Saturday, April 30, 2011

Itz Week End Review 4-30-11

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Earnings drove the market higher this past week, with Caterpillar giving the Dow nearly a +25 point boost on Friday. The DJIA has gained more than 700 points over the past 2 weeks and the Nasdaq ended the month at a 10-year high,  Dow Transports and the Russell 2000 closed at historic highs. The market  had a good week and it is even more amazing when you consider the potential for an upset over the FOMC announcement and press conference. Instead of focusing on the lowered economic outlook from the Fed and Bernanke's view of unemployment plus the constant stream of weaker economics, investors just kept buying stocks. They looked at the weaker economics as a sign the Fed would remain on hold for an even longer "extended period" and provide a fertile environment for equities. The outlook for the declining dollar is more of the same and that means investors have to buy stocks and commodities to offset the dollar's fall. The best explanation of the Fed action came from Brian Kelly on CNBC Fast Money who said; 'the sacrificial lamb was the dollar'.
For the week ahead, on Wednesday we shift into employment mode with the ADP report, which is expected to show a gain of 200,000 jobs. However, the Non-Farm Payroll report on Friday is expected to show a smaller increase at +145,000 jobs compared to the +216,000 gain in March. So far 323 of the S&P-500 have already reported earnings and the busiest week of the Q2 cycle is now behind us.  For Q1 the earnings have been outstanding with the latest update showing 73% have beaten estimates and only 15% have missed estimates. For this year consensus estimates are for another rise to $99.31 and a new record. If you apply a discounted PE of 14 that suggests the S&P is fully valued in the 1,400 range.

 Research in Motion (RIMM) also warned on Thursday after the close that sales of their  BlackBerry product were slowing. That sales of the smartphones would be on the low side of prior estimates because consumers were going for the cheaper products. That was the second major warning in the last six weeks. Its obvious sales are going to the iPhone and Android as well. The PlayBook is also being greeted coldly despite some decent ads this week. Analysts have recommended waiting for the next version or skipping the PlayBook completely. RIMM shares fell -14% on Friday, it would be a surprise if RIMM is being eyed as a takeover, or will it end up as another Eastman Kodak? For now Itz Pix will stay with it & see how PlayBook does on next Q earnings.

Colin Gillis, BGC analyst, explains why BGC has a "sell" on Research in Motion. Gillis adds that Microsoft is still cheap, despite "somewhat disappointing" earnings.CNBC's Jon Fortt weighs in.

The Dollar broke the 74.50 support level and is now looking to retest the 2008 lows. The Fed is hoping the decline is 'orderly', but is ready to step in if it gets out of control. Does that mean below the '08 lows? Because if it breaks the next support...there's a lot of air below. Former Fed governor Wayne Angel told Larry Kudlow, that Bernanke will most like begin raising rate in September. If true, will the market begin to anticipate that this summer?

The lower dollar is pressing commodities higher. WTI oil is testing $114 level. Gold hit a 30 month high and silver is ever close to testing the $50 psychological level. The thing that gets me, is the talk from the media of silver testing the 1980 highs! Come on that was over 30 years ago...doesn't anyone adjust for inflation? Historical gold prices Inflation Calculator Gold high back in 1980 was at $615 = $2035 currently @ $1562 --while silver $50 = $135.60 currently at $47.94, as you can see we're far from those levels.
However, the trade in silver has reached a frenzy and we could see a correction if it cannot close above $50. Itz noted several times on Twitter, that the miners have underperformed the physical metal itself over the last several weeks. Why? More than likely traders are looking for a 'pure' play versus equities. There's expectation that several countries are looking to tax miners as gold & silver prices rise. Itz believes that the decline in mining stocks has created some value near term. Silver Wheaton being a favorite pick and Itz Pix holding. We continue to look for the 120 ema as highlighted in last weeks blog post, as an attractive entry level. But again, caution is warranted, after all we are trading on sentiment here and emotion. Granted there's a demand/supply issue, but this mania tends to feed on itself. Specs can turn on a dime and run for the exit very quickly, just look at the 10% drop last week, suggest one be hedged in positions. Proshares Ultrashort Silver ETF (ZSL) is on etf to consider.
One reason silver has done so well is investor demand and the largest silver etf is the SLV.  Take a look at this past Friday's trading volume 106.2 million shares with a price of $46.88. That equates to $4.98 billion. Net Assets are $13.56B and double the average volume. What this means is the turnover in days is 2.72. On Wednesday  the turnover ratio was 1.56 days. Basically this is telling us this etf is being flipped.
So going into this week, the big mover will be the Non-Farm Payrolls on May 6th.

Itz Pix Videos

A look at what the Fed's QE2 has done for the economy and stocks, with Gordon Charlop, Rosenblatt Securities; Vincent Reinhart, Fed's Division of Monetary Affairs former director and CNBC's Steve Liesman & Rick Santelli.

Rising crude oil prices will drive the American public to push for a national energy policy, Mark Fisher, founder and CEO, MBF Asset Management

Dennis Gartman,The Gartman Letter, and the Fast Money traders parse out what they heard from Bernanke's statement today, and the affect on the markets.

Discussing where to put your money, Don Luskin, Trend Macro; Lee Munson, Portfolio; and Jim Lacamp, Macro-Portfolio Advisors.

Matt Hougan, IndexUniverse, assesses whether a bubble is forming in silver ETFs.

Insight on whether there is more room to run for silver, with Matt Shapiro, MWS Capital and Jim Iuorio, TJM Institutional Services.

Will silver break over $50 & head to $60?

A look at the top business stories this week, and which stock picks the pros are recommending, including blue-chip plays, silver & more, with CNBC's JeeYeon Park.

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