Stock Market Report 3-2-10

US stocks rose on Tuesday after United Parcel Service (UPS) and DR Horton released encouraging earnings reports.

Gains were broad based on Tuesday, with 28 of 30 Dow stocks rising.

UPS reported a drop in fourth-quarter profit, but forecast a sharp increase in 2010 earnings. Its stock rose over 1%.

The National Association of Realtors’ pending home sales index rose 1%, in line with expectations. The index fell 16.4% in the previous month. DR Horton, one of the top five US home builders, reported its first-quarterly profit in almost three years and its stock jumped 11%. Pulte Homes and Lennar Corp rose over 7%.

Amazon.com slid for a second straight day, falling 2%, and limited the Nasdaq’s advance.

The S&P 500 industrial sector rose over 1%. Cummins and Emerson Electric rose between 7% and 8%. Cummins is a US manufacturer of diesel engines and other power generation equipment. Emerson is an industrial conglomerate that produces technology used by the oil and natural gas industries.

Major automakers, including Ford Motor, General Motors and Nissan all reported improved January sales. Toyota, however, saw a bigger-than-expected decline in January sales, impacted by a major recall.

Credit card companies rose after analysts upgraded companies within the industry. American Express, Discover Financial Services and Capital One Financial rose between 2% and 3%.

So far, 48% of the S&P 500 companies have reported results. Analysts expect earnings to have tripled from the prior year, although the improvement is mostly due to cost cutting and easy comparisons to the fourth quarter of 2008. The financial sector is expected to lead the advance.

In other news, Moody’s Investors Service said the outlook for the US’ AAA credit rating remains stable even with the effects of the credit crisis and recession on government debt and fiscal flexibility.

Commodities

Stock Market Report 21-1-10

Wall Street suffered its worst slide of 2010 on Wednesday as investors worried that lending restrictions in China could hurt the global economic recovery.

Market breadth was negative. On the NYSE, losers beat winners by more than three to one. On the NASDAQ, decliners topped advancers three to one.

Commodity-related shares were hurt by concerns that China may curb its economic expansion. A stronger dollar also put pressure on commodity prices and commodity-related stocks.

Technology shares were among the biggest decliners after IBM gave a conservative outlook, despite reporting better-than-forecast quarterly sales and earnings. IBM shares fell 3.8%.

Healthcare stocks were down on Wednesday. An index of pharmaceuticals companies fell 1.1%. Healthcare stocks had risen the prior day on speculation that the healthcare system would face new obstacles following a surprise Republican election to the Massachusetts Senate seat.

Several banks reported earnings. Wells Fargo & Co and US Bancorp reported better-than-expected quarterly earnings, helped by recent acquisitions. The Bank of America reported a wider-than-expected loss, but said its credit problems were beginning to stabilise. The Bank of America said losses widened to US$5.2B in the fourth quarter of last year, partly due to the bank paying back government bailout funds. The company said the repayments shaved off $US4B from its bottom line. US Bancorp shares added 2.3% while the Bank of America gained 0.6%. Morgan Stanley reported its second-straight quarterly profit, one year after posting a significant loss. The financial firm said it earned US$617M for the quarter versus a loss of $11B a year ago. The result missed expectations, and shares in the company fell around 1%.

In economic news, building permits, a measure of builder confidence, rose to a 653,000 unit annual rate in December, from a 589,000 rate in November, the government reported. Permits were expected to rise to a 590,000 rate, according to a consensus of economists. However, housing starts fell to a 557,000 unit annual rate, from a 580,000 unit rate in November.

The Producer Price Index (PPI), a measure of wholesale inflation, rose 0.2% after climbing 1.8% in the previous month. Economists expected it to hold steady. The so-called core PPI, which strips out volatile food and energy prices, was flat versus forecasts for a gain of 0.1%.

Overseas Markets

Dow down 137 pts to 10,588 (10,517 – 10,720)

S&P 500 down 14 pts to 1,136 (1,129 – 1,148)

Nasdaq down 33 pts to 2,287 (2,269 – 2,304)

SPI 200 Futures down 31 pts to 4,806 (4,776 – 4,840)

FTSE down 92 pts to 5,421 (5,404 – 5,513)

Nikkei down 27 pts to 10,738 (10,725 – 10,861)

Shanghai SE Comp down 95 pts to 3,152 (3,148 – 3,255)

Commodities

WTI Oil down 2.0% to US$77.43/bbl

Gold down 2.4% to US$1,113/oz

Sugar (NY) up 0.4% to USc29.11/lb

Corn down 0.3% to US$3.32/bushel

Wheat down 0.6% to US$4.67/bushel

Natural Gas (Henry Hub) up 0.6% to US$5.54/MMbtu

Silver down 4.5% to US$17.91/oz

Platinum down 0.9% to US$1,630/oz

Palladium up 0.6% to US$469.25/oz

Copper (NY) down 2.6% to US$3.35/lb

Currency

A$ / US$ down 1.7USc to US$0.91 /A$

EUR / US$ down 2.8USc to US$1.41 /EUR

GBP / US$ down 0.6USc to US$1.63 /GBP

US$ / Yen up 0.5 Yen to 91.24 Yen/US$

Stock Market Report 20-1-10

US stocks rose in a broad-based rally as investors bought healthcare shares on bets that a potential Republican victory in Massachusetts’ Senate race could stall President Obama’s reforms and remove a threat to profits in the sector.

