This is what happened last week…
Bad news, bad news and bad news again (tell’em, tell’em again and tell’em what you told them). Nevertheless, last Friday, the market rallied some off of Thursday’s technical reversal action.
The banks are still sending out the worst news, what with Citi breaking up and Bank of America needing more cash to digest Merrill Lynch, it is a fact that Wall Street has moved to Washington, D.C., perhaps never to return to Manhattan. If that was not enough, the production capacity numbers were worse than anyone expected.
All of us that remember the’70’s are reminiscing about what it was like back in the day; it seemed grim at best; the main focus of the corruption was HQ’d on Pennsylvania Ave., Washington, D.C., and interest rates were the highest in history; now they are the lowest, and the corruption is on Wall Street, NY. Unpopular war back then, 2 unpopular wars now, but we all had hope. I recall shaking hands with Ronald Reagan in 1980, at a fund raiser, thanking him for deciding to run for the presidency, and writing a check.
Back to last week’s stuff: Circuit City, the country’s 2nd largest electronics retailer could not find a buyer and will liquidate. Not unexpected, and it makes the Top 10 Story List again this week.
Unemployment continues to rise (the numbers are worse than stated), and more mortgages are foreclosed even though the lenders are working hard to stem them.
This is some good news, and perhaps what inspired the reversal last Thursday, as some analysts are saying that the credit markets are poised for a gradual recovery in 2009.
Stay tuned…
Technical Snapshot: Technicals on the week ended January 16, 2009
US stocks off on the week as financials continue to trouble the market
U.S. stocks on Friday ended with daily gains and weekly losses after an up-and-down day that had some of the biggest financial companies hit. The Dow Jones Industrial Average closed at 8281.228 + 68.73 pts, or 0.8%, to 8,281.22, leaving it down 3.7% from last Friday’s close. The S&P 500 closed at 850.12 + 6.38 points, or 0.8% leaving the broad market indicator with a weekly loss of 4.5%. The Nasdaq Composite closed at 1,529.33 +17.49 points, or 1.2%, to stand at 1,529.33, minus 2.7% from a week ago.
Market Fact: The S&P is on sale, and there are bargains among the S&P 500 lowest-priced issues (below US$10/shr), a group that currently numbers roughly 80 issues, or 16% of the index. Most are down more than 50% this year, amid the worst Bear Market in years.
Best Quotes of the Week
Best Technical Quote of the Week: “…the US Dollar Index, in spite of today’s jump, up 88 basis points, to 82.483, is locked in a downtrend. Only a close above 88 could save it, and that’s not likely.” Frank Chambers, The Money Changer
Best Scary Quote of the Week: “People are genuinely worried about what the world is going to look like in 2009.” Gary Dugan, CIO, U.S. Bank
Best Quote on the Stock Market: “I fear that the US Treasury, the Federal Reserve, and the White House may decide who wins and who loses in the capital markets over the next three to five years.” Cliff Draughn.
Best Quotes on the state of the economy: “History shows that the only way to get rid of high debt is to default on it or inflate it away, which is what most of the world’s central banks are trying to do now. That way they can repay it through inflation or higher taxes.” Keith Fitzgerald, analyst.
Best Political Quote of the Week: “We give you a Republic; now see if you can keep it.” — Ben Franklin
Best Quote on Risk: The global financial crisis has halted development on what’s supposed to be the world’s tallest building. Dubai-based building Nakheel PJSC said, “work will resume in 12 months on the tower that will stand 1 kilometer, 3,280 feet, high when completed.”
Best Optimistic Quote of the Week: “It’s not too late to change course, “but only if we take dramatic action as soon as possible.” US President elect Barack Obama.
The Best Gold Quote: “The private sectors recently gobbled up in excess of $30 billion worth of T-Bills – enough to guarantee a negative return – over fears of the coming economic crash. On top of T-Bills, investors seeking safer investments are buying so much physical gold that bullion dealers as well as producers can’t keep up. In just the past month, gold prices have steadily soared almost 14% – with another 50% surge expected in the near term.” Greg McCoach, Investment Director, The Mining Speculator
Best Overall Quote of the Week: “My daughter said, ‘Daddy, the plane turned into a boat.’”
