The VRTrader.com VR Silver Newsletter - Monday 3/3/2008
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LEIBOVIT FILES | by Mark Leibovit
Monday, March 03, 2008
A High Risk Period Continues!
Economic Reports and Market Events March 3-7:
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MONDAY, March 3:
Construction Spending for January (10 am ET)
ISM Index for February (10 am ET)
Treasury auctions 3 & 6-month bills (1 pm ET)
Auto Sales for February
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TUESDAY, March 4:
Weekly Chain Store Sales (8:55 am ET)
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WEDNESDAY, March 5:
Productivity Index for Q4 (8:30 am ET)
Factory Orders for January (10 am ET)
ISM Services Index for February (10 am ET)
EIA Petroleum Status Report (10:30 am ET)
Fed releases Beige Book (2 pm ET)
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THURSDAY, March 6:
Weekly Initial Jobless Claims (8:30 am ET)
Pending Home Sales for January (10 am ET)
Chain Store Sales for February
Weekly Money Supply (4:30 pm ET)
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FRIDAY, March 7:
Employment Report for February (8:30 am ET)
Consumer Credit for January (3 pm ET)
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Friday morning's action reaffirmed my near-term (and long-term) bearish view of the marketplace and I reversed index positions and went short. On Friday's close I switched to a TIMER DIGEST 'Sell' signal in reaction to my belief that we will likely not only break the 1300 to 1400 'trading range' in the S&P 500, but also take out the January 23 low, i.e., 1270.05. Equivalent levels in the Dow Industrials and Nasdaq are 11,647 and 2202.54. I have no ego here, and for of you who have subscribed to the VR Forecaster Report (the Annual Forecast Model), you know exactly what I mean. Intra-day week (at Wednesday's close) I erred by switching to a 'Buy' signal, thinking at that time we could trade higher first. My thinking was that with the market might break its recent trading range (1300 on the low end and 1400 on the upper end in the S&P 500) to the upside and reach the 200 day moving average BEFORE resuming the predominant bear trend. In the S&P 500 that would have represented 1470 and in the Dow Industrials 13,280. Overall, I feel and have written that "we may be in the early stages of a multi-year bear market - though I expect to see some nice rally tries in this wild election year."
Stocks opened lower and continued to move down Friday, after AIG and Dell fall short of their earnings estimates, the PCE price index increased more than expected and wiped out the gains in personal income and spending for January and a weak Chicago NAPM report. Bonds rallied in a flight to safety. The long bond is up 1 22/32.
According to Wharton's Jeremy Siegel..."Economic weakness signals further rate cuts, but further rate cuts mean greater inflation and neither of these developments is good for the market. The accelerating decline in the dollar and rise in commodity prices clearly speaks to the dilemma the Fed finds itself in. Bernanke's inattention to these inflationary trends is worrying international traders, and fears that the US will unilaterally support a much weaker dollar to improve the trade balance while ignoring the inflationary consequences of this action does not augur well for stocks. Fed funds futures are projecting a
1.75% funds rate by late summer, 125 bps below the current level. If this prevails the value of the dollar is likely to decline 5% to 10% further and inflation in imported goods (including oil) will spike upward
accordingly. Central banks cannot prevent, but only moderate business cycles. Central bankers must keep their eyes on the long-term goal of a stable inflation-free environment for the economy. Trying to solve the housing and credit problems by accepting more inflation is ultimately self-defeating. As I noted last week, Bernanke must announce that the Fed is near an end of its easing cycle and that he is attending the growing inflation threats. In the short run the equity markets (and Wall Street) will scream, but in the long run they will be thankful."
Thankful? Will they be thankful if the Dow Industrials is trading at 10,600 or lower? We shall see. Meanwhile, keep in mind that the Fed kept on cutting rates in 1930 and as recently as 2001, but couldn't prevent an recession in either instance.
Personal income in January slowed to a 0.3 percent gain while personal consumption advanced 0.4 percent. Both these numbers exceeded expectations. However, inflation worsened in January as the overall PCE price index increased 0.4 percent. Even the core PCE price index firmed with a 0.3 percent gain. Year-on-year headline inflation is at 3.7 percent, compared to 3.6 percent in December. Adjusted for inflation, personal consumption was flat while personal income was actually down.
The Chicago NAPM report is fell to 44.5 in February, down from. 51.5 in January. Any number below 50 mean negative growth. New orders were at 48.8, up from January but still below 50. Employment is down to a very bleak 33.5 vs. January's 47.0. But prices paid remains severely elevated at 79.4. Bad news all around in this report.
On the plus side, the Reuters/University of Michigan consumer sentiment report fared much better than Tuesday's very pessimistic confidence report from the Conference Board. The Reuters reading edged higher to 70.8 from a mid-month level of 69.6, though the latest level still compares very poorly with a 78.4 reading in January. While this news is in fact positive, it is being overwhelmed by the negative news today.
Dell reported a fourth-quarter profit that fell 6% from a year ago despite a rise in revenue as the PC maker was hit with several charges related to acquisitions and restructuring efforts. Dell suggested that business could be adversely impacted by reduced customer spending. Dell reported fiscal fourth-quarter earnings of $679 million, or 31 cents a share, on $16 billion in revenue. During the year-ago period, Dell earned $726 million, or 32 cents a share, on $14.47 billion in revenue. Dell was expected to earn 36 cent, a 5 cent miss. As a result, DELL is down 1.5%.
