The Obama Inauguration Rally Begins

[Excerpted from Bill Cara's Daily Report]

Despite more selling of the shares of the Bank of America (BAC -13.7%), Citigroup (C -8.6%) and JP Morgan (JPM -6.2%), Friday was clearly the start of the Obama Inauguration Rally, with all sectors, except Financials (XLF -3.0%) and all major industries, except Banks ($BKX -4.3%), in rally mode. Following the Citigroup announcement of a quarterly loss of -$8.3 billion, the major US equity indexes sold off after a huge start, but then turned from negative to positive and clawed their way back to gains on the day.
http://billcara2.com/tkchart/tkchart.asp?stkname=BAC,C,JPM&ind=rsi&wt=0

The same thing happened on Thursday, where the major market indexes in NY sank for the first three and a half hours, and then rallied for the final three and a half hours.

By the end of the day Friday, the DJIA (+68.73 +0.84% to 8281.22), S&P 500 (+6.38 +0.76% to 850.12) and NASDAQ Composite (+17.49 +1.16% to 1529.33) all enjoyed higher volume again, and once again it was notable that most of the cash flow increase was in rallying stocks.

The Dow Jones World Equity Index ($DJW) rallied on Friday by a very strong +1.6%, with every major country market trading higher. The Asia-Pacific equity markets were led by: Tokyo (+2.58% to 8230.2), Australia (+0.52% to 3494.9), Shanghai (+1.78% to 1954.4), Hong Kong (+0.09% to 13255.5), and India (+3.06% to 9323.6). The European bourses were also stronger than Thursday: French CAC (+0.81% to 3020.3); German DAX (+0.78% to 4370.5); and UK FTSE (+0.75% to 4151.9). The gains there would have been higher had these exchanges been able to capture the later gains in NY and Toronto. The Toronto Composite gained +40.79 +0.46% to 8920.4 (following Thursday’s gain of +2.20%), and on Friday the Venture Board was up +21.35 +2.53% to 865.65.

The Big Three US Banks took an average loss on Friday of -9.3%, which is just incredible as it follows a week of flat-out selling. This week alone, BAC -44.7%, C -48.2% and JPM -12.1%, were down an average -35.0%. Therein lays the anchor that is holding back the Good Ship America, giving traders a sinking feeling, taking their eyes off the rising tide.
http://billcara2.com/tkchart/tkchart.asp?stkname=BAC,C,JPM&ind=rsi&wt=1

In the industry groups, Goldminers ($XAU +4.7%) were the leaders, with the third strong gain in the past four days.

In the Cara 100, there were many winners, and the volume was impressive once again: Silver Wheaton (SLW +11.2%) soared due to the rally in silver prices to $11.26/oz; Best Buy (BBY +8.1%) on +201% average daily volume; Kinross Gold (KGC +7.3%), SanDisk (SNDK +6.4%); and Goldcorp (GG +5.7%). The losers were Russia’s telecom service giants Mobile TeleSystems (MBT -7.9%) and Vimpel (VIP -7.7%); Deutsche Bank (DB -4.8%); and Brunswick Corp (BC -3.7%).
http://billcara2.com/tkchart/tkchart.asp?stkname=slw,bby,kgc,sndk,gg,mbt...

The $USD slipped ($USD -0.60% to 83.97 from 84.48), while the Euro jumped ($XEU +1.13% from 131.25 to 132.73). The Yen sank a further -0.99% to 110.20, after being down -1.08% on Thursday, as traders have been easing up on their risk aversion late in the week. The Pound gained (+0.63% to 147.43) for the third straight session after being trounced on Monday and Tuesday. The Cdn Loonie recovered from the 70’s on Thursday with a solid gain of +0.98% to close the week at 80.53.

The US long bond ($USB), which had hit a peak of about 138 the previous day, sold down Friday to a close of 136.22 (-0.67% on the day). The yields on the 30-, 10-, and 5-year Treasury bonds and notes closed Friday at 2.894, 2.304, and 1.451 percent respectively. T-Bill yields are at 0.115 percent, which is the highest all week.

Crude Oil futures again closed down (-$0.97/bbl) to 42.57, which was the third straight day of losses, albeit small ones. Notable is that the stocks (XLE +0.80%) were up a second straight day. However, the earlier losses took XLE down -4.3% W/W.

More notable is the relative performance of the XLE (stocks) against the USO (oil contracts) since early October. This performance chart shows major buying of the oil stocks in the past 13 or 14 weeks.
http://stockcharts.com/charts/performance/perf.html?XLE,USO

Gold futures ($GOLD) rocketed +$32.60/oz (+4.04%) to close at 839.90 yesterday, but $SILVER (+7.42%) was even stronger, which is expected in a precious metals rally. During the Bear phase for the Precious Metals, silver was the leader on the downside, and now it has started to lead the Bull higher.
http://stockcharts.com/charts/performance/perf.html?$GOLD,$SILVER

On Friday, the spot gold, palladium, platinum and silver closed the week higher at: 842.03 (close to Friday’s high of 843.13); 183; 946; and 11.26, respectively.

The DJIA futures at the close of the week were 8243, down a tad from the DJIA index which closed at 8281.22.

