OVERVIEW: This is one maniacal market… In the week before last we saw everything go down (except the U$D and Treasury yields), this week we saw everything go up (except the U$D and Treasury yields). Go figure… Not only did the majors go up, but they made new highs although the COMP/NDX failed to follow suit. We had some pretty miserable economic data; Account deficit set a new high as did the trade deficit, housing sales are on the decline and retail sales slowed. Add in the geo-political ills as the Iran chatter picked up this week followed by more chatter about the Fed being one and done on the rate hikes. I don’t know about you, but I am rather sick of this rate hike guessing game. Since everyone and their brother is chiming in, here is my assessment: it is my belief that as long as the trumped up data shows a strong economy, real estate prices and stocks remain overvalued, then the Fed will continue with rate hikes. And if that is not enough, inflation is real whether the data shows it or not. I will get further into this a little later. As for Gold, Oil and the U$D we saw Gold hold in a range as did Oil, but the U$D took a tumble. This current action for the Gold’s yellow and black are hanging mostly on what I perceive as the uncertainty surrounding the economic picture and world events. The U$D on the other hand may be weakening due to a variety of reasons, but most notably the 90 area has proven to be tough resistance. Who knows, things could change in the coming week. It seems every week lately has a hidden agenda of some sort. What will be the flavor of the week?
The CoT data has gotten quite interesting this week. The open interest has shot way up on the NDX as have Commercial Shorts and Long Spec Longs, very interesting indeed and something looks to be brewing. The SPX open interest has also picked up considerably as did the Commercial Short positions. The DJIA paints an entirely different picture, while open interest picked up, Commercial Shorts continue to decline. Gold open interest is falling off as are the Commercial Shorts and Large Spec Longs. Oil open interest has shot way up with Commercial Long positions continuing to fall off. This week’s data is quite a change from the usual we have seen over the last few months. Just what it portends is to be determined. You can go here to view the CoT data graphs #msg-9171642 -- Equity Fund flows much like the CoT data saw some extraordinary activity. Ss detailed by AMG Data Services, Equity funds reported inflows of $385M in the week ended March 15 with Non-domestic funds reporting inflows totaling $1.267B and Domestic funds reporting net cash outflows of -$882M. Excluding ETF activity, International Equity funds reported net cash inflows of $1.121 billion with inflows reported in all Emerging and Developed regions. ETF activity was the largest area of inflows where $2.783B went to the SPDR Trust Series 1 fund, $1.220B to the NASDAQ 100 Index Tracking Stock Fund and $0.787B to the iShares Russell 2000 Index fund. The largest ETF outflows were fairly minimal with -$272M from the iShares S&P Small Cap 600 Index fund. Money Market funds reported net outflows totaling -$15.998B. The full report can be viewed at #msg-10224454 Read about record inflows into emerging markets at #msg-10166712 -- As for Oil, Gold and the U$D, we saw Oil strengthen to $64bbl with Gold following suit and strengthening to $554 and the U$D having turned down off of 90 and finishing slightly below 89. The CRB recovered slightly and finished out at 325. Treasury yields fell as the spread continued to remain tighten with the yield curve flattening. The 2yrs@4.62%, 5yrs@4.61%, 10yrs@4.67%, 20yrs@4.70% and 30yrs@4.71%. The Yield Curve can be viewed at #msg-10110864 ...
ECONOMIC #’s: Ughh…
Account Deficit – Q4 = -$224.9B vs -$185.4B w/expectations of -$218.0B #msg-10162564
Retail Sales – Feb = -1.3% vs 2.9% w/expectations of -0.9%% Retail Sales (ex-autos) – Feb = -0.4% vs 2.6% w/expectations of -0.5% #msg-10162476
Import Prices (ex-oil) – Feb = -0.5% vs 0.3% w/expectations N/A Export Prices (ex-ag) – Feb = 0.1% vs 0.7% w/expectations N/A #msg-10182236
Business Inventories – Jan = 0.4% vs 0.8% w/expectations of 0.3% #msg-10162405
MBA Mortgage Applications – 3/10 declined -0.2%, Refi’s declined to -0.9% #msg-10186680
Oil Inventories – 3/10 as reported by the DoE and API Crude = DoE +4.8M bbls / API +2.2M bbls Gas = DoE -900K bbls / API +184K bbls Dist = DoE -3.9M bbls / API -2.5M bbls
NY Empire State Index – Mar = 31.2 vs 21.0 w/expectations of 19.0 #msg-10182250
Net Foreign Purchases – Jan = $66.0B vs $53.8B w/expectations N/A #msg-10182298
Building Permits – Feb = 2.145M vs 2.216M w/expectations of 2.113M Housing Starts – Feb = 2.120M vs 2.303M w/expectations of 2030M #msg-10203076
Core CPI – Feb = 0.1% vs 0.2% w/expectations of 0.2% CPI – Feb = 0.1% vs 0.7% w/expectations of 0.1% #msg-10202978
Initial Jobless Claims – 3/11 = 309K vs 304K w/expectations of 298K #msg-10203107