The S&P Healthcare Index climbed nearly 2%. Drug maker Eli Lilly rose 5%. Health insurers Humana and Aetna gained 3.6% and 4%, respectively.

All 10 S&P 500 industry groups traded in positive territory.

The Dow also received a boost from McDonald’s, which gained 2.3% on an analyst upgrade. 3M was another notable mover, rising 2%.

Kraft Foods was the biggest drag on the Dow, declining 1.1% after it agreed to a revised cash-and-stock deal to buy Cadbury for about US$19.6B.

In other deal news, Tyco International agreed to buy Brink’s Home Security Holdings for US$1.9B. Brink’s shares surged almost 31.6%.

Large-cap technology companies buoyed the NASDAQ. IBM is expected to report its quarterly earnings after market close. Apple was up 4.2% while IBM advanced 1%.

Citigroup reported a fourth-quarter loss that met analysts’ expectations as the third-largest US bank took charges linked to repaying government bailout funds. On the upside, the company said consumer credit losses dropped in the quarter and that it also set aside less money for bad loans during the quarter. Shares gained 3%.

The Bank of America and Morgan Stanley will report on Wednesday. Goldman Sachs and Google will report earnings on Thursday.

S&P 500 earnings are expected to have almost tripled versus those a year ago and revenue is expected to have risen 7%. However, the jump is largely due to a spike in financial sector results versus an easy comparison to the fourth quarter of 2008 amid the height of the financial crisis. Without the financial sector, earnings are expected to be down 8% and revenue is expected to decline 1%.

Overseas Markets

Dow up 116 pts to 10,725 (10,592 – 10,730)

S&P 500 up 14 pts to 1,150 (1,136 – 1,150)

Nasdaq up 31 pts to 2,319 (2,291 – 2,320)

FTSE up 19 pts to 5,513 (5,431 – 5,532)

Nikkei down 90 pts to 10,765 (10,749 – 10,867)

Shanghai SE Comp up 10 pts to 3,247 (3,237 – 3,269)

Commodities

WTI Oil up 0.8% to US$78.66/bbl

Gold up 0.7% to US$1,138/oz

Sugar (NY) up 4.9% to USc28.98/lb

Corn down 2.6% to US$3.33/bushel

Wheat down 1.7% to US$4.70/bushel

Natural Gas (Henry Hub) down 2.7% to US$5.51/MMbtu

Silver up 1.0% to US$18.82/oz

Platinum up 1.7% to US$1,650/oz

Currency

A$ / US$ up 0.1USc to US$0.92 /A$

EUR / US$ down 0.9USc to US$1.43 /EUR

GBP / US$ up 1.1USc to US$1.64 /GBP

US$ / Yen up 0.4 Yen to 91.14 Yen/US$

Stock Market Report 15-1-10

US stocks traded slightly higher on Thursday, led by the technology sector.

Market breadth was positive. On the NYSE, winners beat losers by four to three. On the NASDAQ advancers topped decliners eight to five.

The technology sector led gains on the back of positive brokerage comments on Oracle and ahead of an expected profit report from Intel. Shares of Oracle, the world’s second largest business software maker, gained 2.5% and led gains on the NASDAQ. Dow component Intel Corp, the world’s largest chipmaker, is expected to report a quarterly profit after market close. Its stock advanced 1.6%. Analysts expect the company to report earnings of 30cps, compared with 4cps in the previous year. IBM and Hewlett-Packard shares also advanced.

The KBW bank index was up 1.4%, led mainly by regional and midsize banks. President Obama proposed a fee to make big banks repay taxpayers for bailouts. Bank shares had declined earlier in the week on concern about the fee, but on Thursday the sector was higher.

On the downside, US economic data appeared to cast doubt on the strength of the economic recovery. Sales at US retailers unexpectedly fell in December and applications for jobless benefits rose last week. A government report showed that retail sales fell 0.3% in December. Economists were expecting sales to have risen 0.5%. Retail sales excluding autos fell 0.2% versus expectations of a 0.3% rise. Helping to soften the blow, the National Retail Federation said holiday sales for the November – December period rose 1.1%, which was better than the retail group’s expectations for a 1% decline.

The number of American’s filing new claims for unemployment rose last week to 444,000 from 433,000 the previous week. Economists expected claims would rise to 437,000. Continuing claims, a measure of Americans who have been receiving benefits for a week ore more, fell to 4.596M from 4.897M in the previous week.

On the positive side, business inventories rose slightly more than expected in November, up 0.4% as businesses re-stock.

