"When the technicians get excited, I get excited"

transcript from a TV program*:

On Wall Street today, we can tell you some good news. A powerful rally in the markets on this first day of March, a stronger than expected manufacturing report the catalyst. A number of bulls now feel vindicated after calling this rally for the past few weeks here on this broadcast.

(BEGIN VIDEO CLIP)

HARVEY EISEN, BEDFORD OAKS ADVISORS: The economy has bottomed. It will take the experts six months to realize -- I mean, last time I was on the show, we had some economists saying we're in a recession. That's the good news. Bad news is, hey, pal, we knew that a year ago. Now the recession's over. So that's the good news about the market.

MIKE HOLLAND, HOLLAND & CO.: We're in the middle of a turn. The recession is over. Cash flow's starting to get a little bit better. We've got a huge amount of money supply in the system. Demand hasn't started. It will start. It always does, as the night follows the day.

UNIDENTIFIED MALE: We believe the economy's improving, we believe earnings are rising sharply. We believe multiples will not increase, but there's less risk in the system because of these dynamics of earnings. Very powerful increases.

(END VIDEO CLIP)

DOBBS: Very powerful increase today indeed. The Dow tonight at its highest level in six months, up 262 points today, a gain of more than 2.5 percent for the session. The Nasdaq shot up 4 percent, breaking through 1,800. The broader market also participating in the rally, the S&P 500 up more than 2 percent today. We'll have of course a lot more on Wall Street later here in the broadcast.

DOBBS: Today's manufacturing reports show that for the first time in a year and a half manufacturing picked up. New orders for raw materials also the strongest in eight years. This is the latest in a series of reports showing the economy pulling out of recession. Kathleen Hays has the report.


BRUCE KASMAN, MERRILL LYNCH: The growth is going to come as firms shift from being enormously pessimistic, cutting back on production, cutting back on capital spending plans, bringing them to a more normal level. That will get you a lift on growth, which may not feel like it's a major movement up in terms of final demand.

(END VIDEO CLIP)

HAYS: The National Association of Manufacturers is looking for 2 percent growth in output this year, half of '91 when manufacturing grew 4 percent, and past recessions, when it grew 6 percent. Very important sector, Lou. Manufacturing is less than 15 percent of the labor force, but 80 percent of the job losses came from there, 1.6 million jobs. As this turns, this is going to be so important, the economists are hoping, in terms of getting the jobs going again and get the recovery rolling.

DOBBS: We need good news across the board.

HAYS: Well, you know, this was very surprising to people to see it not just turn up, but turn up as much as it did. It really feels to a lot of people like something's starting to happen.

DOBBS: Good. Good. Kathleen Hays, as always, thank you.

Well, my next guest says that rebound in manufacturing helped to set a positive tone for the markets. And for some insight, we're joined now by Hugh Johnson, the chief investment officer at First Albany. Hugh, good to have you here.

HUGH JOHNSON, FIRST ALBANY: Nice to be with you, Lou.

DOBBS: That rally felt pretty good, didn't it?

JOHNSON: This was a great rally. It's not just the stock market went up, but the bond market went down, which is what happens when investors start to get more confident. And also, you know, you saw investors migrating to the so-called bull market sectors. They were buying technology, telecommunications, consumer cyclicals and sort of staying away from the bear market sectors like utilities, health care and consumer staples. So there were real strong messages from this market today that the bull market has resumed.

DOBBS: And this bull market has resumed, and what will it look like in quantitative terms? How much can we expect the Dow Jones Industrials and the Nasdaq then in this bull market this year to rise in percentage terms?

JOHNSON: Well, I think, you know, overall, whether we're looking at this year or the next couple of years, we're talking about very modest returns from the markets, say, maybe in 8 percent to 10 percent. And that's true whether we're looking at the broader market, the S&P or even at Nasdaq.

But if you're pretty good on your timing, that is if the market becomes as undervalued as I believe it did, say, at the beginning of this week or last week, you actually can enhance your return. So you've got to make a lot of good decisions, one of them being entry points. When the market gets undervalued, you have to take advantage of it, and I think it's still a little bit on the undervalued side.

DOBBS: So you would recommend investors to go in now and buy, overall talking broadly about the market. What specifically would you recommend they buy?

JOHNSON: Well, I think you buy the bull market sectors. You start with consumer cyclicals, companies like Target, Harley Davidson and Home Depot. The industrial sector is one that does well in the initial stages of a bull market, companies like United Technologies. And technology itself is always a leader in a bull market. You worry a little bit about the priciness of that sector, but companies like IBM and Microsoft, make sure you diversify, but buy those bull market sectors. They're likely to do well.


DOBBS: When the technicians get excited, I get excited.

(LAUGHTER)

HOPKINS: If you look at the charts, it looks good.

DOBBS: Terrific. Christine Romans, Jan Hopkins, thanks very much. And your forecast that the market will be up how much over the next year?

*LOU DOBBS MONEYLINE
Aired March 1, 2002 - 18:00 ET

5 Minute Charts -- QQQQ, EEM, SPY, IWM, XLF

in the newsletter I intend to make some comment about the short term price formations in the Stock Markt, but I don't want to overload the report with too many charts, so I am posting these 5 minute charts of some of the major index ETFs here on the blog, that way my subscribers have easy access to them.

if you want my analysis of the major markets, please do subscribe to my newsletter. if you just like to look at charts on your own, sign up for StockCharts.com. I think if you give them my email address as a referrer I get an extra free month or something. trendandvalue@gmail.com

note from a subscriber

Guess you’re going out on the town tonite?? Beers all around??

