Stocks are trading flat to slightly lower on extremely light volume today. The SPDR S&P 500 ETF Trust (NYSEARCA:SPY) is trading at $149.92, -0.16 (-0.11%). At this stage of the day, markets are in a floating pattern until tomorrow when the Non Farm Payrolls and Unemployment Report will be released. This will happen at 8:30AM ET. The markets are looking for further guidance after yesterday's GDP Report came in weaker than expected. Most analysts chalked the weak GDP number, up to the Fiscal Cliff worry and other things. Tomorrow will enlighten the markets even more.
Facebook Inc (NASDAQ:FB) opened lower today at $29.15, down over $2.00 from the close yesterday. Fourth quarter earnings were released and initially disappointed investors. However, the market continues to see bidders rushing for any name brand stock. Facebook has climbed all the way back to the flat line on the day. It is trading at $31.16, -0.08 (-0.26%).
The Dollar continues to fall, day after day. There is a head and shoulder pattern on the daily chart that is on the verge of triggering. A head and shoulder pattern is a bearish pattern that usually leads to further downside. The trigger (when the pattern is in play) occurs when the neck-line breaks. Please note the chart below. The tracking ETF used to view this is the PowerShares DB US Dollar Index Bullish (NYSEARCA:UUP). It is trading at $21.61, -0.03 (-0.14%).
While this pattern has been recognized by countless market technicians, once it triggers it may fail. According to the proprietary PPT Strategies, there is a 60% chance of pattern failure in the near term. Should the pattern fail, a sharp spike up would be expected on the Dollar which would result in a down move in the markets.
Almost everyone has heard of or perhaps even used feng shui when decorating their homes. This is a way to allow positive energy flow effortlessly throughout the rooms of the home or apartment. Many new buildings in New York City are now being designed using feng shui architecture. Feng Shui is an ancient art and science developed over 3,000 years ago in China. It is used to balance the energies of any given space to assure good fortune for the people using it. Well, traders and investors should invite feng shui techniques when playing the stock market.
You see, a technical trader does not care if the Dow Jones Industrial Average (DJIA) goes up to 15,000 or 20,000. The technical trader does not care if the DJIA goes down to 5,000 or 500. All a technical trader should care about is being on the correct side of the trade. The charts will usually tell us when the turning points are going to occur in the stock market. It is then the trader's job to simply go with that energy whether it is to the upside or to the downside. Believe me, after every bull market there will be a bear market. On the flip side, after every bear market there will be another bull market.
Another rule that traders should follow from feng shui is to not take stocks personally. Often, many traders will lose money on a trade and then try to get even or get revenge on the stock. Remember, the stock does not care if we make money trading it or not. I once saw a trader continue to try and get revenge on a stock that he lost money on. In fact, the stock was Skyworks Solutions Inc (NASDAQ:SWKS), but it can really be any stock. To my amazement, he day traded that stock all week long losing money everyday. He kicked his desk, tossed his computer mouse and slammed his keyboard on his desk in frustration, taking lose after lose. Finally, I said to him, you are a good trader, why don’t you just leave that stock alone and trade something else. He replied, that he must get even with the stock and he was not going to allow that stock to beat him. Soon, he was no longer trading in the office with us. I suspect that he lost a lot of money. We should all remember what Sun Tzu said, “What the ancients called a clever fighter is one who not only wins, but excels in winning with ease.”
Many popular stocks in the media will receive the bulk of attention by traders, but it is the consistently active stocks that traders should focus on. Leading stocks such as Exxon Mobil Corp (NYSE:FCX), Toll Brothers Inc (NYSE:TOL), and J.P. Morgan Chase & Co (NYSE:JPM) present countless opportunities everyday without much stress. These types of stocks usually have easy fluent moves in the market both up and down. Simply put, buy the support and sell the resistance levels.
Feng Shui trading may become popular one day. As traders, we simply must go with the flow and not force our opinions on the market. The charts will tell us everything that you need to know. Forget the news and the noise as that is simply the enemy for traders.
JPMorgan Chase & Co. (NYSE:JPM) continues to inch higher today. The stock is trading at $47.22, +0.10 (0.22%). At this point, JPM is short term extended as it is approaching its first major resistance level. This level matches the double top high from 2011 at $48.35. Should JPM hit this level in the next couple weeks, expect a pull back.
Following that level, the eye turns to the pre financial crisis levels of $53.25. It is possible, later in the year the stock gets there.
Today, U.S. GDP was reported for the fourth quarter 2012. The number shocked analysts and investors as it showed a contraction of 0.1%. Most had expected a modest expansion. The big question must be raised, with the Federal Reserve printing trillions of Dollars over the last few years, is this all the economy can muster? Is this as good as it gets?
Most average investors have no clue what I am eluding to. Let's take a closer look. Understand that the Federal Reserve's balance sheet has expanded by more than four trillion Dollars in the last few years. Also, understand that this expansion is from them printing money for their "quantitative easing". Lastly, understand that there are repercussions to printing trillions of Dollars. Mainly, dilution of the Dollar means higher food and energy prices (yet to come). Do you remember when one working average American father could support his whole family, save for retirement, buy a house and live well? Where did those days go? Now two parents must work to support their family and they are lucky if they can afford a house and have some savings left over to put towards retirement.
The scary thing about this is, the Federal Reserve printing policy over the last four years has not even hit food and energy prices in any major way. This will start in 2014 and be catastrophic. Food and energy will soar another 50% higher in price, possibly more. The sad aspect of this is that the average, hard working Americans spend a majority of their income on food and energy. The middle class will shrink further.
If the Federal Reserve policy of printing money to get us back into growth was working, trillions should have bought us the biggest expansion in history. Instead it bought us minor growth and 8% unemployment. At what point does the Federal Reserve admit they are wrong? Can they ever admit it? Most likely not.
To summarize, while I think the printing of trillions of new Dollars was and is idiotic, I would have still been semi alright with it if it bought us a great expansion. The fact that it has failed to generate any meaningful economic activity should shock and anger the masses. Not only is there no major economic recovery, but the coming future problems from this reckless printing of money will cause yet another economic collapse. Cheers!
