U.S. Starts to Push Back Against China -- NYT

U.S. Starts to Push Back Against China in Growing Rift

By HELENE COOPER
WASHINGTON — For the past year, China has adopted an increasingly muscular position toward the United States, berating American officials for the global economic crisis, stage-managing President Obama’s visit to China in November, refusing to back a tougher climate change agreement in Copenhagen and standing fast against American demands for tough new Security Council sanctions against Iran.

Now, the Obama administration has started to push back. In announcing an arms sales package to Taiwan worth $6 billion on Friday, the United States leveled a direct strike at the heart of the most sensitive diplomatic issue between the two countries since America affirmed the “one China” policy in 1972. [Continues]

So pro-dollar forces are on the offensive, finally. I do take some issue with the last two paragraphs of the Times article:

But the tougher American positions do not change the fact that Mr. Obama needs Chinese cooperation on a host of issues. Beyond his efforts to rein in Iran’s nuclear ambitions, the president is also working with Beijing on similar ambitions in North Korea.

And Mr. Obama announced in his State of the Union address last week that he planned to double American exports in the next five years, an ambitious goal that cannot be met unless he somehow persuades China to let its currency appreciate, making Chinese products more expensive in the United States and American products more affordable in China.

I just don't see Iran or North Korea as pressing issues at the moment (the two countries may only exist as topics of the New York Times 'News & Analysis' section for all I know) and I'm not sure if the CNY/USD exchange rate has much to do with US exports. It doesn't seem to have deterred Taiwan (for instance) from placing an order.

And while I am thinking about it, I am not sure how vital China's place in the Treasury market is anymore. With the new term deposit facility, the Fed should be able to control dollar liquidity and absorb longer dated assets at the same time. For a while at least.

$MVR -- Morgan Stanley Retail Index

This is an equally weighted index, and they tend to swing bigger than cap weighted indexes, but still, this thing is back to where is was in 2007. A good rule of thumb is to sell anything fetching 2007 prices. There are exceptions, but not many.

Equal Weight S&P vs Regular S&P

Using RSP (Rydex Equal Weight S&P 500 ETF) and SPY (regular S&P weighted by market cap) as our proxies, here is the ratio dating back a long long time:



RSP from substantially outperformed SPY from 2000 to 2006, and again over the past year. But is that a double top at .357?

Index Data

Closing values for Friday, January 29, 2010:

Trend & Value 50:

997.68 (down .81%)

Foreign Blend:

6215 (down 148 pts)

China Small Cap ADR 25:

876.43 (down 2.50%)

Large Cap Dividend Top 50:

1006.92 (down .80%)

Precious Metals Complex:

4315 (down 2.36%)

General Liquidity:

983.15 (down .74%)

BRIC Basic Materials:

900.54 (down 1.91%)

Wonder Dogs:

369.89 (down 1.51%)

Leaders of the Pack:

779.30 (down 2.38%)

Penny Banks*:

988.75 (down 1.13%)

-----



* The Penny Banks Index is an equally weighted basket of 50 US bank holding companies with market capitalizations of less than $300 million. Click here to view the list of components.

Shanghai Index

Testing the 200 day moving average.

TYP -- 3x Technology Bearish ETF

A lot of volume coming in here. That's good I think, but there is the concern that higher volume in a leveraged product like this denotes increased retail interest, which all things equal I usually see as contrary indicator. I'll leave this undecided, I don't think I've been following these 3x ETFs long enough to really know what means what.

And by the way, if you want leverage against Tech, it would probably be more cost efficient to short Nasdaq 100 emini futures contracts. I'm assuming everyone knows the story with these leveraged ETFs by now right?

Yen versus Euro

Pretty cool pattern.

And here is the pair going back to 1991:



Back in 2008 I think I suggested an ultimate target of 100 yen to the euro (1.00 on these charts) but then I turned pretty negative on the yen about a year ago. Taking another look at the big picture here though, 100 certainly seems in the realm of possibility.

But even so, I am much more focused on the situation on the daily chart at the top now than I am on ultimate-gee-that-would-be-cool targets.

Index Data

Closing values for Thursday, January 28, 2010:

Trend & Value 50:

1005.81 (down 1.30%)

Foreign Blend:

6363 (down 61 pts)

China Small Cap ADR 25:

898.88 (down 1.05%)

Large Cap Dividend Top 50:

1015.04 (down .93%)

Precious Metals Complex:

4420 (down .46%)

General Liquidity:

990.46 (down .61%)

BRIC Basic Materials:

918.10 (down 1.58%)

Wonder Dogs:

375.56 (down .56%)

Leaders of the Pack:

798.28 (down 2.52%)

-----

Leaders of the Pack took a big hit today. That's not positive.

NPBC -- Regional Bank Mover

Ouch. According to the Philadelphia Inquirer, National Penn took a big loss and sacked the CEO.