Good call on the PM shorts. Carried some overnight into this morning’s open and did what I should-took profits!

Uno mas cerveza, por favor!

once my clients master the art of timing the metals, we'll start in on the Spanish lessons.

update: client responds:

Ha! I'll have you know my Spanish is from the best sources--spaghetti
westerns!

spot Silver -- daily chart with plastic speedlines

Bullidex since 1996

as regular readers Know, one of my favorite indicators is the Bullidex, devised by Chuck at Smoking Securities.

now Chuck does a great job analyzing his creation, and I recommend reading the SS blog for the latest updates (here's the most recent). but this afternoon I wanted to get a long term picture of the Bullidex compared to the actual price movements of the Stock Markt. it occurred to me though that the methodology of the VIX was changed in September 2003 to include the entire S&P 500. before then the VIX measured volatility of just the S&P 100. but luckily the old VIX is still calculated under the ticker VXO. so I have, in the interest of continuity, substituted VXO for VIX, and BPOEX for BPSPX, for a Bullidex of $BPOEX:$VXO instead of $BPSPX:$VIX.

here is a chart of the 'legacy' Bullidex (blue area) since 1996. the OEX is overlaid (green dashed line).



(click to enlarge)

and below is the indicator with OEX overlay for every calander year, starting with 1996.

quote of the day

the "China as an ugly hybrid of Japan and Brazil" meme is gaining some traction outside of the Minsky/Macro Man/Pettis underworld of Austrian economics.

SAFE investment strategies

I find myself linking to IKN again today.

7/25/09
Good read on China and copper

in the post Otto links to the latest John Mauldin article which deals with China, the US, respective growth prospects, and so on.

now I think I subscribe to Mauldin's freeletter, but it gets delivered to another email I rarely check, because, well, that box is chalk full of eletters and the like that I just can't be bothered to read with any regularity.

so the talk is China. Mauldin rightly sees this year's forced credit expansion leads to speculative bubbles within the Chinese economy. but then he says that it is very smart for the Chinese to spend their official reserves to buy up natural resource assets beyond the Middle Kingdom.

so the former is reckless bubble blowing, while the other is sound investing?

prediction: China's (oh the absurdity of referring to 1.3 billion people in the singular, but this whole discussion is really just a reflection of the absurdity of the Nation State per se) investment of accumulated foreign exchange reserves for this 'going out strategy' will come to an abrupt halt the moment the domestic credit expansion unravels.

the bromide has been that China accumulated those reserves by selling Americans 'real stuff' in exchange for 'worthless paper'. but which is worthless at this point, the US paper, or the desechables with which China has blanketed the world? every other tienda here in Quito is crammed full of worthless Chinese Shit, and I would guess the situation is similar in most other cities of the world. so if we invert the bromide to say that China has been accumulating valuable paper in exchange for dumping worthless shit on the world, then perhaps China hasn't been so foolish after all.

but within China, who has benefited? Chinese manufacturers are up to their eyeballs in debt (and likely massive inventory overhang). Chinese banks are up to their eyeballs in soon to be NPLs (and these likely collateralized by worthless inventories of worthless shit and near worthless factories and equipment from which all the shit is expelled), while all the while the Official elite, through SAFE (or as I like to call it, the 'Communist Party Pension Plan'), have amassed an enormous amount of wealth.

when push comes to shove, these reserves will be used to keep the Chinese ruling class the, ah, Chinese ruling class. if you want to bet on where these reserves get deployed, as Mauldin purposes, my suggestion is manufacturers of riot gear. a second idea is discrete off-shore banking institutions. the real money will be made in the laundering of the $2 odd trillion.

ILF:FXI ratio

I am doing some work on ILF (LatAm ETF) for the next newsletter, and on a whim I decided to see how the fund was performing compared to FXI (China). nice trianglie formation. the eventual breakout might be a decent trade if yer into trading more exotic ratios.

any guess which way it goes? I'll pass, seems like trying to guess which flavor ice cream will melt fastest..

Middle Ratios

here are the major ratios derived from the Middle Sequence. just posting this for my own reference.

6.761369

4.613470

3.147899

2.147899

1.465571 ('M')

0.6823278 ('m')

0.4655712

0.3176722

0.2167566

0.1478990

quote of the day

History teaches that history does not teach anything.

MSFT disappoints

surprise, surprise.

from the Barron's Tech Trader blog:

Sales fell 17%, year over year, to $13.1 billion, missing the average $14.37 billion estimate by over a billion dollars. Profit per share was 36 cents, in line with estimates. The 36-cent result excludes 2-cents worth of capitalized R&D expense for Windows 7. Including that 2 cents, Microsoft actually missed estimates.

best comment on the post:

You’re very close MSFT. Just 2 or 3 more commercials away from turning this ship around.
Comment by sg, California - July 24, 2009 at 2:01 am

and here is the comment I made about MSFT in Tuesday morning's newsletter:

Seems to be trying to break some resistance here, and is testing the pre-panic levels of last year. Not a bad feat for a stock with no growth prospects of its own, whatever money it makes will be on the good graces of the economy at large. Anybody holding this thing since September ought to be pretty anxious to get their money back about now. I don't see any reason for this to get above 25 any time soon. 26, max.

