Sunday, November 21, 2010

Itz Pix Weekend Review

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Last week's report stated ... 'More than likely the China and Ireland/EU stories will spill over into the coming week and that the major indexes will see lower support levels tested.' 
The Ireland story has somewhat settled down and it appears they will get a bailout somewhere in the range of 60 to 120 billion euros. This will help recapitalize their banks and provide some stability. The problem mushroomed recently when depositors began withdrawing money from the banks in anticipation of a collapse of the banking system. If Ireland had imploded Spain and Portugal would have been next in line. Banks in those countries have already seen some deposit flight but not like Ireland. The fix for Ireland will fix those other countries as well but probably only for a few months.
China announced on Friday night it was raising the reserve rate for banks for the second time this month and the fifth time this year. China has resisted pressure from the U.S. and others to halt this daily currency intervention and let the renminbi rise in value. Beijing is forcefully arguing today that the U.S. QE2 is a de facto devaluation of the dollar. Actually they are right. China expected Bernanke to mention China as a currency manipulator in his Friday speech so they took the action before he spoke. Bernanke did point a finger at China in his speech and blaming "persistent imbalances that represent a growing financial risk" and blamed "export countries with undervalued currencies" for retarding growth in developed countries.
Finance heads from all over the world approached Fed Chairman- Bernanke in Frankfurt on Friday. He and the Fed are taking some serious heat on the QE2 program. Dozens of nations have complained that weakening the dollar will damage their economies. The German Finance Minister called the policy "clueless." Bernanke answered his critics at the beginning of his speech saying, "The best way to continue to deliver the strong economic fundamentals that underpin the value of the dollar, as well as to support the global recovery, is through policies that lead to a resumption of robust growth in a context of price stability in the United States."
The upcoming week is a holiday shortened period and as long as the markets can avoid more bearish news like Ireland/EU & China, it should see it retest it's resistance levels. Now the low for the $SPX was 1,173 (25% Fibonacci), Itz has been targeting 1,155 (38.2%).

S&P500 ($SPX): Inverse Head & Shoulders ~ Cup & Handle Formation

U.S. Dollar ($USD): The dollar rally may have run its course now that the Euro debt problems are easing and the Fed is on a $30 billion a week pace for securities purchases.

 Two ITZ PIX portfolio stocks performed this past week.  Walter Energy (WLT) surged another $9 to $106 after saying on Thursday they were in talks with Canadian miner Western Coal about a $3.3 billion acquisition. Apparently investors liked the deal because WLT spiked to new highs and the acquirer rarely rallies that strongly. 

A look at the technical pattern the market is seeing, with Chris Johnson, Johnson Research Group.

CNBC's Sharon Epperson discusses the day's activity in the commodities markets, and looks ahead to where oil and gold are likely headed next week.

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