National Penn posts $283.3M loss, replaces CEO

By Harold Brubaker
INQUIRER STAFF WRITER

National Penn Bancshares Inc. lost $283.3 million in the fourth quarter, replaced its chief executive, and signed an informal agreement with regulators, the Boyertown bank said today.
The loss included a $275 million noncash write-down of goodwill, a $47 million set-aside for anticipated losses on loans, and a $6 million loss on the sale of certain loans.

Effective yesterday, Scott V. Fainor took over as president and CEO, and joined the board of directors. Fainor, who came to National Penn in 2008 through the bank's purchase of Bethlehem-based KNBT Bancorp Inc., replaced Glenn Moyer.

Fainor said in an interview that the bank's problems are concentrated in its $406 million portfolio of commercial real estate construction loans, most of which are to homebuilders. "That's where the concentration of the risk is," said Fainor, 48.

He said that 31 percent of those loans are at risk, with the biggest problems in southern Montgomery County, southern Bucks County, eastern Chester County and Philadelphia. "There was more growth in that region, so you can imagine there is more stress in that region," he said.

National Penn's regulatory agreement is a memorandum of understanding. It requires the bank to "maintain our capital ratios until we get these classified loans reduced," Fainor said. Classified loans are still paying, but they have an elevated risk of not paying in the future.

National Penn's level of classified loans soared to $500 million on Dec. 31 from $196 million a year earlier, but the rate of growth slowed "tremendously" toward the end of the year, Fainor said.

National Penn's shares were off 13.97 percent, or $1, at $6.16 in early trading on Nasdaq.

Lunch Time Advisory -- time to buy!

Just kidding.

Commodities (base metals the notable exception) and EMs holding up better than one might have expected on a day like today, but I don't see much reason to read too much into that. Gold still hasn't broken down, so there is still hope for hype.

But gold miners are finding zero traction so far. They calmed down for a couple days there, only to resume the downward slide today. Here's the point & figure chart of the GDX:GLD ratio that we have been following in the newsletter:



The fallout from that triangle breakdown has been gratifying.

I am trying to make a bona fide effort to hunt for bargains in this mess of a market, but the selling pressure is just so wide-spread on this downturn. It will be hard to identify good deals until we see some indication that the broader markets are stabilizing.

Buen Provecho!

Index Data

Closing values for Wednesday, January 27, 2010:

Trend & Value 50:

1019.06 (down .14%)

Foreign Blend:

6424 (down 15 pts)

China Small Cap ADR 25:

908.44 (down .14%)

Large Cap Dividend Top 50:

1024.62 (down .27%)

Precious Metals Complex:

4440 (down .90%)

General Liquidity:

996.50 (down .55%)

BRIC Basic Materials:

932.80 (down .08%)

Wonder Dogs:

377.68 (down .39%)

Leaders of the Pack:

818.89 (up .91%)

-----

First day the General Liquidity Index has been below 1000 since I started tracking it.



But I started tracking it in early November, right as the markets were coming out of the last significant retracement, so basically we have the markets probing the lows of three months ago.

Quote of the Day

In addition, the temporary liquidity swap arrangements between the Federal Reserve and other central banks will expire on February 1.

-- FOMC statement

Markets testing critical interim supports...

A little late for a 'lunch time advisory' post now, but there are still a few words to be said about the near-term situation.

EWZ at critical support:



Ditto for USO. Different pattern than EWZ, but still 'critical':



SPY's position might not be quite as critical as the first two, but it does seem that the fund needs to hold this level to avoid another five point (more or less) drop:



And then of course there is the recent pattern on Gold that has everybody aflutter.



In my very small trading account I was long the dollar and nippy and short gold up till 20 minutes ago. Did alright on the trade. I have a feeling that markets are going to embarrass me by aggressively moving in the direction I was positioned for. But then I also have a feeling that a temporary squeeze is around the corner. Trades get so crowded so quickly these days. So since I am feeling the potential for two different occurrences, I am 'in doubt'. And when in doubt, stay out. Right?

Or the closing of positions could be explained by how over-leveraged I was. Didn't want to bother with another equity drawdown, even if temporary, so I booked the profits I had.

Index Data

Closing values for Tuesday, January 26, 2010:

Trend & Value 50:

1020.53 (down .18%)

Foreign Blend:

6439 (down 30 pts)

China Small Cap ADR 25:

909.67 (down 1.90%)

Large Cap Dividend Top 50:

1027.61 (down .05%)

Precious Metals Complex:

4480 (down .15%)

General Liquidity:

1001.96 (down .67%)

BRIC Basic Materials:

933.55 (down 2.49%)

Wonder Dogs:

379.14 (down 1.03%)

Leaders of the Pack:

811.50 (up .62%)

-----

Stocks versus Gold and Silver

We'll use DIA, GLD, and SLV as our proxies.

first DIA:GLD:



Something of a triangle at risk of breaking lower in the short-term, but as long as that doesn't get too severe it's tempting to view the larger pattern as a potential inverted thingie.

