Dollar Update

Here's a chart from Stockcharts for the US Dollar Index:The dollar consolidated from the beginning of January to mid-February. Then it started losing value in a clearly defined downtrend. Notice the 20 day SMA is crossing over the 50-day SMA. The last time this happened in early November the dollar dropped 3...

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Oil Market Update

Oil is one of the primary commodities that is driving -- or not driving -- inflation. Therefore, it's important to keep on top of where oil is and where it might be heading.Here's a chart from Stockcharts:Since the price low in mid-January, oil has been steadily moving up. It consolidated gains twice -- once in late January and once in mid-February....

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Market Recap

The markets closed up today. The SPYs were up 1.04%, the QQQQs were up .3% and the IWNs were up .94%. Starting at about 11AM, all three markets traded in a sideways pattern, indicating supply and demand were in equilibrium. This looks like mostly a technical bounce, nothing more. This makes more sense especially considering 1.) New home starts dropped 16%, 2.) The PMI was recessionary for a second month in a row and 3.) GDP was revised down to 2.2%. The bottom line is the economy appears to be slowing and the housing market hasn't hit bottom...

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Market Update

The markets have rebounded from yesterday's loss. As of this writing, the QQQQs are up .8%, the IWNs are up 1.1% and the SPYs are up 1.3%. All of the markets are establishing some strong intra-day support levels. We may be seeing two technical patterns right now.1.) An inside day -- think of this like a triangle pattern.2.) A dead-cat bounce. Prices drop hard, then rebound slightly. It's akin to dropping a, well, dead cat from a high height (sorry for the visual).As with all technical analysis -- it's about probabilities not certainti...

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New Home Sales Plunge

From Bloomberg: New-home sales in the U.S. fell last month by the most in 13 years, pointing to more weakness in the real-estate market that limited economic growth last year.The 16.6 percent decrease to an annual rate of 937,000 in January, less than any economist had forecast in a Bloomberg News survey, Commerce Department figures showed today. The pace of sales was the slowest since February 2003. A measure of housing inventory rose to the highest in three months.The figures show home construction will remain a drag on the economy even with...

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Chicago PMI Drops Slightly

Here is a link to the full report.The overall index dropped from 48.8 to 47.9.Production decreased slightly, but new orders increased slightly.Inventories increased in a big way from 38.5 to 56.5 -- the largest gain in 30 years.Here's a big phrase from the report: overall demand down 28% - 30% and sales incentives are high. When you have to pay people to buy your products you have problems.While this report isn't completely recessionary, it is leaning in that direction. In addition, we have two downward trends in the overall business barometer...

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GDP Increases 2.2%

From the BEA:Real gross domestic product -- the output of goods and services produced by labor and property located in the United States -- increased at an annual rate of 2.2 percent in the fourth quarter of 2006, according to preliminary estimates released by the Bureau of Economic Analysis. In the third quarter, real GDP increased 2.0 percent. The GDP estimates released today are based on more complete source data than were available for the advance estimates issued last month. In the advance estimates, the increase in real GDP was 3.5 percent...

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Asian Market Recap

From the WSJ:nvestors in Shanghai-listed stocks Wednesday bucked the very trend they'd begun a day earlier, bidding shares well into positive territory, even as other Asian benchmark indexes plunged for a second straight session.Shanghai's Composite Index gained 3.94% to close at 2881.07, reversing a negative performance in the early part of the morning session. The Shanghai index, which tracks shares listed on the bigger of China's two stock markets, fell 8.8% Tuesday, triggering a global selloff that led to the biggest one-day losses in the U.S....

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Nikkei Opens 700 Points Lower

From the WSJ:Japan's Nikkei 225 index tumbled more than 700 points at Wednesday's open in Tokyo, falling below 18000 for the first time in nearly a week, as investors sold stocks across the board in the wake of steep losses on Wall Street.Not go...

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What Will Happen Tomorrow

Let's look ahead.1.) Today has a huge down day on record volume. None of the daily charts found a meaningful technical bottom.2.) The markets have rallied for the better part of 6 months without a major correction.So before we get to tomorrow's economic news we already have a strong bearish bias.Tomorrow we have GDP, new home sales and the Chicago PMI.There's been a lot of talk about a large downward revision to this number -- a revision in the range of about 1% in GDP growth. If this happens the US economy will have three straight quarters of...

