Squawk Box Europe – Bill McLaren

LET’S LOOK AT THE S&P 500 INDEX DAILY CHART

There is a chance, a probability for a high today or Monday. When the July “False Break” low was hit I indicated three probabilities. A new leg up running to a minimum 1247 in 90 to 99 calendar days, a secondary high or fast rally that exhausts before a new high usually 7/8 of the range down in 60 to 65 calendar days. Or a lower double top and this is where the index is now located. So as the index moves into these time window we need to look at the wave structure, volume, price level and the pattern of the trend to confirm the probability. The index is at the “OBVIOUS” resistance of the previous high and now within the time window at 180 days.

There is a 5 wave structure up (5 or 3of 3), volume has been decreasing but not unusual if the trend were up at this stage, but the pattern of trend is not setting up well. Notice how small the daily ranges have become. High points and tops tend to have some volatility. Notice the expansion of ranges during the January top and the April top and in this case the ranges are narrowing. If there is a move down it is possible to see just one to three days down and resumption of the trend due to the resistance being “obvious.”

Running out cycles from the July low has 45 days on the 15th and if a low could indicate a 90 day move up. If this is a counter trend rally in a down trending market the highest probability is to run out 60 to 65 days or out to the first week in September. If there is a high point now it should not exceed 1134. I don’t like the odds for a top due to the small range days and the probability the move down could be a small counter trend down. The small range days leaves a possibility of a large spike up. If today can not advance following yesterday’s reversal up and a daily low is broken I’ll consider a short term move down to trade but I doubt the trend reversal. I hate those small range days as it usually indicates support coming in at high levels and an exhaustion up might be necessary to eliminate the buyers.

GOLD

The two weeks ago I said gold would go to 154 to 157 for a low at 50% of the last leg up. We are now looking for this rally to fail and confirm a downtrend into one of the major support. The move down to 50% of the last leg up to consolidated that leg up. I felt the entire trend since 2008 needed to be consolidated so we are looking for this rally to fail and run down to ¼ of the major range which is the minimum move down to correct or consolidate a major trend or 1122. Once gold establishes a downtrend there is a fast rally as occurred in this uptrend as noted with arrows and this occurs in almost all up trends. So we are looking for evidence this rally will fail at a price above 1212 and possibly on the 12th of August at 1220. If the index runs past 12 trading days there is no high in place and a new high is likely. The pattern of the downtrend was weak so we need solid evidence to conclude a lower high is in place. But that is what we are looking to occur.

Source: McLaren Report

CNBC Squawkbox Europe

LET’S LOOK AT THE S&P 500 DAILY CHART

This is the trend since the July low one year ago. This move down has shown three thrusts down or the classic Elliott wave configuration for a low. The retracements or rallies have been large during this downtrend indicating the pattern of trend has not been strong even though it has dropped over 15%. When retracements are large false breaks are possible. Fast trends and trend reversals come from “false breaks” or breaks to new highs or lows above or below “OBVIOUS” resistance or support that fail to follow through. In this instance the rally has moved well above the previous swing low and that is bullish. The low was a 1/8 extension down as show last report and that is the normal price for a “false break” low. The normal counter trend in a fast trend is one to four day and this has rallied 3 days with the last day a smaller range indicating some resistance. Exceeding the fourth day is critical. The calculated resistance at 1/3 to 3/8 of the range down is 1080 to 1090 and that is important. Exceeding 4 days of rally will indicate a low is in place and a selloff should produce a higher low. There is a turning point on the 13th and a higher low around the 24th would be bullish. There are still only four alternatives: a 30 or 45 day fast run to a secondary high around 1180 followed by a bear trend; a struggling move up to 1247 for a top in September or October followed by a two year bear trend. A struggling movement that stays inside the last range down creating a distribution pattern with 3 lower highs. Or a new low to around 950 followed by a 6 month rally and then a bear trend.

LET’S LOOK AT GOLD

Two weeks ago we forecast a top in gold between the 28th June and 3rd July and that high occurred on the 28th. We also indicated it would not be any higher in price since the price targets had been hit.

The objectives for a decline are 1122 at ¼ major range which keeps the uptrend in a strong position for another rally so there needs to be caution with that support. Then 1/3 to 3/8 at 1075 though 1051 as the ultimate objective. The only problem with my forecast is the last low was only 3/8 retracement of the last leg and that small retracement does keep the last leg up intact. But I expect that to be broken and test 1157, bounce to around 1183 and resume the downtrend. But it must break this current support which I didn’t believe would stop the move down. Timing dates are July 17, August 4th for a possible trend completion and August 16th.