As everyone can see, the stock markets around the world have exploded higher. It really does not matter if you look at the London FTSE 100, German DAX, Shanghai Index, Nikkei 225 Index, Dow Jones Industrial Average, or even the Athens Stock Exchange (ASE), they are all surging higher. What is the one factor that all of these economies have in common? It is simply money printing. All of the central banks that control the currencies of these nations are printing money like never before.
The Federal Reserve made this popular many years ago, however, they took money printing to new all-time levels since the credit crisis began in 2007. Since that time, the Bank of London, People's Bank of China, Bank of Japan, Swiss National Bank, European Central Bank, and others have continued to inflate their equity markets by implementing easy money policies (essentially money printing). Can central bankers simply print money forever? The answer to this question is no, but at this time it seems that they will continue to print money into the foreseeable future.
Obviously, we all know that there is a price to pay when a currency is artificially deflated. The usual and most common effect will be inflation. Inflation will help to lift the value of asset prices, so many investors may think that is good. The downside is that it will make the price of goods that people need to survive more expensive. Food, oil, gasoline, heating oil, jet fuel, and other energy products will increase. Commodities such as copper, iron ore, and building materials will also inflate in price making products more expensive for everyone.
The other negative that will occur when there is this much monetary easing taking place around the world is another global stock bubble. Generally, the bigger the bubble is when it is being created the bigger the decline will be when the bubble pops. For example, just look at the bubble that was created in the late 1980's in Japan. In January 1990, the Nikkei 225 Index traded as high as 39,922.00. Today, the Nikkei 225 Index trades around the 11,100.00 level. It is safe to say that the Japanese markets have faced deflationary pressures for over 20 years. Now, the Japanese are trying to inflate their stock markets on a daily basis. They are doing this to try and boost their exports as goods become cheaper outside of their own country. Almost every country on the Earth that has a central bank is trying that same method right now. In the short term, it will boost the markets, but in the long term there will always be a price to pay. Unfortunately, the price could be a long twenty plus year sluggish economy.
Another negative for all of this money printing could just be a lack of faith in a nation's currency. Once that happens hyper-inflation can occur and that is when goods and products will explode higher in price. According to Wikipedia, hyperinflation occurs when a country experiences very high, accelerating, and perceptibly "unstoppable" rates of inflation. Many countries have experienced this in the past. Some notable countries that have experienced hyper-inflation are Germany, Argentina, and recently Zimbabwe. It is not fun when you need a month's worth of wages to buy a loaf of bread.
The United States is the world's reserve currency. This means if you are Japan, China, Russia, or any other country that does not use U.S. Dollars for trade you will need to convert that capital into U.S. Dollars in order to buy oil, gold, copper, wheat, or any other commodity. If other nations ever lose faith in the U.S. Dollar there could be serious problems around the world. Already, there are countries such as China and Brazil initiating trade deals with each other, so there could always be a problem brewing in the future.
Gold and precious metals have exploded higher over the past thirteen years. In 1999, gold was trading around the $250.00 level. Today, gold trades around the $1600.00 level after reaching a high of $1923.70 an ounce on September 6, 2011. What is gold telling us? Gold is telling us that many smart people are losing faith in fiat currencies such as the U.S. Dollar and all other printed money. You see, you cannot print gold, it must be taken from the earth and it is very difficult to get. Recently, Germany has asked for some of its gold deposits back from the New York Federal Reserve. Could this be a sign of things to come? Perhaps, but in the meantime the central bankers are printing a lot of money.
Post by: Nick Santiago
This morning, most of the leading oil refinery stocks are soaring sharply higher to start the trading session. One of the leading stocks in the oil refinery sector is Valero Energy Corporation (NYSE:VLO). Today, VLO stock is climbing higher by $3.28 to $42.09 a share. While this rally is very strong today the stock is now trading into very important near term resistance. Traders should understand, this entire industry group is now very overbought on the daily and weekly charts. This tells us that profit taking could occur at any time. Short term traders should watch for intra-day resistance around the $43.00. This same level is also the daily chart resistance area. The next important weekly resistance level for VLO stock will be around the $46.37 area.
Some other leading oil refinery stocks that are surging higher today include Phillips 66 (NYSE:PSX), HollyFrontier Corporation (NYSE:HFC), and Tesoro Corporation (NYSE:TSO). Often, the weaker U.S. Dollar Index will help to lift most oil related equities. Today, the U.S. Dollar Index is trading sharply lower on the session.
This morning, leading retail stock J.C. Penney Company Inc (NYSE:JCP) is catching a strong bid higher on the trading session. The stock is moving on the news that the company is going back to its old ways of offering sales to shoppers. Last year, the company announced that it was done with promotional pricing, however we can obviously see that the results have not been very good for the stock price. Remember, J.C. Penney is not Nordstrom Inc (NYSE:JWN), they simply have two different consumers. Nordstrom has always catered to the more affluent consumer, while J.C. Penney has attracted more of the bargain shopper.
J.C. Penney could start to take some business away from other retail leaders such as Macy's Inc (NYSE:M), Sears Holdings Corporation (NASDAQ:SHLD), and Kohl's Corporation (NYSE:KSS). Short term traders following JCP stock should watch for intra-day resistance around the $20.60 level. The daily chart of JCP stock will have daily chart resistance around the $22.00 area.
After new 52 week and all time highs last week, Amazon.com, Inc. (NASDAQ:AMZN) is pulling back sharply. The stock is trading at $275.72, -8.27 (-2.91%). This drop is occurring as investors are taking profits ahead of earnings on Tuesday, January 29th, 2013, after the markets close. Wall Street is expecting earnings of $0.29 per share.
The key to remember is that Amazon, even if they beat estimates is still trading at a 100 plus price-to-earnings ratio. Institutions are unloading, recognizing this. On a technical basis, the chart is extremely extended and there may be a reversal candle on the daily chart as of today. That is a very bearish signal. All eyes will be on Amazon tomorrow when they report.
This morning, the leading base and industrial metal stock are all coming under early selling pressure. This decline in the base metal stocks comes despite a strong Shanghai Index (Chinese market) last night. Often, when the Chinese markets do well the base metals will rally higher as well. That is certainly not the case today.
