Saturday

The Technical State of Base Metals - Scott Wright on Greenfaucet. A good long read. I think it is time to start looking. "The bottom line is base metals technicals are ugly. If these insanely low base metals prices are sustained the supply stream will contract to dangerously low levels. And when demand picks back up and the world's developing economies continue their growth, there will be a reckoning that will ignite yet another bubble-type atmosphere as more and more consumers bid for a constrained supply. We will remain cautious as this recession runs its course, but prudent investors and speculators can position themselves for legendary gains when the base metals become bullish once again."

If You're Hot on Chile, Try ECH - Roger Nusbaum on TheStreet.com (8/11/08). ECH seems like a clever way to participate in a copper price recovery. "One big theme for Chile is that it is copper rich and that exporting copper around the world helps to build up the infrastructure of ascending countries. . . . The other big catalyst is that Chile has what amounts to a privatized social security program. Roughly half of Chile's workers put 10% of their annual income into individual, self-managed pension accounts. . . . a successful program that creates ongoing demand for equities with plenty of long-term visibility. The combination of copper and mandated contributions makes Chile a less volatile way to access the emerging market/commodity theme; a Brazil-lite, so to speak. The iShares MSCI Chile Fund (ECH) has been less volatile in both directions than iShares MSCI Brazil Fund (EWZ) . . . . Chile has proven itself a couple of times this decade of being capable of providing real diversification for U.S.-based investors." Also, as noted by Martin Hutchinson, "Chile is interesting because it built up a reserve fund of $21 billion (12% of GDP) during the years when copper prices were high - it is thus not dependent on foreign-fund inflows." ECH does not have as much volume as more popular ETFs, but it is liquid enough to trade. Due to the fund's short trading history correlation over long time periods can not be calculated, but 1-year correlation to the S&P is a rather high .96. However, ECH does have improving relative strength.

Will the Oil Bubble Burst? - TIME, June 5, 2008. In retrospect, billionaire oil investor Richard Rainwater's decision to sell all his energy holdings last spring was timed brilliantly.

$819B Stimulus Breakdown: 5% Going to Infrastructure - John C. Lee on Greenfaucet.
"$102 B - Unemployment/food stamps
$42 B - Highway/rail/mass transit
$211 B - State gov't aid
$70 B - Healthcare/education/environment
$110 B - Business tax benefits
$165 B - Individual tax benefits
$119 B - "Other"
$819 B - Total
What is the "other" and why is only 5% of the bill going to the much-hyped infrastructure improvement program?" Other = change you can believe in.

Cato @ Liberty - GDP Is Down 1% - Not 3.8%. "The preliminary GDP estimate for the fourth quarter of 2008 is $11,599.4 billion (in 2000 dollars). That was 0.965% smaller than the third quarter — a figure commonly multiplied by four to convert it into a more dramatic 3.8% annual rate. But these quarterly rates are highly erratic, even in recessions, so converting them into compound annual rates is misleading if not foolhardy."

(Stock Market) Decline Continues - Carl Swenlin, Decision Point. "I still believe that the November lows will be tested soon."

Retail investors chase commodities ETFs for safety - MarketWatch. "Holdings in the SPDR Gold Trust (GLD) , the largest gold ETF, jumped more than 60 tons, or 8%, in one month to hit a record high of 843.59 tons Thursday. SPDR gold holdings are now nearly 80 tons higher than the holdings of Japan, which is seventh in the World Gold Council's ranking of official, or mostly sovereign, owners. Volume in the largest oil ETF, the United States Oil Fund (USO) , hit a record high near 55 million shares on Jan. 15, more than doubling the level a month earlier. The number of crude futures contracts held by the fund has also hit a record high above 70,000." Safety? Gold? Spare me! Gold can really move, in both directions. The tone of many recent articles like this, plus serious momentum divergences and excessive bullishness lead me to believe that a sharp pullback is likely in the near future. The major trend is now up, so I will be looking to buy at that time.

Looking for a nice place to stay in Manhattan? Try the Hotel Carter, 250 West 43rd St.

Friday PM

CARPE DIEM: Housing Affordability Surges to Record High in Dec. "Interestingly, the record-high level of housing affordability has not yet been reported, or at least I couldn't find a single news report on this topic."

Living with double-digit interest rates in Brazil - GlobalPost. Brazilians pay cash even for their homes because of sky-high interest rates. But last week, the Brazilian Central Bank lowered the Selic, its short-term interest rate, from 13.75 to 12.75 percent. . . . non-economists around the world ignored it.

