Are we all ready?…..This week is the beginning of 4th quarter earnings season with the earnings of Alcoa to be release on Wednesday, January 9th. Naturally, we are all waiting with bated breath for the earnings of the financials, which will be released before the January options expire.
The FOMC will be under a ton of pressure to cut rates at their next confab, which will be a two-day meeting on January 29 and 30th. Although the FOMC remains concerned about inflation, it would appear that the economic slowdown will be of primary concern to this group. Lower interest rates will, naturally, help the financial institutions who make money on the spreads between their borrowing costs and the lending charges, however; will they, these institutions, be willing to lend, and at what cost to the borrower? Would you lend funds, and how much of penalty would you charge the borrower, for the risk you are taking on that loan? The interest rate gougers will be out in full force, borrowing cheap and lending expensive so, how will this help the mortgage market and housing? Frankly, it won’t help much at all, but at least the financial institutions will make money on the spread.
We are beginning to get a first glimpse of some of the higher priced commercial interest rate pressures. Still, the NYC commercial and residential real-estate market is a very tight market with low vacancy rates. In the January 6th article published by the New York Times, HARRY MACKLOWE’S $6.4 BILLION BILL written by Charles V. Bagli and Terry Pristin, we are allowed a bird’s-eye view at one of New York’s top ranked developers and, the financial mess he finds himself in today. His loans are based on fantasy, speaking of $100 a square foot rent when then market actually was at $55 to $59 a foot. This massaging of numbers reminds us of the mid-1980’s tax shelters, remember the aggressive tax write offs created in part to the accrual of debt, which naturally would be covered by rents that are going up, and, who cares if is a write-off anyway! We lived through this era where the IRS disallowed the write-offs and the accruals came due to slap the faces of the investors who finally sold the properties for pennies on the dollar. Although this article talks about commercial property, we remind you that many exotic mortgages, generally in the millions, are beginning to balloon……or, come due fairly soon and will carry into the future for about 5 years.
This coming week, we will hear from the European Central Bank and the Bank of England, both announcing their interest rate decision on Thursday. It is widely expected that the Bank of England will adjust their interest rates lower. The European Central Bank is the wild card in the Thursday release, wild, because the talk has been very hawkish although, there seems to be a slow-down in the region. Should both the Bank of England and the European Central Bank lower their interest rates, we could experience some stability in the US Dollar. However, should the ECB continue their tough talk and remain ever firm on interest rates, we could see the US Dollar retreat.
Monday: Atlanta Fed President Lockhart speaks.
Tuesday: November pending home sales is released at 10:00 and November consumer credit is released at 3:00.
Wednesday: November wholesale inventories are released at 10:00, Alcoa begins the 4th quarter earnings parade and St.Louis Fed President Poole speaks.
Thursday: November international trade and import prices are released at 8:30, December chain store sales, the Bank of England and the European Central Bank release their interest rate decisions and Fed Chairman Bernanke speaks along with Kansas City Fed President Hoenig at 1:00.
Friday: US trade deficit and Fed Governor Mishkin speaks with Boston Fed President Rosengren.
The US Dollar index battled the bears in the Friday session receding with the news release on the December “Jobs” data. Some footing was regained once the information was digested, and the market regained much of what it had originally lost early in the day. When the “Jobs” report was released, the market plunged to 75.37, then rallied back to 75.90 by 10:00 in the morning and finally fished the day at 75.82. The stochastic indicator is issuing a fresh buy-signal. The RSI continues to point lower and our own indicator looks as though it could issue a buy-signal by the Monday session. The Thomas DeMark Expert indicator is issuing a buy-signal. We have a 6-count on the bottom and a rather sizable gap on the chart. That gap is from the lower opening on December 27, 2007. (Gap is from 77.12 to 76.76). The 5-period exponential moving average is at 76.137. The top of the Bollinger band is at 78.093 and the lower edge is at 75.443. The downtrend line for this coming Friday is at 79.585, basis the weekly chart. All the indicators, that we follow herein, are pointing lower on the weekly chart. The monthly chart is equally as confusing with most of the indicators either not trending or issuing fresh sell-signals at oversold levels. If we should rally to the gap seen on the daily chart, remember, that we will step into that gap and retreat before filling it then, probably will return to that gap and fill it. That, of course, is the optimistic view. Should we retreat we will see support at 74.76. The recent low is 74.65 seen on November 23, 2007. Should we decline to that level, or even near it, expect to see some pressure to the downside as the marketeers look for the sell-stops below that level. That, naturally, will lead to a violation of that low, and a new low which will be followed by a quick reversal.
The Euro would love to go to 150!!! Can it get there with a count of 18, if history is any guide we can point to a time in late October when we did see a 19 count, resulting in a rest, and then an assault to higher levels? Remember also we have an interest rate decision on Thursday by the European Central Bank. The daily chart of the Euro is exhausted. The stochastic indicator, the Thomas DeMark Expert indicator and our own indicator are all issuing a sell-signal, only the RSI continues to point higher. The 5-period exponential moving average is at 147.15. The top of the Bollinger band is at 148.722 and the lower edge is seen at 142.857. The weekly chart continues to look positive for the Euro. So long as we do not close below 143.27, we will be in position to remove the previous high of 149.13. Just as $100 crude oil was on the radar, a 150 Euro is widely anticipated. The monthly chart shows the Euro to be overbought and in need of a rest. The indicators continue to point higher albeit, at overbought levels.