Overseas Markets

Dow up 34 pts to 10,715 (10,667 – 10,724)

S&P 500 up 3 pts to 1,149 (1,144 – 1,150)

Nasdaq up 11 pts to 2,319 (2,303 – 2,323)

Russell 2000 up 3 pts to 647 (642 – 648)

SPI 200 Futures up 11 pts to 4,890 (4,874 – 4,899)

FTSE up 25 pts to 5,498 (5,473 – 5,522)

Nikkei up 173 pts to 10,908 (10,774 – 10,910)

Shanghai SE Comp up 43 pts to 3,216 (3,166 – 3,219)

Commodities

WTI Oil down 0.3% to US$79.39/bbl

Gold up 0.4% to US$1,141/oz

Sugar (NY) down 1.0% to USc27.76/lb

Corn down 0.9% to US$3.45/bushel

Wheat down 1.8% to US$4.95/bushel

Natural Gas (Henry Hub) up 2.8% to US$5.77/MMbtu

Silver up 0.4% to US$18.71/oz

Platinum up 2.1% to US$1,612/oz

Palladium up 5.3% to US$447.13/oz

Copper (NY) down 0.3% to US$3.38/lb

Currency

A$ / US$ up 1.1USc to US$0.93 /A$

EUR / US$ up 0.1USc to US$1.45 /EUR

GBP / US$ up 1.6USc to US$1.63 /GBP

US$ / Yen up 0.1 Yen to 91.07 Yen/US$

Stock Market Report 11-1-10

US stocks rose on Friday despite weak December jobs data. The S&P 500, Dow Jones and NASDAQ hit their highest level in at least 15 months. Friday ended a strong week, with the S&P 500 rising in all five sessions.

Volume was light on the NYSE. Advancing stocks outnumbered declining ones on the NYSE by a ratio of about three to two, while advancing stocks beat decliners on the NASDAQ by about seven to four.

Data from the Labour Department showed that 85,000 jobs were cut in December. Analysts expected no non-farm job losses in December from the previous month. However, analysts noted that monthly job losses have declined sharply since the height of the recession. In addition, November’s payrolls report was revised to show a gain of 4,000 jobs, versus the initially reported loss of 11,000. The unemployment rate, generated by a separate survey, held steady at 10%, in line with forecasts.

UPS gave support to the market after it boosted its fourth-quarter outlook and said it will cut 1,800 jobs. Its shares rose nearly 5%. The news also sent shares of rival Fedex Corp higher by 2.5%. It also boosted investor optimism for the reporting season, which starts Monday with Alcoa reporting its results.

On the NASDAQ, biotechnology companies were in favour. Teva Pharmaceutical Industries gained 4.4% after the drug maker set a revenue target of 2015 of US$31B, more than double its current annual amount.

Among other biotechnology companies, Genzyme Corp advanced 5.2% on speculation that billionaire investor Carl Icahn was considering a proxy battle at the biotech company.

The first week of the year got off to a positive start. For the week, the Dow rose 1.8% the S&P 500 added 2.7% and the NASDAQ rose 2%.

In other economic news, wholesale inventories rose 1.5% in November after rising 0.6% in October. Economists expected inventories to fall 0.3%. Another report showed consumer borrowing fell by US$17.5B in November versus expectations of US$5B. Borrowing was down US$3.5B in the previous month.

Since the start of the year, analysts have revised up their earnings estimates for all S&P sectors except healthcare, financials and consumer staples.

Overseas markets

Dow up 11 pts to 10,618 (10,554 – 10,619)

S&P 500 up 3 pts to 1,145 (1,136 – 1,145)

Nasdaq up 17 pts to 2,317 (2,291 – 2,318)

Russell 2000 up 3 pts to 645 (640 – 645)

SPI 200 Futures up 30 pts to 4,925 (4,887 – 4,925)

FTSE up 8 pts to 5,534 (5,495 – 5,549)

Nikkei up 117 pts to 10,798 (10,678 – 10,816)

Shanghai SE Comp up 3 pts to 3,196 (3,149 – 3,199)

Commodities

S&P 500 Metals & Mining Index up 5.3pts (2.8%) to 192.4

Sugar (NY) down 1.7% to USc27.53/lb

Corn up 1.6% to US$3.82/bushel

Wheat up 2.1% to US$5.29/bushel

Natural Gas (Henry Hub) down 13.8% to US$6.47/MMbtu

Silver up 1.3% to US$18.48/oz

Platinum up 1.5% to US$1,579/oz

Palladium up 0.4% to US$428.25/oz

Copper (NY) down 0.7% to US$3.39/lb

Currency

A$ / US$ up 0.5USc to US$0.92 /A$

EUR / US$ up 0.0USc to US$1.44 /EUR

GBP / US$ up 0.0USc to US$1.60 /GBP

US$ / Yen up 0.3 Yen to 92.66 Yen/US$

Stock Market Report 8-1-10

Overseas markets

Dow up 31 pts to 10,605 (10,505 – 10,612)

S&P 500 up 5 pts to 1,142 (1,131 – 1,142)

Nasdaq down 2 pts to 2,299 (2,285 – 2,301)

Russell 2000 up 4 pts to 642 (633 – 642)

SPI 200 Futures up 29 pts to 4,913 (4,875 – 4,913)

FTSE down 3 pts to 5,527 (5,500 – 5,552)

Nikkei down 50 pts to 10,682 (10,637 – 10,774)

Shanghai SE Comp down 61 pts to 3,193 (3,177 – 3,269)

Top 3 US sectors: Financials up 2.3%; Industrials up 1.3%; Consumer Disc. up 0.9%.