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What the Hell Happened Today

OK. The markets are closed. Let's take a breath and look at what happened.A big drop in China started it off:The Shanghai Composite Index, which surged an astonishing 127% in 2006 and is up 13% over the last six sessions, plunged 8.8% -- the biggest one-day decline in 10 years. Worries the Chinese government may step up its efforts to curb speculative...

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Market Update After Close

It's a bloodbath in the market right now. After the close I'll have a market upda...

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Existing Homes Sales Increase 3%.

From Bloomberg:Sales of previously owned homes in the U.S. rose more than forecast in January to a seven-month high as lower prices and warm weather brought out more buyers.Purchases increased 3 percent last month to an annual rate of 6.46 million, up from a 6.27 million December rate that was higher than previously reported, the National Association...

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Durables Goods Orders Drop

From Bloomberg:Durable-goods orders fell 7.8 percent in January, reflecting the biggest slide in business equipment demand in three years, the Commerce Department said in Washington. At the same time, the Conference Board's consumer-optimism index unexpectedly increased to the highest level in more than five years, and the National Association of Realtors said existing- home sales rose more than forecast.Durable-goods orders excluding transportation equipment dropped 3.1 percent, the most since July 2005. Excluding military equipment, orders fell...

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China's Markets Drop Almost 9%

From the WSJ:Shanghai's benchmark stock index plunged nearly 9% on Tuesday, its biggest drop in more than 10 years, as investors unloaded shares to lock in profits after recent gains. Asian-Pacific markets ended mostly lower.The Shanghai Composite Index tumbled 8.8% to close at 2771.79, its biggest single-day decline since it fell 9.4% on Feb. 18, 1997, just after the death of Communist Party elder Deng Xiaoping. The Shanghai index had gained 1.4% on Monday to 3040.60, extending a spate of record high closes.Shares in airlines, steelmakers and...

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BA Reservations II

It seems that I was not alone in experiencing problems accessing the BA Reservations call centre yesterday.I tipped off the Times yesterday about my troubles, and they reported today that others had the same issues:"More fun and games for British Airways customers, who discovered yesterday morning that the main number to make reservations, as specified on the website, didn't work. Nor did another number supplied by BA's Executive Club. The airline, which is by now convinced that I am deliberately persecuting it, admits to 'some call-routing issues'...

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Foreclosures Increasing

From Marketwatch:And RealtyTrac reported last week that the number of homes entering the foreclosure process increased by 19% in January, compared with December's numbers. Compared with January 2006, the number of homes in the process is up 25%. In 2006, a total of 1.2 million homes entered the foreclosure process, 42% more than 20...

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On Technical Analysis

A poster has asked the very legitimate question of why do I use technical analysis.I struggled for a long time with this question myself. However, it wasn't until I read some of the older classic trader's books that I really started to understand how it works. The works of Gann, Schabacker and Gartley-- especially Gartley-- were incredibly enlightening. First, none of these traders used TA exclusively; they used it as part of an overall strategy. For example, in one book written in the 1930s, Gann spends a great deal of time talking about what...

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Will Commodities Rally Soon?

The charts from the metals got me thinking about the overall commodities situation. Here is the daily chart from Stockcharts:Notice the chart has broken through the downtrend started in early December. In addition, we have a nice strong uptrend that has broken through the moving averages. Finally, the 20 Day SMA has crossed the 50 day SMA -- another...

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Oil Moving Up

From Reuters:Some analysts see a growing upward momentum for oil and note the latest data from the New York Mercantile Exchange points to an increase in investment by large funds."It is the first time this year that the large speculative funds are showing a net long position in crude oil," said Olivier Jakob, an analyst at Swiss-based Petromatrix.Oil prices have swung between a high of $78.40 last July, when fighting flared in Lebanon, and a 20-month low of $49.90 in January when an expected influx of fund money failed to materialise, disappointing...

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Metals May Be Looking At a Summer Rally

Here are three charts that may indicate metals are thinking about a summer rally:Here's a chart for copper:This is the weakest of the three charts, largely because of large sell-off and gapping down formation. The gap down could be a selling-exhaustion gap, indicating the last of the sellers finally got out of the metal at the beginning of the year....