One the leading base and industrial metal stocks in the market is Rio Tinto plc (NYSE:RIO). This stock is declining lower by 0.63 cents to $55.18 a share. Short term traders should watch for intra-day support around the $54.90, and $53.60 levels. Both areas are likely to see small intra-day bounces. The daily chart is showing support around the $52.00.
Some other leading base and industrial metal stocks that are declining lower today include Southern Copper Corp (NYSE:SCCO), Cliffs Natural Resources Inc (NYSE:CLF), Freeport-McMoRan Copper & Gold Inc (NYSE:FCX), and BHP Billiton Limited (ADR) (NYSE:BHP). All of these stocks have been trading very close together recently.
Almost everyone is talking about the euphoric stock market. The big shots in Davos, Switzerland seem very bullish and optimistic about the economy every time they are interviewed on CNBC. The important and highly followed Dow Jones Industrial Average is now just 145.0 points from the 14,000 level. Please remember, the all time high for the Dow Jones Industrial Average is 14,198.10 made on October 11, 2007. So it is safe to say the bullish sentiment is growing by the day.
What most people do not realize is that gasoline prices are starting to creep up at the pump again. Whenever gasoline prices rise they become a direct tax on the U.S. consumer and that could slow down consumer spending. In fact, if you look at a chart of the United States Gasoline Fund (NYSEARCA:UGA) it is now approaching it's September high at $61.95 a share. Very often, when gasoline prices become expensive the major stock indexes will usually stage a correction or at least a pullback in the near term.
Many people do not realize this, but when the value of the U.S. Dollar declines against other currencies it will often cause commodity prices to rise, especially oil and gasoline prices. Unfortunately, this is one of the side effects of printing money and it is going on in the United States, Japan, Europe, Asia, and Zimbabwe.
Recently, most tax payers in the United States received a tax hike as the fiscal cliff deal was partially settled by the politicians. Higher gasoline prices will simply be another added tax that will have a negative effect on consumer spending. Please understand, consumer spending accounts for roughly 70.0 percent of the GDP (gross domestic product) in the United States. If all of these bailouts and easy money policies are going to be effective the U.S. consumer is going to need to spend money.
Some other energy equities that will also rise on the back of a weaker dollar include the United States Oil Fund LP (NYSEARCA:USO), ProShares Ultra DJ-UBS Crude Oil (NASDAQ:UCO), and iPath Goldman Sachs Crude Oil Total Return Index ETN (NYSEARCA:OIL).
The markets have fallen off their highs, back to the flat line. This is significant for a few reasons. First, the S&P 500 hit the master target level of 1500 at the highs. Secondly, if the markets close flat to lower, a topping tail will have formed. A topping tail is a technical signal of a reversal of trend. In this case a move to the downside. The fact that it may coincide with the master level target is very significant.
Just as all the suckers pile back into the stock market, a major target is hit. Two weeks ago I alerted the world the SPDR S&P 500 ETF Trust (NYSEARCA:SPY) would hit $150.00. In addition, the S&P 500 would tag the 1500 level. Once this target was hit, the market would start to get rocky and pull back. Sure enough, that level was hit perfectly today. It amazes investors that the markets still pushed higher to that master level regardless of the horrid earnings from Apple Inc. (NASDAQ:AAPL). However, knowing these master levels, you know it will happen, just like the sun will rise in the east and set in the west. This is how master levels work.
As I look to short the markets across the board here, a very sad fact remains constant in every market top. The individual investor just piled in over the last two weeks, thinking it was clear sailing ahead. This always happens at market tops and was no different this time. Recently, mutual funds saw the biggest inflow of capital in 12 years.
When emotion is removed from the equation and the charts are used to analyze a stock, the truth emerges. This could be seen when Apple was at $700 per share and analysts were upgrading it to $1,000 price targets. It was pure emotion and totally illogical. Now look at Apple. It trades barely holding onto the $450.00 level. I gave the sell signal as soon as those analysts were upgrading it. Analysts are supposed to be good at what they do? Frankly, they are no better than the milk man.
The key to knowing every market and stock top and bottom is in the charts. Learn the proprietary PPT Strategies. Take the seven day free trial to the Research Center and get swing trade alerts along with the keys to deciphering every major top and bottom from this day forth!
The stock market has surged sharply higher since the fiscal cliff vote in the United States in early January. The bulls have run wild at the start of the new year. Many talking heads in the financial media have now started to say that money is coming into stocks instead of the usual mutual fund outflows that have been occurring since 2008. Often, when the public starts to get excited about the stock market it is time for a correction to occur in the markets.
Many professional institutional traders will unload positions right into the public's buying spree. Just think about it, traders can easily see what happened to tech leader Apple Inc (NASDAQ:AAPL) when it was trading around $700 a share in late September 2012. I will never forget watching a clip on CNBC and seeing all of these individual investors that were saying they will never sell Apple Inc. They were talking about how this stock is a life time hold. That day, I pointed it out to my chat room members that the top was likely in for Apple Inc as the public has reached the emotion of euphoria. Please understand, stocks and markets top out on euphoria and bottom out on despair. This is how it has been from the beginning and this is how it will be until the end.
The central banks around the world are printing money out of thin air in order to try and get the public involved in the markets. Throughout recent history (past 200 years) this has always worked and it is still working today. The public always wants to be a part of something important. Just look at what the public did from 2003 through 2007 with the housing market. They were buying houses at outrageous prices even though they really could not afford them. I remember when I sold my house at that time of euphoria, I had 100 people on my front lawn bidding the house higher. Believe it or not I was a year early, but that was the first day that I had the ad in the newspaper. Soon afterward, the top of the housing market was in.
Everyone in the trading and investing business knows that with every bull market there will be another bear market. This current bull market that started in March 2009 has already been in place for nearly four years. How much longer does this bull have left in the tank before it rolls over and the bear market takes hold? If anyone has ever been to Spain and witnessed a bullfight you know that it takes a lot to kill a bull. So there could be some more upside to go before the bear awakens and claws everything lower. Sure, the central banks are printing a lot of money, they always have, but when the bear comes back it will not matter. Watch the public's opinion of the stock market for signs that this bull market is coming to an end.