Bottom 3 US sectors: Telecom Svcs down 0.9%; Utilities down 0.5%; Materials down 0.5%.

Rio Tinto plc up 0.11% to A$63.22 eq.; a 20% discount to prev Aust close A$79.00

BHP plc down -0.43% to A$36.34 eq.; a 17% discount to prev Aust close A$43.77

BHP ADR down -0.78% to A$43.76 eq.; a 0% discount to prev Aust close A$43.77

Gold: Barrick Gold Corp -1.3%; NewMont -0.4%; Anglogold -0.8%.

Oil: Chevron -0.4%; Exxon -0.3%; Coconophillips -0.5%; Anadarko -0.1%.

Resources: Alcoa -2.2%; Freeport -1.9%.

Steel: Arcelor +1.0%; Nucor -0.8%; US Steel +0.8%; Posco -1.3%.

Commodities

WTI Oil down 0.5% to US$82.75/bbl

Gold down 0.5% to US$1,131/oz

S&P 500 Metals & Mining Index down 2.1pts (1.1%) to 187.2

Sugar (NY) down 1.4% to USc28.00/lb

Corn up 0.8% to US$3.80/bushel

Wheat down 1.9% to US$5.18/bushel

Natural Gas (Henry Hub) up 16.0% to US$7.50/MMbtu

Silver up 0.4% to US$18.28/oz

Platinum up 0.0% to US$1,557/oz

Palladium down 0.5% to US$426.00/oz

Copper (NY) down 1.9% to US$3.41/lb

Currency

A$ / US$ up 0.5USc to US$0.92 /A$

EUR / US$ down 0.5USc to US$1.43 /EUR

GBP / US$ down 0.5USc to US$1.59 /GBP

US$ / Yen up 1.6 Yen to 93.31 Yen/US$

All Three Major US Indices Hit New Highs; Uptrend Confirmed

Even though the Dow made a new bull market high last week, the S&P 500 and Nasdaq Composite had yet to do so.  After this morning’s 1% plus gains across the board, both the S&P 500 and Nasdaq have now also traded to new intraday bull market highs.  With all three major indices breaking to new highs today, the market uptrend has once again been confirmed.

Source: Bespoken Research

Stock Market Wrap 8-10-09

The Australian market soared upon opening and reached a plateau for the rest of the morning, before lifting off again in the afternoon. The All Ordinaries finished Wednesday 99 points higher.

The S&P/ASX 200 closed 104 points up. The Materials sector surged, with winners including BHP Billiton (+$1.16), Rio Tinto (+$3.02), Newcrest Mining (+$2.22), Fortescue Metals (+$0.31), Lihir (+$0.17), Amcor (+$0.15), BlueScope Steel (+$0.08), Incitec Pivot (+$0.21), Alumina (+$0.09) and OZ Minerals (+$0.08). The Financials sector benefited from gains in the four majors: Commonwealth Bank (+$1.80), Westpac (+$0.33), National Australia Bank (+$0.93) and ANZ (+$0.55), plus a strong showing from Westfield (+$0.27), Macquarie Group (+$3.05), Suncorp-Metway (+$0.58) and Stockland (+$0.16). The Energy sector saw Origin (+$0.20), Santos (+$0.18), Oil Search (+$0.08) and particularly WorleyParsons (+$1.61) rise. In the Industrials sector, Leighton Holdings (+$1.27) and Macquarie Airports (+$0.16) gained but Brambles (-$0.41) extended its decline. Another notable loser was Singtel (-$0.14).

On Tuesday night, Rio Tinto took another step towards the development of a world class copper-gold resource in Mongolia with the signing of an investment agreement for the Oyu Tolgoi project with the Government of Mongolia. The government will address the conditions precedent and Rio Tinto and Ivanhoe Mines will commence the development phase. Production is expected to start in 2013.

US stocks rose for a third day as banks climbed on an analyst upgrade, while Alcoa jumped before beginning the third-quarter earnings season.

The S&P 500 fell for most of the day, as homebuilders declined on speculation Congress will not extend a tax credit. Pulte Homes, KB Home and DR Horton were down between 3% and 4%. AT&T led a slump in telephone shares after saying it will allow iPhone customers to use internet phone carriers.

Boeing, United Technologies, 3M and Travelers Companies were among the biggest decliners on the blue-chip average. They were also among the biggest gainers in the early-week rally.

Late in the session, a rally in a variety of financial stocks gave the market a boost. The Bank of America, the largest US lender by assets, and Wells Fargo each added 2.1%.