The IKN Weekly: A free sample

Otto is giving away a sample of the Best Darn Newsletter This Side Of The Rio Grande, The IKN Weekly. click the following link to view the free offer:

7/23/09
The IKN Weekly: A free sample

(you can also just jump straight to the download page by clicking here.)

I myself read every issue of the IKN Weekly. this alone is a huge endorsement, as I do not read much of anything else on a regular basis. sure, I am lucky enough to get a free subscription and in exchange I send Otto my newsletter, but I can honestly say that Otto's newsletter is one of the most informative investment analysis services I have ever come across.

and for me it has also been very educational. Otto is a top notch fundamental analyst, which has always been an aspect of investments to which I never devoted much effort. but I feel like I'm getting lessons from a pro now.

in addition to fundamental analysis and well-considered (read 'profitable') stock picks, IKN Weekly also features Political and Economic intelligence specific to Latin America. if you want to make money in this part of the world, you have to Know the environment. and I doubt anyone in the investment arena has a better understanding of Latin America than Otto. those who do Know a thing or two about these parts are likely IKN readers.

So it is your lucky day, Mr Investor. click here to download the free issue of the IKN Weekly. then go to the Inca Kola News blog to sign up for the newsletter. it's priced at a very reasonable $25 a month.

http://incakolanews.blogspot.com/

Recovering Bull

in this morning's Trend & Value Letter I had a laugh at the supposed V-shaped recovery. Mish has talked about an L-shaped one. this afternoon, Otto out-does everybody with this post:

7/23/09
Dow Jones and Sesame Street

so I've been thinking, what's my preferred recovery symbol? as far letters go, I think a lowercase 'h' best approximates reality. but if we can get away from the alphabet, I'd go with the 'Lightening Bolt' recovery.

afternoon trendline -- GOOG -- CMF(114)

random chart for you this afternoon.

Forthcoming -- Chart Analysis of the S&P Indexes ($OEX, $SPX, $MID, $SML, $SPSUPX, $SPCMI)

the next Trend & Value Letter will feature analysis of the following Standard & Poors US Stock Market indexes:

S&P 100
S&P 500
S&P 400
S&P 600
S&P 1500
S&P Completion Index

the report should be completed and emailed to subscribers sometime before the market opens tomorrow morning. if you are not a subscriber yet, I think this would be a good issue with which to get on board. (remember, I'm the kid that predicted 666 on the S&P 500 way back on 11/08/08). subscription rates are posted at the top of the blog, and right underneath is the payment button to sign up.

you can also buy this S&P report à la carte for only $5.00. email trendandvalue@gmail.com and I'll send you a payment request.

dow theory buy july 2009 -- search of the day

someone from Holland arrived at Trend & Value via the following google query,

dow theory buy july 2009

this brought the reader to a post I wrote last week pointing out another minor non-confirmation between the Industrials and the Transports:

Monday, July 13, 2009
a bit of Dow Theory

well today the Industrials hit a new high for the rally, but without a corresponding new high for the Transports.



now this is the third non-confirmation since the beginning June. call them minor non-confirmations if you want, but the previous two certainly indicated something was awry in each case. we should give the Transports a little time to catch up here, but as it stands I don't see anything that constitutes a 'buy' signal that the googler seems to be looking for.

furthermore, I do not see a buy signal of any consequence coming along until both averages surpass the highs recorded at the beginning of the year, 3737 for the Transports and 9088 for the Industrials.

end of day chart survey -- GLD, SLV, GDX, XLK, DIA:GLD

just getting back into the swing of things after a relaxing (extended) weekend at Baños de Agua Santa. (see previous post for some pictures.)

here's a few charts I found notable today.



GLD, the Gold ETF up nicely, though I notice that volume on this most recent rally has been less than impressive. but the price is now above all the moving averages, which has to be considered bullish until the situation reverses.



SLV, the Silver ETF up as well. volume hasn't picked up here either. furthermore the fund is still caught in the middle of the moving average web. the price would have to close above 14 now to become bullish again in that regard.



GDX, the Gold Stocks ETF, up big. but here too volume was lackluster. when something goes straight up on light volume it always makes me suspicious. what about you? price is testing the high of bounce previous to this, as well as the .57 price retracement. good potential for resistance here, but if not here then the .755 speedline or price retracement line should prove very hard to surpass.



XLK, the Tech sector ETF, is hitting new highs, on strong volume no less. but, notice the oversquare day on the equivolume chart. increased volume is generally a good thing, expect when it is not accompanied by proportional movement in the price. caveat emptor.



finally, an hourly chart of the DIA:GLD ratio (proxy for the Dow:Gold ratio). backed off a bit today. but I tell you, if that resistance is ever cleared, watch out. . .

our trip to Baños

Verleger Predicts $20 Oil This Year on ‘Devastating’ Crude Glut -- bloomberg

July 16 (Bloomberg) -- Crude oil will collapse to $20 a barrel this year as the recession takes a deeper toll on fuel demand, according to academic and former U.S. government adviser Philip Verleger.

A crude surplus of 100 million barrels will accumulate by the end of the year, straining global storage capacity and sending prices to a seven-year low, said Verleger, who correctly predicted in 2007 that prices were set to exceed $100. Supply is outpacing demand by about 1 million barrels a day, he said.

the entire article is worth a read. click here for the rest.

My target for later this year (which I first made in March) is for $29 basis December 2009 NYMEX. $20 seems a little low. near month futures price of $24.65 for WTI sounds more realistic.

the only problem I have is that I am so used to using bloomberg headlines as contrary indicators that this has me a little suspicious. not enough for me to change my outlook, but maybe enough to keep me on my toes.

