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David White
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David White is a software/firmware/marketing professional and a long time investor. He has worked in the networking field, the semiconductor equipment field, the mainframe computer field, and the pharmaceutical/scientific instrumentation field. He has bachelor's degrees in bioresource sciences... More
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  • PMI Data for Trading From the March 2010 ISM Report
    17 manufacturing industries reported growth in March. Plastics and Rubber Products was the only industry reporting contraction in March.
    Most commodities were reported up in price. Notably Steel and Aluminum have been up for 9 consecutive months. Natural Gas is the only commodity that was reported down in price.
    No commodities were reported in short supply.
    ISM's New Orders Index registered 61.5 percent in March, 2 percentage points higher than the seasonally adjusted 59.5 percent registered in February. This is the ninth consecutive month of growth in the New Orders Index.
    ISM's Production Index registered 61.1 percent in March, which is an increase of 2.7 percentage points from the February reading of 58.4 percent (seasonally adjusted).
    ISM's Employment Index registered 55.1 percent in March, which is 1 percentage point lower than the seasonally adjusted 56.1 percent reported in February. This is the fourth consecutive month of growth in manufacturing employment.
    The delivery performance of suppliers to manufacturing organizations was slower in March as the Supplier Deliveries Index registered 64.9 percent, which is 3.8 percentage points higher than the 61.1 percent registered in February (seasonally adjusted). This is the 10th consecutive month the Supplier Deliveries Index has been above 50 percent. A reading above 50 percent indicates slower deliveries (good because more demand).
     
    Manufacturers' inventories expanded in March following 46 months of contraction, as the Inventories Index registered 55.3 percent. The index is 8 percentage points higher than the seasonally adjusted February reading of 47.3 percent.
    The ISM Customers' Inventories Index registered 39 percent in March, 2 percentage points higher than in February when the index registered 37 percent, and the 12th consecutive month the Customers' Inventories Index has been below 50 percent. The index indicates that respondents believe their customers' inventories are too low at this time.
     
    The ISM Prices Index registered 75 percent in March, 8 percentage points higher than the 67 percent reported in February. This is the ninth consecutive month in which the Prices Index has registered above 50 percent. This indicates inflationary pressures.
     
    ISM's Backlog of Orders Index registered 58 percent in March, 3 percentage points lower than the 61 percent reported in February.
     
    ISM's New Export Orders Index registered 61.5 percent in March, 5 percentage points higher than the 56.5 percent reported in February.
     
    Imports of materials by manufacturers expanded in March as the Imports Index registered 57 percent, 1 percentage point higher than the 56 percent reported in February.
     
     
     


    Disclosure: no positions at this time
    Tags: SLX, JJU
    Apr 02 1:42 AM | Link | Comment!
  • Is Gold About To Bounce?

    The 30 year Treasury Bond yield is breaking out. This is a sign of inflation. Many consider gold to be the best hedge against inflation. With the apparent break out on the 30 year Treasury Bond yield chart (see below), gold may find the traction it has been lacking lately.

     



    Aside from just the above chart, a new $1T health care bill has been approved recently. A jobs bill has been approved. A jobless benefits bill has been approved by the Senate (and is a shoe-in to be approved by the House). These latter two bills amount to more than $150B in further stimulus. The US government is still spending parts of the nearly $1T stimulus bill from last year. It is incurring further debt load. The Fed is going to stop buying MBS’s at the end of March. The extra supply of debt instruments that results from this change in policy is likely to raise long term Treasury yields further. The US government budget is growing, but the tax revenues have shrunk from the 2007-2008 period (as the GDP has shrunk). The US government has been effectively printing money. As the Fed slowly withdraws the stimulus, the long term bond yields should rise further. The price of gold will likely accompany them.

    Right now the GLD (gold ETF) chart indicates an oversold condition. It is near its bottom Bollinger Band. The Williams %R indicator shows GLD is oversold. With Trichet’s apparent approval of the joint Eurozone and IMF bailout plan for Greece, the Euro may rise again against the USD (at least in the near term). This should help most commodity prices rise in USD terms. Many if not all of the ducks appear to be in a row. Buying GLD right now may be a good play. Of course, if the market starts falling dramatically, it may be a good idea to abandon this play. Still many feel that the market will continue to chug along until the end of the quarter at least. It may be over bought. It may be over priced. However, the pundits seem to believe the market will go up. If so, GLD will most likely join the market. The 6 month chart of GLD is below.