The benchmark index was further buoyed in the final hour of trading as investors speculated Alcoa, the first Dow company to report earnings, would post better-than-estimated results.

After market close, Alcoa reported its first quarterly profit in a year, as it benefited from improving metal prices and saved money by cutting jobs and reducing other costs. Profit, excluding one-time charges, was 4cps, exceeding analysts’ average estimate for a 9cps loss. Revenue was US$4.62B versus forecasts for US$4.55B. Results were weaker than those a year ago. Alcoa cut 18,000 jobs in the 12 months to June as the global recession depressed demand and prices for aluminium.

In other earnings news, Costco, the largest US warehouse club, reported fourth-quarter profit that fell less than analysts estimated as gross margin improved. Shares gained 1.8% in NASDAQ trading. Net income dropped 6% in the quarter from a year ago. Shoppers join the members-only warehouse club for basics, along with designer goods and other luxuries. Costco has seen sales of non-essential items fall as consumers pull back to cope with job losses and the recession. Costco runs stores in North America, Asia, Mexico, the UK and Australia.

Broad S&P 500 third-quarter earnings are expected to have fallen 25% from a year ago, extending the losing streak to nine quarters. Analysts expect the energy sector to report that profits fell 64% from a year ago. Industrials are expected to post a 45% drop in profits. Financials are expected to post the best results due to easy comparisons against an abysmal third quarter of 2008. The sector is expected to see earnings growth of 59%.

Overnight Stock Markets 6-01-09

Index/Security Close Chg %Chg

Dow Jones (US) 9,600 +112.1 +1.2

S&P 500 1,040 +15.3 +1.5

NASDAQ 2,068 +20.0 +1.0

US stocks rose as data showed service industries returned to growth after 11 months of contraction.

Banks led the advance, with the Bank of America, JPMorgan and Wells Fargo up between 4% and 7%. The KBW Banking index added 3.2%.

Department store chain Nordstrom climbed 9.5% for the biggest advance in the S&P 500 after analysts upgraded the stock. Limited Brands, the owner of Victoria’s Secret lingerie chain, climbed 7.6% after analysts raised their earnings forecasts for the company.

The US services sector expanded in September at a faster pace than expected, with the ISM’s services index coming in at 50.9, compared to a forecast of 50.0.

Alcoa is scheduled to release third-quarter results on 7 October, the first company in the Dow Jones index to report earnings. The company is expected to report a quarterly loss versus a year ago, reflecting a weak materials sector. Overall, S&P 500 profits for the third quarter are expected to have dropped almost 25% from a year-ago levels. Analysts expect companies to report earnings growth in the fourth quarter.

Among notable movers, Brocade Communications rallied 15% in unusually active trading on reports that it has put itself up for sale. Both Hewlett-Packard and Oracle were cited as potential buyers, according to media reports.

Since bottoming at a 12-year low on 9 March, the S&P 500 has gained 51.2% and the Dow has gained 45%. After hitting a six-year low, the NASDAQ has gained nearly 61%.

Overnight Stock Markets 5-10-09

US stocks fell on Friday as weak jobs data gave more evidence that the economic recovery would be less robust than expected.

Declining stocks outnumbered advancing ones on the NYSE by a ratio of about two to one. On the NASDAQ, about nine stocks fell for every five that rose.

US employers cut a deeper-than-expected 263,000 jobs in September, lifting the unemployment rate to 9.8%, according to a government report on Friday. The Labour Department said the unemployment rate was the highest since June 1983. Payrolls have now dropped for 21 consecutive months. Friday’s report also showed companies cut working hours, pushing weekly earnings lower. The average work week shrank to 33 hours in September, matching a record low, while average weekly earnings fell to US$616.11.

Industrial companies in the S&P 500 fell 1.5%, the biggest decline among the index’s 10 industry groups. A report from the Commerce Department showed orders placed with US factories fell 0.8%, more than estimated, after a revised 1.4% increased in July. Excluding transportation equipment, orders rose 0.4%.

Energy stocks tracked crude prices lower. Chevron and Exxon Mobil both declined 1%.

More downbeat news came from General Electric (GE), which slid 3.8% after the CEO said the company was holding discussion on partnerships or an IPO for its NBC Universal unit (NBCU). According to media reports, GE and Comcast were discussing a deal under which the US cable firm would take control of 51% of NBCU with GE keeping the rest.

Apple shares were among the bright spots, rising 2.2% on an analyst upgrade.

The S&P index of consumer staples, up 0.6%, was the only positive S&P 500 sector. The sector was buoyed by a 4.2% gain in PepsiCo, which advanced after analysts upgraded the stock.

Alcoa, the biggest US aluminium producer, is scheduled to release third-quarter results on 7 October, the first company on the Dow average to do so. Analysts expect third quarter profits for companies in the S&P 500 to be down 23% from a year ago. For the fourth quarter, analysts expect profits to be up 63%.

Stock,CFD, Fx and Forex Options – Data and Trade Recs 11-05-09

Calendar

What’s going on?

