Traders Put Some Cash Back in the Market

[Excerpted from Bill Cara's Daily Report]

Traders put a little bit of the $9 trillion in cash to work on Tuesday, and the US equity market popped between two and three percent on a quiet trading day.

On Tuesday, the US equity market was very strong: DJIA (+186.46 +2.17% to 8668.39), S&P 500 (+21.22 +2.44% to 890.64), and NASDAQ Composite (+40.38 +2.67% to 1550.70). The Toronto Composite and Venture Board also lifted +193.43 +2.24% to 8830.72 and +30.07 +4.05% to 773.06, respectively.

Next week, the mutual fund salespeople return to work, with a need to earn income, so any year-end strength will be hyped. So, volumes ought to pick up on Monday. The market is open Friday, but only the computer trading programs will be active.

Earlier Wednesday, the international equity markets were strong in Europe but mixed in Asia-Pacific markets, as follows: Japan (+1.28% to 8859.6), Hong Kong (+1.07% to 14387.5), Shanghai (-0.66% to 1820.8), India (-0.71% to 99647.3) and Australia (+1.89% to 3659.3). Based on the importance of these individual markets, there was a definite bullish bias.

At 8:20am ET (vs 7:30am in brackets, the European bourses were strong again: French CAC +0.98% (+1.14%); German DAX +2.24% (+2.24%); and UK FTSE +1.19% (+0.65%). The oils, again, and the banks were leading the bullish action, which has carried on all week.

In NY, all ten sectors were consistently up. If any were lagging, it would be as expected the healthcare and consumer staples sectors, which are the most defensive.

Of the industry groups, there was a remarkable consistency to the market lift. The one group that declined, and only a bit, was goldminers ($XAU -0.6%). I issued an alert yesterday morning in this report, saying that in the afternoon the day before we took steps to consolidate our gains in this group. Next week, we expect this group to start to move again higher with the broad market.

The Dow Chemical, which had been hammered -19% on Monday, stabilized as DOW gained +1.5% on 98% increase over average daily volume. There should be more gains this week. Of the other extreme traders among the Cara 100, the miners pulled back as expected. The winners were the electronic brokers (OXPS +12% and IBKR +6.4%), AET +8.2%, which was helped by the T-Bill yield lifting from 0.10% to 0.90%, which is an indication that the financial squeeze is lightening up. A yield above +1.5% is needed to reflect a healthier credit market and give an indication to traders that cash is coming out of T-Bills and into the market. As the banks make less use of Treasuries, putting more funds into client loans, the Treasury prices will drop, and yields rise. No fixed income investor feels comfortable with 30-year, 10-year and 5-year yields of +2.583%, 2.087% and 1.463%. The only talking heads who like these low rates are the economists who are telling you the world is going to hell in a hand basket.

Gold and silver precious metal prices are a bit softer again Wednesday; the Euro is soft at 139.29 earlier this morning, after closing yesterday at 140.80, up +0.84%. The $USD is up to 82.155, after closing yesterday at 80.88.

Precious metal prices in the spot market are presently (compared to yesterday at this time): gold at 861.03 (871.88), palladium 183 (181), platinum 905 (901), and silver 10.80 (10.87). Gold is down about $1.50 in the past hour as the Euro strengthened; and silver is a tad weaker as well. These markets must be watched closely.

On Monday, Crude Oil ($WTIC) dropped -$0.99/bbl to close at 39.03. The futures are weaker this morning, presently at 37.29.

DJIA futures are modestly stronger at 8653.

Comments

[NOWHEREMAN:]

Apparently you are long everything, and as far as I can tell, most are looking for a positive January effect.

Since, there are no shorts provided, I will provide my own:

DZZ and BGZ.

If there was a double short on GLD, I would have used that too.

If gold is up for 2008, and this now looks probable, it will be the 8th year in a row. Looking for a massive runup in 2009 seems to be too much of a stretch.

IMO

2008 Dec 31 11:36 AM

[arlin:]

Gold looks close to overbought at these levels with resistence at the dt line around 880 and needs to clear 900 in the short term,but if the dollar bounces off these levels,I think gold could retest 660 or 50% 550 area.the dollar may go to 95 over the next few months,and thats usually not good for gold,but may set up a great buy.....and your dzz trade could go back to its old highs.Im long AUY and GDX and am hoping we go a little higher before the pull back.....looking for 9 in auy,and a couple higher in gdx....we will see.


On Dec 31 11:36 AM aitvaras wrote:

> Apparently you are long everything, and as far as I can tell, most
> are looking for a positive January effect.
>
> Since, there are no shorts provided, I will provide my own:
>
> DZZ and BGZ.
>
> If there was a double short on GLD, I would have used that too.
>
>
> If gold is up for 2008, and this now looks probable, it will be the
> 8th year in a row. Looking for a massive runup in 2009 seems to be
> too much of a stretch.
>
> IMO
>

Jan 01 10:11 AM

[User 30121:]

Aitvares and arlin: I'm dense. I don't get it. Please ENLIGHTEN me as to how gold (and silver) is not THE place to be in 2009? Start by explaining to me how the Fed's money making machine will not result in MASSIVE INFLATION? Also, tell me how the escalation of conflict in the Middle East will not result in oil resuming its trek to $100+ per barrel? China is DUMPING 3+ TRILLION pieces of US green paper because they have REFUSED to go along with saving our butts (to the tune of 3.5 BILLION per day) on our credit splurg. They want the funny money above to be replaced by GOLD! Explain how this will make the USD a better venue than gold?

Come on people, if you are gonna post here at least make sense. I know, I know, you are probably hung over. That isn't any excuse, just like DUI.

Wise up, and have a Happy New Year!

Jan 01 11:33 AM