Saturday, January 29, 2011

Itz Week End Review 1-30-11

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This coming week is going to be very pivotal for the markets. First of all the headline news...Egypt in turmoil. The Egyptian uprising presents a serious impact to global markets not specifically because of the possibility of a government turnover in Egypt but the possibility of the contagion spreading to other countries. Saudi Arabia already has increased civilian unrest that is set to erupt. If this kind of problem rose in Saudi Arabia the U.S. would be drawn into the picture in order to protect Saudi from outside influences, protect the royal family and protect the oil fields. This worry over Saudi being drawn into the fray is the real problem for the U.S. markets.
Some blame the Egypt news for the sell off, but it maybe the excuse, but not the reason. Other events were in play Friday, the GDP report for Q4 came in lower than expected and put a damper on trader spirits. The headline number showed growth of +3.2% compared to estimates of +3.6%. This was still an improvement over the +2.6% growth in Q3. The biggest drag on growth was a giant decline in inventories that removed -3.7% from the GDP number.
The big event this week, besides the geopolitical events, will be  The Non-Farm Payrolls, estimates are for a gain of 146,000 jobs. Recent economic reports have shown an increase in the employment components so the whisper numbers are higher than the 146K.
As for earnings last week,  Amazon reported earnings on Thursday night and declined  the day with a 7% loss. Amazon represents 2.1% of the Nasdaq 100 and while that is far less than Apple's 18% the big drop in Amazon was a major hit to sentiment for tech stocks. Microsoft has a 4.5% weighting in the Nasdaq and the stock lost -4% on Friday after posting earnings that left many traders disappointed. Visa and MC report this week and will give us a consumer update by releasing the latest delinquency numbers.
The big winners for the past week were commodities, especially gold, silver and oil, rallied strongly on the Egyptian violence. Itz had alerted investors that Oil would drop from the low 90's to under $88 support, testing $85/$86 levels. Suggesting to long crude oil via ProShares Ultra Crude Oil ETF (UCO) under $11.
Itz also highlighted that gold was set to test it's 150 day moving average, which over the last 18 months has proven to be a reversal point. Itz has called for $100 per barrel crude for early 2011 and $110 by year end, prior to the Middle East geopolitical events. Concerns of the Suez canal being blocked has traders concerned that oil will spike on a disruption of supplies. Itz believes that scenario occurring is very slim, this isn't a military action, but a civilian unarmed protest. However, as stated earlier...IF this escalates into other countries and Hamas and or Al Qaeda increase their presence, well then things will definitely worsen.
Investors will be very cautious Monday, as geopolitical events continue to unfold. 

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