The British Pound Sterling seems to be anticipating a rate cut in the Thursday meeting of the Bank of England. The indicators are uniformly issuing a sell-signal albeit at oversold levels. The 5-period exponential moving average is at 197.62. The top of the Bollinger band is at 204.94 and the lower edge is seen at 195.06. The weekly chart is oversold but continues to point to lower levels. We can expect to see a return or test of the March lows of 192-191.92. The downtrend line on the weekly chart is at 202.10, for this coming Friday. The monthly chart continues to look like it is under pressure to the downside. We are nearing levels where we would likely see some support.
The Canadian Dollar retreated in the first week of trading of the New Year. Friday’s retreat was deep dropping 1.15% on the day. All the indicators that are followed herein are issuing a continued sell-signal with plenty of room to the downside. The 5-period exponential moving average is at 100.98. The top of the Bollinger band is at 102.60 and the lower edge is seen at 97.60. We would not be surprised to see the Canadian Dollar retreat to 98 or even test the recent low of 97.65, seen on December 14, 2007. The weekly chart continues to be negative. The indicators on the weekly chart are three down with one up, only the Thomas DeMark Expert indicator is issuing a buy-signal. The indicators on the monthly chart are also negative. It looks as thought there could be more pressure on the Canadian Dollar for the near future.
The S&P 500 has suffered a rather steep decline in the first days of the New Year. The stochastic indicator, the RSI and our own indicator are all oversold but continue to point lower. The Thomas DeMark Expert indicator is issuing a fresh buy-signal. The 5-period exponential moving average is at 1460.64. The top of the Bollinger band is at 1528.35 and the lower edge is seen at 1436.49. The downtrend line for the Monday session is at 1501.52. We continue to look as though we will test the November low of 1406. Perhaps, not on this trip down but likely in the very near future. The downturn has been too steep to continue at this rate of decline. Some moderation is needed, either in a bounce or a consolidation. Believe it or not, the weekly chart shows that we continue above an uptrend line. The uptrend line for this coming Friday is at 1421.21. The downtrend line is at 1500.31 for this coming Friday. As to the indicators on the weekly chart, they all are pointing lower not one is oversold. The stochastic indicator, the RSI and our own indicator are pointing lower on the monthly chart only the Thomas DeMark Expert indicator is pointing higher. The monthly chart doesn’t look that awful however, should we remove the Friday lows and take out the November lows, our opinion will likely change. The 200 day moving average is at 1498.83, the 50 day moving average is at 1482.05, we are below both of these landmarks.
The NASDAQ 100 closed below the November lows in the bear raid seen in the Friday session. The stochastic indicator, the RSI and our own indicator are all issuing a continued sell-signal. The Thomas DeMark Expert indicator is issuing a buy-signal. The next support level is at 1905-1905 a level not seen since August of 2007. The 5-period exponential moving average is at 2072.20. The top of the Bollinger band is at 2182.18 and the lower edge is seen at 2017.28. The NASDAQ 100 has broken the uptrend line on the weekly chart. All the indicators that we follow herein are issuing a continued uniform sell-signal for this time-frame. We continue above the uptrend line on the monthly chart. All the indicators for the monthly chart are uniformly issuing a continued sell-signal with signs of exhaustion. Be careful with stocks that don’t pay a dividend. They will likely be removed from a portfolio in favor of those stocks paying a dividend especially in a time of economic slowing.
The Russell 2000 removed the previous lows of the 2007 trading year in the Friday session. The indicators are oversold but continue to point lower, only the Thomas DeMark Expert indicator is pointing higher. The 5-period exponential moving average is at 756.40. The top of the Bollinger band is at 808.32 and the lower edge is seen at 734.23. The weekly chart of the Russell 2000 reveals that there should be some support beginning at 716.80 and 705.91. The indicators on the weekly chart are all pointing lower on the weekly chart. On the monthly chart, only the Thomas DeMark Expert indicator is pointing to the upside, the rest are pointing lower. The 50 moving average is at 775.16, which will offer the first resistance level and the 200 day moving average is at 809.45 another area of resistance. Those numbers will only come into play once some basic resistance levels are removed. The first of these levels will be seen at 739.97. Naturally, this market is overdue for a bounce which could be seen as early as the Monday session, perhaps after a lower opening.
