Saturday, November 27, 2010

Itz Week End Review 11-27-10

Add to Technorati Favorites Subscribe in a reader

Well, Thanksgiving is behind us and we've entered into the holiday season with just 25 days of trading remaining in 2010. This coming week brings a fresh influx of key economic data ~ including Black Friday sales reports and the November employment report ~ however, data could get eclipsed by the eurozone if contagion fears continued Korean tensions that could escalate as U.S. ships near.
The market rallied early in the week, as  Ireland formally requesting an 85 billion euro ($113 billion) aid package from the European Union and the International Monetary Fund. Although Ireland released a detailed austerity plan and details of its aid package were all but finalized during the course of the week, market participants quickly zeroed in on other weak eurozone nations, wondering which would be the next to seek financial support.  The falling dominos in the Eurozone. Greece, Ireland and now Portugal have fallen prey to speculators. Next up would be Spain and the largest economy to be targeted. Eurozone finance ministers are pressuring Portugal to apply for a bailout quickly in order to prevent the damage to the financial markets that would come from a protracted delay. Anxiety remained elevated on Friday amid reports of artillery fire on North Korean territory as part of an apparent military exercise. According to a New York Times report, North Korea was riled by the U.S. and South Korea's plans to conduct a joint training exercise on Sunday, putting Seoul on alert for a possible follow-up attack. The threat was so high that China warned against performing military acts near its coastline.
All eyes will be on the Labor Department at 8:30 a.m. EST on Friday when it releases November jobs data. The U.S. unemployment rate is expected to remain unchanged at 9.6%. According to, economists expect the economy to add 130,000 nonfarm payrolls in November after gaining 151,000 in October. Nonfarm private payrolls are slated to show an increase of 140,000, compared with the previous month's growth of 159,000.  The market also gets information on October factory orders and November nonmanufacturing activity on Friday. Economists expect the Commerce Department to say that factory orders slipped 1.2% in October after gaining 2.1% in September. The ISM services index is expected to inch up to 54.5 in November, from 54.3, previously. 

Geopolitical tensions & events have historically induced fears and triggered investors to sell risky assets. However, safe-haven assets such as precious metals should remain supported. Famed investor Jim Rogers, however, encourages investors to buy commodities no matter if there's war or not. He believes Fed's QE measures would weaken the US dollar so that investors should hold money in real assets. He particularly favors palladium, platinum, rice, natural gas, and silver over gold. >>Read Report

China's measure to increase margins on trading gold, copper and aluminum futures after the market closes on November 29 will dampen speculations and lower risk appetite. >>Read More  Silver has outperformed gold since the second half of the year and gold-to-silver ratio has dropped below 50 last week. Itz agrees with Jim Roger's view that silver will continue to outperform gold in 2011, Itz Pix favorite and best performing holding remains Silver Wheaton (SLW).

Crude oil neared $80 early Tuesday morning, but managed to again bounce from that level rallying to above $84 by mid-week.  For years the IEA has claimed for years that peak oil did not exist. Jeffrey Rubin, the former chief economist at CIBC World Markets, had an interesting article in the Huffington Post. >>LINK
Those that follow Itz Stock Chartz blog as well as on Twitter know ITZ has been targeting $78 for crude, but that it would rally in 2011 targeting $110.  With Helicopter Ben pushing the U.S. Dollar lower, even though the dollar has recently spiked higher, longer term the Fed has its sights set on a lower dollar & higher inflation. Most economists as well as Rubin expect higher energy prices to possibly put us back into a recession. Near term, Itz sees a possible Head and Shoulders pattern developing for Crude Oil . On Tuesday Itz highlighted the same pattern developing for gold >>LINK

The range on the S&P has been 1175-1200 for nearly two weeks. Every time the shorts get squeezed to take us back to 1200 there is a news story overnight to knock us back down. Considering the frequency and severity of the stories I am surprised we have not plunged through support towards Itz 1,155 target on the S&P500.

Wednesday, November 24, 2010

Strong Moves in Crude Oil & Canadian Dollar

Add to Technorati Favorites Subscribe in a reader
Big move in crude oil today $WTIC, the weekly EIA Inventory report showed a build >>LINK Itz Stock Chartz over the last few days, has been focusing on an Ascending Triangle formation on the SCO Proshares Ultrashort Crude Oil on Twitter . Those that follow this blog as well as Twitter know that Itz cites a high correlation between Crude Oil & the Canadian Dollar. Today's move can be attributed to a strong move from the $CDW read more....  Crude oil rallied strong  up over $2.50 a barrell read... The decline in oil over the last week or so can be attributed to 'smart money' decreasing their long positions as per the latest Commitment of Traders report COT see chart below. Itz has been target $78 on the downside for crude oil in the next few weeks...BUT sees oil to break to the upside in the new year and has a 2011 upside price objective of $110. This is based on Itz observation that crude's move lags that of silver by 4 months as noted back in an October post (see chart from that post below)

More on this in the Weekend Review...
Hope everyone has a great Thanksgiving Day!