Philly Fed – Mar = 12.3 vs 15.4 w/expectations of 13.0 #msg-10203133
Capacity Utilization – Feb = 81.2% vs 80.8% w/expectations of 81.4% Industrial Production – Feb = 0.7% vs -0.3% w/expectations of 0.8% #msg-10217820
Michigan Sentiment – Mar = 86.7 vs 86.7 w/expectations of 88.0 #msg-10217923
I like many of you, have concerns. Of course I may be assuming too much, then again maybe not. Here’s a look through my moosehead eyes. Aside from the geo-political issues, economic fallacies abound. The biggest hoaxes are that of no inflation and the low unemployment rate. Inflation is not in check and jobs are not plentiful. Lets start with inflation… As we know, one can cut corners, watch for sales or go to discount outlets to make ends meet, but that doesn’t work for everything all of the time. Regardless of your situation, most everything is getting more expensive. It is not limited to just food and energy, the two must have items excluded from the CPI. But if you look around you can see that insurance, entertainment, schooling, clothing, travel, materials, etc, will cost you more. Here are some examples: $4 for a gallon of milk or juice. Clothes are not cheap unless you shop at Wal-Mart, Target, Kohl’s, etc. basically junk. If you want to buy yourself a nice pair of Levi’s, then you are talking $30-$40 for a pair of pants. Been to Home Depot lately? A decent sheet of plywood will run you about $35. How about dinner and a movie? We’re talking at least $50 unless you consider McDonald’s and a rental as dinner and a movie. Want to do a ballgame or a concert? How about $100 for tickets and parking and that’s before you ever enter the stadium or arena. I went to Vegas last year and could have seen Cirque De Sole’ at $150 per person, we passed… Traveling has gotten pretty expensive too. I went to L.A. for the day; my roundtrip ticket, rental car and food ran me $600 (and I live in CA). Health insurance depending on your age and health can run you anywhere from $200-$600 a month. Schooling is very expensive especially if you want to attend or send your child to a university. I think you can cover a year at Stanford for about $28,000. Just imagine what it would cost you to get a degree. One more thing about the inflation that we are supposedly not experiencing; If the powers that be were to admit there was inflation or to show it in their data, then we would get a Cost-Of Living-Adjustment or COLA. They do not want you or I to get a COLA, this is why the data has been reformulated. Minimum wage has not risen since 1998. Social Security, Workman’s Comp, Unemployment Insurance and pretty much any Government program would have to pay out more. This is why we are always being told inflation is tame and the numbers are fudged to back the claim, but isn’t it odd that the Fed is always fighting this non-existent inflation? That would be because there is inflation; you know it, I know it and they know it. But it will not be recognized by the powers because then they would not get to keep what is rightfully ours. Unemployment is the same game, different circumstances. It keeps wages in check or money out of our hands and in theirs. Ask yourself this; if jobs were so plentiful, would not supply and demand push wages up? Instead wages have been stagnant for years and so has the economic lie that we have been spoon fed and led to believe. I can tell you from first hand experience what the job market is like, it stinks! I am currently unemployed. I just finished up a consulting gig in January. I was there for 9 months. After a year they have to make you permanent. This is what a lot of companies do, they hire you on as a contractor, do not provide benefits or take out taxes (that is all up to you) and then cut you loose just before you reach a permanent status. If they really like you or need you, they will bring you back after nixing the contract and then do it all over again. Jobs offering permanent status aren't much better -- they want over qualified individuals at entry-level pay scales. If you can get an interview you are pretty lucky because there are usually 200 or more people applying for the very same position. Now I cannot speak for everyone, but as for myself, this is what I have experienced in the high tech field. Then those that already have jobs don’t have it much better. Of course you're getting a paycheck and benefits, but The stress is enormous and here's why; when someone is let go, you get new responsibilities (i.e. more work). Also when someone is let go they are rarely replaced. As more people are let go or leave those that are still there just get more and more work. So before you know it you are doing the job of many and to top it off you are not compensated. It is a very stressful situation, especially in a fast paced environment. This is what it is like and after speaking with others in different fields and it is the same for them too. Now I cannot say that it is this way across the board for all fields of employment, but by and large from what I have seen it is.