• The US Unemployment Rate rose to 8.9% on Friday – as expected. NFP losses were slightly lower than expected as indicated by the ADP on Wednesday.
• Still, a lot of talk about ‘green shots’, but tech stocks are showing a marked weakness vs. S&P500 in the past two trading days. Watch out for stocks if Nasdaq breaks the 1377 level. One positive though: The Itraxx Europe CDS Index is much lower on Friday and our own CDS Index agrees.
• The rally in copper stopped for now, but commodities in general are through the roof, especially Crude Oil. Is copper still leading?
• EURUSD broke forcefully higher on Friday, now trading at +1.36.

FX

Equities

Futures

FX Options

Stop Thinking The 30% Stock Rally Means The Bear Market Is Over

Now that stocks have rallied nearly 30% off their low, pundits agree: It’s a new bull market.  So be very afraid.

Market punditry is a lagging indicator, not a leading one.  Pundits are excellent at describing what has happened, not what is going to happen.

But doesn’t the 30% rally off the bottom obviously mean that the bears are fools, that it’s finally safe to get back in the water?  No.  It doesn’t obviously mean anything. 

First, the “mega-bear quartet”–an overlay chart of the bears that began with the DOW in 1929, the NIKKEI in 1989, the NASDAQ in 2000, and the S&P in 2007.  The last one, the current bear, is the blue line. The horizontal axis is time from the peak, measured in years.

If you’re feeling confident that the 30% rally means that happy days are here again, take a look at the humongous rallies in the NIKKEI (red) and NASDAQ (green) that happened at this point in the process.  Then look at what happened afterward:

If that doesn’t sober you up, check out the extended dance remix of the same chart, lasting 19 years instead of 10.  It doesn’t get much better:

But, yes, you’re right, it’s also possible that the recent rally is the start of a Great New Bull Market.  Bear markets have always ended eventually (though Japan’s hasn’t yet).  Here’s Doug’s snapshot of the past hundred years of bear markets, as well as a slide show showing the details how each one ended:

 Source: Henry Blodget

ASX Market Report 27-04-09

View Full Report

The SFE Futures suggested a 43 point rise in the market. BHP and RIO both up in ADR form Friday – 1.80% and 1.93% respectively. (BHP closed at the equivalent of 3287c, up 82c on Friday’s close.) Metals up Friday – Copper up 2.95%, Zinc 0.21% and Aluminium 0.62%. Nickel up 1.76%. Oil price up $2.19 to $50.65. Gold up $7.50 to $914.10. Bonds down with the 10 year yield up to 2.9921%. A$/US$ up to 72.28c.

Materials up 4.4% – Freeport McMoRan up 4.5% and Xstrata up 14.3%. Anglo up7.3%. Financials up 2.5% after being up 4.4% mid afternoon. The government released details regarding the measures used for the stress-testing of 19 of the US’s biggest banks – the results of which are due May 4th. American Express led the financials up – up 20% on better-than-expected quarterly earnings. Fed reserve policymakers will meet Tuesday for a two-day meeting to assess economic conditions and the effectiveness of programs in place. They will consider expanding or adapting the intervention measures. Tech stocks did well – Amazon up 4.78 % helping the Nasdaq to outperform. Microsoft’s earnings were in-line with expectations. Ford’s loss wasn’t as bad as expected – said they have no plans to request
government assistance. The Wall Street Journal reported Chrysler is preparing to file for bankruptcy.

The market is up 56. The SFE Futures suggested 43 point rise this morning. Most sectors up. Resources up 2.2% with BHP and RIO up 2.0% and 1.5%. Property stocks up 2% and Financials up 1.6% – Banks all up ahead of the NAB and ANZ interim results this week. Copper, nickel and zinc companies up on the higher metal prices Friday. So far we are
ignoring Swine flu concerns although Biota is up 70% and Qantas down 3.8%.

Mixed Signals on March Short Interest Report

Following large rallies like the one we have had off the March lows, it’s typical to see short interest decline as traders cover their negative bets.  As Thursday’s short interest figures for the end of March illustrated, short interest on the Nasdaq declined by 4.1%.  On the NYSE, however, we have seen a completely different picture.  Even after the sharp rally in Financials (most of which are listed on the NYSE), short interest as a percentage of shares outstanding is currently at 4.23%, which is higher than it was at the start of March.

Source: Bespoke Research

Tricom Today Australian Stock Report 9-4-09

View Report

The SFE Futures suggested a 45 point rise in the market. BHP and RIO mixed in ADR form overnight BHP down 0.31% and RIO up 4.58%. (BHP closed at the equivalent of 3178c, up 36c yesterday’s close.) Metals all up overnight – Copper up 0.48%, Zinc 1.48% and Aluminium 1.15%. Nickel up 0.64%. Oil price up 0.5% to $49.37. Gold up $2.60 to $885.90. Bonds down with the 10 year yield up to 2.8596%. A$/US$ down 0.08% to 70.98c.

