Search results matching tag 'Crude Oil'

WTI Crude Oil & Oil Stocks Seasonality & Year-End Outlook

ChrisVermeulen — Tue, 30 Oct 2012 17:29:00 GMT

Crude oil has had some large price swings this year and another one may be on its way. This report shows the seasonality of crude oil along with where oil is trading and what the oil service stocks are telling us is likely to happen going into year end.

Since WTI Crude Oil topped out in September at the $100 resistance level (Century Number) many traders are looking for a bounce or bottom to form in the next week. Historical charts show that on average the price of oil falls during November and the first half of December.

The charts of oil and oil stocks shown below have formed patterns on both time frames (weekly & daily) that lower prices are to be expected. If you did not read my Gold Seasonality Report I just posted be sure to review it here: Gold Seasonal Report

WTI Crude Oil Weekly Chart:

Here you can see that price tends to fall going into Christmas and rallies during the last week of trading. This price action falls in line with Dimitri Specks seasonal chart providing us with insight as to what we should expect. Later this week I will finish my report on the Election Cycle Seasonality report which shows weakness in the market during Oct & Nov when a president is up for re-election.

Oil Services Stocks – Weekly Chart:

If you follow oil closely then you know likely know already that oil related stocks can lead the price of oil by a couple weeks. What this means is that if big money is flowing into oil stocks (bullish price patterns with strong volume), then you should expect the price of crude oil to rise in the coming days. That said, if money is flowing OUT of oils stocks then lower or sideways oil price should be expected.

The weekly chart oil stocks show a very large bearish head & shoulders pattern. While I do not think the neckline will be broken it is very possible.

One of the most important pieces of data on the chart is the VOLUME. Notice the lack of it… Volume tells us how much interest and power is behind chart patterns and declining volume clearly tells us these investments are out of favor currently and that big money is not moving into them.

Oil Services Stocks – DAILY Chart:

Zooming into the daily chart of the oil service stocks we can see there is yet another bearish pattern unfolding. Another head & shoulders pattern which looks as though it is just starting to breakdown as of this writing. Next support level is $35-36.

WTI Crude Oil and Oil Service Stocks Trading Conclusion:

Looking forward 1-2 months (November – December) taking the seasonal price swings in oil, re-election cycle seasonality and price action of oil stocks I feel oil will trade sideways or down from here. With that being said, expect crude oil to rally during the last week of the year. I hope this provides some useful info for your trading!

Get my Daily Trading Analysis & Trade Setups at: www.TheGoldAndOilGuy.com

Chris Vermeulen

Dollar drops, but then reverses course this morning . . .

ChuckButler — Tue, 20 Mar 2012 15:43:00 GMT

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In This Issue.

* Dollar drops but then reverses. . .

* UK inflation slows but remains too high for the BOE . . .

* Crude oil prices continue to climb. . .

* NY Fed Head Dudley throws a bit of cold water on the markets. . .

And, Now, Today's Pfennig For Your Thoughts!

Dollar drops, but then reverses course this morning . . .

Good day... It was a warm walk across the bridge this morning, hard to believe we have temperatures in the mid 80's so early in the year. We usually get some odd days during March which bring the temps up, but this summerlike weather has stayed for most of the month. It has certainly faked the plants out, as they are leafing out well ahead of schedule. Today we will start to see if the nice weather we have had across the country has helped the housing industry. At least one Fed head is saying the warm weather is partially responsible for some of the recent gains we have seen in the economic data.

A chart of the dollar index for Monday looks almost identical to the chart from last Friday. The dollar fell dramatically just after NY trading opened, and then settled into a very narrow range for the rest of the day. The fall yesterday was sparked by the one piece of data which was released here in the US, the NAHB Housing Market Index, which indicated the housing recover isn't doing quite as well as most economists expected. While this index isn't widely followed (I had never reported on it until yesterday) this week's data is heavily skewed toward the housing sector and many investors felt this index was a harbinger of more disappointing numbers over the next few days.

The largest move vs. the US$ was made by the Swiss franc which appreciated through a major technical level, triggering automatic orders which fueled a further rise. The early morning move by the franc spilled over to the euro which rose through its 100 day moving average. Neither Chuck nor I are big technical traders, but in lighter markets like we've seen the past few days, a breach of a technical level can lead to a larger currency move. Yesterday both the euro and franc moved through levels which triggered stop orders. These are orders which currency traders place to 'stop' them out if trades start to move against them, or to lock in gains after a certain price is reached. Both currencies held the higher levels they attained in early trading, which could mean further appreciation in the coming days.