Five Most Promising Emerging Market ETFs for 2009 - Martin Hutchinson on Seeking Alpha. "The iShares MSCI Chile investable index (ECH) has net assets of only $112 million and a P/E of 13. However, Chile is interesting because it built up a reserve fund of $21 billion (12% of GDP) during the years when copper prices were high - it is thus not dependent on foreign-fund inflows." I recently read somewhere that Chile has a low correlation to other world stock markets.

Bespoke Investment Group: GDP Price Index Enters the Deflation Zone. "While economists were looking for a quarter/quarter annualized increase of 0.4%, the actual level was a decline of 0.1%. This negative print is only the seventh time since the end of WWII (and the first time since 1954) that prices decrease based on this measure. For now at least, the Fed's view that "inflation pressures will remain subdued in coming quarters" appears to be right on target." This is definitely not consistent with gold prices rising in terms of U.S. dollars.

CARPE DIEM: What About Exxon's Extraordinary Taxes? "Exxon's "extraordinary" profits in 2008 will receive a lot of media attention, but what won't receive much attention is the "extraordinary" amount of taxes paid and collected by Exxon in 2008. According to Exxon's income statement, it paid $36.53 billion in 2008 income taxes, and its effective income tax rate increased to 47% from 44% in 2007. Exxon also reported $34.5 billion in sales-based taxes, and $45.2 billion in other taxes, for a total $116.2 billion taxes paid and collected in 2008"

The Kirk Report : 10 Questions With Michael J. Panzner. "most of the predictions in his book Financial Armageddon came true within two years of publication."

FT.com - Airlines report ‘shocking’ plunge in air cargo traffic.

Researchers discover honey bees can count…but only up to four. allvoices.com.

Marihuana - Weed With Roots in Hell (advertisement poster for an old movie.) "I'll do anything for one more shot!"

Monday AM

Among the known events which could move the market today, Exxon Mobil's earnings report and Q4 Gross Domestic Product could have the greatest impact. Both will be announced before the market opens. S&P futures are up 4 at 6:00.

The Smart Money Tracker: Confused yet? "The market is trying to rally. However the fundamentals are so rotten that there just isn't any way to justify a higher market. The chop over the last couple of weeks hasn't helped either. Traders are now too nervous to hold for any length of time. Not exactly conducive to a trend developing. . . . we just witnessed a crash, of historic proportions, that originated from below the 200 DMA. That's pretty unusual. As I noted the other day we are still extremely stretched below the mean. So I think it's going to be tough to crash again from these severely depressed levels. In order to get the next big leg down I think the market is either going to have to find a way to rally and close some of that big gap between it and the 200 DMA or we are going to have to continue trading sideways and let the 200 DMA catch up to the market." I just found this interesting blog. Its url of garyscommonsense.blogspot.com says it all.

Decision Point Top Advisor's Corner: Equity Guardian Group - Mark Young. "The liquidity is just beginning to hit the market. The economy is next and when that shows up in the news, things could get wild and wooly. There's a ton of accumulated Bearishness. That'll support a big rally. So will near zero interest rates." This was written before yesterday's mini-crash.

Real estate agents say home-price tide has turned, sellers are capitulating - chicagotribune.com. The median home price in Chicago is down 17% from last year.

Unknown Manager Makes Big Bet SPY Will Fall at Least 17% by April - Seeking Alpha. Someone bought $4.8M worth of SPY put options yesterday. What do they know that we don't?

TrimTabs Investment Research estimates that all equity mutual funds posted an inflow of $6.5 billion in the week ended Wednesday, January 28, versus an outflow of $138 million in the previous week.

A Simple Post on Gold - World Beta. "I am not a gold bug . . . Gold is currently above both its 50 and 200 day SMAs. Before someone asks, yes, using a long term simple moving average increases absolute and risk adjusted returns while reducing drawdown vs. a buy and hold of gold. That having been said, and this is probably an Occam’s 5th Grade level observation, but is there anyone out there that believes that if/when gold breaks through the 1000 level that it doesn’t zoom straight to 1300 or 1500? Once that huge psychological barrier of 1000 is broken (it has already been tested once) I think the sky is the limit."

Testing the Infrastructure Waters with PHO - Don Dion on Seeking Alpha. "PHO’s recent recovery comes after a difficult period for the fund and the market in general. From August 15, 2008, to November 20, 2008, the value of PHO’s shares dropped more than 50%—falling from $22.42 to $10.43 during that period. Since late November, however, a steady recovery has taken place in PHO, and shares have risen more than 21% to their January 23 price of $12.67. While PHO can be viewed as a commodity or utility play, the recent improvement in PHO has been credited to its use as an infrastructure play as the new administration took office in January. Infrastructure projects are one of the means that President Obama plans to use to bolster the economy." I sold out last summer at 22 and I have been looking for a place to get long again, but no matter how you look at it the trend is down.

