Monday - pre-market -- 7-30-2012
Dr. John L. Faessel
ON THE MARKET
Commentary and Insights
Quote of the Day
"The waste of public money is a crime against the citizen."
President Grover Cleveland
Lumber ticks 5-month highs (4-days ago)
Corn at new all time 9-month highs*
(Ck the chart of historic sunspot activity below*)
Key Channel resistance rejects late Friday advance
Another terrible GDP report of 1.5% economic growth buoyed the market to 'presume' that it's so rotten out there that the FED will go on another printing press binge with a QU3. Add in there the ECU's [European Central Bank] President Mario Draghi saying that they'll do a "whatever it takes" to save the Euro... However don't believe it till you hear Wolfgang Schauble, German finance minister chime in stick the Germans with the EuroLand debt bomb.
So don't' believe it...
On Friday the Bundesbank said that 'it' was still not in favor of such a step.
"The Bundesbank continues to view the SMP(Securities Market Program) in a critical fashion. The mechanism of bond purchases is problematic because it sets the wrong incentives."
7/30/2012 - 11:44 AM "A deep-seated feeling of mistrust has taken hold" at ECB headquarters, reports Der Speigel following Mario Draghi's "whatever it takes" comments last week suggesting imminent central bank bond purchases. The remark was a unilateral one, and will face clear resistance from the usual suspects. "What's intended to keep the monetary union together could actually drive it even further apart." Comment! [Global & FX]
Important for market technicians is that the 6-week old upper trendline and the upper band of channel resistance and Price resistance are at the 'top' of the Friday's high tic at 1389.
Zacks Investment Research (primer earnings tracker) says that, "with about 292 companies in the S&P 500 having reported second-quarter earnings, the aggregate growth was 5.4%, down from the 8.3% seen at the same companies in the first quarter. More than half that growth has come from the financials, which in turn are showing improvements from non+operational items, like reserve releases. The revenue picture is worse. Second-quarter revenue is down 0.6%-though without energy stocks, it would be up 3.5%, versus 5.5% growth in the first quarter.
I'm still bearish... S&P 500 futures are off 3 points.
The McClellan is now in NEUTRAL at plus 50. Important to know that we came off the McClellan high post of year in OVERBOUGHT'ness at Plus 307 on [7/3/2012]
* Ok... You probably know that CERN** [European Organization for Nuclear Research] just recently found the Higgs boson (God) particle with their $10 billion Large Hadron Collider. The collider is a 38,000 ton machine that runs for 27km (16.5 miles) in a circular tunnel 100 meters beneath the Swiss / French border at Geneva where scientists are studying the "Big Bang". But, did you know that last year CERN posited in the journal Nature which holds that cosmic rays and the Sun, not human activities, are responsible for global warming.
But wait a second, what about this heat wave that's in progress? The believers in man-made causes of global warming are saying it's the cow flatulence, that you're exhaling 'too' much and of course there is all the gasoline and natural gas that we bad boy humans are using to create the warming. And mercy, our horrid ways and subsequent warming are causing agricultural products like corn and wheat to go berserk on the upside. So here's a chart from the McClellan's that tracks numbers of sunspots with wheat /dollar prices that goes way back into the early 1900s. The chart is pretty self-explanatory. Note that, "price fixing" by Roosevelt during the new deal tweaked the chart a bit as did the Arab Oil Embargo during the 70's. For the interesting McClellan commentary link here.
· Find the Scientific American article re CERN and climate change here.
· And another from Dr. Henrik Svensmark of the Danish National Space Centre in Copenhagen. Here
EuroLand Bond Yields have backed off as worries fade.
· Greek 10-year yields 24.52%
· Italy 10-year (gross) bond yield - 5.98% - off from highs of 7.29% on 11-24.
· Spanish 10-year (generic) bond yield - 6.52 %. Last week it ticked cycle highs of 7.41%.
The S&P 500 (SPX) closed Friday at 1385.97
6-week old upper trendline / channel resistance and Price resistance at the 'top' of the Friday's high tic at 1389.
Short term price support is at Fridays day's low of 1382 / 1376 / 1360
50-day moving average support is at 1334
Key trendline support is at 1340
Longer out term price support is at 1325 /1320/1313/ 1309
The 200-day moving average support is at (SPX) 1317
Stronger 'Price' support in the (SPX) is at the June 4th lows of 1266 and will be the battleground zone if the market tests its lows.
Friday's key indicators and metrics:
Cycle highs or lows are in red
· McClellan Oscillator is NEUTRAL at plus 50
· Euro - 1.231
· Swiss Franc - 1.0259
· VIX - 16.70
· Aussie Dollar - 1.0425
· Natural Gas (Globex) 3.015
· Copper - 3.4260
· Crude oil (NYMEX) $90.13
· Brent Crude $106.42
· Silver (COMEX) 27.498
· US Dollar Index - 82.765
· The Treasury 10-year yield 1.56%
· The 30-year Treasury is at 2.64%
· CBOE Put / Call Volume Ratio - 0.89
· 3-month $ LIBOR at 0.447
· Gold (COMEX) $1618.0
· Japanese Yen 12731
· Canadian Dollar - 0.9948
* This week's Bullish Investor Sentiment.
Certainly, sentiment is remains terrible but just off the recent new cycle lows.
(High BULLISH readings in the Investor Sentiment Readings usually are signs of Market tops; low ones, market bottoms.)
· The American Association of Individual Investors [AAII] Investor Sentiment Survey of BULLISHNESS rose to 28.1 from cycle lows of 22.2% the prior week that was the lowest percentile since August 2010..
· The Market Vane (Market Letter Survey) fell to 54% from 58% the prior week. (slightly lagging in compilation)
· Consensus Index BULLISH sentiment fell to 53% from 57% the prior week. (slightly lagging in compilation)
· The AAII Investor Survey of BEARISHNESS jumped to43.1% from 41.6% the prior week. 10-weeks ago it was 46%. On August 4th 2011 it posted cycle highs of 49.9% in Bearishness.
· The Citigroup "Panic / Euphoria" Model rose perceptively to a minus 0.12 from 0.22 the prior week. Six-weeks ago it ticked cycle lows of minus 0.31in the Panic mode. The number is now 'slightly' in the Neutral zone.
The BARRON's Confidence Index fell lower again to post NEW cycle lows 64.7 after breaking to cycle lows of 65.1 the prior week. One-year ago it was 77.1.
The Confidence Index is the premier measure of how the bond markets trillions (total global is around $91 trillion and USA is 39% of that) are allocated: (The bond market is twice the size of the stock market.)
The Index is the High-grade bond index divided by intermediate-grade index. A decline in latter vs. former - generally indicates rising confidence, pointing to higher stocks.
For my Best Ideas for 2012 please send an e-mail request to: Dr.Faessel@onthemar.com