A report out this morning showed UK inflation slowed less than forecast in February, rising 3.4% from a year earlier compared with a 3.6% rise in January. The economists had estimated a 3.3% rise, so the drop from the month earlier didn't as big of an impact on the currency markets as it could have. The Bank of England has forecast price increases will subside in the coming months to settle in at its 2% goal for this year. But there is a good chance the slowdown in consumer prices will be reversed by the recent gains in the price of crude oil which surged above $108 yesterday. This could force the BOE to cut the bond buying program which has been keeping rates down and supplying liquidity to the UK bond markets. The pound sterling reversed a decline against the euro and the US$ after the inflation data was released.

The recent rise in the price of crude oil, combined with the positive economic news out of the US pushed the Canadian dollar to its highest level in almost 6 months. The Canadian dollar had not participated in the recent rallies of the New Zealand and Australian dollars, as interest rate differentials favored the higher yielding currencies of the South Pacific. But recent data out of the US has investors pricing in a possible rate increase by the Bank of Canada later this year. Yields on the benchmark 10 year Canadian bonds have followed US yields higher, adding 23 basis points in the past week to settle at 2.24%. The rise in crude oil has also helped to push the loonie higher.

But news released this morning may lead to a further sell off in the price of oil. Saudi Arabia's cabinet stated in a report this morning that they will work with crude consumers and producers to restore 'fair' prices. Crude prices could come under additional pressure tomorrow as a government report tomorrow may show US stockpiles rose to the highest level in six months last week.

This morning as I turned on the trading screens I noticed the dollar had all but reversed yesterday's drop. The move higher came after BHP Billition Ltd, the world's largest mining company, said China's steel production is slowing, damping demand for commodities. As usual, the markets ran with this indication that Chinese demand would not continue to increase. Didn't I just report yesterday that the IMF was convinced the Chinese economy is heading for a soft landing? And yes, when an economy is slowing, all facets of that economy (including steel making) will slow. But commodity and currency traders are acting like this news of lower demand out of China is surprising.

Both the Aussie and New Zealand dollars traded lower overnight, ending a nice three day rally. The Aussie had traded higher after the publication of central bank minutes which showed officials had decreased their concerns about downside risks to the Australian economy. The minutes released yesterday showed Reserve Bank of Australia policy makers had discussed the while downside risks which "could still materialize, this seemed somewhat less likely than a few months ago. So long as inflation remained well contained, there would be ample scope for the bank to ease policy in such a scenario." Traders had been betting the Reserve bank would be cutting rates again this year, but not the odds of another cut have been reduced.

While many of the commodity based currencies edged lower for the first time in a few days, the Brazilian real has been dropping vs. the US$ for three consecutive days. The real was the only currency which dropped vs. the US$ in trading yesterday. Currency analysts lowered their forecast for the currency's performance in 2012. The currency will end the year at a level of 1.80 real/$ compared to an earlier estimate of 1.75. The Brazilian government has staged a war against currency appreciation, expanding a tax on foreign loans and intervening directly into the currency markets. Brazil's currency has dropped over 5% this month as policy makers have stepped up their dollar purchases. Inflation in Brazil remains within the government's tolerance levels with consumer prices in Brazil's largest city rising just .1% in the past four weeks. Most economists are predicting interest rates will continue to fall as inflation remains subdued. The central bank cut rates 75 basis points in the first week of March, and the bank has signaled it is ready to cut an additional 75 basis points later this year. Investors have been attracted to the real by the relatively high interest rates and excellent currency returns, but as Chuck pointed out late last year, the Brazilian government seems hell bent on making the currency less attractive.

NY Fed President William Dudley threw a bit of cold water on the recent equity rally with a warning that the US economy is still not on solid footing. "The incoming data on the US economy has been a bit more upbeat as of late, suggesting that the recovery may be getting better established," Dudley said in a speech yesterday. "But, while these developments are certainly encouraging, it is far too soon to conclude that we are out of the woods in terms of generating a strong, sustainable recovery." Dudley attributed at least some of the recent gains in the economic data to unseasonably warm weather which has distorted YOY comparisons. He would not comment on the possibility of additional stimulus measures, but most of the stories I read on Dudley's speech referred to his comments as being 'dovish'.

Dudley's prepared statement also correctly pointed out that much of the recent drop in the unemployment rate has been a result of a decline in the labor force participation rate. This rate of participation has declined to 64% from around 66% in 2008. While this 2% drop may seem nominal, it equates to a fairly large move in the unemployment rate. Without this drop in the participation rate, Dudley pointed out the unemployment rate in the US would still be in the double digits. I admire Dudley's attempt to temper some of the recent excitement regarding the 'better than expected' numbers. But you Pfennig readers know the actual unemployment rate is not in the lower double digits as Dudley suggested, but is really over 20%. Our friends over at Shadowstats.com have all of the 'unadjusted' numbers which show a slightly more negative picture of the US economy: http://www.shadowstats.com/alternate_data/unemployment-charts .

