Hey Bull-- Awesome picks on 1/1 of last year:HSGFX, PCRDX, PRPFX, QRAAX, RSNRX and TAVIX. I own several. Did you cash these out at some point? I don't see them on the current post.
OVERVIEW: What a start to the New Year… It seemed many were expecting the markets to fall off a cliff, but I did have my doubts and expressed as much in last weeks update: Being as we started the Christmas rally earlier than expected and did not finish out with a bang of sorts, I am cautiously looking for some strength to be exerted in January. I cannot say one-way or the other if that strength will be in the 1st half or latter half of January, but I am only being open to anything. We are in extraordinary times and while the majors did not go out with a bang, I suspect Sir Alan Greenspan will. I do not believe his majesty will let this market fall on the last minutes of his watch. He may very well pump the presses like never before, might even fry ‘em in the process. And that is exactly what we got, the Fed pump at full tilt boogie. Opening day Jan 3rd saw an influx of $60B in Temp Open Market Operations. I believe that was the most we’ve seen in one day since 9/11 and for the week $175B in just 4 days! That’s a lot of coin… Also we see that NYSE Program Trading exceeded 60% (63.5% to be exact) and as I have mentioned before, when the robots takeover and boost this number over the 50% range it usually means there was buying, not selling. Unfortunately, this data has a one-week lag time and we only know now in hindsight just exactly what took place. Soon M3 will be buried and we will have to come up with some creative calculations to figure out just what it is the Fed is up to. As for the major averages, we saw new highs across the board except for that pesky DJIA. While it looks poised to set a new high, it will have to stand the test of time throughout 2006. That goes for the rest of the majors as well as they put in higher highs… Then we seem to have a reoccurring incident that I touched on back in December and that is that most everything is going up in unison. Besides the majors -- Oil, Gold, CRB and Utilities are all in up trends with the laggards being the U$D and Transports. Also as mentioned before, this type of activity is generally short lived, it is counterintuitive for everything to go up together for any sustained length of time, so who (or more appropriately “what”) blinks first?
The CoT data has yet to be updated (at least the data I follow) so it will be interesting to see where it stands once the update is released. You can go here to view the CoT data graphs #msg-7253670 -- Equity Fund flows as detailed by AMG Data Services reported that excluding ETF activity, Equity funds reported net cash inflows totaling $550M in the week ended January 4 as Domestic funds reported net outflows totaling -$931M and Non-domestic funds reported net inflows of $1.481B. Excluding ETF activity, International funds reported net cash inflows of $1.445B to all developed and emerging regions. The largest ETF Inflows were $1.369B to the Select Sector SPDRs Energy Fund and the largest ETF Outflows were -$777M from the iShares Russell 2000 Index fund. The AMG report can viewed in full at #msg-9158816 … As for Oil, Gold and the U$D, we saw Feb. Oil jump over $64bbl (it seems in just a matter of days we are nearing $70), Gold went to $538 and the U$D got thumped to 88.6. The CRB is at 339 with April Futes posted as $354. Treasury yields have been falling as we have 2yrs @ 4.36%, 5yrs @ 4.32%, 10yrs @ 4.38%, 20yrs @ 4.63% and 30yrs @ 4.57% (one warped yield curve)…
ECONOMIC #’s: A busier week than last economically speaking and it does not seem to matter that these numbers stink, more data moves the markets up…
Holiday Retail Sales – Dec = Retailers Post Modest Sales Gains #msg-9141332
Construction Spending – Nov = 0.2% vs 0.8% expected 0.7% #msg-9105325
ISM Index – Dec = 54.2 vs 58.1 expected 57.5 #msg-9105356
ISM Services – Dec = 59.8 vs 58.5 expected 59.0 #msg-9141271
Auto/Truck Sales – Dec = GM –10.0%, Ford -8.7%, Chrysler –5.0% #msg-9122732
Factory Orders – Dec = 2.5% vs 1.7% expected 2.4% #msg-9122743
MBA Mortgage Applications – 12/31 = Down –1.5%, Refi’s rose +8.3%% #msg-9141316
Oil Inventories – 12/31 as reported by the DoE / API (could not find API #’s this week): (Crude bbls= -1.0M / -1.8M) (Gas bbls = +1.4M / +2.8M) (Distillates bbls = +2.1M / +3.9M) #msg-9141296
Initial Claims – week of 12/31 = 322K vs 318K expected 322K #msg-9141254
Average Workweek – Dec = 33.7 vs 33.8 expected 33.7 Hourly Earnings – Dec = 0.3% vs 0.1% expected 0.2% Nonfarm Payrolls – Dec = 108K vs 305K expected 200K Unemployment Rate – Dec = 4.9% vs 5.0% expected 5.0% #msg-9158415
Bearish folks such as myself tend to be repetitive. It’s not of a choosing, it is the circumstances at hand. FWIW, I am bullish on Oil, Energy, Gold, Commodities, Utilities and Natural Resources. It’s not so much that I think the world is coming to an end or that the sky is falling, I just have genuine concerns about the debts, deficits, imbalances, bubbles and high cost of living (to name a few). I also have genuine concerns about a very expensive war (in terms of life and money), about outsourcing, illegal immigration, lack of job growth and the economy in general. The facts bare me out, I am not making these things up. These are for real, I should be concerned and so should you…
Anyway I thought it would be fun to repeat some of the same old things I always hear and wonder if/when they will come to fruition:
1) This time it’s different 2) Capital expenditures will rise 3) Consumer to corporate hand off 4) Energy prices remain contained 5) High oil prices don’t matter 6) Inverted yield curve does not matter 7) Large Cap will outperform Small Cap 8) The economy is strong and so is job growth 9) The enemy is in a last ditch effort 10) Slowing in housing is a return to normalcy 11) Engineering a soft landing 12) Fed is about done raising rates 13) China growth is slowing 14) We believe in a strong dollar policy 15) We need to be less dependant on foreign oil 16) How goes January, so goes the year
Something I would like to briefly touch on is #16, how the 1st week of January or its variant the month of January goes, so goes the market. I don’t know if you have noticed, but last year and the year before that we started the year with a precipitous drop only to finish out the year higher than where we started.