Wall Street Gets Downbeat on Solar - Greentech Media on Seeking Alpha. All things come to he who waits.

The Mega-Trend is Your Friend - Vinny Catalano on Minyanville. "The Mega-Trend (as I define it) is a multi-year stock price trend analysis where price and two moving averages (50 day and 200 day) are measured. In well-established Mega-Trends, three conditions exist:
1) Price is above (or below) its moving averages.
2) The shorter term (50 day) Moving Average is above (or below) the longer term 200 day.
3) Both moving averages are pointing in the same direction, either up or down."

Japanese industrial production falls at record pace, unemployment rises - MarketWatch. Production fell a seasonally adjusted 9.6% in December compared to November, breaking the previous month's record decline of 8.5%. Unemployment rose to 4.4% from 3.9%.

British slump will be worst in developed world, says IMF - Times Online. "Britain will be hit harder than any other advanced nation in the worst recession for more than 60 years, world economists warned last night. In the bleakest assessment yet of British prospects, the International Monetary Fund (IMF) forecast that the economy would shrink by 2.8 per cent this year, twice as much as it previously thought and far more than the 2 per cent average drop for developed nations in 2009."

Bespoke Investment Group: Russian Troubles. "As shown, the amount of rubles that one dollar will get you has spiked significantly in recent months, going from about 23 rubles per dollar last May to its current level of 34.84 rubles per dollar. And the decline in the currency has run in tandem with the decline in Russian equities. . . . As other countries around the world have rebounded slightly since the start of the year, Russia has recently made new lows. Since last May, Russia's main equity index has now fallen 78.6%."

Tuesday PM

What’s Behind the Sell-Off in USD/CAD? - Kathy Lien on Seeking Alpha. "The biggest mover Wednesday morning is the Canadian dollar which has rallied close to 300 pips against the US dollar and is closing in on the 1.20 level. What’s behind the move? 1. Major merger and acquisition flow. Mexican breadmaker Bimbo closed on a $2.38 billion acquisition of U.S. Bread making unit of Canada’s George Weston Ltd 2. Oil prices are back above $40 a barrel and rising 3. OPEC Says Oil prices at $40-$50 is too cheap, prices need to be between $75 0 $100. 4. IMF says Oil May AVerage $50 a barrel this year and $60 a barrel next year" Looks to me like a head and shoulders formation on the verge of making a big move, possibly to parity. But I don't see this happening unless oil and other commodities really take off.

Schaeffer's Investment Research - Schaeffer's Contrarian Stock Screener Fun to play with and might be useful at times.


New Airline ETF Serves as Proxy for Oil, Economy (FAA) - Roger Nusbaum on TheStreet.com.

CXOAG Investing Notes – Do Stock Index Put-Call Ratio Trend Reversals Anticipate Trend Reversals of the Index Itself? In a word, no.

Man smears feces on his lawyer's hair and face, flings it at jury - Yahoo! News. People have no idea how much fun it can be to work in the criminal justice system until they try it!

Will the 50-Day Moving Averages Hold? Trader Mike. A lot of market participants seem to be hypnotized by the 50 SMA but I am finding that the 65 EMA does a better job of pointing out where the real resistance and support is.

New bank bailout could cost up to $2 trillion - Reuters. Hey - add as many zeros as you like - they don't cost anything!

Bailout Rate of Return for the U.S. Treasury: -1,096% - The Big Picture. "Treasury has invested $165 billion into the nation’s eight largest banks. Those same financial firms are now worth $418 billion less than they were four months ago. CBO calculates the taxpayer’s preferred shares are worth $20 billion less. The government’s annualized rate of return on its investment in the nation’s largest banks is -1,096%."

CARPE DIEM: Beware of the False Claims About Jobless Claims. "Adjusted for the size of the labor force, we're still nowhere close to a record for continued unemployment claims. But that reality won't stop the media from reporting "record jobless claims," there are already dozens of new stories with that "false claim" about "record claims."

Technical analysis predicts trouble - BloggingStocks. "The very rare black swan formation - note both feet and neck are complete and the rare vampire tooth variation is in place. This is very bad. Very very bad." Not sure what this guy is smoking, but I'll pass.

Thursday AM

A lot of things are going on Thursday morning which could move the market sharply in either direction.

