Commodities prices (mostly oil) are on the decline for about 2 weeks coinciding with the increase for the stock market. See chart for Reuters/Jeffries CRB index(CRB). The chart shows that prices have crossed the 50 MA and 200MA. There is a significant price drop but keep in mind that the CRB is heavily weighted with oil.
The leading cause of this is that the rise in interest rates
in the
At the same time we are seeing a significant drop in oil
prices. The intense speculation(increase
in prices) in oil prices that we saw this summer due to the
Since
During the commodities bull run investors were putting their money in the
Canandian stock market(TSX) which is heavy with natural resource stocks. Now money is pouring out.
If the FED takes an additional pause in rate hikes on Wednesday Sept 20 this will be a green light for the stock market. Look for clues of what they will do in the announcements for Housing Starts and PPI on the previous Tuesday. According to the data, it already looks like they will continue the pause.
9/18/06
BOUGHT WFR at 40.40. on
Volume increased heavily and the market immediately dropped after the purchase. It was almost 2PM so maybe everybody came back from lunch and changed their minds of where the market should go.
Another problem, I didn’t wait for the buy point at 40.75
I set the trailing stop to sell at $2.00. I figure if it is going to drop and break the trend, it will go hard and fast so might as well get out early.
9/19/2006
WFR
punged down to about 39.15 which was a little less than the trailing stop so it
was sold. But it is now up for the
day. The market as a whole is down from
the bad news of the coup in
Put a stop buy order at 77.90 for AAPL. Would like to put a trailing stop at about $5. AAPL is trending upwards .
stop order never was executed. AAPL was downgraded by a brokerage. I cancelled the order because it will probably slide downward from here
put in a stop buy order at 18.45 for CVLT. Highest it went today was 18.
Gold often moves in the opposite direction to the dollar.
The majority of ETFs are in a cup formation at the moment. Some are still behind such as Techs, Oil, but S&P, DOW, Russel, Discretionary are in advanced stages. They started their decline at the end of May 10 and started on the way up about mid July. Volume hasn’t been impressive on the way up. Oil doesn’t seem to correlate, but most likely related to interest rates. On May 10th the Fed raised the rate .25% to 5% but probably hinted that a wait and see attitude to the data. They raised again in June, but hinted again that this could be the last increase but they would have to monitor data.
By mid July (the week of 17th) data such as the Industrial Production, PPI, CPI and Housing Starts were lower indicating that the Fed will pause with rates, which would correlate with the increase in ETFs increase. That increase also correlates to about a $5 decrease in oil. Oil started to go up again around Aug. 1th but headed down Aug 8th. This also correlates to a decrease in ETFs, but then after the trend was up as oil moved down.
Oil should start to go up as OPEC cuts production and winter begins. Interest rates will probably remain horizontal but there is talk that there will be cuts and also increases, so there in uncertainty in that area. Perhaps if oil goes up moderately that will slow the DOW and S&P stocks, ETFs growth and the economy prompting more talk of cuts.
Could be time to look at Oil ETFs
May 10 was a pivotal day for futures, bonds, interest rates and inflation. That was the day that the Fed raised interest rates again but hinted that the end of the increases could be near. On this day or week most futures started to drop including gold, copper. US dollar index ended its decline. The DOW, S&P 500, Nikkei and Euro Toppix to name a few started a decline that lasted a month. Catepillar (CAT) started it’s descent. 30 Year Treasuries
Bonds prices stopped their descent and begin to increase. Price increase in bonds means decreasing yield. Bond yields move with the Fed’s interest rate. Decreasing yields means that the bond market could be sensing a Fed cut in rates sometime soon. Bond prices took a huge turn down on October 6, probably in response to the surprise increase in employment numbers and pay rate increases. This meant that the economy is still strong and the Fed could rise rates.
May 10
Uptrend Broken
30
year
Gold and copper
DOW, S&P 500, Nikkei, Euro Toppix, DAX
Caterpillar (CAT)
Euro against US dollar
ETF’s
EWJ-Japan
EWP-Spain
Down Trends broken
US dollar against Yen
August 8- Fed kept rates unchanged.
Uptrend broken
CELG-health stock- broke a major up trend
OIL-Beginning of major downtrend in oil
Downtrend broken
US Treasuries (TYX)
October 5th This week encouraging data that the economy is still strong such as housing and construction rebounded. Employment is up. Data indicates inflation tamed but economy still strong. But could also hint of a Fed rate increase.