Sunday, November 21, 2010

Itz Pix Weekend Review

Add to Technorati Favorites Subscribe in a reader
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.

Thursday, November 18, 2010

Municipal Bond Mess

Add to Technorati Favorites Subscribe in a reader

Anyone paying attention to the Ishares National Municipal Bond ETF (MUB)? As far a bonds go, this type of move is extraordinary. Should this problem spread and infects the treasury market, it could reach the point where interest rates are rising in lockstep with the dollar. If the dollar continues to rise, it would place additional pressure on stocks, commodities, and bonds. For most retail investors, there will be no place to hide.

Historically, the US experienced very few municipal defaults -- around a tenth of 1 percent over the last 40 years, and hence has been thought of as a safe place to invest. But that $2.8 trillion market is becoming more and more vulnerable. >>READ MORE

Wednesday, November 17, 2010

Crude Oil ($WTIC) Near $80

Add to Technorati Favorites Subscribe in a reader

Crude Oil declines even off huge draws in inventories....

Total crude oil and petroleum products stocks declined -9.10 mmb to 1106.40 mmb in the week ended November 12. Crude oil inventory plummeted -7.29 mmb, compared with consensus of a -1.20 mmb incrase, to 357.6 mmb as stockpile in Gulf Coast tumbled -6.81 mmb. Cushing stock, however, rose +1.27 mmb for the first time since July 30. Utilization rate climbed +1.6% to 84.0%.

Have Crude Oil Prices Moved to a Higher Range?  Link

Sunday, November 14, 2010

Itz Weekend Market Review

Add to Technorati Favorites Subscribe in a reader

"At some unknown point, easy money turns into excess leverage, reduced deflation risk becomes inflation fear, fiscal stimulus becomes sovereign credit risk," says the J.P. Morgan Chase asset-allocation group in a recent note. "We can't tell where this turn comes, but history warns us it tends to happen suddenly and violently. As investors, you can't always focus on tail risk, but it makes sense to tilt portfolios toward them."   W$J story

The Shanghai Composite Index plunged more than 5.2% on Friday on fears China would hike rates over the weekend. China was the focus on Friday with inflation at two-year highs and worries over further tightening to slow its rise. China's inflation for October came in at 4.4% and nearly a full point higher than the 3.6% rate in September. Rampant inflation in China caused worries about a new round of tightening and crushed commodity prices and equities.
However, as Itz has pointed out over the last few posts, the markets were looking for a catalyst to sell the news. This rally started back on August 27th when Fed Chairman Ben Bernanke announced more quantitative easing. The first week of November the markets were treated to the FOMC $600B QE2, midterm elections with a Republican win in the house and the positive October Nonfarm Payrolls report. However, this week test the 2 month rally, with negative feedback from G-20 toward US policy, one of the worst earnings reports from Cisco & then Friday's China news. It also doesn't help when you have veteran investors like Jeremy Grantham calling for S&P 900 & Ken Heebner selling Apple shares.
So getting back to inflation...this weeks economic reports tackle that question. The PPI on Tuesday and CPI on Wednesday would normally be worrisome because of the inflation component but inflation is currently near zero. That makes them important only if they show a sudden spike in the core rate of inflation.
So what to do in the coming weeks? As pointed out in past posts Itz has been anticipating a pullback in the markets and welcomed it. Some asset classes & stocks were getting parabolic. Itz Stock Chartz remains long term bullish and is the 'Buy the Dip' camp. The problems in EU will get solved and the current panic will subside as it did before. Even if China does hike rates the country, their economy will still continue to grow at 10%, so the impact to commodities will be minimal at best. Really do most larger investors truly believe things have changed that much in just a short period of time?

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. Itz has pointed out, as for the S&P500, that it was setting up a handle in the Cup & Handle formation (see past charts). Some technicians have cited a 'Double Top'...sorry don't agree. The bears will try to say the market is overbought and over valued, actually it is selling for 13.5xs earnings, cheaper than the 15xs at the April '10 peak?!

This is the pause that refreshes, pick your own specific support levels near term...but remember...'Don't fight the Fed!'

S&P500 Charts:
Since September 1, 2010, Itz has pointed out the the $SPX was set to rally & test the 1225 level. >>LINK >>LINK

Wednesday, November 10, 2010

"I Fear Gold Will Hit $5000."

Add to Technorati Favorites Subscribe in a reader

James DiGeorgia editor of "The Gold and Energy Advisor"

Read more:

SCO Stopped Out of Itz Pix Portfolio

Add to Technorati Favorites Subscribe in a reader

Crude oil ($WTIC) broke above $88 a barrel today, Itz Pix position in Proshares Ultra Short Crude Oil ($SCO) hit the $11 STOP. As per prior post >>LINK Average cost basis $12.45, exited @ $11.00 for a -8% loss. More on this Weekends Review