Archive for February, 2011

Sunday, February 27th, 2011

Arizona is at it again! We agree and disagree with Arizona on several fronts. First of all, we encourage all illegal undocumented workers to get their papers in order and to become part of the legal work-force. We also agree that the employers are equally at fault. That said, we do not agree with denying education, K thru 12 to the children of illegal immigrant workers. As to college, that is far different story and we do not believe that these children should take the place of an American child that wants an education. That said, if the illegal college bound student wants to apply as a foreign student and pay, why not, we have always opened our doors to those seeking education.

As to anchor babies, we really need to address that issue. Certainly it is not the child’s fault nor has the child asked to be born. We have two choices, either we take the burden of that child as our own and stop belly-aching about it or, we simply return pregnant mothers to their home countries and do not allow them to have their children on our shores. Sounds a bit imposing but when we see mothers with several anchor babies receiving benefits greater than our American veterans, we start to wonder if we are off the track somewhere. We believe that we need to encourage people to earn a living and not to live off the system. Many of the illegal immigrants have come to our country seeking work. Those who work do not appear to be a burden on society. Those who want to work should have visa’s that allow them to work. While those Americans that sit on the free pay system, welfare, should be encouraged to do something for that benefit, say in home day-care. How about working for your welfare check by helping watching other people’s children while taking care of your own? How about doing something like painting a house, sewing clothes or other handicrafts for that monthly welfare check? Perhaps Arizona’s focus on illegals is off target and they should focus on American slackers rather than hard working illegals.

All this global anger brings to light the fact that we are not happy with our circumstances. Perhaps the global expansion is not as robust as has been advertised, perhaps inflation is eroding our ability to feel comfortable, perhaps, we need a break from the global riots. The US is also having its share of disruptions and marches. Chris Christie, Governor of our home state, has the right idea. Does having a teacher pay 1.5% of their health care costs have an impact on the teachers’ ability to teach or the child to learn…..we think not! The bottom line is that money is tight for the middle class and when people uniformly feel financial strains, they riot and become very vocal. If the economy is so robust, why are we seeing so many disruptions, financial crisis, and hardships? We think the expansion is very mild and the workers are paying a greater amount of their incomes for benefits that had been previously paid for by the corporations. Their incomes are not expanding and inflation, regarding the cost of food and energy, is expanding so what are they to do? Buy less and pay bills. Not the formula for a good economic forecast. Perhaps a formula for a jobless recovery with very tempered growth an expanding upper class wealth and middleclass poverty.

Monday: January personal income/consumption is released at 8:30, February Chicago PMI is released at 9:45 and New York Fed President Dudley speaks.
Tuesday: January construction spending is released at 10:00, January ISM index is released at 10:00 and Fed Chairman Bernanke testifies on the “Hill.”
Wednesday: Day two of Fed Chairman Bernanke’s scripted testimony with a free for all question period to follow, the European Central Banks issues its interest rate decision, Beige Book is released at 2:00, Challenger Gray & Christmas February job-cut release and Fed Chairman Bernanke speaks in the evening.
Thursday: February chain store sales and 4th quarter productivity cost is released at 8:30.
Friday: February nonfarm payrolls/unemployment is released at 8:30 and January factory orders are released at 10:00.

Sadly, the US Dollar index looks as though the intermediate term outlook is not exactly rosy. We believe that the US Dollar index will see a bounce but that bounce will likely be a short-term oversold bounce rather than something more important. We have damaged the chart and should we continue to see pressure below 77, we will become more convinced that the 74-75 area will be revisited. That said, we must admit that the resent probe below 77 did look like a fishing trip trying to lure the stops out to see where they had their orders. It seems once that was done that the market, satisfied that there were not too many stops waiting election at the lower levels, rallied back above the important 77 level. We are below the Ichimoku Clouds for all the time-frames. The 5-day moving average is at 77.481. The top of the Bollinger band is at 78.883 and the lower edge is seen at 76.964. All of the indicators that we follow herein are issuing a buy-signal. The rate of change is getting flat so we can see that the downside thrust is abating. Although we would expect to see a rally in this market that could take us up to the 78.40 area, we continue to remain concerned about the ability of this market to re-establish the bullish trend.

The S&P 500 futures contract will roll to the June futures in about two weeks so take care with positions and remember the roll. Generally, as we roll from one expiry to another we have a positive bias because many of those who are short will need to buy these contracts. The rally seen in the Friday session kept the market above a rather critical intermediate-term uptrend line.
The 5-day moving average is at 1314.30. The top of the Bollinger band is at 1345.68 and the lower edge is seen at 1288.03. The intermediate uptrend line is at 1301.12. The short-term downtrend line is at 1318.75. We are above the Ichimoku Clouds for all the time-frames. The stochastic indicator, our own indicator and the RSI have all issued a buy-signal. The Thomas DeMark Expert indicator continues to point lower at oversold levels. Although this market has broken the short-term uptrend lines, it remains safely above the intermediate term uptrend line. We do have signs of exhaustion on this chart and we could see some backing and filling in the short term. We need to see a close above 1342 for a melt to the upside.

The NASDAQ 100 futures contract enjoyed a two-day rally after the three day-down draft seen in the beginning of the week. All of this activity did not change the trend to the downside. We did pierce the uptrend line poking below it in both the Wednesday and the Thursdays session. We did see this index, after probing the line, close comfortably above the uptrend line. The channel lines are 2314.01 and 2423.71. The 5-day moving average is at 2329.55. The top of the Bollinger band is at 2414.69 and the lower edge is seen at 2283.55. We are above the Ichimoku Clouds for all the time-frames. All the indicators that we follow herein are issuing a continued buy-signal with plenty of room to the upside. Above 2397.25, we likely will see a melt to the upside. That said, we note that if this market closes below 2280.25 for two days, we will open the door to much lower levels.

The advance in the Russell 2000 is more advanced than that of the NASDAQ 100. We are above the Ichimoku Clouds for all time-frames. The indicators all are issuing a continued buy-signal with plenty of room to the upside. There is less room to the upside than seen in the other finical markets. The 5-day moving average is at 812.68. The top of the Bollinger band is at 839.89 and the lower edge is seen at 782.76. Above 832.30 and 836.40 there is no overhead supply and we will likely quickly move to the upside. The high volume number is 807.70. The Russell 2000 has outperformed the other indices that we follow herein.

Crude oil loves the chaos in the oil producing nations. We have been bullish crude oil for a while but that was not based on the world upheaval but rather the chart which has been strong for a while. The 5-day moving average is 96.81. The top of the Bollinger band is at 99.01 and the lower edge is seen at 84.56. We continue to see buy-signals from the indicators although the rally has brought the stochastic indicator to overbought levels. We are above the Ichimoku Clouds for all the time-frames that we follow herein. We would not be surprised to see crude oil back and fill as some of the global chaos quiets down. Still, we believe that the market will continue to rally after some more trading is seen 90 dollar level. Should the market trade and close above 101.40 we likely will see some aggressive short-covering and strong buying.

Gold and world chaos goes hand in hand. Certainly currency concerns, inflation concerns and riots remind investors about the value of gold. The up-channel lines for gold are at 1390 and 1424.77. This tells the investors that so long as gold stays within that channel, the direction will be higher. The 5-day moving average is at 1406.20. The top of the Bollinger band is at 1420.34 and the lower edge is seen at 1323.43. We are above the Ichimoku Clouds for all time-frames. The indicators continue to issue a buy-signal although they are overbought. We continue to like gold but only on dips.