To recap... The US dollar dropped yesterday morning, but then reversed course today. The Swiss franc was one of the largest movers, triggering stop orders which sent it even higher vs. the US$. Commodity currencies sold off due to concerns over China's growth (didn't we just have confirmation that China was headed for a 'soft' landing?). The Brazilian government continues to try and do everything they can to keep the value of the real down. And NY Fed Head Dudley shared a more pessimistic view of the current US economy than what we have been hearing from the mass media.

Currencies today 3/20/2012. American Style: A$ $1.0482, kiwi .8162, C$ $1.0065, euro 1.3183, sterling 1.5845, Swiss $1.0933, . European Style: rand 7.6203, krone 5.7583, SEK 6.7575, forint 219.86, zloty 3.1337, koruna 18.5628, RUB 29.306, yen 83.76, sing 1.2641, HKD 7.7646, INR 50.395, China 6.3244, pesos 12.7074, BRL 1.8302, Dollar Index 79.828, Oil $107.02, 10-year 2.34%, Silver $32.155, and Gold $1,645.38.

That's it for today... I heard an advertisement for EverBank Wealth Management on the way into the office this morning, and it seems like I see our banner advertisements on every other web page which I visit. We have certainly grown in the last few years, it is great to see we are finally spreading the good word about EverBank! I snuck into the gym for my weekly workout with my trainer this morning, so I am running a bit later than usual. Sorry to all of the EverBank employees who didn't get their Pfennig yesterday, apparently there was a new filter placed on our system which kept all of the 'internal' readers from getting the Pfennig. Funny how all of the technical issues only seem to happen when I'm writing; maybe they are trying to tell me something! Hopefully everyone will have a Terrific Tuesday, and thanks for reading the Pfennig!!

Chris Gaffney, CFA

Vice President

EverBank World Markets

1-800-926-4922

1-314-647-3837

No leaks in this crude oil market

AdamHewison — Tue, 03 Aug 2010 20:56:00 GMT

The massive move-up in crude oil on Monday created a new dynamic for this in-the-news market. The move to two-month highs completed one of our favorite major technical formations.

In this short video, I share with you two conflicting indicators and which one I am choosing to go with. I think you'll find this video technically interesting as well as educational.

Please feel free to comment with your thoughts on this market.

As always our videos are free to watch and there are no registration requirements needed.

http://www.ino.com/info/597/CD3678/&dp=0&l=0&campaignid=3

All the best,
Adam Hewison
President of INO.com
Co-founder of MarketClub

Here is the code for the embeddable video player code featuring the Crude video. We are still tinkering with the player so be sure to email Kenny@ino.com or Jennifer@ino.com with any ideas or questions

Has crude oil topped out for the year?

AdamHewison — Wed, 21 Apr 2010 15:25:00 GMT

There is no doubt about it, crude oil has been very choppy. There are two camps involved in the crude oil market: one is bullish and the other is bearish. In this new short video, I show you which camp I am in and what I think is going to happen to the crude oil market for the balance of the year.

You will also get to see the key areas that we have recently approached and reversed back down from, and why this area is so important for the future of crude oil.

http://www.ino.com/info/547/CD3678/&dp=0&l=0&campaignid=3

As always, our videos are free to watch and there are no registration requirements. We welcome your thoughts and comments regarding this posting on our blog.

All the best,
Adam Hewison
President, INO.com
Co-creator, MarketClub

My favorite Indicator for inflation and it’s not gold. (New Video)

AdamHewison — Wed, 10 Jun 2009 14:46:00 GMT

One of my favorite indicators for large cyclic trends has accurately forecasted every inflationary and deflationary cycle since it was created in 1957.

You may want to watch this index carefully should you want to invest in certain stocks and commodity related markets. Over the last half-century, this index has seen some remarkable moves both on the downside and in the last few months on the upside. I believe that this is the indicator that everyone should watch. If you trade stocks or futures and are interested in world trade trends, this is the indicator to track.

Video link to new video RIGHT HERE!

The tenth revision of this index renamed it the Reuters-Jefferies CRB Index (NYBOT_CR) You can easily track this indicator everyday using MarketClub. You can learn more about this index from our Trader’s Blog.

Here is a list of the 19 markets that are included in the RJ/CRB index as implemented in the 2005 revision:

Metals: aluminum, copper, gold, nickel, silver

Energies: crude oil, heating oil, natural gas, unleaded gas

Grains: corn, soybeans, wheat

Food & Fiber: cocoa, coffee, cotton, orange juice, sugar

Livestock: lean hogs, live cattle

Take a few minutes to watch this short video and see how you can benefit from this indicator. There is no fee and there is no registration required.

The video is free to watch and there is no need to register. I would love to get your feedback about this video on our blog.

All the best,

Adam Hewison

President, INO.com

Co-creator, MarketClub

If you didn’t make money in May watch this video

AdamHewison — Thu, 28 May 2009 18:16:00 GMT

If you didn’t make money this month then you weren’t watching our Trade Triangles.

See how we did in three major markets (my new video).