Martin Sosa, who was with his family on the US Airways flight that ditched in the Hudson River.
My pal Wally Stein’s (Historic) Words of Wisdom
‘I believe that banking institutions are more dangerous to our liberties than standing armies. If the American people ever allow private banks to control the issue of their currency, first by inflation, then by deflation, the banks and corporations that will grow up around the banks will deprive the people of all property until their children wake-up homeless on the continent their fathers conquered.’ Thomas Jefferson 1802
This Week’s 10 11 Big Stories +
1. JPMorgan Chase & Co. Q-4 profit plunged 76%, as the financial crisis forced the bank to write down US$2.9 B in assets and increase its reserves.
2. Bank of America Corp. stock tumbled more than 18% last week, after The Wall Street Journal reported the U.S. Treasury Department used money from its Troubled Asset Relief Program (TARP) to assist the bank in its takeover of Merrill Lynch. Some reports have indicated that that the firm will need more government funds just to stay afloat.
3. New SEC Boss Mary Shapiro, told the Senate Banking Committee that her tenure would “have a laser-like focus on fraud and investor protection, with investor confidence shaken, it is imperative that the SEC be given the resources and the support it needs to investigate and go after those who cut corners, cheat investors and break the law.”
4. Apple Inc. CEO Steve Jobs said he will take a five-month leave of absence after discovering that his health problems are “more complex” than he thought last week. Doctors say he may require surgery to remove his pancreas.
5. US Crude Oil fell US$3.74 to US$33.54 bbl on Thursday afternoon, more than a 10% tumble on expectations that demand will continue to fall.
6. Foreclosures: One in every 54 households in the USA received a foreclosure filing in 2008, an 81% annual increase and a 17% increase from November to December 2008. Almost 3.2MM filings were served, a statistic that includes notices of default, auction sale and repossession. From a RealtyTrac report.
7. Illinois-based Nat’l Bank of Commerce, closed by regulators; Berkeley, Ill.-based National Bank of Commerce was closed last Friday, marking the first bank failure of 2009, the Federal Deposit Insurance Corporation said in a statement.
8. Gannett to close Tucson Citizen if it cannot sell assets; Gannett Co. said Friday it is seeking a buyer for certain assets of the Arizona based Tucson Citizen. The newspaper company said that if a sale is not completed by March 21, it will have to close the paper.
9. Circuit City to seek court approval to liquidate; Circuit City Group which filed for Chapter 11 bankruptcy protection in November 2008 said Friday it will seek Bankruptcy Court approval to liquidate the company. Circuit City does not expect any value to remain for shareholders at this time. The retail chain had employed more than 30,000 workers.
10. Bush White House releases positive economic forecast; The recession may be sharp but it will be short and a vigorous recovery will unfold in 2010 and 2011, according to the last economic forecast released by the Bush White House last Friday. Interest rate-sensitive sectors will lead the 2nd half of 2009 recovery and consumers will be aided by low gasoline prices, the report said. Data show that the size of the recovery is loosely related to the depth of the proceeding recession, the report said. As a result, the Bush administration forecasts real GDP growth averaging almost 5% in 2010 and 2011. The unemployment rate is expected to rise to an annual average of 7.7% this year before declining. Overall CPI inflation is projected at 1.7% in 2009 and 2010. The forecasts were included in the latest Economic Report of the President
11. President-elect Obama stumps for stimulus plan ahead of inauguration: With his inauguration today, President-elect Barack Obama hit the road last week to sell his stimulus plan, and again warned of a long lasting recession if no action is taken. “It’s not too late to change course,” Obama said in Bedford Heights, Ohio, “but only if we take dramatic action as soon as possible.” He highlighted the job-creation parts of the plan, particularly jobs in the renewable energy field.