Earnings reports before the open: AEP, AMB, AN, AZN, BC, BDK, BLL, CAL, CELG, CL, CNX, D, EK, EQT, ERIC, F, FCS, FO, GNTX, HOT, HP, IP, ITW, JBLU, LCC, LEA, LLL, LLY, MMM, MO, MPW, NWL, OSK, OXY, PCZ, RCL, RDS.A, RTN, SEIC, SII, SNE, TKR, TROW, TXT, XEL, YRCW, ZMH

Economic reports:
8:30 Durable Goods Orders (Consensus: -2%)
8:30 Jobless Claims (Consensus: 575K)
10:00 New Home Sales (Consensus: 400K)
10:30 EIA Natural Gas Report

Earnings reports after Thursday's close: ACF, AMZN, ARBA, BRCM, CA, CB, EMN, IDTI, INFA, JNPR, KLAC, MCHP, MXIM, PKI, PMCS, QTM, RMBS, SPWRA, VAR, VSEA, WMS

S&P futures are down 10 at 6:00 (see first link).

Short Signal? VIX Stretched 15% Beneath 10 Day Average - System Trading with Woodshedder Most people who analyze VIX and talk about their work publicly use a 10 day simple moving average of VIX surrounded by 10% or 20% bands to determine when VIX has moved to such an extreme it is likely to snap back. 10% hasn't been enough lately, but 20% may be too much. Here, Woodshedder is trying 15%. If I did a lot of short-term trading of the S&P I would try Parabolic SAR. Just eyeballing the charts, it seems to work at least as well as anything else to determine short-term trend change points in VIX.

Introduction To The Parabolic SAR - Investopedia

Three Companies Still Increasing Dividends in This Market - David Templeton on Seeking Alpha (MHP, PX, and ED announced increases in the last few days.)

Toro's Running of the Bulls Market Blog: Are (Industrial) Metals Bottoming? Maybe copper and nickel.

Are Agriculture ETFs independent of the current financial crisis? Gary Gordon on Greenfaucet. "some measures show agriculture commodity storage is near historic lows. Moreover, planting in North America has been reduced and weather in South America has been dreadful. Add up all of the factors and you may have a genuine supply concern going forward." DBA is the trading vehicle of choice in this arena. I took a small position in early Dec. and it is working out well so far. There are some agricultural exchange traded notes but I think it wise to avoid all ETNs - see Are Barclays ETNs in Trouble? - Tom Lydon on Seeking Alpha.

Brazil: The Neglected BRIC - Paul Baiocchi on Greenfaucet. "in the future we may look back and wonder why we paid so little attention to the one BRIC economy that seemed to "get it." EWZ is a good country ETF to keep an eye on.

Obama 'Shines' Natural Gas - Michael Fitzsimmons on Seeking Alpha. "if Obama was really serious about cutting US foreign imports, he would have at least mentioned the quickest, most cost effective, technologically feasible path to doing so: US produced natural gas powered cars and trucks. That is, the US producing both the natural gas, and the vehicles." Judging by the recent performance of alternative energy ETFs such as PBW, TAN, and FAN, the market thinks Obama's energy policy is mostly hot air.

Wednesday PM

S&P 500 Forming Head & Shoulder Pattern? - The Big Picture. Ahem! I called the left shoulder in October, and the head in November, and at that time I projected the right shoulder for January. Now it looks like it's all coming together.

Quantifiable Edges: 2% Gaps Up Revisted. "The pullback doesn't seem quite like the slam dunk it once did, but it still appears probable. Combined with the fact that the market has already traded higher for 3 days in a row, I'd say the chances of seeing a pullback in the next few days is pretty high."

Jana on Trading Goddess Stock Blog - $HOPE. "Right now, everyone expects a test and break of the November lows. Face it, we are overdue for an extended rally. So what if it's based on stupid shit and horrendous circumstances? Just go with it. You'll have an even better chance to short this roast beefer 100 points up from here. Yes, we may be overbought, but remember, Obama's little blue pill of hope can keep this thing up for days beyond it's natural abilities."

VIX and More: Positive News in Housing Inventories. "I have been maintaining for a long time . . . that the key to the bottoming process in the economy is housing and the key to housing prices is inventory. While housing prices continue to fall, yesterday was the first glimpse of hope on the inventory front in a long time. In the graphic below, I have captured the months of supply of housing inventory since 1963. Note that the December data show the biggest drop in housing inventories in 28 years. . . . If housing inventory continues to fall and cash starts departing money market funds in search of better returns, then it is possible to at least entertain the possibility that equities have turned the corner."

Bespoke Investment Group: Baltic Dry Index Up Seven Days in a Row. The Baltic is a concurrent indicator, but I'll guarantee the SPX isn't going anywhere worthwhile unless the Baltic is rising too.

Random Roger's Big Picture: Hist O Ree. "You have probably heard that the stimulus plan is going to have strong incentives for steel and other materials used in all of the infrastructure projects that are supposed to happen to come from US companies. Oh, boy. . . depending on the details, it . . . would be a reason to get a little more defensive fairly quickly and maybe more so shortly thereafter. As I write this now I'm not sure if that means selling stock, buying the double short ETF or doing both but probably I'd do both. . . . I perceive this sort of protectionism as being a threat to equity prices."

