A Reflection of Negative Thinking

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Includes: AET, AMZN, DIA, GLD, QQQ, SPY, UDN, USO, UUP, XLF, XLP
by: Bill Cara

[Excerpted from Bill Cara's Daily Report]

The morning was a reflection of the negative thinking of weekend warriors, concerned that Relative Strength Indexes for many industry groups is well up in the Distribution Zone. Then along came Goldman Sachs research to put some bank upgrades into the mix and keep the S&P moving higher.

At the closing bell, the S&P 500 (982.18 +2.92 +0.30%), the DJIA (9,108.51 +15.27 +0.17%) and the NASDAQ Composite (1,967.89 +1.93 +0.10%) were higher, but not by much. The new short-term S&P high follows a lower low, which must be tested soon.

There were no sectors or industries that boomed except for Financials (XLF +1.6%), which were pulled up by the Banks ($BKX +3.1%). The REITs ($DJR +1.5%) were also firm. The losers were defensives, led by Consumer Staples (XLP -0.4%). Retailers ($RLX -1.1%) pulled that sector down.

In healthcare, Aetna (AET -2.7%) acknowledged problems with the recession and rising costs. The company also lowered guidance.

Among the retailers, Amazon.com (AMZN -2.6%) received a broker downgrade from hold to sell, citing low and unimproving margins. However the stock has been on a tear from a low on 11/20 at $34.70 to the high on 7/23 at $94.40. The stock had been over-bought, with a PE of about 200.

In the Canadian equity markets Monday, the Toronto Composite (10,757.43 +69.53 +0.65%) and Toronto Venture bourse (1,147.04 +3.09 +0.27%) were modestly bullish, like Friday. And like Friday, the Cdn Loonie was a winner, gaining +53 basis points (92.54 +0.53 +0.58%).

The Cdn Dollar has been soaring since July 13, the date the latest chapter of the Great Reflation play started.

The $USD (78.64 -0.11 -0.14%) hit another short-term cycle low. The Yen (105.08 -0.30 -0.28%) was lower against the falling Dollar as well. As well as the Loonie, the Euro (142.43 +0.42 +0.30%) and Pound (164.99 +0.88 +0.54%) were winners against the Dollar.

The Crude Oil price on Monday was a tad higher ($WTIC 68.38 +0.33 +0.48%) following a strong week last week where four days were higher. Tuesday morning Crude is a bit soft (68.14 -0.24 -0.35% 07:22am ET).

The US long bond ($USB 115.52 -0.58 -0.50%) sagged again after recovering a bit Friday after two previous days of big losses. The bond market continues to sink: Treasury yields for 30-year (4.613 +0.58 +1.27%), 10-year (3.713 +0.43 +1.17%), and 5-year (2.574 +0.27 +1.06%) were on the rise.

The 30-year Treasury has fallen from a closing price of 121.28 on July 8 to yesterday’s close of 115.52.

The Treasury bill yield remained at 0.180 for the fifth straight day.

Earlier Tuesday, Austral-Asian markets were mixed across the region with Japan’s Nikkei 225 (10,087.3 -0.01%) and China (3,438.4 +0.09%) almost flat, Hong Kong (20,624.5 +1.84%) and Australia (4,174.0 +0.63%) lifting, and India (15,331.9 -0.28%) down a tad.

The French CAC (3,368.3 7:25AM ET -0.12%), German DAX (5,244.7 7:11AM ET -0.13%) and FTSE 100 (4,567.5 7:11AM ET -0.41%) were all a bit trading lower in the mid day.

$GOLD (953.70 +2.20 +0.23%) added a bit to Friday’s small gain. Earlier this morning in the spot (cash) market, gold, palladium, platinum and silver were unremarkable, but not breaking down: (952.95 -0.50 -0.05% 07:35am ET); (260.5 +3.5 +1.36% 07:22am ET); (1210 +3 +0.25% 07:22am ET); and (14.00 0.00 0.00% 07:34am ET), respectively.

At that point, the DJIA futures (9037 -33 -0.36% 07:21am ET) were down a bit. The Euro (1.4257 +0.0013 +0.09% 07:22am ET) was a tad stronger.