May 6, 2009 -- now on Old Reports page (Gold, Silver, AUD/NZD, Copper, FCX)

another issue has been added to the archives. click the following link to view the PDF. the text of the letter is below. I am making another mention of FCX in this morning's letter, so I am posting this previous one as reference.

Trend and Value Letter 05_06_2009.pdf

-----------------------------------
Wednesday, May 6, 2009

This issue includes commentary on Gold and Silver, AUD/NZD, as well as a section on Copper and FCX

The Bimetallic Ratio of Gold to Silver last year rose from a low of 47.56 to a high of 84.38 (based on closing prices). That was a gain of nearly 37 points. As the Ratio started to decline sharply early this year I anticipated that it would retrace about 16 points of that move, or 43 percent. So in February I predicted that the Ratio would bottom at 68.54. And quite unbelievably, the ratio hit a low of 68.45 on February 18. Then it stopped dropping. That low held for nearly 12 weeks.

. . .Until yesterday. The Ratio has dropped over six points in the last two weeks to close yesterday at 67.25, 1.2 points below the previous support. A couple of weeks ago I was talking about how what looks like a great call can quickly turn into a horrible call. Case. In. Point.

So. . .What now? Well, we will have to keep our eyes peeled for the next support, because I, for one, am not prepared to view this action as the confirmation of a major downtrend for the Ratio. I Know that more than one my readers will strongly disagree with me on this. Those who have contested my bearish analysis of Silver the last couple months have been – at least recently – more in the right than I, and so I hope you have profited from your conviction during this latest comeback.

But I just have serious doubts that Silver can hold up here. Sure it could go a little bit higher still, but Gold is still having trouble maintaining the 900 mark and I just don't see hope of a sustained advance in Silver with such pressure bearing down on Gold. Of course, if Gold can gain traction and climb out of this mire, then that's another story. But as it stands, the non-confirmation between Gold and Silver is now pretty blatant. Just take a look at the short-term point and figure charts of GLD and SLV on the next page.
What was it I said about Silver a week or two ago? Something like,

The risk for Silver is that it comes to be regarded as Just Another Commodity. . .

Sure I wrote that in anticipation of the metal dropping even more, when in fact it did precisely the opposite and rallied strongly, but the whether up or down, it looks like Silver's fortunes are again tied to the manic-depressive Commodities Complex.

In any case, the pattern on the SLV graph on the left could well be an ABC counter-trend thing. Maybe I'm putting too much emphasis on chart patterns these days, but I am not sure what other tools to use at the moment.

The Commitment of Traders data indicate that the Silver has room to move higher, but I'm not sure how reliable the old way of analysing COT will be moving forward. I'll write about that more another time...

By my reckoning, GLD needs to get back above 90 (spot Gold ~925) to regain a truly bullish trend formation. As I write this it is about 12:30 AM and spot Gold has recaptured the 900 level, with a bid right about 903. The bullish scenario would have Gold break above 925ish this week and head to the next resistance that I see around 955. Beyond that, a break above 960 in the short-term would put the metal in a position to target 1000 once more. To repeat, that is the bullish scenario, one that I don't personally put a lot of stock in at the moment. But it remains in the realm of possibility, so I mention the parameters anyway.

I put a bunch of charts of the Gold-Silver Ratio up on the blog earlier, with the intention of arriving at a new target for the Ratio, but I am going to leave that analysis aside for now and just see what happens the next few days. Rest assured there will be plenty more Bimetallic Analysis in the near future. For the rest of this morning though I would like to touch on a couple other markets.


AUD/NZD Exchange Rate

Double top?


That's the word I'm hearing on the street. Personally I am not certain that the potential double top will hold, though I 'hope' that it does, as a violation of that resistance at this point could well indicate some problems for the New Zealand Dollar. But I am going to venture out on a limb here and project that AUD/NZD will decline to 1.23 or 1.24 pretty soon. This isn't a suggestion to short the pair directly, but if you are looking to add either or both currencies to your portfolio you might get more bang for your buck upping your NZD allocation relative to AUD, at least in the short-term.

Some of you have been requesting more detailed analysis of the New Zealand Dollar and even want me to add NZD to the list of Equal-Weight Currency Indexes at the bottom of letters.

I'm not going to make an NZD Index now for a couple reasons. One, due to the method of construction of the Indexes, I would have to readjust all the other Indexes to include an NZD weighting in each. And aside from this and other logistical considerations, adding another currency to the mix would totally skew the year-to-date returns of the Indexes. And the whole purpose of the Indexes is to track returns over the course of the year.

Besides the seven currencies I have Indexes for were specifically chosen because of their status as 'major' currencies. Though I trade other currencies like NZD and NOK, the fact is that the currencies on the Indexes are the major. Plus, due to our perceptual and epistemological limitations as humans, seven is about the maximum number of units that our minds can keep track of at once. So perhaps it is not arbitrary that there are seven major currencies and not 10 or 13 or whatever.

If you want to track the performance of NZD my suggestion is to use the AUD Index as your basis and then adjust for NZD's performance relative to AUD to approximate how NZD is fairing.

As to the requests I have been receiving for more in depth analysis of the internals of the New Zealand economy and influence these factors might have on the Kiwi Dollar, I should point out that my approach to the markets is to catch the scent of broad trends on the horizon that are hopefully under-appreciated by the majority of market participants. I try to isolate what are or what will be underlying motivations in the markets, and when I arrive at sufficient evidence that these not yet apparent tendencies can manifest into price trends worth exploiting then I run with it.

