Saturday, December 12, 2009

Weekend Review

The key economic news last week was Retail Sales for November and Michigan Sentiment for December, but they gave a larger boost to the dollar than to the equity market. So, the strong dollar move which finally broke out of its downtrend channel, continued to unwind the US Carry Trade.

The Rasmussen Consumer Index, which measures the economic confidence of consumers on a daily basis, jumped over three points to 74.6. That's up three points from its level one week ago as well as one month ago. Consumer confidence is up 15 points from the beginning of the year. >>Read More

Key economic news for this coming week will be Tuesday's Producer Price Index & the FOMC Meeting starts, Wednesday we have the Consumer Price Index and the FOMC rate announcement. Considering recent economic improvements there could be some change in the language other than the "extended period" comment that will show the Fed is setting up for a bias change. Guaranteed this will be the over riding focus of the markets! The earnings calendar will also pick up, with retailer Best Buy (BBY) reporting on Tuesday and tech companies Oracle (ORCL) and Research In Motion (RIMM) on Thursday.

RIMM Update: RBC Capital lowered their Price Target on Research in Motion from $150 to $120 last Thursday, still it's 87% higher than Fridays close. I posted my views on why RIMM it will outperform Apple this past week also... >>Read More Now I believe that it's not so much whether they beat or miss, but the outlook they give for 2010. On the charts the technicals point to a break out to the upside. The 50 and 200 mas have a tight squeeze on the price, the trend line from the March lows give a $60 support and the PnF has a $82 PO.
*click on chart to expand image

Well it finally happened, the dollar broke out of it's downtrend channel. Will it resume its decline or climb higher? I believe it will rise a bit more and that gold and oil will decline too, gold more so than crude oil. Crude oil inventories at the Cushing, Okla., storage hub, which is the delivery point for the Nymex crude futures contract, are 46.5% above a year ago and near record highs, government data show. The Federal Energy Information Administration forecasts that crude oil processing at U.S. refineries this winter will drop 405,000 barrels a day from last winter to a 14-year low. In the U.S., the world's largest oil market, oil demand in the current quarter is expected to average 18.87 million barrels a day, down 2.2%, before posting a narrow gain of 0.7% in the first quarter 2010, the EIA predicted this week. Full-year 2009 U.S. oil demand will be a 12-year low, and a year-on-year drop of 4.1%, the EIA said. In 2010, U.S. oil demand will rise by 1.4%, to near 19 million barrels a day, but will still be 8.8% below the peak level of 2005. So, why am I bullish on oil? Besides my view that the dollar will continue to fall after a short term rally here, I also believe that a global economic recovery is occurring and that demand will spike and catch everyone off guard. Now is the time to accumulate energy stocks...not when oil is at $100 a barrel!
I continue to suggest Transocean (RIG) & Pride Int'l (PDE).
As for the price of gold, I continue to hold my downside PO @ $1075, I would suggest buying at that level with a 12 month PO of $1400. I would also tend to weight silver more than gold, it continues to trail gold and will outperform on an economic recovery, due to its commercial use.

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