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Sub-Prime Funds Drying Up

From the WSJ:Fears about defaults are slowing the gusher of investor funds going to riskier segments of the mortgage market. That means less money available for "subprime" loans to riskier borrowers, forcing lenders to focus more on borrowers who can afford down payments and have well documented finances. With fewer lower-income Americans able to buy homes, downward pressure on prices will probably increase.These pressures have intensified in recent days. The cost of insuring mortgage-bond holders against default risk, as measured by the so-called...

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BA Reservations

Well done BA for further damaging their already badly soiled brand value.I made a bold and futile attempt to contact their reservations line this morning, on 0870 850 9 850 (the number specified on their website).Having pressed the various option buttons, and listened to the "tinny" music, I was informed that I had dialed the wrong number and was given a new number to dial.Can you guess what that was?Yes, that's right 0870 850 9 850!I rang the Executive Club, and was told that in fact the number should be 0870 850 4 850 and that the BA website...

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Home Supply Stores See Earnings Drop

From the Houston Chronicle:Lowe's Cos., the nation's second biggest home improvement store chain, said Friday that its fourth-quarter profit fell 11.5 percent due to a slowing home improvement market amid a continued slump in the housing sector.The Mooresville, N.C.-based retailer said it earned $613 million, or 40 cents a share, for the three months ended Feb. 2, down from $693 million, or 43 cents a share, a year earlier.Revenue fell to $10.4 billion from $10.8 billion a year earlier. Same-store sales, or sales in stores open at least one year,...

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Is Gold Telling Us Inflation Expectations Are Rising?

I'm not a big gold bug. However, gold can tell us what people may be thinking about inflation. If gold prices are increasing, it may signal that people think inflation will pick-up.Here's a chart of the gold ETF:Last week, the ETF broke through resistance on strong volume. In addition, an uptrend is strongly intact. Both of these moves indicate...

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The Market's Last Week

Here's a chart of the SPYsThe uptrend is still firmly in place. The SPYs pretty much treaded water last week. They did well off on Friday on decent volume. This indicates there is some selling pressure in the market. But until a downtrend breaks through a level of technical support this type of selling is simply short-term profit taking.Here's...

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Oil, Inflation and Interest Rates

From Bernanke's recent Congressional testimony:I turn now to the inflation situation. As I noted earlier, there are some indications that inflation pressures are beginning to diminish. The monthly data are noisy, however, and it will consequently be some time before we can be confident that underlying inflation is moderating as anticipated. Recent...

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Mortgage Writedowns hit HR Block

From the Street:The Kansas City, Mo., company reported its mortgage results as discontinued operations, as it's seeking to sell that business. The mortgage operation posted a loss of $69.7 million, or 22 cents a share, compared to a year-ago net profit of $42.4 million, or 13 cents a share.The loss from discontinued operations "reflects an increase of loan loss reserves of approximately $111 million," it says.H&R Block announced in November that it was considering "strategic alternatives" for its subprime mortgage business, Option One, which...

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Oil Closes Above $60/bbl

Here's a chart from stockcharts:Looking at the raw data, here's what we have. Starting in mid-January, oil rose from it's lows and ran into resistance at the 50 day simple moving average. For about the next month, traders consolidated these gains. Yesterday, oil closed over the psychologically important level of $60/bbl. In addition, it appears...

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5,000 Complaints A Day

The financial ombudsman is receiving up to 5,000 complaints a day from angry bank customers, in respect of high penalty charges. It seems that, as the numbers of complaints are rocketing, there is something of a "customer revolt" over bank charges.A year ago the Ombudsman received about 100 calls a day from the public over bank charges.The FOS said the number of complaints it is receiving is unprecedented. A spokesman said: "It has even eclipsed mortgage endowment complaints. We usually get 200 to 250 of them a day, so it has well surpassed that."...

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10th District Manufacturing Increases

From the KC Fed:Tenth District manufacturing activity growth rebounded strongly in February, and expectations for future factory hiring and capital spending rose as well. The majority of price indexes in the survey increased moderately for the second straight month, due largely to rising food prices.The net percentage of firms reporting month-over-month increases in production in February was 18, up from 5 in January and 7 in December (Tables 1 & 2, Chart). Production accelerated at most types of factories, but especially among producers of...

