A Look At How The European Endgame Is Drawing Near Tuesday, Sep 13 2011 

A Look At How The European Endgame Is Drawing Near

The Chinese, Thai, US Bond Markets, and the Equity Markets – Two Ships Passing in the Night? Thursday, Sep 30 2010 

Small investors have fled the stock market since the crash of 2008 seeking safer returns in fixed income despite yields on most US Treasuries below 1%. For the past 30 months investors have poured money in to fixed income investments seeking safety and stability after the 2008 market crash.1 This in turn has pushed yields down to unheard of levels and forced bond managers to chase yield.

Corporate investors have been coming to the market in size as well as signified by recent offerings by McDonalds, Oracle, and Microsoft.2 Corporations, whose balance sheets are already flush with cash are refinancing existing debt or looking to lever up with potential acquisitions on the horizon.

M&A activity is on the rise with corporate balance sheets flush with almost $3 trillion dollars in cash. Over the past few months, companies such as Intel and Unilever have made sizeable acquisitions while the commodity sector is heating up with BHP’s bid for Potash and Kinross’s takeover of Red Back. Even the healthcare sector is getting involved with Sanofi-Aventis pursuing Genzyme.

Even the Federal Reserve is jumping into the bond market by taking principal repayments and expiring mortgage paper and investing the proceeds in US Treasuries.

Overseas, China just issued 50 year bonds and Thailand is considering a 50 year issue as well. This is good news for their respective local bond markets as long dated bond issues increase market liquidity and signify investor confidence.

But as the tide of cash rolls into the market there are investors pulling out. Last week the Chinese government announced that over the past year they have decreased their holdings in US Treasuries by $100 billion dollars while being active purchasers of European and Japanese debt.3 The Chinese may be diversifying their bond holdings much in the same way the Federal Reserve is swapping mortgage debt for US Treasuries or they may be opting to sell before the yields begin to rise.

As a contrarian investor, this is one sign that the bond market is in process of making a top while the stock market may be putting in a bottom. With the stock market currently showing weakness, bond managers chasing yield, and stocks in large cap companies yielding sometimes twice their current bond offerings, investors should look for value rather than chase a trade.

Even with the 2003 tax cuts on capital gains and dividends for the highest tax brackets ready to expire the risk/return ratio is becoming heavily weighted on the side of equities. Small investors would be best served investing in high quality blue chip equities with solid dividend yields that can provide a decent income stream over the coming years.

Any pullbacks during the final quarter of 2010 should be met with buying by small investors looking to chase dividend rather than bond yield.

Disclaimer
Communications are intended solely for informational purposes. Statements made should not be construed as an endorsement, either expressed or implied. This article and the author is not responsible for typographic errors or other inaccuracies in the content. This article may not be reproduced without credit or permission from the author. We believe the information contained herein to be accurate and reliable. However, errors may occasionally occur. Therefore, all information and materials are provided “AS IS” without any warranty of any kind. Past results are not indicative of future results.
PAST RESULTS ARE NOT INDICATIVE OF FUTURE RESULTS. THERE IS RISK OF LOSS AS WELL AS THE OPPORTUNITY FOR GAIN WHEN INVESTING IN THE STOCK, BOND, AND DERIVATIVE MARKETS. WHEN CONSIDERING ANY TYPE OF INVESTMENT, INCLUDING HEDGE FUNDS, YOU SHOULD CONSIDER VARIOUS RISKS INCLUDING THE FACT THAT SOME PRODUCTS: OFTEN ENGAGE IN LEVERAGING AND OTHER SPECULATIVE INVESTMENT PRACTICES THAT MAY INCREASE THE RISK OF INVESTMENT LOSS, CAN BE ILLIQUID, ARE NOT REQUIRED TO PROVIDE PERIODIC PRICING OR VALUATION INFORMATION TO INVESTORS, MAY INVOLVE COMPLEX TAX STRUCTURES AND DELAYS IN DISTRIBUTING IMPORTANT TAX INFORMATION, ARE NOT SUBJECT TO THE SAME REGULATORY REQUIREMENTS AS MUTUAL FUNDS, OFTEN CHARGE HIGH FEES, AND IN MANY CASES THE UNDERLYING INVESTMENTS ARE NOT TRANSPARENT AND ARE KNOWN ONLY TO THE INVESTMENT MANAGER.
Before making any type of investment, one should consult with an investment professional to consider whether the investment is appropriate for the individuals risk profile. This is not intended to be investment advice or a solicitation to purchase any of the securities listed here. I will not be held liable or responsible for any losses or damages, monetary or otherwise that result from the content of this article.