The next chart has the same settings as the one above but has DIA divided by SLV:



DIA:SLV seems to have built a better base than DIA:GLD, though it's a rather wide base and it's quite possible for the ratio to fall back into the lower portion of the base again.

Quote of the Day

[S]ometimes, whatever the situation and however hard you try, you will not have an inspiration! This is not to say that insights are not available, just that someone else is having them. There is always a great temptation to convince yourself that you have an insight, and then to push it. It can be very, very expensive.

-- from the latest Grantham letter.

Today's Lunch Time Advisory

Despite the early weakness the markets are making the effort to hold up today. Some Commodities and several Internationals (mostly the EMs) slipped to new lows for the correction this morning, but the major US benchmarks are in the green for the time being.

The dollar and the nippy should continue to find favor on the foreign exchange markets, brief retracements aside. The fallout from Japan's downgrade or whatever at S&P lasted all of 20 minutes last night (early this morning). Is a negative outlook for Japan's credit actually a positive for the currency? Sure why not? A new era of fiscal restraint in the US and Japan? Sure why not? (Just keep in mind that an 'era' these days has a duration of between two weeks and six weeks...)

Regional Banks, my preferred segment of the stock market, are making gains again today, with the $KRX up about 1.6%. PVTB (highlighted yesterday) jumped another 14% this morning. I know 18 and 14% gains must seem rather staid to all you .V Adventurers out there, but hey, I'm just happy to be on the right side of things for once.

Gold's not dropping, silver came back from the brink. Lot's of potential for a breakdown in the Complex, but it's a sketchy situation.

Advice for the day? Start looking at the Insurance space, there might be enough relative value there to warrant attention. (This a 'note to self' really.)

Mahlzeit!

Index Data

Closing values for Monday, January 25, 2010:

Trend & Value 50:

1022.32 (up .47%)

Foreign Blend:

6469 (up 116 pts)

China Small Cap ADR 25:

927.33 (down .90%)

Large Cap Dividend Top 50:

1028.87 (up .66%)

Precious Metals Complex:

4487 (down .71%)

General Liquidity:

1008.75 (up .22%)

BRIC Basic Materials:

957.38 (up .27%)

Wonder Dogs:

383.09 (up .35%)

Leaders of the Pack:

806.50 (up .46%)

-----

Popcorn?

PVTB -- Regional Bank Mover

While the group was mixed today, with 29 out of 50 KRX components in the red to varying degrees, some issues made decent advances, most notably PVTB, 'The Private Bank':



Yep, it's made a move. That's just super, Lucas. But what now? Op, it's dinner time, gotta run, catch ya later!

Update: I should really keep better tabs on this stuff. PVTB earnings came out earlier in the day. I am just starting to read it myself, but here is a link to the conference call transcript:

Private Bancorp Inc., Q4 2009 Earnings Call Transcript

Silver Wheaton / iShares Silver ratio (SLW:SLV)

I keep an eye on this thinking it is some sentiment or momentum indicator. it helps to gauge how much investors are willing to pay up today (in silver) for the right to sell silver at market in the future. The function of the ratio is kind of analogous to the fluctuating market price of a bond. The bond has a fixed coupon rate that it pays, but the price of the bond fluctuates on the open market. So buying SLW (relative to SLV) at an extremely low price is like buying a bond with a coupon rate of, say, 5% at a, say, 30% discount to par, so if you pay 70 instead of 100 for a bond your future effective yield on the instrument is much higher than the original 5% (how much higher depends on the security's maturity).

Except that SLW is an ongoing concern, with no set duration, as far as I can tell, so comparing SLW:SLV to a preferred stock might be better. Oh except that SLW isn't actually paying owners a regular distibution, so you might compare this to a zero-coupon bond. a zero-coupon preferred share of stock?* Alright, alright, this whole analogy is breaking down pretty quickly. Snip.

Anyhow, what caught my eye about the ratio was the huge divergence between the trend of the ratio itself and the CMF indicator included on the bottom panel. Thing is, I am not sure how meaningful that indicator is on a ratio. Probably just better to view it as a curiosity than a trading signal.


* Zero-coupon preferred stock! I kill me sometimes. And yes, I'm easily amused.

Defense as Defensive? -- A Brief Look at Lockheed Martin (LMT)

We are looking at LMT relative to the broad US stock market (using SPY as our proxy). I like the broad sweeps I see on the long-term chart above. Naturally it is hard to time those with any precision just on the basis of a long-term chart like above, but it appears that we are in the general area where it makes sense to look for support for this LMT:SPY ratio. You can see, as well, that the major turns for this ratio coincide with major turns in the broader market. The ratio's correlation with the direction of the broader market is fairly inverse, so it might make sense to view LMT from a defensive perspective.