This week’s Scammer Story: Florida’s Nadel Missing as FBI, SEC Investigate Funds Bloomberg reported Sunday that the FBI and securities regulators joined the investigation of Arthur Nadel, the Florida hedge-fund manager who disappeared four days ago, leaving clients concerned they may have lost as much as US$350MM. The Federal Bureau of Investigation and U.S. Securities and Exchange Commission are helping on the case, Sarasota Police Lieutenant Stanley Beishline said yesterday in a telephone interview. One of Nadel’s business partners, Neil Moody, said Nadel had spoken to his wife since taking off. Nadel, 76, is president of Scoop Management Inc. in Sarasota, which oversees funds including Valhalla Investment Partners LP. Scoop’s claim to have managed as much as $350 million “may be high because performance results were exaggerated,” Moody said in an interview.
This week’s big story: US government mulls state-run ‘bad bank: The US government is considering new ways to steady the financial system, including the possible creation of a state-run “bad bank” that would buy troubled assets from struggling lenders. Officials at the Treasury, Federal Reserve and Federal Deposit Insurance Corp., in consultation with the incoming Obama administration, are discussing a range of options because they realize the banking crisis is larger than originally thought.
Really Big Story: Gold futures rise for first day in five as US$ slides; Gold futures rallied 4% Friday, gaining for the first session in five as a weaker US$ enhanced the yellow metal’s appeal as an investment alternative. Gold for February delivery ended up US$32.60 at $839.90 oz on the Comex division of the New York Mercantile Exchange. Benchmark Gold had lost nearly $50, or 5.6%, over the four previous sessions, closing Thursday at its lowest since Dec. 9, 2008, Despite Friday’s gain, Gold ended the week down 1.8%
Big Breaking Story: Iran signals reduction of Crude Oil supplies to Asian, European customers: Iran has started putting into place planned output cuts agreed to by the Organization of Petroleum Exporting Countries, reducing supplies to Asian and European customers, reported by Iran’s Mehr News Agency. The customers had been informed of the reduction, the report said. Crude Oil futures closed at about US$36.51 bbl on Friday, down about 75% from July.
On the World Scene: Global auto executives have become increasingly pessimistic about the prospects for their business, and only 15% expect profits to increase in the next five years, according to a new survey by KPMG LLP. The survey of 200 auto executives from around the world found that 24% are predicting profit declines and another 46% say market is too volatile to even predict a bottom line. “Only 12 months ago, companies were beginning to express a cautious optimism after several years of challenge,” the management-advisory firm said. “Today, much of that optimism has been deferred, if not abandoned. In established markets, sales are falling, investments are being reviewed, and some very large auto companies are close to insolvency.”
At the Movies: Strong weekend bow for ‘Paul Blart’; the Kevin James comedy rings up nearly US$34 MM. This Martin Luther King Jr. holiday weekend is proving bountiful for Sony’s PG-rated comedy “Paul Blart: Mall Cop” — starring Kevin James as a hapless security guard-turned-hero, as it rung up an impressive UD$33.8MM in estimated opening grosses through Sunday. “It’s a huge number, there’s no doubt about it,” Sony distribution president Rory Bruer said. Clint Eastwood’s “Gran Torino” from Warner Bros. was second over its second weekend of wide release, following several sessions in limited distribution. Pumping another $22.2 million it its tank this weekend, “Torino” has racked up US$73.2MM.
This Coming Week’s Economic Data
Thursday, January 22
December Building Permits (8:30): 615K expected, 616K past
Housing Starts, December (8:30): 610K expected, 625K past
Initial Jobless Claims, 1/17 (8:30): 548K expected, 524K past
Crude Oil inventories, 1/16 (11:00) NA expected, 1.14M past
Snap Shot of the Major US Market Indices
DJIA: The Blue Chips held the October 2008 closing low on the week last week bouncing off of the 8000 support level last Thursday and posting a small gain last Friday.
Stats: +68.73 pts (+0.84%) close 8281+
Volume: 439MM/shrs last Friday vs. 436MM/shrs
S&P 500: SP500 was up and closed at the October 2008 low. JPM, BAC, C and WFC sold off on Thursday and Friday.