Technical Commentary – September 13th Monday, Sep 13 2010 

Dow Jones Industrial Average – We have had a nice move up over the past two weeks bouncing off support and now we find ourselves in a virtual no mans land between the 50 and 200 day moving averages. Technicals are positive but inconclusive as we wander in this trading range between 10400 and 9800.

Traders and fund managers return this week and there are some items which should dominate headlines namely concerns out of Europe, 3rd Quarter corporate profits, important economic reports namely CPI, PPI, Capacity Utilization, Industrial Production, and the upcoming mid-term elections.

Caution is warranted here unless we can break above the 200 day moving average and clear the 10500 level. It is possible that we start the week with a rally but have it lose strength as the week goes on.

Longer-term we need to move above the 50 week moving average to move back to the 200 week moving average.

I would be hesitant to put any new capital to work on the long side until we have a confirmed breakout above resistance and the trend establishes itself.

Dow Jones Utility Average (UTIL) – The Utilities were added because there is something interesting on the daily chart relative to the Industrials. Check the RSI and MACD as they seem to be in the process of rolling over while Friday’s down volume was heavier than normal.

This bears watching as the week goes on as the Utilities may be leading the market and flashing a sign.

Canada (TSX) – The TSX is in a long basing pattern. Economic reports over the past week gave investors some pause with the possibility of 3rd Quarter growth coming in weaker than expected due to a slowdown in the US. Technical indicators look overbought and investors would be well served to hold off on any buying in the event the TSX pulls back in the coming weeks.

A move above 12250 would signal a breakout and move higher.

Disclaimer
Communications are intended solely for informational purposes. Statements made should not be construed as an endorsement, either expressed or implied. This article and the author is not responsible for typographic errors or other inaccuracies in the content. This article may not be reproduced without credit or permission from the author. We believe the information contained herein to be accurate and reliable. However, errors may occasionally occur. Therefore, all information and materials are provided “AS IS” without any warranty of any kind. Past results are not indicative of future results.
PAST RESULTS ARE NOT INDICATIVE OF FUTURE RESULTS. THERE IS RISK OF LOSS AS WELL AS THE OPPORTUNITY FOR GAIN WHEN INVESTING IN THE STOCK, BOND, AND DERIVATIVE MARKETS. WHEN CONSIDERING ANY TYPE OF INVESTMENT, INCLUDING HEDGE FUNDS, YOU SHOULD CONSIDER VARIOUS RISKS INCLUDING THE FACT THAT SOME PRODUCTS: OFTEN ENGAGE IN LEVERAGING AND OTHER SPECULATIVE INVESTMENT PRACTICES THAT MAY INCREASE THE RISK OF INVESTMENT LOSS, CAN BE ILLIQUID, ARE NOT REQUIRED TO PROVIDE PERIODIC PRICING OR VALUATION INFORMATION TO INVESTORS, MAY INVOLVE COMPLEX TAX STRUCTURES AND DELAYS IN DISTRIBUTING IMPORTANT TAX INFORMATION, ARE NOT SUBJECT TO THE SAME REGULATORY REQUIREMENTS AS MUTUAL FUNDS, OFTEN CHARGE HIGH FEES, AND IN MANY CASES THE UNDERLYING INVESTMENTS ARE NOT TRANSPARENT AND ARE KNOWN ONLY TO THE INVESTMENT MANAGER.
Before making any type of investment, one should consult with an investment professional to consider whether the investment is appropriate for the individuals risk profile. This is not intended to be investment advice or a solicitation to purchase any of the securities listed here. I will not be held liable or responsible for any losses or damages, monetary or otherwise that result from the content of this article.

Week in Review – September 10, 2010 Saturday, Sep 11 2010 

Slow trading dominated as the Rosh Hashanha holiday on Thursday and Friday along with Labor Day on Monday caused traders and managers to take an additional week off.

