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Carlos X. Alexandre
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Carlos X. Alexandre is a Stock Trading Tactician (far more impressive than being a mere trader) and has managed investments privately — stocks, bonds, commodities and currencies — for over two decades. An investment industry outsider and politically independent, he developed proprietary trading... More
My company:
CXA Markets
My blog:
CXA Markets BroadView
My book:
The Strategic Truth about Investing
  • CXA Markets Digest: Is Benghazi Debacle Affecting Markets? 0 comments
    Nov 17, 2012 9:25 AM | about stocks: SPY, DIA, QQQ, VTI, IWM, AGG, OIL, USO, GLD, SLV, UUP, FXE, FXY

    Although it hasn't been spelled out, the ongoing market weakness is extraordinary because typical oversold conditions do not appear to come into play. Certainly the fiscal cliff is in everyone's mind, but we still have time for some sort of compromise, and the encouraging words out of the first meeting with Obama is that progress is being made. But Benghazi and the administration's "flawed" and largely conflicting statements that followed are coming home to roost, and I sense a market uneasiness driven by fear of a political crisis that could mirror Watergate. In addition, Middle East current events cannot be affecting the markets, because oil prices are not reflecting the conflict. Stay tuned.

    On the monetary policy side, and should have been market positive, the Fed's minutes from the last meeting indicated that an expansion of quantitative easing into next year was supported by "a number of participants." Meanwhile, bank stress tests will consider a scenario where GDP drops 6.1% in 2013-Q1 and unemployment rises to 12.1% in 2014-Q2.

    The Japanese are on a tear, as shown by the precipitous decline in the yen, offering to dissolve the lower house in exchange for an agreement to issue "deficit-covering bonds," further highlighting the fragility of a nation that has been fighting the inevitable for over 20 years.

    Keeping with "legal alterations as needed" to accommodate sovereign financing needs in Europe, the ECB changed the collateral rules to allow Greek banks to obtain the necessary funding to cover $5 billion that came due. Then Olli Rehn informed us that Spain would not meet its deficit target in 2014, as if anybody believed that it could, while the background is replete with labor strikes and riots that continue to spread throughout Greece, Spain, Portugal and Italy. And the perfect storm may be unfolding.

    Despite a monthly drop of 3.5% for the S&P 500 thus far, a rebound should have been triggered by now, but all major indices continue to be short and long-term negative. The dollar has kept its slow trip north intact, enjoying short and long-term positive trends, while the euro kept both negative trends unchanged. The yen reversed its short-term trend to negative to join the long-term trend, dropping 2.2% in three days. WTI and Brent oil are facing two forces pulling in different directions - the dollar and Middle East conflict - and while the neutral trends dominate, WTI is still negative long-term and has held that position since 9/19/2012. Gold and silver turned neutral short-term, while keeping their long-term neutral readings. Copper continues to reflect weak manufacturing and economic times with both trends in the negative column. The 10-year Treasury rate declined again to 1.57% from 1.61%, while the short and long-term trends for the 10-year note and 30-year remained positive. The talks regarding Greek debt will continue next week, and we'll get U.S. get housing data as well as some flash PMI readings. In addition, it will be a short week and let's hope that Thanksgiving doesn't deliver any surprises because Europe doesn't do turkey.

    InvestmentsYTD2011
    CXA Markets Nimble40.13%77.75%
    S&P 500 ETF (SPY) - including dividends10.28%1.04%

    The 2013 Federal Budget Balance started off on the wrong foot with a $120 billion deficit, while the IBD/TIPP Economic Optimism index (consumer sentiment) dropped to 48.6 to 54. Retail sales decline 0.3%, the first drop in four months, and using Hurricane Sandy as an excuse is a stretch because only three days out of month were affected. September was revised up to a 1.3% gain.

    Business inventories increased 0.7% in September to a record $1.61 trillion, after an increase of 0.6% in August. Let's hope that sales will follow. The Empire State Manufacturing index registered -5.2, an improvement of 1 point, while the Philly Fed Manufacturing index turned negative with a reading of -10.7 from 5.7.

    The Mortgage Bankers Association's mortgage activity index rose 12.6%, with the refinance gauge climbing 13.1% and purchase applications increasing 11%. Freddie Mac's average 30-year mortgage rate dropped to 3.34% from 3.40%, and the 15-year mortgage rate declined to 2.65% from 2.69% - both record lows. Third quarter mortgage delinquencies declined to 7.4% from 7.58%, and foreclosures declined to 4.07% from 4.27%. However these rates imply that we still have at least another two years to reach normal levels, barring any disruption. And then FHA needs a bailout.

    CPI was a milder 0.2% with the core reading easing markedly to 0.1% from the previous 0.6%. The PPI declined 0.2% in October following a 1.1% increase in September. Jobless claims jumped to 439,000 from 361,000 mostly due to Hurricane Sandy. The 4-week moving average was 383,750, an increase of 11,750. The number for insured unemployment was 3,334,000, an increase of 171,000, while the 4-week moving average was 3,254,500, an increase of 17,750.

    September's total of net foreign acquisitions of long-term securities, short-term U.S. securities, and banking flows was a monthly net TIC inflow of $4.7 billion, a considerable reduction from August when the net inflows totaled $90.3 billion. Industrial production from factories, mines and utilities dropped 0.4% last month, following a downwardly revised 0.2% increase in September from 0.4%. Capacity utilization decreased to 77.8% in October from 78.2%.

    German wholesale prices declined 0.6% in October, while German investor confidence, as measured by ZEW, dropped to -15.7 from -11.5, the first drop since August. ZEW Economic Sentiment for the eurozone declined to -2.6 from -1.4.

    Eurozone industrial production dropped 2.5% in September as compared with August, although it also dropped 2.3% as compared with the one year ago period. Recession in the eurozone has finally arrived, with a contraction of 0.1% in the third quarter following a 0.2% drop in the second quarter. CPI was unchanged at 2.5%.

    The eurozone's current account registered a surplus of €0.8 billion in September, due to surpluses for goods (€4.5 billion) and services (€6.4 billion), which were partially offset by a deficit for current transfers (donations) of €10.1 billion. Trade balance showed a surplus of €9.8 billion ($12.5 billion), but the surplus masks weakness in domestic demand, with imports dropping 2.7% and exports decreasing 1.1%.

    Japan's GDP declined 0.9% during the 3rd quarter, equating to an annualized contraction of 3.5%, and where the tsunami was mentioned one year ago, there's no natural disaster to blame this time around. New loans in China dropped 14% to 505.2 yuan, questioning the "recovery" as advertised.

    Themes: market outlook Stocks: SPY, DIA, QQQ, VTI, IWM, AGG, OIL, USO, GLD, SLV, UUP, FXE, FXY
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