The strongest industry group in the stock market since June 2012 has been the large banks. Today, the large bank stocks are trading higher again. J.P. Morgan Chase & Co (NYSE:JPM) is by far the most important stock in the sector. This stock has surged higher by nearly $16.00 since June 4, 2012 when the stock was trading as low as $30.83 a share. Traders should start to call JPM stock the real bank of America. The stock is now starting to trade into some important resistance around the $48.00 area. There should also be heavy resistance around the $50.00 area as well should the stock trade up there. JPM is also overbought in the near term so pullbacks or consolidation on the daily chart should be expected a little bit higher.
Some other leading financial stocks that are climbing higher today include Deutsche Bank AG (USA) (NYSE:DB), Citigroup Inc (NYSE:C), Wells Fargo & Company (NYSE:WFC), and Bank of America Corp (NYSE:BAC) just to name a few. Traders can follow the entire sector by using the Financial Select Sector SPDR (ETF) (NYSEARCA:XLF). Remember, the trend remains up in all of these stocks, however, the sector is now getting overbought in the near term.
The Volatility Index aka Fear Index is sitting near 12. This level has not been seen since 2007, prior to the financial collapse. While housing prices are not where they were, other bubbles have formed, mainly in the bond market. To see the VIX near 12 is scary to say the least.
So is it smart to invest in an ETF that tracks the VIX? Let's take a look at the VelocityShares VIX Short Term ETN (NYSEARCA:VIIX) and iPath S&P 500 VIX Short Term Futures TM ETN (NYSEARCA:VXX). Both allow you to play volatility but each carries with it additional risks. First, understand that each month these ETF's must roll over their VIX contracts. In doing so, there is some slippage that occurs. Like many double and triple ETF's, these will eventually go to zero over the long term. Because of this, they should only be used as short term trading vehicles, held for days or a few weeks.
If you only use them as short term vehicles, they are fantastic if you can read the market like a pro. This market is as complacent as ever. Retail investors are dumping money into the markets at record pace just like in 2007. There is an overlying feeling the Federal Reserve will always be there to bail out the markets with more money printing. While the VIX could see $10, the risk reward definitely favors the upside. I myself am scoping it out, looking for the proper entry for a small position in the next few days.
The markets saw monster earnings results from companies like International Business Machines Corp. (NYSE:IBM) and Google Inc(NASDAQ:GOOG). In addition, mid size companies Cree, Inc. (NASDAQ:CREE) and Intuitive Surgical, Inc. (NASDAQ:ISRG) are both soaring on their quarterly results. Overall, fourth quarter earnings have been solid. While the markets have been moving higher of late, today the they remain flat. This should be worrisome to investors after such solid reports.
Reasons To Be Cautious
1. The markets have made new 52 week highs in recent days, thus are extremely extended.
2. The unemployment rate remains north of 7.5% and the economy still can barely add jobs.
3. Great earnings should be shooting this market dramatically higher, yet no upside is seen.
4. Markets have rallied on extremely light volume. This light volume is attributed to the small investor, coming into the market again. The retail investor always buys the market tops.
5. Apple Inc. (NASDAQ:AAPL) reports today. This one report could sway the markets dramatically.
The key to the next move is always shown in the charts. The question is, will you see it ahead of time? The markets are starting to show weakness while the retail investor piles in.
Throughout history, many U.S. presidents have had their legacy engraved by the way the economy behaved during their time in office. For example, President Ronald Reagan is credited for a stellar economy, yet the crash of 1987 took place while he was in office. At the start of President Reagan's first term in January, 1981 the highly followed Dow Jones Industrial Average (DJIA) was trading around the 950.0 level. Throughout 1981 to 1987 the Dow Jones Industrial Average rose to a high of 2746.70. This is quite a surge in the stock market when DJIA can rise by nearly 200.0 percent in just six years. Did President Reagan implement policies that were so good for the economy that the stock markets just took off to the upside? I would not be so sure about that.
President Bill Clinton will most likely be remembered for a robust economy as well. Under President Clinton's leadership the Dow Jones Industrial Average climbed from 3232.00 at the start of his first term in 1993, to a high of 11,750.28 in January 2000. That is a gain of more than 250.0 percent in just seven years. Did President Clinton implement policies that were so good for the economy that the stock markets simply took off to the upside? I would not be so sure about that either.
As we all know, the president of the United States does not control interest rates, the Federal Reserve Bank does that. When President Reagan first entered office the fed funds rate was around 19.0 percent. The fed funds rate is the overnight lending rate to the large banks not the prime rate which the public pays for a loan. At the time, Paul Volcker was the Federal Reserve Bank chairman. Once he began to cut interest rates the stock markets soared like eagles to new all time highs. By September 1987, the fed funds rate was as low as 6.75 percent. This is a drastic reduction in interest rates, as the easy money flowed so did the stock market.
Now under President Bill Clinton the fed funds rate was around the 3.0 percent level. The Federal Reserve soon started to raise interest rates into July 1995. At that time, the fed funds rate was at 5.75 percent. Then the Federal Reserve started to lower interest rates, and the stock markets began to climb once again. In 2008, the fed funds rate was as low as 4.75 percent. Once again, the central bank started to raise rates to 6.0 percent in 2000 and the stock markets made their final high before starting a new bear market.
Now, let;s fast forward to modern times. President Obama is now getting credit for a four year stock market rally. Remember, in March 2009 the Dow Jones Industrial Average was as low as 6470.0. Today, the DJIA is trading as high as 13,766, which is a new four year high. Please understand the Federal Reserve has held the fed funds rate at zero to a quarter percent since December 2008. There is also about $90 billion dollars a month worth of bond buying going on by the Federal Reserve.
So I believe it is safe to say that the president of the United States has very little to do with the economy and the stock market. The Federal Reserve has everything to do with the stock market. So the next time someone tells you that Bill Clinton and Ronald Reagan were great leaders you may just want to replace those names with Paul Volker, Alan Greenspan, and now Ben Bernanke.