What I do not do is dissect every little detail. For one, I don't have time, and two, that kind of shit is pretty borinng. And three, most of it doesn't matter. What matters are prices, and relative prices. The price trends in one market create the so-called fundamentals in another market.
That all said, I will publish more 'insight' on New Zealand when it occurs to me.


Copper, FCX

Several readers are interested in the prospects for Copper and stocks companies that mine Copper.

First of all, the only people buying Copper above 150 have been speculators. Either long side specs or short covering from specs who overstayed their welcome. You can see on both the candlestick chart and the point and figure that near-month Copper went completely parabolic. Now it's bouncing around as it decides whether to really have a go and break above the 200 day moving average.

The all time high for near-month Copper futures on the Comex was recorded just about a year ago (May 9, 2008) at 4.27. The very low price at the end of 2008 was 1.25, for a bear market range of 3.02. This range gives us the following Plastic retracement targets: 1.99, 2.23, 2.55, 2.97, 3.53.

The second figure is pretty interesting, as 2.235 was the high price for near-month futures last month.* Taking this into account and also looking at the subsequent price action the last few weeks, there seems to be a fair chance that the top is in for Copper. At the very least I would expect the price to swing back and forth in the plus or minus $2.00 range for a while until it decides where to go.

If for some reason Copper prices take off again, huge supply should be on offer beginning in the high 2.30s. 2.38 was the low in early 2007, 2.41 would make a .382 retracement, and then there is the .43 target at 2.55, which currently coincides with the 265 day moving average.

To the downside, some informed people like Otto Rock are looking for 1.70, though I don't see any reason why 1.50 couldn't turn up again. Hell, if my secondary deflation thesis plays out, Copper prices will most likely hit a new low below 1.25.

Speaking of Otto, I totally missed his birthday earlier this week. Sorry dude! But Happy Belated Birthday!

Anyway, speaking of Otto, he was trying to short Freeport McMoran a month ago when the share price was in the lower 40s. I mentioned to him that it looked like a good short candidate, but that according to my chart voodoo 50 bucks looked like a better entry point.

Well here we are and FCX is right at 50. Is this the time to short? Could be, or at least pretty close. The price is rising into what should be a stiff resistance zone amid a declining trend in volume. At 50 the share price is right in the middle of its trading range in 2006. 50 may have been a legit price when copper was trading above $3, but it seems a little rich these days.



In this market you just never Know, but I think the chance are strong that FCX is looking to top in the near future. 51.21 is the .3247 retrace target, considering that Copper itself hit a wall at its .3247 target last month, this ratio could very well impede FCX from further advance. I look for FCX to decline to at least 35 or perhaps 30.

But unfortunately there is also the chance of FCX advancing all the way to the low 60s, so I can't say a short sell here is without risk. One might want to place a tightish stop loss here, and if it gets hit, try shorting again at the next level.

The headlines listed for FCX at Yahoo Finance the last few days are pretty comical. Take a glance:

Tue, May 5, 2009•The Technical Indicator: Charting another break atop major resistance
at MarketWatch (Tue 1:36pm) •[video] Cramer: Own Gold
at TheStreet.com (Tue 12:59pm) •[video] Win With Silver
TheStreet.com TV (Tue 12:32pm) •[video] Mad About Options: Freeport-McMoRan Flashback
at TheStreet.com (Tue 11:04am) •[video] Profit with Precious Metals
at TheStreet.com (Tue 11:00am) •[$$] The Pain of Being Rational
at RealMoney by TheStreet.com (Tue 6:25am)
Mon, May 4, 2009•Stocks Turn Positive For '09 As More Data Spurs Furious Rally
at Barron's Online (Mon, May 4) •Wall St confidence grows over stress tests
at FT.com (Mon, May 4) •Stocks Worth Waiting For
at Motley Fool (Mon, May 4) •[video] Win With Silver
at TheStreet.com (Mon, May 4) •[$$] 'Tells' of the Beta Trade
at RealMoney by TheStreet.com (Mon, May 4)
Sun, May 3, 2009•[video] Protect Yourself Against Looming Inflation
at TheStreet.com (Sun, May 3) Sat, May 2, 2009
-----------

Looming Inflation! Win with Silver! Own Gold, Cramer says so!






Equal-Weight Currency Indexes

USD: 99.97
JPY: 91.32
EUR: 95.50
GBP: 105.00
CHF: 93.56
CAD: 104.08
AUD: 108.23
XAU: 102.75
XAG: 117.10

FREE! Copy of a Six Month Old Newsletter! it's yer lucky day.

I came across an issue of the Trend & Value Letter from back in January that I thought was interesting. The analysis wasn't perfect (never is) but since it mentions ABT, which had a bad day today, I thought I'd make it available to the public. the text of the report I have copied below (because I'm a search hit slut), but I suggest that you read the PDF directly by clicking the following link.

Trend and Value Letter 01_21_2009.pdf

this issue is also available on the Old Reports page along with several others. eventually I will probably put every report older than say five or six months up on that page just so people don't think I am cherry-picking the good ones, but who Knows when I'll actually get around to that.