CURRENCIES
May has been quite a month, especially for the British Pound (GBP). In an earlier video, I alerted everyone of the potential upward move. The market ended up moving right in line with my expectations and is showing some excellent profits. One currency contract at the CME is showing a profit of over $8,000, a stunning return of over 216% over initial margin*.

ETF
I also alerted you to a move in crude using the ETF USO which closely tracks the crude oil market. This market has gone up over 8% since MarketClub issued the first signal on May 6th at 32.16 using our Trade Triangle technology.

PRECIOUS METAL
Gold has also been a big winner this month with a move over the $950 level. This stellar move produced profits over $2,845 a contract. This represents a return of 50% in less than a month over initial margin*.

If you’re not familiar with our “Trade Triangle” technology, I highly recommend you take a look at it and see how it works in spotting the big moves before they begin.

As always, the videos are free to watch and there’s no need to register. I would love to get your feedback about this video and your own predictions about these markets on our blog.

All the best,

Adam Hewison
President, INO.com
Co-creator, MarketClub

*Initial margin for British Pound Futures $2,700
*Initial margin for Gold Futures $5,399

Oil Rally Likely Says Elliott Wave Theory

RichardSchwartz — Wed, 05 Nov 2008 14:18:00 GMT

COMMODITY VIEW. Oil Rally Begins. Elliott Wave theory, originally produced by R. N. Elliott in the early 1900s, and now carried forward by Bob Prechter, past #1 market guru, basically says Elliott waves or complete market movements come in threes. Well, to more accurate, Elliott says movements really come in fives, three in the prevailing direction, and two counterswings in the other direction. Right now I see three distinct and obvious movements downward in oil and other commodities. Meaning I see a complete movement just finished. So now I have to expect a move in the other direction, a rally upward in oil. For chart lover’s edification, and to see what I see, the three legs down are as follows.

Complete Elliott Wave Movement. The 1^st leg lower off the July 3^rd, 2008 crude oil top ended roughly August 12^th. After a minor sideways counterswing upward until August 29^th, oil, and commodities in general, began their 2^nd legs down with a gap lower the next day and continued downward to September 16^th, where the second counterswing rally upward began. This lasted for only a few days, until September 22^nd before the 3^rd leg down began. Starting September 22^nd, oil, and commodities in general, fell along with most everything else financial in the rare forced panic right through to the bottom on October 27^th. So we now have a complete three legged or Elliott Wave decline in place.

Schwartz View: At this point then I expect some type of oil and general commodity rally, which has already begun, beginning six days back. Maybe going hand in hand with a general stock market rally. But remember, there’s no saying oil can’t just keep on falling after this pause or rally attempt ends. We could easily soon start another whole new movement down in oil. But, bottom line important, this is the price and time point where it’s logical to play for a rally if one’s so inclined. I am so I took a small position in oil on Monday on the dip which took oil back down but not down below its October 27^th lows. Then yesterday we had a big up day in oil after which we were left posted a higher high. Add that to a higher low the day before and over the last week we’ve quickly met the definition on an uptrend, a series of higher lows and higher highs. Thus traders might want to take note and mirror me, using the next decline, oil’s down as I write this morning, to do so as long as we don’t break the old crude price lows. As for additional reasons oil why oil may have finally found its leveling off price, crude at its recent low was down a Fibonacci number, down very close to 61.8%. Normally a great point to expect a bounce. Plus hedge fund commodity deleveraging might just be ending along with the thawing and maybe long awaited ending to the horrific credit crisis. Finally, just use some common sense. No matter how poor the US and global economy gets, a certain amount of business is still going to need to be done.. And with no progress made in freeing ourselves from oil over the last 30 years, no matter what I want and believe will is on the way to happening, it’s not going to occur overnight. Oil is still going to have to be utilized for years to come; why not a rally to some leveling off point, say maybe at about 50% off its highs or in the low $70s?

Disclaimer! I own a little oil with small positions in Rydex Oil & Gas Ultra (RYEIX) and in ProFunds Energy (ENPIX).

Possible Bear Market Rally Ahead

RichardSchwartz — Fri, 17 Oct 2008 14:04:00 GMT

SOME REASONS FOR A BEAR MARKET RALLY

Written Friday, October 17th, 2008: 6:30 am

1. Obviously, IBD says we’ve set up properly for a rally as I spelled out above. Schwartz View: Diluting the strength of yesterday’s bullish follow-through day in the Dow Industrials and S&P 500 was the fact the Nasdaq Composite, S&P 400 Midcap and S&P 600 Smallcap all went to new bear market lows on Wednesday, which means that even after yesterday’s big up day, they haven’t posted bullish follow-through days.. Still a rally has to start someplace. What we don’t want to see next is new closing lows which would negate yesterday’s buy signal.