MF Global was down again following Thursday's report that a $140 million loss on unauthorized trades. Today, S&P said it lowered its long-term counterparty credit rating on MF Global 'BBB' from 'BBB+', and at the same time, placed its rating on MF Global on CreditWatch Negative. Also today, Lehman Bros. downgraded MF shares to equal-weight from overweight and cut it price target to $21 from $36. MF is down another 22% today.
The US Dollar Index touched a new bear market low Friday of 73.56. Support is at 72.00 on the road, I presume, to the 68.00 level. We're oversold here, so a bounce could come at anytime as high as 75.50. Such a bounce would cause metals and oil to retrace. Crude Oil Oil, Natural Gas, Copper, Palladium, and Aluminum were all starting to retrace a little Friday.
Gold (March) was up 7.60 at 972.10 - closing at a record high! Can't argue with that I suppose. I am still projecting Gold into the 1040-1090 range whether we get a retracement or not. Pullback risk is 957 and 931 from current levels. At some point, whether from here or from 1090, we're going to get one of those humdinger corrections of 150 or 200 dollars. Just keep that in mind, if you're trading.
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Canadian, TSE and TSE Venture Commentary for our Canadian Clients updated for Monday, March 3: TSE:
The TSE reversed on Friday pulling back to 13,546.92 from Thursday's high of 13,891.78. That's a quick 450 points! Volume was heavy but not heavy enough to create a Negative Volume Reversal ™. Still, there could be further corrective risk simply due to gravity. We have rallied 1880 points off the January 22 low of 12,011. We have to keep that in mind. Though the trend is higher and there are higher technical projections, we cannot discount the risk of a one-third to one-half retracement coming at anytime. Overall, it appears we could see 14,050 and possibly 14,300 and even the big high at 14,600 in the months ahead. As I told you Friday moorning, if I was going to add to long positions and could pick an 'ideal' long entry point, it would be at 13,350. Several support levels were broken Friday on the sell-off leaving 13,480, 13,350-13,395, 13,106, 12,747, 12,600, 12,200 and 12,000 - the January 22nd low.
TSE Venture:
Fear of heights - Acrophobia must at play here as the TSE Venture touched 2814.88 on declining volume and and then slid bac to 2770.63 before closing at 2782.07. I think we're headed higher, too, but we've rallied just under 500 points since the January 22 low. Major resistance at 2850 lies dead ahead. Two Positive Volume Reversals ™ - one on February 8 and the other on Monday have indicated strong investor buying, but also say support at 2639 and 2480 are critical levels. Support is 2639, 2580, 2530, 2480, and 2340. A break of 2340 opens up 2250 and possibly 1800 ahead. Resistance is 2850 followed by the .618 fibonacci number of 2975 and 3372.00 the big high.
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TIMER DIGEST has named Mark Leibovit of VRTrader.com 'TIMER OF THE YEAR' for 2006 and was named the #2 Timer for 2007. Currently, #7 for 2008. Also, for 2007, he was name the #4 Gold Timer. As you know, Mark was named the #1 Intermediate Market Timer (stock market) for the 10 year period ending in 2006!
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Ux U3O8 Prices*
February 25, 2008
Spot: $73.00 /lb. -$2.00. Bull market high in the cash market is $136.00.
The June Uranium Futures are trading at $80.00.
Big low was $58.00 posted intra-day on August 16. The big high from June 13 is 154.95. Confirmation of a bottom should be evident when the uranium shares begin to move higher. I would use present levels as a long term buying opportunity.
VR TRADER.COM WATCHLISTS: Please note: The VR Watchlist is currently now only available via the VRTrader.com website accessed via your assigned username and password. Please email mark@vrsurvey.com if you misplaced that information.
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DAILY VR LIST:
A Volume Reversal ™ is change from a Rally day to a Reaction day accompanied by an increase of volume or a change from a Reaction day to Rally day accompanied by an increase in volume. Volume Reversals
™ coming off intermediate lows or highs have greater significance in helping to define those lows or highs and important pivot points in the marketplace.
How do you use this list? VRs are buy and sell triggers and are particularly useful in defining lows or highs in stocks and stock
indexes. Traders find them particularly useful, especially coming off market extremes as an indication of a change of direction. Use the VRs in conjunction with your other technical indicators and you've
added a unique technical tool to your arsenal.
List of Volume Reversals 2/29/08 - Sectors
*** Sectors Positive Volume Reversals ***
**** NONE ****
*** Sectors Negative Volume Reversals ***
Energy - Major Integrated Oil & Gas
COP - Conoco Phillips
CVX - Chevron Corp
REP - Repsol Ypf SA
Internet - Software & Services
CKSW - Clicksoftware Technologies
GIB - CGI Group Inc
OTEX - Open Text Cp
Metals & Mining - Copper
FCX - Freeport McMorran C&G B
Metals & Mining - Gold
ABX - Barrick Gold Corp
AEM - AGnico Eagle Mines Ltd
AUY - Yaman Gold Inc
AZK - Aurizon Mines Ltd
EGI - Entree Gold Inc
GG - Goldcorp Inc
Metals & Mining - Steel & Iron
DSUP - Dayton Superior Corp
MTL - Mechel Steel Group
RIO - Companhia Vale Do Rio Doce ADS
RTP - Rio Tinto PLC ADR
STLD - Steel Dynamics Inc
Retail - Grocery Stores
CBD - Companhia Brasiliera De
Telecommunications - Long Distance Carriers
TMX - Telefonos De Mexico SA L
Suggestions? Comments? on the newsletter service. We would like to hear from each and everyone of our subscribers. Our email is mark@vrsurvey.com.
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