The Reserve Bank of Australia held the line on interest rates ‘for the time being’ while 2nd Quarter GDP grew by 1.2% QoQ and 3.3% YoY.

The Bank of Japan held interest rates steady and said that they were prepared to add more monetary stimulus to the economy if needed.

The Bank of Canada hiked rates to 1% and in a brief statement which showed no real bias but gave a mention to a slightly weaker than expected US recovery.

The South African Reserve Bank (SARB) cut its policy rate by 50 bp to 6%. Markets view this rate cut as the final one as the recession was quite mild for South Africa compared to the rest of the globe. Economic growth has been recovering, boosted this year by the World Cup, and now appears to be moderating. The SARB has been in a more restrained rate cut cycle and appears to be having success against inflation as the CPI is now in the 3.5-4% area down from around 11% in 2008.

The Bank of England and the Bank of Korea both kept interest rates at current levels.

Links:

Fascinating article about Japanese politicians wondering why the Chinese are buying their bonds

Japan Machine Orders

Deutsche Bank weighing share sale

Next Week

Sunday – Basel III meeting

Monday – European Union Industrial Production (July)

Tuesday – US Retail Sales (August), Japan Industrial Production (July), DPJ Leadership Election in Japan

Wednesday – US Capacity Utilization and Industrial Production (August)

Thursday – US PPI (August)

Friday – US CPI (August), Germany Producer Prices (August)

Disclaimer
Communications are intended solely for informational purposes. Statements made should not be construed as an endorsement, either expressed or implied. This article and the author is not responsible for typographic errors or other inaccuracies in the content. This article may not be reproduced without credit or permission from the author. We believe the information contained herein to be accurate and reliable. However, errors may occasionally occur. Therefore, all information and materials are provided “AS IS” without any warranty of any kind. Past results are not indicative of future results.
PAST RESULTS ARE NOT INDICATIVE OF FUTURE RESULTS. THERE IS RISK OF LOSS AS WELL AS THE OPPORTUNITY FOR GAIN WHEN INVESTING IN THE STOCK, BOND, AND DERIVATIVE MARKETS. WHEN CONSIDERING ANY TYPE OF INVESTMENT, INCLUDING HEDGE FUNDS, YOU SHOULD CONSIDER VARIOUS RISKS INCLUDING THE FACT THAT SOME PRODUCTS: OFTEN ENGAGE IN LEVERAGING AND OTHER SPECULATIVE INVESTMENT PRACTICES THAT MAY INCREASE THE RISK OF INVESTMENT LOSS, CAN BE ILLIQUID, ARE NOT REQUIRED TO PROVIDE PERIODIC PRICING OR VALUATION INFORMATION TO INVESTORS, MAY INVOLVE COMPLEX TAX STRUCTURES AND DELAYS IN DISTRIBUTING IMPORTANT TAX INFORMATION, ARE NOT SUBJECT TO THE SAME REGULATORY REQUIREMENTS AS MUTUAL FUNDS, OFTEN CHARGE HIGH FEES, AND IN MANY CASES THE UNDERLYING INVESTMENTS ARE NOT TRANSPARENT AND ARE KNOWN ONLY TO THE INVESTMENT MANAGER.
Before making any type of investment, one should consult with an investment professional to consider whether the investment is appropriate for the individuals risk profile. This is not intended to be investment advice or a solicitation to purchase any of the securities listed here. I will not be held liable or responsible for any losses or damages, monetary or otherwise that result from the content of this article.

Gold Bullion – On the verge of a major breakout? Wednesday, Sep 8 2010 

Historically, the argument against Gold was that it provided no yield to investors. Stocks, bonds, and cash all provide some sort of yield so Gold as an investment has no merit.

But that view appears to be changing, with volatility in the equity markets, bonds now providing little or no yield (witness the US treasury yield curve and IBM’s latest offering), and money markets and cd’s providing scant yields Gold is looking much more attractive as a place to park cash.

Seasonally, the fourth and first quarters of a year are the most bullish for Gold.

In countries such as China and India which are experiencing strong economic growth Gold is looked at as a store of value. In both countries imports of Gold are rising as citizens view Gold as lucky and a store of value.