The financial stocks like Goldman Sachs Group, Inc. (NYSE:GS), JPMorgan Chase & Co. (NYSE:JPM) and Citigroup Inc. (NYSE:C) have been leading the markets substantially higher of late. The their problems appear to be ancient history as the Federal Reserve has allowed them to use every avenue possible to regain their dominance.
While these stocks have shown impressive upside, they are extremely extended. A pull back is imminent. JPMorgan is currently trading at $46.33. Just above this level lies the high pivot from 2011 at $48.35. In addition Goldman Sachs also has a major level near the $150.00 area. Almost all the financial stocks have key levels approaching. When they tag these levels, downside should begin. Look for a 10% pull back on all names across the board.
The 3-D printing stocks have been all the rage over the last few months. This new, exciting innovation seems to be where retail investors are flocking over the last few months. That should be a huge warning itself. 3D Systems Corporation (NYSE:DDD) is trading at $70.21, +4.39 (6.67%). From the 2012 lows, the stock is now up a whopping 370%. Another 3-D printing stock is Stratasys, Ltd. (NASDAQ:SSYS). This stock has run over 200% from its 2012 lows. Both of these plays are at 52 week highs and chatter on message boards has reached an all time high. Message boards are online piker forums and should be taken as a contrary indicator.
Considering the extended new all time high moves, the increase in volume (distribution), and the message board hype, these stocks should see a pull back shortly. On DDD, a short level could be seen as $75.00, if hit by tomorrow. Cheers!
Low interest rates certainly make housing an attractive asset class. After all, the 30-year fixed mortgage in the United States is around 3.50 percent, the 15-year fixed mortgage rate is 2.94 percent. These are all time low mortgage rates and many investors and potential home owners are trying to take advantage of these attractive interest rates. The Federal Reserve is also buying approximately $40 billion worth of mortgage backed securities to help inflate the housing sector.
As many of you know, in 2002 the Federal Reserve Bank cut the fed funds interest rate down to 1.00 percent. This rate cut by the central bank helped to bring mortgage rates down from 8.0 percent (2000) to roughly 5.8 percent in 2003 and 2004. This move by the central bank was done in order to stimulate the stocks and housing markets from the technology bubble and the 9-11 tragedy which sent the country into a severe recession.
Well, the low interest rates worked for a while causing the United States to have a five year economic rebound. People in the United States went crazy buying and selling homes. Banks were lending money to anyone that could sign their name on the dotted line. No documented income loans soared as the house became the greatest investment to man. I remember going to a street carnival and seeing the real-estate booth with more people around it than the cotton candy stand. That was a sure sign of a top in housing, but it lasted longer than anyone could believe. Unfortunately, as we all know this housing bubble lead to the greatest credit crisis since the Great Depression. The stock markets plunged and many leading investment firms such as Lehman Brothers, Bear Stearns, Washington Mutual, Wachovia, Merrill Lynch, Countrywide, and countless other firms either failed or were bought for pennies on the dollar. The taxpayer had to bailout most large banks and financial institutions so theoretically the entire financial system as we know it failed.
Now the Federal Reserve (U.S. central bank) has lowered the fed funds interest rate down to zero percent. The rate has been this way since December 2008. The central banks have also implemented three quantitative easing programs (bond buying programs) since that time in order to inflate stock markets and to add liquidity to the financial system. In all fairness, the major stock indexes have mostly recovered all of the losses from the decline in 2008. Unfortunately, we all know that you can print money forever, and inflation is usually a byproduct of this so-called stimulus.
The housing market has been rebounding. Traders can simply look at a chart of the leading housing stocks and see how the sector has been a major winner since October 2011. Leading housing stocks such as Toll Brothers Inc (NYSE:TOL), Lennar Corp (NYSE:LEN), D R Horton Inc (NYSE:DHI), and KB Home (NYSE:KBH) have been some of the strongest stocks in the market recently. If this important and leading stock sector starts to give up its gains and go into correction it will be a sign that the major stock indexes will probably start to falter. The Federal Reserve is certainly trying to cause another housing boom. This will generally help companies such as Home Depot Inc (NYSE:HD), Lowe's Cos (NYSE:LOW), Sherwin-Williams Co (NYSE:SHW), Mohawk Industries Inc (NYSE:MHK) and many others. So sure, the central bank is definitely trying to keep the housing market strong. More construction workers will be needed and this added workforce trickles down to other sectors just as it did in 2003 through 2007.
Is there another housing bubble developing? No, there does not seem to be a housing bubble taking place this time around because the banks are doing their job, they are now only lending to qualified borrowers. Unfortunately, it takes a crisis for these financial institutions to do their job. So another housing bubble is unlikely, but a commodity and stock bubble is certainly more probable down the road.
Post by: Nick Santiago [more]
Chevron Corporation (NYSE:CVX) is trading at $115.43, +1.46 (1.28%). The key to this price point is the gap window. Note the chart below. Generally, stocks will see a pull back off gap window prior to going to gap fill which is at $117.35.
Considering a proprietary time count is seen here as well, there is a solid chance of a pull back in the next few days.
The S&P 500 broke through the 52 week highs today of 1,474.51. This will get the media buzzing and help push more retail investors into the market. I predicted this scenario already and my prediction still says further upside for another week or so. The upside is based on light volume, retail investors jumping in the market (always near the tops and proprietary PPT Strategy calculations). Once February approaches, the markets will begin to pull back as debt ceiling fears start to take their toll.
The SPDR S&P 500 ETF Trust (NYSEARCA:SPY) is trading at $147.84, +0.79 (0.54%). This is the S&P 500 tracking ETF and will head to around $150.00. Once there, shorts on the overall market can be initiated.
Other stocks to short will include large caps trading north of their 52 week highs, +10% in the new year. These are all ripe for a pull back. Some examples would be Amazon.com, Inc. (NASDAQ:AMZN), 3M Co (NYSE:MMM) and Goldman Sachs Group, Inc. (NYSE:GS). This will be a market pull back for multiple weeks thus every stock should see some modest declines.
The key is patience. Wait for the markets to inch higher into the end of January then pounce.
