Let's see if I learned anything…
We had a hell of a day yesterday and I watched it happen with a dumbfounded look on my face as I never imagined this country was willing to go even further in debt to support the massive commodity bubble that is impoverishing more than half the nation – silly me!
Over in Asia the Hang Seng jumped 977 points and the Nikkei soared 579 points as part of the global celebration of the rate cut. The BOJ voted to keep their rates steady as well, despite the recent turmoil that has led to the resignation of the Prime Minister over there.
India's BSE jumped 4%, up 653 for the day to lead the rest of Asia. "The Fed's move on interest rates will improve buying interest, with all of Asia-Pacific expected to perform well this week," said Grant Williamson, an adviser at Hamilton Hindin Greene in New Zealand. Asian investors had been worried that the credit crisis sparked by the collapse of U.S. subprime mortgage lending might drag on growth in the U.S. economy, on which Asian exports are heavily dependent. "Certainly these markets are not out of the woods yet," said Mr. Williamson. "What we have seen is a very short-term solution and we will have to see if the U.S. economy improves."
A VERY short-term solution is what I said it would be yesterday as well but today let's just see if we can make money during that short-term…
Europe was also thrilled with Bernanke's gift to the markets but not so much the foreign securities investors. The monthly Treasury International Capital Report (TIC) showed net foreign buying of long-term U.S. securities fell to $19.2 billion from $97.3 billion in June (down 80%). Well, at least it can't get worse! Private foreign investors sold a net $2.5 billion in Treasury notes and bonds in July, after making net purchases of $20.1 billion the previous month. Meanwhile, foreign official institutions such as central banks sold a net $6.9 billion of these Treasurys, compared with net purchases of $6.4 billion the previous month.
The U.S. has to borrow more than $2 billion a day to cover its trade deficit. A serious pullback by foreign investors could drive the dollar down and interest rates up, at a time when the U.S. economy is already slowing.
Oops, sorry… I'm promised to turn off that part of my brain!
So Go, Go, Go Markets – Woo hoo! Today we need to remain calm, assess the situation, take a deep breath and prepare for the day. Since green is a claming color, let’s take a look at the Big Chart:
|
|
|
Week’s |
Must |
Comfort |
Break |
Next |
|
Index |
Current |
Move |
Hold |
Zone |
Out |
Goal |
|
13,739 |
612 |
13,000 |
13,300 |
13,500 |
14,000 |
|
|
2,892 |
112 |
2,800 |
2,900 |
3,000 |
3,250 |
|
|
1,519 |
68 |
1,470 |
1,505 |
1,530 |
1,550 |
|
|
9,909 |
452 |
9,400 |
9,800 |
10,000 |
10,250 |
|
|
2,651 |
92 |
2,525 |
2,550 |
2,600 |
2,750 |
|
|
498 |
3 |
480 |
490 |
500 |
560 |
|
|
806 |
37 |
810 |
830 |
850 |
900 |
|
|
25,554 |
1,602 |
20,250 |
20,750 |
21,000 |
22,000 |
|
|
16,381 |
504 |
17,400 |
17,700 |
18,300 |
18,500 |
|
|
16,322 |
780 |
13,500 |
14,100 |
14,725 |
15,000 |
|
|
7,712 |
257 |
7,300 |
7,600 |
8,000 |
8,200 |
|
|
5,683 |
225 |
5,750 |
6,000 |
6,100 |
6,300 |
|
|
6,415 |
198 |
6,400 |
6,550 |
6,600 |
7,00 |
So we'd really like to see the Transports break 2,900 – if it's a real recovery then somebody must be shipping something. FDX reports tomorrow and we'll find out if the economy is really on the mend or if the bulls are just full of ship… The Russell was our best performer yesterday and should continue to lead a proper turn around and we'll be watching for critical breakouts in the S&P and the NYSE.
Both the Hang Seng and the BSE have clearly left orbit and it's up to the Dow to make a break for 15,000 by shattering the 14,000 mark. Since the global rally started in mid-2006 we've lagged the Hang Sang's growth by 40%. We can understand the S&P but the very global Dow needs to get it in gear and a worthless dollar is great for pretty much all of those components.
Happy Trading and I are keeping an eye on the very critical 1,550 breakout line on the S&P, where it will be time to dump our callers and let our leaps fly solo until things settle down but for the short-term, we want to see the Dow and the Russell continue to make power moves. FDX will decide the fate of the transports tomorrow as will GS with the financials:
MS had very disappointing earnings (down 17%) but it's not dissuading investors as no one knows how to suck up Uncle Ben's free money than our friends the investment bankers. So LEH was no great shakes, MS clearly missed… If anything is going to derail the rally it will be GS and FDX. Once we get through that, I don't see much that will stop a rally from continuing next week.
Oil is up over $82, gold is over $730 (we have LOTS of gold!) and IT NOW COSTS MORE THAN A DOLLAR TO BUY A CANADIAN DOLLAR. So congratulations to the Loonie – it may be time to buy Pesos before it's too late.
We will get a good open on yesterday's momentum but let's watch our levels and let the stops on our bullish positions guide us. It would be very strange to keep flying without any pullback and there may be some lagging short covering from yesterday's debacle – once that's done, we'll get a clearer picture, or a clear of a picture as you can get on an option expiration week.
"I was dreamin' when I wrote this
Forgive me if it goes astray
But when I woke up this mornin'
Could have sworn it was judgment day
The sky was all purple
There were people runnin' everywhere
Tryin' to run from the destruction
You know I didn't even care
They say two thousand zero, zero, party over,
Oops, out of time!
So tonight I'm gonna party like it's 1999!
I was dreamin' when I wrote this
So sue me if I go too fast
But life is just a party
And parties weren't meant to last
War is all around us
My mind says prepare to fight
So if I gotta die
I'm gonna listen to my body tonight
They say two thousand zero, zero, party over,
Oops, out of time!
So tonight I'm gonna party like it's 1999!
1999!"