Wednesday AM

Wednesday's known events with market-moving potential:

Earnings reports to be released before the market opens - AAI, AMG, BA, BDX, BEN, BHI, COP, DOV, GD, HES, LM, MWV, NVS, NYT, PX, SAP, SO, SY, T, TDW, TEL, USG, WFC, WLP

7:00 MBA Mortgage Applications
10:30 EIA Petroleum Status Report
2:15 FOMC Policy Announcement (No policy change is expected, but the use of descriptive adjectives in the announcement, such as improving, stabilizing or deteriorating, could trigger a powerful response.)

Earnings reports to be released after Wednesday's close - AFFX, ALL, AMP, ARG, BSX, BXP, CPWR, CTXS, CVD, FLEX, HBI, ISIL, LRCX, LSI, MTH, MTW, MUR, OI, QCOM, RHI, RYL, SBUX, SEPR, SYMC, TER, WDC

A positive may be in the cards since Euro stocks have opened sharply higher and S&P futures are up 17 at 6:00. However, we will be getting some important earnings reports before the open and that could change things.

Gold headed south for the short term - Mark Hulbert on MarketWatch. "the latest readings of the Hulbert Gold Newsletter Sentiment Index (HGNSI) . . . stood at 60.9%. This is identical to where the HGNSI stood at the end of December . . . I have more than 25 years of daily data for the HGNSI, and rigorous econometric tests show that the inverse correlation between HGNSI levels and the gold market's subsequent short-term direction is statistically significant at the 95% confidence level. . . this sentiment gauge's average reading over the last five years has been 32.6%, only slightly more than half where it stands now. Over the last five years, furthermore, the HGNSI has been higher than where it is now just 13% of the time." Even after this two-month rally, the daily gold chart is still in a long-term downtrend, and it is now exhibiting strong momentum divergences of the type often seen at major tops.

January FOMC Preview: What to Expect for the Dollar - Kathy Lien on Seeking Alpha. "The only way for Wednesday’s FOMC rate decision to hurt the dollar would be if the central bank announces that they will be purchasing long term US Treasuries in size or if they add more ingredients to their alphabet soup of new programs. There is nothing to support the dollar on the upside as the Fed is not expected to start talking about raising interest rates."

Jim Rogers: The Euro Won't be around in 20 Years.

Eric Oberg on the UltraShort Treasury ETF - Stockpickr. Q. Does the TBT -- Treasury UltraShort -- have the same compounding issues that other UltraShort ETFs have? A. "the short answer is yes -- as a double short, it is subject to the same issues. However, it is really the volatility that kills these things, and it appears that the less volatile sectors do not suffer from the dramatic underperformance as the highly volatile sectors . . . the Treasury market is probably the deepest we have, so activity in any Treasury ETF shouldn't really wag the dog." In other words, since bonds have less absolute volatility than stocks, TBT is a safer bet than most double-short or inverse ETFs - you might actually achieve your desired objective, provided you time the trade well and a favorable move follows.

CrossingWallStreet.com: Cyclical Stocks Still Have a Long Way to Fall. "Here’s a look at the Morgan Stanley Cyclical Index (^CYC) divided by the S&P 500 (^SPX). For such a simple metric, I think is an often-revealing look at the market’s mentality. What it tells us is how well economically sensitive stocks are performing compared with the overall market. About two years ago, I started warnings investors that cyclical stocks were heading towards a top. On July 19, 2007, the CYC reached its peak ratio against the S&P 500 at 0.7273. Since then, all most all kinds of stocks have down poorly but cyclical stocks have down much worse. . . . Until the ratio starts to show some improvement, I’m not going to be terribly optimistic for the broader economy." The author's chart shows a remarkably symmetrical broadening pattern which has been developing since 1978. That is, each consecutive swing of the cyclical stocks relative to the S&P has reached an extreme relative to previous readings. If the pattern continues, the relative strength of the cyclicals may collapse to the .25 level within the next several years.

CARPE DIEM: Global Internet Users Now Top 1 Billion, China's #1

Top 15 Craigslist Personals Least Likely To Be Answered

Tuesday PM

Stocks: To Test or Not to Test (the November Lows) - Mark Arbeter, Chief Technical Strategist for S&P on BusinessWeek. "For a successful major market low to be traced out, culminating in the death of the bear market, we can look to see what has happened many times in the past to guide us through the trenches. . . . Many times, the major indices will trace out price bases that extend many months. So far, we believe the price base started at the panic lows in October so the potential bottom is less than four months. Considering the length of time of the bear market, and magnitude of the decline, we expect a fairly large base, that we see lasting at least eight to ten months before being completed."