This morning, the important and highly followed semiconductor sector is soaring sharply higher. Many traders and investors follow the semiconductors very closely because throughout the years they will signal a sign of strength for the technology stocks. Almost every tech gadget in the world has a semiconductor in it. Seasoned traders and investors know this and will usually ride the NASDAQ Composite higher until the major resistance level on the chip sector is reached.
One way to track the semiconductor industry group is to follow the Market Vectors Semiconductor ETF (NYSEARCA:SMH). This important ETF has surged higher since November 16, 2012 when it traded as low as $30.00 a share. Today, the SMH is trading higher by 0.65 cents to $34.40 a share. Traders should watch for daily chart resistance around the $35.40 level. This is an area where the SMH could see a pullback in the near term. Short term traders should watch for intra-day resistance around the $34.50, and $34.80 levels.
Some leading semiconductor stocks that are rallying higher today include KLA-Tencor Corporation (NASDAQ:KLAC), Broadcom Corporation (NASDAQ:BRCM), SanDisk Corporation (NASDAQ:SNDK), and Skyworks Solutions Inc (NASDAQ:SWKS). This sector looks to be trading in tandem with each other at this time, therefore when the SMH pulls back it is is likely that these stocks will also come under selling pressure.
Almost every day the markets are inching higher after early morning selling. The last five trading days have either seen a gap lower or an early morning sell before the markets float back to the flat to positive side. So what does this mean? Why is this happening?
First, understand that the volume is key. The volume in this market has been insanely light for any month, especially January. Early morning dips are the result of increased volume from institutions on the sell side. After the first hour, the volume is too light for them to sell without hurting the market significantly. Therefore, they stop. The remainder of the day is retail investor buying. Last week saw the largest inflows of retail money into mutual funds since 2002.
The fact that institutions are selling and retail investors are buying should be a warning sign. Average investors always buy the tops on the market and institutions rarely get caught still in full positions at those same tops.
So where is the market heading in the near term? Over the next couple weeks this early sell, followed by a float higher should continue. The SPDR S&P 500 ETF Trust (NYSEARCA:SPY) is only $1.00 away from its 52 week high of $148.11. Additionally, it is likely that 52 week high will be taken out with the SPY heading to $150.00. Once this level is achieved, most of the poor average investors would have bought in. Early February should bring rocky action and a decent decline into the markets. From $150.00, the SPY may fall to $142.00 if not lower.
Name brand large caps like Goldman Sachs Group, Inc. (NYSE:GS) and Chevron Corporation (NYSE:CVX) should remain strong until early February as well.
The key to the future weakness is multi faceted. First, the technical charts are showing clear signals. Secondly, it coincides with the spending cuts and debt ceiling issues facing the United States. These stand as giants above the Fiscal Cliff resolution reached at the start of the year and have the potential to see the U.S. default as well as spin back into recession.
Be warned, good times should remain for the next few weeks. However, storm clouds lurk. For those of us who swing trade the market, amazing opportunities are everywhere. [more]
This coming Friday is the monthly options expiration for January. Often, many traders will experience a lot of volatility during the four trading sessions before expiration. These trading sessions will usually be filled with rumors, and countless upgrades and downgrades. Some of the rumors might be true, however, most will not. This is simply just one of the ways that the large institutions can move stocks in their favor.
Why would they do this? It is simple, the large market moving institutions know that most retail options traders are simply buying call and put options on the near term expiration. The retail options trader does this because the options are cheap. You see, the further out the option is in time the more expensive it is for the trader. On the flip side, the closer the option is to the expiration date the cheaper it is. So, the institutional traders will try and figure out the imbalances in the near term expiration and move the equity in the opposite direction of the majority small retail options traders. For example, if there are a lot of call options bought in a particular stock by a large amount of retail traders the large institutions will drive stocks in the opposite direction and make those options expire worthless or out of the money. This type of action happens every month during the third week of the month.
How do the institutions know what the small retail options trader is betting on? Simple, the institutions watch the options chain with sophisticated computer programs and see where the small number of contracts are bought. Large institutions by thousands of contracts at a time, meanwhile the small retail options trader buys between one and twenty contracts. Believe it or not, this is not really difficult for them to do. Once they see a large imbalance in a particular equity they will take that stock in the opposite direction. Just look at how many bullish call options there were when Apple Inc (NASDAQ:AAPL) was trading just over $700.00 a share. Soon after that high print in Apple Inc stock it rolled over by more than 200.0 points to $505.00 a share. It is safe to say that those call options expired worthless.
Rumors will notoriously occur this week. Today, there have been rumors about Apple Inc, Dell Inc (NASDAQ:DELL), and Hewlett-Packard Company (NYSE:HPQ) just to name a few. Some other leading equities that will usually be very volatile during the week of options expiration will be First Solar Inc (NASDAQ:FSLR), Green Mountain Coffee Roasters Inc (NASDAQ:GMCR), and Netflix, Inc (NASDAQ:NFLX).
Trades should also watch for upgrades at highs and downgrades at lows by major banks and brokerage firms. This is another common way that the large institutions can move stocks in the direction that they are betting. Traders should always be on guard this week as options expiration approaches.
In the last fifteen years, the United States has seen bubbles inflate and burst more often than anytime in history. There has always been a boom and bust cycle, yet in the last decade and a half this has happened once ever few years. The average investor should be extremely worried about this because these cycles destroy more of their wealth than anything else in the world. The average investor will buy into a bubble near the top, then ride it down until they sell at the lows. During the financial crisis, many investors lost their retirement savings. The same thing happened to some extent during the tech boom in the late 1990's. So why are we seeing more dramatic bubbles in the last 15 years?
The simple answer is government intervention, primarily the Federal Reserve. While the Federal Reserve is not part of the government, they act as their hand.
Let's look at an example of a cycle. Take the seasons. There are four seasons, spring, summer, fall and winter. Now what if you took spring and manually kept it all year round? Things would be beautiful, life would flourish...for a while. Yet nutrients would be eliminated from the soil, depleted as new life thrived early on. In no time at all, without new nutrients being put into the soil through death in fall and winter, a catastrophic collapse would occur. Soon life would wither and die regardless of spring. The ecosystem would collapse.
