Nightly Recap 3-29-2010
Market Summary:
DOW +45.50 (10,895.86)
S&P +6.63 (1,173.22)
Nasdaq +9.23 (2,404.36)
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Disclaimer:
Open Positions: SRS at 5.97
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Nightly News Links
US Economy:
Seasonality Map for April, 2010(MarketSci Blog)
On the link above is a map of expected strong/weak days for the U.S. market for April, 2010 based on historical seasonality patterns. "I want to make clear that I do NOT think that seasonality alone is sufficient to justify a trade; however, all of the seasonality plays included in this report have been powerful enough and consistent enough that I do think they should be one of many tools in the trader’s toolbox."
Have commodities outpaced fundamentals?(Investment Postcards)
Have metal prices and the prices of other commodities such as oil outrun the underlying fundamentals? The significant strength of the US dollar since December last year has capped rises in commodity prices. However, metal prices continue to be driven largely by Chinese demand, with China’s manufacturing PMI for new export orders and total new orders leading metal prices. The risks of investing in commodities are increasing as we move forward. The metal markets currently smack of speculation and manipulation. Metal stocks on the London Metal Exchange are currently at levels similar to those at the height of the global liquidity crisis
World Economy:
Euro Trashed (New York Times)
Germany and other “euro-optimists” hoped that the introduction of a common currency and the global economic competitiveness it spurred would quickly lead to sweeping economic and societal modernization across the union. But the opposite has occurred. Rather than pulling the lagging countries forward, the low interest rates of the European Central Bank have lured governments and households, especially in the southern part of the euro zone, into frivolous budgetary policies and excessive consumption. In short, the euro is headed toward collapse.
Greek CDS's Exploding After Horrible Debt Auction, Greeks Blame Weak Demand on Easter(Zero Hedge)
Greek CDS are moving 10 bps wider from 293 to 303 bps as demand for the bailed out country's bonds was much weaker than expected. Greek weakness is spreading to other European countries: The cost of protecting other euro zone government bonds from default were also mostly higher. The German 5-year credit default swap rose to 30.1 bps from 28.9 bps. In the meantime, and in keeping with the Greek tradition of scapegoating, the very weak demand for the new 7 Year issue was blamed on... Easter. About 175 institutions bid for a slice, sources at the lead managers said, compared to 400 investors for the 10-year issue.
"It is Easter week in Greece and Europe and this explains why demand may seem a bit softer, with the book growing at a slower pace compared to the previous 10-year bond issue," said a source at one of the five banks leading the issue.
Japanese Production Takes a Breather(Econompic)
Japan’s industrial production retreated in February, snapping an 11-month winning streak that helped to secure a recovery from the country’s worst postwar recession.
Factory output declined 0.9 percent from January, when it rose 2.7 percent, the most in eight months, the Trade Ministry said today in Tokyo. The median estimate of 24 economists surveyed by Bloomberg News was for a 0.5 percent drop.
The slide is unlikely to last as Asian demand for the country’s electronics and machinery continues to fuel exports, Junko Nishioka, chief economist at RBS Securities Japan Ltd. in Tokyo, said before the report was published. Factory output and exports have yet to return to their peak set two years ago, and the recovery remains plagued by deflation.
Have a Good Night
-K
Is Dow Jones ready to recover?
Almost a Month ago I wrote a post about how the dow had yet to bottom. See: The Dow Jones Industrial Index has not yet bottomed ,at that time the index was at 11,842. A week later I followed up with a prediction that the Dow Jones Industrial would bottom at 10,800 (See:Prediction: Dow Jones Industrial bottoms at 10,800.)
On July 15,2008 the Dow Jones Index fell to 10,827 to make a new 52-week low. That new low came very close to my prediction and soon after it began rebounding. Since the weekend came and I found some time to go and revisit the chart for the dow I now think that the index has bottomed out and should begin to climb.
I believe the market will begin recovering because of a few reasons.
1. 10,800 is a very strong support zone going back to 2006
2. Oil prices have recently fallen from $146 to $128 (maybe that bubble is deflating)
3. The chart shows that the sellers are moving out and more buyers are beginning to take over (green and red lines almost crossing. Green is buyers, red is sellers)
4. At the end of the chart is the amount of money being put in the market. Since mid May it was in a downtrend which meant people were taking money out of the market and now it has broken out of the trend.
As you will see in the chart below however, today's action is within the downturn trend line and it needs to close above 11,500 or we might not have hit recovery period just yet.
Without further adieu i present to you... the Dow Jones Industrial Recovery Chart.
At this point i have invested in stock symbol (DDM) which has the top 30 Dow Jones Companies.
It goes mostly parallel to the Dow Jones Industrial Index. You can check out my current holdings at my Covestor page.
If you have any comments feel free to post them.
Prediction: Dow Jones Industrial bottoms at 10,800
From the way the market has been swinging lately even with any recovery time, the dow jones industrial has yet to bottom a week after i wrote about how it had not bottomed. Over 500 points down later i still think the dow jones industrial has a long ways to go (with some rallies in between obviously). I feel like I am too optimistic by calling a bottom at 10,800 because if President Bush and his best friend Dick Cheney start a war in Iran my bottom call will look stupid.
And here is an updated chart.