-----------------------------

Trend & Value
for the Morning of
Wednesday, January 21, 2009
“It is shameful that there is no authoritative description of the form that life assumes when
existence is a matter of beliefs, as it is that there has never been a persuasive account of the most
grave and important event in history, one which has happened so many times: the loss or dissipation
of a faith, that strange and dramatic reversal in which a broad human group moves from believing
wholeheartedly in the shape of the world to a state of doubt about it.”
-- Jose Ortega y Gasset
McDonalds. . . Are you short yet? If the
trend-line on the equivolume chart gets
violated, things could get pretty ugly in
burger world. Did you watch the video I put
on the blog last week of Shift Manager
Skinner being interviewed on MSNBC?
Either this guy is an economic imbecile, or
he was just putting on a good show for the
public. Perhaps a combination of the two,
but it scares me that someone of this
stature, the head of one of the most
successful corporations ever, maintains
such a ho-hum attitude about debt.
According to Professor Ortega, whom I've
quoted above, historical crises ensue as a
belief system that was built up across the span of several generations begins to fall
into doubt. Ortega's focus was on History as such, in the broadest sense, but I've
found his historiology very useful when applied to financial markets.
Fluctuations in asset prices, whether of the 'bull' or 'bear' variety (Up? Down? It's all
relative), are specific manifestations of the interplay between belief and doubt. A
decades' long growth in the belief Known as 'Debt' coïncided with (if not caused) the
decades' long inflation of asset prices (e.g., the 'bull' market) that first reached bubble
dimensions in 2000, where it initially faltered, and then really started to roll over
during the last couple of years. But why did the inflation falter? Because the belief
became effectively universal. Beliefs are like the markets; if everyone's already bought
in, then there is no one left to buy. The veracity of the belief may hold up at a plateau
for a while, but eventually doubt creeps in and the structure starts to give way.
So our society at present is moving from the collective belief that that debt is perfectly
OK, to the opposite of this; a strongly held belief that debt is absolutely not OK. But we
haven't gotten to the other end of the spectrum yet. This society is currently mired in
the phase called Doubt. There is no longer sufficient credulity to reverse course and
go back to a full belief in debt, yet it is debt which occupies the center of the belief
system which itself constitutes the center our civilization. It's not like we can simply
shed the belief in debt and once it's gone everything will be the same. No, this belief is
so integral to the 'System', that when it goes, the whole power structure collapses.
But the reader would be in error to construe my thoughts as pessimistic, or 'gloom n
doom'. No, in fact I am optimistic that the System will collapse. Those beholden to the
present System will surely view these years as an apocalyptic period. Mr Buffett has
said this is an 'Economic Pearl Harbor'. The implication in this remark is that 'we' will
prevail in the end. I'd rather call the situation an 'Economic Concord and Lexington,'
with the implication that 'we' will prevail. I trust the reader grasps the difference
between my conception and Mr Buffett's.
Another company we are short in the
Model Portfolio is Abbott Labs (ABT). You
Know how a couple years ago all the
corporations were going into to debt to
fund share buy-backs? Well, ABT kept up
this game through 2008. These
continued share buy-backs are a major
reason I can see that the company's
share price didn't participate much in the
bear moves last year. Just a glance at the
closing prices the last couple years shows
how the price has been propped up.
The other day I was listening to ABT's last
conference call (from October 2008) and
I was just amazed at how arrogant these guys
are. They certainly seem overdue for a dose of
humility.
I am convinced that this stock will fall
substantially. The sell-off may begin this week
or three months down the line, but it's coming.
I'd peg fair value of the shares at
approximately 35 right now, and that's
assuming that their forward earnings'
estimates will be met. If earnings falter at all
then the extent of the decline could prove
much larger.
The SPY:GLD ratio closed below 1.00 yesterday. This looks like bad news for the Stock
Market. Whether it amounts to good news for Gold or not is questionable. I should
point out that while I viewed 1.00 as very important on a closing basis, accounting for
intraday data, the ratio has not yet hit a new low, as you can see on the point and
figure chart.
Should one hold out any hope at all for the Stock Market now? Hey, it might still turn
around soon, but until I see some evidence, I'm certainly not going to recommend
buying any more stocks. I'd be more interested in shorting selected equities on
bounces and on liquidity dips buying more of things like the Australian Dollar or
Agriculture (either through DBA or on the futures market).
Index & Ratio Data
Equal-Weight Currency Indexes:
USD: 104.08
JPY: 105.71
EUR: 96.18
GBP: 99.74
CHF: 96.71
CAD: 100.10
AUD: 96.68

Dow Jones news wire says...

According to The Wall Street Journal, citing Small Business Administration data, CIT's small business unit made $770 million in loans in 2008, but almost all of those came before the credit crunch hit in September. Between October 2008 and May 2009, CIT made only $59 billion in small-business loans.

hadn't been following this story, but this little stat caught my eye.

recovery just around the corner store, yep.

RYF:XLF ratio -- weekly chart

just mailed out this morning's Trend & Value Letter. Financial stocks were the main topic. below is a chart that didn't make it into to the letter proper.

Death Cross Failures 1982-2007

now if one wants to 'back test' 50/200 day moving average crosses, the test should not be limited to the 'golden' variety, but should also include 'death crosses'. seems to me that buying a golden cross in a bear market should be about as profitable as shorting a death cross in bull market.

now count the death crosses (when the 50 dma goes below the 200 dma) from the 1982 to 2007 period for the Dow Industrials. when I get up from my nap I'll try to approximate the potential returns.

