OVERVIEW: It’s that time once again to review the past week and look into the next. As you can see by the following chart, the markets were rather docile into month end and then picked up as of Dec 1st being led by the COMP and R2k which finally put in a new high while the SPX and the DJIA finished slightly lower for the week. What I find rather intriguing is that the Indices, Oil, U$D and Gold all exemplify strength simultaneously. At the same time RTH, BKX, Transports and a few canaries such as GE, IBM and VZ seem to be painting a slightly different picture. Also of concern are the 2-yrs and 5-yrs Treasury spreads, which have been flirting with inversion. Top it all off with a build in housing inventories and a declining BDI and an economic slowdown appears to be a given at this point. I will refrain from using the “R” word for the simple reason that the powers that be can and will do anything and everything in their power to support their agenda whatever that “agenda” may be. Let’s face it, we are small fish in a large pond. What transpires on a daily basis is out of our hands, but being on the right side is not. The wonderful thing about the markets is that there are many options on how to approach a trade or investment and so many vehicles in which to execute them. I say pick what you feel most comfortable with and run with it. While my outlook may not pertain to your style of trading, I just try to put things in an intermediate to medium term perspective. I guess that is because I am not into sweating the little things, my style is not about that. I do not need to catch every wiggle of every trading day nor do I need to catch absolute tops or bottoms, just the meat in the middle is fine with me. Anyway, back to the week at hand. The CoT data reveals that open interest remains relatively low on the majors, but has reversed direction on Gold and Oil. Some small short Commercial positions seem to be getting taken up on the majors with the exception of the DJIA although Commercial Longs have been pared back there while Gold has a ton of Commercial Shorts and Large Spec Longs and Oil seeing just the opposite. All data can be viewed at #msg-7253670 -- Equity Fund flows as detailed by AMG Data Services reported net cash inflows totaling $3.674B ($1.744B xETF Activity) in the week ended November 30 with 61% ($2.254B) going to Domestic funds. Domestic Equity funds including ETF activity are reporting the 4th consecutive week of inflows for the 1st time since 7/20/05. International Equity funds reported net inflows of $1.284B ($516 Mil xETF’s) to all Emerging and Developed markets. Inflows are reported in the Technology sector for the 5th consecutive week, the 1st time this occurred since 11/15/2000. Inflows to the Growth and Income sector ($1.027B) are the largest since 1/7/98. Money Market funds reported net outflows of $13.311B. The full report can be viewed at #msg-8726785 -- As for the U$D, Gold and Oil -- the U$D continues to oscillate between 91-92 and finishing just below 92 while Gold continued higher to 23-yrs highs of $507 closing out the week at $503+ with Oil remaining above its 200DMA closing just below $60bbl at $59+. The CRB launched off of its 200DMA at 314 to close at 323+ with the 10-yrs and 30-yrs T-Note yields finding support at their 50DMA’s closing out at 4.519% and 4.717% respectively…
ECONOMIC #’s: A very busy week and a lot of strong data, but I would not get too caught up in the headlines because the data is deceiving to say the least. With that said, it is what the market reacts to so play along…
Nonfarm Payrolls – Nov = 215K vs 44K expected 210K Unemployment Rate – Nov 5.0% vs 5.0% expected 5.0% Average Workweek – Nov = 33.7 vs 33.8 expected 33.8 Hourly Earnings – Nov = 0.2% vs 0.6% expected 0.2 #msg-8726088
Construction Spending – Oct = 0.7% vs 0.2% expected 0.5% #msg-8711464
Personal Income – Oct = 0.4% vs 1.7% expected 0.5% Personal Spending – Oct = 0.2% vs 0.5% expected 0.2 #msg-8711432
Lower gas prices has been a welcome sight, but isn’t it ironic how they are lower just in time for the holiday season? I know many think it is just seasonality, but really isn’t it more than that? Oil is currently just shy of $60bbl and not too long ago when we were at that price per barrel, gas prices were more than they are today. Seasonality, huh?
Our full occupation in Iraq may come to an end sooner rather than later, but not for the reasons many think. There is a ton of pressure on the President to withdraw troops, the media is no longer shy about showing brutal war footage and public support has waned. BUT the real reason to withdraw troops will not be because of this, it will be to further propagate markets or keep the ball rolling if you will. If we rallied on a War that never should have been, what do you think will happen when we draw down?