2. Warren Buffett, the best value investor alive, was in buying stocks below Dow 8500 yesterday and says in a New York Times article that he’s following his rule: “Be fearful when others are greedy, and be greedy when others are fearful.” CNBC says this morning Mr. Buffett did stop buying when stocks took off upward yesterday afternoon. Schwartz View: I’m a little skeptical of just why the Oracle of Omaha wrote to the Times. He does have lots of skin in the game after buying Goldman Sachs and other stocks recently. He sure doesn’t want fear to turn this economic downturn into a depression, right? So he may be using his massive influence to suit his purposes.

3. October has bottomed out numerous bear markets in the past, like the ones in 2002 and 1987 mentioned above. I’d include the Papa Bear market of 1973-1974 in that category too, October being the bottom although stocks did retest that December. Plus October ends the worst six month stretch of the year and leads into two of the best months for stocks, November and December. Schwartz View: Lots of stock sectors show rallies starting in October as well.

4. Recent dramatically lower stock prices have brought back value into the stock market, both here in the US and elsewhere. One reader pointed out General Electric to me yesterday and when I checked into GE, Bloomberg showed a price/earnings ratio of 10, the previous low PE being 16. And then an article I read says the PE for one MSCI Asian gauge traded at 10 times, the lowest since at least 1995. Even perma-bears at www.Comstockfunds.com wrote yesterday that: “For the first time since wee start writing these comments in early 2000 the market has declined to levels where it’s reasonably valued on all five of our major parameters – not, cheap, mind you, but reasonable.” Schwartz View: Many value investors and others now are saying they’re finding “many” cheap stocks out there now. Long term money mangers must be licking their chops.

5. The US presidential election will soon be over. Thank goodness! The stock market hates uncertainty and thus we’ll likely get some uplift just because one uncertainty will be put to rest. Schwartz View: Plus normally, just like after marriages, we should experience some type of honeymoon period where everyone is relieved and feeling good. Some coming together of the whole country at least for a short period after the November 4^th election.

6. Governments everywhere have now come together (somewhat), realizing and admitting the seriousness of this global credit crisis and more importantly have rolled out their big guns to fight it. We got the all-encompassing US rescue package, followed shortly thereafter by coordinated global interest rate cuts (unprecedented). Then we had EUROPE showing some great leadership, and I must say unexpected togetherness, last weekend saying all countries would do everything possible to support their banks and the overall global financial system. England came up with a plan to inject money directly into banks which was widely applauded and which the US and others countries said they’d quickly follow. Schwartz View: Immediately upon first hearing that the US was proposing an all-encompassing, system wide bailout plan to tackle this persistent global credit crisis, forgoing their previous piecemeal approach of tackling each problematic company one at a time as they arose, I felt it had a good chance of working. Then, getting there from here got all bollixed up by the US Congress. But now we’ve past that turmoil, I’m back to thinking these refined, now even larger global wide plans have a good chance of succeeding. And inspire enough, even tepid, confidence by big investors that they will start buying stocks.

7. Short term credit markets -- namely LIBOR, the rate banks charge each other for short term loans -- are freely up some, so say the experts. The average investor has to take the expert’s word for this one since there’s nothing easily tracked but I see Rick Santoli, CNBC’s bond expert, is saying the same thing, he sees signs of credit easing. Schwartz View: Easing of credit markets is and has long been priority #1 for, central banks, investors, everyone, in ending this credit crisis. If money indeed starts flowing again, risk of the ultimate nightmare scenario, businesses everywhere and in all sectors shutting down from lack of credit, will lift and then confidence would start coming back, exactly what we need.

8. Finally, we’ve just gone through a major bout of days upon days of capitulation, of panic selling, which I’d say can be laid at the feet of the economy, the admittance that its getting worse and we’re in recession now and heading deeper down. Not because, as some say, polls showing Senator Obama is likely to win the presidency in 2 ½ weeks caused the selling,. But because it’s just became painfully obvious during the wrangling in Congress over the US government’s proposed bailout bill that the economy was starting to tank and nothing could really stop that. Schwartz View: Whatever the cause of the recent dramatic plunge, the fact is rallies can easily, and many times do, begin when sellers exhaust themselves.

9. Oil is way down as are other commodities, taking big pressure off consumers, businesses, everyone. Schwartz View: If commodities stay down, that will help a lot.

10. Hedge funds, a large influence in today’s stock market, got margin calls because of their securitized investments which they can’t sell so they had to sell something, stocks, bonds, oil, gold, etc.. Another old Wall Street adage in play: “Sell what you can when you can’t sell what you want.” Schwartz View: Hedge funds are also getting quarterly redemptions too so they have to sell to prepare. Net, net, we ended up with this extended selling panic.