Down trends broken
Caterpillar broke it’s 5 month down trend
Bond prices
30 year
Up trends broken
Eurodollar
10 Year T note
US Treasury Bonds
October 18th . Housing starts are up,
Catepiller 3 week up trend is broken.
October 25th Fed announces that they will keep rates steady because of the possibility that the economy is slowing citing the housing market. The Fed sees core inflation as still elevated but moderating because of lower oil prices. Translation= inflation is still there but better without higher oil prices, but there is a strong possibility of an increase if the data shows that it is needed.
Down trend broken
30 year US Treasuries prices
ETF’s
GLD
US dollar against the Canadian dollar
Up trend broken
30 year US Treasury yield
ETF’s
EWS-Singapore
IDU-Dow utilities
IVV-S&P 500 index
Canadian dollar against the US dollar
The media has been reporting that S&P 500, DOW and NASDAQ have been on a tear for several months. The truth is that the S&P 500 has been in an uptrend
since
The Federal Reserve did its part to fuel the record-breaking rally by saying that the world's largest economy is expanding and inflation is under control as it left interest rates unchanged for a third straight meeting.
Once the Fed sees that the economy is slowing down, they will lower rates. It’s not time to lower rates. At this point according to the data, they will raise rates, but most likely hold them steady unless oil goes up.
Nov.
4 (Bloomberg) : This is not the type of economy the Fed cuts rates on,'' said
Lara Rhame, a New York-based senior currency strategist at Credit Suisse. ``It
adds up to higher yields. Given that
foreign exchange is closely tracking the fixed-income market, it's very good
for the dollar.''
The
yield on 10-year Treasury notes rose about 12 basis points, or 0.12 percentage
point, to 4.715 percent in
The
difference in yield between the 10-year Treasury note and the similar-maturity
German bund widened 9 basis points, or 0.09 percentage point, the most since
July 2005, to 94 basis points yesterday.
The
yield gap between the 10-year Treasury and similar- maturity Japanese government
bonds widened 12 basis points to 3 percentage points yesterday, the biggest
move in almost a year.
``It's
exceedingly bullish for the dollar,'' said Richard Franulovich, a senior
currency strategist at Westpac Banking Corp. in
Interesting ETFs
These
are short sellers-these all have Rel. Str. Rating of D
QID-QQQ-Nasdaq
100 Trust
SDS-S&P
500
DXD-DOW
30
SH-SP500
DOG-Dow
ADRs
ADRE-Emerging markets
ADRD
ADRA
The time period from 2001 to 2004 the
That same time period Gold broke it’s downtrend
research suggests that dollar depreciation
will lower the price of gold to investors outside of the
confirms the long-term
measurable relationship between the price of gold and the
LONDON (Reuters) - High and volatile prices will
continue to scare physical gold buyers in most parts of the world, but some
markets such as China and Japan will remain strong, bullion dealers said.
Analysts say a majority of buyers are still not
ready to cope with the wide price fluctuations that lowered global demand in
the past quarters, especially in price-sensitive markets like
Then there are issues related to credit, with
high prices forcing jewelry manufacturers in
Paul Walker, chief executive officer of
consultancy firm GFMS Ltd, said a lot of purchases were taking place with a great
deal of caution due to dramatic price moves in the past months.
"The absolute price levels have a big
impact on the European manufacturers and those supplying the
The traditional remedy for inflation in general, and hyperinflation in particular, is gold. In periods of inflation — or even when people are worried about inflation — people buy tangible assets, such as real estate, commodities or precious metals. After all, anything you buy will cost more later
This
would explain the drop off of commodities and others on May 10. The FED hinted that inflation was beat
Probably the most asked question is, when should one buy gold? When there
is a drop in the currency market gold tends to swing in the opposite direction
and people, having more faith in a sold metal rather than a piece of paper,
tend to buy up gold then. Of course this is when the price is moving upward, so
they then pay a higher price for their concern.
In fact the best time to buy gold is right now, what ever the price. If one is
buying for the long term and intends to keep some assets in gold then the daily
price is immaterial. Over the long term gold has show to increase in value,
especially against the dollar, and whereas inflation means you need more
dollars to purchase the same as you did 10 or 20 years ago, one ounce of solid
gold will purchase exactly the same now as it did all that long ago.
The price of gold may change depending on the value of the currency used to
purchase the gold. But the value of gold does not change. Gold is Gold is Gold
and the price of gold is only the price of the day.
Junk Bonds
Interest rates, economic growth and banks’ lending policies -- the
three other major influences on junk-bond performance -- seemed to be working
in junk investors’ favor in early 2003.