GDP rose more than expected with the economy growing at a 4.3% clip last Qtr. Do you really buy into this number or the idea that Katrina, Rita and Wilma were good for our economy? The unemployment rate and nonfarm payrolls are estimates pulled out of the thin air and so is the GDP number. The global economy is built around the USA. We are addicted to the world's money and they are dependant upon our spending. This cannot end well...
President Bush is stepping up pressure on Congress to embrace his plan for a guest worker plan for foreigners while talking tough about illegal immigration and a need for secure U.S. borders. "Those who enter the country illegally break the law," Bush said Saturday in his weekly radio address. No kidding? Isn’t this the same guy that turned a blind eye to open borders by under-funding border patrol and inviting illegals into the country to take up low paying jobs? Too little too late…
In case you have not noticed, Congress is having a hard time passing bills these days. This from a majority in the House and Senate. The reason for this is that the Reps are not towing the party line due to elections coming up later in the New Year. Be aware that you are going to hear everything you want hear. Once reelected it will be back to business as usual. Say one thing and then do just the opposite. I hope people wise up…
Flu Pandemic, Hugo Chavez, Gold Price Manipulation, Fidel Castro, 9/11, Bankruptcy Law Changes, Easy Money, Kim Jong Il, Open Borders, Redrawn Districts, Social Security, War, Medicare, Middle Class Squeeze, Oil, Drugs, Iran, Tax Proposals, Outsourcing, the list goes on and on. A lot of things in this world are not what they seem. Just do a Google search for “Bilderberger’s” and begin to read. The agenda is clear and the means are plausible. If you open your mind and attempt to think out of the box you may find that everything you thought were just conspiracy theories are much more than that...
Can You Say Propaganda?…
WHAT CAN WE EXPECT NOW?: More of the same appears to be in order although a lot of positioning may take place prior to Options Expiry week, which is preceded by an FOMC meeting. While these are not due until the week after next, we may see some signs of alignment take place. As stated in last week’s update with which this post replies: Divergence are now visible on daily charts, not just the weeklies; market breadth continues to be subject to my suspicion and reeks of distribution, panic buying has materialized and we are clearly in overbought territory. Also of note are the many facets of the markets moving up simultaneously such as the U$D, Gold and the market indices making new highs with Oil beginning to reestablish itself. If I am not mistaken the last time we saw similar action a change of trend emerged. While we are still moving to the upside, we appear to be losing momentum. Possibly the markets are attempting to work off overbought conditions, but breadth is still questionable and the divergence remains. Some of these may be worked off, but let’s just say there are more than a few (McSum, BP%’s, MACD, CCI, Up/Down Vol:A/D, VIX/VXN, etc)... Bullish sentiment is heated and the EPC Ratio is in a downtrend that I suspect will soon see some extremes. So many mixed messages may lead to some cooling or chop and slop followed by range like activity. A top could be closer at hand than most believe, but whether it be through a liquidity push, geo-political events or just plain good ole jawboning and table pounding, one last surge is most likely still in the works. Who knows, the month is still young… As far as Oil, U$D and Gold – As mentioned in last week’s update, Oil appears to have found a bottom and I believe Oil continues to creep higher. The U$D most likely remains range bound and continues to oscillate in the 91-92 range although an attempt at 93 may be in the cards while Gold has taken out $500, but is getting a little long in the tooth, so a breather of sorts may be coming in here. If we are to continue higher we really need to see Gold take out $510 in the near future…
Technically speaking, Bullish Advisors are at 55.8% with Bearish Advisors at 21.1%. The VIX/VXN are in the 11’s & 13’s respectively and beginning to trend against the price action. The CBOE Equity P/C Ratio ended the week at .576 with a 21DMA of .579 and Total P/C ratio at .845 with a 21DMA of .846. The RSI 5-Days are barely Neutral on the DJIA and SPX with the COMP remaining Overbought. The PC ratios, VIX/VXN, $NASI Daily (Summation), $NAMO Daily (McClellan), NAHL Daily (Highs/Lows), $NAAD Daily (Advance/Decline), stocks above 200DMA and Bullish %'s all can be viewed below along with the major indices…
NOTE:
CORE Funds: QRAAX, RSNRX ,TAVIX, SRPIX *Opened a World Currency Account and looking to add Euro & Yen to my port…
Speculative Stocks; ANO
SWING: USPIX, PMPIX, GSX, AGIX, DNDN
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 while performing occasional swing trades. Data presented may not be 100% accurate as I do make mistakes from time to time.
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