Source:  http://www.safehaven.com/article/17427/cnbc-squawkbox-europe

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$

Byron Wien’s ten Stock Market surprises for 2010

Dead on target at the beginning of the new year, 76-year-old Byron Wien again published his annual list of surprises to expect in 2010. Wien, Vice Chairman of Blackstone Advisory Services and one of Wall Street’s best known veterans, has been publishing his list of economic, market and political surprises since 1986.

Reviewing Wien’s 2009 list, he was very accurate with the direction of most of his predictions.

He foresaw a second-half recovery in the US economy, and the S&P 500 Index rising to 1,200 (up from 903 at the end of 2008 to 1,115 by December 31, 2009). He also predicted: “The ten-year US Treasury yield climbs to 4% [up from 2.24% to 3.84%]. Later in the year, as the economy shows signs of recovery, economists and investors shift their mood from concern about deflation to worries about inflation. A weak dollar, rapid growth in money supply and record-setting deficits (over $1 trillion) are behind the change.” Spot on.

Wien also expected the gold and oil prices to climb to $1,200 and $80 respectively – a feat accomplised in December.

He believes his ten surprises have at least a 50% chance of occurring at some point during the year. Although this is not a very high probability, his predictions nevertheless make for stimulating reading. His list for 2010 follows below.

1. The United States economy grows at a stronger than expected 5% real rate during the year and the unemployment level drops below 9%. Exports, inventory building and technology spending lead the way. Standard and Poor’s 500 operating earnings come in above $80.

2. The Federal Reserve decides the economy is strong enough for them to move away from zero interest rate policy. In a series of successive hikes beginning in the second quarter the Federal funds rate reaches 2% by year-end.

3. Heavy borrowing by the US Treasury and some reluctance by foreign central banks to keep buying notes and bonds drives the yield on the 10-year Treasury above 5.5%. Banks loan more to corporations and individuals and pull away from the carry trade, thereby reducing demand for Treasuries. Obama says, “The suits are finally listening”.

4. In a roller coaster year the Standard and Poor’s 500 rallies to 1,300 in the first half and then runs out of steam and declines to 1,000, ending where it started at 1115.10. Even though the economy is strong and earnings exceed expectations, rising interest rates and full valuations present a problem. Concern about longer term growth and obligations to reduce leverage at both the public and private level unsettle investors.

5. Because it is significantly undervalued on a purchasing power parity basis, the dollar rallies against the yen and the euro. It exceeds 100 on the yen and the euro drops below $1.30 as the long slide of the greenback is interrupted. Longer term prospects remain uncertain.

6. Japan stands out as the best performing major industrialized market in the world as its currency weakens and its exports improve. Investors focus on the attractive valuations of dozens of medium sized companies in a market selling at one quarter of its 1989 high. The Nikkei 225 rises above 12,000.

7. Believing he must be a leader in climate control initiatives, President Obama endorses legislation favorable for nuclear power development. Arguing that going nuclear is essential for the environment, will create jobs and reduce costs, Congress passes bills providing loans and subsidies for new plants, the first since 1979. Coal accounts for about 50% of electrical power generation, and Obama wants to reduce that to 25% by 2020.

8. The improvement in the US economy energizes the Obama administration. The White House undergoes some reorganization and regains its momentum. In the November Congressional election the Democrats only lose 20 seats, much less than expected.

9. When it finally passes, financial service legislation, like the health care bill, proves to be softer on the industry than originally feared. There is greater consumer protection, more transparency, tighter restriction of leverage and increased scrutiny of derivatives, but the regulatory changes for investment bankers and hedge funds are not onerous. Trading volume and merger activity increases; financial service stocks become exceptional performers in the US market.

10. Civil unrest in Iran reaches a crescendo. Ayatollah Khameini pushes out Mahmoud Ahmadinejad in favor of a more public relations adept leader. Economic improvement becomes the key issue and anti-Israel rhetoric subsides. Talks with the US and Europe begin but the country remains a nuclear threat. Pakistan becomes the hotspot in the region because of the weak government there, anti-American sentiment, active terrorist groups and concerns about the security of the country’s nuclear arsenal.

Source: PR-inside.com

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%.

Morning Stock Report – Stocks to Watch 22-7-09

International Markets

• Market:

-          Stocks continue to gain after Bernanke says there are sign the economy is stabilizing.