If you’re willing to assume the economy won’t slip
into a severe recession, then it’s reasonable to assume the lion’s share of
defaults will be worked out of the junk market.
As with stocks, if you wait for everything to look
rosy again, then you’ll miss much of the deep discounts in high-yield bonds. By
the way, junk rallies precede stock rallies. Eventually, investors who buy junk
at economic low points tend to take profits and pour cash back into stocks
later.
Junk-bond investors like Federal Reserve rate cuts
almost as much as stock investors do. A stimulated economy promises fewer
defaults.
Purchased
WST (
Inflation
Gold
prices have historically moved up with inflation. Prices of many other
commodities, such as oil, grains and metals, also rise when inflation
accelerates.
Also,
certain industries tend to be inflation-resistant. Whatever happens, consumers
still buy food and household products. They still get sick, go to doctors and
hospitals, and purchase health-care products. Offices may put off buying new
computers, but they must still purchase office supplies when they run out.
Consequently,
the health-care industry, as well as food, household-product makers and
manufacturers of other rapidly used-up necessities, don't suffer much in inflationary
times
High
interest rates usually kill sales of big-ticket items that most buyers finance,
such as housing or automobiles. Related industries such as mortgage finance,
furniture and auto parts also suffer.
Sticking to the stop on WST paid off because the stock initially went down about 40 cents and then went up that same day about 50 cents. The markets, except for the NASDAQ, all finished up. Not too bad considering the news in the morning. It’s up today too, although I have not reached my buy point of 51.55
It fell towards the afternoon with the rest of the markets on earnings news. It seems to be meeting resistance in the 51.75 area.
See Moving Average Explosions for a good article on Squeeze plays involving short sellers actions near resistance levels.
oil is down for moment but could be nearing a bottom. Look for prices to increase. ETF’s to watch:
USO, DBE, DBO, DCR, UCR, OIH, XLE, IEZ, XOP, IEO, IXC, IYE, VDE, XES,PXJ
A recovery in Asian equities may signal
that economies in
Heating demand in the U.S. Northeast
will be 17 percent below normal in the week starting today, Weather Derivatives
forecast on March 8.
Temperatures in almost all of the lower
48 states will be above normal from March 13 to March 21, according to the
National Weather Service. A report yesterday showed
``The warm winter and large crude oil
supplies will limit gains,'' said Hiroyuki Kikukawa, associate director of
research at futures broker Nihon Unicom Corp. in
Acreage Shift
Corn prices have fallen 7.3 percent since reaching a 10-year high at $4.5025
on Feb. 26, declining on speculation
Growers will plant 90.8 million acres of corn, the most since 1944 and up 16 percent from 78.3 million last year, Allendale said March 2 after surveying farmers. Soybeans will be planted on 65.9 million acres, the fewest since 1996 and down 13 percent from 75.5 million in 2006, Allendale said.
``Corn acres will rise significantly and soybeans plantings will fall because farmers respond to high prices,'' Victor said. ``Farmers can make twice as much growing corn than soybeans.''
Is the Economy
Slowing?
Home Depot and
Walmart earnings are down-people aren’t spending money?-Walmart customers
typically live paycheck to paycheck. Possibly living beyond their means. Now they are spending that disposable income
on gas to fill up their SUV’s.
Consumer Price
Index(#1 inflation indicator) is low
Retail sales
are down
Housing is down
Oil up
There two
categories of retailers:
Consumer staples such as drug
stores, grocery stores
Cyclical such as autos, electronics,
clothing, building materials and furniture
The Fed is expected to lower the
interest rate on Tuesday. The question
is how much.
Look at this
article for the affects of a lower interest rate: Lower Interest rates
Basically it
says that lower interest rates will:
The
dollar's drop sparked a rally in gold and oil since they are priced in dollars,
making them more affordable for overseas buyers. Reuters
While
a weaker dollar is good for multinationals, which can sell more goods in
overseas markets, a diminished dollar will make imports more expensive,
possibly fanning inflation.
Aside
from the indicators, investors also will closely watch LIBOR, the London
Interbank Offered Rate. Many adjustable-rate mortgages in the
Next
week marks the end of September and the end of the third quarter, meaning that
much of the trading will be done by institutional investors rebalancing their
portfolios(which might mean HEAVY volume?)
Look at ETF’s
to see how the sectors, countries, commodities are doing. For example gold, China and emerging markets
are doing well, but Europe and short sell ETF’s doing poorly.