Another example would be changing the cycle of life in the human race. To some extend this is already being done through medicine. If you take away the prospect of death in the human race, overcrowding would ensue. Within years, mass starvation would occur and the pollution to the earth would create even more hardships. This can already be seen with hundreds of millions hungry around the world and global warming taking hold.
The bottom line is simple. Cycles are part of life, whether in nature or in the markets. When you mess with them you will screw things up even more. The Federal Reserve tries to limit the severity of recessions by intervening with monetary policy. While in the short run it may and often does help, it never outweighs the long-term consequences.
The best example can be seen right after the technology bubble collapsed. The Federal Reserve dropped interest rates dramatically and encouraged home buying for all. While it may have kept that recession slightly less severe, that action created the real estate and financial crisis.
To deal with the financial crisis and the Great Recession, the Federal Reserve has now printed trillions of Dollars. The way they do this is by pumping money into treasuries and artificially keeping interest rates at 0%. This is known as "Quantitative Easing". In addition, the government has taken on trillions in debt to help alleviate the harshness of the recession.
These actions, even more drastic in nature will have unbelievable consequences down the line. The next bubble is in the bond market, less than 5 years away from collapse. While many average investors do not think the bond market has much heading on their lives, it does. This is tied to inflation and interest rates. In other words, the price you pay for food, energy and everything else you buy may be double in just five years.
Please note that each bubble collapsing, is harsher than the last. This is mainly because each time, the Federal Reserve and government take on more drastic measures to get us out of the mess. The more drastic the measure, the bigger the next bubble created by these measures will be.
Recessions stink, no one wants them but they are a way of life. If left to their own doings, recessions would generally be minor. The more you screw with the natural course of things, the more you screw yourself, the American people and the world.. I plead with the Federal Reserve and government to start hearing common sense and realize screwing future generations will only send them to hell and make the history books curse their names.
Over the past four months the important Market Vectors Retail ETF (NYSEARCA:RTH) has been in sideways trading range. The high end of the range is around the $46.00 level, meanwhile the low end of the range remains at around the $43.00 area. Currently, the pattern on the daily chart of the RTH is still forming bullish consolidation, so a move into the high end of the range soon cannot be ruled out.
Today, the RTH is trading higher by 0.01 cent to $44.29 a share. Short term traders should watch for intra-day resistance around $44.50, and $44.80 levels. Should the RTH decline intra-day there should be support around the $44.15, and $44.87 levels.
Some leading retail stocks that are coming under selling pressure today include Lululemon Athletica Inc (NASDAQ:LULU), The Gap Inc (NYSE:GPS), Costco Wholesale Corporation (NASDAQ:COST), and Bed Bath & Beyond Inc (NASDAQ:BBBY). Each individual retail stock should be viewed on an individual basis as they will not always follow the RTH.
This afternoon, leading coal stock Peabody Energy Corp (NYSE:BTU) is trading lower by 0.52 cents to $26.26 a share. This stock is considered to be the best equity in the coal mining space. Short term traders should watch for intra-day support around the $26.11 level. The daily chart for BTU stock is around the $24.00 area.
Some other leading coal stocks that are struggling to catch a bid today include Alpha Natural Resources Inc (NYSE:ANR), James River Coal Company (NASDAQ:JRCC), and Arch Coal Inc (NYSE:ACI). All of these stocks are susceptible to further downside in the near tern according to the daily charts.
Every market sees a major boom, then a bust. In the last decade however, this boom and bust cycle has gotten increasingly faster as institutions feel they can rape the average investor multiple times a year, rather than once or twice a decade. [more]
There have been many strong stock sectors that lead the markets higher in 2012. Most traders and investors would point to housing, technology, and energy as the strongest sectors in 2012, however, it is the financial stocks that really lead the markets higher. This important industry group is also a critical sector for the stock market. You see, the central banks in the United States and Europe have been printing money at an alarming rate in order to rescue the large financial institutions from the abyss for over four years now.
Just think about it, the fed funds rate (overnight lending rate to the large banks) has been held at zero percent since December 2008. This is the reason why banks pay you and I very little interest in a savings account. Since the fed funds rate is so low the central banks have continued to buy U.S. Treasury Notes and mortgage backed securities (MBS). The funny thing is that the central banks buy these bonds from the large agency banks such as Goldman Sachs Group Inc (NYSE:GS), Jefferies Group Inc (NYSE:JEF), Morgan Stanley (NYSE:MS) and others instead of buying the bonds directly from the U.S. government. The central bank even pays a premium for these bonds, so this is a clear indication that they are working very hard to try and bail out the large banking institutions.
So it is safe to say, as long as the financial stocks hold up and trade higher the major stock indexes should hold up as well. Traders and investors should simply continue to watch and follow the financial stocks very closely. If this important industry group begins to sell off with any conviction then it could spell real trouble in the stock market. Until, then the major stock indexes could just continue to grind and inflate higher.
J.P. Morgan Chase & Co (NYSE:JPM) is by far the most important financial stock in the United States and possibly the world. This stock can be viewed as a financial ETF for the entire sector. The stock has soared sharply higher since June 4, 2012. This is when the central banks in Europe promised more money printing, to their credit the money printing has worked to get the large financial stocks and the stock markets sharply higher. JPM stock is now approaching the high pivot resistance area at $46.49 which was last reached in March 2012. The stock will also have more daily chart resistance around the $50.00 level.
Some other important leading financial stocks that traders should follow include Bank of America Corp (NYSE:BAC), Deutsche Bank AG (USA) (NYSE:DB), and UBS AG (USA) (NYSE:UBS). While all of the leading financial stocks are important J.P. Morgan Chase & Co is by far the most important stock in the sector and possibly the entire stock market.
The markets surged dramatically higher last week, following the avoidance of the catastrophic Fiscal Cliff. A deal was struck in Washington D.C. to keep taxes the same on those making less than $400,000 and families making less than $450,000. The SPDR S&P 500 ETF Trust (NYSEARCA:SPY) had its best week in over a year and the average investor and media breathed a sigh of relief.