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Don't Like the Savings Figure? Redefine it!

From the Mess That Greenspan Made:Everyone just stop it! If, in some twisted sort of way, redefining "wealth" or "net worth" as "savings" makes you feel better about the world and your own lot in life, then go ahead and do it - just do it in private.Whatever gets you through the day.But, please, stop sharing your rationalizations with the rest of us who prefer to continue believing that "savings" (as either a verb or a noun) is not something that can come and go as quickly as a subprime lender.Call it old fashioned if you want, but, just leave...

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Sup-Prime Problems Continue

From BloombergThe perceived risk of owning low- rated subprime mortgage bonds rose to a record for a fifth day after Moody's Investors Service said it may cut the loan servicing ratings of five lenders.An index of credit-default swaps linked to 20 securities rated BBB-, the lowest investment grade, and sold in the second half of 2006 today fell 5.6 percent to 74.2, according to Markit Group Ltd. It's down 24 percent since being introduced Jan. 18, meaning an investor would pay more than $1.12 million a year to protect $10 million of bonds against...

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Stronger Labor Laws Needed to Address U.S. Income Equality

Paul KrugmanThose on the reactionary side of the political spectrum are big proponents of equal opportunity-the outcome, whether you make a decent living, live high off the hog or suffer in poverty-is up to the individual.In today’s U.S. economy, such reasoning is flawed, says economist Paul Krugman. Instead, the nation’s increasingly unequal distribution...

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Oil Breaks $60/bbl. Will it Close there?

From FxStreet:Oil broke through the 60 usd level as US stocks of distillates dropped by more than the market had expectedData from the Energy Information Administration showed that last week distillate stocks, which include heating oil, fell by 5 mln barrels against analysts' expectations of 3.5 mln barrelsGasoline inventories fell by 3.1 mln barrels against expectations of a 950,000 dropClosing above $60 will be a significant psychological eve...

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A Must Read

Go read Fed's Yellen on Housing at Calculated Risk. It's at the top of the page. CR has done a great job with the housing market -- and this article will only solidify his reputation in that rega...

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Fed Governor's Comments: We're Not Lowering Rates

From Bloomberg:Federal Reserve officials, armed with figures showing inflation picking up, made it clear that they aren't close to cutting interest rates.Hours after the government reported yesterday that consumer prices rose more than forecast in January, San Francisco Fed President Janet Yellen said she supports the Fed's tightening bias. St. Louis Fed President William Poole said in an interview that the central bank must act if inflation fails to subside.The remarks, together with minutes of January's policy meeting also published yesterday,...

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Miners Looking to Up Investments

From the WSJ:Prices for some of the world's commodities have slipped in recent months. But big mining companies continue to pump up investment and make plans to carve out more mines -- moves that could bring prices down further in the years ahead.Anglo-Australian giants BHP Billiton Ltd. and Rio Tinto PLC and other megaminers collectively have projects...

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Toll Brothers Revenue Drops on Cancelations

From the Wall Street Journal:Luxury-home builder Toll Brothers Inc. said net income fell 67% in its fiscal first quarter, hit by write-downs and an impairment charge. Revenue declined 19%.The Horsham, Pa., company earned $54.3 million, or 33 cents a share, for the three months ended Jan. 31, down from $163.9 million, or 98 cents a share, a year earlier. The latest results included write-downs of $59 million, or 36 cents a share, and a goodwill-impairment charge of three cents a share, related to the company's 1999 acquisition of the Silverman Companies...

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FOMC Statement

From the FOMCAll meeting participants expressed some concern about the outlook for inflation. To be sure, incoming data had suggested some improvement in core inflation, and a further gradual decline was seen as the most likely outcome, fostered in part by the continued stability of inflation expectations. However, participants did not yet see a downtrend in core inflation as definitively established. Although lower energy prices, declining core import prices, and a deceleration in owners' equivalent rent were expected to contribute to slower core...