SCHWARTZ SUMMING UP. The above is a whole list of reasons, you could probably add a couple more, why the stock market should rally soon. Thus I’m going to search today for which sectors and stocks look primed to rally. While I believe any rally here won’t last more than the normal three months maximum of any intermediate term bear market rally, it sure would be good to get some relief from the downside. I think this bear market lasts at least two years but stock prices, after recently plummeting, are now way ahead of themselves in their normal, historical decline of about -2% a month during extended bear markets. We’re one year in and down -36% on the Dow, meaning we’ve lost on average, about -3% a month. So we have lots o time for a rally. Plus, psychologically, investors have just given up the ship on the economy, and we all know human beings overdo things, good or bad. So we’re due and hopefully all primed for a rally. Now, if only big investors who drive stocks will figure the same as I and start buying.

For traders and speculators only, I would once more put your toe and then one foot back in the water. Step by step get more invested for trading purposes. Rallies don’t come along often in bear markets so when one is due, go for it. One Schwartz Rule is to: “Move Early!” so I plan to do so and see what I can buy for trading purposes in coming days. As long as stocks don’t make new lows. Good trading!

September 2008 Investment Strategy

RichardSchwartz — Tue, 02 Sep 2008 13:27:00 GMT

Richard Schwartz's

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Tuesday, September 2^nd, 2008: Had lovely, blue sky, humidity down weather to wind up the summer and the long Labor Day weekend. Indeed, the weather is supposed to stay gorgeous the early part of this week here as well. But don’t mention the grand weather to Lucy since it’s back to school for her today!

THE BIG PICTURE

Last week I wrote about the necessity of staying positive during a downbeat economy and stock market. Staying upbeat right when there’s near term problems and long term concern that America is losing status in the pecking order of the new, globalized world we live in. Hey, America has long encouraged the rest of the globe to go capitalistic and got a massive, all-encompassing global push in that capitalistic direction after so much economic rot was discovered in the Soviet Union sphere after the Berlin Wall came down. Countries switched and let the marketplace work and, voila, the world started moving forward, growing and getting wealthier. So now, with so much new global competition around and thriving, America has to respond in kind by redoubling our efforts to efficientize, modernize and improve our own financial, economic, social, and especially our dysfunctional political system(s). In other words, take our fundamentally solid, well-working capitalistic system and adjust it to today’s new globalized marketplace. Make some fundamentally sound and foresighted long range decisions about energy, education, health, finance, politics, etc. and then exhibit sacrifice and discipline. Again, all while seeing the glass half full.

Schwartz View: That’s why I’m dismayed by hearing friends, including one back from Iraq duty, tell me it really doesn’t matter who gets elected as the next president of the United States. Their rationale? It doesn’t matter since nothing will change anyway. Maybe my generation and the one coming immediately after us is just too jaded. But, from longtime trafficking in the stock market, the one thing I’ve found we can bet on consistently is change. Change does happen. So, I’d say we have to have hope. We have to believe that our votes will prove meaningful. And the youth of America, not being so long disappointed and denied, frustrated and jaded like their elders, us, have responded to this upcoming presidential election. Grass roots efforts by thousands of inspired youth and the ready adoption of the Internet for fundraising from the masses is how Barack Obama overcame sure bet Hillary Clinton to get the Democrat’s nomination in the first place. So I say re: politics, energy use, etc., just like in the stock market, we need to keep upbeat that positive change is out there just over the horizon. So buck up. The realistic investor can forecast hard times ahead and yet get up each day, plaster a smile on his and her face and still believe that better times are out there, knowing that just like the daily cycle, it’s darkest right before dawn … arrives.

Schwartz Reading Recommendations: For those of you who are interested in Big Picture investing, by that I mean not the nuts and bolts of everyday stock trading, charting, etc. but, say financial planning, etc. I’d like to add former Fed chief Alan Greenspan’s tomb of the 20^th century, The Age of Turbulence, to my recommending reading list. It offers up a wonderful history of America growing wealthy, explains how decisions at the Fed are made and gives forward looking guidance to the world ahead. Also let me add the even newer book, THE POST-AMERICAN WORLD (2008) by Fareed Zakaria, which after I got over my provincial American bias, was wonderful in explaining the world’s likely scenario going forward. a world of shared power with extra kudos to author Zakaria in how he gets into the heads of the Chinese and Indians, explaining how they think, operate and their cultures. Interestingly, India with its long-established democracy, and Indians in their outlook on life, are extremely close to how Americans think. Again these books are for those of you interested in longer range financial planning and the like.

THE ECONOMY

Dell Computer’s report last Friday that the US technology spending slump has spread to Western Europe and some Asian countries just confirms all the other evidence showing up that today’s world, economically and financially is very closely intertwined, not decoupled as the Wall Street argument goes. Of course, this intertwined relationship and what that means isn’t that easy to define, it’s gray, not black or white. But for the near term, negative economic ripples sent streaming outward last year when the US subprime mortgage market imploded are now being sighted and felt in other parts of the globe. How severe these global ripples get, these so-called 3^rd-order effects, as economists like to term them, remains to be seen. Bulls say they will prove minor; bears like me say they will prove more severe; only time will provide the answers.

