates are climbing, prices are increasing, housing is hissing, deficits are multiplying, tensions are soaring, earnings are abating, the economy is slowing, and your benefits are shrinking. Things are not what the powers that be would like us to believe. There are so many issues that could plunge us into a nasty spiral that I would not want to be making any big bets. The risk/reward ratio is rather extreme, yet we are told all is well. I am no odds maker, but I wouldn’t take that bet. The majors were somewhat mixed as the S&P and COMP finished flat, R2K finished down with the DJIA being the index du` jour… Small caps, techs, energy and commodities all took hits at one time or another throughout the week although there were spots of strength strung out through the indices. Make no mistakes about it, breadth has been weak and the new Hi/Lo ratio continues to shrink. Last week I mentioned that I was looking for a test of COMP 2200, SPX 1250 and DJIA 10650, needless to say we did not get it this past week, but I would not count it out just yet.

The CoT data shows much the same as open interest continues to trend higher, albeit nothing extraordinary and positions in Commercial Short interest on the majors are holding steady. Gold open interest remains above average and Commercial Shorts lining up against Large Spec Longs continue their standoff. Oil open interest has spiked again after having spiked and settling with very little Commercial Shorts being established. You can go here to view the CoT data graphs #msg-9171642 -- Equity Fund flows as detailed by AMG Data Services reported Equity funds (xETF’s) net cash inflows totaled $4.219B in the week ended February 8, with $2.697B (64%) going to Non-domestic funds. Excluding ETF activity, International funds reported net inflows totaling $2.299B, the largest inflows to the sector since 10/2/02, as net inflows are reported to all Emerging and Developed regions. Largest ETF inflows were $514M to the iShares MSCI EAFE Index fund and $434M to the DIAMONDS fund. Largest ETF outflows were -$2.214B from the SPDR Trust Series 1 fund, -$901M from the Nasdaq-100 Index Tracking Stock fund, -$889M from the iShares Russell 2000 Index fund and -$642 Mil from the Select Sector SPDRs Energy fund. Interestingly enough, Municipal Bond funds reported net cash inflows totaling $1.474B as four JP Morgan funds reported large inflows ($1.128 B) and Money Market funds reported net outflows totaling -$4.669B. The full report can be viewed at #msg-9670376 -- As for Oil, Gold and the U$D, we saw some extreme volatility in Oil and Gold, with Oil fininshing at roughly $62bbl and Gold finishing out at $551. The U$D continued to show strength by piercing the 90 mark and holding that area to close the week at 90.56… The CRB has been getting trounces since the opening of Feb as the index is down nearly 20pts in a little less than 2-weeks. The CRB closed out the week at 331. Treasury yields are flattening with 2yrs@4.67%, 5yrs@4.58%, 10yrs@4.58%, 20yrs@4.56% and 30yrs@4.55%. The Yield Curve and most current bond yields can be viewed at #msg-9670741 …


ECONOMIC #’s:
Slow week economically speaking, but the data more or less speaks for itself…

Consumer Credit – Dec = $3.3B vs -$0.6B Expected $5.0B
#msg-9608426

MBA Mortgage Applications week of 2/03 = slipped -1.2% as Refi’s edged higher by 0.2%
#msg-9632751

Oil Inventories week of 2/03 and as reported by the DoE / API:
(Crude bbls= -300K / -2.7M) (Gas bbls = +4.3M / +2.8M) (Distillates bbls = -300K / -1.2M)
#msg-9632748

Initial Claims – week of 2/04 = 277K vs 273K Expected 285K
#msg-9648430

Wholesale Inventories – Dec = -$65.7B vs -$64.7B Expected –64.8B
#msg-9649068

Trade Balance – Jan = $21.0B vs $8.6B Expected $8.0B
#msg-9662600

Treasury Budget – Jan = 91.2 vs 93.4 Expected 93.1
#msg-9662886

ECONOMIC CALENDAR For The Week Ahead: http://biz.yahoo.com/c/ec/200607.html


I feel a major rant coming on...