IOZ -- quote of the day

Obama is on the radio, reminding us that the bag of beans he gave us is not a bag of magic beans, that it will require two solid years of thickly spread bullshit as fertilizer before it sprouts. . .

as real economy tanks, Financials rally

thanks apparently to some chick named Meredith.

here's a one minute ratio chart of XLF versus IYT:

a bit of Dow Theory

in this morning's newsletter I outlined a short-term script for the Stock Market (basis S&P 500). if you must Know, I am bearish, but not mega-bearish (in the short-term). however I see this little non-confirmation of the Dow Transports to the Industrials, which, if not resolved soon, could have some bullish implications. I am not a huge devotee of Dow Theory, but the non-confirmation last month was one of many red flags signaling a turn, so I think it is only fair to take this new one into consideration also.

technical analysis golden cross -- search of the day

someone from 'Citicorp Global Information Network' arrived at Trend & Value via the following google search today:

technical analysis golden cross

I have gotten an enormous number (relative to total blog stats anyway) of hits from 'golden cross' related searches the last several weeks. regular blog readers may recall this post I wrote a couple months ago in which I postulated that a 'golden cross' could be used as a contrary indicator to screen stocks that were overextended.

today I just want to evaluate some of the prominent results from the google search above. this will give me a chance to link to some other sites (which I don't do nearly enough) and laugh at whatever idiocy comes up.

the first result is a 'textbook' definition at 'investopedia':

www.investopedia.com/terms/g/goldencross.asp

now I don't Know who wrote this glossary entry, but they seem to think that any cross of a shorter-term moving average above a longer-term one can be called a 'golden cross'. personally I have never heard the term applied to anything other than a 50/200 dma cross, so I am not sure where investopedia is coming from.

the next result is a real knee-slapper, coming, predictably, from bloomberg:

S&P 500 Near Golden Cross May Signal Gains: Technical Analysis

now the date of the article is June 9 2009, just two days before the top (so far at least) in the S&P 500. the bloomberg writer quotes two 'technical analysts' at Bank of America saying some completely obvious and completely meaningless stuff, like,

“If the S&P can hold above its 200-day moving average, the potential for a golden cross increases,” Mary Ann Bartels and Stephen Suttmeier, technical analysts at Bank of America Corp., wrote in a report to clients yesterday.

now this 200 day moving average thing is funny to me by itself. newsletter subscribers may remember what I wrote in mid-May:

These are just two among an essentially infinite number of scenarios. While the market's recent decline comes as absolutely no surprise to me, the fact that we topped right below the high at the beginning of the year and below the 200 day moving average strikes me as a little too convenient. It may be that I am trying to get too cute with my analysis, I still see at least some potential for a new high on the S&P, one not so obvious to the majority of participants. A break above the January high of 943.85 as well as the 200 dma would get all the vulgar 'technicians' excited that a new bull market has been 'confirmed'. This would be a great opportunity for the big, smart money to distribute massive amounts of stock to dumbass momentum traders and confounded short sellers.

The last time the S&P traded at 962 was Wednesday, November 5, 2008, the day after the US Election. The index opened at a high of 1001.84 that day and dropped as low as 949.86, before closing at 952.77. Regardless of my precise 962 figure, I think that day's range makes a very compelling target for the market. It would be the perfect area for what everybody is calling the Hope Rally to culminate.

that is a excerpt from the 05_14_2009 Trend & Value Letter. I have actually made that issue available to the public on the Old Reports page if you want read the whole thing. and I just realized that I had already uploaded the 06_09_2009 issue to the Old Reports page, so if you want to get an idea of what I was thinking at the time of that bloomberg piece you can check that out too.

now one wonders how much money Bank of America spends each year employing all these 'technical analysts'. they should instead consider subscribing to my newsletter, which only costs about a Dollar a day (per email address of course).

the third result from the search was from the It's Just Money blog a few years back:

July 13, 2006
Technical Analysis Review: The Golden Cross

this post seems to a man's honest attempt to judge the efficacy of a certain aspect of 'technical analysis'. not a horrible piece actually, but it seems to me that those attempting to 'prove' (or conversely disprove) techniques of chart analysis with statistics and historical back-testing are entirely missing the point. this is true not only with the analysis of securities transactions but pretty much all things 'human'. thank God I read Human Action, by Mises all those years ago. at the very least it explained to me the difference between Class Probability and Case Probability. the Mises 'Institute' has many faults, but I do appreciate how accessible they have made some of the classic works. this page at mises.org contains the chapter of Human Action dealing with probability. do yourself a favor and read it, if you have not already.

alright that's enough blogging for now. I got a newsletter to write. Monday morning's report will deal with the Oil market and specifically the 'Bakken Play' in Montana and North Dakota.

Minnesota Forex Scam

just came across this Star Tribune article:

Record casts doubt on money manager

now I don't Know anything about this Beckman guy the article is about, but the currency fund he is said to be associated with, run by a certain 'Trevor Cook,' I am slightly familiar with. I Know a couple guys who have worked in the Sales department...

this 'Oxford Global FX' or whatever they call it is so obviously a ponzi scheme. it was obvious when I first heard about it a few years ago, and just as obvious now.

and I'm sure it's not the only forex ponzi around either.

no new stimulus yet...

from yahoo news:

Obama rejects 2nd stimulus: Give recovery time

this 'news' isn't much of a surprise for subscribers of the Trend & Value Letter. here is a excerpt from the June 16, 2009 issue:

The very fact that
everything is ebbing and flowing in an increasingly
similar manner versus the Dollar makes me more
confident that Dollar Enlargement is on the return. In
absence of another pump priming episode – whether
fiscal, or monetary, or both – in the near future, the
general liquidity rally that took shape over the first part
of this year will roll over into another orthodox deflation.
This can be preempted with another round of 'stimulus'
and/or creative monetary policy, but I question whether
officialdom understands the need to strike again, or if
they do understand that whether they have the will or
even the desire to take preemptive action.