But it is the ratio's development over the past several months that has me contemplating a major bottom.



In the latest IKN Weekly, Otto made the following comment,

I’d love to trust charts in the same way that Kyle over at Trend&Value can.

I'll leave Otto's conscious to ponder the degree of back-handed-ness in that compliment, but to my defense I don't think it is quite accurate to say that I 'trust charts'. I don't trust charts any more than I trust a phone book, or trust an almanac. If I trust anything -- and when it comes down to it I am not a very trusting (or trustworthy at times) mensch -- it is my approach to analyzing charts.

And part of my approach is to use charts (which are neither more nor less than the visual representation of historical data) to identify issues that are showing constructive consolidations and the potential for meaningful moves in the mid- to medium-longish-term (time frames are hard to predict). But often it takes months for a chart to confirm or invalidate my hunch. I thought LMT looked cheap, particularly on a relative basis, way back in October so I recommended it as a long position in the newsletter's Seven Symbol Portfolio. Over three months later the f'ing thing has gone nowhere. dead money.

In hindsight I see that I made the call on LMT back then on little more than a 'hunch'. What I should have done is put LMT on my radar and waited for a nice formation (like the one on the daily chart above) to develop. The entry price is about the same this week as in October (at least on the ratio) but we could have been employing that capital elsewhere instead of sitting on something that wasn't ready to move.

Sorry for the longwinded retrospective, I'm really just talking to myself. (While this blog is in public, it's not really kept with public consumption in mind. Think of it as my notepad...)

The upshot of this note is that we should see some confirmation on that LMT:SPY ratio sooner than later. That may mean LMT shares advance or the S&P tanks, and I'm not sure which, but the ratio is shaping up to be a chart that I 'trust'. If the ratio drops much below .65 from here then the chart betrayed me.

Today's Lunch Time Advisory

While you are digging into your brown bag or out having a martini with the complacence officer or whatever the esteemed readers of this site do this time of day, your analyst here at Trend & Value is just starting into his second cup of coffee. Since waking, oh about 45 minutes ago, he has had time to glance at his main list of index ETFs. So far he has just flipped through the default daily candle charts. But what, so far, does he see?

Inside days. All around, inside days. Buyers beware, be very ware.

But enjoy your lunch, I'll be back later in the afternoon.

Regional banks start to get some press

From MarketWatch:

BOSTON (MarketWatch) -- Exchange-traded funds that invest in regional-banking stocks have outperformed the broad financial sector so far in 2010 on hopes that smaller lenders' credit losses are easing and that they'll be affected less by potential financial regulation.

Through Jan. 21, the SPDR KBW Regional Banking ETF (KRE 24.35, -0.58, -2.33%) was up about 12% year-to-date, while the overall market as measured by the S&P 500 Index (SPX 1,092, -24.72, -2.21%) was roughly flat.

Regional banks also have jumped ahead of the general financial sector in a trend that's emerged in recent months. The regional-banking ETF gained 22.3% for the three months ended Jan. 21, compared with a loss of 1.1% for the Financial Select Sector SPDR Fund (XLF 14.18, -0.48, -3.26%) , a barometer of large-cap financial shares that's stuffed with large-cap bank stocks, according to investment researcher Morningstar. (continues here)

It's an alright piece. Doesn't mention the elevated short interest in the group, though. In the comments section of the article there was one dude pumping CRBC, but aside from that the sentiment is extremely negative. I'm no fan of fractional reserve banking myself, dudes and dudettes, but that is not the issue right now. These loan portfolios are collateralized by huge swathes the country's industrial capacity. Don't have a billion dollar private equity firm to buy up distressed debt? Buy regional bank shares instead.

Sunday morning...

...is everyday for all I care.




The new me: Shaved my head (si es frio), taking the occasional bupropion, riding the spin bike, and listening to some songs from my formative years. Seize the day, or the afternoon at least.

"Is it true that Cramer means pimp in French?"

That's the quote of the day. Or yesterday, actually. From a commenter on this CNBC article:

Cramer: Could Obama Cause 1,000-Point Correction?

The Dow has dropped about 550 points already, so I am assuming Jim is talking about 1000 points from here, not from the top. So that would put the market below 9200. There is some potential lateral support from late 2008 there, plus you got some longer-term moving averages in that zone.



My knee-jerk reaction was to view Cramer's bearishness as a contrary indicator, but just looking at the chart of the Dow, the downside figure which he may or may not have pulled out of a hat doesn't look unreasonable.

Personally, I don't have interim targets laid out yet. I'll run some numbers and let subscribers in on some possibilities in the near future.