Nasdaq outperformed on the hope that a recovery in business spending will boost technology stock’s profits. IBM up 2.5% and Qualcomm up 2.2%. Security regulators voted to seek public comment on five proposals to curb
shortselling. Chrysler’s chairman said the government’s May 1 deadline for completing a deal with Fiat is “ample time”. Homebuilders up – Pulte Homes made a bid for Centex Corp from $1.3bn which would create the largest US homebuilder. Centex up 19% and Pulte down 10.5%. Bloomberg data suggests EPS across the S&P500 will fall 37% this quarter and another 30% next quarter. Juniper Networks preannounced quarterly results that were inline with expectations and the company’s prior forecasts.

The market is up 22. The SFE Futures suggested a 45 point rise this morning. All sectors bar telecom and healthcare up. Property leading the way – up 2.9%. Banks mixed – NAB down 1.4% and CBA up 1.4%. BOQ down 4% on 1H results. Resources up – BHP and RIO up 1.3% and 1.5%. Major gold stocks down despite the $2 rise in the gold price.

Tricom Today Australian Stock Market Report 27-3-09

The SFE Futures suggested a 44 point rise in the market.BHP and RIO both up in ADR form overnight – 5.05% and 8.35% respectively. (BHP closed at the equivalent of 3451c, up 73c on yesterday’s close.) Metals up overnight – Copper up 3.03%, Zinc 3.85% and Aluminium 1.83%. Nickel 1.30%. Oil price up 3.1% to $53.87 whilst analysts fail to be able to explain why oil prices are rising against economic data showing the US economy is shrinking and oil inventories are bloated. Gold down $4.20 to $940. Bonds up with the 10 year yield down to 2.7417%. A$/US$ up 0.61% to 70.19c. Financials up 1% – lagged the entire session. The Obama Administration announced their plans for rewriting the financial rules governing Wall Street – the plan is to set up a single regulator who can monitor and intervene in any large firm whose failure could threaten financial stability across the economic system. The outline of the plan also highlighted tightening rules for hedge funds and private equity firms. Technology stocks up 4% – one of the strongest risers overnight – the large caps and the NASDAQ outperformed. The government’s 7-treasury note auction received stronger demand than yesterday’s 5-year note sale. Some of the fears around the government’s cost of capital and investor risk appetites were allayed. Retailers up 4.4%. Best Buy, ConAgra, Dr Pepper Snapple Group – all beat analyst’s expectations. Discretionary stocks up 4.0%. The market is having another good day – up 53 – much in line with the 44 point rise suggested by the futures this morning. The ASX 200 is now up 16.8% from its low of 3120 registered on Tuesday 10th March.

NASDAQ Breaks Out Above Short-Term Resistance

The NASDAQ broke out above short-term resistance today by trading to its highest level since February 19th.  While this is a positive for now, the next area of resistance is only eleven points higher at its 50-day moving average (1,473), and as shown below, over the last several months, closes above the 50-day have been few and far between. 

CFD Trading For Dummies

Contracts for Difference (CFDs) are contracts between a trader and a CFD Provider , who will at the close of the contract, exchange the difference between the opening price and the closing price of the underlying index, share per the number of specified CFD contracts.

A CFD differs from the traditional trading methods as it is not a purchase of the nominated investment, but trading on its speculated price movement. The main idea of CFDs is the ability to be able to trade higher volumes than traditional trading while using less initial capital. The buyer of the contracts is required to pay commission to enter the contract, plus fixed interest on the remaining value of the borrowed amount, until they decide to end the contract, at which time they are paid the price difference. The buyer may opt on either side – Long(buyer) or the Short(seller), which means that if the Index / Share price decreased, the trader could still turn a profit if that was their initial position.

Advantages of CFDs versus traditional share buying This is done on leverage (this is typically between 10% and 50% for actively traded stocks), both shares and CFDs participate in all corporate actions, both buyers receive dividends and sellers have to pay but only a share holder is able to vote and receive the franking credits.

With CFDs one is not entitled to these rights, which enables CFD sellers to sell with ease. This makes CFDs an excellent trading product. The leverage and ability to short sell gives power and flexibility. Unlike futures, CFDs do not have an expiry date, so one can hold on to them for as long as they desire. CFDs open up a whole new trading world, with the ability to trade shares / indices. CFDs are the flexible new way to trade. You have access to worldwide markets, such as the United States (DOW, NASDAQ, S&P), United Kingdom (FTSE), Japan (NEIKKI), Hong Kong (Hang Seng) and many other countries.
1) Leverage If you do not have the money needed to trade shares directly CFDs can offer you the exposure required to make a profit from small percentage moves on the underlying share price. The leverage level offered by the CFD provider magnifies the underlying movement of the stock. Most providers set differing leverage levels and you can find the best level that suits you trading style.2) Controlled Risk If you have ever traded, you know how important it is to use stop losses for capital preservation, especially when using a leveraged product.

CFDs reflect the price of the underlying equity. Therefore, you will always know what the market price is of your shares and know what you can sell out for, provided you choose a CFD Provider who uses “at market” prices. Some CFD providers (market makers) may only give spreads, which have the potential to force you in at higher prices and out and lower prices.