I say desire, because I am not sure that 'They' don't want
a secondary deflation now. From a domestic (US)
standpoint the Statist power grab has really just begun,
but each stage of the process requires a new bogeyman.
In order to exert more control over the productive
economy the State now needs another crisis episode as
an excuse.

From a international perspective the US State also stands
to benefit from another contraction. Years ago I forecast
that in the future, historians would refer to this era as
The Dollar Wars. 2001 to 2008 was the first episode of
this drama (melodrama!). Keeping with the metaphor, a
new episode is playing out right now – The Empire
Strikes Back. By the end of this episode it will appear
that the 'Empire', and its Dollar, is more powerful than
ever.

and in other pro-Dollar news, the US Trade Deficit continues to narrow:

May trade deficit unexpectedly drops to $26B

WASHINGTON – The U.S. trade deficit fell to the lowest level in more than nine years in May as exports posted a small gain while the weak American economy pushed imports down for a 10th straight month.

The slight rebound in exports, combined with a slower pace of decline in imports, showed that the nosedive in global activity may be starting to ebb. Delayed revivals overseas likely will hinder a rebound in the U.S., but most analysts still expect the American economy to grow a bit later this year.

The Commerce Department said Friday the deficit narrowed to $26 billion, a drop of 9.8 percent from April and the lowest level since November 1999. Economists expected the deficit to widen to $30.2 billion in May.

'unexpectedly'!!
now when you start seeing headlines such as, 'US Trade Surplus increases less than forecast' let me know and I'll start taking profits on my USD long positions.

Potash pricing starting to slip

from Reuters:

MOSCOW, July 11 (Reuters) - Belarussian Potash Co, a major supplier of potash to world markets, may revise its price offers after reports that rival supplier Silvinit (SILV.RTS) agreed a deal with India at levels far below market expectations.

read the rest.

I will be writing more about the the world fertilizer business in the newsletter soon, but here are a couple quick chart observations on two of the big players in the industry, POT and MOS.

POT down big, on volume. uptrend not quite broken yet, but selling pressure looks to just be picking up.



relatively large volume on MOS too, but shares managed to hold the very recent support. head and shoulders are all the rage these days, so maybe MOS will find buyers around the potential neckline I drew on the chart and then bounce up some to make something of a 'right shoulder'.

Swiss Franc (CHF/USD) -- point and figure chart

check out that triangle!

"gold bear market" -- blog search

ran a blog search on google this morning.

"gold bear market"

as of this morning the search yielded a total of 75 results, 4 of which were within the past month. most of the results refer the 1980/2001 bear market.

a related search,

"gold is in a bear market"

generated nearly 5000 results, but apart from good old 'Trader Dan' telling everyone not to worry last week, the most recent post dates back to December 2008.

drop me a line when these queries start yielding several new results a day.

here are the first few results from the second search:

Related Blogs:

Welcome To Jim Sinclair's MineSet - http://jsmineset.com/

Trader Dan Comments On Today's Gold Market : Welcome To Jim ...

9 Jul 2009 by Dan Norcini As long as the RSI reading stays above the 35 level or maintains its footing above any of the prior lows in the RSI as shown on this chart, it cannot be said from a technical basis that gold is in a bear market of any sort. ... Welcome To Jim Sinclair's MineSet - http://jsmineset.com/ - References

The Technical Take: Gold v. EURUSD22 Dec 2008 by glerner13@gmail.com (Guy M. Lerner)
The longer term picture suggests that gold is in a bear market, and last week's explosive upside move was nothing more than a strong bounce into resistance. When I made the "call", gold was probing $875, and since then, the precious ...
The Technical Take - http://thetechnicaltakedotcom.blogspot.com/

update: oh shoot, here's another one, by Larry Edelson. seriously, read it. this is my competition, folks...

Re-Inflation About to Send Gold and other Commodities Soaring ...11 Sep 2008
Does it look to you like gold is in a bear market? Heck no! Even if gold were to break the first uptrend line on that chart, it has major system support (not shown) between $735 and $763. While it's true that gold has fallen a bit ...
The Market Oracle - http://www.marketoracle.co.uk/ - References

First Page of Today's Newsletter

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Japanese vs US Stocks compared to Yen/US Dollar exchange rate -- 10 year chart

in this morning's newsletter (due out in a couple hours) I am assessing the relative performance of International Stock Markets to the US Stock Market. of particular interest is the recent out-performance Japanese stocks. the following is a 10 year chart of the EWJ:SPY ratio (blue area) with the Yen/USD exchange rate (black dashed line) overlaid.

Gold -- 7 x 3 point and figure chart

Gold has been taking up a lot of space in the newsletter, so I thought I should put some of the less important charts on the blog.

each box on the chart below is 7 Dollars, so for a new column to form the price has to move up or down 21 Dollars. the bearish price objective targets the April lows now. that seems like a reasonable short-term target. good a place as any for the crash to take a coffee break, and for the bull bugs to cry Bottom! once again.

Break Time?

Looks like the 200 day sma is the cool place to be nowadays.