     



    I have drawn in the support line. If GLD breaches this support line, it may be best to abandon the trade for the near term. I have also drawn in three resistance lines. The upward movement could stop at any one. However, at least one of the upper two resistance lines seems likely to be reached. Some gold mining stocks may follow suit. These may not be quite as pure a gold play as GLD though.

    Good luck Trading.



    Disclosure: no position at this time
    Tags: GLD
    Mar 26 7:52 AM | Link | 5 Comments
  • Bond Yield Breakout Today. More Rises To Come.

    Bond prices have been trading in a channel for the past 3 months (see the 30 year Treasury Yield chart below).

     



    The 30-year note yield chart has formed a flag or pennant. The yield apparently broke above the channel today. There seem to be good fundamental reasons for this breakout to continue. The amount of bonds the government has to sell has been going up. This is due to the rising US National debt. The huge stimulus packages are taking their toll. There was a nearly $1T stimulus bill last year. There was TARP. Some of which has not been recovered. There was a jobs bill recently. There was a jobless bill passed by the Senate recently. This is extremely likely to get rubber stamped by the House soon. The Health Care Bill assessed more taxes, but it spent more too. Obama is due to announce another residential housing help program tomorrow (Friday). This is bound to cost money. The number of other bills is large. The tax revenues have decreased as the GDP has decreased. Yet the US government spending has increased. We will not reach the former GDP level for some time. Recently Moody's said US will use about 7% of taxes for debt payments in 2010 and almost 11% in 2013. Moody’s said the US may lose its AAA credit rating. If this isn’t a reason for Treasury yields to go, one doesn‘t exist.

    Today there was a poor Treasury auction on 7-year notes. The 7-year yield shot up. Ditto other longer yielding Treasuries such as the 30 year note. TLT shot down. To me this looks like a TLT breakout to the down side (see TLT chart below) and a 30 year bond yield breakout to the high side. If the economy is really improving as some are saying, then inflation is just around the corner. Certainly no one can debate that Greece and others are paying more for credit. The pundits gave the 7 year Treasury sale today a D (lower than recent interest and too large an increase in yield). The pundits are looking for more of the same in the future. If there is going to be an increasing supply of Treasury debt, no one has to be in a hurry to buy it. This factor tends to lessen the interest (of buyers) by itself. Additionally, the Fed is ending its buying of MBS’s at the end of March. This should pressure yields upward as a greater debt supply (about $70B/month) will increase the overall supply (tend to lower the prices of debt in general ==> higher yields). The 6 month TLT chart is below.

     

     

    Admittedly the TLT chart shows that it is oversold. However, for the fundamental reasons described above, it could well remain in this state for some time. Even if it does correct short term, the fundamentals agree with the technicals so well that a down trend seems almost assured. The breakout is perhaps tentative at this point, but it is likely a true signal. The trade would seem to be to buy TBT or to sell TLT short. Put options on TLT and call options on TBT can also be used. The TBT chart is not quite as nice as the TLT chart, so I might tend to prefer TLT. I am sure there are other possible plays that I have not mentioned.

    Definitions:

    TLT is the iShares Barclays 20+ Year Treasury Bond ETF (triple the performance)

    TBT is the UltraShort 20+ Year Treasury Proshares ETF (triple the performance)

    Note: Trichet's belated support of the joint Euro zone and IMF plan to bailout Greece may tend to slightly reduce yields globally on Friday. The breakout should still hold with the end of the Fed's MBS buying at the end of March. Bernanke also mentioned eventually selling much of the Fed's current MBS and Treasuries balance sheet as a tightening measure down the line. This would tend to pressure Treasury yields upward.

    Good luck trading.

     

     

     



    Disclosure: No positions, but I may take my own recommendation
    Tags: TLT, TBT
    Mar 25 11:09 PM | Link | 3 Comments
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