This year we are starting the year in an up trend and finished out the year _____________ (to be filled in)…
Anyway, while there are plenty more to add to my list, lets leave it at that. These unlike my concerns are based on speculation, not fact and yet we hear them over and over and over again and nobody utters a sound about it. So if you are going to hear something over and over again that may have an impact on your well being, wouldn't you rather hear facts than speculation?
One last note, a must read: Muckraker Report #msg-9122948
And You Think Bears Are Repetitive?…
WHAT CAN WE EXPECT NOW?: This coming week should be interesting, but will get more interesting around Ops Expiry and even more so when the FOMC meets at the end of the month. For the next few weeks the current trends will most likely remain in place, choppy to sideways with an upward bias until the Span man’s final meeting on the 31st. As we move into the coming week I am seeing way too many bullish messages on the boards these days, it makes me pause… A great barometer these boards are for overly bullish or overly bearish sentiment. Don’t get me wrong, I believe people have good reason to celebrate. After all we just had one heck of a week, but I would like to caution those with rose-colored shades. We are as overbought as we were oversold prior to this current run. Stocks above their respective 200DMA’s have gone off the hook, the EPC dipped into the 4’s again and quite a trend is developing there. Total PC hit the 6’s and I see a number of OTM calls begging to get crushed. We are not immune to whiplash and while I still feel we have a January effect in place, it is so unlike the January effect of years past. We are not moving up on anything more than a liquidity pump. If you remember nothing else, remember this; what the Fed giveth, the Fed can taketh away. The Fed pump will most likely continue throughout January and the market begins to sag, the Fed will probably goose it. How long that lasts and how deep the inkwells run are my queries. It is difficult for me to put my trust in the Fed’s hands after what we have witnessed in the past. I guess all I am saying here is be very very careful. Optimism is running just a little too high, after a 4 day run people are speaking of DJIA 12000, SPX 1400 and COMP 2800 -- easy there people, the year is young. I find it amusing when people proclaim that the housing market is dead, therefore equity has to find its way into the stock market. Really? What is everyone going to do, sell their home and plunk it down on stocks? What I find even more amusing is the assumption that money (wherever it may come from) has nowhere to go except into the US stock market. For those who have not been paying attention, a money market account is currently returning the same as treasury yields (in excess of 4%, more than 5% overseas). International or non-domestic funds have been receiving an influx of investment for several years now (foreign investors send their cash here and we send ours there, what’s wrong with this picture?) Currency markets, commodities and hard assets have been great investments. There are plenty of places to park cash and get a nice return other than US stocks and with less risk mind you… As for the U$D, Gold and Oil, we most likely continue to follow the path of least resistance. I believe that goes for monetary policy as well. The Fed won’t rock the boat and for whatever reason, I do not believe the Fed is close to done (a pause maybe, but done? I wouldn’t count on it). Gold is still a wildcard and while I had initially thought the Gold run had climaxed at $540, I may need to rethink this issue. I certainly did not expect the U$D to weaken so much so quickly, but until $540 is taken with authority I remain cautiously optimistic on the yellow stuff. Oil is back and here we are at almost $65bbl. I think it can be safely said that the upside runs are much more powerful than the down trends. What took months to decline has been nearly regained in a matter weeks. As mentioned in the Dec 18th weekly update: Oil has been hanging around in the $59 - $60bbl range and just in case you had not noticed, gas prices are starting to increase. I was able to buy Reg unleaded at a low of $2.11 in my neighborhood and since then have seen prices move up to $2.15 - $2.19 range. This should not surprise anyone as Christmas shopping is about done. Before you know it the New Year kicks in and so does winter (officially speaking). Oil will most likely base in this area and eventually move on to new highs, I believe now or at the least very soon is the time to position ones self in this sector while the opportunity presents itself. since this writing, prices for Reg unleaded are now between $2.19 - $2.25 in my area…
Technically Speaking, Bullish Advisors are at 55.7% with Bearish Advisors at 23.7%, still wildly optimistic but off the 60%+ bullish sentiment last week. The VIX edged down to 11 and VXN moved in the opposite direction up to 15. The CBOE EPC Ratio ended the week at .583 with a 21DMA of .575 and TPC ratio at .681 with a 21DMA of .786. The RSI 5-Days are Overbought across the board. 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 SRPIX, ENPIX
SPECULATIVE: DNDN
SCALP TRADE: Sold AAPL, LSI and SILC
SWING: USPIX, €uro & ¥en Currency
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 through the positions that I hold. I am not a day trader and invest mostly in funds or baskets of stocks, perform occasional swing trades and have recently gotten into scalping. Data presented may not be 100% accurate as I do make mistakes, so please perform your own due diligence and verification.
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