Saturday, March 19, 2011

Itz Week End Review 3-19-11

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Geopolitical and economic events were the drivers of the market this past week. On Friday financials rallied on the approval by the Fed to allow some banks to raise their dividends. The UN passage of the no-fly, no-drive resolution against Libya's armed forces late Thursday also provided the market with support, but early morning announcement from the Libyan defense minister said Libya had declared an immediate cease fire and was complying with the resolution. As of Saturday, Qaddafi was not adhering to that promise, fighting did not stop and government forces actually stepped up attacks on cities held by the opposition. Also on Friday was the G7 currency intervention to weaken the Yen, this raises the value of the Yen against other currencies. The dollar collapsed to a new 15-month low on the dollar index. Some good news this weekend,  Japan the engineers working on the stricken plants have connected reactor one and two to an auxiliary power line and hope to have "some" cooling pumps running by Sunday. Crude oil had dropped on the events hiting Japan last week,  most expected Japan to be severely limited in refined oil products. However it now appears that refineries in Japan are coming back online sooner than expected. The Petroleum Association of Japan (PAJ) said it expects 780,000 bpd of refining capacity to be restored next week.  Experts had forecasted a drop in demand from Japan , however it now appears demand is actually going to rise by 500,000 bpd with 200,000 bpd going to additional electricity generation and 300,000 bpd going into refined products to support the relief and rebuilding effort. The problem is where to get those barrels since Japan uses light sweet crude. Itz had been short WTI via SCO, but as of Friday afternoon entered a long position via Proshares UCO. It doesn't appear as if the Lybian military action will resolve that quickly, in addition there's the other nations in that area to deal with, Bahrain, Yemen and soon Algeria. Itz continues to see oil hold above $100 a barrel for sometime.

As for the equities market, the $SPX looks as if it has put in a near term bottom and quite possibly the low for the year. It has had quite a bit of geopolitical and economic news thrown at it in recent weeks and really has been very resilient. The Index gave way finally to the 50 day moving average and seems to have rallied off of it's 100ma. Still. some out there say that it is vulnerable to testing it's 200ma, the only powerful event that could do that is violent protests in Saudi Arabia, which would send oil to $200 along with higher gold & silver. Setting us back into another recession and QE3. Watch 1,300 on the S&P500 if the index can hold above that level for awhile, it would provide some conviction and confidence for investors.

Note* Itz Pix entered 2 new positions Southern Copper (SCCO) @ $39.80 & Proshares Ultra DJ-AIG Crude Oil (UCO) @ $51.50.

Itz Pix Videos of the Week

"There's going to be a much bigger demand for oil from power plants because nuclear power plants are being shut around the world." ~ Jim Rogers

”If you take the multiple of the market pre-Japan crisis of 13.5 times, that means it costs the market 40 S&P points. The fact is we’re down almost 70 points,” ~ Doug Kass

Chris Johnson, Johnson Research Group CEO/chief investment strategist discusses the VIX Volatility Index.

The charts say the pullback is a normal part of a bull market trend, with Carter Worth, Oppenheimer Asset Management.

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