Recent news out of Europe indicates market participants are increasingly worried about the stress tests performed on European banks as they are increasingly being viewed as not that stressful at all.

In the US the economy appears to be slowing into a 1-2% growth range, with a budget deficit of over a trillion dollars, new spending proposals, and the Federal Reserve instituting a Zero Interest Rate Policy (ZIRP).

So while we look over the world we see two major areas with slow growth, Europe and the US, and investors rushing to Gold as a safe haven to protect against problems in the banking sector and at the sovereign level.

In Asia strong economic growth is allowing investors to diversify their wealth by purchasing and giving Gold as gifts.

While we may be near a major resistance level, Gold has provided investors with a safe haven in times of trouble. Since its rally from the 2008 lows Gold has seen rising support levels as investors buy on any dip.

Technically, the weekly charts have six straight weeks of upward price movement and may make a slight pullback at this major resistance level. Silver is also outperforming Gold as well which is often a sign that a pullback in both markets is forthcoming.

Investors would be wise to buy Gold on any dips and be ready to allocate some capital before the next leg up starts.

Next week: Gold Equities – Where is the Bull?

Disclaimer
Communications are intended solely for informational purposes. Statements made should not be construed as an endorsement, either expressed or implied. This article and the author is not responsible for typographic errors or other inaccuracies in the content. This article may not be reproduced without credit or permission from the author. We believe the information contained herein to be accurate and reliable. However, errors may occasionally occur. Therefore, all information and materials are provided “AS IS” without any warranty of any kind. Past results are not indicative of future results.
PAST RESULTS ARE NOT INDICATIVE OF FUTURE RESULTS. THERE IS RISK OF LOSS AS WELL AS THE OPPORTUNITY FOR GAIN WHEN INVESTING IN THE STOCK, BOND, AND DERIVATIVE MARKETS. WHEN CONSIDERING ANY TYPE OF INVESTMENT, INCLUDING HEDGE FUNDS, YOU SHOULD CONSIDER VARIOUS RISKS INCLUDING THE FACT THAT SOME PRODUCTS: OFTEN ENGAGE IN LEVERAGING AND OTHER SPECULATIVE INVESTMENT PRACTICES THAT MAY INCREASE THE RISK OF INVESTMENT LOSS, CAN BE ILLIQUID, ARE NOT REQUIRED TO PROVIDE PERIODIC PRICING OR VALUATION INFORMATION TO INVESTORS, MAY INVOLVE COMPLEX TAX STRUCTURES AND DELAYS IN DISTRIBUTING IMPORTANT TAX INFORMATION, ARE NOT SUBJECT TO THE SAME REGULATORY REQUIREMENTS AS MUTUAL FUNDS, OFTEN CHARGE HIGH FEES, AND IN MANY CASES THE UNDERLYING INVESTMENTS ARE NOT TRANSPARENT AND ARE KNOWN ONLY TO THE INVESTMENT MANAGER.
Before making any type of investment, one should consult with an investment professional to consider whether the investment is appropriate for the individuals risk profile. This is not intended to be investment advice or a solicitation to purchase any of the securities listed here. I will not be held liable or responsible for any losses or damages, monetary or otherwise that result from the content of this article.

Technical Commentary (Europe) – September 7th Tuesday, Sep 7 2010 

Greece (Athens) General Share – After the crisis this spring ran its course the ATG put in a nice double bottom in early June and July, which also confirmed the early 2009 bottom, and has moved up through the 50 day moving average. The short-term charts are mildly bullish with this week being key to see if the rally can continue and/or the 50 day moving average begins to provide support for the market. If so, there is a nice rally here up to the 1850 area.

The longer-term charts, while ugly, show a triple bottom around the 1500 level which provided a nice base in 2003, 2009, and 2010.

The Greek market looks to be a very nice contrarian play if the government continues to accept the bitter medicine it was prescribed this spring.

Unfortunately, there is no Greek ETF for small investors to play this rally.

Germany (DAX) – The short-term charts are bullish for Germany as it appears we are moving back to the top of the channel. Strong German economic performance is driving the DAX and we may see a breakout to new yearly highs later this year. The interesting part of the short-term charts are the higher lows on each selloff even if the high on the subsequent rally does not make a higher high.