The things going on in this country should never be allowed to happen in America. A bloated government bureaucracy that is out of control and taking average Americans to the brink. Budget cuts to health, energy, education and multiple social programs such as job training, elderly nutritional programs and energy conservation programs are on the chopping block while increasing subsidies to outsource jobs and lining the budget with new user fees (yes, another word for taxes) are up for approval. If GWB has his way you can expect tax cuts that primarily benefit the wealthiest Americans, an additional minimum tax known as AMT that does away with your tax write offs, cuts to Social Security benefits as well as the Army Corp of Engineers and subsequent infrastructure. What I have mentioned are just a handful of the many issues in the proposed $2.77 Trillion budget. The new budget is a 15-lbs. document of cuts to everything important to the average citizen and spending on everything important to an industrial militarized complex. The bottom line is if you are an average American then your livelihood is at stake. Let’s now go beyond the budget and take a look behind the scenes. There are so many instances I could cite that I would not know where to begin, so I just assume skip the past and well documented issues and just concentrate on the last year. That in and of itself is a plate full. Some key names such as Plame, DeLay, Libby, Abramoff and Katrina lace the headlines. Some key issues such as leaks, bribes, spies, lies, breakdown and failures accompany those names. My question is simple; Just how much more of this crap are people willing to put up with and/or make excuses for before realizing we have been screwed every which way but loose? The death toll from Katrina is still unknown, homeless victims are living in their vehicles and many of which cannot find work or return to their way of life. You and I may not be feeling the full effects of Katrina, but the people of the region have more or less been swept under the rug. If you have not seen the most recent CNN program “Keeping Them Honest” which focuses on the ongoing aftermath of Hurricane Katrina, then you definitely need to see it. Otherwise you may want to read the transcript http://premium.cnn.com/TRANSCRIPTS/0602/10/acd.01.html . It is absolutely appalling. You know what else is a appalling? A President who says he wants to know the truth about who leaked a CIA operative’s name. Wants to know whom? Well, he does not have to look too far… The Abramoff scandal is heating up, Scooter may sing and the newest of pathetic attempts to change the focus of the real issues at hand is that if it weren’t for spying on Americans that a supposed terror attack attempt in Los Angeles would have occurred. The fact that he admits to spying on ALL Americans since 9/11 and using an attempted event that never even took place to qualify his actions just goes to show you how far of a stretch this administration will go to pull the wool over our eyes. The mayor of L.A. does not have a clue to what GWB is talking about, strange? No not really… In one way or another, all of these issues are interrelated. This administration has been playing the terror card to strike fear into the hearts and minds of Americans, not the enemy. There is not enough funding to take care of business let alone any catastrophes. The spending cuts are supplanted by spending of unimaginable magnitudes. All the while the inner circle lines their pockets with our dollars leaving all of us to fend for ourselves. This is not the kind of America I remember. This sounds more like a 3rd world country scenario. Yet it plays out in front of our very eyes day after day. It has been bait and switch every step of the way and while I have suspected it all along it is only now after all of the leaks and intelligence failures that the world at large gets to see what it is that is really going on. And after all that has happened this President still commands an approval rating of over 40%, simply amazing. I certainly hope Americans are not as dumb as we appear to be. If you haven’t already, read the following articles which are just from this week alone:

L.A. Mayor Blindsided by Bush Announcement #msg-9648182
Libby: White House 'Superiors' OK'd Leaks #msg-9648353
Abramoff says he met Bush "almost a dozen" times #msg-9648749
Intel pros say Bush is lying about foiling 2002 terror attack #msg-9663522
Brown Asserts He Alerted White House Quickly on Katrina #msg-9671235
White House Knew of Levee's Failure on Night of Storm #msg-9671248