Crude topping? - Kimston on Traders-Talk.com. (chart and comments posted Mon., Jan. 26 at 12:36p.m.) "Looks like a 4th wave triangle that is almost complete. If this count is correct, crude is topping or should top soon and have another leg down to new lows in early to mid February. This count would be incorrect if triangle wave c is exceeded on the upside (50.47). Relatively low risk short op here. The next wave down to new lows should put in a low for an intermediate rally - largest since the July 2008 top." You don't hear much about Elliott Wave Theory from people who really understand it these days, but Kimston did a nice job on this oil chart.

Hershey net income climbs, sales edge up - MarketWatch. I jumped ship on HSY in the spring of 2007 at 48 after it began to decline from a classic and unmistakable double top. After a protracted decline that eventually reached 31.77, and a lengthy period of choppy sideways action, the stock looks like it could advance once again, but there is an awful lot of overhead resistance.

Luxury Hotels Are Feeling Economy’s Pinch - NYTimes.com. "big-box hotels (in Manhattan) that were charging $270 are now charging $140."

An Interview With a Market Cycle Master - Samuel J. "Bud" Kress - by Clif Droke on Greenfaucet. This makes interesting reading, but it does seem suspicious that neither Samuel J. "Bud" Kress nor his alleged newsletter, SineScope, have a presence on the internet, except through Droke's writings.

For Some, Sound of Profit Is 'Timber!' - WSJ.com. But not for others. Timberland may have held up quite well in the last year, appreciating 5% according to the WSJ, but definitely not the Global Timberlands Index ETF, CUT.

How to Sell Home and Electronic Appliances In Europe (short, amusing advertisement video)

Tuesday AM

Known events with the potential to move the market today:

Earnings announcements before the open - AKS, ASH, AVY, BJS, BMS, BMY, BTU, CBE, CHKP, CP, CVG, DAL, DD, EMC, ENR, FMER, FPL, HSY, KCI, LXK, MHP, NUE, NYB, RYN, SI, STE, STJ, TIN, TLAB, TRV, VLO, VZ, WAT, WDR, X

The Federal Open Market Committee meeting begins this morning and wraps up tomorrow afternoon. They don't have much room to lower rates but they might start buying T-Bonds on the open market.

7:45 ICSC Retail Store Sales
8:55 Redbook
10:00 Consumer Confidence (Consensus 39)
1:00 2-Year Note Auction

Earnings reports after the close: ALTR, AMLN, CHRW, CNB, DV, ETFC, GILD, JAVA, MOLX, NSC, PMTC, RFMD, STM, STSA, SYK, TSS, YHOO.

At 6:00 the Nikkei was up sharply overnight, but European markets have opened lower. S&P futures are up 7, in part due to better-than-expected earnings from TXN.

The Chart Pattern Trader - Public Chart Lists - StockCharts.com. "1/26 Commentary: The financial ETF (XLF) broke out today. It's hourly chart shows that prices rammed above the downward decelerated trendline and then backtest. I believe that the financials are putting in a double bottom."

Bespoke Investment Group: Natural Gas Continues To Head Lower. "While oil has recently made a nice bounce off of its lows, natural gas has continued to fall sharply, and it is currently trading at $4.49 per million BTU. . . .The longer-term chart going back to 1990 shows that natural gas has a lot of support just above the $4 level, so that price will most likely act as a floor this time as well."

Quantifiable Edges: Strong SOX Action Could Be Good For Nasdaq. "I’ve discussed in the past the fact that strong SOX action can often be a good harbinger for the the market. While both the S&P 500 and the Nasdaq failed to gain even 1% on Friday, the SOX rose more than 4%. It’s especially unusual for the SOX to post such strong gains without bringing the Nasdaq composite along with it. It has provided a nicely bullish expectation for the Nasdaq going forward."

Occam's razor - Wikipedia. "All other things being equal, the simplest solution is the best." A very good guideline for trading and for life in general.

S&P Composite 10-Year Annualized Rate of Return - dshort.com. Who says market timing doesn't matter?

VIX and More: Using Intraday VIX Reversals to Identify Market Reversals. "Gio claims that during periods of extreme market volatility the VIX often turns in advance of the broader markets and can therefore be used as a day trading tool. Unfortunately, at least to my eye, I find the accompanying chart provided by Gio to be inconclusive at best. To my (admittedly slightly astigmatic) eye, the DJI turns prior to the VIX in three or four of the five examples he cites. More broadly, my own experience is that the VIX is a superb coincident indicator that occasionally lags turns in the SPX during periods of extreme market volatility – a phenomenon that I documented repeatedly during the last four months of 2008." I didn't think I could see the VIX leading the Dow on Gio's charts either, but what do I know.