The longer-term charts continue to rattle around between the 50 and 200 week moving averages making a strong base. An interesting note is the 50 month and 200 week moving averages are in the 6189 area providing serious resistance. A solid move above these levels on strong volume would likely see a move back up to the 8000 level.

US Commentary – We had a nice rally last week which was long overdue. This week will be slow due to the Labor Day holiday and Rosh Hashanah so trading volume is likely to be lighter than expected.

One thing that worries me about last week’s rally is how everyone seems to be tripping over themselves trying to call a bottom. That is typically not a good sign despite the bullish signals.

Disclaimer
Communications are intended solely for informational purposes. Statements made should not be construed as an endorsement, either expressed or implied. This article and the author is not responsible for typographic errors or other inaccuracies in the content. This article may not be reproduced without credit or permission from the author. We believe the information contained herein to be accurate and reliable. However, errors may occasionally occur. Therefore, all information and materials are provided “AS IS” without any warranty of any kind. Past results are not indicative of future results.
PAST RESULTS ARE NOT INDICATIVE OF FUTURE RESULTS. THERE IS RISK OF LOSS AS WELL AS THE OPPORTUNITY FOR GAIN WHEN INVESTING IN THE STOCK, BOND, AND DERIVATIVE MARKETS. WHEN CONSIDERING ANY TYPE OF INVESTMENT, INCLUDING HEDGE FUNDS, YOU SHOULD CONSIDER VARIOUS RISKS INCLUDING THE FACT THAT SOME PRODUCTS: OFTEN ENGAGE IN LEVERAGING AND OTHER SPECULATIVE INVESTMENT PRACTICES THAT MAY INCREASE THE RISK OF INVESTMENT LOSS, CAN BE ILLIQUID, ARE NOT REQUIRED TO PROVIDE PERIODIC PRICING OR VALUATION INFORMATION TO INVESTORS, MAY INVOLVE COMPLEX TAX STRUCTURES AND DELAYS IN DISTRIBUTING IMPORTANT TAX INFORMATION, ARE NOT SUBJECT TO THE SAME REGULATORY REQUIREMENTS AS MUTUAL FUNDS, OFTEN CHARGE HIGH FEES, AND IN MANY CASES THE UNDERLYING INVESTMENTS ARE NOT TRANSPARENT AND ARE KNOWN ONLY TO THE INVESTMENT MANAGER.
Before making any type of investment, one should consult with an investment professional to consider whether the investment is appropriate for the individuals risk profile. This is not intended to be investment advice or a solicitation to purchase any of the securities listed here. I will not be held liable or responsible for any losses or damages, monetary or otherwise that result from the content of this article.

Week in Review – September 3, 2010 Saturday, Sep 4 2010 

Stocks moved up this week led by better than expected economic reports and a rebound from oversold conditions.

The US ISM rose to 56.3 countering many regional reports which indicated a weakening manufacturing sector.

US unemployment held steady and was taken by the markets as a net positive after some worse than expected job numbers the past two months.

The ECB kept interest rates unchanged during their meeting this week.

In an odd move, the ECB announced before the ECB conference a plan to ban naked short sales of stocks and government debt.

Sweden’s Riksbank raised repo rates by 25 bp and indicated that they will continue to raise rates going forward.

Have a great Labor Day weekend everyone.

Next Week

Monday – Bank of Japan Policy Meeting

Tuesday – Bank of Japan Policy Meeting, Reserve Bank of Australia Policy Meeting, Japan Leading Economic Index, German Manufacturing New Orders,

Wednesday – Bank of Canada Policy Announcement, UK Industrial and Manufacturing Production