Still, right now, everywhere one looks negative ripples sent outward from the US tsunami in collateralized asset-backed investments are starting to show up. One major problematic ripple in the US and globally is the effect being felt by banks and their business. It isn’t, can’t be “:business as usual” any more. Banks’ fortunes – with huge paper losses and their opaque, illiquid, very leveraged and still deteriorating loans on the books – are now directly tied to US house prices. As house prices fall, the value of these locked in bank investments keep tumbling as well. Leading to write-offs. It’s all a negative domino effect. The lingering loss of confidence leads to a continuing reluctance to make loans, thus to lower stock prices and thus also to a growing need for banks and other financials to repair their balance sheets by raising more and more capital. Which in turn dilutes earnings and the vicious cycle continues.

Schwartz View: My ongoing view is that this widespread consumer, business and investor loss of confidence, combined with the first bout of problematic inflation and a weakening US and now global economy is not some short term event. That we’re now in a downward spiral that will take much time to bottom out and reverse. We’re, bottom line, in an economic event and economic changes just can’t move along anywhere near as fast as stock market participants would like them to. Thus, we see frustration by strategists, money managers and all the bulls out there to find and call a bear market bottom way too early. I believe investors have to exhibit extreme patience for the foreseeable future.

THE STOCK MARKET

Impatient investors keep fishing for a bottom, thus causing the periodic “flashy-splashy” big rallies we get, like last Thursday’s +2% move up. These big one and two day moves up are actually symptoms and signs of a stock market still on the way down, actually now firmly controlled by the grizzly bear, if you believe a recent report by Merrill Lynch after they studied all the ups and downs of the just completed full stock market cycle, starting with the bear market running from 2000 to 2002 and the following bull market running from 2002 to 2007. Big pops happen in bear markets but then get completely washed away over time. Certainly during these bear markets stocks can also cobble together rallies which last for weeks or even months at a time, such as two-month rally we put in from mid-March to mid-May this year. Or the rally we are now experiencing; so far six weeks long and still alive and kicking although very saw tooth in nature. Obviously, nothing ever goes in just one direction. That’s especially so in the stock market whereby prices normally shoot out to extremes, up or down, and then need to balance themselves off.

Right now that’s where I see us. Stocks balancing off upwards after a downward movement that dropped too far, too fast. Actually that’s normal in any extended, economically-catalyzed bear market, investors losing confidence periodically, then regaining their nerve, then losing it again. Again, deteriorating economic trend(s) causing some major decline in stock prices just can’t cycle through its phases anywhere near fast enough to please myopic, very rapidly moving stock market players. So we get quick moves down, then bounces up or sideways movements to get time & price back in sync. Then it repeats again.

Schwartz View: These bounces are when and where traders try to make their profits during multi-year bear markets. Most traders early on realize it’s a lot easier and more profitable in the long run to always stay bullish, thick or thin, bull or bear market. Thus the extreme bullishness shown by a very experienced NYSE floor trader when interviewed late last week by CNBC. His time frame is so much different than the rest of us, he can be very bullish right now, right in the midst of a firmly entrenched bear market.

PORTFOLIO STRATEGY

Net, net this six-week rally may last for another month or even two but I wouldn’t get too attached to it. In fact today, let’s hope the market goes up a whole heck of a lot. I plan to book some profits. The first trading day after Labor Day is normally a seasonally strong day but then September can go south very fast and has proven to be the worst overall month of the year on average. Plus August was our first monthly advance in four months for many key indices so I’d like to take advantage of this normal “rally in a downtrend” and lighten up on some short term trading positions established back in July or early August. And suggest readers do the same, review everything else you now hold as well to see if any sectors are now timely to get out of. Again, to take advantage of this recent bear market rally. For example, please review the technology sector after Dell’s news last week warning it sees spreading, global tech weakness now.

Schwartz View: With big players coming back to work this week and with oil resuming its steep decline, we may extend this recent rally. Rallies can last upwards of three months in bear markets and since this one started on July 15^th, the best case scenario says it can run through October 15^th. Still, best I can deduce, all we’ve been doing this summer is killing time before the next round of bearish news hits. So I would continue to book trading profits as you go, sort of imitating the always in traders on the NYSE floor.

Have a grand week!

Reasons For a Summer Rally

RichardSchwartz — Wed, 30 Jul 2008 13:22:00 GMT

UPDATE ON THE STOCK MARKET. Written Wednesday, July 30th, 2008: 6:30 am EST.

Another ‘flashy-splashy’ rally yesterday So typical of bear markets, especially those with much further in time and points to go. Grizzly bear markets thrive on investors’ hope and adamant investor reluctance to believe things can get worse. Bear markets end when that hope is gone. Anyway, everyone jumped on board the stock market yesterday, figuring that, once again, the credit crunch is over or at least winding down. I doubt that and really doubt that the nine month bear market is over but one never knows the future for sure so we always have to keep an open mind.