-          Bernanke comments: ‘Limited inflation pressures’ will allow policy makers to keep interest rates near zero for an extended period. Economy is showing ‘tentative signs of stabilization’

-          S&P500 sectors: Best; Healthcare +1.5%, Oil & Gas +1.2%, Utilities +1.1%. Worst; Financials -0.8%, Cons Services -0.3%, Industrials -0.3%

-          Reporting season update: 70 companies have reported so far in the S&P500, earnings beating expectations on avg 14%

-          Treasuries climb most in 2 weeks. Yield on 10yr -13bpts to 3.48%

• Commodities:

-          Gold, pulls back a little on the US interest rate outlook and rise in the USD. USD +0.4% against Euro

-          Oil, Increased on back of a better than expected result from Caterpiller signalling recession may be easing.

-          Copper: Freeport beat analyst estimates on lower operating costs.

• Eco Data:

-          ABC Consumer confidence -50 (In-line with expectations)

Technical Analysis

· SPX -SP500
- while market has enjoyed very strong rally within the space of a week, major resistance levels have not yet broken and majority of stocks have not managed to break June highs
- this unfortunately still keeps stocks within a very wide choppy trading range where further backing and filling can be experienced before the ultimate breakout and trend higher emerges
- many companies beating expectations are doing so on cost cutting while revenue numbers fail to meet
expectations – this is an unsustainable support for the
economy and market in the near-term
- late august/early sept is still viewed as the ideal timing
point for the market to begin a very strong and robust
rally
- 956 remains huge resistance with false breaks above
this a risk up to 985

· XJO ASX200
- Strong rebound has retested June highs, reducing the risk of 3550 downside limit substantially.
- However, the expectation of choppiness and general difficult and broadly directionless trading is unaltered and rally past week now looks over-extended and at risk of forming a secondary peak in the 4084/4100 zone
- RSI at trendline resistance in keeping with other shortterm peaks seen in the past few months
- Pullback to 3900 likely as part of further backing and filling before ultimate breakout
- While index is testing June highs, very few individual stocks show any potential of making new highs, with few even within striking distance of those equivalent levels.

View Full Report

Percentage of Stocks Above 50-Day Moving Averages

Percentage of Stocks Above 50-Day Moving Averages

With the market falling 5% over the last few days, we wanted to check in on a common breadth indicator that tracks the percentage of stocks trading above their 50-day moving averages.  Currently, 82% of stocks in the S&P 500 are still trading above their 50-days, which is still higher than the peak readings we saw during prior rallies over the last year.  On a sector basis, readings have fallen off the most in Tech, Consumer Discretionary, Utilities, and Financials.  Health Care has actually seen its reading increase up to 87% over the last few days as investors rotate from cyclicals to defensives.

Source: Bespoken Research

S&P 500 Pullback Reaches 5%

The S&P 500′s pullback from Friday’s intraday high crossed the 5% level today.  The current pullback is the third intraday pullback of at least 5% since the rally began on March 9th.  With the S&P 500 on pace for its third straight daily decline (another first for this rally), the current pullback is also the longest. 

A key level to watch on the S&P 500 is 875.  The previous pullback in April ended when the S&P 500 traded down to the level of the March peak.  If this decline is anything like the last, we would expect to see support at the peak of the April rally which was 875.  If that level fails to hold, the next area of support comes into play at the 50-day moving average (~825).

Source: Bespoken Research

Oil and Stocks Trading Together

lf you’ve been following the markets on a daily basis over the last few months, chances are you’ve noticed that oil and stocks have been trading hand in hand together.  When stocks have gone up on the day, oil has also gone up, and vice versa.  Below is a chart highlighting the price of oil and the S&P 500 so far in 2009.  As shown, both are up big since the March lows.

To quantify this trading relationship, we calculated the correlation between the daily percent change of oil and the S&P 500 on a 50-day rolling basis going back to 1986 (as far back as daily oil pricing goes).  As shown below, prior to recently, the correlation between the two over any 50-trading day period had never gone above 0.50 (1 is perfectly correlated).  Now, however, the correlation between their daily moves is at its highest level ever and approaching 0.60.  So if you’ve noticed that the two seem to be much more inline with each other recently, here’s your proof.

Source: Bespoken Research

Stock,CFD, Fx and Forex Options – Data and Trades

Calendar

What’s going on?