Thursday – US and UK Trade Balances, Bank of England Policy Meeting

Friday – Japan 2nd Quarter Final GDP

Disclaimer
Communications are intended solely for informational purposes. Statements made should not be construed as an endorsement, either expressed or implied. This article and the author is not responsible for typographic errors or other inaccuracies in the content. This article may not be reproduced without credit or permission from the author. We believe the information contained herein to be accurate and reliable. However, errors may occasionally occur. Therefore, all information and materials are provided “AS IS” without any warranty of any kind. Past results are not indicative of future results.
PAST RESULTS ARE NOT INDICATIVE OF FUTURE RESULTS. THERE IS RISK OF LOSS AS WELL AS THE OPPORTUNITY FOR GAIN WHEN INVESTING IN THE STOCK, BOND, AND DERIVATIVE MARKETS. WHEN CONSIDERING ANY TYPE OF INVESTMENT, INCLUDING HEDGE FUNDS, YOU SHOULD CONSIDER VARIOUS RISKS INCLUDING THE FACT THAT SOME PRODUCTS: OFTEN ENGAGE IN LEVERAGING AND OTHER SPECULATIVE INVESTMENT PRACTICES THAT MAY INCREASE THE RISK OF INVESTMENT LOSS, CAN BE ILLIQUID, ARE NOT REQUIRED TO PROVIDE PERIODIC PRICING OR VALUATION INFORMATION TO INVESTORS, MAY INVOLVE COMPLEX TAX STRUCTURES AND DELAYS IN DISTRIBUTING IMPORTANT TAX INFORMATION, ARE NOT SUBJECT TO THE SAME REGULATORY REQUIREMENTS AS MUTUAL FUNDS, OFTEN CHARGE HIGH FEES, AND IN MANY CASES THE UNDERLYING INVESTMENTS ARE NOT TRANSPARENT AND ARE KNOWN ONLY TO THE INVESTMENT MANAGER.
Before making any type of investment, one should consult with an investment professional to consider whether the investment is appropriate for the individuals risk profile. This is not intended to be investment advice or a solicitation to purchase any of the securities listed here. I will not be held liable or responsible for any losses or damages, monetary or otherwise that result from the content of this article.

Technical Commentary (Asia Edition)– August 30th Monday, Aug 30 2010 

Nikkei – The Nikkei is in trouble across the board. The 9000 level did not hold and the short and long-term charts are all showing bearish signals.

The market is looking for the government to do something regarding the appreciation of the Yen to help exporters.

If something does not happen soon we may see a test of the 2003 lows around 7800 and if that level does not hold 7000. Should economic numbers come in weaker than expected do we see another round of quantitative easing by the government and the Bank of Japan?

South Korea (KOSPI) – The KOSPI has had a very volatile year with prices whipsawing between 1800 and 1525.

In early August the KOSPI broke through an ascending wedge and pulled back to the 1720 area where it appears as though a triple bottom is being formed. The question this week is will the 1720 level hold and if so is this a springboard to new highs on the year or does it become a trading range?

The weekly charts show strong support at the 50 and 200 week moving averages with an uptrending pattern.

If support holds and we see a strong rally then 1900 and 2100 are distinct possibilities.

Bombay Sensex (BSE) – The BSE just broke through an ascending wedge to the downside on Friday. The short-term charts indicate a pullback to the 17500 area which will make the Sensex flat for the year.

The longer-term charts are overbought but have a bullish slant to them. This coming pullback may just be a pause that refreshes the market.

On the weekly chart there is a clear W formation and this pullback may just be the springboard to set the stage for a rally back to the old high in the 21000 area.

India has been one of the better markets this year with strong economic growth and a proactive central bank already into a rate tightening cycle in an attempt to cool off the economy before inflation gets out of control.

US Comment: Friday’s rally was well overdue in this pullback. Since the sell off following the Federal Reserve meeting rallies have been weak and met with selling. This week we need to a follow through with respect to Friday’s move up and get in position to take out resistance at the 50 day moving average and 1100 on the S&P 500.

AAII sentiment numbers are extremely bearish which points to a possible contrarian rally, one that may just catch people off guard.