Placing automated Stop Loss orders can exit you out of suggestions that go against you while you are busy in your day-to-day activities. Example: XYZ Ltd is currently trading at $9.95 bid and a $10.00 ask price. You want to buy 1000 shares of XYZ Ltd share CFDs at the offer price of $10.00, with your view that the stock will rise in price. We are working on the leverage margin of 1:10. Therefore every dollar of capital you invest the CFD provider will provide you with $10 of leverage.

CFD Trading Traditional Shares

Buy Price $10.00 Buy Price $10.00

Initial Margin (10%) $1,000 Initial Outlay $10,000

Brokerage $17 Brokerage $30

GST 10% $0 GST $1.00

Total Outlay $1,017 Total Outlay $10,031.50

Traditional brokers require that you have 100% of capital required for the trade upfront. The difference in funds required between the CFD provider and the traditional way of trading is $9,014.50.

Closing the trade

CFD Trading Traditional Shares

Sell Price $10.25 Sell Price $10.25

Gross Profit $250 Gross Profit $250

Brokerage $34 Brokerage $60

GST 5% $0 GST $3

Finance Charge $1.45 Finance Charge $0

Net profit/loss $218.55 Net profit/loss $187 In this example the trade was positive for the trader. If the stock had of fallen by $0.25, you would have realized a gross loss of $250 with both the CFD provider and the traditional broker. The net loss would have been $285.45 with the CFD provider and $313 with the traditional broker.

The difference in funds required between the CFD provider and the traditional way of trading is $9,014.50.

Closing the trade

CFD Trading Traditional Shares

Sell Price $10.25 Sell Price $10.25

Gross Profit $250 Gross Profit $250

Brokerage $34 Brokerage $60

GST 5% $0 GST $3

Finance Charge $1.45 Finance Charge $0

Net profit/loss $218.55 Net profit/loss $187

In this example the trade was positive for the trader.

If the stock had of fallen by $0.25, you would have realized a gross loss of $250 with both the CFD provider and the traditional broker.

The net loss would have been $285.45 with the CFD provider and $313 with the traditional broker.

*Brokerage cost are just examples.

Financials Wipeout

In the first chart below we highlight a ratio of the S&P 500 to the S&P 500 Bank group going back to 1940.  When the ratio is rising, the financials are getting weaker relative to the S&P 500 as a whole.  As shown, the ratio is currently as high as it has been over the entire time period, meaning the banks are as small as they’ve been relative to the overall index.  Where we go from here, nobody knows, but the financials are pretty much getting wiped off the investment map.

Below we highlight the percentage declines from peaks of various asset class busts in the last decade.  Prior to the declines that financials, oil, and homebuilders are seeing currently, the only recent comparison for the current generation of investors was the Nasdaq bust from 2000-2002.  As shown, the Nasdaq went down 78% from its March 2000 peak to its October 2002 low.  Following the bursting of the Internet bubble, many investors didn’t think they’d see a similar bust for decades.  But the current declines in financials and homebuilders have now eclipsed those of the Nasdaq, and oil has also gone down just as much. 

Oil’s decline of 77% from July 2008 to its low in December was the fastest bust of the group, while homebuilders have gone down the most and for the longest period of time.  Since July 2005, the homebuilders are down a whopping 87%!  And the S&P 500 Financial sector is down 81%, which isn’t as bad as the homebuilders, but given the fact that it didn’t go up nearly as much as the homebuilders, it’s probably worse.

Source: Bespoke Research

CFD Trading Terminology Explained

Contracts for Difference (CFDs) are contracts between a trader and a CFD Provider, who will at the close of the contract, exchange the difference between the opening price and the closing price of the underlying index, share, commodity, per the number of specified CFD contracts. A CFD differs from the traditional trading methods as it is not a purchase of the nominated investment, but trading on its speculated price movement.

The main idea of CFDs is the ability to be able to trade higher volumes than traditional trading while using less initial capital. The buyer of the contracts is required to pay commission to enter the contract, plus fixed interest on the remaining value of the borrowed amount, until they decide to end the contract, at which time they are paid the price difference. The buyer may opt on either side - buy (long) or sell (short). This makes CFDs an excellent trading product. The leverage and ability to short sell gives power and flexibility.

The leverage which is typically between 5% and 35% for actively traded stocks, both shares and CFDs participate in all corporate actions, both buyers receive dividends but only the buyer of the share is able to vote and receive the franking credits.

To select a great broker if you are trading in Asia, Australia, or UK download a FREE TRIAL today of the Tricom Trader platform.

Unlike futures, CFDs do not have an expiry date, so one can hold on to them for as long as they desire. CFDs open up a whole new trading world, with the ability to trade shares, indices, foreign exchange, and commodities. CFDs are the flexible new way to trade. One can trade Singapore Stock Exchange (SGX) listed shares but you have access to worldwide markets, such as the United States (DOW, NASDAQ, S&P), United Kingdom (FTSE), Japan (NEIKKI), Hong Kong (Hang Seng) and many other countries.