4um blog: "Todays Job Cuts: Caterpillar - 20,000, Sprint - 8,000, HomeDepot - 7,000, General Motors - 2,000" If this keeps up, pretty soon it will look like unemployment is rising.

Monday PM

Bullish bias this week - Gio on iBankCoin. "This week I’m switching to a bullish bias. . . . For other notes, I have a schedule to short gold stocks on Thursday near the close."

Bespoke Investment Group: Natural Gas Continues To Head Lower. "While oil has recently made a nice bounce off of its lows, natural gas has continued to fall sharply, and it is currently trading at $4.49 per million BTU. . . .The longer-term chart going back to 1990 shows that natural gas has a lot of support just above the $4 level, so that price will most likely act as a floor this time as well."

EconomPic Data: Long Bond Drops Most in 22 Years... A Trend or Volatility? "while it is important to keep an eye on the long bond to see if the recent sell off does become a trend, please don't declare victory on your long Treasury shorts yet. Just remember, the Fed has another "weapon" available... the outright purchasing of Treasuries which may be on the way..."

A Refined MACD Indicator - Evidence against the Random Walk Hypothesis - Gunter Meissner, Albin Alex, and Kai Nolte, 2001. (Link opens a 17 page PDF file). The authors tested the popular MACD indicator and found that conventional crossover trading signals give surprisingly poor results. However, they were able to achieve much better results by introducing certain simple refinements, such as waiting three days after an MACD crossover and entering a trade at the close on the third day but only if a whipsaw reversal has not occurred on day two or three. My impression is that this has not been working as well lately as it did during the test period.

Today's Value Investor - Stock Picks For the Week Beginning 1/26/09. CINF looks tempting.

Barel Karsan Value Investing: Microsoft P/E At Historic Low. "The company carries no debt and holds over $20 billion in cash. Even though PC sales may slow in the short-term, it's hard to believe that a company with the low financial risk and the global reach of Microsoft can have a P/E under 10." Not necessarily, if you consider that MSFT is becoming like a utility stock whose turf is being invaded by someone who is giving away electricity for free! Their most profitable offering is Windows. The Vista version of Windows was such a disaster that some OEMs are installing linux instead; now free operating systems like Ubuntu are rapidly gaining popularity.

Channel Breakouts With The CCI - Kathy Lien and Boris Schlossberg on Investopedia. Another use for the versatile CCI indicator. The "Do the right thing" setup can put you on the right side of a trade when many others are trying to fade the price action.
Rules for the Long Trade (CCI -100 for short trades)
1. On the daily or the hourly charts, place the CCI indicator with standard input of 20.
2. Note the very last time the CCI registered a reading of greater than +100 before dropping back below the +100 zone.
3. Take a measure of the peak CCI reading and record it.
4. If CCI once again trades above the +100 and if its value exceeds the prior peak reading, go long at market at the close of the candle.
5. Measure the low of the candle and use it as your stop.
6. If the position moves in your favor by the amount of your original stop, sell half and move the stop to breakeven.
7. Take profit on the rest of the trade when the position moves to two times your stop.

Monday AM

Potential market moving events on Monday:

Earnings reports before Monday's open: CAT, COV, DGX, DHR, ETN, FCX, GWW, HAL, KMB, MCD, SEE, TSN, WFT

10:00 Existing Home Sales (Consensus 4.4M)
10:00 Leading Indicators (Consensus -0.3%)

Earnings reports after Monday's close: AMGN, AXP, CNW, JEC, MCK, NFLX, OLN, PRXL, PTV, QLGC, SLG, STLD, TXN, VMW, ZION

At 6:00 bonds are weak, Euro stocks and commodities are trading higher, and S&P futures are up 4.

Turning Point? Dean Reese, Trading Goddess Stock Blog. "Below is a chart that I have been watching for the past couple months. It shows a Fib Time Expansion by taking the time range from the all-time high to the Mar 2008 low and projecting forward. The 61.8 is an outlier. And while the 38.2, and 100% are not perfect, they are in the ballpark. It gets more interesting, when you look beyond 100%. The 138.2, 150 and 161.8 were each quite close. Now, we also have the 200% that hit on Jan 21st. While not the same convincing prices action we saw in some of the others, we cannot ignore the 5 of 6 that how presented a tradeable reversal within a couple days of these pivots. If the past hold true, it would seem we should get a reversal move here of some magnititude. Food for thought."

Weekly Review: Using intraday Vix reversals to spot intraday market reversals… over, and over, and over… Gio on iBankCoin.

Bernanke Risks ‘Very Unstable’ Market as He Weighs Buying Bonds - Bloomberg. Fed policy makers meeting tomorrow and the day after will be exploring the possible purchase of longer-dated Treasury securities in an effort to push up their price and bring down their yield. Behind the potential move is a desire to reduce long-term borrowing costs at a time when the Fed can’t lower short-term interest rates any further because they are effectively at zero.