A SCHWARTZ RECAP. Bulls, still fighting this bear market, did a great job of spinning (it’s always easier to spin when there is a germ of truth) that Merrill Lynch’s capital raising move yesterday and more billions in write offs showed we’re in the “end game” of this crisis. That Merrill selling some distressed assets, doing what no one has wanted to do, selling out and thus setting a low market price, about 20 cents on the dollar, for some of their CDO’s, means that everyone else may be forced to follow suit and thus that will call an end to the prevailing uncertainty. But this game doesn’t end with Merrill alone, this may just be the beginning of the end, which, as we all know, can go on seemingly interminably. And subprime write downs are now just one piece of the now larger and still spreading problem, although a big part I admit. And subprime sell offs at whatever price would have been better if done many months ago, following the old Wall Street rule which Wall Street, when pressed, totally disregarded: “The first loss is the best loss.” Not many are noting the awful details either, that Merrill is paying Temasek Holdings, a Singapore-owned SWF (no, not meaning Single White Female!), a sovereign wealth fund to buy more stock. Previously Temasek bought Merrill stock and lost a bundle. Thus in this deal Merrill is now paying Temasek a cool $2.5 billion to offset some of Temasek’s losses on that first buy. Plus Merrill is financing the deal for Temasek and this deal will increase and dilute Merrill’s outstanding shares by 36%. And, ironically, the sale of these CDO’s are at a price lower than Merrill’s just announced mark-to-market quarterly earnings report and stated value. Finally, this whole new deal flies in the face of what John Thain, Merrill’s relatively new boss, has said previously, that Mother Merrill wouldn’t need or be raising any new capital. Schwartz View: Net, net, some say Merrill is a goner, that it will have to be taken over down the road some. I don’t know any details but agree with the concept, that brokers will have to merge.

TECHNICAL VIEW. IBD PUTS THE BULL BACK IN THE BOX!

Yep, yesterday was a bullish “follow-through” day according to Investor’s Business Daily (IBD). On the 11^th day, pretty late, after the recent July 14^th bottom, a number of key market indices followed through yesterday, that is rallied more than +1.7% and on heavier trading volume than the day before. Obviously lower oil has been the underlying linchpin to this rally; oil down stocks up and vice versa. Schwartz View: My stated view is that this drop in oil will help stocks for a time, for the time it takes investors to realize that lower oil isn’t going to be the panacea for this bearish stock market. That at some point lower oil will scare the pants off investors (so to speak) because they will see lower oil as confirmation that a recession is here and spreading globally. But we’ll have to wait on this theory of mine as for now lower oil does means higher stock prices.

IBD goes on to remind us that: “Every bull market in Wall street history started with a follow-through. But not every follow-through launches a new bull market.” I believe their stats but also know IBD has put the bull back in the box and then had to take it out a few days or a week or so later a couple times during the last few months. So, remember, nothing, no particular indicator, is perfect, by any means.

More Reasons For a Rally. But I’ve also been writing that the market is oversold, that the US government has come up with a boat load of temporary fixes and props to support the stock market including the stimulus plan, unprecedented lending to non-banks and barring short selling or at least making it extremely difficult to short the financials (the SEC extended this one week ban to August 12^th yesterday). And that a historical study of the pace of declines during extended bear markets show the market is now ahead of itself on the downside. Plus I must say I am impressed by many European stock markets posting a sequence of five straight up days after an extended, inexorable, grinding-lower decline, i.e. a bullish Trader Vic 4-Day Rule and change of intermediate trend. So we could certainly have a summer rally now.

Schwartz View: Myself I’d like to see and have written that a Dow Industrials and S&P 500 close above last Wednesday’s highs would give us a series of higher highs and higher lows, the definition of an uptrend. Well, we didn’t get quite that high a close yesterday another good day or two could do it. As for “Trader Vic’s” as easy as 1-2-3 change of trend, we have condition #1, a broken downtrend line and condition #2, a market which has stopped going down in place. We don’t have, as of yet, condition #3, that’s the higher high I’m watching for. Still, Trader Vic Sperandeo in his two excellent books from the early 1990s, get them, writes we don’t need all three, we can turn bullish with just one or two conditions met. Just be more cautious in proceeding and realize there’s always the chance for a whipsaw and have a backup plan for what you’ll do if that happens, how fast you’ll backtrack. With those caveats in mind, I put on some longs yesterday, not a lot and not terribly risky ones. Basically my theme is that as crude and other commodities correct, pressure should come off the food companies, off their raw material and input and power costs. And that at the same time these pressures diminish, food companies are successfully pushing through price increases such as mentioned by Kraft yesterday. If this summer rally holds together, say we get a new higher high by the Dow and S&P, I’ll push the envelope for short term trading purposes further.