While last week it seemed as if the world was saved, this week the market is on pace to have its second down day in a row. The SPY is trading at $145.32, -0.60 (-0.41%). So why is the market beginning to sell after such great news last week? There are multiple reasons which will be explained below.
1. The market had a dramatic move to the upside of around 5%. It is common see a pull back after such a big move up.
2. The Fiscal Cliff deal struck in Congress only dealt with the tax side. The spending cuts were kicked two months down the line. The spending cuts are arguably the bigger factor to the market as they will influence future growth dramatically.
3. The U.S. will hit the debt ceiling in two months. This means the United States will default on the debt if the ceiling is not raised. A major battle is brewing between Republicans and the President. The Republicans are going to be demanding huge spending cuts if they are to vote in favor of increasing the debt ceiling. This will likely be the final stand and even more important to the stock market. Remember, if the debt ceiling is not raised, the most powerful country in the world would default on its debt.
4. The Federal Reserve has signaled they may stop printing money by the end of 2013. The QE policies of the Federal Reserve have arguably inflated the stock market for the last four years. Think of this as a drug addict (the stock market) that is addicted to drugs (QE). As the year progresses, this will become more and more of a worry to the markets.
The bottom line is this, it appears more and more that the pop from last week may be short lived. It is very possible we could see more downside as the second Fiscal Cliff nears. I am looking to short charts that have PPT Strategy setups in them.
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Today, we saw a Morgan Stanley (NYSE:MS) analyst upgrade Amazon.com, Inc. (NASDAQ:AMZN) to overweight with a price target of $325.00. This came as the stock was hovering just underneath its 52 week and all time highs with a P/E north of 100. [more]
This morning, many of the leading oil refinery stocks are declining lower at the start of the trading session. Phillips 66 (NYSE:PSX) has been a leading oil refinery stock in 2012. At the start of this year, PSX encountered near term selling pressure. Short term traders should watch for intra-day support around the $51.00, and $50.00 levels. The daily chart of PSX is signaling weakness down to the $48.75 level in the near term.
Some other leading oil refinery stocks that are coming under selling pressure today include HollyFrontier Corp (NYSE:HFC), Valero Energy Corporation (NYSE:VLO), and Tesoro Corporation (NYSE:TSO). All of these stocks should have further weakness and possible downside in the near term according to the daily charts.
Apple Inc. (NASDAQ:AAPL) has started to fall again, trading at $527.06, -15.04 (-2.77%). Many investors and analysts are perplexed, wondering whether it is headed to new 52 week lows, below $500.00 per share. The charts tell the truth and will be explained below.
Note the bottoming tail on November 16th, 2012. That was the low pivot in the second half of 2012 and even though the price was retested and pierced, it never closed below that low. This puts a line in the sand at the low of $505.75. As long as AAPL does not close below this low pivot on the daily chart, it has potential to bounce. We have seen this bounce many times in the last few months and never has the stock closed below it.
Should Apple Inc. close below $505.75, it will fall fast. This would represent a technical breakdown with the next major support being at $470.00 - $475.00. Secondary support and the ultimate low would be $425.00. Both represent buying opportunities. The $470 - $475.00 level would be a near term major bounce while the $425.00 would be a long term hold level for major upside.
This morning, many of the leading industrial and base metal stocks are pulling back. This industry group has been very strong since the important Shanghai Index (China) bottomed out in late November 2012. Chinese growth is extremely important for the leading industrial and base metal stocks.
One of the important factors that could stall this important stock sector would be a stronger U.S. Dollar Index. Today, the U.S. Dollar Index futures are catching a bid higher and this is certainly one of the reasons for the small pullback in the industry group. Should the U.S. Dollar Index decline or pullback throughout the trading day then the base and industrial metal stocks are likely to bounce off of the intra-day lows.
Some leading base and industrial metal stocks that are declining lower today include Vale S.A. (NYSE:VALE), RIO Tinto plc (NYSE:RIO), BHP Billiton Limited (NYSE:BHP), and Teck Resources Limited (NYSE:TCK). Short term traders can watch for intra-day support for RIO around the $58.60, and $58.00 levels.
All of the major stock indexes are surging higher after the U.S. fiscal cliff deal was averted last night by the U.S. politicians. What most traders and investors should realize is that while the U.S. government did not go over the fiscal cliff there was really no grand bargain reached. This tells us that the next two months could be very turbulent for the major stock indexes as politicians will once again try to claim victory over the other party. After all, last night's vote to avert the fiscal cliff deal was really a win for the Democrats since it was the democratic controlled U.S. Senate that created the current fiscal cliff deal resolution in the first place.
Now the topics of the debt ceiling, spending cuts, extended unemployment compensation, the budget, and more will be debated over the next two months. The one thing that most people can agree on is if the politicians see the stock market decline for any considerable period of time they will usually be quick to act. For some strange reason the politicians do not like to see the stock market decline very much.
So for now, the major stock indexes are soaring on the trading session. The SPDR Dow Jones Industrial Average (NYSEARCA:DIA) is now approaching its most recent high made on December 19, 2012 at $133.70 a share. Today, the DIA is trading higher by $2.77 to $133.38 a share. Traders must watch for near term chart resistance around the $134.00 levels. In the meantime, leading stocks such as Apple Inc (NASDAQ:AAPL), Google Inc (NASDAQ:GOOG) are all climbing on the session. The home-builder stocks which were one of the strongest sectors in 2012 continue to rally higher as well on the session. This leading industry group looks to be trading right into near term daily chart resistance today, so further upside is likely to be limited. Leading home builder stocks such as Lennar Corp (NYSE:LEN), Toll Brothers Inc (NYSE:TOL), and D.R. Horton inc (NYSE:DHI) are all trading higher on the session, but near term daily chart resistance is now in play for the industry group.
The large financial stocks have been the leading stock sector in the market recently. This industry group continues to defy gravity climbing sharply higher again today. This sector is now looking slightly overbought, however, it is technically still in a confirmed uptrend.
We must now look for signals that the quick rally created by the politicians could be short lived. The truth of the matter is that the politicians could have actually made things worse for the economy. Traders should remember, the stock market usually trades ahead of the actual economy. Any stock market decline is just warning us of a weaker economy to come.