• The stress test on US banks was released yesterday and nothing much new information was revealed. BofA need $34 bln., Wells Fargo $13.7 bln and CitiGroup $5.5 bln. The major issue is still whether the assumptions underlying the stress test regarding the worst case scenario is realistic.
• ECB cut interest rates to 1% and announced that it wants to buy debt and bunds were heading lower on this. BoE announced that it will have another go of buying debt despite that the prior attempt did not have any long lasting effect on the curve.
• Watch out for Non-farm payrolls and Unemployment rate from the US today. Definitely today’s most important event and will move markets.
• Toyota was out with a loss at 436.93 bln. Yen vs. a profit of 1.72 TN Yen last year. Cuts dividend by 50% and present a very bleak outlook for 2009.

FX

Equities

Futures

FX Options

Stock,CFD, Fx and Forex Options – Data and Trades

Calendar

What’s going on?

• Yesterday’s ADP Employment Change was a lot better than expected – and the March figure was revised higher by 34K. Today’s Jobless Claims will probably confirm that we stopped losing jobs at an increasing pace… BUT the US economy is likely to continue losing jobs for the next two years.
• Stocks went higher again – completely disregarding the trend in earnings. We respect the S-T trend, but remain L-T bearish. The S&P500 might test the 200 DMA (now 958) or the big-picture resistance around the 1000 or 1014 (38.2% Fibonacci).
• Copper is rallying strongly and could break higher above the 220-level. That would lead to more (unwarranted) stock optimism.

FX

Equities

Futures

FX Options

Stock,CFD, Forex and Forex Options – Data and Trades

Calendar

What’s going on?

• Stocks were on the retreat yesterday led by Energy and Financials, despite a better than expected ISM Non-Manufacturing.
• The rally in commodities also took a breather and Treasuries gained a tad of luster again. Crude looks toppish and the risk-reward is favoring shorts.
• The focus today will be on banks: BofA is said to need $34B in additional capital. The Treasury will reveal conditions for repaying the TARP money today and the official stress-test results will be released tomorrow.
• Watch out for the ADP Employment Change and the Norwegian Rate Decision.

FX

Equities

Futures

FX Options

Breadth By The 50-Day

As the market continues to rally, the percentage of companies now trading above their 50-day moving averages also continues to rise.  As shown below, 92% of the stocks in the S&P 500 are now trading above their 50-days.  This is by far the highest reading since mid-2006, and it is indicative of extremely strong market breadth.

Every sector except Health Care and Consumer Staples has a >50-DMA reading of more than 90%.  The Consumer Staples sector is at 88%, and Health Care is at 75%.  Telecom only has 9 stocks in the sector, and all of them are trading above their 50-days.  The Industrials sector ranks second at 98%, followed by Energy and Utilities at 97%.  While still high, Financials and Consumer Discretionary have actually seen a decline in the percentage of stocks above their 50-days over the last week.  The indicator maxes out at 100%, so there isn’t currently much upside room from a breadth perspective.  A pullback in these extraordinary numbers would be neither surprising nor unhealthy.

Source: Bespoken Research

Gold, Silver and Oil Special Trading Report 5-5-09

by Chris Vermeulen

Gold & Silver Special Trading Report

Gold and silver have been making a nice controlled pullback since their high in February. With precious metal prices drifting lower making clean looking waves like these it’s generally a sign of profit taking before another move higher.

In my opinion the broad market is over bought and has been for about 2 weeks. With most sectors Bullish Percent Charts at levels of previous intermediate tops (4-6 week cycles) it’s important that we tighten our stops on current trades and be ready for playing the down side for broad market equities.

When the board market starts to slide I expect to see money move into gold, silver and precious metals stocks. I do not think we will see a huge slide in prices for the DOW and SP500 but it’s very likely we could see prices pull back 10-15% from these current levels.

When people start to panic and worry about prices dropping again, money will start to flow back into gold and silver. Both of these metals are great to trade but I would like to note that silver is not as widely owned as gold, so it tends to move a little more freely. When money moves in, it surges higher and when money is pulled out of the metal it drops like a rock. A great fund for trading a combination of these metals is the CEF fund as it owns both gold and silver bullion (57% Gold, 39% Silver, 4% Cash).

Silver Bullion ETF (SLV)

Gold & Silver Trading Conclusion:

Trading these metals has been more difficult the past few months due to volatility. It looks as though the markets are starting to settle down. Currently gold and silver are trading in the mid to upper area of their resistance trend lines which means buying at this level carries much higher risk if the trade is to turn and go against you.