Index Data

Closing values for Friday, January 22, 2010:

Trend & Value 50:

1017.54 (down 1.90%)

Foreign Blend:

6469 (down 114 pts)

China Small Cap ADR 25:

935.71 (down 3.83%)

Large Cap Dividend Top 50:

1022.15 (down 1.83%)

Precious Metals Complex:

4519 (down .10%)

General Liquidity:

1006.49 (down .85%)

BRIC Basic Materials:

954.79 (down 2.27%)

Wonder Dogs:

381.74 (down 1.66%)

Leaders of the Pack:

802.80 (down 2.65%)

-----

Yet another down day across the board on Friday. On the one hand it looks like selling pressure is starting to wane (notice the Precious Metals Complex nearly broke even) but I see that my General Liquidity Momentum Indicator dropped into negative territory for the first time since I started tracking it:



I think we are pretty over-sold in the near-term, but I also see the potential that the past couple weeks are the beginning of a major shift away from the pro-liquidity leadership that prevailed for so many months. The focus now should be to protect capital while trying to identify quality assets that either offer potential to buck the bear, or that have been sold off irrationally during micro-panics like we have seen recently. There is no point in rooting for deflation if you aren't going to take advantage of it and buy the value that it generates. The successful investor from here has a surplus of two things -- Cash & Patience.

Me Three

Cramer: But where's Geithner? I didn't know Volcker became our Treasury Secretary overnight. Geithner works very closely with Frank, I wish he were consulted more on this, maybe he was, but it sure doesn't sound like anything Geithner[...]

F-- Geithner. F-- Frank. No offence to either of you, not personally at least, but unless Obama is just a complete wuss this Volcker Agenda is moving forward. You can step down now, Tim.

When it comes down to it, I don't believe in Government period, let alone more regulatory statutes. The only real-world political agenda I could completely sign on to would be to focus exclusively on repealing statutes rather than adding more laws, no matter how well intended.

But from a pragmatic political (and economic too, I think) perspective the Volcker plan makes sense here and now. If we must suffer populism, directing it against bankers is better than many alternatives.

If investment banking and proprietary trading are really all that, then whatever spin-offs need to happen as a result of this plan should have no trouble attracting sufficient capital backing.

this post was meant to be a here-here to Gary Biiwii's post seconding Derringer's demand of the President: "follow through NOW!"

Biiwii is always required reading, Gary has one of the most consistently profitable eyes for the markets that I have ever encountered, so it is encouraging to me that regional banks have attracted his attention in the blog post linked to above (here's the link again).

(KRE has been a long position in my newsletter's model market neutral Seven Symbol Portfolio since early in December. It's come a long ways, but for what it's worth, my price targets haven't been hit yet.)

(edit at 11:20pm. . .statues, statutes, whatever..)

Foreign Blend Momentum Indicator

The theoretical maximum extremes would be +41 and -41 (because there are 41 symbols comprising the Foreign Blend) but I doubt we will ever see such maximum readings. Here are the daily values since I started tallying the results at the beginning of the year:



0 is neutral, above 0 is bullish, below 0 is bearish. Yesterday came in at -6.8, so the prevailing trend can be seen as bearish now, but not drastically bearish (yet).

Index Data

Closing values for Thursday, January 21, 2010:

Trend & Value 50:

1037.23 (down 1.93%)

Foreign Blend:

6583 (down 315 pts)

China Small Cap ADR 25:

972.97 (down 5.31%)

Large Cap Dividend Top 50:

1041.50 (down 1.45%)

Precious Metals Complex:

4523 (down 3.13%)

General Liquidity:

1015.14 (down 1.10%)

BRIC Basic Materials:

976.94 (down 5.39%)

Wonder Dogs:

388.19 (down 3.17%)

Leaders of the Pack:

824.65 (down 1.20%)

-----

Here is a chart of the volume weighted Precious Metals Complex going back to July:



I'm not sure how much any of those lines mean, I just draw them out of habit really.

IKN Weekly -- Give it a go

Otto devotes valuable blog space to promote his truly excellent newsletter. An excerpt:

Over at The IKN Weekly we know how to say 'goodbye' to stocks not just 'hello' and we don't just recommend buys and then leave you hanging there wondering whether it's time to book profits. Amid the banging and clattering of the market we've recently sold two of our 15 positions*. One has just nailed us a book profit of nearly 140% (and nearly everyone who bought into the stock will have cleared over 120%). The other gave us a 68% profit in almost exactly two months, from 1st reco date to sale time (and is now 16% lower than our sale price).

read the rest of the post and consider subscribing:

1/21/10
The Next IKN Weekly, Out Sunday 24th January

My Lord!

Sorry, I just can't get over this.

Unbelievable

Index Data

Closing values for Wednesday, January 20, 2010:

Trend & Value 50:

1057.61 (down 1.39%)

Foreign Blend:

6898 (down 287 pts)

China Small Cap ADR 25:

1000.55 (down 3.22%)

Large Cap Dividend Top 50:

1056.79 (down 1.19%)

Precious Metals Complex:

4671 (down 3.69%)

General Liquidity:

1026.39 (down 1.45%)

BRIC Basic Materials:

1032.61 (down 3.67%)

Wonder Dogs:

400.88 (down 2.55%)

Leaders of the Pack:

834.68 (down 1.03%)

-----

Well, the General Liquidity Index made it back to the 1020s. . . What now?