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Another One Bites the Dust

From the WSJ: Late Tuesday, NovaStar reported a net loss available to common shareholders of $14.4 million, or 39 cents a share, in the fourth quarter. A year earlier, the company generated net income available to common shareholders of $26.4 million, or 84 cents a share.Problems with mortgages originated in 2006 knocked $17.4 million, or 47 cents a share, off fourth-quarter earnings. Provisions for losses on loans NovaStar has been forced to repurchase cut $13.4 million, or 36 cents a share, off results. More provisions for losses on a package...

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Inflation Increases .3%

From the BLS:The Consumer Price Index for All Urban Consumers (CPI-U) increased 0.3 percent in January, before seasonal adjustment, the Bureau of Labor Statistics of the U.S. Department of Labor reported today. The January level of 202.416 (1982-84=100) was 2.1 percent higher than in January 2006.From Bloomberg:U.S. consumer prices rose more than forecast in January as Americans paid more for food, medical care and airfares, suggesting inflationary pressures persist.From CBS Marketwatch:U.S. consumer prices increased 0.2% in January, led by large...

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Oil Market Update

The chart below indicates two trends. The first is an upward trend started in mid-January. The second is a consolidation trend started in mid-February.We have the following currents in the markets right now:Bullish:Since then rising political tension involving Middle Eastern and African oil producers and reduced output from the Organization of the...

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Projections of the Housing Hangover

From Bloomberg: New and existing home sales dropped almost 10 percent last year, depressing demand for products from copper pipes to kitchen sinks and resulting in the loss of about 100,000 jobs in the U.S. Housing-related unemployment probably will increase in 2007, according to the Joint Center for Housing Studies at Harvard University in Cambridge, Massachusetts.Even if the housing market improves in the second half of 2007, as the National Association of Realtors predicts, sales of furniture and construction supplies will stagnate, said Amal...

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Japan Raises Interest Rates

From the WSJThe Bank of Japan on Wednesday decided to raise interest rates, breaking free from a policy impasse that had kept Japan's super-low borrowing costs unchanged since July, and indicating its continued effort to pursue its goal of slow but steady monetary tightening.The central bank's nine-member policy board voted eight to one to boost the target for short-term rates by 0.25 percentage point to 0.5%. The move came after the BOJ decided against a rate increase in December and again in January amid persistent weakness in some economic indicators...

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The Markets That Never Corrected

Several weeks ago, there was a fair amount of ink devoted to the topic of "it's been a really long time since the markets have corrected." Well, it has been. As the charts below show, the SPYs are still in a strong uptrend, the QQQQs are consolidating in a sideways move and the IWNs consolidated sideways then started to rally again. All markets...

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Wal-Mart Sales Increase

From Reuters:Wal-Mart Stores Inc. on Tuesday posted higher quarterly profit after the world's biggest retailer cut prices on hot items like toys and electronics to lure customers during the holiday shopping season.Net income rose to $3.94 billion, or 95 cents per share, in the fourth quarter that ended on January 31, compared with $3.59 billion or 86 cents per share a year ago.Fourth quarter earnings included a boost of $98 million, or 2 cents per share, related to a tax benefit.Excluding the benefit, analysts on average had been expecting profit...

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SEC Investigating Possible Inside-Information Scandal

From Forbes:In early February, the SEC confirmed that it was investigating whether the major brokerage houses were tipping off hedge funds to the trades the brokers handle for big clients like mutual funds. If that's happening, it would be a scandal.The SEC is also likely to scour trading records to see if the brokers are using info about clients' moves to invest their own capital. If the SEC finds evidence that they are, the scandal would be enormous - and go to the heart of Wall Street's profit machine. A big question mark hangs over Wall Street:...

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Home Depot's Earnings Drop 28%

From Bloomberg:Home Depot Inc., which ousted Chief Executive Officer Robert Nardelli last month over compensation, said profit fell 28 percent as the biggest drop in U.S. home sales in 15 years sapped demand for building supplies. Earnings missed analyst estimates.Net income declined to $925 million, or 46 cents a share, from $1.29 billion, or 60 cents, a year earlier, Atlanta-based Home Depot said today in a statement. Sales for the three months ended Jan. 28 rose 4 percent to $20.3 billion from $19.5 billion.Sales at Home Depot's retail unit...