Comments

[Prudent Man...:]

How does an admitted Socialist as president help a Free Economy? I hope he succeeds but don't bet the ranch.

Of course, Obama is a politician first, so he will try to anything he can to stimulate the economy. But, will his basic socialistic philosophy get in the way? I hope not but will be very cautious.

Not having to explain his economic policies during the campaign while the mainstream media gave him a pass won't carry water now. Speeches are nice but what is the man's record? Now is the time for Obama to walk-the-walk, not talk-the-talk. the media will give him a pass, as it is in our nature not to admit our mistakes until it is too late. But expectations are high and the man's history is not good.

I'll hope for the best but prepare for the worst. Something I have learned to do since the Great Depression. I assure you it works.

Jan 18 11:01 AM

[sleepless_o...:]

Admittedly, short-term stocks look oversold. On a valuation basis, they look over valued. I find it interesting that the author did not hazard a guess about how long the Obama rally might last.

Looking at the details in the article, it seems that the only real rally identified is in oil stocks and precious metals and related stocks. That would be way too narrow a rally to get me excited.

Jan 18 11:04 AM

[PeteK:]

Rally or not, the world just temporarily slow down. Wonder why some people treat it like the end of the world is coming !! Or the sky is falling !!
All those foreclosed houses are now selling like hot cakes because the banks are letting them go at 50% off. That's what is happening in my town.
Some home buyers are very happy. Real estate agents are like busy bees now. Gold & silver will never die, women will never let go of them.
Palladium & platium will never die, many industries need them.
Ships will never stop sailing, they are just slow down a bit.
Oil may go down if all countries promote Solar & Wind power, and build
more elecric cars. That will be good for our planet.
If this is not a good time to buy some shares now, you tell me when ?
The article is absolutely right. This maybe the once in our life time
opportunity. Those who worry too much about every little details will never achieve anything. That's the truth.

Jan 18 01:42 PM

[rber:]

It will be interesting to watch the tug of war between Obama rally bulls and the earnings disaster bears over the next few weeks.

Jan 19 12:59 AM

[James Wilson:]

Obama a Socialist ???? Is that opposed to the the bankers and greed is good people who were investing in weapons for both sides during the Vietnam War and most likely these war our troops are fighting now ?

Screwin the poor can only be a good economic idea for a while then is fails apart. That is what consumerism is !

Making cheaper and cheaper products with shorter useful lifespans so the flow of dollars steadyly increases will only last if the consumer see a increase in thier standard of living over time. If that standard of living dropps and never recovers then they will stop buying. As they have now.








On Jan 18 11:01 AM PrudentMan, CFA wrote:

> How does an admitted Socialist as president help a Free Economy?
> I hope he succeeds but don't bet the ranch.
>
> Of course, Obama is a politician first, so he will try to anything
> he can to stimulate the economy. But, will his basic socialistic
> philosophy get in the way? I hope not but will be very cautious.
>
>
> Not having to explain his economic policies during the campaign while
> the mainstream media gave him a pass won't carry water now. Speeches
> are nice but what is the man's record? Now is the time for Obama
> to walk-the-walk, not talk-the-talk. the media will give him a pass,
> as it is in our nature not to admit our mistakes until it is too
> late. But expectations are high and the man's history is not good.
>
>
> I'll hope for the best but prepare for the worst. Something I have
> learned to do since the Great Depression. I assure you it works.

Jan 19 04:22 AM

[Hefaistos:]

It's hardly a breaking news that Obama will be inaugurated, it might be futile to think that it will move the markets any more than it already has.
He is indeed a great speaker, but I believe his Words are all discounted since long.

Jan 19 08:24 AM

[Emerald:]

Privatize profits, socialize losses by the "private" sector. Then call names. Brilliant!


On Jan 19 04:22 AM James Wilson wrote:

>
>
> Obama a Socialist ???? Is that opposed to the the bankers and greed
> is good people who were investing in weapons for both sides during
> the Vietnam War and most likely these war our troops are fighting
> now ?
>
> Screwin the poor can only be a good economic idea for a while then
> is fails apart. That is what consumerism is !
>
> Making cheaper and cheaper products with shorter useful lifespans
> so the flow of dollars steadyly increases will only last if the consumer
> see a increase in thier standard of living over time. If that standard
> of living dropps and never recovers then they will stop buying. As
> they have now.
>
>
>
>
>
>

Jan 19 04:17 PM

[arlin:]

History,..the planets are alligned,and there is a very good chance of a rally.

Jan 19 05:17 PM

[nova:]

Obama is not a socialist. Obama is a "wealfare state" promoter.

I don't think he even understands the meaning of socialism.


Socialism promotes goods creation though hard working. But at the same time, socialism promotes a central government redistribution of wealth for purposes of "social peace and social justice".

"Wealfare State" concerns ONLY with wealth residtribution, concequently promoting parasitic ways of life.

Jan 19 08:01 PM

[Bajatexas:]

Looking at the futures, it looks like the Obama rally not only began on Friday....

....it ended on Friday as well.

Good call.

Jan 19 08:46 PM

[Chickenpookie:]

Today is Feb 9th, and the DOW is still at the same level and dropped over 200 pts in the interim.

Feb 09 01:52 AM