Moving on to another outrage of the week: Greensapan… He has been retired all of about 2-weeks, but obviously feels the need to turn the markets on their ear. After all, he cannot be held responsible for what he spews so he comes out shooting from the hip and spoke very hawkishly suggesting the market isn't pricing in as much as they should as far as future interest-rate hikes go during a Lehman Brothers conference. Then in a conference with international investors he stated that the high cost of gold does not reflect inflation or the strength of commodities, but rather a fear among investors of a major geopolitical conflict. You want to talk about irresponsible behavior? What’s worse is the markets listen to what he has to say even though he is no longer forming Fed policy. According to a Forex report, “The reports should be treated with great caution - if Greenspan's view on Tuesday differed significantly from the market's assessment of it only a week earlier when he was still chairman, it would imply either an implausibly dramatic change of mind in only a few days, or one of the most spectacular failures of communication in the history of central banking.” I am in total agreement, nuff said… See the following articles if interested:

Gold price riding high on fear of terrorism, says Greenspan and
Dollar Advances as Greenspan Suggests Rates May Rise Further #msg-9632646
Overnight Debt/Forex Report #msg-9632756

The next outrage of the week: Cartoons… Yeah, who would have thunk? I know I should probably be a little more sensitive to the issues surrounding the cartoons of the Prophet Muhammad, but I do not see what all of the hullabaloo is about. Not being from that part of the world may have something to do with it, but I just do not take things like this too seriously. Offensive? Sure I can see that. A reason to burn, bomb and behead? C’mon… The bottom line for me is that these caricatures were printed in Sept 2005, but did not raise an eyebrow. It was only after being reprinted and pushed onto the Middle-Eastern people in that part of the world that they got the recognition that someone was looking for. Here I go with my coincident theorist side, but isn’t just a little ironic that some entity went out of their way to resurrect these drawings and make sure that they were seen by all of Islam? Let’s cut to the chase, some people in high places know how these would be greeted once being made aware of and our government needs to lay some groundwork for an attack on Iran, so what better way to stir the pot and get the backing they desire from the western world? A follow up article to get a better understanding of the issue at hand: http://news.bbc.co.uk/2/hi/middle_east/4693292.stm If you want to see the caricatures and attempt to understand the outrage that followed you can go to the following link: http://michellemalkin.com/archives/004413.htm I do not mean to be offensive and apologize if I have crossed some sacred line by supplying this link, but I think people should see and make an attempt to understand what it is that has created such a stir...

This outrage finds a special interest group trying to overturn the Sarbanes-Oxley Act. You know, that little piece of legislation that was created to monitor the accounting profession after the scandals that led to the bilking of multi-billions of dollars from shareholders, ruined 1000’s of lives and led to the demise of Enron, Global Crossing, WorldCom and the like which to this day, 6 years later, investigations and hearings are still ongoing. Joining the efforts to argue against Sarbanes-Oxley is Kenneth Starr of Pepperdine University who presided over the Monica Lewinsky case. I don’t know about you, but that is all I need to know in order to figure out which powers that be are pushing for this and probably backdoor financing an effort to overturn this law in an attempt to disassemble of the PCAOB or Public Company Accounting Oversight Board. For a follow up article go here:

Conservative Group Challenges Sarbox #msg-9629796

Last, but not least, a rant of this magnitude would not be complete without mentioning big oil. Did you know that oil companies do not see enough good stuff to invest in so this why they are increasing share buybacks and dividends? Talk about a line of bullsh*t… Not enough good stuff to invest in, huh? How about the fact that the last time oil prices surged as they have recently the industry spent more than 80% of its free cash flow (after dividends) on finding and producing new oil. Today that figure is just 40%. At a time when they should be spending at least as much as in the past, they are cutting back. Forget about getting involved in new technologies or increasing refining capacity. Just sit back on those fat tax breaks, subsidies and profits from price gouging during natural disasters and exploitation of geo-political events. With a set-up like that, I would probably do the same. You know what, I take that back. I would not do the same because I have a conscience. For a follow up to this poor excuse for lack of investment:

Energy Companies Returning Windfall #msg-9632721

Thoroughly disgusted yet? You should be, I know I am…

The Common Denominator = NEOCON


WHAT CAN WE EXPECT NOW?:
This coming week should be interesting as most weeks are these days, but next week Ben Bernanke will speak before Congress on the 15th and 16th. While no policy change will be implemented, Wall St. sits on the edge of its seat waiting to hear what comes from the mouth of the new Fed chairman. The markets are predisposed to do whatever they will do, but all Bernanke has to do is fart and the markets will most likely rally. I don’t know, maybe I am too much of a skeptic, but I do not think anything he says will change what Mr. Market has already planned. The big question is what that plan may be. While I am still looking for a test of COMP 2200, SPX 1250 and DJIA 10650, I am not so sure we see it in the week ahead. While the BP%’s, McSum and H/L’s are all heading down and looking somewhat bearish, we have Options Expiry with MaxPain for QQQQ@42, SPY@127 and DIA@108. We are currently sitting at QQQQ 41, SPY 126.5 and DIA 109. Taking into consideration the low P/C ratio at these current prices and if MaxPain is any indication at all, then we are setting up for a stalemate. Last but not least, Ops Exp is followed by a Bradley turn date on the 19th so we could see some effect (if any) just before or just after the coming weekend. All in all, I wouldn’t expect much more than some rotation followed by the volatility that we have come to know and love which is a sign of the times with each day’s news moving markets minute-by-minute while traders sit poised with their finger hovering over the buy/sell button. I tend to believe the commodity sell off was over done and that a new weather front this weekend will be the excuse used to get back into oil and energy at better prices. As for the U$D, Gold and Oil -- the U$D has continued to get support, but I believe resistance in the 90 area will keep it in check. If not, then another visit to 91-92 cannot be ruled out. Gold looks to be about as volatile as I can remember for sometime and either a shakeout is in progress or we will see what I would consider to be a consolidation phase in the $540-550 area. Although price swings have been of a larger magnitude, I tend to believe that we are seeing a shakeout and Gold will hold the stated range similar to what we experienced back in the Oct-Nov’05 timeframe. Oil and energy have taken a hit lately, but Oil still remains near support at $62bbl and I just don’t see us going much lower from here as this sector is oversold and Iran media hype has been absent in the last week as cartoon drawings had taken the front seat. I believe that the hype picks up again as this will most likely be tied back into Iran in some way, shape or form. If not, then look to $60bbl as next support. These are all highly volatile areas and highly driven by news event that can change the outlook of these in a blink of an eye…

Technically Speaking, the week ended with Bullish Advisors creeping lower to 51.6% and Bearish Advisors at 25.3%. The VIX and VXN found support and are oscillating near 13 & 17 respectively. The CBOE EPC Ratio ended the week at .574 and TPC ratio at .677. The RSI 5-Days finished Neutral across the board once again. The P/C ratios, VIX/VXN, $NASI Daily (Summation), $NAMO Daily (McClellan), NAHL Daily (Highs/Lows), $NAAD Daily (Advance/Decline), 200DMA stocks and Bullish %'s all can be viewed below along with the major indices…

Sentiment and Contrary Opinion Charts #msg-9171686
































NOTE:


CORE: NXG, ENPIX, UJPIX, PRGNX, USPIX, €uro & ¥en

SPECULATIVE: DNDN, AGIX

SCALP TRADE:

SWING: GSX, picked up GEOI and CUP (sold JEQ, BGO and CEF)

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 attempt to identify trends and create a track record. I am not a day trader and invest mostly in funds or baskets of stocks, perform occasional swing trades and some scalps. Data presented may not be 100% accurate as I do make mistakes, so please perform your own due diligence.