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Not Cheap, But Not Expensive

This is a table from Barron's that shows how cheap or expensive the markets are. Right now, we're somewhere in between. Here's the S&P 500. The first number is latest week, the second column is the previous week and the third column is same week for the previous year. S&P 500 Index P/E Ratio 17.7 18.3 18Earnings Yield (%)5.65 5.46 5.55Earns $ 82.23 78.57 71.5Dividend Yield (%)1.8 1.82 1.85Dividends ($) 26.2 26.17 23.81Market to Book 3.21 3.17 3.1Book Value ($) 453.06 453.06 414.75The PE ratio decreased...

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Dollar Update

Here's a daily chart of the US Dollar index from Stockcharts:The dollar broke through support in the 84.50 area. This is where Bernanke's testimony last week hurt. The market's interpreted Bernanke's statements as meaning there would be no interest rate increases in the future. At the same time traders are expecting another rate hike from the EU...

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How Long Can This Trend Last?

This is a chart of the percent change from the preceding quarter in personal consumption expenditures.The last time this figure decreased was in 1992. That is 16 years ago. How long can this trend of positive growth continue? The US savings rate (income - expenditures) has been negative for the past 5 quarters. Household debt has increased to over...

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More Market Technicals

I finally broke down an purchased a few online news subscriptions -- The WSJ and Barrons. Both were reasonably priced. Barron's has a new feature called "Technically Speaking" which deals with --- technical analysis of the markets (go figure). This week they have two really good charts.This is a comparison of the S&P 500 and the NY New High/New...

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Sub-Prime Mortgage Derivatives Drop for 4th Week

From Bloomberg:A derivatives index used to bet on bonds backed by the riskiest U.S. mortgages fell for the fourth straight week as more subprime lenders reported losing money.Prices for credit-default swaps linked to 20 securities rated BBB-, the lowest investment grade, and created in the second half of 2006 fell 2.8 percent to 82.82 this week, and are down 15 percent since being introduced Jan. 18. The decline means an investor this week would have paid more than $950,000 a year to protect $10 million of bonds against default.The tumble is being...

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Fed President Moscow on Inflation

From a speech on February 16:Taking all of these factors into account, my assessment is that the risk of inflation remaining too high is greater than the risk of growth falling too low. Thus, some additional firming of policy may yet be necessary to address this inflation risk. Of course, whether policy will need to be adjusted and the degree of any adjustment will depend on the data we see in the months to come and how that data influences our forecast of the economy.Translation: I'm not going to vote for lower rates in the current environme...

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The Market's Last Week

Here's a chart of the SPYsWe're still firmly in the uptrend that started in September. We had two strong rallies this week, followed by two days of consolidation. The last two days of consolidation were on weaker volume, but the markets didn't sell-off. This indicates traders are willing to hold their positions over the weekend. The only negative...

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Housing Starts Plummet 14.3%

From Bloomberg:Builders in the U.S. started work last month on the fewest number of new homes since August 1997 as a glut of unsold houses and the onset of colder weather discouraged new projects.Housing starts slumped 14.3 percent to an annual pace of 1.408 million, less than forecast and down from December's 1.643 million rate, the Commerce Department...

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Producer Prices Decrease .6%

From the BLS:The Producer Price Index for Finished Goods declined 0.6 percent in January, seasonally adjusted, the Bureau of Labor Statistics of the U.S. Department of Labor reported today. This decrease followed a 0.9-percent advance in December and a 1.8-percent jump in November. At the earlier stages of processing, prices for intermediate goods moved down 0.7 percent compared with a 0.5-percent increase in the prior month. The crude goods index decreased 6.3 percent after rising 2.8 percent in December. (See table A.)Before we get too excited...

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Chrysler Cuts Production: Industrial Production to Follow?

From the APThe Chrysler Group, which had an operating loss of $1.475 billion in 2006 and expects to show losses through 2007, announced Wednesday that it would eliminate 13,000 positions, including 11,000 production jobs and 2,000 white-collar posts, as it seeks to cut costs and return to profitability in 2008.Of the production job cuts, 9,000 are in the U.S. and 2,000 are in Canada.Chrysler, part of Germany-based DaimlerChrysler AG, said Wednesday it plans to close the Newark, Del., assembly plant during the next two years and cut shifts at plants...

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