The Continuous Commodity Index cash made a life-of-contract high in the Thursday session when it traded as high as 487.79! The market retreated in the Friday session. All the indicators that we follow herein are uniformly issuing a sell-signal all, at overbought levels. The 5-period exponential moving average is at 481.86. The top of the Bollinger band is at 487.70 and the lower edge is seen at 456.17. At the beginning of 2007 we were trading at 380.26, Friday’s close was more than 100 points higher, but hey, there is no inflation! Remember, this index is an equally weighted index of 17 commodities not just energy or precious metals. Included in this index are meats, agriculturals, softs, metals and energy. This index gives you a broad look at inflation and costs of raw materials. The weekly chart is exhausted. The indicators although overbought, continue to issuing a buy-signal. We have an 18-count on the monthly chart. The indicators for the monthly time-frame are mixed but uniformly overbought and not really trending.
March sugar rallied in both the Thursday and Friday sessions taking the market above some old resistance levels forcing the shorts to cover. The indicators are uniformly pointing higher, all at overbought levels. 11.50 should offer some resistance in the Monday session. The 5-period exponential moving average is at 10.98. The top of the Bollinger band is at 11.47 and the lower edge is seen at 9.74. The weekly chart looks extended. The indicators are overbought and beginning to roll over however, none has issued a sell-signal. If we can get thru the 11.50 level, we will challenge the 11.91 high of March of 2007. Should this market gap lower and fail to trade above 11.31 in the Monday session, we will get a sell-signal.
March cocoa has enjoyed a substantial rally taking it back near the highs of December 19, 2007. The market rallied to 21.41 just .06 shy of the December high, in the Thursday session, however; when it was unable to push through that number, it retreated and continued that retreat into the Friday session. The stochastic indicator and the RSI are both issuing a fresh sell-signal. The Thomas DeMark Expert indictor is issuing a continued buy-signal at overbought levels. Our own indicator is curling over to the downside but has not issued a sell-signal at this time. The 5-period exponential moving average is at 20.81. The top of the Bollinger band is at 21.37 and the lower edge is seen at 20.33. Clearly, the Bollinger bands are contracting, showing that the market is getting ready to make another move. The weekly chart shows signs of exhaustion and a 9-count. The indicators are overbought and issuing a continued buy-signal. March cocoa is in an area of congestion and seems to be having trouble making upside progress. There are two things that can happen here; either the market retreats and garners enough energy to break out to the upside or, we simply retreat. The third possibility is that we gap open higher and just take off to the upside.
March coffee expanded its downside in the Friday session. The short-term uptrend line is at 132.02 for the Monday session. The short-term downtrend line is at 135.37 for the Monday session. There is a longer-term downtrend line at 136.48. All the indicators that we follow herein are uniformly issuing a sell-signal. The 5-period exponential moving average is at 134.10. The top of the Bollinger band is at 136.44 and the lower edge is seen at 130.17. The weekly chart looks as though we are forming a pennant that will resolve itself to the downside. The indicators on the weekly chart are all issuing a sell-signal. The indicators on the monthly chart are also negative. We believe if coffee is to rally it needs to remove 135.37 and 137.00.
May Frozen Concentrated Orange Juice closed below the uptrend line on the daily chart. All the indicators that we follow continue to issue a sell-signal. The 5-period exponential moving average is at 145.21. The top of the Bollinger band is at 153.24 and the lower edge is seen at 139.73. Both the Thursday and the Friday sessions were steep retreats opening the door to a trip to the November lows of 131.75. The weekly chart agrees with the daily chart telling us that this market has broken below the uptrend line. The indicators on the weekly chart are also issuing a continued sell-signal with plenty of room to the downside.
March cotton is exhausted tired and in need of a rest. All the indicators that we follow are issuing a sell-signal all at extremely overbought levels. The 5-period exponential moving average is at 68.42. The top of the Bollinger band is at 69.52 and the lower edge is seen at 62.86. The uptrend line for the Monday session is at 68.25. The weekly charts lend some support to the bulls. The indicators on the weekly chart are overbought, but continue to issue a buy-signal. The monthly chart is topping and needs to close above 69.05 to continue to make some upside progress.
February crude oil rallied above the $100 mark in the Thursday session. The stochastic indicator and the RSI are both issuing a sell-signal. The 5-period moving average is at 97.73. The top of the Bollinger band is at 100.21 and the lower edge is seen at 86.40. If you look at the chart you will note that the 5 period moving average has acted as a good support zone for crude oil. The weekly chart for crude is positive with all the indicators issuing a continued buy-signal. It does look as though we are having trouble making our way much above $100, perhaps because the market expects seller to appear. Actually, if we can close above $105, we will see $110. The monthly chart looks as though crude is getting tired and may need to rest before another assault to the upside. Frankly, we believe that the market will go gunning for the resting buy stops above the market. This may cause a blip to the upside with a quick retreat once the buy-stops have been found.
February gold has a doji candle as a result of the Friday session. We continue to see the market remain above the 5-period moving average. The RSI and the stochastic indicator are both issuing a fresh sell-signal at overbought levels. The 5-period moving average is at 855.10. The top of the Bollinger band is at 865.82 and the lower edge is seen at 778.44. We closed right on the upper edge of the Bollinger band, a level which will offer some resistance to further upside progress. The weekly chart is positive. Both the monthly and the quarterly charts remain positive. We like gold but would like to see it back and fill a bit before the next assault to the upside.