Stats: +6.38 pts (+0.76%) close 850+
NYSE Volume: 1.617B (-1.61%).
NAS: Last Friday the NAS Gapped open, sold, filled the gap, tested the October low, and rebounded close to session highs, but it did not break the 50 day SMA at 1594.
Stats: +17.49 pts (+1.16%) close 1529+
Volume: 2.284B (-8.76%)
Stay tuned…
The Charts*
DJIA Chart: http://stockcharts.com/h-sc/ui?s=djia
The S&P 500 Chart: http://stockcharts.com/h-sc/ui?s=sp500
The NAS Charts: http://stockcharts.com/h-sc/ui?s=NAS
Stock Chart School: http://stockcharts.com/school/doku.php?id=chart_school
Stock Charts Glossary: http://stockcharts.com/school/doku.php?id=chart_school:glossary_s
*Charts from www.Stockcharts.com
MARKET SENTIMENT
The Sentiment Indicators: These indicators are psychological indicators that attempt to measure the degree of bullishness or bearishness in a market. These are contrary indicators and are used in much the same fashion as overbought or oversold oscillators. Their greatest value is when they reach upper or lower extremes.
1. VIX: 46.11; -4.89
2. VXN: 44.19; -4.14
3. VXO: 45.85; -2.61
4. Put/Call Ratio (CBOE): 0.97; -0.2
Note: Watch the VIX, it will tell us when we are moving back to a more rational market.
*The Market Volatility Index (VIX) measures the volatility of the market. A recent news story described it as “the options market’s gauge of investor fear.” Traders use VIX as a general inverse indicator of market volatility and sentiment. High numbers mean that there’s excess bearishness, and low numbers indicate excess bullishness. The VIX is updated intraday by the Chicago Board Options Exchange (CBOE), using Standard & Poor’s 500 Index (SPX) bid/ask quotes. It was created in 1993.
**The CBOE NAS Volatility Index (VXN) employs the same formula used to calculate $VIX, which is based on the implied volatility of S&P 500 index options. This formula is derived from a basket of put and call options. Some are out of the money, some in the money, and some at the money. The resulting $VXN represents the implied volatility of a hypothetical 30-day option that is at the money.
***The VXO is the ticker created to track the “original VIX” that was calculated using the prices of S&P 100 options. The new VIX uses the ticker $VIX and is calculated using the prices of S&P 500 options. The fundamental nature of the VXO is the same as the VIX, but it is less robust and not as simple as the VIX.
Bulls vs. Bears:
Bulls: the Bulls are at 43.0%, up from 41.8% last week and rising. This puts Bullishness above the 35% threshold. This does not mean the action is now Bearish. That level is 55%. Bullishness bottomed on this leg at 21.3% in November 2008.
For your reference: The Bulls bottomed in the summer of 2006, the last major round of selling ahead of this 2007 high, near 36%; 35% is considered Bullish.
Bears: the Bears closed at 34.4% from 34.1% the week before, they declined from 38.5% the week before that, and they are off the 46.2% the touched in December 2008. That puts them below the 35% level considered Bullish, but below the level considered Bearish. Bearishness hit a 5 year high at 54.4% in late October 2008.
For your reference: This move over 50 takes it to the highest point since 1995 and is negative in the extreme. Again, 35% is the level that historically indicates excessive pessimism.
What to expect this week, and down the line…
President Elect Barack Obama becomes President Barack Obama today, setting the stage change. Just what it will be is in the future, Washington D.C. offers hope and misery all within the “City’s” limits on a daily basis. There is uncertainty ahead, no matter what the rhetoric and intentions of the key players who have been and will continue to jockey for positions of power both political and personal.
No matter what happens this week and weeks ahead Wall Street remains concerned that Y 2008 4-Q earnings is going to signal a deepening of the recession, but conventional wisdom is that Congress will inject still more rescue money into the beleaguered financial sector.