Disclaimer
Communications are intended solely for informational purposes. Statements made should not be construed as an endorsement, either expressed or implied. This article and the author is not responsible for typographic errors or other inaccuracies in the content. This article may not be reproduced without credit or permission from the author. We believe the information contained herein to be accurate and reliable. However, errors may occasionally occur. Therefore, all information and materials are provided “AS IS” without any warranty of any kind. Past results are not indicative of future results.
PAST RESULTS ARE NOT INDICATIVE OF FUTURE RESULTS. THERE IS RISK OF LOSS AS WELL AS THE OPPORTUNITY FOR GAIN WHEN INVESTING IN THE STOCK, BOND, AND DERIVATIVE MARKETS. WHEN CONSIDERING ANY TYPE OF INVESTMENT, INCLUDING HEDGE FUNDS, YOU SHOULD CONSIDER VARIOUS RISKS INCLUDING THE FACT THAT SOME PRODUCTS: OFTEN ENGAGE IN LEVERAGING AND OTHER SPECULATIVE INVESTMENT PRACTICES THAT MAY INCREASE THE RISK OF INVESTMENT LOSS, CAN BE ILLIQUID, ARE NOT REQUIRED TO PROVIDE PERIODIC PRICING OR VALUATION INFORMATION TO INVESTORS, MAY INVOLVE COMPLEX TAX STRUCTURES AND DELAYS IN DISTRIBUTING IMPORTANT TAX INFORMATION, ARE NOT SUBJECT TO THE SAME REGULATORY REQUIREMENTS AS MUTUAL FUNDS, OFTEN CHARGE HIGH FEES, AND IN MANY CASES THE UNDERLYING INVESTMENTS ARE NOT TRANSPARENT AND ARE KNOWN ONLY TO THE INVESTMENT MANAGER.
Before making any type of investment, one should consult with an investment professional to consider whether the investment is appropriate for the individuals risk profile. This is not intended to be investment advice or a solicitation to purchase any of the securities listed here. I will not be held liable or responsible for any losses or damages, monetary or otherwise that result from the content of this article.

Week in Review – August 27, 2010 Saturday, Aug 28 2010 

Weakness in the US continued this week as economic reports continued to show that the slowdown in the United States continued into July. US markets rebounded off of oversold levels earlier in the week to stage a nice rally into the weekend. The 10,000 level on the Dow is providing significant support to the market along with 2100 on the NASDAQ.

AAII released very negative Investor Sentiment numbers which portend a contrarian rally.

Existing home sales plummeted to record lows and inventories surged to new highs. The second wave of defaults are now starting. It is going to be interesting to see if the additional houses coming to market are from banks, the gray market, or new foreclosures.

If the bulk of the new supply is coming from banks it is a good sign as bad loans are being dealt with in a constructive manner. The gray market would be bad for the economy in the short term but good in the long term. As gray market properties come to market it would be a signal that investors who were attempting to ride out the cycle have become exasperated and thrown in the towel. Investors

2nd Quarter GDP was revised lower to 1.6% but still came in above estimates. The primary cause was a jump in imports as Chinese firms took advantage of an export subsidy that expired in July by pushing product out the door to the United States and elsewhere around the world.

German 2nd Quarter GDP showed that Europe’s largest economy is beginning to pick up steam as exports, housing, and consumption all showed solid growth despite the weak conditions across Europe.

I mentioned a week or so ago that the inclusion of the statement by Hoenig at the end of the FOMC meeting would make the minutes of the August 10th meeting an interesting read. The Wall Street Journal reported that 7 of the 17 top Federal Reserve officials had reservations about purchasing US Treasuries making the upcoming minutes a must read.

Next week:

Monday – European Economic, Business, and Consumer confidence for August
Tuesday – Canadian 2nd Quarter GDP, Chicago PMI, and minutes from FOMC meeting
Wednesday – China manufacturing PMI, US ISM
Thursday – Europe 2nd Quarter GDP, US Factory Orders
Friday – US August Unemployment rate