January’s Stock Market Flop May Not Predict Year: John Dorfman, Bloomberg The classic "January barometer" attempts to predict stock market direction for the full year based on January's price movement. Dorfman asks a more intelligent question: how does January work for predicting the subsequent eleven months? "When January was a down month, the barometer gave an accurate forecast in only half the cases. From 1950 through 2008 there were 22 January declines. The market continued to fall the next 11 months in 11 cases, but turned around and posted gains 11 other times. Thus, the January barometer has only a 50 percent successful prediction rate when stocks are down in January -- the same success rate one would get by pure chance."

1/23/2009 Market Recap - Extremely Low CPC Readings - Cobra's Market View. "An inside bar again, three days in a row, indecision and emotion accumulation, the breakout will be violent either up or down. Well, I wish I could know the direction, although based on some straws I've collected from my chart book, the guess is UP."

Obama's strong dollar policy may be for real - Reuters. I can't wait to see this: the Obama team is going to implement a strong dollar policy without direct intervention in the markets, with the economy in recession, with interest rates near zero, with a ballooning current account deficit, and they are going to do it without antagonizing China. Right! The only reason the dollar index gives the appearance of being strong is that the Euro and the pound are so much weaker right now.

No Snickering - That Road Sign Means Something Else - NYTimes.com.

Sunday

Woe Is Us - More Bumps Ahead for the Economy and the Markets - Barrons. Alan Abelson discusses "The Aftermath of Financial Crises" by Rogoff and Reinhart. The authors cite the average consequences of serious historic financial crises: housing prices plunge 35% over six years, equity prices lose 55% over roughly 3½ years, the unemployment rate increases 7% over four years, GDP suffers losses averaging more than 9% over two years, and government debt shoots up an average of 86%. Abelson concludes that "Rogoff and Reinhart's findings strongly suggest that in both duration and depth, the aftermath of our current financial woes has yet to run its course. At the very least, you'd do well to brace yourself for more pain." Contrarian alert: the consensus opinion is that we are in a depression which will last for 3.5-6 years! This must be what the market has already discounted. Any outcome which is less severe will be very bullish for stocks and real estate.

Oil Traders Blog: Schlumberger CEO Talks About Oil. "The biggest difference I see from both the mid-'80s as well as ’97, ’98, is the speed with which everybody is reacting,” Schlumberger CEO commented during a conference call. “These cycles are getting much sharper in their amplitude and shorter in their duration, but of course that depends on the general economy.” This is a valuable observation. High volatility in the financial markets may be portending high volatility in the world economy in the future, with unexpectedly wide swings in both directions.

Dow Jones Wilshire REIT Index - Chart of the Day. REITs are down 67% from the February 2007 peak. The parabolic price collapse appears to have entered the final blowoff phase and an upside reversal of 50% or more could occur at any time.

TECHNICAL AND FUNDAMENTAL - Public Chart Lists - StockCharts.com. "THE BKX:SPX CHART IS STILL SIGNALLING THAT THE FINANCIALS ARE IN DEEP ----. LET ME REPEAT WHAT I HAVE SAID PREVIOUSLY-NO BULL MARKET IN HISTORY HAS STARTED WITHOUT THE FINANCIALS LEADING THE WAY, IN THE EARLY STAGES." Good point, but you don't have to shout.

VIX and More: Chart of the Week: Change of Trend in Cash Holdings? "cash in money market mutual funds jumped over 45% from August 2007 through last week, when it reached an all-time high. The chart below shows how cash on the sidelines has increased dramatically since last October, leaving less fuel to keep the S&P 500 index aloft. During the past week the ICI reported the first meaningful drop in money market mutual fund cash levels since September and also only the second time in 16 weeks that cash levels have dropped for institutional investors. If the change in money market mutual fund levels from the past week is the first signs of a change in trend, then this will almost certainly have significant bullish implications for equities."

Jeremy Grantham: Slowly Invest in Global Equities - Seeking Alpha. "Slowly and carefully invest your cash reserves into global equities, preferring high quality U.S. blue chips and emerging market equities. Imputed 7-year returns are moderately above normal and much above the average of the last 15 years. But be prepared for a decline to new lows this year or next, for that would be the most likely historical pattern, as markets love to overcorrect on the downside after major bubbles. 600 or below on the S&P 500 would be a more typical low than the 750 we reached for one day. . . . For the long term, research should be directed into portfolios that would resist both inflationary problems and potential dollar weakness. These are the two serious problems that we may have to face as a consequence of flooding the global financial system with government bailouts and government debt." Another permabear becomes bullish.