We would all like to believe that things are getting back to normal; the truth is that the market is still in for a rough ride. So unless you are prepared to trade the trading range the prudent think to do is to stay cautious.
From what I am reading the credit markets are poised for a gradual recovery and access will be granted for those good companies with strong ratings.
We are not likely to see the high yield markets come alive again during 2009, what with the loan market particularly affected due to the inability of banks to securitize loans. The keynote this year will be managing refinancing risks and liability management.
Analysts are saying that capital deployment will need to be rethought for many companies, and the trend of buyback suspensions, and dividend cuts will continue.
Also, companies with available flexibility will be positioned to take advantage of once-in-a-generation pricing in M&A. Distressed and hostile M&A are in for a sharp rebound in 2009.
Paramount on the list will be protecting the supply chain as the financial stability of many customers and suppliers have been shaken to the core as savvy managers are now preparing to support critical companies in their supply chain through options such as: factorings, liquidity support, investments, or other saving measures.
At any rate there is the feeling of hope in the air and always remember that even the worst recessions are followed by recoveries, and there are positives happening now, like tax reform in the form of corporate tax reductions.
When the Washington money faucet gets turned on the money will begin to flow fast, and good stocks in position to lead will head North in a big way, and then all of the markets will follow as the Bull begins to charge once again.
Here is an example of what is coming on, and it is welcome by all of us ecoRangers, the details are being released now.
Last week the bones of the package alternative energy and infrastructure package were revealed. Now, the numbers can/will probably change to the higher side. The bill now will provide US$20B in tax cuts for wind, geothermal, and bio-energy, electric grid infrastructure will get US$32B, and building retrofits for energy efficiency is slated for US$16B, and the list continues on.
It augurs to be the largest construction project in US history. And it begins today right after the Inauguration of Barack Obama as USA’s 44th President.
Stay tuned…
Chartists plot your points
(Resistance/Support on the DJIA, S&P 500 & the NAS)
DJIA: Close 8281.22
Resistance:
8419 late December 2008 closing low
8451 early October 2008 closing low
8463 10 day EMA
8521 interim high in March 2003
8572 50 day SMA
8626 December 2002
8757 50 day EMA
8829 late November 2008 high
8934 December 2008 closing high
8985 closing low mid-2003 consolidation
9153 90 day SMA
9200 July 2003 high
9323 June 2003 high
9575 September 2003
9654 November 2008 high
Support:
8141 early December 2008 low
8197 2nd October 2008 low
8175 October 2008 closing low; Key
7965 November 2008 intraday low.
7882 early October 2008 low; Key
7702 July 2002 low
7524 March 2002 low
7449 November 2008 low
7282 October 2002 low
S&P 500: Close 850.12
Resistance:
853 July 2002 low
857 December 2008 consolidation low
866 2nd October 2008 low
872 10 day EMA
879 18 day EMA
889 interim 2002 high
896 late November 2008 high
899 early October 2008 closing low
905 50 day EMA
916 November/December 2008 up trendline
919 early December 2008 high
958 90 day SMA
965 2003 consolidation low
995 June 2003 consolidation high
1008 November 2008 high
Support:
848 October 2008 closing low
839 early October 2008 low
815 early December 2008 low
818 November 2008 low
800 March 2003 post bottom low
768 2002 Bear Market low
741 November 2008 low
NAS: Close 1529.33
Resistance:
1534 50 day SMA
1536 late November 2008 high
1542 early October 2008 low
1552 18 day EMA
1594 50 day EMA
1597 November/December 2008 up trendline
1565 2nd October 2008 low
1603 December 2008 high
1620 early 2001 low
1644 August 2003
1696 90 day SMA
1782 August 2004
1786 November 2008 high; Key
1948 early October 2008 Gap Open Down
Support:
1521 late 2002 high off of Bear Market low
1499.21 2008 closing low
1493 October 2008 low + late December 2008 consolidation low.
1428 November 2008 low
1398 early December 2008 low
1387 the 2001 low
1295 November 2008 low
Popularity: 16% [?]