I am sick and tired of seeing our leaders do the least possible for the average American and all the while being on the take. When is the last time Congress didn’t get a raise? I am not talking about a 1-3% raise either, these people vote themselves a 20% raise like clockwork. Must be nice to be the employer and employee. Where is the sacrifice on the part of our leaders? I only see us doing the sacrificing. Cuts in aid, healthcare, education, pensions, you name it. If it benefits the middle or lower class, it will get cut. And here we are with the greatest debts and deficits in our history and what do we have to show for it? Our politicians, their special interest groups and corporate friends (i.e. coffers) are all on the take and at an unprecedented pace. What is worse is all the while we are told how wonderful things are while our country goes to hell in a hand basket. It is rendering our country weak and making us vulnerable to the unthinkable all in the name of money. Free market society? Please… Do not insult my intelligence. Nothing seems to matter to the elite as long as they get their pay offs. They are funneling phenomenal amounts of money out of the hands of those who deserve it, away from the infrastructure and into the hands of special interest and incompetence. It is all at the cost of our security and well being. Our freeways, energy grids, dams/water ways and environment are all being neglected. Our port security is weak, something like 5% of all containers entering the USA are inspected. That is scary, but it gets worse… How do you feel about our airports not passing security field tests? Airline screeners failed government bomb tests where federal investigators recently were able to carry materials needed to make a homemade bomb through security screening at 21 airports nationwide. How about that the Dept of Homeland Security who got an “F” report card on federal computer security? The Department of Health and Human Resources, which would manage the bird flu if it reaches our shores, also got an F, as did the Departments of Energy, Agriculture, Interior and Veterans Affairs. Joining them at the bottom was the State Department, which earned a “D+” in 2004 dropped to an “F” in 2005 and the Defense Department slid from a “D” in 2004 to an “F” for 2005. We are not getting better people, we are getting worse, much worse. Few if any of the 9/11 Commissions findings and recommendations have been implemented. So I have to ask you where is ALL this money we are spending going? Don’t tell me it is all going towards the war effort, I don’t believe that for one minute. We are talking hundreds of billions in deficits, none of which ever has been counted in the deficit numbers. So where is ALL this money going? I think you know, but maybe you don’t want to believe it. We live in a very corrupt society, more corrupt than we can imagine. You saw how the aftermath of Katrina was handled and I don’t think I should have to tell you that I feel as though we are far less safe today than PRIOR to 9/11.
Not only is America being sold out, but so are we the people…
WHAT CAN WE EXPECT NOW?: My sentiment for the most part still remains unchanged. As mentioned over the last few weeks, we have had volatile range bound activity with some bullish patterns on top of an odd backdrop of diverging indicators. The easiest way to sum up my thoughts is obscure activity and this statement that I made a couple of weeks back sums it up best: my sentiment has not changed much over the last couple of weeks. There is something taking place and I am not exactly sure what to make of it. My feeling is that the more we hang in this range, the more of a chance that we breakout. It is not often that we hang in a range and then decline. If memory serves me, we generally make a move up off of trendless ranges. As stated before, formations are somewhat bullish, but a diverging backdrop exists. Sooner or later those negative divergences will play out. The technical picture does not support a sustained move. As I said last week, I just assume see a blow off top followed by a decent correction to reset current conditions. I am leaning towards this scenario as becoming a reality. I do not have an actual timeframe other than “soon”. Again and as stated I still maintain the same outlook. I will say that I believe that the markets are setting up for a let down. The set-up being the “one and done” statements about Fed rate hikes once again making the rounds. I smell the scent of disappointment coming to those who take this to heart. Total P/C ratio also hit an extreme low in the 3’s last week. Also of note is some extreme insider selling taking place. Bottomline: The fall may very well come on the heels of the next Fed meeting. A couple of charts that I posted earlier in the week at #msg-10166724 and #msg-10166731 (shown below) are what I believe may prove to be of a major significance.
As for the U$D, Gold and Oil – These all pretty much speak for themselves and seemed to be tied into the geo-political events of the day. Last week the Iran chatter picked up and so did Oil and Gold while the U$D weakened. As of this moment Oil looks poised for $67bbl, Gold still looks like it could either way although I believe it could remain range bound with the U$D double topping at 90 and looking destined for 88. Of course and as mentioned many times before, these asset markets are difficult to decipher with so much going on geo-politically and geo-economically speaking. At worst I expect range bound volatility leaning toward a breakout for Oil and Gold.
Technically Speaking AAII sentiment as of 3/15 shows Bullish 46.55%, Bearish 32.76% and Neutral 20.69% and what is interesting here is that both Bullish and Bearish sentiment has increased… The VIX and VXN are 12 & 15 respectively with both still remaining in a slight uptrend off of the lower SL. The CBOE EPC Ratio ended the week at .61 and TPC ratio at .79. The RSI 5-Days are nearly Overbought on the COMP, Overbought on the R2k and extremely Overbought on the SPX and DJIA. The P/C ratios, VIX/VXN, Summation, McClellan, Highs/Lows, Advance/Decline, 200DMA stocks and Bullish %'s can all be viewed below along with the major indices…
CORE: Sold NXG, ENPIX, €uro & ¥en Still holding USPIX and a small position in PRGNX
SPECULATIVE: Sold DNDN, AGIX (I hated to do it, but I hope to reposition later) I feel these speculative plays will get the good news I anticipate…
SCALP TRADE:
SWING: Sold GSX, GEOI, CUP
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.
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