Disclaimer
Communications are intended solely for informational purposes. Statements made should not be construed as an endorsement, either expressed or implied. This article and the author is not responsible for typographic errors or other inaccuracies in the content. This article may not be reproduced without credit or permission from the author. We believe the information contained herein to be accurate and reliable. However, errors may occasionally occur. Therefore, all information and materials are provided “AS IS” without any warranty of any kind. Past results are not indicative of future results.
PAST RESULTS ARE NOT INDICATIVE OF FUTURE RESULTS. THERE IS RISK OF LOSS AS WELL AS THE OPPORTUNITY FOR GAIN WHEN INVESTING IN THE STOCK, BOND, AND DERIVATIVE MARKETS. WHEN CONSIDERING ANY TYPE OF INVESTMENT, INCLUDING HEDGE FUNDS, YOU SHOULD CONSIDER VARIOUS RISKS INCLUDING THE FACT THAT SOME PRODUCTS: OFTEN ENGAGE IN LEVERAGING AND OTHER SPECULATIVE INVESTMENT PRACTICES THAT MAY INCREASE THE RISK OF INVESTMENT LOSS, CAN BE ILLIQUID, ARE NOT REQUIRED TO PROVIDE PERIODIC PRICING OR VALUATION INFORMATION TO INVESTORS, MAY INVOLVE COMPLEX TAX STRUCTURES AND DELAYS IN DISTRIBUTING IMPORTANT TAX INFORMATION, ARE NOT SUBJECT TO THE SAME REGULATORY REQUIREMENTS AS MUTUAL FUNDS, OFTEN CHARGE HIGH FEES, AND IN MANY CASES THE UNDERLYING INVESTMENTS ARE NOT TRANSPARENT AND ARE KNOWN ONLY TO THE INVESTMENT MANAGER.
Before making any type of investment, one should consult with an investment professional to consider whether the investment is appropriate for the individuals risk profile. This is not intended to be investment advice or a solicitation to purchase any of the securities listed here. I will not be held liable or responsible for any losses or damages, monetary or otherwise that result from the content of this article.

Technical Commentary – August 23rd Monday, Aug 23 2010 

S&P 500 – The short-term charts look weak but close to oversold levels. This means we could get a short rally next week if economic numbers are not disappointing. We do have a double top at 1130 and another at 1100 and they are resistance levels. The Labor Day holiday will affect trading this week and next with smaller than normal volumes.

On the longer-term charts, the S&P fell below its 50 week moving average (1100) and was unable to climb above last week, possibly turning it into a resistance level if we are unable to make a move above it in the next few weeks.

The 1100 level is becoming an important psychological barrier for the markets. If we are unable to break through it is likely we move back to the 1050 level and then 1000.

On the weekly chart you can see a clear head and shoulders top tracing itself out. Right shoulders can drag themselves out for sometime so this may take a bit longer than expected to resolve itself.

It is not a pretty chart but 1000 will provide a major psychological support level for the market.

NASDAQ – The short-term charts show an index searching for direction after the sharp drop 2 weeks ago. We seem to be rattling around between 2225 and 2160. Just like the S&P we may see a short rally next week with the Labor Day holiday.

The longer-term charts are once again telling the story. The weekly charts shows a golden cross with the 50 week moving average oh so slightly above the 200 week moving average but last weeks rally was not able to take us above the 50 week or 200 week moving averages (2237 and 2220 respectively).

More importantly, the head and shoulders top is much more pronounced here than the S&P. Traders are looking at these charts with trepidation.

TSX – Clear downtrend on both the short and long term charts with prices making lower highs and lower lows. The TSX is at the upper boundary of its trading range and seems to be looking for direction.

The 50 week moving average has become a support level at 11622 with moves below being met with buying. If the TSX falls breaks below 11622 we are likely to see a move down to 11000 which would be the lower end of the trading range.

Economic statistics out of the US are likely to guide the Canadian market as investors will worry that a slowdown in the US will filter back to Canada.

Commentary

The US stock market is at a critical level. Economic statistics have been weak signaling a slowdown and there is the potential for 2nd Quarter GDP to eventually come in a full percent lower than first reported. Markets have been pricing in strong economic growth and it appears as though growth will be coming in below forecasts.

In addition, we have a Hindenburg Omen signal which was confirmed on Thursday and Friday of last week. The Hindenburg Omen does not guarantee a crash but it does signal significant underlying weakness in the stock market. If the market does move lower there is a chance some of the charting signals resolve themselves in a manner which will disappoint investors.

This is not a time when investors should be adding to equity positions unless you are using short ETF’s as a hedge. Investors should be on the sidelines waiting for a trend to establish itself and getting cash ready to allocate.

Once again, I am not calling for a crash but investors should be aware of what Mr. Market is telling us. Economic and technical indicators are showing weakness and investors should be on the sidelines until a trend establishes itself.

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