Table of Short Interest in Regional Banks

Data taken from this finviz screen, so I am not sure how up to date the figures are.

(click to enlarge)

These are the fifty components of the KBW Regional Banking Index (symbol: $KRX), the underlying index for the exchange traded fund KRE.

Index Data

closing values for Tuesday, January 19, 2010:

Trend & Value 50:

1072.56 (up .91%)

Foreign Blend:

7185 (up 143 pts)

China Small Cap ADR 25:

1061.96 (up 1.71%)

Large Cap Dividend Top 50:

1069.47 (up 1.35%)

Precious Metals Complex:

4850 (up .76%)

General Liquidity:

1041.50 (up .59%)

BRIC Basic Materials:

1071.96 (up 1.83%)

Wonder Dogs:

411.38 (up 1.48%)

Leaders of the Pack:

843.33 (up 1.46%)

-----

BRF -- Brazil Small-Cap ETF

flipping through my ETF equivolume chartbook, this BRF caught my eye. notable 'oversquare' days + big CMF divergence = high potential for sell-off.

Index Data

closing values for Friday, January 15, 2010:

Trend & Value 50:

1062.86 (down .93%)

Foreign Blend:

7042 (down 162 pts)

China Small Cap ADR 25:

1044.13 (down 2.05%)

Large Cap Dividend Top 50:

1055.25 (down .83%)

Precious Metals Complex:

4813 (down 1.79%)

General Liquidity:

1035.01 (down .73%)

BRIC Basic Materials:

1052.70 (down 1.15%)

Wonder Dogs:

404.78 (down 1.40%)

Leaders of the Pack:

831.16 (down .82%)

-----

the General Liquidity Index continues to falter. the 50 day average is at 1024.75 now, so it's still good to keep our eyes on the mid-1020s.

Index Data

closing values for Thursday, January 14, 2010:

Trend & Value 50:

1072.81 (up .15%)

Foreign Blend:

7204 (down 26 pts)

China Small Cap ADR 25:

1066.04 (down 1.59%)

Large Cap Dividend Top 50:

1064.06 (up .08%)

Precious Metals Complex:

4901 (down .29%)

General Liquidity:

1042.63 (down .02%)

BRIC Basic Materials:

1064.96 (down .19%)

Wonder Dogs:

410.54 (down .56%)

Leaders of the Pack:

838.04 (down .76%)

-----

Regional Banking Index

Regionals continue to shine.

a 60 minute chart:



weekly:



resistance at 49? not necessarily, but we'll need to pay closer attention now.

Index Data

closing values for Wednesday, January 13, 2010:

Trend & Value 50:

1071.43 (up .52%)

Foreign Blend:

7230 (up 87 pts)

China Small Cap ADR 25:

1083.24 (down .94%)

Large Cap Dividend Top 50:

1063.19 (up .79%)

Precious Metals Complex:

4915 (up 1.02%)

General Liquidity:

1042.79 (up .58%)

BRIC Basic Materials:

1067.01 (down .15%)

Wonder Dogs:

412.87 (up .30%)

Leaders of the Pack:

844.50 (up .96%)

-----

Direxion Daily 30 Yr Trs Bear 3X Shares (TMV)

attention newsletter subscribers. in the most recent report I suggested a couple ways to exploit TBT, the 2x T-Bear ETF. well, I just came across one that is even better:



3X! XXX!!!

Index Data

closing values for Tuesday, January 12, 2010:

Trend & Value 50:

1065.87 (down .55%)

Foreign Blend:

7143 (down 190 pts)

China Small Cap ADR 25:

1093.53 (down 4.09%)

Large Cap Dividend Top 50:

1054.87 (down .52%)

Precious Metals Complex:

4865 (down 2.98%)

General Liquidity:

1036.73 (down .97%)

BRIC Basic Materials:

1068.62 (2.56%)

Wonder Dogs:

411.65 (down 1.52%)

Leaders of the Pack:

836.47 (down 1.50%)

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here's a chart of the Trend & Value 50 for the past 54 closes (should be 55, but we skipped Christmas Eve):



the more defensive and/or blue chippy issues on the market got something of a bid today, mitigating the net decline on a diversified index like the T&V50 (and the Dow for that matter). but you can see that the higher beta stuff was hit pretty hard. not unexpected, considering the near-universal strength we witnessed on the recent run-up.

the General Liquidity Index has backed down some, schau mal:



the usual contraries like T-Bonds, natural gas, and the nippy saw decent gains today, while the GLI's metallic exposure took a sizable hit.

finally, here is a chart of our first dynamic index, the Foreign Blend:



we just started tracking the FB at the turn of the year, but I dare say that it (along with a static version I've analyzed in the newsletter) is proving useful already.

