I … Economic Reports
Oil, US stocks, and world stocks fell lower today, as Lucia Mutikani of Reuters reports that private payrolls rose only modestly in June, and overall employment fell for the first time this year as thousands of temporary census jobs ended; and as the Associated Press reports factory orders fall 1.4 percent in May, the worst showing in 9 months. US Treasuries fell, turning aggregate debt lower.
II … Stock Charts
ACWI -.40% today
USO, DBB, GLD, SLV -0.80%, +0.84, +1.24, +0.11%
KBE, IWM, IYR, SMH -1.54%, -1.09%, -1.91%, -0.54%
The chart of VTI, VT, DNH, EWZ, FEZ and EWP shows the effect of debt deflation stemming from the onset of the European sovereign debt crisis in early April 2010, and the unwinding of yen carry trades globally, as the currency traders went short the world currencies against the US Dollar, $USD, on April 26, 2010.
This week’s chart of VTI, VT, DNH, EWZ, FEZ, and EWP shows Asia stocks fared worse than the European stocks as currency traders sold the Australian Dollar, FXA, and bought the Euro, FXE.
Documenting that the economy has entered into a recession, transportation stocks and industrial stocks fell through a “broadening top pattern” which commenced eight months ago. With today’s trading, the Dow Jones Transportation Average, IYT, has fallen below its November 11, 2009 value; and the Dow Jones Industrial Average, IYJ, has fallen below November 6, 2009 value. The chart of IYJ and IYT together with USO, DBB and EWP shows the effect of debt deflation coming from the European Sovereign debt crisis in early April 2010, and world-wide deflation coming from currency traders selling world currencies against the US Dollar on April 26, 2010, causing disinvestment from commodities as well as stocks.
Chart of small cap shares HAO, RZV, DFE, IWN, DGS shows the European sovereign debt crisis has weighed heavily on the small capitalized stocks with the pure value shares, RZV, and the European shares, DFE, being effected the most, and the US shares, IWN, and the emerging market shares, DGS, being effected the least. The reason being the pure value are the most sensitive to credit contractions and the European being distressed by a falling Euro, FXE.
Of the BRICs, India has held up the best, as investors have successfully chased inflation on a stable Indian Rupe, INR, as is seen in the chart of India, compared to China, Brazil and Russia; chart of INP, FXI, EWZ, RSX.
Chart of Australia, EWA, and Spain, EWP, show these two to be like ‘peas in a pod”. The Australia ETF is laden with financials and basic material stocks; and it has performed like Spain, beaten down by its troubled banks.
The chart of base metals DBB, oil, USO, small cap pure value shares, RZV, world shares, ACWI, and large cap growth shares, ELG, shows the large cap growth have retained their value the most in the downturn since April 26, 2010.
III … Bond Charts
The fact that today US Government bonds stopped their parabolic rise on a day when stocks turned down, suggests that traders may be questioning the commonly perceived safe haven status of US government debt.
Mortgage-backed securities bond fund and Build America Bond fund OUSCX and ECBAX
IV … Currency Charts
We have seen a top in the US Dollar, $USD, traded by UUP.
Perhaps we are seeing a top being made in the Yen, FXY. The rise in the Yen since April 26, 2010 is one of the most stunning charts in investment history. The currency traders in taking the Yen higher have committed a global financial bloodless coup de etat; click on chart to enlarge.
V … Gold And Gold Mining Stock Charts
Gold is undeniable the sovereign currency and storehouse of investment value $GOLD; it could easily fall lower to $1090 from today’s 1,200 before going much much higher as investors seek investment value in a world of collapsing stock and bond values.
The two-week downturn in the ratio of the HUI precious metal mining stocks relative to the US Treasuries, $HUI:$USB, suggests that the gold mining stocks, GDX, and the junior gold mining stocks, GDXJ, can no longer serve as vehicles for storing wealth.
Notice how the chart of junior mining stocks shows substantially weaker, with trading now both below the January dark cloud covering candlestick and below the 50 day moving average.
Chart of GDX; click on chart to enlarge.
Chart of GDXJ; click on chart to enlarge.
VI … Bear Market ETFs
I’ve been recommending the Direxion 300% inverse of the Russell 2000, TZA, to institutional investors; it has gained over 40% since the bear market commenced on April 26, 2010.
VII … EFSF News
EU Observer reports on July 1, 2010 that Slovakia Clears Way For Euro Bail-Out Fund. The future centre-right government in Slovakia will not block the creation of the European Financial Stability Facility (EFSF), the €750 billion eurozone support mechanism.
The European Financials, EUFN, traded slightly up on a higher Euro, FXE.
Ambrose Evans Pritchard writing in July 2, 2010 Telegraph article Spain May Need Financial Rescue, Says Merrill reports Spain’s debt crisis may force the country to tap the EU-IMF rescue fund over the next two to three months and set off a political storm, according a confidential report by the Bank of America Merrill Lynch.
Disclosure: I am invested in gold coins