Knowing when to exit a trade your trade is one of the most difficult tasks of trading and the part 97% of traders do not do correctly. Protecting your money and or gains is critical. Many times I will exit trades at break even and try again on another setup instead of watching a small winning traded turn into a losing trade.

That being said those of you who are buying at these levels be sure you know your exit points and stick to them. I’m expecting a big move in gold and silver but it could go either way.

Special Oil Trading Report

The energy sector has been beaten down hard over the past 8 months. Since November it looks like it has been bouncing along the bottom with investors buying on the dips when dividends are high and prices are dirt cheap for many solid companies.

I must point out that the broad market and energy stocks look over bought and ready for a sharp pullback any day now. But if oil breaks out above $55 and starts rallying higher energy stocks will follow suit. Keeping our eye on crude oil prices is key here.

Oil Services Stocks Forming a Rounded Bottom Pattern

Light Crude Oil Trading Chart

Weekly Reversal Signal

This Oil Fund has created an intermediate buy signal as of Friday’s close. It appears the price action for this fund is signaling a reversal. The long lower candle wick which was formed two weeks ago touched our support trend line and rallied strong into the close.

Then last weeks move higher completed the reversal candle. Risk for entering this trade is about 11% if you set your stop below the support trend line. I only focus on the daily charts and enter trades with 3% or less risk.

USO Crude Oil Trading ETF

Oil Trading Conclusion:

Oil and energy stocks look to be forming a bottom which is a great sign for oil and other energy products like natural gas.

Oil service stocks have been climbing for several weeks and look ready for some type of pullback. It could be a sideways move or a quick 2-3 day drop.

Crude oil prices continue to hold a solid cup & handle pattern as we wait to see which way prices will breakout. Waiting for a low risk setup in our trading funds is difficult but it must be done to keep our risk: reward ratio in line.

I posted a weekly chart of the USO Texas Oil fund because many you trade this. This weekly chart looks very bullish because over the past two weeks we have had a reversal pattern form. This type of setup is for longer term traders who carry more risk and provide more time for trades to mature.

Earnings Season Beat Rate Continues Higher

More than 700 US companies reported earnings this week, which more than doubled the total number of companies that have reported since earnings season started on April 7th.  But even though so many companies reported, the percentage of those beating earnings estimates rose from 60% to 62%.  With three quarters of companies having already reported, this earnings season is shaping up to be one of the best in years.

Source: Bespoken Reasearch

S&P 500 Trending Higher

As shown in the minute-by-minute intraday chart of the S&P 500 over the last 30 trading days, the index is trading in a nice upward sloping channel.  The index broke to intraday rally highs today, but it still closed below these highs.  And even though the market is trading well above its 50-day moving average into what many consider an “overbought” level, it’s right in the middle of this channel, so it doesn’t have rally resistance until it reaches the top of the channel at around 890-900.  Conversely, the rally has support along the bottom of the channel, and that level is currently around 850.

Source: Bespoken Research

Confidence Jumping

The Conference Board’s index of consumer confidence upticked in a major way this month, jumping the most in three years.  Typically, a rebound from extreme pessimism is a good sign.

There have only been three other times we’ve seen the Consumer Confidence index drop to at least a three-year low, then jump at least 10 points the next month.  Those were April 1974, February 1975 and April 2003.  The first one was a dud, but the last two both led to one-year gains of +20% in the S&P 500.

Source: The Conference Board Consumer Confidence Index

S&P 500 will rise to 1,100 this year, Leuthold says

“Steve Leuthold, whose Grizzly Short Fund returned 74% last year betting against US stocks, said the Standard & Poor’s 500 Index will surge to 1,100 after valuations got to the cheapest levels of his career in March.

“Leuthold, 71, who helps manage $3.2 billion as founder of Minneapolis-based Leuthold Weeden Capital Management, said most investors should have 65% of their assets in stocks.

“‘This market was about as cheap as I’ve seen in my 45 years in this business,’ Leuthold said in a Bloomberg Television interview today. ‘We’re probably going to see the economy start turning upward, not now but toward the end of the year. The market is a lead economic indicator, so the time clock is about right for the market to turn up.’

“Leuthold also said that financial shares won’t be the stock market’s leaders. He favors technology and biotechnology companies and advised investors to avoid ‘defensive’ consumer shares and utilities.

“‘Investors should start buying gold over the next year or so because of the threat of inflation,’ Leuthold said. He started buying the precious metal three weeks ago.”

Source: Rita Nazareth and Erik Schatzker