Index Data

closing values for Monday, January 11, 2010:

Trend & Value 50:

1071.74 (up .29%)

Foreign Blend:

7333 (down 4 pts)

China Small Cap ADR 25:

1140.14 (up .04%)

Large Cap Dividend Top 50:

1060.44 (up .56%)

Precious Metals Complex:

5015 (up .84%)

General Liquidity:

1046.84 (up .13%)

BRIC Basic Materials:

1096.71 (up 1.06%)

Wonder Dogs:

417.99 (down .10%)

Leaders of the Pack:

849.19 (up .36%)

-----

is Mr Market tiring a bit? everything that was down has come back, so what is left to rotate into? I'm serious, what is there to buy that hasn't been bid up already? as I mentioned in my last post, there are 79 S&P stocks with RSI over 70, but none (0) (Zero) with RSI below 30. I mean, you can't even make an overbought/oversold ratio out of that.

also, remember how I was tracking the number of S&P stocks trading below the 20, 50, and 200 day moving averages? I looked at that screen again today. there are 5 (out of 500) on that list now. (JCP, HSY, GME, KR, BPI)

Buying Strength vs Buying Weakness

on November 6, 2009, I noticed that there were 9 S&P 500 components with RSI(14) readings above 70 (generally considered the 'overbought' line). there were also 9 components with RSI(14) readings below 30 (generally considered 'oversold').

the overboughts were: EL, RX, AMZN, MCD, HRS, SRCL, ADP, PAYX, and NSC.

the oversolds were: NTRS, PTV, BSX, AYE, FSLR, CVS, JAVA, TAP,and APOL.

on finviz.com I created two equally weighted portfolios to track performances of each group. one portfolio was long all the overboughts, while the other was long the oversolds. I wanted to see how each group fared over a mid-term horizon. it's been a couple months now, so let's see how we stand.

first, it is notable that all 18 stocks are showing a profit from the theoretical buy price on 11/6, which, if nothing else, is a testament to the strength of the broad market over the period in question.

the overbought basket is up 3.95%.

the oversold basket is up 8.84%.

that is a substantial out-performance by the oversold issues and at first thought the results seem to reinforce my personal preference of buying weakness, as opposed to the strategy of buying strength popular in the trend-following set. (though, to be fair, I have never heard of a trend-following strategy as simplistic as buying all the >70 RSI issues on the market and holding them for a couple months.)

but if we examine the results a little more closely, we see that the oversold basket, so far at least, has not drastically out-performed the S&P 500 as a whole, as the benchmark advanced 7.53% over the same period.

but it gets worse. remember I said the two baskets were equally weighted, meaning we placed an equal dollar amount of each stock into the baskets. so to be really fair, shouldn't we be comparing these baskets against the equal weight version of the S&P?

well, the Equal Weight S&P 500 (SPXEW) gained 10% over the period in question:



I am not sure whether we should draw any conclusions from this little study, but I thought it was kinda interesting...

oh, and by the way, there are currently 79 S&P stocks with RSI(14) above 70. how many stocks have RSIs below 30? 0 (Zero). if you will pardon my french, that's fucking sick. Waterloo for the bears indeed. or, just maybe, it's Operation Barbarossa. say, mid-October, 1941.

Index Data

closing values for Friday, January 8, 2010:

Trend & Value 50:

1068.69 (up .58%)

Foreign Blend:

7337 (up 68 pts)

China Small Cap ADR 25:

1139.71 (up 1.59%)

Large Cap Dividend Top 50:

1054.53 (down .05%)

Precious Metals Complex:

4979 (up 1.11%)

General Liquidity:

1045.48 (up .29%)

BRIC Basic Materials:

1085.21 (up .63%)

Wonder Dogs:

418.40 (up .48%)

Leaders of the Pack:

846.13 (up .68%)

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Money Supply Charts

below are one year charts of the monetary base, MZM, M!, and M2. no commentary from me now. I just drew the charts, so you don't have to.






thanks FRED!

Its a Setup / And Away We Go

Its a setup: U-turn at the zero line, hold the 21 ema support, up through the MACD trigger line...and away we go.

The top 2 worked out, maybe have more upside, maybe not. The second 2 look like they are motivated to at least make it to the trigger line if not higher(though I am skeptical). But the last one, the $USD, the only daily chart on here, is still in play. Give it a few more days before writing it off.

A Whole Rush Album at the Same Time

this is pretty random..

what kind of Catastrophe would you like?

as billed on Naked Capitalism (from where I lifted the vid) this interview with Simon Johnson is rather amusing:



what is also amusing to me is how much of what I write ends up being spouted off on cable shows and other more mainstream media weeks and months after I express it. not that anyone is systematically cribbing my thoughts or anything like that (not enough people reading my stuff for that to happen) but just how a logical idea about the future develops over time. zeitgeist, oder?

It was early last year (I'll have to dig out the newsletters) that I explained that the next phase of the crash/crisis/contraction would center in the so-called emerging markets and completely collapse that bubble. I still, and more than ever, think that will come to pass, but it's that damned timing thing. I tried to be patient most of last year, then I got impatient in the fall, now I'm trying to be patient once more, but still alert, cus I'll get really pissed at myself if I miss the move when it finally arrives. it would all be so much easier if I just received a royalty when my ideas appear on TV six months later. even an anti-IP anarchist can dream...

having said all that, you may also wish to entertain a differing view from the calm and intelligent Jonathan Auerbach:

Billionaire Predictions

Forbes sent out a questionnaire to all the billionaires about the prospects for the new year. for me the questions that were asked are more telling than any of the answers. one question was 'Gold: buy, hold, or sell?' another was 'Which emerging world economy is the best bet for investors?'

but whatever.

by far the best answer to any of the questions came from R.J. Kirk. in response to 'What's the best asset to own in 2010?' he said:

In every season, the best assets are those that relate to personal value--character, intelligence, work ethic and honesty. No quantum of financial assets will adequately compensate for deficiencies in these. Problems in these areas are likely to exert a negative influence on the value of any financial portfolio that a person may hold. Consequently, the best financial assets for a person to own would be those over which he has peculiar knowledge or expertise and, ideally, those over which he has the greatest ability to positively impact the outcome.

so who were the lucky winners?

the payroll numbers are due out in a little while. looking at the bloomberg economic calender, I click on the 'consensus' button. I don't know why, I don't usually care. but I clicked anyway. check this out:



I had heard talk of an actual gain, but I had no idea of the sheer magnitude projected. Mr Consensus is estimating that 10 (ten) (!!!!!!!!!!) jobs were added last month. lucky souls.

(seriously, I know that's just an average of all the average analysts' average opinions, and it just happened to come to ten (10), so you don't need to set me straight.)

KRE vs KBE

while the big boys have gotten the pump of late, I don't think the regionals are out of the game just yet.

hey you in the back!

attention. whoever is propping up the euro right now, can you just call it a night? I mean, it's OK to give up.

GDX vs DIA

I'm always monitoring the performance of the Dow relative to gold, as well as the performance of gold mining stocks relative to gold, but you know, I rarely examine the performance of gold mining stocks relative to a broad market benchmark like the Dow. so I present to you a chart of GDX (mining ETF) relative to DIA (Dow Industrials ETF).



hard to say, but there seems to be a little resistance in the .525 area.

Index Data

closing values for Thursday, January 7, 2010:

Trend & Value 50:

1062.56 (up .33%)

Foreign Blend:

7269 (down 105 pts)

China Small Cap ADR 25:

1121.84 (down .52%)

Large Cap Dividend Top 50:

1055.04 (down .48%)

Precious Metals Complex:

4919 (down .61%)

General Liquidity:

1042.49 (down .39%)

BRIC Basic Materials:

1078.45 (down 1.16%)

Wonder Dogs:

416.42 (down .49%)

Leaders of the Pack:

840.39 (down .31%)

------

while down some today, the GLI still holds above the previous set of highs. it is worth noting that my GLI momentum indicator while still firmly in positive territory, remains well below its highs established in November. though frankly, I'm not sure if that is a good sign or a bad one.

Index Data

closing values for Wednesday, January 6, 2010:

Trend & Value 50:

1059.09 (up .16%)

Foreign Blend:

7374 (up 50 pts)

China Small Cap ADR 25:

1127.75 (up 1.54%)

Large Cap Dividend Top 50:

1060.10 (up .02%)

Precious Metals Complex:

4949 (up 2.16%)

General Liquidity:

1046.57 (up .69%)

BRIC Basic Materials:

1091.12 (up 1.60%)

Wonder Dogs:

418.49 (up .46%)

Leaders of the Pack:

842.97 (down 1.34%)

------

GS et al

I mentioned Goldman Sachs (GS) in a positive light last week. over 9 bucks later I can tell you that the easy easy money has been made on the breakout.



in the off chance you hopped aboard GS on my mention, you might consider booking the profit. not because I really think that GS will drop again, I don't know if you must know, but simply because the stock has hit a reasonable target for the type of breakout that I identified. the move from the 160 low has so far amounted to about a 50% retrace of the correction from 190 down to 160. the declining wedge pattern has a high probability rate, in my experience, but only if you accept rather conservative targets for the breakouts.

as for financial stocks as a group, they are going to have to pick up the ball for any further rally in the broad market. the last few days have been a good start, but we are going to need more from the too-big-to-fail segment of the market.

if the S&P is headed to 1200 (big if, I have really no idea) then you'll likely see XLF, the Financials ETF, at 17 or so, putting the XLF:SPY ratio around .142.